<PAGE>   1
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                                 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 JUNE 30, 1997

                                       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 NUMBER: 001-11899

                        THE HOUSTON EXPLORATION COMPANY
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                   22-2674487
   (STATE OR OTHER JURISDICTION OF                    (I.R.S. EMPLOYEE
   INCORPORATION OR ORGANIZATION)                    IDENTIFICATION NO.)

                         1331 LAMAR STREET, SUITE 1065
                              HOUSTON, TEXAS 77010
                             (ADDRESS OF PRINCIPAL
                               EXECUTIVE OFFICES
                                 AND ZIP CODE)
                                 (713) 652-2847
                         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 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.  
                                                 Yes  [X]    No   [ ]

       As of July 31, 1997, 23,332,763 shares of Common Stock, $.01 per share,
were outstanding.


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

<PAGE>   2
                        THE HOUSTON EXPLORATION COMPANY

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                       Page
                                                                                                       ----
<S>                                                                                                      <C>
FACTORS AFFECTING FORWARD LOOKING STATEMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2

PART I.  FINANCIAL INFORMATION

Item 1.      Financial Statements (unaudited)

             Combined Balance Sheets -- June 30, 1997 and
                 December 31, 1996  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3

             Combined Statements of Operations -- Three-Month Periods and the Six-Month Periods
                 Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4

             Combined Statements of Cash Flows -- Six Month Periods
                 Ended June 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   5

             Notes to the Combined Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .   6

Item 2.      Management's Discussion and Analysis of Financial Condition and
                 Results of Operations  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

PART II.     OTHER INFORMATION

Item 6.      Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16

SIGNATURES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
</TABLE>





                                      -1-
<PAGE>   3
                  FACTORS AFFECTING FORWARD LOOKING STATEMENTS

         This Quarterly Report on Form 10-Q contains certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1993, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
The words "anticipate," "believe," "expect," "estimate," "project" and similar
expressions are intended to identify forward-looking statements.  Without
limiting the foregoing, all statements under the caption "Item 2 -- Management's
Discussion and Analysis of Financial Condition and Results of Operations"
relating to the Company's anticipated capital expenditures, future cash flows
and borrowings, pursuit of potential future acquisition opportunities and
sources of funding for exploration and development are forward-looking
statements.  Such statements are subject to certain risks and uncertainties,
such as the volatility of natural gas and oil prices, uncertainty of reserve
information and future net revenue estimates, reserve replacement risks,
drilling risks, operating risks of natural gas and oil operations, acquisition
risks, substantial capital requirements, government regulation, environmental
matters and competition.  Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, believed, expected, estimated or
projected.  For additional discussion of such risks, uncertainties and
assumptions, see "Items 1 and 2.  Business and Properties" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the Company's Annual Report on Form 10-K filed under
the Securities Act of 1934, as amended.





                                      -2-
<PAGE>   4
PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
                        THE HOUSTON EXPLORATION COMPANY

                            COMBINED BALANCE SHEETS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                 JUNE 30,       DECEMBER 31,
                                                                                   1997            1996        
                                                                                ----------      ----------
                                                                                (UNAUDITED)
<S>                                                                             <C>             <C>       
 ASSETS:
    Cash and cash equivalents .............................................     $    2,477      $    2,851
    Accounts receivable ...................................................         33,079          35,845
    Accounts receivable--Affiliate ........................................          2,527              --
    Inventories ...........................................................          1,456             992
    Prepayments and other .................................................            463             924
                                                                                ----------      ----------
         Total current assets .............................................         40,002          40,612
    Natural gas and oil properties, full cost method
         Unevaluated properties ...........................................         78,080          60,258
         Properties subject to amortization ...............................        504,090         468,062
    Other property and equipment ..........................................          7,908           7,308
                                                                                ----------      ----------
                                                                                   590,078         535,628
    Less: Accumulated depreciation, depletion and amortization ............       (200,501)       (176,504)
                                                                                ----------      ----------
                                                                                   389,577         359,124
    Other assets ..........................................................            852           1,549
                                                                                ----------      ----------
         TOTAL ASSETS .....................................................     $  430,431      $  401,285
                                                                                ==========      ==========

 LIABILITIES:
    Accounts payable and accrued expenses .................................     $   30,870      $   36,650
      Accounts payable-Affiliate ..........................................             --           1,010
      Deferred stock obligation ...........................................          8,825              --
                                                                                ----------      ----------
          Total current liabilities .......................................         39,695          37,660
    Long-term debt ........................................................         86,500          65,000
    Deferred federal income tax ...........................................         62,440          56,475
    Other deferred liabilities ............................................            162           8,850
                                                                                ----------      ----------
         TOTAL LIABILITIES ................................................        188,797         167,985

 COMMITMENTS AND CONTINGENCIES (NOTE 4)

 STOCKHOLDERS' EQUITY:
    Common Stock, $.01 par value, 50,000 shares authorized,
         23,333 shares issued and outstanding .............................            233             233
    Additional paid-in capital ............................................        221,470         222,271
    Retained earnings .....................................................         19,931          10,796
                                                                                ----------      ----------
         TOTAL STOCKHOLDERS' EQUITY .......................................        241,634         233,300
                                                                                ----------      ----------

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .......................     $  430,431      $  401,285
                                                                                ==========      ==========
</TABLE>

              The accompanying notes are an integral part of these
                         combined financial statements.





