<PAGE>

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

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  ----------

                                   Form 10-Q


(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934 for the quarterly period ended March 31, 2001.

( ) Transition report pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934.


                       Commission file number 001-16009


                         SPINNAKER EXPLORATION COMPANY
            (Exact name of registrant as specified in its charter)

                 DELAWARE                                76-0560101
      (State or other jurisdiction of       (I.R.S. Employer Identification No.)
       incorporation or organization)


       1200 SMITH STREET, SUITE 800
             HOUSTON, TEXAS                                77002
(Address of principal executive offices)                 (Zip Code)


                                (713) 759-1770
             (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
    -----     ------

  The number of shares outstanding of the registrant's common stock, par value
$0.01 per share, on May 9, 2001 was 27,138,707.

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<PAGE>

                         SPINNAKER EXPLORATION COMPANY
                                   FORM 10-Q
                   FOR THE THREE MONTHS ENDED MARCH 31, 2001



                                                                        Page
                                                                        ----
PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

  Consolidated Balance Sheets
   March 31, 2001 and December 31, 2000................................   3

  Consolidated Statements of Operations
   Three Months Ended March 31, 2001 and 2000..........................   4

  Consolidated Statements of Cash Flows
   Three Months Ended March 31, 2001 and 2000..........................   5

  Notes to Interim Consolidated Financial
   Statements..........................................................   6

 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS..........................   8

 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....  13

PART II - OTHER INFORMATION

 ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.............................  14

SIGNATURES.............................................................  15

                                       2
<PAGE>

                         SPINNAKER EXPLORATION COMPANY
                          CONSOLIDATED BALANCE SHEETS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                                                 MARCH 31,            DECEMBER 31,
                                                                                                   2001                  2000
                                                                                           -----------------       -----------------
ASSETS                                                                                         (Unaudited)
<S>                                                                                           <C>                     <C>
CURRENT ASSETS:
 Cash and cash equivalents.................................................................     $ 66,611               $ 63,910
 Short-term investments....................................................................       49,042                 22,387
 Accounts receivable.......................................................................       38,969                 45,594
 Deferred taxes............................................................................        3,407                      -
 Other.....................................................................................        8,521                  6,402
                                                                                                --------               --------
   Total current assets....................................................................      166,550                138,293

PROPERTY AND EQUIPMENT:
 Oil and gas, on the basis of full-cost accounting:
  Proved properties........................................................................      348,829                293,002
  Unproved properties and properties under development, not being amortized................       79,766                 83,165
 Other.....................................................................................        5,987                  5,642
                                                                                                --------               --------
                                                                                                 434,582                381,809
 Less - Accumulated depreciation, depletion and amortization...............................      (97,226)               (77,428)
                                                                                                --------               --------
   Total property and equipment............................................................      337,356                304,381

OTHER ASSETS...............................................................................           30                     30
                                                                                                --------               --------
   Total assets............................................................................     $503,936               $442,704
                                                                                                ========               ========

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
 Accounts payable..........................................................................     $ 34,342               $ 28,616
 Accrued liabilities.......................................................................       38,701                 35,672
 Hedging liabilities.......................................................................        9,735                      -
                                                                                                --------               --------
   Total current liabilities...............................................................       82,778                 64,288

DEFERRED INCOME TAXES......................................................................       26,249                 17,157

COMMITMENTS AND CONTINGENCIES

EQUITY:
 Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued and
  outstanding at March 31, 2001 and December 31, 2000......................................            -                      -

 Common stock, $0.01 par value; 50,000,000 shares authorized; 27,115,454 shares issued and
  27,098,222 shares outstanding at March 31, 2001; and 26,494,593 shares issued and
  26,476,817 shares outstanding at December 31, 2000.......................................          271                    265


