<PAGE>
 
      A comparison of average daily volumes of gas, measured in millions of
cubic feet, gathered and processed during the three- and six-month periods ended
March 31, 1995 and 1994 is shown below.

<TABLE>
<CAPTION>
                         Three Months Ended        Six Months Ended
                             March 31,                March 31,
                         ------------------        ----------------          
Average Daily Volumes      1995     1994             1995    1994
- ---------------------    -------  -------          -------  -------
<S>                      <C>      <C>              <C>      <C>
          (MMCF)
Gathering                  54.1     46.4             52.5     43.6
Processing                 26.4     21.2             26.6     20.1
</TABLE>

      Gas gathering is the collection of natural gas from various individual
wells, combining it into a single gas stream and delivering it into a major
transmission line for transportation to market.  A gathering system sometimes
includes an associated processing plant for the removal of gas liquids,
depending on the content of liquefiable hydrocarbons in the gas streams and the
capabilities of transmission lines.

OIL AND GAS -  Revenues of $2.2 million and an operating loss of $192,000 for
the second quarter of fiscal 1995 compared unfavorably to the corresponding
fiscal 1994 period's revenues of $2.8 million and operating income of $432,000.
The decline was attributable to significantly lower natural gas prices, as well
as reduced income from the Bolivian operations ($116,000 in 1995 as compared to
$876,000 in 1994). Zapata's domestic natural gas production was approximately
58% higher in the second quarter of fiscal 1995 as compared to the level of
production in fiscal 1994 when the Company encountered production difficulties
at the Wisdom gas field, the Company's most significant domestic oil and gas
property.

      Similarly, year-to-date fiscal 1995 revenues of $5.0 million and operating
income of $218,000 compared unfavorably to the fiscal 1994 revenues of $6.3
million and operating income of $640,000, reflecting lower natural gas prices
and reduced receipts from the Bolivian operations.

RECENTLY ISSUED ACCOUNTING STANDARDS

      In April 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used, and for long-lived assets and certain identifiable intangibles to
be disposed of.  Adoption of the new standard by the Company is required no
later than the fiscal year ending September 30, 1997.  Based on existing
conditions and a preliminary review, management believes adoption of the new
standard will not have a material impact on the Company's results of operations
or financial position.

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