                                      -3-
<PAGE>   5
                        THE HOUSTON EXPLORATION COMPANY

                       COMBINED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED     SIX MONTHS ENDED
                                                                JUNE 30,              JUNE 30,            
                                                          -------------------   -------------------
                                                            1997       1996       1997       1996
                                                          --------   --------   --------   --------
<S>                                                       <C>        <C>        <C>        <C>     
REVENUES
   Natural gas and oil revenues .......................   $ 22,050   $ 11,272   $ 47,064   $ 21,252
    Other .............................................        170        302        484        535
                                                          --------   --------   --------   --------
     Total revenues ...................................     22,220     11,574     47,548     21,787

OPERATING COSTS AND EXPENSES
   Lease operating ....................................      3,764      1,806      8,013      3,634
   Depreciation, depletion and amortization ...........     12,573      5,897     23,955     11,571
   General and administrative, net ....................      1,546      1,210      2,956      2,702
                                                          --------   --------   --------   --------
     Total operating expenses .........................     17,883      8,913     34,924     17,907

INCOME FROM OPERATIONS ................................      4,337      2,661     12,624      3,880
Interest expense, net .................................        286        657        429      1,118
                                                          --------   --------   --------   --------
Income before income taxes ............................      4,051      2,004     12,195      2,762
Provision (benefit) for federal
     income taxes .....................................        609        191      3,060        (27)
                                                          --------   --------   --------   --------
NET INCOME ............................................   $  3,442   $  1,813   $  9,135   $  2,789
                                                          ========   ========   ========   ========

Net income per share ..................................   $   0.15   $   0.12   $   0.39   $   0.18
                                                          ========   ========   ========   ========

Weighted average shares outstanding ...................     23,333     15,295     23,333     15,295
</TABLE>


              The accompanying notes are an integral part of these
                        combined financial statements.



                                      -4-
<PAGE>   6
                        THE HOUSTON EXPLORATION COMPANY

                       COMBINED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                 SIX MONTHS ENDED
                                                                                     JUNE 30,
                                                                              ---------------------
                                                                                 1997        1996        
                                                                              ---------   ---------
<S>                                                                           <C>         <C>      
 CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income ...............................................................   $   9,135   $   2,789
 Adjustments to reconcile net income to net cash provided by
    operating activities:
    Depreciation, depletion and amortization ..............................      23,955      11,571
    Deferred income tax expense ...........................................       5,305       6,206
 Changes in operating assets and liabilities:
    Decrease in accounts receivable .......................................         239       3,935
    Increase in inventories ...............................................        (464)        (33)
    Decrease in prepayments and other .....................................         461         759
    Decrease in other assets and liabilities ..............................         833         615
    Decrease in accounts payable and accrued expenses .....................      (6,790)     (9,005)
                                                                              ---------   ---------
 Net cash provided by operating activities ................................      32,674      16,837

 CASH FLOWS FROM INVESTING ACTIVITIES:
 Investment in property and equipment .....................................     (55,979)    (30,629)
 Dispositions and other ...................................................       1,572       1,523
                                                                              ---------   ---------
 Net cash used in investing activities ....................................     (54,407)    (29,106)

 CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from long-term borrowings .......................................      35,500       5,991
 Paydowns on long-term borrowings .........................................     (14,000)         --
 Common stock issuance costs ..............................................        (141)         --
 Capital contributions from Brooklyn Union ................................          --      10,293
                                                                              ---------   ---------
 Net cash provided by financing activities ................................      21,359      16,284

 Increase in cash and cash equivalents ....................................        (374)      4,015

 Cash and cash equivalents, beginning of period ...........................       2,851         598
                                                                              ---------   ---------

 Cash and cash equivalents, end of period .................................   $   2,477   $   4,613
                                                                              =========   =========

 Cash paid for interest ...................................................   $   2,487   $   2,253
                                                                              =========   =========
 Cash paid for income taxes ...............................................   $      --   $      --
                                                                              =========   =========
</TABLE>


              The accompanying notes are an integral part of these
                        combined financial statements.





                                      -5-
<PAGE>   7
                        THE HOUSTON EXPLORATION COMPANY

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                  (UNAUDITED)

NOTE 1 -- BASIS OF PRESENTATION

         Organization

         The Houston Exploration Company ("Houston Exploration" or the
"Company"), a Delaware corporation, was incorporated in December 1985 and began
operations in January 1986 for the purpose of conducting certain natural gas
and oil exploration and development activities for The Brooklyn Union Gas
Company ("Brooklyn Union").  Prior to its initial public offering in September
1996 (the "IPO"), the Company was an indirect wholly-owned subsidiary of
Brooklyn Union.  The Company's operations focus on the exploration, development
and acquisition of domestic natural gas and oil properties offshore in the Gulf
of Mexico and onshore in South Texas, the Arkoma Basin, East Texas and West
Virginia.

         Effective February 29, 1996 Brooklyn Union implemented a
reorganization of its exploration and production assets and liabilities by
transferring to Houston Exploration certain onshore producing properties and
acreage formerly owned by Fuel Resources, Inc. ("FRI"), a wholly owned
subsidiary of Brooklyn Union.  These combined financial statements have been
prepared giving effect to the transfer of these assets and liabilities from the
time of the acquisition of such assets and liabilities by Brooklyn Union.  The
transfer of assets and liabilities has been accounted for at historical cost as
a reorganization of companies under common control in a manner similar to a
pooling-of- interests and the financial statements reflect the combined
historical results of Houston Exploration and the assets and liabilities
transferred by Brooklyn Union for all of the periods presented.

