<PAGE>
 
     In September 1993, Cimarron significantly expanded its natural gas
gathering and processing activities by acquiring approximately 350 miles of
natural gas gathering systems in West Texas and Oklahoma and a gas processing
plant in Sutton County, Texas.  A comparison of average daily volumes of gas,
measured in thousands of cubic feet, gathered and processed during the first
quarter of fiscal 1994 and 1993 are shown below.

<TABLE>
<CAPTION>
 
                                       1994    1993
                                      ------  ------
<S>                                   <C>     <C>
         Gathering                    40,396  12,631
         Processing                   18,772   7,274
</TABLE>

OIL AND GAS - Revenues of $3.4 million and operating income of $208,000 for the
first quarter of fiscal 1994 were substantially below the fiscal 1993 period's
revenues of $7.2 million and operating income of $3.0 million.  The shortfall
was due primarily to lower natural gas production in the Gulf of Mexico.
Additionally, the Bolivian operation contributed $1.1 million to operating
income in the 1994 period which was less than the $1.3 million in the
corresponding 1993 quarter.

     Zapata's domestic natural gas production for the first three months of
fiscal 1994 was one-third of the fiscal 1993 period's level of production. The
decline in production was due to production difficulties encountered during 1993
at the Wisdom gas field, the Company's most significant oil and gas property.

     Efforts to restore production commenced in February 1994 and may take up to
two months to complete.  The workover/recompletion of the first well which is
estimated to cost approximately $2.5 million had been delayed because of the
lack of workover rig availability.  Based upon the results of the initial
efforts, the Company may pursue a systematic workover/recompletion of additional
wells in the Wisdom gas field.  The Company currently estimates that each
additional workover/recompletion will cost approximately $2.5 million.

     Until such time that repairs to the wells in the Wisdom gas field can be
effected and production restored, revenues from domestic oil and gas operations
will be based on significantly lower production quantities than in prior years.

MARINE PROTEIN - Revenues of $20.7 million and operating income of $1.8 million
for the first quarter of fiscal 1994 compared favorably to the 1993 first
quarter revenues of $13.0 million and operating income of $513,000.  The
improved operating results were achieved by increased sales volumes which
resulted from higher levels of inventories which were carried over from the
fiscal 1993 fishing season.  Compared to the year-earlier period, sales volume
of fish meal during the first quarter of 1994 was 37% higher while the average
per ton price of $356 was 10% lower.  Likewise, fish oil volumes more than
doubled while the average per ton price of $316 was 6% lower.

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