 Additional paid-in capital................................................................      361,764                349,506
 Retained earnings.........................................................................       39,680                 11,532
 Less: Treasury stock, at cost, 17,232 and 17,776 shares at March 31, 2001 and
   December 31, 2000, respectively.........................................................          (43)                   (44)
 Accumulated other comprehensive income (loss).............................................       (6,763)                     -
                                                                                                --------               --------
   Total equity............................................................................      394,909                361,259
                                                                                                --------               --------
   Total liabilities and equity............................................................     $503,936               $442,704
                                                                                                ========               ========
</TABLE>

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

                                       3
<PAGE>

                         SPINNAKER EXPLORATION COMPANY
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)




<TABLE>
<CAPTION>
                                                                                                  FOR THE THREE MONTHS
                                                                                                     ENDED MARCH 31,
                                                                                       ---------------------------------------
                                                                                              2001                   2000
                                                                                       ----------------       ----------------
<S>                                                                                       <C>                    <C>
REVENUES...............................................................................     $67,453                $13,867
EXPENSES:
 Lease operating expenses..............................................................       2,691                  1,609
 Depreciation, depletion and amortization - natural gas and oil properties.............      19,342                  7,765
 Depreciation and amortization - other.................................................          96                     69
 General and administrative............................................................       2,532                  1,498
                                                                                            -------                -------
   Total expenses......................................................................      24,661                 10,941
                                                                                            -------                -------
INCOME FROM OPERATIONS.................................................................      42,792                  2,926
OTHER INCOME (EXPENSE):
 Interest income.......................................................................       1,345                    244
 Interest expense......................................................................        (156)                   (84)
                                                                                            -------                -------
   Total other income (expense)........................................................       1,189                    160
                                                                                            -------                -------
INCOME BEFORE INCOME TAXES.............................................................      43,981                  3,086
INCOME TAX PROVISION...................................................................      15,833                      -
                                                                                            -------                -------
NET INCOME.............................................................................     $28,148                $ 3,086
                                                                                            =======                =======

NET INCOME PER COMMON SHARE:
 Basic.................................................................................       $1.05                  $0.15
                                                                                            =======                =======
 Diluted...............................................................................       $1.00                  $0.15
                                                                                            =======                =======

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
 Basic.................................................................................      26,772                 20,417
                                                                                            =======                =======
 Diluted...............................................................................      28,196                 21,259
                                                                                            =======                =======
</TABLE>

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

                                       4
<PAGE>

                         SPINNAKER EXPLORATION COMPANY
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                   FOR THE THREE MONTHS
                                                                                                     ENDED MARCH 31,
                                                                                       ----------------------------------------
                                                                                             2001                    2000
                                                                                       ----------------       -----------------
<S>                                                                                       <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income..............................................................................  $ 28,148                $  3,086
 Adjustments to reconcile net income to net cash provided by (used in) operating
  activities:
  Depreciation, depletion and amortization...............................................    19,438                   7,834
  Deferred income tax expense............................................................    15,833                       -
  Other..................................................................................      (362)                      -
 Change in components of working capital:
  Accounts receivable....................................................................     6,625                  (7,776)
  Accounts payable and accrued liabilities...............................................    15,755                   8,329
  Other current assets and other.........................................................    (2,119)                   (648)
                                                                                           --------                --------
     Net cash provided by operating activities...........................................    83,318                  10,825

CASH FLOWS FROM INVESTING ACTIVITIES:
 Oil and gas properties..................................................................   (52,068)                (37,245)
 Change in property related payables.....................................................    (7,000)                 13,987
 Purchases of other property and equipment...............................................      (345)                   (702)
 Purchases of short-term investments.....................................................   (26,655)                      -
                                                                                           --------                --------
     Net cash used in investing activities...............................................   (86,068)                (23,960)

CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from exercise of stock options.................................................     5,451                     316
                                                                                           --------                --------
     Net cash provided by financing activities...........................................     5,451                     316
                                                                                           --------                --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.....................................     2,701                 (12,819)
CASH AND CASH EQUIVALENTS, beginning of year.............................................    63,910                  20,452
                                                                                           --------                --------
CASH AND CASH EQUIVALENTS, end of period.................................................  $ 66,611                $  7,633
                                                                                           ========                ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
 Cash paid for interest, net of amounts capitalized......................................       $71                     $10
 Cash paid for income taxes..............................................................         -                       -
</TABLE>


