---

Securities and Exchange CommissionWashington, D.C. 20549

Form
10-K

(Mark One)

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

SECURITIES EXCHANGE ACT OF 1934

For
the fiscal year ended December 31, 2002

OR

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

Commission File Number: 18094

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

Delaware              
       741764876(State or other jurisdiction of       
      (I.R.S. Employerincorporation or organization)      
     Identification No.)

1001 Fannin, Suite 1600, Houston, Texas
77002-6794(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 [ ]

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK
is not contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10K or any amendment to this Form 10K. [X]

Indicate
by check mark whether the  registrant  is an  accelerated  filer (as defined in Rule
12b2 of the  Act). Yes [X] No [ ]

As
of June 28, 2002, approximately 175,818,834 shares of Common Stock, par value $0.10
per share, were outstanding and the aggregate market value of the outstanding
shares of Common Stock of the Company held by nonaffiliates (based on the
closing price of these shares on the New York Stock Exchange) was approximately
$3.8 billion. For purposes of determining the above amount, all directors and
executive officers are considered affiliates.

As
of February 28, 2003, approximately 177,690,917 shares of Common Stock, par value
$0.10 per share, were outstanding and the aggregate market value of the
outstanding shares of Common Stock of the Company held by nonaffiliates (based
on the closing price of these shares on the New York Stock Exchange) was
approximately $3.5 billion. For purposes of determining the above amount, all
directors and executive officers are considered affiliates.

Documents
Incorporated by ReferenceThe information required by Part III of Form 10K will be incorporated by reference
to the Companys definitive proxy statement for its annual meeting of
stockholders in 2003. To the extent that such proxy statement is not filed
within 120 days of the Companys fiscal year end, the Company will file an
amendment to this Form 10K to include such information.

---

Ocean
Energy, Inc.

Index

|                                                                               | Page
|------------------------------------------------------------------------------ | ----
|Part I                                                                         |     
|                                                                              
|Item 1.   Business                                                             |     
|Oil and Gas Operations                                                         |     
|U.S. Regulation                                                                |     
|Competition                                                                    |     
|Environmental Matters                                                          |     
|Risk Factors                                                                   |     
|Employees                                                                      |     
|Executive Officers of the Company                                              |     
|Item 2.   Properties                                                           |     
|Item 3.   Legal Proceedings                                                    |     
|Item 4.   Submission of Matters to a Vote of Security Holders                  |     
|                                                                              
|Part II                                                                        |     
|Item 5.   Market for Registrants Common Stock and Related Stockholder Matters |     
|Item 6.   Selected Financial Data                                              |     
|Item 7.   Managements Discussion and Analysis of Financial Condition and     
|Results of Operations                                                          |     
|Item 7a. Quantitative and Qualitative Disclosures About Market Risk            |     
|Item 8.   Financial Statements and Supplementary Data                          |     
|Item 9.   Changes in and Disagreements with Accountants on Accounting         
|and Financial Disclosure                                                       |     
|                                                                              
|Part III                                                                       |     
|Item 10.   Directors and Executive Officers of the Registrant                  |     
|Item 11.   Executive Compensation                                              |     
|Item 12.   Security Ownership of Certain Beneficial Owners and Management      |     
|Item 13.   Certain Relationships and Related Transactions                      |     
|Item 14.   Controls and Procedures                                             |     
|                                                                              
|Part IV                                                                        |     
|Item 15.   Exhibits, Financial Statement Schedules and Reports on Form 8-K     |     
|Signatures                                                                     |     
|Certifications                                                                 |     
|Index to Exhibits                                                              |     

(i)

---

# Ocean
Energy,  Inc.

Part I

Item 1.   Business

Ocean
Energy, Inc. (the Company, OEI or  Ocean) is one of
the largest independent oil and gas exploration and  production companies in the United
States. The Company conducts North American  operations in the shelf and deepwater areas
of the Gulf of Mexico, the Rocky  Mountains, Permian Basin, Anadarko, East Texas, North
Louisiana and the Gulf  Coast regions. Internationally, Ocean holds a leading position
among U.S.  independents in West Africa with oil and gas activities in Equatorial Guinea,
Angola, Nigeria and Côte dIvoire. The Company also conducts operations in
Egypt, the Russian Republic of Tatarstan, Brazil and Indonesia.

Recent
Developments

On
February 23, 2003, Ocean and Devon Energy Corporation (Devon)
entered into an Agreement and Plan of Merger that provides for the merger of
Ocean into a subsidiary of Devon. In connection with the merger, which is
anticipated to close midyear 2003, Ocean stockholders will receive 0.414 share
of common stock of Devon for each share of Ocean common stock they own. After
the merger, the stockholders of Ocean are expected to own approximately 32% of
the outstanding common stock of the combined company. The merger is expected to
qualify as a taxfree transaction with no gain or loss recognized for U.S.
Federal income tax purposes by the Ocean stockholders upon receipt of Devon
common stock in exchange for shares of Ocean common stock. The merger is subject
to approval by the stockholders of each Company and certain other customary
closing conditions, including regulatory review under the HartScottRodino Antitrust Improvements Act
of 1976. The agreement between the companies contains reciprocal provisions for
the payment of breakup fees under certain termination events.

We
believe the combination of Ocean and Devon will yield operational and financial benefits:

- Devons  stable,  gasfocused  North  American  assets  will be  complemented  by  Oceans  highpotential
         international and deepwater development and exploration projects.
- The  transaction  creates an entity  with a stronger  balance  sheet and  greater  financial  flexibility,
         allowing for acceleration of key exploration opportunities.
- The companies expect general and administrative cost savings of at least $50 million annually.
- Devon and Ocean have significant core area overlap that will provide operational synergies.

The
combination of Ocean and Devon will create the largest  U.S.based  independent oil and
natural gas  producer with  production of  approximately  650,000 BOE per day, and upon
completion of the merger,  the combined  company will have an estimated enterprise value of
approximately $20 billion. After the merger the combined company will, based on information as of December 31, 2002:

- Produce  approximately 2.4 billion cubic feet of natural gas and approximately  250,000 barrels of oil and
         natural gas liquids per day.
- Have approximately 2.2 billion BOE proved reserves, with 84 percent in North America.
- Have 90 percent of its worldwide production from North America, of which 69 percent will be natural gas.
- Have longterm debt of approximately 52 percent of total capitalization.

1

---

# Ocean
Energy,  Inc.

- Hold approximately 29 million net undeveloped acres worldwide.
- Be the largest  independent  deepwater  Gulf  leaseholder,  with interests in more than 500 deepwater
         Gulf of Mexico blocks.

General

Ocean
has developed a strong position among U.S. independent oil and gas exploration
and production companies in the deep waters off the coasts of the Gulf of
Mexico, Brazil and West Africa. The Company has assumed an operator
position as controlling partner on selected properties in each of these deepwater areas. During 2002, Ocean
increased its deepwater net acreage position in the Gulf of Mexico and expanded
its international operations by adding new blocks in Angola, Nigeria and Egypt.

In 2002, the Company reduced its capital expenditure budget approximately 30%
from the prior year in response to the lower commodity price environment that
existed at the beginning of the year. With a reduced capital expenditure budget,
a greater portion of the budget was used to fund deepwater development projects
resulting from three prior years of exploratory success, and exploration and
acquisition spending were reduced.

The
reduction in capital spending negatively impacted the Companys reserve
replacement rate and finding and development costs for 2002. The 2002 reserve
replacement rate was 111% as compared to 387% for 2001, and 2002 finding and
development cost was $12.11 per BOE as compared to $5.52 for 2001. Companies
involved in exploration activities can have highly variable results from year to
year. Our threeyear averages include a reserve replacement rate of 254%, and a
threeyear average finding and development cost of $6.12 per BOE. During 2003,
the Company expects to return to the exploration emphasis it had in 2001.

Oceans
total estimated proved reserves declined 1% to 593 MMBOE as of December 31, 2002
from 601 MMBOE at yearend 2001. Reserves were negatively affected by the impact of higher commodity prices on foreign
production sharing contracts and the sales of assets. These reductions in reserves were partially offset by the impact of higher
commodity prices on reserves not held under foreign production sharing contracts. Proved natural gas reserves, which comprise 50%
of total proved reserves, reached 1.8 trillion cubic feet and oil reserves
totaled 297 million barrels. Of these total proved reserves, 66% are located in
North America and 34% are located internationally.

Despite shutins caused by two hurricanes in the Gulf of Mexico and installation delays on deepwater Gulf of Mexico
projects, the Company achieved a 3% yearoveryear production increase and a
9% fourth quarter increase over the same period in 2001. Production averaged 153
MBOE per day for 2002 as compared to 149 MBOE per day for 2001. Higher
production volumes were primarily attributable to new deepwater production from
the Nansen/Boomvang complex and continued exploitation in the Zafiro field in
Equatorial Guinea.

Ocean
is focused on financial discipline and a balanced property base. The
Companys assets combine revenuegenerating international, domestic onshore
and shelf properties as well as highpotential deepwater Gulf of Mexico and
international exploratory prospects. The Company remains committed to producing
lowcost energy, enhancing stockholder value, maintaining its focus on operating
efficiency, and continuing to strengthen its capital structure.

The
Companys internet address is www.oceanenergy.com. The Company makes available free

2

---

# Ocean
Energy,  Inc.

of charge on
or through its internet website its annual reports  on Form 10K, quarterly reports
on Form 10Q, current reports on  Form 8K, and amendments to those reports
filed or furnished pursuant to  Section 13(a) or 15(d) of the Exchange Act as soon
as reasonably  practicable after electronically filing such material with, or furnishing
it to,  the Securities and Exchange Commission (the Commission).

Oil and Gas
Operations

The
Companys  activities  are focused  primarily  in three  operating  areas:  (i) the
continental  shelf and deepwater areas of the Gulf of Mexico, (ii) onshore areas of North America, and (iii) internationally in  Equatorial
Guinea, Angola, Nigeria, Côte dIvoire, Egypt, the Russian Republic of  Tatarstan, Brazil
and Indonesia.

The Companys capital investment program  for 2003 is expected to
total approximately $1 billion. The spending will be  funded from the Companys
discretionary cash flow based on anticipated  commodity prices and is subject to change
if market conditions shift or new  opportunities are identified. Of the budget, $500
million to $550 million will  be spent in the Gulf of Mexico region, $300 million to $400
million will be  spent internationally, and $100 million to $150 million will be spent in
the  U.S. onshore region. Approximately onethird of the budget is allocated to
exploratory projects.

Oceans
principal oil and gas producing areas include the following:

|                      | Estimated Proved Reserves at December 31, 2002
|--------------------- | ----------------------------------------------
|                     
|
|                     
|Domestic:             |                                               
|Gulf of Mexico        |                                               
|North America Onshore |                                               
|International:        |                                               
|Equatorial Guinea     |                                               
|Egypt                 |                                               
|Cote d'Ivoire         |                                               
|Other International   |                                               
|                     
|Total                 |                                               
|                     

For
additional information relating to the Companys oil and gas reserves, see
Note 20 to the Consolidated Financial Statements. As required, Ocean also files
estimates of oil and gas reserve data with various governmental regulatory
authorities and agencies. These estimates were not materially different from the
reserve estimates reported in the Consolidated Financial Statements.

DOMESTIC

The
Companys domestic activities reside in two main areas: the Gulf of Mexico
and certain onshore areas of North America. The domestic area includes 66% of
the Companys reserves and accounted for 64% of total production for the
year ended December 31, 2002.

3

---

# Ocean
Energy,  Inc.

Gulf  of
Mexico

The
Companys Gulf of Mexico properties are located in offshore waters along
the coasts of Texas and Louisiana. For 2002, the Gulf of Mexico area had average
daily production of 51 MBOE. This area currently accounts for 33% of
Companywide production and will be the focus of approximately
50% of the  Companys planned capital expenditures in 2003, with 75% of that amount
focused on deepwater activities.

The
major growth in this area is associated with Oceans deepwater prospects.
Ocean now ranks among the top six companies in terms of leasehold in the
deepwater Gulf of Mexico with interests in approximately 860,000 net acres covering
361 blocks. The deepwater Gulf of Mexico is characterized by
increasing production, multiple development projects and an active exploration
program. The Company plans to utilize a hubandspoke concept in developing the
deepwater Gulf to enhance the economics of producing from deepwater areas.
Exploratory efforts are focused on specific regions followed by subsequent
development of neighboring discoveries with production from a large, centrally
located facility.

Nansen/Boomvang/Navajo
ComplexDuring 2002, production began from Oceans first
major deepwater fields in the East Breaks area of the Gulf of Mexico where Ocean
made two significant discoveries in 1999. The Nansen and Boomvang production
sites feature the worlds first truss spars with a combined daily
production capacity of up to 80,000 barrels of oil and 400 million cubic feet of
gas. Production began from the Nansen field (50% working interest
(WI)) in January 2002 and from the Navajo (50% WI) and Boomvang (20% WI) fields in June
2002. Additional discoveries made in the West Navajo field in East Breaks Block 689 (50% WI) and the Northwest Navajo field in East Breaks Block 646 (50% WI) during 2002 are being linked to the nearby Nansen spar via subsea tiebacks. Oceans combined net production from the Nansen/Boomvang/Navajo complex was
approximately 37,000 BOE per day at December 31, 2002. Completion of dry tree
and subsea wells will continue through the first half of 2003.

Zia
Development The Zia project in Mississippi Canyon Block 496 (65% WI)
is the first deepwater development project operated by Ocean. The field will
utilize a subsea completion that will flow approximately 16 miles to a platform
in South Pass 89. First production is scheduled for late summer 2003.

Magnolia
Development  Ocean is participating in the development of the Magnolia
Field (25% WI) in nearly 4,700 feet of water. The deepwater development project
is located in Garden Banks blocks 783 and 784. Development drilling is underway, with 2 of 8 platform development wells already drilled,
and construction of a tension leg platform has begun. Production is anticipated
to begin by yearend 2004.

Redhawk
Development  Two development wells (50% WI) have already been drilled and are waiting on subsea completion.  Fabrication of
a cell spar has begun and first production is anticipated in 2004.

Atwater
Valley Area  Two discoveries were made in the Atwater Valley area, Merganser in
block 36 (50% WI) and Vortex in block 261 (33% WI). Ocean is continuing to evaluate its additional exploration opportunities in the area.

Trident
Prospect  The Trident partnership is currently evaluating Trident in
Alaminos Canyon block 943 (13% WI) and offset discoveries in the area to
determine overall commerciality.

4

---

# Ocean
Energy,  Inc.

Deepwater
Exploratory Activities  In 2003, Ocean anticipates drilling
another six deepwater exploratory prospects. Four of the prospects, Yorktown in
Mississippi Canyon Block 841 (50% WI), Shiner in
Garden Banks Block 656 (25% WI),  Tuscany in Desoto Canyon Block 179 (37.5% WI) and Aztec
in Keathley Canyon Block 196 (50% WI) will be Oceanoperated.

Gulf
of Mexico Shelf Activities in 2002 included a workover and
recompletion program designed to maximize production from the area and
successful development drilling programs at the Main Pass 69 field (100% WI) and
the Eugene Island 126 field (100% WI). The recompletion and workover program will
continue during 2003 and the Company plans to engage in exploitation and
exploration drilling. The programs are concentrated in the core areas in the
Delta and Central Gulf.

North
America Onshore

Oceans portfolio
of onshore properties in North America is focused
primarily in the Rocky Mountains, Permian Basin, Anadarko, East Texas, North
Louisiana and the Gulf Coast regions. These properties are located mostly in
mature areas where the Company can take advantage of lowcost exploitation to
maintain and replace reserves. During 2002, the Companys share of
production from the North America Onshore area averaged 47 MBOE per day.

Rocky
Mountains  The Rocky Mountain area contains the Bear Paw
field where Ocean has a large inventory of drilling locations. During 2002, the
Company completed a 75well development drilling program in the Bear Paw Field
(96% WI). In 2003, Ocean will continue production and reserve development by
expanding its drilling program to 100 wells. The Company plans to implement 3D
seismic for the first time within the Bear Paw producing areas to help identify
optimum drilling locations within new fault blocks. The Company obtained a 75%
working interest in approximately 60,000 acres in northwest Colorado during 2002
and plans to conduct exploratory activities on this acreage during 2003.

Permian
Basin  The Companys 2002 activities in the Permian Basin
included a successful horizontal drilling and development program in Ward
County. The program included the drilling of two 17,000 foot horizontal gas
wells, the Harding Fee #2H and the Harding Fee #3H (65% WI), which targeted the
Montoya formation. During 2003, the Company will continue horizontal drilling
and development activities and plans to drill the first exploratory horizontal
well in Midland County. During 2003, the Company also plans to build upon its
successful 2002 exploratory efforts in West Texas and New Mexico.

Anadarko  The Company continues to exploit its extensive acreage
position in the Anadarko area. During 2002, the primary focus was in the Strong
City and WatongaChickasha areas in the Anadarko Basin and the Wilburton area in
the Arkoma Basin. For 2003, the Company plans additional development of the
Anadarko area, particularly in the Texas Panhandle. Activities will include
application to the Companys undeveloped acreage of new stimulation techniques, which have revitalized sparselydeveloped, existing marginal fields.

East
Texas and North Louisiana  Focus areas are the Bossier, Carthage and
Stockman Fields in East Texas and the Vernon Ansley and Ruston Field areas in
North Louisiana. Development drilling and recompletion activities are ongoing.

5

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# Ocean
Energy,  Inc.

Gulf
Coast  The primary focus for 2002 was a recompletion/workover program
complemented by a continued exploration effort primarily in the Wilcox trend in
South Texas. Exploitation activities will continue in 2003 with increased
development drilling and a continued active recompletion/workover program.
Exploration activities will continue and will include the use of 3D seismic to
identify more exploration leads.

INTERNATIONAL

The
Company produces oil and gas in five countries outside of the United States
 Equatorial Guinea, Egypt, Russia, Côte dIvoire and Indonesia.
In addition, the Company has interests in other countries, including Angola,
Brazil and Nigeria. The Company discontinued exploratory activities in the
Arabian Sea offshore Pakistan during 2002.

In
Equatorial Guinea, Egypt, Côte dIvoire, Angola, and Nigeria, the
Companys acreage is generally held pursuant to production sharing
contracts (PSCs) with the host governments. Typically, under a PSC
the working interest partners pay all of the capital and operating costs and
production is split between the government and the working interest partners.
Working interest partners recover costs from a percentage of production. The remaining
production, after cost recovery, is divided between the government and the working interest partners. Included in
the governments share of remaining petroleum are, in certain situations, the applicable income taxes for the working interest
partners.

Equatorial
Guinea

In
Equatorial Guinea, the Company has three PSCs covering 1.9 million gross acres.
Equatorial Guinea currently includes 20% of the Companys reserves and
accounted for 22% of Companywide production for 2002. During 2002, the
Companys share of production averaged 33 MBOE per day. Nearly half of the
Companys international budget for 2003 will be spent in Equatorial Guinea
on continued development of the Zafiro field.

Block
B  Block B (23.75% WI) covers approximately 547,000 gross acres and
contains the Zafiro field, where production currently occurs from two
facilities, the Zafiro Producer and the Jade Platform. During 2002, the Company
continued development of this area by successfully drilling eight development
wells. One of these wells, the JP6, is the longest extended reach well from the
Jade Platform to date, with approximately 13,000 feet of horizontal displacement. A
debottlenecking shut down was successfully completed for the Zafiro Producer and
the field was returned to full production during third quarter 2002.

The
Company has also been conducting development activities in the Southern
Expansion Area (SEA) of the Zafiro field. To date, seven development
wells have been drilled and suspended pending arrival of the Serpentina, a
floating production, storage and offloading vessel (FPSO) which will
add the capacity needed to begin producing from this area. The SEA Project
remains on schedule for startup of the FPSO Serpentina which is anticipated to
occur in the second half of 2003.

Block
C  During 2002, the Company conducted exploratory activities on Block
C (37.6% WI). An exploratory well failed to discover commercial quantities of
reserves and the Company is evaluating the remaining potential for oil in Block
C. This block covers approximately 649,000 gross acres.

6

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# Ocean
Energy,  Inc.

Block
N  In early 2002, the Company entered into a PSC with the government
of Equatorial Guinea covering Corisco Bay Block N (25.5% WI), a 678,000 gross
acre concession in the Rio Muni Basin offshore the mainland of Equatorial
Guinea. Interpretation of final processed 3D seismic data for Block N is
underway and the Company expects to drill an exploratory well in the second half
of 2003.

Block
D  During 2002, the Company withdrew from
Block D concession after exploratory efforts indicated insufficient quantities
of reserves to justify commercial recoverability.

Egypt

Egypt
currently includes 4% of the Companys reserves and accounted for 6% of
Companywide production for 2002. During 2002, the Companys share of
production averaged 9 MBOE per day.

The
Companys Egyptian operations consist of working interests in seven
concessions covering 3.8 million gross acres. Four of these concessions are
producing concessions  East Zeit, Qarun, East Beni Suef and West Abu
Gharadig. Ocean also holds an interest in an exploratory block, Southwest Gebel
el Zeit in the Gulf of Suez. During 2002, Ocean acquired interests in two
additional exploratory blocks, Ras Abu Darag in the Northern Gulf of Suez and
North Zeit Bay in the Gulf of Suez.

East
Zeit  The Company is operator of the East Zeit concession (100%
WI) which covers 6,672 acres and is located offshore in the Gulf of Suez. During
2002, the Company conducted a workover program and installed jet pump surface
equipment to boost production. A second platform is under construction and the
Company plans to drill the C-1 well during 2003 to develop the reserves
discovered by the A-21 well.

Qarun
 The Qarun concession (25% WI) covers approximately 66,000 gross acres
located 45 miles southwest of Cairo, Egypt. During 2002, the Company
successfully drilled two development wells.

East
Beni Suef  The East Beni Suef concession (50% WI) covers approximately
3.4 million gross acres lying adjacent and to the south of the Qarun concession.
During 2002, the Company drilled the EBS10 development well and completed it as
a producer. The Company is also conducting exploratory drilling on the
concession.

West
Abu Gharadig  The West Abu Gharadig concession (30% WI) covers
32,222 gross acres in lower Egypt.

Southwest
Gebel el Zeit  The Southwest Gebel el Zeit concession (43.75%
WI) covers 7,413 gross acres located offshore in the Gulf of Suez. The Company
assumed operatorship of the block during 2002 and is conducting
exploratory activities.

Ras
Abu Darag and North Zeit Bay  The Ras Abu Darag concession (100% WI)
covers 229,312 gross acres and the North Zeit Bay concession (100% WI) covers
44,973 gross acres. The Company is in the process of 3D seismic acquisition for
these exploratory blocks.

Côte dIvoire

In
Côte dIvoire, the Company is the operator on three blocks, Block
CI01 (80% WI), Block CI02 (65% WI) and Block CI11 (48% WI) which in total
cover approximately 313,000 gross acres. The Company also owns and operates the Lion Gas
Plant. During 2002, the Companys share of production averaged 7 MBOE per
day.

7

---

# Ocean
Energy,  Inc.

During
2002, an attempted coup detat occurred in the country. A peace accord
between the government of Côte dIvoire, the rebels and various
political parties has been signed in Paris. The political situation remains
uncertain. To date, Ocean has not experienced any disruption in its operations
in Côte dIvoire but can provide no assurance that future political
or economic events affecting Côte dIvoire will not adversely affect
its operations.

Russia

The Company has a net 45% interest in a joint venture in Tatarstan, a
republic in the Russian Federation. During 2002, the joint venture successfully
drilled 29 development wells and 2 exploratory wells in the Onbysk and Demkino
fields and plans additional development activity in the Onbysk and Demkino
fields during 2003.

During
2002, the Companys share of production averaged 5 MBOE per day.

Angola

Ocean
is the only U.S. independent chosen to act as an operator in Angola and
currently holds interests in 2.7 million gross acres.

Block
10  Ocean acquired an operated interest in Block 10 (35% WI) offshore
Angola in early 2002. The Company holds an interest in 1.2 million gross acres
in Block 10 and is in the process of conducting 3D seismic acquisition. The
Company plans to drill the first exploratory well on Block 10 during 2003.

Block
24 Block 24 (40% WI) is in the Kwanza Basin adjacent to Block 10.
Ocean will become operator of this Block following the drilling of the Varina North well which
spud in February 2003. The Company anticipates drilling a second exploratory
well on Block 24 in late 2003. The Company holds an interest in 1.2 million
gross acres in Block 24.

Block
19  During 2002, the Company discontinued exploratory activities on
Block 19 (20% WI) in the Lower Congo Basin after exploratory efforts indicated
insufficient quantities of reserves to justify commercial recoverability.

Brazil

Ocean
holds an interest in two deepwater exploration blocks offshore Brazil. The
Company has a 65% working interest in Block BMC15, which it operates, and a
20% working interest in Block BMS22. The two blocks cover a total of 1.2
million gross acres. The Company is in the process of interpreting 3D seismic
data on Block BMC15 in the Campos Basin and plans to drill on this block in
late 2003 or early 2004. Drilling activities on Block BMS22 are not
anticipated to begin until 2004.

8

---

# Ocean
Energy,  Inc.

Nigeria

In
early 2003, the Company finalized a production sharing contract to become
operator of OPL Block 256 (95% WI). The 631,000 gross acre block spans
approximately 87 miles and is located in water depths of 6,0009,500 feet. The
working program calls for seismic studies and the drilling of three obligatory
exploration wells, the first of which is expected to spud in 2004.  The Company plans to
farm out a portion of its interest in this block.

Indonesia

Ocean owns a 1.7% interest in a joint venture in East Kalimantan, Indonesia.
The majority of the joint ventures revenues results from the sale of
liquefied natural gas.

Production

The
following table summarizes the Companys production, average sales prices
and productionrelated operating costs for the periods indicated:

9

---

# Ocean
Energy,  Inc.

|                                          | Year Ended December 31,
|----------------------------------------- | -----------------------
|                                         
|                                          |                        
|                                         
|Domestic:                                 |                        
|Net production:                           |                        
|Oil and NGL (MBbl)                        |                        
|Gas (MMcf)                                |                        
|Average sales price:(1)                   |                        
|Oil and NGL (per Bbl)                     |                        
|Gas (per Mcf)                             |                        
|Average productionrelated operating      |                        
|costs (per BOE)(2)                        |                        
|Equatorial Guinea:                        |                        
|Net oil production (MBbl)                 |                        
|Average oil sales price (per Bbl)(1)      |                        
|Average productionrelated operating      |                        
|costs (per BOE)(2)                        |                        
|Egypt:                                    |                        
|Net production:                           |                        
|Oil and NGL (MBbl)                        |                        
|Gas (MMcf)                                |                        
|Average sales price:(1)                   |                        
|Oil and NGL (per Bbl)                     |                        
|Gas (per Mcf)                             |                        
|Average productionrelated operating      |                        
|costs (per BOE)(2)                        |                        
|Côte dIvoire:                            |                        
|Net production:                           |                        
|Oil and NGL (MBbl)                        |                        
|Gas (MMcf)                                |                        
|Average sales price: (1)                  |                        
|Oil and NGL (per Bbl)                     |                        
|Gas (per Mcf)                             |                        
|Average productionrelated operating      |                        
|costs (per BOE)(2)                        |                        
|Other International:                      |                        
|Net production:                           |                        
|Oil and NGL  (MBbl)                       |                        
|Gas (MMcf)                                |                        
|Average sales price: (1)                  |                        
|Oil and NGL (per Bbl)                     |                        
|Gas (per Mcf)                             |                        
|Average productionrelated operating      |                        
|costs (per BOE)(2)                        |                        
|Total:                                    |                        
|Net production:                           |                        
|Oil and NGL  (MBbl)                       |                        
|Gas (MMcf)                                |                        
|Average sales price:(1)                   |                        
|Oil and NGL (per Bbl)                     |                        
|Gas (per Mcf)                             |                        
|Average sales price including hedging:(1) |                        
|Oil and NGL (per Bbl)                     |                        
|Gas (per Mcf)                             |                        
|Average productionrelated operating      |                        
|costs (per BOE)(2)                        |                        

|(1) |  | Average
sales prices are before  deduction of production,  severance,  and other taxes and
transportation  expenses.
|--- |  | --------------------------------------------------------------------------------------------------------------------

|(2) |  | Operating costs represent costs incurred to operate and maintain wells and
related equipment and facilities. These costs include, among other things,
repairs and maintenance, workover expenses, labor, materials, supplies, property
taxes, insurance, severance taxes, transportation expenses and general operating
expenses. These costs exclude certain employee costs that support the
Companys ongoing oil and gas activities.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

---

# Ocean
Energy,  Inc.

Oil and Gas
Drilling Activities

Oceans
oil and gas exploratory and developmental drilling activities are as follows for
the periods indicated. A well is considered productive for purposes of the
following table if it justifies the installation of permanent equipment for the
production of oil or gas. The term gross wells means the total
number of wells in which Ocean owns an interest, while the term net
wells means the sum of the fractional working interests Ocean owns in
gross wells. The information should not be considered indicative of future
performance, nor should it be assumed that there is necessarily any correlation
between the number of productive wells drilled, quantities of reserves found or
economic value.

11

---

# Ocean
Energy,  Inc.

|                      | Year Ended December 31,
|--------------------- | -----------------------
|                     
|
|                     
|
|                     
|Domestic:             |                        
|Exploratory Drilling: |                        
|Productive Wells      |                        
|Dry Holes             |                        
|Development Drilling: |                        
|Productive Wells      |                        
|Dry Holes             |                        
|Equatorial Guinea:    |                        
|Exploratory Drilling: |                        
|Productive Wells      |                        
|Dry Holes             |                        
|Development Drilling: |                        
|Productive Wells      |                        
|Dry Holes             |                        
|Egypt:                |                        
|Exploratory Drilling: |                        
|Productive Wells      |                        
|Dry Holes             |                        
|Development Drilling: |                        
|Productive Wells      |                        
|Dry Holes             |                        
|Côte dIvoire:        |                        
|Exploratory Drilling: |                        
|Productive Wells      |                        
|Dry Holes             |                        
|Development Drilling: |                        
|Productive Wells      |                        
|Dry Holes             |                        
|Other International:  |                        
|Exploratory Drilling: |                        
|Productive Wells      |                        
|Dry Holes             |                        
|Development Drilling: |                        
|Productive Wells      |                        
|Dry Holes             |                        
|Total:                |                        
|Exploratory Drilling: |                        
|Productive Wells      |                        
|Dry Holes             |                        
|Development Drilling: |                        
|Productive Wells      |                        
|Dry Holes             |                        

The
Company had 36 gross (16 net) exploratory wells and 72 gross (37 net)
development wells in progress at December 31, 2002. Wells classified as in
progress at yearend represent wells where drilling activity is ongoing,
wells awaiting installation of permanent equipment and wells awaiting the
drilling of additional delineation wells.

12

---

# Ocean
Energy,  Inc.

The
following table sets forth information regarding the number of productive wells
in which the Company held a working interest at December 31, 2002. Productive
wells are either producing wells or wells capable of commercial production
although currently shutin. One or more completions in the same borehole are
counted as one well.

|                    | Gross Wells | Net Wells
|------------------- | ----------- | ---------
|                   
|
|
|                   
|Domestic:           |             |          
|Gulf of Mexico      |             |          
|North America       |             |          
|Onshore             |             |          
|International:      |             |          
|Equatorial Guinea   |             |          
|Egypt               |             |          
|Côte dIvoire       |             |          
|Other International |             |          
|                   
|                    |             |          
|                   

Developed and
Undeveloped Oil and Gas Acreage

As
of December 31, 2002, the Company owned working interests in the following
developed and undeveloped oil and gas acreage (amounts in thousands):

|                         | Developed | Undeveloped(1) | Total
|------------------------ | --------- | -------------- | -----
|                        
|
|                        
|Domestic:                |           |                |      
|Gulf of Mexico Deepwater |           |                |      
|Gulf of Mexico Shelf     |           |                |      
|North America Onshore    |           |                |      
|International:           |           |               
|Equatorial Guinea        |           |                |      
|Egypt                    |           |                |      
|Côte dIvoire            |           |                |      
|Angola                   |           |                |      
|Brazil                   |           |                |      
|Russia                   |           |                |      
|                        
|Total                    |           |                |      
|                        

|(1) |  | Excludes an
interest in 1,194,000 gross (239,000 net) acres in Angola Block 19 which was relinquished in early 2003 and 1,485,000 gross (1,262,000 net) acres in the Makran Central block in Pakistan which was assigned in early 2003.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Additionally,
as of December 31, 2002,  the Company owned  mineral  and/or  royalty  interests in
185,445  gross (1,750 net) developed  acres and 3.4 million  gross  (39,832 net)  undeveloped  acres in  other
international locations.

For
additional  information  relating  to oil and gas  producing  activities,  see Notes 19
and 20 to the  Consolidated Financial Statements.

13

---

# Ocean
Energy,  Inc.

U.S.
Regulation

The
availability  of a ready market for oil and natural gas production  depends upon numerous
regulatory  factors  beyond the  Companys  control.  These  factors  include  regulation
of oil and natural  gas  production,  federal and state regulations  governing
environmental quality and pollution control and state limits on allowable  rates of
production by a well or proration unit.  State and federal  regulations  generally are
intended to prevent  waste of oil and natural gas,  protect rights to produce oil and
natural gas between owners in a common  reservoir,  control  the amount of oil and
natural  gas  produced  by  assigning  allowable  rates of  production  and control
contamination of the environment.

Regulation
of Oil and Natural Gas Exploration and Production. Exploration and production operations
of the Company are subject to various types of regulation at the federal, state and
local levels. Such regulation includes requiring permits for the drilling of wells,
maintaining bonding requirements in order to drill or operate wells, and regulating the
location of wells, the method of drilling and casing wells, the surface use and
restoration of properties upon which wells are drilled and the plugging and abandonment
of wells. The Companys operations are also subject to various conservation laws
and regulations. These include the regulation of the size of drilling and spacing units
or proration units and the density of wells which may be drilled and unitization or
pooling of oil and gas properties. In this regard, some states allow the forced pooling
or integration of tracts to facilitate exploration while other states rely on voluntary
pooling of lands and leases. In addition, state conservation laws establish maximum
rates of production requirements regarding the ratability of production.

Federal
Regulation of Sales and Transportation of Natural Gas. Historically, the
transportation and sale of natural gas in U.S. interstate commerce has been
regulated pursuant to several laws enacted by Congress and the regulations promulgated
under these laws by the Federal Energy Regulatory Commission ("FERC"). The
FERC regulates the transportation and sale for resale of natural gas in interstate
commerce pursuant to the Natural Gas Act of 1938, or NGA, and the Natural Gas Policy
Act of 1978, or NGPA. Deregulation of wellhead sales in the natural gas industry
began with the enactment of the NGPA in 1978. In 1989, Congress enacted the Natural
Gas Wellhead Decontrol Act. The Decontrol Act removed all NGA and NGPA price and
non-price controls affecting wellhead sales of natural gas effective January 1, 1993.