         Interim Financial Statements

         The balance sheet of the Company at June 30, 1997 and the statements
of operations and cash flows for the periods indicated herein have been
prepared by the Company without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission.  Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted,
although the Company believes that the disclosures contained herein are
adequate to make the information presented not misleading.  The balance sheet
at December 31, 1996 is derived from the December 31, 1996 audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.  The Interim Financial Statements should be read in
conjunction with the Combined Financial Statements and Notes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1996.

         In the opinion of management, all adjustments, consisting of normal
recurring accruals, necessary to present fairly the information in the
accompanying financial statements have been included.  The results of
operations for such interim periods are not necessary indicative of the results
for the full year.


         New Accounting Pronouncements

         In February 1997, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share".  This statement supersedes APB Opinion No. 15, "Earnings per Share" and
simplifies the computation of earnings per share ("EPS").  Primary EPS is
replaced with a presentation of basic EPS.  Basic EPS includes no dilution and
is computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period.  Fully





                                      -6-
<PAGE>   8
diluted EPS is replaced with diluted EPS.  Diluted EPS reflects the potential
dilution if certain securities are converted.  SFAS No. 128 requires dual
presentation of basic and diluted EPS by entities that issue any securities
other than ordinary common stock.  SFAS No. 128 will be effective for financial
statements for both interim and annual periods ending after December 15, 1997,
and requires retroactive restatement of all EPS data presented.   The Company
plans to adopt the statement on December 31, 1997.  The Company does not expect
the effect of adopting SFAS No. 128 to have a material impact on its EPS
calculations, and, if adopted currently, SFAS  No. 128 would not have a
material impact on the Company's reported EPS.

NOTE 2 -- ACQUISITIONS

         TransTexas

         On July 2, 1996, the Company acquired certain natural gas and oil
properties and associated gathering pipelines and equipment located in Zapata
County, Texas (the "TransTexas Acquisition") from TransTexas Gas Corporation
and TransTexas Transmission Corporation (together, "TransTexas").  The Company
acquired a 100% working interest (95% after the exercise by James G. Floyd, the
Company's President and Chief Executive Officer, of his right to purchase a 5%
working interest) in the approximately 142 wells on such properties.  The
purchase price of $62.2 million ($59.1 million after giving effect to the
exercise of Mr. Floyd's purchase option) for the TransTexas Acquisition was
reduced by $3.1 million for production revenues and expenses related to the
assets between the May 1, 1996 effective date  and July 2, 1996.  The purchase
price of the TransTexas Acquisition was paid in cash, financed with borrowings
under the Company's Credit Facility.

         Soxco

         On September 25, 1996, the Company acquired substantially all of the
natural gas and oil properties and related assets (the "Soxco Acquisition") of
Smith Offshore Exploration Company ("Soxco").  The natural gas and oil
properties acquired in the Soxco Acquisition consisted solely of working
interests in properties located in the Gulf of Mexico that were already
operated by the Company or in which the Company also had a working interest.
Pursuant to the Soxco Acquisition, the Company paid Soxco cash in the aggregate
amount of $20.3 million (net of $3.4 million for certain purchase price
adjustments), and issued to Soxco 762,387 shares of common stock.  The cash
portion of the purchase price was funded with the proceeds of the Company's
initial public offering.  In addition to the foregoing, the Company will pay
Soxco a deferred purchase price of up to $17.6 million payable  on January 31,
1998.  The amount of the deferred purchase price  will be determined by the
probable reserves of Soxco as of December 31, 1995 (approximately 17.6 Bcfe)
that are produced prior to or classified as proved as of  December 31, 1997,
provided that Soxco is entitled to receive a minimum deferred purchase price of
approximately $8.8 million.  The Company has accrued and classified as current
the $8.8 million minimum deferred purchase price.  The amounts so determined
will be paid in shares of common stock based on the fair market value of such
stock at the time of issuance.

NOTE 3 -- STOCKHOLDERS' EQUITY

         On September 19, 1996, the Company entered into an underwriting
agreement with respect to the initial public offering of its common stock at a
price of $15.50 per share (the "IPO").  The initial closing of the IPO, in
which the Company issued 6,200,000 shares of common stock, was completed on
September 25, 1996.  The underwriters delivered notice of the exercise of their
over allotment option on September 30, 1996.  The closing of the over
allotment, in which the Company issued an additional 930,000 shares of common
stock, was completed on October 3, 1996.  The Company received net proceeds of
approximately $101.0 million from the total of 7,130,000 shares sold in the
IPO.

         Concurrently with the completion of the IPO, the Company's President
exchanged certain of his after program- payout working interests valued at $2.3
million for 145,161 shares of common stock.  In addition,





                                      -7-
<PAGE>   9
concurrently with the completion of the public offering, the Company issued
762,387 shares of common stock valued at $11.8 million to Soxco in connection
with the Soxco Acquisition.  See Note 2--Acquisitions.