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

                                       5
<PAGE>

                         SPINNAKER EXPLORATION COMPANY
         Notes to Interim Consolidated Financial Statements (Unaudited)
                                 MARCH 31, 2001


1. BASIS OF PRESENTATION

   The accompanying unaudited consolidated financial statements of Spinnaker
Exploration Company ("Spinnaker" or the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal and recurring adjustments) necessary to present a fair statement
of the results for the periods included herein have been made and the
disclosures contained herein are adequate to make the information presented not
misleading. Interim period results are not necessarily indicative of results of
operations or cash flows for a full year. These consolidated financial
statements and the notes thereto should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.

2. EARNINGS PER SHARE

   Basic and diluted net income per share is computed based on the following
information (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                               FOR THE THREE MONTHS
                                                                                  ENDED MARCH 31,
                                                                      ------------------------------------
                                                                            2001                 2000
                                                                      ---------------      ---------------
<S>                                                                      <C>                  <C>
Numerator:
 Net income.....................................................           $28,148             $ 3,086
                                                                           =======             =======

Denominator:
 Basic weighted average number of shares........................            26,772              20,417
                                                                           =======             =======
 Dilutive securities:
  Stock options.................................................             1,424                 842
                                                                           -------             -------
 Diluted adjusted weighted average number of shares and assumed
  conversions...................................................            28,196              21,259
                                                                           =======             =======

Net income per common share:
 Basic..........................................................           $  1.05             $  0.15
                                                                           =======             =======
 Diluted........................................................           $  1.00             $  0.15
                                                                           =======             =======
</TABLE>

3. NEW ACCOUNTING PRINCIPLE

   In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 established
accounting and reporting standards requiring that all derivative instruments be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133 requires that changes in a derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. Accounting for qualifying hedges allows derivative gains and losses to
offset related results on the hedged item in the income statement and requires a
company to formally document, designate and assess the effectiveness of
transactions that qualify for hedge accounting. The Company adopted SFAS
No. 133 on January 1, 2001.

   The Company currently utilizes collar arrangements to reduce its exposure to
fluctuations in natural gas and oil prices and to achieve a more predictable
cash flow. Based upon the Company's assessment of its derivative contracts at
January 1, 2001, it recorded (i) a net current liability of $41.7 million,
representing the fair market value of all derivatives on that date and (ii) a
reduction of equity through accumulated other comprehensive income of $27.1

                                       6
<PAGE>

million, representing the intrinsic and time value components of the derivatives
as of January 1, 2001, net of income taxes of $14.6 million. The current
liability is adjusted monthly to reflect the current fair market value, and the
monthly settlement is recorded to revenues with related adjustments to
accumulated other comprehensive income.

  Based upon the Company's assessment of its derivative contracts at March 31,
2001, it reported (i) a net current liability of $9.7 million and (ii) a
reduction of equity through accumulated other comprehensive income of $6.7
million, net of income taxes of $3.4 million. The change in the
time value component of the derivatives of $0.4 million was recorded in revenues
in the first quarter of 2001.

  The Company recognized net hedging losses of $16.6 million in the first
quarter of 2001 compared to net hedging income of $0.5 million in the same
period in 2000. Comprehensive income was $31.9 million in the first quarter of
2001.

                                       7
<PAGE>

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

             Cautionary Statement About Forward-Looking Statements

  Some of the information in this Quarterly Report on Form 10-Q contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The forward-
looking statements speak only as of the date made, and the Company undertakes no
obligation to update such forward-looking statements. These forward-looking
statements may be identified by the use of the words "believe," "expect,"
"anticipate," "will," "contemplate," "would" and similar expressions that
contemplate future events. These future events include the following matters:

  .  financial position;
  .  business strategy;
  .  budgets;
  .  amount, nature and timing of capital expenditures;
  .  drilling of wells;
  .  natural gas and oil reserves;
  .  timing and amount of future production of natural gas and oil;
  .  operating costs and other expenses;
  .  cash flow and anticipated liquidity;
  .  prospect development and property acquisitions; and
  .  marketing of natural gas and oil.

