This is another in a series of analysis on the SEC 10-Q quarterly statements mandated by Federal Law and submitted to the Securities and Exchange Commission for Oil Companies doing business in the USA.

This next company is ENRON ... and this company is EXTREMELY CANDID and forthcoming. I only wish that they'd publish more about their embedded systems test results and methodologies. This report is loaded with honesty about what this company thinks may happen. They are much more pessimistic in tone than any other company that I've read their own information on. See what you think and then comment accordingly. NOTE --- THIS REPORT IS DATED AUGUST 20th, 1999. About 7 weeks old and contains more than just the 10-Q information dated to end of June.

ENRON

http://www4.enron.com/corp/inside/y2k.doc

Updated August 20, 1999 from 2nd Quarter Statement Excerpted:

State of Readiness

Enrons Board of Directors has been briefed about the Year 2000 problems generally and as they may affect Enron. The Board has adopted a Year 2000 plan (the "Plan") covering all of Enrons business units. The aim of the Plan is to take reasonable steps to prevent Enrons mission-critical functions from being impaired due to the Year 2000 problem. "Mission-critical" functions are those critical functions whose loss would cause an immediate stoppage of or significant impairment to major business areas (a major business area is one of material importance to Enrons business).

Enron also has engaged outside consultants, technicians and other external resources to aid in formulating and implementing the Plan.

Under the Plan, Enron will continue to inventory its mission-critical computer hardware and software systems and embedded chips (computer chips with date-related functions, contained in a wide variety of devices); assess the effects of Year 2000 problems on the mission-critical functions of Enrons business units; remedy systems, software and embedded chips in an effort to avoid material disruptions or other material adverse effects on mission-critical functions, processes and systems; verify and test the mission-critical systems to which remediation efforts have been applied; and attempt to mitigate those mission-critical aspects of the Year 2000 problem that are not remediated by January 1, 2000, including the development of contingency plans to cope with the mission-critical consequences of Year 2000 problems that have not been identified or remediated by that date.

It is important to recognize that the processes of inventorying, assessing, analyzing, converting (where necessary), testing, and developing contingency plans for mission-critical items in anticipation of the Year 2000 event are necessarily iterative processes. That is, the steps are repeated as Enron learns more about the Year 2000 problem and its effects on Enrons internal systems and on Outside Systems, and about the effects that embedded chips may have on Enrons systems and Outside Systems. As the steps are repeated, it is likely that new problems will be identified and addressed. Enron anticipates that it will continue with these processes through January 1, 2000 and, if necessary based on experience, into the year 2000 in order to assess and remediate problems that reasonably can be identified only after the start of the new century.

Enrons Year 2000 Plan calls for most business units to have completed initial rounds of inventory, assessment, remediation and validation testing of its mission critical internal items by June 30, 1999. At Enron, that deadline has been met in all material respects. (However, as explained elsewhere in this statement, that does not insure that these systems do not continue to contain hidden Year 2000 defects in computer code or in embedded devices.) Remaining mission critical items are expected to be completed for purposes of initial remediation and validation testing prior to September 30, 1999.

As of July 31, 1999, Enron and all its business units were at various stages in implementation of the Plan, as shown in the following tables. The first table deals with the Enron business units mission-critical internal systems (including embedded chips) and the second deals with the business units mission-critical Outside Systems of Outside Entities. Any notation of "complete" conveys the fact only that the initial iteration of this phase has been substantially completed.

[Editor Note: Couldn't get the charts to paste over correctly, but visit the website for confirmation]

(Enron continues to focus on hidden defects in computer code, including re-coding errors in remediated code; sabotage of remediated code; embedded devices with Year 2000 defects; and the potential failure of mission-critical external entities, both domestic and international and including foreign governments. Enron is developing reasonable contingency plans to prepare to the extent practicable to avoid substantial Year 2000-related disruptions that may have a material adverse effect on Enron and its business. Because of the imponderable nature of potential Year 2000 deficiencies, their impact cannot be quantified. None of these problems is unique to Enron.

Year 2000 Risk Factors

Regulatory requirements. Certain of Enrons business units operate in industries that are regulated by governmental authorities. Enron expects to satisfy these regulatory authorities requirements for achieving Year 2000 readiness. If Enrons reasonable expectations in this regard are in error, and if a regulatory authority should order the temporary cessation of Enrons operations in one or more of these areas, the adverse effect on Enron could be material. Outside Entities could face similar problems that materially adversely affect Enron.

