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

                       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, 1998

                                       OR

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

                         Commission file number: 1-8094

                           SEAGULL ENERGY CORPORATION
             (Exact name of registrant as specified in its charter
                    TEXAS                                    74-1764876
      (State or other jurisdiction of                      (I.R.S. Employer
       incorporation or organization)                     Identification No.)

              1001 FANNIN, SUITE 1700, HOUSTON, TEXAS         77002-6714
             (Address of principal executive offices)         (Zip code)

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

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

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

As of July 31, 1998,  63,058,384  shares of Common  Stock,  par value $0.10 per
share, were outstanding.


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


<PAGE>


                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES



                                      INDEX

<TABLE>
<CAPTION>
                                                                           PAGE
                                                                          NUMBER
<S>                                                                       <C>
PART I.  FINANCIAL INFORMATION
    Item 1.   Unaudited Consolidated Financial Statements

            Consolidated Statements of Operations for the Three and
            Six Months Ended June 30, 1998 and 1997.......................    1

            Consolidated Balance Sheets - June 30, 1998
            and December 31, 1997.........................................    2

            Consolidated Statements of Cash Flows for the Six Months
            Ended June 30, 1998 and 1997..................................    3

            Consolidated Statements of Comprehensive Income for
            the Three and Six Months Ended June 30, 1998 and 1997.........    4

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

   Item 2.    Management's Discussion and Analysis of Financial Condition
              and Results of Operations...................................    9

PART II.  OTHER INFORMATION

   Item 4.    Submission of Matters to a Vote of Security Holders.........   15

   Item 6.    Exhibits and Reports on Form 8-K............................   15

SIGNATURES ...............................................................   16
</TABLE>


                                      (i)

<PAGE>


   ITEM 1.  UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Amounts in Thousands Except Per Share Data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                      Three Months Ended June 30,        Six Months Ended June 30,
                                                    --------------------------------  -------------------------------
                                                         1998             1997             1998            1997
                                                    ---------------   --------------  ---------------  --------------

<S>                                                 <C>               <C>             <C>              <C>
Revenues:
  Oil and gas operations...........................    $   86,104      $  105,406       $  176,553       $  230,410
   Alaska transmission and distribution............        17,425          16,774           49,301           51,343
                                                     --------------   --------------   --------------   -------------
                                                          103,529         122,180          225,854          281,753
Costs of Operations:
   Operations and maintenance......................        38,501          41,005           78,381           83,876
   Alaska transmission and distribution
     cost of gas sold..............................         7,343           7,244           22,106           23,966
   Exploration charges.............................         8,178           7,346           18,296           16,299
   Depreciation, depletion and amortization........        40,876          45,661           80,855           87,772
   General and administrative......................         3,056           3,113            6,440            5,423
                                                     --------------   --------------   --------------   -------------
                                                           97,954         104,369          206,078          217,336
                                                     --------------   --------------   --------------   -------------

Operating Profit...................................         5,575          17,811           19,776           64,417

Other (Income) Expense:
   Interest expense................................         9,305           9,585           17,852           19,995
   Interest income and other.......................        (1,669)           (215)          (2,201)            (913)
                                                     --------------   --------------   --------------   -------------
                                                            7,636           9,370           15,651           19,082
                                                     --------------   --------------   --------------   -------------

Income (Loss) Before Income Taxes..................        (2,061)          8,441            4,125           45,335

Income Tax Expense (Benefit).......................        (1,010)          5,820            2,021           25,460
                                                     --------------   --------------   --------------   -------------

Net Income (Loss)..................................    $   (1,051)     $    2,621       $    2,104       $   19,875
                                                     ==============   ==============   ==============   =============

Earnings (Loss) Per Share:
   Basic...........................................    $    (0.02)     $     0.04       $     0.03       $     0.32
                                                     ==============   ==============   ==============   =============
   Diluted.........................................    $    (0.02)     $     0.04       $     0.03       $     0.31
                                                     ==============   ==============   ==============   =============

Weighted Average Number of Common
   Shares Outstanding:
     Basic.........................................        63,052          63,007           63,036           62,897
                                                     ==============   ==============   ==============   =============
     Diluted.......................................        63,052          63,627           63,480           63,632
                                                     ==============   ==============   ==============   =============
</TABLE>

See accompanying Notes to Consolidated Financial Statements.





