<PAGE>   1
 
      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1998
                                                 REGISTRATION NO. 333-
================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ---------------------
 
                                    FORM S-4
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                             ---------------------
 
                          VISTA ENERGY RESOURCES, INC.
             (Exact name of Registrant as specified in its charter)
 
<TABLE>
<S>                             <C>                             <C>
           DELAWARE                          1311                         75-2766114
 (State or other jurisdiction    (Primary Standard Industrial          (I.R.S. Employer
      of incorporation or         Classification Code Number)       Identification Number)
         organization)
                                                              C. RANDALL HILL
                                                    CHAIRMAN AND CHIEF EXECUTIVE OFFICER
                                                        VISTA ENERGY RESOURCES, INC.
           550 WEST TEXAS AVENUE                           550 WEST TEXAS AVENUE
                 SUITE 700                                       SUITE 700
            MIDLAND, TEXAS 79701                            MIDLAND, TEXAS 79701
               (915) 570-5045                                  (915) 570-5045
(Address, including zip code, and telephone       (Name, address, including zip code, and
number, including area code, of Registrant's     telephone number, including area code, of
        principal executive offices)                         agent for service)
</TABLE>
 
                             ---------------------
                                   Copies to:
 
<TABLE>
<S>                                            <C>
               A. WINSTON OXLEY                              VERNON E. REW, JR.
            VINSON & ELKINS L.L.P.                      LAW, SNAKARD & GAMBILL, P.C.
               2001 ROSS AVENUE                               500 THROCKMORTON
                  SUITE 3700                                     SUITE 3200
             DALLAS, TEXAS 75201                          FORT WORTH, TEXAS 76102
                (214) 220-7700                                 (817) 335-7373
</TABLE>
 
                             ---------------------
     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
 
     If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
 
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
                             ---------------------
                        CALCULATION OF REGISTRATION FEE
 
<TABLE>
<CAPTION>
================================================================================================================
                                                                           PROPOSED MAXIMUM        AMOUNT OF
   TITLE OF EACH CLASS OF         AMOUNT TO        PROPOSED MAXIMUM       AGGREGATE OFFERING     REGISTRATION
 SECURITIES TO BE REGISTERED    BE REGISTERED   OFFERING PRICE PER UNIT         PRICE               FEE(1)
----------------------------------------------------------------------------------------------------------------
<S>                           <C>               <C>                     <C>                    <C>
Common Stock, par value $.01
  per share..................     4,467,699             $2.19                 $9,784,261           $2,886.36
----------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01
  per share(2)...............     2,253,094             $2.19                 $4,934,276           $1,455.61
================================================================================================================
</TABLE>
 
(1) Estimated solely for the purpose of calculating the registration fee in
    accordance with Rule 457(c) under the Securities Act of 1933.
 
(2) Issuable upon exercise of warrants.
                             ---------------------
     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>   2
 
                            MIDLAND RESOURCES, INC.
                          616 FM 1960 West, Suite 600
                              Houston, Texas 77090
 
Dear Stockholder:
 
     You are cordially invited to attend a Special Meeting of Stockholders of
Midland Resources, Inc. ("Midland") to be held at 10:00 a.m. Midland, Texas time
on             , 1998 at                . I hope that you will be present or
represented by proxy at this important meeting.
 
     Midland has entered into an agreement and plan of merger (the "Merger
Agreement") with Vista Resources Partners, L.P. ("the Vista Partnership") that
provides for Midland to become a subsidiary of Vista Energy Resources, Inc.
("Vista"), currently a newly created subsidiary of the Vista Partnership. The
transaction involving Midland will require Midland Merger Co., currently a newly
created subsidiary of Vista, to be merged into Midland, resulting in Midland
becoming a subsidiary of Vista (the "Merger"). As contemplated by the Merger
Agreement, each of the limited partners of the Vista Partnership and each of the
stockholders of Vista Resources I, Inc., the general partner of the Vista
Partnership (the "General Partner"), have entered into exchange agreements
pursuant to which each such holder's limited partnership interests in the Vista
Partnership and shares of common stock in the General Partner will be exchanged
(the "Vista Exchange") for shares of common stock of Vista contemporaneously
with the Merger. As a result of the Merger and the Vista Exchange, a new
publicly held oil and gas exploration and development company will be created
that will own interests in 497 gross oil and gas wells located in Texas, New
Mexico, Colorado and Illinois and operate 402 gross oil and gas wells located in
Texas and New Mexico, that had a combined production in 1997 of approximately
596,392 Bbls of oil and 1,772,407 Mcf of gas.
 
     The purpose of the Special Meeting is to approve the Merger Agreement among
Midland, the Vista Partnership, Vista and Merger Sub. Your Board of Directors
has determined that the Merger is fair to and in the best interests of Midland
and its stockholders. YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT.
 
     The Merger and related matters are described in greater detail in the
accompanying Proxy Statement/ Prospectus, which you are urged to read carefully
and in its entirety.
 
     Approval and adoption of the Merger Agreement to be voted on at the Special
Meeting requires the affirmative vote of the holders of at least two-thirds
(66 2/3%) of the outstanding shares of Midland Common Stock. Holders of Midland
Common Stock will not be entitled to dissenters' rights in connection with the
Merger.
 
     WE URGE YOU TO CONSIDER THESE IMPORTANT MATTERS, WHICH ARE DESCRIBED IN THE
ENCLOSED PROXY STATEMENT/ PROSPECTUS. In order to ensure that your vote is
represented at the Special Meeting, whether or not you plan to attend the
Special Meeting, PLEASE INDICATE YOUR CHOICE ON THE ENCLOSED PROXY CARD, DATE
AND SIGN IT, AND RETURN IT IN THE ENCLOSED ENVELOPE. Your prompt response will
be greatly appreciated. If you are able to attend the Special Meeting, you may
revoke your proxy at any time before its exercise and may, of course, vote your
shares in person.
 
Sincerely,
 
Wayne M. Whitaker             Robert R. Donnelly             Deas H. Warley III
Chairman of the Board         President, Director                      Director
of Directors                 
                             ---------------------
 
     THE BOARD OF DIRECTORS OF MIDLAND RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT TO BE PRESENTED AT THE
SPECIAL MEETING.
 
     PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING. YOUR PROXY WILL BE REVOCABLE, EITHER IN
WRITING OR BY VOTING IN PERSON AT THE SPECIAL MEETING, AT ANY TIME PRIOR TO ITS
EXERCISE.
 
                             YOUR VOTE IS IMPORTANT
                 PLEASE VOTE, SIGN, DATE AND RETURN YOUR PROXY
<PAGE>   3
 
                            MIDLAND RESOURCES, INC.
                          616 FM 1960 West, Suite 600
                              Houston, Texas 77090
 
                   NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
                         TO BE HELD             , 1998
 
To the Stockholders of Midland Resources, Inc.:
 
    NOTICE IS HEREBY GIVEN that a special meeting of Stockholders (the "Special
Meeting") of Midland Resources, Inc., a Texas corporation ("Midland"), has been
called by the Board of Directors of Midland and will be held at               ,
Texas               , at 10:00 a.m. Midland, Texas time on            , 1998 to
consider and vote upon the following matters described in the accompanying Proxy
Statement/Prospectus:
 
        (1) To consider and vote upon a proposal to adopt and approve the
    Agreement and Plan of Merger, dated as of May 22, 1998, as it may be
    amended, supplemented or modified from time to time (the "Merger
    Agreement"), by and among Midland, Vista Resources Partners, L.P., a Texas
    limited partnership ("the Vista Partnership"), Vista Energy Resources, Inc.,
    a Delaware corporation and a direct wholly owned subsidiary of the Vista
    Partnership ("Vista"), and Midland Merger Co., a Texas corporation and a
    direct wholly owned subsidiary of Vista ("Merger Sub"), pursuant to which
    Merger Sub will be merged into Midland; and
 
        (2) Such other business as may properly come before the Special Meeting
    or any adjournments or postponements thereof.
 
    Notwithstanding stockholder approval of the Merger Agreement, Midland
reserves the right to abandon the Merger at any time prior to the consummation
of the Merger, subject to the terms and conditions of the Merger Agreement and
applicable law.
 
    The Board of Directors has fixed the close of business on               ,
1998, as the record date for determination of stockholders entitled to notice of
and to vote at such meeting or any adjournments or postponements thereof.
 
    Approval and adoption of the Merger Agreement to be voted on at the Special
Meeting requires the affirmative vote of the holders of at least two-thirds
(66 2/3%) of the outstanding shares of Midland Common Stock. Holders of Midland
Common Stock will not be entitled to dissenters' rights in connection with the
Merger.
 
    A proxy card and Proxy Statement/Prospectus containing more detailed
information with respect to the Merger (including the Merger Agreement attached
as Appendix A thereto) accompany and form a part of this notice.
 
By Order of the Board of Directors,
 
Marilyn D. Wade
Secretary
Houston, Texas
           , 1998
                             ---------------------
 
     THE BOARD OF DIRECTORS OF MIDLAND RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT TO BE PRESENTED AT THE
SPECIAL MEETING.
 
     PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY, WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING. YOUR PROXY WILL BE REVOCABLE, EITHER IN
WRITING OR BY VOTING IN PERSON AT THE SPECIAL MEETING, AT ANY TIME PRIOR TO ITS
EXERCISE.
 
                             YOUR VOTE IS IMPORTANT
                 PLEASE VOTE, SIGN, DATE AND RETURN YOUR PROXY
<PAGE>   4
 
                            MIDLAND RESOURCES, INC.
 
                                PROXY STATEMENT
                             ---------------------
 
                          VISTA ENERGY RESOURCES, INC.
 
                                   PROSPECTUS
 
    This Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") is being
furnished to holders of shares of common stock, par value $.001 per share
("Midland Common Stock"), of Midland Resources, Inc., a Texas corporation
("Midland"), in connection with the solicitation of proxies by the board of
directors of Midland (the "Midland Board") for use at the meeting of Midland
stockholders (the "Midland Meeting") to be held at 10:00 a.m. (Midland, Texas
time) on           , 1998, at             and any adjournment or postponement
thereof.
 
    This Proxy Statement/Prospectus relates to an Agreement and Plan of Merger,
dated as of May 22, 1998 (the "Merger Agreement"), among Midland, Vista
Resources Partners, L.P., a Delaware limited partnership (the "Vista
Partnership"), Vista Energy Resources, Inc., a Delaware corporation ("Vista"),
and Midland Merger Co., a Texas corporation ("Merger Sub"). The Merger Agreement
provides for the merger (the "Merger") of Merger Sub with and into Midland with
Midland being the surviving corporation (the "Surviving Subsidiary"). As a
result of the Merger, (a) each issued and outstanding share of Midland Common
Stock will be converted into the right to receive one share of common stock, par
value $.01 per share, of Vista ("Vista Common Stock"), (b) each Midland Stock
Option (as defined herein) (other than the Midland Exchange Stock Options (as
defined herein)) and each outstanding Midland Warrant (as defined herein) shall
remain outstanding following consummation of the Merger (the "Effective Time"),
at which time such options and warrants will be assumed by Vista and will be
exercisable for shares of Vista Common Stock and (c) each other outstanding
right, warrant, option, convertible security or indebtedness, exchangeable
security or other instrument, or other right (other than the Midland Stock
Options and Midland Warrants) exercisable for or convertible or exchangeable
into, directly or indirectly, shares of Midland Common Stock at the time of
issuance or upon the passage of time or occurrence of some future event (each a
"Midland Common Stock Warrant") shall remain outstanding following the Effective
Time, at which time such warrants will be assumed by Vista and will be
exercisable for shares of Vista Common Stock.
 
    During May and June of 1998, and as contemplated by the Merger Agreement,
Sam R. Brock, a director of Midland, Darrell M. Dillard, a director of Midland,
Robert R. Donnelly, president and a director of Midland, Wayne M. Whitaker, a
director of Midland, John Q. Adams, an advisory director of Midland and Marilyn
D. Wade, corporate secretary of Midland, who hold all issued and outstanding
options to acquire shares of Midland Common Stock ("Midland Exchange Stock
Options") granted pursuant to the Midland Resources, Inc. 1997 Board of
Directors' Stock Incentive Plan (the "Midland Directors Plan"), and 137,931
options granted pursuant to the 1996 Midland Resources, Inc. Long-Term Incentive
Plan (the "Midland Incentive Plan") entered into separate exchange agreements
with Vista (collectively, the "Midland Exchange Agreement"). Pursuant to the
terms of such agreement, at the Effective Time, without any action on the part
of any holder thereof, each Midland Exchange Stock Option will be exchanged for
a warrant having an initial exercise price of $4.00 per share (a "Vista
Warrant") that is exercisable for that whole number of shares of Vista Common
Stock (to the nearest whole share) equal to the product of (x) .725 times (y)
the number of shares of Vista Common Stock into which the shares of Midland
Common Stock subject to such Midland Exchange Stock Option would be converted
pursuant to the Merger. Pursuant to the Midland Exchange Agreement, no payment
shall be made for fractional interests. Pursuant to the terms of the Midland
Exchange Agreement, each Midland Exchange Stock Option subject thereto shall be
terminated immediately following its exchange for a Vista Warrant.
 
