SYMSKAYA EXPLORATION INCORPORATED
                      (A Company in the Development Stage)


                    Report on Audits of Financial Statements
                              and Supplemental Data
            as of December 31, 1996 and 1995 and for the years ended
                        December 31, 1996, 1995 and 1994,
                and the period from inception (November 25, 1991)
                              to December 31, 1996



<PAGE>







                        Report of Independent Accountants


To the Board of Directors of
Symskaya Exploration Incorporated:

We  have  audited  the  accompanying   balance  sheet  of  Symskaya  Exploration
Incorporated  (a company in the  development  stage) as of December 31, 1996 and
1995, and the related statements of operations, changes in stockholders' equity,
and cash flows for the years ended  December  31, 1996,  1995 and 1994,  and the
period from inception  (November 25, 1991) to December 31, 1996. These financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,   the  financial   position  of  Symskaya   Exploration
Incorporated  (a company in the  development  stage) as of December 31, 1996 and
1995,  and the results of its  operations and its cash flows for the years ended
December 31, 1996,  1995 and 1994, and for the period from  inception  (November
25, 1991) to December 31, 1996 in conformity with generally accepted  accounting
principles.




Salt Lake City, Utah
February 13, 1997


                                                         

<PAGE>




                       SYMSKAYA EXPLORATION, INCORPORATED
                      (A Company in the Development Stage)

                                  BALANCE SHEET
                  as of December 31, 1996 and December 31, 1995

                                                           1996            1995
                                                           ----            ----
    ASSETS
Current assets:
    Cash and cash equivalents                       $     46,150   $    171,408
    Due from Equity Oil Company                          101,771        189,425
    Due from Leucadia National Corporation               101,771        189,425
                                                    ------------   ------------
           Total current assets                          249,692        550,258
                                                    ------------   ------------
Unproved oil and gas property, at cost
    (full cost method of accounting)                   5,876,700     10,329,991
                                                    ------------   ------------
           Total assets                             $  6,126,392   $ 10,880,249
                                                    ============   ============

    LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                $     68,476   $    241,093
    Accrued interest payable - Equity Oil Company         29,734         93,480
                                                    ------------   ------------
           Total current liabilities                      98,210        334,573
                                                    ------------   ------------
Accrued interest payable                               1,105,002        126,306
Notes payable - Equity Oil Company                     6,644,380      5,648,922
Notes payable - Leucadia National Corporation          4,903,861      3,908,403
                                                    ------------   ------------
           Total liabilities                          12,751,453     10,018,204
                                                    ------------   ------------

Commitments (Note 1)

Stockholders' equity:
    Common stock, no par value:
    Authorized:  20,000,000 shares; issued 1,000
        shares                                             1,000          1,000
    Contributed capital - Equity Oil Company           2,238,132        494,625
    Contributed capital - Leucadia National
        Corporation                                    2,238,132        494,625
    Deficit accumulated during development stage     (11,102,325)      (128,205)
                                                    ------------   ------------
                                                      (6,625,061)       862,045
                                                    ------------   ------------
        Total liabilities and stockholders' equit   $  6,126,392   $ 10,880,249
                                                    ============   ============

                     The accompanying notes are an integral
                       part of these financial statements


                                                         

<PAGE>




                       SYMSKAYA EXPLORATION, INCORPORATED
                      (A Company in the Development Stage)

                             STATEMENT OF OPERATIONS
              for the years ended December 31, 1996, 1995 and 1994
     and the period from inception (November 25, 1991) to December 31, 1996
<TABLE>
<CAPTION>

                                                                                Inception to
                                                                                 December 31,
                                       1996            1995            1994            1996
                               ------------    ------------    ------------    ------------