  Numerous important factors, risks and uncertainties may affect the Company's
operating results, including:

  .  the risks associated with exploration;
  .  the ability to find, acquire, market, develop and produce new properties;
  .  natural gas and oil price volatility;
  .  uncertainties in the estimation of proved reserves and in the projection of
     future rates of production and timing of development expenditures;
  .  operating hazards attendant to the natural gas and oil business;
  .  downhole drilling and completion risks that are generally not recoverable
     from third parties or insurance;
  .  potential mechanical failure or under-performance of significant wells;
  .  climatic conditions;
  .  availability and cost of material and equipment;
  .  delays in anticipated start-up dates;
  .  actions or inactions of third-party operators of the Company's properties;
  .  the ability to find and retain skilled personnel;
  .  availability of capital;
  .  the strength and financial resources of competitors;
  .  regulatory developments;
  .  environmental risks; and
  .  general economic conditions.

  Any of the factors listed above and other factors contained in this Form 10-Q
could cause the Company's actual results to differ materially from the results
implied by these or any other forward-looking statements made by the Company or
on its behalf. The Company cannot assure you that future results will meet
expectations. You should pay particular attention to the risk factors and
cautionary statements described in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000.

                                       8
<PAGE>

GENERAL

  Spinnaker is an independent energy company engaged in the exploration,
development and production of natural gas and oil in the U.S. Gulf of Mexico.
The Company's operating results depend substantially on the success of its
exploratory drilling program and the price of natural gas and oil. Revenues,
profitability and future growth rates also substantially depend on factors
beyond the Company's control, such as economic, political and regulatory
developments and competition from other sources of energy. The energy markets
historically have been very volatile, and natural gas and oil prices may
fluctuate widely in the future. Sustained periods of low prices for natural gas
and oil could materially and adversely affect the Company's financial position,
its results of operations, the quantities of natural gas and oil reserves that
it can economically produce and its access to capital.

OVERVIEW

  Since its inception in December 1996, Spinnaker recorded its best results ever
in the first quarter of 2001. Performance highlights compared to results in the
first quarter of 2000 included record:

  .  Production of 12.4 billion cubic feet equivalent ("Bcfe"), up 153 percent.
  .  Income from operations of $42.8 million, up from $2.9 million.
  .  Net income of $28.1 million, or $1.00 per diluted share, up from $3.1
     million, or $0.15 per diluted share.
  .  Cash flow from operating activities, before working capital changes, of
     $63.1 million, up 477 percent.

  Spinnaker's results of operations and financial position were significantly
impacted by increased natural gas production and prices in the first quarter of
2001. Natural gas revenues increased $69.7 million and natural gas production
volumes increased 7.4 Bcf, primarily due to wells on eight new blocks which
commenced production subsequent to the first quarter of 2000, contributing $56.6
million of the increase in natural gas revenues. Average natural gas price
increases contributed $13.1 million of the increase in natural gas
revenues.

  The Company had $115.7 million in cash, cash equivalents and short-term
investments at March 31, 2001. In addition, the Company had no debt at March 31,
2001.

