<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. ACQUISITIONS--(CONTINUED)
In September 1993, Cimarron acquired the natural gas gathering and processing
plant interests of Stellar for approximately $16.4 million. The purchase price
reflects an upward adjustment of $200,000 related to the net working capital of
Stellar as of August 31, 1993. The acquisition was financed through the use of
working capital cash and assumption of certain existing indebtedness of
Stellar. The acquisition of Stellar is not significant to the Company's results
of operations or financial position. Zapata accounted for the acquisition using
the purchase method of accounting and recorded $5.5 million of goodwill in
connection therewith. The goodwill is being amortized over 20 years.
NOTE 5. UNCONSOLIDATED AFFILIATES
In January 1992, Zapata exchanged its 34.7% interest in Zapata Gulf Marine
Corporation ("Zapata Gulf") for approximately 8.3 million shares of Tidewater
common stock. Zapata sold 4.1 million and 3.5 million shares of its Tidewater
common stock in fiscal 1994 and 1993, respectively. Initially, Zapata followed
the equity method of accounting for its investment in Tidewater based on its
percent ownership and proxies that allowed the Company to have voting control
of 20% of the total shares of Tidewater common stock outstanding.
Effective January 1, 1993, Zapata changed from the equity to the cost method
of accounting for its investment in Tidewater as a result of Zapata's decision
to sell 3.5 million of its 8,258,220 shares of Tidewater common stock.
Consequently, Zapata has not reported its percentage of Tidewater's results
since such time. Instead, Tidewater's dividends of approximately $826,000 and
$480,000 that were declared in March 1993 and July 1993, respectively, were
included in other income. Zapata received dividends from Tidewater totalling
$719,000, $2.5 million and $620,000 in fiscal 1994, 1993 and 1992,
respectively.
The Company was also engaged directly in the offshore drilling business until
October 31, 1990, when its offshore drilling rigs were sold to Arethusa
(Offshore) Limited ("Arethusa"). In conjunction with the sale, the Company made
a $17.5 million investment in Arethusa. In fiscal 1993, the Company disposed of
its investment in Arethusa for $11.8 million resulting in a pretax loss of $5.7
million. The Company accounted for its investment in Arethusa using the cost
method of accounting.
A summary of equity in net income of and investments in unconsolidated
affiliates is shown below:
<TABLE>
<CAPTION>
EQUITY IN INVESTMENTS
NET AS OF
INCOME SEPTEMBER 30
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
1994
Tidewater.......................................... $ -- $ 14,471
====== ========
1993
Tidewater.......................................... $1,125 $ 56,289
====== ========
1992
Zapata Gulf and Tidewater.......................... $1,497 $ 96,957
Arethusa........................................... 17,500
------ --------
$1,497 $114,457
====== ========
</TABLE>
In June 1993, Zapata completed a sale of 3.5 million shares of its Tidewater
stock through an underwritten public offering. The Tidewater shares were sold
at a net price of $21.25 per share or $73.5 million and the sale generated a
third-quarter 1993 pretax gain of $32.9 million. In November 1993, Zapata
24
