<PAGE>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-Q

(Mark One)

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

         For the Quarterly Period Ended September 30, 1999

         OR

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

         For the Transition Period from             to
                                         -----------    -----------

                          Commission File No. 1-12905


                                EEX CORPORATION
             (Exact name of Registrant as specified in its charter)

                                     TEXAS
         (State or other jurisdiction of incorporation or organization)

                                   75-2421863
                      (I.R.S. Employer Identification No.)

             2500 CITYWEST BLVD., SUITE 1400, HOUSTON, TEXAS 77042
               (Address of principal executive office) (Zip Code)

                                 (713) 243-3100
              (Registrant's telephone number, including Area Code)

         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 twelve 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 [_]

Number of shares of Common Stock of Registrant outstanding as of October 31,
1999: 42,471,069
<PAGE>

                         PART I.  FINANCIAL INFORMATION


Item 1.  Financial Statements



                                EEX CORPORATION
                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>

                                    Three Months Ended         Nine Months Ended
                                       September 30              September 30
                                ------------------------   ----------------------
                                     1999         1998        1999        1998
                                ------------   ---------   ---------    --------
                                    (In thousands, except per share amounts)
<S>                             <C>            <C>         <C>          <C>
Revenues:
 Natural gas.................       $24,349    $ 22,913    $ 69,637     $100,770
 Oil, condensate and natural
  gas liquids................        24,141      18,909      57,949       57,806
 Cogeneration operations.....         1,545       4,159       6,486       10,123
 Other.......................            52         342        (447)         698
                                    -------    --------    --------     --------
  Total......................        50,087      46,323     133,625      169,397
                                    -------    --------    --------     --------
Costs and Expenses:
 Production and operating....         9,352      11,941      28,809       35,495
 Exploration.................         9,537      11,345      55,022       37,600
 Depletion, depreciation and
  amortization...............        16,428      21,771      54,719       77,415
 (Gain) Loss on sales of
  property, plant and
  equipment..................          (747)     (3,000)     (1,258)       1,266
  Cogeneration operations....         1,566       2,879       6,105        7,679
 General, administrative and
  other......................         7,104       6,240      20,398       19,057
 Taxes, other than income....         1,424       2,245       3,399        9,636
                                    -------    --------    --------     --------
  Total......................        44,664      53,421     167,194      188,148
                                    -------    --------    --------     --------
Operating Income (Loss)......         5,423      (7,098)    (33,569)     (18,751)
Other Income - Net...........           221          73          57           59
Interest Income..............         1,324          12       4,384          374
Interest and Other Financing
 Costs.......................        (4,442)     (4,138)    (12,707)     (14,162)
                                    -------    --------    --------     --------
Income (Loss) Before Income
 Taxes.......................         2,526     (11,151)    (41,835)     (32,480)
Income Taxes (Benefit).......         1,067      (5,699)      2,287       (4,127)
Minority Interest............             -           -           -        6,532
                                    -------    --------    --------     --------
Net Income (Loss)............         1,459      (5,452)    (44,122)     (34,885)
Preferred Stock Dividends....         3,116           -       8,938            -
                                    -------    --------    --------     --------
Net (Loss) Applicable to
 Common Shareholders.........       $(1,657)   $ (5,452)   $(53,060)    $(34,885)
                                    =======    ========    ========     ========

Basic and Diluted Net (Loss)
 Per Share...................        $(0.04)     $(0.13)     $(1.26)      $(0.83)
                                    =======    ========    ========     ========

Weighted Average Shares
 Outstanding.................        42,200      42,205      42,200       42,211
                                    =======    ========    ========     ========

</TABLE>
See accompanying notes.

                                       1
<PAGE>

                                EEX CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  (UNAUDITED)

<TABLE>
<CAPTION>


                                                                        September 30    December 31
                                                                            1999            1998
                                                                        -------------   ------------
                                                                               (In thousands)
<S>                                                                     <C>             <C>
ASSETS
Current Assets:
 Cash and cash equivalents...........................................     $   97,583     $   15,588
 Accounts receivable-trade (net of allowance of $1,189 and $2,504)...         25,872         42,530
 Other...............................................................         14,489         14,240
                                                                          ----------     ----------
    Total current assets.............................................        137,944         72,358
                                                                          ----------     ----------
Property, Plant and Equipment (at cost):
 Oil and gas properties (successful efforts method)..................      1,062,384      1,106,274
 Other...............................................................          8,004         19,998
                                                                          ----------     ----------
    Total............................................................      1,070,388      1,126,272
 Less accumulated depletion, depreciation and amortization...........        597,970        674,887
                                                                          ----------     ----------
    Net property, plant and equipment................................        472,418        451,385
                                                                          ----------     ----------
Deferred Income Tax Assets...........................................         26,442         28,826
Other Assets.........................................................          4,604         12,501
                                                                          ----------     ----------
    Total............................................................     $  641,408     $  565,070
                                                                          ==========     ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
 Accounts payable-trade..............................................     $   42,850     $   45,528
 Short-term borrowings...............................................              -              -
 Current portion of capital lease obligations........................         17,248         10,874
 Other...............................................................          2,498          5,190
                                                                          ----------     ----------
    Total current liabilities........................................         62,596         61,592
                                                                          ----------     ----------
Bank Revolving Credit Agreement......................................              -              -
                                                                          ----------     ----------
Capital Lease Obligations............................................        205,634        222,444
                                                                          ----------     ----------
Other Liabilities....................................................         34,675         46,734
                                                                          ----------     ----------
Shareholders' Equity:
 Preferred stock (10,000 shares authorized; 1,589 and 0 shares
    issued; liquidation preference of $158,938 and $0)...............             16              -
 Common stock ($0.01 par value; 150,000 shares authorized;
    42,476 and 42,387 shares issued).................................            425            424
 Paid in capital.....................................................        726,749        569,268
 Retained earnings (deficit).........................................       (387,894)      (334,698)
 Unamortized restricted stock compensation...........................           (482)          (206)
 Treasury stock, at cost (14 and 22 shares)..........................           (311)          (488)
                                                                          ----------     ----------
    Total shareholders' equity.......................................        338,503        234,300
                                                                          ----------     ----------
    Total............................................................     $  641,408     $  565,070
                                                                          ==========     ==========
</TABLE>