Potential shortcoming. Enron estimates that its mission-critical systems, domestic and international, will be Year 2000-ready substantially before January 1, 2000. However, there is no assurance that the Plan will succeed in accomplishing its purposes or that unforeseen circumstances will not arise during implementation of the Plan that would materially and adversely affect Enron.

Cascading effect. Enron and its business units are taking reasonable steps to identify, assess, and, where appropriate, replace devices that contain embedded chips. Despite these reasonable efforts,

Enron anticipates that it will not be able to find and remediate all embedded chips in systems in Enrons business units. Further, Enron anticipates that Outside Entities on which Enron depends also will not be able to find and remediate all embedded chips in their systems. Some of the embedded chips that fail to operate or that produce anomalous results may create system disruptions or failures. Some of these disruptions or failures may spread from the systems in which they are located to other systems in a cascade. These cascading failures may have adverse effects upon Enrons ability to maintain safe operations and may also have adverse effects upon Enrons ability to serve its customers and otherwise to fulfill certain contractual and other legal obligations. The embedded chip problem is widely recognized as one of the more difficult aspects of the Year 2000 problem across industries and throughout the world. Enron believes that the possible adverse impact of the embedded chip problem is not, and will not be, unique to Enron.

Third parties. Enron cannot assure that suppliers upon which it depends for essential goods and services will convert and test their mission-critical systems and processes in a timely and effective manner. Failure or delay to do so by all or some of these entities, including U.S. federal, state or local governments and foreign governments, could create substantial disruptions having a material adverse affect on Enrons business.U.S. Y2K Act. Enron may face additional risk as a result of the uncertainties, and probable additional litigation, resulting from the enactment of the U.S. federal "Y2K Act." Because experience with this recently enacted legislation is very limited, Enron cannot at this time quantify the financial impact or potential business disruption that may result from this legislation. However, the adverse impact on Enrons business might be material.

Contingency Plans

As part of the Plan, Enron is developing contingency plans that deal with two aspects of the Year 2000 problem: (1) that Enron, despite its good-faith, reasonable efforts, may not have satisfactorily remediated all of its internal mission-critical systems; and (2) that Outside Systems may not be Year 2000 ready, despite Enrons good-faith, reasonable efforts to work with Outside Entities. Enrons contingency plans are being designed to minimize the disruptions or other adverse effects resulting from Year 2000 incompatibilities regarding these mission-critical functions or systems, and to facilitate the early identification and remediation of mission-critical Year 2000 problems that first manifest themselves after January 1, 2000.

Enrons contingency plans will contemplate an assessment of all its mission-critical internal information technology systems and its internal operational systems that use computer-based controls. This process will commence in the early minutes of January 1, 2000, and continue for hours, days, or weeks as circumstances require. Further, Enron will in that time frame assess any mission-critical disruptions due to Year 2000-related failures that are external to Enron. The assessment process will cover, for example, loss of electrical power from utilities; telecommunications services from carriers; or building access, security, or elevator service in facilities occupied by Enron.

Enrons contingency plans include the creation of teams that will be standing by on the evening of December 31, 1999, prepared to respond rapidly and otherwise as necessary to mission-critical Year 2000-related problems as soon as they become known. The composition of teams that are assigned to deal with Year 2000 problems will vary according to the nature, mission-criticality, and location of the problem. Because Enron operates internationally, some of its Year 2000 contingency teams will be stationed at Enrons mission-critical facilities overseas.

Worst Case Scenario

The Securities and Exchange Commission requires that public companies forecast the most reasonably likely worst case Year 2000 scenario. Analysis of the most reasonably likely worst case Year 2000 scenarios Enron may face leads to contemplation of the following possibilities which, though unlikely in some or many cases, must be included in any consideration of worst cases: widespread failure of electrical, gas, and similar supplies by utilities serving Enron domestically and internationally; widespread disruption of the services of communications common carriers domestically and internationally; similar disruption to means and modes of transportation for Enron and its employees, contractors, suppliers, and customers; significant disruption to Enrons ability to gain access to, and remain working in, office buildings and other facilities; the failure of substantial numbers of Enrons mission-critical information (computer) hardware and software systems, including both internal business systems and systems (such as those with embedded chips) controlling operational facilities such as electrical generation, transmission, and distribution systems and oil and gas plants and pipelines, domestically and internationally; and the failure, domestically and internationally, of Outside Systems, the effects of which would have a cumulative material adverse impact on Enrons mission-critical systems. Among other things, Enron could face substantial claims by customers or loss of revenues due to service interruptions, inability to fulfill contractual obligations, inability to account for certain revenues or obligations or to bill customers accurately and on a timely basis, and increased expenses associated with litigation, stabilization of operations following mission-critical failures, and the execution of contingency plans. Enron could also experience an inability by customers, traders, and others to pay, on a timely basis or at all, obligations owed to Enron. Additionally, there may be sustained interruption of the capital markets. Under these circumstances, the adverse effect on Enron, and the diminution of Enrons revenues, would be material, although not quantifiable at this time. Further in this scenario, the cumulative effect of these failures could have a substantial adverse effect on the economy, domestically and internationally. The adverse effect on Enron, and the diminution of Enrons revenues, from a domestic or global recession or depression also is likely to be material, although not quantifiable at this time.