                                       9
<PAGE>

RESULTS OF OPERATIONS

  The following table sets forth certain operating information with respect to
the natural gas and oil operations of the Company:

<TABLE>
<CAPTION>
                                                                               FOR THE THREE MONTHS
                                                                                  ENDED MARCH 31,
                                                                    ---------------------------------------
                                                                          2001                   2000
                                                                    ----------------       ----------------
<S>                                                                    <C>                    <C>
PRODUCTION:
 Natural gas (MMcf)...........................................          11,969                  4,556
 Oil and condensate (MBbls)...................................              77                     58
  Total (MMcfe)...............................................          12,430                  4,904

REVENUES (IN THOUSANDS):
 Natural gas..................................................        $ 81,455                $11,739
 Oil and condensate...........................................           2,163                  1,620
 Net hedging income (loss)....................................         (16,600)                   508
 Other........................................................             435                      -
                                                                      --------                -------

  Total.......................................................        $ 67,453                $13,867

AVERAGE SALES PRICE PER UNIT:
 Natural gas revenues from production (per Mcf)...............        $   6.81                $  2.58
 Effects of hedging activities (per Mcf)......................           (1.39)                  0.18
                                                                      --------                -------

  Average price (per Mcf).....................................        $   5.42                $  2.76

 Oil and condensate revenues from production (per Bbl)........        $  28.18                $ 27.93
 Effects of hedging activities (per Bbl)......................               -                  (5.82)
                                                                      --------                -------

  Average price (per Bbl).....................................        $  28.18                $ 22.11

 Total revenues from production (per Mcfe)....................        $   6.73                $  2.72
 Effects of hedging activities (per Mcfe).....................           (1.34)                  0.11
                                                                      --------                -------

  Total average price (per Mcfe)..............................        $   5.39                $  2.83

EXPENSES (PER MCFE):
 Lease operating expenses.....................................        $   0.22                $  0.33
 Depreciation, depletion and amortization - natural gas and
  oil properties..............................................        $   1.56                $  1.58

INCOME FROM OPERATIONS (IN THOUSANDS).........................        $ 42,792                $ 2,926
</TABLE>

 Three Months Ended March 31, 2001 as Compared to the Three Months Ended
 March 31, 2000

  Production increased approximately 7.5 Bcfe in the first quarter of 2001
compared to the first quarter of 2000. The daily production rate at the end of
March 2001 was approximately 150 million cubic feet equivalent ("MMcfe")
compared to approximately 130 MMcfe at the end of December 2000.

  Revenues increased $53.6 million and income from operations increased $39.9
million in the first quarter of 2001 compared to the first quarter of 2000.
Excluding the effects of hedging activities, natural gas revenues increased
$69.7 million and oil and condensate revenues increased $0.5 million in the
first quarter of 2001 compared to the same period in 2000. Net losses associated
with natural gas and oil hedging activities increased $16.6 million in the first
quarter of 2001 compared to the same period in 2000.

  Natural gas production volumes increased 7.4 Bcf, primarily due to wells on
eight new blocks which commenced production subsequent to the first quarter of
2000, contributing $56.6 million of the increase in natural gas revenues,
excluding the effects of hedging activities. Average natural gas price
increases contributed $13.1 million of the increase in natural gas revenues.
Oil and condensate production volumes increased approximately 19 thousand
barrels ("MBbls"), primarily due to wells on eight new blocks which commenced
production subsequent to the first quarter of

                                       10
<PAGE>

2000, contributing $0.5 million of the increase in oil and condensate revenues.
Average oil and condensate prices increased slightly in the first quarter of
2001 compared to the same period in 2000.

  Lease operating expenses increased $1.1 million in the first quarter of 2001
compared to the first quarter of 2000. Of the total increase in lease operating
expenses, $1.9 million was attributable to wells on eight new blocks which
commenced production subsequent to the first quarter of 2000, offset in part by
$0.8 million primarily related to lower production activity on two wells and
recompletion activities on another well in the first quarter of 2001 compared to
the same period in 2000.

  Depreciation, depletion and amortization ("DD&A") increased $11.6 million in
the first quarter of 2001 compared to the first quarter of 2000. The increase in
DD&A was primarily attributable to the 7.5 Bcfe increase in production volumes
in the first quarter of 2001, contributing $11.9 million of the increase in
DD&A, offset in part by $0.3 million related to a decrease in the DD&A rate.