         In connection with the IPO, the Company's certificate of incorporation
was amended to effect an increase in the authorized capital stock of the
Company to 50,000,000 shares of common stock, par value $.01 per share, and
5,000,000 shares of preferred stock, par value $.01 per share.  Additionally,
the Company effected a forward stock split, effective prior to the completion
of the public offering, increasing the number of shares of common stock issued
and outstanding to 15,295,215.  The financial statements reflect,
retroactively, the conversion and reclassification of the Company's common
stock pursuant to the split.

         Net income per share for each period presented was determined by
dividing net income by the weighted average number of common shares
outstanding, after giving effect to the split referred to above.  As of June
30, 1997, the Company had 2,333,276 options authorized of which 1,285,638 had
been granted.  The options and the estimated number of shares issuable to Soxco
pursuant to the $8.8 million minimum deferred purchase price (see Note 2 -
Acquisitions) were not reflected in the earnings per share calculation as they
were antidilutive  for the three months and the six months ended  June 30,
1997.

NOTE 4 -- COMMITMENTS AND CONTINGENCIES

         The Company is involved from time to time in various claims and
lawsuits incidental to its business.  In the opinion of management, the
ultimate liability thereunder, if any, will not have a material adverse affect
on the financial position or results of operations of the Company.

NOTE 5 -- PRO FORMA COMBINED FINANCIAL INFORMATION

         The unaudited combined pro forma information for the three months and
the six months ended June 30, 1996 gives effect to the TransTexas Acquisition,
the Soxco Acquisition and the application of the net proceeds from the IPO as
if such transactions had been completed as of January 1, 1996.  See Note
2--Acquisitions and Note 3--Stockholders' Equity.

         The historical results of operations have been adjusted to reflect (i)
an increase in natural gas and oil revenues, lease operating expense, general
and administrative expense and depreciation, depletion and amortization
attributed to the acquired properties, (ii) a reduction in interest expense
giving effect to the use of proceeds from the IPO to pay down long-term debt
and (iii) a  net increase in income taxes as a result of the above.





                                      -8-
<PAGE>   10

           The pro forma combined financial information does not purport to be
indicative of the results of operations of the Company had such transactions
occurred on the date assumed, nor is the pro forma combined information
necessarily indicative of the future results of operations of the Company.  The
pro forma combined financial information should be read together with the
Combined Financial Statements of the Company, including the Notes thereto.


<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED       SIX MONTHS ENDED
                                                   JUNE 30, 1996          JUNE 30, 1996
                                                   -------------          -------------
 <S>                                                 <C>                   <C>
 REVENUES

   Natural gas and oil revenues ..................   $   21,056            $   41,055 
   Other .........................................          302                   535 
                                                     ----------            ---------- 
                                                                                      
      Total revenues .............................       21,358                41,590 
                                                                                      
 OPERATING COSTS AND EXPENSES                                                         
                                                                                      
   Lease operating expense .......................        3,428                 7,036 
   Depreciation, depletion and amortization ......       10,287                20,324 
                                                                                      
   General and administrative, net ...............        1,259                 2,796 
                                                     ----------            ---------- 
                                                                                      
      Total operating expenses ...................       14,974                30,156 
                                                                                      
 INCOME FROM OPERATIONS ..........................        6,384                11,434 
 Interest expense, net ...........................          475                   790 
                                                     ----------            ---------- 
                                                                                      
 Income before income taxes ......................        5,909                10,644 
                                                                                      
 Provision for federal income taxes ..............        1,558                 2,732 
                                                     ----------            ---------- 
                                                                                      
 NET INCOME ......................................   $    4,351            $    7,912 
                                                     ==========            ========== 
 Net income per share ............................   $     0.19            $     0.34 
                                                     ==========            ========== 
                                                                                      
 Weighted average shares outstanding .............       23,333                23,333 
</TABLE>                                                                     


NOTE 6 -- RELATED PARTY TRANSACTIONS


       Effective January 1, 1997, the Company entered into an agreement to sell
to a subsidiary of  Brooklyn Union certain onshore producing wells of the
Company that produce from formations that qualify for tax credits under Section
29 of the Internal Revenue Code ("Section 29").  Section 29 provides for a tax
credit from non-conventional fuel sources such as oil produced from shale and
tar sands and natural gas produced from geopressured brine, Devonian shale,
coal seams and tight sands formations.  Brooklyn Union acquired an economic
interest in wells that are qualified for the tax credits and in exchange, the
Company  (i) retained a volumetric production payment and a net profits
interest of 100% in the properties, (ii) will receive a cash down payment of
$1.6 million and will receive a quarterly payment of $0.75 for every dollar of
tax credit utilized.  The Company will manage and administer the daily
operations of the properties in exchange for an annual management fee of
$100,000.  At June 30, 1997, the balance sheet effect of this transaction was a
$1.6 million reduction to the full cost pool for the down payment.  The income
statement effect for the three months ended and the six months ended June 30,
1997 was a reduction to income tax expense of $0.4 million and $0.9 million,
respectively.





                                      -9-
<PAGE>   11

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

            The following discussion is intended to assist in an understanding
of the historical financial position and results of operations of The Houston
Exploration Company (the "Company") for the three months and the six months
ended June 30, 1996 and 1997.  The Company's historical combined financial
statements and notes thereto included elsewhere in this report contain detailed
information that should be referred to in conjunction with the following
discussion.