See accompanying notes.

                                       2
<PAGE>

                                EEX CORPORATION
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>

                                                                            Nine Months Ended
                                                                               September 30
                                                                    --------------------------------
                                                                           1999             1998
                                                                    ------------------   ----------
                                                                            (In thousands)
<S>                                                                 <C>                  <C>
OPERATING ACTIVITIES
 Net (loss)......................................................           $ (44,122)   $ (34,885)
 Impairment of undeveloped leasehold.............................               2,907            -
 Dry hole cost...................................................              27,625       17,445
 Depletion, depreciation and amortization........................              54,719       77,415
 Deferred income taxes (benefit).................................               2,384       (8,678)
 (Gain) Loss on sales of property, plant and equipment...........              (1,258)       1,266
 Other...........................................................              (4,309)       4,279
 Changes in current operating assets and liabilities:
  Accounts receivable............................................              16,658       17,299
  Other current assets...........................................                (249)      (3,685)
  Accounts payable...............................................             (12,987)     (70,319)
  Other current liabilities......................................              (2,692)      (4,691)
                                                                            ---------    ---------
  Net cash flows provided by (used in) operating activities......              38,676       (4,554)
                                                                            ---------    ---------
INVESTING ACTIVITIES
 Additions to property, plant and equipment......................            (106,554)    (118,133)
 Proceeds from disposition of property, plant and equipment......                   -      236,148
 Other (changes in accruals).....................................              10,309        9,485
                                                                            ---------    ---------
  Net cash flows provided by (used in) investing activities......             (96,245)     127,500
                                                                            ---------    ---------
FINANCING ACTIVITIES
 Issuance of preferred stock and common stock warrants...........             150,000            -
 Borrowings under bank revolving credit agreement................              80,000      160,000
 Repayment of borrowings under bank revolving credit agreement...             (80,000)    (155,000)
 Borrowings under short-term financing agreement.................               2,000      167,764
 Repayment of borrowings under short-term financing agreement....              (2,000)    (172,764)
 Redemption of minority interest in preferred
  securities of subsidiary.......................................                   -     (100,000)
 Payments of capital lease obligations...........................             (10,436)      (8,040)
                                                                            ---------    ---------
  Net cash flows provided by (used in) financing activities......             139,564     (108,040)
                                                                            ---------    ---------
Net Increase in Cash and Cash Equivalents........................              81,995       14,906
Cash and Cash Equivalents at Beginning of Period.................              15,588        3,790
                                                                            ---------    ---------
Cash and Cash Equivalents at End of Period.......................           $  97,583    $  18,696
                                                                            =========    =========
</TABLE>

See accompanying notes.

                                       3
<PAGE>

                                EEX CORPORATION
              Notes to Condensed Consolidated Financial Statements


1. In the opinion of management, all adjustments (consisting only of normal
   recurring accruals) necessary for a fair presentation of the financial
   position, results of operations and cash flows for the interim periods
   included herein have been made. Certain items in prior periods have been
   reclassified to be consistent with the current presentation.

2. On December 22, 1998, EEX entered into a Purchase Agreement ("Agreement")
   that provided the Company would receive $150 million and issue to the
   purchaser 1,500,000 shares of Series B 8% Cumulative Perpetual Preferred
   Stock (the "Preferred Stock") and Warrants to acquire 21 million shares of
   the Company's common stock. On January 8, 1999, the transaction was closed
   and EEX issued the Preferred Stock and Warrants in exchange for $150 million.

   Each share of Preferred Stock has a stated value of $100 and a current
   dividend rate of 8% per year, payable quarterly. The 8% dividend rate will be
   adjusted to a market rate, not to exceed 18%, after seven years or the
   earlier occurrence of certain events including a change of control (as
   defined in the Agreement). Prior to any adjustment of the dividend rate, the
   Company may, at the Company's option, accrue dividends or pay them in cash,
   shares of Preferred Stock or shares of common stock. After any adjustment of
   the dividend rate, dividends must be paid in cash. The Preferred Stock is
   entitled to a liquidation preference of $100 per share plus accrued and
   unpaid dividends. The Preferred Stock may be redeemed, in whole but not in
   part, by the Company at any time for cash at the stated value plus accrued
   and unpaid dividends. Until any adjustment of the dividend rate, holders of
   the Preferred Stock will be entitled to cast an aggregate of eight million
   votes on matters voted upon by the common stock holders, and to a separate
   class vote on certain matters affecting the Preferred Stock. EEX has entered
   into a Registration Rights Agreement to register under the Securities Act of
   1933, and maintain the effectiveness of such registration of, the resale of
   the Preferred Shares, the Warrants and any common stock acquired by the
   purchaser pursuant to the Warrants. Under the terms of the Agreement, the
   purchaser has the right to designate a member to the Company's Board of
   Directors and did so in January 1999. The purchaser may continue the
   representation on the Company's Board of Directors if certain conditions are
   maintained. In the event of a Change of Control, as defined in the Agreement,
   occurring prior to the sixth anniversary of the closing of the transaction,
   the Purchaser has the right to exchange all or part of the Preferred Stock
   and Warrants for shares of common stock at the rate of 18.6047 shares of
   common stock for each share of Preferred Stock and a proportionate number of
   Warrants, provided that the Company may, under certain