Our
sales of natural gas are affected by the  availability,  terms and cost of
transportation.  The price  and terms for access to pipeline  transportation  are subject
to extensive federal and state regulation.  From 1985  to the present,  several major
regulatory  changes have been  implemented by Congress and the FERC that affect the
economics of natural gas production, transportation and sales.

Commencing
in April 1992,  the FERC issued Order Nos. 636 and  subsequent  orders in the same
proceeding  (collectively  "Order No. 636"), which require interstate
pipelines to provide  transportation  services separate,  or "unbundled,"  from
the pipelines sales of gas. Also,  Order No. 636  requires  pipelines to provide open
access  transportation  on a  nondiscriminatory  basis that is equal for all natural gas
shippers.  The courts have largely  affirmed the  significant  features of Order  No. 636
and numerous  related  orders  pertaining  to the  individual  pipelines,  although the
FERC continues to review and modify their open access  regulations.  These initiatives
may  affect the intrastate transportation of gas under certain circumstances.

14

---

# Ocean
Energy,  Inc.

In
particular,  the FERC is conducting a broad review of their transportation  regulations,
including how  they  operate in  conjunction  with state  proposals  for retail  gas
market  restructuring, whether to
eliminate  costofservice  rates for shortterm  transportation,  whether
to allocate all shortterm capacity on the basis of  competitive  auctions, and
whether changes to longterm  transportation  policies may also be  appropriate to
avoid a  market bias toward  shortterm  contracts.  In  February  2000,  the FERC
issued  Order  No. 637  amending  certain  regulations  governing  interstate  natural
gas  pipeline  companies  in  response  to  the  development  of  more  competitive
markets for natural gas and natural gas  transportation.  The goal of Order  No. 637 is
to "fine tune" the open access regulations  implemented by Order  No. 636 to
accommodate  subsequent  changes in the market.  Among  other  things,  Order  No. 637
revised  FERC  pricing  policy by waiving  price  ceilings  for  shortterm
released  capacity for a twoyear  period,  and  effected  changes in FERC
regulations  relating to  scheduling  procedures,  capacity segmentation,  pipeline
penalties,  rights  of first refusal and information  reporting.  The U.S. Court of
Appeals for the District  of Columbia  Circuit  recently issued a decision that either
upheld or declared  premature  for review  most major  aspects of Order No. 637.  Order
No. 637  required  interstate  natural  gas  pipelines  to  implement the policies
mandated by the order  through  individual  compliance  filings.  The FERC has now ruled
on a  number of the  individual  compliance  filings,  although its decisions in such
proceedings  remain  subject to the  outcome of pending  rehearing  requests and possible
court appeals.  We  cannot predict  whether and to what extent  FERCs market
reforms will survive  judicial  review and, if so,  whether the FERCs actions will
achieve the goal  of increasing  competition  in markets in which our natural gas is
sold. We do not believe that we will  be affected  by any action taken  materially
differently  than other natural gas  producers,  gatherers and marketers with which  we
compete.

The
Outer  Continental  Shelf Lands Act (OCSLA)  requires that all pipelines
operating on or across the  Outer Continental Shelf (OCS) provide
openaccess,  nondiscriminatory  transportation  service on their systems.  Commencing
in April 2000,  FERC issued Order Nos. 639 and 639A  (collectively,  "Order No.
639"),  which  required  gas service  providers  operating on the OCS to
make public their rates,  terms and  conditions  of service.  The  purpose of Order No.
639 was to provide  regulators and other  interested  parties with  sufficient
information to  detect and to remedy  discriminatory  conduct by such service  providers.
In a recent decision,  the U.S. District  Court for the District of Columbia  permanently
enjoined the FERC from enforcing  Order No. 639, on the basis that  the FERC did not
possess the requisite  rulemaking  authority  under the OCSLA for issuing  Order No.
639.  FERCs  appeal of the courts  decision is pending in the U.S.  Court of Appeals
for the District of Columbia  Circuit.  We  cannot  predict the outcome of this appeal,
nor can we predict what further  action FERC will take with respect to  this matter.

On
September 27, 2001,  FERC issued a Notice of Proposed  Rulemaking in Docket No.  RM0110.
The proposed  rules would expand  FERCs  current  standards of conduct to include a
regulated  transmission  provider and all of  its  energy  affiliates.  It is not known
whether  FERC will issue a final rule in this  docket  and,  if it does,  whether the
final rule would impact our operations.

Additional
proposals  and  proceedings  that might  affect the natural gas  industry  are pending
before  Congress,  the FERC and the  courts.  The  natural  gas  industry  historically
has been very  heavily  regulated;  therefore,  there is no assurance  that the less
stringent  regulatory  approach  recently  pursued by the FERC and  Congress will
continue.

Offshore
Leasing. U.S. offshore operations the Company conducts are on federal oil and gas
leases. Ocean must comply with regulatory restrictions from numerous agencies,
including the U.S. Minerals Management Service (MMS), U.S. Bureau of Land
Management, U.S. Coast Guard and U.S. Environmental Protection Agency. For offshore
operations, the Company must obtain regulatory

15

---

# Ocean
Energy,  Inc.

approval for exploration, development
and production plans prior to the commencement of such operations. These agencies
have stringent engineering and construction specifications, safetyrelated regulations
concerning the design and operating procedures for offshore production  platforms and
pipelines, regulations to prohibit the flaring of liquid  hydrocarbons and oil without
prior authorization, regulations governing the  plugging and abandonment of wells located
offshore and the removal of all production  facilities and other rules and regulations
governing many phases of offshore operations.  To cover the various obligations of
lessees, governmental agencies generally require  substantial bonds or other acceptable
assurances that such obligations will be met.

The
restructuring  of oil and gas markets  has  resulted  in a shifting  of markets
downstream  from the  wells.  Deregulation  has altered the  marketplace  such that
lessors,  including  the MMS,  are  challenging  the  methods of  valuation of
production  for royalty  purposes.  In addition,  the MMS is  conducting  an inquiry into
certain contract  settlement  agreements from which producers on MMS leases have received
settlement proceeds that  are royalty bearing and the extent to which producers have paid
the appropriate royalties on those proceeds.

The
MMS issued a final rule that amended its  regulations  governing  the  valuation of crude
oil produced  from  federal  leases.  This  rule,  which  became  effective  June 1,
2000,  provides  that the MMS will  collect  royalties  based on the market value of oil
produced from federal  leases.  The lawfulness of the new rule has been  challenged in
federal court.  We cannot predict  whether this new rule will be upheld in federal court,
nor can we  predict  whether the MMS will take  further  action on this matter.  However,
we do not believe that this new rule  will affect us any differently than other producers
and marketers of crude oil.

Competition
and Significant Customers

The
Companys  competitors  in oil and gas  exploration,  development  and  production
include major oil  companies,  as well as numerous independent oil and gas companies,
individuals and drilling partnerships.  Some of  these  competitors  have  financial  and
personnel  resources  substantially  in excess of those  available to the  Company  and,
therefore,  the  Company  may be placed at a  competitive  disadvantage.  The  Companys
success in  discovering  reserves will depend on its ability to select  suitable
prospects for future  exploration  in todays  competitive  environment.  For  further
discussion  of the  Companys  customers  and  markets  see  Note 2 to the  Consolidated
Financial Statements.

Duke
Energy Trading & Marketing and affiliates (DETM), a whollyowned subsidiary
of Duke Energy Corp.,  and ExxonMobil Sales and Supply (EMSS), a whollyowned
subsidiary of ExxonMobil Corporation, accounted for  significant portions of the
Companys total oil and gas production revenues during 2002, 2001 and 2000 as follows:

|                                           | Year Ended December 31,
|------------------------------------------ | -----------------------
|                                          
|                                           |                        
|                                          
|Percentage of total oil and gas production |                        
|revenues purchased by:                     |                        
|                                           |                        
|Duke Energy Trading & Marketing            |                        
|ExxonMobil Sales and Supply                |                        

16

---

# Ocean
Energy,  Inc.

Because
a ready market exists for the Companys oil and gas production, the Company
does not believe the loss of any individual customer would have a material
adverse effect on its financial position or results of operations.

Environmental
Matters

Oceans operations
are subject to federal, foreign, state and local laws and regulations governing
the discharge of materials into the environment or otherwise relating to
environmental protection. Numerous governmental departments issue rules and
regulations to implement and enforce such laws which are often difficult and
costly to comply with and which carry substantial penalties for failure to
comply. These laws and regulations may require the acquisition of a permit
before drilling or production commences, restrict the types, quantities and
concentration of various substances that can be released into the environment in
connection with drilling and production activities, limit or prohibit
construction or drilling activities on certain lands lying within wilderness,
wetlands and other protected areas, restrict the rate of oil and gas production,
require remedial actions to prevent pollution from former operations and impose
substantial liabilities for pollution resulting from the Companys
operations. In addition, these laws and regulations may impose substantial
liabilities and penalties for the Companys failure to comply with them or
for any contamination resulting from the Companys operations.

The
Company has established policies and procedures for continuing compliance with
environmental laws and regulations. However, the Company does not believe costs
relating to these laws and regulations have had a material adverse effect on the
Companys operations or financial condition in the past. As these laws and
regulations are becoming more stringent and complex, there is no assurance that
changes in or additions to laws or regulations regarding the protection of the
environment will not have such an impact in the future. The requirements imposed
by these laws and regulations are frequently changed and subject to new
interpretations. It is likely that the costs of compliance with environmental
laws and regulations could increase the cost of operating drilling equipment or
significantly limit drilling and operation or production activities.

The
Oil Pollution Act of 1990 (OPA) and regulations thereunder impose a
variety of regulations on responsible parties related to the
prevention of oil spills and liability for damages resulting from such spills in
waters of the United States. A responsible party includes the owner
or operator of a facility or vessel, or the lessee or permittee of the area in
which an offshore facility is located. The OPA imposes strict, joint and several
liability on responsible parties for oil removal costs and a variety of public
and private damages, including natural resource damages. While liability limits
apply in some circumstances, a party cannot take advantage of liability limits
if the spill was caused by gross negligence or willful misconduct or resulted
from violation of a federal safety, construction or operating regulation. If the
party fails to report a spill or to cooperate fully in the cleanup, liability
limits likewise do not apply. Even if applicable, the liability limits for
offshore facilities require the responsible party to pay all removal costs, plus
up to $75 million in other damages. Few defenses exist to the liability imposed
by the OPA. In addition OPA regulations require parties responsible for offshore
facilities to provide financial assurance in the amount of $35 million to cover
potential OPA liabilities. This amount can be increased up to $150 million in
certain limited circumstances. OPA regulations also require the development and
implementation of oil spill response plans. The Company believes it is in
substantial compliance with OPA requirements.

17

---

# Ocean
Energy,  Inc.

Risk Factors

In
addition to the other information in this document, investors in our common
stock should consider carefully the following risks.

Oceans
Pending Merger with Devon. Oceans pending merger with Devon,
described above under BusinessRecent Developments, is subject to a
number of closing conditions and may not be consummated. The merger agreement
requires, among other things, adoption of the merger agreement by Oceans
stockholders and approval by Devons stockholders of the issuance of shares
of Devon common stock to Oceans stockholders pursuant to the merger
agreement. The merger agreement also requires termination or expiration of the
waiting period under the HartScottRodino Antitrust Improvements Act of 1976.

Even
if the merger is consummated, Ocean stockholders may not realize the anticipated
benefits expected to result from the combination. To be successful following the
merger, management of the combined company will need to combine and integrate
the operations of Ocean and Devon into one company. Because of the size,
complexity and diverse asset base of each company, integration will be a
difficult process that will require substantial management attention that could
detract attention from the daytoday business of the combined company. If Ocean
and Devon cannot be integrated successfully, some of the expected benefits of
the merger, including expected cost savings, may not be realized. Moreover, any
difficulties associated with the transition and integration process could have
an adverse effect on the revenue, level of expenses and operating results of the
combined company. In addition, the combined company may not realize the
accretion to various financial measurements that Ocean expects to result from
the merger. Finally, the combined companys debt level is expected to be
significant and will be higher than Oceans debt level on a standalone
basis.

18

---

# Ocean
Energy,  Inc.

Dependence
on Oil and Gas Prices. Oceans success will depend on the market prices
of oil and gas. These market prices tend to fluctuate significantly in response
to factors beyond the Companys control. The prices the Company receives
for its crude oil production are based on global market conditions. The
continued threat of war in the Middle East, the continuing economic crisis in
Venezuela (a major oil exporter), and actions of OPEC and its maintenance of
production constraints, as well as other economic, political, and environmental
factors will continue to affect world supply. Natural gas prices fluctuate
significantly in response to numerous factors including the U.S. economic
environment, North American weather patterns, other factors affecting demand
such as substitute fuels, the impact of drilling levels on natural gas supply,
and the environmental and access issues that limit future drilling activities
for the industry.

The
year 2002 began with lower commodity prices as a result of the global economic
downturn and decreases in demand. During 2002, crude oil prices increased due to
a combination of factors including fears of war in Iraq (and the resulting
impact on the Middle East), Venezuelan strikes that reduced oil exports, and
continued OPEC production discipline. Natural gas prices also increased
throughout 2002 as U.S. productive capacity declined and as demand increased in
the fourth quarter with belownormal temperatures. Commodity prices ended the
year at their highest levels and have remained strong in 2003. The Company
expects that commodity prices will continue to fluctuate significantly in the
future.

Changes
in commodity prices significantly affect the Companys capital resources,
liquidity and expected operating results. Price changes directly affect revenues
and can indirectly impact expected production by changing the amount of funds
available to reinvest in exploration and development activities. Reductions in
oil and gas prices not only reduce revenues and profits, but could also reduce
the quantities of reserves that are commercially recoverable. Significant
declines in prices could result in noncash charges to earnings due to a ceiling
test writedown under the full cost method of accounting which the Company uses
to account for its exploration and development activities. The Company uses
derivative financial instruments to hedge its exposure to price risk from
changing commodity prices and the Company has hedged a substantial portion of its anticipated production for 2003.

Significant
Capital Requirements. Ocean must make a substantial amount of capital
expenditures for the acquisition, exploration and development of oil and gas
reserves. Historically, we have paid for these expenditures with cash from
operating activities, proceeds from debt and equity financings and asset sales.
Oceans revenues or cash flows could be reduced because of lower oil and
gas prices or for other reasons. If Oceans revenues or cash flows
decrease, we may not have the funds available to replace our reserves or to
maintain production at current levels. If this occurs, our production will
decline over time. Other sources of financing may not be available if
Oceans cash flows from operations are not sufficient to fund its capital
expenditure requirements. Where Ocean is not the majority owner or operator of
an oil and gas project, it may have no control over the timing or amount of
capital expenditures associated with the particular project. If Ocean cannot
fund its capital expenditures, its interests in some projects may be reduced or
forfeited.

Our
Oil and Gas Reserve Information Is Estimated. The proved oil and gas reserve
information included in this document represents estimates. These estimates are
based primarily on reports prepared by internal reserve engineers and were
calculated using oil and gas prices as of December 31, 2002. These prices could
change. An independent petroleum engineering firm annually reviews at least 80%
of the Companys estimates of proved reserves. Petroleum engineering is a
subjective process of estimating underground accumulations of oil and gas that
cannot be measured in an exact manner. Estimates of economically recoverable oil
and gas reserves and of future net cash flows necessarily depend upon a number
of variable factors and assumptions, including:

19

---

# Ocean
Energy,  Inc.

- historical production from the area compared with production from other similar producing areas;
- the assumed effects of regulations by governmental agencies;
- assumptions concerning future oil and gas prices; and
- assumptions  concerning  future  operating  costs,  severance  and  excise  taxes,  development  costs and
         workover and remedial costs.

Because
all reserve estimates are to some degree subjective, each of the following items
may differ materially from those assumed in estimating reserves:

- the quantities of oil and gas that are ultimately recovered;
- the production and operating costs incurred;
- the amount and timing of future development expenditures; and
- future oil and gas sales prices.

Furthermore,
different reserve engineers may make different estimates of reserves and cash
flows based on the same available data. Oceans actual production, revenues
and expenditures with respect to reserves will likely be different from
estimates and the differences may be material. The discounted future net cash
flows included in this document should not be considered as the current market
value of the estimated oil and gas reserves attributable to Oceans
properties. As required by the SEC, the estimated discounted future net cash
flows from proved reserves are generally based on prices and costs as of the
date of the estimate, while actual future prices and costs may be materially
higher or lower. Actual future net cash flows also will be affected by factors
such as:

- the amount and timing of actual production;
- supply and demand for oil and gas;
- increases or decreases in consumption; and
- changes in governmental regulations or taxation.

In
addition, the 10% discount factor, which is required by the SEC to be used to
calculate discounted future net cash flows for reporting purposes, is not
necessarily the most appropriate discount factor based on interest rates in
effect from time to time and risks associated with the Company or the oil and
gas industry in general.

Ocean
Operates in Foreign Countries and Will Be Subject to Political, Economic and
Other Uncertainties.Ocean conducts significant operations in foreign
countries including Equatorial Guinea, Côte dIvoire and Egypt. As of
December 31, 2002, 34% of the Companys reserves were located in foreign
countries. Ocean may also expand its foreign operations in the future.
Operations in foreign countries are subject to political, economic and other
uncertainties, including:

- the  risk  of war,  acts of  terrorism,  revolution,  border  disputes,  expropriation,  renegotiation  or
         modification of existing contracts, import, export and transportation regulations and tariffs;

20

---

# Ocean
Energy,  Inc.

- taxation policies, including royalty and tax increases and retroactive tax claims;
- exchange  controls,  currency  fluctuations  and other  uncertainties  arising  out of foreign  government
         sovereignty over Ocean's international operations;
- laws and policies of the U.S. affecting foreign trade, taxation and investment; and
- the  possibility  of having to be subject to the exclusive  jurisdiction  of foreign  courts in connection
         with legal disputes and the possible inability to subject foreign  persons to the  jurisdiction of courts
         in the United States.

Foreign
countries have occasionally asserted rights to land, including oil and gas
properties, through border disputes. If a country claims superior rights to oil
and gas leases or concessions granted to Ocean by another country, Oceans
interests could be lost or decreased in value. Various regions of the world have
a history of political and economic instability. This instability could result
in new governments or the adoption of new policies that might assume a
substantially more hostile attitude toward foreign investment. In an extreme
case, such a change could result in termination of contract rights and
expropriation of foreignowned assets. This could adversely affect Oceans
interests. The Company seeks to manage these risks by, among other things,
concentrating its international exploration efforts in areas where the Company
believes that the existing government is favorably disposed towards United
States exploration and production companies. The Company maintains insurance
against certain political uncertainties. However, the occurrence of an event
that is not fully covered by insurance could have a material adverse effect on
the financial position and results of operations of Ocean.

Oil
and Gas Operations Involve Substantial Costs and Are Subject to Various Economic
Risks. The oil and gas operations of Ocean are subject to the economic risks
typically associated with exploration, development and production activities,
including the necessity of significant expenditures to locate and acquire
properties and to drill exploratory wells. In conducting exploration and
development activities, the presence of unanticipated pressure or irregularities
in formations, miscalculations or accidents may cause Oceans exploration,
development and production activities to be unsuccessful. This could result in a
total loss of Oceans investment in a particular property. If exploration
efforts in a country are unsuccessful in establishing proved reserves and
exploration activities cease, the amounts accumulated as unproved costs would be
charged against earnings as impairments. In addition, the cost and timing of
drilling, completing and operating wells is often uncertain.

Drilling
Oil and Gas Wells Could Involve Blowouts, Environmental Hazards and Other
Risks. The nature of the oil and gas business involves certain operating
hazards such as well blowouts, cratering, explosions, uncontrollable flows of
oil, gas or well fluids, fires, formations with abnormal pressures, pollution,
releases of toxic gas and other environmental hazards and risks. Any of these
operating hazards could result in substantial losses to Ocean. In addition,
Ocean may be liable for environmental damages associated with Oceans
historical activities at sites no longer owned or operated by Ocean, and
third-party activities at sites currently owned or operated by Ocean. As a
result, substantial liabilities to third parties or governmental entities may be
incurred. The payment of these amounts could reduce or eliminate the funds
available for exploration, development or acquisitions. These reductions in
funds could result in a loss of Oceans properties. Additionally, some of
Oceans oil and gas operations are located in areas that are subject to
tropical weather disturbances. Some of these disturbances can be severe enough
to cause substantial damage to facilities and possibly interrupt production. In
accordance with customary industry practices, Ocean maintains insurance against
some, but not all, of such risks and losses. The occurrence of an event that is
not fully covered by insurance could have a material adverse effect on the
financial position and results of operations of Ocean.

21

---

# Ocean
Energy,  Inc.

Competition
Within the Oil and Gas Industry is Intense. The exploration and production
business is highly competitive. Many of Oceans competitors have
substantially larger financial resources, staffs and facilities than Ocean.
These competitors include other independent oil and gas producers such as
Anadarko Petroleum Corporation, Apache Corporation, Burlington Resources
Inc., Devon Energy Corporation, EOG Resources, Inc., KerrMcGee
Corporation, Noble Energy, Inc., Pioneer Natural Resources Company, and  Unocal Corporation as well as major oil and gas companies such as
ExxonMobil  Corporation, ChevronTexaco Corporation, Shell Oil Company and BP Corporation.

Government
Agencies Can Increase Costs and Can Terminate or Suspend Operations.
Oceans business is subject to foreign, federal, state and local laws and
regulations relating to the exploration for, and the development, production and
transportation of, oil and gas, as well as environmental and safety matters.
Many of these laws and regulations have become stricter in recent years. These
laws and regulations often impose greater liability on a larger number of
potentially responsible parties. Under some circumstances, the U.S. Minerals
Management Service may require the operations of Ocean on federal leases to be
suspended or terminated. These circumstances include Oceans failure to pay
royalties, Oceans failure to comply with safety and environmental
regulations and the MMS reaction to political pressure to limit offshore
drilling in environmentally sensitive areas. This could have a material adverse
effect on Oceans financial condition and operations. The requirements
imposed by these laws and regulations are frequently changed and subject to new
interpretations. It is likely that the costs of compliance could increase the
cost of operating offshore drilling equipment or significantly limit drilling
activity.

Terrorist
Attacks or Similar Hostilities May Adversely Impact Our Results of Operations. The impact that future terrorist attacks or regional hostilities
(particularly in the Middle East) may have on the energy industry in general,
and on us in particular, is not known at the time. Uncertainty surrounding
military strikes or a sustained military campaign may affect our operations in
unpredictable ways, including disruptions of fuel supplies and markets,
particularly oil, and the possibility that infrastructure facilities, including
pipelines, production facilities, processing plants and refineries, could be
direct targets of, or indirect casualties of, an act of terror or war. Moreover,
we have incurred additional costs since the terrorist attacks of September 11,
2001 to safeguard certain of our assets and we may be required to incur
significant additional costs in the future.

The
terrorist attacks on September 11, 2001 and the changes in the insurance markets
attributable to such attacks have made certain types of insurance more difficult
for us to obtain. There can be no assurance that insurance will be available to
us without significant additional costs. A lower level of economic activity
could also result in a decline in energy consumption which could adversely
affect our revenues or restrict our future growth. Instability in the financial
markets as a result of terrorism or war could also affect our ability to raise
capital.

Employees

As
of February 28, 2003, the Company had approximately 948 employees. In addition
to the services of its full time employees, the Company contracts, as needed,
the services of consulting geologists, engineers, regulatory consultants,
contract pumpers and certain other temporary employees. Except for local
national employees in Côte dIvoire, none of the Companys
employees are represented by a labor union. The Company considers its relations
with its employees to be satisfactory.

22

---

# Ocean
Energy,  Inc.

Executive
Officers of the Company

The
executive officers of the Company, each of who has been elected to serve until
his successor is elected and qualified, are as follows:

|Name | Age | Present Position and Prior Business Experience
|---- | --- | ----------------------------------------------

|James T. Hackett* | 49 | President and Chief Executive Officer since March 1999 and
Chairman of the Board since January 2000; President and Chief Executive Officer of
Seagull from September 1998 and Chairman of the Board of Seagull from January 1999 to
March 1999; Group President of Duke Energy's unregulated operations and Executive Vice
President of PanEnergy from January 1996 to September 1998.
|----------------- | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Robert K. Reeves* | 45 | Executive Vice President, General Counsel and Secretary since March 1999;
Executive Vice President, General Counsel and Secretary of Ocean Energy, Inc. (a predecessor entity) from June 1997 to March 1999; Senior Vice President, General Counsel and Secretary of Ocean Energy, Inc. (a predecessor entity) from May 1994 to June 1997.
|----------------- | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|John D. Schiller, Jr.* | 43 | Executive Vice President, Exploration & Production since March 2002;
Executive Vice President, Operations from March 2000 to March 2002,
Senior Vice President, North America Onshore and International
Operations from March 1999 to March 2000; Senior Vice President,
Operations of Seagull from September 1998 to March 1999; Production
Manager - Gulf Coast Division of Burlington Resources from October 1997
to August 1998; Engineering Manager - Offshore Division of Burlington
Resources from April 1994 to September 1997.
|---------------------- | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|William L. Transier* | 48 | Executive Vice President
and Chief Financial Officer since March 1999;
Executive Vice President and Chief Financial Officer of Seagull from
September 1998 to March 1999; Senior Vice President and Chief Financial
Officer of Seagull from May 1996 to September 1998; For the previous 20
years, he held a variety of positions at KPMG LLP including partner from
July 1986 until April 1996.
|-------------------- | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|John H. Campbell, Jr. | 45 | Senior Vice
President, North American Onshore Operations since February 2003; Vice President Exploitation North America
Onshore from April 1999 to January 2003; Vice President and Chief Engineer, Seagull Energy Corporation, from October 1998
to March 1999; Regional Deepwater and Acquisitions Engineer, Burlington Resources Offshore Division,
from June 1997 to September 1998; Regional Engineer, Burlington Resources Offshore Division from May 1994 to May 1997.
|--------------------- | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|William S. Flores, Jr. | 46 | Senior Vice President, Drilling since March 1999; Vice President,
Drilling of Ocean Energy, Inc. (a predecessor entity) from March 1998 to March 1999; Vice President,
Operations of Ocean Energy, Inc. (a predecessor entity) from August 1993 to March 1998.
|---------------------- | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

23

---

# Ocean
Energy,  Inc.

|Name | Age | Present Position and Prior Business Experience
|---- | --- | ----------------------------------------------

|Scott A. Griffiths | 48 | Senior Vice President, Exploration & International New Ventures since
March 2002; Senior Vice President, International Exploration from March
1999 to March 2002; Senior Vice President Domestic Exploration of
Seagull from September 1998 to March 1999; Vice President Domestic
Exploration of Seagull from May 1997 to September 1998; Vice President
of Domestic Exploration of Seagull from October 1996 to May 1997; Vice
President of Exploration of Global Natural Resources from 1992 to
October 1996.
|------------------ | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|K. Earl Reynolds | 42 | Senior Vice President, International
and Gulf of Mexico Operations since February 2003; Senior Vice President, International Operations from March 2000
to February 2003; General Manger and Director Burlington Resources from January 1998 to March 2000.
|---------------- | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Bruce Busmire | 45 | Vice President, Investor Relations since February 2000;
Controller of
Altura Energy Ltd. from March 1997 to January 2000; For the previous 16
years, Mr. Busmire held a variety of positions in finance, accounting
and investor relations at Amoco Corporation.
|------------- | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Mario M. Coll, III | 41 | Vice President, Operational Planning and Chief Information Officer since
March 2001; Vice President, Operational Planning from March 1999 to
March 2001; Vice President, Planning - Corporate and International of
Ocean Energy, Inc. (a predecessor entity) from April 1998 to March 1999; Business Planning Coordinator
of Ocean Energy, Inc. (a predecessor entity) from September 1996 to April 1998.
|------------------ | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Peggy T. d'Hemecourt | 51 | Vice President, Human Resources since March 1999; Director, Human
Resources of Ocean Energy, Inc. (a predecessor entity) from March 1998 to February 1999; Vice President,
Human Resources of UMC Petroleum Corporation from April 1997 to February
1998; Director, Human Resources of United Meridian Corporation ("UMC")
from January 1996 to March 1997.
|-------------------- | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Philip J. Iracane | 48 | Vice President, Marketing since December 2000; Vice President, Sales and
Services, Columbia Gas of Virginia from December 1998 to December 2000;
For the previous 11 years, Mr. Iracane was Sr. Vice President,
MarketingEast Coast of Coastal Gas Marketing.
|----------------- | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|John J. Patton | 62 | Vice President and Associate
General Counsel, since September 1999; Vice
President and Assistant General Counsel  International of Ocean Energy, Inc. (a predecessor entity) from March 1998 to March 1999; Senior Vice President and General Counsel
of UMC from April 1995 to March 1998.
|-------------- | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Andrew J. Sheu | 40 | Vice President, Tax since March 1999; Assistant Vice President, Tax of
Seagull from January 1998 to March 1999; Director, Tax of Torch Energy
Advisors, Inc. from December 1995 to January 1998.
|-------------- | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

---

# Ocean
Energy,  Inc.

|Name | Age | Present Position and Prior Business Experience
|---- | --- | ----------------------------------------------

|Alan L. Smith | 40 | Vice President, Business Development since March 2001; Manager, Anadarko
Asset Team/NA Onshore Business Development December 1999 to March 2001;
Vice President Acquisitions, XPLOR Energy from November 1998 to December
1999 and Vice President Operations March 1997 to November 1998; Prior
to XPLOR, Mr. Smith held positions at Vastar Resources, Burlington
Resources and Ryder Scott.
|------------- | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Winston M. Talbert* | 40 | Vice President  Finance  & Treasurer since October 2002;Vice President and Treasurer since July 2001;
Assistant Treasurer, Corporate Finance from October 1999 to July 2001; Assistant Treasurer of
PennzEnergy Company from November 1998 to October 1999; Manager,
International Finance of Pennzoil Company from December 1996 to November
1998.
|------------------- | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Robert L. Thompson* | 56 | Vice President and Controller since January 2001; Senior Consultant with
Cambridge Energy Research Associates from January 2000 to January 2001;
Member of merger transition team of Kerr McGee Corp. from February 1999
to December 1999; Vice President, Planning and Controller of Oryx Energy
Company ("Oryx") from September 1997 to February 1999; Comptroller and
Corporate Planning Director of Oryx from January 1995 to September
1997.
|------------------- | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Cathy L. Tompkins | 41 | Vice President, Information
Technology since December 2002; Director Information Technology from November 1999 to December 2002; Director
Information Technology of Total Safety, Inc. from September 1999 to November 1999; Information Technology Manager of
Ocean Energy, Inc. (a predecessor entity) from May 1998 to May 1999; Manager of Applications of UMC Petroleum from March 1997 to May 1998.
|----------------- | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Carl E. Volke | 59 | Vice President, Administration since March 1999; Vice President,
Administration of Seagull from November 1996 to March 1999; Director,
Administration of Seagull from November 1986 to November 1996.
|------------- | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Janice Aston White | 50 | Vice President, Corporate Communications since December 2000; Director,
Corporate Communications of Ocean from November 1999 to November 2000;
Owner and President of Acclaim Communications from January 1997 to
November 1999; Director of Corporate Communications of Tenneco Energy
from February 1990 to December 1996.
|------------------ | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Frank D. Willoughby | 37 | Vice President, Financial Planning since March 1999; Prior to
March 1999, Mr. Willoughby held various financial positions with Ocean Energy, Inc. (a predecessor entity), including Treasurer and Controller.
|------------------- | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|* |  | Denotes
persons deemed officers for purposes of Section 16 of the Securities Exchange
Act of 1934. Other persons listed are not deemed officers for that purpose.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

25

---

# Ocean
Energy,  Inc.

Defined Terms

Oil,
condensate and natural gas liquids (NGL) are stated in barrels
(Bbl) or thousand barrels (MBbl). Natural gas is stated
herein in billion cubic feet (Bcf), million cubic feet
(MMcf) or thousand cubic feet (Mcf). Oil, condensate and  NGL are converted to gas at a ratio of one
barrel of liquids per six Mcf of gas.  MMBOE, MBOE and BOE represent one million barrels,
one thousand barrels and one  barrel of oil equivalent, respectively, with six Mcf of gas
converted to one  barrel of liquid. MMBtu represents one million British
Thermal  Units. Bcfe represents one billion cubic feet of gas equivalent. Net acres,
production or wells refers to the total acres, production or wells in  which the Company
has a working interest, multiplied by the percentage working  interest owned by the
Company.

Item 2.   Properties

Incorporated
herein by reference to Item 1 of this Annual Report on Form 10K.

Item 3.   Legal
Proceedings

The
Company is a named defendant in lawsuits and is a party in governmental
proceedings from time to time arising in the ordinary course of business. While
the outcome of such lawsuits or other proceedings against the Company cannot be
predicted with certainty, management does not expect these matters to have a
material adverse effect on the financial position or results of operations of
the Company.

A lawsuit captioned Breakwater Partners, LP v. James T. Hackett, et. al. (Case No. 200310161) was filed on February 27,
2003 in the District Court of Harris County, Texas, naming as defendants Ocean and all of the members of Oceans board of directors.
The complaint generally alleges that:

- the 0.414 exchange ratio is inadequate and unfair to Ocean common stockholders; and
- the defendants breached their fiduciary duties to Ocean stockholders, including the duty of care and the duty of loyalty, or
                  aided and abetted in the breach of those fiduciary duties, by, among other things, (1) failing to conduct a full
                  and fair auction process or active market check; (2) agreeing to the terms of the merger agreement, including a
                  non-solicitation provision and the termination fee that is payable by Ocean to Devon under certain circumstances;
                  (3) failing to make an informed decision; (4) failing to ensure that conflicts of interest are resolved in the best
                  interests of Oceans public stockholders; (5) personally benefiting from the merger; and (6) not appointing any
                  truly independent person or entity to negotiate on behalf of Ocean stockholders.

The complaint seeks class action status.  It also seeks (1) injunctive relief against completing the merger or, if the
merger is completed, rescission of the merger; (2) monetary damages in an unspecified amount; and (3) recovery of the plaintiffs
costs and attorneys fees. Ocean believes that the lawsuit is without merit and intends to defend against it vigorously.  We can provide no assurance
that additional claims may not be made or filed the substance of which is similar to the allegations described above or that
otherwise might arise from, or in connection with, the merger agreement and related transactions. See Note 18 to the Companys Consolidated Financial Statements.