    During May and June of 1998, and as contemplated by the Merger Agreement,
the holders of all of the outstanding shares of common stock, par value $.01 per
share ("GP Common Stock"), of Vista Resources I, Inc., the sole general partner
of the Vista Partnership (the "General Partner"), and the holders of all of the
outstanding limited partnership interests ("Partnership Interests") in the Vista
Partnership entered into separate exchange agreements with Vista (collectively,
the "Vista Exchange Agreement"). Pursuant to the terms of such agreement, at the
Effective Time, without any action on the part of any holder thereof, (a) each
share of GP Common Stock that is issued and outstanding prior to the Effective
Time shall be exchanged (the "Vista Exchange") for (i) a number of shares of
Vista Common Stock equal to 1.60089817 (the "Vista GP Conversion Stock Number")
and (ii) a Vista Warrant that is exercisable for a number of shares of Vista
Common Stock equal to 1.16511028 (the "Vista GP Conversion Warrant Number") and
(b) each Partnership Interest that is issued and outstanding prior to the
Effective Time shall be exchanged for (i) a number of shares of Vista Common
Stock equal to 117,674.06 (the "Vista LP Conversion Stock Number") and (ii) a
Vista Warrant that is exercisable for a number of shares of Vista Common Stock
Equal to 85,641.46 (the "Vista LP Conversion Warrant Number"). As provided in
the Vista Exchange Agreement, any fractional Partnership Interest shall be
likewise exchanged on a pro rata basis.
 
    As a result of the Merger, Midland stockholders will receive 27.5% of the
outstanding shares of Vista Common Stock in exchange for their shares of Midland
Common Stock, with such transaction being tax free under Sections 351 and 368 of
the Internal Revenue Code of 1986, as amended (the "Code"). As a result of the
Vista Exchange, the former holders of Partnership Interests in the Vista
Partnership and shares of GP Common Stock will hold 72.5% of the shares of Vista
Common Stock and Vista Warrants outstanding upon consummation of the Merger. The
Vista owners will receive additional shares of Vista Common Stock in order to
maintain their 72.5% sharing ratio based on the number of Midland Common Stock
Warrants whose exercise price is equal to or less than the American Stock
Exchange (the "ASE") trading price of Midland Common Stock for any of the five
days prior to the closing of the Merger ("Midland Exercisable Warrants").
 
    Vista has filed a registration statement pursuant to the Securities Act of
1933 (the "Securities Act") covering the shares of Vista Common Stock issuable
in connection with the Merger. This Proxy Statement/Prospectus constitutes the
Prospectus filed as a part of the registration statement and is being furnished
to stockholders of Midland in connection with the solicitation of proxies by the
Midland Board for use at Midland's special meeting of stockholders (or any
adjournment or postponement thereof), scheduled to be held on             , 1998
(the "Midland Meeting").
 
    The shares of Midland Common Stock are listed on the ASE under the symbol
"MLD." On June 15, 1998, the last reported sales price of Midland Common Stock
was $2 7/8. Application will be made for the shares of Vista Common Stock to be
listed on the ASE.
 
    This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to stockholders of Midland on or about           , 1998.
 
    All information in this Proxy Statement/Prospectus relating to Midland has
been supplied by Midland and all information relating to the Vista Partnership
and Vista has been supplied by Vista. Certain capitalized terms used in this
Proxy Statement/Prospectus without definition have the meanings ascribed thereto
in the Glossary of Terms.
 
     SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR CERTAIN CONSIDERATIONS RELEVANT
TO APPROVAL OF THE PROPOSAL AND AN INVESTMENT IN THE SECURITIES REFERRED TO
HEREIN.
                             ---------------------
 
    No person is authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus and, if given or
made, such information or representation should not be relied upon as having
been authorized. This Proxy Statement/Prospectus does not constitute an offer to
sell, or a solicitation of an offer to purchase, any securities, or the
solicitation of a proxy, by any person in any jurisdiction in which such an
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so or to any person to whom it is
unlawful to make such an offer or solicitation of an offer or proxy
solicitation. Neither delivery of this Proxy Statement/Prospectus nor any
distribution of the securities referred to in this Proxy Statement/Prospectus
shall, under any circumstances, create an implication that there has been no
change in the information set forth therein since the date of this Proxy
Statement/Prospectus.
                             ---------------------
 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY OTHER STATE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
 
       The date of this Proxy Statement/Prospectus is             , 1998.
<PAGE>   5
 
                               TABLE OF CONTENTS
 
<TABLE>
<S>                                                            <C>
SUMMARY.....................................................     4
RISK FACTORS................................................    12
THE COMPANIES...............................................    17
THE MIDLAND MEETING.........................................    18
MARKET PRICE DATA...........................................    18
THE MERGER..................................................    20
  General...................................................    20
  The Merger................................................    20
  The Vista Exchange........................................    20
  The Midland Exchange......................................    21
  Vista Ownership Chart.....................................    21
  Background of the Merger..................................    22
  Recommendation of Midland's Board of Directors; Midland's
     Reasons for the Merger.................................    25
  Opinion of Midland's Financial Advisor....................    26
  Other Agreements..........................................    31
  Interests of Certain Persons in the Merger................    32
  Certain Income Tax Consequences...........................    33
  Accounting Treatment......................................    35
  Registration Rights.......................................    35
  Stock Exchange Listing....................................    36
  Restrictions on Resales by Affiliates.....................    36
  Dissenters' Rights........................................    36
VISTA.......................................................    37
CAPITALIZATION..............................................    41
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF VISTA
  ENERGY RESOURCES, INC.....................................    42
MIDLAND.....................................................    52
THE VISTA PARTNERSHIP.......................................    72
CERTAIN TERMS OF THE AGREEMENTS.............................    91
OWNERSHIP OF MIDLAND AND VISTA COMMON STOCK.................   101
CERTAIN TRANSACTIONS........................................   103
DESCRIPTION OF VISTA CAPITAL STOCK..........................   105
VISTA STOCK OPTION PLAN.....................................   106
REGISTRATION RIGHTS FOR VISTA STOCKHOLDERS..................   109
COMPARISON OF STOCKHOLDER RIGHTS............................   109
DISSENTERS' RIGHTS..........................................   112
LEGAL MATTERS...............................................   112
TAX OPINION.................................................   112
EXPERTS.....................................................   112
STOCKHOLDER PROPOSALS.......................................   112
GLOSSARY OF TERMS...........................................   113
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS..................   F-1
</TABLE>
 
                                        2
<PAGE>   6
 
                       AVAILABLE INFORMATION FOR MIDLAND
 
     Midland is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, file
reports, proxy statements other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by Midland with the Commission can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the
Commission's Regional Offices at Seven World Trade Center, Suite 1300, New York,
New York 10048 and at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material also can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, at prescribed rates. Such material may also be
accessed electronically at the Commission's site on the World Wide Web located
at http://www.sec.gov.
 
     The shares of Midland Common Stock are currently listed on the ASE, and
such material relating to Midland may also be inspected at the offices of the
ASE, 86 Trinity Place, New York, New York 10006. After consummation of the
Merger, Midland will no longer file reports, proxy statements or other
information with the Commission. Instead, such information would be provided, to
the extent required, in filings made by Vista. Application will be made for
listing of the Vista Common Stock on the ASE. Accordingly, after receiving
approval from the ASE, such material may also be inspected at the offices of the
ASE, 86 Trinity Place, New York, New York 10006 after consummation of the
Merger.
 
     This Proxy Statement/Prospectus is included as part of a Registration
Statement on Form S-4 (together with all amendments, exhibits and schedules
thereto, including documents and information incorporated therein by reference,
the "Registration Statement") filed with the Commission by Vista relating to the
registration under the Securities Act, (i) with respect to the shares of Vista
Common Stock to be issued to holders of outstanding shares of Midland Common
Stock and the upon consummation of the Merger and (ii) issuable upon exercise of
the warrants issued and outstanding under that certain Warrant Agreement dated
as of November 1, 1990 by and between Midland and Stock Transfer Company of
America, Inc. (the "Midland Warrants") that will be assumed by Vista in the
Merger. This Proxy Statement/Prospectus does not contain all of the information
set forth in the Registration Statement, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission. Such
additional information is available for inspection and copying at the offices of
the Commission. Statements contained in this Proxy Statement/ Prospectus as to
the contents of any contract or other document referred to herein are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement or
such other document, each such statement being qualified in all respects by such
reference.
 
                                        3
<PAGE>   7
 
                                    SUMMARY
 
     The following is a summary of certain information contained elsewhere in
this Proxy Statement/ Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained in this
Proxy Statement/Prospectus. Stockholders are urged to carefully read this Proxy
Statement/Prospectus in its entirety. As used in this Proxy
Statement/Prospectus, unless otherwise required by the context, the term
"Midland" refers to the historical results of Midland Resources, Inc. and its
consolidated subsidiaries and the term "the Vista Partnership" refers to the
historical results of Vista Resources Partners, L.P. and its consolidated
subsidiaries. Unless otherwise indicated, all reserve information is as of
December 31, 1997. Certain terms relating specifically to the transactions
described in this Proxy Statement/Prospectus and relating to the oil and gas
business and used herein are defined in the "Glossary of Terms" included
elsewhere in this Proxy Statement/Prospectus.
 
GENERAL
 
     At the Midland Meeting, the stockholders of Midland will be asked to
approve the Merger Agreement pursuant to which Merger Sub will merge with and
into Midland. A copy of the Merger Agreement is attached to this Proxy
Statement/Prospectus as Appendix A.
 
     As a result of the Merger, (a) each issued and outstanding share of Midland
Common Stock will be converted into the right to receive one share of Vista
Common Stock, (b) each issued and outstanding option to acquire shares of
Midland Common Stock granted pursuant to any of the Midland Stock Plans (each a
"Midland Stock Option") (other than the Midland Exchange Stock Options) and each
outstanding Midland Warrant shall remain outstanding following the Effective
Time, at which time such options and warrants will be assumed by Vista and will
be exercisable for shares of Vista Common Stock and (c) each Midland Common
Stock Warrant shall remain outstanding following the Effective Time, at which
time such warrants will be assumed by Vista and will be exercisable for shares
of Vista Common Stock.
 
     During May and June of 1998, and as contemplated by the Merger Agreement,
Sam R. Brock, a director of Midland, Darrell M. Dillard, a director of Midland,
Robert R. Donnelly, president and a director of Midland, Wayne M. Whitaker, a
director of Midland, John Q. Adams, an advisory director of Midland and Marilyn
D. Wade, corporate secretary of Midland, who hold all issued and outstanding
Midland Exchange Stock Options granted pursuant to the Midland Directors Plan,
and 137,931 options granted pursuant to the Midland Incentive Plan entered into
the Midland Exchange Agreement. Pursuant to the terms of such agreement, at the
Effective Time, without any action on the part of any holder thereof, each
Midland Exchange Stock Option will be exchanged for a Vista Warrant that is
exercisable for that whole number of shares of Vista Common Stock (to the
nearest whole share) equal to the product of (x) .725 times (y) the number of
shares of Vista Common Stock into which the shares of Midland Common Stock
subject to such Midland Exchange Stock Option would be converted pursuant to the
Merger. Pursuant to the Midland Exchange Agreement, no payment shall be made for
fractional interests. Pursuant to the terms of the Midland Exchange Agreement,
each Midland Exchange Stock Option subject thereto shall be terminated
immediately following its exchange for a Vista Warrant.
 
     Pursuant to the terms of the Midland Exchange Agreement, the holders of
Midland Exchange Stock Options will receive warrants exercisable for 995,375
shares of Vista Common Stock, representing 5.8% of such shares outstanding at
the Effective Time (assuming for purposes of this calculation exercise of all
such warrants as of such time).
 
