<PAGE>
Bolivian properties continue to be operated by the joint venture, which began
receiving payments with respect to current and past-due invoices on June 30,
1991. 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 October 1993. The Company recorded revenues of $4.1 million in
fiscal 1994 from its Bolivian interest. During 1995, the Company recorded
revenues of $2.7 million.
Since 1993, the Company committed to participate in the drilling of four
exploratory wells in its Bolivian operation, two of which were drilled in 1994,
one during 1995 and the fourth is scheduled to be drilled during 1996.
The Company's oil and gas operations are subject to all of the risks and
hazards typically associated with the exploration for, and production of, oil
and gas, including blowouts, cratering, oil spills and fires, as well as
political, each of which could result in damage to or destruction of oil and
gas wells, production facilities or other property or the environment or injury
to persons. Although the Company maintains customary insurance coverage, it is
not fully insured against such risks, either because such insurance is not
available or because of high premium costs. In addition, the Company's
investment in its Bolivian oil and gas properties is that of a minority
interest owner. Accordingly, the majority owner has the right to determine the
details of any exploration and development drilling program.
Oil and Gas Reserves. The following table sets forth information as to the
Company's proved and proved developed reserves of oil and natural gas as of
September 30, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
UNITED STATES BOLIVIA
-------------- --------------
GAS LIQUIDS GAS LIQUIDS
(MMCF) (MBBL) (MMCF) (MBBL)
------ ------- ------ -------
<S> <C> <C> <C> <C>
TOTAL PROVED RESERVES AS OF:
September 30, 1995....................... -- -- 29,552 683.5
September 30, 1994....................... 34,736 366.8 27,317 744.4
September 30, 1993....................... 40,735 360.4 22,534 721.9
TOTAL PROVED DEVELOPED RESERVES AS OF:
September 30, 1995....................... -- -- 29,552 683.5
September 30, 1994....................... 27,386 221.3 27,317 744.4
September 30, 1993....................... 28,181 200.9 22,534 721.9
</TABLE>
As used herein, the term "Mcf" means thousand cubic feet, the term "MMcf"
means million cubic feet, the term "Bbl" means barrel and the term "MBbl" means
thousand barrels. Liquids include crude oil, condensate and natural gas
liquids.
The reserve estimates presented herein were prepared by Huddleston & Co.,
Inc. ("Huddleston"), independent petroleum reserve engineers. Since September
30, 1995, no major favorable or adverse event has occurred which the Company
believes significantly affects or changes estimated reserve quantities as of
that date. Zapata is not a party to any contracts that include an obligation to
provide a fixed and determinable quantity of oil and gas in the future. No
estimates of the Company's proved net oil or gas reserves have been filed with
or included in reports to any federal authority or agency other than the
Securities and Exchange Commission since October 1, 1994.
There are numerous uncertainties inherent in estimating quantities of proved
reserves, including many factors beyond the control of the producer. The
reserve data set forth herein represent only estimates. Reserve engineering is
a subjective process of estimating underground accumulations of crude oil and
natural gas that cannot be measured in an exact manner, and the accuracy of any
reserve estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. As a result, estimates
of
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