26

---

# Ocean
Energy,  Inc.

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

None
during the fourth quarter of 2002.

Part II

Item 5.   Market
for Registrants Common Stock and Related Stockholder Matters

|A. |  | The Companys Common Stock (the Common Stock) is traded on the
New York Stock Exchange under the ticker symbol OEI. The high and
low sales prices on the New York Stock Exchange Composite Tape for each
quarterly period during the last two fiscal years for the registrant were as
follows:
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|               | 2002 | 2001
|-------------- | ---- | ----
|              
|
|              
|First Quarter  |      |     
|Second Quarter |      |     
|Third Quarter  |      |     
|Fourth Quarter |      |     

|B. |  | As
of February 28, 2003, there were approximately 2,806 holders of record of Common Stock.
|-- |  | ------------------------------------------------------------------------------------------

|C. |  | Since January 2001, the Company has paid quarterly dividends of $0.04 per  share on its
Common Stock. The amount of future dividends will be determined on  a quarterly basis at
the discretion of the Companys board of directors,  and will depend on earnings,
financial condition, capital requirements and other  factors. The Company did not declare
any cash dividends on its Common Stock  during the first three quarters of 2000 or in
1999 or 1998. The Companys  revolving credit agreement and outstanding indentures
restrict the  Companys declaration or payment of dividends on and repurchases of
Common  Stock. Under the most restrictive of these tests, as of December 31, 2002,
approximately $519 million was available for payment of dividends or
repurchase  of  Common Stock. In addition, the terms of the Companys Series B
Convertible  Preferred Stock and certain debt securities limit the Companys
ability to pay cash  dividends.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

D.
     Equity  Compensation Plans

The
table below provides information relating to the Companys equity
compensation plans as of December 31, 2002:

|                                 |  |  | Number of securities
|-------------------------------- |  |  | --------------------
|
|
|
|
|
|
|                                
|Equity compensation plans        |  |  |                     
|approved by security holders     |  |  |                     
|                                 |  | 
|Equity compensation plans        |  | 
|not approved by security holders |  |  |                     
|                                
|Total                            |  |  |                     
|                                

27

---

# Ocean
Energy,  Inc.

Item 6.   Selected Financial Data

Selected
Financial Data(1)(Amounts in Thousands Except Per Share Data)

|                                   | Year Ended December 31,
|---------------------------------- | -----------------------
|                                  
|                                   |                        
|                                  
|Revenues                           |                        
|Net income (loss) from continuing  |                        
|operations(2)                      |                        
|Earnings (loss) from continuing    |                        
|operations per share (2):          |                        
|Basic                              |                        
|Diluted                            |                        
|Cash dividends declared on         |                        
|common stock (per share)           |                        
|Net cash provided by operating     |                        
|activities before changes in       |                        
|operating assets and               |                        
|liabilities                        |                        
|Net cash provided by operating     |                        
|activities                         |                        
|Total assets                       |                        
|Longterm debt                     |                        
|Stockholders equity               |                        
|Capital expenditures               |                        
|Acquisitions, net of cash acquired |                        
|Standardized measure of            |                        
|discounted future                  |                        
|net cash flows                     |                        

|(1) |  | Includes
the effect of the Companys merger with Seagull Energy Company  since March 30, 1999.
|--- |  | ----------------------------------------------------------------------------------------------

|(2) |  | Includes aftertax impairments of $50 million, $13 million, $43 million and $335
million in 2002, 2000, 1999 and 1998, respectively, and aftertax merger and
integration costs of $2 million, $31 million and $33 million in 2000, 1999 and
1998, respectively.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

28

---

# Ocean
Energy,  Inc.

Item 7.   Managements
Discussion and Analysis of Financial Condition and Results of Operations

Ocean
Energy, Inc. (the Company, OEI or Ocean) is
an independent energy company engaged in the exploration, development,
production and acquisition of crude oil and natural gas. North American
operations are focused in the shelf and deepwater areas of the Gulf of Mexico,
the Rocky Mountains, Permian Basin, Anadarko, East Texas, North Louisiana and
the Gulf Coast regions. Internationally, Ocean holds a leading position among
U.S. independents in West Africa with oil and gas activities in Equatorial
Guinea, Angola, Nigeria and Côte dIvoire. The Company also conducts
operations in Egypt, the Russian Republic of Tatarstan, Brazil and Indonesia.

On
February  23,  2003,  Ocean  entered into an Agreement  and Plan of Merger under the
terms of which  Ocean would merge into a  subsidiary  of Devon  Energy  Corporation
("Devon").  Under the terms of the  agreement,  Ocean  stockholders  will
receive  0.414 share of Devon common  stock for each Ocean  common  share.  The proposed
merger is subject to approval by the  stockholders  of each company as well as other
customary  closing  conditions  and is expected to be completed  midyear 2003. The
discussions  included in this Item 7. Managements  Discussion  and Analysis of
Financial  Condition  and Results of  Operations  and in Item 7.a  Quantitative  and
Qualitative  Disclosures About Market Risks do not reflect the effect the proposed merger
would have on Ocean.

The
Companys accompanying Consolidated Financial Statements contain detailed
information that should be referred to in conjunction with the following
discussion.

Corporate
Governance

Ocean
supports the recent initiatives by the United States Congress, the Securities and
Exchange Commission and the New York Stock Exchange to restore investor
confidence and to ensure the credibility and transparency of financial
reporting. Ocean has been built on a culture where integrity is the first and
most important value, and this value has long been a part of the Companys
corporate values. Ocean has endeavored to maintain best practices in the area of
corporate governance including having an independent majority of the Board of
Directors, with only independent members serving on the Audit, Governance and
Nominating and Organization and Compensation committees; board governance
guidelines and charters for all committees; a business conduct policy;
independent auditors; and an internal audit function.

Recently
the Company has enhanced its corporate governance by adopting a new Code of
Business Conduct and Ethics that includes adopting a new Code of Ethics for
Senior Financial Officers; adopting new Corporate Governance Guidelines;
amending and restating its committee charters for the Audit, the Governance and
Nominating and the Compensation and Benefits Committees of the Board of
Directors, forming a Disclosure Committee of senior management to assist the
Companys certifying officers in fulfilling their responsibility for
oversight of the accuracy and timeliness of the disclosures made by the Company.
The Company has also taken steps to ensure that the Companys independent
auditors do not perform prohibited nonaudit services and, therefore, are able
to maintain their independence.

The
Board of Directors has also adopted a standard of independence and evaluated
each director in light of this standard. The Board has concluded that it has
three nonindependent directors and ten independent directors. The Company will
continue to have solely independent directors on each of its Audit Committee,
Governance and Nominating Committee and Organization and Compensation

29

---

# Ocean
Energy,  Inc.

Committees. The
Boards nonmanagement directors will regularly meet in  executive session. The
Company will continue to enhance its governance practices  as new ideas and best
practices emerge.

Results of
Operations

In
2002, the Company reduced its capital expenditure budget as a result of the
lower commodity price environment that existed at the beginning of the year.
Company plans were to fund development commitments generated by earlier
exploration successes while maintaining balance sheet strength. The Company was
successful in this regard. At the same time, reduced capital spending, lower
commodity prices, adverse weather and installation delays in the Gulf of Mexico
led to some mixed operating results. Production growth was lower than expected
at the start of 2002. Reserve replacement and the current year finding and
development cost were below the Companys targets. With rising commodity
prices and new production, the Company ended 2002 with a strong fourth quarter.

The
Company reached a milestone in its deepwater strategy with the installation and
start up of its first Gulf of Mexico deepwater development in the Nansen and
Boomvang fields. There was further exploitation success in the Zafiro field in
Equatorial Guinea and the Company continued to expand its exploration activities
in the deepwater Gulf of Mexico region, West Africa and other international
locations.

Results
for 2002 can be summarized as follows:

- 3% yearoveryear and 9% fourth quarter over prioryear quarter production increase
- refinanced fixedrate debt to achieve lower cost of capital
- maintenance of 48% debt to total capitalization ratio
- 34% reduction in capital expenditures to accommodate lower commodity prices
- 111% reserve replacement rate
- $12.11 per BOE finding and development cost.

The
Company reported net income of $135 million, or $0.74 per diluted share for 2002
compared to net income of $274 million, or $1.53 per diluted share for 2001. For
fourth quarter 2002, the Company reported net income of $67 million, or $0.37
per diluted share, as compared to $21 million, or $0.12 per diluted share, for
fourth quarter 2001.

Two
special items affected this years results. First, the Company announced
that it would discontinue exploratory activities in the Arabian Sea offshore
Pakistan and on Block 19 in the Lower Congo Basin offshore Angola. As a result,
the Company recognized an impairment in the amount of $76 million ($50 million,
after tax). Second, the Company repurchased $202 million of fixedrate debt,
resulting in a loss on the early extinguishment of debt of $12 million ($8
million, after tax).

30

---

# Ocean
Energy,  Inc.

Oil and Gas
Operations(Amounts in Thousands)

|                                         | Year Ended December 31,
|---------------------------------------- | -----------------------
|                                        
|                                         |                        
|                                        
|Oil and Gas Operations:                  |                        
|Revenues:                                |                        
|Crude oil                                |                        
|Natural gas                              |                        
|                                        
|                                         |                        
|                                        
|Operating expenses                       |                        
|                                         |                        
|Depreciation, depletion and amortization |                        
|Impairment of oil and gas properties     |                        
|                                        
|Operating profit                         |                        
|Corporate                                |                        
|                                        
|Total Operating Profit                   |                        
|                                        
|                                         |                        

Revenues
 Ocean operates in highly competitive markets where energy prices
fluctuate significantly. As oil and gas prices fluctuate, so do the
Companys revenues, results of operations and cash flows. The year began
with lower commodity prices as a result of the global economic downturn and
decreases in demand. These conditions were only partially offset by OPECs
supply constraints. During 2002, crude oil prices increased due to a combination
of factors including fears of war in Iraq, Venezuelan strikes that reduced oil
exports and continued OPEC production discipline. Natural gas prices rose
throughout 2002 as U.S. productive capacity declined. Demand for natural gas
increased in the fourth quarter with belownormal temperatures. Commodity prices
ended the year at their highest levels and have remained strong in 2003. High
oil prices also support natural gas prices by not competing as effectively as a
substitute fuel source.

Oil
Revenues  For 2002, revenues from sales of crude oil totaled $662 million, an
increase of $106 million, or 19%, compared to revenues of $556 million for 2001. The
change in revenues included:

- An increase in revenues of $26 million due to a 4% increase in the average  realized  price for crude oil,
         excluding the impact of financial derivatives, to $22.32 per Bbl for 2002 from $21.48 per Bbl for 2001.
- An increase in revenues of $55 million due to a 9% increase in  production.  Average daily oil  production
         was 82 MBbl per day for 2002 as  compared  to 75 MBbl per day for 2001.  Higher  production  volumes  were
         primarily  attributable  to new  deepwater  production  in the Gulf of Mexico and  continued  success with
         Zafiro field exploitation initiatives in Equatorial Guinea.
- A  positive  yearoveryear  net  change  of $25  million  relating  to the  Companys  use of  crude  oil
         derivative financial  instruments.  The effect of derivative  financial  instruments on oil revenues was a
         decrease of $9 million for 2002 as compared to a decrease of $34 million for 2001.

For
2001, revenues from sales of crude oil totaled $556 million, an increase of $9
million, or 2%, compared to revenues of $547 million for 2000. The change in
revenues included:

31

---

# Ocean
Energy,  Inc.

- A decrease in revenues of $111 million due to a 16% decline in the average  realized  price for crude oil,
         excluding the impact of financial derivatives, to $21.48 per Bbl for 2001 from $25.51 per Bbl for 2000.
- An increase in revenues of $70 million due to a 10% increase in  production.  Average daily oil production
         was 75 MBbl  for  2001  as  compared  to 68 MBbl  for  2000.  Higher  production  volumes  were  primarily
         attributable to increased  exploration and  exploitation  success from the Gulf of Mexico shelf properties
         and the Zafiro field in Equatorial Guinea.
- A  positive  yearoveryear  net  change  of $50  million  relating  to the  Companys  use of  crude  oil
         derivative financial  instruments.  The effect of derivative  financial  instruments on oil revenues was a
         decrease of $34 million for 2001 as compared to a decrease of $84 million for 2000.

Oil
prices were on a steady upward trend through 2002. The Company expects that
future crude oil prices will fluctuate significantly. The continued threat of
war in the Middle East, the continuing economic crisis in Venezuela (a major oil
exporter), and actions of OPEC and its maintenance of production constraints, as
well as other economic, political and environmental factors will continue to
affect world supply.

Gas
Revenues  For 2002, revenues from sales of natural gas totaled $500 million, a
decrease of $199 million, or 28%, compared to revenues of $699 million for 2001. The
change in revenues included:

- A decrease  in revenues of $155  million  due to a 24% decline in the average  realized  price for natural
         gas,  excluding  the  impact of  financial  derivatives,  to $3.19 per Mcf for 2002 from $4.18 per Mcf for
         2001.
- A decrease in revenues of $26 million  due to a 4% decline in  production.  Average  daily gas  production
         was 426 MMcf for 2002 as compared to 443 MMcf for 2001.
- A  negative  yearoveryear  net  change of $18  million  related  to the  Companys  use of  natural  gas
         derivative financial  instruments.  The effect of derivative financial  instruments on gas revenues was an
         increase of $5 million for 2002 as compared to an increase of $23 million for 2001.

For
2001, revenues from sales of natural gas totaled $699 million, an increase of
$173 million, or 33%, compared to revenues of $526 million for 2000. The change
in revenues included:

- An increase in  revenues  of $53  million due to a 9% increase in the average  realized  price for natural
         gas,  excluding the impact of financial  derivatives,  to $4.18 per Mcf for 2001 compared to $3.85 per Mcf
         for 2000.
- An increase in revenues of $51 million due to a 9% increase in  production.  Average daily gas  production
         was 443  MMcf  for 2001 as  compared  to 407 MMcf for  2000.  Higher  production  volumes  were  primarily
         attributable  to  successful  results  from  U.S.  drilling   activities  and  acquisitions  of  producing
         properties in Texas and Louisiana during 2001.
- A  positive  yearoveryear  net change of $69  million  relating  to the  Companys  use of  natural  gas
         derivative financial  instruments.  The effect of derivative financial  instruments on gas revenues was an
         increase of $23 million for 2001 as compared to a decrease of $46 million for 2000.

32

---

# Ocean
Energy,  Inc.

Natural
gas prices fluctuate significantly in response to numerous factors. Since most
of Oceans gas reserves and production are in the United States, future
natural gas prices will be dependent primarily on the U.S. economic environment,
North American weather patterns, other factors affecting demand such as
substitute fuels, the impact of drilling levels on natural gas supply and the
environmental and access issues that limit future drilling activities for the
industry.

Operating
Data (*)

|                                            | Year Ended December 31,
|------------------------------------------- | -----------------------
|                                           
|                                            |                        
|                                           
|Net Daily Oil and NGL Production (Bbl):     |                        
|Domestic                                    |                        
|Equatorial Guinea                           |                        
|Egypt                                       |                        
|Other International                         |                        
|                                           
|Total                                       |                        
|                                           
|Average Oil and NGL Prices ($ per Bbl):     |                        
|Domestic                                    |                        
|Equatorial Guinea                           |                        
|Egypt                                       |                        
|Other International                         |                        
|Weighted Average                            |                        
|Average Oil and NGL Prices Including the    |                        
|Impact of Financial Derivatives ($ per Bbl) |                        
|                                           
|Net Daily Natural Gas Production (Mcf):     |                        
|Domestic                                    |                        
|International                               |                        
|                                           
|Total                                       |                        
|                                           
|Average Natural Gas Prices ($ per Mcf):     |                        
|Domestic                                    |                        
|International                               |                        
|Weighted Average                            |                        
|Average Natural Gas Prices Including  the   |                        
|Impact of Financial Derivatives ($ per Mcf) |                        

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

Total
production  for 2002 was 56 MMBOE, a 3% increase over 2001.  Average daily  production
for the full  year  was 426 MMcf of gas and 82 MBbl of oil,  or 153  MBOE  per  day.  For
fourth  quarter  2002,  average  daily  production  was 158 MBOE per day, an increase of
9% over fourth  quarter 2001 average daily  production of 145 MBOE  per day. The Company
expects its production to increase  during 2003 as a result of increased  production from
the  deepwater Gulf of Mexico and Equatorial  Guinea and from Egypt, net of anticipated
declines in onshore and Gulf of  Mexico shelf areas related to their  constrained
capital  spending in 2002 and asset sales which  occurred in late  2002.

33

---

# Ocean
Energy,  Inc.

Total
production  for 2001 was 54 MMBOE as compared to 50 MMBOE for 2000.  Average daily
production  for  the full year was 443 MMcf of gas and 75 MBbl of oil, or 149 MBOE per
day.

Reclassification
of Expenses  The Company expenses employee costs associated with operating
and general corporate activities. In prior years, a portion of costs related to
certain administrative functions which support the Companys ongoing operating
activities were included in operating expense. During 2002, the Company reclassified
costs of certain administrative functions as general and administrative expense.
As a result, previous years have been reclassified to conform to current year
presentation. While this reclassification had no effect on net income, it did
decrease operating expense, and increase general and administrative expense, by
$24 million, $20 million and $18 million for the years ended December 31, 2002, 2001
and 2000, respectively.

Operating
Expenses  Total operating expenses increased $25 million, or 9%, to $312 million
for 2002 from $287 million for 2001 due to higher transportation expense related
to new deepwater Gulf of Mexico production, increased workover and repair
expense and higher lease operating expense due to increased production, offset
by lower production and ad valorem taxes due to lower natural gas prices.

Total
operating  expense per BOE  increased  6% to $5.58 per BOE for the year ended  December
31,  2002,  compared to $5.27 for 2001.

Total
operating  expenses  increased $48 million,  or 20%, to $287 million for the year ended
December 31,  2001 from $239 million for 2000 due to increased  workover  expense;
increases in production and ad valorem taxes  due to increased  production,  higher
commodity prices and an increase in the production tax rate for the State of  Louisiana;
and higher lease operating expense due to the 10% increase in production.

Operating
expenses per BOE increased 9% to $5.27 per BOE for the year ended  December 31, 2001,
compared  to $4.83 for 2000.

Depreciation,
Depletion and Amortization Expense  Total depreciation, depletion and amortization
(DD&A) expense for oil and gas operations increased $14 million, or 4%, to $358
million for 2002 from $344 million for 2001 due to increased production and increased
rates from higher estimated future development costs. DD&A expense per BOE related to
oil and gas operations increased 1% to $6.39 per BOE for 2002 as compared to $6.33 per
BOE for 2001 primarily due to higher estimated future development costs and 2002 finding
and development cost of $12.11 per BOE.

Total
DD&A  expense for oil and gas  operations  increased  $39 million to $344 million for
the year ended  December  31,  2001,  from $305  million for 2000  primarily  due to
increased  production.  DD&A  expense per BOE  related to oil and gas  operations
rose 3% to $6.33 per BOE for the year ended  December 31, 2001,  from $6.15 per  BOE for
2000 primarily due to the effects of property  acquisitions,  higher estimated future
development costs and  the geographic mix of production.

Impairment
of Oil and Gas Properties  During 2002, the Company announced that it would
discontinue current exploratory activities in Pakistan and on Block 19 offshore
Angola. As a result, the Company recognized an impairment in the amount of $76
million. During 2000, the Company recognized an impairment in the amount of $20 million
related to the discontinuance of exploration activities in the Republic of Yemen. The
Company recognized no impairments during 2001 and had no ceiling test limitations in
2002, 2001 or 2000.

34

---

# Ocean
Energy,  Inc.

Corporate

Corporate
expenditures  are  comprised  of general and  administrative  expenses and the DD&A expense
for  nonoil and gas assets.

General
and Administrative Expenses  General and administrative expenses increased $13 million,
or 25%, to $64 million for the year ended December 31, 2002, compared to $51 million for
2001. This increase was due primarily to increases in insurance cost, occupancy cost,
transportation and certain employee-related costs. On a per BOE basis, general and
administrative expenses rose to $1.14 per BOE for 2002 from $0.94 per BOE for 2001.

General
and  administrative  expenses  increased  $5  million,  or 11%, to $51 million for the
year ended  December  31,  2001,  compared  to $46  million  for  2000.  This  increase
was  due  primarily  to  increases  in  employeerelated  costs.  On a per BOE basis,
general and  administrative  expenses rose to $0.94 per BOE for 2001  from $0.93 per BOE
for 2000.

The
Company  capitalizes  certain  employeerelated  costs that are directly  attributable
to oil and gas  operations.  The Company  capitalized  costs of $61  million,  $58
million and $45 million in 2002,  2001 and 2000,  respectively.  The increases are
related to the Companys  expanding  activities in deepwater Gulf of Mexico and to  new
cost centers in Angola and Brazil.

DD&A 
DD&A expense for nonoil and gas assets was  approximately  $12 million,  $6 million and
$6 million  for the years 2002, 2001 and 2000, respectively. The increase in 2002 was due
to an increase in corporate assets.

Other

Interest
Expense  Interest expense decreased $2 million, or 3%, to $61 million for the
year ended December 31, 2002, from $63 million in 2001. Interest expense for 2002 was
reduced as a result of lower average borrowing rates achieved on the Companys
outstanding debt. Borrowing rates were reduced due to refinancings of fixedrate debt
during 2002 and 2001 and a lower average rate applicable to the Companys credit
facility. In addition, the effect of interest rate swaps relating to the
Companys 7 5/8% and 7 7/8% senior notes was a reduction in interest expense of $7
million in 2002 compared to $3 million in 2001. The interest savings was offset by
a $1 million reduction in the amount of interest capitalized ($44 million during
2002 compared to $45 million during 2001) and by an increase in the total debt
balance.

Interest
expense  decreased  $12  million,  or 16%, to $63 million for the year ended  December
31, 2001,  from $75 million in 2000.  This decrease was primarily the result of lower
average  borrowing rates achieved on the  Companys  outstanding  debt due to a
refinancing of fixedrate  debt and to a lower average rate applicable to the  Companys
credit  facility  during 2001. In addition,  the interest rate swaps  described  above
reduced  interest  expense by approximately $3 million in 2001.

35

---

# Ocean
Energy,  Inc.

The
Company  capitalized  interest  expense of $44 million,  $45 million and $44 million in
2002, 2001 and  2000,  respectively.  The amount of interest expense  capitalized is
generally a function of the Companys  average  interest cost and level of capital
expenditures.

Early
Extinguishment of Debt  During 2002, the Company repurchased $175 million of its 8
7/8% senior subordinated notes due July 2007 and $27 million of its 8 3/8% senior
subordinated notes due July 2008.
In connection with these repurchases, the  Company recorded other expense of $12 million
and a related tax benefit of $4 million.

During
2001, the Company  retired  existing  higher  interestrate  debt by exercising call
provisions for  $100  million of its 8 5/8% senior  subordinated  notes due 2005 and $2
million of its 9 3/4%  senior  subordinated  notes due 2006.  The Company also
repurchased  $22 million of its 8 3/8% senior  subordinated  notes due July 2008  and $25
million of its 8 7/8% senior  subordinated  notes due July 2007.  The  repurchase of
these notes was funded  with  available cash balances and borrowings  under the Companys
existing  credit  facility.  In connection  with  these repurchases, the Company recorded
other expense of $6 million and a related tax benefit of $2 million.

The
Company reported losses on early extinguishment of debt as extraordinary items until
fourth quarter 2002. During fourth quarter 2002, the Company early adopted
certain provisions of Statement of Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13,
and Technical Corrections ("SFAS No. 145"). With the adoption of SFAS No.
145, the classification of losses associated with extinguishments of debt, that were
previously recorded as extraordinary items, were reclassified into other expense with
the related tax benefit reclassified into income tax expense.

Merger
and Integration Costs  Merger and integration costs of $3 million associated with the
merger of Ocean and Seagull Energy Corporation were recorded in the first quarter
of 2000 and related primarily to severance costs.

Income
Tax Expense  Income tax expense of $130 million relating to continuing operations was
recognized for the year ended December 31, 2002, compared to expense of $224 million
for the year ended December 31, 2001. The effective income tax rate was 49% for 2002
and 45% for 2001. The increase in effective income tax rate for 2002 was primarily
due to the effect of the international impairments as the tax benefit resulting
from the impairments was calculated at a lower incremental tax rate.

Income
tax expense of $224  million was  recognized  for the year ended  December  31,  2001,
compared to  expense of $165 million for the year ended  December 31, 2000.  Total income
tax expense  increased  primarily  due  to higher  revenues and operating  profit
recognized in 2001.  The effective  income tax rate was 45% for 2001 and  44% for 2000.

Dividends
 Quarterly stock dividends, which were first declared in December 2000, continued
for each quarter of 2002 and 2001. The Company paid cash dividends on common stock
totaling approximately $28 million and $27 million during 2002 and 2001,
respectively. The amount of future dividends for OEI common stock will be determined
on a quarterly basis and will depend on earnings, financial condition, capital
requirements and other factors.

36

---

# Ocean
Energy,  Inc.

Preferred
Dividends  The Company pays quarterly dividends on its preferred stock. The preferred
stock has a 6.5% cumulative dividend.

Liquidity and
Capital Resources

Liquidity
 The Companys primary sources of liquidity are its cash on hand, cash flows from
operations and available borrowing capacity under its credit facility. The Company
made significant progress during
2002 in improving liquidity, primarily by expanding  its borrowing capacity and reducing
costs of capital. Ocean continued to take  advantage of the positive interestrate
environment and improve its credit position  by repurchasing higher fixedrate debt and
replacing it with lowercost debt. In  addition, a new credit facility, with an
extended term, will provide increased  flexibility to the Company.

The
Company  successfully  maintained  its  balance  sheet  leverage  during  2002.  The
debt  to  total  capitalization  ratio was 48% at December 31, 2002 compared to 47% at
December  31,  2001.  Although the balance  sheet  reflects a $160  million  increase in
debt at yearend  2002  compared to yearend  2001,  this  increase is  partially offset
by a $66 million increase in the yearend cash balance.

New
Revolving Credit Facility  During 2002, the Company was able to extend by two years
and double the amount of its credit facility. The new credit facility provides for
$1 billion in borrowing capacity and has a maturity date of May 2006. The credit
facility replaced the Companys previous $500 million facility which was scheduled to
mature in March 2004. As of December 31, 2002, the Companys outstanding borrowings
under the credit facility were zero, and letters of credit totaled $28 million,
leaving $972 million of available borrowing capacity under the Companys credit
facility. The Companys obligations under the credit facility are unsecured and
guaranteed by Ocean Energy, Inc., a Louisiana corporation. 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. The average interest rate on
the facilities was 3% during 2002.

Debt
Issuances and Repurchases  The Company took advantage of current low interest rates to
refinance a significant portion of its debt during 2002 by issuing $400 million of 4
3/8% senior notes due October 2007. The proceeds were used to repay amounts
outstanding under the credit facility which included balances used to retire debt
earlier in the year when the Company exercised call provisions for $175 million
of its 8 7/8% senior subordinated notes due July 2007. In addition, the Company
purchased $27 million of its 8 3/8% senior subordinated notes due July 2008. The
4 3/8% notes are redeemable at any time at the Companys option and, upon certain
changes in control, the notes would be subject to a mandatory repurchase offer.

During
2001,  the Company  issued $350  million of 7 1/4% senior notes due October  2011. A
portion of the  proceeds was used to repay  amounts  outstanding  under the  Companys
credit  facility,  and the remainder of the  proceeds was used to retire  existing
higher  interest rate debt by exercising call provisions for $100 million of  8 5/8%
senior  subordinated notes due 2005 and $2 million of 9 3/4% senior subordinated notes
due 2006. Also during  2001,  the Company  repurchased  on the open market $22  million
of its 8 3/8% senior  subordinated  notes due July  2008 and $25 million of its 8 7/8%
senior  subordinated  notes due July 2007.  The  repurchase  of these notes was  funded
with  available  cash balances and  borrowings  under the Companys  existing  credit
facility.  The 7 1/4%  notes are redeemable at any time at the Companys option  and,
upon certain changes in control,  the notes would be  subject to a mandatory repurchase
option.

37

---

# Ocean
Energy,  Inc.

The
Companys 7 7/8% senior  notes,  in the amount of $100  million,  are due in August 2003.
The Company  has established the necessary  credit capacity,  through its credit
facility,  to refinance the 7 7/8% senior notes  and it is the Companys  current
intention to refinance these  obligations on a longterm  basis.  The Companys 8  3/8%
senior  subordinated  notes due July 2008 are redeemable at a premium  beginning in July
2003. The Company may  choose to call these notes if market conditions warrant.

Asset
Sales  During 2002, the Company closed the sale of selected royalty, overriding
royalty and mineral interests in various locations throughout the United States
and two packages of noncore working interests. Total net proceeds from the sales  provided additional cash flow of $74
million to the Company. The Company received $64  million in proceeds from the sales of
certain non-core properties during 2001.

Operating
Leases  During 2002, the Company leased two spars that are being used in the
development of the Nansen and Boomvang fields in the Gulf of Mexico. The operating
leases extend for 20 years and contain various options whereby the Company may
purchase the lessors interests in the spars. Future cash payments under the operating
leases total $9 million, $11 million, $15 million, $15 million and $15 million for the
years 2003, 2004, 2005, 2006 and 2007, respectively, and $258 million total for
all years thereafter. The Company has guaranteed that the spars will have residual
values to the lessors at the end of the operating leases equal to at least 10% of the
fair market value of the spars at the inception of the leases. The total guaranteed
value is $20 million in 2022 for the spars and the amount may be reduced under the terms
of the lease agreements.

Prepaid
Commodity Transactions  In 1999 and 2000, the Company entered into two standard
prepaid commodity transactions, one for crude oil in 1999 and one for natural gas in
2000. The prepaid crude oil sales contract provides that the Company deliver
approximately 5.6 MBbl per day of crude oil for the period February 2000 through May
2003. In exchange for the crude oil to be provided, the Company received an advance
payment of approximately $100 million. The prepaid natural gas sales contract is a
marketsensitive contract which, as amended, provides that the Company deliver
53,500 MMBtu per day of natural gas for 2003 and 55,600 MMBtu per day for 2004. In
exchange for the natural gas to be provided, the Company received an advance
payment of approximately $75 million.

The
obligations  associated  with the future delivery of the crude oil and natural gas have
been recorded  as deferred  revenue in the Companys  accompanying  Consolidated  Balance
Sheets,  and the remaining  unamortized  balance was  approximately  $87 million as of
December 31, 2002. The prepaid  proceeds were shown as a component of  cash flows from
financing activities in the Companys  Consolidated  Statements of Cash Flows in the
years in which  they were received.  The prepaid  proceeds are being  amortized  into
revenue as scheduled  deliveries of crude oil  and  natural  gas are made.  This
amortization  is  deducted from net income when computing Net Cash Provided by Operating Activities in the
Companys Consolidated Statements of Cash Flows as scheduled delivery occurs.

38

---

# Ocean
Energy,  Inc.

Financing
Transaction  During 2000, the Company conveyed certain Internal Revenue Code Section
29 tax creditbearing properties to a trust for approximately $70 million, which
was recorded in other noncurrent liabilities. The trust receives the operating
cash flow from the properties until the investor recoups its investment plus a
required aftertax rate of return. At December 31, 2002, payout is estimated to occur
during second quarter 2009. The transaction is determined to have an embedded derivative
financial instrument as described in Note 12 to the Companys Consolidated Financial
Statements.

Capital
Expenditures(Amounts in Thousands)

|                                         | Year Ended December 31,
|---------------------------------------- | -----------------------
|                                        
|                                         |                        
|                                        
|Leasehold acquisitions                   |                        
|Exploration costs                        |                        
|Development costs                        |                        
|Acquisitions                             |                        
|                                        
|Total oil and gas capital expenditures   |                        
|Corporate and other capital expenditures |                        
|                                        
|Total capital expenditures               |                        
|                                        

The
reduced capital expenditure program in 2002 compared to 2001 reflected a
desire to manage expenditures in relation to expected cash flows from operations
and to maintain the debt to total capital ratio at a time when the Company was
operating in an environment of lower commodity prices and economic recession.
During 2002, a greater portion of the capital expenditure budget was used to
fund deepwater development projects resulting from three prior years of
exploratory success, and exploration spending was reduced by $97 million.

The
Company had a reserve replacement of 111% for 2002 compared to 387% for 2001
and a finding and development cost of $12.11 per BOE for 2002 compared to
$5.52 for 2001 reflecting the higher level of development expenditures and the
reduced exploratory investment. Oceans total estimated proved reserves
declined 1% to 593 MMBOE as of December 31, 2002, from 601 MMBOE at yearend
2001. This amount includes the effect of approximately 14 MMBOE in divestitures
during the year. The Companys estimated threeyear average reserve
replacement rate now stands at 254%, and its threeyear average finding and
development cost is $6.12 per BOE. Finding and development costs and reserve
replacement results are expected to be variable in an explorationoriented
company and longterm averages are a better measure of value creation than just
twelve month results.

During
2002, oil and gas expenditures, excluding acquisitions, totaled $509 million for
domestic operations and $240 million for international operations and the
Company completed a total of 238 gross wells (131 net wells), with an 81%
success rate. Of the 238 gross wells completed, 31 were exploratory wells and
207 were development wells. The success rate for exploratory wells was 52%.

During
2001, oil and gas expenditures, excluding acquisitions, totaled $634 million for
domestic operations and $224 million for international operations and the
Company completed a total of 315 gross wells (129 net wells), with an 87%
success rate. Of the 315 gross wells completed, 40 were exploratory wells and
275 were development wells. The success rate for exploratory wells was 60%.

39

---

# Ocean
Energy,  Inc.

Acquisitions
in 2001 totaled $305 million and included the purchase of all outstanding shares
of stock of Texoil, Inc., an independent oil and gas company. The Company also
purchased oil and gas assets located primarily in East Texas and North Louisiana
from EnSight Resources, L.L.C. for a cash purchase price of approximately $118
million. In addition, the Company recognized a deferred tax liability of
approximately $50 million due to the excess of book over tax basis of the oil
and gas properties acquired in the purchase of Texoil.

2003
Capital Expenditure Budget  The Companys capital
expenditure budget for the year 2003 is approximately $1 billion, a 30% increase
over 2002, and in 2003 the Company anticipates returning to the level of
exploration spending it had in 2001. In addition, a significant portion of the
2003 capital program is dedicated to development of the Companys
exploration successes in West Africa and the deepwater Gulf of Mexico.

