UNITED MERIDIAN CORP, 424B4, 1996-11-04

UNITED MERIDIAN CORP
424B4, 1996-11-04
CRUDE PETROLEUM & NATURAL GAS

Previous: NUVEEN CALIFORNIA MUNICIPAL VALUE FUND INC, N-30D, 1996-11-04

Next: FIRST UNITED BANCORPORATION /SC/, 10-Q, 1996-11-04

<PAGE> 1
Filed Pursuant to Rule 424(b)(4)
File No. 333-12823
PROSPECTUS

5,750,000 SHARES

LOGO

UNITED MERIDIAN CORPORATION

COMMON STOCK
---------------------
Of the 5,750,000 shares of Series A Voting Common Stock, par value $0.01
per share ("Common Stock"), offered hereby, 3,250,000 shares are being sold by
United Meridian Corporation ("UMC" or the "Company") and 2,500,000 shares are
being sold by certain stockholders of the Company (the "Selling Stockholders").
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Stockholders. See "Selling Stockholders."

Of the shares of Common Stock being offered hereby, 4,600,000 shares (the
"U.S. Shares") are being offered in the United States and Canada (the "U.S.
Offering") by the U.S. Underwriters and 1,150,000 shares (the "International
Shares") are being offered outside the United States and Canada (the
"International Offering" and, together with the U.S. Offering, the "Offerings")
by the International Managers. The price to public and underwriting discount per
share are identical for both Offerings and the closings for both Offerings are
conditioned upon each other. See "Underwriting."

The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "UMC." On October 31, 1996, the last reported sale price of the
Common Stock on the NYSE was $47 1/8 per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON
STOCK OFFERED HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
======================================================================================================
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share........................ $46.50 $1.75 $44.75 $44.75
- ------------------------------------------------------------------------------------------------------
Total(3)......................... $267,375,000 $10,062,500 $145,437,500 $111,875,000
======================================================================================================
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses payable by the Company estimated at $465,000.

(3) The Company has granted the U.S. Underwriters and International Managers
options for 30 days to purchase up to 690,000 and 172,500 additional shares
of Common Stock, respectively, at the Price to Public, less Underwriting
Discount, solely to cover over-allotments, if any. If such options are
exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $307,481,250, $11,571,875 and $184,034,375,
respectively. See "Underwriting."

---------------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that delivery of the shares of Common Stock will be made in New York, New York
on or about November 6, 1996.

---------------------
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED
PETRIE PARKMAN & CO.
---------------------

The date of this Prospectus is November 1, 1996.

<PAGE> 2

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, (the "Exchange Act"), and, in accordance
therewith, files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Copies of such
materials can be obtained by mail from the Public Reference Section of the
Commission, at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, such reports, proxy and information statements
and other information can be inspected and copied at the public reference
facility referenced above and at the Commission's regional offices at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7
World Trade Center, Suite 1300, New York, New York 10048. The Commission
maintains a web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants, such as the
Company, that file electronically with the Commission. Such reports, proxy
statements and other information concerning the Company can also be inspected
and copied at the New York Stock Exchange, 20 Broad Street, New York, New York
10005.

The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is hereby made to the Registration Statement,
which may be inspected at the Commission's offices without charge, or copies of
which may be obtained from the Commission upon payment of prescribed fees. Each
statement made in this Prospectus as to the contents of any contract or other
document is not necessarily complete and is qualified in its entirety by
reference to the copy of such contract or other document filed as an exhibit to
the Registration Statement.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents filed with the Commission pursuant to the Exchange
Act are incorporated herein by reference:

1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (the "1995 10-K");

2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996;

3. The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996;

4. The Company's Current Report on Form 8-K, filed with the Commission on
February 16, 1996;

5. The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A, filed with the Commission on June
15, 1993; and

6. The description of the Company's Preferred Stock Purchase Rights
contained in the Company's Registration Statement on Form 8-A, filed
with the Commission on February 16, 1996, as amended by Amendment No. 1
thereto on Form 8-A/A, filed with the Commission on March 4, 1996.

All documents filed by the Company pursuant to Section 13(a), 13(e), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Offerings shall be deemed to be incorporated by reference
in this Prospectus and shall be deemed a part hereof from the date of filing of
such documents.

Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for all purposes to the extent that
a statement contained in this Prospectus, or in any other subsequently filed
document which is also, or is deemed to be, incorporated by reference, modifies
or replaces such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this Prospectus, except as so modified or
superseded. The Company will provide without charge to each person to whom this
Prospectus has been delivered, on written or oral request of such person, a copy
(without exhibits, unless such exhibits are specifically incorporated by
reference into such documents) of any or all documents incorporated by reference
in this Prospectus. Requests for such copies should be addressed to Secretary,
United Meridian Corporation, 1201 Louisiana, Suite 1400; Houston, Texas
77002-5603, telephone number (713) 654-9110.

IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements (including the notes thereto)
included elsewhere in this Prospectus. Unless the context indicates otherwise,
the terms "Company" and "UMC" refer to UMC and its subsidiaries. For definitions
of certain terms used in this Prospectus, see "Glossary of Oil and Gas Terms."
Unless otherwise indicated, all information contained in this Prospectus assumes
no exercise of the Underwriters' over-allotment option.

THE COMPANY

BUSINESS OVERVIEW

United Meridian Corporation ("UMC" or the "Company") is a leading
independent energy company engaged in the exploration, development, production
and acquisition of oil and natural gas in North America and certain
international regions. Since its inception in 1987, the Company has grown
through a series of strategic corporate and property acquisitions, and a
successful exploration program that has focused on UMC's core operating areas in
North America and in certain high potential, international regions. In North
America, the Company's production is concentrated in the Gulf Coast, Permian
Basin, Mid-continent and Rocky Mountain regions and in Western Canada.
Internationally, the Company currently operates in the West African oil and
natural gas producing regions of Cote d'Ivoire and Equatorial Guinea. In
addition, the Company has been awarded a production sharing contract or
petroleum concession agreement ("PSC") on one block and has a contractual
arrangement covering PSCs on two adjacent blocks in Pakistan and expects to
receive a PSC in Bangladesh.

Since January 1, 1996, the Company has initiated significant new oil and
natural gas production. Oil production increased 46% to 10.2 Mbopd during the
first half of 1996 as compared to 7.0 Mbopd for the similar period of 1995. The
majority of this increase was the result of the Company's successful exploration
and development activities in Cote d'Ivoire. Natural gas production increased
26% to 157 MMcfd during the first half of 1996 as compared to 125 MMcfd for the
similar period of 1995. The majority of this increase was the result of new
production from the Gulf of Mexico. The Company's EBITDA increased 89% to $82.7
million in the first half of 1996 from $43.9 million in the comparable period of
1995 as a result of increased production and higher average sales prices for oil
and natural gas. UMC expects that it will experience increased natural gas
production levels and substantially increased oil production through 1997. The
Company anticipates that its average daily rate of oil production should
increase to 15-18 Mbopd for the fourth quarter of 1996 based upon commencement
of Phase I oil production from the Zafiro complex in Equatorial Guinea in August
1996. While year end reserve evaluations will not be available until early 1997,
based on the results of the Company's drilling program for 1996, it is expected
that acquisitions, extensions, and other additions to reserves for the year will
exceed production and reserve dispositions for the Company.

The Company's successful exploration program will continue to focus on
select areas of high potential and low cost reserve additions, both domestically
and internationally. The Company will concentrate its North American exploration
program on its interests in 86 offshore blocks in the Gulf of Mexico and in over
132,000 gross acres (22,000 net acres) in the Cotton Valley Reef trend in East
Texas. Additionally, the Company has initiated exploration activities utilizing
3-D seismic data in the Permian Basin of West Texas and New Mexico, and in the
Williston Basin of North Dakota and Montana. Internationally, the Company will
continue to concentrate on the 13 PSCs it either currently holds or is
negotiating in Cote d'Ivoire, Equatorial Guinea, Pakistan and Bangladesh, which
collectively cover over 12 million gross acres. The Company will act as operator
on 12 of these 13 PSCs. UMC currently estimates that it will make capital
expenditures in 1996 of approximately $95 million in North America ($50 million,
$35 million and $10 million for development, exploration and acquisition
activities, respectively), $43 million of which was spent in the first half of
1996. Additionally, UMC estimates that it will make capital expenditures in 1996
of approximately $110 million internationally ($73 million and $37 million for
development and exploration activities, respectively), $19 million of which was
spent in the first half of 1996. In 1997, UMC expects its capital expenditures
to be approximately $80-$100 million for North American activities and
approximately $150-$200 million for

3
<PAGE> 4

international activities. The actual level of capital expenditures will depend
on the success of the Company's drilling activities.

RECENT DEVELOPMENTS

International. Several factors attributable to the Company's international
operations have positively impacted the Company's overall production, reserves,
acreage and drilling prospects. These include, among others: (i) additional oil
discoveries and initial oil production in Equatorial Guinea; (ii) significant
opportunities for future drilling in West Africa; and (iii) new PSCs in Cote
d'Ivoire and Pakistan and an anticipated new contract in Bangladesh.

Discoveries and Production in Equatorial Guinea. The Company
anticipates adding significant reserves and production from its 25%
interest in Block B in Equatorial Guinea during 1996. UMC together with
Mobil Equatorial Guinea Corporation ("Mobil"), which holds a 75% interest
and is the operator of this block, drilled four exploration and five
development wells in the Zafiro complex, all of which were successful. Two
exploratory wells drilled in 1996 in the Zafiro complex, the Amatista No. 1
and Topacio No. 1, have successfully extended the field three miles to the
south. These two wells, plus an additional development well, the Zafiro No.
6, encountered significant known field pay zones and established additional
new pay zones where future drilling could add substantial reserves. By late
September 1996, production exceeded 40 Mbopd (9 Mbopd net to UMC) from five
wells in the Zafiro complex to a floating production, storage and
off-loading system ("FPSO"). It is anticipated that the addition of two
producing wells, constituting completion of Phase I, should increase
production to the FPSO to a rate of as much as 50 Mbopd (11 Mbopd net to
UMC) by year end 1996. UMC has initiated Phase II of the development plan
on the Zafiro complex which will include the drilling of eight additional
wells and the implementation of secondary recovery activities. The planned
expenditures in 1997 for Block B are approximately $400 million, of which
the Company's share is $100 million.

West African Drilling Activity. As a result of the Company's
historical drilling success and high quality prospects in West Africa, UMC
expects to continue an active drilling program in this area. In Equatorial
Guinea, the Company anticipates that in the fourth quarter of 1996 up to
three drilling rigs will be used to drill development and exploration wells
on the 25% owned Block B and one rig will be used to commence exploratory
drilling on the UMC-operated Block D, which is 75% owned by UMC. In Cote
d'Ivoire, the Company anticipates using two drilling rigs in the fourth
quarter of 1996 to drill development and exploration wells on its 25-45%
owned blocks. The West African drilling program contemplates approximately
10-15 exploratory wells and 20-25 development wells during the next 18
months.

New Production Sharing Contracts. UMC has entered into several new
PSCs which provide significant future exploration and development
opportunities. In Cote d'Ivoire, UMC and Shell Exploration B.V. ("Shell"),
a unit of the Royal Dutch/Shell Group, executed a PSC in September 1996 for
the Entente Block (Block CI-105) covering approximately 512,000 offshore
deepwater acres. Shell has agreed to reimburse UMC for certain expenses,
carry UMC for a significant portion of the initial 3-D seismic costs and,
if Shell elects to proceed to the operational phase, carry UMC for a
substantial portion of the initial exploration expenses, which are expected
to be incurred when drilling begins in late 1997 or early 1998. In
Pakistan, the Company has been awarded one block and is awaiting government
approval of assignments of interest on two other blocks, covering
approximately 4.4 million gross acres, approximately half of which is
offshore. UMC's interest in these three blocks, which will be 80% upon
approval of the assignments, may be reduced by bringing in other partners
prior to beginning drilling, which is expected in 1998. In Bangladesh, UMC
is finalizing a PSC on Block 22, a block it anticipates being awarded
covering approximately 3.3 million acres. UMC's interest in this block,
which will initially be 40%, may be reduced by bringing in other partners
prior to drilling. The Company continues to evaluate other worldwide
concession arrangements which might provide future exploration
opportunities for UMC.

4
<PAGE> 5

North America. Several factors attributable to the Company's North American
operations have positively impacted the Company's overall production, reserves,
acreage and drilling prospects. These include, among others: (i) a natural gas
discovery and concurrent accumulation of a major acreage position in the East
Texas Cotton Valley Reef trend; (ii) the substantial new natural gas production
from the Gulf of Mexico and identification of several new exploratory prospects;
and (iii) the exploration in the Permian Basin in West Texas and New Mexico, and
the Williston Basin in Montana and North Dakota.

Cotton Valley Reef. UMC, together with several companies including
Sonat Exploration Company, formed a joint venture in April 1996 to
participate in 3-D seismic surveys and exploration and development drilling
in the Cotton Valley Reef trend, a prolific natural gas producing region in
East Texas. Based upon successful drilling results, the Company has
continued to add to its significant acreage position in this area. As of
August 1996, UMC had accumulated approximately 132,000 gross acres (22,000
net acres), one of the largest accumulations by any operator in this trend,
in which it generally holds a 30% interest. The Company has successfully
drilled in 1996 one of two wells on its acreage in this area. During the
fourth quarter of 1996, initial gross production from this well, the Watson
No. 2, is anticipated to reach 30 MMcfd (6 MMcfd net to UMC). Twelve
separate 3-D seismic surveys are planned for this area during the balance
of 1996 and 1997. UMC and its joint venture partners plan to drill
approximately 10 exploratory wells on UMC's acreage during the balance of
1996 and 1997. Successful exploration results by UMC or other industry
participants would likely lead to expanded activity levels in 1997 and
1998.

Gulf of Mexico. The Company's natural gas production increased to 157
MMcfd during the first half of 1996 as compared to 125 MMcfd for the
similar period during 1995, primarily as a result of its production from
the Gulf of Mexico which increased 96% to 55 MMcfd from 28 MMcfd in the
same period. The Company has interests in 86 offshore blocks representing
approximately 331,000 gross acres (154,000 net acres) in this area on which
it may conduct future exploratory drilling. During 1995 and the first half
of 1996, the Company has been successful on 21 of 28 exploratory and
development wells drilled in the Gulf of Mexico, including 6 of 12
exploratory wells. UMC anticipates drilling 15 exploratory wells in 1996 in
the Gulf of Mexico, eight of which have been drilled to date, with 10 to 12
exploratory wells planned in 1997.

Permian and Williston Basins. The Company is conducting a new focused
exploration program in the Permian and Williston Basins. Based on leads
identified from the Company's extensive 2-D seismic database, the Company
is initiating 3-D seismic surveys in 12 areas in these regions to identify
exploration drilling opportunities in which it generally expects to hold
40-60% interests in these prospects. UMC is currently leasing acreage in
areas where it believes new horizontal drilling technology can be applied
to existing producing areas to increase production and reserve recoveries
as compared to conventional production techniques.

BUSINESS STRATEGY

UMC's business strategy is to increase reserves and production in a cost
effective manner through a drilling program that balances lower risk development
and exploratory drilling on UMC's North American acreage with high potential
international prospects, supplemented by opportunistic property and corporate
acquisitions. Supporting this strategy are: (i) a substantial portfolio of high
return exploration opportunities; (ii) a large exploitation inventory; and (iii)
a successful history of acquisitions. The Company also anticipates that the
continued success of its international activities will continue to move the
overall mix of its proved reserves and production toward a more equal balance
between oil and natural gas.

5
<PAGE> 6

operational control. The risks of these prospects are shared with industry
partners and a group of institutional investors on terms considered favorable to
the Company. The Company has generated a significant number of development
drilling opportunities as a result of its exploration efforts and through
producing property acquisitions. UMC has identified a large exploitation
inventory including over 120 proved undeveloped drilling sites and 560 probable
and possible drilling sites. Through June 1996, the Company has participated in
drilling 38 development wells, 35 of which were successfully completed. Total
capital expenditures for North American activities in 1996 are expected to be
approximately $95 million, $43 million of which was spent in the first half of
1996. Capital expenditures in 1997 are expected to be approximately $80-$100
million.

International. The Company's business strategy in the international arena
is to pursue selected opportunities characterized by low initial costs, high
reserve potential and the availability of existing technical data that may be
further developed using current technology. The Company believes that it has
unique management and technical expertise in identifying international
opportunities and establishing favorable operating relationships with host
governments. The Company attempts to manage major exploration commitments by
negotiating directly with host governments for terms which minimize bonuses and
initial work commitments. Additionally, the Company forms joint ventures under
which partners provide a significant amount of the initial exploration costs.
This strategy permits the Company to limit its capital exposure until commercial
development is assured. The Company has identified a large number of exploration
prospects on its Equatorial Guinea and Cote d'Ivoire acreage and has two
development programs in progress. On Block CI-11 in Cote d'Ivoire, UMC will
drill four development wells in 1996 and implement secondary recovery activities
and drill additional development wells in 1997. Total capital expenditures for
international activities in 1996 are expected to be approximately $110 million,
$19 million of which was spent in the first half of 1996. Current plans for the
balance of 1996 and 1997 include the drilling of 10-15 exploratory wells and
20-25 development wells. It is anticipated that 1997 capital expenditure levels
for international activities will be approximately $150-$200 million, depending
in part on the success of drilling activities.

Acquisitions and asset management. The Company is continually evaluating
opportunities to acquire oil and natural gas properties, primarily focusing on
properties that complement its existing reserve base. This focus allows the
Company to apply its engineering knowledge and expertise to maximize future
development potential and reduce reserve risk associated with a given
acquisition. The acquisitions must meet well-defined return, payout and cash
flow criteria. Though only $10 million in acquisitions are planned for 1996, the
Company will continue to pursue other acquisition opportunities. The Company has
acquired over $800 million of properties over the last eight years on behalf of
itself and institutional investors. In addition, as part of its business
strategy, the Company periodically evaluates and, from time to time, sells
certain of its producing properties. Such sales enable the Company to maintain
financial flexibility, reduce overhead and operating expenses and redeploy
capital to activities which are expected to have higher financial returns.
Consistent with this strategy, the Company expects to sell as much as $35
million of non-strategic North American producing properties during 1996.

Low cost operating structure. Management strives to maintain a low cost
operating structure through the implementation of the aforementioned strategies
and by employing an experienced and stable workforce. Controllable cash costs
which are continuously monitored by management include production costs and
general and administrative expenses. In 1995 UMC's production cost, before ad
valorem and production taxes, averaged $0.58 per Mcfe of production and general
and administrative expense averaged $0.17 per Mcfe of production. During the
first half of 1996, UMC incurred production costs, before ad valorem and
production taxes, and general administrative costs of $0.53 per Mcfe and $0.16
per Mcfe, respectively, down from $0.54 per Mcfe and $0.18 per Mcfe,
respectively, for the comparable period of 1995. Further per unit cost
improvement is anticipated for the balance of 1996 and 1997 as production
volumes increase and cost containment efforts continue.

6
<PAGE> 7

THE OFFERINGS

<TABLE>
<S> <C>
Shares of Common Stock offered by the
Company:

U.S. Offering...................... 2,600,000

International Offering............. 650,000
---------
Total......................... 3,250,000
=========
Shares of Common Stock offered by the
Selling Stockholders:

U.S. Offering...................... 2,000,000

International Offering............. 500,000
---------
Total......................... 2,500,000
=========
Shares of Common Stock outstanding:(1)

Before the Offerings............... 30,798,799

After the Offerings................ 34,048,799

Use of proceeds......................... The net proceeds to the Company from the sale of
the Common Stock offered hereby, estimated to be
approximately $145 million, will be used to fund
planned capital expenditures and for general
corporate purposes. Prior to incurring those costs,
the Company will use the net proceeds to repay
borrowings under the Cote d'Ivoire Facility and
also under the Credit Facility. The Credit Facility
will remain available for capital expenditures and
other general corporate purposes following the
Offerings. The Company will not receive any
proceeds from the sale of shares by the Selling
Stockholders. See "Use of Proceeds."

NYSE symbol............................. UMC
</TABLE>

- ---------------

(1) Excludes 2,892,028 shares of Common Stock reserved for issuance as of August
31, 1996 upon the exercise of outstanding stock options under the Company's
stock option plans.

7
<PAGE> 8

SUMMARY FINANCIAL DATA

The following summary financial data as of and for each of the three years
in the period ended December 31, 1995 and as of and for the six month periods
ended June 30, 1995 and 1996 are derived from the Consolidated Financial
Statements of the Company included herein and are qualified in their entirety
by, and should be read in conjunction with, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
Consolidated Financial Statements and notes thereto.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------- --------------------
1993 1994 1995 1995 1996
-------- --------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................................. $ 82,318 $ 97,817 $147,041 $ 68,774 $114,962
Costs and expenses:
Production costs........................ 30,539 36,938 42,891 19,481 25,766
General and administrative.............. 8,097 12,504 10,425 5,437 6,519
Exploration, including dry holes and
impairments.......................... 6,811 16,187 15,682 7,623 14,711
Depreciation, depletion and
amortization......................... 35,938 50,727 53,942 25,828 41,821
Impairment of proved oil and gas
properties(1)........................ 10,051 94,793 8,317 -- --
-------- --------- -------- -------- --------
Income (loss) from operations............. (9,118) (113,332) 15,784 10,405 26,145
Interest and debt expense................. (6,532) (9,040) (17,945) (8,729) (11,380)
Net income (loss)......................... (10,786) (80,989) 2,099 4,070 8,951
Net income (loss) available to common
stockholders............................ (12,284) (80,989) 615 4,070 7,420
Net income (loss) per share of common
stock................................... $ (1.06) $ (3.47) $ 0.02 $ 0.14 $ 0.24(2)
Weighted average number of shares of
common stock outstanding................ 11,588 23,330 29,259 29,035 30,474

OTHER FINANCIAL DATA:
EBITDA(3)................................. $ 43,682 $ 48,375 $ 93,725 $ 43,856 $ 82,677
Capital expenditures:(4)
Exploration and development............. $ 30,971 $ 52,137 $130,848 $ 50,639 $ 61,592
Acquisitions and other.................. 144,815 130,399 29,979 4,229 615
-------- --------- -------- -------- --------
$175,786 $ 182,536 $160,827 $ 54,868 $ 62,207
======== ========= ======== ======== ========

BALANCE SHEET DATA (AT END OF PERIOD):
Property and equipment, net............... $291,723 $ 424,930 $468,673 $417,804 $459,381
Total assets.............................. 343,223 511,214 578,450 493,940 557,784
Total long-term debt, including current
maturities.............................. 92,149 239,634 247,899 189,495 231,608
Stockholders' equity...................... 189,672 171,438 212,312 203,509 229,816
</TABLE>

- ---------------

(1) Sharp declines in oil and natural gas prices in 1993 and 1994, combined with
the implementation of Statement of Financial Accounting Standard ("SFAS")
121 in 1995, resulted in impairments on the carrying value of certain oil
and natural gas assets. See Note 3 to the Consolidated Financial Statements
of the Company.

(2) On July 25, 1996, all of the outstanding shares of Series F Convertible
Preferred Stock were converted into 1.845 million shares of Common Stock in
accordance with the automatic conversion terms of such shares. Had the
conversion of the Series F Preferred Stock occurred at January 1, 1996, the
reported earnings per share would have been $0.28 for the six months ended
June 30, 1996.

(3) Reflects income from operations plus depreciation, depletion and
amortization, impairment of proved oil and gas properties, non-recurring
costs and exploration expense. EBITDA is presented because it is a widely
accepted financial indication of the Company's ability to service and incur
debt. EBITDA should not be considered as an alternative to earnings (loss)
as an indicator of the Company's operating performance or to cash flows as a
measure of liquidity.

(4) See Consolidated Statement of Cash Flows included in the Consolidated
Financial Statements included herein.

8
<PAGE> 9

SUMMARY RESERVE AND OPERATING DATA

The following table sets forth summary information with respect to
estimates of the Company's proved oil and natural gas reserves for each of the
years in the three year period ended December 31, 1995, as evaluated by
Netherland, Sewell & Associates, Inc., Ryder Scott Company and McDaniel &
Associates Consultants, Ltd., independent petroleum engineers, and other
production, price and cost data for the same three year period and the six
months ended June 30, 1995 and 1996. For additional information relating to the
Company's oil and natural gas reserves and operating data, see "Business and
Properties -- Reserves" in the 1995 10-K, "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Results of Operations" and
Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Proved Reserves:
Oil (Mbbls)........................... 10,572 22,667 32,439
Natural gas (MMcf).................... 340,843 439,412 438,925
MMcfe (6 Mcf per bbl)................. 404,275 575,414 633,559
SEC Value of Discounted Future Net Cash
Flows ($ in thousands)(1)............. $323,568 $318,416 $505,153
Percent of Proved Developed Reserves.... 81% 74% 74%
Production Replacement %................ 589% 456% 358%
Reserve Life (years).................... 10.8 11.4 10.4
Net Production:
Oil (Mbbls)........................... 1,298 1,778 2,760 1,269 1,861
Natural gas (MMcf).................... 29,608 39,669 44,453 22,567 28,609
MMcfe (6 Mcf per bbl)................. 37,396 50,337 61,013 30,181 39,775
Average Net Sales Prices:(2)
Oil ($ per bbl)....................... $ 15.31 $ 15.00 $ 16.35 $ 16.65 $ 18.96
Natural gas ($ per Mcf)............... 2.04 1.71 1.53 1.51 2.13
Additional disclosures ($ per Mcfe):
Production and operating costs(3)..... 0.64 0.58 0.58 0.54 0.53
Ad valorem and production taxes....... 0.18 0.15 0.12 0.11 0.12
General and administrative expense.... 0.22 0.25 0.17 0.18 0.16
Oil and natural gas depletion and
depreciation....................... 0.95 0.99 0.87 0.84 1.04
</TABLE>

- ---------------

(1) Estimated future net revenue before income taxes reflects future cash
inflows less future production costs and future development costs. See Notes
to Consolidated Financial Statements.

(2) Includes the effects of the Company's hedging activities. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

(3) Costs incurred to operate and maintain wells and related equipment,
excluding ad valorem and production taxes.

9
<PAGE> 10

RISK FACTORS

The following factors should be considered carefully together with the
information provided elsewhere in this Prospectus in evaluating an investment in
the Common Stock offered hereby. This Prospectus contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth in the
following risk factors and elsewhere in this Prospectus. See "Disclosure
Regarding Forward-Looking Statements."

VOLATILE NATURE OF OIL AND NATURAL GAS MARKETS; FLUCTUATIONS IN PRICES

Revenues generated from the Company's operations are highly dependent upon
the price of and demand for oil and natural gas. Historically, the markets for
oil and natural gas have been volatile and are likely to continue to be volatile
in the future. Prices for oil and natural gas are subject to wide fluctuation in
response to relatively minor changes in the supply of and demand for oil and
natural gas, market uncertainty and a variety of additional factors that are
beyond the control of the Company. These factors include political conditions in
the Middle East, the foreign supply of oil and natural gas, the price of foreign
imports, the level of consumer product demand, weather conditions, domestic and
foreign government regulations, the price and availability of alternative fuels
and overall economic conditions. Declines in oil and natural gas prices may
adversely affect the Company's cash flow, liquidity and profitability. Lower oil
and natural gas prices also may reduce the amount of the Company's oil and
natural gas that can be produced economically. It is impossible to predict
future oil and natural gas price movements with any certainty. In order to
manage its exposure to price risks in the sale of its oil and natural gas, the
Company from time to time enters into energy price hedging arrangements covering
a portion of its actual production volumes. The Company believes that its
hedging strategies are generally conservative in nature. See "Business and
Properties" in the 1995 10-K and Note 15 of Notes to Consolidated Financial
Statements.

RELIANCE ON ESTIMATES OF PROVED RESERVES

There are numerous uncertainties inherent in estimating quantities of
proved reserves, including many factors beyond the control of the Company. The
reserve information set forth in this Prospectus represents only estimates based
on reports prepared by Ryder Scott Company, Netherland, Sewell & Associates,
Inc. and McDaniel & Associates Consultants, Ltd. as of December 31, 1993, 1994,
and 1995.

