<PAGE>   1
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)
   [X]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

   [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                 For the transition period from ______ to ______


                        COMMISSION FILE NUMBER 001-14575

                               PRIZE ENERGY CORP.

         DELAWARE                                                 75-2766114
  (State of Incorporation)                                      (Tax ID Number)

                              3500 WILLIAM D. TATE
                                    SUITE 200
                               GRAPEVINE, TX 76051
                                  817-424-0400

          Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
         TITLE OF EACH CLASS:                NAME OF EACH EXCHANGE ON WHICH REGISTERED:
         --------------------                ------------------------------------------
<S>                                          <C>
      Common Stock, $.01 Par Value                      American Stock Exchange
Common Stock Warrants at $28.00 Per Share               American Stock Exchange

</TABLE>

        Securities Registered Pursuant to Section 12(g) of the Act: NONE

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

     As of March 27, 2001, 12,867,405 shares of the Registrant's Common Stock
were outstanding, and the aggregate market value of the Common Stock held by
non-affiliates was approximately $97.2 million.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held May 24, 2001, are incorporated by reference into Part
III of this Form 10-K.

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<PAGE>   2



                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                 PAGE
                                                                                 ----
<S>        <C>                                                                   <C>
PART I
 Item 1.   Business.............................................................    4
 Item 2.   Properties...........................................................    8
 Item 3.   Legal Proceedings....................................................   12
 Item 4.   Submission of Matters to a Vote of Security Holders..................   12
 Item 4A.  Executive Officers of the Registrant.................................   13

PART II
 Item 5.   Market for Registrant's Common Equity and Related
           Stockholder Matters..................................................   14
 Item 6.   Selected Financial Data..............................................   15
 Item 7.   Management's Discussion and Analysis of Financial Condition
           and Results of Operations............................................   16
 Item 7A.  Quantitative and Qualitative Disclosures About Market Risk...........   22
 Item 8.   Financial Statements and Supplementary Data..........................   25
 Item 9.   Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure.............................................   47

PART III
 Item 10.  Directors and Executive Officers of the Registrant...................   47
 Item 11.  Executive Compensation...............................................   47
 Item 12.  Security Ownership of Certain Beneficial Owners and Management.......   47
 Item 13.  Certain Relationships and Related Transactions.......................   47

PART IV
 Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....   47
</TABLE>

                           FORWARD-LOOKING STATEMENTS

     Certain information included in this Form 10-K and other materials filed by
the Company with the SEC contain forward-looking statements that involve risks
and uncertainties that could cause actual results to differ from projected
results. Such statements address activities, events or developments that the
Company expects, believes, projects, intends or anticipates will or may occur,
including such matters as future capital, development and exploration
expenditures, including the amount and nature thereof, drilling of wells,
reserve estimates, including estimates of future net revenues associated with
such reserves and the present value of such future net revenues, future
production of oil and natural gas, future sales prices for oil and gas
production, business strategies, expansion and acquisition, obtaining financial
or industry partners for prospect or program development, or marketing of oil
and natural gas. Factors that could cause actual results to differ materially
are described, among other places, in the Marketing, Competition, and Government
Regulation sections in this Form 10-K and under the Captions "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Without limiting the Cautionary Disclosures so described, Cautionary Disclosures
include, among others: general economic conditions, the market price of oil and
natural gas, the risks associated with exploration, the Company's ability to
find, acquire, market, develop and produce new properties, operating hazards
inherent to the oil and natural gas business, uncertainties in the estimation of
proved reserves and in the projection of future rates of production and timing
of development expenditures, the strength and financial resources of the
Company's competitors, the Company's ability to find and retain skilled
personnel, climatic conditions, labor relations, availability and cost of
material and equipment, environmental risks, the results of financing efforts,
and regulatory developments. All written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Disclosures. The Company disclaims
any obligation to update or revise any forward-looking statement to reflect
events or circumstances occurring hereafter or to reflect the occurrence of
anticipated or unanticipated events.




                                       2
<PAGE>   3
COMMONLY USED OIL & GAS TERMS

     The following list contains abbreviations and definitions of terms commonly
used in the oil and gas industry and this document.

     "Bbl" means a barrel of 42 U.S. gallons of oil or natural gas liquids.

     "Bcf" means billion cubic feet of natural gas.

     "Bcfe" means billion cubic feet of natural gas equivalent, which is
determined using the ratio of one Bbl of oil, condensate or natural gas liquids
to six Mcf of natural gas.

     "BOE" means barrels of oil equivalent. BOEs are determined using the ratio
of six Mcf of natural gas to one Bbl of oil.

     "BOPD" means barrels of oil per day.

     "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.

     "Dry Hole" or "Dry Well" means a well found to be incapable of producing
hydrocarbons in sufficient quantities such that proceeds from the sale of such
production exceed production expenses and taxes.

     "Exploratory Well" means a well drilled to find and produce oil or gas
reserves not classified as proved, to find a new production reservoir in a field
previously found to be productive of oil or gas in another reservoir or to
extend a known reservoir.

     "Gas" means natural gas.

     "Gross" when used with respect to acres or wells, refers to the total acres
or wells in which the Company has a working interest.

     "Infill Drilling" means drilling of an additional well or wells provided
for by an existing spacing order to more adequately drain a reservoir.

     "MBbl" means thousand barrels of oil.

     "MBOE" means thousand barrels of oil equivalent.

     "Mcf" means thousand cubic feet of natural gas.

     "Mcfd" means thousand cubic feet of natural gas per day.

     "MMcfd" means million cubic feet of natural gas per day.

     "MMcf" means million cubic feet of natural gas.

     "MMBbl" means million barrels of oil.

     "MMBOE" means million barrels of oil equivalent.

     "MMBtu" means one million British Thermal Units. British Thermal Units
means that quantity of heat required to raise the temperature of one pound of
water by one degree Fahrenheit.

     "Net" when used with respect to acres or wells, refers to gross acres or
wells multiplied, in each case, by the percentage working interest owned by the
Company.

     "NGL" means natural gas liquid.

     "NPV-10" when used with respect to oil and gas reserves, means the
estimated future gross revenues to be generated from the production of proved
reserves calculated in accordance with the guidelines of the SEC, net of
estimated production and future development costs, using prices and costs as of
the date of estimation without future escalation, except to the extent a
contract specifically provides otherwise, without giving effect to non-property
related expenses such as general and administrative expenses, debt service,
future income tax expense and depreciation, depletion and amortization, and
discounted using an annual discount rate of 10 percent.


                                       3
<PAGE>   4

     "Operator" means the individual or company responsible for the exploration,
development and production of an oil or gas well or lease.

     "Productive Wells" or "Producing Wells" consist of producing wells and
wells capable of production, including wells waiting on pipeline connections.

     "Recompletion" means the completion for production of an existing well bore
in another formation from that in which the well has been previously completed.

     "3-D Seismic" means an advanced technology method by which a three
dimensional image of the earth's subsurface is created through the
interpretation of reflection seismic data collected over surface grid. 3-D
seismic surveys allow for a more detailed understanding of the subsurface than
do conventional surveys and contribute significantly to field appraisal,
development and production.

     "WIP" means wells in progress.

     "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.

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

ITEM 1. BUSINESS

GENERAL

     Prize Energy Corp., including its subsidiaries ("Prize" or the "Company"),
is a mid-size public independent oil and gas company engaged primarily in the
acquisition, enhancement, and exploitation of producing oil and gas properties.
Prize began operations in January 1999 as a privately-held company. On February
8, 2000, the Company completed its acquisition of Vista Energy Resources, Inc.
("Vista") through a reverse merger and became a publicly traded company on the
American Stock Exchange under the symbol "PRZ." On February 28, 2001, Prize
again increased the scope of its operations when it closed on a $65 million
purchase of oil and gas properties from Apache Corporation.

     Prize currently owns oil and gas properties in three core operating areas
which are principally located in the Permian Basin of West Texas and
Southeastern New Mexico, the onshore Gulf Coast area of Texas and Louisiana, and
the Mid-Continent area of Western Oklahoma and the Texas Panhandle. Over 80% of
Prize's oil and gas property base is located in Texas. (A detailed description
of the significant properties can be found under "Item 2. Properties.")

     Listed below is a brief summary of Prize's total proved oil and gas reserve
base and the pro forma total proved oil and gas reserve base after giving effect
to the acquisition of the Apache properties at December 31, 2000. (See "Recent
Developments" for a description of the Apache acquisition.)

<TABLE>
<CAPTION>
                                             Prize                           Pro forma
                                     -------------------------------  ----------------------------
<S>                                  <C>                              <C>
Total Proved Reserves.............   298 Bcf of natural gas           321 Bcf of natural gas
                                     49 MMBbl of oil and liquids      58 MMBbl of oil and liquids
                                     99 MMBOE                         112 MMBOE
                                     593 Bcfe                         669 Bcfe
Balanced Reserve Mix..............   50% oil and liquids              52% oil and liquids
                                     50% natural gas                  48% natural gas
Proved Reserve Value NPV-10(1)....   $1.7 billion                     $1.8 billion
Reserve to Production Ratio (2)...   13 years                         13 years
</TABLE>

----------

(1)  The present value of pre-tax future net revenues discounted at 10% per
     annum assuming unescalated prices of $26.12 per Bbl of oil, $14.91 per Bbl
     of NGL and $9.41 per Mcf of natural gas. On December 31, 2000, NYMEX prices
     were $26.80 per Bbl for West Texas Intermediate crude oil and $9.78 per
     MMBtu for natural gas.

(2)  Represents proved reserves at December 31, 2000, divided by the Company's
     production for the year ended December 31, 2000.


                                       4
<PAGE>   5
     The principal and administrative offices of Prize are located at 3500
William D. Tate Ave., Suite 200, Grapevine, TX 76051 (telephone (817) 424-0400).


BUSINESS STRATEGY

     The primary objective of the Company's business strategy is to increase net
asset value per share by increasing oil and natural gas reserves, production,
cash flow and net income through the acquisition, exploitation and enhancement
of producing oil and gas properties and by maintaining a low operating and
corporate cost structure. Management believes the following components of this
strategy will allow the Company to achieve its objective.

     -    Geographic Concentration. Prize focuses its activities in the core
          areas where its management, technical staff and field operations teams
          have significant prior experience. Substantially all of the Company's
          properties are located in these core operating areas where it can
          better achieve economies of scale.

     -    Acquisition of Producing Properties. Prize focuses on acquiring
          producing reserves with a production history of at least three to five
          years in order to reduce the risks inherent in estimating the
          remaining oil and natural gas reserves and the future production
          profile.

     -    Aggressive Value Enhancement. Prize seeks to purchase oil and gas
          properties that it will operate and that have potential for
          development and operational improvements. Prize undertakes an
          extensive well-by-well operational study of acquired properties in
          order to identify value enhancement opportunities such as development
          drilling, recompletions, workovers and cost reductions. These
          activities can increase cash flow and, in some cases, add incremental
          reserves.

     -    Low Cost Operating Structure. Prize pursues a low cost operating
          strategy at both the field and corporate levels.

     -    Financial Flexibility. Prize seeks to maintain financial flexibility
          in order to be able to take advantage of strategic acquisition
          opportunities and protect against price declines. As a result of
          Prize's strategy of acquisition, exploitation and enhancement, debt
          levels will vary from time to time. Over the long-term, management
          believes that an appropriate target debt level is 50% of oil and
          natural gas reserve value, given historical price levels. Management
          may seek to further reduce oil and gas reserve, price and financial
          risks by:

          -    diversifying the Company's property holdings and avoiding
               concentrating a large value in any single property; and

          -    using commodity price hedges, interest rate swaps and other
               financial strategies.

RECENT DEVELOPMENTS

     Apache Acquisition. On February 28, 2001, the Company closed on the
purchase of $65 million of interests in oil and gas properties from Apache
Corporation. The effective date of the purchase was January 1, 2001, and Prize
assumed operations of the oil and gas properties on March 1, 2001. The Company
financed the acquisition under its existing bank credit facility.

     The producing properties are primarily located in the Company's core
operating areas of the Permian Basin of West Texas, onshore Gulf Coast region of
South Texas and Louisiana, and the Mid-Continent region of Western Oklahoma and
the Texas Panhandle. As of December 31, 2000, the proved producing reserves
attributable to the oil and gas properties acquired were approximately 9.0
million barrels of oil and 22.8 billion cubic feet of natural gas or 12.8
million barrels of oil equivalent.

ACQUISITION ACTIVITIES

     The Company has allocated a substantial portion of its capital expenditures
to the acquisition of producing oil and gas properties. The Company's continuing
emphasis on reserve additions through producing property acquisitions reflects
its belief that consolidation and restructuring activities on the part of major
integrated and larger independent oil and gas companies has afforded and should
continue to afford in the future, attractive opportunities to purchase domestic
producing properties.

     The following is a brief discussion of the Company's significant
acquisition and divestiture activities since inception:

     Pioneer Natural Resources. On May 17, 1999, the Company entered into a
purchase and sale agreement with Pioneer Natural Resources to acquire over 400
domestic onshore oil and gas properties for $215 million in cash and the
issuance of $30 million of convertible preferred stock. The transaction closed
on June 29, 1999, with an effective date of July 1, 1999. Funds for this
acquisition were provided through a combination of equity and advances on the
Company's revolving credit facility.



                                       5

<PAGE>   6
     Sale of Fee Minerals. On August 16, 1999, the Company completed the sale of
its non-strategic producing mineral and mineral fee acreage, which was acquired
with the Pioneer properties, to Black Stone Mineral Company, L.P. for $32
million effective July 1, 1999. Proceeds from the sale were used to pay down
debt under the Company's revolving credit facility.

     Vista Energy Resources, Inc. On February 8, 2000, Prize completed its
merger with Vista. Although Vista was the surviving entity, for accounting
purposes the merger was treated as an acquisition of Vista by the former Prize.
Prior to the merger, Prize was a private company with no readily determinable
market value. Thus, in order to determine the purchase price paid by Prize,
Prize management estimated the fair value of Prize's oil and gas assets, its
debt and other assets and liabilities as of the purchase agreement date. The
final purchase price was $69.9 million, including liabilities assumed of $53.8
million.

     Prize frequently reviews acquisition opportunities and anticipates making
additional acquisitions when the properties, and the terms and conditions of the
transaction, are determined to be appropriate. Prize does not have a specific
acquisition budget since the timing and size of acquisitions are difficult to
forecast. At the present time, Prize has no binding agreements with respect to
any significant acquisitions.

DRILLING AND RECOMPLETION ACTIVITIES

     Prize is engaged in numerous drilling and recompletion activities on
properties presently owned and intends to drill or develop other properties
acquired in the future. For 2001, Prize's drilling and recompletion activities
will be focused in the Permian Basin of West Texas, onshore Gulf Coast area of
South Texas and Louisiana, and the Mid-Continent region of Western Oklahoma and
the Texas Panhandle.

     The following table sets forth Prize's drilling results for 2000:

<TABLE>
<CAPTION>
                                               Gross                                            Net
                          ----------------------------------------------  ----------------------------------------------
Drilling                  Productive      Dry         WIP        Total    Productive     Dry          WIP        Total
                          ----------   ---------   ---------   ---------  ----------   ---------   ---------   ---------
<S>                       <C>          <C>         <C>         <C>        <C>          <C>         <C>         <C>
      Onshore Gulf Coast          10           2           6          18        5.70        0.89        3.36        9.95
      Permian Basin               30          --           8          38       15.71          --        2.78       18.49
      Mid-Continent                7           1           7          15        3.99        0.25        5.13        9.37
                           ---------   ---------   ---------   ---------   ---------   ---------   ---------   ---------
                                  47           3          21          71        25.4        1.14       11.27       37.81
Recompletions
      Onshore Gulf Coast          14           2           4          20        9.08        0.89        1.83       11.80
      Permian Basin               13           2           6          21       11.15        0.95        5.36       17.46
      Mid-Continent                8           1           3          12        5.93        0.65        3.00        9.58
                           ---------   ---------   ---------   ---------   ---------   ---------   ---------   ---------
                                  35           5          13          53       26.16        2.49       10.19       38.84

Total                             82           8          34         124       51.56        3.63       21.46       76.65
                           =========   =========   =========   =========   =========   =========   =========   =========
</TABLE>

     As of March 27, 2001, total development activity begun in 2000 resulted in
108 gross productive wells (67.49 net), 12 gross dry holes (7.03 net) and 4
remaining gross wells in progress (2.12 net) drilling and recompletion projects.
During 2000, Prize had no exploratory drilling activity.

     The following table sets forth Prize's drilling results for 1999:

<TABLE>
<CAPTION>
                                          Gross                                  Net
                           ------------------------------------   ------------------------------------
Drilling                   Productive      Dry         Total      Productive      Dry         Total
                           ----------   ----------   ----------   ----------   ----------   ----------
<S>                        <C>          <C>          <C>          <C>          <C>          <C>
      Onshore Gulf Coast            4            1            5         0.73         0.14         0.87
      Permian Basin                 3           --            3         0.64           --         0.64
      Mid-Continent                 2           --            2         0.04           --         0.04
                           ----------   ----------   ----------   ----------   ----------   ----------
                                    9            1           10         1.41         0.14         1.55
</TABLE>

     During 1999, Prize drilled no exploratory wells.

CUSTOMERS

     The principal customers for Prize's crude oil production are refiners,
remarketers and other companies, some of which have pipeline facilities near the
producing properties. In the event pipeline facilities are not conveniently
available, crude oil is trucked or barged to storage, refining or pipeline
facilities.


                                       6
<PAGE>   7

     Prize sells its gas production to a variety of customers, including
pipelines, utilities, gas marketing firms, industrial users and local
distribution companies. The Company uses existing gathering systems and
interstate and intrastate pipelines to consummate gas sales and deliveries.

     For the year ended December 31, 2000, one significant purchaser, Duke
Energy, accounted for 11% of Prize's total revenue. Duke purchases production
from numerous Prize properties at variable and market-sensitive prices. Prize
does not consider itself dependent upon this purchaser since other purchasers
are willing to purchase this same production at competitive prices.

OIL AND NATURAL GAS MARKETING

     Oil Marketing. Prize's oil production is sold under short-term agreements
at negotiated prices. As a result, purchasers can change whenever price
improvements can be received. Prize periodically enters into hedging activities
with a portion of its oil production which are intended to support its oil price
at targeted levels and to manage the Company's exposure to oil price
fluctuations. (See "Item 7A. Quantitative and Qualitative Disclosures About
Market Risk.")

     Natural Gas Marketing. Prize's gas production is sold under both long and
short-term agreements at negotiated prices. Although exact percentages vary
daily, as of February, 2001 approximately 60% of Prize's natural gas production
was sold under short-term contracts at variable or market-sensitive prices.
These market-sensitive sales are referred to as "spot market" sales. Another 39%
was committed under various long-term contracts (one year or more) at variable
prices which dedicate the natural gas to a purchaser for the contract period.
Prize's remaining gas production was dedicated under long-term contracts at
fixed prices.

     Under both long-term and short-term contracts, typically either the entire
contract (in the case of short-term contracts) or the price provisions of the
contract (in the case of long-term contracts) are renegotiated at intervals from
one day to one year. The spot market has become progressively more competitive
in recent years. As a result, prices on the spot market have been volatile.

     The spot market is subject to volatility as supply and demand factors in
various regions of North America fluctuate. In addition to entering into
long-term fixed price contracts, Prize periodically enters into hedging
arrangements or firm delivery commitments with a portion of its gas production.
These activities are intended to support targeted gas price levels and to manage
the Company's exposure to gas price fluctuations. (See "Item 7A. Quantitative
and Qualitative Disclosures About Market Risk.")

COMPETITION

     The oil and gas business is highly competitive. Prize encounters
competition by major integrated, independent oil and gas companies and others in
acquiring producing oil and gas properties, new leases, contracting for drilling
equipment and securing trained personnel. Intense competition occurs with
respect to marketing, particularly of natural gas. Certain competitors have
financial and other resources that substantially exceed those of Prize.

SEASONAL NATURE OF BUSINESS

     Generally, the demand for natural gas decreases during the summer months
and increases during the winter months. Seasonal anomalies such as mild winters
sometimes lessen this fluctuation. Also, summer natural gas demand is increasing
as more gas fired electrical generating units come on line. In addition,
pipelines, utilities, local distribution companies and industrial users utilize
natural gas storage facilities and purchase some of their anticipated winter
requirements during the summer. This can also lessen seasonal demand
fluctuations.