On
a geographic basis, over half of the projected 2003 capital spending budget will
be directed toward Gulf of Mexico activities, with 75% of that amount focused on
deepwater activities. Approximately 30% to 40% will be targeted to international
assets with the remainder funding domestic onshore exploration and exploitation.

In
the Gulf of Mexico, the Company plans to spend approximately $500 to $550
million. The majority of these funds will be used to develop recent deepwater
discoveries and grow the Companys reserve base through additional
deepwater exploration in addition to ongoing activities on the shelf. Some $275
million will fund development drilling, completions and construction activities
at the Red Hawk, Magnolia and Zia deepwater discoveries and further development
activities in the Nansen and Boomvang deepwater fields. The Company anticipates
drilling six deepwater exploration prospects, four of which will be
Oceanoperated. These include Yorktown in Mississippi Canyon Block 841, Shiner
in Garden Banks Block 656, Tuscany in Desoto Canyon Block 179 and Aztec in Keathley Canyon Block 196 (50% WI).

The
Company has allocated approximately $300 to $400 million to international
operations. Nearly half of the expenditures will be directed toward activities
in Equatorial Guinea where development will continue in the southern expansion
area of the Zafiro field. The Company has planned a fullyear, threerig
drilling and completion program on Block B in preparation for the start of
production in fall 2003 from the Serpentina FPSO, a floating production, storage
and offloading vessel. In Angola, the Company is currently planning to drill the
first exploratory well on the Oceanoperated Block 10, and two exploratory wells
are budgeted on Block 24. Also in Africa, the Company expects to install a new
platform and drill a development well on its East Zeit concession in the Gulf of
Suez offshore Egypt. Plans also include additional drilling in Russia, continued
exploratory activities in Brazil and funding of Nigerian Block 256 and initial
exploratory activities there.

The
Company has allocated approximately $100 to $150 million to exploitation and
exploration of its domestic onshore properties. In the Rockies, Ocean plans to
drill approximately 100 development wells in its Bear Paw field in north central
Montana. The majority of the remaining onshore budget will focus on activities
to develop gas production in the Anadarko, East Texas, South Texas and Permian
Basin regions.

40

---

# Ocean
Energy,  Inc.

Actual
capital spending may vary and is subject to change if market conditions shift or
new opportunities are identified. The 2003 capital expenditure budget was
developed using certain assumed price levels for the sales of crude oil and
natural gas and forecasted production growth. Changes in commodity prices or
variances from forecasted production growth could impact the
Companys cash flows from operations and funds available for reinvestment.
For example, shortfalls in budgeted cash flows from
operations could result in  the reduction of the Companys capital spending program,
increases in  borrowing under the credit facility, issuance of additional equity or debt
securities or divestments of properties. The Company will evaluate its level of  capital
spending throughout the year based upon drilling results, commodity  prices, cash flows
from operations and property acquisitions. In general, the  Companys strategy is to
maintain capital spending, excluding acquisitions  and/or divestments, at levels near
discretionary cash flows (cash flows from  operations before changes in working capital).

The
Company makes, and will continue to make, substantial capital expenditures for
the acquisition, exploration, development and production of oil and 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 gas properties, sales of partial interests in
exploration concessions and project finance borrowings. The Company intends to
finance capital expenditures for the year 2003 primarily with cash flows from
operations and intends to balance the demand for capital from exploration and
development programs with maintenance of a strong balance sheet. As discussed
below, the Company has engaged in hedging activities to reduce the risk from
fluctuations in commodity prices on its 2003 capital expenditure program.

The
ability of the Company to satisfy its obligations and fund planned capital
expenditures will be dependent upon its future performance. Such future
performance is subject to many conditions that are beyond the Companys
control, particularly oil and gas prices, and the Companys ability to
obtain additional debt and equity financing, if necessary. In addition, where
the Company is not the majority owner and/or operator of the venture, it may
have less control over the timing or amount of capital expenditures associated
with the particular project. The Company currently expects that its cash flows
from operations and availability under the credit facility will be adequate to
execute its business plan for the year 2003. No assurance can be given that the
Company will not experience liquidity problems from time to time or on a
longterm basis. If the Companys cash flows from operations and
availability under the credit facility are not sufficient to satisfy its cash
requirements, there can be no assurance that additional debt or equity financing
will be available to meet its requirements.

Commodity
Pricing  Changes in commodity prices significantly affect the
Companys capital resources, liquidity and expected operating results.
Price changes directly affect revenues and can indirectly impact expected
production by changing the amount of funds available to reinvest in exploration
and development activities. The prices the Company receives for its crude oil
production are based on global market conditions. The prices the Company
receives for its natural gas production are primarily driven by North American
market forces. Oil and gas prices have fluctuated significantly in recent years
in response to numerous economic, political and environmental factors. The year
2002 began with a weakened commodity environment and lower prices. However, prices were
on an upward trend through the year. Prices are also affected by weather,
factors of supply and demand, and commodity inventory levels. The Company
expects that commodity prices will continue to fluctuate significantly in the
future.

41

---

# Ocean
Energy,  Inc.

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. Cash
flow hedges are maintained at levels which management considers necessary to
manage its cash flow in support of the 2003 capital expenditure budget. As of
February 28, 2003, the Company has hedged approximately 86% of total estimated
production for March through December of 2003. See Notes 2 and 13 to the
Companys Consolidated Financial Statements.

Disclosures
About Contractual Obligations and Commercial Commitments

The
following table sets forth the Companys obligations and commitments to
make future payments under its debt agreements, lease agreements, transportation
agreements and other longterm obligations as of December 31, 2002:

|                                   | Payments due by Period (in thousands)
|---------------------------------- | -------------------------------------
|                                  
|
|                                  
|Principal Payments on LongTerm    |                                      
|Debt                               |                                      
|Interest Payments on LongTerm     |                                      
|Debt                               |                                      
|Operating Leases:                  |                                      
|Office space, equipment, vehicles  |                                      
|Spar operating leases              |                                      
|Future Minimum Transportation      |                                      
|Payments                           |                                      
|Benefit Plans                      |                                      
|                                  
|Total Contractual Cash             |                                      
|Obligations                        |                                      
|Other LongTerm Obligations:       |                                      
|Deferred Revenue(1)                |                                      
|Conveyance of Sec 29 Properties(2) |                                      
|                                  
|Total Contractual Obligations      |                                      
|                                  

(1) Represents
amortization of forward sales as product is delivered.(2) Represents estimates of proceeds from related trust properties as payments for
obligation.

42

---

# Ocean
Energy,  Inc.

|                          | Amount of Commitment Expiration Per Period (in thousands) |  |   |        | 
|------------------------- | --------------------------------------------------------- |  | - | ------ | 
|                         
|
|
|
|                         
|Standby Letters of Credit |                                                           |  | $ | 28,000 | 
|Guarantees                |                                                           |  |   | 5,000  | 
|                         
|Total Commercial          |                                                           | 
|Commitments               |                                                           |  | $ | 33,000 | 
|                         

Under
the terms of certain joint venture agreements, international production sharing
contracts or concession agreements, the Company has commitments to conduct
seismic activity or to participate in other exploratory or development
activities. Certain agreements are backed by letters of credit or parent company
guarantees.

Under
certain conditions relating to a change of control, the Companys longterm
debt may be subject to a mandatory repurchase offer. In addition, under the
terms of the Nansen and Boomvang Operating Leases, the Company would be required
to provide letters of credit or other comparable credit support up to a
maximum amount (approximately $43 million under the Nansen Operating Lease and approximately
$15 million under the Boomvang Operating Lease at December 31, 2002) if the Companys  senior debt credit
rating were to be downgraded below investment grade by both  Moodys and Standard
& Poors.

Critical
Accounting Policies

Application
of generally accepted accounting principles requires the use of estimates,
judgments and assumptions that affect the reported amounts of assets and
liabilities as of the date of the financial statements and revenues and expenses
during the reporting period. In addition, alternatives can exist among various
accounting methods. In such cases, the choice of accounting method can also have
a significant impact on reported amounts. The following is a discussion of the
Companys critical accounting policies which management believes affect its
more significant judgments and estimates used in the preparation of its
Consolidated Financial Statements.

Full
Cost Method of Accounting for Oil and Gas Properties  The
Companys exploration and production activities are accounted for using the
full cost method. Under the full cost method all acquisition, exploration and
development costs, including certain directly related employee costs and a
portion of interest expense, incurred for the purpose of finding oil and gas are
capitalized. The Company believes that the full cost method is the most
appropriate method to use to account for its oil and gas production activities.
The Company is conducting significant exploration programs in the Gulf of Mexico
and in certain international regions. The full cost method more appropriately
treats the costs of entering these ventures as part of an overall investment in
discovering and developing proved reserves and allows for comparable analysis
with our peers. Application of the full cost method of accounting for oil and
gas properties generally results in higher capitalized costs, lower exploration
costs and higher DD&A rates than application of the successful efforts
method of accounting.

Reserves
 Estimates of the Companys proved oil and gas reserves are prepared
by the Companys engineers in accordance with guidelines established by the
SEC. Those guidelines require that reserve estimates be prepared under existing
economic and operating conditions with no provisions for increases in commodity
prices except by contractual arrangement and assuming continuation of existing
operating conditions. Estimation of oil and gas reserve quantities is inherently
difficult and is subject to numerous uncertainties. Such uncertainties include
the projection of future rates of production and the timing of development
expenditures. The accuracy of the estimates depends on the quality of available
geological and geophysical data and requires interpretation and judgment.
Estimates may be revised either upward or downward by results of future
drilling, production or well performance. The Companys estimates of its
reserves are expected to change as additional information becomes available.
Each year an independent petroleum engineering firm reviews at least 80% of the
Companys yearend estimates of proved reserves.

43

---

# Ocean
Energy,  Inc.

In
general, estimates of volumes considered to be commercially recoverable increase
with increases in commodity prices. However, the terms of certain international
production sharing contracts (PSCs) create an inverse relationship between
commodity prices and reserve quantities. When commodity prices increase, the
amount of reserves necessary to recoup expenditures through the cost recovery
mechanism inherent in these PSCs is reduced, resulting in lower proved
reserves.

The
estimates of proved oil and gas reserves have a significant effect on the
Companys depreciation, depletion and amortization (DD&A)
expense. For example, if estimates of proved reserves decline, the
Companys DD&A rate increases and therefore net income is reduced.

Full
Cost Ceiling Calculation  Where proved reserves are established,
capitalized costs are limited on a countrybycountry basis (ceiling
limitation). The amount of capitalized costs in the full cost pools are
compared to the present value of future net cash flows, using current
unescalated pricing, discounted at 10%, and the lower of cost or fair value of
unproved properties (ceiling test). If the capitalized cost of the
full cost pool exceeds the ceiling limitation, the excess is charged to
earnings. The full cost ceiling is primarily impacted by current commodity
prices and by reserve estimates. Changes in prices, reserve estimates and future
development costs impact the full cost ceiling. The Company performs quarterly
ceiling tests. The Company had no ceiling limitations in 2002, 2001 or 2000. The
full cost ceiling calculation is more stringent than the impairment test under
the successful efforts method of accounting. In a successful efforts impairment
test future net cash flows are estimated by applying estimated future oil and
gas prices rather than current unescalated prices.

Impairment
of Unproved Oil and Gas Properties  In countries where the existence
of proved reserves has not yet been determined, costs incurred during the
exploration phase remain capitalized in unproved property cost centers until
proved reserves have been established or until exploration activities cease. The
Company evaluates these costs periodically to determine whether the value of the
exploratory costs incurred have been permanently diminished in part or in whole.
Based on the Companys impairment evaluation and its future exploration
plans, the unproved property cost centers related to the area of interest could
be impaired, in which case accumulated costs are charged against earnings.

The
Companys evaluation of these costs, and therefore the amount and timing of
any impairment, can be significantly impacted by a number of factors including:
the results of exploration activities; availability of funds for future
activities; determination of commerciality of reserves based on cash flow
forecasts with estimated future commodity prices and operating costs; and the
current and projected political climate in the areas in which the Company
operates.

At
December 31, 2002, the Company had unproved oil and gas property costs of $81
million in Angola, $37 million in Brazil and $17 million in other international
locations. If the Company were to determine that the values of any of these
properties had been permanently diminished, there would be a charge against
earnings.

44

---

# Ocean
Energy,  Inc.

Capitalized
Interest and Employee Costs  In accordance with the full cost
method, the Company capitalizes a portion of interest expense on borrowed funds.
Employeerelated costs that are directly attributable to exploration and
development activities are also capitalized. These costs are considered to be
direct costs based on the nature of their function as it relates to the
exploration and development activities.

Derivative
Financial Instruments and Hedging Activities  The Company uses
derivative financial instruments primarily to hedge its exposure to price risk
from changing commodity prices. The Companys hedging program is a tool the
Company uses to manage cash flows in support of its annual capital expenditure
budget. The Company does not enter into derivative or other financial
instruments for trading purposes. Management exercises significant judgment
related to its hedge program in determining the types of instruments to be used,
the amount of production volumes to be hedged, the prices at which to hedge and
the counterparties and their creditworthiness, all of which is covered by the
Companys hedging policy.

The Company must estimate the correlation between future changes in the fair
value of the derivative instrument and the transaction being hedged, both at
inception and on an ongoing basis. Hedge effectiveness
is assessed at least  quarterly, and any ineffective portion of the derivative instruments
change in fair value is recognized immediately as an increase or a decrease in  revenues.

For
cash flow hedges, changes in fair value, to the extent the hedge is effective,
are recognized in other comprehensive income until the forecasted transaction is
recognized in earnings. Therefore, prior to settlement of the derivative
instruments, changes in the fair market value of these instruments can cause
significant increases or decreases in other comprehensive income. The result of
the settlement of the hedge is included in income when the forecasted
transactions occur.

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 its capital expenditures, earnings and
competitive position.

45

---

# Ocean
Energy,  Inc.

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

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

In addition, this Form 10K contains forwardlooking statements
relating to the Companys proposed merger with Devon.  Please read Risk Factors for a more complete description of risks relating to the merger
and other risks which may cause our forwardlooking statements to be inaccurate.  The Company undertakes no obligation to publicly update or revise
any forwardlooking statements.

Defined Terms

Oil,
condensate and natural gas liquids (NGL) are stated herein 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. Natural gas is stated in billion cubic feet (Bcf),
million cubic feet (MMcf) or thousand cubic feet (Mcf).
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. MMBtu and BBtu are one million British Thermal Units and one
billion British Thermal Units, respectively.

46

---

# Ocean
Energy,  Inc.

Selected
Quarterly Financial Data

Summarized
quarterly financial data is as follows (amounts in thousands except per share  data):

|                    | Quarter Ended
|------------------- | -------------
|                   
|
|                   
|2002:               |              
|Revenues            |              
|Operating Profit    |              
|Net Income(1)       |              
|Earnings per Share: |              
|Basic(2)            |              
|Diluted(2)          |              
|                    |              
|2001:               |              
|Revenues            |              
|Operating Profit    |              
|Net Income          |              
|Earnings per Share: |              
|Basic(2)            |              
|Diluted(2)          |              

|(1) |  | Includes
pre-tax impairment of oil and gas assets of $76 million in the third quarter of 2002.
|--- |  | ----------------------------------------------------------------------------------------------

|(2) |  | Quarterly
earnings per common share may not total to the full year per share amount, as the
weighted average number of shares outstanding for each quarter fluctuated as a result of
the assumed exercise of stock options.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 7a.   Quantitative and Qualitative Disclosures About Market Risk

Market Risk
Disclosures

The
Company  experiences  market risks in two major areas:  commodity  prices and interest
rates.  Because  the  U.S.  dollar  is  the  functional  currency  for  all of  the
Companys  existing  foreign  operations,  with  predominantly  all transactions  being
denominated in U.S.  dollars,  the Company  currently has limited risk from  foreign
currency translation.

Commodity
Price Risk  The Company experiences market risk primarily in
the area of commodity prices. The Company has utilized derivative financial
instruments with respect to a portion of its 2002 oil and gas production to
achieve a more predictable cash flow by reducing its exposure to price
fluctuations. The Company does not enter into derivative or other financial
instruments for trading purposes.

At
February 28, 2003, the Company had the following volumes under derivative
contracts related to its oil and gas producing activities:

47

---

# Ocean
Energy,  Inc.

|                       |  |  |             | Weighted
|---------------------- |  |  | ----------- | --------
|
|
|                      
|Crude Oil:             |  |  |             |         
|01/01/03  12/31/03    |  |  | WTI         |         
|01/01/03  12/31/03    |  |  | Dated Brent |         
|03/01/03  12/31/03(2) |  |  | Dated Brent |         
|04/01/03  12/31/03(2) |  |  | Dated Brent |         
|                       |  | 
|Natural Gas:           |  | 
|01/01/03  12/31/03    |  |  | NYMEX       |         
|01/01/03  12/31/03    |  |  | NYMEX       |         
|03/01/03  12/31/03(2) |  |  | NYMEX       |         
|04/01/03  06/30/03    |  |  | NYMEX       |         
|09/01/03  10/31/03    |  |  | NYMEX       |         
|                       |  | 
|Gas Swap of            |  | 
|Related Trust:         |  | 
|01/01/03  12/31/03    |  |  | NYMEX       |         
|01/01/04  12/31/04    |  |  | NYMEX       |         
|01/01/05  12/31/05    |  |  | NYMEX       |         

|(1) |  | A
"3way collar" combines a sold call, a purchased put and a sold put. The
purchased put and sold put establish a floating minimum price ("floating  floor")
and the sold call establishes a maximum price ("ceiling price")  the Company
will receive for the volumes under contract.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Contract
entered into subsequent to December 31, 2002.
|--- |  | ------------------------------------------------------

These
instruments  have  been  designated  as cash  flow  hedges.  See  Notes  2 and 13 to the
Companys  Consolidated  Financial  Statements for a description of the Companys
accounting policies for derivative financial  instruments  and for additional
information  regarding the derivative  financial  instruments to which the Company  was a
party at December 31, 2002.

To
calculate the potential  effect of the derivatives  contracts on future  revenues,  the
Company applied the  average New York Mercantile  Exchange  (NYMEX) or Brent,
as applicable,  oil and gas strip prices as of December  31, 2002 to the quantity of the
Companys  oil and gas  production  covered by  derivative  contracts to which the
Company was a party at  December  31,  2002.  The  following  table shows the  estimated
potential  effects of the  derivative financial instruments on future revenues (in
millions):

48

---

# Ocean
Energy,  Inc.

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

All
derivative financial instruments outstanding at December 31, 2001, except for
the gas swap of a related trust noted above, have expired. The effect of
derivative financial instruments outstanding at December 31, 2001 was a $4
million decrease in revenues during 2002.

Interest
Rate Risk  The Company has minimal exposure to risk resulting
from changes in interest rates because substantially all debt obligations at
December 31, 2002, were at fixed interest rates. At December 31, 2002, the
Company had longterm debt outstanding of $1.4 billion. Of this amount 99% is
fixed rate debt. As of December 31, 2002, the Companys outstanding
borrowings under the credit facility were zero.

At
December 31, 2002, the Company was party to interest rate swap agreements
relating to its 7 5/8% senior notes due July 2005 and its 7 7/8% senior notes
due August 2003. Under the terms of the agreements, the counterparties pay the
Company a weighted average fixed annual rate of 7.74% on total notional amounts
of $225 million, and the Company pays the counterparties a variable annual rate
equal to the average sixmonth LIBOR rate plus a weighted average rate of 2.73%.
The swap agreements remain in effect through the maturity dates of the
respective notes.

49

---

# Ocean
Energy,  Inc.

Item 8.   Financial Statements and Supplementary Data

# Report of Management to Stockholders

The
management of Ocean Energy, Inc. is responsible for the preparation and  integrity of
financial statements and related data in this Annual Report,  whether audited or
unaudited. The financial statements were prepared in  conformity with generally accepted
accounting principles and include certain  estimates and judgments that management
believes are reasonable under the  circumstances.

Management
is also responsible for and maintains a system of internal accounting controls  that is
designed to provide reasonable assurance that assets are safeguarded  against loss or
unauthorized use and that financial records are reliable for  preparing financial
statements, as well as to prevent and detect fraudulent  financial reporting. The
internal control system is supported by written  policies and procedures and the
employment of trained, qualified personnel. The  Company has an internal audit function
that reviews the adequacy of the internal  accounting controls and compliance with them.
Management has considered the  recommendations of internal audit and KPMG LLP,
independent certified public  accountants, concerning the Companys system of
internal controls and has  responded appropriately to those recommendations.

KPMG
LLP, independent certified public accountants, have audited the accompanying
consolidated financial statements of Ocean Energy, Inc. as of December 31, 2002,  and
their report is included herein. Their audit was made in accordance with  generally
accepted auditing standards and included a review of the system of  internal controls to
the extent considered necessary to determine the audit  procedures required to support
their opinion on the consolidated financial  statements.

The
Board of Directors, through its Audit Committee composed exclusively of independent
directors, meets periodically with representatives of management, internal audit  and the
independent auditors to ensure the existence of effective internal  accounting controls
and that financial information is reported accurately and  timely with all appropriate
disclosures included. The independent auditors and  internal audit have full and free
access to, and meet with, the Audit Committee,  with and without management present.

|                                     |  | 
|------------------------------------ |  | 
|/s/ James T. HackettJames T. Hackett |  | 
|Chairman of the Board,               |  | 
|President and Chief                  |  | 
|Executive Officer                    |  | 

January 28,
2003

50

---

# Ocean
Energy,  Inc.

# Independent Auditors Report

The  Board of
Directors and StockholdersOcean Energy, Inc.:

We  have
audited the accompanying consolidated balance sheets of Ocean Energy, Inc.  and
subsidiaries as of December 31, 2002 and 2001, and the related consolidated  statements
of operations, stockholders equity and cash flows for each of  the years in the
threeyear period ended December 31, 2002. These consolidated  financial statements are
the responsibility of the Companys management.  Our responsibility is to express an
opinion on these consolidated financial  statements based on our audits.

We  conducted
our audits in accordance with auditing standards generally accepted in  the United States
of America. Those standards require that we plan and perform  the audit to obtain
reasonable assurance about whether the financial statements  are free of material
misstatement. An audit includes examining, on a test basis,  evidence supporting the
amounts and disclosures in the financial statements. An  audit also includes assessing
the accounting principles used and significant  estimates made by management, as well as
evaluating the overall financial  statement presentation. We believe that our audits
provide a reasonable basis  for our opinion.

In our
opinion, the consolidated financial statements referred to above present fairly,  in all
material respects, the financial position of Ocean Energy, Inc. and  subsidiaries as of
December 31, 2002 and 2001, and the results of their  operations and their cash flows for
each of the years in the threeyear period  ended December 31, 2002 in conformity with
accounting principles generally  accepted in the United States of America.

As  discussed
in Note 2 to the consolidated financial statements, effective January  1, 2001, the
Company changed its method of accounting for derivative financial  instruments.

/s/ KPMG  LLPKPMG LLP

Houston,
TexasJanuary 28, 2003

51

---

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

|                                                      | Year Ended December 31,
|----------------------------------------------------- | -----------------------
|                                                     
|                                                      |                        
|                                                     
|Revenues                                              |                        
|                                                      |                        
|Costs of Operations:                                  |                        
|Operating expenses                                    |                        
|Depreciation, depletion and amortization              |                        
|Impairment of oil and gas properties                  |                        
|General and administrative                            |                        
|                                                     
|                                                      |                        
|                                                     
|                                                      |                        
|Operating Profit                                      |                        
|                                                      |                        
|Other Expense:                                        |                        
|Interest expense                                      |                        
|Loss on early extinguishment of debt                  |                        
|Merger and integration costs                          |                        
|Other expense                                         |                        
|                                                     
|Income Before Income Taxes                            |                        
|Income Tax Expense                                    |                        
|                                                     
|Net Income                                            |                        
|Preferred Stock Dividends                             |                        
|                                                     
|Net Income Available to Common Stockholders           |                        
|                                                     
|                                                      |                        
|Earnings Per Share:                                   |                        
|Basic                                                 |                        
|                                                     
|Diluted                                               |                        
|                                                     
|                                                      |                        
|Cash Dividends Declared Per Common Share              |                        
|                                                      |                        
|Weighted Average Number of Common Shares Outstanding: |                        
|Basic                                                 |                        
|                                                     
|Diluted                                               |                        
|                                                     

See
accompanying Notes to Consolidated Financial Statements.

52

---

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

|                                                                     | December 31,
|-------------------------------------------------------------------- | ------------
|                                                                    
|                                                                     |             
|                                                                    
|Assets                                                               |             
|Current Assets:                                                      |             
|Cash and cash equivalents                                            |             
|Accounts receivable, net                                             |             
|Other current assets                                                 |             
|                                                                    
|Total Current Assets                                                 |             
|                                                                    
|Property, Plant and Equipment, at cost, full cost method for oil and |             
|gas properties:                                                      |             
|Proved oil and gas properties                                        |             
|Oil and gas properties excluded from amortization                    |             
|Other                                                                |             
|                                                                    
|                                                                     |             
|Accumulated Depreciation, Depletion and Amortization                 |             
|                                                                    
|                                                                     |             
|                                                                     |             
|Other Assets                                                         |             
|                                                                    
|Total Assets                                                         |             
|                                                                    
|Liabilities and Stockholders Equity                                 |             
|Current Liabilities:                                                 |             
|Accounts and notes payable                                           |             
|Accrued  interest payable                                            |             
|Accrued liabilities                                                  |             
|                                                                    
|Total Current Liabilities                                            |             
|                                                                    
|                                                                     |             
|LongTerm Debt                                                       |             
|Deferred Revenue                                                     |             
|Deferred Income Taxes                                                |             
|Other Noncurrent Liabilities                                         |             
|Commitments and Contingencies                                        |             
|                                                                     |             
|Stockholders Equity:                                                |             
|Preferred stock, $1.00 par value; authorized 10,000,000 shares;      |             
|issued 50,000 shares                                                 |             
|Common stock, $0.10 par value; authorized 520,000,000 shares;        |             
|issued 178,887,756 and 174,936,240 shares, respectively              |             
|Additional paidin capital                                           |             
|Retained earnings (deficit)                                          |             
|Treasury stock, at cost; 2,562,430 and 2,641,640 shares,             |             
|respectively                                                         |             
|Deferred compensation and other                                      |             
|Accumulated other comprehensive income (loss)                        |             
|                                                                    
|Total Stockholders Equity                                           |             
|                                                                    
|Total Liabilities and Stockholders Equity                           |             
|                                                                    

See
accompanying Notes to Consolidated Financial Statements.

53

---

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

|                                                         | Year Ended December 31,
|-------------------------------------------------------- | -----------------------
|                                                        
|                                                         |                        
|                                                        
|Operating Activities:                                    |                        
|Net income                                               |                        
|Adjustments to reconcile net income to net               |                        
|cash provided by operating activities:                   |                        
|Depreciation, depletion and amortization                 |                        
|Impairment of oil and gas properties                     |                        
|Deferred income taxes                                    |                        
|Loss on early extinguishment of debt                     |                        
|Tax benefit from stock option exercises                  |                        
|Amortization of deferred compensation                    |                        
|Other                                                    |                        
|Changes in operating assets and liabilities, net of      |                        
|acquisitions:                                            |                        
|Decrease (increase) in accounts receivable               |                        
|Increase in other current assets and other               |                        
|Increase (decrease) in accounts payable                  |                        
|Amortization of deferred revenue                         |                        
|Increase (decrease) in accrued expenses and other        |                        
|                                                        
|Net Cash Provided by Operating Activities                |                        
|                                                        
|Investing Activities:                                    |                        
|Oil and gas capital expenditures                         |                        
|Acquisition costs, net of cash acquired                  |                        
|Corporate and other capital expenditures                 |                        
|Proceeds from sales of property, plant and equipment     |                        
|Other                                                    |                        
|                                                        
|Net Cash Used in Investing Activities                    |                        
|                                                        
|Financing Activities:                                    |                        
|Proceeds from debt                                       |                        
|Principal payments on debt                               |                        
|Proceeds from issuance of common stock                   |                        
|Dividends paid                                           |                        
|Premiums paid on debt buy back                           |                        
|Purchase of treasury stock                               |                        
|Increase in deferred revenue                             |                        
|Proceeds from conveyance of Section 29 credit properties |                        
|Other                                                    |                        
|                                                        
|Net Cash Provided by (Used in) Financing Activities      |                        
|                                                        
|Increase (Decrease) in Cash and Cash Equivalents         |                        
|Cash and Cash Equivalents at Beginning of Year           |                        
|                                                        
|Cash and Cash Equivalents at End of Year                 |                        
|                                                        

See
accompanying Notes to Consolidated Financial Statements.

54

---

Ocean
Energy, Inc.Consolidated Statements of Stockholders Equity(Amounts in Thousands)

|                                                        |  |  |   | Retained
|------------------------------------------------------- |  |  | - | --------
|
|
|
|                                                       
|Balance, January 1, 2002                                |  |  | $ | 50      
|Exercise of common stock options and employee           |  | 
|stock purchases                                         |  |  |   | --      
|Treasury stock purchase                                 |  |  |   | --      
|Deferred compensation                                   |  |  |   | --      
|Amortization of deferred compensation                   |  |  |   | --      
|Preferred stock dividends                               |  |  |   | --      
|Common stock dividends                                  |  |  |   | --      
|Tax benefit from exercise of stock options              |  |  |   | --      
|Funding of supplemental benefit plans trust             |  |  |   | --      
|Transfer of supplemental benefit plans trust            |  | 
|obligation                                              |  |  |   | --      
|Contribution of shares to employee plans                |  |  |   | --      
|Other                                                   |  |  |   | --      
|Comprehensive income:                                   |  | 
|Net income                                              |  |  |   | --      
|Other comprehensive income (net of tax):                |  | 
|Net effect of derivative financial instruments          |  |  |   | --      
|Other                                                   |  |  |   | --      
|                                                       
|Balance, December 31, 2002                              |  |  | $ | 50      
|                                                       
|Balance, January 1, 2001                                |  |  | $ | 50      
|Exercise of common stock options and employee           |  | 
|stock purchases                                         |  |  |   | --      
|Treasury stock purchase                                 |  |  |   | --      
|Deferred compensation                                   |  |  |   | --      
|Amortization of deferred compensation                   |  |  |   | --      
|Preferred stock dividends                               |  |  |   | --      
|Common stock dividends                                  |  |  |   | --      
|Tax benefit from exercise of stock options              |  |  |   | --      
|Funding of supplemental benefit plans trust             |  |  |   | --      
|Transfer of supplemental benefit plans trust obligation |  |  |   | --      
|Other                                                   |  |  |   | --      
|Comprehensive income:                                   |  | 
|Net income                                              |  |  |   | --      
|Other comprehensive income (net of tax):                |  | 
|Cumulative effect of accounting change for derivative   |  | 
|financial instruments                                   |  |  |   | --      
|Net effect of derivative financial instruments          |  |  |   | --      
|Other                                                   |  |  |   | --      
|                                                       
|Balance, December 31, 2001                              |  |  | $ | 50      
|                                                       
|Balance, January 1, 2000                                |  |  | $ | 50      
|Exercise of common stock options                        |  |  |   | --      
|Treasury stock purchase                                 |  |  |   | --      
|Deferred compensation                                   |  |  |   | --      
|Amortization of deferred compensation                   |  |  |   | --      
|Preferred stock dividends                               |  |  |   | --      
|Common stock dividends declared                         |  |  |   | --      
|Tax benefit from exercise of stock options              |  |  |   | --      
|Other                                                   |  |  |   | --      
|Comprehensive income:                                   |  | 
|Net income                                              |  |  |   | --      
|                                                       
|Balance, December 31, 2000                              |  |  | $ | 50      
|                                                       

See
accompanying Notes to Consolidated Financial Statements.

55

---

Ocean
Energy, Inc.Consolidated Statements of Stockholders Equity, Continued(Amounts in Thousands)

|                                               |  |  | Accumulated |         |  
|---------------------------------------------- |  |  | ----------- | ------- | -
|
|
|
|                                              
|Balance, January 1, 2002                       |  |  | $           | (35,654 | )
|Exercise of common stock options and           |  | 
|employee stock purchases                       |  |  |             | --      |  
|Treasury stock purchase                        |  |  |             | (1,959  | )
|Deferred compensation                          |  |  |             | 162     |  
|Amortization of deferred compensation          |  |  |             | --      |  
|Preferred stock dividends                      |  |  |             | --      |  
|Common stock dividends                         |  |  |             | --      |  
|Tax benefit from exercise of stock options     |  |  |             | --      |  
|Funding of supplemental benefit plans trust    |  |  |             | 806     |  
|Transfer of supplemental benefit plans         |  | 
|trust obligation                               |  |  |             | --      |  
|Contribution of shares to employee plans       |  |  |             | 1,527   |  
|Other                                          |  |  |             | 9       |  
|Comprehensive income:                          |  | 
|Net income                                     |  |  |             | --      |  
|Other comprehensive income (net of tax):       |  | 
|Net effect of derivative                       |  | 
|financial instruments                          |  |  |             | --      |  
|Other                                          |  |  |             | --      |  
|                                              
|Balance, December 31, 2002                     |  |  | $           | (35,109 | )
|                                              
|Balance, January 1, 2001                       |  |  | $           | (35,354 | )
|Exercise of common stock options               |  | 
|and employee stock purchases                   |  |  |             | --      |  
|Treasury stock purchase                        |  |  |             | (6,671  | )
|Deferred compensation                          |  |  |             | --      |  
|Amortization of deferred compensation          |  |  |             | --      |  
|Preferred stock dividends                      |  |  |             | --      |  
|Common stock dividends                         |  |  |             | --      |  
|Tax benefit from exercise of stock options     |  |  |             | --      |  
|Funding of supplemental benefit plans trust    |  |  |             | 6,343   |  
|Transfer of supplemental benefit plans         |  | 
|trust obligation                               |  |  |             | --      |  
|Other                                          |  |  |             | 28      |  
|Comprehensive income:                          |  | 
|Net income                                     |  |  |             | --      |  
|Other comprehensive income (net of tax):       |  | 
|Cumulative effect of accounting change for     |  | 
|derivative financial instruments               |  |  |             | --      |  
|Net effect of derivative financial instruments |  |  |             | --      |  
|Other                                          |  |  |             | --      |  
|                                              
|Balance, December 31, 2001                     |  |  | $           | (35,654 | )
|                                              
|Balance, January 1, 2000                       |  |  | $           | (3,114  | )
|Exercise of common stock options               |  |  |             | --      |  
|Treasury stock purchase                        |  |  |             | (32,217 | )
|Deferred compensation                          |  |  |             | --      |  
|Amortization of deferred compensation          |  |  |             | --      |  
|Preferred stock dividends                      |  |  |             | --      |  
|Common stock dividends declared                |  |  |             | --      |  
|Tax benefit from exercise of stock options     |  |  |             | --      |  
|Other                                          |  |  |             | (23     | )
|Comprehensive income:                          |  | 
|Net income                                     |  |  |             | --      |  
|                                              
|Balance, December 31, 2000                     |  |  | $           | (35,354 | )
|                                              

See
accompanying Notes to Consolidated Financial Statements.