Revenues:
<S>                            <C>             <C>             <C>             <C>         
    Overhead income            $     47,258    $     62,097    $       --      $    109,355
    Interest income                  12,147           7,146           5,663          24,956
                               ------------    ------------    ------------    ------------
                                     59,405          69,243           5,663         134,311
                               ------------    ------------    ------------    ------------
Expenses:
    Overhead expenses                64,213          62,106            --           126,319
    Impairment of unproved
        oil and gas property     10,955,728            --              --        10,955,728
    Interest expense                   --              --              --           126,306
    Foreign exchange loss            13,584           8,431           6,268          28,283
                               ------------    ------------    ------------    ------------
                                 11,033,525          70,537           6,268      11,236,636
                               ------------    ------------    ------------    ------------

           Net (loss)          $(10,974,120)   $     (1,294)   $       (605)   $(11,102,325)
                               ============    ============    ============    ============

</TABLE>









                     The accompanying notes are an integral
                       part of these financial statements




<PAGE>



                       SYMSKAYA EXPLORATION, INCORPORATED
                       A Company in the Development Stage)

<TABLE>
<CAPTION>
                  STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                for the period from inception (November 25, 1991)
                              to December 31, 1996

                                                            Contributed Capital        Deficit Accumulated
                                        Common Stock     Equity Oil Leucadia National      During the
                                      Shares    Amount      Company   Corporation      Development Stage    Total
                                      ------    ------      -------   -----------      -----------------    -----
<S>                                    <C>      <C>        <C>           <C>            <C>            <C>       
Contribution of capital                     -         -     $  60,000             -                -    $   60,000
  Loss from inception to
   December 31, 1991                        -         -             -             -                -             -
                                       ------    ------      --------     ---------          -------      --------
Balance at December 31, 1991                -         -        60,000             -                -        60,000
Issuance of common stock for
 cash on February 29, 1992
  (at $1.00 per share)                  1,000    $1,000             -             -                -         1,000
Conversion of contributed
 capital to note payable                    -         -       (60,000)            -                -       (60,000)
1992 net loss                               -         -             -             -       $  (34,484)      (34,484)
                                       ------    ------      --------     ---------         --------      ---------
Balance at December 31, 1992            1,000     1,000             -             -          (34,484)      (33,484)

1993 net loss                               -         -             -             -          (91,822)      (91,822)
                                       ------    ------      --------     ---------         --------      --------
Balance at December 31, 1993            1,000     1,000             -             -         (126,306)     (125,306)

Contribution of capital                     -         -       494,625      $494,625                -       989,250
1994 net loss                               -         -             -             -             (605)         (605)
                                       ------    ------       -------      --------         -----------   --------
Balance at December 31, 1994            1,000     1,000       494,625       494,625         (126,911)      863,339

1995 net loss                               -         -             -             -           (1,294)       (1,294)
                                       ------    ------       -------      --------         ----------    --------
Balance at December 31, 1995            1,000   $ 1,000       494,625       494,625         (128,205)      862,045

Contribution of capital                     -         -     1,743,507     1,743,507                -     3,487,014
1996 net loss                               -         -                                  (10,974,120)  (10,974,120)
                                       ------    ------     ---------     ---------       ----------    ----------
Balance at December 31, 1996            1,000   $ 1,000    $2,238,132    $2,238,132     $(11,102,325)  $(6,625,061)
                                       ======    ======     =========     =========       ==========    ==========
</TABLE>

                     The accompanying notes are an integral
                       part of these financial statements


                                                                    

<PAGE>





                       SYMSKAYA EXPLORATION, INCORPORATED
                      (A Company in the Development Stage)

<TABLE>
<CAPTION>
                             STATEMENT OF CASH FLOWS
              for the years ended December 31, 1996, 1995 and 1994
                and the period from inception (November 25, 1991)
                              to December 31, 1996

                                                                                                       Period from
                                                                                                        inception
                                                                                                   (November 25, 1991)
                                                                                                     to December 31,
                                                               1996            1995            1994        1996
                                                       ------------    ------------    ------------    ------------
Cash flows from operating activities:
<S>                                                    <C>             <C>             <C>             <C>          
  Net loss                                             $(10,974,120)   $     (1,294)   $       (605)   $(11,102,325)
  Impairment of unproved
    oil and gas property                                 10,955,728            --              --        10,955,728
  Increase (decrease) from changes in:
    Accrued interest payable - Equity Oil Company              --              --              --           126,306
                                                       ------------    ------------    ------------    ------------
          Net cash used in operating activities             (18,392)         (1,294)           (605)        (20,291)
                                                       ------------    ------------    ------------    ------------