                                       1

<PAGE>

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    (Amounts in Thousands Except Share Data)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                 JUNE 30, 1998         December 31, 1997
                                                                               ------------------    ---------------------
<S>                                                                            <C>                   <C>
ASSETS:
   Current Assets:
     Cash and cash equivalents.........................................          $      15,094          $      45,654
     Accounts receivable, net..........................................                133,948                147,442
     Inventories.......................................................                 17,616                 13,635
     Prepaid expenses and other........................................                 13,802                 16,240
                                                                               ------------------    ---------------------
       Total Current Assets............................................                180,460                222,971

   Property, Plant and Equipment - at cost.............................              2,284,310              2,053,683
   Accumulated Depreciation, Depletion and Amortization................                988,929                908,849
                                                                               ------------------    ---------------------
                                                                                     1,295,381              1,144,834

   Other Assets........................................................                 43,256                 43,261
                                                                               ------------------    ---------------------

   Total Assets........................................................          $   1,519,097          $   1,411,066
                                                                               ==================    =====================

LIABILITIES AND SHAREHOLDERS' EQUITY:
   Current Liabilities:
     Accounts and note payable.........................................          $     161,379          $     159,138
     Accrued expenses..................................................                 32,953                 47,625
     Current maturities of long-term debt..............................                  7,117                  7,097
                                                                               ------------------    ---------------------
       Total Current Liabilities.......................................                201,449                213,860

   Long-Term Debt......................................................                566,914                469,017
   Other Noncurrent Liabilities........................................                 51,950                 51,168
   Deferred Income Taxes...............................................                 33,225                 14,126

   Redeemable Bearer Shares............................................                 15,620                 15,691

   Commitments and Contingencies.......................................                      -                      -

   Shareholders' Equity:
     Common Stock, $.10 par value; authorized 100,000,000 shares;
       issued 63,915,150 shares (1998) and 63,877,442 shares (1997)....                  6,392                  6,388
     Additional paid-in capital........................................                494,533                493,829
     Retained earnings.................................................                167,039                164,935
     Less - note receivable from employee stock ownership plan.........                 (3,067)                (2,990)
     Less - 861,314 shares of Common Stock held in Treasury, at cost...                (14,958)               (14,958)
                                                                               ------------------    ---------------------

       Total Shareholders' Equity......................................                649,939                647,204
                                                                               ------------------    ---------------------

    Total Liabilities and Shareholders' Equity.........................          $   1,519,097          $   1,411,066
                                                                               ==================    =====================
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

                                       2

<PAGE>

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                         Six Months Ended June 30,
                                                                                  ------------------------------------------
                                                                                         1998                   1997
                                                                                  -------------------    -------------------
<S>                                                                               <C>                    <C>
 OPERATING ACTIVITIES:
   Net income...............................................................           $    2,104            $   19,875
   Adjustments to reconcile net income to net cash
     provided by operating activities:
     Depreciation, depletion and amortization...............................               80,855                87,772
     Amortization of deferred financing costs...............................                  978                 1,215
     Deferred income taxes..................................................               (5,479)               11,336
     Dry hole expense.......................................................                6,154                 3,401
     Other..................................................................                  229                   350
                                                                                  -------------------    -------------------
                                                                                           84,841               123,949

     Changes in operating assets and liabilities, net of acquisitions:
       Decrease in accounts receivable......................................               16,426                44,096
       Increase in inventories, prepaid expenses and other..................               (2,486)               (9,685)
       Decrease in accounts and notes payable...............................              (19,556)              (16,688)
       Decrease in accrued expenses and other...............................              (14,984)              (15,678)
                                                                                  -------------------    -------------------

   Net Cash Provided By Operating Activities................................               64,241               125,994

 INVESTING ACTIVITIES:
   Capital expenditures.....................................................             (112,605)             (137,348)
   Acquisitions of oil and gas properties, net of cash acquired.............             (101,554)                 (821)
   Acquisitions of other assets and liabilities, net of cash acquired.......               (1,337)                   -
   Proceeds from sales of property, plant and equipment.....................                  463                 1,156
                                                                                  -------------------    -------------------

   Net Cash Used In Investing Activities....................................             (215,033)             (137,013)

 FINANCING ACTIVITIES:
   Proceeds from debt.......................................................              241,555               368,003
   Principal payments on debt ..............................................             (122,044)             (344,007)
   Proceeds from sales of common stock......................................                  556                 2,798
   Other....................................................................                  165                (1,530)
                                                                                  -------------------    -------------------

   Net Cash Provided By Financing Activities................................              120,232                25,264

 Effect of exchange rate changes on cash....................................                   -                    (64)
                                                                                  -------------------    -------------------

   Increase (Decrease) In Cash And Cash Equivalents.........................              (30,560)               14,181

 Cash And Cash Equivalents At Beginning Of Period...........................               45,654                15,284
                                                                                  -------------------    -------------------

 Cash And Cash Equivalents At End Of Period.................................           $   15,094            $   29,465
                                                                                  ===================    ===================
</TABLE>

See accompanying Notes to Consolidated Financial Statements.

                                       3

<PAGE>

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                             (Amounts in Thousands)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                         Three Months Ended June 30,       Six Months Ended June 30,
                                                        -----------------------------    ----------------------------
                                                            1998            1997             1998           1997
                                                       ---------------  --------------  --------------  -------------
                                                          $  (1,051)        $ 2,621       $  2,104        $  19,875
<S>                                                    <C>              <C>             <C>             <C>
Net income (loss)....................................

Other comprehensive income, net of tax:
   Foreign currency translation adjustment...........             -             341               -            (855)
                                                       ---------------  --------------  --------------  -------------

Comprehensive income (loss)..........................     $  (1,051)        $ 2,962       $   2,104       $  19,020
                                                        ==============   ============   ==============   ============
</TABLE>

See accompanying Notes to Consolidated Financial Statements.