56

---

# Ocean
Energy, Inc.Notes to Consolidated Financial Statements

1.   Organization

Ocean
Energy, Inc. (the Company, OEI or Ocean) is
an independent energy company engaged in the exploration, development,
production and acquisition of crude oil and natural gas. North American operations are focused
in the shelf and deepwater areas of the Gulf of Mexico, the Rocky Mountains,
Permian Basin, Anadarko, East Texas, North Louisiana and the Gulf Coast regions.
Internationally, the Company conducts oil and gas activities in West Africa in Equatorial
Guinea, Angola, Nigeria and Côte dIvoire. The Company also conducts operations in
Egypt, the Russian Republic of Tatarstan, Brazil and Indonesia.

On
February 23, 2003, Ocean and Devon Energy  Corporation  (Devon) executed
an Agreement and Plan of Merger.  The merger must be approved by the  stockholders  of
both Ocean and Devon.  Under  the terms of the merger  agreement,  Oceans  common stockholders
will receive 0.414 shares of Devon common stock for each  common share of Ocean.  After
the merger,  the stockholders of Ocean will own  approximately 32% of the outstanding
common stock of the combined  company.  The merger is expected to qualify as a taxfree
transaction and is subject  to each  Companys  stockholders approval and
certain other  conditions.  The  transaction  is  anticipated to be  completed midyear
2003.

2.   Summary of
Significant Accounting Policies

General The accompanying Consolidated Financial Statements of the Company
have been prepared according to generally accepted accounting principles and
pursuant to the rules and regulations of the Securities and Exchange Commission.
These accounting principles require the use of estimates, judgments and
assumptions that affect the reported amounts of assets and liabilities as of the
date of the financial statements, and revenues and expenses during the reporting
period. Actual results could differ from those estimates. Certain
reclassifications of amounts previously reported have been made to conform to
current year presentations.

Consolidation
 The accompanying Consolidated Financial Statements include the accounts of Ocean
Energy, Inc. and its majorityowned entities. All significant intercompany transactions
have been eliminated. At this time, the Company does not believe the requirements of the recently
issued Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest
Entities, will result in consolidation of any additional entities.

Cash
Equivalents  The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.

Inventories
 Materials and supplies and oil inventories are valued at the lower of
average cost or market value (net realizable value).

Oil
and Gas Properties  The Companys exploration and production
activities are accounted for using the full cost method. Under this method, all
acquisition, exploration and development costs, including certain directly
related employee costs and a portion of interest expense, incurred for the
purpose of finding oil and gas are capitalized. These capitalized costs are
accumulated in pools on a countrybycountry basis. Capitalized costs include
the cost of drilling and equipping productive wells, dry hole costs, lease
acquisition costs, seismic and other geological and geophysical costs, delay
rentals and costs related to such activities. Employee
costs associated with production and other operating activities and general corporate activities are
expensed in the period incurred. Proceeds from sales of reserves in
place, unless significant, are recorded as reductions to oil and gas
properties.

57

---

# Ocean
Energy, Inc.

Where
proved reserves are established, capitalized costs are limited on a
countrybycountry basis (the ceiling limitation). The ceiling limitation is
calculated as the sum of the present value of future net cash flows related to estimated production of
proved reserves, using endofperiod prices, discounted at 10%, plus the lower of cost or estimated fair value of unproved
properties, all net of expected income tax effects. If the capitalized cost of the full cost pool
exceeds the ceiling limitation, the excess is charged to expense as additional
depreciation, depletion and amortization (DD&A) expense.

Depreciation,
depletion and amortization of oil and gas properties is computed on a
countrybycountry basis using a unitofproduction method based on estimated
proved reserves. Through December 31, 2002, all costs associated with proved oil
and gas properties, including an estimate of future development, restoration,
dismantlement and abandonment costs associated therewith, were included in the
computation base. As of January 1, 2003, capitalized costs related to asset retirement
obligations were included in the full cost pool. The costs of investments in unproved properties and portions
of costs associated with major development projects are excluded from the
DD&A calculation until the project is evaluated and proved reserves are
established or impaired.

Unproved
property costs include leasehold costs, seismic costs and other costs incurred
during the exploration phase. In areas where proved reserves are established,
significant unproved properties are evaluated
periodically for impairment. If a reduction in value has occurred, these property costs are
considered impaired and are transferred to the related full cost pool. Unproved
properties whose acquisition costs are not individually significant are
aggregated, and the portion of such costs estimated to be ultimately
nonproductive, based on experience, is amortized to the full cost pool over an
average holding period.

In
countries where the existence of proved reserves has not yet been determined,
leasehold costs, seismic costs and other costs incurred during the exploration
phase remain capitalized in unproved property cost centers until proved reserves
have been established or until exploration activities cease. If exploration
activities result in the establishment of a proved reserve base, amounts in the
unproved property cost center are reclassified as proved properties and become
subject to depreciation, depletion and amortization and the application of the
ceiling test. If exploration efforts in a country are unsuccessful in
establishing proved reserves, the Company may determine that the value of its
exploratory costs incurred have been permanently diminished in part or in whole.
Therefore, based on the Companys impairment evaluation and its future
exploration plans, the unproved property cost centers related to the area of
interest could be impaired, in which case accumulated costs are charged against
earnings.

During
2002, the Company announced that it would discontinue current exploratory
activities in Pakistan and on Block 19 offshore Angola. As a result, the Company
recognized an impairment in the amount of $76 million ($50 million, aftertax).
During 2000, the Company recognized an impairment in the amount of $20 million
($13 million, aftertax) related to the discontinuance of exploration
activities in the Republic of Yemen. The Company recognized no impairments during 2001 and
had no ceiling limitations in 2002, 2001 or 2000.

Interest
cost capitalized as property, plant and equipment amounted to $44 million, $45
million and $44 million in 2002, 2001 and 2000, respectively. The Company also
capitalized certain employee costs related to exploratory and development
activities in the amounts of $61 million, $58 million and $45 million in 2002,
2001 and 2000, respectively.

58

---

# Ocean
Energy, Inc.

The
Company estimates oil and gas reserves quarterly. An independent petroleum
engineering firm annually reviews at least 80% of the Companys estimates
of proved reserves.

Other
Property, Plant and Equipment Other property, plant and
equipment consists of oil and gas pipeline facilities, gas processing plant, and
corporaterelated assets and equipment with a net book value of $106 million and
$102 million at December 31, 2002 and 2001, respectively. Depreciation of other
property is computed principally using the straightline method over their
estimated useful lives, which vary from three to twenty years. The Company
groups and evaluates other property, plant and equipment for
impairment based on the ability to identify separate cash flows generated therefrom in
accordance with Statement of Financial Accounting Standards No. 144, Accounting for the
Impairment or Disposal of LongLived Assets (SFAS No. 144).
No impairment charges related to other property, plant and equipment were recorded
during 2002, 2001 and 2000.

Maintenance,
repairs and renewals are charged to operating expense except that renewals which
extend the life of the asset are capitalized.

Environmental
Liabilities Environmental expenditures that relate to an
existing condition caused by past operations, and that do not contribute to
current or future revenue generation, are expensed. Liabilities are accrued when
environmental assessments and/or cleanups are probable, and the costs can be
reasonably estimated.

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

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

Reclassification
of General and Administrative Expense  The Company expenses employee
costs associated with production and other operating activities and general corporate activities. In
prior years, a portion of costs related to certain administrative functions that
support the Companys ongoing operating activities were included in
operating expense. During 2002, the Company reclassified costs of certain
administrative functions as general and administrative expense. As a result, previous years have been reclassified to conform to current
year presentation. While this reclassification had no effect on net income, it
did decrease operating expense, and increase general and administrative expense,
by $24 million, $20 million and $18 million for the years ended December 31,
2002, 2001 and 2000, respectively.

Derivative
Instruments and Hedging Activities From time to time, the
Company has utilized and expects to continue to utilize derivative financial
instruments to hedge cash flows from operations or to hedge the fair value of
financial instruments.

59

---

# Ocean
Energy, Inc.

The
Company uses derivative financial instruments with respect to a portion of its
oil and gas production to achieve a more predictable cash flow by reducing its
exposure to price fluctuations. These transactions generally are swaps, collars
or options and are entered into with major financial institutions or commodities
trading institutions. Derivative financial instruments are intended to reduce  the Companys
exposure to declines in the market prices of crude oil and  natural gas that the Company
produces and sells, and to manage cash flows in  support of the Companys annual
capital expenditure budget. Prior to  January 1, 2001, gains and losses from derivative
financial instruments were  recognized in oil and gas revenues as the associated
production occurred.

The
Company may also utilize derivative financial instruments such as interest rate
swap agreements. Prior to January 1, 2001, gains and losses from interest rate
hedges were included in interest expense.

Effective
January 1, 2001, the Company adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities (SFAS No. 133), as
amended. 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 sheets as assets or liabilities.

Adoption
of SFAS No. 133 at January 1, 2001, resulted in the recognition of $1 million of
additional derivative assets, included in other current assets; $23 million of
derivative liabilities, $11 million of which were included in current
liabilities and $12 million of which were included in other noncurrent
liabilities in the Companys Consolidated Balance Sheets; and $14 million,
net of taxes, of deferred hedging losses, included in accumulated other
comprehensive income (loss) as the effect of the change in accounting principle.
The Company also recorded a deferred tax asset of $9 million upon adoption.
Amounts were determined as of January 1, 2001, based on quoted market values,
the Companys portfolio of derivative instruments, and the Companys
measurement of hedge effectiveness.

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 its inception. SFAS No. 133 requires that a
company document, at the inception of a hedge, the hedging relationship, the entitys risk management objective
and the strategy for undertaking the hedge. The documentation includes the
identification of the hedging instrument, the hedged item or
transaction, the nature of the risk being hedged, the method that will be used
to assess effectiveness and the method that will be used to measure hedge
ineffectiveness of derivative instruments that receive hedge accounting
treatment.

Derivative
instruments designated as cash flow hedges are reflected at fair value in the
Companys Consolidated Balance Sheets. Changes in fair value, to the extent
the hedge is effective, are recognized in other comprehensive income until the forecasted transaction occurs.
Hedge effectiveness is assessed at least quarterly based on total changes in the derivatives fair value. Any
ineffective portion of the derivative instruments change in fair value is
recognized immediately in revenues.

The
Company may utilize derivative financial instruments that have not been
designated as hedges under SFAS No. 133 even though they protect the Company
from changes in commodity prices. These instruments are marked to market with
the resulting changes in fair value recorded in oil and gas revenues.

60

---

# Ocean
Energy, Inc.

The
Company may also utilize derivative financial instruments to hedge exposure to
interest rates. Instruments may include contracts to convert the interest rate
on fixedrate debt to floating, or contracts to convert the interest rate on
floatingrate debt to fixed. Both types of contracts are reflected at fair value
in the Companys Consolidated Balance Sheets. The Company currently only has contracts
that convert the interest rates on its fixed rate debt to floating. These transactions qualify as
fair value hedges. Therefore, the related portion of fixedrate debt being
hedged is reflected at an amount equal to the sum of its carrying
value plus an  adjustment representing the change in its fair value attributable to the
interest rate risk being hedged. The gains or losses on the derivative financial
instrument and the hedged item, as well as the settlements on the derivative financial
instrument,  are recognized currently in interest expense. The net effect of this
accounting on the Companys  operating results is that interest expense on the
portion of fixedrate debt being hedged is  generally recorded based on variable
interest rates.

Income
Taxes The Company uses the liability method of accounting for
income taxes under which deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities, and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized as part of the
provision for income taxes in the period that includes the enactment date.

Foreign
Currency Translation  The U.S. dollar is the functional currency for all of the
Companys existing foreign operations, as predominantly all transactions in these
operations are denominated in U.S. dollars.

StockBased
Compensation  The Company currently has stock option plans and
an employee stock purchase plan, which are further described in Note 15. The
Company accounts for stockbased compensation plans for employees and
directors using the intrinsic value method. Under this method, the Company records no
compensation expense for stock options granted when the exercise price of
options granted is equal to or greater than the fair market value of the
Companys common stock on the date of grant. The Company also records no
compensation expense for employee purchases of stock under its employee stock
purchase plan because the plan is considered noncompensatory. The
following table presents the effect on net income and earnings per share if the Company had
applied a fair value recognition method:

61

---

# Ocean
Energy, Inc.

|                                                  | Year Ended December 31,
|------------------------------------------------- | -----------------------
|                                                 
|                                                  |                        
|                                                 
|Net income, as reported                           |                        
|Deduct:  Total stockbased employee compensation  |                        
|expense determined  under fair value based method |                        
|for all awards, net of related tax effects        |                        
|                                                 
|Pro forma                                         |                        
|                                                 
|Earnings per share:                               |                        
|Basic  as reported                               |                        
|Basic  pro forma                                 |                        
|                                                  |                        
|Diluted  as reported                             |                        
|Diluted  pro forma                               |                        

Concentrations
of Market Risk  The future results of the Companys oil and gas operations will be affected by the market
prices of oil and gas. The availability of a ready market for crude oil, natural
gas and liquid products in the future will depend on numerous factors beyond the
control of the Company, including weather, imports, marketing of competitive
fuels, proximity and capacity of oil and gas pipelines and other transportation  facilities, any oversupply or undersupply of oil, gas and
liquid products, the  regulatory environment, the economic environment, and other
regional and  political events, none of which can be predicted with certainty.

The
Company operates in various phases of the oil and gas industry. The
Companys receivables include amounts due from purchasers of oil and gas
production and amounts due from joint venture partners for their respective
portions of operating expense and exploration and development costs. The
Company believes that no single customer or joint venture partner exposes the Company to
significant credit risk. While certain of these customers and joint venture partners are
affected by  periodic downturns in the economy in general or in their specific segment of
the  crude oil or natural gas industry, the Company believes that its level of  creditrelated
losses due to such economic fluctuations has been and will  continue to be immaterial to
the Companys results of operations in the  long term. Trade receivables are
generally not collateralized. The Company  analyzes customers and joint venture
partners historical credit  positions and payment histories prior to extending
credit.

Duke
Energy Trading & Marketing and affiliates (DETM), a whollyowned
subsidiary of Duke Energy Corp., and ExxonMobil Sales and Supply
(EMSS), a whollyowned subsidiary of ExxonMobil Corporation,
accounted for significant portions of the Companys total oil and gas
production revenues during 2002, 2001 and 2000 as follows:

|                                           | Year Ended December 31,
|------------------------------------------ | -----------------------
|                                          
|                                           |                        
|                                          
|Percentage of total oil and gas production |                        
|revenues purchased by:                     |                        
|Duke Energy Trading & Marketing            |                        
|ExxonMobil Sales and Supply                |                        

62

---

# Ocean
Energy, Inc.

DETM
has an implied senior debt rating of BBB from Standard & Poors
(S&P) and Duke Energy Corporations senior debt is rated A
by S&P and A3 by Moodys. EMSS is not rated but ExxonMobil
Corporations senior debt is rated AAA by S&P and Aaa by Moodys.

The
Company has a significant portion of its operations in various international
areas. The Companys activities in these areas are subject to risks
associated with international operations, including political and economic
uncertainties, risks of cancellation or unilateral modification of agreements,
operating restrictions, currency repatriation restrictions, expropriation,
export restrictions, the imposition of new taxes and the increase of existing
taxes, inflation, foreign exchange fluctuations and other risks arising out of
international government sovereignty over areas in which the operations are
conducted. The Company has endeavored to protect itself against political and
commercial risks inherent in these operations. There is no certainty that the
steps taken by the Company will provide adequate protection.

Concentrations
of Credit Risk  Derivative financial instruments that
hedge the price of oil and gas and interest rates are generally executed with
major financial or commodities trading institutions which expose the Company to
market and credit risks, and may at times be concentrated with certain
counterparties or groups of counterparties. Although notional amounts are used
to express the volume of these contracts, the amounts potentially subject to
credit risk, in the event of nonperformance by the counterparties, are
substantially smaller. The creditworthiness of counterparties is subject to
continuing review and full performance is anticipated. The Companys policy
is to execute financial derivatives only with counterparties having a senior
debt rating of A or higher.

Impact
of RecentlyIssued Accounting Pronouncements The Financial
Accounting Standards Board (FASB) has recently issued the following
accounting pronouncements:

Statement
of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations(SFAS No. 143) requires entities to record the liability for asset retirement obligation
at fair value in the period in which it is incurred and a corresponding increase in the carrying amount of the
related longlived asset. This statement is required to be adopted for periods
after December 31, 2002 using a cumulative effect  approach to recognize transition amounts for asset retirement
obligations, asset  retirement costs and accumulated depreciation. The Company adopted
SFAS No. 143  as of January 1, 2003. The adoption of this statement resulted in the
recognition of a liability for asset retirement obligations of $94 million, $1 million
of which was included in accrued liabilities and $93 million of which was included in
other noncurrent liabilities, a corresponding increase in net property, plant and  equipment
of $116 million in the Companys balance sheets, and a cumulative  accounting
adjustment of $13 million, net of $9 million deferred tax expense, as the effect of the
change in accounting  principle.

Statement
of Financial Accounting Standards No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections(SFAS No. 145) rescinds Statement of Financial Accounting
Standards No. 4, Reporting Gains and Losses from Extinguishment of Debt,
and requires that all gains and losses from extinguishment of debt should be
classified as extraordinary items only if they meet the criteria in Accounting
Principles Board Opinion No. 30, Reporting the Results of Operations(APB No. 30). Applying APB No. 30 distinguishes transactions
that are part of an entitys recurring operations from those that are
unusual or infrequent or that meet the criteria for classification as an
extraordinary item. Any gain or loss on extinguishment of debt that was
classified as an extraordinary item in prior periods presented that does not
meet the criteria in APB No. 30 for classification as an extraordinary item must
be reclassified. The Company early adopted the provisions related to the rescission of
SFAS No. 4 during fourth quarter 2002. With the adoption of SFAS No. 145, the
classification of losses associated with extinguishments of debt that were
previously recorded as extraordinary items were reclassified into other expense
with the related tax benefit reclassified into income tax expense.

63

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# Ocean
Energy, Inc.

During 2002,
the FASB issued two interpretations: FASB Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (FIN 45) and FASB
Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). There
was no current impact of FIN 45 or FIN 46 on the Companys financial position or results of operations.

3.   Earnings
Per Share

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

|                               | Net Income | Weighted Average |  
|------------------------------ | ---------- | ---------------- | -
|
|
|                              
|Year Ended December 31, 2002:  |            |                  |  
|Basic                          |            |                  | $
|Effect of dilutive securities: |            |                 
|Stock options                  |            |                  |  
|Convertible preferred stock    |            |                  |  
|                              
|Diluted                        |            |                  | $
|                              

|Year Ended December 31, 2001:  |  |  |   |         |  |  |         |  |   |   |    
|------------------------------ |  |  | - | ------- |  |  | ------- |  | - | - | ---
|Basic                          |  |  | $ | 270,532 |  |  | 170,178 |  | $ | 1 | .59
|Effect of dilutive securities: |  | 
|Stock options                  |  |  |   | --      |  |  | 4,814   | 
|Convertible preferred stock    |  |  |   | 3,250   |  |  | 3,424   | 
|                              
|Diluted                        |  |  | $ | 273,782 |  |  | 178,416 |  | $ | 1 | .53
|                              
|Year  Ended December 31, 2000: |  | 
|Basic                          |  |  | $ | 209,953 |  |  | 167,144 |  | $ | 1 | .26
|Effect of dilutive securities: |  | 
|Stock options                  |  |  |   | --      |  |  | 4,217   | 
|Convertible preferred stock    |  |  |   | 3,250   |  |  | 3,388   | 
|                              
|Diluted                        |  |  | $ | 213,203 |  |  | 174,749 |  | $ | 1 | .22
|                              

Basic
earnings per share is computed by dividing net income available to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted earnings per share is determined on the assumption that
outstanding stock options have been converted using the average common stock
price for the period and that convertible preferred stock has been converted at
its stated conversion price.

Options
to purchase shares of common stock are excluded from the computation of diluted
earnings per share when their exercise prices are greater than the average
market price of the common shares during the period. The following options were
excluded from the computation of diluted earnings per share (options in
thousands):

64

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# Ocean
Energy, Inc.

|                                          | Year Ended December 31,
|----------------------------------------- | -----------------------
|                                         
|                                          |                        
|                                         
|Weighted average options excluded from    |                        
|computation of diluted earnings per share |                        
|Option exercise price range               |                        

These
options expire at various dates through 2012.

4.   Operating
Expenses

Components  of
operating expenses are as follows (in thousands):

|                                      | Year Ended December 31,
|------------------------------------- | -----------------------
|                                     
|                                      |                        
|                                     
|Lease operating expense               |                        
|Production taxes                      |                        
|Transportation expenses               |                        
|Ad valorem taxes and other            |                        
|                                     
|Productionrelated operating expenses |                        
|Other operating expenses              |                        
|                                     
|Total operating expenses              |                        
|                                     

Other operating
expenses include certain employee costs that support the Companys ongoing oil  and
gas activities.

5.   Supplemental
Disclosures of Cash Flow Information

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

|                               | Year Ended December 31,
|------------------------------ | -----------------------
|                              
|                               |                        
|                              
|Cash paid during the year for: |                        
|Interest                       |                        
|Income taxes                   |                        

65

---

# Ocean
Energy, Inc.

6.   Other
Current Assets

Other
current assets include the following at December 31, 2002 and 2001 (in
thousands):

|                                                                  | December 31,
|----------------------------------------------------------------- | ------------
|                                                                 
|                                                                  |             
|                                                                 
|Prepaid drilling costs                                            |             
|Inventories                                                       |             
|Oil and gas derivative financial instruments at fair market value |             
|Current deferred taxes                                            |             
|Tax refund due                                                    |             
|Other                                                             |             
|                                                                 
|Other current assets                                              |             
|                                                                 

7.   Acquisition
and Disposition of Assets

Acquisitions
  During 2001, the Company acquired Texoil, Inc.
(Texoil) for a cash purchase price of $115 million before assumed
bank debt of $15 million. Texoil was an independent oil and gas company engaged
in exploration, development, and acquisition of oil and gas reserves in Texas
and Louisiana. No goodwill was recorded in connection with the purchase of  Texoil. The Company also
acquired certain oil and gas assets from EnSight  Resources, L.L.C. for a cash purchase
price of $118 million. The properties are  located primarily in East Texas and North
Louisiana. Pro forma results of  operations assuming acquisitions occurred at the
beginning of the period would  not have been significantly different from actual results
for 2001.

Dispositions
During 2002, the Company closed the sale of selected royalty,
overriding royalty and mineral interests in various locations throughout the
United States and two packages of noncore working interests for
total net proceeds of $74 million. The Company received $64 million in proceeds
from the sales of certain noncore properties during 2001. Under full cost
accounting rules, the proceeds were recorded as a reduction of the U.S. cost
pool and no gain or loss was realized.

8.   Other
Noncurrent Assets

Other
noncurrent assets include the following at December 31, 2002 and 2001 (in
thousands):

|                                                                      | December 31,
|--------------------------------------------------------------------- | ------------
|                                                                     
|                                                                      |             
|                                                                     
|Oil and gas imbalances (net of current portion of $6 million and $3.5 |             
|million in 2002 and 2001, respectively)                               |             
|Deferred financing costs                                              |             
|Interest rate swap agreements at fair market value                    |             
|Assets held in supplemental benefit plans trust at fair market value  |             
|Other                                                                 |             
|                                                                     
|Other noncurrent assets                                               |             
|                                                                     

66

---

# Ocean
Energy, Inc.

9.   Accrued
Liabilities

Accrued
liabilities include the following at December 31, 2002 and 2001 (in thousands):

|                                              | December 31,
|--------------------------------------------- | ------------
|                                             
|                                              |             
|                                             
|Income taxes payable                          |             
|Contribution to Ocean Retirement Savings Plan |             
|Production and ad valorem taxes               |             
|Payroll and related employee benefits         |             
|Accrued spar lease payments                   |             
|Other                                         |             
|                                             
|Accrued liabilities                           |             
|                                             

10.   Debt

Longterm
debt consisted of the following at December 31, 2002 and 2001 (in thousands):

|                                                           | December 31,
|---------------------------------------------------------- | ------------
|                                                          
|                                                           |             
|                                                          
|Credit Facility (average interest rate of 3%) due May 2006 |             
|Public Notes:                                              |             
|7 7/8% Senior Notes, due August 2003                       |             
|7 5/8% Senior Notes, due July 2005                         |             
|4 3/8% Senior Notes, due October 2007                      |             
|7 1/4% Senior Notes, due October 2011                      |             
|8 1/4% Senior Notes, due July 2018                         |             
|7 1/2% Senior Notes, due September 2027                    |             
|8 7/8% Senior Subordinated Notes, due July 2007            |             
|8 3/8% Senior Subordinated Notes, due July 2008            |             
|Other                                                      |             
|                                                          
|                                                           |             
|Less:  Current maturities                                  |             
|Unamortized debt discount                                  |             
|                                                          
|Total longterm debt                                       |             
|                                                          

Credit
Facility As of December 31, 2002, the Companys credit facility
consisted of a $1 billion revolving credit facility with a maturity
date of May 2006. The credit facility replaced the Companys previous $500
million facility which was scheduled to mature in March 2004. The Companys
obligations under the credit facility are unsecured. 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 December 31,
2002, the Companys outstanding borrowings under the credit facility were
zero, and letters of credit totaled $28 million, leaving $972 million of
available credit.

Other
Financing Activities During 2002, the Company issued $400 million of
4 3/8% senior notes due October 2007 pursuant to a shelf registration statement.
The notes are redeemable at any time at the Companys option, and upon certain changes
in control, the notes would be subject to a mandatory repurchase offer. The
proceeds were used to repay amounts outstanding under the Companys credit
facility which included balances used to retire debt earlier in 2002 when the
Company exercised call provisions for $175 million of its 8 7/8% senior
subordinated notes due July 2007. The Company has also repurchased $27 million
of its 8 3/8% senior subordinated notes due July 2008. In connection with these
repurchases, the Company recorded other expense of $12 million and a related tax
benefit of $4 million.

During
2001, the Company issued $350 million of 7 1/4% senior notes due October 2011
pursuant to a shelf registration statement. The notes are redeemable at any time at the
Companys option, and upon certain changes in control, the notes would be
subject to a mandatory repurchase offer. A portion of the proceeds was used to
repay amounts outstanding under the Companys credit facility, and the
remainder of the proceeds was used to retire existing higher interest rate debt
by exercising call provisions for $100 million of 8 5/8% senior subordinated
notes due 2005 and $2 million of 9 3/4% senior subordinated notes due 2006. Also
during 2001, the Company repurchased on the open market $22 million of its 8
3/8% senior subordinated notes due July 2008 and $25 million of its 8 7/8%
senior

67

---

# Ocean
Energy, Inc.

subordinated notes due July 2007. The repurchase of these notes was
funded with available cash balances and borrowings
under the Companys  existing credit facility. In connection with these repurchases,
the Company  recorded other expense of $6 million and a related tax benefit of $2 million.

Public
Notes The Companys senior and senior subordinated notes are
general unsecured obligations of the Company. Ocean Energy, Inc. (incorporated
in Louisiana), a whollyowned subsidiary of the Company, has guaranteed the
payment of principal, premium (if any), and interest on the Companys outstanding notes. Other than intercompany
arrangements and transactions, the consolidated financial statements of the
subsidiary are equivalent in all material respects to those of the Company and
therefore are not presented separately.

The
Companys debt contains conditions and restrictive provisions including,
among other things, restrictions on incurrence of additional indebtedness by the Company and
its subsidiaries, the payment of dividends or repurchases of common stock and entering into
sale and leaseback transactions, and requires the maintenance of certain financial ratios. Under the most restrictive of these provisions, approximately
$519 million was available for payment of cash dividends on common stock or to
repurchase common stock as of December 31, 2002.

Annual
Maturities At December 31, 2002, the Companys aggregate
annual maturities of longterm debt are $101 million, $1 million, $126 million, $1
million and $401 million for the years 2003, 2004, 2005, 2006 and 2007,
respectively. The Companys 8 3/8% senior subordinated notes due July 2008
are redeemable at a premium beginning in July 2003.

The
Companys 7 7/8% senior notes, in the amount of $100 million, are due in
August 2003. The Company has established the necessary credit capacity, through
its credit facility, to refinance these notes. Therefore, in accordance with
SFAS No. 6, Classification of Shortterm Obligations Expected to be
Refinanced, the notes will continue to be classified as longterm debt
because it is the Companys intent to refinance these obligations on a
longterm basis.

Deferred
Financing Costs  Deferred financing costs represent financing costs
incurred in connection with the execution of various debt facilities entered
into or securities issued by the Company. These costs are capitalized as other
noncurrent assets in the Companys Consolidated Balance Sheets and
amortized to interest expense over the life of the related debt.

11.   Deferred Revenue

In
1999, the Company entered into a prepaid crude oil sales contract to deliver 5.6
MBbl per day of crude oil for the period February 2000 through May 2003. In
exchange for the crude oil to be provided, the Company received an advance
payment of $100 million.

The
Company is party to a marketsensitive prepaid natural gas sales contract to
deliver 53,500 MMBtu per day of natural gas for the period January 2003 through
December 2003 and 55,600 MMBtu per day of natural gas for the period January
2004 through December 2004. In exchange for the natural gas to be provided, the
Company received an advance payment of $75 million during 2000. The contract
also provides that the purchaser will make additional payments to the Company in
the event the spot price, as defined in the contract, exceeds $2.50 per MMBtu
for any delivery month during 2003 or exceeds $3.00 for any delivery month
during 2004.

The
obligations associated with the future delivery of the crude oil and natural gas
have been recorded as deferred revenue in the Companys Consolidated
Balance Sheets. The prepaid proceeds

68

---

# Ocean
Energy, Inc.

were included in
cash flows from  financing activities in the Companys Consolidated Statements of
Cash Flows  in the years in which they were received. The prepaid proceeds are being
amortized into  revenue as scheduled deliveries of crude oil and natural gas are made.
This amortization is deducted from net income when computing Net Cash Provided by Operating Activities in the Companys
Consolidated  Statements of Cash Flows as scheduled delivery occurs.  Deliveries of crude
oil and natural gas are made as follows:

|                                   | Year Ended December 31,
|---------------------------------- | -----------------------
|                                  
|                                   |                        
|                                  
|Revenues (in thousands)            |                        
|Annual crude oil delivery (MBbl)   |                        
|Annual natural gas delivery (BBtu) |                        

12.   Other
Noncurrent Liabilities

Other
noncurrent liabilities include the following at December 31, 2002 and 2001 (in
thousands):

|                                                                     | December 31,
|-------------------------------------------------------------------- | ------------
|                                                                    
|                                                                     |             
|                                                                    
|Conveyance of Section 29 credit properties:                          |             
|Tax credit agreement                                                 |             
|Embedded derivative at fair market value                             |             
|Oil and gas imbalances (net of current portion of $4 million in 2002 |             
|and $2 million in 2001)                                              |             
|Supplemental benefit plans                                           |             
|Deferred spar lease fees                                             |             
|Other                                                                |             
|                                                                    
|Other noncurrent liabilities                                         |             
|                                                                    

Conveyance
of Section 29 Credit Properties  In 2000, the Company conveyed certain
Internal Revenue Code Section 29 tax creditbearing properties to a trust for
$70 million, which was recorded in other noncurrent liabilities. The trust receives the operating
cash flow from the properties until the investor recoups its investment
plus a required aftertax rate of return. At December 31, 2002, payout is estimated to occur
during second quarter 2009.  As part of the transaction, the trust was
required to hedge 85% of its total estimated gas production through December 31,
2005. Although the Company is not a party to the financial instrument, under
SFAS No. 133 this transaction is determined to have an embedded derivative
financial instrument. The fair market value of that financial derivative is a liability of $9 million at
December 31, 2002 and an asset of $8 million at December 31, 2001, and is
included with the trust liability in other noncurrent liabilities.

Supplemental
Benefit Plans  Supplemental benefit plans represent the Companys obligation under its
executive supplemental retirement plan ($7 million), the outside directors
deferred fee plan ($2 million) and other supplemental benefit plans ($2
million).

Deferred
Spar Lease Fees See discussion of spar operating leases in Note 18.

69

---

# Ocean
Energy, Inc.

13.   Fair Value
of Financial Instruments

The
estimated fair value of financial instruments has been determined by the Company
using available market information. The estimated fair values of
the Companys financial instruments are summarized as follows (in
thousands):

|                                  | December 31,
|--------------------------------- | ------------
|                                 
|
|                                 
|                                  |             
|                                  |             
|                                 
|Asset (liability)                 |             
|Longterm debt                    |             
|Derivative financial instruments: |             
|Interest rate swaps               |             
|Oil and gas derivative            |             
|financial instruments             |             
|Embedded derivative               |             
|financial instrument              |             

Debt  The fair value of public notes is estimated based on quoted
market prices for the same or similar issues. The carrying amount of all other
debt approximates fair value because these instruments bear interest at rates
tied to current market rates or mature in one year.

Derivative
Financial Instruments  The Companys derivative
financial instruments are recorded at fair market value in the Companys
Consolidated Balance Sheets. The fair market values are the amounts the Company
would expect to receive or pay to settle the instruments at the reporting date,
taking into account the difference between market prices or index prices at year
end and the contract prices of the instruments. The fair market values were
obtained from the thirdparty counterparties to the instruments.

Interest
Rate Swaps The Company has entered into interest rate swap
agreements relating to its 7 5/8% senior notes due July 2005 and its 7 7/8% senior
notes due August 2003. Under the terms of the agreements, the counterparties pay
the Company a weighted average fixed annual rate of 7.74% on total notional
amounts of $225 million, and the Company pays the counterparties a variable
annual rate equal to the average sixmonth LIBOR rate plus a weighted average
rate of 2.73%. The swap agreements remain in effect through the maturity dates
of the respective notes. The swap agreements have been designated as fair value
hedges and are included in other noncurrent assets in
the Companys Consolidated Balance Sheets. Interest expense for 2002 and
2001 was reduced by $7 million and $3 million, respectively as a result of the interest
rate swaps.