     During May and June of 1998, and as contemplated by the Merger Agreement,
the holders of all of the outstanding GP Common Stock and the holders of all of
the outstanding Partnership Interests entered into the Vista Exchange Agreement.
Pursuant to the terms of such agreement, at the Effective Time, without any
action on the part of any holder thereof, (a) each share of GP Common Stock that
is issued and outstanding prior to the Effective Time shall be exchanged for (i)
a number of shares of Vista Common Stock equal to the Vista GP Conversion Stock
Number (being 1.60089817) and (ii) a Vista Warrant that is exercisable for a
number of shares of Vista Common Stock equal to the Vista GP Conversion Warrant
Number (being 1.16511028) and (b) each Partnership Interest that is issued and
outstanding prior to the Effective Time shall
                                        4
<PAGE>   8
 
be exchanged for (i) a number of shares of Vista Common Stock equal to the Vista
LP Conversion Stock Number (being 117,674.06) and (ii) a Vista Warrant that is
exercisable for a number of shares of Vista Common Stock Equal to the Vista LP
Conversion Warrant Number (being 85,641.46). As provided in the Vista Exchange
Agreement, any fractional Partnership Interest shall be likewise exchanged on a
pro rata basis.
 
     Pursuant to the terms of the Vista Exchange Agreement, the holders of GP
Common Stock and Partnership Interests will receive 11,778,479 shares of Vista
Common Stock, representing 72.5% of such shares outstanding at the Effective
Time, and warrants exercisable for 8,564,146 shares of Vista Common Stock,
representing 34.5% of such shares outstanding at the Effective Time (assuming
for purposes of this calculation exercise of all such warrants as of such time).
 
THE COMPANIES
 
     Midland. Midland is a Texas independent oil and gas corporation engaged in
the exploration, acquisition, development, exploitation and production of oil
and gas properties. The principal executive offices of Midland are located at
616 FM 1960 West, Suite 600, Houston, Texas 77090, and its telephone number at
such offices is (281) 580-9989.
 
     The Vista Partnership. The Vista Partnership is a Texas limited partnership
engaged in the exploration, acquisition, development, exploitation and
production of oil and gas properties. The principal executive offices of the
Vista Partnership are located at 550 West Texas Avenue, Suite 700, Midland,
Texas 79701, and its telephone number at such offices is (915) 570-5045.
 
     Vista. Vista is a newly formed Delaware corporation and wholly owned
subsidiary of the Vista Partnership that has not, to date, conducted any
significant activities other than those incident to its formation, its execution
of the Merger Agreement and its participation in the preparation of this Proxy
Statement/ Prospectus. Vista has no material assets or liabilities, other than
its rights and obligations under the Merger Agreement and the Vista Exchange
Agreement, and has not generated any material revenues or expenses. The Merger
and the Vista Exchange will create a newly formed independent oil and gas
company by combining the oil and gas reserves, operations and businesses of the
Vista Partnership and Midland. Drilling and production operations will be
located in Texas and New Mexico. The principal executive offices of Vista are
located at 550 West Texas Avenue, Suite 700, Midland, Texas 79701, and its
telephone number at such offices is (915) 570-5045.
 
     Vista's principal strength and strategies will include the following:
 
     - Vista will have over 14.0 MMBOE of total proved reserves, comprised of
       25.2 Bcf of natural gas and 9.9 MMBbls of crude oil, with an SEC PV10 of
       approximately $56.4 million and Vista's daily production is expected to
       be over 1,800 Bbls of oil and 5,200 Mcf of natural gas;
 
     - Vista will operate over 400 producing wells, representing over 92% of its
       total proved reserves and increasing its control over the implementation
       of its strategies and projects;
 
     - Vista's management team will be led by C. Randall Hill, Steven D. Gray
       and R. Cory Richards, the current Chairman and Chief Executive Officer,
       President and Vice President -- Exploration, respectively, of the General
       Partner of the Vista Partnership, with over 35 years of collective
       experience in the oil and gas industry; and
 
     - Vista intends to pursue its primary corporate objective to rapidly expand
       its reserve base, production capacity, cash flow and earnings by: (i)
       acquiring domestic, proved oil and gas properties with realizable upside
       potential; (ii) exploiting such properties through a comprehensive
       program of workovers, recompletions, developmental and exploratory
       drilling, and secondary recovery projects using sophisticated technology;
       (iii) reducing costs at all levels of its business; and (iv) internally
       generating exploration projects where Vista can operate and control the
       timing and costs of such exploration efforts.
 
                                        5
<PAGE>   9
 
THE MIDLAND MEETING
 
     Date, Time and Place. The Midland Meeting will be held on                ,
1998 at 10:00 a.m., Midland, Texas time, at                ,                ,
Texas                .
 
     Purpose of Midland Meeting. At the Midland Meeting the stockholders of
Midland will be asked to consider and vote upon the proposal to approve and
adopt the Merger Agreement, which is summarized below and described in more
detail elsewhere in this Proxy Statement/Prospectus. See "Certain Terms of the
Agreements."
 
     Record Date; Holders Entitled to Vote. The Midland Board has established
            , 1998 ("Midland Record Date") as the date to determine those record
holders of Midland Common Stock entitled to notice of and to vote at the Midland
Meeting and any adjournments or postponements thereof.
 
     Quorum; Vote Required. The presence, in person or by proxy, of the holders
of a majority of the shares entitled to vote is necessary to constitute a quorum
at the Midland Meeting. Approval and adoption of the Merger Agreement to be
voted on at the Midland Meeting requires the affirmative vote of the holders of
at least two-thirds (66 2/3%) of the outstanding shares of Midland Common Stock.
Holders of Midland Common Stock will not be entitled to dissenters' rights in
connection with the Merger.
 
RECOMMENDATION OF MIDLAND'S BOARD OF DIRECTORS; MIDLAND'S REASONS FOR THE MERGER
 
     The Midland Board believes that the terms of the Merger Agreement and the
transactions contemplated thereby are fair to and in the best interests of
Midland and its stockholders. Accordingly, the Midland Board has approved the
Merger Agreement and recommended approval and adoption thereof by the
stockholders of Midland. In reaching its determination, the Midland Board
consulted with Midland management and considered a number of factors, including
without limitation the following:
 
     Strategic Considerations. An assessment of Midland's current operational
and financial position and strategic alternatives that would enhance stockholder
value, including remaining a separate company, selling additional equity or
debt, and making acquisitions or divestitures of assets. In this respect, the
Midland Board concluded, following extensive discussions with Midland's
management and among the directors, that the transactions contemplated by the
Merger Agreement provided the best means for holders of Midland Common Stock to
maximize the value of their holdings.
 
     Property Characteristics. The level of operational control and the location
of the Vista Partnership's properties, the long life nature of the Vista
Partnership's properties, the relative amount of oil properties versus gas
properties and the amount of development potential of Midland's properties.
 
     Financial. Information concerning the financial performance, financial
condition, business operations and prospects of each of the Vista Partnership
and Midland;
 
     Efficiencies. The opportunities for operating efficiencies that are
anticipated to result from the Merger, particularly in terms of the integration
of office facilities, technical personnel and support functions;
 
     Management. The management strengths of the Vista Partnership in building
equity value and the experience of Natural Gas Partners II, L.P. and Natural Gas
Partners III, L.P. (collectively, "NGP"), which will be the largest stockholder
of Vista upon consummation of the Merger, in assisting their portfolio companies
execute their business plans.
 
     Access to Capital. Improvements in the combined company's ability to access
the capital markets and otherwise increase its financial flexibility;
 
     Exchange Ratio/Market Price. The exchange ratio of shares of Vista Common
Stock issuable for shares of Midland Common Stock upon consummation of the
Merger (the "Midland Conversion Number") and recent trading prices for Midland
Common Stock and the belief of the Midland Board, following analyses and
discussions with Midland's management and among the directors, that the Midland
Conversion Number was fair and in the best interests of the Midland
stockholders; and
 
                                        6
<PAGE>   10
 
     Fairness Opinion. The opinion of Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated, to the effect that the Merger is fair to the holders of
Midland Common Stock from a financial point of view.
 
     The Midland Board believes that the Merger offers the opportunity to create
a combined company that will have greater competitive strengths, business
opportunities, financial resources and flexibility than Midland could achieve
alone.
 
OPINION OF MIDLAND'S FINANCIAL ADVISOR
 
     At the May 21, 1998 meeting of the Midland Board held to consider and vote
on entering into the Merger Agreement, the Midland Board considered the
presentation made by the representatives of Dain Rauscher Wessels, a division of
Dain Rauscher Incorporated, regarding its preliminary valuation and financial
analysis of the Merger, that was confirmed by its final valuation and financial
analysis presented at a meeting of the Midland Board on June 25, 1998, and in
writing with delivery of its written fairness opinion on June 30, 1998, that the
Merger was fair from a financial point of view to the holders of Midland Common
Stock.
 
     For information on the assumptions made, matters considered and limits of
the review by Dain Rauscher Wessels, and for information concerning compensation
paid or payable to such firm in connection with the Merger, see "The
Merger -- Opinion of Midland's Financial Advisor." Midland Stockholders are
urged to read in its entirety the full text of the opinion of Dain Rauscher
Wessels, which is set forth as Appendix D-1 and D-2 to this Proxy
Statement/Prospectus.
 
INTERESTS OF CERTAIN PERSONS
 
     In considering the recommendation of the Midland Board, stockholders should
be aware that certain members of the boards of directors and certain executive
officers of Vista and Midland have interests in the Merger separate from their
interests as stockholders. See "The Merger -- Interests of Certain Persons in
the Merger."
 
ACCOUNTING TREATMENT
 
     The Merger and the Midland Exchange will be accounted for as a purchase of
Midland by Vista for financial accounting purposes. See "The
Merger -- Accounting Treatment."
 
CERTAIN TAX CONSEQUENCES
 
     The Merger has been structured to qualify as a reorganization under the
Code. Midland received an opinion from Arthur Andersen LLP to the effect that
the Merger should be treated as a reorganization under the Code. See "The
Merger -- Certain Income Tax Consequences."
 
DISSENTERS' RIGHTS
 
     Under Texas law, holders of Midland Common Stock will not be entitled to
any dissenters' rights in connection with the Merger.
 
COMPARISON OF STOCKHOLDER RIGHTS
 
     Rights of stockholders of Midland are currently governed by the Texas
Business Corporation Law, the Articles of Incorporation of Midland and the
Bylaws of Midland. Upon consummation of the Merger, Midland stockholders will
become stockholders of Vista and their rights as Vista stockholders will be
governed by the Delaware General Corporation Law, the Certificate of
Incorporation of Vista and the Bylaws of Vista. There are various differences
between the rights of Midland stockholders and the rights of Vista stockholders.
See "Comparison of Stockholder Rights" and "Description of Vista Capital Stock."
 
                                        7
<PAGE>   11
 
RISK FACTORS
 
     In evaluating the Merger, stockholders should take into account the
following risk factors relating to the Merger, Midland, the Vista Partnership
and Vista, and their respective businesses, which risk factors are discussed at
greater length under the caption "Risk Factors."
 
     - forward-looking statements are contained in this Proxy
       Statement/Prospectus and, although Vista and Midland believe they are
       based on reasonable assumptions, no assurances can be given that actual
       results may not differ from such forward-looking statements;
 
     - the merger consideration to be received by the stockholders of Midland is
       fixed and will not be adjusted due to market conditions or in the event
       of any fluctuations in the price of the Midland Common Stock;
 
     - prices for oil and gas production and the costs of acquiring, finding,
       developing and producing such products are volatile;
 
     - the Vista Partnership's and Midland's reserve information is based upon
       estimates of proved reserves and future net cash flows, which may not
       prove to be accurate;
 
     - Vista's success will depend upon replacement of reserves;
 
     - Vista's success will require substantial capital requirements;
 
     - Vista will have substantial indebtedness upon consummation of the Merger;
 
     - drilling for oil and gas involves a high degree of risk;
 
     - Vista's success will depend upon successful acquisitions and divestitures
       of properties;
 
     - the failure of Midland stockholders to approve the Merger Agreement would
       likely cause Midland to further reduce personnel, consider the sale of
       properties it would prefer not to sell at current market prices to reduce
       debt, and possibly take other actions that the Midland Board does not
       presently consider to be as advantageous to the Midland stockholders as
       the Merger;
 
     - substantially all of Vista's oil and gas properties will be mortgaged to
       secure borrowings from its lenders;
 
     - Vista's success will depend upon key personnel;
 
     - a majority of Vista's capital stock will be controlled by a single
       stockholder;
 
     - oil and gas operations involve risks that may not be fully insured;
 
     - governments regulate the oil and gas industry extensively;
 
     - oil and gas production, development and exploration activities are highly
       competitive;
 
     - certain Vista stockholders will have the right to require Vista to
       register their Vista Common Stock;
 
     - restrictions will exist on the payment of dividends under Vista's Credit
       Facility (as defined herein);
 
     - Vista Common Stock will not have a public market before the Merger and no
       assurances can be given that an active public market for such stock will
       develop or be sustained; and
 
     - the price of Vista Common Stock may be volatile.
 