Enron will continue to monitor business conditions with the aim of assessing and minimizing adverse effects, if any, that result or may result from the Year 2000 problem.

Summary

Enron has a plan to deal with the Year 2000 challenge and believes that it will be able to achieve substantial Year 2000 readiness with respect to the mission critical systems that it controls. However, from a forward-looking perspective, the extent and magnitude of the Year 2000 problem as it will affect Enron, both before and for some period after January 1, 2000, are difficult to predict or quantify for a number of reasons. Among these are: the difficulty of locating "embedded" chips that may be in a great variety of mission-critical hardware used for process or flow control, environmental, transportation, access, communications and other systems; the difficulty of inventorying, assessing, remediating, verifying and testing Outside Systems; the difficulty in locating all mission-critical software (computer code) internal to Enron that is not Year 2000 compatible, or that may be subject to re-coding errors or sabotage; and the unavailability of certain necessary internal or external resources, including but not limited to trained hardware and software engineers, technicians, and other personnel to perform adequate remediation, verification and testing of mission-critical Enron systems or Outside Systems. Accordingly, there can be no assurance that all of Enrons systems and all Outside Systems will be adequately remediated so that they are Year 2000 ready by January 1, 2000, or by some earlier date, so as not to create a material disruption to Enrons business. If, despite Enrons reasonable efforts under its Year 2000 Plan, there are mission-critical Year 2000-related failures that create substantial disruptions to Enrons business, the adverse impact on Enrons business could be material. Additionally, while Enrons Year 2000 costs are not expected to be material, such costs are difficult to estimate accurately because of unanticipated vendor delays, technical difficulties, the impact of tests of Outside Systems and similar events. Moreover, the estimated costs of implementing the Plan do not take into account the costs, if any, that might be incurred as a result of Year 2000-related failures that occur despite Enrons implementation of the Plan.

Conclusions: What is there left to say? This company has been truly candid. It has NOT told us the complete technical details of their remediation, but their candor tells us that they are NOT hiding anything substantial from us. They are telling it like it is! And for that we give them. I know it was long and my html handicapping wasn't able to highlight some of the more significant elements, sorry.

-- R.C. (racambab@mailcity.com), October 17, 1999

Answers

Allow me to review and highlight separately some of the remarkable statements made by ENRON:

Here's one pertaining to their remediation and testing...

"As the steps are repeated, it is likely that new problems will be identified and addressed. Enron anticipates that it will continue with these processes through January 1, 2000 and, if necessary based on experience, into the year 2000 in order to assess and remediate problems that reasonably can be identified only after the start of the new century."

Hmmm.. new problems WILL be cropping up. "based on experience...into the year 2000 in order to assess and remediate problems that reasonably can be identified ONLY after the start of the new century." But everyone else says this can't happen, it will all be fixed, but maybe BITR.

NEXT example:

"Enrons Year 2000 Plan calls for most business units to have completed initial rounds of inventory, assessment, remediation and validation testing of its mission critical internal items by June 30, 1999."

INITIAL ROUNDS??? Hey these guys aren't making excuses or PR spin. They are a GI company and are leveling with the public.

NEXT: "Enron continues to focus on hidden defects in computer code, including re-coding errors in remediated code; sabotage of remediated code; embedded devices with Year 2000 defects; and the potential failure of mission-critical external entities, both domestic and international and including foreign governments."

They really are NOT kidding and they realize that they can't be "compliant."

NEXT: Enron is developing reasonable contingency plans to prepare to the "extent practicable to avoid substantial Year 2000-related disruptions that may have a material adverse effect on Enron and its business. Because of the imponderable nature of potential Year 2000 deficiencies, their impact cannot be quantified. None of these problems is unique to Enron."