                                       4
<PAGE>

   circumstances, pay a portion of the exchange in cash. The exercise price of
   the Warrants and the exchange formula related to a Change of Control may be
   adjusted upon the occurrence of certain events described in the anti-dilution
   provisions of the Warrants.

   The Warrants were issued in three series, each exercisable at any time after
   August 31, 1999 for $12 per share of common stock: (a) Series A Warrants to
   acquire 10.5 million shares, exercisable for ten years; (b) Series B Warrants
   to acquire 2.5 million shares, exercisable for seven years, and (c) Series C
   Warrants to acquire 8 million shares, exercisable for seven years. The Series
   A and Series B Warrants are exercisable for cash or by utilizing shares of
   Preferred Stock at the stated value on a gross or net basis. The Series C
   Warrants will be exercisable only as a stock appreciation right (entitled to
   receive the cash difference between the exercise price and the market price
   of the common stock on the trading day prior to the date of exercise) unless
   the Company, prior to July 30, 2002, elects to allow the Series C Warrants to
   be exercised for cash or by utilizing shares of Preferred Stock at the stated
   value on a gross or net basis.

   EEX paid dividends on the Preferred Stock as follows:
<TABLE>
<CAPTION>

                                                   Amount of Dividends                     Number of Preferred
              Date                                   ($ in millions)                          Shares Issued
---------------------------------         ---------------------------------          -----------------------------
<S>                                          <C>                                        <C>
September 30, 1999                                       3.1                                 31,164
June 30, 1999                                            3.0                                 30,554
March 31, 1999                                           2.8                                 27,667
</TABLE>

3. Early in 1998, EEX entered into two forward purchase facilities to repurchase
   shares of its common stock.  EEX has initiated several transactions under
   these facilities, which allow for settlement, at EEX's option, by physical
   delivery of the shares to EEX in exchange for cash or on a net basis in
   either shares of EEX common stock or in cash. For a net basis settlement, to
   the extent that the market price of EEX's common stock on a settlement date
   is higher (lower) than the forward purchase price, the net differential is
   received (paid) by EEX. As of September 30, 1999, transactions under these
   facilities covered approximately $8.9 million or 796,533 shares of EEX's
   common stock, with an average forward purchase price of $11.17 per share. If
   the agreements were settled on a net basis on the September 30, 1999 market
   price of EEX's common stock ($2.9375 per share), EEX would be obligated to
   pay approximately $6.55 million in cash or deliver approximately 2,231,378
   shares. Under the terms of one of the facilities, EEX will deposit in a cash
   collateral account up to $5.0 million during the fourth quarter 1999, and may
   be required to settle the transactions prior to the expiration dates of
   August and September 2000.

                                       5
<PAGE>

4. EEX is involved in a number of legal and administrative proceedings incident
   to the ordinary course of its business.  In the opinion of management and
   based on the advice of counsel and current assessment, any liability to EEX
   relative to these ordinary course proceedings will not have a material
   adverse effect on EEX's operations or financial condition.

   In addition, on August 3, 1998, EEX, several of its current and/or former
   officers and directors, Texas Utilities Company ("TUC") and TUC's Chief
   Executive Officer were named in a class action lawsuit filed in the Northern
   District of Texas that was designated as Gracy Fund L.P. v. EEX Corporation,
   et al., ("Gracy Fund"). The Gracy Fund complaint alleged violations of the
   Securities Act of 1933 ("33 Act") and the Securities Exchange Act of 1934
   ("34 Act") against various defendants.

   Also, on August 3, 1998, EEX, several of its current and/or former officers
   and directors, and two additional companies (ENSERCH Corporation and DeGolyer
   & MacNaughton) were named in a class action lawsuit filed in the Southern
   District of Texas that was designated as Stan C. Thorne v. EEX Corp., et al
   ("Thorne"). The Thorne complaint alleged violations of the 34 Act and common
   law-based negligent misrepresentations and fraud claims.

   On October 5, 1998, the Thorne defendants filed a motion to transfer the
   Thorne action to the Northern District of Texas. On November 20, 1998, the
   Thorne action was transferred to the Northern District of Texas and
   consolidated with the Gracy Fund action.

   On January 22, 1999, plaintiffs filed an amended class action complaint in
   the consolidated Gracy Fund action against EEX, several of its current and/or
   former officers and directors and ENSERCH Corporation ("Consolidated
   Complaint"). The Consolidated Complaint alleges violations of Sections 11,
   12(a)(2) and 15 of the 33 Act and violations of Sections 10(b), 14(a) and
   20(a) of the 34 Act against various defendants. The Consolidated Complaint
   alleges the Sections 10(b), 15 and 20(a) claims on behalf of a class of
   plaintiffs who acquired EEX's stock pursuant to an October 1996 Registration
   Statement and Proxy/Prospectus ("EEX Subclass").