GENERAL

            The Company was incorporated in December 1985 to conduct certain of
the natural gas and oil exploration and development activities of The Brooklyn
Union Gas Company ("Brooklyn Union").  The Company initially  focused on the
exploration and development of high potential prospects in the Gulf of Mexico.
Effective February 29, 1996, Brooklyn Union implemented a reorganization of its
exploration and production assets by transferring to the Company certain
onshore producing properties and related developed and undeveloped acreage.
Subsequent to the reorganization, the Company has expanded its focus to include
low risk exploitation and development drilling on the onshore properties
transferred, in addition to seeking opportunistic acquisitions both onshore and
offshore. On July 2, 1996, the Company acquired certain natural gas and oil
properties and associated pipelines located in Zapata County, Texas (the
"TransTexas Acquisition") from TransTexas Gas Corporation and TransTexas
Transmission Corporation.  In September 1996, the Company completed an initial
public offering (the "IPO") of 7,130,000 shares of its common stock at $15.50
per share, resulting in net cash proceeds of approximately $101.0 million.
Concurrently with the completion of the IPO, the Company completed the
acquisition of the natural gas and oil properties and related assets of Smith
Offshore Exploration Company (the "Soxco Acquisition").  As of December 31,
1996, THEC Holdings Corp., a wholly-owned subsidiary of Brooklyn Union, owned
approximately 66% of the outstanding shares of Common Stock.  At December 31,
1996, the Company had net proved reserves of 327 Bcfe, 98% of which were
natural gas and 74% of which were classified as proved developed.

            The Company's revenue, profitability and future rate of growth are
substantially dependent upon prevailing prices for natural gas, oil and
condensate, which are dependent upon numerous factors beyond the Company's
control, such as economic, political and regulatory developments and
competition from other sources of energy.  The energy markets have historically
been highly volatile, and future decreases in natural gas and oil prices could
have a material adverse effect on the Company's financial position, results of
operations, quantities of natural gas and oil reserves that may be economically
produced, and access to capital.

            The Company uses the full cost method of accounting for its
investment in natural gas and oil properties.  Under the full cost method of
accounting, all costs of acquisition, exploration and development of natural
gas and oil reserves are capitalized into a "full cost pool" as incurred, and
properties in the pool are depleted and charged to operations using the
unit-of-production method based on the ratio of current production to total
proved natural gas and oil reserves.  To the extent that such capitalized costs
(net of accumulated depreciation, depletion and amortization) less deferred
taxes exceed the present value (using a 10% discount rate) of estimated future
net cash flows from proved natural gas and oil reserves and the lower of cost
or fair value of unproved properties, such excess costs are charged to
operations.  If a writedown is required, it would result in a charge to
earnings but would not have an impact on cash flows from operating activities.

            The Company utilizes natural gas fixed-floating price swaps for a
portion of its natural gas production to achieve a more predictable cash flow,
as well as to reduce its exposure to adverse price fluctuations of natural gas.
The swap agreements call for the Company to receive or make payment based upon
the





                                      -10-
<PAGE>   12
differential between a fixed and a variable commodity price specified in the
contracts.  The Company accounts for these transactions as hedging activities
and, accordingly, gains or losses are included in natural gas and oil revenues
in the period of the hedged production.  The Company has entered into contracts
covering an average of approximately 73,000 Mmbtu per day (70,200 Mcf/d) for
July 1997 through October 1997 at a weighted average price of $2.04 per Mmbtu
and contracts covering an average of approximately 19,000 Mmbtu per day (18,000
Mcf/d) for November 1997 through March 1998 at a weighted average price of
$2.02 per Mmbtu, in each case before transaction and transportation costs.
During June 1997, net production from the Company's properties  averaged
approximately 127,000 Mcfe per day.

RESULTS OF OPERATIONS

        The following table sets forth the Company's historical and pro forma
natural gas and oil production data during the periods indicated:

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED               SIX MONTHS ENDED
                                                            JUNE 30,                        JUNE 30,       
                                                ------------------------------   ------------------------------
                                                                     PRO FORMA                        PRO FORMA
                                                  1997       1996      1996(1)     1997       1996     1996(1)
                                                --------   --------   --------   --------   --------   --------
<S>                                             <C>        <C>        <C>        <C>        <C>        <C>   
Production:
  Natural gas (Mmcf) ........................     11,246      5,759     10,535     21,817     11,498     20,956
  Oil (Mbbls) ...............................         39         16         20         72         41         51
  Total (Mmcfe) .............................     11,480      5,855     10,655     22,249     11,744     21,262
Average sales prices:
  Natural gas (per Mcf)(2) ..................   $   1.90   $   1.89   $   1.95   $   2.09   $   1.78   $   1.91
  Oil (per Bbl) .............................      17.62      25.06      24.25      19.21      18.93      18.69
Expenses (per Mcfe):
  Lease operating ...........................   $   0.33   $   0.31   $   0.31   $   0.36   $   0.31   $   0.33
  Depreciation, depletion and
    amortization ............................       1.10       1.01       0.97       1.08       0.99       0.96
  General and administrative, net ...........       0.13       0.21       0.12       0.13       0.23       0.13
</TABLE>


---------------------------

(1) The pro forma production information for the three month and the six
    periods ended June 30, 1996 gives effect to the TransTexas Acquisition and
    the Soxco Acquisition as if such transactions had been completed as of
    January 1, 1996.