  General and administrative expenses increased $1.0 million in the first
quarter of 2001 compared to the first quarter of 2000. The increase in general
and administrative expenses was primarily due to increased employment-related
costs of approximately $0.5 million associated with personnel additions
subsequent to the first quarter of 2000 and increased payroll taxes of $0.3
million associated with stock option exercises during the first quarter of 2001.

  Interest income increased $1.1 million in the first quarter of 2001 compared
to the first quarter of 2000 primarily due to investment income associated with
proceeds from the Company's public offering of Common Stock completed on August
16, 2000. Interest expense increased $0.1 million in the first quarter of 2001
compared to the same period in 2000 primarily due to higher debt financing costs
and commitment fees. At March 31, 2001, the Company had no outstanding
borrowings.

  An income tax provision of $15.8 million was recorded in the first quarter of
2001. No income tax provision was recorded in the first quarter of 2000 due to
the availability of net operating loss carryforwards not previously benefited
that offset estimated taxable income in 2000.

  The Company recognized net income of $28.1 million, or $1.05 per basic share
and $1.00 per diluted share in the first quarter of 2001 compared to net income
of $3.1 million, or $0.15 per basic and diluted share in the first quarter of
2000.

LIQUIDITY AND CAPITAL RESOURCES

  The Company has experienced and expects to continue to experience substantial
capital requirements, primarily due to its active exploration and development
programs in the Gulf of Mexico. Capital expenditures in 1999, 2000 and the first
quarter of 2001 were $85.1 million, $163.7 million and $59.4 million
respectively. The Company has capital expenditure plans for 2001 totaling
approximately $260 million. While the Company believes that working capital,
cash flows from operations and borrowings under its $75.0 million credit
facility ("Credit Facility") will be sufficient to meet its capital requirements
through the end of 2001, additional financing may be required in the future to
fund its growth and exploration and development programs. In the event
additional capital resources are unavailable, the Company may curtail its
drilling, development and other activities or be forced to sell some of its
assets on an untimely or unfavorable basis.

  Cash and cash equivalents increased $2.7 million to $66.6 million at March 31,
2001 from $63.9 million at December 31, 2000. The Company also has $49.0 million
of highly liquid investments in commercial paper that have maturity dates
greater than three months. The increase in cash and cash equivalents resulted
from $83.3 million provided by operating activities and $5.5 million provided by
financing activities, offset in part by $86.1 million used in investing
activities.

  The Company has a $75.0 million Credit Facility with two banks that expires in
July 2001. Spinnaker and the banks have agreed to a nominal $30.0 million
borrowing base in order to minimize fees associated with the commitment. The
Company believes this borrowing base is adequate given the Company's cash, cash
equivalents, short-term investments and cash flow from operations. Management
believes that the borrowing base can be increased substantially based on current
natural gas and oil reserves and current commodity prices.

                                       11
<PAGE>

 OPERATING ACTIVITIES

  The Company intends to use cash, short-term investments and cash flows from
operations to fund a portion of its future lease acquisition, exploration and
development activities. Net cash of $83.3 million was provided by operating
activities in the first quarter of 2001, primarily as a result of increases in
natural gas production and prices. Cash flow from operations will depend on the
Company's ability to increase production through its exploration and development
programs and the prices of natural gas and oil. The Company has made significant
investments to expand its operations in the Gulf of Mexico. These investments
have resulted in an increase in the Company's daily production to approximately
150 MMcfe at the end of March 2001 from approximately 130 MMcfe at the end of
December 2000. The Company expects higher production and cash flow during the
remainder of 2001 as recent discoveries commence production. However, the
Company can provide no assurance that production volumes and pricing in 2001
will achieve expectations.

  The Company currently sells most of its natural gas and oil production under
price sensitive or market price contracts. To reduce exposure to fluctuations in
natural gas and oil prices, the Company enters into hedging arrangements.
However, these contracts also limit the benefits the Company would realize if
prices increase. See "Item 3. Quantitative and Qualitative Disclosures About
Market Risk."