                                        8
<PAGE>   12
 
SUMMARY SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF THE VISTA PARTNERSHIP
 
     The following table sets forth selected consolidated financial information
of the Vista Partnership for the three months ended March 31, 1998 and 1997, and
for the years ended December 31, 1997 and 1996 and for the period from inception
(September 21, 1995) to December 31, 1995. This data should be read in
conjunction with the Consolidated Financial Statements of the Vista Partnership
and the related notes thereto.
 
<TABLE>
<CAPTION>
                                                                                                          FOR THE PERIOD
                                                                                                          FROM INCEPTION
                                                     THREE MONTHS ENDED                                     (SEPT. 21,
                                                          MARCH 31,            YEAR ENDED DECEMBER 31,        1995)
                                                  -------------------------   -------------------------    TO DEC. 31,
                                                     1998          1997          1997          1996            1995
                                                  -----------   -----------   -----------   -----------   --------------
                                                         (UNAUDITED)
<S>                                               <C>           <C>           <C>           <C>           <C>
REVENUES:
  Oil and gas sales.............................  $ 2,054,168   $ 2,107,166   $ 8,874,961   $ 5,537,720    $ 1,348,647
                                                  -----------   -----------   -----------   -----------    -----------
        Total revenues..........................    2,054,168     2,107,166     8,874,961     5,537,720      1,348,647
                                                  -----------   -----------   -----------   -----------    -----------
COSTS AND EXPENSES:
  Lease operating...............................      986,728       903,313     3,688,695     2,544,567        728,540
  Exploration costs.............................           --        43,575        97,211       273,843             --
  Depreciation, depletion and amortization......      494,958       417,168     2,169,098     1,272,316        308,132
  General and administrative....................      307,955       226,445       987,020       581,048        208,509
  Amortization of unit option awards............      166,849            --       315,518            --             --
                                                  -----------   -----------   -----------   -----------    -----------
        Total costs and expenses................    1,956,490     1,590,501     7,257,542     4,671,774      1,245,181
                                                  -----------   -----------   -----------   -----------    -----------
        Operating income........................       97,678       516,665     1,617,419       865,946        103,466
                                                  -----------   -----------   -----------   -----------    -----------
  Interest expense..............................     (343,452)     (180,542)   (1,048,009)     (476,363)       (77,093)
  Other income (loss), net......................       24,121       (97,289)       28,271         4,699         33,684
                                                  -----------   -----------   -----------   -----------    -----------
NET INCOME (LOSS) BEFORE TAXES(1)...............     (221,653)      238,834       597,681       394,282         60,057
                                                  -----------   -----------   -----------   -----------    -----------
  Pro forma benefit (provision) for taxes.......       77,578       (82,307)     (211,720)     (139,284)       (21,190)
                                                  -----------   -----------   -----------   -----------    -----------
PRO FORMA NET INCOME (LOSS).....................  $  (144,075)  $   156,527   $   385,961   $   254,998    $    38,867
                                                  ===========   ===========   ===========   ===========    ===========
CASH FLOW DATA:
EBITDAEX(2).....................................      592,636       977,408     3,883,728     2,412,105        411,598
Cash flows from operating activities............      460,513       767,324     3,469,638     2,072,649        195,878
Cash flows from investing activities............     (671,076)   (2,026,515)  (12,648,815)   (7,046,720)    (7,948,840)
Cash flows from financing activities............           --       984,923     9,189,095     5,015,077      8,265,167
Capital expenditures............................      671,176     2,041,457    13,038,815     7,417,091      7,720,478
Ratio of earnings to fixed charges(3)...........           --           2.3x          1.6x          1.8x           1.8x
 
BALANCE SHEET DATA (end of period):
Working capital.................................      190,110       228,076       421,132       613,666        648,130
Property, plant, and equipment, net.............   25,062,929    16,147,491    24,870,766    14,523,202      9,076,679
Total assets....................................   26,553,548    17,445,312    27,036,103    16,259,340     10,364,620
Long-term obligations...........................   17,900,000     9,600,000    17,900,000     8,615,077      3,600,000
Owners' equity..................................    7,641,848     7,022,287     7,696,652     6,783,453      6,389,171
</TABLE>
 
---------------
 
(1) The pro forma benefit (provision) for taxes is the amount that would have
    been recorded in the financial statements had the Vista Partnership been a
    taxable entity.
 
(2) EBITDAEX is presented because of its wide acceptance as a financial
    indicator of a company's ability to service or incur debt. EBITDAEX (as used
    herein) is calculated by adding depletion, depreciation and amortization,
    and exploration costs to operating income. Interest includes accrued
    interest expense and amortization of deferred financing costs. EBITDAEX
    should not be considered as an alternative to net income (loss) or operating
    income (loss), as defined by generally accepted accounting principles, as an
    indicator of the Vista Partnership's financial performance, as an
    alternative to cash flow, as a measure of liquidity or as being comparable
    to other similarly titled measures of other companies.
 
(3) For purposes of calculating the ratio of earnings to fixed charges, earnings
    are defined as income (loss) before taxes plus fixed charges. Fixed charges
    consist of interest expense. For the three months ended March 31, 1998,
    earnings were insufficient to cover fixed charges by $0.2 million.
 
                                        9
<PAGE>   13
 
SUMMARY SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF MIDLAND
 
     The following table sets forth selected consolidated financial information
of Midland for the three months ended March 31, 1998 and 1997, and for each of
the five fiscal years in the period ended December 31, 1997. This data should be
read in conjunction with the Consolidated Financial Statements of Midland and
the related notes thereto.
 
                           SUMMARY BALANCE SHEET DATA
 
<TABLE>
<CAPTION>
                               AS OF MARCH 31,                                AS OF DECEMBER 31,
                          -------------------------   -------------------------------------------------------------------
                             1998          1997          1997          1996          1995          1994          1993
                          -----------   -----------   -----------   -----------   -----------   -----------   -----------
                                 (UNAUDITED)
<S>                       <C>           <C>           <C>           <C>           <C>           <C>           <C>
Current Assets.........   $ 1,432,689   $ 1,989,666   $ 2,036,145   $ 3,644,720   $ 2,038,452   $ 1,134,999   $ 1,444,981
Current Liabilities....     1,477,301     3,012,110     1,564,683     3,268,428     1,950,703     2,152,910     1,864,131
                          -----------   -----------   -----------   -----------   -----------   -----------   -----------
 
  Working capital......       (44,612)   (1,022,444)      471,462       376,292        87,749    (1,017,911)     (419,150)
Oil and gas properties
  (net)................    13,196,366    13,802,163    13,004,527    13,408,878     9,887,998     9,257,900     7,991,304
Other assets...........     2,702,750     2,756,134     2,579,811     1,923,048     2,196,902     2,385,641     2,113,785
Total assets...........    17,331,805    18,547,963    17,620,483    18,976,646    14,123,352    12,778,540    11,550,070
Long-term debt
  (excluding current
  maturities)..........     9,107,188     6,403,327     9,115,370     7,166,421     4,524,617     4,254,042     3,616,628
Other non-current
  liabilities..........       213,639       473,637       221,404       364,537            --            --            --
Stockholders' equity...     6,533,677     8,658,889   $ 6,719,026   $ 8,177,260   $ 7,648,032   $ 6,371,588     6,069,311
                          ===========   ===========   ===========   ===========   ===========   ===========   ===========
Stockholders' equity
  per common share.....   $      1.46   $      1.96   $      1.51   $      1.86   $      1.74   $      1.90   $      1.80
                          ===========   ===========   ===========   ===========   ===========   ===========   ===========
Shares outstanding.....     4,463,499     4,411,031     4,463,499     4,401,031     4,386,231     3,362,222     3,373,522
                          ===========   ===========   ===========   ===========   ===========   ===========   ===========
</TABLE>
 
                             SUMMARY OF OPERATIONS
 
<TABLE>
<CAPTION>
                             THREE MONTHS ENDED                            YEARS ENDED DECEMBER 31,
                          -------------------------   -------------------------------------------------------------------
                             1998          1997          1997          1996          1995          1994          1993
                          -----------   -----------   -----------   -----------   -----------   -----------   -----------
                                 (UNAUDITED)
<S>                       <C>           <C>           <C>           <C>           <C>           <C>           <C>
Oil and gas sales......   $ 1,155,062   $ 1,828,255   $ 6,396,249   $ 6,958,491   $ 5,147,033   $ 5,265,759   $ 4,569,022
Other..................        35,665        29,884       204,238       183,234       231,141       217,884        82,173
                          -----------   -----------   -----------   -----------   -----------   -----------   -----------
  Total operating
    revenues...........     1,190,727     1,858,139     6,600,487     7,141,725     5,378,174     5,483,643     4,651,195
Production costs.......       730,463       737,489     3,088,886     2,981,837     2,509,854     2,423,032     2,091,955
Exploration costs......         3,126         8,555       849,534       766,855       198,453            --            --
Depreciation, depletion
  and amortization.....       315,859       314,781     1,964,658     1,306,287     1,033,905     1,120,841       786,918
Abandonments...........        34,086            --        93,760            --         3,000        41,676        25,732
General and
  administrative
  expenses.............       232,015       333,849     1,451,404     1,295,298     1,049,904     1,145,719     1,422,094
Impairment costs(a)....            --            --     1,277,342       114,904     1,020,670            --            --
                          -----------   -----------   -----------   -----------   -----------   -----------   -----------
 
  Total operating
    expenses...........     1,315,549     1,394,674     8,725,584     6,465,181     5,815,786     4,731,268     4,326,699
                          -----------   -----------   -----------   -----------   -----------   -----------   -----------
                             (124,822)      463,465    (2,125,097)      676,544      (437,612)      752,375       324,496
Gain (loss) on sale of
  properties(b)........            --       351,079       462,571        36,308      (102,984)       81,962            --
Other income(c)........         7,297         9,956        32,337        61,997        38,911       169,174        51,692
Interest expense.......      (205,271)     (212,637)     (970,430)     (722,447)     (611,587)     (473,048)     (296,797)
                          -----------   -----------   -----------   -----------   -----------   -----------   -----------
Income (loss) before
  income taxes and
  cumulative effect of
  change in accounting
  principle............      (322,796)      611,863    (2,600,619)       52,402    (1,113,272)      530,463        79,391
Income tax expense
  (benefit)............      (109,748)      206,125      (717,237)       30,280      (376,241)      204,769        29,457
                          -----------   -----------   -----------   -----------   -----------   -----------   -----------
Income (loss) before
  cumulative effect of
  change in accounting
  principle............   $  (213,048)  $   405,738   $(1,883,382)  $    22,122   $  (737,031)  $   325,694   $    49,934
                          ===========   ===========   ===========   ===========   ===========   ===========   ===========
</TABLE>
 
                                       10
<PAGE>   14
 
<TABLE>
<CAPTION>
                             THREE MONTHS ENDED                            YEARS ENDED DECEMBER 31,
                          -------------------------   -------------------------------------------------------------------
                             1998          1997          1997          1996          1995          1994          1993
                          -----------   -----------   -----------   -----------   -----------   -----------   -----------
                                 (UNAUDITED)
<S>                       <C>           <C>           <C>           <C>           <C>           <C>           <C>
Income (loss) per
  common share before
  cumulative effect of
  change (basic and
  diluted).............   $     (0.05)  $      0.09   $     (0.42)  $      0.01   $     (0.22)  $      0.10   $      0.02
                          ===========   ===========   ===========   ===========   ===========   ===========   ===========
Weighted average shares
  outstanding..........     4,463,499     4,406,031     4,433,113     4,395,414     3,381,592     3,368,455     2,267,563
                          ===========   ===========   ===========   ===========   ===========   ===========   ===========
</TABLE>
 
---------------
 
(a)  In 1995, concurrent with Midland's adoption of the Financial Accounting
     Standards Board Statement No. 121, "Accounting for the Impairment of
     Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("FAS 121"),
     Midland recognized a charge of $1,020,670 for certain properties which were
     held for sale.
 
(b)  Gain (loss) on sale of properties was principally composed of the loss on
     the sale of Midland's former office facilities in Midland, Texas, in 1995
     and a gain on the sale of a working interest in an oil and gas property to
     Summit Petroleum Corporation in 1994. In 1997, gains were realized
     primarily from the sale of oil and gas properties.
 
(c)  In 1994, there was other income from the settlement of litigation regarding
     a former property operator of $120,090.
 
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF VISTA
 
     The following tables sets forth unaudited pro forma combined financial data
of Vista for the three months ended March 31, 1998 and for the year ended
December 31, 1997. This data should be read in conjunction with "Unaudited Pro
Forma Combined Financial Statements of Vista Energy Resources, Inc."
 
