---

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, 2001

OR

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

Commission file number: 1-8094

Ocean Energy, Inc.(Exact name of registrant as specified in its charter)

Texas              
             74-1764876(State or other jurisdiction of       
      (I.R.S. 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)

Securities registered pursuant to Section 12 (b)
of the Act:

Name of each exchange on  
Title of each class         
       which registered
Common Stock, par value $.10 per share
     New York Stock
Exchange      Preferred Stock Purchase Rights      
     New York Stock Exchange

Securities registered
pursuant to Section 12 (g) of the Act: None

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 April 30, 2001,
170,263,110 shares of Common Stock, par value $0.10 per share, were outstanding.

---

# Ocean
Energy, Inc.

# Index

`Page
Part I.  Financial Information
------------------------------

    Item 1.   Unaudited Consolidated Financial Statements

                  Consolidated Statements of Operations for the Three Months
                  Ended March 31, 2001 and 2000.........................................    1

                  Consolidated Balance Sheets - March 31, 2001
                  and December 31, 2000.................................................    2

                  Consolidated Statements of Cash Flows for the Three Months
                  Ended March 31, 2001 and 2000.........................................    3

                  Consolidated Statements of Comprehensive Income
                  for the Three Months Ended March 31, 2001 and 2000 ...................    4

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

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

    Item 3.   Quantitative and Qualitative Disclosures about Market Risks...............   16

Part II.  Other Information.............................................................   16

Signatures..............................................................................   17`

(i)

---

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

`Three Months Ended March 31,
                                                                  ---------------------------------------
                                                                        2001                 2000
                                                                  -----------------    ------------------

Revenues........................................................       $  403,255           $  251,409

Costs of Operations:
   Operating expenses...........................................           74,564               62,161
   Depreciation, depletion and amortization.....................           82,455               80,080
   General and administrative...................................            6,141                9,122
                                                                  -----------------    ------------------
                                                                          163,160              151,363
                                                                  -----------------    ------------------

Operating Profit................................................          240,095              100,046

Other (Income) Expense:
   Interest expense.............................................           16,944               19,228
   Merger and integration costs.................................                -                3,273
   Interest income and other....................................           (1,182)                (739)
                                                                  -----------------    ------------------

Income Before Income Taxes......................................          224,333               78,284
Income Tax Expense..............................................          100,949               35,306
                                                                  -----------------    ------------------

Net Income......................................................          123,384               42,978
Preferred Stock Dividends.......................................              813                  813
                                                                  -----------------    ------------------

Net Income Available to Common Shareholders.....................       $  122,571           $   42,165
                                                                  =================    ==================

Earnings Per Common Share:
   Basic........................................................       $    0.73            $    0.25
                                                                  =================    ==================
   Diluted......................................................       $    0.70            $    0.25
                                                                  =================    ==================


Cash Dividends Declared Per Common Share........................       $    0.04            $        -
                                                                  =================    ==================

Weighted Average Number of Common Shares Outstanding:
   Basic........................................................          168,279              167,031
                                                                  =================    ==================
   Diluted......................................................          177,011              174,550
                                                                  =================    ==================`

See accompanying Notes to Consolidated Financial
Statements.

1

---

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

`March 31,          December 31,
                                                                               2001                 2000
                                                                        ------------------   ------------------
                                                      Assets
Current Assets:
   Cash and cash equivalents.......................................       $      37,551        $      23,039
   Accounts receivable, net........................................             224,704              222,478
   Other current assets............................................              75,811               79,037
                                                                        ------------------   ------------------
     Total Current Assets..........................................             338,066              324,554

Property, Plant and Equipment, at cost, full cost method for oil and gas:
   Evaluated oil and gas properties................................           4,502,461            4,167,993
   Unevaluated oil and gas properties excluded from amortization...             554,883              556,276
   Other...........................................................             160,365              157,258
                                                                        ------------------   ------------------
                                                                              5,217,709            4,881,527
Accumulated Depreciation, Depletion and Amortization...............          (2,554,569)          (2,513,577)
                                                                        ------------------   ------------------
                                                                              2,663,140            2,367,950