                                       4

<PAGE>

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1.  PRESENTATION OF FINANCIAL INFORMATION

     In  the  opinion  of  management,   the  unaudited  consolidated  financial
statements presented herein contain all adjustments  necessary to present fairly
the financial  position of Seagull  Energy  Corporation  and  Subsidiaries  (the
"Company" or "Seagull") as of June 30, 1998,  and the results of its  operations
and cash flows for the three and six months  ended June 30,  1998 and 1997.  All
adjustments made are of a normal,  recurring  nature.  The results of operations
for the three and six months ended  June 30, 1998  and 1997 are not  necessarily
indicative of the results to be expected for the full year.

     The financial  information  presented  herein should be read in conjunction
with the consolidated  financial  statements and notes included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.

     Comprehensive  Income --  Effective  January 1, 1998,  the Company  adopted
Financial  Accounting Standards Board ("FASB") Statement of Financial Accounting
Standard  ("SFAS") No. 130,  "Reporting  Comprehensive  Income." This  statement
established  standards for reporting and display of comprehensive income and its
components in the Company's financial statements.  Comprehensive income includes
all changes in the Company's  equity except those resulting from  investments by
and distributions to owners.

     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>
                                                                               Weighted Average         Earnings (Loss)
                                                                                 Common Shares             Per-Share
                                                      Net Income (Loss)           Outstanding                Amount
                                                     --------------------    ----------------------    -------------------
<S>                                                  <C>                     <C>                       <C>
QUARTER ENDED JUNE 30, 1998:
     BASIC.....................................           $   (1,051)                  63,052                 $ (0.02)
     EFFECT OF DILUTIVE STOCK OPTIONS..........                    -                        -
                                                     --------------------    ----------------------
     DILUTED...................................           $   (1,051)                  63,052                 $ (0.02)
                                                     ====================    ======================

Quarter Ended June 30, 1997:
     Basic.....................................           $    2,621                   63,007                 $ 0.04
     Effect of dilutive stock options..........                    -                      620
                                                     --------------------    ----------------------
     Diluted...................................           $    2,621                   63,627                 $ 0.04
                                                     ====================    ======================

SIX MONTHS ENDED JUNE 30, 1998:
     BASIC.....................................           $    2,104                   63,036                 $ 0.03
     EFFECT OF DILUTIVE STOCK OPTIONS..........                    -                      444
                                                     --------------------    ----------------------
     DILUTED...................................           $    2,104                   63,480                 $ 0.03
                                                     ====================    ======================

Six Months Ended June 30, 1997:
     Basic.....................................           $   19,875                   62,897                 $ 0.32
     Effect of dilutive stock options..........                    -                      735
                                                     --------------------    ----------------------
     Diluted...................................           $   19,875                   63,632                 $ 0.31
                                                     ====================    ======================
</TABLE>

                                       5

<PAGE>

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

     Weighted  average  options to purchase  2,817,546,  1,756,099 and 1,827,369
shares of common stock at $17.38 to $26.38 per share were outstanding during the
first  half of 1998,  the first  half of 1997 and the  second  quarter  of 1997,
respectively,  but were not included in the  computation of earnings per diluted
share because the options'  exercise prices were greater than the average market
price of the common  shares.  Outstanding  options  expire at various dates from
2003 to 2008.  The effect of the  assumed  exercise  of stock  options as of the
beginning  of the  second  quarter  of 1998 has an  anti-dilutive  effect on the
computation  of loss per  diluted  share  for the  period.  Therefore,  weighted
average options to purchase  4,476,368 shares of common stock at $5.89 to $26.38
per share have not been included in the weighted average number of common shares
outstanding for the second quarter of 1998.

     Derivative  Financial  Instruments  -- The Company enters into a variety of
commodity derivative financial  instruments (futures contracts,  price swaps and
options) only for non-trading purposes as a hedging strategy to manage commodity
prices  associated  with oil and gas  sales and to  reduce  the  impact of price
fluctuations.  To qualify as hedges,  these instruments must highly correlate to
anticipated future production such that the Company's exposure to the effects of
price  changes is  reduced.  The Company  uses the hedge or  deferral  method of
accounting for these instruments and, as a result, gains and losses on commodity
derivative financial  instruments are generally offset by similar changes in the
realized  prices of the  commodities.  Income and costs related to these hedging
activities  are  recognized  in oil and gas revenues  when the  commodities  are
produced.  Income and costs on commodity derivative  financial  instruments that
are closed  before  the hedged  production  occurs are also  deferred  until the
production  month  originally  hedged.  In the  event  of a loss of  correlation
between  changes in oil and gas  reference  prices under a commodity  derivative
financial  instrument  and  actual  oil and gas  prices,  income  or  costs  are
recognized  currently  to the extent  the  financial  instrument  has not offset
changes in actual oil and gas  prices.  Any  realized  income and costs that are
deferred at the balance sheet date and any margin accounts for futures contracts
are  included  as net  current  assets.  While  commodity  derivative  financial
instruments  are  intended to reduce the  Company's  exposure to declines in the
market  price  of oil  and  natural  gas,  the  commodity  derivative  financial
instruments  may also limit the  Company's  gain from  increases in those market
prices.