Cash flows from investing activities:
  Additions to unproved oil and gas property             (5,760,104)     (5,057,805)     (3,224,241)    (15,755,522)
                                                       ------------    ------------    ------------    ------------
          Net cash used in investing activities          (5,760,104)     (5,057,805)     (3,224,241)    (15,755,522)
                                                       ------------    ------------    ------------    ------------

Cash flows from financing activities:
  Issuance of common stock                                     --              --              --             1,000
  Notes payable - Equity Oil Company                        995,458       2,649,047       1,281,013       6,584,380
  Notes payable - Leucadia National Corporation             995,458       2,649,047       1,259,356       4,903,861
  Contribution of capital - Equity Oil Company            1,743,507            --           494,625       2,298,132
  Contribution of capital - Leucadia National
    Corporation                                           1,743,507            --           494,625       2,238,132
  Due from Equity Oil Company and Leucadia
    National Corporation                                    175,308        (100,871)       (277,979)       (203,542)
                                                       ------------    ------------    ------------    ------------
          Net cash provided by financing activities       5,653,238       5,197,223       3,251,640      15,821,963
                                                       ------------    ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents       (125,258)        138,124          26,794          46,150

Cash and cash equivalents at beginning of period            171,408          33,284           6,490            --
                                                       ------------    ------------    ------------    ------------

Cash and cash equivalents at end of period             $     46,150    $    171,408    $     33,284    $     46,150
                                                       ============    ============    ============    ============

Supplemental  disclosures  of cash flow  information:  Cash paid during the year
  for:
    Income taxes                                                 -                -               -               -
    Interest                                                     -                -               -               -
</TABLE>

Supplemental  disclosures  of non-cash  investing and financing  activities:  At
December 31, 1996, 1995, and 1994 the Company financed $1,047,172, $334,573, and
$336,621,  respectively, of oil and gas property additions with accounts payable
and accrued liabilities.  Effective February 29, 1992, the Company converted the
original  $60,000  capital  contribution  from Equity Oil Company to an interest
bearing note payable to Equity Oil Company.

                     The accompanying notes are an integral
                       part of these financial statements



                                                        

<PAGE>






                       SYMSKAYA EXPLORATION, INCORPORATED
                       (A Company in the Deveopment Stage)

                          NOTES TO FINANCIAL STATEMENTS


1.       SIGNIFICANT ACCOUNTING POLICIES:

                 A.  Symskaya  Exploration,  Inc., a company in the  development
                 stage,  (the  Company),  a Texas  corporation,  was  formed  on
                 November 25, 1991, and is engaged in oil and gas exploration in
                 Russia.  Symskaya holds a Combined  License which grants it the
                 exclusive right to explore, develop and produce hydrocarbons on
                 a contract area totaling  approximately  1,100,000 acres in the
                 Yenisysk  District  of the  Krasnoyarsk  Krai  in  the  Russian
                 Federation. The License has a primary term of 25 years.

                 The work to be  performed  and the  obligations  and  rights of
                 Symskaya are set forth in a License  Agreement and a Production
                 Sharing  Agreement  (PSA)  which  are  integral  parts  of  the
                 License.  Under the  License  and PSA,  Symskaya  will  provide
                 funding for all  exploration  and  development and will recover
                 these costs from 80% of hydrocarbon production after payment of
                 an 8% royalty. The remaining 20% of any hydrocarbon production,
                 net of  royalty,  will be shared by  Symskaya  and the  Russian
                 government based on the rate of production.

                 Minimum  expenditures  required under the License and PSA total
                 $12,000,000  during the first five years of the  License  term,
                 which began on November  15,  1993.  As of December  31,  1996,
                 Symskaya  had  satisfied   all  of  the  minimum   expenditures
                 required.