Petroleum engineering is a subjective process of estimating underground
accumulations of oil and natural gas that cannot be measured in an exact manner.
Estimates of economically recoverable oil and natural gas reserves and of future
net cash flows necessarily depend upon a number of variable factors and
assumptions, such as historical production from the area compared with
production from other producing areas, the assumed effects of regulations by
governmental agencies and assumptions concerning future oil and natural gas
prices, future operating costs, severance and excise taxes, development costs
and workover and remedial costs, all of which may in fact vary considerably from
actual results. For these reasons, estimates of the economically recoverable
quantities of oil and natural gas attributable to any particular group of
properties, classifications of such reserves based on risk of recovery and
estimates of the future net cash flows expected therefrom prepared by different
engineers or by the same engineers at different times may vary substantially.
Actual production, revenues and expenditures with respect to Company's reserves
will likely vary from estimates, and such variances may be material. See
"Business and Properties -- Reserves" in the 1995 10-K.

The discounted future net cash flows referred to in this Prospectus should
not be construed as the current market value of the estimated oil and natural
gas reserves attributable to the Company's properties. In accordance with
applicable requirements of the Commission, the estimated discounted future net
cash flows from proved reserves are generally based on prices and costs as of
the date of the estimate, whereas actual future prices and costs may be
materially higher or lower. Actual future net cash flows also will be affected
by factors such as the amount and timing of actual production, supply and demand
for oil and natural gas, curtailments or increases in consumption by natural gas
purchasers and changes in governmental regulations or taxation. The timing of
actual future net cash flows from proved reserves, and thus their actual present

10
<PAGE> 11

value, will be affected by the timing of both the production and the incurrence
of expenses in connection with development and production of oil and natural gas
properties. In addition, the 10% discount factor, which is required by the
Commission to be used to calculate discounted future net cash flows for
reporting purposes, is not necessarily the most appropriate discount factor
based on interest rates in effect from time to time and risks associated with
the Company or the oil and natural gas industry in general.

DEPENDENCE ON ACQUIRING OR FINDING ADDITIONAL RESERVES

The Company's future success depends upon its ability to find, develop or
acquire additional oil and natural gas reserves that are economically
recoverable. The rate of production from oil and natural gas properties declines
as reserves are depleted. Except to the extent the Company acquires additional
properties containing proved reserves, conducts successful exploration and
development activities or, through engineering studies, identifies additional
zones behind the casing of a well or additional secondary recovery reserves, the
proved reserves of the Company will decline as reserves are produced. Future oil
and natural gas production is therefore highly dependent upon the Company's
level of success in acquiring or finding additional reserves. There can be no
assurance, however, that the Company's planned development projects and
acquisition activities will result in significant additional reserves or that
the Company will have continuing success drilling productive wells at low
finding and development costs. Furthermore, while the Company's revenues may
increase if prevailing oil and natural gas prices increase significantly, the
Company's finding costs for additional reserves could also increase. See
"Business and Properties -- Reserves" in the 1995 10-K and Notes to Consolidated
Financial Statements.

SUBSTANTIAL CAPITAL REQUIREMENTS

The Company has made, and will continue to make, substantial capital
expenditures for the acquisition, exploration and development of oil and natural
gas reserves. Historically, the Company has financed these expenditures
primarily with proceeds from debt and equity financings, cash provided by
operating activities, asset sales and sales of partial interests in foreign
concessions. The Company currently plans to increase capital expenditures from
approximately $200 million in fiscal 1996 to approximately $230 to $300 million
in fiscal 1997 principally for anticipated development costs in Western Africa
and the Gulf Coast region, including East Texas. Management believes that, after
debt service, it will have sufficient cash provided by operating activities,
availability under the Credit Facility, the Offerings and other debt financings
and asset sales to fund planned capital expenditures in 1997. If revenues
decrease as a result of lower oil and natural gas prices or otherwise, the
Company may have limited ability to expend the capital necessary to replace its
reserves or to maintain production at current levels, resulting in a decrease in
production over time. Where the Company is not the majority owner, it may have
no control over the timing or amount of capital expenditures associated with the
particular project. Additionally, capital expenditures associated with
international projects can be significantly greater than those typically
associated with the Company's domestic projects. If the Company is not able to
fund its capital expenditures, the Company's interests in some of its properties
may be reduced or forfeited. If the Company's cash flow from operations is not
sufficient to satisfy its capital expenditure requirements, there can be no
assurance that additional debt or equity financing, asset sales or sales of
partial interests in foreign concessions will be available to meet these
requirements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."

ECONOMIC RISKS OF OIL AND NATURAL GAS OPERATIONS

The Company's oil and natural gas operations are subject to the economic
risks typically associated with exploration, development and production
activities, including the necessity of significant expenditures to locate and
acquire producing properties and to drill exploratory wells. In conducting
exploration and development activities, the Company may drill unsuccessful wells
and experience losses and, if oil or natural gas is discovered, there is no
assurance that such oil or natural gas can be economically produced or
satisfactorily marketed. The presence of unanticipated pressure or
irregularities in formations, miscalculations or accidents

11
<PAGE> 12

may cause the Company's exploration, development and production activities to be
unsuccessful, resulting in a total loss of the Company's investment in such
activities.

DRILLING RISKS

The nature of the oil and natural gas business involves certain operating
hazards such as well blowouts, cratering, explosions, uncontrollable flows of
oil, natural gas or well fluids, fires, formations with abnormal pressures,
pollution, releases of toxic gas and other environmental hazards and risks, any
of which could result in substantial losses to the Company. In addition, the
Company may be liable for environmental damages caused by previous owners of
property purchased by the Company. As a result, substantial liabilities to third
parties or governmental entities may be incurred, the payment of which could
reduce or eliminate the funds available for exploration, development or
acquisitions, or result in loss of the Company's properties. Additionally, some
of the Company's oil and natural gas operations are located in an area that is
subject to tropical weather disturbances, some of which can be severe enough to
cause substantial damage to facilities and possibly interrupt production. In
accordance with customary industry practices, the Company maintains insurance
against some, but not all, of such risks and losses. The occurrence of such an
event not fully covered by insurance could have a material adverse effect on the
financial position and results of operations of the Company.

COMPETITIVE INDUSTRY

The Company operates in a highly competitive environment. In seeking to
acquire desirable producing properties or new leases for future exploration and
in marketing its oil and natural gas production, the Company faces intense
competition from both major and independent oil and natural gas companies, as
well as from numerous individuals, drilling programs and marketers. Many of
these competitors have financial and other resources substantially in excess of
those available to the Company. See "Business and Properties -- Competition" in
the 1995 10-K.

FOREIGN OPERATIONS

The Company's international operations are currently being conducted in the
countries of Cote d'Ivoire and Equatorial Guinea in Western Africa and in
Pakistan, and are anticipated to be conducted in Bangladesh. Such operations are
subject to political, economic and other uncertainties, including, among others,
risk of war, revolution, border disputes, expropriation, renegotiation or
modification of existing contracts, import, export and transportation
regulations and tariffs, taxation policies, including royalty and tax increases
and retroactive tax claims, exchange controls, currency fluctuations and other
uncertainties arising out of foreign government sovereignty over the Company's
international operations. The Company's international operations may also be
adversely affected by laws and policies of the United States affecting foreign
trade, taxation and investment. Furthermore, in the event of a dispute arising
from international operations, the Company may be subject to the exclusive
jurisdiction of foreign courts or may not be successful in subjecting foreign
persons to the jurisdiction of courts in the United States. On occasion, certain
African countries, including Nigeria, have asserted rights to land, including
oil and natural gas properties, through border disputes. If a country other than
the one that granted the Company the PSC to properties successfully asserted
superior rights to such properties, the Company's interests could be adversely
affected. Certain regions of Africa and other regions of the world have a
history of political and economic instability. Such instability could result in
new governments or the adoption of new policies that might assume a
substantially more hostile attitude toward foreign investment. In an extreme
case, such a change could result in voiding pre-existing contracts and/or
expropriation of foreign-owned assets. Although the Company operates in
countries that have relatively stable political and economic environments, there
can be no assurance that political, economic and other uncertainties will not
develop in the region or countries in which the Company operates.

REGULATION

The petroleum industry is subject to various types of regulation throughout
the world, including regulation in the United States by state and federal
agencies, relating to the development, production,

12
<PAGE> 13

marketing and transmission of oil and natural gas, as well as environmental and
safety matters. There is no assurance that laws and regulations enacted in the
future will not adversely affect the Company's exploration for and production
and marketing of oil and natural gas. Many of these laws and regulations have
become more stringent in recent years, often imposing greater liability on a
larger number of potentially responsible parties. Although the Company believes
it is in substantial compliance with all applicable laws and regulations, the
requirements imposed by such laws and regulations are frequently changed and
subject to interpretation, and the Company is unable to predict the ultimate
cost of compliance with these requirements or their effect on its operations.
Under certain circumstances, the Minerals Management Service (the "MMS"), an
agency of the U.S. Department of the Interior, may require any Company
operations on federal leases to be suspended or terminated. Any such
suspensions, terminations or inability to meet applicable bonding requirements
could materially and adversely affect the Company's financial condition and
operations. Although significant expenditures may be required to comply with
governmental laws and regulations applicable to the Company, to date such
compliance has not had a material adverse effect on the earnings or competitive
position of the Company. It is possible that such regulations in the future may
add to the cost of operating offshore drilling equipment or may significantly
limit drilling activity. See "Business and Properties -- Environmental
Matters -- United States Environmental Regulations" and "-- Canadian
Environmental Regulations" in the 1995 10-K.

ABSENCE OF DIVIDENDS ON COMMON STOCK

The Company currently intends to retain its cash for the operation and
expansion of its business, including exploration, development and acquisition
activities. The terms of the Credit Facility contain restrictions on the payment
of dividends to holders of Common Stock. Accordingly, the Company's ability to
pay dividends will depend upon such restrictions and the Company's results of
operations, financial condition, capital requirements and other factors deemed
relevant by the Board of Directors. See "Price Range of Common Stock and
Dividend Policy."

CERTAIN ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation and Bylaws and the Delaware
General Corporation Law contain provisions that may have the effect of
discouraging unsolicited takeover proposals for the Company. These provisions,
among other things, provide for the classification of the Board of Directors,
restrict the ability of stockholders to take action by written consent,
authorize the Board of Directors to designate the terms of and issue new series
of preferred stock, limit the personal liability of directors, require the
Company to indemnify directors and officers to the fullest extent permitted by
applicable law and impose restrictions on business combinations with certain
interested parties. In addition, the Company has granted one stockholder's right
for each share of Common Stock entitling the holder thereof to purchase, upon
the accumulation by a party of 15% or more of the outstanding voting stock of
the Company or the announcement of an unsolicited offer to acquire 30% or more
of the Company's voting stock, the capital stock of the Company or an acquiring
entity at a substantial discount from the then current market price.

13
<PAGE> 14

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included in this
Prospectus, including without limitation, statements under "Prospectus Summary,"
"Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" regarding planned capital expenditures, increases in
oil and gas production, the number of anticipated wells to be drilled in 1996
and thereafter, the Company's financial position, business strategy and other
plans and objectives for future operations, are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. There are numerous uncertainties
inherent in estimating quantities of proved oil and natural gas reserves and in
projecting future rates of production and timing of development expenditures,
including many factors beyond the control of the Company. Reserve engineering is
a subjective process of estimating underground accumulations of oil and natural
gas that cannot be measured in an exact way, 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 made by different
engineers often vary from one another. In addition, results of drilling, testing
and production subsequent to the date of an estimate may justify revisions of
such estimate and such revisions, if significant, would change the schedule of
any further production and development drilling. Accordingly, reserve estimates
are generally different from the quantities of oil and natural gas that are
ultimately recovered. Additional important factors that could cause actual
results to differ materially from the Company's expectations are disclosed under
"Risk Factors" and elsewhere in this Prospectus, including without limitation in
conjunction with the forward-looking statements included in this Prospectus. All
subsequent written and oral forward-looking statements attributable to the
Company or persons acting on its behalf are expressly qualified in their
entirety by such factors.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the shares
of Common Stock offered hereby (at an offering price of $46.50 per share and
after deducting estimated underwriter discounts and offering expenses) are
estimated to be approximately $145 million ($184 million if the over-allotment
option is exercised). The Company intends to apply these net proceeds to fund
planned capital expenditures and for general corporate purposes. Prior to
incurring those costs, the Company will use the net proceeds to repay borrowings
under the Cote d'Ivoire Facility and also under the Credit Facility. The Credit
Facility will remain available for capital expenditures and other general
corporate purposes following the Offerings. The Company will not receive any
proceeds from the sale of shares of Common Stock by the Selling Stockholders.

14
<PAGE> 15

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Since July 22, 1993 the Company's Common Stock has been traded on the NYSE
under the symbol "UMC." As of August 31, 1996, there were 30,798,779 shares of
Common Stock outstanding held by approximately 212 stockholders of record. The
Company has never paid dividends on its Common Stock and does not expect to pay
dividends in the near future.

The following table shows the high and low sales prices of the Common Stock
on the NYSE for the periods indicated:

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
QUARTER ENDED, 1994
March 31................................. $15.50 $12.63
June 30.................................. $15.88 $12.00
September 30............................. $15.25 $12.75
December 31.............................. $14.63 $11.00
QUARTER ENDED, 1995
March 31................................. $14.25 $10.25
June 30.................................. $16.13 $13.38
September 30............................. $18.75 $15.13
December 31.............................. $18.13 $16.13
QUARTER ENDED, 1996
March 31................................. $25.88 $15.00
June 30.................................. $36.25 $23.13
September 30............................. $48.38 $32.13
December 31 (through October 31)......... $50.00 $43.88
</TABLE>

CAPITALIZATION

The following table sets forth, as of August 31, 1996, the historical
unaudited consolidated capitalization of the Company and as adjusted to give
effect to the Offerings and the application of the estimated net proceeds
therefrom. This table should be read in conjunction with "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the Company's Consolidated Financial Statements and notes
thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AUGUST 31, 1996
----------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Credit Facility.................................................. $ 65,731 $ --
10 3/8% Senior Subordinated Notes................................ 150,000 150,000
Cote d'Ivoire Facility........................................... 33,750 --
--------- ---------
Total long-term debt (including current maturities)...... 249,481 150,000
--------- ---------
Stockholders' equity:
Common Stock, $0.01 par value, 46,000,000 shares authorized;
30,798,799 shares issued and outstanding; 34,048,799 shares
issued and outstanding as adjusted............................ 308 340
Additional paid-in capital....................................... 350,376 495,317
Foreign currency translation adjustment.......................... (4,214) (4,214)
Retained earnings (deficit)...................................... (111,949) (111,949)
--------- ---------
Total stockholders' equity............................... 234,521 379,494
--------- ---------
Total capitalization................................... $ 484,002 $ 529,494
========= =========
</TABLE>

15
<PAGE> 16

RECENT DEVELOPMENT

On October 24, 1996, UMC announced its third quarter 1996 consolidated net
income of $2.8 million, or $0.09 per share of Common Stock, compared to a net
loss of $1.9 million, or $0.09 per share of Common Stock, for the third quarter
of 1995. For the first nine months of 1996, net income totaled $11.8 million, or
$0.33 per share of Common Stock, versus $2.2 million, or $0.05 per share of
Common Stock, earned in the same period in 1995. Total revenues for the third
quarter of 1996 were $55.1 million, compared to $29.1 million for the third
quarter of 1995, and for the first nine months of 1996 they were $170.0 million,
compared to $97.8 million for the first nine months of 1995. Included in third
quarter 1996 amounts is a $7.6 million pre-tax gain from the sale of
international contract interests. Interim results are not necessarily indicative
of the results which may be expected for any other interim period or for the
full year.

SUMMARY UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL DATA

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------- ---------------------
1995 1996 1995 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
Revenues...................................... $ 29,069 $ 55,063 $ 97,843 $170,025
Costs and expenses:
Production costs........................... 11,318 11,919 30,799 37,685
General and administrative................. 1,646 3,040 7,083 9,559
Exploration, including dry holes and
impairments.............................. 4,496 8,105 12,119 22,816
Depreciation, depletion and amortization... 13,087 21,072 38,915 62,893
-------- -------- -------- --------
Income (loss) from operations................. (1,478) 10,927 8,927 37,072
Interest and debt expense..................... (3,098) (5,440) (11,827) (16,820)
Net income (loss)............................. (1,852) 2,838 2,218 11,789
Net income (loss) per share of common stock... $ (0.09) $ 0.09 $ 0.05 $ 0.33
Weighted average number of shares of common
stock outstanding.......................... 27,999 32,025 29,207 30,695
BALANCE SHEET DATA (AT END OF PERIOD):
Property and equipment, net................... $447,000 $481,227
Total assets.................................. 563,172 610,850
Long-term total debt, including current
maturities................................. 217,818 255,117
Stockholders' equity.......................... 212,959 240,396
</TABLE>

16
<PAGE> 17

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected historical consolidated financial data of the
Company for each year in the five-year period ended December 31, 1995 is derived
from, and qualified by reference to, the Company's Consolidated Financial
Statements and the notes thereto. The consolidated financial data as of December
31, 1991, 1992, 1993, 1994 and 1995 and for the years then ended were derived
from the historical Consolidated Financial Statements of the Company, which were
audited by Arthur Andersen LLP, independent certified public accountants. The
consolidated financial information as of June 30, 1995 and 1996, and for the six
months ended June 30, 1995 and 1996, were derived from the unaudited historical
consolidated financial statements included elsewhere in this Prospectus. In the
opinion of the Company, the unaudited consolidated financial statements reflect
all adjustments which are of a normal recurring nature, necessary for a fair
presentation of the financial position and results of operation for the
unaudited period. The results of operations for the six months ended June 30,
1996 are not necessarily indicative of the results to be expected for the full
year. The selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and with the Company's Consolidated Financial Statements and notes
thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------------------------- -------------------
1991 1992 1993(1) 1994(1) 1995 1995 1996
-------- -------- -------- --------- -------- -------- --------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Gas sales................................... $ 38,866 $ 43,019 $ 60,457 $ 67,763 $ 68,228 $ 34,122 $ 60,986
Oil sales................................... 22,773 17,257 19,877 26,675 45,122 21,128 35,284
Gain on sale of assets and other............ 5,129 5,793 1,984 3,379 33,691 13,524 18,692
-------- -------- -------- --------- -------- -------- --------
Total revenues.......................... 66,768 66,069 82,318 97,817 147,041 68,774 114,962
-------- -------- -------- --------- -------- -------- --------
Costs and expenses:
Production costs............................ 21,640 21,233 30,539 36,938 42,891 19,481 25,766
General and administrative.................. 8,459 7,213 8,097 12,504 10,425 5,437 6,519
Exploration, including dry holes............ 6,713 5,769 6,811 16,187 15,682 7,623 14,711
Depreciation, depletion and amortization.... 25,969 25,155 35,938 50,727 53,942 25,828 41,821
Impairment of proved oil and gas
properties(2)............................. -- -- 10,051 94,793 8,317 -- --
Interest expense............................ 10,370 6,434 6,532 9,040 17,945 8,729 11,380
Other credits, net.......................... (283) (71) (2,102) 141 (375) (305) (78)
-------- -------- -------- --------- -------- -------- --------
72,868 65,733 95,866 220,330 148,827 66,793 100,119
-------- -------- -------- --------- -------- -------- --------
Income (loss) before taxes, discontinued
operations and cumulative effect of changes
in accounting principles.................... (6,100) 336 (13,548) (122,513) (1,786) 1,981 14,843
Income tax benefit (provision)................ 2,333 1,657 6,305 41,524 3,885 2,089 (5,892)
-------- -------- -------- --------- -------- -------- --------
Income (loss) before discontinued operations
and cumulative effect of changes in
accounting principles....................... (3,767) 1,993 (7,243) (80,989) 2,099 4,070 8,951
Cumulative effect of changes in accounting
principles, net of tax...................... -- (368) (3,543) -- -- -- --
-------- -------- -------- --------- -------- -------- --------
Net income (loss)............................. (3,767) 1,625 (10,786) (80,989) 2,099 4,070 8,951
Preferred stock dividends..................... -- (782) (1,498) -- (1,484) -- (1,531)
-------- -------- -------- --------- -------- -------- --------
Net income (loss) available to common
stockholders................................ $ (3,767) $ 843 $(12,284) $ (80,989) $ 615 $ 4,070 $ 7,420
======== ======== ======== ========= ======== ======== ========
Net income (loss) per share of common stock... $ (1.33) $ 0.06 $ (1.06) $ (3.47) $ 0.02 $ 0.14 $ 0.24(3)
Weighted average number of shares of common
stock outstanding........................... 2,833 13,143 11,588 23,330 29,259 29,035 30,474
OTHER FINANCIAL DATA:
EBITDA(4)..................................... $ 36,669 $ 37,623 $ 43,682 $ 48,375 $ 93,725 $ 43,856 $ 82,677
Capital expenditures:(5)
Exploration and development................. $ 28,738 $ 12,430 $ 30,971 $ 52,137 $130,848 $ 50,639 $ 61,592
Acquisitions and other...................... 4,983 7,930 144,815 130,399 29,979 4,229 615
-------- -------- -------- --------- -------- -------- --------
$ 33,721 $ 20,360 $175,786 $ 182,536 $160,827 $ 54,868 $ 62,207
======== ======== ======== ========= ======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD):
Property and equipment, net................... $181,297 $167,885 $291,723 $ 424,930 $468,673 $417,804 $459,381
Total assets.................................. 208,084 197,207 343,223 511,214 578,450 493,940 557,784
Long-term debt, including current
maturities.................................. 97,660 67,990 92,149 239,634 247,899 189,495 231,608
Stockholders' equity.......................... 70,586 90,985 189,672 171,438 212,312 203,509 229,816
</TABLE>

- ---------------

See notes (1)-(5) on following page.

17
<PAGE> 18

- ---------------

(1) The Company made significant acquisitions in 1993 and 1994. See Notes to the
Consolidated Financial Statements included herein.

(2) See Note 3 of Notes to Consolidated Financial Statements regarding the
Company's policy for assessing the recoverability of proved oil and natural
gas properties. In 1993, the Company recorded a total pre-tax charge of
$15.4 million against earnings, $10.1 million of which applied to 1993 and
$3.5 million which applied to periods prior to 1993, net of a deferred tax
benefit of $1.8 million and in 1994 a pre-tax charge against earnings of
$94.8 million. In 1995, the Company adopted SFAS 121, resulting in a pre-tax
impairment charge of $8.3 million.

(3) On July 25, 1996, all of the outstanding shares of Series F Convertible
Preferred Stock were converted into 1.845 million shares of Common Stock in
accordance with the automatic conversion terms of such shares. Had the
conversion of the Series F Preferred Stock occurred at January 1, 1996, the
reported earnings per share would have been $0.28 for the six months ended
June 30, 1996.

(4) Reflects income from operations plus depreciation, depletion and
amortization, impairment of proved oil and gas properties, non-recurring
costs and exploration expense. EBITDA is presented because it is a widely
accepted financial indication of the Company's ability to service and incur
debt. EBITDA should not be considered as an alternative to earnings (loss)
as an indicator of the Company's operating performance or to cash flows as a
measure of liquidity.

(5) See Consolidated Statement of Cash Flows included in the Consolidated
Financial Statements included herein.

18
<PAGE> 19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

The following discussion is intended to assist in understanding the
Company's financial position and results of operations for each year in the
three year period ended December 31, 1995 and for the six months ended June 30,
1995 and 1996. The Consolidated Financial Statements and the notes thereto
included elsewhere in this Prospectus should be referred to in conjunction with
this discussion.

OVERVIEW

The Company was incorporated in 1987 to pursue opportunities to acquire oil
and natural gas properties. Since its inception, the Company has grown through a
series of strategic corporate and property acquisitions, combined with an
exploration program that focuses on UMC's existing properties in North America
and in certain international regions. Management's strategy is to increase
reserves and production in a cost effective manner through a drilling program
that balances lower risk development and exploratory drilling in the Company's
North America acreage with higher potential international prospects,
supplemented by opportunistic property and corporate acquisitions.

The Company's international activities were initiated in 1991 and are now
focused on the offshore regions of Equatorial Guinea and Cote d'Ivoire, where it
holds substantial acreage positions in highly prospective regions. The Company's
acreage in Equatorial Guinea is located in the Nigerian Delta and is directly
adjacent to the prolific oil fields offshore Nigeria, which in 1995 had annual
oil production of approximately 620 MMbbls. Management believes that this region
has the potential to significantly increase the Company's reserves based upon
results of drilling to date and analysis of technical data regarding additional
prospects. Production is expected to reach as much as 50 Mbopd (11 Mbopd net to
UMC) by year end 1996 from Block B in Equatorial Guinea. In Cote d'Ivoire, the
Company has discovered oil and natural gas by evaluating and pursuing geological
leads and drilling results generated by the majors. Initial development of a
portion of the Company's acreage has resulted in production in excess of 16
Mbopd and 50 MMcfd (3 Mbopd and 8 MMcfd net to UMC), with a majority of the
acreage on the five PSCs still to be explored.

Although the Company's reserves have historically been concentrated in
natural gas, recent discoveries, primarily from the Company's international
operations, are shifting the percentage of reserves represented by oil and
condensate toward a more equal balance with natural gas reserves. Concurrently,
the Company expects to continue the historical trend of adding to its North
American reserve base. The Company believes these additions to reserves, both
domestically and internationally, will lead to significant increases in
production through 1997.

The Company has historically entered into oil and natural gas price swaps,
or other similar hedging transactions, on a portion of its production volumes to
reduce its exposure to price fluctuations. The sale prices for oil and natural
gas shown in results of operations described below reflect hedging transactions
undertaken by the Company. See Notes 2 and 15 of Notes to Consolidated Financial
Statements.

The Company follows the successful efforts method of accounting for oil and
natural gas producing activities. Under this method, the Company capitalizes all
costs incurred to acquire mineral interests in oil and natural gas properties,
to drill and equip exploratory wells in which proved reserves are discovered and
to drill and equip development wells. Geological and geophysical costs,
including sizable upfront seismic costs, delay rentals and technical support
costs are expensed as incurred except in those circumstances where the Company
has a contractual right to recover such costs from additional proved reserves,
in which case they are capitalized. The costs of drilling and equipping
exploratory wells in which proved reserves are not discovered are expensed upon
determination that a well does not justify commercial development. The
capitalized costs of producing oil and natural gas properties are depreciated
and depleted by the units-of-production method based on estimated proved
reserves. Unproved oil and natural gas properties are periodically assessed for
impairment of value, and are expensed in the period in which the impairment is
recognized. The successful efforts method of accounting could affect the
Company's income from operations depending upon the Company's level of
exploration drilling and the results of such drilling in any year.

19
<PAGE> 20

RESULTS OF OPERATIONS

The following table sets forth information with respect to the Company's
production and average unit prices and costs for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Production:
Oil (Mbbls)
U.S......................... 917 1,160 1,826 866 1,122
Canada...................... 381 618 649 334 295
Cote d'Ivoire............... -- -- 285 69 444
------- ------- ------- ------- -------
Total.................. 1,298 1,778 2,760 1,269 1,861
Natural Gas (MMcf)
U.S......................... 26,785 35,182 38,878 19,696 24,850
Canada...................... 2,823 4,487 5,383 2,871 2,516
Cote d'Ivoire............... -- -- 192 -- 1,243
------- ------- ------- ------- -------
Total.................. 29,608 39,669 44,453 22,567 28,609
Average net sales price,
including hedging:
Oil ($ per bbl)
U.S......................... $ 15.50 $ 14.93 $ 16.41 $ 16.40 $ 19.32
Canada...................... 14.85 15.14 16.59 17.59 17.85
Cote d'Ivoire............... -- -- 15.45 15.04 18.79
------- ------- ------- ------- -------
Average................ $ 15.31 $ 15.00 $ 16.35 $ 16.65 $ 18.96
Natural Gas ($ per Mcf)
U.S......................... $ 2.08 $ 1.73 $ 1.58 $ 1.57 $ 2.23
Canada...................... 1.66 1.58 1.17 1.15 1.37
Cote d'Ivoire............... -- -- 1.72 -- 1.73
------- ------- ------- ------- -------
Average................ $ 2.04 $ 1.71 $ 1.53 $ 1.51 $ 2.13
</TABLE>

SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1995

Oil and natural gas revenues for the six months ended June 30, 1996 were
$96.3 million, or 74.2% greater than the six months ended June 30, 1995 amount
of $55.3 million. The increase in oil and natural gas revenues was primarily
attributable to significant improvements in oil and natural gas prices for the
period and increased production volumes of both oil and natural gas.