     The Company  recorded  $0.5 million and $8 million for the six months ended
June 30,  1998 and  1997,  respectively,  in costs  related  to  equity  hedging
activities, including costs related to the monetary production payment hedges of
approximately $0.5 million and $1 million in 1998 and 1997, respectively. By the
end of the first quarter of 1997, the Company's  equity  hedging  activities had
been   substantially   reduced,   leaving  primarily  the  commodity  hedges  of
approximately  11 MMcf per day through December 1998, which were required by the
monetary  production  payment (related to the 1995 sale of the Company's Section
29 tax credit-bearing properties).  For the second quarter of 1998 and 1997, all
of the  Company's  equity  hedging  costs  of $0.3  million  and  $0.2  million,
respectively,  related to the monetary  production  payment hedges.  The Company
also recorded hedging costs related to third-party  marketing activities of $1.5
million  and $0.2  million  for the six  months  ended  June 30,  1998 and 1997,
respectively,  and $1 million and none for the second  quarter of 1998 and 1997,
respectively.

     At June 30,  1998,  the Company had open  natural  gas  futures,  swaps and
option  contracts  related  to its  equity  and  third-party  marketing  hedging
activities  totaling 20 Bcf related to purchases and 33 Bcf related to sales for
the period from July 1998  through July 1999.  At June 30, 1998,  the fair value
related to the Company's  commodity hedging activities was $0.1 million of costs
related to open contracts.

                                       6

<PAGE>

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

     Accounting  Pronouncements  -- In June 1997,  the FASB issued SFAS No. 131,
"Disclosures  about  Segments of an Enterprise  and Related  Information."  This
statement  establishes  standards  for  reporting  information  about  operating
segments in annual financial  statements and requires selected information about
operating  segments be included in interim  reports issued to  shareholders.  In
February  1998,  the FASB  issued SFAS No. 132,  "Employers'  Disclosures  about
Pensions  and  Other  Postretirement   Benefits."  This  statement   establishes
standards  for  disclosure  for  pensions and other  postretirement  benefits in
annual  financial  statements.  These  statements  are  effective  for financial
statements for periods  beginning after December 15, 1997. As both SFAS Nos. 131
and 132 establish  standards  for  reporting  and display,  the Company does not
expect  the  adoption  of these  statements  to have a  material  impact  on its
financial condition or results of operations.

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities."  This statement  establishes  standards of
accounting for and disclosures of derivative instruments and hedging activities.
This statement is effective for fiscal years  beginning after June 15, 1999. The
Company has not yet  determined  the impact of this  statement on the  Company's
financial condition or results of operations.


NOTE 2.  ACQUISITIONS

     On June 1, 1998,  the Company  completed  the  purchase of the stock of BRG
Petroleum, Inc. ("BRG"), a closely held private company, and the assets of BRG's
limited  partnerships  and  programs for $103  million in cash,  excluding  cash
acquired of $2 million and noncash deferred tax liabilities of $25 million.  The
Company funded this acquisition through existing credit facilities.

     The following  table presents the unaudited pro forma results of Seagull as
though the acquisition of the acquired assets had occurred on January 1, 1998:

<TABLE>
<CAPTION>
                              PRO FORMA INFORMATION
                  (Amounts in Thousands Except Per Share Data)

                                                           SIX MONTHS ENDED
                                                            JUNE 30, 1998
                                                          -----------------
<S>                                                       <C>
Revenues................................................   $234,525
Net income..............................................      1,081
Basic earnings (loss) per share.........................       0.02
Diluted earnings (loss) per share.......................       0.02
</TABLE>


                                       7
<PAGE>

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

     The  unaudited pro forma  information  does not purport to be indicative of
actual results,  if the acquisition of the BRG assets had been in effect for the
period indicated, or of future results.


NOTE 3.  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
                             (Amounts in Thousands)

                                             Six Months Ended June 30,
                                            --------------------------
                                               1998           1997
                                            ------------    ----------
<S>                                         <C>             <C>
Cash paid during the period for:
  Interest, net of amount capitalized......   $16,204        $20,913
  Income taxes.............................   $ 8,628        $13,377
</TABLE>


NOTE 4.  COMMITMENTS AND CONTINGENCIES

     Year  2000  Issue  --  Historically,   most  computer  systems   (including
microprocessors  embedded  into field  equipment and other  machinery)  utilized
software that processed  transactions  using two digits to represent the year of
the  transaction  (i.e.,  97 represents the year 1997).  This software  requires
modification to properly  process dates beyond December 31, 1999 (the "Year 2000
Issue").  During 1997, the Company utilized both internal and external resources
to  reprogram,  or  replace,  and  test  software  for  necessary  modifications
identified in its  assessment of the Year 2000 Issue.  By December 31, 1997, the
Company's Year 2000  remediation was  substantially  complete and  approximately
$300,000 had been  expensed  related to this  assessment  and  remediation.  The
Company  presently  believes that, as a result of these  efforts,  the Year 2000
Issue will not have a material adverse effect on the Company's operations.