                 Symskaya is owned 50% each by Equity Oil Company  (Equity)  and
                 Leucadia National  Corporation,  (Leucadia).  Leucadia acquired
                 50% of the stock of  Symskaya  effective  January 1,  1994,  in
                 exchange for their commitment to spend up to $6,000,000,  in an
                 amount  equal to that spent by  Equity,  towards  the  Symskaya
                 project  through the drilling,  completion  and/or plugging and
                 abandonment of the initial test well, the Lemok #1. Pursuant to
                 a Shareholders' Agreement, Leucadia was not required to pay any
                 part of the amounts previously  advanced by Equity under a Loan
                 Agreement with  Symskaya,  with the exception of one-half (1/2)
                 of  the  interest  on a  $1,740,519  loan  between  Equity  and
                 Symskaya. The loan reflects the initial investment by Equity in
                 Symskaya prior to Leucadia's ownership.




                                                         

<PAGE>








                    NOTES TO FINANCIAL STATEMENTS, Continued:


1.       SIGNIFICANT ACCOUNTING POLICIES, Continued:

                 Amounts  advanced by Equity and Leucadia  after January 1, 1994
                 are treated as interest-bearing advances or equity, as mutually
                 agreed upon by the  respective  companies.  The agreement  with
                 Leucadia  also  requires  that  Leucadia  share  equally in the
                 payment of the one (1%) percent royalty  obligation in favor of
                 Coastline  Exploration,   Inc.  on  future  revenues  from  the
                 Symskaya project.

                 Equity  and  Leucadia  have  agreed  to  continue  funding  the
                 operations  of  Symskaya,  through at least  December 31, 1997,
                 while the Company conducts its search for additional  financing
                 to fund further exploration activity.

         B.      ACCOUNTING FOR OIL AND GAS OPERATIONS:

                 The  Company  uses the full cost  method of  accounting,  under
                 which the costs of all exploration  and development  activities
                 (both   successful  and   unsuccessful)   are  capitalized  and
                 subsequently amortized to expense using the units-of-production
                 method,  based upon  production and estimates of proved reserve
                 quantities.  Unevaluated costs and related capitalized interest
                 costs  are  excluded  from  the  amortization  base  until  the
                 properties  associated  with  these  costs  are  evaluated  and
                 determined  to  be  productive  or  impaired.  Should  the  net
                 evaluated  capitalized costs exceed the estimated present value
                 of oil and gas  reserves  on a  country-by-country  basis,  the
                 excess would be charged to expense.  Proceeds from disposals of
                 oil and gas properties are applied as reductions of capitalized
                 costs.  Gain or loss is recognized  only on the sale of oil and
                 gas  properties  involving  significant  amounts  of  reserves.
                 During the years ended  December 31, 1996,  1995 and 1994,  the
                 Company  capitalized  interest  of  $1,097,994,   $188,455  and
                 $158,756, respectively, related to its unproved property.

                 In August of 1996,  Symskaya plugged and abandoned the Lemok #1
                 well,  which was the initial test well drilled on the Company's
                 concession. Symskaya subsequently charged the drilling costs of
                 the well to expense.



                                                         

<PAGE>





                    NOTES TO FINANCIAL STATEMENTS, Continued:


1.       SIGNIFICANT ACCOUNTING POLICIES, Continued:

         B.      ACCOUNTING FOR OIL AND GAS OPERATIONS, continued:

                 The remaining  capitalized  costs associated with the Company's
                 uproved  oil  and gas  properties  respresent  the  cost of the
                 concession,  as  well  as  related  equipment  and  capitalized
                 interest costs. Future exploration  activities are dependent on
                 Symskaya's obtaining additional  financing.  Should Symskaya be
                 unable to obtain adequate financing, or should Symskaya abandon
                 the license area for whatever reason, the remaining capitalized
                 costs  would be  charged to  expense  during  the  period  that
                 determination is made.

         C.      FOREIGN OPERATIONS:

                 The Company's exploration  activities are located in Russia and
                 its  functional  and  reporting   currency  is  U.S.   dollars.
                 Aggregate   exchange   gains  and  losses   arising   from  the
                 translation of foreign  currency  transactions  are included in
                 income.