The average sales price for natural gas increased $0.62 per Mcf or 41.1% in
the first six months of 1996 from the first six months of 1995. Natural gas
production for the six months ended June 30, 1996 was 28,609 MMcf, an increase
of 26.8% over 1995 volumes due primarily to new production from the Gulf of
Mexico and gas production in Cote d'Ivoire which commenced late in 1995. The
average sales price for oil increased $2.31 per bbl or 13.9% in the first six
months of 1996 compared to the first six months of 1995. Oil production
increased 46.7% or 592 Mbbls in the first six months of 1996 due primarily to
increased oil production in Cote d'Ivoire and condensate production in the Gulf
of Mexico.

Production costs, including ad valorem and production taxes, for the first
six months of 1996 of $25.8 million increased 32.3% from $19.5 million for the
first six months of 1995, with the increase primarily attributable to production
in Cote d'Ivoire. However, production costs per Mcfe remained flat at $0.65 in
the first six months of 1996 and 1995.

General and administrative expenses for the six months ended June 30, 1996
were $6.5 million compared to $5.4 million for the six months ended June 30,
1995, primarily due to an overall increase in the Company's

20
<PAGE> 21

operations. However, in the first six months of 1996, general and administrative
expenses per Mcfe of production were $0.16 compared to $0.18 for the comparable
period of 1995 or a decrease of 11.1%.

Exploration, dry hole and lease impairment expense for the first six months
of 1996 was $14.7 million compared to $7.6 million for the first six months of
1995. This increase of $7.1 million was primarily due to increased geological
and geophysical costs, reflecting a higher level of international and North
American exploration activity in 1996 and increased seismic and dry hole costs.

Depreciation, depletion and amortization ("DD&A") expense for the first six
months of 1996 of $41.8 million increased 62.0% from $25.8 million for the six
months ended June 30, 1995 due to increased production levels. Furthermore, a
greater proportion of the Company's oil and natural gas volumes were produced
from the Gulf of Mexico region which historically has had higher amortization
rates.

Interest and debt expense for the first six months of 1996 was $11.4
million compared to $8.7 million for the first six months of 1995. This $2.7
million increase was primarily due to higher average interest rates in 1996
relating to the issuance of the 10 3/8% Senior Subordinated Notes due 2005 (the
"Senior Subordinated Notes") in the fourth quarter of 1995.

An income tax provision of $5.9 million (of which $0.3 million is a current
provision and $5.6 million is a deferred provision) was recognized as of June
30, 1996, compared to a benefit of $2.1 million for the comparable period of
1995. During the second quarter of 1995, an on-going audit of the Company's
Canadian operations was completed with favorable results, triggering the release
of $0.7 million in deferred income taxes and generation of a $0.6 million
current tax receivable. Consistent with SFAS 109, the income tax provision or
benefit is derived from changes in deferred income taxes on the balance sheet.

The Company reported net income of $9.0 million, or $0.24 per share, for
the first six months of 1996 compared to net income of $4.1 million, or $0.14
per share, for the comparable period in 1995.

YEAR ENDED DECEMBER 31, 1995 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1994

Oil and natural gas revenues for 1995 were $113.4 million, or 20.1% greater
than 1994 oil and natural gas revenues of $94.4 million. The average sales price
before hedging for U.S. natural gas decreased to $1.46 per Mcf or 15.1% in 1995
from 1994. The impact of hedging on natural gas prices received and natural gas
revenues for 1995 and 1994 was an increase (decrease) of $0.07 and $(0.01) per
Mcf and $3.5 million and $(0.4) million, respectively. Natural gas production
for 1995 was 44,453 MMcf, an increase of 12.1% over 1994 volumes due primarily
to the acquisition of General Atlantic Resources, Inc. ("GARI") in late 1994 and
commencement of production in Cote d'Ivoire. The average sales price before
hedging for oil increased 7.7% in 1995 compared to 1994. The impact of hedging
on oil prices received and oil revenues for 1995 and 1994 was an increase of
$0.22 and $0.03 per barrel and $0.6 million and $0.1 million, respectively. Oil
production increased 55.2% or 982 Mbbls in 1995, due primarily to commencement
of oil production in Cote d'Ivoire and the GARI acquisition in late 1994.

The disposition of oil and natural gas assets either for rate of return,
capital funding requirements or political risk mitigation generated gains on
sales of assets of $31.2 million in 1995, as compared to $0.7 million in 1994.
The largest contributors to the gain in 1995 were the sales of partial interests
in Block CI-01 and CI-02 in Cote d'Ivoire and Blocks B, C and D in Equatorial
Guinea. From these partial interest sales, the Company received $40.1 million in
consideration in 1995 and 1996. A pre-tax gain of $18.3 million was recognized
on 1995 proceeds of $22.1 million. During 1995, the Company recognized $12.9
million as gain on sales of producing properties in North America.

Production costs for 1995 of $42.9 million increased 16.3% from $36.9
million for 1994, primarily due to a full year of ownership of GARI and
commencement of production in Cote d'Ivoire. However, on a cost per Mcfe basis,
production costs for 1995 decreased $0.03 per Mcfe when compared to 1994.

General and administrative expense for 1995 was $10.4 million compared to
$12.5 million in 1994. This decrease was due to (i) certain non-recurring costs
in 1994 associated with the GARI merger; (ii) an increase in recovery of
management fees from institutional partners; (iii) an increase in recovery of
overhead from

21
<PAGE> 22

industry partners domestically and internationally and (iv) certain
consolidation efficiencies from the GARI merger. For the reasons previously
mentioned, general and administrative expense as a percentage of total revenue
decreased from 12.8% in 1994 to 7.1% in 1995.

Exploration, dry hole and lease impairment expense for 1995 totaled $15.7
million as compared to $16.2 million in 1994. This decrease of $0.5 million was
primarily due to recovery of costs incurred from the sale of certain of the
Company's interests in Cote d'Ivoire and Equatorial Guinea as previously
discussed, offset by higher exploration activity levels internationally and
offshore Gulf of Mexico.

DD&A expense for 1995 of $53.9 million increased 6.3% from $50.7 million
for 1994. However, the rate per Mcfe of oil and natural gas DD&A decreased 12.1%
from $0.99 per Mcfe in 1994 to $0.87 per Mcfe in 1995. This absolute increase
was primarily attributable to increased production levels and commencement of
production in Cote d'Ivoire, which was offset by decreases in net book values
due primarily to the impairment of proved properties recorded at December 31,
1994.

During 1995, the Financial Accounting Standards Board (FASB) issued SFAS
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of. The Company adopted the provisions of SFAS 121 during
the fourth quarter of 1995, recording a pre-tax impairment of $8.3 million and
an after-tax effect of $5.1 million.

Interest and debt expense for 1995 was $17.9 million compared to $9.0
million in 1994. This $8.9 million increase was primarily due to the increased
debt levels incurred to acquire GARI and to support the 1995 capital expenditure
program, which was dominated by development expenditures in the Gulf of Mexico
and Western Africa. The Company's average interest rate for 1995 and 1994 was
7.47% and 5.95%, respectively. The increase in the average interest rate was due
primarily to the issuance of the Senior Subordinated Notes during the fourth
quarter of 1995. While raising the Company's average interest rate, issuance of
the Senior Subordinated Notes replenished liquidity available under the
Company's Credit Facility.

An income tax benefit of $3.9 million was recognized in 1995, compared to a
benefit of $41.5 million in 1994. Consistent with SFAS 109, the income tax
benefit was derived primarily from changes in deferred income tax assets and
liabilities recorded on the balance sheet. The primary items affecting the 1995
deferred tax benefit were the property sales and the impairment of proved
properties relating to the adoption of SFAS 121 during the fourth quarter of
1995. The 1994 $94.8 million impairment of proved oil and gas property was the
largest item affecting the 1994 deferred tax benefit. All of these transactions
had the effect of reducing the difference between tax basis of Company assets
and the basis of those assets for financial reporting purposes. This reduction
in deferred tax liabilities more than offset the use of $31 million of net
operating loss ("NOL") carryforwards to eliminate 1995 taxable income. The
Company paid cash income taxes in 1995 and 1994 of $0.5 million and $0.4
million, respectively, to several states, Canada and the U.S. for the
Alternative Minimum Tax.

The Company reported net income of $2.1 million, or $0.02 per share, for
1995 compared to a net loss of ($81.0) million, or ($3.47) per share, for 1994.

YEAR ENDED DECEMBER 31, 1994 COMPARED WITH THE YEAR ENDED DECEMBER 31, 1993

Oil and natural gas revenues for 1994 were $94.4 million, or 17.6% greater
than the 1993 amount of $80.3 million. The average sales price for U.S. natural
gas decreased $0.37 per Mcf or 17.7% in 1994 from 1993. The impact of hedging on
natural gas prices received and natural gas revenues for 1994 and 1993 was a
reduction of $0.01 and $0.05 per Mcf and $0.4 million and $1.4 million,
respectively. Natural gas production for 1994 was 39,669 MMcf, an increase of
34.0% over 1993 volumes due primarily to the successful drilling in late 1993
and 1994, and the acquisition of GARI in September 1994. The average sales price
for oil decreased 2.2% in 1994 compared to 1993. The impact of hedging on oil
prices received and oil revenues for 1994 was an increase of $0.03 per bbl and
$0.1 million, respectively. Oil production increased 37.0% or 480 Mbbls in 1994
due primarily to the Canadian production acquired from Norfolk Holdings, Inc.
("NHI") in 1993 and the GARI acquisition in 1994.

22
<PAGE> 23

Production costs for 1994 of $36.9 million increased 21.0% from $30.5
million for 1993, primarily due to a full year of NHI and KPX, Inc. ("KPX") and
GARI since the dates of acquisition. However, on a cost per Mcfe basis,
production costs for 1994 decreased $0.09 per Mcfe when compared to 1993.

General and administrative expense for 1994 was $12.5 million compared to
$8.1 million in 1993. This increase was due to (1) the NHI acquisition; (2)
additional costs associated with being a publicly traded company for a full
year; (3) operations of GARI since September 19, 1994 and (4) certain
non-recurring costs associated with the GARI acquisition. For the reasons
previously mentioned, general and administrative expense as a percent of total
revenue increased from 9.8% in 1993 to 12.8% in 1994. The 1994 general and
administrative expenses do not include the consolidation efficiencies from the
GARI acquisition that were realized in 1995.

Exploration, dry hole and lease impairment expense for 1994 totaled $16.2
million as compared to $6.8 million in 1993. This increase of $9.4 million was
primarily due to increased geological and geophysical costs, reflecting the
higher level of international and North American exploration activity in 1994,
and the expensing of two dry holes in Equatorial Guinea and four Gulf of Mexico
wells in the fourth quarter of 1994.

DD&A expense for 1994 of $50.7 million increased 41.2% from $35.9 million
for 1993. However, the rate per Mcfe increased only 4.2% from $0.95 per Mcfe in
1993 to $0.99 per Mcfe in 1994. This increase was primarily due to (i) the value
at which the GARI properties were recorded in accordance with the purchase
method of accounting; (ii) $3.1 million attributable to the write-off of three
depleted properties; and (iii) increased production.

Interest and debt expense for 1994 was $9.0 million compared to $6.5
million in 1993. This $2.5 million increase was primarily due to the increased
debt levels incurred to acquire GARI and a slight increase in UMC's average
interest rate from 5.51% in 1993 to 5.95% in 1994. The effect of interest rate
hedging for the year 1994 was to reduce interest expense $0.2 million. The
effect on 1993 was immaterial.

An income tax benefit, on a net basis, of $41.5 million (all of which is a
deferred benefit) was recognized in 1994, compared to a net benefit of $6.3
million in 1993. Consistent with SFAS 109, the income tax benefit was derived
from changes in deferred income taxes on the balance sheet. The $10.1 million
impairment of proved oil and natural gas properties, applicable to 1993, and the
$94.8 million impairment, applicable to 1994, were the largest items affecting
the deferred tax benefit, increasing the 1993 and 1994 benefit by $4.4 million
and $36.1 million, respectively. See Note 3 of Notes to Consolidated Financial
Statements. The Company paid cash income taxes in 1994 and 1993 of $0.4 million
and $0.9 million, respectively, reflecting the lower taxable income position due
to prices and also the availability of over $147.0 million in NOL carryforwards.

Due principally to the recording of the impairment of proved oil and
natural gas properties, the Company reported a net loss of $81.0 million, or
$3.47 per share, for 1994 compared to a net loss of $10.8 million, or $1.06 per
share, for 1993.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically funded its operations, acquisitions,
exploration and development expenditures from cash flows from operating
activities, bank borrowings, sales of common and preferred stock, issuance of
Senior Subordinated Notes, sales of non-strategic oil and natural gas
properties, sales of partial interests in exploration concessions and project
finance borrowings. Total available liquidity, which was primarily available
under its revolving loan credit capacity, at December 31, 1993, 1994 and 1995
was $53.8 million, $42.0 million and $110.4 million, respectively, and was
$126.7 million at June 30, 1996.

The Company's cash flows provided by operating activities for the years
ended December 31, 1993, 1994 and 1995, and for the six months ended June 30,
1996 were $42.2 million, $43.6 million, $46.0 million and $35.0 million,
respectively.

The Company has historically used borrowings under a credit agreement with
a syndicate of lenders (the "Credit Facility") to partially finance its
operating and capital expenditure activity. As of June 30, 1996, the

23
<PAGE> 24

borrowing base under the Credit Facility was $190 million, and the Company had
outstanding borrowings thereunder of approximately $45 million. The borrowing
base increased to $200 million on November 1, 1996.

In July 1995, a subsidiary of the Company entered into a loan agreement
(the "Cote d'Ivoire Facility") with the International Finance Corporation, an
affiliate of the World Bank (the "IFC"), in connection with the development of
Block CI-11 offshore Cote d'Ivoire. The Cote d'Ivoire Facility provides for
borrowings up to $35.0 million by the Company's subsidiary which holds its
interest in Block CI-11 and is secured by liens on those interests and related
assets as well as a guarantee from the Company and UMC Petroleum Corporation
("Petroleum"). The guarantees of the Cote d'Ivoire Facility by UMC and Petroleum
are to be released upon the achievement of certain reserve levels and production
rates from the properties. As of June 30, 1996, the Company had borrowed $35
million under the Cote d'Ivoire Facility. Amortization of principal under the
Cote d'Ivoire Facility began in July 1996 with final maturity in January 2005.
It is anticipated that a portion of the net proceeds from the Offerings will be
used to repay all outstanding borrowings under the Cote d'Ivoire Facility.

The Company is currently in negotiations with several institutions
concerning a possible financing based solely upon the Company's international
assets. Management believes that completing a facility of up to $100 million by
early 1997 is possible, subject to final terms and market conditions. If a new
international facility is implemented, total credit availability under both an
international facility and the Credit Facility will likely be in the $250-$300
million range. Absent a new international facility, the Company is confident
that the Credit Facility could be expanded beyond the $200 million borrowing
base.

In September 1995, Havre Pipeline LLC, an entity 50% owned by the Company
and accounted for under the equity method, entered into a credit agreement with
Union Bank of California (the "Havre Credit Facility") in order to finance the
purchase of a natural gas pipeline in the Bearpaw area of Montana. The Havre
Credit Facility provides for a $14.3 million term loan and a $2.0 million
revolving loan, with the revolving loan balance converting into an additional
term loan on September 30, 1997. Amortization of principal under the Havre
Credit Facility began in July 1996 with final maturity in September 2005. As of
August 31, 1996, outstanding borrowings thereunder were approximately $14.8
million, $7.4 million net to UMC. The Company is in the process of negotiating
the purchase of additional interests in Havre Pipeline LLC. If the purchase is
completed, a portion of the Havre Credit Facility will be recorded in the
consolidated financial statements of the Company.

Equity financings have represented a significant source of funds for the
Company. Since the Company's inception, over $197 million of private equity
capital and approximately $143 million of public equity capital has been raised
to support its growth. The Company completed its initial public offering in July
1993, resulting in net proceeds to the Company of $68.7 million. In November
1994, the Company issued approximately $64 million in common equity as partial
consideration for the GARI acquisition. In June and July 1995, the Company sold
an aggregate $35.0 million of Series F Preferred Stock in a private placement to
institutional investors. The Series F Preferred Stock had an 8.75% cumulative
dividend, payable quarterly commencing on September 30, 1995. The Series F
Preferred Stock was automatically converted into Common Stock in July 1996, due
to the substantial increase in the Common Stock price since July 1995. Also
during the first half of 1996, 318,358 stock options to acquire Common Stock at
various prices were exercised and 233,556 warrants to acquire Common Stock at
$15.36 per share were exercised resulting in $6.2 million of new funds to UMC.

On October 30, 1995, the Company closed a public offering of $150 million
of the Senior Subordinated Notes at an initial price of 99.5% of face value. Net
proceeds of $144.9 million were used to reduce debt under the Credit Facility.

The Company has also engaged in selected dispositions of non-strategic
assets, including the sale of its Appalachian properties for net proceeds of
$41.2 million in February 1995. The sale of these properties, the proceeds of
which were initially used to repay debt, allows the Company to effectively
redeploy capital to domestic and international opportunities which management
believes represent higher potential rates of return. The Company expects to sell
as much as $35 million in non-strategic assets during 1996.

24
<PAGE> 25

As a result of the GARI acquisition, the Company conducts a portion of its
oil and natural gas activities with a small group of institutional and corporate
investors that participate in property acquisitions, development and exploration
and provide the Company with certain carried interests and management fees. Each
year this group of institutional investors commits to a maximum amount of funds
for both exploration prospects and acquisition projects. The Company typically
offers investors the opportunity to participate in the most significant Gulf of
Mexico exploration and North American property acquisition opportunities. Though
each institution has discretion over each investment, historically they have
participated in all of the prospects offered to them by the Company. These
relationships both mitigate the Company's project risks and augment its
available capital.

The Company believes that it will have sufficient capital available from
the credit facilities described above, together with cash flows from operating
activities, the Offerings and other debt financing and asset sales, to fund the
remainder of its 1996 capital expenditure program and expected 1997 capital
expenditures, including the international development opportunities in Cote
d'Ivoire and Equatorial Guinea, and to meet the Company's other obligations. The
Company also believes that the funds available from such sources will enable the
Company to continue to selectively pursue strategic corporate and property
acquisitions.

NET OPERATING LOSS CARRYFORWARDS AND CANADIAN TAX POOLS

As of December 31, 1995, the Company has $110.0 million of United States
NOL carryforwards and $21.9 million of Canadian federal tax pools which it
expects to use in sheltering future taxable income in the U.S. and Canada,
respectively. Approximately $24 million of the U.S. NOL carryforward is expected
to be used to offset 1996 taxable income which will result primarily from gains
on sale of assets, concession interests and higher revenue from an increase in
oil and natural gas production and prices.

The Company's U.S. NOL carryforward is subject to certain limitations.
Under Section 382 of the Internal Revenue Code, the taxable income of UMC
available for offset by pre-ownership change NOL carryforwards and certain
built-in losses is subject to an annual limitation (the "382 Limitation") if an
"ownership change" occurs. The Company has determined that an ownership change
occurred for purposes of Section 382 in 1994. As a result of this ownership
change, the total amount of NOL carryforwards will not be affected, but the 382
Limitation will equal the value of the stock of the Company immediately before
the ownership change multiplied by the long-term tax exempt interest rate,
subject to adjustment for certain built-in gains of the Company. To the extent
the 382 Limitation exceeds the federal taxable income of the postmerger company
for a given year, the 382 Limitation for the subsequent year will be increased
by such excess.

NOL carryforwards of the Company will be disallowed entirely if certain
continuity of business enterprise requirements are not met. It is expected these
requirements will be met. The effect of the 382 Limitation may be to defer the
use of the Company's existing NOL carryforwards. Although the Company expects
that its earnings will not exceed the 382 Limitation, there can be no assurance
that the Company will be able to use the NOL carryforward in full.

The use of the Company's existing Canadian federal tax pools was not
affected by the acquisition of GARI. The GARI Canadian federal tax pools of $7.4
million may be used only to offset future taxable income generated by the
Canadian properties acquired from GARI.

FOREIGN CURRENCY TRANSACTIONS

The Company conducts a portion of its business in Canadian dollars.
Therefore, a portion of the Company's business is subject to fluctuations in
currency exchange rates. In preparing the Company's financial statements, the
results of operations of the Canadian subsidiary were translated at the average
exchange rate for the year and the subsidiary's assets and liabilities were
translated at the rate of exchange in effect on the balance sheet date.

The majority of revenues and expenditures for the Company's West African
operations are settled, and all books and records are maintained, in U.S.
dollars.

25
<PAGE> 26

CHANGES IN PRICES AND INFLATION

The Company's revenues and the value of its oil and natural gas properties
have been, and will continue to be, affected by changes in oil and natural gas
prices. The Company's ability to maintain current borrowing capacity and to
obtain additional capital on attractive terms is also substantially dependent on
oil and natural gas prices. Oil and natural gas prices are subject to
significant seasonal and other fluctuations that are beyond the Company's
ability to control or predict. Although certain of the Company's costs and
expenses are affected by the level of inflation, inflation did not have a
significant effect on the Company's results of operations during 1995 and 1994.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

The FASB issued SFAS 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, in March 1995. The Company
adopted the provisions of SFAS 121 during the fourth quarter of 1995, and
recorded a pre-tax impairment of $8.3 million or $5.1 million after-tax effect.
See Note 3 of Notes to Consolidated Financial Statements.

26
<PAGE> 27

THE COMPANY
GENERAL

UMC is a leading independent energy company engaged in the exploration,
development, production and acquisition of oil and natural gas in North America
and certain international regions. Since its inception in 1987, the Company has
grown through a series of strategic corporate and property acquisitions, and a
successful exploration program that has focused on UMC's core operating areas in
North America and in certain high potential, international regions. In North
America, the Company's production is concentrated in the Gulf Coast, Permian
Basin, Mid-continent and Rocky Mountain regions and in Western Canada.
Internationally, the Company currently operates in the West African oil and
natural gas producing regions of Cote d'Ivoire and Equatorial Guinea. In
addition, the Company has been awarded a PSC on one block and has a contractual
arrangement covering PSCs on two adjacent blocks in Pakistan and expects to
receive a PSC in Bangladesh.

The Company is a corporation organized under the laws of Delaware. The
Company's principal executive offices are located at 1201 Louisiana, Suite 1400,
Houston, Texas 77002, and its telephone number is (713) 654-9110.

RECENT DEVELOPMENTS

27
<PAGE> 28

others: (i) additional oil discoveries and initial oil production in Equatorial
Guinea; (ii) significant opportunities for future drilling in West Africa; and
(iii) new PSCs in Cote d'Ivoire and Pakistan and an anticipated new contract in
Bangladesh.

Discoveries and Production in Equatorial Guinea. The Company
anticipates adding significant reserves and production from its 25%
interest in Block B in Equatorial Guinea during 1996. UMC together with
Mobil, which holds a 75% interest and is the operator of this block,
drilled four exploration and five development wells in the Zafiro complex,
all of which were successful. Two exploratory wells drilled in 1996 in the
Zafiro complex, the Amatista No. 1 and Topacio No. 1, have successfully
extended the field three miles to the south. These two wells, plus an
additional development well, the Zafiro No. 6, encountered significant
known field pay zones and established additional new pay zones where future
drilling could add substantial reserves. By late September 1996, production
exceeded 40 Mbopd (9 Mbopd net to UMC) from five wells in the Zafiro
complex to a FPSO. It is anticipated that the addition of two producing
wells, constituting completion of Phase I, should increase production to
the FPSO to a rate of as much as 50 Mbopd (11 Mbopd net to UMC) by year end
1996. UMC has initiated Phase II of the development plan on the Zafiro
complex which will include the drilling of eight additional wells and the
implementation of secondary recovery activities. The planned expenditures
in 1997 for Block B are approximately $400 million, of which the Company's
share is $100 million.

New Production Sharing Contracts. UMC has entered into several new
PSCs which provide significant future exploration and development
opportunities. In Cote d'Ivoire, UMC and Shell executed a PSC in September
1996 for the Entente Block (Block CI-105) covering approximately 512,000
offshore deepwater acres. Shell has agreed to reimburse UMC for certain
expenses, carry UMC for a significant portion of the initial 3-D seismic
costs and, if Shell elects to proceed to the operational phase, carry UMC
for a substantial portion of the initial exploration expenses, which are
expected to be incurred when drilling begins in late 1997 or early 1998. In
Pakistan, the Company has been awarded one block and is awaiting government
approval of assignments of interest on two other blocks, covering
approximately 4.4 million gross acres, approximately half of which is
offshore. UMC's interest in these three blocks, which will be 80% upon
approval of the assignments, may be reduced by bringing in other partners
prior to beginning drilling, which is expected in 1998. In Bangladesh, UMC
is finalizing a PSC on Block 22, a block it anticipates being awarded
covering approximately 3.3 million acres. UMC's interest in this block,
which will initially be 40%, may be reduced by bringing in other partners
prior to drilling. The Company continues to evaluate other worldwide
concession arrangements which might provide future exploration
opportunities for UMC.

North America. Several factors attributable to the Company's North American
operations have positively impacted the Company's overall production, reserves,
acreage and drilling prospects. These include, among others: (i) a natural gas
discovery and concurrent accumulation of a major acreage position in the East
Texas Cotton Valley Reef trend; (ii) the substantial new natural gas production
from the Gulf of Mexico and identification of several new exploratory prospects;
and (iii) the exploration in the Permian Basin in West Texas and New Mexico and
the Williston Basin in Montana and North Dakota.

28
<PAGE> 29

position in this area. As of August 1996, UMC had accumulated approximately
132,000 gross acres (22,000 net acres), one of the largest accumulations by
any operator in this trend, in which it generally holds a 30% interest. The
Company has successfully drilled in 1996 one of two wells on its acreage in
this area. During the fourth quarter of 1996, initial gross production from
this well, the Watson No. 2, is anticipated to reach 30 MMcfd (6 MMcfd net
to UMC). Twelve separate 3-D seismic surveys are planned for this area
during the balance of 1996 and 1997. UMC and its joint venture partners
plan to drill approximately 10 exploratory wells on UMC's acreage during
the balance of 1996 and 1997. Successful exploration results by UMC or
other industry participants would likely lead to expanded activity levels
in 1997 and 1998.

BUSINESS STRATEGY

North America. The Company is aggressively exploiting its North American
properties through the integration of advanced 3-D seismic technology,
horizontal drilling and geoscience studies. UMC conducts a North American
exploration program focused on internally-generated prospects, primarily in the
Gulf Coast region, including East Texas, and in the Permian and Williston
Basins, where the Company believes high success rates and excellent reserve
potential exist. The Company manages its domestic exploration risk by applying
state-of-the-art technology to identify prospects, emphasizing prospects over
which it will have operational control. The risks of these prospects are shared
with industry partners and a group of institutional investors on terms
considered favorable to the Company. The Company has generated a significant
number of development drilling opportunities as a result of its exploration
efforts and through producing property acquisitions. UMC has identified a large
exploitation inventory including over 120 proved undeveloped drilling sites and
560 probable and possible drilling sites. Through June 1996, the Company has
participated in drilling 38 development wells, 35 of which were successfully
completed. Total capital expenditures for North American activities in 1996 are
expected to be approximately $95 million, $43 million of which was spent in the
first half of 1996. Capital expenditures in 1997 are expected to be
approximately $80-$100 million.

29
<PAGE> 30

data that may be further developed using current technology. The Company
believes that it has unique management and technical expertise in identifying
international opportunities and establishing favorable operating relationships
with host governments. The Company attempts to manage major exploration
commitments by negotiating directly with host governments for terms which
minimize bonuses and initial work commitments. Additionally, the Company forms
joint ventures under which partners provide a significant amount of the initial
exploration costs. This strategy permits the Company to limit its capital
exposure until commercial development is assured. The Company has identified a
large number of exploration prospects on its Equatorial Guinea and Cote d'Ivoire
acreage and has two development programs in progress. On Block CI-11 in Cote
d'Ivoire, UMC will drill four development wells in 1996 and implement secondary
recovery activities and drill additional development wells in 1997. Total
capital expenditures for international activities in 1996 are expected to be
approximately $110 million, $19 million of which was spent in the first half of
1996. Current plans for the balance of 1996 and 1997 include the drilling of
10-15 exploratory wells and 20-25 development wells. It is anticipated that 1997
capital expenditure levels for international activities will be approximately
$150-$200 million, depending in part on the success of drilling activities.