Deferred Income Taxes..............................................              24,368              143,820
Other Assets.......................................................              57,126               54,076
                                                                        ------------------   ------------------

Total Assets.......................................................       $   3,082,700        $   2,890,400
                                                                        ==================   ==================

                                       Liabilities And Shareholders' Equity
Current Liabilities:
   Accounts and note payable.......................................       $     329,583        $     338,172
   Accrued liabilities.............................................              59,496               55,685
                                                                        ------------------   ------------------
     Total Current Liabilities.....................................             389,079              393,857

Long-Term Debt.....................................................           1,102,262            1,032,564
Deferred Revenue...................................................             138,606              146,043
Other Noncurrent Liabilities.......................................             170,452              165,248
Commitments and Contingencies......................................                   -                    -

Shareholders' Equity:
   Preferred stock, $1.00 par value; authorized 10,000,000 shares; issued
     50,000 shares.................................................                  50                   50
   Common stock, $0.10 par value; authorized 230,000,000 shares;
     issued 172,539,844 and 170,069,114 shares, respectively.......              17,254               17,007
   Additional paid-in capital......................................           1,546,504            1,517,064
   Accumulated deficit.............................................            (228,194)            (343,962)
   Less - treasury stock, at cost; 2,763,640 and 2,754,566 shares,
     respectively..................................................             (35,507)             (35,354)
   Accumulated other comprehensive income..........................             (10,664)                   -
   Other...........................................................              (7,142)              (2,117)
                                                                        ------------------   ------------------
     Total Shareholders' Equity....................................           1,282,301            1,152,688
                                                                        ------------------   ------------------

Total Liabilities and Shareholders' Equity.........................       $   3,082,700        $   2,890,400
                                                                        ==================   ==================`

See accompanying Notes to Consolidated Financial
Statements.

2

---

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

`Three Months Ended March 31,
                                                                       ---------------------------------------
                                                                             2001                 2000
                                                                       -----------------    ------------------
 Operating Activities:
   Net income........................................................       $  123,384           $   42,978
   Adjustments to reconcile net income to net cash
     provided by operating activities:
     Depreciation, depletion and amortization........................           82,455               80,080
     Deferred income taxes...........................................           75,707               28,245
     Other...........................................................           10,184                1,800
     Changes in operating assets and liabilities, net of acquisitions:
       Decrease in accounts receivable...............................           12,599                2,904
       Increase in inventories, prepaid expenses and other...........           (2,824)              (6,168)
       Decrease in accounts and notes payable........................          (35,336)             (30,055)
       Amortization of deferred revenue..............................           (7,437)              (4,958)
       Decrease in accrued expenses and other........................           (9,835)             (25,181)
                                                                       -----------------    ------------------
     Net Cash Provided by Operating Activities.......................          248,897               89,645
                                                                       -----------------    ------------------

 Investing Activities:
   Capital expenditures..............................................         (186,299)            (123,484)
   Acquisition costs, net of cash acquired...........................         (120,362)                (286)
   Proceeds from sales of property, plant and equipment..............              (68)              90,226
                                                                       -----------------    ------------------
     Net Cash Used in Investing Activities...........................         (306,729)             (33,544)
                                                                       -----------------    ------------------

 Financing Activities:
   Proceeds from debt................................................          526,400              401,289
   Principal payments on debt .......................................         (466,026)            (449,446)
   Proceeds from exercise of common stock options....................           18,825                1,738
   Other.............................................................           (6,855)              (1,682)
                                                                       -----------------    ------------------
     Net Cash Provided by (Used in) Financing Activities.............           72,344              (48,101)
                                                                       -----------------    ------------------

 Increase In Cash and Cash Equivalents...............................           14,512                8,000

 Cash and Cash Equivalents at Beginning of Period....................           23,039               64,889
                                                                       -----------------    ------------------

 Cash and Cash Equivalents at End of Period..........................       $   37,551           $   72,889
                                                                       =================    ==================`

See accompanying Notes to Consolidated
Financial Statements.

