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  The Bolivian operations contributed approximately $3.5 million and $3.2
million to operating income in fiscal 1994 and 1993, respectively. Based on the
Bolivian oil and gas company's performance under renegotiated contracts and
improved operating conditions, Zapata returned to the accrual method of
accounting for its Bolivian oil and gas operations beginning in fiscal 1994.
 
  Zapata's domestic natural gas production for fiscal 1994 was approximately
one-half 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. U.S.
spot gas prices declined during the second half of fiscal 1994 and compared
unfavorably to prices in the corresponding fiscal 1993 period. The decline was
due primarily to an oversupply of natural gas that resulted from mild weather
conditions during the summer and early fall.
 
  In late April 1993 one of the oil and gas division's wells in the Wisdom gas
field was shut-in when such well started producing sand. Prior to the failure,
this well was capable of producing 6.5 MMcf per day. After some minor repairs,
the well was returned to production at a significantly reduced level. Efforts
to restore production from this well have been deferred.
 
  In early September 1993 an additional well in the Wisdom gas field ceased
production as a result of an influx of sand and water. Immediately prior to the
time the well ceased producing, this well was capable of producing
approximately 5.5 MMcf per day. After some minor repairs, the well was returned
to production at a significantly reduced level. Efforts to restore production
commenced in February 1994 and the workover/recompletion of this well and one
additional well successfully restored production of these wells to acceptable
levels. The Company undertook the recompletion of a third well in the Wisdom
gas field which was abandoned after a series of mechanical failures. The Wisdom
gas field was producing 10.8 MMcf per day in August 1994 before curtailing
production in September due to low gas prices.
 
  Revenues of $20.2 million and operating income of $6.0 million for fiscal
1993 were substantially below the fiscal 1992 revenues of $30.1 million and
operating income of $11.2 million. Despite higher prices for U.S. natural gas
and the absence of workover expenses of the Wisdom gas field, the division's
1993 results declined due to the combination of reduced revenues from the
Bolivian oil and gas operations and lower U.S. natural gas production. Cash
receipts from the Bolivian operation totalled $3.2 million in 1993 versus $10.1
million in 1992. Bolivian receipts, recognized as revenues, included
collections of certain past-due receivables in fiscal 1992. Results for the
fiscal 1992 period included $3.0 million of Wisdom gas field workover expenses.
 
  U.S. spot gas prices improved during fiscal 1993 and remained substantially
higher than the extremely low levels experienced during fiscal 1992. However,
Zapata's natural gas production for fiscal 1993 was 31% lower than the fiscal
1992 level of production. A major contributing factor to the decline in
production was due to the production difficulties at the Wisdom gas field.
 
 Tidewater
 
  In June 1993, Zapata completed the sale of 3.5 million of its shares of
Tidewater common stock through an underwritten public offering. The shares were
sold for a net price of $21.25 per share or $73.5 million and the sale
generated a 1993 pretax gain of $32.9 million. The gain is reflected on the
statement of operations as other income. In November 1993, Zapata sold an
additional 3.75 million shares of its Tidewater common stock for a net price of
$20.75 per share or $77.8 million and in March 1994, Zapata sold 375,175
additional shares of its Tidewater stock for a net price of $21.34 per share or
$8.0 million. The fiscal 1994 sales generated pretax gains totaling $37.5
million; the gains are recorded in other income. As of September 1994, the
Company owns 673,077 shares of Tidewater common stock.
 
  As a result of its decision to sell a portion of its Tidewater common stock,
effective January 1, 1993, Zapata changed from the equity to the cost method of
accounting for its investment in Tidewater. Consequently, Zapata has not
included its percentage of Tidewater's results as equity income since December
31, 1992. Instead, Tidewater dividends to Zapata have been included as other
income when, as and if declared.
 
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