BUSINESS AND PROPERTIES

North America. The Company conducts a focused exploration and development
program designed to add significant reserves at competitive and economic costs.
The Company's North American efforts are predominantly in the Gulf Coast region,
including East Texas, and more recently in the Permian and Williston Basins. The
Company's North American exploration program generally involves either: (i)
exploratory drilling beneath producing fields where potentially significant
reserves are undeveloped on proven structures; or (ii) drilling on the Company's
undeveloped acres, much of which is adjacent to proven producing acreage.
Typically, the Company seeks to operate these projects and to retain at least a
25-60% working interest. In 1996, the Company expects to spend approximately 16%
of its 1996 capital expenditures for North American exploration, including the
drilling of over 35 exploratory wells. Historically, the Company has
successfully used 3-D seismic technology as an effective exploration tool in
locating hydrocarbon indicators or "bright spots". This data is used to further
delineate specific prospect leads and to assist in the development of
exploratory discoveries.

30
<PAGE> 31

UMC focuses its development activities in those areas which offer the most
attractive potential returns to the Company, including development opportunities
resulting from exploration activities. In addition, the Company has identified
over 120 proved undeveloped and over 560 probable and possible drilling
opportunities within its existing inventory. During 1995, UMC participated in
the drilling of 136 development wells, 114 of which were completed as productive
wells. UMC has prioritized development projects which will maximize the
production potential per dollar of investment in view of the large number of
opportunities available to the Company.

The following is a description of each of the Company's major producing
regions in North America.

Gulf Coast. The Gulf Coast region comprises approximately 515,000 gross
acres (201,000 net acres to UMC) along the Texas and Louisiana coasts, and in
East Texas. This region represented approximately 102 Bcfe, or 16%, of the
Company's total proved reserves at December 31, 1995. Approximately 29% of the
Company's 1996 capital expenditure budget is allocated to the Gulf Coast region.
In general, UMC generates leads in the Gulf of Mexico and East Texas utilizing
available 2-D seismic data. The Company then purchases 3-D seismic data which is
processed to delineate "bright spot" prospects with reserve potential in the
20-100 Bcf range. In this manner, the Company expects to generate and drill
approximately 15 to 20 prospects in the Gulf Coast region per year. Through
mid-year 1996, the Company had successfully completed two of the four
exploratory wells drilled in the Gulf Coast region, which the Company expects to
provide additions to its production and reserve base. Approximately 20 potential
exploratory wells have been identified for 1997. In May 1996, UMC acquired nine
leases at the federal lease sale offshore Louisiana, increasing UMC's inventory
of undrilled lease blocks in the Gulf of Mexico to 23 encompassing approximately
107,000 gross acres (87,000 net acres to UMC). UMC typically seeks to be the
operator of its properties and currently retains an average working interest of
approximately 55% in its Gulf of Mexico projects. A second Gulf Coast region
exploration focus area for the Company is the Cotton Valley Reef trend in East
Texas, where the Company generally holds a 30% interest in over 132,000 gross
acres (22,000 net acres). Over 150 miles of 3-D seismic are being acquired and
several wells are scheduled for drilling in 1996 and 1997. To date, UMC has been
successful on one of the two exploratory wells it has drilled.

Mid-continent. The Mid-continent region comprises approximately 468,000
gross acres (174,000 net acres to UMC) and represented approximately 144 Bcfe,
or 23%, of UMC's total proved reserves at the end of 1995. Projects in this
region include continued low-risk development drilling in the Anadarko Basin and
West Texas, several waterflood oil projects and new 3-D seismic-generated
exploration primarily focused in the Permian Basin. Approximately 7% of 1996
capital expenditures will be spent in this region. The Company expects to hold a
40-60% interest in these projects.

Rocky Mountains. The Rocky Mountain region comprises approximately 899,000
gross acres (334,000 net acres to UMC) and represented approximately 147 Bcfe,
or 23%, of the Company's total proved reserves at the end of 1995. UMC's most
important properties in the Rockies lie in the Bearpaw area in the north central
portion of Montana where shallow, low-cost development drilling has made UMC the
largest producer of natural gas in the state. The Company has secured firm
transportation commitments which permit it to access premium markets in the
upper Midwest. UMC holds interests in more than 300 wells in the Bearpaw field
and net production to UMC is approximately 30 MMcfd. Other projects of
importance in the region include a waterflood oil project that is underway in
the Powder River Basin and new 3-D seismic-generated exploration program.
Approximately 7% of 1996 capital expenditures will be spent in this region.

Canada. The Western Canadian region comprises approximately 858,000 gross
acres (246,000 net acres to UMC) and represented approximately 91 Bcfe, or 14%,
of UMC's total proved reserves at the end of 1995. The Company anticipates that
approximately 4% of UMC's 1996 capital expenditures will be allocated to
Canadian properties with such activity focused on development drilling and
limited exploratory drilling. Due to the low natural gas price environment
currently existing in Western Canada, UMC will continue to limit capital
expenditures in 1997.

International. The Company's business strategy in the international arena
is to pursue selected international opportunities characterized by low initial
costs, high reserve potential and the availability of existing technical data
that may be further developed using current technology. UMC continually
reassesses

31
<PAGE> 32

its position during the course of larger international exploration and
development projects, and may periodically consider selling interests in one or
more projects. The sale of a part of its interests in a project may be used to
balance perceived technical or political risks and funding commitments. For
example, UMC received net proceeds of $40.1 million in a partial sale of
interests in Equatorial Guinea and Cote d'Ivoire during the fourth quarter of
1995. Total capital expenditures for the Company's international operations in
1996 are expected to be $110 million and production should average 7 MMcfd and
5.2 Mbopd, though oil production is expected to increase to an average of 11.8
Mbopd in the fourth quarter. In 1997, capital expenditures are expected to be
approximately $150-$200 million. The actual expenditures spent on each block
will be contingent on exploration success. The Company has signed or is
negotiating 13 PSCs (12 of which it operates) with Cote d'Ivoire, Equatorial
Guinea, Pakistan and Bangladesh.

Cote d'Ivoire. During 1991, UMC initiated negotiations with the Republic of
Cote d'Ivoire for a PSC covering Block CI-11, most of which is located offshore
in the Atlantic Ocean. Since acquiring the initial PSC, the Company has signed
four additional PSCs. Under these five PSCs, UMC holds contract interests
ranging from 25% to 75% and has acreage totaling approximately 3.0 million gross
acres.

On Block CI-11, the Company is the operator and has made eight consecutive
oil and natural gas discoveries in the Lion oil and Panthere natural gas fields
since late 1993. As a result of the successful discoveries and subsequent
production history, UMC has recognized proved reserves of 6.4 MMbbls of oil and
40.5 Bcf of natural gas on Block CI-11 at December 31, 1995. The drilling of
five delineation wells, construction of processing facilities and installation
of a natural gas pipeline was completed in late 1995 with the commencement of
natural gas sales. In addition to its continuing development activities on Block
CI-11, UMC has identified several exploration opportunities on this block. A 3-D
seismic survey currently under evaluation will further delineate the Company's
opportunities in that area. Four development wells will be drilled in the last
half of 1996.

The Lion oil field commenced initial oil production at the rate of 10 Mbopd
(1.5 Mbopd net to UMC) in late April 1995 and is currently producing at a rate
of approximately 15 Mbopd (2.3 Mbopd net to UMC). Oil production should increase
to approximately 19 Mbopd (2.9 Mbopd net to UMC) as a result of the recent
successful completion of the Lion A-3 well. Natural gas production commenced in
October 1995 under a take-or-pay contract with the government of Cote d'Ivoire
under which the government will take an initial minimum of 20 MMcfd (3.0 MMcfd
net to UMC). Natural gas sales have increased to 50 MMcfd (7.5 MMcfd net to UMC)
currently, and further increases in market demand are expected to increase sales
over the next year to approximately 80-100 MMcfd. The initial natural gas price
was approximately $1.70 per Mcf. Although UMC's contract interest in this Block
is 25%, UMC's current percentage of production (inclusive of cost recovery)
resulting from the PSC is approximately 15%.

On Block CI-12, which is immediately west of Block CI-11, UMC has
identified several seismic anomalies which it believes are on trend with the
sands in the Lion oil field. The Company is currently evaluating a 3-D seismic
program to further define several potential prospects, with initial exploration
drilling on this block expected in the second half of 1996. UMC owns a 25%
contract interest in Block CI-12.

Blocks CI-01 and CI-02, located approximately 80 miles east of Block CI-11,
possess proven accumulations of oil and natural gas in reservoirs previously
drilled by major oil companies in the 1980s. As of December 31, 1995, the
Company had recognized net proved reserves of 1.0 MMbbls of oil and 42.0 Bcf of
natural gas on Blocks CI-01 and CI-02. Mapping of existing 3-D seismic data on
Block CI-01 and a new 3-D seismic survey on CI-02 will further help evaluate the
reserve potential of these blocks. On Block CI-01, the Company has drilled one
dry hole in 1996 and plans to drill one exploratory well in the Kudu natural gas
field in 1996. UMC currently owns a 45% contract interest in Block CI-01 and a
75% contract interest in Block CI-02. However, the Company's ultimate contract
interest in Block CI-02 could be reduced up to 30% subject to final election by
Petroci, the national petroleum company of Cote d'Ivoire.

UMC has been in discussions with the government of Ghana for the sale of
natural gas production from Block CI-01. Ghana is currently buying electricity
from Cote d'Ivoire for internal consumption. The governments of Ghana and Cote
d'Ivoire have tentatively approved the sale of natural gas from Block CI-01 to

32
<PAGE> 33

Ghana for power generation. The plan, if concluded, would call for UMC to
develop Block CI-01 and export the natural gas to a power plant being built on
the coast of Ghana.

UMC and Shell executed a PSC in September 1996 for the Entente Block
covering approximately 512,000 offshore deepwater acres. The award was made as a
result of a deep-water study conducted by the Company covering the entire
offshore region of the country. A recent revision to the Ivorian petroleum laws
will provide more favorable cost recovery and government contractor profit
splits as an incentive for the high cost of deep water exploration and
development. The revised law includes (i) flexible and advantageous cost
recovery terms, (ii) a negotiated investment credit on recoverable costs, (iii)
an initial 55% profit split to UMC, and (iv) favorable tax treatment.

Equatorial Guinea. UMC has negotiated four PSCs with the Republic of
Equatorial Guinea for four blocks located offshore in the Atlantic Ocean. Under
the PSCs, UMC holds approximately 1.8 million gross acres.

Block A was initially evaluated during 1993 and 1994 with a 3-D seismic
program. A test well, the Dorado-1, was drilled in the Block and was a dry hole.
UMC had a carried interest on the well. UMC is currently evaluating whether
further exploration on the Block is warranted. The Company owns a 100% contract
interest in Block A.

Block B was evaluated by a 1993 2-D seismic program, in which UMC had a
carried interest. Mobil then carried UMC in the drilling of a test well on the
Delta prospect which was a dry hole in late 1994. Mobil, as operator, and UMC
have successfully drilled nine wells during 1995 and 1996 on the Zafiro field
complex. The wells were tested at rates up to 11 Mbopd (2 Mbopd net to UMC).
Initial production commenced in August 1996, and by mid-September production had
reached 35 Mbopd (8 Mbopd net to UMC). Production is expected to reach as much
as 50 Mbopd (11 Mbopd net to UMC) by year end. The Company recognized proved
reserves of 3.8 MMbbls on Block B at December 31, 1995 and expects a substantial
increase in reserve levels by year end 1996. The Company currently owns a 25%
contract interest in Block B. It is expected that three additional exploration
wells on other portions of the block will be drilled during the balance of 1996.

Concessions on Blocks C and D, both of which are adjacent to Block B,
contain similar seismically identified structures as discovered on Block B. The
discovery of high quality reservoirs with high oil flow rates on Block B
increases the likelihood of successful exploration on Blocks C and D. UMC will
continue to evaluate the exploration potential of these Blocks following the
success on Block B. The Company currently owns a 75% contract interest in each
of Blocks C and D and has conducted a 3-D seismic program on Block D. Further,
the Company will drill an exploratory well on Block D late in 1996 to pursue
exploration prospects that are similar to the Zafiro complex.

Pakistan. UMC has signed one PSC and is awaiting approval of assignment for
two other PSCs from the government of Pakistan in 1996 covering nearly 4.4
million gross acres. Pakistan has been experiencing severe shortages of
electricity over the last several years. A number of power projects are
currently being constructed or have recently been approved. If the Company's
drilling program is successful, it is likely to be primarily natural gas which
should have several available markets as a result of such power projects. UMC's
current 20% partner, Xenel Industries Limited, a Saudi Arabian based company, is
a part owner in the 1,000 megawatt Hub River Power Project south of Karachi.
This power project could likely utilize all or a portion of the prospective
natural gas production from these blocks.

Bangladesh. UMC anticipates executing a PSC with the government of
Bangladesh on Block 22, the Chittagong Hills Tract, in October 1996. Block 22
covers 3.3 million gross acres in an area next to recent significant natural gas
discoveries. If successful, Block 22 is likely to contain significant natural
gas reserves with markets available in Bangladesh, Myanmar or other countries in
the Indian Sub-continent. UMC will proceed to upgrade the technical aspects of
this prospect and bring in an industry partner in the future. Drilling activity
could occur sometime in 1998.

33
<PAGE> 34

MANAGEMENT

The following table sets forth certain information regarding the directors
and officers of the Company and its subsidiaries:

<TABLE>
<CAPTION>
DIRECTOR'S
NAME AGE POSITION TERM ENDING
- ------------------------------ --- ------------------------------------------- -----------
<S> <C> <C> <C>
John B. Brock................. 64 Chairman, Chief Executive Officer and 1999
Director

James L. Dunlap............... 59 President, Chief Operating Officer and 1998
Director

Jim Smitherman III............ 51 Executive Vice President -- Exploration and --
Production

Jonathan M. Clarkson.......... 46 Executive Vice President -- Chief Financial --
Officer

Lee B. Backsen................ 56 Senior Vice President, Gulf Coast Division --
Manager

Gary R. McGregor.............. 53 Senior Vice President, Denver Division --
Manager

John J. Patton................ 56 Senior Vice President and General Counsel --

Christopher E. Cragg.......... 35 Vice President -- Controller and Chief --
Accounting Officer

Daniel P. Foley............... 42 Vice President of Planning --

Kevin D. McMillan............. 38 Vice President & Treasurer --

Marya M. Ingram............... 61 Corporate Secretary --

J. Dennis Bonney.............. 65 Director 1999

Charles R. Carson............. 68 Director 1997

Robert H. Dedman.............. 70 Director 1998

Steven A. Denning............. 48 Director 1999

Robert L. Howard.............. 60 Director 1998

Robert V. Lindsay............. 70 Director 1997

Elvis L. Mason................ 63 Director 1998

James L. Murdy................ 58 Director 1997

David K. Newbigging........... 62 Director 1999

Matthew R. Simmons............ 53 Director 1997

Donald D. Wolf................ 53 Director 1998

Walter B. Wriston............. 77 Director 1997
</TABLE>

The officers named above were elected to serve in such capacities until the
next annual meeting of the Board of Directors, or until their respective
successors have been duly elected and have been qualified, or until their death,
resignation, disqualification or removal from office.

JOHN B. BROCK has been the Chairman of the Board and Chief Executive
Officer of UMC since May 1995 and a director of UMC since November 1989. Mr.
Brock served as the President of the Company from May 1996 to October 1996,
served as the President and Chief Executive Officer of the Company from February
1992 to May 1995 and served as the President and Chief Operating Officer of UMC
from November 1989 to February 1992. Prior to assuming his responsibilities with
UMC, Mr. Brock was President and Chief Executive Officer of Ensource Inc. Mr.
Brock served as the Chairman, President and Chief Executive Officer of Brock
Energy Corporation and its predecessor from 1980 until January 1986. From 1959
until 1980, he served in various capacities with Quintana Petroleum Corporation,
including Executive Vice President -- Oil and Gas, and President of a number of
Quintana subsidiaries. Mr. Brock is a director of Southwest Bank of Texas and an
Advisory Director of Kanaly Trust Company. He is also a director and member of
the Executive Committee of the Texas Midcontinent Oil and Gas Association, a
director of the

34
<PAGE> 35

National Mid Continent Oil and Gas Association, a director of the American
Petroleum Institute and a director of St. Luke's Episcopal Hospital.

JAMES L. DUNLAP has served as the Company's President, Chief Operating
Officer, and Director since October 1996. Prior to assuming his current
responsibilities with UMC, Mr. Dunlap was a Senior Vice President with Texaco
Inc. During his long career with Texaco he had responsibilities as President of
Texaco U.S.A., President and Chief Executive Officer of Texaco-Canada, Vice
Chairman of Texaco Limited, and General Manager Latin America/West Africa. Mr.
Dunlap is a Director of Massachusetts Mutual Life Insurance Company. He is also
a Director of the Jones Graduate School of Business, Rice University and the
Nantucket Conservation Foundation.

JIM SMITHERMAN III has served as UMC's Executive Vice President,
Exploration and Production since October 1989, with responsibilities for
international operations since May 1995. Prior to assuming his current
responsibilities with UMC, Mr. Smitherman was Senior Vice
President -- Exploration and Production of Ensource Inc. Before joining Ensource
in May 1988, Mr. Smitherman was Vice President of Eastern Region Exploration and
Development at CSX Oil and Gas.

JONATHAN M. CLARKSON has served as the Company's Executive Vice President
since November 1994 and has served as the Chief Financial Officer of UMC since
October 1989. Mr. Clarkson served as Senior Vice President of the Company from
October 1989 until November 1994. From May 1987 to September 1989, Mr. Clarkson
served as UMC's Vice President and Treasurer. Prior to joining UMC, Mr. Clarkson
served as Senior Vice President of InterFirst Bank, Dallas, managing commercial
lending functions in the Energy and U.S. Corporate Divisions.

LEE B. BACKSEN serves as Senior Vice President and Division Manager of the
Gulf Coast Division and is responsible for the exploration, production, land and
marketing activities offshore and onshore in the Gulf of Mexico. Prior to
joining UMC in 1994 through the merger with GARI, Mr. Backsen was President of
General Atlantic Gulf Coast, a subsidiary founded in 1990. From 1983 thru 1989,
Mr. Backsen was Senior Vice President -- Exploration of Pelto Oil Company. From
1963 to 1980, Mr. Backsen served in various exploration and management positions
with Shell Oil Company.

GARY McGREGOR serves as Senior Vice President and Division Manager of the
Denver Division and is responsible for the exploration, production, land and
marketing activities in the Permian Basin, Mid-continent and Rocky Mountain
areas. Prior to joining the Company in 1982, Mr. McGregor held engineering and
management positions with Coseka Resources (U.S.A.) Limited after a 13-year
career with Amoco Production Company. Mr. McGregor held various positions with
Amoco including District Engineer and Facilities Superintendent with
responsibilities over his tenure in operations, reservoir engineering and
facilities management.

JOHN J. PATTON has served as the Senior Vice President and General Counsel
of UMC since April 1995. Prior to assuming his responsibilities with UMC and
since 1990, Mr. Patton was general counsel of OPICOIL Houston, Inc., an
affiliate of Chinese Petroleum Corporation, the national oil company of the
Republic of China (Taiwan). From 1978 to 1990, Mr. Patton was Vice President and
general counsel of OPICOIL's predecessor, Roy M. Huffington, Inc.

CHRISTOPHER E. CRAGG has served as the Vice President -- Controller of UMC
since June 1996. Mr. Cragg served as Assistant Controller of the Company from
July 1995 until June 1996, and as Director -- Internal Audit from April 1994
until July 1995. Prior to joining the Company, Mr. Cragg was with Cooper
Industries from April 1993 to April 1994 and Price Waterhouse from August 1983
to April 1993, where he served in the firm's Worldwide Petroleum Industry
Practice. Mr. Cragg is a Certified Public Accountant in the State of Texas.

DANIEL P. FOLEY serves as Vice President of Planning and is responsible for
long-term planning, risk management and institutional programs for the Company.
Mr. Foley joined UMC in 1987 after four years with Shell Oil Company and four
years with Chevron Corporation.

35
<PAGE> 36

KEVIN D. McMILLAN serves as Vice President & Treasurer and is responsible
for all treasury and external financing functions. Prior to joining UMC and its
predecessors in 1986, Mr. McMillan's professional experience included four years
with Brock Energy Corporation and one year with both Arthur Andersen & Co. and
Ernst & Whinney.

MARYA M. INGRAM has served as Corporate Secretary since May 1995. Prior to
assuming that responsibility Ms. Ingram had served as Assistant Corporate
Secretary of the Company and Corporate Secretary of the various subsidiary
companies since September 1989 when Ensource Inc. was acquired by UMC. The
previous three years Ms. Ingram had acted as Corporate Secretary for Ensource
Inc. and, prior to that time, Vice President and Corporate Secretary of Brock
Energy Corporation.

J. DENNIS BONNEY has served as a director of UMC since May 1996. Mr. Bonney
retired from Chevron Corporation in 1995, where he served as Vice Chairman of
the Board from 1987 to 1995 and as director from 1986 to 1995. From 1987 until
his retirement in 1995, Mr. Bonney was responsible for worldwide oil and gas
exploration and production. Mr. Bonney served Chevron Corporation in various
capacities from 1960 to 1987 including Vice President with responsibilities
including worldwide logistics and trading, international production, corporate
planning, European refining and marketing, Indonesian oil exploration and
production and diversified investments.

CHARLES R. CARSON has served as a director of UMC since June 1987. From
1951 until his retirement in January 1987, Mr. Carson served General Electric
Company in various capacities, most recently as Senior Vice President. General
Electric Company is an affiliate of General Electric Pension Trust, a
stockholder of the Company. Mr. Carson is no longer an affiliate of General
Electric Company or General Electric Pension Trust. Mr. Carson is also a
director of Worthington Industries, Inc.

ROBERT H. DEDMAN has served as a director of UMC since May 1987. Since
1957, Mr. Dedman has been Chairman of the Board and Chief Executive Officer of
Club Corporation International. His directorships also include Stewart
Information Services Corporation and Franklin Federal Bankcorp, a wholly-owned
subsidiary of Club Corporation International.

STEVEN A. DENNING has served as a director of the Company since November
1994. Previously, and since 1985, Mr. Denning served as a director of GARI. Mr.
Denning is presently the Executive Managing Member of General Atlantic Partners,
L.L.C. Mr. Denning has been a member of General Atlantic Partners, L.L.C. since
February 1989. Prior to that time, Mr. Denning was Managing Director of General
Atlantic Corporation, a stockholder of the Company. Mr. Denning is a member of
the board of directors of GT Interactive Software Corporation, a public consumer
software company, and several other private information technology companies.

ROBERT L. HOWARD has served as a director of UMC since September 1996. Mr.
Howard retired from Shell Oil Company in 1995, where he served in various
capacities since 1959, most recently as Vice President Domestic Operations,
Exploration and Production, a position he assumed in 1992. From 1985 until his
retirement in 1995, Mr. Howard also served as President of Shell Offshore Inc.,
a subsidiary of Shell Oil Company with operations in the Gulf of Mexico. Mr.
Howard is also a director of Camco International, Inc. and Southwestern Energy
Company.

ROBERT V. LINDSAY has been a director of UMC since 1987 and is the former
President and a former director of J.P. Morgan & Co. and its wholly owned
subsidiary, Morgan Guaranty Trust Company of New York. Mr. Lindsay served as
Chairman of Morgan Guaranty Trust Company of New York's International Council
from 1987 to 1989. Mr. Lindsay is also a director of Chubb Corporation, Hudson
Chartered Corporation and The Fluor Corporation.

ELVIS L. MASON has served as a director of UMC since November 1988. He has
also served as the Managing Partner of Mason Best Company, L.P., a merchant
banking firm, since August 1984. Since December 1991, Mr. Mason has served as
Chairman of the Board of Directors and Chief Executive Officer of San Jacinto
Holdings, Inc. Since February 1992, Mr. Mason has served as Chairman of the
Board of Safeguard Business Systems, Inc., a wholly-owned subsidiary of San
Jacinto Holdings, Inc. Mr. Mason is also

36
<PAGE> 37

a director of Tracor, Inc., a defense electronics firm, and American Eagle Group
Inc., a property casualty insurance company.

JAMES L. MURDY has served as a director of UMC since May 1987. Since
September 1996, Mr. Murdy has served as Senior Vice President and Chief
Financial Officer of Allegheny Teledyne Incorporated, a diversified
manufacturing company with a concentration in specialty metals. From 1988 to
1996, Mr. Murdy served as Senior Vice President of Finance, Chief Financial
Officer and director of Allegheny Ludlum Corporation, a specialty metals
corporation. From 1985 to 1988, Mr. Murdy served as Executive Vice President of
Finance and Administration for Schneider Enterprises, Inc. Prior to 1985, Mr.
Murdy was Executive Vice President of Gulf Oil Corporation, Inc.

DAVID K. NEWBIGGING has served as a director of the Company since August
1987. Mr. Newbigging presently serves as Chairman of Faupel Trading Group PLC, a
textile trader based in the United Kingdom, as Chairman of Equitas Holdings
Limited, the parent company of the Equitas Group which is based in the United
Kingdom and was established to reinsure the 1992 and prior year liabilities of
Lloyd's of London insurance syndicates. Mr. Newbigging also serves as Chairman
of Equitas Reinsurance Limited, a wholly-owned subsidiary of Equitas Holdings
Limited, and Equitas Limited, a wholly-owned subsidiary of Equitas Reinsurance
Limited, both of which companies are authorized reinsurance companies. Mr.
Newbigging is Deputy Chairman of Friends' Provident Life Office, which is based
in the United Kingdom. Mr. Newbigging is also a director of Merrill Lynch & Co.,
Inc. Mr. Newbigging retired from Jardine, Matheson & Co. Limited in 1983 after
30 years with that company, having served as its Chairman and Chief Executive
Officer since 1975. Subsequent appointments have included Chairman of Rentokil
Group PLC and of Ivory & Sime PLC, both based in the United Kingdom.

MATTHEW R. SIMMONS has served as a director of the Company since November
1994. Mr. Simmons is the Chairman and President of Simmons & Company
International, a specialized investment bank that concentrates on providing
corporate finance expertise to companies in the worldwide oil service and
equipment industry and also researches and trades oil service and equipment
securities for institutional investors. Prior to founding Simmons & Company
shortly after the 1973 Oil Embargo, Mr. Simmons had a small
consulting/investment banking firm in Boston which provided advice to a variety
of clients. Previously, he served on the faculty of Harvard Business School as a
Research Associate. Mr. Simmons is a Chairman of National Ocean Industries
Association.

DONALD D. WOLF has been a director of the Company since November 1994. Mr.
Wolf resigned as an officer of the Company in April 1996 to pursue other
interests and is currently Chairman and Chief Executive Officer of Westport Oil
and Gas, Inc. Mr. Wolf served as President of the Company from November 1994 to
April 1996, Chief Operating Officer from September 1995 to April 30, 1996. Mr.
Wolf served as Chairman, President, and Chief Executive Officer of General
Atlantic Resources, Inc. from May 1993 until November 1994 and as President and
a director of GARI since 1981. Mr. Wolf has a diversified 30-year business and
management career in the oil and gas industry with various companies.

WALTER B. WRISTON has been a director of UMC since April 1987. In September
1984, Mr. Wriston retired from his position as Chairman and Chief Executive
Officer of Citicorp/Citibank. He is currently a director of ICOS Corporation,
York International Corporation, Cygnus, Inc., AEA Investors Inc., Tandem
Computers, Inc., WMNB Acquisition Corp. and Vion Pharmaceuticals, Inc.

37
<PAGE> 38

SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock by the Selling Stockholders as of
September 30, 1996, and as adjusted to reflect the sale of shares offered
hereby.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERINGS NUMBER OF SHARES AFTER THE OFFERINGS
------------------------ TO BE SOLD IN ------------------------
NAME SHARES PERCENTAGE THE OFFERINGS SHARES PERCENTAGE
- --------------------------------- --------- ---------- ---------------- --------- ----------
<S> <C> <C> <C> <C> <C>
General Atlantic
Corporation(1)................. 2,197,759 7.1% 1,250,000 947,759 2.8%
John Hancock Mutual Life
Insurance Company.............. 1,943,060 6.3% 1,000,000 943,060 2.8%
The Travelers Insurance
Company........................ 237,251 * 112,500 124,751 *
The Travelers Indemnity
Company........................ 231,979 * 110,000 121,979 *
The Travelers Life and Annuity
Company........................ 26,360 * 12,500 13,860 *
The Phoenix Insurance Company.... 31,633 * 15,000 16,633 *
</TABLE>

- ---------------

* Less than 1%

(1) Steven A. Denning, a director of the Company, is the Executive Managing
Member of General Atlantic Partners, L.L.C., an affiliate of General
Atlantic Corporation.