3

---

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

`Three Months Ended March 31,
                                                                     ---------------------------------------
                                                                           2001                 2000
                                                                     -----------------    ------------------

Net income...........................................................     $  123,384           $   42,978

Other comprehensive income (loss), net of tax:
   Cumulative effect of accounting change for financial derivatives..        (14,262)                   -
   Net change in fair value of derivative financial instruments......         (3,895)                   -
   Financial derivative settlements taken to income..................          7,617                    -
   Other.............................................................           (124)                   -
                                                                     -----------------    ------------------
                                                                             (10,664)                   -
                                                                     -----------------    ------------------
Comprehensive income.................................................     $  112,720           $   42,978
                                                                     =================    ==================`

See accompanying Notes to Consolidated Financial
Statements.

4

---

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

## Note 1.
Presentation of Financial Information

The
consolidated financial statements of Ocean Energy, Inc. (Ocean,
OEI or the Company), a Texas corporation, included
herein have been prepared, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission (SEC). Although certain
information normally included in financial statements prepared in accordance
with 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, 2000.

Property,
Plant and Equipment  The Company capitalizes interest expense and
certain employee-related costs that are directly attributable to oil and gas
operations. For the three months ended March 31, 2001 and 2000, the Company
capitalized interest expense in the amount of $10 million and $12 million,
respectively, and certain employee-related costs in the amount of $14 million
and $10 million, respectively.

Revenue Recognition 
Revenues associated with sales of crude oil
and natural gas are recorded when delivery to the customer has occurred (i.e.
when production has been delivered to the pipeline or a tanker lifting has
occurred).  Oil and gas sales revenues from properties in which the Company has
an interest with other producers are recognized following the entitlements
method of accounting for production, in which any excess amount received above
the Companys share is treated as a liability.  If less than the Companys
entitlement is received, the underproduction 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):

`Weighted Average         Earnings
                                          Net Income Available        Common Shares           Per Share
                                         to Common Shareholders         Outstanding             Amount
                                         ------------------------  ----------------------  ------------------
Quarter Ended March 31, 2001:
     Basic...............................     $  122,571                  168,279               $ 0.73
     Effect of dilutive securities:
          Stock options..................              -                    5,282
          Convertible preferred stock....            813                    3,450
                                         ------------------------  ----------------------
     Diluted.............................     $  123,384                  177,011               $ 0.70
                                         ========================  ======================`

5

---

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

`Weighted Average         Earnings
                                          Net Income Available         Common Shares           Per Share
                                         to Common Shareholders         Outstanding             Amount
                                         ------------------------  ----------------------  ------------------

Quarter Ended March 31, 2000:
     Basic...............................     $    42,165                 167,031              $  0.25
     Effect of dilutive securities:
          Stock options..................              -                    4,078
          Convertible preferred stock....             813                   3,441
                                         ------------------------  ----------------------
     Diluted.............................     $    42,978                 174,550              $  0.25
                                         ========================  ======================`

Options
to purchase 4.8 million shares of common stock at $17.94 to $36.54 per share and
options to purchase 9.4 million shares of common stock at $10.19 to $36.54 per
share were outstanding during the first quarter of 2001 and 2000, respectively,
but were not included in the computation of diluted earnings per share because
the options exercise prices were greater than the average market price of
the common shares. These options expire at various dates through 2011.

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

Change
in Accounting Method Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards
No. 133 (SFAS 133), Accounting for Derivative Instruments and
Hedging Activities.This statement establishes accounting and reporting
standards requiring that derivative instruments (including certain derivative
instruments embedded in other contracts) be recorded at fair market value and
included in the balance sheet as assets or liabilities. The accounting for
changes in the fair value of a derivative instrument depends on the intended use
of the derivative and the resulting designation, which is established at the
inception of a derivative. Special accounting for qualifying hedges allows a
derivatives gains and losses to offset related results on the hedged item
in the statement of operations. 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 the
relative changes in fair value between the derivative contract and the hedged
item over time. Any change in fair value resulting from ineffectiveness, as
defined by SFAS 133, is recognized immediately in earnings.