Oil
and Gas Derivative Financial Instruments At February 28, 2003,
the Company had the following volumes under derivative contracts related to its
oil and gas producing activities:

70

---

# Ocean
Energy, Inc.

|                        |  |  |             | Weighted
|----------------------- |  |  | ----------- | --------
|
|
|                       
|Crude Oil:              |  |  |             |         
|01/01/03  12/31/03     |  |  | WTI         |         
|01/01/03  12/31/03     |  |  | Dated Brent |         
|03/01/03  12/31/03 (2) |  |  | Dated Brent |         
|04/01/03  12/31/03 (2) |  |  | Dated Brent |         
|                        |  | 
|Natural Gas:            |  | 
|01/01/03  12/31/03     |  |  | NYMEX       |         
|01/01/03  12/31/03     |  |  | NYMEX       |         
|03/01/03  12/31/03 (2) |  |  | NYMEX       |         
|04/01/03  06/30/03     |  |  | NYMEX       |         
|09/01/03  10/31/03     |  |  | NYMEX       |         

|(1) |  | A
3way  collar combines a sold call, a purchased put and a sold put. The
purchased put and  sold put establish a floating minimum price (floating floor)
and the sold  call establishes a maximum price (ceiling price) the Company
will receive  for the volumes under contract.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | Contract entered into
subsequent to December 31, 2002.
|--- |  | ------------------------------------------------------

The
Companys oil and gas derivative financial instruments have been designated
as cash flow hedges and are included in accounts and notes payable at
December 31, 2002 and in other current assets at December 31, 2001 in the Companys Consolidated Balance Sheets.

The
Company may utilize derivative financial instruments that have not
been designated as cash flow hedges even though they protect the Company from
changes in commodity prices. These instruments would be marked to market quarterly
with the resulting changes in fair value recorded in oil and gas revenues.

Embedded
Derivative Financial Instrument  A related trust, to which the
Company conveyed Section 29 tax creditbearing properties, is required to hedge
85% of total estimated gas production from these properties through 2005.
Through a swap agreement, the trust has hedged the following volumes:

|                           |  |  |  | Weighted
|-------------------------- |  |  |  | --------
|
|
|                          
|Gas Swap of Related Trust: |  |  |  |         
|01/01/03  12/31/03        |  |  |  | NYMEX   
|01/01/04  12/31/04        |  |  |  | NYMEX   
|01/01/05  12/31/05        |  |  |  | NYMEX   

The
fair market value of the embedded derivative financial instrument is the amount
the trust would expect to receive or pay to settle the instrument at the
reporting date. The financial instrument has been designated as a cash flow
hedge.

71

---

# Ocean
Energy, Inc.

The
change in fair values of the Companys oil and gas derivative financial
instruments and the embedded derivative financial instrument included in
revenues are as follows (in thousands):

|                                                                             | Year Ended December 31,
|---------------------------------------------------------------------------- | -----------------------
|                                                                            
|                                                                             |                        
|                                                                            
|Financial derivative settlements transferred from other comprehensive income |                        
|Net change in fair market value of options                                   |                        
|Ineffective portion of derivative financial instruments                      |                        
|                                                                            
|Decrease in revenues from derivative financial instruments qualifying        |                        
|as cash flow hedges                                                          |                        
|Decrease in revenues from other oil and gas derivative financial instruments |                        
|                                                                            
|Decrease in revenues from oil and gas derivative financial instruments       |                        
|                                                                            

If
commodity prices were to stay the same as they were at December 31, 2002,
approximately $24 million of net deferred losses related to those fair
values included in accumulated other comprehensive income (loss) at December 31,
2002 would be reversed during the next twelve months as the forecasted
transactions occur, and would be recorded as a reduction in revenues. Any actual increase/decrease
in revenues will be determinant upon market conditions over the period the forecasted transactions occur. All
forecasted transactions currently being hedged are expected to occur by December
2005.

Prior
to the adoption of SFAS No. 133 at January 1, 2001, the impact of oil and gas derivative financial
instruments and the embedded derivative financial instrument were recorded in
revenues as the associated production occurred. During 2002 and 2001, there were
no gains or losses reclassified into earnings as a result of the discontinuance
of hedge accounting treatment for any of the Companys derivative financial
instruments.

The
net effect of the Companys oil and gas derivative financial instruments
and the embedded derivative financial instrument included as a component of
other comprehensive income, net of tax, is as follows (in thousands):

|                                                            | Year Ended December 31,
|----------------------------------------------------------- | -----------------------
|                                                           
|                                                            |                        
|                                                           
|Cumulative effect of accounting change for oil and gas      |                        
|derivative financial instruments                            |                        
|Net change in fair market value of oil and gas derivative   |                        
|financial instruments                                       |                        
|Financial derivative settlements taken to income            |                        
|                                                           
|Net effect of oil and gas derivative financial instruments, |                        
|increase (decrease) in stockholders equity                 |                        
|                                                           

72

---

# Ocean
Energy, Inc.

14.   
Stockholders Equity

The
following table reflects the activity in shares of the Companys common
stock, preferred stock and treasury stock during the three years ended December
31, 2002:

|                                             | Year Ended December 31,
|-------------------------------------------- | -----------------------
|                                            
|                                             |                        
|                                            
|Common Stock Outstanding:                    |                        
|Shares at beginning of year                  |                        
|Exercise of common stock options             |                        
|Deferred compensation                        |                        
|Employee stock purchase plan                 |                        
|Other                                        |                        
|                                            
|Shares at end of year                        |                        
|                                            
|Preferred Stock Outstanding                  |                        
|                                            
|Treasury Stock Outstanding:                  |                        
|Shares at beginning of year                  |                        
|Purchase of shares                           |                        
|Transfer to supplemental benefit plans trust |                        
|Contribution of shares to employee plans     |                        
|Directors deferred compensation              |                        
|                                            
|Shares at end of year                        |                        
|                                            

Preferred
Stock The Company is authorized to issue 10,000,000 shares of
preferred stock, in one or more series. As of December 31, 2002, the Company
had outstanding 50,000 shares of Series B Convertible Preferred Stock. The preferred stock
has a 6.5% cumulative dividend payable semiannually and ranks senior to the
Companys common stock with respect to dividend distribution and
distribution upon liquidation. Upon liquidation, the holders of the preferred
shares are entitled to receive $1,000 per share, plus any accrued and unpaid
dividends. The Companys preferred stock is subject to automatic conversion
to shares of OEI common stock, if, and only if, for 20 consecutive trading days
the closing price of OEI common stock equals or exceeds the forced conversion
price which was $22.02 at December 31, 2002. The adjusted conversion price of
the preferred shares decreases based on the amount of dividends paid on common
stock and was $14.68 at December 31, 2002.

Common
Stock Dividends  At December 31, 2002, the Company had accrued
dividends payable of $7 million ($0.04 per share) on the Companys
outstanding common stock. Dividends of $28 million were charged to retained
earnings during 2002. See Note 10 for discussion of restrictions on payment of
cash dividends on common stock.

Preferred
Share Purchase Rights  The Company has a Rights Agreement
(the Plan) to protect the Companys stockholders from coercive
or unfair takeover tactics. Under the Plan, each outstanding share and each
share of common stock subsequently issued has attached to it one Right,
exercisable at $30.75, subject to certain adjustments. In the event a person or
group acquires 10% or more of the outstanding common stock, or in the event the
Company is acquired in a merger or other business combination, or 50% or more of
the Companys consolidated assets or earning power is sold, each Right
unless redeemed, entitles the holder to purchase $30.75 worth of shares of
common stock of the Company or of the acquiring company, as the case may be, for
half of the thencurrent, pershare market prices.

73

---

# Ocean
Energy, Inc.

The
Rights, under certain circumstances, are redeemable at the option of OEIs
Board of Directors at a price of $0.005 per Right, within 10 days (subject to
extension) following the day on which the acquiring person or group exceeds the
10% threshold. If any person or group acquires 10% or more (but less than 50%)
of the Companys outstanding common stock, the Board may, at its option,
issue common stock in exchange for all or part of the outstanding and
exercisable Rights (other than Rights owned by such person or group which would
become null and void) at an exchange ratio of one share of common stock for each
two shares of common stock for which each Right is then exercisable, subject to
adjustment. The Rights expire on May 21, 2003, but may be extended by an action
of the Board of Directors. The Plan was amended in connection with the Companys execution of the merger agreement
with Devon to except Devon and the merger agreement from the operative provisions of the Plan.

Accumulated
Other Comprehensive Income (Loss)  Components of accumulated other
comprehensive income consisted of the following at December 31, 2002 and 2001
(in thousands):

|                                                | December 31,
|----------------------------------------------- | ------------
|                                               
|                                                |             
|                                               
|Net effect of oil and gas derivative financial  |             
|instruments                                     |             
|Minimum supplemental retirement plans liability |             
|adjustment and other                            |             
|                                               
|Accumulated other comprehensive income (loss)   |             
|                                               

At
December 31, 2002, the effect of derivative financial instruments is net of a
deferred income tax benefit of $18 million. The minimum supplemental retirement
plans liability adjustment and other is net of a deferred income tax benefit of
$1 million.  At December 31, 2001, the effect of derivative financial instruments is net of deferred
income tax expense of $15 million.  The minimum supplemental retirement plans liability
adjustment and other is net of deferred income tax benefit of $260,000.

15.   Benefit
Plans

Stock
Option Plans  The Company currently has various stock option
plans. The stock options generally become exercisable over a threeyear period
and expire 10 years after the date of grant. At December 31, 2002, 6
million shares of common stock were available for grant. Information relating to
stock options is summarized as follows:

|                      | 2002 | 2001 | 2000
|--------------------- | ---- | ---- | ----
|                     
|
|
|
|
|
|                     
|Balance outstanding  |      |      |     
|Beginning of year     |      |      |     
|Granted               |      |      |     
|Exercised             |      |      |     
|Forfeited             |      |      |     
|                     
|Balance outstanding  |      |     
|End of year           |      |      |     
|                     
|Options exercisable  |      |     
|End of year           |      |      |     
|                     

74

---

# Ocean
Energy, Inc.

The
weighted average fair value of stock options granted during 2002, 2001 and 2000
was $7.94, $7.99 and $4.86 per share,
respectively. The fair value of each option grant is estimated on
the date of  grant using the BlackScholes optionspricing model with the
following weighted  average assumptions used for grants in 2002, 2001 and 2000:

|                        | Year Ended December 31,
|----------------------- | -----------------------
|                       
|                        |                        
|                       
|Riskfree interest rate |                        
|Expected life           |                        
|Expected volatility     |                        
|Expected dividend yield |                        

Actual
value realized, if any, is dependent on the future performance of Ocean common
stock and overall stock market conditions. There is no assurance the value
realized by an optionee will be at or near the value estimated by the
BlackScholes model.

Information
relating to stock options outstanding at December 31, 2002 is summarized as
follows:

|               | Options Outstanding | Options Exercisable
|-------------- | ------------------- | -------------------
|              
|
|
|
|
|              
|$3.65  7.30   |                     |                    
|$7.31  10.96  |                     |                    
|$10.97  14.61 |                     |                    
|$14.62  18.26 |                     |                    
|$18.27  21.92 |                     |                    
|$21.93  25.57 |                     |                    
|$25.58  36.54 |                     |                    
|              
|               |                     |                    
|              

The
Company accounts for its stockbased compensation plans under Accounting
Principles Board Opinion 25, Accounting for Stock Issued to Employees,
and related interpretations. All outstanding options were issued at an exercise
price equal to fair market value or greater of the Companys common stock
as of the date of grant. Accordingly, for the years ended December 31, 2002,
2001 and 2000, no compensation expense relating to these options was recognized
in the Companys results of operations.

Executive
Supplemental Retirement Plan  The Executive Supplemental Retirement
Plan (the Plan) was established to provide supplemental retirement
benefits to certain key employees. The Plan is a noncontributory defined
benefit retirement plan, which provides for supplemental benefits based on the
employees years of service and compensation. The Companys policy
generally is to fund the benefits as they become payable.

The
following tables set forth the Plans benefit obligation, Plan assets,
reconciliation of funded status, amounts recognized in the Consolidated Balance
Sheets, and the actuarial assumptions used (in thousands):

75

---

# Ocean
Energy, Inc.

|                                                     | Year Ended December 31,
|---------------------------------------------------- | -----------------------
|                                                    
|                                                     |                        
|                                                    
|Change in benefit obligation:                        |                        
|Benefit obligation at beginning of year              |                        
|Service cost                                         |                        
|Interest cost                                        |                        
|Actuarial loss                                       |                        
|Benefits paid                                        |                        
|                                                    
|Benefit obligation at end of year                    |                        
|                                                    
|Change in Plan assets:                               |                        
|Fair value of Plan assets at beginning of year       |                        
|Employer contribution                                |                        
|Benefits paid                                        |                        
|                                                    
|Fair value of Plan assets at end of year             |                        
|                                                    
|Funded status                                        |                        
|Unrecognized actuarial (gain) loss                   |                        
|                                                    
|Net amount recognized                                |                        
|                                                    
|Amounts recognized in the balance sheets consist of: |                        
|Accrued benefit cost                                 |                        
|Additional minimum liability                         |                        
|Deferred taxes                                       |                        
|Accumulated other comprehensive loss                 |                        
|                                                    
|Net amount recognized                                |                        
|                                                    

Net
periodic benefit cost for the Plan includes the following components (in
thousands):

|                                 | Year Ended December 31,
|-------------------------------- | -----------------------
|                                
|                                 |                        
|                                
|Service cost                     |                        
|Interest cost                    |                        
|Recognized actuarial (gain) loss |                        
|                                
|Net periodic benefit cost        |                        
|                                

Weighted
average assumptions include the following:

|              | Year Ended December 31,
|------------- | -----------------------
|             
|              |                        
|             
|Discount rate |                        

Employee
Stock Purchase Plan During 2001, the Company established an Employee
Stock Purchase Plan (ESPP) that allows eligible employees to
purchase common stock of the Company at a 15% discount from the lower of the
stock price at the beginning of the offering period or at the end of the
offering period. There are two offering periods annually, and employees may
elect to make contributions to the ESPP in amounts from 1% to 15% of eligible
compensation. An employees contribution in any calendar year
is limited to an amount that will purchase no more than the number of shares having a fair
market value of $25,000 on the first day of an offering period.

Deferred
Compensation  The Company awarded common stock as deferred
compensation to various Company employees during 2002, 2001 and 2000. The fair market
value of the stock at the date

76

---

# Ocean
Energy, Inc.

of grant is
included as a charge to equity and  amortized to earnings as compensation expense over
the vesting period, which is  generally three years for restricted stock awards. These
shares are included in  the calculation of diluted earnings per share. The number of
common shares  issued and the average fair market value of the shares at grant date are
as  follows:

|                                        | Year Ended December 31,
|--------------------------------------- | -----------------------
|                                       
|                                        |                        
|                                       
|Shares issued to employees              |                        
|Average fair market value per share at  |                        
|grant date                              |                        
|                                        |                        
|Shares issued to nonemployee directors |                        
|Average fair market value per share at  |                        
|grant date                              |                        

Supplemental
Benefit Plans Trust  During 2001, the Company
established a trust (the Trust) to assist the Company in funding its
obligations under deferred compensation plans for certain employees and
nonemployee directors. Trust assets consist of investments in marketable
securities and shares of Company common stock. The Trust assets are included in the Companys
Consolidated Balance Sheets.  Investments in marketable securities of $4 million are classified as trading
securities and reported at fair value at December 31, 2002 and 2001 with unrealized gains and
losses included in earnings.  Obligations which are to be settled by Trust assets other than shares
of Company common stock total $4 million at December 31, 2002 and 2001 and are included in other noncurrent liabilities
in the Companys Consolidated Balance Sheets.

For
investments in Company common stock, the Trust has been funded with treasury stock as
compensation is earned. The related compensation obligation will be settled by
the delivery of a fixed number of shares of Company common stock, and diversification
is not permitted. As a result, when funding of shares of stock to the Trust
occurs, the balance in the Companys treasury stock account is reduced by
the average cost of the shares to the Company. The Trust records the shares at
fair market value, and the difference is recorded to additional paidin capital.
The stock held by the Trust is included in stockholders equity and changes
in the fair value are not recognized subsequent to funding. The related
obligation totaled $9 million and $8 million at December 31, 2002 and 2001,
respectively, and is also classified in stockholders equity. The Trust
held 506,818 shares of common stock at December 31, 2002 and 472,000 shares of common stock at
December 31, 2001. These shares are included in the calculations of basic and
diluted earnings per share as though they were outstanding.

The
Trust assets and the related obligation were as follows at December 31, 2002 and
2001 (in thousands):

|                                                   | December 31,
|-------------------------------------------------- | ------------
|                                                  
|                                                   |             
|                                                  
|Assets funded to Supplemental Benefit Plans Trust: |             
|Marketable securities and other                    |             
|Common stock                                       |             
|                                                  
|Total assets held in Trust                         |             
|                                                  
|Amount included in other noncurrent liabilities    |             
|Amount included in stockholders equity            |             
|                                                  
|Total supplemental benefit plans obligation        |             
|                                                  

77

---

# Ocean
Energy, Inc.

Other
Benefit Plans The Company maintains the Ocean Retirement
Savings Plan (the ORS Plan), a defined contribution plan created
from the January 2001 merger of several previous 401(k) plans and an employee
stock ownership plan. All eligible employees, as defined in the ORS Plan, may participate,
and the Company matches a portion of employees contributions. Company
contributions, including additional optional annual contributions, to the ORS
Plan and the previous plans were $10 million, $8 million and $8 million in 2002,
2001 and 2000, respectively, and were included in operating and general and
administrative expenses.

16.   Income
Taxes

The
income before income taxes and the components of income tax expense (benefit)
for each of the years ended December 31, 2002, 2001 and 2000 were as
follows (in thousands):

|                                      | Year Ended December 31,
|------------------------------------- | -----------------------
|                                     
|                                      |                        
|                                     
|Income before income taxes:           |                        
|Domestic                              |                        
|Foreign                               |                        
|                                     
|                                      |                        
|                                     
|Current income tax expense (benefit): |                        
|Federal                               |                        
|Foreign                               |                        
|State                                 |                        
|                                     
|Total current                         |                        
|                                     
|Deferred income tax expense:          |                        
|Federal                               |                        
|Foreign                               |                        
|State                                 |                        
|                                     
|Total deferred                        |                        
|                                     
|Income tax expense                    |                        
|                                     

The
Company recognized tax benefits on the exercise of nonqualified stock options
of $12 million in 2002, $15 million in 2001 and $6 million in 2000. In addition,
in 2001 the Company recognized a deferred tax liability of $50 million due to
the excess of book over tax basis of the oil and gas properties acquired in the
purchase of Texoil.

As
of December 31, 2002 and 2001, the Company and its subsidiaries had U.S. federal
net operating loss (NOL) carryforwards of $488 million. These loss carryforward
amounts will expire during the years 2012 through 2021. The Company has a
statutory depletion carryforward of $7.7 million and an alternative minimum tax
credit carryforward of $17.7 million at December 31, 2002.

For
federal income tax purposes, certain limitations are imposed on an entitys
ability to utilize its NOLs in future periods if a change of control, as defined
for federal income tax purposes, has taken place. In general terms, the
limitation on utilization of NOLs and other tax attributes during any one year
is determined by the value of an acquired entity at the date of the change of
control multiplied by the thenexisting longterm taxexempt interest rate. The
manner of determining an acquired entitys value has not yet been addressed
by the Internal Revenue Service. The Company has determined that, for federal
income tax purposes, a change of control occurred during 1999. However, the
Company does not believe such limitations will significantly impact the
Companys ability to utilize the NOLs.

78

---

# Ocean
Energy, Inc.

Income
tax expense for each of the years ended December 31, 2002, 2001 and
2000 was different than the amount computed using the federal statutory rate
(35%) for the following reasons (in thousands):

|                                                             | Year Ended December 31,
|------------------------------------------------------------ | -----------------------
|                                                            
|                                                             |                        
|                                                            
|Amount computed using the statutory rate                     |                        
|Increase in taxes resulting from:                            |                        
|Net book deductions not available for tax due to differences |                        
|in book/tax basis                                            |                        
|State and local income taxes, net of federal effect          |                        
|Taxation of foreign operations, net of federal effect        |                        
|Other                                                        |                        
|                                                            
|Income tax expense                                           |                        
|                                                            

The
tax effects of temporary differences that gave rise to significant portions of the deferred
tax liabilities and deferred tax assets as of December 31, 2002 and 2001
were as follows (in thousands):

|                                                                   | December 31,
|------------------------------------------------------------------ | ------------
|                                                                  
|                                                                   |             
|                                                                  
|Deferred tax assets:                                               |             
|Net operating loss carryforwards                                   |             
|Percentage depletion carryforwards                                 |             
|Alternative minimum tax credit carryforwards                       |             
|Components of other comprehensive income                           |             
|Other                                                              |             
|                                                                  
|Deferred tax assets                                                |             
|                                                                  
|Deferred tax liabilities:                                          |             
|Property, plant and equipment, due to differences in depreciation, |             
|depletion and amortization                                         |             
|Components of other comprehensive income                           |             
|                                                                  
|Deferred tax liabilities                                           |             
|                                                                  
|Net deferred tax assets (liabilities)                              |             
|Less  reclassification to current deferred tax assets             |             
|                                                                  
|Net noncurrent deferred tax assets (liabilities)                   |             
|                                                                  

17.   Related
Party Transactions

During
2001 and 2000, the Company purchased 300,000 shares and 750,000 shares,
respectively, of its common stock from members of its Board of Directors, or
related entities, for $6 million and $12 million, respectively. These
transactions were part of the Companys stock repurchase plan and were
purchased at market prices on the day of the transaction. Such director purchase
programs are no longer in place at the Company.

The
Company paid an annual consulting fee of $425,000 from June 1, 1999 through May
31, 2002 to a member of the Companys Board of Directors as part of a
contractual severance agreement in relinquishing his role as an officer of the
predecessor company.

79

---

# Ocean
Energy, Inc.

Effective
January 1, 2000, the Company paid an annual salary of $100,000 to the Vice
Chairman of the Board of Directors of the Company. Upon the Vice Chairmans
resignation on January 23, 2001, the contract was terminated.

During
2002, the Company retained the law firm of Vinson & Elkins L.L.P.
(V&E) to perform various legal services for the Company. One of
the members of the Board of Directors of the Company is a retired managing
partner of V&E. Fees paid to V&E totaled $1 million for each of the
years ended December 31, 2002, 2001 and 2000. V&E has been retained to
perform similar services in 2003.

The Company
retains Southwest Bank of Texas to perform various banking services for the
Company. One of the members of the Board of Directors of the Company serves on
the board of directors of Southwest Bank of Texas.

During
2002 and 2001, the Company paid fees of $200,000 and $500,000, respectively, to
Cal Dive International, Inc. (CDI), a company that provides subsea services
to the oil and gas industry.  A member of the Companys senior management serves on
the board of CDI.

18.   
Commitments and Contingencies

Marketing
Contract Approximately 53% of the Companys monthly domestic gas
production is being sold pursuant to a purchase and sale agreement with Duke
Energy Trading and Marketing, L.L.C. The agreement is in effect through
September 30, 2003.

Transportation
Commitments The Company has entered into various agreements for
transportation of specified quantities of natural gas with estimated future
minimum transportation expense payments of $2 million for 2003 and $1 million
for each of the years 2004, 2005, 2006 and 2007.

Lease
Commitments The Company leases certain office space, equipment and vehicles
under operating lease arrangements. Total rental expense under operating leases
net of sublease income was $9 million in 2002, $7 million in 2001 and $5
million in 2000.

During
2002, the Company leased two spars that are being used in the development of the
Nansen and Boomvang fields in the Gulf of Mexico. The operating leases are for
20year terms and contain various options whereby the Company may purchase the
lessors interests in the spars. At the inception of the leases, the
Company received approximately $11 million in connection with the lessors
purchases of the spars from third parties. This amount is included in other
noncurrent liabilities in the Companys Consolidated Balance Sheets and is
being amortized over the life of each lease. Total rental expense under the
operating leases was $13 million in 2002. The Company has guaranteed that the
spars will have residual values at the end of the operating leases equal to at
least 10% of the fair market value of the spars at the inception of the leases.
The total guaranteed value is $20 million in 2022 for the spars and the amount may be reduced
under the terms of the lease agreements.

Scheduled
minimum future lease payments under the Companys operating leases are as
follows (in millions):

80

---

# Ocean
Energy, Inc.

|                              | Office Space and | 
|----------------------------- | ---------------- | 
|
|                             
|2003                          |                  | 
|2004                          |                  | 
|2005                          |                  | 
|2006                          |                  | 
|2007                          |                  | 
|Thereafter                    |                  | 
|                             
|Minimum future lease payments |                  | 
|                             

Guarantee
 The Company has guaranteed the payment of principal and interest under the
terms of a note utilized by its partners in a related operation. The
note is due in 2008 and the maximum amount of future payments required if the Company had to perform
under the guarantee, based on the balance outstanding at December 31, 2002, would be $5 million.

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.

A lawsuit captioned Breakwater Partners, LP v. James T. Hackett, et. al. (Case No. 200310161) was filed on February 27,
2003 in the District Court of Harris County, Texas, naming as defendants Ocean and all of the members of Oceans board of directors.
The complaint generally alleges that:

- the 0.414 exchange ratio is inadequate and unfair to Ocean common stockholders; and
- the defendants breached their fiduciary duties to Ocean stockholders, including the duty of care and the duty of loyalty, or
                  aided and abetted in the breach of those fiduciary duties, by, among other things, (1) failing to conduct a full
                  and fair auction process or active market check; (2) agreeing to the terms of the merger agreement, including a
                  non-solicitation provision and the termination fee that is payable by Ocean to Devon under certain circumstances;
                  (3) failing to make an informed decision; (4) failing to ensure that conflicts of interest are resolved in the best
                  interests of Oceans public stockholders; (5) personally benefiting from the merger; and (6) not appointing any
                  truly independent person or entity to negotiate on behalf of Ocean stockholders.

The complaint seeks class action status.  It also seeks (1) injunctive relief against completing the merger or, if the
merger is completed, rescission of the merger; (2) monetary damages in an unspecified amount; and (3) recovery of the plaintiffs
costs and attorneys fees. Ocean believes that the lawsuit is without merit and intends to defend against it vigorously.  We can provide no assurance
that additional claims may not be made or filed the substance of which is similar to the allegations described above or that
otherwise might arise from, or in connection with, the merger agreement and related transactions.

19.   Oil and
Gas Operations

Capitalized
Costs Relating to Oil and Gas Producing Activities(Amounts
in Thousands)

|                              |  | Equatorial |   | Côte       | Other |  
|----------------------------- |  | ---------- | - | ---------- | ----- | -
|
|                             
|December 31, 2002:            |  |            |   |            |       |  
|Proved oil and                |  |           
|gas properties                |  |            | $ | 3,970,367  |       | $
|Oil and gas properties        |  |           
|excluded from                 |  |           
|amortization                  |  |            |   | 517,038    |       |  
|                             
|Total capitalized costs       |  |            |   | 4,487,405  |       |  
|Accumulated depreciation,     |  |           
|depletion and amortization    |  |            |   | (2,015,444 | )     |  
|                             
|Net capitalized costs         |  |            | $ | 2,471,961  |       | $
|                             
|December 31, 2001:            |  |           
|Proved oil and gas properties |  |            | $ | 4,036,538  |       | $
|Oil and gas properties        |  |           
|excluded from amortization    |  |            |   | 510,489    |       |  
|                             
|Total capitalized costs       |  |            |   | 4,547,027  |       |  
|Accumulated depreciation,     |  |           
|depletion and amortization    |  |            |   | (2,274,508 | )     |  
|                             
|Net capitalized costs         |  |            | $ | 2,272,519  |       | $
|                             

|(1) |  | Other
International unproved properties are located in Angola ($81 million), Brazil ($37
million), and other international locations ($17 million).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

81

---

# Ocean
Energy, Inc.

Costs
Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities(Amounts in Thousands)

|                              |  | Equatorial |   | Côte    | Other |  
|----------------------------- |  | ---------- | - | ------- | ----- | -
|
|                             
|Year Ended December 31, 2002: |  |            |   |         |       |  
|Acquisition costs:            |  |           
|Proved                        |  |            | $ | 5,756   |       | $
|Unproved                      |  |            |   | 125     |       |  
|Leasehold unproved costs      |  |            |   | 52,095  |       |  
|Exploration costs             |  |            |   | 190,952 |       |  
|Development costs             |  |            |   | 265,495 |       |  
|                             
|Total costs incurred          |  |            | $ | 514,423 |       | $
|                             
|Year Ended December 31, 2001: |  |           
|Acquisition costs:            |  |           
|Proved                        |  |            | $ | 234,510 |       | $
|Unproved                      |  |            |   | 70,217  |       |  
|Leasehold unproved costs      |  |            |   | 55,903  |       |  
|Exploration costs             |  |            |   | 270,584 |       |  
|Development costs             |  |            |   | 307,060 |       |  
|                             
|Total costs incurred          |  |            | $ | 938,274 |       | $
|                             
|Year Ended December 31, 2000: |  |           
|Acquisition costs:            |  |           
|Proved                        |  |            | $ | 6,276   |       | $
|Unproved                      |  |            |   | --      |       |  
|Leasehold unproved costs      |  |            |   | 46,915  |       |  
|Exploration costs             |  |            |   | 148,703 |       |  
|Development costs             |  |            |   | 191,318 |       |  
|                             
|Total costs incurred          |  |            | $ | 393,212 |       | $
|                             

Costs
being excluded from amortization consist of the following at December 31, 2002,
and are presented by the year incurred (in thousands):

|                        |  | Year Ended December 31,
|----------------------- |  | -----------------------
|                       
|                        |  |                        
|                       
|Unproved property costs |  |                        
|Exploration costs       |  |                        
|Development costs       |  |                        
|                       
|                        |  |                        
|                       

82

---

# Ocean
Energy, Inc.

Results of
Operations for Oil and Gas Producing Activities(Amounts
in Thousands)

|                                |  | Equatorial |   | Côte    | Other |  
|------------------------------- |  | ---------- | - | ------- | ----- | -
|
|                               
|Year Ended December 31, 2002:   |  |            |   |         |       |  
|Revenues                        |  |            | $ | 720,569 |       | $
|Productionrelated              |  |           
|operating expenses(1)           |  |            |   | 217,369 |       |  
|DD&A(2)                         |  |            |   | 247,002 |       |  
|Impairment of oil and           |  |           
|gas properties                  |  |            |   | --      |       |  
|Income tax expense (benefit)(3) |  |            |   | 96,074  |       |  
|                               
|Results of activities           |  |            | $ | 160,124 |       | $
|                               
|Year Ended December 31, 2001:   |  |           
|Revenues                        |  |            | $ | 881,460 |       | $
|Productionrelated              |  |           
|operating expenses(1)           |  |            |   | 204,226 |       |  
|DD&A(2)                         |  |            |   | 235,008 |       |  
|Income tax expense(3)           |  |            |   | 165,835 |       |  
|                               
|Results of activities           |  |            | $ | 276,391 |       | $
|                               
|Year Ended December 31, 2000:   |  |           
|Revenues                        |  |            | $ | 711,012 |       | $
|Productionrelated              |  |           
|operating expenses(1)           |  |            |   | 156,976 |       |  
|DD&A(2)                         |  |            |   | 198,669 |       |  
|Impairment of oil and           |  |           
|gas properties                  |  |            |   | --      |       |  
|Income tax expense(3)           |  |            |   | 133,262 |       |  
|                               
|Results of activities           |  |            | $ | 222,105 |       | $
|                               

|(1) |  | Operating
expenses represent costs incurred to operate and maintain wells and  related equipment
and facilities. These costs include, among other things,  repairs and maintenance, labor,
materials, supplies, property taxes, insurance,  severance taxes, transportation expense,
and all overhead expenses directly  related to oil and gas producing activities.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | DD&A represents
depreciation, depletion and amortization.
|--- |  | ---------------------------------------------------------

|(3) |  | Income tax expense (benefit) is calculated by applying the statutory tax rate to
operating profit, then adjusting for any applicable permanent tax differences or
tax credits and allowances.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

83

---

# Ocean
Energy, Inc.

20.   
Supplemental Oil and Gas Information (Unaudited)

Reserve
Quantity Information

|                                  |  | Equatorial |  | Côte      | Other | 
|--------------------------------- |  | ---------- |  | --------- | ----- | 
|
|                                 
|Proved Reserves (MBOE):           |  |            |  |           |       | 
|January 1, 2002                   |  |            |  | 378,553   |       | 
|Revisions of previous estimates   |  |            |  | 11,620    |       | 
|Extensions and discoveries        |  |            |  | 51,224    |       | 
|Purchases of reserves in place    |  |            |  | 1,931     |       | 
|Sales of reserves in place        |  |            |  | (13,807   | )     | 
|Production                        |  |            |  | (35,590   | )     | 
|                                 
|December 31, 2002                 |  |            |  | 393,931   |       | 
|                                 
|January 1, 2001                   |  |            |  | 284,448   |       | 
|Revisions of previous estimates   |  |            |  | 582       |       | 
|Extensions and discoveries        |  |            |  | 101,738   |       | 
|Purchases of reserves in place    |  |            |  | 43,052    |       | 
|Sales of reserves in place        |  |            |  | (15,774   | )     | 
|Production                        |  |            |  | (35,493   | )     | 
|                                 
|December 31, 2001                 |  |            |  | 378,553   |       | 
|                                 
|January 1, 2000                   |  |            |  | 282,483   |       | 
|Revisions of previous estimates   |  |            |  | (2,153    | )     | 
|Extensions and discoveries        |  |            |  | 74,353    |       | 
|Purchases of reserves in place    |  |            |  | 1,193     |       | 
|Sales of reserves in place        |  |            |  | (38,666   | )     | 
|Production                        |  |            |  | (32,762   | )     | 
|                                 
|December 31, 2000                 |  |            |  | 284,448   |       | 
|                                 
|Proved Developed Reserves (MBOE): |  |           
|December 31, 2002                 |  |            |  | 254,561   |       | 
|December 31, 2001                 |  |            |  | 258,067   |       | 
|December 31, 2000                 |  |            |  | 185,673   |       | 
|December 31, 1999                 |  |            |  | 225,773   |       | 
|Proved Developed Oil Reserves     |  |           
|(MBbl):                           |  |           
|December 31, 2002                 |  |            |  | 80,258    |       | 
|December 31, 2001                 |  |            |  | 73,679    |       | 
|December 31, 2000                 |  |            |  | 43,477    |       | 
|December 31, 1999                 |  |            |  | 74,445    |       | 
|Proved Developed Gas Reserves     |  |           
|(MMcf):                           |  |           
|December 31, 2002                 |  |            |  | 1,045,816 |       | 
|December 31, 2001                 |  |            |  | 1,106,330 |       | 
|December 31, 2000                 |  |            |  | 853,176   |       | 
|December 31, 1999                 |  |            |  | 907,968   |       | 

The
reserve volumes presented are estimates only and should not be construed as
being exact quantities. These reserves may or may not be recovered and may
increase or decrease as a result of future operations of the Company and changes
in economic conditions.  Reserves for Equatorial Guinea, Egypt and Côte dIvoire are
shown in accordance with the terms of production sharing contracts.  The reserves include estimated
quantities allocated to Ocean for recovery of costs and taxes and Oceans net equity share after
recovery of such costs.