38
<PAGE> 39

UNDERWRITING

Subject to the terms and conditions set forth in the U.S. purchase
agreement (the "U.S. Purchase Agreement") among the Company, the Selling
Stockholders and the underwriters named below (the "U.S. Underwriters"), the
Company and the Selling Stockholders have agreed to sell to the U.S.
Underwriters, and the U.S. Underwriters for whom Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), J.P. Morgan Securities Inc. ("J.P.
Morgan"), Howard, Weil, Labouisse, Friedrichs Incorporated ("Howard Weil") and
Petrie Parkman & Co., Inc. ("Petrie Parkman") are acting as representatives (the
"U.S. Representatives"), have severally agreed to purchase from the Company and
the Selling Stockholders, the number of shares of Common Stock indicated below
opposite their respective names.

<TABLE>
<CAPTION>
U.S. UNDERWRITERS NUMBER OF SHARES
----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................... 487,750
J.P. Morgan Securities Inc................................................... 487,750
Howard, Weil, Labouisse, Friedrichs Incorporated............................. 487,750
Petrie Parkman & Co., Inc. .................................................. 487,750
CS First Boston Corporation.................................................. 105,000
Dean Witter Reynolds Inc. ................................................... 105,000
Dillon, Read & Co. Inc. ..................................................... 105,000
Donaldson, Lufkin & Jenrette Securities Corporation.......................... 105,000
Goldman, Sachs & Co. ........................................................ 105,000
Hanifen, Imhoff Inc. ........................................................ 105,000
Lehman Brothers Inc.......................................................... 105,000
Morgan Keegan & Company, Inc. ............................................... 105,000
PaineWebber Incorporated..................................................... 105,000
Prudential Securities Incorporated........................................... 105,000
Rauscher Pierce Refsnes, Inc. ............................................... 105,000
Salomon Brothers Inc ........................................................ 105,000
Sanders Morris Mundy Inc. ................................................... 105,000
Simmons & Company International.............................................. 105,000
Smith Barney Inc. ........................................................... 105,000
Southeast Research Partners, Inc. ........................................... 105,000
Wasserstein Perella Securities, Inc. ........................................ 105,000
Robert W. Baird & Co. Incorporated........................................... 54,000
The Chicago Corporation...................................................... 54,000
Cowen & Company.............................................................. 54,000
Dain Bosworth Incorporated................................................... 54,000
EVEREN Securities, Inc. ..................................................... 54,000
Janney Montgomery Scott Inc. ................................................ 54,000
Johnson Rice & Company L.L.C. ............................................... 54,000
Josephthal Lyon & Ross Incorporated.......................................... 54,000
Ladenburg, Thalmann & Co. Inc. .............................................. 54,000
Legg Mason Wood Walker, Incorporated......................................... 54,000
McDonald & Company Securities, Inc. ......................................... 54,000
Piper Jaffray Inc. .......................................................... 54,000
Principal Financial Securities, Inc. ........................................ 54,000
Stephens Inc. ............................................................... 54,000
TD Securities Inc. .......................................................... 54,000
Wheat, First Securities, Inc. ............................................... 54,000
----------------
Total........................................................... 4,600,000
=============
</TABLE>

39
<PAGE> 40

The Company and the Selling Stockholders have also entered into an
international underwriting agreement (the "International Purchase Agreement")
with certain underwriters outside the United States and Canada (the
"International Managers" and, together with the U.S. Underwriters, the
"Underwriters"), for whom Merrill Lynch International, J.P. Morgan Securities
Ltd., Howard Weil and Petrie Parkman are acting as representatives (the "Lead
Managers" and, together with the U.S. Representatives, the "Representatives").
Subject to the terms and conditions set forth in the International Purchase
Agreement, and concurrently with the sale of 4,600,000 shares of Common Stock to
the U.S. Underwriters pursuant to the U.S. Purchase Agreement, the Company and
the Selling Stockholders have agreed to sell to the International Managers, and
the International Managers severally have agreed to purchase from the Company
and the Selling Stockholders, an aggregate of 1,150,000 shares of Common Stock.
The public offering price per share and the total underwriting discount per
share are identical under the U.S. Purchase Agreement and the International
Purchase Agreement.

In the U.S. Purchase Agreement and the International Purchase Agreement,
the several U.S. Underwriters and the several International Managers,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such Underwriting Agreement if any of such shares are purchased. Under
certain circumstances, the commitments of the non-defaulting U.S. Underwriters
or the International Managers (as the case may be) may be increased as set forth
in the U.S. Purchase Agreement and the International Purchase Agreement,
respectively. The closing with respect to the sale of shares of Common Stock to
be purchased by the International Managers and the U.S. Underwriters are
conditioned upon one another.

The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Under the terms of the Intersyndicate
Agreement, the Underwriters are permitted to sell shares of Common Stock to each
other for purposes of resale at the public offering price, less an amount not
greater than the selling concession. Under the terms of the Intersyndicate
Agreement, the U.S. Underwriters and any dealer to whom they sell shares of
Common Stock will not offer to sell or sell shares of Common Stock to persons
who are non-United States and non-Canadian persons, and the International
Managers and any dealer to whom they sell shares of Common Stock will not offer
to sell or sell shares of Common Stock to persons who are United States or
Canadian persons or to persons they believe intend to resell to United States or
Canadian persons, except, in each case, for transactions pursuant to the
Intersyndicate Agreement.

The U.S. Representatives have advised the Company that the U.S.
Underwriters propose to offer the shares of Common Stock offered hereby to the
public initially at the public offering price set forth on the cover page of
this Prospectus, and to certain dealers at such price less a concession not in
excess of $1.05 per share. The U.S. Underwriters may allow, and such dealers may
re-allow, a discount not in excess of $.10 per share on sales to certain other
dealers. After the public offering, the public offering price, concession and
discount may be changed.

The Company has granted the U.S. Underwriters an option, exercisable by the
U.S. Representatives, to purchase up to 690,000 additional shares of Common
Stock at the public offering price set forth on the cover page of this
Prospectus, less the underwriting discount. Such option, which expires 30 days
after the date of this Prospectus, may be exercised solely to cover
over-allotments. To the extent that the U.S. Representatives exercise such
option, each of the U.S. Underwriters will be obligated, subject to certain
conditions, to purchase approximately the same percentage of the option shares
that the number of shares to be purchased initially by that U.S. Underwriter
bears to the total number of shares to be purchased initially by the U.S.
Underwriters. The Company has also granted an option to the International
Managers, which expires 30 days after the date of this Prospectus, to purchase
up to 172,500 additional shares of Common Stock to cover over-allotments, if
any, on terms similar to those granted to the U.S. Underwriters.

The Company and certain of its directors and executive officers and the
Selling Stockholders have agreed that they will not, for a period of 90 days
from the date of this Prospectus, without the prior written consent of Merrill
Lynch, directly or indirectly, offer, sell or otherwise dispose of or grant any
option with respect to, pledge or hypothecate any shares of Common Stock or
securities convertible into or exchangeable or

40
<PAGE> 41

exercisable for Common Stock, except for the exercise of options granted
pursuant to existing employee plans (and except for the over-allotment option
granted to the Underwriters in the Offerings).

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including certain liabilities under
the Securities Act or to contribute to payments the Underwriters may be required
to make in respect thereof.

Certain of the Representatives, including Merrill Lynch, have performed
investment banking services for the Company and its affiliates for which they
received customary compensation. David K. Newbigging, a director of the Company,
is a director of Merrill Lynch & Co., Inc. From time to time, in the ordinary
course of their respective businesses, J.P. Morgan and its affiliates, including
Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), have engaged and
may in the future engage in commercial and investment banking transactions with
the Company and its affiliates. Morgan Guaranty is co-agent and a lender under
the Credit Facility, the outstanding borrowings of which will be paid down with
a portion of the net proceeds of the Offerings. The Offerings are being made
pursuant to the provisions of Sections 2710(c)(8)(A) and 2720 (c)(3)(B) of the
Conduct Rules of the National Association of Securities Dealers, Inc.

LEGAL MATTERS

The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Akin, Gump, Strauss, Hauer & Feld, L.L.P.,
Dallas, Texas. Certain legal matters will be passed upon for the Underwriters by
Vinson & Elkins L.L.P., Houston, Texas. Vinson & Elkins L.L.P. also acts as
counsel to the Company in connection with matters unrelated to the Offerings. In
addition, Vinson & Elkins L.L.P. acts as counsel for the Lenders under the
Credit Facility.

EXPERTS

The audited financial statements of UMC included in this Prospectus and
elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report. Reference is made to said report which includes
an explanatory paragraph with respect to the change in the method of accounting
for assessing recoverability of proved oil and gas properties in 1993 and the
adoption of SFAS 121 in 1995, as discussed in Note 3 to the financial
statements.

The estimated reserve evaluations and related calculations of Netherland,
Sewell & Associates, Inc., McDaniel & Associates Consultants, Ltd., and Ryder
Scott Company set forth in, and incorporated by reference into, this Prospectus
have been included herein in reliance upon the authority of said firms as
experts in petroleum engineering.

41
<PAGE> 42

GLOSSARY OF OIL AND GAS TERMS

The following are abbreviations and words commonly used in the oil and gas
industry and in this Prospectus.

"3-D seismic" means seismic that is run, acquired, and processed to yield a
three-dimensional picture of the subsurface.

"bbl" means barrel, a standard measure of volume for oil, condensate and
natural gas liquids which equals 42 U.S. gallons.

"Bcf" means a billion cubic feet.

"Bcfe" means a billion cubic feet equivalent.

"bopd" means a barrel of oil or condensate per day.

"Carried interest" means a fractional interest in a lease which is free of
all costs of drilling and completing a well up to a designated point. The
carried party's expenses are paid by the other parties who own the working
interest in the well. After the designated point is reached, the carried
interest usually becomes a working interest and shares in the costs.

"Development well" means a well drilled within the proved area of an oil or
gas reservoir to the depth of a stratigraphic horizon known to be productive.

"Discounted future net cash flows" refers to a method of determining the
present value of proved reserves. Under the Commission method, the future net
revenues before income taxes from proved reserves are estimated assuming that
oil and natural gas prices and production costs remain constant. The resulting
stream of revenues is then discounted at the rate of 10% per year to obtain the
present value.

"EBITDA" means income from operations plus depreciation, depletion and
amortization, impairment of proved oil and gas properties, non-recurring costs
and exploration expense.

"Exploratory well" means a well drilled to find commercially productive
hydrocarbons in an unproved area or to extend significantly a known oil or
natural gas reservoir.

"Finding costs", expressed in dollars per Mcfe, are calculated by dividing
the amount of total capital expenditures by the amount of total reserves added
during the same period as a result of drilling activities, property
acquisitions, reserve revisions and improved recovery.

"Gross" oil and natural gas wells or "gross" acres are the total number of
wells or acres, respectively, in which the Company has an interest, without
regard to the size of that interest.

"Mbbls" means a thousand barrels.

"Mbopd" means a thousand barrels of oil or condensate per day.

"Mcf" means a thousand cubic feet, a standard measure of volume for gas.

"Mcfe" means a thousand cubic feet equivalent, which is determined using
the ratio of one barrel of crude oil, condensate or natural gas liquids to six
Mcf of natural gas so that of a barrel of crude oil, condensate or natural gas
liquids is referred to as one thousand cubic feet of natural gas equivalent or
one Mcfe.

"MMbbls" means a million barrels.

"MMcf" means a million cubic feet.

"MMcfe" means a million cubic feet equivalent.

"MMcfd" means a million cubic feet per day.

"Net" oil and natural gas wells or "net" acres are determined by
multiplying gross wells or acres by the Company's working interest in those
wells or acres.

G-1
<PAGE> 43

"Proved developed reserves" are expected to be recovered from existing
wells (including reserves behind pipe). Improved recovery reserves are
considered developed only after the necessary equipment has been installed, or
when the costs to do so are relatively minor. Developed reserves may be
subcategorized as producing or nonproducing.

"Proved reserves" can be estimated with reasonable certainty to be
recoverable under current economic conditions. Current economic conditions
include prices and costs prevailing at the time of the estimate. Proved reserves
may be developed or undeveloped. In general, reserves are considered proved if
commercial productibility of the reservoir is supported by actual production or
formation tests. Proved reserves must have facilities to process and transport
those reserves to market that are operational at the time of the estimate, or
there is a commitment or reasonable expectation to install such facilities in
the future.

"Reserves" means estimated volumes of oil, condensate, natural gas, natural
gas liquids, and associated substances anticipated to be commercially
recoverable from known accumulations from a given date forward, under existing
economic conditions, by established operating practices, and under current
government regulations. Reserve estimates are based on interpretations of
available geographic geologic and/or engineering data. All reserve estimates
involve some degree of uncertainty, depending chiefly on the amount and
reliability of geologic and engineering data available at the time of the
estimate and the interpretation of these data. The relative degree of
uncertainty may be conveyed by placing reserves in one or two classifications,
either proved or unproved. Unproved reserves are less certain to be recovered
than proved reserves and may be subclassified as probable or possible to denote
progressively increasing uncertainty.

"Royalty" means an interest in an oil and gas lease that gives the owner of
the interest the right to receive a portion of the production from the leased
acreage (or of the proceeds of the sale thereof), but generally does not require
the owner to pay any portion of the costs of drilling or operating the wells on
the leased acreage. Royalties may be either landowner's royalties, which are
reserved by the owner of the leased acreage at the time the lease is granted, or
overriding royalties, which are usually carved from the leasehold interest
pursuant to an assignment to a third party reserved by an owner of the leasehold
in connection with a transfer of the leasehold to a subsequent owner.

"Working interest" means an interest in an oil and gas lease that gives the
owner of the interest the right to drill for and produce oil and gas on the
leased acreage and requires the owner to pay a share of the costs of drilling
and production operations. The share of production to which a working interest
owner is entitled will always be smaller than the share of costs that the
working interest owner is required to bear, with the balance of the production
accruing to the owners of royalties. For example, the owner of a 100% working
interest in a lease burdened only by a landowner's royalty of 12.5% would be
required to pay 100% of the costs of a well but would be entitled to retain
87.5% of the production.

"Workover" means operations on a producing well to restore or increase
production.

In this Prospectus, natural gas volumes are stated at the legal pressure
base of the state or area in which the reserves are located and at 60 degrees
Fahrenheit.

G-2
<PAGE> 44

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

UNITED MERIDIAN CORPORATION

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2

Consolidated Statement of Income for Years Ended December 31, 1993, 1994 and 1995 and
for the Six Months Ended June 30, 1995 and 1996 (Unaudited)......................... F-3

Consolidated Balance Sheet as of December 31, 1994 and 1995 and June 30, 1996
(Unaudited)......................................................................... F-4

Consolidated Statement of Changes in Stockholders' Equity for the Years Ended December
31, 1993, 1994 and 1995 and for the Six Months Ended June 30, 1996 (Unaudited)...... F-6

Consolidated Statement of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995 and for the Six Months Ended June 30, 1995 and 1996 (Unaudited)................ F-7

Notes to Consolidated Financial Statements............................................ F-8
</TABLE>

F-1
<PAGE> 45

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders,
United Meridian Corporation:

We have audited the accompanying consolidated balance sheets of United
Meridian Corporation (a Delaware corporation) and subsidiaries as of December
31, 1995 and 1994, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of United Meridian Corporation
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.

As discussed in Note 3 to the Consolidated Financial Statements, effective
January 1, 1993, the Company changed its method of accounting for assessing
recoverability of proved oil and gas properties and in 1995 the Company adopted
the provisions of Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of.

ARTHUR ANDERSEN LLP

Houston, Texas
February 21, 1996

F-2
<PAGE> 46

UNITED MERIDIAN CORPORATION

CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------- --------------------
1993 1994 1995 1995 1996
-------- --------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Gas sales......................... $ 60,457 $ 67,763 $ 68,228 $34,122 $ 60,986
Oil sales......................... 19,877 26,675 45,122 21,128 35,284
Contract settlements and other.... 913 2,703 2,507 955 680
Gain on sale of assets............ 1,071 676 31,184 12,569 18,012
-------- --------- -------- ------- --------
82,318 97,817 147,041 68,774 114,962
-------- --------- -------- ------- --------
Costs and expenses:
Production costs.................. 30,539 36,938 42,891 19,481 25,766
General and administrative........ 8,097 12,504 10,425 5,437 6,519
Exploration, including dry holes
and impairments................ 6,811 16,187 15,682 7,623 14,711
Depreciation, depletion and
amortization................... 35,938 50,727 53,942 25,828 41,821
Impairment of proved oil and gas
properties..................... 10,051 94,793 8,317 -- --
-------- --------- -------- ------- --------
91,436 211,149 131,257 58,369 88,817
-------- --------- -------- ------- --------
Income (loss) from operations....... (9,118) (113,332) 15,784 10,405 26,145
Other income, expenses and
deductions:
Interest and other income
(expense)...................... 2,102 (141) 375 305 78
Interest and debt expense......... (6,532) (9,040) (17,945) (8,729) (11,380)
-------- --------- -------- ------- --------
Net income (loss) before income
taxes and cumulative effect of
change in accounting principle.... (13,548) (122,513) (1,786) 1,981 14,843
Income tax benefit (provision)...... 6,305 41,524 3,885 2,089 (5,892)
Cumulative effect of change in
accounting principle, net of
tax............................... (3,543) -- -- -- --
-------- --------- -------- ------- --------
Net income (loss)................... (10,786) (80,989) 2,099 4,070 8,951
Preferred stock dividends........... (1,498) -- (1,484) -- (1,531)
-------- --------- -------- ------- --------
Net income (loss) available to
common stockholders............... $(12,284) $ (80,989) $ 615 $ 4,070 $ 7,420
======== ========= ======== ======= ========
Net income (loss) per common share,
after giving effect to a
one-for-two reverse stock split
effective May 20, 1993:
Before cumulative effect of change
in accounting principle........ $ (0.75) $ (3.47) $ 0.02 $ 0.14 $ 0.24
Cumulative effect of change in
accounting principle........... (0.31) -- -- -- --
-------- --------- -------- ------- --------
Total............................... $ (1.06) $ (3.47) $ 0.02 $ 0.14 $ 0.24
======== ========= ======== ======= ========
Weighted average number of common
shares and common share
equivalents outstanding, after
giving effect to a one-for-two
reverse stock split effective May
20, 1993.......................... 11,588 23,330 29,259 29,035 30,474
======== ========= ======== ======= ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE> 47

UNITED MERIDIAN CORPORATION

CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 11,825 $ 13,586 $ 4,138
Accounts receivable, net of allowance for doubtful
accounts of $1,266 at December 31, 1994 and 1995
and $1,190 at June 30, 1996:
Oil and gas sales................................ 15,325 18,188 21,083
Joint interest and other......................... 15,767 22,522 22,157
Deferred income taxes............................... 15,498 3,875 8,826
Inventory........................................... 6,447 15,313 8,695
Prepaid expenses and other.......................... 3,870 2,529 3,188
--------- --------- ---------
Total current assets........................ 68,732 76,013 68,087
--------- --------- ---------
Property and equipment, at cost:
Oil and gas (successful efforts method)
Proved properties................................ 684,725 759,695 768,353
Unproved properties.............................. 11,701 12,369 11,565
Other property and equipment........................ 3,847 6,231 6,860
--------- --------- ---------
700,273 778,295 786,778
Accumulated depreciation, depletion and
amortization........................................ (275,343) (309,622) (327,397)
--------- --------- ---------
424,930 468,673 459,381
--------- --------- ---------
Other assets:
Gas imbalances receivable........................... 6,678 5,852 5,818
Deferred income taxes............................... 2,897 17,140 14,295
Debt issue cost..................................... 4,877 9,905 9,375
Other............................................... 3,100 867 828
--------- --------- ---------
17,552 33,764 30,316
--------- --------- ---------
TOTAL ASSETS................................ $ 511,214 $ 578,450 $ 557,784
========= ========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements

F-4
<PAGE> 48

UNITED MERIDIAN CORPORATION

CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1994 1995 1996
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Accounts payable.................................... $ 52,566 $ 58,137 $ 37,534
Advances from joint owners.......................... 1,263 8,238 8,977
Interest payable.................................... 1,315 4,494 5,310
Accrued liabilities................................. 8,397 6,202 8,761
Notes payable....................................... -- 10,639 --
Current maturities of long-term debt................ -- 3,100 4,350
--------- --------- ---------
Total current liabilities................... 63,541 90,810 64,932
--------- --------- ---------
Long-Term Debt:
Revolving loan...................................... 237,784 61,049 44,758
Unsecured notes..................................... 1,850 -- --
Cote d'Ivoire project loan.......................... -- 33,750 32,500
10 3/8% senior subordinated notes................... -- 150,000 150,000
--------- --------- ---------
239,634 244,799 227,258
--------- --------- ---------
Deferred Credits and Other Liabilities:
Deferred income taxes............................... 19,810 18,499 23,167
Gas imbalances payable.............................. 6,474 6,377 6,460
Other............................................... 10,317 5,653 6,151
--------- --------- ---------
36,601 30,529 35,778
--------- --------- ---------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $.01 par value, 32,000,000 shares
authorized, no shares issued and outstanding at
December 31, 1994 and 1995 and June 30, 1996..... -- -- --
Series F preferred stock, $.01 par value, 1,166,667
shares authorized, shares issued and outstanding
at December 31, 1995 and June 30, 1996........... -- 12 12
Common stock, $.01 par value, 46,000,000 shares
authorized, 27,721,881 and 28,150,224 issued and
outstanding at December 31, 1994 and 1995,
respectively, and 28,702,138 shares issued and
outstanding at June 30, 1996..................... 277 281 287
Additional paid-in capital.......................... 296,168 336,469 346,526
Foreign currency translation adjustment............. (3,999) (4,057) (4,036)
Retained earnings (deficit)......................... (121,008) (120,393) (112,973)
--------- --------- ---------
171,438 212,312 229,816
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY.................................... $ 511,214 $ 578,450 $ 557,784
========= ========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE> 49

UNITED MERIDIAN CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SERIES A-E SERIES F
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- ------------------ ------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
----------- ------ --------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992......................... 20,688,463 $ 207 5,664,653 $ 57 $118,456
Preferred stock issuance
-- April 30.................................... 1,400,000 14 34,441
-- June 11..................................... 313,962 3 7,846
Adjustment resulting from recording the acquisition
of NHI in accordance with the purchase method.... 1,893
Adjustment to reflect 1 for 2 reverse stock
split............................................ (2,832,326) (28) 28
Foreign currency translation adjustment..........
Preferred Stock dividends........................
Initial Public Stock offering, July 22........... 4,400,000 44 68,637
Conversion of Preferred Stock to Common Stock,
July 22........................................ (22,402,425) (224) 15,326,235 153 71
Net loss.........................................
----------- ----- --------- ---- ---------- ---- --------
Balance, December 31, 1993......................... -- -- -- -- 22,558,562 226 231,372
Adjustment resulting from recording the
acquisition of GARI in accordance with the
purchase method................................ (82)
Foreign currency translation adjustment..........
Exercise of common stock options................. 144,375 1 1,404
Issuance of stock as partial purchase in GARI
merger......................................... 5,018,944 50 63,474
Net loss.........................................
----------- ----- --------- ---- ---------- ---- --------
Balance, December 31, 1994......................... -- -- -- -- 27,721,881 277 296,168
Foreign currency translation adjustment..........
Preferred Stock issuance
-- June 30..................................... 833,333 $ 8 24,992
-- July 24..................................... 333,334 4 9,902
Exercise of common stock options................. 428,343 4 5,407
Preferred Stock dividends........................
Net income.......................................
----------- ----- --------- ---- ---------- ---- --------
Balance, December 31, 1995......................... -- -- 1,166,667 12 28,150,224 281 336,469
Foreign currency translation adjustment..........
Exercise of common stock options................. 318,358 3 6,472
Exercise of warrants............................. 233,556 3 3,585
Preferred Stock dividends........................
Net income.......................................
----------- ----- --------- ---- ---------- ---- --------
Balance, June 30, 1996 (Unaudited)............... -- $ -- 1,166,667 $ 12 28,702,138 $287 $346,526
=========== ===== ========= ==== ========== ==== ========

FOREIGN RETAINED
CURRENCY EARNINGS
ADJUSTMENT (DEFICIT) TOTAL
---------- --------- --------
<S> <C> <C> <C>
Balance, December 31, 1992......................... $ (27,735) $ 90,985
Preferred stock issuance
-- April 30.................................... 34,455
-- June 11..................................... 7,849
Adjustment resulting from recording the acquisition
of NHI in accordance with the purchase method.... 1,893
Adjustment to reflect 1 for 2 reverse stock
split............................................ --
Foreign currency translation adjustment.......... $ (1,907) (1,907)
Preferred Stock dividends........................ (1,498) (1,498)
Initial Public Stock offering, July 22........... 68,681
Conversion of Preferred Stock to Common Stock,
July 22........................................ --
Net loss......................................... (10,786) (10,786)
-------- --------- --------
Balance, December 31, 1993......................... (1,907) (40,019) 189,672
Adjustment resulting from recording the
acquisition of GARI in accordance with the
purchase method................................ (82)
Foreign currency translation adjustment.......... (2,092) (2,092)
Exercise of common stock options................. 1,405
Issuance of stock as partial purchase in GARI
merger......................................... 63,524
Net loss......................................... (80,989) (80,989)
-------- --------- --------
Balance, December 31, 1994......................... (3,999) (121,008) 171,438
Foreign currency translation adjustment.......... (58) (58)
Preferred Stock issuance
-- June 30..................................... 25,000
-- July 24..................................... 9,906
Exercise of common stock options................. 5,411
Preferred Stock dividends........................ (1,484) (1,484)
Net income....................................... 2,099 2,099
-------- --------- --------
Balance, December 31, 1995......................... (4,057) (120,393) 212,312
Foreign currency translation adjustment.......... 21 21
Exercise of common stock options................. 6,475
Exercise of warrants............................. 3,588
Preferred Stock dividends........................ (1,531) (1,531)
Net income....................................... 8,951 8,951
-------- --------- --------
Balance, June 30, 1996 (Unaudited)............... $ (4,036) $(112,973) $229,816
======== ========= ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE> 50

UNITED MERIDIAN CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------- ----------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).......................... $ (10,786) $ (80,989) $ 2,099 $ 4,070 $ 8,951
Adjustments to reconcile net income (loss)
to cash from operating activities:
Exploration, including dry holes and
impairments............................ 6,811 16,187 15,682 7,623 14,711
Depreciation, depletion and
amortization........................... 35,938 50,727 53,942 25,828 41,821
Impairment of proved oil and gas
properties............................. 15,419 94,793 8,317 -- --
Amortization of debt issue cost.......... 893 532 1,173 319 792
Deferred income tax (benefit)
provision.............................. (9,261) (41,549) (4,217) (2,476) 5,595
Gain on sale of assets................... (1,071) (676) (31,184) (12,569) (18,012)
--------- --------- --------- --------- ---------
37,943 39,025 45,812 22,795 53,858
Changes in assets and liabilities:
Decrease (increase) in receivables....... (9,813) 6,118 (9,618) (3,744) (2,530)
Increase (decrease) in payables and
accrued liabilities.................... 16,239 (7) 8,150 (517) (19,185)
Increase (decrease) in net gas
imbalances............................. (320) (408) 729 183 117
Other.................................... (1,875) (1,164) 933 1,869 2,700
--------- --------- --------- --------- ---------
Net cash provided by operating
activities........................ 42,174 43,564 46,006 20,586 34,960
--------- --------- --------- --------- ---------
Cash flows from investing activities:
Exploration................................ (8,617) (21,169) (32,914) (14,120) (24,148)
Development................................ (22,354) (30,968) (97,934) (36,519) (37,444)
Acquisition of properties.................. (2,317) (798) (28,538) (3,680) --
Additions to other property and
equipment................................ (544) (419) (1,441) (549) (615)
Corporate acquisitions (net of cash
acquired)................................ (141,954) (129,182) -- -- --
Net proceeds from the sale of assets....... 3,232 2,376 78,119 48,410 29,715
--------- --------- --------- --------- ---------
Net cash used in investing
activities........................ (172,554) (180,160) (82,708) (6,458) (32,492)
--------- --------- --------- --------- ---------
Cash flows from financing activities:
Repayment of long-term debt................ (198,240) (90,299) (337,033) (237,784) (105,238)
Additions to total debt.................... 222,399 237,784 345,298 187,645 88,947
Debt issue cost............................ (4,305) (964) (6,089) -- (251)
Net proceeds from issuance of preferred
stock.................................... 42,304 -- 34,906 24,970 --
Net proceeds from initial public
offering................................. 68,681 -- -- -- --
Preferred stock dividends.................. (1,498) -- (1,484) -- (1,531)
Proceeds from common stock options and
warrants exercised....................... -- 1,405 2,865 1,029 6,157
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities.............. 129,341 147,926 38,463 (24,140) (11,916)
--------- --------- --------- --------- ---------
Effect of exchange rate changes on cash...... (37) -- -- -- --
Net increase (decrease) in cash and cash
equivalents................................ (1,076) 11,330 1,761 (10,012) (9,448)
Cash and cash equivalents at beginning of
period..................................... 1,571 495 11,825 11,825 13,586
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period... $ 495 $ 11,825 $ 13,586 $ 1,813 $ 4,138
========= ========= ========= ========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-7
<PAGE> 51

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION

The accompanying consolidated financial statements of United Meridian
Corporation (UMC or the Company), a Delaware corporation, have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC). The 1994 statements include the assets and liabilities of General
Atlantic Resources, Inc. (GARI) from September 19, 1994 and the results of
operating such assets since that date. This consolidation reflects the Company's
51% ownership of GARI as of September 19, 1994 and 100% ownership as of November
15, 1994. Additionally, the financial statements include the assets and
liabilities of Norfolk Holdings Inc. (NHI), KPX, Inc. (KPX) and Sterling Energy
Limited (SEL) from April 30, 1993, June 11, 1993 and October 29, 1993,
respectively, and the results of operating such assets since those dates. See
Note 4 below for additional information concerning these acquisitions.