Adoption
of SFAS 133 at January 1, 2001 resulted in the recognition of $1 million of
additional derivative assets included in other current assets and $23 million
of derivative liabilities, $11 million of which are included in current liabilities
and $12 million of which are included in other noncurrent liabilities in the
Companys Consolidated Balance Sheet, and $14 million, net of taxes, of
deferred hedging losses, included in accumulated other comprehensive income as
the effect of the change in accounting principle. The cumulative effect of the
accounting change did not have a material effect on the Companys net
income and had no effect on earnings per share amounts.  Amounts were
determined as of January 1, 2001 based on quoted

6

---

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

market values, the Companys
portfolio of derivative instruments, and the Companys measurement of hedge effectiveness.

From time to time,
the Company has  utilized and expects to continue to utilize 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
price of natural gas and crude oil. Through  December 31, 2000,  gains and losses from these
financial  instruments have been  recognized  in  revenues during the  periods  to which  the  derivative
financial instruments relate.

Reclassification
of Transportation Expense As a result of the consensus on Emerging
Issues Task Force Issue 00-10, Accounting for Shipping and Handling Fees and
Costs, the Company reclassified prior periods to reflect transportation
expenses incurred as operating expenses, instead of a deduction from revenues as
previously recorded. While this reclassification had no effect on net income, it
did increase revenues and operating expenses by $5 million for the first quarter
of 2000.  Transportation expense totaled approximately $6 million for the first quarter of 2001.

## 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 the
acquisition of oil and gas reserves through a program, which included purchases
of reserves, development and exploration activities in Texas and
Louisiana.

Disposition
of Oil and Gas Assets On March 31, 2000, the Company completed the
sale of its East Bay Complex receiving net proceeds of approximately $78
million. The East Bay Complex contributed revenues of $23 million and operating
profit of $10 million for the three months ended March 31, 2000. The proceeds
were used to repay amounts outstanding under the Companys existing credit
facilities.

## 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,
                                                   ------------------------------------------------
                                                            2001                         2000
                                                   --------------------        ----------------------
Cash paid during the period for:
  Interest........................................     $    47,664                 $    41,491
  Income taxes....................................           4,153                      15,087`

7

---

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

## Note 4. Financial
Instruments

As
of March 31, 2001, the Company has in place put options that place an annual
floor price of $25.00 per Bbl on 20 MBbl of oil per day and annual floor prices
of $4.00 and $5.00 per Mcf each on 100 MMcf of natural gas per day for the
remainder of 2001. The Company has oil swaps covering 15 MBbl of oil per day
at an average price of $21.53 per Bbl through June 2001. With the Texoil acquisition,
the Company acquired collars which expire in July 2001 and cover 225 MBbls of 2001
production with weighted average floor prices of $24.67 and weighted average
ceiling prices of $33.02.

In addition,
a related trust has a swap agreement covering 14,500 Mcf of gas per
day at a price of $4.77 per Mcf for the remainder of 2001 and additional amounts
at various prices through 2005.  Although the Company is not a party to this
financial instrument, under SFAS 133 the Company is required to account for this
swap as an embedded derivative financial instrument.

As
discussed in Note 1, the Company began accounting for
the swaps and collars, which have been designated as cash flow
hedges, in accordance with SFAS 133. As a result, changes in the fair value of
these cash flow hedges are recognized in other comprehensive income until the hedged item
is recognized in earnings, and any change in fair value resulting
from ineffectiveness is recognized immediately in earnings. 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, 2001
                                                                --------------------------

Financial derivative settlements transferred
   from other comprehensive income..............................      $   (12,756)
Change in time value of put options.............................          (11,363)
Ineffective portion of derivative financial instruments
   qualifying as cash flow hedges...............................              657
                                                                --------------------------
Change in fair value of derivative financial instruments
   included in oil and gas revenues.............................         $(23,462)
                                                                ==========================`

The Company expects to transfer
approximately  $5 million of the balance in accumulated  other  comprehensive  income to earnings
during 2001 when the forecasted  transactions actually occur. All forecasted  transactions currently being hedged are
expected to occur by December 2005.

## Note 5.
Subsequent Event

Acquisition of Texas and
Louisiana Assets  During April 2001 the Company  acquired  certain oil and gas assets located  primarily
in East Texas and North Louisiana for a purchase price of approximately $118 million.

