NATURAL GAS SERVICES--COMPRESSION
In November 1993, Zapata purchased the natural gas compression businesses of
Energy Industries. Energy Industries is engaged in the business of renting,
fabricating, selling, installing and servicing natural gas compressor packages.
Total consideration paid for the purchase of Energy Industries and for a
related noncompetition agreement (collectively, the "Energy Industries
Acquisition") was $90.2 million. The purchase price consisted of $74.5 million
in cash and 2.7 million shares of Common Stock valued at $5.80 per share, which
approximated the average trading price prior to closing of the acquisition.
Operations. A natural gas compressor package consists of a compressor, a
natural gas engine or electric motor, a heat exchanger, a control panel and
assorted piping and tubing. Natural gas compression is used in the production,
processing and delivery of natural gas. Energy Industries primarily supplies
natural gas compressor packages in natural gas production and processing
applications. In natural gas production applications, natural gas compression
is used to increase the flow rate of gas wells with low reservoir pressures. In
natural gas processing applications, natural gas compression is used in the
process of separating the various hydrocarbon components of the wellhead
natural gas stream. In interstate natural gas pipeline applications, natural
gas compression is used to increase the pressure of natural gas from reservoir
levels to interstate pipeline standards. Additionally, Energy Industries
manufactures heat exchangers used in fabricating natural gas compressor
packages and other industrial applications; the Company expects to dispose of
the heat exchanger manufacturing operation in fiscal 1995. The heat exchanger
operation does not have a material impact on the operating results or financial
position of the Company.
Energy Industries fabricates natural gas compressor packages at its Corpus
Christi, Texas fabrication facility from components which are acquired from
various suppliers at market prices. Energy Industries maintains an inventory of
compressor and engine components at its Corpus Christi facility to support the
fabrication and repair of natural gas compressor packages.
Including its Corpus Christi, Texas location, Energy Industries maintains
eleven branch offices in Texas, Louisiana, Oklahoma, Arkansas and New Mexico.
Branch office personnel negotiate natural gas compressor package rentals and
sales, perform maintenance services for Energy Industries' fleet of rental
compressors and other natural gas compressor packages on a contract basis and
recondition Energy Industries' rental fleet packages when rental contracts
expire. Energy Industries also has facilities for fabricating natural gas
compressor packages at its branches in Midland and Houston, Texas and
Lafayette, Louisiana, if market conditions require.
The following table identifies major categories of Energy Industries' natural
gas compression revenue for fiscal years 1992 through 1994. The Company
acquired Energy Industries in November 1993, therefore Zapata's consolidated
financial results include only eleven months of Energy Industries operations.
For comparative purposes, however, the 1994 revenues presented in the following
tables are for the twelve months ended September 30, 1994.
1994 1993 1992
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<S> <C> <C> <C>
Compressor rentals................................ $17,575 $15,256 $13,456
Fabrication and sales............................. 29,842 22,020 21,943
Parts and service................................. 21,138 16,662 11,008
Other............................................. 9,981 9,334 8,260
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Total........................................... $78,536 $63,272 $54,667
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Natural Gas Compressor Package Rentals. Energy Industries maintains a fleet
of approximately 700 natural gas compressor packages of various capacities for
rental to natural gas producers and processors. Energy Industries rents natural
gas compressor packages to its customers under contracts which require monthly
payments based on a fixed fee or on the volume of gas compressed. The initial
fixed term of a natural