Note: "Their impact cannot be quantified. None of these problems is unique to Enron."

NEXT: "Accordingly, there can be no assurance that all of Enrons systems and all Outside Systems will be adequately remediated so that they are Year 2000 ready by January 1, 2000, or by some earlier date, so as not to create a material disruption to Enrons business"

You'll note in the above posting that Enron thinks it likely that there will be serious utilities difficulties...and this is not just lawyer covering... these fellows see it as a real serious potential threat.

All in all... this company deserves A+ for candor... I really do hope that if only one oil company were allowed by God to make it, that it would be these guys. At least they were the most candid about things.

-- R.C. (racambab@mailcity.com), October 17, 1999.

You know, I keep hoping that I'll wake up and discover that all of this has been a new remake on the old Dallas series which we were all left wondering "who shot JR?" But some of you guys refuse to let me, I keep discovering that the pinching hurts and I'm not dreaming (or nightmaring :-( as the case may be).

Thanks for the info though, if it wasn't for all of you that keep posting the articles, I for one would be in a world of trouble because I'm still figuring out the mouse clicks. I know, I'm verrrry slow sometimes :-)

-- me (me@me.com), October 17, 1999.

Under---Worst case scenario

Additionally,there may be sustained interruption of the capital markets.

-- Maggie (aaa@aaa.com), October 17, 1999.

Thanks RC!

Whenever I am 'tempted' to consider the possibility that y2k will be no more than a BITR, I go back to oil.

The vast majority of us want nothing more than a BITR, but should oiul take a hit, as appears almost certain, well, let's just say that the best we could then hope for is a huge 'bump'.

Really just wanted to say "Thank you RC".

-- The Original Me (me@me.me), October 17, 1999.

Thanks RC! Wish I owned a drilling rig in working condition.

-- jeanne (jeanne@hurry.now), October 17, 1999.

"I really do hope that if only one oil company were allowed by God to make it, that it would be these guys. At least they were the most candid about things."

I agree 100% R.C.

-- the Virginian (1@1.com), October 17, 1999.

This report gives me the deep willies. I'll need to look closely at those tables, but the text makes Enron sound about 18 months behind schedule. Leaving out the usual stuff about power etc, their worst case is entirely too close to their current status for comfort. What can you make of "there is no assurance that the Plan will succeed in accomplishing its purposes"? I don't think the ranger is gonna like this, Yogi.

-- Flint (flintc@mindspring.com), October 17, 1999.

Oh boy! Should be required reading for all, GI and DGI.

-- Mike Lang (webflier@erols.com), October 17, 1999.

Flint,

Go to the actual website and read it all. THEY CLAIM TO BE DONE but their definition of done is not the same as everyone elses. They're done in that they've gone through round one of remediation...which is what everyone else's standard is.

But note that they also say that one time through is not enough. These folks are spouting the same dogma about remediation that all the computer consultants talk about... like Ed, Cory, etc...that remediation is a series of remediation sweeps not just once through. ENRON wants to do it right. They want to be thorough. They realize they can't do it in the time remaining.

These folks have painted the FULL BLOW HONEST PICTURE that IS TRUE OF EVERY OTHER OIL COMPANY and ENRON EVEN SAYS THIS IN ITS STATEMENT.

NOW, Combine this with the BAKER HUGHES Inc. statement and status and the combo should give you a pretty good focus on the tip of the iceberg and that the iceberg below the waterline is much more ominous than what you're seeing above the waterline. In other words, ALL the other oil companies are in the same boat...the same one that ENRON admits that it is in... Enron is admitting the situation, but the other companies are in "denial."

Flint: Mobil, Amoco, Shell, Chevron --(who 6 months ago said they wouldn't make it now sorta says they will)Texaco, Citgo, and all the rest, are in just as bad a shape as ENRON, AND PROBABLY WORSE, because ENRON has been smart enough to admit the problems and recognize it publicly... they're the only GI's in the Oil business regarding what remediation is all about... (well perhaps Baker Hughes is also a GI) but most of the majors just DON'T GET IT about remediation OR ELSE they're LYING THROUGH THEIR TEETH on their 10-Qs.

Either way, Flint, its a mess...a mess that continues to indicate a much greater likelihood for Serious LONG TERM disruptions to Oil supplies and refining.

GOT OIL? GOT GAS??? No? Better buy some more beans!

-- R.C. (racambab@mailcity.com), October 17, 1999.

