<PAGE>
 
          In fiscal 1994 and 1993, Cimarron significantly expanded its natural
gas gathering and processing activities through the acquisition and expansion 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 millions of cubic feet, gathered and processed during the first
quarters of fiscal 1995 and 1994 are shown below.

<TABLE>
<CAPTION>
 
              1995  1994
            ------------
<S>           <C>   <C>
Gathering     51.3  40.4
Processing    27.2  18.8
 
</TABLE>

OIL AND GAS -  Operating income of $410,000 for the first quarter of fiscal 1995
- -----------                                                                     
compared favorably to the fiscal 1994 period's operating income of $208,000
while revenues declined to $2.8 million in the 1995 period as compared to $3.4
million in the prior-year period.  The improvement in operating income was due
primarily to the absence of workover expenses in fiscal 1995; the fiscal 1994
period included $400,000 of workover expenses at the Company's Wisdom gas field.
The division's results were negatively impacted by the significantly lower
natural gas prices in the first quarter of fiscal 1995, as well as reduced
receipts from the Bolivian operations ($700,000 in 1995 compared to $1.0 million
in 1994). Additionally, the Company curtailed production in the Gulf of Mexico
during the first quarter of fiscal 1995 as a result of the low gas prices.

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