GOVERNMENT REGULATION

     Prize's operations are subject to various levels of government controls and
regulations. In the United States, legislation affecting the oil and gas
industry has been pervasive and is under constant review for amendment or
expansion. Pursuant to such legislation, numerous federal, state and local
departments and agencies have issued extensive rules and regulations binding on
the oil and gas industry and its individual members, some of which carry
substantial penalties for the failure to comply. Such laws and regulations have
significant impact on oil and gas drilling and production activities, increase
the cost of doing business and, consequently, affect profitability. Inasmuch as
new legislation affecting the oil and gas industry is commonplace and existing
laws and regulations are frequently amended or reinterpreted, Prize is unable to
predict the future cost or impact of complying with such laws and regulations.

     Exploration and Production. Prize's operations are subject to various types
of regulation at the federal, state and local levels. Such regulation includes
requiring permits for the drilling of wells; maintaining bonding requirements in
order to drill or operate wells; submitting and implementing spill prevention
plans; submitting notification relating to the presence, use and release of
certain contaminants incidental to oil and gas operations; and regulating the
location of wells, the method of drilling and casing wells, the use,



                                       7
<PAGE>   8

transportation, storage and disposal of fluids and materials used in connection
with drilling and production activities, surface usage and the restoration of
properties upon which wells have been drilled, the plugging and abandoning of
wells and the transporting of production. Prize's operations are also subject to
various conservation matters, including the regulation of the size of drilling
and spacing units or proration units, the number of wells which may be drilled
in a unit, and the unitization or pooling of oil and gas properties. In this
regard, some states allow the forced pooling or integration of tracts to
facilitate exploration while other states rely on voluntary pooling of lands and
leases, which may make it more difficult to develop oil and gas properties. In
addition, state conservation laws establish maximum rates of production from oil
and gas wells, generally prohibit the venting or flaring of gas, and impose
certain requirements regarding the ratable purchase of production. The effect of
these regulations is to limit the amounts of oil and gas Prize can produce from
its wells and to limit the number of wells or the locations at which Prize can
drill.

     Environmental and Occupational Regulations. Various federal, state and
local laws and regulations concerning the discharge of contaminants into the
environment, the generation, storage, transportation and disposal of
contaminants or other relating to the protection of public health, natural
resources, wildlife and the environment, affect Prize's exploration, development
and production operations and the costs attendant thereto. These laws and
regulations increase Prize's overall operating expenses. Prize maintains levels
of insurance customary in the industry to limit its financial exposure in the
event of a substantial environmental claim resulting from sudden and accidental
discharges of oil, salt water or other harmful substances. However, 100%
coverage is not maintained concerning any possible environmental claim, and no
coverage is maintained with respect to any award of punitive damages against
Prize or any penalty or fine required to be paid by Prize because of its
violation of any federal, state or local law. Prize is committed to meeting its
responsibilities to protect the environment wherever it operates and anticipates
making increased expenditures of both a capital and expense nature as a result
of the increasingly stringent laws relating to the protection of the
environment. Prize has not expended and does not presently expect to spend any
significant amounts related to non-compliance with environmental laws and
regulations or site remediation.

     Prize is also subject to laws and regulations concerning occupational
safety and health. Due to the continued changes in these laws and regulations,
and the judicial construction of same, Prize is unable to predict with any
reasonable degree of certainty its future costs of complying with these laws and
regulations.

     Prize maintains its own internal Environmental and Safety Department which
is responsible for instituting and maintaining an environmental and safety
compliance program for Prize. The program includes field inspections of
properties and internal audits of Prize's compliance procedures.

EMPLOYEES

     As of March 1, 2001 Prize's staff consisted of 139 full-time employees,
including 12 professionals in engineering, 10 in geology, 14 in the land
department, 25 in accounting, marketing and administration, and 78 in field
operations. The Company also engages independent consulting petroleum engineers,
geologists, geophysicists, landmen and attorneys on a fee basis.

ITEM 2. PROPERTIES

     At December 31, 2000, the Company owned and operated producing properties
in 12 states, with its proved reserves located primarily in three core areas:
the Permian Basin of West Texas and Southeastern New Mexico, the onshore Gulf
Coast area of Texas and Louisiana and the Mid-Continent area of Western Oklahoma
and the Texas Panhandle. As of December 31, 2000, the Company operated
approximately 1,530 gross productive wells and also owned non-operated interests
in 1,304 gross productive wells. The Company continuously evaluates the
profitability of its oil and gas operations and attempts to divest unprofitable
leases or areas of operations that are not consistent with its operating
philosophy.

PROVED RESERVES AND ESTIMATED FUTURE NET REVENUES

     "Proved reserves" are those quantities of oil, natural gas and NGLs, which
geological and engineering data demonstrate with reasonable certainty to be
recoverable in the future from known reservoirs under existing economic and
operating conditions. Estimates of proved reserves are prepared by Prize's
internal staff of engineers and are strictly technical judgments that are not
knowingly influenced by attitudes of conservatism or optimism. 75% of the NPV-10
value of Prize's proved reserves were audited by the independent petroleum
engineering firm of Netherland, Sewell, & Associates, Inc. The following table
sets forth Prize's estimated proved reserves, the estimated future net revenues
therefrom and NPV-10 thereof as of December 31, 2000. All reserve estimates were
prepared using standard geological and engineering methods generally accepted by
the petroleum industry and in accordance with SEC guidelines (as described in
the notes below). These estimates correspond with the method used in presenting
the supplemental information on oil and gas operations in note 13 to Prize's
consolidated financial statements included herein, except that federal income
taxes attributable to such future net revenues have been disregarded in the
presentation below.


                                       8
<PAGE>   9
     The following table sets forth estimates of the proved oil and gas reserves
of Prize at December 31, 2000.

                             Total Proved Reserves
                                 (in thousands)

<TABLE>
<CAPTION>
                                          Developed(1)   Undeveloped(2)      Total        Percent
                                          ------------   --------------   ----------   -----------
<S>                                       <C>            <C>              <C>          <C>
Oil (Bbls) .............................       30,400          10,888         41,288         42%
NGL (Bbls) .............................        5,983           1,767          7,750          8%
Gas (Mcf) ..............................      223,977          74,453        298,430         50%
BOE (Bbls)(3) ..........................       73,713          25,064         98,777        100%

Undiscounted future net revenues(4) ....   $2,219,233      $  756,812     $2,976,045

NPV-10(4) ..............................   $1,262,608      $  395,202     $1,657,810

Percent ................................           76%             24%           100%
</TABLE>
----------

(1)  Proved developed reserves are proved reserves that are expected to be
     recovered from existing wells with existing equipment and operating
     methods.

(2)  Proved undeveloped reserves are proved reserves to be recovered from new
     wells on undrilled acreage or from existing wells where a relatively major
     expenditure is required for recompleting or deepening a well or for new
     fluid injection facilities.

(3)  Gas reserves are converted to BOE at the rate of six Mcf per Bbl of oil,
     based upon the approximate relative energy content of natural gas to oil,
     which rate is not necessarily indicative of the relationship of gas to oil
     prices. The respective prices of gas and oil are affected by market
     conditions and other factors in addition to relative energy content.

(4)  These amounts were calculated using prices and costs in effect as of
     December 31, 2000. These prices were not changed except where different
     prices were fixed and determinable from applicable contracts. These
     assumptions yield average prices over the life of Prize's properties of
     $26.12 per Bbl of oil, $9.41 per Mcf of natural gas and $14.91 per Bbl of
     NGLs. On December 31, 2000, NYMEX prices were $26.80 per Bbl for West Texas
     Intermediate crude oil and $9.78 per MMBtu for natural gas.

     The following table sets forth estimates of Prize's pro forma oil and gas
reserves after giving effect to the acquisition of the Apache properties (in
millions):

<TABLE>
<CAPTION>
                                                 December 31, 2000
                                   ----------------------------------------------
                                     Prize             Apache             Total
                                   ----------        ----------        ----------
<S>                                <C>               <C>               <C>
Total proved reserves:
  Oil and NGL (Bbls)                     49.0               9.0              58.0
  Natural gas (Mcf)                     298.4              22.8             321.2
  BOE (Bbls)                             98.8              12.8             111.6
Proved Reserve Value NPV-10        $    1,658        $      161        $    1,819

</TABLE>

     Estimates of the Company's 2000 proved reserves set forth above have not
been filed with, or included in reports to, any Federal authority or agency,
other than the Securities and Exchange Commission.

ALTERNATIVE PRICING CASE

     The information below is presented strictly for supplementary information.
The pricing assumptions used are not necessarily indicative of managements
long-term outlook in oil and gas prices, nor is the NPV-10 value management's
estimate of the fair value of the reserves.



                                       9
<PAGE>   10

     Assuming oil and gas prices at year end 2000 were at more moderate levels,
such as a NYMEX oil price of $25.00 per barrel and NYMEX gas price of $5.00 per
Mcf, Prize's pro forma oil and gas reserves after giving effect to the
acquisition of the Apache properties would have been (in millions):

<TABLE>
<CAPTION>
                                                 December 31, 2000
                                   ----------------------------------------------
                                     Prize             Apache            Total
                                   ----------        ----------        ----------
<S>                                <C>               <C>               <C>
Total proved reserves:
  Oil and NGL (Bbls)                     47.8               8.8              56.6
  Natural gas (Mcf)                     291.1              22.1             313.2
  BOE (Bbls)                             96.3              12.5             108.8
Proved Reserve Value NPV-10        $      922        $       93        $    1,015
</TABLE>

     The prices used in calculating the estimated future net revenues
attributable to proved reserves do not necessarily reflect market prices for
oil, gas and NGL production subsequent to December 31, 2000. There can be no
assurance that all of the proved reserves will be produced and sold within the
periods indicated, that the assumed prices will be realized or that existing
contracts will be honored or judicially enforced.

     The process of estimating oil, gas and NGL reserves is complex, requiring
significant subjective decisions in the evaluation of available geological,
engineering and economic data for each reservoir. The data for a given reservoir
may change substantially over time as a result of, among other things,
additional development activity, production history and viability of production
under varying economic conditions. Consequently, material revisions to existing
reserve estimates may occur in the future.

PRODUCTION, REVENUE AND PRICE HISTORY

     Certain information concerning oil and natural gas production, prices,
revenues and operating expenses for the year ended December 31, 2000, is set
forth in "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations."

WELL STATISTICS

     The following table sets forth Prize's producing wells as of December 31,
2000:

<TABLE>
<CAPTION>
                         Oil Wells                Gas Wells                Total Wells
               --------------------------   ------------------------  ---------------------
                  Gross           Net          Gross         Net         Gross         Net
               ------------   -----------   -----------  -----------  -----------  --------
<S>                           <C>           <C>          <C>          <C>          <C>
                  2,066         995           768          395         2,834        1,390
</TABLE>

ACREAGE

     The following table sets forth Prize's developed and undeveloped oil and
gas lease and mineral acreage as of December 31, 2000:

<TABLE>
<CAPTION>
                               Developed                         Undeveloped
                       --------------------------        --------------------------
                         Gross            Net              Gross             Net
                       ---------        ---------        ---------        ---------
<S>                    <C>              <C>              <C>              <C>
Arkansas .......         3,693.7            946.2               --               --
Illinois .......           160.0            140.0            437.0            382.4
Indiana ........           343.9            309.5            442.7            415.9
Kansas .........        17,133.0         14,027.3         91,983.4         82,400.3
Louisiana ......         6,992.0          4,773.9          1,992.6          1,957.8
Mississippi ....         3,120.0          1,873.7          1,579.9            857.4
New Mexico .....        10,195.1          5,528.2         20,700.8         20,554.4
North Dakota ...        12,167.5         11,109.6         29,333.4          8,043.3
Oklahoma .......        80,903.0         35,035.9         58,702.3         17,896.8
Texas ..........       182,203.9        165,255.1        180,276.5         98,612.7
Utah ...........         8,062.7          8,062.7          3,345.0          3,165.0
Wyoming ........        26,217.5         25,997.5         22,357.8         19,182.5
                       ---------        ---------        ---------        ---------
    Total ......       351,192.3        273,059.6        411,151.4        253,468.5
                       =========        =========        =========        =========
</TABLE>




                                       10
<PAGE>   11

OPERATION OF PROPERTIES

     The day-to-day operations of oil and gas properties are the responsibility
of an operator designated under pooling or operating agreements. The operator
supervises production, maintains production records, employs field personnel and
performs other functions. The charges under operating agreements customarily
vary with the depth and location of the well being operated.

     Prize is the operator of 1,530 of its wells. These operated wells account
for over 75% of Prize's total proved reserves. As operator, Prize receives
reimbursement for direct expenses incurred in the performance of its duties as
well as monthly per-well producing and drilling overhead reimbursement at rates
customarily charged in the area to or by unaffiliated third parties. In
presenting its financial data, Prize records the monthly overhead reimbursements
as a reduction of general and administrative expense, which is a common industry
practice.

SIGNIFICANT PROPERTIES

     The following table sets forth proved reserve information on the most
significant geographic areas in which Prize's properties are located as of
December 31, 2000:

                          OIL AND GAS RESERVES BY AREA
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                  PERMIAN       ONSHORE         MID-
                                   BASIN       GULF COAST     CONTINENT       TOTAL
                                 ----------    ----------    ----------    ----------
<S>                              <C>           <C>           <C>           <C>
Oil (Bbls) ...................       33,947         4,703         2,638        41,288
NGL (Bbls) ...................        2,916            --         4,834         7,750
Gas (Mcf) ....................       85,454       128,204        84,772       298,430
BOE (Bbls) ...................       51,106        26,070        21,601        98,777
Proved Reserve Value NPV-10 ..   $  622,503    $  671,059    $  364,248    $1,657,810
Percent of value .............           38%           40%           22%          100%
</TABLE>

                         [MAP OF CORE OPERATING AREAS]

     Permian Basin Area. The Permian Basin area includes oil and gas properties
located primarily in West Texas and Southeastern New Mexico. The Spraberry,
Cherry Canyon, Yates, San Andres, Ellenberger, Holt, McKee, and Wolfcamp
formations are the dominant producing reservoirs on the Company's acreage in the
Permian Basin area with well depths ranging from 2,800 feet to



                                       11
<PAGE>   12

15,000 feet. As of December 31, 2000, the Permian Basin area comprised 52
percent of the Company's total proved reserves. The Company currently operates
1,078 gross productive wells and owns an interest in 746 gross productive wells
operated by others. During 2000, total net daily production from the Permian
Basin averaged approximately 9,410 BOE or 46 percent of total production.
Numerous workovers and recompletion opportunities exist in the Cherry Canyon
formation in the Warwink field, along with additional infill locations. The
Kermit, Keystone and Abell fields have waterflood potential that may add
additional oil and gas reserves. For 2001, the Company anticipates spending
approximately $23.4 million on drilling and recompletion activities associated
with 105 wells. The majority of this activity will be concentrated in the
Warwink, Kermit, Keystone, and Will-O fields of the Permian Basin.

     Onshore Gulf Coast Area. The onshore Gulf Coast area includes oil and gas
properties located primarily in South Texas and the southern half of Louisiana.
Production in this area is predominantly from the Wilcox, Edwards, Frio, Yegua,
and Miocene formations. The depths of the producing reservoirs range from 2,000
to 17,000 feet. At December 31, 2000, the onshore Gulf Coast area accounted for
26 percent of the Company's total proved reserves. The Company currently
operates 252 gross productive wells in this area and owns an additional interest
in 156 gross productive wells operated by others. Total daily net production
from this area in 2000 was approximately 7,691 BOE or 37 percent of total
production. A significant inventory of workovers, recompletions and development
drilling opportunities are available in the Oakville, Roleta, Buchel, Provident
City, Perry Point, and Delta Farms fields. For 2001, the Company anticipates
spending approximately $23.2 million on drilling and recompletion activities
associated with 45 wells. The majority of this activity will be concentrated in
the Buchel, Word/Word North, Oakville, and Loma Novia fields of the Onshore
Gulf Coast.

     Mid-Continent Area. The Mid-Continent area includes oil and gas properties
located primarily in Western Oklahoma and the Texas Panhandle. Production in
this area is predominantly from the Granite Wash, Morrow, Albany, Wolfcamp,
Sycamore, Viola, Hunton, and Woodford formations. The depths of the producing
reservoirs range from 800 to 15,000 feet. At December 31, 2000, the
Mid-Continent area accounted for 22 percent of the Company's total proved
reserves. The Company currently operates 200 gross productive wells in this area
and owns an additional interest in 402 gross productive wells operated by
others. Total daily net production from this area in 2000 was approximately
3,404 BOE or 17 percent of total production. A significant inventory of
workovers, recompletions and development drilling opportunities are available in
the Red Deer, Mendota NW, and Eola Robberson fields. For 2001, the Company
anticipates spending approximately $13.4 million on drilling and recompletion
activities associated with 35 wells. The majority of this activity will be
concentrated in the Northwest Eola Robberson, Red Deer Creek, and Mendota
Northwest fields of the Mid-Continent.

TITLE TO PROPERTIES

     Title to the Company's properties is subject to contractual arrangements
customary in the oil and gas industry, liens for current taxes not yet due and
other encumbrances. Prize believes that such burdens do not materially detract
from the value of such properties or from the respective interests therein or
materially interfere with their use in the operation of its business.

     As is customary in the industry in the case of undeveloped properties,
little investigation of record title is made at the time of acquisition (other
than a preliminary review of local records). Investigations, which may include a
title opinion of outside counsel, are made prior to the consummation of an
acquisition of producing properties and before commencement of drilling
operations on undeveloped properties.

ITEM 3. LEGAL PROCEEDINGS

     Prize is a defendant in legal proceedings that have resulted from the
ordinary conduct of its business. While the outcome of these proceedings against
Prize cannot be predicted with certainty, management of Prize does not expect
that these proceedings will have a material adverse effect on Prize's financial
condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no matters submitted to the Company's stockholders during the
fourth quarter ended December 31, 2000.



                                       12
<PAGE>   13
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

     Set forth below is certain information concerning the executive officers of
the Company. Executive officers are elected by the Board of Directors of the
Company and serve at its discretion.

<TABLE>
<CAPTION>
NAME                           AGE                        POSITION
---------------------------    ---     ---------------------------------------
<S>                            <C>     <C>
Philip B. Smith............    49      Director, Chairman of the Board,
                                       Chief Executive Officer and Treasurer
Lon C. Kile................    45      Director, President and
                                       Chief Operating Officer
D. Richard Massengill......    54      Vice President -- Exploitation
</TABLE>

     Mr. Smith, the founder of Prize, has been chairman of the board of
directors, chief executive officer, treasurer and a director of Prize since
January 1999. He was also president of Prize during a portion of 1999. From 1996
until 1999, he served as a director of HS Resources, Inc. and Pioneer Natural
Resources Company and its predecessor, MESA, Inc. In 1996, Mr. Smith founded a
small independent oil and gas company which he managed until 1999. Mr. Smith
served as president, chief executive officer and a director of Tide West Oil
Company, an independent oil and gas company, from 1992 until 1996. He was
president and a director of Draco Petroleum, Inc., a wholly-owned subsidiary of
Tide West, from 1991 until 1996, and of Tide West Trading & Transport Company,
formerly Draco Production Company, a wholly-owned subsidiary of Tide West, from
1989 until 1996. From 1986 until 1991, Mr. Smith was a senior vice president of
Mega Natural Gas Company, a natural gas gathering company and the former parent
company of Tide West Trading & Transport Company and its predecessor companies.
Prior to that time, he held various technical and management positions at other
independent and major oil and gas companies. He earned his M.B.A. from the
University of Tulsa and his B.S. in mechanical engineering from Oklahoma State
University.

     Mr. Kile has been president, chief operating officer and a director of
Prize since June 1999. From 1997 until 1999, he was executive vice president of
Pioneer Natural Resources Company, an independent oil and gas company. Mr. Kile
joined Parker & Parsley Petroleum Company, an independent oil and gas company
and a predecessor to Pioneer, in 1985 and was promoted to senior vice president
in 1996. Previously, he was vice president and manager of the mid-continent
division of Parker & Parsley. Prior to that, he held the positions of vice
president -- equity finance & analysis and vice president -- marketing and
program administration of Parker & Parsley. Before joining Parker & Parsley, he
was employed as supervisor -- senior, audit, in charge of Parker & Parsley's
audit, with Ernst & Young. Mr. Kile earned his Bachelor of Business
Administration degree in accounting from Oklahoma State University.

     Mr. Massengill has been a vice president of Prize since July 1999. From
1998 to 1999 he served as reservoir engineering manager, domestic division for
Pioneer Natural Resources Company. He was reservoir engineering manager for the
mid-continent division of Pioneer and its predecessors from 1996 to 1998. Prior
to that time, he held various positions with both large and small oil companies
as well as an owner in consulting and acquisition companies. Mr. Massengill
earned a Master of Science in Chemical Engineering from the University of
Wyoming.