RC, thanks for picking out the interesting points and elaboraiting. I'm too lazy to read those looooooooooong posts.

-- (SoilingMyself@fterReading.that), October 17, 1999.

They are cutting it too fine.

Darn near all of the majors, including the Fortune 1000, are cutting it too fine.

Cramming the night before the exam, hoping to get by.

-- mushroom (mushroom_bs_too_long@yahoo.com), October 17, 1999.

RC: Here is a dumb question (sorry).

Who/where is Enron in the oil scheme of things? Are they retailers, producers, middlemen, refiners or what?

I have never seen their name in my neck of the woods.

Thanks.

sdb

-- S. David Bays (SDBAYS@prodigy.net), October 18, 1999.

Bump this up for the cause.

Flint gets the willies? This must be a first.

Thanks for the filing RC.

-- Brian (imager@home.com), October 18, 1999.

Oh no, Flint man, don't do this to me. That's the second time in the last few days you've showed signs of waiviering in the doomer direction. Think this through some more.

Decker, are you still there? Ffffaacctfinder? Whadda 'bout you? Come on, guys, don't let them beat up on us like this.

-- Oh crikey! (not@flint.net), October 19, 1999.

Relax. OK, there's been some indication lately that some important outfits aren't doing quite as well as they'd hoped, combined with a general trend of finding things harder than expected and slowing down. I don't regard these as good omens, but they aren't proof of doom either. Impacts may be more visible and exasperating than I'd been hoping.

On the other hand, didn't Yardeni say last week that he now projects y2k-induced problems to be less severe than the 1973-74 recession? And perhaps for similar reasons -- higher gasoline prices look like a safe bet.

-- Flint (flintc@mindspring.com), October 19, 1999.

Phew!

-- No valium tonight, yippee (yeah@flint.net), October 19, 1999.

One small contingency plan that I know of first hand: Enron will have tanker trucks full of gasoline available for their huge (and I do mean huge!) generator in downtown Houston. (Guarded, of course!)

-- Gayla (privacy@please.com), October 19, 1999.

Who/where is Enron in the oil scheme of things?

Just because they don't have gasoline stations, don't underestimate them. They are a huge producer of natural gas, as well as oil. They're mostly domestic. They're not Exxon, but who is?

-- Dog Gone (layinglow@rollover.now), October 19, 1999.

Thanks Dog Gone. ...and I wasn't dissing them, just never heard of 'em. Domestic and big in natural gas. Hmmmm. It's all very interesting.

sdb

-- S. David Bays (SDBAYS@prodigy.net), October 19, 1999.

From USA Today:

A worst-case Y2K scenario

The Securities and Exchange Commission requires every corporation to provide "a worst-case scenario" in Y2K readiness statements. Some are more dramatically specific than others.

Enron, the energy giant, offers a glimpse of the future for those wedded to the notion that Y2K means the end of the world as we know it. The company does caution, however, that the scenario is "unlikely in some or many cases." Says Enron spokeswoman Karen Denne: "We gave the SEC what they requested ... odds are very low that this will happen, but it remains a possibility."

Enron's SEC filing says Y2K could cause: "Widespread failure of electrical, gas and similar supplies by utilities serving Enron domestically and internationally; widespread disruption of the services of communications common carriers domestically and internationally; similar disruption to means and modes of transportation for Enron and its employees, contractors, suppliers and customers; significant disruption to Enron's ability to gain access to, and remain working in, office buildings and other facilities; the failure of substantial numbers of Enron's mission- critical information hardware and software systems, including both internal business systems and systems controlling operational facilities such as electrical generation, transmission and distribution systems and oil and gas plants and pipelines, domestically and internationally; and the failure, domestically and internationally, of outside systems, the effects of which would have a cumulative material adverse impact on Enron's mission-critical systems.

"Among other things, Enron could face substantial claims by customers or loss of revenues due to service interruptions, inability to fulfill contractual obligations, inability to account for certain revenues or obligations or to bill customers accurately and on a timely basis, and increased expenses associated with litigation, stabilization of operations following mission-critical failures, and the execution of contingency plans. Enron could also experience an inability by customers, traders and others to pay, on a timely basis or at all, obligations owed to Enron.

"Further in this scenario, the cumulative effect of these failures could have a substantial adverse effect on the economy, domestically and internationally. The adverse effect on Enron, and the diminution of Enron's revenues, from a domestic or global recession or depression also is likely to be material, although not quantifiable at this time."

-- Gayla (privacy@please.com), October 20, 1999.