<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED      YEAR ENDED
                                                               MARCH 31, 1998     DECEMBER 31, 1997
                                                             ------------------   -----------------
<S>                                                          <C>                  <C>
REVENUES:
  Oil and gas sales........................................      $3,209,230          $16,589,144
                                                                 ----------          -----------
          Total revenues...................................       3,209,230           16,589,144
                                                                 ----------          -----------
COSTS AND EXPENSES:
  Lease operating..........................................       1,544,046            6,239,213
  Exploration costs........................................           3,126              946,745
  Depreciation, depletion and amortization.................       1,079,823            4,855,431
  General and administrative...............................         334,706            1,366,860
  Amortization of unit option awards.......................         166,849              315,518
                                                                 ----------          -----------
          Total costs and expenses.........................       3,128,550           13,723,767
                                                                 ----------          -----------
          Operating income.................................          80,680            2,865,377
                                                                 ----------          -----------
Interest expense...........................................        (520,359)          (1,704,034)
Other income, net..........................................          40,363              145,834
                                                                 ----------          -----------
NET INCOME (LOSS) BEFORE TAXES.............................        (399,316)           1,307,177
                                                                 ----------          -----------
  Pro forma benefit (provision) for taxes..................         139,760             (457,512)
                                                                 ----------          -----------
NET INCOME (LOSS)..........................................      $ (259,556)         $   849,665
                                                                 ==========          ===========
</TABLE>
 
                                       11
<PAGE>   15
 
                                  RISK FACTORS
 
     Stockholders should carefully review the following factors together with
the other information contained in this Proxy Statement/Prospectus prior to
voting on the proposal herein.
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
 
     This Proxy Statement/Prospectus includes forward-looking statements within
the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements other than statements of historical fact included in this
Proxy Statement/Prospectus including, without limitation, the statements under
"Summary," "The Vista Partnership -- Management's Discussion and Analysis of
Financial Condition and Results of Operations of the Vista Partnership," "The
Vista Partnership -- Business and Properties of the Vista Partnership,"
"Midland -- Management's Discussion and Analysis of Financial Condition and
Results of Operations of Midland" and "Midland -- Business and Properties of
Midland" are forward-looking statements. Although the Vista Partnership and
Midland believe their respective expectations are based on reasonable
assumptions, no assurance can be given that actual results may not differ
materially from those in the forward-looking statements. Important factors that
could cause actual results to differ materially from the expectations of the
Vista Partnership and Midland include, among other things, the prices received
or demand for oil and gas, the uncertainty of reserve estimates, operating
hazards, competition and the effects of governmental and environmental
regulation, conditions in the capital markets and equity markets, and the
ability of Vista to achieve the goals described in "Vista -- Strengths and
Strategies," as well as other factors discussed in this Proxy
Statement/Prospectus.
 
FIXED MERGER CONSIDERATION FOR MIDLAND STOCKHOLDERS
 
     Stockholders of Midland should consider that the merger consideration will
not be adjusted in the event of an increase or decrease in the market price of
Midland Common Stock. Holders of Midland Common Stock will receive one share of
Vista Common Stock for each share of Midland Common Stock held. Stockholders of
Midland are urged to obtain current stock market quotations for Midland Common
Stock.
 
EFFECT OF VOLATILE PRODUCT PRICES AND MARKETS
 
     The future financial condition and results of operations of Vista will
depend upon the prices received for oil and gas production and the costs of
acquiring, finding, developing and producing reserves. Prices for oil and gas
are subject to fluctuations in response to relatively minor changes in supply,
demand, market uncertainty and a variety of additional factors that are beyond
the control of Vista. These factors include worldwide political instability
(especially in the Middle East and other oil-producing regions), the foreign
supply of oil and gas, the price of foreign imports, the level of consumer
product demand, government regulations and taxes, the price and availability of
alternative fuels and the overall economic environment. A substantial or
extended decline in oil or gas prices would have a material adverse effect on
Vista's financial position, results of operations, quantities of oil and gas
that may be economically produced and access to capital.
 
     The sale of oil and gas production of Vista depends upon a number of
factors beyond its control, including the availability and capacity of
transportation and processing facilities. A substantial portion of Vista's oil
and a significant portion of its gas is transported through gathering systems
and pipelines that are not owned by Vista. Transportation space on such
gathering systems and pipelines is occasionally limited and at times unavailable
due to repairs or improvements being made to such facilities or due to such
space being utilized by other oil and gas shippers that may or may not have
priority transportation agreements. Vista has not experienced any material
inability to market its proved reserves of oil or gas as a result of limited
access to transportation space. If transportation space is materially restricted
or is unavailable in the future, Vista's ability to market its oil or gas could
be impaired and cash flow from the affected properties could be reduced, which
could have a material adverse effect on Vista's financial condition or results
of operations. See "-- Governmental Regulation and Environmental Matters."
 
     Oil and gas prices have historically been volatile and are likely to
continue to be volatile in the future. Such volatility makes it difficult to
estimate the value of producing properties for acquisition and to budget and
                                       12
<PAGE>   16
 
project the financial return on exploration and development projects involving
producing properties. In addition, unusually volatile prices often disrupt the
market for oil and gas properties, as buyers and sellers have more difficulty
agreeing on the purchase price of properties. In particular, from January 2,
1997 to June 15, 1998, the prices of crude oil have ranged from a high of $26.82
per Bbl to a low of $11.55 per Bbl and gas prices have ranged from a high of
$3.68 per Mcf to a low of $1.70 per Mcf, in each case as the reported NYMEX
Daily Prompt Month Closing Price.
 
     The Vista Partnership engages in hedging activities with respect to a
portion of its projected oil and gas production through a variety of financial
arrangements designed to protect against price declines, including swaps,
collars and futures agreements and Vista expects to continue to do so. To the
extent that Vista engages in such activities, it may be prevented from realizing
the benefits of price increases above the levels reflected in such hedges.
 
RELIANCE ON ESTIMATES OF PROVED RESERVES AND FUTURE NET CASH FLOWS
 
     Information relating to the Vista Partnership's and Midland's proved oil
and gas reserves set forth in this Proxy Statement/Prospectus is based upon
engineering estimates. Reserve engineering is a subjective process of estimating
the recovery from underground accumulations of oil and gas that cannot be
measured in an exact manner, and the accuracy of any reserve estimate is a
function of the quality of available data and of engineering and geological
interpretation and judgment. Estimates of economically recoverable oil and gas
reserves and of future net cash flows necessarily depend upon a number of
variable factors and assumptions, such as historical production from the area
compared with production from other producing areas, the assumed effects of
regulations by governmental agencies and assumptions concerning future oil and
gas prices, future operating costs, severance and excise taxes, development
costs and workover and remedial costs, all of which may in fact vary
considerably from actual results. Because all reserve estimates are to some
degree speculative, the quantities of oil and gas that are ultimately recovered,
production and operation costs, the amount and timing of future development
expenditures, and future oil and gas sales prices may all vary from those
assumed in these estimates. Those variances may be material. In addition,
different reserve engineers may make different estimates of reserve quantities
and cash flows based upon the same available data.
 
     The present value of estimated future net cash flows should not be
construed as the current market value of the estimated proved oil and gas
reserves attributable to the Vista Partnership's or Midland's properties. In
accordance with applicable requirements of the Commission, the estimated
discounted future net cash flows from proved reserves are generally based on
prices and costs as of the date of the estimate, whereas actual future prices
and costs may be materially higher or lower. Actual future net cash flows also
will be affected by factors such as the amount and timing of actual production,
supply and demand for oil and gas, curtailments or increases in consumption by
gas purchasers and changes in governmental regulations or taxation. The timing
of actual future net cash flows from proved reserves, and thus their actual
present value, will be affected by the timing of both the production and the
incurrence of expenses in connection with development and production of oil and
gas properties. In addition, the 10% discount factor, which is required by the
Commission to be used to calculate discounted future net cash flows for
reporting purposes, is not necessarily the most appropriate discount factor
based on interest rates in effect from time to time and risks associated with
the Vista Partnership's or Midland's business or the oil and gas industry in
general.
 
REPLACEMENT OF RESERVES
 
     Vista's future success will depend on its ability to find, develop or
acquire additional oil and gas reserves that are economically recoverable. The
proved reserves of Vista will generally decline as reserves are depleted, except
to the extent that Vista conducts successful exploration or development
activities or acquires properties containing proved reserves, or both. There can
be no assurance that Vista's planned development and exploration projects and
acquisition activities will result in significant additional reserves or that
Vista will have success drilling productive wells at low finding and development
costs. Furthermore, while Vista's revenues may increase if prevailing oil and
gas prices increase significantly, Vista's finding costs for additional reserves
could also increase.
 
                                       13
<PAGE>   17
 
SUBSTANTIAL CAPITAL REQUIREMENTS
 
     The Vista Partnership and Midland have made, and Vista will continue to
make, substantial capital expenditures for the development, exploration,
acquisition and production of oil and gas reserves. Historically, the Vista
Partnership and Midland have financed these expenditures primarily with proceeds
from bank borrowings, cash flow and private placements. The Vista Partnership
and Midland respectively made capital expenditures (including expenditures for
acquisitions) of $6.7 million and $3.8 million during 1996, $12.1 million and
$4.1 million during 1997 and $660,000 and $500,000 for the quarter ended March
31, 1998. If revenues decrease as a result of lower oil and gas prices or
operating difficulties, Vista may be limited in its ability to expend the
capital necessary to undertake or complete its drilling program in future years.
There can be no assurance that additional debt or equity financing or cash
generated by operations will be available to meet these requirements.
 
LEVERAGE
 
     Upon consummation of the Merger, Vista will have long-term indebtedness of
approximately $28 million under its Amended and Restated Credit Agreement, dated
August 15, 1997, between the Vista Partnership and Union Bank of California (the
"Credit Facility"). It is anticipated that Vista will incur additional
indebtedness in the future to assist in financing its growth. Any delay in
repayment or default on such debt could have an adverse effect on Vista and its
stockholders.
 
     Vista's degree of leverage could have important consequences to the holders
of the Vista Common Stock, including the following: (i) Vista's ability to
obtain additional financing for working capital, capital expenditures,
acquisitions, general corporate purposes or other purposes may be impaired in
the future; (ii) a substantial portion of Vista's cash flow from operations must
be dedicated to the payment of principal and interest on its indebtedness,
thereby reducing the funds available to Vista for other purposes; (iii) Vista's
borrowings under the Credit Facility will be at variable rates of interest,
which will expose Vista to the risk of increased interest rates; (iv) Vista may
be substantially more leveraged than certain of its competitors, which may place
Vista at a competitive disadvantage; and (v) Vista's degree of leverage may
limit its flexibility to adjust to changing market conditions, reduce its
ability to withstand competitive pressures and make it more vulnerable to a
downturn in general economic conditions or its business.
 
DRILLING RISKS
 
     Drilling for oil and gas involves a high degree of risk. For any given
well, there is no assurance that a reservoir will be encountered or, if
encountered, will produce in commercial quantities. The cost of drilling,
completing and operating wells is often uncertain, and drilling operations may
be curtailed, delayed or canceled as a result of a variety of factors,
including, without limitation, unexpected drilling conditions, pressure or
irregularities in formations, equipment failures or accidents, adverse weather
conditions and shortages or delays in the delivery of equipment. Vista's future
drilling activities may not be successful and, if unsuccessful, such failure
will have an adverse effect on Vista's future results of operations and
financial condition. While all drilling, whether development or exploratory,
involves these risks, exploratory drilling involves greater risks of dry holes
or failure to find commercial quantities of hydrocarbons. Because of the
percentage of Vista's capital budget devoted to exploratory projects, it is
likely that Vista will continue to experience exploration and abandonment
expenses.
 
ACQUISITIONS AND DIVESTITURES
 
     Each of the Vista Partnership's and Midland's rapid growth in recent years
has been largely the result of acquisitions of producing oil and gas properties.
Vista's growth following full development of its existing property base could be
impeded if it is unable to acquire additional oil and gas properties on a
profitable basis. The success of any acquisition will depend on a number of
factors, including the ability to estimate accurately the recoverable volumes of
reserves, rates of future production and future net revenues attributable to
reserves and to assess possible environmental liabilities. All of these factors
affect whether an acquisition will ultimately generate cash flows sufficient to
provide a suitable return on investment. Although Vista performs a
 
                                       14
<PAGE>   18
 
review of the properties it seeks to acquire that it believes is consistent with
industry practices, such reviews are often limited in scope.
 