     The Company has initiated formal communications with all of its significant
suppliers  and large  customers to determine  the extent to which the Company is
vulnerable to those third parties' potential failure to remediate their own Year
2000  Issue.  However,  there  can be no  guarantee  that the  systems  of other
companies,  on which the Company's  systems rely, will be timely  converted,  or
that  a  failure  to  convert  by  another  company,  or a  conversion  that  is
incompatible  with the  Company's  systems,  would not have a  material  adverse
effect on the Company.

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

                                       8

<PAGE>

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


     The following  discussion is intended to assist in an  understanding of the
Company's  financial  position and results of operations for each of the periods
indicated.  The Company's  accompanying  unaudited financial  statements and the
notes thereto and the  consolidated  financial  statements and notes included in
the Company's  Annual  Report on Form 10-K for the year ended  December 31, 1997
contain detailed  information that should be referred to in conjunction with the
following discussion.

                              RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                             CONSOLIDATED HIGHLIGHTS
                             (Amounts in Thousands)
                                                         Three Months Ended                    Six Months Ended
                                                              June 30,                             June 30,
                                                   -------------------------------    -----------------------------------
                                                       1998              1997              1998                1997
                                                   --------------    -------------    --------------      ---------------
<S>                                                <C>               <C>              <C>                 <C>
Revenues:
  Oil and gas operations.......................      $   86,104        $ 105,406        $  176,553           $  230,410
  Alaska transmission and distribution.........          17,425           16,774            49,301               51,343
                                                   --------------    -------------    --------------      ---------------
                                                     $  103,529        $ 122,180        $  225,854           $  281,753
                                                   --------------    -------------    --------------      ---------------

Operating Profit:
  Oil and gas operations.......................      $    6,835        $  19,681        $   15,766           $   58,760
  Alaska transmission and distribution.........           2,749            1,971            12,290               12,437
  Corporate....................................          (4,009)          (3,841)           (8,280)              (6,780)
                                                   --------------    -------------    --------------      ---------------
                                                     $    5,575        $  17,811        $   19,776           $   64,417
                                                   ==============    =============    ==============      ===============

Net income (loss)..............................      $   (1,051)       $   2,621        $    2,104           $   19,875
Net cash provided by operating
  activities before changes in
  operating assets and liabilities.............      $   39,781        $  50,836        $   84,841           $  123,949
Net cash provided by operating
  activities...................................      $   31,238        $  52,479        $   64,241           $  125,994
</TABLE>


     Revenues decreased $19 million and $56 million, respectively, and operating
profit declined $12 million and $45 million, respectively, for the three and six
month periods  ending June 30, 1998 versus the same periods of 1997  principally
due to three factors:  (i) significant  decreases in worldwide oil prices,  (ii)
declines in domestic gas production and (iii) the sale of the Company's Canadian
oil and gas  operations in October  1997.  The effect of these three factors was
partially offset by higher oil production from the Company's Egyptian operations
for both the  three  and six  months  ended  June 30,  1998 and an  increase  in
domestic  oil  volumes in the first half of 1998  compared to the same period in
1997. Net income (loss) decreased from $3 million for the second quarter of 1997
to $(1)  million for the same period in 1998 and  declined  from $20 million for
the six months of 1997  compared to $2 million for the first half of 1998 due to
the lower commodity prices discussed above.



                                       9

<PAGE>

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                    OIL AND GAS OPERATIONS
                                                    (Amounts in Thousands)

                                                   Three Months Ended June 30,                Six Months Ended June 30,
                                               -------------------------------------      ----------------------------------
                                                   1998                  1997                 1998                1997
                                               ----------------     ----------------      --------------     ---------------
<S>                                            <C>                  <C>                    <C>               <C>
Revenues:
  Natural gas...............................   $    57,757            $  68,219           $  118,317           $ 153,719
  Oil and NGL...............................        22,390               32,411               46,675              63,234
  Pipeline and marketing....................         5,957                4,776               11,561              13,457
                                               ----------------     ----------------      --------------     ---------------
                                                    86,104              105,406              176,553             230,410
                                               ----------------     ----------------      --------------     ---------------

Production operating expenses...............        26,866               29,241               54,310              59,124
Pipeline and marketing expenses.............         6,429                6,289               13,415              13,980
Exploration charges.........................         8,178                7,346               18,296              16,299
Depreciation, depletion and amortization....        37,796               42,849               74,766              82,247
                                               ----------------     ----------------      --------------     ---------------
  Operating profit..........................   $     6,835            $  19,681           $   15,766           $  58,760
                                               ================     ================      ===============    ===============
</TABLE>