84

---

# Ocean
Energy, Inc.

Reserve
Quantity Information

|                                |  | Equatorial |  | Côte      | Other | 
|------------------------------- |  | ---------- |  | --------- | ----- | 
|
|                               
|Proved Oil Reserves (MBbl):     |  |            |  |           |       | 
|January 1, 2002                 |  |            |  | 115,537   |       | 
|Revisions of previous estimates |  |            |  | 10,945    |       | 
|Extension and discoveries       |  |            |  | 15,089    |       | 
|Purchases of reserves in place  |  |            |  | 774       |       | 
|Sales of reserves in place      |  |            |  | (5,083    | )     | 
|Production                      |  |            |  | (11,445   | )     | 
|                               
|December 31, 2002               |  |            |  | 125,817   |       | 
|                               
|January 1, 2001                 |  |            |  | 80,682    |       | 
|Revisions of previous estimates |  |            |  | 3,896     |       | 
|Extension and discoveries       |  |            |  | 41,071    |       | 
|Purchases of reserves in place  |  |            |  | 12,463    |       | 
|Sales of reserves in place      |  |            |  | (12,405   | )     | 
|Production                      |  |            |  | (10,170   | )     | 
|                               
|December 31, 2001               |  |            |  | 115,537   |       | 
|                               
|January 1, 2000                 |  |            |  | 89,808    |       | 
|Revisions of previous estimates |  |            |  | (330      | )     | 
|Extension and discoveries       |  |            |  | 27,546    |       | 
|Purchases of reserves in place  |  |            |  | 406       |       | 
|Sales of reserves in place      |  |            |  | (26,774   | )     | 
|Production                      |  |            |  | (9,974    | )     | 
|                               
|December 31, 2000               |  |            |  | 80,682    |       | 
|                               
|Proved Gas Reserves (MMcf):     |  |           
|January 1, 2002                 |  |            |  | 1,578,095 |       | 
|Revisions of previous estimates |  |            |  | 4,047     |       | 
|Extension and discoveries       |  |            |  | 216,813   |       | 
|Purchases of reserves in place  |  |            |  | 6,940     |       | 
|Sales of reserves in place      |  |            |  | (52,345   | )     | 
|Production                      |  |            |  | (144,870  | )     | 
|                               
|December 31, 2002               |  |            |  | 1,608,680 |       | 
|                               
|January 1, 2001                 |  |            |  | 1,222,602 |       | 
|Revisions of previous estimates |  |            |  | (19,892   | )     | 
|Extension and discoveries       |  |            |  | 364,000   |       | 
|Purchases of reserves in place  |  |            |  | 183,538   |       | 
|Sales of reserves in place      |  |            |  | (20,216   | )     | 
|Production                      |  |            |  | (151,937  | )     | 
|                               
|December 31, 2001               |  |            |  | 1,578,095 |       | 
|                               
|January 1, 2000                 |  |            |  | 1,156,049 |       | 
|Revisions of previous estimates |  |            |  | (10,935   | )     | 
|Extension and discoveries       |  |            |  | 280,840   |       | 
|Purchases of reserves in place  |  |            |  | 4,723     |       | 
|Sales of reserves in place      |  |            |  | (71,353   | )     | 
|Production                      |  |            |  | (136,722  | )     | 
|                               
|December 31, 2000               |  |            |  | 1,222,602 |       | 
|                               

The
Companys standardized measure of discounted future net cash flows as of
December 31, 2002 and 2001, and changes therein for each of the years 2002, 2001
and 2000, are provided based on the present value of future net revenues from
proved oil and gas reserves. The Companys estimates of proved oil and gas
reserves are prepared by internal petroleum engineers in accordance with
guidelines established by the Securities and Exchange Commission and are
reviewed by an independent petroleum engineering firm. These estimates were
computed by applying yearend prices for oil and gas to estimated future
production of proved oil and gas reserves over the economic lives of the
reserves and

85

---

# Ocean
Energy, Inc.

assuming continuation of
existing operating conditions. Yearend  2002 and 2001 calculations were made using
net estimated realized prices at December 31, 2002 and  2001.  The following table shows
the net estimated realized prices used in the calculation  as well as the base pricing
used before any adjustments for location, transportation or other factors:

|                                                  | December 31,
|------------------------------------------------- | ------------
|                                                 
|                                                  |             
|                                                 
|Oil and NGL Prices ($ per Bbl):                   |             
|Yearend prices used for standardized measure of  |             
|discounted future net cash flows                  |             
|Average realized oil and NGL prices excluding the |             
|impact of financial derivatives                   |             
|NYMEX WTI at Cushing                              |             
|Brent                                             |             
|Natural Gas Prices ($ per Mcf):                   |             
|Yearend prices used for standardized measure of  |             
|discounted future net cash flows                  |             
|Average realized gas prices excluding the         |             
|impact of financial derivatives                   |             
|Henry Hub                                         |             

Because
the disclosure requirements are standardized, significant changes can occur in
these estimates based upon oil and gas prices in effect at year end. The
following estimates should not be viewed as an estimate of fair market value.
Income taxes are computed by applying the statutory income tax rate in the
jurisdiction to the net cash inflows relating to proved oil and gas reserves
less the tax bases of the properties involved and giving effect to appropriate
net operating loss carryforwards, tax credits and allowances relating to such
properties.

86

---

# Ocean
Energy, Inc.

Standardized
Measure of Discounted Future Net Cash Flows(Amounts
in Thousands)

|                             |  | Equatorial |   | Côte       | Other |  
|---------------------------- |  | ---------- | - | ---------- | ----- | -
|
|                            
|December 31, 2002:           |  |            |   |            |       |  
|Future cash inflows          |  |            | $ | 11,028,927 |       | $
|Future development costs     |  |            |   | (1,111,006 | )     |  
|Future production costs      |  |            |   | (2,743,972 | )     |  
|                            
|Future net cash flows before |  |           
|income taxes                 |  |            |   | 7,173,949  |       |  
|10% annual discount          |  |            |   | (2,834,717 | )     |  
|                            
|Discounted future            |  |           
|net cash flows               |  |           
|before income taxes          |  |            |   | 4,339,232  |       |  
|Discounted income taxes      |  |            |   | (1,078,806 | )     |  
|                            
|Standardized measure         |  |           
|of discounted                |  |           
|future net cash flows        |  |            | $ | 3,260,426  |       | $
|                            
|December 31, 2001:           |  |           
|Future cash inflows          |  |            | $ | 6,299,765  |       | $
|Future development costs     |  |            |   | (839,346   | )     |  
|Future production costs      |  |            |   | (2,030,995 | )     |  
|                            
|Future net cash flows before |  |           
|income taxes                 |  |            |   | 3,429,424  |       |  
|10% annual discount          |  |            |   | (1,417,802 | )     |  
|                            
|Discounted future            |  |           
|net cash flows               |  |           
|before income taxes          |  |            |   | 2,011,622  |       |  
|Discounted income taxes      |  |            |   | (257,220   | )     |  
|                            
|Standardized measure         |  |           
|of discounted                |  |           
|future net cash flows        |  |            | $ | 1,754,402  |       | $
|                            

Principal
Sources of Change in the Standardized Measure ofDiscounted
Future Net Cash Flows(Amounts
in Thousands)

|                                                            | Year Ended December 31,
|----------------------------------------------------------- | -----------------------
|                                                           
|                                                            |                        
|                                                           
|Beginning of Year                                           |                        
|                                                            |                        
|Revisions of previous quantity estimates less related costs |                        
|Extensions and discoveries less related costs               |                        
|Purchases of reserves in place                              |                        
|Sales of reserves in place                                  |                        
|Net changes in future prices and production costs           |                        
|Future development costs incurred during the period         |                        
|Sales of oil and gas produced, net of production costs      |                        
|Accretion of discount                                       |                        
|Net changes in income taxes                                 |                        
|Changes in estimated future development costs, production,  |                        
|timing and other                                            |                        
|                                                           
|                                                            |                        
|                                                           
|End of Year                                                 |                        
|                                                           

87

---

# Ocean
Energy, Inc.

Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Part III

Item 10.   Directors and Executive Officers of the Registrant

The
information required by Part III, Item 10 of this Form 10K will be incorporated
by reference to the following section of the Companys definitive proxy
statement for its annual meeting of stockholders in 2003  Election
of Directors. To the extent that such proxy statement is not filed within
120 days of the Companys fiscal year end, the Company will file an
amendment to this Form 10-K to include such information.

Item 11.   Executive Compensation

The
information required by Part III, Item 11 of this Form 10K will be incorporated
by reference to the following sections of the Companys definitive proxy
statement for its annual meeting of stockholders in 2003  Executive
Compensation  Summary Compensation Table, Compensation
Arrangements, Aggregated Option/SAR Exercises in Last Fiscal
Year and Fiscal YearEnd Option/SAR Values, Option/SAR Grants
in Last Fiscal Year, and Executive Supplemental Retirement
Plan and Election of DirectorsCompensation of Directors.
To the extent that such proxy statement is not filed within 120 days of the
Companys fiscal year end, the Company will file an amendment to this Form
10K to include such information. Notwithstanding any provision in this Annual
Report on Form 10K to the contrary, under no circumstances are the Report
of the Organization and Compensation Committee on Executive Compensation
or the information under the heading Stockholder Return Performance
Presentation incorporated herein for any purpose.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters

The
information required by Part III, Item 12 of this Form 10K will be incorporated
by reference to the following sections of the Companys definitive proxy
statement for its annual meeting of stockholders in 2003  Principal
Stockholders, Election of Directors  Security Ownership of
Directors and Management. To the extent that such proxy statement is not
filed within 120 days of the Companys fiscal year end, the Company will
file an amendment to this Form 10K to include such information.

Item 13.   Certain Relationships and Related Transactions

The
information required by Part III, Item 13 of this Form 10K will be incorporated
by reference to the following section of the Companys definitive proxy
statement for its annual meeting of stockholders in 2003  Election
of Directors  Certain Transactions. To the extent that such proxy
statement is not filed within 120 days of the Companys fiscal year end,
the Company will file an amendment to this Form 10K to include such
information.

88

---

# Ocean
Energy, Inc.

Item 14.   Controls and Procedures

Within
90 days prior to the filing date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer
and Chief Financial Officer, of the Companys disclosure controls and
procedures (as defined in Rule 13a14(c) of the Securities Exchange Act of
1934). Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that the Companys disclosure controls and
procedures are effective.

There
have been no significant changes in the Companys internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Part IV

Item 15.   Exhibits, Financial Statement Schedules and Reports on Form 8K

(a)          1.
Financial Statements:

The
following financial statements, the Report of Management to Stockholders and the
Independent Auditors Report are filed as a part of this report on the
pages indicated:

|                                                                                           | Page
|------------------------------------------------------------------------------------------ | ----
|                                                                                          
|Report of Management to Stockholders                                                       |     
|Independent Auditors Report                                                               |     
|Consolidated Statements of Operations for the Years Ended December 31, 2002, 2001 and 2000 |     
|Consolidated Balance Sheets  December 31, 2002 and 2001                                   |     
|Consolidated Statements of Cash Flows for the Years Ended December 31, 1002, 2001 and 2000 |     
|Consolidated Statements of Stockholders Equity for the Years Ended                        |     
|December 31, 2002, 2001 and 2000                                                           |     

| |  | 2.  Schedules:
| |  | --------------

All
schedules have been omitted because the required information is insignificant or
not applicable.

89

---

# Ocean
Energy, Inc.

| |  | 3.  Exhibits:
| |  | -------------

|2.1 |  | Agreement
and Plan of Merger (the "Merger  Agreement"),  dated as of February  23,  2003,
among  Ocean, Devon Energy Corporation (Devon) and Devon Newco Corporation,
a wholly owned subsidiary  of Devon  (incorporated  by reference to Exhibit 2.1) to the
Companys  current report on Form 8K  filed with the Securities and Exchange Commission
(the SEC) on February 25, 2003.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.2 |  | Agreement
and Plan of Merger,  dated March 30, 2001,  by and between  Ocean Energy Inc., a Texas
corporation, and Ocean Energy Inc., a Delaware corporation,  incorporated by reference to
Exhibit  2.1 to the Companys Current Report on Form 8K filed with the SEC on May 14,
2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1 |  | Certificate
of  Incorporation  of Ocean Energy,  Inc., a Delaware  corporation,  incorporated  by
reference to Exhibit 4.1 to the  Companys  Current  Report on Form 8K filed with the
SEC on May  14, 2001.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.2 |  | Bylaws
of Ocean Energy,  Inc., a Delaware  corporation,  incorporated by reference to Exhibit
4.2  to the Companys Current Report on Form 8K filed with the SEC on May 14, 2001.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.3 |  | Certificate
of  Designations  relating to Series B Convertible  Preferred  Stock of Ocean Energy,
Inc., a Delaware  corporation,  incorporated by reference to Exhibit 4.3 to the Companys
Current  Report on Form 8K filed with the SEC on May 14, 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.1 |  | Amended
and Restated Rights  Agreement dated March 17, 1989, as amended  effective June 13, 1992,
and  amended and  restated  as of December  12,  1997,  between the Company and
Equiserve  Trust  Company,  N.A.,  including  Form of  Statement  of  Resolution
Establishing  the Series B Junior  Participating  Preferred  Stock,  the Form of Right
Certificate and Form of Summary of Rights to  Purchase  Preferred  Shares (the Agreement
is  incorporated  by reference to Exhibit 2 to Current  Report  on Form 8K  dated
December  15,  1997;  Amendment  No.  1 dated  November  24,  1998 is  incorporated  by
reference  to Exhibit  4.1 to Current  Report on Form 8K filed on  December 1,  1998).
Amendment No. 2, dated as of March 10, 1999, is  incorporated by reference to Exhibit 4.1
to the Companys  Current Report on Form 8K filed with the SEC on March 12, 1999;
Amendment No.  3, dated as of May 19,  1999,  is  incorporated  by  reference  to Exhibit
4.1 to the  Companys  Current  Report on Form 8K filed  with the SEC on May 21,  1999).
Amendment  No. 4, dated as of  May 19, 2000,  is  incorporated  by reference to the
Companys  Current  Report on Form 8K filed  with  the SEC on May 22,  2000;  Amendment
No.  5,  dated  as of May 9,  2001,  incorporated  by  reference to Exhibit 4.4 to the
Companys  Current  Report on Form 8K filed with the SEC on May  14, 2001;  Amendment
No. 6, dated as of December 12, 2001,  incorporated  by reference to Exhibit  4.1 to the
Companys  Annual Report on Form 10K for the year ended December 31, 2001;  Amendment
No. 7, dated as of February 23, 2003,  incorporated  by reference to Exhibit 4.1 to the
Companys  Current Report on Form 8K, as filed with the SEC on February 25, 2003.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.2 |  | Revolving
Credit Agreement dated as of May 31, 2002, by and among Ocean Energy,  Inc., a Delaware
corporation, Ocean  Energy,  Inc. (a Louisiana  corporation) and the lenders signatory
thereto (as  incorporated  by reference to Exhibit 99.1 to the Companys  Current Report
on Form 8K, as filed  with the SEC on June 3, 2002).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.3 |  | Guaranty
Agreement  dated as of May 31,  2002 by and among  Ocean  Energy,  Inc.,  (a  Louisiana
corporation), and  the lenders  signatory thereto (as incorporated by reference to Exhibit
99.2 to  the Companys Current Report on Form 8K, as filed with the SEC on June 3, 2002).
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.4 |  | Senior
Indenture  dated as of July 15, 1993,  relating to the 7 7/8% Notes due 2003, by and between
the Company and The Bank of New York,  as Trustee  (incorporated  by  reference to
Exhibit 4.1 to  Quarterly  Report  on Form  10Q for the  quarter  ended  March  31,
1998);  First  Supplemental  Indenture,  dated as of March 30,  1999,  is  incorporated
by  reference  to Exhibit 4.11 to the  Companys Form 10Q for the period ended March 31,
1999);  Second Supplemental  Indenture,  dated  as of May 9, 2001,  incorporated by
reference to Exhibit 99.3 to the Companys  Current Report on  Form 8K filed with the
SEC on May 14, 2001.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

90

---

# Ocean
Energy, Inc.

|4.5 |  | Senior
Indenture among the Company and The Bank of New York, as Trustee,  and Specimen of 7 1/2%
Senior Notes  (incorporated  by  reference  to Exhibit 4.4 to Annual  Report on Form 10K
for the  year ended December 31, 1997; the First  Supplemental  Indenture,  dated as of
March 30, 1999, is  incorporated  by reference to Exhibit 4.10 to the Companys  Form
10Q for the period ended March  31, 1999); Second Supplemental  Indenture,  dated as of
May 9, 2001, incorporated by reference to  Exhibit 99.4 to the Companys Current Report
on Form 8K filed with the SEC on May 14, 2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.6 |  | Indenture,
dated as of July 8, 1998, among Ocean Energy,  Inc., its Subsidiary  Guarantors,  and
U.S. Bank Trust National  Association,  relating to the 8 3/8% Series A Senior
Subordinated Notes  due  2008  and the 8 3/8%  Series  B  Senior  Subordinated  Notes
due  2008  (the  Indenture  is  incorporated  by reference  to Exhibit  10.22 to the Form
10Q for the period ended June 30, 1998  of Ocean Energy, Inc. (Registration No.
025058); the First Supplemental  Indenture,  dated March  30, 1999, is  incorporated  by
reference to Exhibit 4.3 to the Companys Form 10Q for the period  ended March 31,
1999);  Second  Supplemental  Indenture,  dated as of May 9, 2001 incorporated by
reference to Exhibit 99.7 to the Companys  Current  Report on Form 8K filed with the
SEC on May  14, 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.7 |  | Indenture,
dated as of July 8, 1998, among Ocean Energy,  Inc., its Subsidiary  Guarantors,  and
Norwest Bank Minnesota,  National Association  (Norwest Bank) as Trustee,  relating to
the 7 5/8%  Senior Notes due 2005 (the  Indenture is  incorporated  by reference to
Exhibit 10.23 to the Form  10Q for the period ended June 30, 1998 of Ocean Energy,  Inc.
(Registration  No. 025058);  the  First Supplemental  Indenture,  dated March 30, 1999,
is incorporated by reference to Exhibit 4.4  to the Companys Form 10Q for the period
ended March 31, 1999); Second  Supplemental  Indenture,  dated as of May 9, 2001,
incorporated  by  reference to Exhibit  99.1 to the  Companys  Current  Report on Form
8K filed with the SEC on May 14, 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.8 |  | Indenture,
dated as of July 8, 1998, among Ocean Energy,  Inc., its Subsidiary  Guarantors,  and
Norwest  Bank as  Trustee,  relating  to the 8 1/4%  Senior  Notes  due 2018  (the
Indenture  is  incorporated  by reference  to Exhibit  10.24 to the Form 10Q for the
period ended June 30, 1998  of Ocean Energy, Inc. (Registration No. 025058); the First
Supplemental  Indenture,  dated March  30, 1999, is  incorporated  by reference to
Exhibit 4.5 to the Companys Form 10Q for the period  ended March 31, 1999); Second
Supplemental  Indenture,  dated as of May 9, 2001,  incorporated by  reference to Exhibit
99.2 to the Companys  Current  Report on Form 8K filed with the SEC on May  14, 2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.9 |  | Senior
Indenture  dated as of  September  28, 2001  between  Ocean  Energy,  Inc.  (a  Louisiana
corporation)  and The Bank of New York, as trustee  (incorporated  by reference to
Exhibit 4.1 to  the Companys  Current  Report on Form 8K filed with the SEC on
September  28, 2001).  Officers  Certificate  establishing the terms of the 7 1/4%
Senior Notes due October 1, 2011, including the  form of global note relating  thereto
(incorporated by reference to Exhibit 4.2 to the Companys  Current Report on Form 8K
filed with the SEC on September 28, 2001).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.10 |  | Purchase
Agreement  dated as of  September  17,  2002  relating to the 4.375%  Senior  Notes Due
October 1, 2007 by and among the Company and the  underwriters  named  therein
(incorporated  by  reference  to  Exhibit  1.1 to the  Companys  Current  Report on Form
8K filed  with the SEC on  September 17, 2002).  Officers  Certificate  evidencing the
terms of the 4.375% Senior Notes due  October 1, 2007,  including the form of global note
relating  thereto  (incorporated by reference  to Exhibit 4.1 to the  Companys  Current
Report on Form 8K filed with the SEC on September 17,  2002).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.1 |  | 1999
LongTerm  Incentive Plan  (incorporated  by reference to Exhibit 10.1 to the Companys
Form  10Q for the period ended June 30, 1999).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------

91

---

# Ocean
Energy, Inc.

|#10.2 |  | Seagull
Energy Corporation 1983 Stock Option Plan (Restated),  including forms of agreements,  as
amended (plan is incorporated  by reference to Exhibit 10.4 to Quarterly  Report on Form
10Q for  the quarter ended March 31, 1998).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.3 |  | Seagull
Energy  Corporation  1990 Stock Option Plan,  including  forms of agreements,  as amended
(incorporated  by  reference  to Exhibit  10.1 to  Quarterly  Report on Form 10Q for the
quarter  ended March 31, 2001); Form of Amendment to Stock Option  Agreement(s)
incorporated by reference  to Exhibit 10.5 to the Companys Annual Report on Form 10K
for the year ended December 31, 2001.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.4 |  | Global
Natural  Resources Inc. 1989 Key Employees Stock Option Plan  incorporated by reference
to  Exhibit 4.1 to  Registration  Statement No.  3331537 of Global Natural  Resources
Inc.; Form of  Stock Option  Agreement  incorporated by reference to Exhibit 4.2 to
Registration  Statement No.  3331537 of Global  Natural  Resources  Inc.;  Form of
Amendment  to Stock  Option  Agreement(s)  incorporated  by reference to Exhibit 10.6 to
the  Companys  Annual  Report on Form 10K for the  ear ended December 31, 2001.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.5 |  | Global
Natural  Resources  Inc.  1992  Stock  Option  Plan and Form of  Stock  Option  Agreement
(incorporated  by  reference  to  Exhibit  10.7 to Annual  Report on Form 10K for the
year ended  December 31, 2000); Form of Amendment to Stock Option  Agreement(s)
incorporated by reference to  Exhibit 10.7 to the Companys Annual Report on Form 10K
for the year ended December 31, 2001.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.6 |  | Seagull
Energy  Corporation  1993 Nonemployee  Directors  Stock Option Plan,  including forms of
agreements,  as amended  (incorporated  by reference to Exhibit 10.1 to Quarterly  Report
on Form  10Q for the quarter ended September 30, 1997).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.7 |  | Seagull
Energy  Corporation  1993 Stock Option Plan,  as amended  (incorporated  by reference to
Exhibit 10.3 to Quarterly Report on Form 10Q for the quarter ended September 30, 1997).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.8 |  | 1995
Omnibus Stock  (incorporated by reference to exhibit 10.10 to Annual Report on Form 10K
for  the year ended December 31, 2000);  Form of Amendment to Stock Option  Agreement(s)
incorporated  by  reference to Exhibit  10.10 to the  Companys  Annual  Report on Form
10K for the year ended  December 31, 2001).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.9 |  | 1998
Omnibus Stock Plan  (incorporated  by reference to Exhibit 10.1 to Quarterly  Report on
Form  10Q for the quarter ended June 30, 1998).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------

|#10.10 |  | UMC
1987  Nonqualified  Stock  Option  Plan,  as  amended,  (the Plan is  incorporated
herein by  reference  to Exhibit 10.3 to UMCs Form S1 (No.  33-63532)  filed with the
SEC on May 28, 1993;  the Third Amendment,  dated November 16, 1993, and the Fourth
Amendment, dated April 6, 1994, are  incorporated  by  reference  to  Exhibit  10.12 to
Annual  Report on Form 10K for the year ended  December 31, 2000; the Fifth Amendment,
dated November 19, 1997, is incorporated by reference to  Exhibit 4.7 to UMCs Form S3
(No.  33342467);  the Sixth  Amendment,  dated March 27, 1998, and  the Seventh
Amendment,  dated February 1, 1999, are incorporated by reference to Exhibit 10.3 to
Form 10Q for the period ended March 31, 1999).
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.11 |  | UMC
1994  Employee  Nonqualified  Stock Option  Plan,  as amended  (the Plan is  incorporated
by  reference  to Exhibit 4.14 to UMCs Form S8 (No.  33-79160)  filed with the SEC on
May 19, 1994;  the First  Amendment,  dated November 16, 1994, is incorporated by
reference to Exhibit 4.11.1 to  UMCs Form S8 (No.  3386480)  filed with the SEC on
November  18, 1994;  the Second  Amendment,  dated May 22,  1996,  is  incorporated  by
reference  to  Exhibit  4.3.2 to UMCs  Form S8 (No.  33305401) filed with the SEC on
June 6, 1996; the Third  Amendment,  dated November 13, 1996, is  incorporated by
reference to Exhibit 4.3.3 to UMCs Form S8 (No.  33328017)  filed with the SEC  on May
29, 1997; the Fourth  Amendment,  dated May 29, 1997, is incorporated  herein by
reference  to Exhibit 4.3.4 to UMCs Form S8 (No.  33328017) filed with the SEC on May
29, 1997; the Fifth  Amendment,  dated  November 19, 1997, is  incorporated  by reference
to Exhibit 4.8 to UMCs Form  S3 (No.  33342467)  filed with the SEC on December 17,
1997; the Sixth  Amendment,  dated March  27, 1998 is  incorporated  by  reference  to
Exhibit 10.4 to Form 10Q for the period ended March  31, 1999).
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

92

---

# Ocean
Energy, Inc.

|#10.12 |  | UMC
1994 Outside Directors  Nonqualified Stock Option Plan, as amended (the Plan is
incorporated  herein by reference to Exhibit  4.15 to UMCs Form S8 (No.  3379160)
filed with the SEC on May  19, 1994; the First Amendment,  dated May 22, 1996, is
incorporated by reference to Exhibit 4.4.1  to UMCs  Form S8 (No.  33305401)  filed
with the SEC on June 6,  1996;  the Second  Amendment,  dated  November 13, 1996,  is
incorporated  herein by reference to Exhibit 4.4 to UMCs Form S8  (No.  33328017)
filed with the SEC on May 29, 1997;  the Third  Amendment,  dated  November 19,  1997,
is  incorporated  by  reference to Exhibit 4.9 to UMCs Form S3 (No.  33342467);
Fourth  Amendment,  dated March 27, 1998 is  incorporated  by  reference to Exhibit 10.6
to Form 10Q for  the period ended March 31, 1999).
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.13 |  | 1994
LongTerm  Incentive  Plan (the Plan, as amended,  is  incorporated  by reference to
Exhibit  10.3 to  Amendment  No. 2 to the  Registration  Statement  on Form S1  (No.
3384308)  of Ocean  Energy,  Inc.  (Registration  No.  025058);  the  Second
Amendment,  dated  March  27,  1998 is  incorporated by reference to Exhibit 4.2 to Form
10Q for the period ended March 31, 1999).
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.14 |  | 1996
LongTerm  Incentive Plan, as amended (the Plan, as amended, is incorporated by reference
to  Exhibit 99.1 to the Form S8 (No.  33345117) of Ocean Energy,  Inc.  (Registration
No. 025058)  filed  with the SEC on  January  29,  1998;  the  Second  Amendment,  dated
March 27,  1998,  is  incorporated by reference to Exhibit 4.2 to Form 10Q for the
period ended March 31, 1999).
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.15 |  | 1998
LongTerm  Incentive Plan  (incorporated by reference to Appendix E to Ocean Energy,
Inc.s  Joint Proxy Statement Prospectus on Form S4 (33343933) filed with the SEC on
January 9, 1998).
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.16 |  | LongTerm
Incentive  Plan for  NonExecutive  Employees,  as amended (the Plan,  as amended,  is
incorporated by reference to Exhibit 99.1 to the Form S8 (No.  33345119) of Ocean
Energy,  Inc.  (Registration  No.  025058);  Amendment No. 2,  incorporated by reference
to Exhibit 99.2 to the  Form S8 (No.  33349185)  of Ocean Energy,  Inc.;  Amendment No.
3, dated as of May 20, 1998, is  incorporated  by reference to Exhibit  10.46 to the
Annual Report on Form 10K for the year ended  December  31,  1998,  of Ocean  Energy,
Inc.  (Registration  No.  025058);  Amendment  No. 4 is  incorporated  by reference to
Exhibit 10.20 to the  Companys  Annual Report on Form 10K for the  year ended  December
31, 1999;  Amendment No. 5 is  incorporated  by reference to Exhibit 10.1 to  Quarterly
Report on Form 10Q for the quarter  ended  September  30,  2001;  Amendment  No. 6 is
incorporated  by reference to Exhibit  10.18 to the Annual Report on Form 10K for the
year ended  December 31, 2001;  Amendment No. 7 is  incorporated by reference to
incorporated by reference to  Exhibit 99.1 to the Companys  Registration  Statement on
Form S8, (No. 333100903),  filed with  the SEC on October 31, 2002.
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.17 |  | Ocean
Energy,  Inc. 2001 LongTerm  Incentive Plan,  incorporated by reference to Exhibit 99.9
to  the Companys Current Report on Form 8K filed with the SEC on May 14, 2001.
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.18 |  | Outside
Directors  Deferred Fee Plan as Amended and Restated Effective July 1, 2001 (incorporated
by  reference to Exhibit  10.1 to  Quarterly  Report on Form 10Q for the quarter  ended
June 30,  2001).
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.19 |  | Ocean
Energy, Inc. Directors  Compensation Plan (as amended and restated effective July 1,
2002),  (incorporated  by  reference  to Exhibit  10.1 to  Quarterly  Report on Form 10Q
for the quarter  ended June 30, 2002).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

93

---

# Ocean
Energy, Inc.

|#10.20 |  | Ocean
Energy Inc. Executive Supplemental Retirement Plan (as Amended and Restated) as of July
1,  2001  (incorporated by reference  to Exhibit 10.2 to Quarterly Report on Form 10Q
for the quarter  ended  September 30,  2001);  Amendment No. 1 effective July 18, 2002 is
incorporated by reference  to Exhibit  10.2 to Quarterly Report on Form 10Q for the
quarter ended June 30 2002.
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.21 |  | Ocean
Energy Inc.  Supplemental  Benefit  Plan,  as Amended and Restated  Effective  July 1,
2001  (incorporated  by  reference  to Exhibit  10.2 to  Quarterly  Report on Form 10Q
for the quarter  ended June 30, 2001).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.22 |  | Ocean
Energy,  Inc.  Excess Benefit Plan dated  September 29, 2000,  incorporated by reference
to  the Companys Form 10Q for the quarter ended September 30, 2000; First Amendment
thereto,  dated  December 14, 2000,  (incorporated by reference to Exhibit 10.24 to
Annual Report on Form 10K for  the year ended December 31, 2000).
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.23 |  | Form
of  Indemnification  Agreements  among  the  Company  and  certain  executive  officers
and  directors  (incorporated  by reference  to Exhibit  10.19 to Form 10Q for the
period ended March  31, 1999).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.24 |  | Employment
Agreement by and between the Company and James T. Hackett,  as amended (the Agreement  is
incorporated  by reference  to Exhibit 10.6 to Quarterly  Report on Form 10Q for the
quarter  ended  September  30,  1998;  Amendment  to  Employment  Agreement  dated
November  24,  1998 is  incorporated  by  reference  to Exhibit  10.15 to Form 10Q for
the period  ended March 31, 1999;  Second Amendment to Employment  Agreement,  effective
as of December 15, 1999, is incorporated by  reference  to Exhibit  99.2 to Current
Report on Form 8K filed with the SEC on January 7, 2000;  Third  Amendment to
Employment  Agreement,  dated as of February 23, 2003,  is  incorporated  by  reference
to the Companys Current Report on Form 8K filed with the SEC on February 25, 2003).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.25 |  | Employment
and  Consulting  Agreement  by and between the Company and Barry J. Galt,  as amended
(the Agreement is incorporated by reference to Exhibit 10.1 to Quarterly  Report on Form
10Q for  the quarter ended  September 30, 1998;  Amendment to Employment  and Consulting
Agreement  dated  November  24, 1998 is  incorporated  by  reference  to Exhibit  10.16
to Form 10Q for the period  ended March 31, 1999; Second Amendment to Employment and
Consulting  Agreement is incorporated by  reference to Exhibit 10.6 to Form 10Q for the
period ended June 30, 1999).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.26 |  | Employment
Agreement  between the Company and Robert K. Reeves  (incorporated  by  reference  to
Exhibit 10.41 to Form 10Q for the period ended June 30, 1999).
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.27 |  | Employment
Agreement  between the Company and William L. Transier  (incorporated by reference to
Exhibit 10.5 to Form 10Q for the period ended June 30, 1999).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.28 |  | Employment
Agreement  between  the  Company  and  John D.  Schiller  Jr.  dated  July  20,  2000
(incorporated  by  reference  to Exhibit  10.4 to the  Companys  Form 10Q for the
period  ended  September 30, 2000).
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.29 |  | Executive
Supplemental  Retirement Plan Membership Agreement by and between the Company and James
T. Hackett  (incorporated  by reference to Exhibit 10.7 to Quarterly  Report on Form 10Q
for the  quarter ended  September 30, 1998);  First  Amendment to Executive  Supplemental
Retirement Plan  Membership Agreement effective as of June 26, 2000,  incorporated by
reference to Exhibit 10.3 to  the Companys Form 10Q for the period ended  September 30,
2000;  Second  Amendment to Executive  Supplemental Retirement Plan Membership Agreement
effective as of January 1, 2001,  (incorporated  by  reference  to Exhibit  10.33 to
Annual  Report on Form 10K for the year ended  December  31,  2000).
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

94

---

# Ocean
Energy, Inc.

|#10.30 |  | Executive
Supplemental  Retirement  Plan  Membership  Agreement  by and  between the Company and
Robert K. Reeves effective January 1, 2001  (incorporated by reference to Exhibit 10.35
to Annual  Report on Form 10K for the year ended December 31, 2000).
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.31 |  | Executive
Supplemental  Retirement Plan Membership Agreement by and between the Company and John
D.  Schiller  effective  January 1, 2001  (incorporated  by reference to Exhibit  10.36
to Annual  Report on Form 10K for the year ended December 31, 2000).
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.32 |  | Executive
Supplemental  Retirement  Plan Membership  Agreement  between the Company and Barry J.
Galt dated as of February 3, 1986, as amended  (incorporated by reference to Exhibit
10.34 to the  Companys Annual Report on Form 10K for the year ended December 31, 2001).
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.33 |  | Executive
Supplemental  Retirement  Plan  Membership  Agreement  by and  between the Company and
William L.  Transier  effective  January 1, 2001  (incorporated  by reference to Exhibit
10.37 to  Annual Report on Form 10K for the year ended December 31, 2000).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.34 |  | Severance
Agreement  between the  Company  and James T.  Hackett,  as amended  (incorporated  by
reference to Exhibit 10.8 to Quarterly  Report on Form 10Q for the quarter  ended
September 30,  1998).  Amendment to Severance  Agreement,  effective  as of December 15,
1999,  incorporated  by  reference  to Exhibit  99.1 to Current  Report on Form 8K filed
with the SEC on January 7, 2000.  Second Amendment to Severance Agreement dated as of
February 23, 2003,  incorporated by reference  to the Companys Current Report on Form
8K filed with the SEC on February 25, 2003.
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.35 |  | Severance
Agreement  between  the  Company  and  Robert L.  Thompson  dated  January  16,  2001,
(incorporated  by  reference  to Exhibit  10.40 to Annual  Report on Form 10K for the
year ended  December 31, 2000).
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.36 |  | Ocean
Energy,  Inc. 2001 Change of Control Severance Plan dated September 27, 2001
(incorporated  by reference to the Companys  Quarterly  Report on Form 10Q for the
quarter ended September 30,  2001).
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.37 |  | Ocean
Energy,  Inc. 2001 Employee Stock Purchase Plan,  incorporated  by reference to Exhibit
4.8  to the Companys Form S8 filed with the SEC on November 13, 2000.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*10.38 |  | Natural
Gas Purchase and Sale  Agreement  dated October 1, 2001 between the Company as Seller and
Duke Energy Trading and Marketing,  L.L.C.,  as Buyer  incorporated by reference to
Exhibit 10.43  to the Companys  Annual Report on Form 10K for the year ended  December
31, 2001;  Amendment to  Natural Gas Purchase and Sale Agreement dated November 14, 2002,
filed herewith.
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*21.1 |  | Subsidiaries
of Ocean Energy, Inc.
|----- |  | ----------------------------------

|*23.1 |  | Consent
of KPMG LLP.
|----- |  | --------------------

|*99.1 |  | Certification
of Chief Executive Officer of Ocean Energy, Inc. pursuant to 18 U.S.C. Section 1350  as
adopted pursuant to Section 906 of the SarbanesOxley Act of 2002.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*99.2 |  | Certification
of Chief Financial Officer of Ocean Energy, Inc. pursuant to 18 U.S.C. Section 1350  as
adopted pursuant to Section 906 of the SarbanesOxley Act of 2002.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

*  Filed
herewith.