  The Company's cash flow from operations also depends on its ability to manage
working capital, including accounts receivable, accounts payable and accrued
liabilities. The decrease in accounts receivable of $6.6 million was primarily
due to a decrease in accrued natural gas and oil revenues of $8.9 million
largely as a result of a decrease in natural gas prices since December 2000,
partially offset by an increase in joint interest billings and other receivables
of $2.3 million due to higher activity levels associated with wells operated by
the Company. The increases in accounts payable and accrued liabilities were
primarily due to costs associated with increased drilling and development
activities during the first quarter of 2001 compared to the end of 2000.

 INVESTING ACTIVITIES

  Net cash of $86.1 million used in investing activities in the first quarter of
2001 included net oil and gas property capital expenditures of $59.1 million and
purchases of other property and equipment of $0.3 million. The Company also
purchased short-term investments of $26.7 million.

  The Company drilled nine exploratory wells in the first quarter of 2001, five
of which were successful. In 2000, the Company drilled 28 exploratory wells, 16
of which were successful. Since inception, the Company has drilled 68
exploratory wells, 42 of which were successful, representing a success rate of
approximately 62%.

  The 2001 budget includes development costs that are contingent on the success
of future exploratory drilling. The Company does not anticipate that budgeted
leasehold acquisition activities will include the acquisition of producing
properties. The Company does not anticipate any significant abandonment or
dismantlement costs in 2001. The Company has capital expenditure plans for 2001
totaling approximately $260 million, primarily for costs related to exploration
and development programs. Actual levels of capital expenditures may vary
significantly due to many factors, including drilling results, natural gas and
oil prices, the availability of capital, industry conditions, decisions of
operators and other prospect owners and the prices of drilling rig dayrates and
other oilfield goods and services.

 FINANCING ACTIVITIES

  Net cash of $5.5 million was provided by financing activities in the first
quarter of 2001. These proceeds related to stock option exercises.

  The Company is currently a party to the $75.0 million Credit Facility with an
original term of 364 days. The borrowing base as of March 31, 2001 was $30.0
million. At March 31, 2001, the Company had no outstanding borrowings under the
Credit Facility. The Credit Facility is secured by substantially all of the
Company's assets, including its interests in natural gas and oil properties. The
Company has the option to elect to use a base interest rate as described below
or the LIBOR rate plus, for each such rate, a spread based on the percent of the
borrowing base used at that time.  The base interest rate under the Credit
Facility is a fluctuating rate of interest equal to the higher of either the
Toronto-Dominion Bank's base rate for dollar advances made in the United States
or the Federal Funds Rate plus 0.5 percent per annum.

                                       12
<PAGE>

  The Credit Facility contains various covenants and restrictive provisions. It
also requires the Company to maintain certain financial covenants, including the
ratio of consolidated current assets to consolidated current liabilities, other
than debt and hedging-related liabilities, as of the end of each fiscal quarter
so that it is not less than 1.00 to 1.00 and the ratio of EBITDAX, as defined,
to consolidated interest expense so that it is not less than 5.0 to 1.0 for any
period of four consecutive fiscal quarters.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 Interest Rate Risk

  The Company is exposed to changes in interest rates. Changes in interest rates
affect the interest earned on the Company's cash, cash equivalents and short-
term investments and the interest rate paid on borrowings under the Credit
Facility. Under its current policies, the Company does not use interest rate
derivative instruments to manage exposure to interest rate changes.

 Commodity Price Risk

  The Company's revenues, profitability and future growth depend substantially
on prevailing prices for natural gas and oil. Prices also affect the amount of
cash flow available for capital expenditures and the Company's ability to borrow
and raise additional capital. Lower prices may also reduce the amount of
natural gas and oil that the Company can economically produce. The Company
currently sells most of its natural gas and oil production under price sensitive
or market price contracts. To reduce exposure to fluctuations in natural gas and
oil prices and to achieve more predictable cash flow, the Company entered into
hedging arrangements beginning in the fourth quarter of 1999. However, these
contracts also limit the benefits the Company would realize if prices increase.
These financial arrangements take the form of costless collars and are placed
with major financial institutions the Company believes represent minimum credit
risks.