8

---

## 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, 2001 and 2000.

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,  2000  contain  detailed
information that should be referred to in conjunction with the following discussion.

Results Of
Operations
(Amounts in Thousands)

`Three Months Ended March 31,
                                                     ---------------------------------------
                                                          2001                   2000
                                                     ------------------     ----------------
Oil and gas operations:
Revenues:
  Natural gas.......................................   $    271,815          $     98,233
  Oil and NGL.......................................        131,440               153,176
                                                      -----------------      ----------------
                                                            403,255               251,409
                                                      -----------------     ----------------

Operating expenses..................................         74,564                62,161
Depreciation, depletion and amortization............         80,599                78,498
                                                      -----------------     ----------------
    Operating profit................................        248,092               110,750
Corporate...........................................         (7,997)              (10,704)
                                                      -----------------     ----------------
   Total operating profit...........................   $    240,095          $    100,046
                                                      =================     ================`

During
the first quarter of 2001 the Company has continued to benefit from higher
natural gas prices and a growing production base. As a result, the
Companys total operating profit for the first quarter of 2001 was nearly
two and one-half times that of the first quarter of 2000.

Revenues
 The Companys natural gas revenues have been increasing steadily
since the first quarter of 2000. Natural gas revenues for the first quarter of
2001 were nearly three times that of the first quarter of 2000 and were one and
one-half times that of fourth quarter 2000. These increases are primarily due to
higher average gas prices realized during the period as well as increases in
production. The average realized price for natural gas excluding the impact of financial derivatives for the
first quarter of 2001 was nearly three times that of the first quarter of
2000, $7.11 per Mcf in the first quarter of 2001 as compared to $2.55 in 2000.
Daily natural gas production for the first quarter of 2001 was 431 MMcf, an
increase of three percent as compared to daily production of 417 MMcf for the
first quarter of 2000. Excluding production from properties sold during the
first quarter of 2000, the increase in daily gas production was eight percent.

Oil
revenues totaled $131 million for the three months ended March 31, 2001, a
decrease of 14% from revenues of $153 million for the three months ended March
31, 2000. This decrease is the result of a three percent decrease in production
and an eight percent decrease in the average realized oil price excluding the
impact of financial derivatives during the period. The average

9

---

## Ocean Energy,
Inc.

## Item 2.
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations

realized price for oil
excluding the impact of financial derivatives was $23.51 per barrel
for the first quarter of 2001 as compared to $25.61 for the first
quarter of 2000. Daily oil production was 71 MBbl for the first quarter of 2001
as compared to 73 MBbl for the first quarter of 2000. Excluding production from
properties sold during the first quarter of 2000, the Company experienced a ten
percent increase in daily oil production.

Reclassification
of Transportation Expense The Company has reclassified the first
quarter of 2000 to reflect transportation expenses incurred as operating
expenses, instead of as a deduction from revenues as previously recorded. While
this reclassification had no effect on net income, it did increase revenues and
operating expenses by $5 million for the first quarter of 2000. Transportation expense totaled
approximately $6 million for the first quarter of 2001.

10

---

## Ocean Energy,
Inc.

## Item 2.
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations

Operating Data

`Three Months Ended March 31,
                                                 ---------------------------------------------------
                                                           2001                       2000
                                                 -------------------------  ------------------------
Net Daily Natural Gas Production (MMcf):
   Domestic ...................................               403                       374
   Cote d'Ivoire ..............................                20                        33
   Other International ........................                 8                        10
                                                 -------------------------  ------------------------
   Total.......................................               431                       417
                                                 =========================  ========================

Average Natural Gas Prices ($ per Mcf):
   Domestic....................................     $        7.37              $        2.57
   Cote d'Ivoire ..............................     $        2.40              $        2.01
   Other International ........................     $        5.51              $        3.46
   Weighted Average............................     $        7.11              $        2.55
Average Natural Gas Prices Including the Impact
   of Financial Derivatives ($ per Mcf)........     $        7.01              $        2.59