#  Identifies management contracts and compensatory plans or arrangements.

95

---

# Ocean
Energy, Inc.

(b)  Reports on
Form 8K

On
February 25, 2003,  the Company  filed a Current  Report on Form 8K  containing  the
Agreement and  Plan of Merger,  dated as of February 23, 2003,  among Ocean,  Devon
Energy  Corporation  ("Devon") and Devon Newco  Corporation,  a wholly  owned
subsidiary  of Devon.  The item  reported in such  Current  Report was Item 5 (Other
Events).

96

---

# Ocean
Energy, Inc.

Signatures

Pursuant
to the requirements of Section 13 or 15(d) 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.

|Date: March 7, 2003 | By: /s/ James T. Hackett
     James T. Hackett, Chairman of the Board,
     President and Chief Executive Officer
     (Principal Executive Officer)
|------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

|By:    
/s/ James T. Hackett 
        James T. Hackett, Chairman of the Board,
          President, Chief Executive Officer and Director
          (Principal Executive Officer)Date:  March 7, 2003 | By:    
/s/ Peter J. Fluor          Peter J. Fluor, Director
 Date:  March 7, 2003
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------

|By:    
/s/ William L. Transier 
        William L. Transier, Executive Vice President 
          and Chief Financial Officer
          (Principal Financial Officer)Date:  March 7, 2003 | By:    
/s/ Barry J. Galt          Barry J. Galt, Director
 Date:  March 7, 2003
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------

|By:    
/s/ Robert L. Thompson 
         Robert L. Thompson, Vice President and  
          Controller (Principal Accounting Officer)Date:  March 7, 2003 | By:    
/s/ Wanda G. Henton          Wanda G. Henton, Director
 Date:  March 7, 2003
|--------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------

|By:    
/s/ J. Evans Attwell 
         J. Evans Attwell, Director
Date:  March 7, 2003 | By:    
/s/ Robert L. Howard          Robert L. Howard, Director
 Date:  March 7, 2003
|-------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------

|By:    
/s/ John B. Brock 
         John B. Brock, Director
Date:  March 7, 2003 | By:    
/s/ Elvis L. Mason          Elvis L. Mason, Director
 Date:  March 7, 2003
|-------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------

|By:    
/s/ Milton Carroll 
        Milton Carroll, Director
Date:  March 7, 2003 | By:    
/s/ Charles F. Mitchell, M.D.          Charles F. Mitchell, M.D.,     
    Director
 Date:  March 7, 2003
|--------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------

|By:    
/s/ Thomas D. Clark, Jr. 
        Thomas D. Clark, Jr., Director 
Date:  March 7, 2003 | By:    
/s/ David K. Newbigging          David K. Newbigging,     
    Director
 Date:  March 7, 2003
|---------------------------------------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------

| | By:    
/s/ Dee S. Osborne          Dee S. Osborne, Director
 Date:  March 7, 2003
| | ----------------------------------------------------------------------------------

97

---

# Ocean
Energy, Inc.

Certifications

I, James T.
Hackett, certify that:

| | 1.
I have reviewed this annual report on Form 10K of Ocean Energy, Inc.;
| | -------------------------------------------------------------------------

| | 2.
Based on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.
Based on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.
The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a)
designed such disclosure controls and procedures to ensure that material  information
relating to the registrant, including its consolidated subsidiaries,  is made known to us
by others within those entities, particularly during the  period in which this annual
report is being prepared;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b)
evaluated the effectiveness of the registrants disclosure controls and  procedures
as of a date within 90 days prior to the filing date of this annual  report (the Evaluation
Date); and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c)
presented in this annual report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation of the Evaluation  Date;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5.
The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a)
all significant deficiencies in the design or operation of internal controls  which could
adversely affect the registrants ability to record, process,  summarize and report
financial data and have identified for the  registrants auditors any material
weaknesses in internal controls; and
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b)
any fraud, whether or not material, that involves management or other employees  who have
a significant role in the registrants internal controls; and
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6.
The registrants other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date: March 7, 2003 | By: /s/ James T. Hackett
     James T. Hackett, Chairman of the Board,
     President and Chief Executive Officer
|------------------- | -----------------------------------------------------------------------------------------------------------------

98

---

# Ocean
Energy, Inc.

# Certifications

I, William L.
Transier, certify that:

| | 1.
I have reviewed this annual report on Form 10K of Ocean Energy, Inc.;
| | -------------------------------------------------------------------------

| | 2.
Based on my knowledge, this annual report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this annual report;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3.
Based on my knowledge, the financial statements, and other financial information
included in this annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this annual report;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4.
The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a14 and 15d14) for the registrant and have:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a)
designed such disclosure controls and procedures to ensure that material  information
relating to the registrant, including its consolidated subsidiaries,  is made known to us
by others within those entities, particularly during the  period in which this annual
report is being prepared;
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b)
evaluated the effectiveness of the registrants disclosure controls and  procedures
as of a date within 90 days prior to the filing date of this annual  report (the Evaluation
Date); and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | c)
presented in this annual report our conclusions about the effectiveness of the
disclosure controls and procedures based on our evaluation of the Evaluation  Date;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 5.
The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a)
all significant deficiencies in the design or operation of internal controls  which could
adversely affect the registrants ability to record, process,  summarize and report
financial data and have identified for the  registrants auditors any material
weaknesses in internal controls; and
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b)
any fraud, whether or not material, that involves management or other employees  who have
a significant role in the registrants internal controls; and
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 6.
The registrants other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date: March 7, 2003 | By: /s/ William L. Transier
     William L. Transier
     Executive Vice President
     and Chief Financial Officer
|------------------- | -------------------------------------------------------------------------------------------------------------------

99

---

# Ocean
Energy, Inc.

| |  | Index to Exhibits
| |  | -----------------

|2.1 |  | Agreement
and Plan of Merger (the "Merger  Agreement"),  dated as of February  23,  2003,
among  Ocean, Devon Energy Corporation (Devon) and Devon Newco Corporation,
a wholly owned subsidiary  of Devon  (incorporated  by reference to Exhibit 2.1) to the
Companys  current report on Form 8K  filed with the Securities and Exchange Commission
(the SEC) on February 25, 2003.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2.2 |  | Agreement
and Plan of Merger,  dated March 30, 2001,  by and between  Ocean Energy Inc., a Texas
corporation, and Ocean Energy Inc., a Delaware corporation,  incorporated by reference to
Exhibit  2.1 to the Companys Current Report on Form 8K filed with the SEC on May 14,
2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.1 |  | Certificate
of  Incorporation  of Ocean Energy,  Inc., a Delaware  corporation,  incorporated  by
reference to Exhibit 4.1 to the  Companys  Current  Report on Form 8K filed with the
SEC on May  14, 2001.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.2 |  | Bylaws
of Ocean Energy,  Inc., a Delaware  corporation,  incorporated by reference to Exhibit
4.2  to the Companys Current Report on Form 8K filed with the SEC on May 14, 2001.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.3 |  | Certificate
of  Designations  relating to Series B Convertible  Preferred  Stock of Ocean Energy,
Inc., a Delaware  corporation,  incorporated by reference to Exhibit 4.3 to the Companys
Current  Report on Form 8K filed with the SEC on May 14, 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.1 |  | Amended
and Restated Rights  Agreement dated March 17, 1989, as amended  effective June 13, 1992,
and  amended and  restated  as of December  12,  1997,  between the Company and
Equiserve  Trust  Company,  N.A.,  including  Form of  Statement  of  Resolution
Establishing  the Series B Junior  Participating  Preferred  Stock,  the Form of Right
Certificate and Form of Summary of Rights to  Purchase  Preferred  Shares (the Agreement
is  incorporated  by reference to Exhibit 2 to Current  Report  on Form 8K  dated
December  15,  1997;  Amendment  No.  1 dated  November  24,  1998 is  incorporated  by
reference  to Exhibit  4.1 to Current  Report on Form 8K filed on  December 1,  1998).
Amendment No. 2, dated as of March 10, 1999, is  incorporated by reference to Exhibit 4.1
to the Companys  Current Report on Form 8K filed with the SEC on March 12, 1999;
Amendment No.  3, dated as of May 19,  1999,  is  incorporated  by  reference  to Exhibit
4.1 to the  Companys  Current  Report on Form 8K filed  with the SEC on May 21,  1999).
Amendment  No. 4, dated as of  May 19, 2000,  is  incorporated  by reference to the
Companys  Current  Report on Form 8K filed  with  the SEC on May 22,  2000;  Amendment
No.  5,  dated  as of May 9,  2001,  incorporated  by  reference to Exhibit 4.4 to the
Companys  Current  Report on Form 8K filed with the SEC on May  14, 2001;  Amendment
No. 6, dated as of December 12, 2001,  incorporated  by reference to Exhibit  4.1 to the
Companys  Annual Report on Form 10K for the year ended December 31, 2001;  Amendment
No. 7, dated as of February 23, 2003,  incorporated  by reference to Exhibit 4.1 to the
Companys  Current Report on Form 8K, as filed with the SEC on February 25, 2003.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.2 |  | Revolving
Credit Agreement dated as of May 31, 2002, by and among Ocean Energy,  Inc., a Delaware
corporation, Ocean  Energy,  Inc. (a Louisiana  corporation) and the lenders signatory
thereto (as  incorporated  by reference to Exhibit 99.1 to the Companys  Current Report
on Form 8K, as filed  with the SEC on June 3, 2002).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.3 |  | Guaranty
Agreement  dated as of May 31,  2002 by and among  Ocean  Energy,  Inc.,  (a  Louisiana
corporation), and  the lenders  signatory thereto (as incorporated by reference to Exhibit
99.2 to  the Companys Current Report on Form 8K, as filed with the SEC on June 3, 2002).
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.4 |  | Senior
Indenture  dated as of July 15, 1993,  relating to the 7 7/8% Notes due 2003, by and between
the Company and The Bank of New York,  as Trustee  (incorporated  by  reference to
Exhibit 4.1 to  Quarterly  Report  on Form  10Q for the  quarter  ended  March  31,
1998);  First  Supplemental  Indenture,  dated as of March 30,  1999,  is  incorporated
by  reference  to Exhibit 4.11 to the  Companys Form 10Q for the period ended March 31,
1999);  Second Supplemental  Indenture,  dated  as of May 9, 2001,  incorporated by
reference to Exhibit 99.3 to the Companys  Current Report on  Form 8K filed with the
SEC on May 14, 2001.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

100

---

# Ocean
Energy, Inc.

|4.5 |  | Senior
Indenture among the Company and The Bank of New York, as Trustee,  and Specimen of 7 1/2%
Senior Notes  (incorporated  by  reference  to Exhibit 4.4 to Annual  Report on Form 10K
for the  year ended December 31, 1997; the First  Supplemental  Indenture,  dated as of
March 30, 1999, is  incorporated  by reference to Exhibit 4.10 to the Companys  Form
10Q for the period ended March  31, 1999); Second Supplemental  Indenture,  dated as of
May 9, 2001, incorporated by reference to  Exhibit 99.4 to the Companys Current Report
on Form 8K filed with the SEC on May 14, 2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.6 |  | Indenture,
dated as of July 8, 1998, among Ocean Energy,  Inc., its Subsidiary  Guarantors,  and
U.S. Bank Trust National  Association,  relating to the 8 3/8% Series A Senior
Subordinated Notes  due  2008  and the 8 3/8%  Series  B  Senior  Subordinated  Notes
due  2008  (the  Indenture  is  incorporated  by reference  to Exhibit  10.22 to the Form
10Q for the period ended June 30, 1998  of Ocean Energy, Inc. (Registration No.
025058); the First Supplemental  Indenture,  dated March  30, 1999, is  incorporated  by
reference to Exhibit 4.3 to the Companys Form 10Q for the period  ended March 31,
1999);  Second  Supplemental  Indenture,  dated as of May 9, 2001 incorporated by
reference to Exhibit 99.7 to the Companys  Current  Report on Form 8K filed with the
SEC on May  14, 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.7 |  | Indenture,
dated as of July 8, 1998, among Ocean Energy,  Inc., its Subsidiary  Guarantors,  and
Norwest Bank Minnesota,  National Association  (Norwest Bank) as Trustee,  relating to
the 7 5/8%  Senior Notes due 2005 (the  Indenture is  incorporated  by reference to
Exhibit 10.23 to the Form  10Q for the period ended June 30, 1998 of Ocean Energy,  Inc.
(Registration  No. 025058);  the  First Supplemental  Indenture,  dated March 30, 1999,
is incorporated by reference to Exhibit 4.4  to the Companys Form 10Q for the period
ended March 31, 1999); Second  Supplemental  Indenture,  dated as of May 9, 2001,
incorporated  by  reference to Exhibit  99.1 to the  Companys  Current  Report on Form
8K filed with the SEC on May 14, 2001.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.8 |  | Indenture,
dated as of July 8, 1998, among Ocean Energy,  Inc., its Subsidiary  Guarantors,  and
Norwest  Bank as  Trustee,  relating  to the 8 1/4%  Senior  Notes  due 2018  (the
Indenture  is  incorporated  by reference  to Exhibit  10.24 to the Form 10Q for the
period ended June 30, 1998  of Ocean Energy, Inc. (Registration No. 025058); the First
Supplemental  Indenture,  dated March  30, 1999, is  incorporated  by reference to
Exhibit 4.5 to the Companys Form 10Q for the period  ended March 31, 1999); Second
Supplemental  Indenture,  dated as of May 9, 2001,  incorporated by  reference to Exhibit
99.2 to the Companys  Current  Report on Form 8K filed with the SEC on May  14, 2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.9 |  | Senior
Indenture  dated as of  September  28, 2001  between  Ocean  Energy,  Inc.  (a  Louisiana
corporation)  and The Bank of New York, as trustee  (incorporated  by reference to
Exhibit 4.1 to  the Companys  Current  Report on Form 8K filed with the SEC on
September  28, 2001).  Officers  Certificate  establishing the terms of the 7 1/4%
Senior Notes due October 1, 2011, including the  form of global note relating  thereto
(incorporated by reference to Exhibit 4.2 to the Companys  Current Report on Form 8K
filed with the SEC on September 28, 2001).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4.10 |  | Purchase
Agreement  dated as of  September  17,  2002  relating to the 4.375%  Senior  Notes Due
October 1, 2007 by and among the Company and the  underwriters  named  therein
(incorporated  by  reference  to  Exhibit  1.1 to the  Companys  Current  Report on Form
8K filed  with the SEC on  September 17, 2002).  Officers  Certificate  evidencing the
terms of the 4.375% Senior Notes due  October 1, 2007,  including the form of global note
relating  thereto  (incorporated by reference  to Exhibit 4.1 to the  Companys  Current
Report on Form 8K filed with the SEC on September 17,  2002).
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.1 |  | 1999
LongTerm  Incentive Plan  (incorporated  by reference to Exhibit 10.1 to the Companys
Form  10Q for the period ended June 30, 1999).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------

101

---

# Ocean
Energy, Inc.

|#10.2 |  | Seagull
Energy Corporation 1983 Stock Option Plan (Restated),  including forms of agreements,  as
amended (plan is incorporated  by reference to Exhibit 10.4 to Quarterly  Report on Form
10Q for  the quarter ended March 31, 1998).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.3 |  | Seagull
Energy  Corporation  1990 Stock Option Plan,  including  forms of agreements,  as amended
(incorporated  by  reference  to Exhibit  10.1 to  Quarterly  Report on Form 10Q for the
quarter  ended March 31, 2001); Form of Amendment to Stock Option  Agreement(s)
incorporated by reference  to Exhibit 10.5 to the Companys Annual Report on Form 10K
for the year ended December 31, 2001.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.4 |  | Global
Natural  Resources Inc. 1989 Key Employees Stock Option Plan  incorporated by reference
to  Exhibit 4.1 to  Registration  Statement No.  3331537 of Global Natural  Resources
Inc.; Form of  Stock Option  Agreement  incorporated by reference to Exhibit 4.2 to
Registration  Statement No.  3331537 of Global  Natural  Resources  Inc.;  Form of
Amendment  to Stock  Option  Agreement(s)  incorporated  by reference to Exhibit 10.6 to
the  Companys  Annual  Report on Form 10K for the  ear ended December 31, 2001.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.5 |  | Global
Natural  Resources  Inc.  1992  Stock  Option  Plan and Form of  Stock  Option  Agreement
(incorporated  by  reference  to  Exhibit  10.7 to Annual  Report on Form 10K for the
year ended  December 31, 2000); Form of Amendment to Stock Option  Agreement(s)
incorporated by reference to  Exhibit 10.7 to the Companys Annual Report on Form 10K
for the year ended December 31, 2001.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.6 |  | Seagull
Energy  Corporation  1993 Nonemployee  Directors  Stock Option Plan,  including forms of
agreements,  as amended  (incorporated  by reference to Exhibit 10.1 to Quarterly  Report
on Form  10Q for the quarter ended September 30, 1997).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.7 |  | Seagull
Energy  Corporation  1993 Stock Option Plan,  as amended  (incorporated  by reference to
Exhibit 10.3 to Quarterly Report on Form 10Q for the quarter ended September 30, 1997).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.8 |  | 1995
Omnibus Stock  (incorporated by reference to exhibit 10.10 to Annual Report on Form 10K
for  the year ended December 31, 2000);  Form of Amendment to Stock Option  Agreement(s)
incorporated  by  reference to Exhibit  10.10 to the  Companys  Annual  Report on Form
10K for the year ended  December 31, 2001).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.9 |  | 1998
Omnibus Stock Plan  (incorporated  by reference to Exhibit 10.1 to Quarterly  Report on
Form  10Q for the quarter ended June 30, 1998).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------

|#10.10 |  | UMC
1987  Nonqualified  Stock  Option  Plan,  as  amended,  (the Plan is  incorporated
herein by  reference  to Exhibit 10.3 to UMCs Form S1 (No.  33-63532)  filed with the
SEC on May 28, 1993;  the Third Amendment,  dated November 16, 1993, and the Fourth
Amendment, dated April 6, 1994, are  incorporated  by  reference  to  Exhibit  10.12 to
Annual  Report on Form 10K for the year ended  December 31, 2000; the Fifth Amendment,
dated November 19, 1997, is incorporated by reference to  Exhibit 4.7 to UMCs Form S3
(No.  33342467);  the Sixth  Amendment,  dated March 27, 1998, and  the Seventh
Amendment,  dated February 1, 1999, are incorporated by reference to Exhibit 10.3 to
Form 10Q for the period ended March 31, 1999).
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.11 |  | UMC
1994  Employee  Nonqualified  Stock Option  Plan,  as amended  (the Plan is  incorporated
by  reference  to Exhibit 4.14 to UMCs Form S8 (No.  33-79160)  filed with the SEC on
May 19, 1994;  the First  Amendment,  dated November 16, 1994, is incorporated by
reference to Exhibit 4.11.1 to  UMCs Form S8 (No.  3386480)  filed with the SEC on
November  18, 1994;  the Second  Amendment,  dated May 22,  1996,  is  incorporated  by
reference  to  Exhibit  4.3.2 to UMCs  Form S8 (No.  33305401) filed with the SEC on
June 6, 1996; the Third  Amendment,  dated November 13, 1996, is  incorporated by
reference to Exhibit 4.3.3 to UMCs Form S8 (No.  33328017)  filed with the SEC  on May
29, 1997; the Fourth  Amendment,  dated May 29, 1997, is incorporated  herein by
reference  to Exhibit 4.3.4 to UMCs Form S8 (No.  33328017) filed with the SEC on May
29, 1997; the Fifth  Amendment,  dated  November 19, 1997, is  incorporated  by reference
to Exhibit 4.8 to UMCs Form  S3 (No.  33342467)  filed with the SEC on December 17,
1997; the Sixth  Amendment,  dated March  27, 1998 is  incorporated  by  reference  to
Exhibit 10.4 to Form 10Q for the period ended March  31, 1999).
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

102

---

# Ocean
Energy, Inc.

|#10.12 |  | UMC
1994 Outside Directors  Nonqualified Stock Option Plan, as amended (the Plan is
incorporated  herein by reference to Exhibit  4.15 to UMCs Form S8 (No.  3379160)
filed with the SEC on May  19, 1994; the First Amendment,  dated May 22, 1996, is
incorporated by reference to Exhibit 4.4.1  to UMCs  Form S8 (No.  33305401)  filed
with the SEC on June 6,  1996;  the Second  Amendment,  dated  November 13, 1996,  is
incorporated  herein by reference to Exhibit 4.4 to UMCs Form S8  (No.  33328017)
filed with the SEC on May 29, 1997;  the Third  Amendment,  dated  November 19,  1997,
is  incorporated  by  reference to Exhibit 4.9 to UMCs Form S3 (No.  33342467);
Fourth  Amendment,  dated March 27, 1998 is  incorporated  by  reference to Exhibit 10.6
to Form 10Q for  the period ended March 31, 1999).
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.13 |  | 1994
LongTerm  Incentive  Plan (the Plan, as amended,  is  incorporated  by reference to
Exhibit  10.3 to  Amendment  No. 2 to the  Registration  Statement  on Form S1  (No.
3384308)  of Ocean  Energy,  Inc.  (Registration  No.  025058);  the  Second
Amendment,  dated  March  27,  1998 is  incorporated by reference to Exhibit 4.2 to Form
10Q for the period ended March 31, 1999).
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.14 |  | 1996
LongTerm  Incentive Plan, as amended (the Plan, as amended, is incorporated by reference
to  Exhibit 99.1 to the Form S8 (No.  33345117) of Ocean Energy,  Inc.  (Registration
No. 025058)  filed  with the SEC on  January  29,  1998;  the  Second  Amendment,  dated
March 27,  1998,  is  incorporated by reference to Exhibit 4.2 to Form 10Q for the
period ended March 31, 1999).
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.15 |  | 1998
LongTerm  Incentive Plan  (incorporated by reference to Appendix E to Ocean Energy,
Inc.s  Joint Proxy Statement Prospectus on Form S4 (33343933) filed with the SEC on
January 9, 1998).
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.16 |  | LongTerm
Incentive  Plan for  NonExecutive  Employees,  as amended (the Plan,  as amended,  is
incorporated by reference to Exhibit 99.1 to the Form S8 (No.  33345119) of Ocean
Energy,  Inc.  (Registration  No.  025058);  Amendment No. 2,  incorporated by reference
to Exhibit 99.2 to the  Form S8 (No.  33349185)  of Ocean Energy,  Inc.;  Amendment No.
3, dated as of May 20, 1998, is  incorporated  by reference to Exhibit  10.46 to the
Annual Report on Form 10K for the year ended  December  31,  1998,  of Ocean  Energy,
Inc.  (Registration  No.  025058);  Amendment  No. 4 is  incorporated  by reference to
Exhibit 10.20 to the  Companys  Annual Report on Form 10K for the  year ended  December
31, 1999;  Amendment No. 5 is  incorporated  by reference to Exhibit 10.1 to  Quarterly
Report on Form 10Q for the quarter  ended  September  30,  2001;  Amendment  No. 6 is
incorporated  by reference to Exhibit  10.18 to the Annual Report on Form 10K for the
year ended  December 31, 2001;  Amendment No. 7 is  incorporated by reference to
incorporated by reference to  Exhibit 99.1 to the Companys  Registration  Statement on
Form S8, (No. 333100903),  filed with  the SEC on October 31, 2002.
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.17 |  | Ocean
Energy,  Inc. 2001 LongTerm  Incentive Plan,  incorporated by reference to Exhibit 99.9
to  the Companys Current Report on Form 8K filed with the SEC on May 14, 2001.
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.18 |  | Outside
Directors  Deferred Fee Plan as Amended and Restated Effective July 1, 2001 (incorporated
by  reference to Exhibit  10.1 to  Quarterly  Report on Form 10Q for the quarter  ended
June 30,  2001).
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.19 |  | Ocean
Energy, Inc. Directors  Compensation Plan (as amended and restated effective July 1,
2002),  (incorporated  by  reference  to Exhibit  10.1 to  Quarterly  Report on Form 10Q
for the quarter  ended June 30, 2002).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

103

---

# Ocean
Energy, Inc.

|#10.20 |  | Ocean
Energy Inc. Executive Supplemental Retirement Plan (as Amended and Restated) as of July
1,  2001  (incorporated by reference  to Exhibit 10.2 to Quarterly Report on Form 10Q
for the quarter  ended  September 30,  2001);  Amendment No. 1 effective July 18, 2002 is
incorporated by reference  to Exhibit  10.2 to Quarterly Report on Form 10Q for the
quarter ended June 30 2002.
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.21 |  | Ocean
Energy Inc.  Supplemental  Benefit  Plan,  as Amended and Restated  Effective  July 1,
2001  (incorporated  by  reference  to Exhibit  10.2 to  Quarterly  Report on Form 10Q
for the quarter  ended June 30, 2001).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.22 |  | Ocean
Energy,  Inc.  Excess Benefit Plan dated  September 29, 2000,  incorporated by reference
to  the Companys Form 10Q for the quarter ended September 30, 2000; First Amendment
thereto,  dated  December 14, 2000,  (incorporated by reference to Exhibit 10.24 to
Annual Report on Form 10K for  the year ended December 31, 2000).
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.23 |  | Form
of  Indemnification  Agreements  among  the  Company  and  certain  executive  officers
and  directors  (incorporated  by reference  to Exhibit  10.19 to Form 10Q for the
period ended March  31, 1999).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.24 |  | Employment
Agreement by and between the Company and James T. Hackett,  as amended (the Agreement  is
incorporated  by reference  to Exhibit 10.6 to Quarterly  Report on Form 10Q for the
quarter  ended  September  30,  1998;  Amendment  to  Employment  Agreement  dated
November  24,  1998 is  incorporated  by  reference  to Exhibit  10.15 to Form 10Q for
the period  ended March 31, 1999;  Second Amendment to Employment  Agreement,  effective
as of December 15, 1999, is incorporated by  reference  to Exhibit  99.2 to Current
Report on Form 8K filed with the SEC on January 7, 2000;  Third  Amendment to
Employment  Agreement,  dated as of February 23, 2003,  is  incorporated  by  reference
to the Companys Current Report on Form 8K filed with the SEC on February 25, 2003).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.25 |  | Employment
and  Consulting  Agreement  by and between the Company and Barry J. Galt,  as amended
(the Agreement is incorporated by reference to Exhibit 10.1 to Quarterly  Report on Form
10Q for  the quarter ended  September 30, 1998;  Amendment to Employment  and Consulting
Agreement  dated  November  24, 1998 is  incorporated  by  reference  to Exhibit  10.16
to Form 10Q for the period  ended March 31, 1999; Second Amendment to Employment and
Consulting  Agreement is incorporated by  reference to Exhibit 10.6 to Form 10Q for the
period ended June 30, 1999).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.26 |  | Employment
Agreement  between the Company and Robert K. Reeves  (incorporated  by  reference  to
Exhibit 10.41 to Form 10Q for the period ended June 30, 1999).
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.27 |  | Employment
Agreement  between the Company and William L. Transier  (incorporated by reference to
Exhibit 10.5 to Form 10Q for the period ended June 30, 1999).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.28 |  | Employment
Agreement  between  the  Company  and  John D.  Schiller  Jr.  dated  July  20,  2000
(incorporated  by  reference  to Exhibit  10.4 to the  Companys  Form 10Q for the
period  ended  September 30, 2000).
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.29 |  | Executive
Supplemental  Retirement Plan Membership Agreement by and between the Company and James
T. Hackett  (incorporated  by reference to Exhibit 10.7 to Quarterly  Report on Form 10Q
for the  quarter ended  September 30, 1998);  First  Amendment to Executive  Supplemental
Retirement Plan  Membership Agreement effective as of June 26, 2000,  incorporated by
reference to Exhibit 10.3 to  the Companys Form 10Q for the period ended  September 30,
2000;  Second  Amendment to Executive  Supplemental Retirement Plan Membership Agreement
effective as of January 1, 2001,  (incorporated  by  reference  to Exhibit  10.33 to
Annual  Report on Form 10K for the year ended  December  31,  2000).
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

104

---

# Ocean
Energy, Inc.

|#10.30 |  | Executive
Supplemental  Retirement  Plan  Membership  Agreement  by and  between the Company and
Robert K. Reeves effective January 1, 2001  (incorporated by reference to Exhibit 10.35
to Annual  Report on Form 10K for the year ended December 31, 2000).
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.31 |  | Executive
Supplemental  Retirement Plan Membership Agreement by and between the Company and John
D.  Schiller  effective  January 1, 2001  (incorporated  by reference to Exhibit  10.36
to Annual  Report on Form 10K for the year ended December 31, 2000).
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.32 |  | Executive
Supplemental  Retirement  Plan Membership  Agreement  between the Company and Barry J.
Galt dated as of February 3, 1986, as amended  (incorporated by reference to Exhibit
10.34 to the  Companys Annual Report on Form 10K for the year ended December 31, 2001).
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.33 |  | Executive
Supplemental  Retirement  Plan  Membership  Agreement  by and  between the Company and
William L.  Transier  effective  January 1, 2001  (incorporated  by reference to Exhibit
10.37 to  Annual Report on Form 10K for the year ended December 31, 2000).
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.34 |  | Severance
Agreement  between the  Company  and James T.  Hackett,  as amended  (incorporated  by
reference to Exhibit 10.8 to Quarterly  Report on Form 10Q for the quarter  ended
September 30,  1998).  Amendment to Severance  Agreement,  effective  as of December 15,
1999,  incorporated  by  reference  to Exhibit  99.1 to Current  Report on Form 8K filed
with the SEC on January 7, 2000.  Second Amendment to Severance Agreement dated as of
February 23, 2003,  incorporated by reference  to the Companys Current Report on Form
8K filed with the SEC on February 25, 2003.
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.35 |  | Severance
Agreement  between  the  Company  and  Robert L.  Thompson  dated  January  16,  2001,
(incorporated  by  reference  to Exhibit  10.40 to Annual  Report on Form 10K for the
year ended  December 31, 2000).
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|#10.36 |  | Ocean
Energy,  Inc. 2001 Change of Control Severance Plan dated September 27, 2001
(incorporated  by reference to the Companys  Quarterly  Report on Form 10Q for the
quarter ended September 30,  2001).
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.37 |  | Ocean
Energy,  Inc. 2001 Employee Stock Purchase Plan,  incorporated  by reference to Exhibit
4.8  to the Companys Form S8 filed with the SEC on November 13, 2000.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*10.38 |  | Natural
Gas Purchase and Sale  Agreement  dated October 1, 2001 between the Company as Seller and
Duke Energy Trading and Marketing,  L.L.C.,  as Buyer  incorporated by reference to
Exhibit 10.43  to the Companys  Annual Report on Form 10K for the year ended  December
31, 2001;  Amendment to  Natural Gas Purchase and Sale Agreement dated November 14, 2002,
filed herewith.
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*21.1 |  | Subsidiaries
of Ocean Energy, Inc.
|----- |  | ----------------------------------

|*23.1 |  | Consent
of KPMG LLP.
|----- |  | --------------------

|*99.1 |  | Certification
of Chief Executive Officer of Ocean Energy, Inc. pursuant to 18 U.S.C. Section 1350  as
adopted pursuant to Section 906 of the SarbanesOxley Act of 2002.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|*99.2 |  | Certification
of Chief Financial Officer of Ocean Energy, Inc. pursuant to 18 U.S.C. Section 1350  as
adopted pursuant to Section 906 of the SarbanesOxley Act of 2002.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

*  Filed
herewith.

#  Identifies management contracts and compensatory plans or arrangements.

105

---