The Company is an independent energy company engaged in the acquisition,
exploration, development and production of natural gas and crude oil across
North America and in the West African oil and natural gas producing regions of
Cote d'Ivoire and Equatorial Guinea.

The financial statements reflect all adjustments that, in the opinion of
management, are necessary for a fair presentation.

In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments of a normal, recurring nature
necessary to present fairly the financial position of the Company as of June 30,
1995 and 1996 and the results of operations and cash flows for the six-month
periods ended June 30, 1995 and 1996. The results of operations for the interim
periods presented are not necessarily indicative of the results to be expected
for the full year.

NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its majority-owned affiliates. All significant intercompany balances and
transactions have been eliminated in consolidation.

Certain reclassification of amounts previously reported have been made to
conform to current year presentation.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents.

INVENTORY

UMC conducts a portion of its oil and gas activities with a small group of
institutional and corporate investors. In connection therewith, the Company
periodically acquires oil and gas properties with the intention of selling a
portion of its interests to such investors. To the extent those properties are
to be resold to investors, costs are carried as a current asset and classified
as inventory. No gain or loss is recognized on inventoried properties. At
December 31, 1995 and 1994, costs of properties to be resold included in
inventory totaled $12,410,000 and $4,500,000, respectively. The remaining
inventory consists of tubular goods and other equipment.

OIL AND GAS PROPERTIES

The Company and its subsidiaries follow the successful efforts method of
accounting for oil and gas producing activities. Under this method, all costs to
acquire mineral interests in oil and gas properties, to

F-8
<PAGE> 52

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

acquire production sharing contracts with foreign governments, to drill and
equip exploratory wells which find proved reserves and to drill and equip
development wells are capitalized. Geological and geophysical costs, delay
rentals and technical support costs are expensed as incurred except in those
circumstances where the Company has a contractual right to recover such costs
from additional proved reserves, in which case they are capitalized. Other
internal costs related to oil and gas acquisitions, exploration and development
activities are generally expensed as general and administrative, exploration or
production expenses. The costs of drilling exploratory wells which do not find
proved reserves are expensed upon determination that a well does not justify
commercial development. The capitalized costs of producing oil and gas
properties are depreciated and depleted by the units-of-production method based
upon estimated proved reserves. Unproved oil and gas properties are periodically
assessed for impairments of value and a loss is recognized as appropriate.

OTHER PROPERTY AND EQUIPMENT

Other property consists primarily of furniture, office equipment, leasehold
improvements and computers. The majority of these assets are depreciated on a
straight-line basis with useful lives of three to ten years.

GAS IMBALANCES

The Company follows the entitlements method of accounting for production
imbalances. Under this method, the Company recognizes revenues based on its
interest in production from a well. Imbalance payables are recorded at
historical amounts and imbalance receivables are valued at the lower of (i) the
price in effect at the time of production, (ii) the current market value or
(iii) the contract price net of selling expenses. Gas imbalances arise when a
purchaser takes delivery of more or less gas volume from a well than UMC's
actual interest in the production from that well. Such imbalances are reduced
either by subsequent recoupment of over and under deliveries or by cash
settlement, as required by applicable contracts. Under-deliveries are included
in Other Assets and over-deliveries are included in Deferred Credits and Other
Liabilities.

HEDGING

UMC periodically enters into contracts in order to hedge against the
volatility in oil and gas prices. The Company enters into such transactions for
the purpose of insuring against a possible decline in the short-term (3 to 12
months) price of oil or natural gas. The contracts generally take the form of
swaps or price collars, and are placed with major financial institutions. The
results of such transactions are included as oil or gas sales in the
Consolidated Statement of Income as the related production volumes are sold.

The Company may also enter into interest rate swap contracts from time to
time with major financial institutions. These transactions are made to protect
against higher future interest costs on the Company's long-term debt. The
results of interest rate swaps are included in interest expense on the
Consolidated Statement of Income.

FEDERAL INCOME TAXES

The Company follows the provisions of Statement of Financial Accounting
Standards (SFAS) 109, "Accounting for Income Taxes," under which deferred tax
assets or liabilities are estimated at the financial statement date based upon
(i) temporary differences between the tax basis of assets and liabilities and
their reported amounts in the financial statements and (ii) operating loss and
tax credit carryforwards for tax purposes.

STATEMENT OF CASH FLOWS

Cash flows from operating activities for 1995, 1994 and 1993, include cash
payments for interest of $14,642,000, $8,042,000 and $6,082,000 and income taxes
of $553,000, $408,000 and $850,000, respectively.

F-9
<PAGE> 53

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FOREIGN CURRENCY TRANSLATION

The financial position and results of operations attributable to the
Company's foreign operations are translated into U.S. currency in accordance
with SFAS 52, the U.S. dollar primarily being used as the functional currency.
Accordingly, the assets and liabilities of the financial statements are
translated using the currency exchange rate in effect at the balance sheet date
while the revenues, expenses, gains and losses are translated using the weighted
average exchange rate for the period. The effect of such translations are
reflected as adjustments to stockholders' equity as shown in the Statement of
Changes in Stockholders' Equity in the Company's Consolidated Financial
Statements.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

NOTE 3 -- CHANGE IN METHOD OF ACCOUNTING FOR ASSESSING RECOVERABILITY OF PROVED
OIL AND GAS PROPERTIES

During 1995, the Financial Accounting Standards Board issued SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." The Company adopted the provisions of SFAS 121 during the
fourth quarter of 1995, recording a pre-tax impairment of $8,317,000 (after-tax
effect: $5,125,000).

Confronted with lower oil prices in the fourth quarter of 1993, the Company
adopted a policy to assess recoverability on a periodic basis of its proved
properties by individual property groups having similar geological or operating
characteristics utilizing estimates of undiscounted future net revenues
attributable to proved reserves based on current prices and to provide
impairment reserves as conditions warrant. In its application of this policy,
the Company recorded a total pre-tax charge of $15,400,000 against earnings,
$10,051,000 of which applied to 1993, and $3,500,000 of which applied to periods
prior to 1993 net of a deferred tax benefit of $1,800,000. A precipitous decline
in natural gas prices at year-end 1994 and continuing into 1995 required a
similar adjustment to costs applicable to proved properties of $94,793,000
before tax (after-tax effect: $58,772,000).

NOTE 4 -- ACQUISITIONS AND DISPOSITIONS

As part of its on-going operations, the Company continually sells producing
and undeveloped reserves and related assets. Significant dispositions and
acquisitions for the years ending December 31, 1995, 1994 and 1993 are shown
below.

1995 TRANSACTIONS

In 1995, the Company agreed to assign to Yukong Limited a portion of its
interests in Blocks CI-01 and CI-02 in Cote d'Ivoire and Blocks B, C and D in
Equatorial Guinea. Mobil subsequently exercised its preferential right to
purchase the interest in Block B in lieu of the proposed assignment to Yukong
Limited. Under the agreements, the Company will receive $40,135,000 in
consideration in 1995 and 1996. A pre-tax gain of $18,278,000 was recognized in
1995 for proceeds received through December 31, 1995.

In February 1995, UMC sold all of its interest in oil and gas properties in
West Virginia, effective January 1, 1995. Net proceeds from the sale were
$41,200,000 and a gain of $7,000,000 was recognized. Total proved reserves at
December 31, 1994 attributable to the sold properties were 61,715 MMCFE.

F-10
<PAGE> 54

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In March 1995, UMC sold all of its interest in the Main Pass 108 offshore
Louisiana field effective February 1, 1995. Net proceeds from the sale were
$6,900,000 with a recognized gain of $4,700,000. Total proved reserves at
December 31, 1994 associated with the Company's interest in Main Pass 108 were
2,106 MMCFE.

In October 1995, the Company and its institutional partners acquired
certain oil and natural gas properties at a cost of $58,626,000 (approximately
$21,300,000 net to the Company). The acquired interests relating to one of the
institutional partners (in an additional amount of approximately $10,250,000)
were included in inventory until January 1996, at which time the partner
reimbursed UMC for its proportionate share of the acquisition, including
carrying costs. A separate short-term facility was negotiated for the financing
of this interest in the properties and was paid at closing in January 1996.

1994 TRANSACTIONS

On November 15, 1994 the Company and its wholly-owned subsidiary, UMC
Merger Corporation, a Delaware corporation, completed the acquisition of all
outstanding common stock of GARI, 51% of which was purchased for cash and the
remainder of which was acquired in exchange for the issuance of 5,018,944 shares
of UMC common stock. The acquisition was accounted for under the purchase method
and, as a result, the assets and liabilities of GARI were added to the Company's
balance sheet as of September 19, 1994 at amounts that reflect the purchase
price of 51% of GARI's equity. On November 15, 1994, the remainder of GARI's
equity was acquired by exchange of stock and was recorded as additional basis in
the assets acquired.

GARI was an independent oil and gas company with operations and prospects
concentrated in major producing basins in the Rocky Mountain, Gulf Coast
(on-shore and off-shore), Mid-Continent and West Texas regions and in Western
Canada.

The following schedule provides an analysis of the consideration paid in
the acquisition of GARI (in thousands):

<TABLE>
<S> <C>
Cash costs --
Purchase of GARI common stock in individual transactions and tender
offer.............................................................. $ 78,359
Liquidation of GARI debt.............................................. 49,769
Transaction costs..................................................... 1,970
Cash acquired in the transaction...................................... (916)
--------
Total net cash consideration.................................. 129,182
Issuance of 5,018,944 shares of UMC stock in exchange for remaining GARI
stock, net of related costs........................................... 63,524
Liabilities assumed --
Current............................................................... 27,333
Non-current........................................................... 5,525
Assets acquired (except oil and gas properties)
Current, except for cash.............................................. (18,209)
Non-current........................................................... (2,410)
--------
Total consideration before tax effect................................... 204,945
Accrual of deferred taxes related to difference between book and tax
basis of assets acquired.............................................. 35,008
--------
Total costs allocated to oil and gas assets............................. $239,953
========
</TABLE>

F-11
<PAGE> 55

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In late 1994, the Company acquired certain oil and gas properties in three
separate transactions at a cost of $18,000,000. During the first quarter of
1995, a portion of this acquisition package was sold to the Company's
institutional partners, reducing UMC's portion to $6,000,000.

1993 TRANSACTIONS

In 1993, the Company acquired the stock of three privately owned oil and
gas companies, NHI, KPX and SEL. The acquisitions were accounted for under the
purchase method, which provides that the cost of the acquisition (i.e. cash,
stock and liabilities assumed) be allocated to the assets and liabilities
acquired based upon their fair value. As a result, the assets and liabilities of
NHI, KPX and SEL were added to UMC's balance sheet at amounts that reflect the
purchase prices rather than the historical costs reported by the acquired
companies.

NHI: On April 30, 1993, the Company purchased for cash the equity of NHI
for $119,626,000, including acquisition costs.

KPX: On June 11, 1993, the Company acquired KPX for $16,594,000. The
purchase price was comprised of 313,962 shares of Series E Convertible Preferred
Stock (which was converted to Common Stock upon the effective date of the
Company's initial public offering), cash of $625,000, warrants to purchase
250,004 shares of the Company's Common Stock and repayment of $7,300,000 of
senior bank debt of KPX.

SEL: On October 29, 1993, the Company purchased the outstanding stock of
SEL for $6,900,000. The purchase included oil and natural gas properties in the
company-operated Bearpaw area of Montana and in Canada valued at $5,400,000 and
$1,500,000 in cash and other assets.

Assuming the acquisition of GARI, NHI, KPX and SEL had been consummated as
of January 1, 1993, the unaudited pro forma income statement approximates the
following (in thousands, except per share amounts):

<TABLE>
<CAPTION>
PRO FORMA FOR THE
YEARS ENDED
DECEMBER 31,
---------------------
1993 1994
-------- --------
(UNAUDITED)
<S> <C> <C>
Revenues....................................................... $138,089 $128,028
Loss from operations including impairments of proved properties
of $10,100 and $57,700, respectively......................... $(16,146) $(81,582)
Net loss before income taxes and cumulative effect of change in
accounting principle......................................... $(25,115) $(94,980)
Net loss....................................................... $(20,364) $(64,973)
Net loss per common share...................................... $ (0.74) $ (2.34)
Weighted average number of common shares outstanding........... 27,577 27,722
</TABLE>

The above unaudited pro forma net loss amounts have been determined as follows:

The 1994 statement of income is a result of combining the statement of
income of UMC for the year with the statement of income of GARI from January 1,
1994 until the date of acquisition adjusted for (i) certain costs that GARI had
capitalized under the full cost method of accounting that are expensed under the
successful efforts method of accounting; (ii) depreciation, depletion and
amortization of GARI properties calculated using the units-of-production method
applied to the adjusted basis of the properties acquired using the purchase
method of accounting; (iii) increased interest expense resulting from the
additional borrowings under the Credit Facility to acquire the common stock of
GARI and (iv) recalculation of the impairment after giving effect to recording
depreciation, depletion and amortization since January 1, 1993.

F-12
<PAGE> 56

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The 1993 statement of income is a result of combining: (i) the income
statement of UMC for the year with; (ii) the statements of income of NHI, KPX
and SEL from January 1, 1993 until date of acquisition adjusted for a) realized
or anticipated general and administrative cost savings in connection with the
acquisition of NHI, KPX and SEL; b) depreciation, depletion and amortization of
NHI, KPX and SEL properties calculated using the units-of-production method
applied to the adjusted basis of the properties acquired using the purchase
method of accounting; c) reduced interest expense resulting from the net
proceeds of the initial public offering being used to reduce debt; d) sale and
conversion of Series E Preferred Stock into common stock on January 1, 1993,
eliminating any dividend payments and e) a nonrecurring expense accrual for
production taxes of $1,012,000 and a nonrecurring reduction of revenue of
$667,000 associated with a 1992 gas contract settlement made by NHI (the gas
contract settlement adjustment increases revenue, income from operations, income
before taxes and net income by $667,000, $1,679,000, $1,679,000 and $1,679,000,
respectively); and (iii) the statement of income of GARI for 1993 with the
adjustments mentioned above for GARI in 1994.

NOTE 5 -- DEBT

Long-term debt consisted of the following at December 31, 1995 and 1994 and
June 30, 1996 (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1994 1995 1996
-------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
Revolving loan..................................... $237,784 $ 61,049 $ 44,758
10 3/8% senior subordinated notes.................. -- 150,000 150,000
Cote d'Ivoire facility............................. -- 35,000 35,000
Unsecured notes.................................... 1,850 1,850 1,850
-------- -------- --------
239,634 247,899 231,608
Less: current maturities........................... -- (3,100) (4,350)
-------- -------- --------
Long-term debt..................................... $239,634 $244,799 $227,258
======== ======== ========
</TABLE>

Current maturities at December 31, 1995 include the Unsecured Notes and the
initial annual amortization of the Cote d'Ivoire Facility. Amortization of the
Revolving Loan does not begin until 2000 and the 10 3/8% Senior Subordinated
Notes are due 2005. Maturities of long-term debt by calendar year are as follows
(in thousands):

<TABLE>
<S> <C>
1996.............................................................. $ 3,100
1997.............................................................. 3,375
1998.............................................................. 4,750
1999.............................................................. 5,250
2000.............................................................. 18,799
Thereafter........................................................ 212,625
--------
$247,899
========
</TABLE>

REVOLVING LOAN

At the beginning of 1995 the Credit Facility provided a borrowing base
amount of $250,000,000 of which nearly $238,000,000 was outstanding. The Credit
Facility was supplemented by a $30,000,000 Liquidity Facility. After the sale of
the Appalachia properties, the borrowing base was reduced to $225,000,000. In
conjunction with the placement of the 10 3/8% Senior Subordinated Notes, the
borrowing base was reduced to $190,000,000 and the Liquidity Facility was
terminated.

F-13
<PAGE> 57

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Credit Facility, which is with a group of commercial banks, consists of
two parts: (i) a credit facility among UMC, certain of its subsidiaries and
certain lenders (the U.S. Lenders) pursuant to which the U.S. Lenders agree to
make a portion of the Revolving Loan (subject to Borrowing Base limitations) to
UMC (the U.S. Credit Facility) and (ii) a credit facility between UMC and
certain lenders (the Canadian Lenders) pursuant to which the Canadian Lenders
agree to make the remaining part of the Revolving Loan (subject to aggregate
Borrowing Base limitations under the Credit Facility and a specific Canadian
Borrowing Base sub-limit) to UMC (the Canadian Credit Facility). The amount of
the Borrowing Base, which governs the aggregate Revolving Loan jointly under
both the U.S. Credit Facility and the Canadian Credit Facility, and the
sub-limit on the portion of the Revolving Loan that will be made by the Canadian
Lenders, are both determined from time to time jointly by the U.S. Lenders and
the Canadian Lenders. The next Borrowing Base redetermination date is scheduled
for November 1, 1996.

The Revolving Loan has a term of seven years with amortization of the
Borrowing Base to begin in 1997, unless extended by the Company and the Lenders.
The following table provides the Borrowing Base and outstanding borrowings under
the Credit Facility as of December 31, 1995 (in thousands):

<TABLE>
<CAPTION>
BORROWING OUTSTANDING
BASE BORROWINGS
--------- -----------
<S> <C> <C>
Revolving Loan:
U.S. Credit Facility........................................ $172,269 $45,000
Canadian Credit Facility.................................... 17,731 16,049
-------- -------
Total............................................... $190,000 $61,049
======== =======
</TABLE>

During 1995, 1994 and 1993, the Credit Facility provided the Company with
various interest rate options based upon prime and LIBOR rates. The Company's
actual average interest rate for 1995, 1994 and 1993 was 7.47%, 5.95%, and
5.51%, respectively. Additionally, a facility fee of 0.375% per annum on the
unused portion is payable quarterly by UMC.

10 3/8% SENIOR SUBORDINATED NOTES

On October 30, 1995, the Company closed a public offering of $150,000,000
of 10 3/8% Senior Subordinated Notes (Notes) due 2005 at an initial price of
99.5% of face value. Proceeds of $144,933,000 (after deducting underwriting
discounts, commission and expenses of the offering) were used to reduce debt
under the Revolving Loan. Interest is payable semiannually on April 15 and
October 15 of each year, commencing April 15, 1996. The Notes are general
unsecured senior obligations of the Company and are guaranteed by UMC Petroleum
Corporation (Petroleum) but are subordinate to the Revolving Loan (see Note 19).
The Notes are redeemable at the option of the Company, whole or in part, at
anytime after October 15, 2000 at certain premiums to face value.

COTE D'IVOIRE PROJECT LOAN

In July 1995, a subsidiary of the Company entered into the Cote d'Ivoire
Facility with the International Finance Corporation in connection with the
development of Block CI-11 offshore Cote d'Ivoire. The Cote d'Ivoire Facility
provides for borrowings of up to $35,000,000 by the Company's subsidiary which
holds the interest in Block CI-11 and is secured by liens on that interest and
related assets as well as a guarantee from the Company and its primary operating
subsidiary. The guarantees of the Cote d'Ivoire Facility by UMC and Petroleum
are to be released upon the achievement of certain reserve levels and production
rates from the properties. As of December 31, 1995, $35,000,000 was outstanding
under the Cote d'Ivoire Facility and was fully guaranteed by UMC and Petroleum.
Amortization of principal under the Cote d'Ivoire Facility begins in July 1996
with final maturity in January 2005.

F-14
<PAGE> 58

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

LIQUIDITY FACILITY

Effective December 31, 1994, UMC obtained a $30,000,000 one-year credit
facility with certain members of the existing Bank Group. No borrowings were
made under this facility, which terminated with the issuance of the Notes in the
fourth quarter of 1995.

UNSECURED NOTES

Unsecured notes payable in the amount of $1,850,000 were outstanding at
December 31, 1995 and 1994. These notes, which are due in 1996, bear interest at
7.375%.

OTHER

During 1995 and 1994, $1,049,000 and $321,000 of total interest incurred
was capitalized. No interest expense was capitalized in 1993.

Effective January 18, 1994, UMC entered into five-year fixed LIBOR interest
rate swap contracts that provide for fixed interest rates to be realized on
notional amounts of $30,000,000 in 1994 and $45,000,000 from 1995 through 1998.
The agreement includes varying annual fixed interest rates ranging from 3.66% in
1994 to 6.40% in 1998, plus interest rate margins. Additionally, the Company
entered into a two-year LIBOR interest rate cap contract on an additional
notional amount of $45,000,000 for 1995 and 1996 at interest rate caps of 7.60%
and 8.30%, respectively, plus interest rate margins.

NOTE 6 -- CAPITAL STOCK

COMMON STOCK

On May 18, 1993, the Company's shareholders adopted an amendment to the
Company's Certificate of Incorporation providing for a 1 for 2 reverse stock
split of its Series A Voting Common Stock, par value $0.01 per share, and a 1
for 2 reverse stock split of its Series B Nonvoting Common Stock, par value
$0.01 per share. The authorized shares of Series A and Series B stock at
December 31, 1995 and December 31, 1994, were 45,000,000 and 1,000,000,
respectively. Of the 1,000,000 shares of Series B stock authorized, none were
outstanding at December 31, 1995 and 1994.

On June 11, 1993, the Company issued warrants to purchase 250,004 shares of
the Company's Common Stock in connection with the KPX acquisition. The exercise
price of the warrants is $15.36 per share for a three year term ending June 11,
1996. As of December 31, 1995, no warrants had been exercised.

On July 21, 1993, 7,900,000 shares of Common Stock were sold in an initial
public offering at $17.00 per share ($15.94 per share net of discounts and
commissions). This offering consisted of 4,400,000 new shares sold by UMC with
the remainder being sold by certain stockholders of the Company. The net
proceeds to the Company of $68,681,000 were used to prepay a portion of its
long-term debt. The closing of the public offering automatically triggered the
conversion of all outstanding Preferred Stock into 15,326,325 shares of Common
Stock.

In connection with the GARI merger discussed in Note 4, the Company issued
5,018,944 new shares of UMC Common Stock pursuant to an Agreement and Plan of
Merger dated as of August 9, 1994 in exchange for the 4,562,662 remaining Common
Shares of GARI (1.1 shares of UMC Common Stock were issued for each remaining
share of GARI Common Stock). The value of this stock, based on UMC's closing
price on November 15, 1994, was $63,524,000.

On February 14, 1996, the Company granted one shareholder's right (Rights)
for each share of Series A Voting Common Stock to holders of record at the close
of business on February 29, 1996. The Rights will automatically become part of
and traded with existing and future shares of UMC's Series A Common Stock.

F-15
<PAGE> 59

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Rights will become exercisable only in the event, with certain exceptions,
an acquiring party accumulates 15% or more of UMC's voting stock, or if a party
announces an offer to acquire 30% or more of UMC's voting stock. No separate
right certificates will be issued until after these thresholds are met. The
Rights will expire on February 28, 2006. Each Right will entitle the holder,
other than the acquiring party, to purchase either United Meridian stock or
shares in an "acquiring entity" at a 50% discount to the then current market
value. The Company generally will be entitled to redeem the Rights at $0.01 per
Right at any time until the tenth day following the acquisition of a 15 percent
position in its voting stock.

SERIES F CONVERTIBLE PREFERRED STOCK

In June and July 1995, the Company sold an aggregate $35,000,000 of Series
F Convertible Preferred Stock in a private placement to institutional investors.
The Series F Convertible Preferred Stock has an 8.75% cumulative dividend,
payable quarterly commencing on September 30, 1995. A total of 1,166,667
authorized shares were sold at $30 per share and remain outstanding at December
31, 1995.

Each share is convertible into shares of Common Stock at any time at the
option of the holder, based on an initial conversion price of $19.08 per share.

The Series F Convertible Preferred Stock will automatically convert into
shares of Common Stock at the conversion price if, for any 20 trading days
within any period of 30 consecutive trading days, the closing price of the
Common Stock equals or exceeds the Forced Conversion Price, which amount, prior
to the third anniversary of the closing, shall be 175% of the Conversion Price
and thereafter shall be 150% of the Conversion Price.

Subsequent Event (unaudited). On July 25, 1996, all of the outstanding
shares of Series F Convertible Preferred Stock were converted into 1.845 million
shares of common stock in accordance with the automatic conversion terms of such
shares. Had the conversion of the Series F preferred stock occurred at January
1, 1996, the reported earnings per share would have been $0.28 for the six
months ended June 30, 1996.

F-16
<PAGE> 60

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7 -- INCOME TAXES

Under the provisions of SFAS 109, Accounting for Income Taxes, the
components of the net deferred income tax assets and liabilities recognized in
the Company's Consolidated Balance Sheet at December 31, 1995 and 1994, were as
follows (in thousands):

<TABLE>
<CAPTION>
1994 1995
---------------------------------------- ----------------------------------------
FEDERAL FOREIGN STATE TOTAL FEDERAL FOREIGN STATE TOTAL
------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Deferred tax assets --
Net operating loss carryforward....... $51,365 $ -- $ 3,791 $ 55,156 $ 40,610 $ 5,338 $ 3,713 $49,661
Percentage depletion carryforward..... 1,983 -- 172 2,155 2,158 -- 174 2,332
Investment tax credit carryforward.... 3,447 -- -- 3,447 2,619 -- -- 2,619
Alternative minimum tax credit
carryforward........................ 2,634 -- -- 2,634 3,276 -- -- 3,276
Deferred foreign tax credit
carryforward........................ -- -- -- -- 1,138 -- -- 1,138
Other................................. 1,813 -- 81 1,894 891 -- 51 942
Valuation allowance................... (5,645) -- (105) (5,750) (4,257) -- (79) (4,336)
------- -------- -------- -------- -------- -------- -------- -------
55,597 -- 3,939 59,536 46,435 5,338 3,859 55,632
------- -------- -------- -------- -------- -------- -------- -------
Deferred tax liabilities -- Excess of
basis in oil and gas properties for
financial reporting purposes over the
tax basis............................. 36,402 17,225 5,839 59,466 24,382 22,715 4,723 51,820
Other................................... 1,298 -- 187 1,485 1,186 -- 110 1,296
------- -------- -------- -------- -------- -------- -------- -------
37,700 17,225 6,026 60,951 25,568 22,715 4,833 53,116
------- -------- -------- -------- -------- -------- -------- -------
Net deferred tax asset (liability)...... 17,897 (17,225) (2,087) (1,415) 20,867 (17,377) (974) 2,516
Current portion of deferred tax assets
classified as current asset........... 15,000 -- 498 15,498 3,727 -- 148 3,875
------- -------- -------- -------- -------- -------- -------- -------
Total non-current deferred tax asset
(liability)........................... $ 2,897 $(17,225) $ (2,585) $(16,913) $ 17,140 $(17,377) $ (1,122) $(1,359)
======= ======== ======== ======== ======== ======== ======== =======
</TABLE>

As of December 31, 1995 and 1994, the Company and its subsidiaries had U.S.
federal net operating loss (NOL) carryforwards of approximately $116,000,000 and
$147,000,000, respectively. The Company's Canadian subsidiary also had
$21,900,000 and $24,600,000 in Canadian Tax Pool carryforwards as of December
31, 1995 and 1994, respectively.