                                       13
<PAGE>   14

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET PRICE

     Prize's common stock has been publicly traded on the American Stock
Exchange (the "AMEX") under the symbol "PRZ" since February 9, 2000. Previously,
Vista's common stock was traded on the AMEX under the symbol "VEI." Prize's
Class B $28 warrants are also traded on the AMEX under the symbol "PRZ.WS."

     The following table sets forth the high and low sales prices for the
Company's common stock for the periods indicated below (after giving effect to
the Company's 1 for 7 reverse stock split effective February 8, 2000).

<TABLE>
<CAPTION>
                                                           HIGH           LOW
                                                        ----------     ----------
<S>                                                     <C>            <C>
1999
 Quarter Ended March 31..........................       $   14 7/8     $    7 7/8
 Quarter Ended June 30...........................           17 1/2          8 3/4
 Quarter Ended September 30......................           19 1/4         12 1/4
 Quarter Ended December 31.......................           19 1/4         10 1/2
2000
 Through February 8..............................           14             10 1/2
 February 8 Through March 31.....................           19 1/2         12 3/8
 Quarter Ended June 30...........................           27 7/8         16
 Quarter Ended September 30......................           26 1/8         17 3/8
 Quarter Ended December 31.......................           20 3/4         15 1/8
2001
 Through March 27 ...............................           22             19 1/16
</TABLE>

 On March 27, 2001, there were 531 holders of record of Prize common stock.

PRIZE WARRANTS

      At December 31, 2000, there were 11,811,073 (2,252,670 publicly traded on
the American Stock Exchange under the symbol "PRZ.WS" and 9,558,403 that are
privately held) warrants outstanding that are currently exercisable to purchase
an aggregate of 1,687,296 shares of common stock. Under the terms of the
warrants, seven warrants plus $28 in cash are required to obtain one share of
Prize common stock. The warrants will expire on November 1, 2002.

      In addition, at December 31, 2000, there were also outstanding 165,000
warrants that are currently exercisable to purchase an aggregate of 36,428
shares of common stock with exercise prices ranging from $20.13 to $21.14 per
share and which have expiration dates ranging from February 24, 2001, to June
29, 2002. On February 24, 2001, warrants for the purchase of 5,000 shares of
common stock expired.

DIVIDENDS

     No dividends have been declared or paid on the Company's Common Stock.
Prize intends to retain all future earnings for the development of its business
and, therefore, Prize does not anticipate paying dividends in the foreseeable
future. Any future payments of dividends will be at the discretion of the
Company's Board of Directors and will depend on then-existing conditions,
including the Company's financial condition, results of operations, contractual
restrictions, capital requirements, business prospects and other factors deemed
relevant by the Board. Moreover, the Company's revolving credit facility
prohibits the Company from paying cash dividends on its Common Stock.



                                       14
<PAGE>   15
ITEM 6. SELECTED FINANCIAL DATA

     The following selected financial information (not covered by the
independent auditors' report) should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the consolidated financial statements of Prize and the notes
thereto included in "Item 8. Financial Statements and Supplementary Data."

<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                        -------------------------------------------------------------------------------------------
                                                          1999(1)
                                                         Pro Forma
                                           2000(1)      (Unaudited)        1999(2)         1998(3)         1997(3)        1996(3)
                                        -------------  -------------   -------------   -------------   -------------  -------------
                                                              (IN THOUSANDS EXCEPT PER SHARE DATA AND RATIOS)
<S>                                     <C>            <C>             <C>             <C>             <C>            <C>
OPERATING RESULTS
 Oil and Gas Sales ...................  $     149,489  $     101,258   $      47,978   $      79,418   $     120,821  $     109,266
 Other ...............................            775            388             268              --              --             --
                                        -------------  -------------   -------------   -------------   -------------  -------------
 Total Revenues ......................        150,264        101,646          48,246          79,418         120,821        109,266
 Lease Operating Expenses ............         46,373         34,670          16,607          26,211          32,739         24,233
                                        -------------  -------------   -------------   -------------   -------------  -------------
 Revenues in Excess of Direct
  Operating Expenses .................        103,891         66,976          31,639          53,207          88,082         85,033
 Depreciation, Depletion, and
  Amortization (D, D&A) ..............         25,471         23,664           8,714             n/a             n/a            n/a
 General and Administrative Expenses
  (G&A) ..............................          9,162          8,846           2,831             n/a             n/a            n/a
 Interest Expense ....................         17,604         15,186           6,070             n/a             n/a            n/a
 Other ...............................             --             53              --             n/a             n/a            n/a
                                        -------------  -------------   -------------   -------------   -------------  -------------
 Income Before Income Taxes ..........         51,654         19,227          14,024             n/a             n/a            n/a
 Income Taxes ........................         19,112          7,108           4,915             n/a             n/a            n/a
                                        -------------  -------------   -------------   -------------   -------------  -------------
 Net Income ..........................         32,542         12,119           9,109             n/a             n/a            n/a
 Preferred Dividend (4) ..............            459          1,841             907             n/a             n/a            n/a
                                        -------------  -------------   -------------   -------------   -------------  -------------
 Income Available to Common
  Stockholders .......................  $      32,083  $      10,278   $       8,202             n/a             n/a            n/a
 Net Earnings Per Share
  Basic ..............................  $        2.60  $        0.97   $        1.20             n/a             n/a            n/a
  Diluted ............................  $        2.29  $        0.82   $        1.03             n/a             n/a            n/a
BALANCE SHEET DATA
 Total Assets ........................  $     371,664  $     337,033   $     238,610             n/a             n/a            n/a
 Long-Term Debt ......................  $     214,319  $     180,725   $     127,000             n/a             n/a            n/a
 Stockholders' Equity ................  $     111,568  $     104,527   $      88,452             n/a             n/a            n/a
CASH FLOW DATA
 Net Cash Provided by Operating
  Activities .........................  $      45,842            n/a   $      19,798             n/a             n/a            n/a
 Net Cash Used (Provided) by
  Investing Activities ...............  $      54,718            n/a   $    (184,964)            n/a             n/a            n/a
 Net Cash Provided by Financing
  Activities .........................  $       6,343            n/a   $     168,519             n/a             n/a            n/a
OTHER FINANCIAL DATA
 EBITDA(5),(7) .......................  $      94,730         58,077   $      28,808             n/a             n/a            n/a
 Cash Margin(6),(7) ..................  $      69,997            n/a   $      18,018             n/a             n/a            n/a
PRODUCTION, PRICE, AND COST DATA
 PRODUCTION:
  Oil (Bbls) .........................          2,858          2,873             990           2,359           2,240          1,900
  NGL (Bbls) .........................            702            659             382             656             289             37
  Gas (Mcf) ..........................         23,672         23,690          10,236          22,863          28,800         26,899
  BOE ................................          7,505          7,480           3,078           6,826           7,329          6,420
 AVERAGE REALIZED PRICES
  (INCLUDING EFFECTS OF HEDGING):
  Oil (Bbls) .........................  $       23.67  $       15.78   $       18.83   $       12.49   $       18.97  $       20.80
  NGL (Bbls) .........................  $       17.39  $       10.15   $       11.15   $        8.13   $       11.50  $       12.23
  Gas (Mcf) ..........................  $        2.95  $        2.10   $        2.45   $        1.95   $        2.36  $        2.24
  BOE ................................  $       19.92  $       13.54   $       15.59   $       11.64   $       16.48  $       17.02
 COST PER BOE:
  Lease Operating ....................  $        6.18  $        4.64   $        5.40   $        3.84   $        4.47  $        3.77
  D, D&A .............................  $        3.39  $        3.16   $        2.83             n/a             n/a            n/a
  G&A ................................  $        1.22  $        1.18   $        0.92             n/a             n/a            n/a
</TABLE>

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

(1)  1999 Unaudited Pro Forma operating results assume that the Pioneer
     purchase, the Minerals sale, the Sunterra purchase, and the Vista Merger
     all occurred on January 1, 1999. The balance sheet pro forma data has been
     prepared assuming the merger closed on December 31, 1999. These amounts
     have been updated for the revisions to the purchase price allocation which
     were recognized in the fourth quarter of 2000. It should also be noted that
     these pro forma amounts include the results of Vista for twelve months
     while the 2000 financial statements include the activities of Vista from
     February 8, 2000.



                                       15


<PAGE>   16

(2)  The 1999 column is presented for Prize only from January 15, 1999
     (inception) through December 31, 1999 and is derived from Prize's audited
     consolidated financial statements. A significant amount of the activity is
     the direct result of the acquisition of producing properties from Pioneer,
     which was effective July 1, 1999.

(3)  The 1998, 1997, and 1996 amounts are derived from the audited statements of
     revenues and direct operating expenses of the Pioneer properties. The data
     have been adjusted to exclude revenue of $5,136,967, $7,189,442 and
     $8,578,608, respectively, as well as direct operating expense of $793,131,
     $1,115,379 and $1,037,518, respectively, associated with the mineral
     interest properties Prize acquired in connection with Prize's acquisition
     of the Pioneer properties. Prize sold the mineral interest properties in
     July 1999. The 1998 statement of revenues and direct operating expenses is
     included in Item 8. Financial Statements and Supplementary Data.

(4)  On March 31, 2000, all of the outstanding shares of convertible preferred
     stock were converted into shares of common stock.

(5)  EBITDA represents earnings before interest, taxes, depreciation, depletion,
     and amortization expense.

(6)  Cash margin represents total revenues less cash expenses. Cash expenses are
     all expenses other than the non-cash expenses of depreciation, depletion,
     and amortization and deferred income taxes. Cash margin measures the net
     cash which is generated by a company's operations during a given period,
     without regard to the period such cash is physically received or spent by
     the company. This margin ignores the non-operational effect on a company's
     "net cash provided by operating activities," as measured by generally
     accepted accounting principles, from a company's activities as an operator
     of oil and gas wells. Such activities produce net increases and decreases
     in temporary cash funds held by the operator which have no effect on net
     income.

(7)  EBITDA is presented because it is commonly accepted in the oil and gas
     industry as a financial indicator of a company's ability to service or
     incur debt and because it is a component of Prize's debt covenants. Cash
     margin is presented because it is commonly accepted in the oil and gas
     industry as a financial indicator of a company's ability to fund capital
     expenditures or service debt. EBITDA and cash margin are also presented
     because investors routinely request such information. Management interprets
     trends in EBITDA and cash margin in a similar manner as trends in net
     income.

     EBITDA and cash margins should be used as supplements to, and not as
     substitutes for, net income and cash provided by operating activities,
     determined in accordance with generally accepted accounting principles, as
     measures of Prize's profitability and liquidity. There may be operational
     or financial demands and requirements that reduce management's discretion
     over the use of EBITDA and cash margin. See "Item 7. Management's
     Discussion and Analysis of Financial Condition and Results of Operations."
     EBITDA and cash margin as used by the Company, may not be comparable to
     similarly titled measures used by other companies.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The following discussion and analysis should be read in conjunction with
"Item 6. Selected Financial Data" and Prize's audited consolidated financial
statements.

OVERVIEW

     Prize was formed in January 1999 and has grown rapidly through the
acquisition of producing oil and gas properties. On June 29, 1999, Prize
completed the acquisition of producing oil and gas properties from Pioneer for
$239 million. On February 8, 2000, Prize merged with Vista, a publicly traded
company that owned producing oil and gas properties located in the Permian Basin
of West Texas and Southeastern New Mexico.

     Prize's growth from the acquisition of producing oil and gas properties has
affected its financial results in a number of ways. Acquisitions of new
properties often will result in an initial increase in lease operating expenses.
Acquired properties frequently have not received the focused attention of the
operator prior to acquisition by Prize. After acquisition, these properties
require maintenance, workovers, recompletions and other remedial activity not
constituting capital expenditures. For example, Prize estimates it has spent at
least $3.5 million in nonrecurring remedial lease operating expenses with
respect to the properties obtained in the Pioneer acquisition alone.

     Acquisitions may also result in an increase in general and administrative
expenses. For example, as a result of the Pioneer acquisition, Prize has
recruited and developed operating, geological, engineering, accounting and
administrative personnel compatible with the increased size of our operations.
Since inception, Prize has grown to over 100 full-time employees. Consequently,
Prize has incurred corresponding increases in its general and administrative
expenses.

     Prize believes that its large portfolio of enhancement and exploitation
projects and the significant number of staff it has added have well positioned
it to follow through on its development and exploitation activities and to
pursue additional producing oil and gas property acquisition opportunities which
complement its existing asset base.



                                       16
<PAGE>   17


     Prize uses the successful efforts method of accounting for its oil and gas
producing activities. Under this method, costs to acquire mineral interests in
oil and gas properties, to drill and equip exploratory wells that result in
proved reserves and to drill and equip development wells are capitalized. Costs
to drill exploratory wells that do not result in proved reserves, geological and
geophysical costs and costs of carrying and retaining properties that do not
contain proved reserves are expensed. Costs of significant nonproducing
properties, wells in the process of being drilled and significant development
projects are excluded from depletion until such time as the related project is
developed and proved reserves are established or impairment is determined.

RESULTS OF OPERATIONS

Results of Operations for 2000 and 1999

     The financial statements of Prize, which began operations on January 15,
1999, include the results of the 50-week period ended December 31, 1999. As a
result of Prize's oil and gas operations not formally beginning until July 1999
with the Pioneer acquisition, the 1999 results discussed below only include six
months of activity. Further, Prize experienced significant growth in 2000 from
its merger with Vista on February 8, 2000 and the subsequent $41.2 million
investment in a development program. Consequently, substantially all of the
significant increases illustrated below are directly attributable to Prize's
acquisition and development activity over the past 18 months.

     Changes in oil/liquids and gas production, average realized prices
including the effects of hedging, and revenues for the year ended December 31,
2000 and 1999, are shown in the table below:

<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31,
                                              ---------------------------------
                                                                       2000
                                                2000        1999      VS 1999
                                              ---------   ---------   ---------
<S>                                           <C>         <C>         <C>
PRODUCTION:
 Oil/liquids (MBbls) ......................       3,560       1,372         159%
 Gas (MMcf) ...............................      23,672      10,236         131%
 Total (MBOE) .............................       7,505       3,078         144%
AVERAGE REALIZED PRICES:
 Oil/liquids (per Bbl) ....................   $   22.36   $   16.68          34%
 Gas (per Mcf) ............................   $    2.95   $    2.45          20%
 Per BOE ..................................   $   19.92   $   15.59          28%
TOTAL REVENUES (IN THOUSANDS):
 Oil/liquids ..............................   $  79,609   $  22,899         248%
 Gas ......................................      69,880      25,079         179%
                                              ---------   ---------
 Total ....................................   $ 149,489   $  47,978         212%
                                              =========   =========
</TABLE>

     Oil/Liquids Revenues. Oil/liquids revenues increased $56.7 million in 2000.
Oil/liquids production rose 2.2 million barrels resulting in increased revenues
of $36.5 million. In addition, $20.2 million of revenues were added as a result
of a $5.68 per barrel increase in the oil/liquids price. The oil/liquids
revenues are net of hedge settlements of $17 million ($4.78 per barrel) and $2.6
million ($1.90 per barrel) for 2000 and 1999, respectively. As previously
stated, the substantial rise in volumes is attributable to Prize's brief
operating history, rapid growth from acquisitions, the Vista merger and the
ongoing development program.

     Gas Revenues. Gas revenues increased $44.8 million in 2000. As a result of
higher gas production in the amount of 13,436 MMcf, gas revenues increased by
$33 million. A price increase of $.50 per Mcf added $11.8 million in gas
revenues. Hedge settlements of $18.6 million ($.79 per Mcf) and $.6 million
($.06 per Mcf) for 2000 and 1999, respectively, have been netted against the gas
revenues. As previously stated, the substantial rise in volumes is attributable
to Prize's brief operating history, rapid growth from acquisitions, the Vista
merger and the ongoing development program.



                                       17
<PAGE>   18
     Production and Operating Expenses. Set forth below are the changes in
production and operating expenses for the year ended December 31, 2000, as
compared to 1999:

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                               ---------------------------------
                                                                         2000
                                                 2000        1999       VS 1999
                                               ---------   ---------   ---------
<S>                                            <C>         <C>         <C>
PRODUCTION AND OPERATING EXPENSES
 (IN THOUSANDS):
 Lease operating ...........................   $  31,996   $  11,791         171%
 Production taxes ..........................      14,376       4,816         199%
                                               ---------   ---------
 Total .....................................   $  46,372   $  16,607         179%
                                               =========   =========
PER BOE PRODUCED:
 Lease operating ...........................   $    4.26   $    3.83          11%
 Production taxes ..........................   $    1.92   $    1.56          23%
</TABLE>

      Lease operating expenses increased 171% as a result of the increase in
production and ongoing efforts to upgrade and further enhance existing
production from the properties. Consequently, on a BOE basis, lease operating
expenses increased 11%. Production taxes increased $9.6 million as a result of
an increase in sales from the above described production increase in 2000 and
higher oil and gas prices received during 2000 compared to 1999. In addition, as
previously stated, the rise in production and operating expenses is also
attributable to Prize's brief operating history, rapid growth from acquisitions,
the Vista merger and the ongoing development program.

     Depreciation, Depletion, and Amortization Expenses (DD&A). DD&A expense for
2000 was $25.5 million compared to $8.7 million in 1999. On a BOE basis, the
average DD&A rate was $3.39, 20% higher than the rate of $2.83 in 1999. The
higher DD&A rate is attributable to the increased production and investment
resulting from the Company's ongoing efforts to enhance production from its
existing properties.

     General and Administrative Expenses (G&A). G&A expense in 2000 was $9.2
million as compared to $2.8 million in 1999. On a BOE basis, the G&A rate was
$1.22, $.30 higher than the rate of $.92 in 1999. The increase in 2000 resulted
from Prize's increase in staffing, related benefit costs and registration costs
related to the September 26, 2000 registration statement, which registered
certain stockholders' shares to be sold in a public offering. No proceeds were
received by the Company from the offering.

     Interest Expense. Interest expense for 2000 was $17.6 million as compared
to $6.1 million in 1999. The weighted-average interest rate on the debt
outstanding was 8.23% and 8.27% for 2000 and 1999, respectively, which takes
into account the effect of any interest rate swaps. The higher interest expense
in 2000 is a direct result of the increase in debt from $127 million to $214
million. The increase in long-term debt was primarily attributable to $53.7
million of debt assumed in the Vista acquisition, $26.1 million spent to
repurchase over 1.8 million shares of the Company's common stock in 2000 and
$6.5 million paid as a deposit on the acquisition of the Apache properties.

     Income Taxes. Income tax expense increased principally due to the change in
pretax income. Management expects that its effective tax rate of 37% in 2000
should approximate its future rate in 2001. Of the $19.1 million and $4.9
million in tax expense for 2000 and 1999, respectively, $7.1 million and $4.8
million relate to the current portion of the provision.

Results of Operations for 1999 and 1998

     Prize's historical consolidated financial statements include the results of
the 50-week period from its inception, January 15, 1999, through December 31,
1999. Prior to June 30, 1999, Prize had no oil and gas operations. As a result
of Prize's limited operating history and rapid growth associated with the
Pioneer acquisition, which was effective July 1, 1999, Prize's consolidated
financial statements are not readily comparable and are not indicative of future
results. In order to make a meaningful comparison of 1999's activity to 1998's
activity, Prize has based the following discussion of the results of operations
upon the pro forma revenues and direct operating expenses of Prize, prior to the
Vista merger. These pro forma amounts were previously reported in the 1999
annual report on Form 10-K. Neither the 1999 pro forma amounts or the 1998
adjusted amounts will agree to the Selected Financial Data, however Prize
believes this comparison represents the most meaningful comparison of the 1999
and 1998 results prior to the Vista merger.




                                       18
<PAGE>   19

     Changes in oil/liquids and gas production, average realized prices
including the effects of hedging in 1999, and revenues for the years ended
December 31, 1999 and 1998, are shown in the table below.

