<PAGE>
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 5. UNCONSOLIDATED AFFILIATES--(CONTINUED)
common stock. Consequently, Zapata has not reported its percentage of
Tidewater's results since such time. Instead, Tidewater's dividends of
approximately $826,000 and $480,000 that were declared in March 1993 and July
1993, respectively, were included in other income. Zapata received dividends
from Tidewater totalling $719,000, $2.5 million and $620,000 in fiscal 1994,
1993 and 1992, respectively.
 
  The Company was also engaged directly in the offshore drilling business until
October 31, 1990, when its offshore drilling rigs were sold to Arethusa
(Offshore) Limited ("Arethusa"). In conjunction with the sale, the Company made
a $17.5 million investment in Arethusa. In fiscal 1993, the Company disposed of
its investment in Arethusa for $11.8 million resulting in a pretax loss of $5.7
million. The Company accounted for its investment in Arethusa using the cost
method of accounting.
 
  A summary of equity in net income of and investments in unconsolidated
affiliates is shown below:
 

<TABLE>
<CAPTION>
                                                          EQUITY IN INVESTMENTS
                                                             NET       AS OF
                                                           INCOME   SEPTEMBER 30
                                                          --------- ------------
                                                              (IN THOUSANDS)
      <S>                                                 <C>       <C>
      1994
      Tidewater..........................................  $   --     $ 14,471
                                                           ======     ========
      1993
      Tidewater..........................................  $1,125     $ 56,289
                                                           ======     ========
      1992
      Zapata Gulf and Tidewater..........................  $1,497     $ 96,957
      Arethusa...........................................               17,500
                                                           ------     --------
                                                           $1,497     $114,457
                                                           ======     ========
</TABLE>

 
  In June 1993, Zapata completed a sale of 3.5 million shares of its Tidewater
stock through an underwritten public offering. The Tidewater shares were sold
at a net price of $21.25 per share or $73.5 million and the sale generated a
third-quarter 1993 pretax gain of $32.9 million. In November 1993, Zapata sold
3.75 million shares of its Tidewater common stock through an underwritten
public offering for a net price of $20.75 per share or $77.8 million; the sale
resulted in a pretax gain of $33.8 million. Additionally, in March 1994, Zapata
sold 375,175 shares of its Tidewater common stock for a net price of $21.34 per
share or $8.0 million resulting in a pretax gain of $3.6 million. These gains
are reflected on the statement of operations as other income. The Company now
owns 673,077 shares of Tidewater common stock all of which are reserved for the
possible exchange for $17.5 million of senior indebtedness held by Norex. See
Note 6.
 
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