Net Daily Oil and NGL Production (MBbl):
   Domestic ...................................                27                         33
   Equatorial Guinea...........................                27                         21
   Cote d'Ivoire...............................                 4                          5
   Egypt ......................................                 8                          9
   Other International.........................                 5                          5
                                                 -------------------------  ------------------------
   Total.......................................                71                         73
                                                 =========================  ========================

Average Oil and NGL Prices ($ per Bbl):
   Domestic ...................................    $        26.73             $        26.31
   Equatorial Guinea...........................    $        21.85             $        26.35
   Cote d'Ivoire ..............................    $        22.29             $        23.74
   Egypt.......................................    $        23.38             $        26.16
   Other International.........................    $        16.26             $        18.36
   Weighted Average............................    $        23.51             $        25.61
Average Oil and NGL Prices Including the Impact
    Of Financial Derivatives ($ per Bbl).......    $        20.44             $        23.06

Wells Drilled :
   Gross.......................................                99                        44
   Net ........................................                32                        19
   Success Rate................................                90%                       91%`

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

Operating
Expenses  Operating expenses per BOE increased 21%, to $5.78 per BOE
for the first quarter of 2001 from $4.79 per BOE for the first quarter of 2000,
and total operating expenses increased $13 million to $75 million for the three
months ended March 31, 2001 from $62 million for the comparable 2000 period.
Approximately sixty percent of this increase is related to increased production
taxes resulting from higher commodity prices. Increased

11

---

## Ocean Energy,
Inc.

## Item 2.
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations

production and
additional workover expense also contributed to the increase in total operating
expenses.

Depreciation,
Depletion and Amortization Expense  Total depreciation, depletion and
amortization (DD&A) expense for oil and gas operations remained relatively
flat, increasing only four percent to $81 million for the three months ended
March 31, 2001 as compared to $78 million for the comparable period in 2000. DD&A
expense per BOE related to oil and gas operations also increased by three percent
to $6.25 per BOE for the quarter ended March 31, 2001 as compared to $6.05 per
BOE for the comparable period in 2000.

General
and Administrative Expenses  General and administrative expenses
decreased $3 million, or 33%, to $6 million for the three months ended March 31,
2001 from $9 million in the comparable 2000 period. The difference is due
primarily to the decrease in expense relating to compensation plans that are
tied directly to the market price of the Companys common stock.

# Other

Interest
Expense  Interest expense decreased 11%, or $2 million, to $17 million
for the three months ended March 31, 2001 from $19 million in the comparable
2000 period. This decrease is the result of the sixteen percent reduction in the
Companys debt balance since March 31, 2000.

Merger
and Integration Costs Merger and integration costs of $3
million relating primarily to severance costs were recorded in the first quarter
of 2000.

Income
Tax Expense Income tax expense of $101 million was recognized for the
first quarter of 2001 as compared to $35 million for the first quarter of 2000.
The effective income tax rate was 45% for the first quarter of 2001 and 2000.

# Liquidity
and Capital Resources

Liquidity
As of March 31, 2001, 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, 2001, borrowings outstanding totaled $70 million.Letters of
Credit totaled $41 million, leaving $389 million of available credit. The
Companys long-term debt totaled $1 billion and its debt to capitalization
ratio was 46% at March 31, 2001.

On
March 27, 2001, the Companys Board of Directors declared a quarterly common
stock dividend of four cents per share payable on April 20, 2001, to
stockholders of record at the close of business on April 6, 2001. The amount of
future dividends on OEI common stock will be

12

---

## Ocean Energy,
Inc.

## Item 2.
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations

determined on a quarterly basis
and will depend on earnings, financial condition, capital requirements and other
factors.