<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31,
                                             ---------------------------------
                                             PRO FORMA   PRO FORMA     1999
                                               1999        1998      VS 1998
                                             ---------   ---------   ---------
<S>                                          <C>         <C>         <C>
PRODUCTION:
 Oil/liquids (MBbls) .....................       2,621       3,015         (13)%
 Gas (MMcf) ..............................      20,789      24,021         (13)%
 Total (MBOE) ............................       6,086       7,019         (13)%
AVERAGE REALIZED PRICES:
 Oil/liquids (per Bbl) ...................   $   14.67   $   11.54          27%
 Gas (per Mcf) ...........................        2.12        1.96           8%
 Per BOE .................................       13.56       11.65          16%
TOTAL REVENUES (IN THOUSANDS):
 Oil/liquids .............................   $  38,458   $  34,792          11%
 Gas .....................................      44,045      46,968          (6)%
                                             ---------   ---------
 Total ...................................   $  82,503   $  81,760           1%
                                             =========   =========
</TABLE>

     Oil/Liquids Revenues. Oil/liquids revenues increased $3.7 million in 1999.
Oil/liquids production decreased 394,000 barrels resulting in reduced revenues
of $4.5 million as a result of the lack of focused attention of the previous
operators. This decrease was offset by $8.2 million added as a result of a $3.13
per barrel increase in the oil/liquids price.

     Gas Revenues. Gas revenues decreased $2.9 million in 1999. Gas production
decreased 3,232 MMcf, resulting in reduced revenues of $6.2 million as a result
of the lack of focused attention of the previous operators. The decrease in
production was offset by a price increase of $0.16 per Mcf which added $3.3
million in gas revenues.

     Production and Operating Expenses. Set forth below are the changes in
production and operating expenses for the years ended December 31, 1999 and
1998.

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                         ------------------------------------
                                                         PRO FORMA    PRO FORMA      1999
                                                            1999         1998       VS 1998
                                                         ----------   ----------   ----------
<S>                                                      <C>          <C>          <C>
PRODUCTION AND OPERATING EXPENSES (IN THOUSANDS):
 Lease operating .....................................   $   19,565   $   18,767            4%
 Production taxes ....................................        8,429        8,234            2%
                                                         ----------   ----------
 Total ...............................................   $   27,994   $   27,001            4%
                                                         ==========   ==========
PER BOE PRODUCED:
 Lease operating .....................................   $     3.21   $     2.67           20%
 Production taxes ....................................         1.39         1.17           19%
</TABLE>

      Despite lower production rates, lease operating expenses increased 4% as a
result of additional expenditures needed to upgrade properties into working
condition during the last half of 1999 because of the lack of focused attention
by the previous operator. Consequently, on a BOE basis, lease operating expenses
increased 20%. Production taxes increased $195,000 as a result of the higher oil
and gas prices received during the second half of 1999 compared to 1998.

LIQUIDITY AND CAPITAL RESOURCES

     Liquidity. As of December 31, 2000, Prize had current cash reserves of $.8
million and working capital of $16.9 million. The current ratio was 1.63 to 1.
In addition, Prize had long-term debt outstanding of $214.3 million.

     Maturities of long-term debt are as follows (in thousands):

<TABLE>
<S>                                     <C>
2001..........                         $      --
2002..........                            40,185
2003..........                            53,580
2004..........                            53,580
2005..........                            53,580
Thereafter....                            13,394
                                       ---------
                                       $ 214,319
                                       =========
</TABLE>


                                       19
<PAGE>   20
     Prize has obligations under noncancelable operating leases for certain
equipment and office space expiring in various years through 2005. Minimum
annual rental commitments at December 31, 2000, are (in thousands):

<TABLE>
<S>                                <C>
2001..........                     $   454
2002..........                         451
2003..........                         374
2004..........                         374
2005..........                         393
                                   -------
                                   $ 2,046
                                   =======
</TABLE>

     Capital Sources. Prize's initial capitalization, bank financing, cash flow
from operations and private equity sales have provided funding for its business
activities. The Pioneer acquisition was funded with the issuance of the Prize
convertible preferred stock to Pioneer and cash from Prize's initial
capitalization, additional private equity sales and bank financing.

     Prize does not have a specific acquisition budget since the timing and size
of acquisitions are difficult to forecast. Prize regularly engages in
discussions relating to the potential acquisition of oil and gas properties. On
February 28, 2001, Prize closed on the purchase of $65 million of interests in
oil and gas properties from Apache Corporation. Substantially all of the
acquisition was financed under Prize's existing credit facility. Any future
acquisitions may require additional financing and will be dependent upon
financing arrangements being available at the time.

     Prize anticipates that its oil and gas capital expenditures will be
approximately $60 million for enhancement, exploitation and drilling activity in
2001. The timing of most of Prize's capital expenditures are discretionary with
no long-term capital expenditure commitments. Consequently, Prize has a
significant degree of flexibility to adjust the level of its capital
expenditures as circumstances warrant. The capital expenditure budget, other
than significant acquisitions, will be funded from internally generated cash
flow. However, in the long term, if Prize's cash flow from operations and
availability under its senior credit agreement are not sufficient to satisfy
cash requirements, there can be no assurance that additional debt or equity
financing will be available to meet its requirements.

     In March 2000 and September 2000, the Company's Board of Directors approved
a plan to buy back up to $20 million and $15 million, respectively, of its
common stock from time to time in the open market or through negotiated
transactions. On March 28, 2000, the Company entered into a stock purchase
agreement with Pioneer Natural Resources to acquire 1,346,482 shares of Prize
common stock for $18.4 million. As of December 31, 2000, the Company had
acquired an additional 463,700 common shares for $7.7 million.

     Although some of Prize's costs and expenses may be affected by inflation,
inflation has not had a significant effect on Prize's results of operations.
Improving industry conditions may significantly increase competition, creating a
relative shortage of oilfield supplies and/or services which would result in
inflationary cost pressures on Prize's operations.

     Cash provided by operating activities will be the primary source of Prize's
capital and short-term liquidity in the future. For the year ended December 31,
2000 and the period from inception through December 31, 1999, net cash provided
by operating activities was $45.8 million and $19.8 million, respectively.

     For the year ended December 31, 2000 and the period from inception through
December 31, 1999, Prize's cash used in investing activities was $54.7 million
and $185 million, respectively. The 2000 period amount was principally spent for
development activities and $6.5 million for a deposit on the Apache acquisition,
while the 1999 period expenditures consisted primarily of the acquisition of oil
and gas properties acquired from Pioneer, net of the proceeds from the sale of
the mineral interests acquired from Pioneer.

     Cash provided by financing activities of $6.3 million in 2000 consisted
principally of $31.7 million in net borrowings and $1.1 million from the
issuance of common stock, less $26.1 million for the purchase of treasury
shares. Cash provided by financing activities was $168.5 million for the period
from inception through December 31, 1999. This included $125.4 million of net
borrowings under Prize's senior credit agreement and $45.5 million of capital
contributions, offset by $2.6 million of loan origination fees.

     Credit Agreements. Prize's initial senior credit agreement established a
four-year revolving credit facility, up to the maximum amount of $250 million,
subject to a borrowing base to be determined annually by the lenders based on
proved oil and gas reserves and other assets of Prize. To the extent that the
borrowing base is less than the aggregate principal amount of all outstanding
loans and letters of credit under the senior credit agreement, the deficiency
must be cured by either prepaying a portion of the outstanding amounts under the
senior credit agreement or pledging additional collateral to the lenders. On
February 8, 2000, in connection with the merger with Vista, the Company amended
its senior credit agreement to refinance all of its and Vista's outstanding debt
and to



                                       20
<PAGE>   21

provide for total borrowings of up to $400 million, subject to the borrowing
base. At December 31, 2000, the bank borrowing base was $325 million. The
Company is currently negotiating for an increase in the bank borrowing base from
$325 million to $375 million.

     From December 31, 1999 to December 31, 2000, Prize's outstanding net
long-term debt increased from $127 million to $214 million. The increase in
long-term debt was primarily attributable to the $53.7 million of debt assumed
in the Vista acquisition, $26.1 million spent to repurchase over 1.8 million
shares of the Company's common stock and $6.5 million paid as a deposit on the
acquisition of the Apache properties. At March 27, 2001, Prize's outstanding net
long-term debt had increased to $281 million, principally due to the funding at
closing on the acquisition of the Apache properties. The weighted-average
interest rate in 2000 under the senior credit facility was 8.23%. Borrowings
under the senior credit facility are secured by substantially all of the
Company's assets. All outstanding amounts under the amended senior credit
agreement will convert to a term loan on June 29, 2002, with quarterly principal
payments after that date through June 29, 2006.

     On October 1, 2000, the Company amended its credit facility to provide an
increase in the available letters of credit up to an aggregate of $15 million
with an additional supplemental letter of credit (as defined by the credit
agreement) of $15 million. At December 31, 2000, $13.5 million was outstanding
under the letters of credit.

     Prize's financial covenants under the amended senior credit agreement
require its current ratio, which is the ratio of consolidated current assets as
defined by the agreement to consolidated current liabilities (as defined), as of
the end of any fiscal quarter, not to be less than 1 to 1 and the ratio of
consolidated EBITDA to the sum of consolidated net interest expense plus letter
of credit fees not to be less than 2.5 to 1. In addition to these financial
covenants, restrictions under the senior credit agreement include restrictions
on the incurrence of debt, paying dividends and making other restricted
payments, asset dispositions, consolidations and mergers and other restrictions
typical in the oil and gas industry. As of December 31, 2000, Prize was in
compliance with all financial covenants and restrictions.

     At Prize's option, borrowings under the amended senior credit agreement
bear interest at either (1) the "Base Rate," which is the annual rate of
interest announced by Fleet Bank, or (2) the adjusted Eurodollar rate as defined
by the agreement plus a margin ranging from 1.25% to 1.875% per annum, depending
on the level of Prize's aggregate outstanding borrowings under the senior credit
agreement. Prize currently pays interest at a rate of LIBOR plus 1.75%, or 8.15%
as of December 31, 2000. In addition, Prize is committed to pay in arrears, a
quarterly commitment fee ranging from .25% to .50% based on the unused portion
of the borrowing base.

     The loan documents governing the amended senior credit agreement contain
covenants and restrictions relating to Prize's operations that are customary in
the oil and gas industry. In addition, the line of credit is secured by a first
lien on properties that represents at least 80% of the value of Prize's proved
oil and gas properties. See Note 3 of notes to Prize's consolidated financial
statements included elsewhere in this document. Prize believes that, in the
short term, the availability under its senior credit agreement and cash flow
from operations will be sufficient for anticipated operating and capital
expenditure requirements in 2000.

STOCK OPTIONS AND COMPENSATION EXPENSE

     In 1999, Prize instituted a stock option plan for key employees. A total of
2,141,300 shares of the Company's common stock were reserved for issuance under
this plan. Options to purchase a total of 2,141,300 shares of the Company's
common stock were granted under the plan by the board of directors in 1999. Of
these options granted, 2,122,363 were outstanding as of December 31, 2000. Prize
terminated the plan with respect to any future issuances of stock options. The
options are exercisable at an exercise price of $7.84 per share. The options
were to vest ratably over a period of three years, however, the closing of the
Vista merger accelerated the vesting of all of the outstanding options. The
Company did not recognize any compensation expense in connection with the
issuance of the options.

     Effective with the Vista merger, Prize adopted Vista's existing stock
option plan. A total of 500,000 shares of the Company's common stock are
reserved for issuance under this stock option plan. As of December 31, 2000,
nonqualified stock options for a total of 220,000 shares of common stock had
been granted under this stock option plan. The exercise price of these options
equaled the fair market value of the Company's common stock on the date of
grant, between $12.38 and $16.94 per share, and the options vest ratably over a
period of three years and expire five years after the date of grant.

     Total outstanding options as of December 31, 2000 and December 31, 1999,
respectively, were 2,342,363 and 2,141,263. Accordingly, 2,622,363 shares of
common have been reserved for issuance upon exercise.

NATURAL GAS BALANCING

     It is possible in the natural gas industry for various working interest
partners to produce more or less than their entitlement share of natural gas. In
those events, it is possible for there to be overproduced parties and
underproduced parties. At December 31, 2000, Prize's net gas balancing position
was not material.


                                       21
<PAGE>   22
NEW ACCOUNTING STANDARDS

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," (SFAS 133). SFAS 133 requires the accounting
recognition of all derivative instruments as either assets or liabilities at
fair value. Derivative instruments that are not hedges must be adjusted to the
fair value through net income (loss). Under the provisions of SFAS 133, changes
in the fair value of derivative instruments that are fair value hedges are
offset against changes in the fair value of the hedged assets, liabilities, or
firm commitments, through net income (loss). Changes in the fair value of
derivative instruments that are cash flow hedges are recognized in other
comprehensive income (loss) until such time as the hedged items are recognized
in net income (loss). Ineffective portions of a derivative instrument's change
in fair value are immediately recognized in net income (loss). The Company
adopted the provisions of SFAS 133, as amended, effective January 1, 2001. The
adoption of SFAS 133 will result in a January 1, 2001 transition adjustment to
increase other current liabilities and long-term liabilities by $48 million and
$6.9 million, respectively, and reduce stockholders' equity by $54.9 million.

     Due to the settlement of maturing derivative contracts and reductions in
gas prices, it is expected that the SFAS 133 impact to the Company's
stockholders' equity as of March 31, 2001 will be significantly lower than the
initial transition adjustment, which was based upon the market-quoted prices as
of January 1, 2001. The fair value of derivative instruments at March 19, 2001
was a liability of approximately $33.6 million.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Prize's business is impacted by fluctuations in commodity prices and
interest rates. The following discussion is intended to identify the nature of
these market risks, describe Prize's strategy for managing these risks and to
quantify the potential effect of market volatility on Prize's financial
condition and results of operations.

     Oil and Gas Prices. Prize's financial condition, results of operations and
capital resources are highly dependent upon the prevailing market prices of, and
demand for, oil and natural gas. These commodity prices are subject to wide
fluctuations and market uncertainties due to a variety of factors that are
beyond the control of Prize. These factors include the level of global demand
for petroleum products, foreign supply of oil and gas, the establishment of and
compliance with production quotas by oil-exporting countries, weather
conditions, the price and availability of alternative fuels and overall economic
conditions, both foreign and domestic. It is impossible to predict future oil
and gas prices with any degree of certainty. Sustained weakness in oil and gas
prices may adversely affect Prize's financial condition and results of
operations, and may also reduce the amount of net oil and gas reserves that
Prize can produce economically. Any reduction in reserves, including reductions
due to price fluctuations, can have an adverse effect on Prize's ability to
obtain capital for its exploitation and development activities. Similarly, any
improvements in oil and gas prices can have a favorable impact on Prize's
financial condition, results of operations and capital resources.

     In order to mitigate the effect of price fluctuations, Prize and prior to
the merger, Vista periodically utilized hedging transactions with respect to a
portion of their oil and gas production. Prize utilizes derivative financial
instruments to provide methods to fix the price for natural gas and oil
independently of the physical sale. While the use of these hedging arrangements
limits the downside risk of price declines, this use may also limit benefits
which may be derived from price increases. Prize uses various financial
instruments, such as swaps and collars, in which monthly settlements are based
on differences between the prices specified in the instruments and the
settlement prices of futures contracts quoted on the NYMEX or other indices.
Generally, when the applicable settlement price is less than the price specified
in the contract, Prize receives a settlement from the counterparty based on the
difference. Similarly, when the applicable settlement price is higher than the
specified price, Prize pays the counterparty based on the difference. The
instruments utilized by Prize differ from futures contracts in that there is not
a contractual obligation which requires or permits the future physical delivery
of the hedged products. In addition, Prize generally utilizes over the counter
instruments which are subject to more credit risk than exchange-traded futures
contracts. However, management does not believe this risk is significant as the
Company only uses highly rated and reputable counterparties who generally do not
require collateral.

     During 1998 and continuing into the first quarter of 1999, the oil and gas
industry operated in a depressed commodity price environment. In mid-1999,
prices for both oil and gas began to increase to high levels based on the price
history of the 1990's. Prize began hedging both oil and gas prices just prior to
the closing of the purchase of the properties from Pioneer in June 1999, and
continues to enter the hedge market from time to time. Prize's hedging policies
are based upon the judgment of management and the need to meet requirements of
Prize's lenders. Prize had natural gas hedges in place which hedged
approximately 13,100 MMcf and 1,800 MMcf of production during 2000 and 1999,
respectively. Prize also had crude oil hedges in place which hedged
approximately 1,500 MBbls and 200 MBbls of production during 2000 and 1999,
respectively.

     In the tables set forth below, A "swap" is a fixed-price hedge and a
"collar" is a hedge that has a ceiling price and a floor price. If the
particular product stays in between the ceiling and the floor prices, then no
payments are made by either party under a collar. The terms "Put Floor Price"
and "Call Ceiling Price" refer to the prices at which Prize has hedged its
production and are expressed in the



                                       22
<PAGE>   23

calendar monthly average of daily NYMEX closing prices for Light Sweet Crude Oil
or monthly NYMEX (Henry Hub) or other indices' closing prices for natural gas.
Volumes refer to barrels of crude oil or Mcf of gas, where one Mcf is equivalent
to one MMBtu. The total fair market value of the commodity hedges described
below were $(55) million and $(5.9) million at December 31, 2000 and 1999,
respectively. At March 19, 2001, the fair market value of the commodity hedges
described below was $(33.6) million.

     Set forth below is the contract amount and material terms of all natural
gas hedging instruments held by Prize at December 31, 2000:

<TABLE>
<CAPTION>
                                                             2001         2002         2003
                                                           ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>
Natural Gas Hedge Derivatives:
      Swap contract:
             Average daily notional Mcf volumes                 4,000          n/a          n/a
             Fixed price per Mcf                           $     2.35          n/a          n/a
      Collar contracts:
             Average daily notional Mcf volumes                41,726       28,000       10,000
             Weighted-average put floor price per Mcf      $     2.92   $     3.05   $     3.00
             Weighted-average call ceiling price per Mcf   $     4.11   $     6.29   $     4.70
      Average yearly NYMEX gas price                       $     6.13   $     4.39   $     3.83
</TABLE>

     Set forth below is the contract amount and material terms of all oil
hedging instruments held by Prize at December 31, 2000:

<TABLE>
<CAPTION>
                                                               2001         2002
                                                            ----------   ----------
<S>                                                         <C>          <C>
Oil Hedge Derivatives:
      Swap contract:
              Average daily notional Bbl volumes                   500          n/a
              Fixed price per Bbl                           $    17.44          n/a
      Collar contracts:
              Average daily notional Mcf volumes                 4,044        1,000
              Weighted-average put floor price per Bbl      $    19.38   $    20.00
              Weighted-average call ceiling price per Bbl   $    25.48   $    24.85
      Average yearly NYMEX oil price                        $    24.94   $    22.88
</TABLE>

     Set forth below is the contract amount and material terms of all natural
gas hedging instruments held by Prize at December 31, 1999:

<TABLE>
<CAPTION>
                                                             2000         2001
                                                          ----------   ----------
<S>                                                       <C>          <C>
Natural Gas Hedge Derivatives:
     Collar contracts:
            Average daily notional Mcf volumes                35,000       14,904
            Weighted-average put floor price per Mcf      $     2.26   $     2.23
            Weighted-average call ceiling price per Mcf   $     2.58   $     2.54
     Average yearly NYMEX gas price                       $     2.44   $     2.49
</TABLE>

     Set forth below is the contract amount and material terms of all oil
hedging instruments held by Prize at December 31, 1999:

<TABLE>
<CAPTION>
                                                             2000        2001
                                                           ---------   ---------
<S>                                                        <C>         <C>
Oil Hedge Derivatives:
      Swap contract:
             Average daily notional Bbl volumes                1,500         623
             Fixed price per Bbl                           $   17.44   $   17.44
      Collar contracts:
             Average daily notional Mcf volumes                2,418         995
             Weighted average put floor price per Bbl      $   17.48   $   17.09
             Weighted average call ceiling price per Bbl   $   20.25   $   19.61
      Average yearly NYMEX oil price                       $   22.20   $   20.57
</TABLE>




                                       23
<PAGE>   24

     Prize may choose at some time in the future to hedge separately the basis
differential for its natural gas production. This separation would be immaterial
to the financial performance of Prize. There were no NGLs hedged in 2000.

 Set forth below are annual hedged volumes. Volumes for 2000 are based upon
actual settlements and volumes for 2001 through 2003 are based upon positions
outstanding at December 31, 2000:

<TABLE>
<CAPTION>
                                  2000         2001         2002         2003
                                ---------    ---------    ---------    ---------
<S>                             <C>          <C>          <C>           <C>
Gas (Bcf)                            13.1         16.7         10.2          3.7
Oil (MBbl)                          1,820        1,657          365           --
Total (MBOE)                        4,003        4,440        2,065          617
</TABLE>

     Interest Rates. Prize's interest rate risk exposure after the merger
results primarily from having short-term variable rates under its credit
facility. All of Prize's outstanding indebtedness is subject to market rates of
interest as determined from time to time by the banks under the credit facility.
Any increases in the variable interest rates related to this facility can have
an adverse impact on Prize's results of operations and cash flow. As of December
31, 2000, Prize had $214 million of outstanding debt under the credit facility.
Under the credit facility, Prize currently pays interest at a rate of LIBOR plus
1.75%, or 8.15% as of December 31, 2000.