(2) Reflects the effects of hedging.  Absent the effects of hedging, average
    realized natural gas prices would have been $1.96, $2.33 and $2.19 per Mcf
    for the three months ended June 30, 1997, 1996 and pro forma 1996,
    respectively; and, $2.36, $2.31 and $2.20 per mcf for the six months ended
    June 30, 1997,1996 and pro forma 1996.

RECENT FINANCIAL AND OPERATING RESULTS

         COMPARISON OF THREE MONTHS ENDED JUNE 30, 1996 AND 1997

         General.  Houston Exploration's production increased 96% from 5,855
Mmcfe for the three months ended June 30, 1996 to 11,480 Mmcfe for the three
months ended June 30, 1997.  The primary source of this production increase is
the Charco Field which the Company acquired July 1, 1996 in the TransTexas
Acquisition.  Beginning in the fourth quarter of 1996 the Company initiated a
development drilling and work over program that as of June 30, 1997 has
resulted in the successful completion of 7 new Charco wells.  Since the end of
June 1997, the Company brought on line three additional Charco wells and was in
the process of completing two wells





                                      -11-
<PAGE>   13
and drilling three more.  Adding to the production increase for the three
months ended June 30, 1997 was new offshore production at Mustang Island 807,
Galveston Island 272 and West Cameron 60.

         Natural Gas and Oil Revenues.  Natural gas and oil revenues increased
96% from $11.3 million for the three months ended June 30, 1996 to $22.1
million for the three months ended June 30, 1997 as a result of the 96%
increase in production.   The average realized price for natural gas increased
slightly by 1% from $1.89 per mcf for the three months ended June 30, 1996 to
$1.90 per mcf for the three months ended June 30, 1997.

         As a result of hedging activities, the Company realized an average gas
price of $1.90 per Mcf for the three months ended June 30, 1997, compared to an
average price of $1.96 per Mcf that otherwise would have been received,
resulting in a $0.7 million decrease in natural gas revenues for the three
month period.  For the three months ended June 30, 1996, the average realized
gas price was $1.89 per Mcf compared to an unhedged average gas price of $2.33
per Mcf, resulting in an decrease to natural gas revenues of $2.5 million for
the three month period.

         Lease Operating Expenses.  Lease operating expenses increased 111%
from  $1.8 million for the three months ended June 30, 1996 to $3.8 million for
the three months ended June 30, 1997.  On an Mcfe basis, lease operating
expenses increased 6% from $0.31 for the three months ended June 30, 1996 to
$0.33 for the comparable period of 1997.  The increase in lease operating
expense is attributable to new operations and workover activities at the Charco
Field acquired in July 1996, the start-up of operations at Mustang Island 807
in early June  1997, combined with a general increase in costs in the oil
service industry.

         Depreciation, Depletion and Amortization.  Depreciation, depletion and
amortization expense  increased 113% from $5.9 million for the three months
ended June 30, 1996 to $12.6 million for the three months ended June 30, 1997.
Depreciation, depletion and amortization expense per Mcfe increased 9% from
$1.01 for the three months ended June 30, 1996 to $1.10 for the three months
ended June 30, 1997.  The increase in expense was a result of the production
increases  from properties acquired in the TransTexas and Soxco Acquisitions as
well as newly developed properties combined  with an increase in the depletion
rate.  The increase in the depletion rate is attributable to the expansion of
the Company's exploration and development drilling program and reflects the
industry-wide increase in the costs of drilling goods and services, platform
and facilities construction and transportation services.

         General and Administrative Expenses.  General and administrative
expenses, net of overhead reimbursements received from other working interest
owners of $0.1 million and $0.2 million for the three months ended June 30,
1996 and 1997, respectively, increased 25% from $1.2 million for the three
months ended June 30,  1996 to $1.5 million for the three months ended June 30,
1997.  The Company capitalized general and administrative expenses directly
related to oil and gas exploration and development activities of $1.2 million
and $1.6 million, respectively, for the three months ended June 30, 1996 and
1997. The increase in aggregate general and administrative expense reflects the
overall growth and expansion of the Company's operations during the second half
of 1996 and continuing through the first six months of 1997.  On an Mcfe basis,
general and administrative expenses decreased 38% from $0.21 for the three
months ended June 30, 1996 to $0.13 for the three months ended June 30, 1997.
The lower rate per Mcfe for  the three months ended June 30, 1997 is directly
attributable to the significant increase in production for the three months
ended June 30, 1997 as compared to the same period of 1996.

         Income Tax Provision.  The provision for income taxes increased 200%
from expense of $0.2 million for the three months ended June 30, 1996 to an
expense of $0.6 million for the  three months ended June 30, 1997 due to the
increase in pretax income.





                                      -12-
<PAGE>   14
         Net Income.  Operating income increased 59% to $4.3 million for the
three months ended June 30, 1997, an increase of $1.6 million compared to $2.7
million for the same period of 1996.  Net income increased 89% or  $1.6 million
from $1.8 million for the three months ended June 30, 1996, to $3.4 million for
the three months ended June 30, 1997.  The increase in operating income and net
income was attributable primarily to higher production volumes.

         COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 AND 1997

         General.  Houston Exploration's production increased 89% from 11,744
Mmcfe for the six  months ended June 30, 1996 to 22,249 Mmcfe for the six
months ended June 30, 1997.  The increase in production was attributable to
added production from both the TransTexas and the Soxco Acquisitions, which
were completed during the second half of 1996, combined with  newly developed
offshore production brought on line during the the second quarter of 1997 and
the successful development drilling and workover programs begun in the latter
half of 1996 and continuing through the second quarter of 1997 on the Charco
Field properties acquired in the TransTexas Acquisition.