     Vista reviews its property base for the purpose of identifying
non-strategic assets, the disposition of which would increase capital resources
available for other activities and create organizational and operational
efficiencies. Various factors could materially affect the ability of Vista to
dispose of non-strategic assets, including the availability of purchasers
willing to purchase the non-strategic assets at prices acceptable to Vista.
 
EFFECT ON MIDLAND OF FAILURE TO OBTAIN STOCKHOLDER APPROVAL OF THE MERGER
 
     The Midland Board has considered various strategic alternatives to the
Merger including the issuance of equity or debt securities, the sale of assets,
and the merger with, or acquisition of, another company. After exhaustively
exploring such alternatives, the Midland Board has determined that the Merger is
in the best interests of the Midland stockholders. Midland has devoted
substantial management and capital resources in pursuing the Merger for the
reasons set forth under "The Merger -- Recommendation of Midland's Board of
Directors; Midland's Reasons for the Merger." Further, in an effort to achieve
operating efficiencies, Midland has made certain personnel reductions and
operational changes. As a result of these events and actions and the current
reduced level of oil and gas prices, the failure of the Midland stockholders to
approve the Merger Agreement would likely cause Midland to further reduce
personnel, consider the sale of properties it would prefer not to sell at
current market prices to reduce debt, and possibly take other actions which the
Midland Board does not presently consider to be as advantageous to the Midland
stockholders as the Merger.
 
TITLE TO PROPERTIES
 
     Substantially all of Vista's oil and gas properties will be mortgaged to
secure borrowings under the Credit Facility. In the event of Vista's default
under certain provisions of the Credit Facility, Vista's ownership interest in
these properties may by subject to foreclosure by the lender.
 
DEPENDENCE ON KEY PERSONNEL
 
     Vista will depend to a large extent on the services of C. Randall Hill,
Steven D. Gray and R. Cory Richards. Vista has key man life insurance on Messrs.
Hill and Gray in the amount of $1 million for each officer. The loss of the
services of Messrs. Hill, Gray or Richards could have a material adverse effect
on Vista's ability to achieve its goals.
 
CONTROL BY PRINCIPAL STOCKHOLDER
 
     After consummation of the Merger, Vista's principal stockholder will be
NGP. As of June 15, 1998, NGP owned approximately 71% of the outstanding
Partnership Interests and approximately 79% of the outstanding shares of GP
Common Stock. Upon consummation of the Merger, NGP will own approximately 52% of
the outstanding shares of Vista Common Stock. Accordingly, NGP will be able to
control the outcome of stockholder votes, including votes concerning the
election of directors, the adoption or amendment of provisions in Vista's
Certificate of Incorporation or Bylaws and the approval of mergers and other
significant transactions. The existence of this level of ownership concentrated
in a single stockholder makes it unlikely that any other holder of Vista Common
Stock will be able to affect the management or direction of Vista. These factors
may also have the effect of delaying or preventing a change in the management or
voting control of Vista.
 
OPERATING HAZARDS; LIMITED INSURANCE COVERAGE
 
     Vista's operations will be subject to hazards and risks inherent in
drilling for and production and transportation of oil and gas, such as fires,
natural disasters, explosions, encountering formations with abnormal pressures,
blowouts, cratering, pipeline ruptures and spills, any of which can result in
the loss of hydrocarbons, environmental pollution, personal injury claims and
other damage to properties of Vista and others. These risks could result in
substantial losses to Vista due to injury and loss of life, severe damage to and
                                       15
<PAGE>   19
 
destruction of property and equipment, pollution and other environmental damage
and suspension of operations. As protection against operating hazards, the Vista
Partnership and Midland have maintained and Vista expects to maintain insurance
coverage against some, but not all, potential losses. The occurrence of an event
that is not covered, or not fully covered, by insurance could have a material
adverse effect on Vista's financial condition and results of operations. In
addition, pollution and environmental risks generally are not fully insurable.
The occurrence of an event that is not fully covered by insurance could have an
adverse effect on Vista's financial condition and results of operations.
 
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
 
     Vista's business will be regulated by certain local, state and federal laws
and regulations relating to the exploration for, and the development,
production, marketing, pricing, transportation and storage of, oil and gas.
Vista's business will also be subject to extensive and changing environmental
and safety laws and regulations governing plugging and abandonment, the
discharge of materials into the environment or otherwise relating to
environmental protection. As with any owner of property, Vista will also be
subject to cleanup costs and liability for hazardous materials, asbestos or any
other toxic or hazardous substance that may exist on or under any of its
properties. The implementation of new, or the modification of existing, laws or
regulations, including amendments to the Oil Pollution Act of 1990, as amended,
or regulations which may be promulgated thereunder, could have a material
adverse effect on Vista. The imposition of any such liabilities on Vista could
have a material adverse effect on Vista's financial condition and results of
operations.
 
COMPETITION
 
     The oil and gas industry is highly competitive. Vista will encounter
competition from other oil and gas companies in all areas of its operations,
including the acquisition of producing properties. Vista's competitors include
major integrated oil and gas companies and numerous independent oil and gas
companies, individuals and drilling and income programs. Many of its competitors
are large, well-established companies with substantially larger operating staffs
and greater capital resources than Vista and which, in many instances, have been
engaged in the energy business for a much longer time than Vista. Such companies
may be able to pay more for productive oil and gas properties and exploratory
prospects and to define, evaluate, bid for and purchase a greater number of
properties and prospects than Vista's financial or human resources will permit.
Vista's ability to acquire additional properties and to discover reserves in the
future will be dependent upon its ability to evaluate and select suitable
properties and to consummate transactions in a highly competitive environment.
 
SHARES ELIGIBLE FOR FUTURE SALE
 
     Vista believes that immediately after the Effective Time, in addition to
the shares of Vista Common Stock being registered pursuant to this Proxy
Statement/Prospectus, all of the 11,778,479 shares issued pursuant to the Vista
Exchange will be eligible for resale under Rules 144 and 145 of the Securities
Act. In addition, out of the shares of Vista Common Stock subject to this Proxy
Statement/Prospectus, 1,621,918 shares will be subject to Rule 145 and will be
eligible for resale thereunder.
 
RESTRICTIONS ON DIVIDENDS
 
     Dividends will be paid on Vista Common Stock only if, as and when declared
by the board of directors of Vista (the "Vista Board"). Vista's ability to pay
dividends is limited by the terms of the Credit Facility and may be limited by
terms of any future debt indentures and preferred stock. It is Vista's current
intention to retain earnings to fund future growth and, therefore, Vista will
not pay dividends.
 
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
 
     Before consummation of the Merger, there has been no public market for the
Vista Common Stock, and an active public market for the Vista Common Stock may
not develop or be sustained. The market price for Vista Common Stock may be
highly volatile depending on various factors, including the general economy,
 
                                       16
<PAGE>   20
 
stock market conditions, announcements by Vista, its competitors and
fluctuations in Vista's overall operating results. In addition, the stock market
historically has experienced volatility that has affected the market price of
securities of many companies and which has sometimes been unrelated to the
operating performance of such companies. The market price of the Vista Common
Stock could also be subject to significant fluctuations in response to
variations in quarterly results of operations, changes in earnings estimates by
analysts, governmental regulatory action, general trends in the industry and
overall market conditions, and other factors.
 
                                 THE COMPANIES
 
MIDLAND
 
     Midland is an independent oil and gas company engaged primarily in the
exploration and development of domestic oil and gas. Midland's initial emphasis
was on acquisition and exploitation of oil and gas properties. In 1995, Midland
changed its emphasis to exploration, utilizing 3-D seismic technology. Although
Midland's principal properties are located in Texas, Midland also owns working
interest and minor royalty leasehold interests in developed and undeveloped oil
and gas acreage in Illinois and Colorado.
 
     Midland had approximately 5.0 million BOE of total proved reserves at
December 31, 1997 and SEC PV10 of approximately $17.8 million. Oil reserves at
year end 1997 were 2.7 million Bbls and natural gas reserves at year end 1997
were 13.9 Bcf. On a BOE basis, 67% of Midland's total proved reserves at
December 31, 1997 are proved developed reserves. Midland operates 95% of its
total proved reserves. The reserve-to-production ratio associated with Midland's
proved reserves is 14 years on a BOE basis.
 
THE VISTA PARTNERSHIP
 
     The Vista Partnership is a privately held independent oil and gas
exploration and production company with operations and properties located in the
Permian Basin of West Texas and Southeastern New Mexico and the onshore Gulf
Coast region of South Texas. The Vista Partnership and its operating subsidiary,
Vista Resources, Inc., were formed by management of the Vista Partnership and
various affiliates of NGP in September 1995 to focus on acquisitions and
exploitation drilling primarily in the Permian Basin of West Texas and Southeast
New Mexico.
 
     The Vista Partnership had approximately 9.1 million BOE of total proved
reserves at December 31, 1997 and SEC PV10 of approximately $38.6 million. Oil
reserves at year end 1997 were 7.2 million Bbls and natural gas reserves at year
end 1997 were 11.3 Bcf. On a BOE basis, 52% of the Vista Partnership's total
proved reserves at December 31, 1997 are proved developed reserves. The Vista
Partnership operates 92% of its total proved reserves. The reserve-to-production
ratio associated with the Vista Partnership's proved reserves is 14 years on a
BOE basis.
 
VISTA
 
     Vista is a newly formed Delaware corporation and wholly owned subsidiary of
the Vista Partnership that has not, to date, conducted any significant
activities other than those incident to its formation, its execution of the
Merger Agreement and its participation in the preparation of this Proxy
Statement/Prospectus. Vista has no material assets or liabilities, other than
its rights and obligations under the Merger Agreement, the Midland Exchange
Agreement and the Vista Exchange Agreement, and has not generated any material
revenues or expenses. The Merger will create a newly formed independent oil and
gas company by combining the oil and gas reserves, operations and businesses of
the Vista Partnership and Midland. Vista's growth strategy involves a
coordinated balance of acquisitions, exploitation and exploration. Drilling and
production operations will be located in Texas and New Mexico.
 
                                       17
<PAGE>   21
 
                              THE MIDLAND MEETING
 
DATE, TIME AND PLACE
 
     The Midland Meeting will be held on             , 1998 at 10:00 a.m.,
Midland, Texas time, at                ,                , Texas                .
 
PURPOSE OF MIDLAND MEETING
 
     The Midland Meeting of the stockholders of Midland has been called by the
Midland Board. The stockholders of Midland are being asked to consider and vote
upon the proposal to approve and adopt the Merger Agreement, which is described
in more detail elsewhere in this Proxy Statement/Prospectus. See "Certain Terms
of the Agreements."
 
RECORD DATE; HOLDERS ENTITLED TO VOTE
 
     The Midland Board has established             , 1998 ("Midland Record
Date") as the date to determine those record holders of Midland Common Stock
entitled to notice of and to vote at the Midland Meeting and any adjournments or
postponements thereof.
 
QUORUM; VOTE REQUIRED
 
     The presence, in person or by proxy, of the holders of a majority of the
shares entitled to vote is necessary to constitute a quorum at the Midland
Meeting. The approval and adoption of the Merger Agreement to be voted on at the
Midland Meeting requires the affirmative vote of the holders of at least
two-thirds (66 2/3%) of the outstanding shares of Midland Common Stock. Holders
of Midland Common Stock will not be entitled to dissenters' rights in connection
with the Merger.
 
                               MARKET PRICE DATA
 
     There is no established trading market for the securities of the Vista
Partnership or the General Partner. Application will be made for the shares of
Vista Common Stock to be listed on the ASE.
 
     Midland Common Stock is traded on the ASE under the symbol "MLD." Midland
Common Stock was originally authorized for trading on NASDAQ Small-Cap Issues in
May 1991 and, in August 1997, Midland listed with the ASE. The following table
sets forth the high and low sales prices of Midland Common Stock for the periods
indicated.
 
<TABLE>
<CAPTION>
                                                              HIGH   LOW
                                                              ----   ---
<S>                                                           <C>    <C>
1996
  Quarter ended March 31....................................   3 7/8  2 5/8
  Quarter ended June 30.....................................   4 1/4  3 1/8
  Quarter ended September 30................................   3 3/4  2 7/8
  Quarter ended December 31.................................   3 1/4  1 15/16
1997
  Quarter ended March 31....................................   6 1/2  2 5/8
  Quarter ended June 30.....................................   7 3/4  4 1/2
  Quarter ended September 30................................   5 1/8  3 1/8
  Quarter ended December 31.................................   4      1 7/8
1998
  Quarter ended March 31....................................   4 1/8  2 1/8
  Quarter ending June 30 (through June 15)..................   4      2 1/4
</TABLE>
 
     On May 22, 1998, the last full trading day prior to the public
announcements by the Vista Partnership and Midland of the proposed Merger, the
last reported sales price on the ASE of the Midland Common Stock
 
                                       18
<PAGE>   22
 
was $3 5/8 and the high and low sales prices were $3 3/4 and $3 1/2,
respectively. As of the last trading date immediately before the date of this
Proxy Statement/Prospectus, the last reported sales price on the ASE of the
Midland Common Stock was $          and the high and low sales prices were
$          and $          , respectively;
 
     On June 15, 1998, there were 7,271,251 Partnership Interests of the Vista
Partnership held of record by 25 securityholders and there were 4,467,699 shares
of Midland Common Stock outstanding held of record by 1,353 stockholders.
 