   Plaintiffs allege that during the class period, defendants made materially
   false and misleading statements, and failed to disclose material facts,
   regarding the value and volume of EEX's proved reserves from its East Texas
   operations. According to plaintiffs, these purported misrepresentations
   artificially inflated the price of EEX's common stock throughout the class
   period, induced the EEX Subclass to approve the merger that spun EEX off from
   ENSERCH and induced the EEX Subclass to acquire stock pursuant to the
   Registration Statement and Proxy/Prospectus issued regarding this merger.

                                       6
<PAGE>

  While the Company intends to contest this action vigorously and has filed a
  motion to dismiss the Consolidated Complaint, the Company cannot predict the
  outcome of this matter at this time.  All discovery is stayed pending the
  determination of the motion to dismiss.

  The operations and financial position of EEX continue to be affected from time
  to time in varying degrees by domestic and foreign political developments as
  well as legislation and regulations pertaining to restrictions on oil and gas
  production, imports and exports, natural gas regulation, tax increases,
  environmental regulations and cancellation of contract rights.  Both the
  likelihood of such occurrences and their overall effect on the Company vary
  greatly and are not predictable.  These uncertainties are part of a number of
  items that EEX has taken and will continue to take into account in
  periodically establishing accounting reserves.

                                       7
<PAGE>

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


Certain statements in this report, including statements of EEX's and
management's expectations, intentions, plans and beliefs, are "forward-looking
statements," within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, that are subject to certain events, risks and uncertainties
that may be outside EEX's control.  See "Forward-Looking Statements -
Uncertainties and Risks."

RESULTS OF OPERATIONS

For the third quarter of 1999, EEX reported a net loss of $1.7 million ($0.04
per share), versus a net loss of $5.5 million ($0.13 per share) for the same
period in 1998.   For the nine months ended September 30, 1999, EEX reported a
net loss of $53.1 million ($1.26 per share), versus a net loss of $34.9 million
($0.83 per share) for the same period in 1998.

QUARTERS ENDED SEPTEMBER 30, 1999 AND 1998

For the third quarter of 1999, total revenues were $50.1 million, 8% higher than
total revenues in the third quarter of 1998.  Natural gas revenues, 6% higher
than the year-earlier period, were impacted by an 18% increase in average prices
and a 10% decrease in production. The decrease in production is primarily due to
property sales and production decline.  The average natural gas sales price per
thousand cubic feet ("Mcf") was $2.44 in the third quarter of 1999, compared
with $2.06 in the same period of 1998.  Natural gas production for the third
quarter of 1999 was 10 billion cubic feet ("Bcf"), compared with 11 Bcf in the
same period of 1998. Oil revenues increased 28% from the same period in 1998 due
to an increase in average price to $19.93 from $12.53, offset by a 20% decrease
in production, primarily due to property sales.

Costs and expenses for the third quarter of 1999 were $44.7 million, compared
with $53.4 million in 1998.  Operating expenses (production and operating,
general and administrative and taxes other than income) were $17.9 million in
the current quarter, 12% lower than the same period of 1998, primarily as a
result of property sales and the abandonment of the Cooper field.  Exploration
expenses for the third quarter of 1999 decreased to $9.5 million, compared to
$11.3 million for the same period of 1998.  The current quarter includes $4.7
million of exploration expenses associated with the George prospect in
Mississippi Canyon Block 442 that was determined to be a dry hole in July 1999.
Depletion, depreciation and amortization for the third quarter of 1999 was $16.4
million, $5.3 million lower than the same period of 1998, primarily due to lower
production volumes in 1999 resulting from the impact of dispositions of
properties in 1998.  In addition, during the current period no depreciation was
taken on the

                                       8
<PAGE>

pipelines and the shallow water facility which had previously serviced the
production from the Cooper field.

Total interest and other financing costs for the third quarter of 1999,
including interest income, preferred stock dividends and other income, were $6.0
million, a $2.0 million increase from the same period of 1998.  This increase
was primarily due to the dividends associated with the preferred shares,
partially offset by increased interest income.

NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998

For the nine months ended September 30, 1999, total revenues were $133.6
million, 21% lower than the year-earlier period.  Natural gas revenues, 31%
lower than the first nine months of 1998, were impacted by a 5% decrease in
average prices and a 27% decrease in production. The decrease in production is
primarily due to property sales in 1998 and production decline.  The average
natural gas sales price per Mcf was $2.16 in the first nine months of 1999,
compared with $2.28 in the comparable period of 1998.  Natural gas production
for 1999 was 32 Bcf, compared with 44 Bcf in 1998.  Oil revenues remained
constant from the same period in 1998.  A 22% increase in unhedged prices was
offset by a $1.1 million hedging loss for the first nine months of 1999,
compared to a $3.7 million hedging gain for the same period in 1998.

