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     Approximately 80% of the demand for natural gas compression (on a
horsepower basis) is met through the use of natural gas compressor packages
owned by the companies which use them.  Energy Industries competes with other
fabricators of natural gas compressors for sales in this market.  The demand for
newly constructed natural gas compressor packages is a function of growth in the
consumption of natural gas and the age of producing wells.  Natural gas
compression is required to maintain production rates and to maximize recoverable
reserves as natural gas reservoirs age and field pressure declines.     
    
     The remaining 20% of demand for natural gas compression is met through
rental of natural gas compressor packages.  In addition to well age and natural
gas consumption, a structural shift in U.S. oil and gas operations recently
affected demand for natural gas compression package rentals.  Major oil
companies have directed their focus toward international operations and away
from domestic natural gas reserves.  Accordingly, these companies are either
selling their domestic reserves or minimizing staff in domestic operations.  As
a result, demand for rental packages of natural gas compressors is expected to
increase as buyers of natural gas reserves or reduced staffs are less likely to
own and operate natural gas compressor packages and more likely to rent natural
gas compressor packages to meet their natural gas compression needs.     
    
     International Operations.  While most of Energy Industries' operations are
domestic, Energy Industries sells natural gas compressor packages and parts in
Canada through ENSERV, Inc. ("Enserv") and outside the U.S. and Canada through
Atlas Copco Airpower, N.V. ("Atlas Copco").     
    
     Energy Industries has entered into an agreement whereby it is an exclusive
supplier of gas compressor packages and parts to Enserv in Canada.  This
agreement runs through 2002 and is subject to automatic annual renewal
thereafter.  Additionally, Energy Industries has entered into a marketing
agreement with Atlas Copco, headquartered in Stockholm, Sweden, for sales
outside North America.  As compensation for use of its worldwide marketing and
distribution network, Atlas Copco receives a commission on all such
international sales of Energy Industries' equipment.  This agreement runs
through 1998 and also is subject to automatic annual renewal unless notice is
given of a party's desire to terminate the relationship.     
    
     Competition.  The principal competitive factors in natural gas compression
markets are price, service, availability and delivery time.  Energy Industries
operates in a highly competitive environment and competes with a large number of
companies, some of which are larger and have greater resources than Energy
Industries.     
    
     Facilities and Real Estate.  Energy Industries owns the facilities and
related real estate in Harris, Midland and Nueces Counties, Texas, Oklahoma
County, Oklahoma and Lafayette Parish, Louisiana.  The main fabrication facility
is in Nueces County, Texas and the other properties are currently being used for
branch offices.  Other branch facilities are leased from third parties.     
    
NATURAL GAS SERVICES--GATHERING, PROCESSING AND MARKETING     
    
     This segment of the Company's natural gas services operations involves two
major categories of business activities: the gathering and processing of natural
gas and the marketing of its constituent products.  In fiscal 1993, the Company
purchased all of the stock of Cimarron for $3.8 million consisting of $2.5
million and 2.2 million shares of Common Stock.  For purposes of recording the
acquisition, the stock consideration was valued at $1.3 million.     
    
     In September 1993, Cimarron acquired the interests of Stellar, a group of
companies engaged in natural gas gathering and processing, for an aggregate
purchase price of $16.2 million.  The purchase price included $6.1 million in
cash, the redemption of $3.7 million of notes payable to former Stellar
shareholders and the assumption of $6.4 million of indebtedness of Stellar.  The
purchase price is subject to adjustment upward or downward based on the net
working capital of Stellar on August 31, 1993.  Any shortfall in the net working
capital amount will be paid to Cimarron by the shareholders of Stellar and any
excess will be paid to such shareholders by Cimarron.     
    
     Gathering and Processing.  Through the acquisition of Stellar, Cimarron
owns and operates approximately 350 miles of natural gas gathering systems in
West Texas and Oklahoma and a gas processing plant in Sutton County, Texas.  The
systems gather approximately 45 MMcf (million cubic feet) of natural gas per day
and the plant is capable of     

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