The Company is subject to taxation under the laws of Cote d'Ivoire and
Equatorial Guinea. Income taxes in these jurisdictions will be taken as a credit
or deduction against the Company's United States tax liability.

Management believes the Company will realize the benefit of all NOLs. The
Company has recognized a deferred tax asset relating to these carryforwards. The
U.S. federal NOLs expire as follows (in thousands):

<TABLE>
<S> <C>
1996.............................................................. $ 10,000
1997.............................................................. 16,000
1998.............................................................. 5,000
1999.............................................................. 1,000
2000.............................................................. 22,000
2001.............................................................. 16,000
2002.............................................................. 6,000
2003.............................................................. 1,000
Beyond 2003....................................................... 39,000
--------
$116,000
========
</TABLE>

For federal income tax purposes, certain limitations are imposed on an
entity's ability to utilize its NOLs in future periods if a "change of control",
as defined for federal income tax purposes, has taken place. In general terms,
the limitation on utilization of NOLs and other tax attributes during any one
year is determined

F-17
<PAGE> 61

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

by the value of an acquired entity at the date of the "change of control"
multiplied by the then-existing long-term, tax-exempt interest rate. The manner
of determining an acquired entity's "value" has not yet been addressed by the
Internal Revenue Service. The Company has determined that, for federal income
tax purposes, a "change of control" occurred in 1994 as a result of the stock
purchases made by the Company's shareholders in 1994 and in previous years, and
future utilization of NOLs will be limited in the manner described above. The
use of NOLs acquired as a result of corporate acquisitions prior to 1994 were
already subject to limitations computed at the time of each acquisition. The
Company does not believe such limitations will have a material effect on future
federal income taxes payable.

As of December 31, 1995 and 1994, the Company and its subsidiaries had
investment tax credit carryforwards of approximately $2,600,000 and $3,400,000,
respectively. To the extent not utilized, these carryforwards will expire in the
years 1996 through 2001. For purposes of computing the net deferred tax
liability as of December 31, 1995 and 1994, none of these carryforwards were
utilized.

The components of the Income Tax Benefit recognized in the Consolidated
Statement of Income are as follows (in thousands):

<TABLE>
<CAPTION>
1993 1994 1995
------- -------- -------
<S> <C> <C> <C>
CURRENT TAXES --
Federal............................................ $ 264 $ (323) $ 340
Foreign............................................ 492 409 (370)
State.............................................. 375 (61) 362
------- -------- -------
1,131 25 332
------- -------- -------
DEFERRED TAXES --
Federal............................................ (6,026) (38,251) (2,762)
Foreign............................................ (2,302) 1,157 (339)
State.............................................. (933) (4,455) (1,116)
------- -------- -------
(9,261) (41,549) (4,217)
------- -------- -------
TOTAL INCOME TAX BENEFIT
(including $1,825 netted with the cumulative effect
of a change in accounting principle in 1993).... $(8,130) $(41,524) $(3,885)
======= ======== =======
</TABLE>

F-18
<PAGE> 62

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a reconciliation of the income tax benefit computed by
applying the federal statutory income tax rate to net loss before income taxes
to the income tax benefit shown in the Consolidated Statement of Income (in
thousands):

<TABLE>
<CAPTION>
1993 1994 1995
------- -------- -------
<S> <C> <C> <C>
Income tax benefit computed at the federal statutory
rate of 35%........................................ $(6,621) $(42,880) $ (625)
State and local taxes (net of federal effect)........ (363) (2,935) (490)
Tax effect of:
(Benefit) provision for net book deductions not
available for tax due to differences in book/tax
basis........................................... 54 9,486 (927)
Excess of taxes on foreign income over federal
statutory rate.................................. 475 381 165
Benefit of NOL resulting from adjustments from
estimate to actual in estimating taxable
income.......................................... (901) (6,227) (181)
Benefit of deferred foreign tax credit
carryforward.................................... -- -- (1,138)
Increase in tax rate............................... (200) -- --
Alternative minimum tax credit carryforward
provision (benefit)............................. (546) 141 (321)
Other.............................................. (28) 510 (368)
------- -------- -------
Income tax benefit................................... $(8,130) $(41,524) $(3,885)
======= ======== =======
</TABLE>

NOTE 8 -- EMPLOYEE BENEFIT PLANS

STOCK OPTION PLANS

At December 31, 1995, UMC had three non-qualified stock option plans:

<TABLE>
<CAPTION>
AUTHORIZED
SHARES
----------
<S> <C>
1987 Employee Plan...................................... 1,555,625
1994 Employee Plan...................................... 2,350,000
1994 Outside Directors Plan............................. 150,000
---------
4,055,625
=========
</TABLE>

The two 1994 plans were approved by the shareholders of the Company on May
17, 1994. The 1994 Employee Plan was amended on November 15, 1994 by the
shareholders to increase authorized shares from 850,000 to 2,350,000 in
connection with the merger with GARI.

The plans provide that directors, officers and key employees may be awarded
options to purchase Common Stock of the Company at a price equal to the market
value of UMC Common Stock on the award date. Options vest over a five-year
period. Outstanding options at December 31, 1995, provide for option prices
ranging from $2.75 to $17.88.

Options that had been granted by GARI to its directors, officers and
employees that were outstanding on November 15, 1994 were converted to UMC stock
options at the ratio of 1.1 UMC shares for each GARI share. Options that had
vested under the GARI option plan were converted as vested options under the UMC
plan. The total new option shares of UMC resulting from the GARI conversion were
1,427,940.

F-19
<PAGE> 63

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of actual options granted and exercised follows:

<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Option shares outstanding --
Beginning of year............................ 1,451,000 1,647,500 3,185,065
Granted...................................... 199,000 1,711,940 446,000
Exercised.................................... -- (144,375) (428,354)
Cancelled.................................... (2,500) (30,000) (54,099)
---------- ---------- ----------
End of year.................................. 1,647,500 3,185,065 3,148,612
========== ========== ==========
Shares available for grant at end of year...... 52,500 870,560 478,659
Shares exercisable at end of year.............. 1,212,875 2,205,047 2,070,664
Average price of options exercised during the
year......................................... $ -- $ 9.96 $ 6.69
Average exercise price of options outstanding
at end of year............................... $ 10.36 $ 9.20 $ 10.05
</TABLE>

SAVINGS PLAN

The Company maintains a defined contribution savings plan for the benefit
of its U.S. employees. Under the Plan, employees may contribute up to 16% of
their base salary to a trust for investments (including UMC stock) selected by
each participating employee. The Company makes a 75% matching contribution up to
a maximum of 8% of each participant's qualified salary, resulting in a maximum
Company contribution of 6% of salary as a result of an amendment to the Plan,
effective January 1, 1994. The Plan was also amended to provide for the
inclusion of total compensation paid during the year as qualified salary for
purposes of making contributions and computing matching contributions.

During 1995, 1994 and 1993, the Company made contributions to the Plan on
behalf of all participants totaling $696,000, $434,000, and $248,000,
respectively.

The Company's wholly-owned Canadian subsidiary, UMC Resources Canada, Ltd.,
maintains a separate group savings plan for its employees. During 1995, 1994 and
1993, this subsidiary contributed $63,000, $62,000 and $26,000, respectively, to
the Plan for the benefit of its employees.

NOTE 9 -- COMMITMENTS AND CONTINGENCIES

The Company has entered into operating leases for office space and
equipment for which $1,547,000, $1,399,000 and $1,038,000 in rental expense has
been included in the accompanying financial statements for the years ended
December 31, 1995, 1994 and 1993, respectively. Future minimum rental payments
required for the years ending December 31, 1996 through 2000 are $954,000,
$484,000, $500,000, $390,000 and $146,000, respectively. The Company currently
has no operating lease that extends beyond 2000, although management is
currently in negotiations for office space for its headquarters.

UMC Resources Canada, Ltd. has an agreement with Nova Corporation, a
natural gas pipeline company, to transport specified quantities of natural gas.
Future minimum transportation expense payments required for years ending
December 31, 1996 and 1997 are $383,000 and $234,000, respectively.

The Company has entered into agreements for transportation of natural gas
across Canada for sales to the Great Lakes region for 35,000 MMBTU per day
through 2000. Future minimum transportation expense payments required are
$5,174,000 per annum for years ending December 31, 1996 and 1997.

F-20
<PAGE> 64

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- OIL AND GAS PROPERTY COSTS

Capitalized costs at December 31, 1995 and 1994 relating to the Company's
oil and gas activities are shown below (in thousands):

<TABLE>
<CAPTION>
EQUATORIAL
GUINEA
UNITED COTE AND OTHER
STATES CANADA D'IVOIRE FOREIGN TOTAL
-------- ------- ------- ---------- --------
<S> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1995
Proved properties........................... $581,566 $96,198 $55,743 $ 26,188 $759,695
Unproved oil and gas interests.............. 10,815 50 1,072 432 12,369
-------- ------- ------- -------- --------
Total capitalized costs.................. 592,381 96,248 56,815 26,620 772,064
Less: Accumulated depreciation, depletion
and amortization......................... 280,834 22,858 1,384 -- 305,076
-------- ------- ------- -------- --------
Net capitalized costs.................... $311,547 $73,390 $55,431 $ 26,620 $466,988
======== ======= ======= ======== ========
AS OF DECEMBER 31, 1994
Proved properties........................... $582,209 $89,849 $12,667 $ -- $684,725
Unproved oil and gas interests.............. 9,792 1,469 -- 440 11,701
-------- ------- ------- -------- --------
Total capitalized costs.................. 592,001 91,318 12,667 440 696,426
Less: Accumulated depreciation, depletion
and amortization......................... 257,386 15,261 -- -- 272,647
-------- ------- ------- -------- --------
Net capitalized costs.................... $334,615 $76,057 $12,667 $ 440 $423,779
======== ======= ======= ======== ========
</TABLE>

F-21
<PAGE> 65

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Costs incurred during 1995, 1994 and 1993 in the Company's oil and gas
activities were as follows (in thousands):

<TABLE>
<CAPTION>
EQUATORIAL
GUINEA
UNITED COTE AND OTHER
STATES CANADA D'IVOIRE FOREIGN TOTAL
-------- ------- ------- ---------- --------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Property acquisition costs:
Proved................................... $ 24,819 $ 376 $ -- $ -- $ 25,195
Unproved................................. 3,032 311 -- -- 3,343
Exploration costs........................... 21,561 1,599 2,912 11,948 38,020
Development costs........................... 31,252 2,519 42,900 19,798 96,469
-------- ------- ------- -------- --------
Total costs incurred................ $ 80,664 $ 4,805 $45,812 $ 31,746 $163,027
======== ======= ======= ======== ========
YEAR ENDED DECEMBER 31, 1994
Property acquisition costs:
Proved................................... $ 131 $ 667 $ -- $ -- $ 798
Unproved................................. 1,966 118 -- -- 2,084
Corporate acquisition costs:
Purchase price........................... 184,425 20,520 -- -- 204,945
Deferred taxes........................... 31,784 3,224 -- -- 35,008
Exploration costs........................... 10,424 2,369 899 3,522 17,214
Development costs........................... 18,898 5,014 7,598 -- 31,510
-------- ------- ------- -------- --------
Total costs incurred................ $247,628 $31,912 $ 8,497 $ 3,522 $291,559
======== ======= ======= ======== ========
YEAR ENDED DECEMBER 31, 1993
Property acquisition costs:
Proved................................... $ 1,464 $ -- $ -- $ -- $ 1,464
Unproved................................. 853 -- -- -- 853
Corporate acquisition costs:
Purchase price........................... 86,218 55,736 -- -- 141,954
Deferred taxes........................... (9,006) 16,368 -- -- 7,362
Exploration costs........................... 5,192 2,035 675 1,965 9,867
Development costs........................... 19,069 2,478 1,517 -- 23,064
-------- ------- ------- -------- --------
Total costs incurred................ $103,790 $76,617 $ 2,192 $ 1,965 $184,564
======== ======= ======= ======== ========
</TABLE>

NOTE 11 -- RELATED PARTY TRANSACTIONS

UMC currently conducts a portion of its oil and gas activities in
conjunction with a group of institutional and corporate investors that
participate in UMC's acquisition, development and exploration programs, and
provide the Company with certain carried interests and management fees.
Management fee income of $1,286,000 and $538,000, related to the year ended
December 31, 1995 and the period September 19, 1994 through year-end,
respectively, is included in the Consolidated Statement of Income.

UMC is participating with Aspect Resources Limited-Liability Company
(Aspect), a company controlled by a former director of UMC, as co-venturers in
the generation of certain oil and gas exploration prospects. The activities
regarding this venture in 1994 and 1995 were negligible. UMC and Aspect are also
each 40% owners of Energy Arrow Exploration L.L.C. (Arrow), whose purpose is
also the generation of oil and gas exploration prospects. UMC and Aspect each
reimburse Arrow for a portion of its monthly general and administrative expenses
and prospect acquisition costs. In 1994, UMC paid Arrow $75,000 for general and
administrative costs and $226,000 for prospect acquisition costs. Total payments
to Arrow in 1995 were $2,477,000, most of which related to lease acquisitions,
seismic and drilling costs.

F-22
<PAGE> 66

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In late 1995, UMC executed separate farm-out agreements with Aspect and MB
Exploration LLC (MB) (a 20% owner of Arrow) whereby UMC acquired additional 10%
and 5% working interests from Aspect and MB, respectively, in an
outside-operated two well drilling program. If the wells are completed, Aspect
and MB revert to a 5% and 2.5% working interest, respectively.

UMC also conducts joint interest operations with Brigham Oil & Gas LP, a
partnership owned in part by General Atlantic Partners LLC for which Steven
Denning, a director of UMC, acts as Executive Managing Member. Total payments to
Brigham for the operation of jointly owned properties operated by Brigham during
1995, 1994 and 1993 were $75,000, $1,240,000 and $2,168,000, respectively. UMC
billings to Brigham for the operation of jointly owned properties operated by
UMC during 1995, 1994 and 1993 were $596,000, $930,000 and $814,000,
respectively. UMC's receivables and payables from/to Brigham at December 31,
1995 were each less than $100,000.

At December 31, 1994, the Company held a promissory note in the principal
amount of $875,000 payable by General Atlantic Investments Limited (GAIL), an
affiliate of the Company, and several promissory notes in the aggregate initial
principal amount of $3,562,000 payable by General Atlantic Equatorial Guinea
(GAEG). The demand notes were issued in 1991 and 1992 at the prime interest rate
plus one percent. In 1994, the Company recorded $29,000 of interest income on
these notes. At December 31, 1994, the receivable balance from GAIL and GAEG,
including accrued interest of $227,000 and $16,000, was approximately $1,102,000
and $935,000, respectively. All notes were paid in full during 1995.

Dee Osborne, a director of GARI prior to the merger, received a fee of
$250,000 in 1994 upon consummation of UMC's merger with GARI for his role in
initiating the transaction.

NOTE 12 -- LITIGATION

The Company is a named defendant in lawsuits and is a party in governmental
proceedings from time to time arising in the ordinary course of business. While
the outcome of such lawsuits or other proceedings against the Company cannot be
predicted with certainty, management does not expect these matters to have a
material adverse effect on the financial condition or results of operations of
the Company.

NOTE 13 -- MAJOR CUSTOMERS

The Company markets its oil and gas production to numerous purchasers under
a combination of short and long-term contracts. During 1995, 1994 and 1993,
Northern Natural Gas Company, a subsidiary of Enron Corporation, accounted for
9.0%, 10.7% and 10.1%, respectively, of oil and gas revenues of the Company.
During 1993, Southern Natural Gas Company, a subsidiary of Sonat Exploration
Company, accounted for 10.1% of oil and gas revenues. The Company had no other
purchasers that accounted for greater than 10.0% of its oil and gas revenues.
The Company believes that the loss of any single customer would not have a
material adverse effect on the results of operations of the Company.

NOTE 14 -- GAS CONTRACT SETTLEMENTS

From time to time, the Company has had disagreements with certain
purchasers of the Company's natural gas production concerning the contractual
obligations of such purchasers to take specified quantities of gas at contract
prices. In order to resolve such disagreements, the Company has entered into gas
contract settlements, wherein, for a nonrefundable cash payment, the Company has
released the purchaser from its contractual obligations and, in some cases, the
contract itself. During 1995, 1994 and 1993, contract settlements of $1,872,000,
$1,981,000 and $104,000, respectively, were included in revenues.

F-23
<PAGE> 67

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 15 -- CREDIT RISK AND PRICE PROTECTION AGREEMENTS

TRADE RECEIVABLES AND PAYABLES

Substantially all of the Company's accounts receivable at December 31,
1995, result from oil and gas sales and joint interest billings to other
companies in the oil and gas industry and institutional partners. This
concentration of customers and joint interest owners may impact the Company's
overall credit risk, either positively or negatively, in that these entities may
be similarly affected by industry-wide changes in economic or other conditions.
Such receivables are generally not collateralized. Credit losses incurred by the
Company on receivables generally have not been significant in prior years.

OIL AND GAS MARKET HEDGE

The Company's revenues are primarily the result of sales of its oil and
natural gas production. Market prices of oil and natural gas may fluctuate and
adversely affect operating results. To mitigate this risk, the Company has, from
time to time, entered into oil and natural gas price hedging contracts to reduce
its exposure to price reductions on its production. These transactions have been
entered into with major financial institutions, thereby minimizing credit risk.
The Company hedged a portion of its natural gas production in 1995, 1994 and
1993 and a portion of its oil production in 1995 and 1994, the results of which
were included in natural gas or oil revenues.

At December 31, 1995, the Company had the following natural gas hedge
contracts outstanding:

<TABLE>
<CAPTION>
NOTIONAL
SWAP VOLUME IN
PRICE MMBTU TERM
- -------- --------- ----------------
<C> <C> <S>
$2.3320 680,000 Jan 1996
2.2100 600,000 Jan-Dec 1996(1)
2.1940 680,000 Feb 1996
2.3900 680,000 Feb 1996
2.1500 680,000 Mar 1996
2.0250 680,000 Mar 1996
1.9725 680,000 Apr 1996
</TABLE>

- ---------------

(1) Settlements are made on a monthly basis on 1/12 of the contract volume.

In a typical "Swap" agreement, UMC receives the difference between a fixed
price per unit of production and the index price, if the index price is lower.
If the index price is higher, UMC pays the difference. UMC's current hedging
agreements are settled on a monthly basis. All of UMC's contracts specify the
third-party index to be the New York Mercantile Exchange (NYMEX) futures
contract prices for the applicable commodity. Cash of $542,000, which was paid
in December 1995 relating to a loss on a January 1996 natural gas hedge, was
deferred at December 31, 1995, to be recognized as a reduction to gas sales in
1996. There was no deferred hedge gain or loss for crude oil at year end 1995.

INTEREST RATE MARKET HEDGE

UMC has interest rate hedge contracts currently outstanding. The hedge
transactions have been entered into with major financial institutions,
minimizing credit risk associated with these agreements. See Note 5 for further
discussion of these contracts.

F-24
<PAGE> 68

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 16 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash and equivalents,
short-term trade receivables and payables, long-term debt, interest rate hedging
agreements and natural gas and crude oil hedging agreements. As of December 31,
1995 and 1994, the fair market values of the Company's financial instruments are
shown below:

Trade Receivables and Payables: The carrying amount approximates fair
market value due to the highly liquid nature of these short-term instruments.

Long-Term Debt: The carrying amount approximates fair market value due to
(i) the nature of UMC's Senior Revolver Credit Facility, whereby the interest
rates offered by the member banks are floating rates which reflect market rate
and (ii) the 10 3/8% Senior Subordinated Notes issuance on October 30, 1995.

Interest Rate Swap Agreements: The fair market value of the interest rate
swap contracts at December 31, 1995 and 1994 was $(838,000) and $4,367,000,
respectively. The fair market value at December 31, 1995 and 1994 was determined
by the institutional holders of the hedges.

Natural Gas and Oil Swap Agreements: The fair market value of the natural
gas and oil swap contracts at December 31, 1995 and 1994 approximate $(305,000)
and $1,550,000, respectively, as determined by the institutional holders of the
hedges.

F-25
<PAGE> 69

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 17 -- GEOGRAPHIC DATA

UMC is an independent oil and gas company engaged in the acquisition,
development and exploration of oil and natural gas properties. Information about
the Company's operations by geographic area for the years ended December 31,
1995, 1994, and 1993 is as follows (in thousands):

<TABLE>
<CAPTION>
EQUATORIAL
GUINEA
AND OTHER
U.S. CANADA COTE D'IVOIRE INTERNATIONAL TOTAL
--------- ------- ------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
Revenues....................... $ 107,112 $16,922 $ 7,106 $15,901 $ 147,041
Depreciation, depletion and
amortization................ $ 44,265 $ 8,208 $ 1,420 $ 49 $ 53,942
Impairment of proved oil and
gas properties.............. $ 8,317 $ -- $ -- $ -- $ 8,317
Operating profit (loss)........ $ 2,269 $ (125) $ 502 $13,138 $ 15,784
Capital expenditures........... $ 80,664 $ 4,805 $45,812 $31,746 $ 163,027
Identifiable assets............ $ 392,490 $80,151 $77,875 $27,934 $ 578,450
YEAR ENDED DECEMBER 31, 1994
Revenues....................... $ 81,339 $16,478 $ -- $ -- $ 97,817
Depreciation, depletion and
amortization................ $ 44,759 $ 5,968 $ -- $ -- $ 50,727
Impairment of proved oil and
gas properties.............. $ 94,793 $ -- $ -- $ -- $ 94,793
Operating profit (loss)........ $(110,895) $(2,437) $ -- $ -- $(113,332)
Capital expenditures(1)........ $ 216,262 $28,689 $ 8,497 $ 3,522 $ 256,970
Identifiable assets............ $ 401,421 $85,407 $23,020 $ 1,366 $ 511,214
YEAR ENDED DECEMBER 31, 1993
Revenues....................... $ 71,976 $10,342 $ -- $ -- $ 82,318
Depreciation, depletion and
amortization................ $ 30,745 $ 5,193 $ -- $ -- $ 35,938
Impairment of proved oil and
gas properties.............. $ 4,879 $ 5,172 $ -- $ -- $ 10,051
Operating profit (loss)........ $ (2,942) $(6,176) $ -- $ -- $ (9,118)
Capital expenditures(2)........ $ 113,340 $60,249 $ 2,192 $ 1,965 $ 177,746
Identifiable assets............ $ 271,407 $67,659 $ 2,192 $ 1,965 $ 343,223
</TABLE>

- ---------------

(1) Total includes Corporate Acquisitions of $204,945.

(2) Total includes Corporate Acquisitions of $141,954.

NOTE 18 -- DISCLOSURE OF OIL AND GAS OPERATIONS (UNAUDITED)

PROVED RESERVES

Substantially all reserve estimates presented herein were prepared by
either Ryder Scott Company, Netherland, Sewell & Associates, Inc., or McDaniel &
Associates Consultants Ltd., independent petroleum engineers. The Company
cautions that there are many uncertainties inherent in estimating proved reserve
quantities, and in projecting future production rates and the timing of future
development expenditures. In addition, reserve estimates of new discoveries are
more imprecise than those of properties with a production history. Accordingly,
these estimates are subject to change as additional information becomes
available.

F-26
<PAGE> 70

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Proved oil and gas reserves are the estimated quantities of crude oil,
condensate, natural gas and natural gas liquids that geological and engineering
data demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under existing economic and operating conditions. Proved
developed oil and gas reserves are those reserves expected to be recovered
through existing wells with existing equipment and operating methods.

Information presented for the Company's international locations relates to
contract interests held in multiple production sharing contracts between the
Company, its joint venture partners and the governments of Cote d'Ivoire and
Equatorial Guinea. The Company has no ownership interest in the oil and gas
reserves but does have the right to share revenues and/or production and is
entitled to recover most field and other operating costs. The reserve estimates
are subject to revision as prices fluctuate due to the cost recovery feature
under the production sharing contract.

Net quantities of proved reserves and proved developed reserves of crude
oil (including condensate and natural gas liquids) and natural gas, as well as
the changes in proved reserves during the periods indicated, are set forth in
the tables below:

<TABLE>
<CAPTION>
UNITED COTE EQUATORIAL
STATES CANADA D'IVOIRE GUINEA TOTAL
------- ------ -------- ---------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
NATURAL GAS (MCF)
PROVED:
December 31, 1992.................... 180,264 -- -- -- 180,264
Revisions of previous estimates... (4,479) (3,321) -- -- (7,800)
Extensions, discoveries and other
additions....................... 21,570 6,527 -- -- 28,097
Purchases......................... 109,180 63,669 -- -- 172,849
Sales of reserves-in-place........ (2,959) -- -- -- (2,959)
Production........................ (26,785) (2,823) -- -- (29,608)
------- ------ ------- ------ -------
December 31, 1993.................... 276,791 64,052 -- -- 340,843
Revisions of previous estimates... (463) (6,310) -- -- (6,773)
Extensions, discoveries and other
additions....................... 16,956 76 32,612 -- 49,644
Purchases......................... 84,409 14,508 -- -- 98,917
Sales of reserves-in-place........ (3,546) (4) -- -- (3,550)
Production........................ (35,182) (4,487) -- -- (39,669)
------- ------ ------- ------ -------
December 31, 1994.................... 338,965 67,835 32,612 -- 439,412
Revisions of previous estimates... 4,655 (1,060) 5,746 -- 9,341
Extensions, discoveries and other
additions....................... 35,558 2,060 58,290 -- 95,908
Purchases......................... 21,839 -- -- -- 21,839
Sales of reserves-in-place........ (68,113) (1,014) (13,995) -- (83,122)
Production........................ (38,878) (5,383) (192) -- (44,453)
------- ------ ------- ------ -------
December 31, 1995.................... 294,026 62,438 82,461 -- 438,925
======= ====== ======= ====== =======
PROVED DEVELOPED:
December 31, 1993.................... 211,077 59,187 -- -- 270,264
======= ====== ======= ====== =======
December 31, 1994.................... 256,348 66,997 -- -- 323,345
======= ====== ======= ====== =======
December 31, 1995.................... 245,860 62,438 21,722 -- 330,020
======= ====== ======= ====== =======
</TABLE>

F-27
<PAGE> 71

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
UNITED COTE EQUATORIAL
STATES CANADA D'IVOIRE GUINEA TOTAL
------- ------ ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CRUDE OIL (BBLS)
PROVED:
December 31, 1992.................... 7,568 -- -- -- 7,568
Revisions of previous estimates... (3,081) (229) -- -- (3,310)
Extensions, discoveries and other
additions....................... 200 875 -- -- 1,075
Purchases......................... 1,480 5,270 -- -- 6,750
Sales of reserves-in-place........ (213) -- -- -- (213)
Production........................ (917) (381) -- -- (1,298)
------- ------ ------- ------ -------
December 31, 1993.................... 5,037 5,535 -- -- 10,572
Revisions of previous estimates... 609 (712) -- -- (103)
Extensions, discoveries and other
additions....................... 262 391 4,626 -- 5,279
Purchases......................... 8,455 980 -- -- 9,435
Sales of reserves-in-place........ (725) (13) -- -- (738)
Production........................ (1,160) (618) -- -- (1,778)
------- ------ ------- ------ -------
December 31, 1994.................... 12,478 5,563 4,626 -- 22,667
Revisions of previous estimates... 1,099 (201) 1,905 -- 2,803
Extensions, discoveries and other
additions....................... 801 151 1,440 5,258 7,650
Purchases......................... 4,757 -- -- -- 4,757
Sales of reserves-in-place........ (762) (82) (332) (1,502) (2,678)
Production........................ (1,826) (649) (285) -- (2,760)
------- ------ ------- ------ -------
December 31, 1995.................... 16,547 4,782 7,354 3,756 32,439
======= ====== ======= ====== =======
PROVED DEVELOPED:
December 31, 1993.................... 4,227 5,458 -- -- 9,685
======= ====== ======= ====== =======
December 31, 1994.................... 11,109 5,531 -- -- 16,640
======= ====== ======= ====== =======
December 31, 1995.................... 14,967 4,735 3,302 -- 23,004
======= ====== ======= ====== =======
</TABLE>

F-28
<PAGE> 72

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS

The following table sets forth the standardized measure of the discounted
future net cash flows attributable to the Company's proved oil and gas reserves.
Future cash inflows were computed by applying year-end prices of oil and gas to
the estimated future production of proved oil and gas reserves. Gas prices were
escalated only where existing contracts contained fixed and determinable
escalation clauses. Contractually provided gas prices in excess of estimated
market clearing prices were used in computing the future cash inflows only if
the Company expects to continue to receive higher prices under legally
enforceable contract terms. Future prices actually received may differ from the
estimates in the standardized measure.