Costs and expenses were $167.2 million for the nine months ended September 30,
1999, compared with $188.1 million in the comparable period of 1998.  Operating
expenses (production and operating, general and administrative and taxes other
than income) were $52.6 million in the first nine months of 1999, 18% lower than
the comparable period of 1998, primarily as a result of property sales and the
favorable impact from cost reduction measures.  Exploration expenses increased
to $55.0 million for the nine months ended September 30, 1999, compared to $37.6
million for the comparable period in 1998.  The current period includes $24.0
million of exploration expenses associated with the George prospect dry hole in
Mississippi Canyon Block 442.  Depletion, depreciation and amortization during
the period was $54.7 million, $22.7 million lower than the comparable period of
1998, primarily due to lower production volumes in 1999 resulting from
disposition of properties and additional depreciation expense in 1998 associated
with the disposition of properties in East Texas.

Total interest and other financing costs for the nine months ended September 30,
1999, including interest income, minority interest, preferred stock dividends
and other income, were $17.2 million, a $3.1 million decrease from the
comparable period of 1998.  This decrease was primarily due to increased
interest income, reduced debt and redemption of the outstanding preferred
securities of a subsidiary.  This decrease was partially offset by the dividends
associated with preferred shares.

                                       9
<PAGE>

                                EEX CORPORATION
                       SUMMARY OF SELECTED OPERATING DATA
                       FOR OIL & GAS PRODUCING ACTIVITIES
                                  (UNAUDITED)

<TABLE>
<CAPTION>

                                                 Three Months       Nine Months
                                                    Ended              Ended
                                                 September 30       September 30
                                               ---------------   -------------------
                                                1999     1998     1999       1998
                                               ------   ------   ------   ----------
<S>                                            <C>      <C>      <C>      <C>
Sales Volumes
 Natural gas (Bcf)..........................     10.0     11.1     32.2        44.3
 Oil and condensate (MMBbls) (a)............      1.2      1.5      3.8         4.3
    Total volumes (MMBoe) (b)...............      2.9      3.4      9.2        11.6

Average Sales Price (c)
 Natural gas (per Mcf)......................   $ 2.44   $ 2.06   $ 2.16      $ 2.28
 Oil and condensate (per Bbl) (a)...........    19.93    12.53    15.22       13.57
    Total product revenue (per Boe) (b).....    16.88    12.44    13.90       13.63

Average Cost and Expenses (per Boe) (b)
 Production and operating (d)...............   $ 3.26   $ 3.55   $ 3.14      $ 3.05
 Exploration................................     3.32     3.38     6.00        3.23
 Depletion, depreciation and amortization...     5.72     6.48     5.96        6.65
 General, administrative and other..........     2.47     1.86     2.22        1.64
 Taxes, other than income...................     0.50     0.67     0.37        0.83

</TABLE>
(a)  Oil and condensate volumes and average sales price includes amounts for
     natural gas liquids.
(b)  Natural gas is converted to barrels of oil equivalents (Boe) on the basis
     of six Mcf equals one Boe.
(c)  Includes the effects of hedging.
(d)  Before related production, severance and ad valorem taxes.



LIQUIDITY AND CAPITAL RESOURCES

Net cash flows provided by operating activities during the nine months ended
September 30, 1999 were $38.7 million, compared to net cash flows used in
operating activities of $4.6 million in the same period of 1998.  The increase
in operating cash flow was largely due to reduced working capital.

Net cash flows used in investing activities during the nine months ended
September 30, 1999 were $96.2 million, compared with net cash flows provided by
investing activities of $127.5 million for the same period in 1998. In the first
nine months of 1998, the Company realized $236.1 million in proceeds from
property sales.

In December 1998, EEX entered into a Purchase Agreement under which the Company
received $150 million and issued to the purchaser 1,500,000 shares of Series B
8% Cumulative Perpetual Preferred Stock and Warrants to acquire 21 million
shares of the Company's common stock on January 8, 1999.

                                       10
<PAGE>

EEX intends to utilize substantially all of its internally generated cash flows
for growth of the business and expects to fund its business plans using
available cash flow from operations, proceeds from the issuance of Preferred
Stock, asset sales, additional use of public and private equity markets, and
borrowings under credit facilities.

EEX has a $350 million revolving credit line with a group of banks that matures
on June 27, 2002, of which none was used at September 30, 1999.  The revolving
credit agreement limits, at all times, total debt, as defined, to the lesser of
60% of capitalization, as defined, or $1 billion, and prohibits liens on
property except under certain circumstances. A portion of the funds available
under the revolving credit line may be borrowed on a short-term basis at current
money market rates.

At September 30, 1999, debt, including both capital and operating leases as
defined in loan agreements, represented 40.3% of total capitalization, compared
to 50.6% at December 31, 1998.

EEX plans to initially finance the Tesoro acquisition (see "Recent Events"
below) through a combination of cash on hand and borrowings under the revolving
credit line.  EEX is pursuing other financing options and asset sales to
refinance this acquisition.

YEAR 2000 ISSUE

EEX has completed an inventory, assessment and risk analysis of its Information
Technology systems which include the Company's business and financial software
applications, geological and geophysical software applications, operating
systems, hardware and the interfaces and interdependencies between these
systems.  The Accounting and Human Resources systems software have been upgraded
to versions certified by the vendors to be Year 2000 compliant and testing in
accordance with EEX's plan has been successfully completed.

An Onshore and Offshore embedded chip inventory, assessment, and risk analysis
has been completed.  This program found 185 non-compliant and indeterminate
components that require replacement or other remediation. Implementation of
corrective actions is complete.