         Natural Gas and Oil Revenues.  Natural gas and oil revenues increased
121% from $21.3 million for the six months ended June 30, 1996 to $47.1 million
for the six months ended June 30, 1997 as a result of the 89% increase in
production combined with a 17% increase in average realized natural gas prices
from $1.78 per Mcf in the six months ended June 30, 1996 to $2.09 per Mcf in
the six months ended June 30, 1997.

         As a result of hedging activities, the Company realized an average gas
price of $2.09 per Mcf for the six months ended June 30, 1997, compared to an
average price of $2.36 per Mcf that otherwise would have been received,
resulting in a $5.7 million decrease in natural gas revenues for the six month
period.  For the six months ended June 30, 1996, the average realized gas price
was $1.78 per Mcf compared to an unhedged average gas price of $2.31, resulting
in a decrease to natural gas revenues of $6.0 million for the six month period.

         Lease Operating Expenses.  Lease operating expenses increased 122%
from $3.6 million for the six  months ended June 30, 1996 to $8.0 million for
the six months ended June 30, 1997.  On an Mcfe basis, lease operating expenses
increased 16% from $0.31 for the six months ended June 30, 1996 to  $0.36 for
the six months ended June 30, 1997. The increase in lease operating expense for
the second half of 1997 is primarily attributable to properties acquired in the
TransTexas Acquisition combined with the effects of an industry-wide increase
in drilling and operating costs.

         Depreciation, Depletion and Amortization.  Depreciation, depletion and
amortization expense increased 106% from $11.6 million for the six months ended
June 30, 1996 to $23.9 million for the six months ended June 30, 1997.
Depreciation, depletion and amortization expense per Mcfe increased 9% from
$0.99 for the six months ended June 30, 1996 to $1.08 for the six months ended
June 30, 1997.  The increase in expense was a result of the increased
production from acquired as well as newly developed properties combined with an
increased depletion rate.  The increase in the depletion rate is attributable
to exploratory drilling in 1996 which did not add significant new reserves
combined with an industry wide increase in costs of drilling goods and
services, platform and facilities construction and transportation services.

         General and Administrative Expenses.  General and administrative
expenses, net of overhead reimbursements received from other working  interest
owners of $0.3 million and $0.5 million for the six month periods ended June
30, 1996 and 1997, respectively, increased 7% from $2.7 million for the six
months ended June 30,  1996 to $2.9 million for the six months ended June 30,
1997.  The Company capitalized general and administrative expenses directly
related to oil and gas exploration and development activities of $2.4 million
and $3.4 million, respectively, for the six months ended June 30, 1996 and
1997. Aggregate general and administrative expense has increased from the first
half of 1996, and reflects the overall growth and expansion of the Company's
operations during the second half of 1996 and continuing through the first
quarter of 1997.





                                      -13-
<PAGE>   15
On an Mcfe basis, general and administrative expenses decreased 43% from $0.23
for the six months ended June 30, 1996 to $0.13 for the six months ended June
30, 1997.  The  lower rate per Mcfe during the first half of 1997 reflects the
increase in the Company's production during the first half of 1997.

         Income Tax Provision.  The provision for income taxes increased 102%
from a benefit of $0.03 million for the first six months of 1996 to an expense
of $3.1 million for the first six months of 1997 due to the increase in pretax
income.

         Net Income.  Operating income increased 223% to $12.6 million for the
six months ended June 30, 1997, an increase of $8.7 million compared to $3.9
million for the same period of 1996.  Net income increased 225% or $6.3 million
from $2.8 million for the six  months ended June 30, 1996, to $9.1 million for
the six  months ended June 30, 1997.  The significant increase in operating
income and net income was  attributable primarily to higher production volumes
and higher net realized natural gas prices.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has historically funded its operations, acquisitions,
capital expenditures and working capital requirements from cash flows from
operations, bank borrowings and capital contributions from Brooklyn Union.
Subsequent to the IPO, the Company has not received and does not anticipate
receiving  capital contributions from Brooklyn Union.

         The Company had $0.3 million in working capital and $61.9 million of
available borrowing base under its Credit Facility as of June 30, 1997.  Net
cash provided by operating activities for the first six months of 1997 was
$32.7 million compared to $16.8 million for the same period of 1996.  The
Company's cash position was increased during the period by borrowings of $35.5
million under the Company's Credit Facility.  Funds used in investing and
financing activities consisted of $56.0 million for investments in property and
equipment and principal payments of $14.0 million on long-term borrowing under
the Credit Facility.  As a result of these activities, cash and cash
equivalents decreased $0.3 million from $2.8 million at December 31, 1996 to
$2.5 million at June 30, 1997.