     In an attempt to manage its interest rate risk, Prize entered into an
interest rate swap effective July 2, 1999, which is accounted for as a hedge
with any realized gains or losses recorded as interest expense. The swap
consists of $50 million of notional amount of indebtedness at a fixed swap rate
of 6.07 percent based on the three-month LIBOR rate. The Swap terminates on July
2, 2001. As of December 31, 2000, the fair value of the swap was $108,795.




                                       24
<PAGE>   25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
                                                                             PAGE
                                                                             ----
<S>                                                                            <C>
PRIZE ENERGY CORP. AND SUBSIDIARIES :
 Report of Independent Auditors.....................................           26
 Consolidated Balance Sheets as of December 31, 2000 and 1999.......           27
 Consolidated Statements of Operations for the
 periods ended December 31, 2000 and 1999...........................           28
 Consolidated Statements of Stockholders' Equity for the
 periods ended December 31, 2000 and 1999...........................           29
 Consolidated Statements of Cash Flows for the
 periods ended December 31, 2000 and 1999...........................           30
 Notes to the Consolidated Financial Statements.....................           31
PRODUCING PROPERTIES ACQUIRED BY PRIZE ENERGY CORP. FROM
 PIONEER NATURAL RESOURCES USA, INC.:
 Report of Independent Auditors.....................................           43
 Audited Statement of Revenues and Direct Operating
 Expenses for the year ended December 31, 1998......................           44
</TABLE>


                                       25
<PAGE>   26

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors of
Prize Energy Corp.:

     We have audited the accompanying consolidated balance sheets of Prize
Energy Corp. as of December 31, 2000 and 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year
ended December 2000 and for the period from inception (January 15, 1999) to
December 31, 1999. 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 auditing standards generally
accepted in the United States. 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 consolidated financial position of Prize Energy
Corp. at December 31, 2000 and 1999, and the consolidated results of its
operations and its cash flows for the year ended December 31, 2000 and for the
period from inception (January 15, 1999) to December 31, 1999, in conformity
with accounting principles generally accepted in the United States.

                                                ERNST & YOUNG LLP

Fort Worth, Texas
February 16, 2001



                                       26
<PAGE>   27
                               PRIZE ENERGY CORP.
                           CONSOLIDATED BALANCE SHEETS
                          (In thousands, except shares)

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                       ----------------------
                                                                                         2000         1999
                                                                                       ---------    ---------
<S>                                                                                    <C>          <C>
 ASSETS
       Current assets:
            Cash and cash equivalents                                                  $     820    $   3,353
            Accounts receivable - oil & gas                                               29,710       18,488
            Accounts receivable - trade, net of allowance                                  4,942        2,173
            for doubtful accounts of $251 and $100
            Prepaid income taxes                                                           5,153           --
            Other                                                                          3,078          633
                                                                                       ---------    ---------
       Total current assets                                                               43,703       24,647
       Properties and equipment at cost:
            Oil and gas properties using the successful efforts method of accounting     349,971      219,227
            Other                                                                          2,978          985
                                                                                       ---------    ---------
                                                                                         352,949      220,212
            Less accumulated depreciation and depletion                                  (34,186)      (8,715)
                                                                                       ---------    ---------
       Total properties and equipment at cost, net                                       318,763      211,497
       Deposit on acquisition                                                              6,500           --
       Other assets, net                                                                   2,698        2,466
                                                                                       ---------    ---------
 TOTAL ASSETS                                                                          $ 371,664    $ 238,610
                                                                                       =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
       Current liabilities:
           Accounts payable                                                            $  15,650    $  10,799
           Federal and state income tax payable                                               --        4,898
           Accrued interest                                                                2,583        2,203
           Hedge liability payable                                                         1,782          616
           Other accrued liabilities                                                       6,743        4,484
                                                                                       ---------    ---------
       Total current liabilities                                                          26,758       23,000
       Long-term debt                                                                    214,319      127,000
       Deferred income taxes                                                              19,019          158
       Commitments and Contingencies
       Stockholders' equity:
           Convertible voting preferred stock:
            authorized shares - 10,000,000 and 16,651,870;
            issued and outstanding - 0 and 3,958,879                                          --       30,907
           Common stock, $.01 par value:
            authorized shares - 50,000,000 and 33,303,740;
            issued and outstanding - 14,614,587 and 8,291,301                                146           83
           Paid-in capital                                                                96,413       49,260
           Retained earnings                                                              40,285        8,202
           Treasury stock - 1,747,182 and 0 shares                                       (25,276)          --
                                                                                       ---------    ---------
               Total stockholders' equity                                                111,568       88,452
                                                                                       ---------    ---------
 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                            $ 371,664    $ 238,610
                                                                                       =========    =========
</TABLE>

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




                                       27

<PAGE>   28
                               PRIZE ENERGY CORP.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (In thousands, except per share amounts and shares)



<TABLE>
<CAPTION>
                                                    Periods Ended December 31,
                                                   ----------------------------
                                                      2000            1999
                                                   ------------    ------------
<S>                                                <C>             <C>
 OIL AND GAS SALES                                 $    149,489    $     47,978
 COSTS AND EXPENSES
       Lease operations                                  31,996          11,791
       Production taxes                                  14,376           4,816
       Depletion, depreciation, and amortization         25,472           8,714
       General and administrative                         9,162           2,831
                                                   ------------    ------------
               Total costs and expenses                  81,006          28,152
                                                   ------------    ------------
 OPERATING INCOME                                        68,483          19,826
 OTHER:
         Interest expense                                17,604           6,070
         Other income                                      (775)           (268)
                                                   ------------    ------------
               Total other expenses                      16,829           5,802
                                                   ------------    ------------
 INCOME BEFORE INCOME TAXES                              51,654          14,024
 PROVISION FOR INCOME TAXES                             (19,112)         (4,915)
                                                   ------------    ------------
 NET INCOME                                              32,542           9,109
 PREFERRED DIVIDEND                                        (459)           (907)
                                                   ------------    ------------
 INCOME AVAILABLE TO
         COMMON STOCKHOLDERS                       $     32,083    $      8,202
                                                   ============    ============

 NET INCOME PER COMMON SHARE:
         Basic                                     $       2.60    $       1.20
         Diluted                                   $       2.29    $       1.03

 WEIGHTED-AVERAGE
         COMMON SHARES OUTSTANDING:
         Basic                                       12,333,989       6,820,606
         Diluted                                     14,204,462       8,878,777
</TABLE>

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






                                       28
<PAGE>   29
                               PRIZE ENERGY CORP.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                          (In thousands, except shares)


<TABLE>
<CAPTION>
                                      Convertible Voting
                                        Preferred Stock             Common Stock            Note        Additional
                                    ------------------------    -----------------------   Receivable     Paid-in       Retained
                                     Shares         Amount        Shares       Amount      Officer       Capital       Earnings
                                    ----------    ----------    ----------   ----------   ----------    ----------    ----------
<S>                                 <C>           <C>           <C>          <C>          <C>           <C>           <C>
 Issuance of common stock                   --    $       --     8,291,301   $       83   $     (250)   $   49,260    $       --
 Issuance of preferred stock         3,843,252        30,000            --           --           --            --            --
 Preferred dividends                   115,627           907            --           --           --            --          (907)
 Repayment of note receivable               --            --            --           --          250            --            --
 Net income                                 --            --            --           --           --            --         9,109
                                    ----------    ----------    ----------   ----------   ----------    ----------    ----------

 Balance as of December 31, 1999     3,958,879    $   30,907     8,291,301   $       83   $       --    $   49,260    $    8,202

 Issuance of stock in acquisition           --            --     2,339,089           23           --        15,788            --
 Preferred stock dividend               25,318           198            --           --           --            --          (459)
 Preferred conversion               (3,984,197)      (31,105)    3,984,197           40           --        31,065            --
 Purchase of treasury shares                --            --            --           --           --            --            --
 Warrant exercises                          --            --            --           --           --           330            --
 Option exercises                           --            --            --           --           --           (30)           --
 Net income                                 --            --            --           --           --            --        32,542
                                    ----------    ----------    ----------   ----------   ----------    ----------    ----------

 Balance as of December 31, 2000            --    $       --    14,614,587   $      146   $       --    $   96,413    $   40,285
                                    ==========    ==========    ==========   ==========   ==========    ==========    ==========
<CAPTION>

                                           Treasury Stock
                                      ------------------------
                                        Shares       Amount         Total
                                      ----------    ----------    ----------
<S>                                   <C>           <C>           <C>
 Issuance of common stock                     --    $       --    $   49,093
 Issuance of preferred stock                  --            --        30,000
 Preferred dividends                          --            --            --
 Repayment of note receivable                 --            --           250
 Net income                                   --            --         9,109
                                      ----------    ----------    ----------

 Balance as of December 31, 1999              --    $       --    $   88,452

 Issuance of stock in acquisition           (900)          (22)       15,789
 Preferred stock dividend                     --            --          (261)
 Preferred conversion                         --            --            --
 Purchase of treasury shares          (1,810,182)      (26,138)      (26,138)
 Warrant exercises                        45,000           615           945
 Option exercises                         18,900           269           239
 Net income                                   --            --        32,542
                                      ----------    ----------    ----------

 Balance as of December 31, 2000      (1,747,182)   $  (25,276)   $  111,568
                                      ==========    ==========    ==========
</TABLE>


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



                                       29
<PAGE>   30

                               PRIZE ENERGY CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                        Periods Ended December 31,
                                                                        --------------------------
                                                                            2000          1999
                                                                        -----------    -----------
<S>                                                                      <C>           <C>
OPERATING ACTIVITIES
    Net Income                                                           $   32,542    $    9,109
    Adjustments to reconcile net income to net cash
    provided by operating activities:
     Depreciation, depletion and amortization                                25,472         8,714
     Amortization of loan origination fees                                      444           174
     Undistributed earnings of equity investee                                   --           (88)
     Deferred income tax                                                     11,984           158
                                                                         ----------    ----------
                                                                             70,442        18,067
    Changes in operating assets and liabilities:
     Accounts receivable                                                     (8,502)      (19,957)
     Other assets                                                            (7,562)         (594)
     Accounts payable and accrued liabilities                                (8,536)       22,282
                                                                         ----------    ----------
CASH PROVIDED BY OPERATING ACTIVITIES                                        45,842        19,798
INVESTING ACTIVITIES
    Additions to oil and gas properties                                     (46,225)     (215,979)
    Additions to other properties and equipment                              (1,993)         (985)
    Deposit on acquisition                                                   (6,500)           --
    Proceeds from sale of mineral interest                                       --        32,000
                                                                         ----------    ----------
CASH USED BY INVESTING ACTIVITIES                                           (54,718)     (184,964)
FINANCING ACTIVITIES
    Proceeds from issuance of common stock                                    1,092        45,464
    Purchase of treasury stock                                              (26,138)           --
    Repayment of notes receivable from shareholder                               --           250
    Borrowings under credit facilities                                       57,250       171,000
    Repayment of credit facilities                                          (25,600)      (45,608)
    Loan origination fees                                                        --        (2,587)
    Payment of preferred dividend                                              (261)           --
                                                                         ----------    ----------
CASH PROVIDED BY FINANCING ACTIVITIES                                         6,343       168,519
                                                                         ----------    ----------
Increase (Decrease) in Cash and Cash Equivalents                             (2,533)        3,353
Cash and Cash Equivalents, Beginning of Period                                3,353            --
                                                                         ----------    ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                 $      820    $    3,353
                                                                         ==========    ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid during the period for income taxes                         $   17,179    $       34
    Cash paid during the period for interest                             $   16,779    $    3,693

SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
    Dividend in kind                                                     $      198    $      907
    Convertible preferred stock issued as consideration in acquisition   $       --    $   30,000
    Issuance of common stock to officer for note receivable              $       --    $      250
</TABLE>


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




                                       30
<PAGE>   31

                               PRIZE ENERGY CORP.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

BUSINESS AND ORGANIZATION

     Prize Energy Corporation (the Company) was formed on January 15, 1999
(inception) and is a Delaware corporation engaged in the development and
production of proved oil and gas properties. The Company's corporate
headquarters is located in Grapevine, Texas with oil and gas producing
properties primarily located in Texas, Louisiana, and Oklahoma.

     The Company was initially formed through the contribution of cash and a
minority investment in a limited liability company for the purpose of acquiring
oil and gas properties. Pursuant to the terms of a Purchase and Sale Agreement
(Purchase Agreement), on June 29, 1999 the Company completed the acquisition of
interests in certain oil and gas producing properties, primarily located in
Texas, Louisiana, and Oklahoma from affiliates of Pioneer Natural Resources USA,
Inc. (Pioneer) for $215 million in cash and the issuance of $30 million of 6%
convertible preferred stock.

     Subsequent to the purchase from Pioneer and effective July 1, 1999, Prize
sold a group of mineral interests for $32 million, which were acquired with the
oil and gas properties purchased from Pioneer. The properties were located
outside Prize's principal operating areas of Texas, Louisiana, Oklahoma and New
Mexico. Accordingly, the properties were assigned a value of $32 million when
purchased, and no gain or loss was recognized on disposal.

     At inception, certain stockholders contributed a minority investment in a
limited liability company, Sunterra Petroleum LLC (Sunterra). Subsequently, the
Company purchased the remaining interest in Sunterra in exchange for $750,000
cash, a gas plant and the assumption of Sunterra's debt. The total consideration
paid for Sunterra during 1999 was $6,378,826, plus the assumed debt of
$1,607,791.

 As further discussed in Note 2, on February 8, 2000, the Company merged with
Vista Energy Resources, Inc. (Vista), an independent oil and gas development and
production company.

PRINCIPLES OF CONSOLIDATION AND PRESENTATION

     The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The financial statements for the period ended
December 31, 1999 reflect the operations of the Company from January 15, 1999
through December 31, 1999. However, the Company had no significant operations
until July 1, 1999.

CASH EQUIVALENTS

     Cash and cash equivalents include cash in banks and money market accounts
as well as highly liquid investments with initial maturities of less than three
months.

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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

OIL AND GAS PROPERTIES

     The Company follows the successful efforts method of accounting for its oil
and gas properties whereby acquisition costs of proved properties, costs of
productive wells, developmental dry holes and productive leases are capitalized
and amortized on a unit-of-production basis over remaining proved reserves.
Depreciation, depletion and amortization of capitalized costs of oil and gas
properties are provided on a common area basis. Gas is converted to equivalent
barrels at the rate of six Mcf of gas to one barrel of oil.

     Leasehold costs are capitalized when incurred. Though no significant
unproved acreage has been acquired to date, unproved oil and gas properties with
significant acquisition costs will be periodically assessed and any impairment
in value charged to expense. The costs of unproved properties, which are not
individually significant, will be assessed periodically in the aggregate based
on historical experience, and any impairment in value will be charged to
expense. The costs of unproved properties that are determined to be productive
will be transferred to proved oil and gas properties.




                                       31
<PAGE>   32

     Exploration costs, such as geological and geophysical expenses and annual
delay rentals, will be charged to expense as incurred. Exploratory drilling
costs, if any, including the costs of stratigraphic test wells, will be
initially capitalized but charged to expense if and when the well is determined
to be unsuccessful.

     Other property and equipment is recorded at cost and depreciated using the
straight-line method with estimated useful lives ranging from three to five
years. Expenditures for repairs and maintenance are charged to expense as
incurred; improvements which materially prolong the lives of the assets are
capitalized.

IMPAIRMENT OF OIL AND GAS PROPERTIES.

     The Company has evaluated its oil and gas properties under the provisions
of Statement of Financial Accounting Standards 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
(SFAS 121). SFAS 121 requires that proved oil and gas properties be assessed for
impairment whenever events or changes in circumstances indicate that their
carrying value may not be recoverable. SFAS 121 requires that this assessment be
performed by comparing the undiscounted future net cash flows and the net
carrying value of oil and gas properties. For the periods ended December 31,
2000 and December 31, 1999, there was no impairment of the Company's oil and gas
properties.

ENVIRONMENTAL

     The Company's environmental expenditures are expensed or capitalized
depending on their future economic benefit. Expenditures that relate to an
existing condition caused by past operations and that have no future economic
benefits are expensed. Liabilities for expenditures of a noncapital nature are
recorded when environmental assessment and/or remediation is probable and the
costs can be reasonably estimated. Such liabilities are generally undiscounted
unless the timing of cash payments for the liability are fixed or reliably
determinable. The Company is not aware of any significant instances where it
will incur a material cost due to environmental remediation or to correct an
instance of non-compliance with environmental laws and regulations.

REVENUE RECOGNITION

     The Company uses the sales method of accounting for oil and gas revenues.
Under the sales method, revenues are recognized based on actual volumes of oil
and natural gas sold to purchasers.

EARNINGS PER SHARE

     The following tables provide a reconciliation between basic and diluted
earnings per common share for the periods ended December 31, 2000 and 1999,
respectively (in thousands except per share amounts and shares).

<TABLE>
<CAPTION>
                                                        DECEMBER 31, 2000
                                              ---------------------------------------
                                                         WEIGHTED-AVERAGE   PER SHARE
                                                INCOME        SHARES         AMOUNT
                                              -----------   -----------   -----------
<S>                                           <C>             <C>         <C>
Basic earnings per share
 Income available to common stockholders...   $    32,083    12,333,989   $      2.60
Effect of Dilutive Securities:
 Employee Stock Options ...................            --       878,819
 Warrants .................................            --         1,048
 Convertible preferred shares .............           459       990,606
                                              -----------   -----------
 Diluted earnings per share ...............   $    32,542    14,204,462   $      2.29
                                              ===========   ===========
</TABLE>

<TABLE>
<CAPTION>
                                                        DECEMBER 31, 1999
                                              ---------------------------------------
                                                         WEIGHTED-AVERAGE   PER SHARE
                                                INCOME        SHARES         AMOUNT
                                              -----------   -----------   -----------
<S>                                           <C>             <C>         <C>
Basic earnings per share
 Income available to common stockholders...   $     8,202     6,820,606   $      1.20
Effect of Dilutive Securities:
 Convertible preferred shares .............           907     2,058,171
                                              -----------   -----------
 Diluted earnings per share ...............   $     9,109     8,878,777   $      1.03
                                              ===========   ===========
</TABLE>


                                       32
<PAGE>   33

     Employee stock options for 2,141,430 shares have been excluded from the
diluted earnings per share calculation as antidilutive for the period ended
December 31, 1999. Warrants to purchase 1,561,581 shares of common stock assumed
in the Vista merger have been excluded from the diluted earnings per share
calculation as antidilutive for the period ended December 31, 2000.

BENEFIT PLAN

     The Company provides a 401(k) benefit plan (the Plan) covering
substantially all employees. Under the Plan, employees having attained the age
of 21 are eligible to participate and can contribute up to 15% of their
compensation each year subject to certain Internal Revenue Code limitations. The
Plan provides for matching contributions by the Company, at the discretion of
the Board of Directors, to be determined on an annual basis. Additionally, the
Company can provide a profit sharing contribution, at the discretion of the
Board of Directors, to be determined on an annual basis. Employees vest in the
employer contribution over a two year period. The Company made total matching
contributions of $608,353 and $134,627 in 2000 and 1999, respectively.

STOCK-BASED COMPENSATION

     The Company accounts for employee stock-based compensation using the
intrinsic value method prescribed by Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25). Accordingly, the Company has
only adopted the disclosure provisions of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123). See Note
5 for disclosure of the pro forma effect of employee stock options.

HEDGING

     The Company has entered into derivative contracts to hedge a portion of the
price risk of its future production and its interest rate risk. Changes in the
value of the financial instruments are recognized in the statement of operations
when the underlying transactions are recognized.

     The Company's criteria for a derivative instrument to qualify for hedge
accounting treatment are as follows:

     -    The timing or duration and characteristics of the underlying exposure
          must have been identified with reasonable certainty;

     -    Changes in the value or the cash flows of the derivative must
          correlate to a high degree with changes in the present value or the
          cash flows of the exposure;

     -    The derivative has been designated as a hedge or is a synthetic
          alteration of a specific asset, liability or anticipated transaction;
          and

     -    The derivative instrument either: (a) reduces exposure of net income
          or cash flow to fluctuations caused by movements in commodity prices
          or interest rates; or (b) alters the profile of the Company's interest
          rate exposure to achieve a resulting overall exposure in line with
          policy guidelines.