The Company assessed the Year 2000 readiness status of external agents upon whom
it relies for goods and services in order to conduct its day to day business.
Where external agents have not demonstrated Year 2000 readiness, alternative
vendors and suppliers have been identified.

Contingency plans for each of the three areas above are being completed to
address the potential impact to the Company where risk may not have been
adequately minimized.  To date, EEX has spent approximately $1.3 million of a
budgeted $1.5 million in addressing the Year 2000 issue.

                                       11
<PAGE>

The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations.  Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition.  Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party suppliers and customers,
no assurances can be given that business interruptions arising from the Year
2000 issue will not occur.  However, the Company believes that implementation of
its Year 2000 readiness program will reduce the potential for material adverse
consequences to occur.

RECENT EVENTS

Tesoro Acquisition - On October 8, 1999, EEX Operating LLC ("Buyer"), a wholly-
owned subsidiary of the Company, entered into a Stock Purchase Agreement (the
"Agreement")with Tesoro Petroleum Corporation and Tesoro Gas Resources Company,
Inc., as Seller, for the purchase of all of the issued and outstanding stock of
Tesoro Exploration and Production Company ("E&P") and Tesoro Reserves Company
("Reserves") (together, the "Acquired Companies") and all of Seller's interest
in Tesoro E&P Company, L.P. ("E&P L.P."). E&P is the general partner of E&P L.P.
and owns a 1% interest; Reserves is the limited partner of E&P L.P. and owns a
99% interest. E&P L.P. owns U.S. domestic properties located principally in
South Texas and the Gulf Coast. The properties are primarily natural gas fields
that currently produce an approximate daily net amount of 80 million cubic feet
of gas equivalent. The transaction does not include the international oil and
gas and certain pipeline assets that are owned by other subsidiaries of Tesoro.
The purchase price is $216 million cash and the effective date of the sale is
July 1, 1999. The Company guaranties certain of the Buyer's obligations.

The Agreement contains representations and warranties of Seller and Buyer
customary for transactions of this nature.  Seller will retain, and indemnify
Buyer for, any liabilities of the Acquired Companies and E&P L.P. that are (i)
not related to the assets of E&P L.P., (ii) for income taxes prior to the
closing, and (iii) related to contingent royalty obligations for periods prior
to the closing.  Buyer will assume, and indemnify Seller for, all other
liabilities of the Acquired Companies and E&P L.P.  The Buyer will conduct due
diligence reviews of corporate, financial, title and environmental matters.  If
material defects are discovered, certain adjustments of the purchase price may
be made.  If the value of uncured defects or uninsured casualty losses after the
effective date exceed 10% of the purchase price, either party may terminate the
Agreement.  The Agreement is subject to customary conditions to closing,
including obtaining any necessary governmental and third party consents.
Subject to the satisfaction or waiver of the conditions, closing is expected to
occur on December 14, 1999.

Deepwater Gulf of Mexico - Garden Banks Block 386 (Llano, EEX 30%)--The Glomar-
Artic 1 semi-submersible rig moved into the Garden Banks area

                                       12
<PAGE>

and began drilling the second appraisal well at Llano on October 3, 1999. This
well, Llano #3, is located approximately one mile northwest of the discovery
well and will test the western extent of this reservoir and is expected to be
drilled to approximately 26,000 feet into the Lower Pliocene and Miocene sands
encountered in the discovery well.

Deepwater Gulf of Mexico - Mississippi Canyon Block 620 (Mackerel, EEX 100%)--
The Mackerel well which had an original target depth of 15,000 feet was drilled
to an approximate depth of 11,000 feet in September 1999. Drilling was
temporarily suspended in order to conduct additional seismic and geological
evaluations and the rig was moved off location. As part of the evaluation
process, EEX will examine the feasibility of re-entering the well to complete
the drilling program. The additional evaluations are expected to be completed
during January 2000. Upon completion of these evaluations, management may order
further, detailed processing of the data or immediately finalize its drilling
program which could include (1) continuing to drill to the target depth,
(2)sidetracking the well to a new bottom hole target location, or (3) abandoning
the well. The cost of this well incurred to date is $19.9 million (100% EEX).

Deepwater Gulf of Mexico - Mississippi Canyon Block 442 (George, EEX 70%)--The
George well reached a depth of 22,000 feet in July 1999, and encountered
hydrocarbons in non-commercial quantities.  The well was plugged and abandoned
during the third quarter.  The total cost to EEX associated with this prospect
is approximately $24.0 million, $19.3 million of which has been included in the
results of operations in the second quarter and the remaining $4.7 million has
been included in the results of operations in the third quarter of 1999.

                                       13
<PAGE>

FORWARD-LOOKING STATEMENTS -- UNCERTAINTIES AND RISKS

Certain statements in this report, including statements of EEX's and
management's expectations, intentions, plans and beliefs, are "forward-looking
statements," within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and are subject to certain events, risks and uncertainties
that may be outside EEX's control. These forward-looking statements include
statements of management's plans and objectives for EEX's future operations and
statements of future economic performance; information regarding drilling
schedules, expected or planned production, future production levels of
international and domestic fields, EEX's capital budget and future capital
requirements, EEX's meeting its future capital needs, the level of future
expenditures for environmental costs and the outcome of regulatory and
litigation matters; and the assumptions underlying such forward-looking
statements. Actual results and developments could differ materially from those
expressed in or implied by such statements due to a number of factors,
including, without limitation, those described in the context of such forward-
looking statements and the risk factors set forth below and described from time
to time in EEX's other documents and reports filed with the Securities and
Exchange Commission.