     The decline in commodity  prices was the significant  factor in the 65% and
73% decreases in operating profit for the Oil and Gas Operations ("O&G") segment
to $7 million and $16 million for the three and six months  ended June 30, 1998,
respectively.  Domestic natural gas prices realized by the Company  decreased 8%
from  $2.32  per Mcf in the  first  half of 1997 to  $2.14  per Mcf for the same
period in 1998. This price decrease and a 6% decrease in domestic gas production
combined to create an $18 million  decrease  in domestic  natural gas  revenues.
Worldwide oil prices  realized by the Company  showed a significant  decrease of
31%,  from $17.77 per Bbl in 1997's first half to $12.19 per Bbl in 1998.  While
declining  oil prices were the primary  factor for the decrease in oil revenues,
this was  partially  offset by a 23% increase in oil  production in the U.S. and
Egypt as Seagull  realized  additional  contributions  from several new domestic
wells and two Egyptian  concessions - Qarun, where additional  facilities became
operational during mid-1997, and West Abu Gharadig,  which was purchased in late
1997.  For the second  quarter of 1998,  domestic  gas  prices  realized  by the
Company  increased $0.10 per Mcf over the 1997 quarter's $2.04 per Mcf. However,
domestic gas  production  and worldwide oil prices  reflected the same trends as
the first half of 1998.

     In addition, 1998 reflects the absence of the Company's Canadian operations
which  were  sold  in  October  1997.  These  Canadian  operations   contributed
approximately  $7 million and $18 million in revenues and $(0.2)  million and $4
million in operating  profit  (loss) for the three and six months ended June 30,
1997, respectively.

     Pipeline and marketing  revenues  declined $2 million for the first half of
1998 due to a decrease in third party marketing  margins and revenues related to
the  Company's gas gathering  and  processing  facilities.  This decrease in gas
gathering and processing revenues was substantially  offset by a decrease in the
related cost of gas.

                                       10
<PAGE>

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                     EXPLORATION AND PRODUCTION OPERATING DATA

                                    Three Months Ended June 30,                          Six Months Ended June 30,
                          -------------------------------------------------------------------------------------------------------
                            Net Daily Production          Unit Price           Net Daily Production            Unit Price
                             1998         1997         1998        1997         1998          1997         1998         1997
                          ----------- ------------- ----------- ----------- ------------- ------------- ----------- -------------

<S>                       <C>         <C>           <C>         <C>         <C>            <C>          <C>         <C>
Gas Sales(1):
   Domestic.............      281.9        310.7      $  2.14     $  2.04       286.8        306.7         $  2.14    $    2.32
   Canada(2) ...........          -         51.1           -         1.34           -         49.6               -         1.75
   Cote d'Ivoire........        9.5          5.7         1.64        1.78         9.9          5.3            1.57         1.83
   Indonesia............        7.7         10.3         1.92        3.58         9.7         12.0            2.46         3.53
   Other................        1.1          0.2         1.39        0.99         0.8          0.2            1.34         1.00
                          ----------- ------------- ----------- ----------- ------------- ------------- ----------- -------------
                              300.2        378.0      $  2.11     $  1.98       307.2        373.8         $  2.13    $    2.28
                          =========== ============= =========== =========== ============= ============= =========== =============

Oil and NGL Sales(1):
   Domestic.............      5,078        5,085      $ 11.29     $ 17.68       5,066        4,383         $ 12.44    $   18.96
   Canada(2)............          -          857           -        14.54           -          867               -        17.06
   Egypt................     11,081        9,241        12.75       17.37      10,794        8,555           12.95        18.46
   Cote d'Ivoire........      1,102        1,264        14.04       18.12       1,101        1,356           12.19        19.75
   Tatarstan............      3,985        5,139         7.51       13.00       3,989        4,281            9.56        14.54
   Indonesia............        128          149        15.42       22.00         201          203           17.03        20.75
   Other................          7           16        12.70       16.02           8           16           12.65        17.71
                          ----------- ------------- ----------- ----------- ------------- ------------- ----------- -------------
                             21,381       21,751      $ 11.51     $ 16.37      21,159       19,661         $ 12.19    $   17.77
                          =========== ============= =========== =========== ============= ============= =========== =============
</TABLE>

(1) Natural gas is stated in MMcf and $ per Mcf.  Oil and NGLs are stated in Bbl
and $ per Bbl. 
(2) All of the Company's Canadian oil and gas operations were sold in October 
1997.


While production  expenses decreased by $2 million to $27 million for the second
quarter  of 1998 and by $5 million  to $54  million  for the first half of 1998,
production expenses per equivalent unit of production increased to $4.13 per Boe
versus $3.79 per Boe in the second quarter of 1998 and 1997,  respectively,  and
to $4.15 per Boe versus $3.99 per Boe for the first six months of 1998 and 1997,
respectively.  While the overall amount of production  expenses decreased due to
the  absence of the  Company's  Canadian  operations,  production  expenses  per
equivalent  unit of  production  increased  slightly  due to  increases in lease
operating expenses in the Company's domestic operations.

     Exploration  charges  increased  $2 million for the first half of 1998 over
1997  principally  due to  increased  dry hole  costs  offset by the  absence of
exploration charges related to Canada.