Capital
Expenditures(Amounts in Thousands)

`Three Months Ended March 31,
                                                  ------------------------------------------
                                                       2001                     2000
                                                  ------------------       ------------------
Oil and Gas Operations:
  Leasehold acquisitions..........................   $    21,515              $    15,424
  Exploration costs...............................        60,861                   48,757
  Development costs...............................       100,312                   56,973
                                                  ------------------       ------------------
                                                         182,688                  121,154
Corporate.........................................         3,611                    2,330
                                                  ------------------       ------------------
Total Capital Expenditures........................   $   186,299              $   123,484
                                                  ==================       ==================

Acquisitions......................................   $   186,885              $       286
                                                  ==================       ==================`

The
Companys capital investment program during 2001, as approved by the
Companys Board of Directors, was increased from the originally approved
budget of $700 million to include the Texoil acquisition, other planned activity
and higher prices for rig rentals and well services. The Companys revised budget totals
approximately $1 billion including acquisition costs.  The spending will be funded
from the Companys cash flows from operations based on anticipated
commodity prices and is subject to change if market conditions shift or new
opportunities are identified. 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.

During
March 2001 the Company acquired Texoil, Inc. for a cash purchase price of
approximately $115 million before assumed bank debt of $15
million. During the second quarter of 2001 the Company
will complete its acquisition of certain oil and gas assets located primarily in
East Texas and North Louisiana for a purchase price of approximately $118
million. These acquisitions are being funded with cash flows from
operations and borrowings under the credit facility.

The
Company makes, and will continue to make, substantial capital expenditures for
the acquisition, exploration, development, production and abandonment of its oil
and natural gas reserves. The Company has historically funded its expenditures
from cash flows from operating activities, bank borrowings, sales of equity and
debt securities, sales of non-strategic oil and natural gas properties, sales of
partial interests in exploration concessions and project finance borrowings. The
Company intends to finance capital expenditures for the year 2001 primarily with
funds provided by operations.

13

---

## Ocean Energy,
Inc.

## Item 2.
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations

## Environmental

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

## Defined Terms

Natural
gas is stated herein in thousand cubic feet (Mcf) or million cubic
feet (MMcf). Oil, condensate and natural gas liquids
(NGL) are stated in barrels (Bbl) or thousand barrels
(MBbl). 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. MBOE
and BOE represent one thousand barrels and one barrel of oil equivalent,
respectively, with six Mcf of gas converted to one barrel of liquid.

14

---

## Ocean Energy,
Inc.

## Item 2.
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations

## 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:

- volatility of energy commodity prices, generally, and fluctuations in the
commodity prices for crude oil and natural gas that have not been effectively
hedged, in particular;
- operational and systems risk incident to the drilling and operation
of oil and gas wells;
- competitive conditions in
the oil and gas industry;
- 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; and
- the effect on our results of operations and financial
condition associated with implementing various accounting rules and
regulations.

15

---

# Ocean
Energy, Inc.

## Item 3. Quantitative
and Qualitative Disclosures About Market Risks

To
mitigate a portion of its exposure to fluctuations in commodity prices, the
Company has entered into various derivative financial instruments for its oil
and gas production. See Note 4 to the Companys Consolidated Financial
Statements for a discussion of activities involving derivative financial instruments during the first quarter of
2001. 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, 2001 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 Increase
                                        Estimated               (Decrease) in          Estimated Decrease in
                                   Decrease in Revenues       Revenues with 10%          Revenues with 10%
          Instrument                at Current Prices        Decrease in Prices         Increase in Prices
--------------------------------   -----------------------   -----------------------   -------------------------

Oil and gas puts.............       $          (7)          $           6             $          (7)

Oil swaps and collars........                  (6)                     (3)                      (10)

Gas swap of related trust....                 (11)                     (2)                      (19)`

## Part II.
Other Information

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

None during the first
quarter of 2001.

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

(a)  Exhibits:

`* #10.1            Seagull Energy Corporation 1990 Stock Option Plan, including forms of agreements,  as amended, filed
                   herewith.`

*  Filed herewith.

#  Identifies management contracts and compensatory
plans or arrangements.

(b)  Reports on Form 8-K:

None.

16

---

# Ocean
Energy, Inc.

# 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 2, 2001


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

                                               Date:  May 2, 2001`

17

---

# Ocean
Energy, Inc.

# INDEX TO
EXHIBITS

`* #10.1            Seagull Energy Corporation 1990 Stock Option Plan, including forms of agreements,  as amended, filed
                   herewith.`

*  Filed herewith.

#  Identifies management contracts and compensatory
plans or arrangements.

18

---