Exploration Risk--Exploration for oil and gas in the Deepwater Gulf of Mexico
and unexplored frontier areas has inherent and historically high risk. EEX is
focusing on exploration opportunities in offshore and international areas which
will increase associated exploration risk. Future reserve increases and
production will be dependent on EEX's success in these exploration efforts and
no assurances can be given of such success. Exploration may involve unprofitable
efforts, not only with respect to dry wells, but also with respect to wells that
are productive but do not produce sufficient net revenues to return a profit
after drilling, operating and other costs.

Operational Risks and Hazards--EEX's operations are subject to the risks and
uncertainties associated with finding, acquiring and developing oil and gas
properties, and producing, transporting and selling oil and gas. Operations may
be materially curtailed, delayed or canceled as a result of numerous factors,
such as accidents, weather conditions, compliance with governmental requirements
and shortages or delays in the delivery of equipment. Operating hazards such as
fires, explosions, blow-outs, equipment failures, abnormally pressured
formations and environmental accidents may have a material adverse effect on
EEX's operations or financial condition. EEX's ability to sell its oil and gas
production is dependent on the availability and capacity of gathering systems,
pipelines and other forms of transportation.

                                       14
<PAGE>

Offshore Risks--EEX's Gulf of Mexico oil and gas reserves and exploration
prospects include properties located in water depths of 20 to greater than 7,000
feet where operations are by their nature more difficult than drilling
operations conducted on land in established producing areas. Deepwater drilling
and operations require the application of more advanced technologies that
involve a higher risk of mechanical failure and can result in significantly
higher drilling and operating costs which, in turn, can require greater capital
investment than anticipated and materially change the expected future value of
offshore development projects. Furthermore, offshore operations require a
significant amount of time between the discovery and the time the gas or oil is
actually marketed, increasing the market risk involved with such operations.

Volatility of Oil and Gas Markets--EEX's operations are highly dependent upon
the prices of, and demand for, oil and gas. These prices have been, and are
likely to continue to be, volatile. Prices are subject to fluctuations in
response to a variety of factors that are beyond the control of EEX, such as
worldwide economic and political conditions as they affect actions of OPEC and
Middle East and other producing countries, and the price and availability of
alternative fuels. EEX's hedging activities with respect to some of its
projected oil and gas production, which are designed to protect against price
declines, may prevent EEX from realizing the benefits of price increases above
the levels of the hedges.

Estimating Reserves and Future Net Cash Flows--Uncertainties are inherent in
estimating quantities and values of reserves and in projecting rates of
production, net revenues and the timing of development expenditures.  Reserve
data represent estimates only of the recovery of hydrocarbons from underground
accumulations and are often different from the quantities ultimately recovered.
Downward adjustment in reserve estimates could adversely affect EEX. Also, any
substantial decline in projected net revenues resulting from production of
reserves could have a material adverse effect on the Company's financial
position and results of operations.

Capital Funding--EEX's access to public or private equity or debt markets may be
limited by general conditions in or volatility of the markets or conditions
affecting the oil and gas industry. No assurances can be given that the Company
will be able to secure funds in these markets when necessary, or that such funds
will be obtained on terms favorable to the Company.

                                       15
<PAGE>

Government Regulation--EEX's business is subject to certain federal, state and
local laws and regulations relating to the drilling for and the production of
oil and gas, as well as environmental and safety matters. See "Business--
Government Regulation" and "Environmental Matters," in the Company's Annual
Report on Form 10-K. Enforcement of or changes to these regulations could have a
material impact on the Company's operations, financial condition and results of
operations.

International Operations--EEX's interests in properties in countries outside the
United States are subject to the various risks inherent in foreign operations.
These risks may include, among other things, property and equipment as a result
of expropriation, nationalization, war, insurrection and other political risks,
risks of increases in taxes and governmental royalties, renegotiations of
contracts with governmental entities, changes in laws and policies governing
operations of foreign-based companies and other uncertainties arising out of
foreign government sovereignty over the Company's international operations. The
Company's international operations may also be adversely affected by laws and
policies of the United States affecting foreign trade, taxation and investment.
In addition, in the event of a dispute arising from foreign operations, the
Company may be subject to the exclusive jurisdiction of foreign courts or may
not be successful in subjecting foreign persons to the jurisdiction of the
courts of the United States.

                                       16
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the third quarter of 1999, EEX realized a total net loss on hedging
activities of $0.8 million.  The total net hedging loss includes a loss of $1.7
million related to hedging activities excluding the hedging gain of $0.9 million
associated with the contractual requirement to purchase gas for delivery to a
co-generation plant in East Texas.  The table below provides information about
EEX's hedging instruments as of September 30, 1999.  The Notional Amount is
equal to the net volumetric hedge position of EEX during the periods.  The fair
values of the hedging instruments are based on the difference between the strike
price and the New York Mercantile Exchange future prices for the applicable
trading months. In addition, with the recent acquisition of Tesoro, EEX has
hedged over 90% of the estimated proved developed reserves to be acquired from
Tesoro for the period January 2000 through December 2004 at an average price of
$2.64 per MMBtu. This amounts to approximately 61 Bcf of reserves. EEX follows
hedge accounting for these positions and accordingly, the fair values presented
below, which represent unrealized gains (losses), have not been recognized in
the financial statements.