     The  decrease in E&P  depreciation,  depletion  and  amortization  ("DD&A")
expense to $37 million  and $74 million for the three and six months  ended June
30,  1998,  respectively,  from $42  million  and $81 million for the prior year
periods is primarily due to the decrease in domestic gas production and the sale
of  the  Company's  Canadian  operations,  partially  offset  by  increased  oil
production  in the U.S.  and Egypt.  The DD&A  expense  per  equivalent  unit of
production for oil and gas producing  activities increased slightly to $5.65 per
Boe from $5.49 per Boe for the first half of 1998 and 1997, respectively.


                                       11

<PAGE>

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                           ALASKA TRANSMISSION AND DISTRIBUTION
                                        (Amounts in Thousand Except Operating Data)
                                                Three Months Ended June 30,                 Six Months Ended June 30,
                                             ----------------------------------        -------------------------------------
                                                  1998               1997                   1998                 1997
                                             ---------------      -------------        ----------------     ----------------

<S>                                          <C>                  <C>                  <C>                  <C>
Revenues..................................    $  17,425             $ 16,774              $ 49,301            $   51,343
Cost of gas sold..........................        7,343                7,244                22,106                23,966
                                             ---------------      -------------        ----------------     ----------------
  Gross margin............................       10,082                9,530                27,195                27,377
Operations and maintenance expense .......        5,206                5,475                10,656                10,772
Depreciation, depletion and amortization..        2,127                2,084                 4,249                 4,168
                                             ---------------      -------------        ----------------     ----------------
  Operating profit........................    $   2,749             $  1,971              $ 12,290            $   12,437
                                             ===============      =============        ================     ================

OPERATING DATA:
  Degree days (1).........................        1,585                1,571                 5,282                 5,291
</TABLE>

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

     Operating profit of the Alaska  transmission  and distribution  segment for
the second quarter of 1998 increased from the 1997 period  primarily as a result
of increased gross margin due to a change in the mix of customers.

     This segment's business is seasonal with approximately 65%-70% of its sales
made in the first and fourth quarters of each year.




                                       12

<PAGE>

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                         LIQUIDITY AND CAPITAL RESOURCES


<TABLE>
<CAPTION>
                                          CAPITAL EXPENDITURES AND ACQUISITIONS
                                                 (Amounts in Thousands)
                                               Three Months Ended June 30,                Six Months Ended June 30,
                                            ----------------------------------      --------------------------------------
                                                 1998               1997                 1998                  1997
                                            ---------------    ---------------      ---------------       ----------------

<S>                                         <C>                <C>                  <C>                   <C>
Exploration and production:
  Leasehold..............................    $    2,816          $  13,426            $    4,424             $   14,259
  Exploration............................        11,796             22,796                32,334                 44,633
  Development............................        34,847             40,979                66,910                 70,750
                                            ---------------    ---------------      ---------------       ----------------
                                                 49,459             77,201               103,668                129,642
Pipeline and marketing...................           661                  8                 1,217                     45
                                            ---------------    ---------------      ---------------       ----------------
  Oil and gas operations.................        50,120             77,209               104,885                129,687
Alaska transmission and distribution.....         2,465              2,046                 4,004                  3,451
Corporate................................         1,886              2,666                 3,716                  4,210
                                            ---------------    ---------------      ---------------       ----------------
                                             $   54,471          $  81,921            $  112,605             $  137,348
                                            ===============    ===============      ===============       ================

Acquisitions.............................    $  127,092          $     720            $  127,469             $      821
                                            ===============    ===============      ===============       ================
</TABLE>


     Seagull's capital  expenditure program is designed to fulfill the Company's
goals of growing its reserve base and production capacity. Capital expenditures,
excluding  acquisitions,  decreased  by nearly $25 million for the first half of
1998 over 1997 as expenditures  declined domestically and because of the sale of
the Company's  Canadian  operations with expenditures of $8 million in the first
half  of  1997,  partially  offset  by  increased  expenditures  related  to the
Company's Egyptian operations.

     The Company has a revolving credit facility (the "Credit  Facility") with a
maximum  commitment  of $500 million.  At June 30, 1998,  there was $100 million
borrowed under the Credit Facility and $359 million of the unused commitment was
immediately available.

     The Credit Facility contains certain covenants and restrictive  provisions,
including  limitations  on the  incurrence  of  additional  debt or  liens,  the
declaration  or payment of dividends and the repurchase or redemption of capital
stock  and  the  maintenance  of  certain  financial  ratios.   Under  the  most
restrictive of these  provisions,  approximately  $266 million was available for
payment of cash  dividends on common stock or to  repurchase  common stock as of
June 30, 1998.

     On June 1, 1998,  the  Company  completed  the  purchase of the BRG and its
related partnership  interests for $103 million in cash, excluding cash acquired
of $2 million and noncash  deferred tax liabilities of $25 million.  The Company
funded this acquisition through its existing credit facility.