         D.      CASH AND CASH EQUIVALENTS:

                 The  Company  considers  all  highly  liquid  debt  instruments
                 purchased with an original  maturity of three months or less to
                 be cash  equivalents.  The majority of the  Company's  cash and
                 cash  equivalents is held by one financial  institution in Salt
                 Lake City, Utah.

         E.      OVERHEAD INCOME AND EXPENSE:

                  Overhead  expense  represents a monthly  charge to the Company
                  for  management  services  provided by Equity.  This charge is
                  borne  equally by Equity and  Leucadia,  and is  recognized as
                  overhead  income by the Company  upon  issuance of invoices to
                  Equity and Leucadia.

         F.      ESTIMATES:

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



                                                         

<PAGE>





                    NOTES TO FINANCIAL STATEMENTS, Continued:


2.       NOTES PAYABLE:

         Through December 31, 1993, the Company borrowed  $1,740,519 from Equity
         under a note payable which bears interest at the rate of prime plus two
         percent (10.5% at December 31, 1996) with a cap of twelve (12%) percent
         from and after January 1, 1994. Subsequent to the plugging of the Lemok
         #1 well,  Equity and Leucadia  agreed to suspend  interest  payments on
         Symskaya's  note with Equity.  Unpaid  interest will continue to accrue
         until  exploration   operations  resume,  or  until  the  sale  of,  or
         production of oil and gas from, the Symskaya project. Interest incurred
         between  January 1, 1994 and August 31, 1996 will be repaid using funds
         advanced  by  Equity  and  Leucadia,  and is  classified  as a  current
         liability.  The interest accrued before and after this repayment period
         and the unpaid  principal  balance  will become due upon the receipt of
         any  proceeds by the Company from its Russian  project.  If no proceeds
         are received,  the principal balance of the note and any unpaid accrued
         interest will be forfeited by Equity.  The unpaid interest  accrued and
         note  payable have been  classified  as long-term as no amounts will be
         repaid during 1997.

         As agreed  upon by Equity  and  Leucadia  effective  January  1,  1994,
         advances  to the  Company  are  treated as  interest  bearing  notes or
         equity. The notes are evidenced by loan agreements, with interest being
         accrued at prime rates in effect for the terms of the loans.  The loans
         have a primary term of five years,  at which time accrued  interest and
         principal will be repaid.

         During the years ended December 31, 1995 and 1994,  Equity and Leucadia
         each advanced $2,649,047 and $1,259,356,  respectively, to the Company.
         Such advances were  non-interest  bearing  during 1995 and 1994, but at
         the option of the  stockholders a portion became interest bearing notes
         as mutually agreed upon by the  stockholders  during 1996. In addition,
         Equity and Leucadia have each designated a portion of their advances as
         contributed capital as of December 31, 1996.

3.       INCOME TAXES:

         The Company  accounts  for income  taxes using the asset and  liability
         approach in accordance with Statement of Financial Accounting Standards
         (SFAS) No.  109,  "Accounting  for Income  Taxes".  The Company had net
         operating loss  carryforwards of approximately  $11,102,000 at December
         31, 1996,  which are available to offset future  taxable income through
         2007 and 2011.  The Company  recognized  no income tax benefit from its
         net losses in 1996, 1995 and 1994.



                                                        

<PAGE>








                    NOTES TO FINANCIAL STATEMENTS, Continued:


3.       INCOME TAXES, continued:

         The components of the net deferred tax asset as of December 31, 1996
         and
         December 31, 1995 are as follows:

                                                 December 31,      December 31,
                                                     1996              1995

             Deferred tax asset:
             Net operating loss carryforwards    $ 4,163,400       $ 48,000

             Valuation allowance                  (4,163,400)       (48,000)
                                                  ----------        -------

             Net deferred tax asset              $         -       $      -
                                                  ==========        =======


          The valuation allowance increased by $4,115,400,  $400 and $350 during
          the years ended December 31, 1996, 1995 and 1994, respectively.