     Gains or losses realized from derivative instruments that qualified as
hedges are deferred as assets or liabilities until the underlying hedged asset,
liability or transaction monetized, matured or was otherwise recognized under
generally accepted accounting principles. When recognized in net income (loss),
hedge gains and losses are classified as components of the commodity prices,
interest or foreign exchange rates that the derivative instrument hedged. The
fair value of Vista's hedges was recognized as a liability at the purchase date.
See Note 8 for a description of the specific types of derivative transactions in
which the Company participates.

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). SFAS 133 requires the accounting recognition
of all derivative instruments as either assets or liabilities at fair value.
Derivative instruments that are not hedges must be adjusted to the fair value
through net income. Under the provisions of SFAS 133, changes in the fair value
of derivative instruments that are fair value hedges are offset against changes
in the fair value of the hedged assets, liabilities, or firm commitments,
through net income. Changes in the fair value of derivative instruments that are
cash flow hedges are recognized in other comprehensive income until such time as
the hedged items are recognized in net income. Ineffective portions of a
derivative instrument's change in fair value are immediately recognized in net
income. The Company adopted the provisions of SFAS 133, as amended, effective
January 1, 2001. The adoption of SFAS 133 will result in a January 1, 2001
transition adjustment to increase other current liabilities and long-term
liabilities by $48 million and $6.9 million, respectively, and reduce
stockholders' equity by $54.9 million.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the consolidated balance sheets for cash,
accounts receivable and accounts payable approximate their fair value.
Management believes the carrying amount of the Company's long-term debt also
approximates fair value because the interest rates applicable to the debt
presently approximate current market rates. See Notes 3 and 8 for the fair value
of the Company's derivative positions.


                                       33
<PAGE>   34


RECLASSIFICATIONS

     Certain reclassifications have been made to the prior year financial
statements to conform to current year presentation.

2. VISTA MERGER

     On February 8, 2000, the Company merged with Vista Energy Resources, Inc.
(Vista), an independent oil and gas development and production company. Though
the Company's shareholders exchanged their shares for new shares of Vista, the
stockholders of the Company have an 84% controlling interest in the merged
company. Accordingly, the transaction was accounted for as a purchase of Vista
by the Company in accordance with the provisions of APB 16. The merged company's
stock is listed on the American Stock Exchange under the ticker symbol "PRZ."

     Under the terms of the merger, Prize stockholders effectively exchanged 16%
of their interest in Prize for an 84% interest in Vista. Prior to the merger,
Prize was a private company with no readily determinable market value. Thus, in
order to determine the purchase price paid by Prize, Prize management estimated
the fair value of Prize's oil and gas assets, its debt and other assets and
liabilities as of the purchase agreement date. Prize initially estimated the
purchase price at $86.6 million, including liabilities assumed of $61.4 million.
However, as the Company was preparing its annual reserve survey in the fourth
quarter of 2000, it learned additional information concerning the future
operating expenses and development costs on the oil and gas properties purchased
from Pioneer in 1999 and, accordingly, it revised its estimate of the fair value
of its properties as of the purchase date and therefore its estimate of the
purchase price of Vista. No changes were made to the assumptions for oil and gas
prices or the discount rate in revising the estimate of the fair value of the
purchased properties. The final purchase price of Vista was $69.9 million,
including liabilities assumed of $53.8 million. The final purchase price was
assigned to the assets of Vista based on their fair value, resulting in current
and other assets of $5.6 million, oil and gas properties of $84.8 million,
current liabilities of $13.7 million, debt of $53.7 million, and a net deferred
tax liability of $6.9 million. Additionally, $1.3 million of accrued interest
and bank fees were rolled into the debt principal.

     As a result of the merger, which included a one-for-seven reverse stock
split, all share and option amounts and earnings per share as of and for the
period ended December 31, 2000 and 1999 have been restated to reflect the
equivalent number of new shares resulting from the merger based on the
conversion ratio of the merger.

PRO FORMA INFORMATION

     The following condensed pro forma financial information reflects the pro
forma statement of operations assuming that the Pioneer purchase, the Minerals
sale, the Sunterra purchase, and the Vista Merger all occurred on January 1,
1999. The Company emphasizes that this information is not necessarily indicative
of future performance (in thousands).

<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                                  ------------------------
                                                    2000          1999
                                                  ----------    ----------
<S>                                               <C>           <C>
Oil and gas sales .............................   $  151,130    $  101,258

Lease operating expenses & production taxes ...       47,307        34,723
Depreciation, depletion and amortization ......       25,819        23,664
General and administrative ....................        9,458         8,846
Interest expense, net .........................       17,965        15,186
Other income ..................................         (786)         (388)
                                                  ----------    ----------
     Income before income taxes ...............       51,367        19,227
Provision for income taxes ....................      (19,006)       (7,108)
                                                  ----------    ----------
     Net Income ...............................       32,361        12,119
Preferred dividends ...........................         (459)       (1,841)
                                                  ----------    ----------
     Income available to common stockholders ..   $   31,902    $   10,278
                                                  ==========    ==========

Earnings per share:
 Basic ........................................   $     2.59    $      .97
 Diluted ......................................   $     2.28    $      .82
</TABLE>

3. CREDIT FACILITIES

     In connection with the acquisition of the Pioneer properties, the Company
entered into a $250 million credit facility (Senior Facility) and a $13 million
senior subordinated credit facility (Subordinated Facility) with a bank. The
Subordinated facility provided for a single advance of $13 million and was
repaid in full in conjunction with the sale of the mineral interest in July,
1999.


                                       34
<PAGE>   35
     On February 8, 2000, in connection with the merger agreement with Vista,
the Company amended its Senior Facility to provide for total borrowings of $400
million. The amended Senior Facility is due June 29, 2006. The revised Senior
Facility provides for letters of credit in addition to a revolving credit
facility. In October 2000, the Company amended the Senior Facility to provide
for an increase in limits for letters of credit to an aggregate of $15 million
with an additional supplemental letter of credit (as defined by the credit
agreement) of $15 million. At December 31, 2000, $13,515,000 was outstanding
under the letter of credit provisions of the facility. The revolver converts to
a term loan on June 29, 2002 with quarterly principal payments after that date,
through June 29, 2006. Interest is due quarterly at either the bank's prime rate
or eurodollar rate plus a margin as defined in the agreement. At December 31,
2000, $214 million was outstanding. As of October 1, 2000, the Company's
borrowing base was raised from $250 million to $325 million. The bank credit
facility has various restrictions including a limit on incurred debt and asset
dispositions. The Company is required to maintain certain financial and
non-financial covenants including minimum current and interest coverage ratios.
At December 31, 2000, the Company was in compliance with all financial and
non-financial covenants. Borrowings under the credit facility are secured by
substantially all of the Company's assets.

     The Company is required to pay a commitment fee on the revolving credit
facility ranging from .25% to .5% based on a ratio of outstanding credit to the
borrowing base and a letter of credit fee ranging from 1.25% to 1.875% based on
a ratio of the average daily amount outstanding during the quarter to the
borrowing base. Both fees terminate upon conversion of the revolver to a term
loan.

     In July 1999, the Company entered into an interest rate protection
agreement with its bank (the "Swap Agreement") to modify the interest
characteristics of an aggregate principal amount of $50 million of the revolving
line of credit from a variable rate to a fixed rate. The Swap Agreement requires
the company to pay a fixed rate interest obligation of 6.07% and receive an
interest obligation based on variable LIBOR rates. The Swap Agreement terminates
on July 2, 2001. At December 31, 2000 the Swap Agreement had a favorable fair
value of $108,795.

     The Company assumed $53.7 million of debt and $1.3 million of accrued
interest and bank fees when it purchased Vista. This debt was added to the
Senior Facility in 2000.

     Maturities of long-term debt are as follows (in thousands):

<TABLE>
<S>                     <C>
2001...........                        --
2002...........                    40,185
2003...........                    53,580
2004...........                    53,580
2005...........                    53,580
Thereafter.....                    13,394
                        -----------------
                        $         214,319
                        =================
</TABLE>

4. STOCKHOLDERS' EQUITY

     In conjunction with the Purchase Agreement, the Company amended its
Certificate of Incorporation to create a convertible preferred class of capital
stock. Effective with the amendment, the Company has the authority to issue
60,000,000 shares of capital stock, consisting of 10,000,000 shares of
convertible voting preferred stock and 50,000,000 shares of common stock.

     Preferred stock may be issued from time to time in one or more series, and
the Board of Directors, without further approval of the stockholders, is
authorized to fix the dividend rates and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, sinking fund, and
any other rights, preferences, privileges and restrictions applicable to each
series of preferred stock.

     Preferred and common stockholders vote as a single class except for those
matters for which a separate class vote of the preferred stock is specifically
required under Delaware law.

     Pursuant to the Purchase Agreement described in Note 1, the Company issued
3,843,252 shares of convertible voting preferred stock (Series A preferred). The
Series A preferred earned cumulative dividends at 6%, payable quarterly. Unpaid
dividends accrued interest at 6%. Dividends were paid in kind in the amount of
140,945 shares and in cash of $260,858 through March 28, 2000.

     On March 28, 2000, the Company entered into an agreement with the Series A
preferred stockholder to acquire 1,346,482 shares of Prize common stock for
approximately $18.4 million. Prior to the acquisition, the Series A preferred
stockholder agreed to convert all Series A preferred stock to common stock,
resign the two board seats held by the Series A preferred stockholder, and
cancel the exploration and participation agreement associated with the Series A
preferred stock. Subsequently, the Series A preferred stockholder owned
approximately 2.6 million shares of common stock. The transaction was effective
March 31, 2000 and was funded through the Company's Senior Credit Facility. No
other preferred shares were issued or outstanding at December 31, 2000.



                                       35
<PAGE>   36
     In October 2000, the Company initiated a stock repurchase program for the
purchase of up to $15 million of common stock. As of December 31, 2000, the
Company had acquired 463,700 common shares for $7.7 million.

     At December 31, 2000, there were 2,252,670 warrants outstanding that are
publicly traded on the American Stock Exchange under the symbol "PRZ.WS." These
warrants are currently exercisable for an aggregate of 321,810 shares of common
stock (seven warrants per share) at an aggregate exercise price of $28.00 per
share. These warrants will expire on November 1, 2002.

     In addition, at December 31, 2000, there were 9,558,403 warrants
outstanding that are currently exercisable to purchase an aggregate of 1,365,486
shares of common stock (seven warrants per share) at an aggregate exercise price
of $28.00 per share that are not publicly traded. These warrants will expire on
November 1, 2002. At December 31, 2000, there were also outstanding 165,000
warrants that are currently exercisable to purchase an aggregate of 36,428
shares of common stock with exercise prices ranging from $20.13 to $21.14 per
share and which have expiration dates ranging from February 24, 2001, to June
29, 2002.

5. STOCK OPTIONS

     In 1999, Prize instituted a stock option plan for key employees. A total of
2,141,300 shares of the Company's common stock were reserved for issuance under
this plan. Options to purchase a total of 2,141,300 shares of the Company's
common stock were granted under the plan by the board of directors in 1999,
2,122,363 of which are outstanding and exercisable as of December 31, 2000.
Prize terminated the plan with respect to any future issuances of stock options.
The options are exercisable at an exercise price of $7.84 per share. The options
were to vest ratably over a period of three years, however, the closing of the
Vista merger accelerated the vesting of all of the outstanding options. The
Company did not recognize any compensation expense in connection with the
issuance of the options.

     Effective with the Vista merger, Prize adopted Vista's existing stock
option plan. A total of 500,000 shares of the Company's common stock are
reserved for issuance under this stock option plan. As of December 31, 2000,
nonqualified stock options for a total of 220,000 shares of common stock had
been granted under this stock option plan. The exercise price of these options
equaled the fair market value of the Company's common stock on the date of
grant, between $12.38 and $16.94 per share, and the options vest ratably over a
period of three years and expire five years after the date of grant.

     Total outstanding options as of December 31, 2000 and December 31, 1999,
respectively, were 2,342,363 and 2,141,263. Accordingly, 2,622,363 shares of
common stock have been reserved for issuance upon exercise.

     The following table summarizes information about the Company's stock
options outstanding at December 31, 2000:

<TABLE>
<CAPTION>
                                   Options Outstanding
                                  --------------------
                                     Options            Options             Remaining
                                  Outstanding at     Exercisable at        Contractual
 Exercise Price                     Year End           Year End            Life (Years)
-------------------------------------------------------------------------------------------
<S>                               <C>                <C>                   <C>
 $  7.84                           2,122,363           2,122,363               3.50
 $ 12.38                              70,000                  --               4.17
 $ 16.94                             150,000                  --               4.92
                                  ----------           ---------
 Total                             2,342,363           2,122,363
                                  ----------           ---------
</TABLE>

     The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                                            2000         1999
                                                          --------     --------
<S>                                                       <C>          <C>
Expected option life - years                                   5.0          5.0
Risk-free interest rate                                        5.5%        5.94%
Dividend yield                                                   0%           0%
Volatility                                                    55.1%         n/a
Weighted-average fair value of options                    $   8.26     $   0.18
</TABLE>

 SFAS No. 123 "Accounting for Stock-based Compensation" defines a fair value
method of accounting for an employee stock option or similar equity instrument.
SFAS No. 123 allows an entity to continue to measure compensation costs for
these plans using Accounting Principles Board (APB) Opinion No. 25 and related
interpretations. The Company has elected to continue using APB No. 25 for
accounting for employee stock compensation plans. Accordingly, no compensation
expense is recognized for stock options granted with an exercise price equal to
the market value of the Company stock on the date of grant. If compensation
expense for the



                                       36
<PAGE>   37

Company's stock option plans had been determined using the fair-value method in
SFAS No. 123, the Company's net income and earnings per share would have been as
shown in the pro forma amounts below (in thousands except per share amounts):

<TABLE>
<CAPTION>
                                                  2000            1999
                                                 --------        -------
<S>                            <C>               <C>             <C>
Net income                     As reported       $ 32,542        $ 9,109
                               Pro forma         $ 32,433        $ 8,865

Basic earnings per share       As reported       $   2.60        $  1.20
                               Pro forma         $   2.59        $  1.17

Diluted earnings per share     As reported       $   2.29        $  1.03
                               Pro forma         $   2.28        $  1.00
</TABLE>

6. INCOME TAXES

     Significant components of the provision for income taxes for the period
ended December 31, 2000 and 1999, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                               2000       1999
                                                              -------    -------
<S>                                                           <C>        <C>
                                  Current ................    $ 7,128    $ 4,757
                                  Deferred ...............     11,984        158
                                                              -------    -------
                                                              $19,112    $ 4,915
                                                              =======    =======
</TABLE>

     The difference between the provision for income taxes and income taxes
computed using the statutory federal income tax rate are as follows ( in
thousands):

<TABLE>
<CAPTION>
                                                                                    2000      1999
                                                                                   -------   -------
<S>                                                                                <C>       <C>
                         Federal income tax provision at statutory rate (34%) ..   $17,562   $ 4,768
                         State taxes, net of federal benefit ...................     1,447       143
                         Nondeductible expenses and other ......................       103         4
                                                                                   -------   -------
                         Provision for income taxes ............................   $19,112   $ 4,915
                                                                                   =======   =======
</TABLE>

     At December 31, the components of the net deferred tax liability are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                           2000        1999
                                                                         --------    --------
<S>                                                                      <C>         <C>
                                  Deferred tax assets:
                                   Net operating loss carryforwards ..   $ (4,302)   $     --
                                   Other .............................       (147)        (35)
                                  Deferred tax liabilities:
                                   Properties and equipment ..........     23,468         193
                                                                         --------    --------
                                                                         $ 19,019    $    158
                                                                         ========    ========
</TABLE>

     On February 8, 2000, in connection with the merger with Vista, the Company
acquired $15.5 million in net operating loss carryforwards. Due to IRS
regulations, the net operating loss carryforwards are subject to a yearly
limitation of $3.7 million. As of December 31, 2000, $3.6 million of the net
operating loss carryforwards were utilized. The remaining net operating loss
carryforwards expire between 2012 and 2020.

7. COMMITMENTS AND CONTINGENCIES

     The Company has obligations under noncancelable operating leases for
certain office space expiring in various years through 2005. Rent expense
incurred was approximately $526,000 and $101,000 in 2000 and 1999, respectively.
Minimum annual rental commitments at December 31, 2000 are (in thousands):

<TABLE>
<S>                                                                          <C>
                                    2001.............................        $   454
                                    2002.............................            451
                                    2003.............................            374
                                    2004.............................            374
                                    2005.............................            393
                                                                             -------
                                                                             $ 2,046
                                                                             =======
</TABLE>


                                       37
<PAGE>   38

     The Company is involved in various litigation and other contingencies
arising in the normal course of business primarily related to matters involving
the properties purchased from Pioneer. Based on currently available information,
management believes that any possible liability from these actions will not be
material to the Company's financial position or results of operations.


8. DERIVATIVE FINANCIAL INSTRUMENTS

     The Company has entered into commodity price hedge agreements to protect
against price declines which may be associated with the volatility in oil and
gas spot prices. The commodity price hedges were achieved through the purchase
of over the counter costless collars and swaps by the Company. The Company's
positions are with highly rated and prominent counterparties. Thus, management
believes the credit risk associated with these positions is minimal, and no
collateral is required by the Company or the counterparties. Set forth below is
the contract amount and material terms of all gas hedging instruments held by
the Company at December 31, 2000 (daily volumes are expressed in thousand cubic
feet (Mcf) and all prices are expressed in daily NYMEX closing prices for
natural gas at actual index prices.) The fair market value of the options were
determined using the Black-Scholes option-pricing model with the following
assumptions: risk free interest rate of 5.38%, volatility of 55.1%, and floor
and ceiling price and terms determined by contract. The fair value of the swaps
was estimated based on discounted cash flows and the forward price curve for
oil and natural gas.

<TABLE>
<CAPTION>
                                                    PRICE
                              DAILY       -------------------------                   FAIR
   TRADE      TRANSACTION     VOLUME         PUT           CALL                       MARKET
   DATE          TYPE          (Bbl)        (FLOOR)      (CEILING)       TERM      VALUE (000'S)
-----------   -----------   -----------   -----------   -----------   -----------  -------------
<S>           <C>           <C>           <C>           <C>           <C>          <C>
     2/8/99          Swap         4,000   $     2.350   $     2.350   01/01-12/01   $    (5,538)
    6/14/99        Collar        10,000   $     2.300   $     2.570   07/99-06/01        (7,802)
    6/22/99        Collar         5,000   $     2.100   $     2.420   08/99-07/01        (4,175)
    6/22/99        Collar         5,000   $     2.150   $     2.430   08/99-07/01        (4,280)
    6/30/99        Collar         5,000   $     2.150   $     2.560   09/99-08/01        (4,407)
     7/1/99        Collar         5,000   $     2.150   $     2.640   09/99-08/01        (4,711)
    3/22/00        Collar        15,000   $     2.400   $     3.330   08/01-12/01        (5,391)
    6/21/00        Collar         5,000   $     3.000   $     4.750   01/01-12/01        (3,383)
    9/28/00        Collar        15,000   $     3.000   $     6.775   01/02-12/02        (1,760)
   10/26/00        Collar        10,000   $     3.000   $     5.750   01/02-12/02        (1,966)
   10/26/00        Collar        10,000   $     3.000   $     4.700   01/03-12/03        (2,293)
   11/21/00        Collar        10,000   $     4.000   $     6.350   01/01-12/01        (2,948)
    12/1/00        Collar         2,000   $     4.780   $     6.650   04/01-12/01           (23)
    12/1/00        Collar         2,000   $     4.360   $     6.110   04/01-12/01           (87)
    12/1/00        Collar         1,500   $     3.750   $     6.150   01/02-12/02           (50)
    12/1/00        Collar         1,500   $     3.360   $     5.260   01/02-12/02          (157)
                                                                                    -----------
                                                                                    $   (48,971)
                                                                                    ===========
</TABLE>

     Set forth below is the contract amount and material terms of all oil
hedging instruments held by the Company at December 31, 2000 (daily volumes are
expressed in barrels (Bbls) and all prices are expressed in the daily NYMEX
closing prices for crude oil).