DIVIDEND POLICIES
 
     The Vista Partnership has not paid distributions to its partners and
Midland has not paid dividends on its capital stock. It is Vista's intention to
retain earnings to fund future growth and, therefore, Vista will not pay
dividends.
 
                                       19
<PAGE>   23
 
                                   THE MERGER
 
GENERAL
 
     The Vista Partnership, Midland, Vista and Merger Sub have entered into the
Merger Agreement which provides that, subject to the satisfaction of the
conditions thereof (see "Certain Terms of the Agreements -- Conditions to the
Merger"), the Merger will be effected. THE DESCRIPTION OF THE MERGER AGREEMENT
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MERGER AGREEMENT, A COPY OF WHICH IS INCLUDED AS APPENDIX A TO
THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED IN ITS ENTIRETY HEREIN BY
REFERENCE.
 
THE MERGER
 
     The final structure of the Merger, the Midland Exchange and the Vista
Exchange, as respectively set out in the Merger Agreement, the Midland Exchange
Agreement and the Vista Exchange Agreement, respectively, provide that (i) Vista
will be formed as a new Delaware corporation; (ii) holders of Partnership
Interests and GP Common Stock will exchange all of their interests in the Vista
Partnership and the General Partner for shares of outstanding Vista Common Stock
(together with Vista Warrants to purchase 8,564,146 shares of Vista Common Stock
at $4.00 per share and having terms substantially similar to the Midland
Warrants, including their expiration at the same time as the Midland Warrants,
with such transaction being tax free under Section 351 of the Code); (iii)
Merger Sub, a newly formed, wholly owned subsidiary of Vista, will be merged
with and into Midland with Midland being the Surviving Subsidiary, upon which
Midland stockholders would receive shares of Vista Common Stock equal to 27.5%
of the outstanding shares of Vista Common Stock in exchange for their stock in
Midland, with such transaction being tax free under Sections 351 and 368 of the
Code; (iv) after such transactions the former holders of Partnership Interests
and GP Common Stock and former Midland stockholders will own all of the issued
and outstanding Vista Common Stock in accordance with their 72.5% and 27.5%
combination ratios; (iv) all currently existing and outstanding Midland Warrants
to purchase 2,253,094 shares of Midland Common Stock at $4.00 per share, all of
which expire in November 2002 will become exercisable for Vista Common Stock on
a one-to-one basis after the closing of the Merger; (v) all Midland Stock
Options (other than the Midland Exchange Stock Options) to acquire 268,000
shares of Midland Common Stock at various exercise prices will expire within 120
days after the closing of the Merger unless otherwise exercised; (vi) all
currently existing Midland Exchange Stock Options to acquire 1,372,931 shares of
Midland Common Stock at an exercise price of $3.00 per share will be exchanged
by their holders for Vista Warrants to purchase 995,375 shares of Vista Common
Stock at $4.00 per share; and (vii) the currently existing Midland Common Stock
Warrants to purchase 270,000 shares of Midland Common Stock at various exercise
prices and containing various termination dates which were issued to various
financial advisers and brokers over the last few years by Midland in return for
various services will (unless otherwise agreed to by the holders of the Midland
Common Stock Warrants prior to closing of the Merger) become exercisable for
Vista Common Stock on a one-to-one basis after the closing of the Merger;
provided, however, the Vista owners will receive additional shares of Vista
Common Stock in order to maintain their 72.5% sharing ratio based on the number
of Midland Common Stock Warrants whose exercise price is equal to or less than
the ASE trading price of the Midland Exercisable Warrants.
 
THE VISTA EXCHANGE
 
     During May and June of 1998, and as contemplated by the Merger Agreement,
the holders of all of the outstanding GP Common Stock and the holders of all of
the outstanding Partnership Interests entered into the Vista Exchange Agreement.
Pursuant to the terms of such agreement, at the Effective Time, without any
action on the part of any holder thereof, (a) each share of GP Common Stock that
is issued and outstanding prior to the Effective Time shall be exchanged for (i)
a number of shares of Vista Common Stock equal to the Vista GP Conversion Stock
Number (being 1.60089817) and (ii) a Vista Warrant that is exercisable for a
number of shares of Vista Common Stock equal to the Vista GP Conversion Warrant
Number (being 1.16511028) and (b) each Partnership Interest that is issued and
outstanding prior to the Effective Time shall be exchanged for (i) a number of
shares of Vista Common Stock equal to the Vista LP Conversion Stock
 
                                       20
<PAGE>   24
 
Number (being 117,674.06) and (ii) a Vista Warrant that is exercisable for a
number of shares of Vista Common Stock Equal to the Vista LP Conversion Warrant
Number (being 85,641.46). As provided in the Vista Exchange Agreement, any
fractional Partnership Interest shall be likewise exchanged on a pro rata basis.
 
     Pursuant to the terms of the Vista Exchange Agreement, the holders of GP
Common Stock and Partnership Interests will receive 11,778,479 shares of Vista
Common Stock, representing 72.5% of such shares outstanding at the Effective
Time, and warrants exercisable for 8,564,146 shares of Vista Common Stock,
representing 34.5% of such shares outstanding at the Effective Time (assuming
for purposes of this calculation exercise of all such warrants as of such time).
 
THE MIDLAND EXCHANGE
 
     During May and June of 1998, and as contemplated by the Merger Agreement,
Sam R. Brock, a director of Midland, Darrell M. Dillard, a director of Midland,
Robert R. Donnelly, president and a director of Midland, Wayne M. Whitaker, a
director of Midland, John Q. Adams, an advisory director of Midland and Marilyn
D. Wade, corporate secretary of Midland, who hold all issued and outstanding
options to acquire shares of Midland Common Stock ("Midland Exchange Stock
Options") granted pursuant to the Midland Resources, Inc. 1997 Board of
Directors' Stock Incentive Plan (the "Midland Directors Plan"), and 137,931
options granted pursuant to the 1996 Midland Resources, Inc. Long-Term Incentive
Plan (the "Midland Incentive Plan") entered into separate exchange agreements
with Vista (collectively, the Midland Exchange Agreement"). Pursuant to the
terms of such agreement, at the Effective Time, without any action on the part
of any holder thereof, each Midland Exchange Stock Option will be exchanged for
a Vista Warrant that is exercisable for that whole number of shares of Vista
Common Stock (to the nearest whole share) equal to the product of (x) .725 times
(y) the number of shares of Vista Common Stock into which the shares of Midland
Common Stock subject to such Midland Exchange Stock Option would be converted
pursuant to the Merger. Pursuant to the Midland Exchange Agreement, no payment
shall be made for fractional interests. Pursuant to the terms of the Midland
Exchange Agreement, each Midland Exchange Stock Option subject thereto shall be
terminated immediately following its exchange for a Vista Warrant.
 
     Pursuant to the terms of the Midland Exchange Agreement, the holders of
Midland Exchange Stock Options will receive warrants exercisable for 995,375
shares of Vista Common Stock, representing 5.8% of such shares outstanding at
the Effective Time (assuming for purposes of this calculation exercise of all
such warrants as of such time).
 
VISTA OWNERSHIP CHART
 
     The following chart sets forth in tabular form the ownership of Vista as of
the Effective Time after giving effect to the Merger, the Midland Exchange and
the Vista Exchange:
 
<TABLE>
<CAPTION>
                                    MIDLAND                                    VISTA
                                SECURITYHOLDERS         MIDLAND             PARTNERSHIP              VISTA
                                   PRIOR TO         SECURITYHOLDERS       SECURITYHOLDERS       SECURITYHOLDERS
                                EFFECTIVE TIME    POST EFFECTIVE TIME   POST EFFECTIVE TIME   POST EFFECTIVE TIME
                                ---------------   -------------------   -------------------   -------------------
<S>                             <C>               <C>                   <C>                   <C>
Common shares outstanding.....     4,467,699           4,467,699            11,778,479            16,246,178
Midland Stock Options(1)......       268,000             268,000                     0               268,000
Midland Common Stock
  Warrants(2).................       270,000             270,000                     0               270,000
Midland Exchange Stock
  Options.....................     1,372,931                   0                     0                     0
Midland Warrants..............     2,253,094           2,253,094                     0             2,253,094
Vista Warrants................             0                   0             5,939,975(3)          5,939,975
Vista Warrants................             0             995,375(4)          2,624,171(5)          3,619,546
</TABLE>
 
---------------
 
(1) All Midland Stock Options expire on the 120th day following the Effective
    Time unless previously exercised. If Midland Stock Options are exercised,
    then the holders of GP Common Stock and
 
                                       21
<PAGE>   25
 
    Partnership Interests will receive additional shares of Vista Common Stock
    in order to maintain their 27.5% sharing ratio.
 
(2) Holders of GP Common Stock and Partnership Interests will receive no
    securities comparable to the Midland Common Stock Warrants; provided,
    however, the holders of GP Common Stock and Partnership Interests will
    receive shares of Vista Common Stock based on the amount of Midland
    Exercisable Warrants (as if such Midland Exercisable Warrants were
    equivalent to shares of outstanding Midland Common Stock) in order to
    maintain their 72.5% sharing ratio with the holders of outstanding Midland
    Common Stock.
 
(3) Vista Warrants that the holders of GP Common Stock and Partnership Interests
    will receive in order to maintain their 72.5% sharing ratio with the holders
    of Midland Warrants.
 
(4) Vista Warrants for which holders of the 1,372,931 Midland Exchange Stock
    Options have agreed to exchange pursuant to the Midland Exchange.
 
(5) Vista Warrants that the holders of GP Common Stock and Partnership Interests
    will receive in order to maintain their 72.5% sharing ratio with the 995,375
    Vista Warrants to be received by the holders of the Midland Exchange Stock
    Options pursuant to the Midland Exchange.
 
BACKGROUND OF THE MERGER
 
     In November 1996, the Midland Board established certain operational
objectives and goals for management to achieve. Thereafter, during the first
seven months of 1997, Midland conducted drilling on four of its exploration
projects and achieved four commercial wells. The use of Midland's resources to
drill these four exploratory wells, coupled with the results management had
achieved in meeting the operational objectives and goals, resulted in the
Midland Board determining that the company should consider various strategic
alternatives including the issuance of equity or debt, the sale of assets, and
the merger with or acquisition of another company. Thereafter, on August 8,
1997, Midland engaged First Union Capital Markets Corp. ("First Union"), an
entity affiliated with Midland's senior lender, to assist and advise in
considering these alternatives. Following the engagement of First Union, the
Midland Board determined that a transaction with another company would be the
most likely method to permit the company to achieve its financial and
operational objectives and goals and increase value for its stockholders.
Beginning in September 1997, First Union sent information packages to
approximately 50 companies, seeking both a cash transaction as well as
transactions involving only the exchange of equity securities. As a result of
these activities, no formal offer to purchase Midland's assets in a cash
transaction was received. Although various companies expressed some level of
interest in pursuing discussions with Midland, only two companies expressed
significant interest in a transaction involving only the exchange of equity
securities. However after due diligence and limited negotiations, no formal
offers were received from either of these companies. Given the significant level
of time devoted by Midland's management to these negotiations and in assisting
First Union, coupled with the lack of apparent success, the Midland Board
determined in December 1997 to terminate the engagement of First Union and
complete any ongoing discussions with potential transaction candidates before
developing and pursuing other strategies intended to meet its original
objectives. Under the agreement by which Midland engaged First Union, First
Union was to receive up to 2% of the gross consideration received by Midland or
its stockholders in an acquisition transaction. Midland intends to dispute
whether First Union has complied with such engagement agreement so as to entitle
it to receive such compensation. To the extent any amount is determined to be
owed by Midland to First Union under such agreement, such amount will be paid by
Vista.
 
     On November 13, 1997, Mr. C. Randall Hill, the Chairman and Chief Executive
Officer of the General Partner, contacted Mr. Bill Haskins of First Union, and
expressed the Vista Partnership's interest in learning more about Midland and
its plans for the future, including whether Midland would be interested in
pursuing a potential business combination with the Vista Partnership. Mr. Hill
followed up the telephone conversation with a letter dated November 13, 1997
addressed to Mr. Haskins in which Mr. Hill requested information about Midland
and provided preliminary information to First Union about the Vista Partnership.
 