Future production and development costs represent the estimated future
expenditures (based on current costs) to be incurred in developing and producing
the proved reserves, assuming continuation of existing economic conditions.
Future income tax expenses were computed by applying statutory income tax rates
to the difference between pre-tax net cash flows relating to the Company's
proved oil and gas reserves and the tax basis of proved oil and gas properties.
In addition, the effects of statutory depletion in excess of tax basis,
available net operating loss carryforwards and investment tax credit
carryforwards were used in computing future income tax expense. The resulting
annual net cash inflows were then discounted using a 10% annual rate (in
thousands).

<TABLE>
<CAPTION>
UNITED COTE EQUATORIAL
STATES CANADA D'IVOIRE GUINEA TOTAL(2)(3)
--------- -------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
AT DECEMBER 31, 1995
Future cash inflows.......................... $ 821,122 $157,548 $317,580 $ 65,789 $1,362,039
--------- -------- -------- ------- ----------
Future production costs...................... 268,790 65,859 59,307 26,625 420,581
Future development costs..................... 35,782 5,337 103,538 16,250 160,907
Future income taxes.......................... 50,573 19,448 37,232 7,562 114,815
--------- -------- -------- ------- ----------
Total future costs.................... 355,145 90,644 200,077 50,437 696,303
--------- -------- -------- ------- ----------
Future net cash inflows...................... 465,977 66,904 117,503 15,352 665,736
Discount at 10% per annum.................... (133,051) (24,011) (43,215) (1,458) (201,735)
--------- -------- -------- ------- ----------
Standardized measure of discounted future net
cash flows................................. $ 332,926 $ 42,893 $ 74,288 $ 13,894 $ 464,001
========= ======== ======== ======= ==========
AT DECEMBER 31, 1994(1)
Future cash inflows.......................... $ 727,738 $167,486 $128,401 $ -- $1,023,625
--------- -------- -------- -------- ----------
Future production costs...................... 259,826 73,670 19,070 -- 352,566
Future development costs..................... 68,739 5,641 56,131 -- 130,511
Future income taxes.......................... 16,656 18,692 16,203 -- 51,551
--------- -------- -------- -------- ----------
Total future costs.................... 345,221 98,003 91,404 -- 534,628
--------- -------- -------- -------- ----------
Future net cash inflows...................... 382,517 69,483 36,997 -- 488,997
Discount at 10% per annum.................... (142,214) (24,872) (18,601) -- (185,687)
--------- -------- -------- -------- ----------
Standardized measure of discounted future net
cash flows................................. $ 240,303 $ 44,611 $ 18,396 $ -- $ 303,310
========= ======== ======== ======== ==========
AT DECEMBER 31, 1993
Future cash inflows.......................... $ 716,658 $190,526 $ -- $ -- $ 907,184
--------- -------- -------- -------- ----------
Future production costs...................... 209,831 71,996 -- -- 281,827
Future development costs..................... 42,547 7,027 -- -- 49,574
Future income taxes.......................... 59,745 30,776 -- -- 90,521
--------- -------- -------- -------- ----------
Total future costs.................... 312,123 109,799 -- -- 421,922
--------- -------- -------- -------- ----------
Future net cash inflows...................... 404,535 80,727 -- -- 485,262
Discount at 10% per annum.................... (146,542) (38,170) -- -- (184,712)
--------- -------- -------- -------- ----------
Standardized measure of discounted future net
cash flows................................. $ 257,993 $ 42,557 $ -- $ -- $ 300,550
========= ======== ======== ======== ==========
</TABLE>

- ---------------

(1) Included in the United States and Total columns at December 31, 1994 are
future net cash inflows of $132,297,000, future production costs of
$43,522,000 and future development costs of $15,241,000, from Appalachia
properties which were sold in February 1995.

(2) Total future net cash flows before income taxes are $780,551,000,
$540,548,000 and $575,783,000 as of December 31, 1995, 1994 and 1993,
respectively.

(3) Total future net cash flows before income taxes discounted at 10% per annum
are $505,153,000, $318,416,000 and $323,568,000, as of December 31, 1995,
1994 and 1993, respectively.

F-29
<PAGE> 73

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS

The following are the principal sources of change in the standardized
measure of discounted future net cash flows (in thousands):

<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Beginning balance.......................................... $171,100 $300,550 $303,310
-------- -------- --------
Revisions to reserves proved in prior years --
Net changes in prices and production costs............... 11,674 (115,800) 58,564
Net changes due to revisions in quantity estimates....... (25,420) (2,818) 24,357
Net changes in estimated future development costs........ 11,747 (705) 59,821
Accretion of discount.................................... 22,721 32,357 32,247
Changes in production rates (timing) and other........... (2,772) (8,145) (10,462)
-------- -------- --------
Total revision................................... 17,950 (95,111) 164,527
New field discoveries and extensions, net of future
production and development costs......................... 26,237 39,874 93,643
Purchases of reserves in-place............................. 140,834 112,508 38,631
Sale of reserves in-place.................................. (2,489) (5,458) (46,410)
Sales of oil and gas produced, net of production costs..... (53,436) (56,966) (69,918)
Net change in income taxes................................. 354 7,913 (19,782)
-------- -------- --------
Net change in standardized measure of discounted future
net cash flows........................................ 129,450 2,760 160,691
-------- -------- --------
Ending balance............................................. $300,550 $303,310 $464,001
======== ======== ========
</TABLE>

NOTE 19 -- SUPPLEMENTAL GUARANTOR INFORMATION

In connection with the sale by United Meridian Corporation of the Notes,
Petroleum, wholly-owned and the Company's only direct subsidiary, has
unconditionally guaranteed the full and prompt performance of the Company's
obligations under the Notes and related indenture, including the payment of
principal, premium (if any) and interest. Other than intercompany arrangements
and transactions, the consolidated financial statements of Petroleum are
equivalent in all material respects to those of the Company and therefore the
separate consolidated financial statements of Petroleum are not material to
investors and have not been included herein. However, in an effort to provide
meaningful financial data relating to the guarantor (i.e., Petroleum on an
unconsolidated basis) of the Notes, the following condensed consolidating
financial information has been provided following the policies set forth below:

(1) Investments in subsidiaries are accounted for by the Company on
the cost basis. Earnings of subsidiaries are therefore not reflected in the
related investment accounts.

(2) Certain reclassifications were made to conform all of the
financial information to the financial presentation on a consolidated
basis. The principal eliminating entries eliminate investments in
subsidiaries and intercompany balances.

F-30
<PAGE> 74

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)

<TABLE>
<CAPTION>
UNCONSOLIDATED
-------------------------------------
GUARANTOR NON-GUARANTOR CONSOLIDATED
UMC SUBSIDIARY SUBSIDIARIES UMC
------- --------- ------------- ------------
<S> <C> <C> <C> <C>
1995
Revenues........................................ $ -- $ 107,108 $ 39,933 $ 147,041
------- --------- --------- ----------
Costs and expenses:
Production costs.............................. -- 34,028 8,863 42,891
General and administrative.................... 415 6,966 3,044 10,425
Exploration, including dry holes and
impairments................................ -- 10,852 4,830 15,682
Depreciation, depletion and amortization...... -- 44,264 9,678 53,942
Impairment of proved oil and gas properties... -- 8,317 -- 8,317
------- --------- --------- ----------
Income (loss) from operations................... (415) 2,681 13,518 15,784
Interest income (expense), net................ 12,629 (25,789) (4,785) (17,945)
Other credits, net............................ -- (28) 403 375
------- --------- --------- ----------
Net income (loss) before income taxes........... 12,214 (23,136) 9,136 (1,786)
Income tax benefit (provision).................. (4,275) 7,681 479 3,885
------- --------- --------- ----------
Net income (loss)............................... $ 7,939 $ (15,455) $ 9,615 $ 2,099
======= ========= ========= ==========
1994
Revenues........................................ $ -- $ 79,757 $ 18,060 $ 97,817
------- --------- --------- ----------
Costs and expenses:
Production costs.............................. -- 31,285 5,653 36,938
General and administrative.................... 801 6,750 4,953 12,504
Exploration, including dry holes and
impairments................................ -- 9,254 6,933 16,187
Depreciation, depletion and amortization...... -- 43,442 7,285 50,727
Impairment of proved oil and gas properties... -- 94,706 87 94,793
------- --------- --------- ----------
Income (loss) from operations................... (801) (105,680) (6,851) (113,332)
Interest income (expense), net................ 12,374 (18,530) (2,884) (9,040)
Other credits, net............................ -- 136 (277) (141)
------- --------- --------- ----------
Net income (loss) before income taxes........... 11,573 (124,074) (10,012) (122,513)
Income tax benefit (provision).................. (6,921) 48,112 333 41,524
------- --------- --------- ----------
Net income (loss)............................... $ 4,652 $ (75,962) $ (9,679) $ (80,989)
======= ========= ========= ==========
1993
Revenues........................................ $ -- $ 67,019 $ 15,299 $ 82,318
------- --------- --------- ----------
Costs and expenses:
Production costs.............................. -- 25,934 4,605 30,539
General and administrative.................... 650 5,557 1,890 8,097
Exploration, including dry holes and
impairments................................ -- 4,117 2,694 6,811
Depreciation, depletion and amortization...... -- 24,780 11,158 35,938
Impairment of proved oil and gas properties... -- 10,028 23 10,051
------- --------- --------- ----------
Income (loss) from operations................... (650) (3,397) (5,071) (9,118)
Interest income (expense), net................ 10,238 (15,486) (1,284) (6,532)
Other credits, net............................ -- 2,007 95 2,102
------- --------- --------- ----------
Net income (loss) before income taxes and
cumulative effect of change in accounting
principle..................................... 9,588 (16,876) (6,260) (13,548)
Income tax benefit (provision).................. (404) 4,899 1,810 6,305
Cumulative effect of change in accounting
principle, net of tax......................... -- (3,543) -- (3,543)
------- --------- --------- ----------
Net income (loss)............................... $ 9,184 $ (15,520) $ (4,450) $ (10,786)
======= ========= ========= ==========
</TABLE>

F-31
<PAGE> 75

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS)

F-32
<PAGE> 76

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS)

<TABLE>
<CAPTION>
UNCONSOLIDATED
--------------------------------------
GUARANTOR NON-GUARANTOR ELIMINATING CONSOLIDATED
UMC SUBSIDIARY SUBSIDIARIES ENTRIES UMC
-------- --------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1995
ASSETS
Current assets.................... $ 31 $ 44,599 $ 31,383 $ -- $ 76,013
Intercompany investments.......... 453,574 (239,072) (76,165) (138,337) --
Property and equipment, net....... -- 305,930 162,743 -- 468,673
Other assets...................... 6,103 28,970 (1,309) -- 33,764
-------- --------- -------- --------- ---------
Total assets............ $459,708 $ 140,427 $116,652 $(138,337) $ 578,450
======== ========= ======== ========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities............... $ 3,443 57,920 $ 29,447 $ -- $ 90,810
Long-term debt.................... 150,000 39,225 55,574 -- 244,799
Deferred credits and other
liabilities..................... -- 12,655 17,874 -- 30,529
Stockholders' equity.............. 306,265 30,627 13,757 (138,337) 212,312
-------- --------- -------- --------- ---------
Total liabilities &
stockholders'
equity................ $459,708 $ 140,427 $116,652 $(138,337) $ 578,450
======== ========= ======== ========= =========
1994
ASSETS
Current assets.................... $ 12 $ 55,581 $ 13,139 $ -- $ 68,732
Intercompany investments.......... 260,434 (125,043) (10,899) (124,492) --
Property and equipment, net....... -- 343,647 81,283 -- 424,930
Other assets...................... 260 17,260 32 -- 17,552
-------- --------- -------- --------- ---------
Total assets............ $260,706 $ 291,445 $ 83,555 $(124,492) $ 511,214
======== ========= ======== ========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities............... $ 55 $ 49,348 $ 14,138 $ -- $ 63,541
Long-term debt.................... -- 218,250 21,384 -- 239,634
Deferred credits and other
liabilities..................... (1,091) 18,878 18,814 -- 36,601
Stockholders' equity............ 261,742 4,969 29,219 (124,492) 171,438
-------- --------- -------- --------- ---------
Total liabilities &
stockholders'
equity................ $260,706 $ 291,445 $ 83,555 $(124,492) $ 511,214
======== ========= ======== ========= =========
</TABLE>

F-33
<PAGE> 77

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
AT JUNE 30, 1996 (UNAUDITED)
(IN THOUSANDS)

F-34
<PAGE> 78

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)

<TABLE>
<CAPTION>
UNCONSOLIDATED
----------------------------------------
GUARANTOR NON-GUARANTOR CONSOLIDATED
UMC SUBSIDIARY SUBSIDIARIES UMC
-------- --------- ------------- ------------
<S> <C> <C> <C> <C>
1995
Cash flows from operating activities:
Net income (loss)....................... $ 7,939 $ (15,455) $ 9,615 $ 2,099
Adjustments to reconcile net income
(loss) to cash from operating
activities........................... 494 45,239 (2,020) 43,713
Changes in assets and liabilities....... 5,755 13,146 (18,707) 194
-------- --------- -------- ---------
Net cash provided by (used in)
operating activities.......... 14,188 42,930 (11,112) 46,006
Cash flows used in investing activities... -- (18,488) (64,220) (82,708)
Cash flows provided by (used in) financing
activities.............................. (14,169) (21,539) 74,171 38,463
-------- --------- -------- ---------
Net increase (decrease) in cash and cash
equivalents............................. 19 2,903 (1,161) 1,761
Cash and cash equivalents at beginning of
period.................................. 12 3,728 8,085 11,825
-------- --------- -------- ---------
Cash and cash equivalents at end of
period.................................. $ 31 $ 6,631 $ 6,924 $ 13,586
======== ========= ======== =========
1994
Cash flows from operating activities:
Net income (loss)....................... $ 4,652 $ (75,962) $ (9,679) $ (80,989)
Adjustments to reconcile net income
(loss) to cash from operating
activities........................... 880 104,769 14,365 120,014
Changes in assets and liabilities....... (805) (12,161) 17,505 4,539
-------- --------- -------- ---------
Net cash provided by (used in)
operating activities.......... 4,727 16,646 22,191 43,564
Cash flows provided by (used in) investing
activities.............................. 340 (148,771) (31,729) (180,160)
Cash flows provided by (used in) financing
activities.............................. (5,072) 135,762 17,236 147,926
-------- --------- -------- ---------
Net increase (decrease) in cash and cash
equivalents............................. (5) 3,637 7,698 11,330
Cash and cash equivalents at beginning of
period.................................. 17 91 387 495
-------- --------- -------- ---------
Cash and cash equivalents at end of
period.................................. $ 12 $ 3,728 $ 8,085 $ 11,825
======== ========= ======== =========
1993
Cash flows from operating activities:
Net income (loss)....................... $ 9,184 $ (15,520) $ (4,450) $ (10,786)
Adjustments to reconcile net income
(loss) to cash from operating
activities........................... 382 15,258 33,089 48,729
Changes in assets and liabilities....... 45 (10,062) 14,248 4,231
-------- --------- -------- ---------
Net cash provided by (used in)
operating activities.......... 9,611 (10,324) 42,887 42,174
Cash flows used in investing activities... -- (116,996) (55,558) (172,554)
Cash flows provided by (used in) financing
activities.............................. (9,617) 127,365 11,593 129,341
Effect of exchange rate changes on cash... -- -- (37) (37)
-------- --------- -------- ---------
Net increase (decrease) in cash and cash
equivalents............................. (6) 45 (1,115) (1,076)
Cash and cash equivalents at beginning of
period.................................. 23 46 1,502 1,571
-------- --------- -------- ---------
Cash and cash equivalents at end of
period.................................. $ 17 $ 91 $ 387 $ 495
======== ========= ======== =========
</TABLE>

F-35
<PAGE> 79

UNITED MERIDIAN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
(IN THOUSANDS)

F-36
<PAGE> 80

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF
COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................. 2
Incorporation of Certain Information
by Reference........................ 2
Prospectus Summary.................... 3
Risk Factors.......................... 10
Disclosure Regarding Forward-Looking
Statements.......................... 14
Use of Proceeds....................... 14
Price Range of Common Stock and
Dividend Policy..................... 15
Capitalization........................ 15
Recent Development.................... 16
Selected Consolidated Financial
Data................................ 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
The Company........................... 27
Management............................ 34
Selling Stockholders.................. 38
Underwriting.......................... 39
Legal Matters......................... 41
Experts............................... 41
Glossary of Oil and Gas Terms......... G-1
Index to Financial Statements......... F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------

- ------------------------------------------------------
- ------------------------------------------------------
[UMC LOGO]
5,750,000 SHARES

UNITED MERIDIAN CORPORATION
COMMON STOCK

-----------------

PROSPECTUS

-----------------

MERRILL LYNCH & CO.

J.P. MORGAN & CO.

HOWARD, WEIL,
LABOUISSE, FRIEDRICHS
INCORPORATED

PETRIE PARKMAN & CO.

NOVEMBER 1, 1996

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 81

PROSPECTUS

5,750,000 SHARES

[UMC LOGO]

UNITED MERIDIAN CORPORATION

Of the shares of Common Stock being offered hereby, 1,150,000 shares (the
"International Shares") are being offered outside the United States and Canada
(the "International Offering") by the International Managers and 4,600,000
shares (the "U.S. Shares") are being offered in the United States and Canada
(the "U.S. Offering" and, together with the International Offering, the
"Offerings") by the U.S. Underwriters. The price to public and underwriting
discount per share are identical for both Offerings and the closings for both
Offerings are conditioned upon each other. See "Underwriting."

The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "UMC." On October 31, 1996, the last reported sale price of the
Common Stock on the NYSE was $47 1/8 per share.

(3) The Company has granted the International Managers and U.S. Underwriters
options for 30 days to purchase up to 172,500 and 690,000 additional shares
of Common Stock, respectively, at the Price to Public, less Underwriting
Discount, solely to cover over-allotments, if any. If such options are
exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $307,481,250, $11,571,875 and $184,034,375,
respectively. See "Underwriting."

---------------------

---------------------
MERRILL LYNCH INTERNATIONAL
J.P. MORGAN SECURITIES LTD.
HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED
PETRIE PARKMAN & CO.

ABN AMRO ROTHSCHILD DEUTSCHE MORGAN GRENFELL NATWEST SECURITIES LIMITED
PARIBAS CAPITAL MARKETS SOCIETE GENERALE
---------------------

The date of this Prospectus is November 1, 1996.

<PAGE> 82

FOR UNITED KINGDOM PURCHASERS: THE SHARES OF COMMON STOCK MAY NOT BE
OFFERED OR SOLD IN THE UNITED KINGDOM OTHER THAN TO PERSONS WHOSE ORDINARY
ACTIVITIES INVOLVE THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF
INVESTMENTS, WHETHER AS PRINCIPAL OR AGENT (EXCEPT IN CIRCUMSTANCES THAT DO NOT
CONSTITUTE AN OFFER TO THE PUBLIC WITHIN THE MEANING OF THE PUBLIC OFFERS OF
SECURITIES REGULATIONS 1995 OR THE FINANCIAL SERVICES ACT 1986), AND THIS
PROSPECTUS MAY ONLY BE ISSUED OR PASSED ON TO ANY PERSON IN THE UNITED KINGDOM
IF THAT PERSON IS OF A KIND DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES
ACT 1986 (INVESTMENT ADVERTISEMENTS) (EXEMPTIONS) ORDER 1996 OR IS A PERSON TO
WHOM THE PROSPECTUS MAY OTHERWISE LAWFULLY BE PASSED ON.

AVAILABLE INFORMATION

2
<PAGE> 83

UNDERWRITING

Subject to the terms and conditions set forth in the international purchase
agreement (the "International Purchase Agreement") among the Company, the
Selling Stockholders and the underwriters named below (the "International
Managers"), the Company and the Selling Stockholders have agreed to sell to the
International Managers, and the International Managers, for whom Merrill Lynch
International, J.P. Morgan Securities Ltd. ("J.P. Morgan"), Howard, Weil,
Labouisse, Friedrichs Incorporated ("Howard Weil") and Petrie Parkman & Co.,
Inc. ("Petrie Parkman") are acting as lead managers (the "Lead Managers"), have
severally agreed to purchase from the Company and the Selling Stockholders, the
number of shares of Common Stock indicated below opposite their respective
names.

<TABLE>
<CAPTION>
INTERNATIONAL MANAGERS NUMBER OF SHARES
-------------------------------------------------------------- ----------------
<S> <C>
Merrill Lynch International................................... 237,500
J.P. Morgan Securities Ltd.................................... 237,500
Howard, Weil, Labouisse, Friedrichs Incorporated.............. 237,500
Petrie Parkman & Co., Inc..................................... 237,500
ABN AMRO Rothschild........................................... 40,000
Banque Paribas................................................ 40,000
NatWest Securities Limited.................................... 40,000
Morgan Grenfell & Co. Limited................................. 40,000
Societe Generale.............................................. 40,000
----------------
Total............................................ 1,150,000
=============
</TABLE>

The Company and the Selling Stockholders have also entered into a U.S.
purchase agreement (the "U.S. Purchase Agreement") with certain other
underwriters in the United States and Canada (the "U.S. Underwriters" and,
together with the International Managers, the "Underwriters"), for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), J.P. Morgan
Securities Inc., Howard Weil and Petrie Parkman are acting as representatives
(the "U.S. Representatives" and together with the Lead Managers, the
"Representatives"). Subject to the terms and conditions set forth in the U.S.
Purchase Agreement, and concurrently with the sale of 1,150,000 shares of Common
Stock to the International Managers pursuant to the International Purchase
Agreement, the Company and the Selling Stockholders have agreed to sell to the
U.S. Underwriters, and the U.S. Underwriters severally have agreed to purchase
from the Company and the Selling Stockholders, an aggregate of 4,600,000 shares
of Common Stock. The public offering price per share of Common Stock and the
total underwriting discount per share are identical under the International
Purchase Agreement and the U.S. Purchase Agreement.

In the International Purchase Agreement and the U.S. Purchase Agreement,
the several International Managers and the several U.S. Underwriters,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of Common Stock being sold pursuant to
each such Purchase Agreement if any of such shares being sold pursuant to each
such Purchase Agreement are purchased. Under certain circumstances, the
commitments of non-defaulting International Managers or U.S. Underwriters (as
the case may be) may be increased as set forth in the International Purchase
Agreement and the U.S. Purchase Agreement, respectively. The closing with
respect to the sale of shares of Common Stock to be purchased by the
International Managers and the U.S. Underwriters are conditioned upon one
another.

The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Under the terms of the Intersyndicate
Agreement, the Underwriters are permitted to sell shares of Common Stock to each
other for the purposes of resale at the public offering price, less an amount
not greater than the selling concession. Under the terms of the Intersyndicate
Agreement, the International Managers and any dealer to whom they sell shares of
Common Stock will not offer to sell or sell shares of Common Stock to persons
who are United States or Canadian persons or to persons they believe intend to
resell to persons who are United States or Canadian persons, and the U.S.
Underwriters and any dealer to whom they sell shares of Common Stock will not
offer to sell or sell shares of Common Stock to persons who are non-United
States and non-Canadian

39
<PAGE> 84

persons or to persons they believe intend to resell to persons who are
non-United States persons or non-Canadian persons, except, in each case, for
transactions pursuant to the Intersyndicate Agreement.

The Lead Managers have advised the Company that the International Managers
propose to offer the shares of Common Stock offered hereby to the public at the
public offering price set forth on the cover page of this Prospectus, and to
certain dealers at such price less a concession not in excess of $1.05 per
share. The International Managers may allow, and such dealers may reallow, a
discount not in excess of $.10 per share on sales to certain other dealers.
After the public offering, the public offering price, concession and discount
may be changed.

The Company has granted the International Managers an option, exercisable
by the Lead Managers, to purchase up to 172,500 additional shares of Common
Stock at the public offering price set forth on the cover page of this
Prospectus, less the underwriting discount. Such option, which expires 30 days
after the date of this Prospectus, may be exercised solely to cover
over-allotments. To the extent that the International Managers exercise such
option, each of the International Managers will be obligated, subject to certain
conditions, to purchase approximately the same percentage of the option shares
that the number of shares to be purchased initially by that International
Manager bears to the total number of shares to be purchased initially by the
International Managers. The Company has also granted an option to the U.S.
Underwriters, which expires 30 days after the date of this Prospectus, to
purchase up to 690,000 additional shares of Common Stock to cover
over-allotments, if any, on terms similar to those granted to the International
Managers.

The Company and certain of its directors and executive officers and the
Selling Stockholders have agreed that they will not, for a period of 90 days
after the date of this Prospectus, without the prior written consent of Merrill
Lynch, directly or indirectly, offer, sell or otherwise dispose of or grant any
option with respect to, pledge or hypothecate any shares of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock,
except for the exercise of options granted pursuant to existing employee plans
(and except for the over-allotment option granted to the Underwriters in the
Offerings).

Each International Manager represents and agrees that (a) it has not
offered or sold and prior to the expiration of six months from the closing date
of the Offerings, will not offer or sell any shares of Common Stock to persons
in the United Kingdom, except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995,
(b) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the Common Stock in, from or otherwise involving the United Kingdom, and (c) it
has only issued or passed on and will only issue or pass on to any person in the
United Kingdom any document received by it in connection with the issue or sale
of the Common Stock if that person is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1995 or is a person to whom such document may otherwise lawfully be issued or
passed on.

No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of Common Stock
or the possession, circulation or distribution of this Prospectus or any other
material relating to the Company or the shares of Common Stock in any
jurisdiction where action for that purpose is required. Accordingly, the shares
of Common Stock may not be offered or sold, directly or indirectly, and neither
this Prospectus nor any other offering material or advertisements in connection
with the shares of Common Stock may be distributed or published, in or from any
country or jurisdiction except in compliance with any applicable rules and
regulations of such country or jurisdiction.

Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase, in addition to the offering price set forth on the
cover page of this Prospectus.

40
<PAGE> 85

Certain of the Representatives, including Merrill Lynch, have performed
investment banking services for the Company and its affiliates for which they
received customary compensation. David K. Newbigging, a director of the Company,
is a director of Merrill Lynch & Co., Inc. From time to time, in the ordinary
course of their respective businesses, J.P. Morgan and its affiliates, including
Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), have engaged and
may in the future engage in commercial and investment banking transactions with
the Company and its affiliates. Morgan Guaranty is co-agent and a lender under
the Credit Facility, the outstanding borrowings of which will be paid down with
a portion of the net proceeds of the Offerings. The Offerings are being made
pursuant to the provisions of Sections 2710(c)(8)(A) and 2720(c)(3)(B) of the
Conduct Rules of the National Association of Securities Dealers, Inc.

LEGAL MATTERS

EXPERTS

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents filed with the Commission pursuant to the Exchange
Act are incorporated herein by reference:

1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (the "1995 10-K");

2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996;

3. The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1996;

4. The Company's Current Report on Form 8-K, filed with the Commission on
February 16, 1996;

5. The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A, filed with the Commission on June
15, 1993; and

41
<PAGE> 86

42
<PAGE> 87

- ------------------------------------------------------
- ------------------------------------------------------

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
Risk Factors.......................... 10
Disclosure Regarding Forward-Looking
Statements.......................... 14
Use of Proceeds....................... 14
Price Range of Common Stock and
Dividend Policy..................... 15
Capitalization........................ 15
Recent Development.................... 16
Selected Consolidated Financial
Data................................ 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
The Company........................... 27
Management............................ 34
Selling Stockholders.................. 38
Underwriting.......................... 39
Legal Matters......................... 41
Experts............................... 41
Incorporation of Certain Information
by Reference........................ 41
Glossary of Oil and Gas Terms......... G-1
Index to Financial Statements......... F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------

- ------------------------------------------------------
- ------------------------------------------------------
[UMC LOGO]
5,750,000 SHARES

UNITED MERIDIAN CORPORATION
COMMON STOCK
-----------------

PROSPECTUS

-----------------

MERRILL LYNCH INTERNATIONAL

J.P. MORGAN SECURITIES LTD.

HOWARD, WEIL

LABOUISSE, FRIEDRICHS

INCORPORATED

PETRIE PARKMAN & CO.

ABN AMRO ROTHSCHILD

DEUTSCHE MORGAN GRENFELL

NATWEST SECURITIES LIMITED

PARIBAS CAPITAL MARKETS

SOCIETE GENERALE

NOVEMBER 1, 1996

- ------------------------------------------------------
- ------------------------------------------------------