<TABLE>
<CAPTION>
                                                    PRICE
                               DAILY      -------------------------                    FAIR
   TRADE      TRANSACTION     VOLUME          PUT          CALL                       MARKET
   DATE          TYPE          (Bbl)        (FLOOR)      (CEILING)       TERM      VALUE (000'S)
-----------   -----------   -----------   -----------   -----------   -----------  -------------
<S>           <C>           <C>           <C>           <C>           <C>          <C>
    6/14/99          Swap         1,500   $    17.44    $    17.44    07/99-06/01   $    (2,296)
    6/18/99        Collar         1,000   $    17.00    $    19.00    07/99-06/01        (1,258)
     7/1/99        Collar           500   $    17.15    $    20.05    09/99-08/01          (710)
    3/22/00        Collar         1,500   $    19.00    $    24.35    08/01-12/01          (573)
    6/20/00        Collar         1,500   $    20.00    $    30.24    01/01-12/01          (174)
    12/1/00        Collar         1,000   $    22.00    $    26.00    04/01-12/01          (312)
    12/1/00        Collar         1,000   $    20.00    $    24.85    01/02-12/02          (725)
                                                                                    -----------
                                                                                    $    (6,048)
                                                                                    ===========
</TABLE>


                                       38
<PAGE>   39

9. RELATED PARTY TRANSACTIONS

     Beginning July 1, 1999, the Company is committed to pay an advisory fee of
$150,000 per year to a stockholder. The Company paid $150,000 and $75,000 in
conjunction with this agreement in 2000 and 1999, respectively.

10. SIGNIFICANT CUSTOMERS

     One customer accounted for approximately 11% of net sales for the period
ended December 31, 2000. In 1999, one customer accounted for approximately 19%
of net sales. Virtually all of the Company's receivables are due from companies
involved in the oil and gas business. To date credit losses have been
insignificant.

11. SUBSEQUENT EVENT (UNAUDITED)

 On February 28, 2001, the Company closed on the purchase of $65 million of
interests in oil and gas properties from Apache Corporation. The effective date
of the purchase was January 1, 2001, and Prize assumed operations of the oil and
gas properties on March 1, 2001. The Company financed the acquisition under its
existing bank credit facility. On December 29, 2000, the Company paid a $6.5
million deposit in conjunction with the acquisition.

 The producing properties are primarily located in the Company's core operating
areas of the Permian Basin of West Texas, Onshore Gulf Coast region of South
Texas and Louisiana, and the Mid-Continent region of Western Oklahoma and the
Texas Panhandle. As of December 31, 2000, the proved producing reserves
attributable to the oil and gas properties acquired were approximately 9.0
million barrels of oil and 22.8 billion cubic feet of natural gas or 12.8
millions barrels of oil equivalent.

12. OIL AND NATURAL GAS PRODUCING ACTIVITIES (UNAUDITED)

     Costs capitalized for oil and natural gas producing activities are as
follows (in thousands):

<TABLE>
<CAPTION>
Oil and Gas Properties                                                              2000         1999
                                                                                  ---------    ---------
<S>                                                                               <C>          <C>
 Proved .......................................................................   $ 349,971    $ 219,227
 Less accumulated depletion ...................................................     (33,469)      (8,644)
                                                                                  ---------    ---------
Net capitalized costs for oil and gas properties ..............................   $ 316,502    $ 210,583
                                                                                  =========    =========
</TABLE>

     Costs Incurred for Oil and Gas Producing Activities are as follows (in
thousands):

<TABLE>
<S>                                                                               <C>          <C>
 Proved property acquisition costs ............................................   $  89,510    $ 249,572
 Development costs ............................................................      41,234        1,655
                                                                                  ---------    ---------
Total costs incurred ..........................................................   $ 130,744    $ 251,227
                                                                                  =========    =========
</TABLE>



                                       39
<PAGE>   40

13. UNAUDITED SUPPLEMENTARY INFORMATION

     RESERVE QUANTITY INFORMATION

<TABLE>
<CAPTION>
                                                              CRUDE OIL       NGL      NATURAL GAS
                                                               (MBbls)      (MBbls)      (MMcf)        MBOE
                                                              ---------    ---------    ---------    ---------
<S>                                                           <C>          <C>          <C>           <C>
               Total Proved Reserves:
                Balance, January 15, 1999 .................          --           --           --           --
                 Purchases of minerals-in-place ...........      27,085       10,101      275,199       83,052
                 Production ...............................        (990)        (382)     (10,236)      (3,078)
                 Sales of minerals-in-place ...............        (489)          (9)     (22,986)      (4,329)
                                                              ---------    ---------    ---------    ---------
                Balance, December 31, 1999 ................      25,606        9,710      241,977       75,645

                 Revisions of previous estimates ..........       3,211       (1,474)      41,420        8,641
                 Purchase of minerals-in-place ............      15,329          216       38,705       21,996
                 Production ...............................      (2,858)        (702)     (23,672)      (7,505)
                                                              ---------    ---------    ---------    ---------
                Balance, December 31, 2000 ................      41,288        7,750      298,430       98,777
                                                              =========    =========    =========    =========

               Proved Developed Reserves, December 31, 1999
                 1999 .....................................      21,042        7,538      188,488       59,994
                 2000 .....................................      30,400        5,983      223,977       73,713
</TABLE>

     Estimated quantities of proved net reserves include only those quantities
that can be expected to be commercially recoverable at prices and costs in
effect at the effective date of the acquisition, under existing regulatory
practices and with conventional equipment and operating methods. Proved
developed reserves represent only those reserves expected to be recovered
through existing wells with existing equipment and operating methods. Proved
undeveloped reserves include those reserves expected to be recovered from new
wells on undrilled acreage or from existing wells on which a relatively major
expenditure is required for recompletion. All of Prize's proved reserves are
located in the United States.

     Oil and gas reserve quantity estimates are subject to numerous
uncertainties inherent in the estimation of quantities of proved reserves and in
the projection of future rates of production and the timing of development
expenditures. The accuracy of such estimates is a function of the quality of the
available data and of engineering and geological interpretation and judgment.
Results of subsequent drilling, testing and production may cause either upward
or downward revisions of previous estimates. Further, the volumes considered to
be commercially recoverable fluctuate with changes in prices and operating
costs. The Company emphasizes that reserve estimates are inherently imprecise
and are expected to change as additional information becomes available in the
future.

     The following is a summary of the standardized measure of discounted future
net cash flows related to the Company's proved oil and gas reserves. For these
calculations, estimated future cash flows from estimated future production of
proved reserves were computed using oil and gas prices as of December 31, 2000
and 1999. Future development and production costs attributable to the proved
reserves were estimated assuming that existing conditions would continue over
the economic life of the properties, and costs were not escalated for the
future. The information presented below should not be viewed as an estimate of
the fair value of the properties, nor should it be considered indicative of any
future trends.



                                       40
<PAGE>   41
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (IN THOUSANDS):

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,
                                                               --------------------------
                                                                  2000           1999
<S>                                                            <C>            <C>
Standardized Measure of Discounted Future Net Cash Flows:

 Future cash inflows .......................................   $ 4,002,437    $ 1,276,946
 Future production costs ...................................      (902,008)      (442,478)
 Future development costs ..................................      (124,384)       (52,732)
 Future income tax expense .................................      (952,242)      (191,253)
                                                               -----------    -----------
                                                                 2,023,803        590,483
 10% annual discount factor ................................      (902,458)      (267,059)
                                                               -----------    -----------
 Standardized measure of discounted future net cash flows...   $ 1,121,345    $   323,424
                                                               ===========    ===========
</TABLE>

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                               --------------------------
                                                                   2000           1999
<S>                                                            <C>            <C>
Changes in Standardized Measure:

 Oil and gas sales, net of production costs .............      $  (103,117)   $   (31,371)
 Net changes in prices and production costs .............          787,089             --
 Sales of minerals-in-place .............................               --        (32,000)
 Purchases of minerals-in-place .........................          322,552        492,951
 Development costs incurred .............................           41,234             --
 Revisions of estimated future development costs ........         (103,698)            --
 Revisions of previous quantity estimates and reserves
   added by developmental drilling ......................          151,665             --
 Accretion of discount ..................................           42,753             --
 Changes in production rates, timing and other ..........           89,752             --
                                                               -----------    -----------
 Changes in present value of future net revenues ........        1,228,230        429,580
 Net change in present value of future income taxes .....         (430,309)      (106,156)
                                                               -----------    -----------
                                                                   797,921        323,424
 Balance, beginning of year .............................          323,424             --
                                                               -----------    -----------
 Balance, end of year ...................................      $ 1,121,345    $   323,424
                                                               ===========    ===========
</TABLE>

     The prices of oil and gas at December 31, 2000 used in the calculation of
the standardized measure were $26.80 per barrel for oil and $9.78 per MMBTU for
gas, respectively. The prices of oil and gas at December 31, 1999 used in the
calculation of the standardized measure were $25.60 per barrel for oil and $2.30
per MMBTU for gas, respectively.



                                       41
<PAGE>   42
14. QUARTERLY FINANCIAL DATA (UNAUDITED)

 The following are summarized quarterly financial data for the years ended
December 31, 2000 and 1999 (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                               Quarter
                                                 -------------------------------------
                                                  1st        2nd       3rd       4th
                                                 -------   -------   -------   -------
<S>                                              <C>       <C>       <C>       <C>
2000
----
 Oil and gas sales                               $28,988   $37,330   $40,962   $42,209
 Production and operating expenses               $10,362   $11,794   $12,248   $11,968
 Net Income                                      $ 5,151   $ 7,591   $ 9,414   $10,386
 Net income per common share
   Basic                                         $  0.49   $  0.57   $  0.71   $  0.83
   Diluted                                       $  0.35   $  0.54   $  0.66   $  0.74
 Weighted-average common shares outstanding        9,627    13,269    13,314    13,107

1999
----
 Oil and gas sales                               $    --   $    --   $22,693   $25,285
 Production and operating expenses               $    --   $    --   $ 6,018   $10,589
 Net Income                                      $    26   $    83   $ 5,555   $ 3,445
 Net income per common share
   Basic                                         $    --   $  0.01   $  0.62   $  0.56
   Diluted                                       $    --   $  0.01   $  0.46   $  0.55
 Weighted-average common shares outstanding        5,239     6,100     8,291     8,291
</TABLE>



                                       42
<PAGE>   43

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Prize Energy Corp.

     We have audited the accompanying statement of revenues and direct operating
expenses for the producing properties acquired by Prize Energy Corp. from
Pioneer Natural Resources USA, Inc. (Acquired Properties) for the year ended
December 31, 1998. The statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on the statement based
on our audit.

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

     The accompanying statement was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission and is not
intended to be a complete presentation of the revenues and expenses of the
Acquired Properties.

     In our opinion, the statement referred to above presents fairly, in all
material respects, the operating revenues and direct operating expenses of the
Acquired Properties for the year ended December 31, 1998, in conformity with
accounting principles generally accepted in the United States.

                                                  ERNST & YOUNG LLP

Fort Worth, Texas
September 3, 1999



                                       43
<PAGE>   44

               PRODUCING PROPERTIES ACQUIRED BY PRIZE ENERGY CORP.
                    FROM PIONEER NATURAL RESOURCES USA, INC.

               STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES

<TABLE>
<CAPTION>
                                                                     YEAR ENDED
                                                                    DECEMBER 31,
                                                                        1998
                                                                     -----------
<S>                                                                  <C>
Revenues:
 Crude sales .....................................................   $30,576,824
 Natural gas sales ...............................................    48,485,086
 Natural gas liquids sales .......................................     5,493,151
                                                                     -----------
                                                                      84,555,061
Direct operating expenses:
 Lease operating expenses ........................................    18,318,306
 Oil and gas production taxes ....................................     8,685,884
                                                                     -----------
                                                                      27,004,190
                                                                     -----------
Revenues in excess of direct operating expenses ..................   $57,550,871
                                                                     ===========
</TABLE>


                             See accompanying notes.



                                       44
<PAGE>   45

               PRODUCING PROPERTIES ACQUIRED BY PRIZE ENERGY CORP.
                    FROM PIONEER NATURAL RESOURCES USA, INC.

          NOTES TO STATEMENTS OF REVENUES AND DIRECT OPERATING EXPENSES

1. BASIS OF PRESENTATION

     Pursuant to the terms of a Purchase and Sale Agreement dated May 16, 1999
and effective as of July 1, 1999, Prize Energy Corp. (the Company) completed the
acquisition of interests in certain oil and gas producing properties (Acquired
Properties), primarily located in Texas, Louisiana, and Oklahoma from Pioneer
Natural Resources USA, Inc. (Pioneer), for $215 million in cash and the
issuance of $30 million of 6% convertible preferred stock.

     The oil and gas revenues and direct operating expenses presented herein
relate only to the interests in the Acquired Properties and do not represent all
of the oil and gas operations of Pioneer. Oil and gas revenues of the Acquired
Properties are recorded on the entitlements method. Direct operating expenses
include all costs incurred which are necessary for the production, marketing and
distribution of the products produced from the subject properties including,
without limitation, costs and expenses of field separation; treatment;
dehydration; direct overhead charges (other than costs associated with general
corporate activities); pumper, roustabout and field supervision labor; meter
calibrations; engineering supervision charges; fuel and electricity; valves,
connections and other minor equipment repair; oil and lubricants; major repairs;
rental tools and equipment; pipe inspection; trucking; reservoir testing;
pressure testing; well plugging; site remediation; operator bonding; insurance
charges; salt water disposal; water injection and pressure maintenance; gas
compression; hot oil and hot water treatments; filing fees; make-up water
purchases; electrician charges; mud and chemicals; pulling and workover units;
other miscellaneous supplies and services; and severance, ad valorem and other
production related taxes and charges. In addition, lease operating expenses are
net of gas plant processing fees and oil and gas production taxes include
production and severance taxes and ad valorem taxes associated with the
properties. Direct operating expenses do not include charges for depletion,
depreciation, amortization and abandonment; federal and state income taxes;
interest; or corporate general and administrative expenses. The oil and gas
revenues and direct operating expenses for the periods presented may not be
indicative of the results of future operations of the properties acquired.

2. SUBSEQUENT EVENT

     Effective July 1, 1999, the Company sold certain mineral interests included
in the properties purchased from Pioneer to Blackstone Minerals Co., LP for $32
million. The revenues and direct operating expenses associated with these
properties included in the Statements of Revenues and Direct Operating Expenses
were as follows:

<TABLE>
<CAPTION>
                                                                                 YEAR ENDED
                                                                                DECEMBER 31,
                                                                                   1998
                                                                               --------------
<S>                                                                            <C>
                  Revenues......................................               $    5,136,967
                  Direct operating expenses.....................                      793,131
                                                                               --------------
                  Revenues in excess of direct operating
                   expenses.....................................               $    4,343,836
                                                                               ==============
</TABLE>

3. SUPPLEMENTAL OIL AND GAS RESERVE AND STANDARDIZED MEASURE INFORMATION
   (UNAUDITED)

     Estimated quantities of proved net reserves include only those quantities
that can be expected to be commercially recoverable at prices and costs in
effect at the effective date of the acquisition, under existing regulatory
practices and with conventional equipment and operating methods. Proved
developed reserves represent only those reserves expected to be recovered
through existing wells with existing equipment and operating methods. Proved
undeveloped reserves include those reserves expected to be recovered from new
wells on undrilled acreage or from existing wells on which a relatively major
expenditure is required for recompletion.

     Oil and gas reserve quantity estimates are subject to numerous
uncertainties inherent in the estimation of quantities of proved reserves and in
the projection of future rates of production and the timing of development
expenditures. The accuracy of such estimates is a function of the quality of
available data and of engineering and geological interpretation and judgment.
Results of subsequent drilling, testing and production may cause either upward
or downward revision of previous estimates. Further, the volumes considered to
be commercially recoverable fluctuate with changes in prices and operating
costs. The Company emphasizes that reserve estimates are inherently imprecise
and that estimates of new discoveries are more imprecise than those of currently
producing oil and gas properties. Accordingly, these estimates are expected to
change as additional information becomes available in the future.



                                       45
<PAGE>   46
     The following table presents the proved oil and gas reserves of the
Acquired Properties and a rollforward of the changes in proved reserves for
1998. Because reserve data prior to December 31, 1998 is not available, this
table assumes that the only change in reserve quantities was due to production.

                     ESTIMATED QUANTITIES OF PROVED RESERVES

<TABLE>
<CAPTION>
                                                         1998
                                         ---------------------------------------
                                          OIL & NGLs       GAS
                                            (Bbl)         (Mcf)          BOE
                                         -----------   -----------   -----------
<S>                                       <C>          <C>            <C>
Proved reserves ......................    26,051,394   224,026,656    63,389,170
Proved developed reserves ............    23,136,377   193,193,545    55,335,301
Proved undeveloped reserves ..........     2,915,017    30,833,111     8,053,869
</TABLE>

<TABLE>
<CAPTION>
                                          OIL & NGLs       GAS
                                            (Bbl)         (Mcf)          BOE
                                         -----------   -----------   -----------
<S>                                       <C>          <C>            <C>
Balance, January 1, 1998 .............    29,185,695   248,955,853    70,678,337
Production ...........................     3,134,301    24,929,197     7,289,167
                                         -----------   -----------   -----------
Balance, December 31, 1998 ...........    26,051,394   224,026,656    63,389,170
                                         ===========   ===========   ===========
</TABLE>

     The following table is a summary of the standardized measure of discounted
future net cash flows related to the proved oil and gas reserves of the Acquired
Properties and a rollforward of the standardized measure for 1998. Similar to
the preceding table on reserve quantities, because reserve data prior to
December 31, 1998 is not available, the table assumes that the only change in
reserve quantities was due to production. For these calculations, estimated
future cash flows from the future production of proved reserves were computed
using oil and gas prices as of the end of the year. Future development and
production costs attributable to proved reserves were estimated assuming that
conditions existing in 1998 would continue over the economic life of the
properties, and costs were not escalated for the future. The Acquired Properties
are not a separate tax paying entity. Accordingly, the standardized measure of
discounted future net cash flows from proved reserves is presented before
deduction of federal income taxes. The information presented below should not be
viewed as an estimate of the fair value of the acquired interests, nor should it
be considered indicative of any future trends.

            STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                                  1998
                                                                          ------------------
<S>                                                                       <C>
Future cash inflows.................................................      $      621,543,244
Future production and development costs.............................            (267,522,684)
Discounts of future net cash flows at 10% per annum.................            (154,852,977)
                                                                          ------------------
Standardized measure of discounted future net cash flows............      $      199,167,583
                                                                          ==================
Standardized measure of discounted future net
 cash flows, beginning of year......................................      $      345,964,430
Oil and gas sales net of production costs...........................             (57,550,871)
Development costs, accretion of discount, etc.......................             (89,245,976)
                                                                          ------------------
Standardized measure of discounted future net
 cash flows, end of year............................................      $      199,167,583
                                                                          ==================
</TABLE>

     The weighted-average prices of oil and gas at December 31, 1998 used in the
calculation of the Standardized Measure were $9.63 per barrel for oil, $6.52 per
barrel for NGL's, and $1.76 per MCF for gas.

     Development costs for the year ended December 31, 1998 were $21,138,128.
Exploration costs and incremental general and administrative costs were
insignificant for all periods presented.



                                       46
<PAGE>   47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

 None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information called for by this Item 10 with respect to the Company's
executive officers appears at Item 4A of Part I of this Form 10-K. Additional
information called for by this Item 10 is incorporated herein by reference to
the definitive Proxy Statement to be filed by the Company pursuant to Regulation
14A of the General Rules and Regulations under the Securities Exchange Act of
1934 not later than April 29, 2001.

ITEM 11. EXECUTIVE COMPENSATION

     The information called for by this Item 11 is incorporated herein by
reference to the definitive Proxy Statement to be filed by the Company pursuant
to Regulation 14A of the General Rules and Regulations under the Securities
Exchange Act of 1934 not later than April 29, 2001.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information called for by this Item 12 is incorporated herein by
reference to the definitive Proxy Statement to be filed by the Company pursuant
to Regulation 14A of the General Rules and Regulations under the Securities
Exchange Act of 1934 not later than April 29, 2001.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information called for by this Item 13 is incorporated herein by
reference to the definitive Proxy Statement to be filed by the Company pursuant
to Regulation 14A of the General Rules and Regulations under the Securities
Exchange Act of 1934 not later than April 29, 2001.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-K

(a)(1) Financial Statements:

     The financial statements of Prize and its subsidiaries and related report
of independent public accountants are listed in Item 8 of this Form 10-K.

(2) Financial Statement Schedules:

     All schedules are omitted as inapplicable or because the required
information is contained in the financial statements of Prize or included in the
respective notes thereto.