                                       13

<PAGE>

                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES

                 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The assets  acquired  include  proved oil and gas  reserves  of 102 billion
cubic feet of natural gas equivalents  ("Bcfe").  BRG operated  approximately 70
percent  of 600  currently  producing  oil and gas  wells in  approximately  140
fields.  Daily  production from the properties net to the combined BRG interests
averaged  approximately  18 million cubic feet of gas and 400 barrels of oil and
natural  gas  liquids  in  1997.  The  most  significant  of  these  assets  are
concentrated in East Texas, primarily in Freestone, Upshur, Rusk and Nacogdoches
counties.

     Management  believes  the  Company's  internally  generated  funds and bank
borrowing  capabilities  will be  sufficient to finance  current and  forecasted
operations, including capital expenditures.

     In March 1998,  Seagull announced it may include some of its less strategic
E&P  properties  located  away from its  various  core  assets  in a package  of
properties to be liquidated later in 1998.

DEFINED TERMS

     Natural gas is stated herein in billion  cubic feet ("Bcf"),  million cubic
feet ("MMcf") or thousand  cubic feet ("Mcf").  Oil,  condensate and natural gas
liquids  ("NGL")  are stated in barrels  ("Bbl") or thousand  barrels  ("MBbl").
MMcfe and Mcfe  represent the  equivalent of one million and one thousand  cubic
feet of natural gas, respectively.  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

     Item 2 of this  document  includes  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, as amended. Although Seagull believes that such
forward-looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will in fact occur. Important factors that could
cause  actual  results to differ  materially  from those in the  forward-looking
statements  include,  but are not limited to, political  developments in foreign
countries,  federal and state regulatory developments,  the timing and extent of
changes in commodity  prices,  the timing and extent of success in  discovering,
developing and producing or acquiring oil and gas reserves,  the availability of
skilled personnel,  materials and equipment,  operating hazards attendant to the
industry,  and  conditions of the capital and equity  markets during the periods
covered  by  the  forward-looking  statements,  as  well  as the  other  factors
discussed in Seagull's  Annual  Report on Form 10-K for the year ended  December
31, 1997.

                                       14

<PAGE>


                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES

                           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 13, 1998,
the  shareholders  voted to elect four  directors to serve until the 2001 Annual
Meeting of  Shareholders,  approve the Seagull Energy  Corporation  1998 Omnibus
Stock Plan and ratify the  appointment  of KPMG Peat Marwick LLP as  independent
auditors of the Company for the fiscal year ended December 31, 1998.  Votes cast
were as follows:


<TABLE>
<S>                                                <C>                 <C>                <C>               <C>
                                                                                             Broker
                                                        For               Against          Non-Votes         Abstained
                                                   ---------------     --------------    ---------------    -------------
Election as a Director of the Company of:
    Richard J. Burgess..........................     51,267,754                   -                   -       1,035,072
    Thomas H. Cruikshank........................     51,264,657                   -                   -       1,038,169
    Robert F. Vagt..............................     51,305,014                   -                   -         997,812
    R.A. Walker.................................     51,271,186                   -                   -       1,031,640
Approval of 1998 Omnibus Stock Plan.............     41,508,052          10,565,159              50,000         179,615
Ratification of Selection of KPMG Peat
    Marwick LLP as Independent Auditors for
    1998........................................     51,935,016             295,366                   -          72,444
</TABLE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)        Exhibits:

*3.1    Articles of Incorporation of the Company,  as amended, and that certain
        Statement of Resolution Establishing Series of Shares of Series B Junior
        Participating  Preferred  Stock of  Seagull  Energy  Corporation  filed
        March 21, 1989 with the Secretary of State of the State of Texas.

*#10.1  1998 Omnibus Stock Plan.

*27.1   Financial Data Schedule.

(b)     Reports on Form 8-K: On June 4, 1998, the Company filed a current Report
        on Form 8-K dated June 1, 1998 with respect to Seagull's acquisition  of
        BRG.  The items reported in such Current Report were Item 2 (Acquisition
        or Disposition of Assets) and Item 7 (Financial Statements and
        Exhibits).

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

                                       15

<PAGE>



                   SEAGULL ENERGY CORPORATION AND SUBSIDIARIES

                                   SIGNATURES

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

                           SEAGULL ENERGY CORPORATION



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

                                      Date: August 6,1998



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

                                       Date:  August 6, 1998





                                     16

<PAGE>






                                  EXHIBIT INDEX


<TABLE>
<S>                 <C>                                                                              <C>
    EXHIBIT                                                                                              PAGE
    NUMBER                                           DESCRIPTION                                        NUMBER
----------------    ------------------------------------------------------------------------------   --------------


*3.1                Articles of Incorporation of the Company,  as amended, and that certain
                    Statement of Resolution Establishing Series of Shares of Series B Junior
                    Participating  Preferred  Stock of  Seagull  Energy  Corporation  filed
                    March 21, 1989 with the Secretary of State of the State of Texas.

*#10.1              1998 Omnibus Stock Plan.

*27.1               Financial Data Schedule.
</TABLE>


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