<TABLE>
<CAPTION>

                                    Notional         Average           Fair Value at
                                     Amount       Strike Price      September 30, 1999
                                   (BBtu) (1)   ($ per MMBtu) (2)    ($ in thousands)
                                   ----------   -----------------   -------------------
<S>                                <C>          <C>                 <C>
Natural Gas:
 October 1999 - December 1999...       4,455                2.73                  (124)
 January 2000 - March 2000......       7,371                2.85                    96
 April 2000 - June 2000.........       7,007                2.49                  (245)
 July 2000 - September 2000.....       6,900                2.56                   (18)
 October 2000 - December 2000...       6,716                2.71                  (175)
 January 2001 - March 2001......       2,100                2.76                    (5)
 April 2001 - June 2001.........       2,110                2.49                   (16)
 July 2001 - September 2001.....       2,120                2.50                   (21)
 October 2001 - December 2001...       2,120                2.69                    (5)
 January 2002 - March 2002......       1,200                2.74                   (23)
 April 2002 - June 2002.........       1,200                2.51                   (16)
 July 2002 - September 2002.....       1,200                2.51                   (28)
 October 2002 - December 2002...       1,200                2.69                   (10)
 January 2003 - March 2003......       1,650                2.76                   (12)
 April 2003 - June 2003.........       1,650                2.54                   (12)
 July 2003 - September 2003.....       1,650                2.54                   (12)
 October 2003 - December 2003...       1,650                2.72                   (12)
 January 2004 - March 2004......       1,650                2.80                   (12)
 April 2004 - June 2004.........       1,650                2.58                   (12)
 July 2004 - September 2004.....       1,650                2.57                   (12)
 October 2004 - December 2004...       1,650                2.76                   (12)
                                      ------                ----                  ----
   Total........................      58,899                                      (686)
                                      ======                                      ====
</TABLE>

EEX enacted crude oil hedges during the third quarter of 1999.  The table below
provides information about these instruments:
<TABLE>
<CAPTION>

                                    Notional                Average         Fair Value at
                                     Amount              Strike Price    September 30, 1999
                                    (MBbls) (3)          ($ per Bbl)      ($ in thousands)
                                   ----------            ------------    ------------------
                                                         Floor   Ceiling
                                                         -----   -------
<S>                                <C>                   <C>     <C>     <C>
Crude Oil:
 October 1999 - December 1999...       92                18.86   22.05         (174)
</TABLE>

                                       17
<PAGE>

EEX has a contractual requirement to purchase gas for delivery to a co-
generation plant in East Texas.  These volumes are not included in the above
natural gas hedging table.  The Notional Amount is equal to the net volumetric
position of EEX during the period.  The fair values of the hedging instruments
are based on the difference between the strike price and the New York Mercantile
Exchange future prices for the applicable trading month of 1999 and 2000. EEX
follows hedge accounting for these positions and accordingly, the fair values
presented below, which represent unrealized gains (losses), have not been
recognized in the financial statements.
<TABLE>
<CAPTION>

                                    Notional         Average           Fair Value at
                                     Amount       Strike Price      September 30, 1999
                                   (BBtu) (1)   ($ per MMBtu) (2)    ($ in thousands)
                                   ----------   -----------------   -------------------
<S>                                <C>          <C>                 <C>
Natural Gas:
 October 1999 - December 1999...       1,380                2.18                   816
 January 2000 - March 2000......       1,365                2.31                   720
 April 2000 - June 2000.........       1,365                2.14                   524
 July 2000 - September 2000.....       1,380                2.16                   541
 October 2000 - December 2000...       1,380                2.32                   582
                                       -----                                     -----
   Total........................       6,870                                     3,183
                                       =====                                     =====
</TABLE>


(1)  Billions of British Thermal Units.
(2)  Millions of British Thermal Units.
(3)  Thousands of Barrels

                                       18
<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

     EXHIBIT 10.1 - Stock Purchase Agreement dated as of October 8, 1999 by and
     between Tesoro Petroleum Corporation and Tesoro Gas Resources Company,
     Inc., as Seller, and EEX Operating LLC, as Buyer

     EXHIBIT 27.1 - Financial Data Schedule

(b)  Reports on Form 8-K

     Current Report on Form 8-K dated September 22, 1999. (News release dated
     September 22, 1999: EEX temporarily suspends Mackerel drilling; rig moves
     to Llano appraisal well.)

                                       19
<PAGE>

                                   SIGNATURES


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

                                       EEX CORPORATION
                                       (Registrant)



Dated: November 12, 1999         By  /s/ R. S. Langdon
                                     -------------------------------
                                       R. S. Langdon
                                       Executive Vice President,
                                       Finance and Administration,
                                       and Chief Financial Officer



                                       The above officer of registrant has
                                       signed this report as its duly authorized
                                       representative and as its principal
                                       financial officer.

                                       20
<PAGE>

                                 EXHIBIT INDEX


Exhibit
Number         Description
------         -----------

10.1           Stock Purchase Agreement dated as of October 8, 1999 by and
               between Tesoro Petroleum Corporation and Tesoro Gas Resources
               Company, Inc., as Seller, and EEX Operating LLC, as Buyer

27.1           Financial Data Schedule

                                       21