(3) Exhibits:

     The following documents are included as exhibits to this Form 10-K. Those
exhibits below incorporated by reference herein are indicated as such by the
information supplied in the parenthetical thereafter. If no parenthetical
appears after an exhibit, such exhibit is filed herewith.

<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                DESCRIPTION
      -------               -----------
<S>              <C>
       2.1   --  Agreement and Plan of Merger, dated as of October 8, 1999,
                 among Vista Energy Resources, Inc. (now named Prize Energy
                 Corp.), PEC Acquisition Corp. and Prize Energy Corp. (now named
                 Prize Natural Resources, Inc.) (filed as Annex A to the Proxy
                 Statement/Prospectus included in the Company's Registration
                 Statement on Form S-4, Registration No. 333-93561, as amended
                 (the "Registration Statement").
</TABLE>


                                       47
<PAGE>   48
<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                DESCRIPTION
      -------               -----------
<S>              <C>
       2.2   --  First Amendment to Agreement and Plan of Merger, dated as of
                 January 5, 2000, among Vista Energy Resources, Inc. (now named
                 Prize Energy Corp.), PEC Acquisition Corp. and Prize Energy
                 Corp. (now named Prize Natural Resources, Inc.) (filed as
                 Exhibit 2.2 to the Registration Statement).

       3.1   --  Amended and Restated Certificate of Incorporation of the
                 Company (filed as Exhibit 3.1 to the Company's report on Form
                 8-K dated February 8, 2000).

       3.2   --  Amended and Restated Bylaws of the Company (filed as Exhibit
                 3.2 to the Company's report on Form 8-K dated February 8,
                 2000).

       4.1   --  Amended and Restated Registration Rights Agreement, dated as of
                 February 8, 2000, among the Company, Prize Natural Resources,
                 Inc. (formerly known as Prize Energy Corp.) and certain
                 stockholders of the Company (filed as Exhibit 4.1 to the
                 Company's report on Form 8-K dated February 8, 2000).

       4.2   --  Certificate of Designation, Voting Powers and Rights of Series
                 A 6% Convertible Preferred Stock of the Company (filed as
                 Exhibit 4.2 to the Company's report on Form 8-K dated February
                 8, 2000).

       4.3   --  Specimen Stock Certificate for the Common Stock, par value $.01
                 per share, of the Company (filed as exhibit 4.1 to the
                 Company's Registration Statement on Form S-1, Registration No.
                 333-44346, as amended (the "S-1 Registration Statement")).

       4.4   --  Registration Rights Agreement, dated as of October 28, 1998, by
                 and among Vista Energy Resources, Inc. (now named Prize Energy
                 Corp.) and certain security holders of Midland Resources, Inc.
                 (filed as an exhibit to the Company's Registration Statement on
                 Form S-4, Registration No. 333-58495, as amended ( the "1998
                 Registration Statement")).

       4.5   --  Warrant Agreement dated as of October 28, 1998, among Vista
                 Energy Resources, Inc. (now named Prize Energy Corp.) and
                 American Stock Transfer & Trust Company (filed as an exhibit to
                 the 1998 Registration Statement).

       4.6   --  Warrant Agreement dated as of November 1, 1990, among Midland
                 Resources, Inc. and Stock Transfer Company of America, Inc.
                 (filed as Exhibit 4.6 to the 1998 Registration Statement).

      10.1   --  Amended and Restated Credit Agreement, dated as of February 8,
                 2000, among Prize Energy Resources, L.P., Vista Resources
                 Partners, L.P. and Midland Resources, Inc., as borrowers, the
                 Company, as guarantor, certain financial institutions,
                 BankBoston, N.A., as administrative agent, First Union National
                 Bank, as syndication agent, CIBC Inc., as documentation agent,
                 and Bank One, Texas, N.A., as lead manager (filed as Exhibit
                 10.1 to the Company's report on Form 8-K dated February 8,
                 2000).
</TABLE>


                                       48
<PAGE>   49
<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                DESCRIPTION
      -------               -----------
<S>              <C>
      10.2   --  Voting and Shareholders Agreement, dated as of February 8,
                 2000, among the Company, Prize Natural Resources, Inc.
                 (formerly known as Prize Energy Corp.) and certain stockholders
                 of the Company (filed as Exhibit 10.2 to the Company's report
                 on Form 8-K dated February 8, 2000).

      10.3   --  Assignment and Assumption Agreement, dated as of February 8,
                 2000, between the Company and Prize Natural Resources, Inc.
                 (formerly known as Prize Energy Corp.) relating to that certain
                 Joint Participation Agreement attached thereto, dated as of
                 June 29, 1999, between Prize Energy Corp. (now Prize Natural
                 Resources, Inc.) and Pioneer Natural Resources USA, Inc. (filed
                 as Exhibit 10.3 to the Company's report on Form 8-K dated
                 February 8, 2000).

      10.4*  --  Amended and Restated Option Plan of the Company (filed as
                 Exhibit 10.4 to the Company's report on Form 8-K dated February
                 8, 2000).

      10.5   --  Advisory Services Agreement between Vista Energy Resources,
                 Inc. (now named Prize Energy Corp.), Natural Gas Partners II,
                 L.P. and Natural Gas Partners III, L.P. (filed as Exhibit 10.4
                 to the 1998 Registration Statement).

      10.6*  --  Vista Energy Resources, Inc.( now Prize Energy Corp.) 1998 Key
                 Employee Stock Option Plan (filed as an exhibit to the 1998
                 Registration Statement).

      10.7*  --  Consulting and Termination Agreement, dated as of October 8,
                 1999, by and among Prize Energy Corp. (now named Prize Natural
                 Resources, Inc.), Vista Energy Resources, Inc. (now named Prize
                 Energy Corp.) and C. Randall Hill (filed as an exhibit to the
                 Company's report on Form 10-Q for the quarter ended September
                 30, 1999).

      10.8*  --  Consulting and Termination Agreement, dated as of October 8,
                 1999, by and among Prize Energy Corp. (now named Prize Natural
                 Resources, Inc.), Vista Energy Resources, Inc. (now named Prize
                 Energy Corp.) and Steven D. Gray (filed as an exhibit to the
                 Company's report on Form 10-Q for the quarter ended September
                 30, 1999).

      10.9*  --  Consulting and Termination Agreement, dated as of October 8,
                 1999, by and among Prize Energy Corp. (now named Prize Natural
                 Resources, Inc.), Vista Energy Resources, Inc. (now named Prize
                 Energy Corp.) and R. Cory Richards (filed as an exhibit to the
                 Company's report on Form 10-Q for the quarter ended September
                 30, 1999).

      10.10* --  Form of Indemnification Agreement by and between Vista Energy
                 Resources, Inc. (now named Prize Energy Corp.) and each of its
                 directors and executive officers (filed as an exhibit to the
                 1998 Registration Statement).
</TABLE>



                                       49
<PAGE>   50
<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                DESCRIPTION
      -------               -----------
<S>              <C>
      10.11* --  Vista Energy Resources, Inc. (now Prize Energy Corp.) Severance
                 Benefit Plan, effective October 8, 1999 (filed as an exhibit to
                 the Company's report on Form 10-Q for the quarter ended
                 September 30, 1999).

      10.12* --  Amendment No. 1 to Prize Energy Corp. 1998 Key Employee Stock
                 Option Plan (filed as Exhibit A to the Company's Proxy
                 Statement for Annual Meeting of Stockholders dated April 28,
                 2000).

      10.13  --  First Amendment to the Amended and Restated Credit Agreement,
                 dated as of June 30, 2000, among Prize Energy Resources, L.P.,
                 the Company, Fleet National Bank, successor-in-interest to
                 BankBoston, N.A., as administrative agent, and certain
                 financial institutions (filed as Exhibit 10.1 to the Company's
                 report on Form 10-Q for the quarter ended June 30, 2000).

      10.14  --  Second Amendment to Amended and Restated Credit Agreement,
                 dated as of October 1, 2000, among Prize Energy Resources,
                 L.P., the Company, Fleet National Bank, Successor-in-interest
                 to Bank Boston, N.A., as administrative agent, and certain
                 financial institutions (filed as Exhibit 10.1 to the Company's
                 report on Form 10-Q for the quarter ended September 30, 2000).

      10.15  --  Third Amendment to Amended and Restated Credit Agreement, dated
                 as of Novemeber 1, 2000, among Prize Energy Resources, L.P.,
                 the Company, Fleet National Bank, Successor-in-interest to Bank
                 Boston, N.A., as administrative agent, and certain financial
                 institutions (filed as Exhibit 10.2 to the Company's report on
                 Form 10-Q for the quarter ended September 30, 2000).

      10.16  --  Advisory Services and Indemnification Agreement, dated January
                 25, 1999, between the Company and Natural Gas Partners V, L.P.
                 and Amendment thereto dated June 28, 1999 (filed as Exhibit
                 10.6 to the S-1 Registration Statement).

      10.17  --  Purchase and Sale Agreement, dated May 16, 1999, by and between
                 Pioneer Natural Resources, USA, Inc. and Pioneer Resources
                 Producing, L.P. as Seller and Prize Energy Corp. (filed as
                 Exhibit 10.1 to Pioneer Natural Resources Company's report on
                 Form 8-K dated June 29, 1999).

      10.18  --  Stock Purchase Agreement, dated March 28, 2000, by and between
                 the Company and Pioneer Natural Resources, USA, Inc. (filed as
                 Exhibit 10.2 to Pioneer's Amendment Number 1 to Schedule 13D
                 dated March 31, 2000).

      21     --  Subsidiaries of the Company.

      23.1   --  Consent of Ernst & Young LLP.

      23.2   --  Consent of Netherland, Sewell & Associates, Inc.
</TABLE>

----------

* Management contract or compensatory plan or arrangement

(b) Reports on Form 8-K:

            No reports on Form 8-K were filed during the fourth quarter of 2000.



                                       50
<PAGE>   51
                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.

     Date: April 2, 2001                    PRIZE ENERGY CORP.


                                            By:        /s/ LON C. KILE
                                               ---------------------------------
                                                           Lon C. Kile
                                                          President and
                                                     Chief Operating Officer

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf, of the Company and in the capacities and on the dates indicated.

<TABLE>
<S>                                     <C>                                   <C>
      /s/ PHILIP B. SMITH               Director, Chairman of the Board,      April 2, 2001
-----------------------------------      Chief Executive Officer,
        Philip B. Smith                  Treasurer (Principal Executive
                                         Officer)

        /s/ LON C. KILE                 Director, President and Chief         April 2, 2001
-----------------------------------      Operating Officer (Principal
          Lon C. Kile                    Financial Officer and Principal
                                         Accounting Officer)

      /s/ DAVID R. ALBIN                Director                              April 2, 2001
-----------------------------------
        David R. Albin

     /s/ KENNETH A. HERSH               Director                              April 2, 2001
-----------------------------------
       Kenneth A. Hersh

      /s/ THERESA KILGORE               Director                              April 2, 2001
-----------------------------------
        Theresa Kilgore

     /s/ JAMES R. LATIMER               Director                              April 2, 2001
-----------------------------------
       James R. Latimer
</TABLE>





                                       51
<PAGE>   52
                                  EXHIBIT INDEX

The following documents are included as exhibits to this Form 10-K. Those
exhibits below incorporated by reference herein are indicated as such by the
information supplied in the parenthetical thereafter. If no parenthetical
appears after an exhibit, such exhibit is filed herewith.

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<CAPTION>
      EXHIBIT
      NUMBER                DESCRIPTION
      -------               -----------
<S>              <C>
       2.1   --  Agreement and Plan of Merger, dated as of October 8, 1999,
                 among Vista Energy Resources, Inc. (now named Prize Energy
                 Corp.), PEC Acquisition Corp. and Prize Energy Corp. (now named
                 Prize Natural Resources, Inc.) (filed as Annex A to the Proxy
                 Statement/Prospectus included in the Company's Registration
                 Statement on Form S-4, Registration No. 333-93561, as amended
                 (the "Registration Statement").

       2.2   --  First Amendment to Agreement and Plan of Merger, dated as of
                 January 5, 2000, among Vista Energy Resources, Inc. (now named
                 Prize Energy Corp.), PEC Acquisition Corp. and Prize Energy
                 Corp. (now named Prize Natural Resources, Inc.) (filed as
                 Exhibit 2.2 to the Registration Statement).

       3.1   --  Amended and Restated Certificate of Incorporation of the
                 Company (filed as Exhibit 3.1 to the Company's report on Form
                 8-K dated February 8, 2000).

       3.2   --  Amended and Restated Bylaws of the Company (filed as Exhibit
                 3.2 to the Company's report on Form 8-K dated February 8,
                 2000).

       4.1   --  Amended and Restated Registration Rights Agreement, dated as of
                 February 8, 2000, among the Company, Prize Natural Resources,
                 Inc. (formerly known as Prize Energy Corp.) and certain
                 stockholders of the Company (filed as Exhibit 4.1 to the
                 Company's report on Form 8-K dated February 8, 2000).

       4.2   --  Certificate of Designation, Voting Powers and Rights of Series
                 A 6% Convertible Preferred Stock of the Company (filed as
                 Exhibit 4.2 to the Company's report on Form 8-K dated February
                 8, 2000).

       4.3   --  Specimen Stock Certificate for the Common Stock, par value $.01
                 per share, of the Company (filed as exhibit 4.1 to the
                 Company's Registration Statement on Form S-1, Registration No.
                 333-44346, as amended (the "S-1 Registration Statement")).

       4.4   --  Registration Rights Agreement, dated as of October 28, 1998, by
                 and among Vista Energy Resources, Inc. (now named Prize Energy
                 Corp.) and certain security holders of Midland Resources, Inc.
                 (filed as an exhibit to the Company's Registration Statement on
                 Form S-4, Registration No. 333-58495, as amended ( the "1998
                 Registration Statement")).

       4.5   --  Warrant Agreement dated as of October 28, 1998, among Vista
                 Energy Resources, Inc. (now named Prize Energy Corp.) and
                 American Stock Transfer & Trust Company (filed as an exhibit to
                 the 1998 Registration Statement).
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<PAGE>   53
<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                DESCRIPTION
      -------               -----------
<S>              <C>
       4.6   --  Warrant Agreement dated as of November 1, 1990, among Midland
                 Resources, Inc. and Stock Transfer Company of America, Inc.
                 (filed as Exhibit 4.6 to the 1998 Registration Statement).

      10.1   --  Amended and Restated Credit Agreement, dated as of February 8,
                 2000, among Prize Energy Resources, L.P., Vista Resources
                 Partners, L.P. and Midland Resources, Inc., as borrowers, the
                 Company, as guarantor, certain financial institutions,
                 BankBoston, N.A., as administrative agent, First Union National
                 Bank, as syndication agent, CIBC Inc., as documentation agent,
                 and Bank One, Texas, N.A., as lead manager (filed as Exhibit
                 10.1 to the Company's report on Form 8-K dated February 8,
                 2000).

      10.2   --  Voting and Shareholders Agreement, dated as of February 8,
                 2000, among the Company, Prize Natural Resources, Inc.
                 (formerly known as Prize Energy Corp.) and certain stockholders
                 of the Company (filed as Exhibit 10.2 to the Company's report
                 on Form 8-K dated February 8, 2000).

      10.3   --  Assignment and Assumption Agreement, dated as of February 8,
                 2000, between the Company and Prize Natural Resources, Inc.
                 (formerly known as Prize Energy Corp.) relating to that certain
                 Joint Participation Agreement attached thereto, dated as of
                 June 29, 1999, between Prize Energy Corp. (now Prize Natural
                 Resources, Inc.) and Pioneer Natural Resources USA, Inc. (filed
                 as Exhibit 10.3 to the Company's report on Form 8-K dated
                 February 8, 2000).

      10.4*  --  Amended and Restated Option Plan of the Company (filed as
                 Exhibit 10.4 to the Company's report on Form 8-K dated February
                 8, 2000).

      10.5   --  Advisory Services Agreement between Vista Energy Resources,
                 Inc. (now named Prize Energy Corp.), Natural Gas Partners II,
                 L.P. and Natural Gas Partners III, L.P. (filed as Exhibit 10.4
                 to the 1998 Registration Statement).

      10.6*  --  Vista Energy Resources, Inc.( now Prize Energy Corp.) 1998 Key
                 Employee Stock Option Plan (filed as an exhibit to the 1998
                 Registration Statement).

      10.7*  --  Consulting and Termination Agreement, dated as of October 8,
                 1999, by and among Prize Energy Corp. (now named Prize Natural
                 Resources, Inc.), Vista Energy Resources, Inc. (now named Prize
                 Energy Corp.) and C. Randall Hill (filed as an exhibit to the
                 Company's report on Form 10-Q for the quarter ended September
                 30, 1999).

      10.8*  --  Consulting and Termination Agreement, dated as of October 8,
                 1999, by and among Prize Energy Corp. (now named Prize Natural
                 Resources, Inc.), Vista Energy Resources, Inc. (now named Prize
                 Energy Corp.) and Steven D. Gray (filed as an exhibit to the
                 Company's report on Form 10-Q for the quarter ended September
                 30, 1999).
</TABLE>

<PAGE>   54
<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                DESCRIPTION
      -------               -----------
<S>              <C>
      10.9*  --  Consulting and Termination Agreement, dated as of October 8,
                 1999, by and among Prize Energy Corp. (now named Prize Natural
                 Resources, Inc.), Vista Energy Resources, Inc. (now named Prize
                 Energy Corp.) and R. Cory Richards (filed as an exhibit to the
                 Company's report on Form 10-Q for the quarter ended September
                 30, 1999).

      10.10* --  Form of Indemnification Agreement by and between Vista Energy
                 Resources, Inc. (now named Prize Energy Corp.) and each of its
                 directors and executive officers (filed as an exhibit to the
                 1998 Registration Statement).

      10.11* --  Vista Energy Resources, Inc. (now Prize Energy Corp.) Severance
                 Benefit Plan, effective October 8, 1999 (filed as an exhibit to
                 the Company's report on Form 10-Q for the quarter ended
                 September 30, 1999).

      10.12* --  Amendment No. 1 to Prize Energy Corp. 1998 Key Employee Stock
                 Option Plan (filed as Exhibit A to the Company's Proxy
                 Statement for Annual Meeting of Stockholders dated April 28,
                 2000).

      10.13  --  First Amendment to the Amended and Restated Credit Agreement,
                 dated as of June 30, 2000, among Prize Energy Resources, L.P.,
                 the Company, Fleet National Bank, successor-in-interest to
                 BankBoston, N.A., as administrative agent, and certain
                 financial institutions (filed as Exhibit 10.1 to the Company's
                 report on Form 10-Q for the quarter ended June 30, 2000).

      10.14  --  Second Amendment to Amended and Restated Credit Agreement,
                 dated as of October 1, 2000, among Prize Energy Resources,
                 L.P., the Company, Fleet National Bank, Successor-in-interest
                 to Bank Boston, N.A., as administrative agent, and certain
                 financial institutions (filed as Exhibit 10.1 to the Company's
                 report on Form 10-Q for the quarter ended September 30, 2000).

      10.15  --  Third Amendment to Amended and Restated Credit Agreement, dated
                 as of Novemeber 1, 2000, among Prize Energy Resources, L.P.,
                 the Company, Fleet National Bank, Successor-in-interest to Bank
                 Boston, N.A., as administrative agent, and certain financial
                 institutions (filed as Exhibit 10.2 to the Company's report on
                 Form 10-Q for the quarter ended September 30, 2000).

      10.16  --  Advisory Services and Indemnification Agreement, dated January
                 25, 1999, between the Company and Natural Gas Partners V, L.P.
                 and Amendment thereto dated June 28, 1999 (filed as Exhibit
                 10.6 to the S-1 Registration Statement).

      10.17  --  Purchase and Sale Agreement, dated May 16, 1999, by and between
                 Pioneer Natural Resources, USA, Inc. and Pioneer Resources
                 Producing, L.P. as Seller and Prize Energy Corp. (filed as
                 Exhibit 10.1 to Pioneer Natural Resources Company's report on
                 Form 8-K dated June 29, 1999).

      10.18  --  Stock Purchase Agreement, dated March 28, 2000, by and between
                 the Company and Pioneer Natural Resources, USA, Inc. (filed as
                 Exhibit 10.2 to Pioneer's Amendment Number 1 to Schedule 13D
                 dated March 31, 2000).
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<PAGE>   55
<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                DESCRIPTION
      -------               -----------
<S>              <C>
      21     --  Subsidiaries of the Company.

      23.1   --  Consent of Ernst & Young LLP.

      23.2   --  Consent of Netherland, Sewell & Associates, Inc.
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