  Under its current hedging practice, the Company does not hedge more than 50
percent of its production quantities without the prior approval of the risk
management committee. The daily production rates at the end of March 2001 were
approximately 144.5 MMcf of natural gas and approximately 850 barrels of oil
and condensate. The Company has entered into the following natural gas collar
arrangements (one MMBtu approximates one Mcf of gas):

<TABLE>
<CAPTION>
                                                                            Average             Average              Average
                                                                             Daily               NYMEX                NYMEX
                                                                            Volume               Floor               Ceiling
                           Time Period                                      (MMBtu)           Price/MMBtu          Price/MMBtu
------------------------------------------------------------------     -------------      ----------------     ----------------
<S>                                                                       <C>                <C>                  <C>
Second Quarter 2001...............................................            53,297                 $2.99                $4.64
Third Quarter 2001................................................            50,000                  3.00                 4.72
Fourth Quarter 2001 (through November 30, 2001)...................            50,000                  3.00                 4.72
</TABLE>

  The Company's open collar arrangements will settle based on the reported
settlement price on the NYMEX for the last trading day each month for natural
gas. In a collar transaction, the counterparty is required to make a payment to
the Company if the settlement price for any settlement period is below the floor
price for the transaction, and the Company is required to make a payment to the
counterparty if the settlement price for any settlement period is above the
ceiling price for the transaction. The Company recognizes gains and losses in
revenues when the related production occurs. The Company recognized net hedging
losses of $16.6 million in the first quarter of 2001.

  In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 established accounting and
reporting standards requiring that all derivative instruments be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in a derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Accounting for qualifying hedges allows derivative gains and losses to offset
related results on the hedged item in the income statement and requires a
company to formally document, designate and assess the effectiveness of
transactions that qualify for hedge accounting. The Company adopted SFAS No. 133
on January 1, 2001.

                                       13
<PAGE>

  Based upon the Company's assessment of its derivative contracts at January 1,
2001, it recorded (i) a net current liability of $41.7 million, representing the
fair market value of all derivatives on that date and (ii) a reduction of equity
through accumulated other comprehensive income of $27.1 million, representing
the intrinsic and time value components of the derivatives as of January 1,
2001, net of income taxes of $14.6 million. The current liability is adjusted
monthly to reflect the current fair market value, and the monthly settlement is
recorded to revenues with related adjustments to accumulated other comprehensive
income.

  Based upon the Company's assessment of its derivative contracts at March 31,
2001, it reported (i) a net current liability of $9.7 million and (ii) a
reduction of equity through accumulated other comprehensive income of $6.7
million, net of income taxes of $3.4 million. The change in the time value
component of the derivatives of $0.4 million was recorded in revenues in the
first quarter of 2001.

  The Company recognized net hedging losses of $16.6 million in the first
quarter of 2001 compared to net hedging income of $0.5 million in the same
period in 2000.


                          PART II - OTHER INFORMATION


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

          None.

     (b)  Reports on Form 8-K

          None.

                                       14
<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.

                                       SPINNAKER EXPLORATION COMPANY

<TABLE>
<S>    <C>                                           <C>
Date:            May 10, 2001                        By:             /s/  ROBERT M. SNELL
       ----------------------------                        -------------------------------------
                                                                       Robert M. Snell
                                                               Vice President, Chief Financial
                                                                    Officer and Secretary

Date:            May 10, 2001                        By:            /s/  JEFFREY C. ZARUBA
       ----------------------------                        -------------------------------------
                                                                      Jeffrey C. Zaruba
                                                               Vice President, Treasurer and
                                                                     Assistant Secretary
</TABLE>

                                       15