         As of June 30, 1997, the Company has spent approximately $56 million
on exploration and development. As a result of the Company's continued
development drilling program in the Charco Field and the acceleration of
offshore exploratory drilling during the second half of 1997, the Company's
Board of Directors has approved an increase of $25 million to the initial
capital expenditure budget of $75 million for 1997.  These amounts include
development costs associated with recently acquired properties and amounts that
are contingent upon drilling success.  The Company will continue to evaluate
its capital spending plans through the remainder of the year.  No significant
abandonment or dismantlement costs are anticipated through 1997.  Actual levels
of capital expenditures may vary significantly due to a variety of factors,
including drilling results, natural gas and oil prices, industry conditions and
outlook and future acquisitions of properties.  The Company believes cash flows
from operations and borrowings under its credit facility will be sufficient to
fund these expenditures.  The Company will continue to selectively seek
acquisition opportunities for proved reserves with substantial exploration and
development potential both offshore and onshore.  The size and timing of
capital requirements for acquisitions is inherently unpredictable.  The Company
expects to fund exploration and development through a combination of cash flow
from operations, borrowings under its credit facility, additional borrowing
facilities or the issuance of equity or debt securities.

         The Company has entered into a credit facility (the "Credit Facility")
with a syndicate of lenders led by Texas Commerce Bank National Association
("TCB") which provides a maximum loan amount of $150 million, subject to
borrowing base limitations, on a revolving basis.  On June 30, 1997, the
borrowing base was $150 million, $86.5 million of which was borrowed and $1.6
million was committed under outstanding letter of credit obligations.  The
Credit Facility matures on July 1, 2000.  Advances under the Credit Facility
bear interest, at the Company's election at (i) a fluctuating rate ("Base
Rate") equal to the higher of the Federal Funds Rate plus





                                      -14-
<PAGE>   16
0.5% or TCB's prime rate or (ii) a fixed rate ("Fixed Rate") equal to a quoted
LIBOR rate plus a margin between 0.5% and 1.125% depending on the amount
outstanding under the Credit Facility.  Interest is due at calendar quarters
for Base Rate loans and at the earlier of maturity or three months from the
date of the loan for Fixed Rate loans.  The Credit Facility contains covenants
of the Company, including certain restrictions on liens and financial covenants
which require the Company  to, among other things, maintain (i) a minimum
tangible net worth ($185.9 million as of June 30, 1997) and  (ii) a total debt
to capitalization ratio of less than 55%.  The Credit Facility also restricts
the Company's ability to purchase or redeem its capital stock or to pledge its
oil and gas properties or other assets.  The borrowing base under the Credit
Facility is determined by TCB in its discretion in accordance with TCB's then
current standards and practices for similar oil and gas loans taking into
account such factors as TCB deems appropriate.





                                      -15-
<PAGE>   17
PART II.         OTHER INFORMATION

ITEM 4.          SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

                 On April 27, 1997, the Company held its annual meeting of
                 stockholders.  All  matters brought for a vote before the
                 shareholders as listed in the Company's proxy statement were
                 approved:

1.       The Company's Restated Certificate of Incorporation was amended to
         remove the classification of the Board of Directors.

         Votes For: 20,180,035    Votes Against: 2,159,106    Abstained: 700

2.       The following eight Directors of the Company were elected to serve
         until the Company's next annual meeting:

<TABLE>
<CAPTION>
         DIRECTOR                  VOTES FOR             VOTES WITHHELD
         --------                  ---------             --------------
         <S>                       <C>                       <C>
         James G. Floyd            22,245,821                94,020
         Robert B. Catell          22,328,821                11,020
         Gordon F. Ahalt           22,333,941                 5,900
         Russell D. Gordy          22,328,816                11,025
         Craig G. Matthews         22,328,621                11,220
         James Q. Riordan          22,333,941                 5,900
         Lester H. Smith           22,334,236                 5,605
         Donald C. Vaughn          22,334,241                 5,600
</TABLE>

3.       The existing 1996 Stock Option Plan was approved so that grants under
         such plan will remain exempt form a cap on deductible compensation
         imposed by Section 162(m) of the Internal Revenue Code of 1986, as
         amended.

         Votes For: 19,805,002   Votes Against: 2,490,540    Abstained: 44,299

4.       The appointment of Arthur Andersen LLP as the Company's independent
         public accountants for the fiscal year ending December 31, 1997 was
         ratified and approved.

         Votes For: 22,339,091   Votes Against: 150        Abstained: 600

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


         (a)      Exhibits

     EXHIBIT NO.              DESCRIPTION
     -----------              -----------

       3.1   --     Restated Certificate of Incorporation as amended
       3.2   --     Restated Bylaws
      10.1   --     Purchase and Sale Agreement dated January 1, 1997, 
                    between The Houston Exploration Company and Keyspan 
                    Natural Fuel, LLC
      27.1   --     Financial Data Schedule

         (b)      Reports on Form 8-K:
                  None.





                                      -16-
<PAGE>   18
                                   SIGNATURES

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


                                  THE HOUSTON EXPLORATION COMPANY



Date:   July 31, 1997             By:/s/ James G. Floyd                       
                                     ---------------------------------------
                                     James G. Floyd
                                     President and Chief Executive Officer



Date:   July 31, 1997             By:/s/ James F. Westmoreland                
                                     ---------------------------------------
                                     James F. Westmoreland
                                     Vice President, Chief Accounting Officer,
                                     Comptroller and Secretary





                                      -17-

<PAGE>   19

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO.              DESCRIPTION
-----------              -----------
           <S>   <C>    <C>                      
           3.1   --     Restated Certificate of Incorporation as amended
           3.2   --     Restated Bylaws
          10.1   --     Purchase and Sale Agreement dated January 1, 1997, 
                        between The Houston Exploration Company and Keyspan 
                        Natural Fuel, LLC
          27.1   --     Financial Data Schedule
</TABLE>