     On or about November 17, 1997, the Vista Partnership received a proposed
confidentiality agreement concerning and covering non-public Midland data and
information to be supplied by Midland through First
 
                                       22
<PAGE>   26
 
Union. The confidentiality agreement was executed by the Vista Partnership and
returned to First Union on November 18, 1997. Mr. Hill also requested that First
Union forward a copy of the Midland Information Memorandum (herein so called)
for the Vista Partnership's review.
 
     On December 2, 1997, Mr. Haskins informed Mr. Hill that Midland was not
interested in pursuing a potential business combination with the Vista
Partnership. Mr. Hill then sent a letter dated December 2, 1997, and addressed
to each member of the Midland Board. Such letter expressed the Vista
Partnership's disappointment in Midland's decision to not pursue discussions
with the Vista Partnership about a possible business combination without either
party having been provided any significant information about the other and
without the Vista Partnership being permitted to address the Midland Board about
the Vista Partnership's business and properties as well as why the Vista
Partnership believed a business combination with Midland might be beneficial to
each company's stockholders and partners. Later in the day on December 2, 1997,
Mr. Haskins called Mr. Hill and informed him that the Midland Board was in fact
interested in learning more about the Vista Partnership and was interested in
discussing a possible business combination. The next day the Vista Partnership
received a copy of the Midland Information Memorandum along with other
previously requested due diligence information.
 
     From December 2, 1997 through December 17, 1997, Darrell Dillard, one of
the members of the Midland Board, contacted Mr. Hill concerning the status of
the Vista Partnership's review of Midland and so that Mr. Dillard could learn
more information about the Vista Partnership. On various occasions during this
period, Mr. Dillard and four of the five members of the Midland Board met in the
General Partner's offices in Midland, Texas with Mr. Hill, Mr. Steven D. Gray,
the General Partner's President, and Mr. R. Cory Richards, the General Partner's
Vice President and Exploration Manager. The primary purpose of each of these
meetings was for each of the members of the Midland Board to learn more about
the Vista Partnership, its business, properties, operations and management team.
At these meetings, the idea of combining the two companies was generally
discussed, along with strategies for growth, attitudes toward leverage,
management philosophies and other pertinent matters.
 
     On December 18, 1997, Mr. Hill faxed a preliminary proposal for a business
combination to First Union for further delivery to the Midland Board. Such
proposal was included in a Vista Presentation (herein so called) dated December
19, 1997. Such proposal was for a tax free, stock-for-stock merger of the two
companies pursuant to which the stockholders of Midland would own 25% of the
combined company and the owners of the Vista Partnership would own 75% of the
combined company (the "Initial Vista Proposal"). Late in the afternoon on
December 18, 1997, Mr. Hill received a telephone call from Mr. Haskins of First
Union informing Mr. Hill that First Union's relationship as financial advisor to
Midland had been terminated and suggested that further contact between the Vista
Partnership and Midland should not be made through First Union. By letter dated
December 18, 1997, Mr. Warley informed Mr. Hill that he believed the Initial
Vista Proposal was inadequate.
 
     On December 22, 1997, the complete Vista Presentation, together with the
Initial Vista Proposal, was sent directly to each board member of Midland by
overnight mail. On December 29, 1997, and again on December 30, 1997, Mr. Hill
and Mr. Gray met with Mr. Dillard concerning the Vista Partnership's continued
interest in pursuing a potential business combination along the lines of the
Initial Vista Proposal. Throughout the first week of January 1998, various
telephone calls and meetings resulted in Mr. Hill and Mr. Dillard agreeing that,
subject to the approval of both companies' respective boards, the Vista
Partnership and Midland would enter into a letter agreement pursuant to which
the Vista Partnership would have the exclusive right to negotiate a definitive
merger agreement with Midland through February 19, 1998. The General Partner's
board of directors was informed of the potential business combination and the
Initial Vista Proposal through a series of phone calls with Mr. Ken Hersh, Mr.
David Albin and Mr. John Foster on or about January 7, 1998. All General Partner
board members unanimously agreed to proceed with execution of the proposed
letter agreement. Such letter agreement was entered into as of January 14, 1998
(as amended from time to time, the "Letter Agreement"), and provided for, among
other things, a non-binding expression of interest in pursuing a tax free,
stock-for-stock merger between the two companies pursuant to which the
stockholders of Midland would own 26% of the combined company and the owners of
the Vista Partnership would own 74% of the combined company (the "Second Vista
Proposal"). Pursuant to the terms of the Letter Agreement, the
                                       23
<PAGE>   27
 
Second Vista Proposal was a non-binding expression of mutual intent, subject to
the fulfillment of a number of conditions including, without limitation, the
negotiation and execution of a definitive merger agreement and related
documentation, the requisite approval of the stockholders of Midland, and the
preparation and delivery of acceptable final, independent reserve reports by
Williamson Petroleum Consultants ("Williamson") on each company's reserves
(individually, the "Vista Williamson Report" or the "Midland Williamson Report,"
as the case may be, and collectively, the "Williamson Reports"). The Letter
Agreement also provided that the Vista Partnership would have the exclusive
right to negotiate a definitive merger agreement with Midland until February 19,
1998, on the assumption that the Vista Williamson Report and the Midland
Williamson Report would be completed by February 16, 1998.
 
     On January 20, 1997, Mr. Warley met with Messrs. Hill and Gray in the
General Partner's offices in Midland. At such meeting, Mr. Hill and Mr. Warley
discussed a timetable for due diligence matters, timing of the Williamson
Reports and other related issues. Mr. Hill and Mr. Gray also discussed various
aspects of the Vista Partnership so that Mr. Warley could learn more about the
Vista Partnership, its business, properties, operations, and management team.
Mr. Hill also discussed the Vista Partnership's history, its strategies for
growth, management philosophies and other pertinent matters.
 
     From and after January 20, 1998, through February 10, 1998, the Vista
Partnership and Midland continued due diligence reviews of each company's
business, operations, prospects and financial position. Also, both companies
continued to work with Williamson on preparation of the Williamson Reports. On
February 12, 1998, the Vista Partnership and Midland entered into an amendment
of the Letter Agreement extending its terms through March 2, 1998, in order to
give Williamson sufficient time to complete the Williamson Reports. On February
25, 1998, the Vista Partnership and Midland entered into Amendment No. 2 to the
Letter Agreement to extend its term through March 20, 1998, in order to give
Williamson more time to complete the Williamson Reports. Williamson completed
the Vista Report on or about March 5, 1998, and such report was forwarded to
Midland for review and additional due diligence review of the reserves. On March
13, 1998, the Vista Partnership and Midland entered into Amendment No. 3 to the
Letter Agreement extending its terms through March 31, 1998, in order to give
Williamson more time to finish the Midland Report. On March 30, 1998, the Vista
Partnership and Midland entered into Amendment No. 4 to the Letter Agreement
extending its terms through April 17, 1998, in order to give Williamson more
time to finish the Midland Report. Williamson completed the Midland Report on or
about April 5, 1998, and such report was forwarded to the Vista Partnership for
review and additional due diligence review of the Vista Partnership's reserves.
 
     On April 8, 1998, representatives of Midland, being Mr. Wayne Whitaker, Mr.
Dillard, and Mr. Robert R. Donnelly met at the offices of the Vista Partnership
with Messrs. Hill, Gray and Richards to negotiate the main terms of a business
combination. In the afternoon, the Midland negotiating group convened in Mr.
Dillard's office in Midland, Texas to deliberate and continue to negotiate by
telephone with the Vista Partnership negotiating group. Later that afternoon,
the boards of the two companies unanimously approved the main terms of the
transaction (which remained subject to the satisfaction of a number of
conditions including, without limitation, definitive documentation, the delivery
of a fairness opinion and the requisite approval of Midland's stockholders). A
press release announcing the unanimous approval by the Midland Board of the main
terms of the Merger was released on April 9, 1998. The main terms included a tax
free, stock-for-stock merger between the two companies pursuant to which the
stockholders of Midland would own 27.5% of the combined company and the owners
of the Vista Partnership would own 72.5% of the combined company (the "Final
Main Terms"). It was also announced that the management team of the Vista
Partnership would become the management team of the newly combined company and
the headquarters of the newly combined company would be located in Midland,
Texas. From and after April 10, 1998, the parties began drafting and negotiating
definitive merger documentation and Midland engaged Dain Rauscher Incorporated
("Dain Rauscher") for the purpose of rendering a fairness opinion.
 
     On April 13, 1998, the Vista Partnership and Midland entered into Amendment
No. 5 to the Letter Agreement extending its terms through April 29, 1998, in
order to give both parties sufficient time to negotiate and draft definitive
merger documentation and for Dain Rauscher to complete and deliver a fairness
opinion. From April 13 through April 28, 1998, representatives of the Vista
Partnership and Midland, including their
                                       24
<PAGE>   28
 
legal counsel, held meetings to further conduct due diligence reviews of the
other party and to negotiate and draft a definitive merger agreement along with
all ancillary exhibits and disclosure schedules to the definitive merger
agreement. Also during this period, both Midland personnel and the Vista
Partnership personnel had numerous discussions with representatives of Dain
Rauscher concerning the structure of the Merger and the business, operations,
prospects, properties and financial condition of both the Vista Partnership and
Midland. On April 28, 1998, the Vista Partnership and Midland entered into
Amendment No. 6 to the Letter Agreement extending its terms through May 8, 1998,
in order to give both parties sufficient time to negotiate and draft definitive
merger documentation and for Dain Rauscher to complete and deliver a fairness
opinion. From April 28 to May 8, 1998, the parties continued to negotiate and
revise drafts of definitive merger documentation and to provide Dain Rauscher
with additional information about the two companies in order for Dain Rauscher
to be able to complete and deliver a fairness opinion.
 
     On May 8, 1998, and again on May 18, 1998, the parties entered into
Amendments Nos. 7 and 8, respectively, to extend the terms of the Letter
Agreement through May 18 and May 27, 1998, respectively, in order to give the
parties sufficient time to finalize all definitive merger documentation. On May
22, 1998, the parties finalized all definitive merger documentation. The Midland
Board held a special meeting in Fort Worth, Texas and unanimously approved the
execution and delivery of an Agreement and Plan of Merger dated May 22, 1998 (as
amended from time to time, the "Merger Agreement").
 
     On the evening of May 22, 1998, Midland and the Vista Partnership, after
final negotiations, executed the Merger Agreement. All members of the Midland
Board being Messrs. Warley, Whitaker, Dillard, Donnelly, Sam Brock and advisory
member John Adams executed voting agreements pursuant to which they agreed,
among other things, to vote in favor of the approval of the Merger Agreement at
the Midland Special Meeting.
 
     On May 26, 1998 the Vista Partnership and Midland publicly announced the
execution and delivery of the Merger Agreement.
 
RECOMMENDATION OF MIDLAND'S BOARD OF DIRECTORS; MIDLAND'S REASONS FOR THE MERGER
 
     THE MIDLAND BOARD UNANIMOUSLY RECOMMENDS THAT HOLDERS OF MIDLAND COMMON
STOCK VOTE IN FAVOR OF THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
 
     The Midland Board believes that the terms of the Merger Agreement and the
transactions contemplated thereby are fair to and in the best interests of
Midland and its stockholders. Accordingly, the Midland Board has approved the
Merger Agreement and recommends approval and adoption thereof by the
stockholders of Midland. In view of the wide variety of factors considered in
connection with its evaluation of the Merger, the Midland Board did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weight to the specific factors considered in reaching its determination to
recommend approval of the Merger and the Merger Agreement. In reaching its
determination, the Midland Board consulted with Midland management and
considered a number of strategic, financial and other factors, including without
limitation those described below.
 
     Strategic Considerations. The Midland Board assessed Midland's properties
that it currently operates, the developmental potential of properties from its
exploration activities and its financial position in light of the capital needed
to fully develop its assets. As a part of this assessment, the Midland Board
considered strategic alternatives that would enhance stockholder value,
including whether to remain a separate company, sell additional equity or debt
to fund future development of its assets, or make additional property
acquisitions or divest a significant amount of assets and use those funds to
develop its assets or reduce debt. In this respect, the Midland Board concluded,
following extensive discussions with Midland's management and among the
directors, that the transactions contemplated by the Merger Agreement provided
the best means for holders of Midland Common Stock to maximize the value of
their holdings.
 
     Property Characteristics. The Midland Board considered many aspects of the
Vista Partnership properties to be attractive in the context of a merger.
Specifically, the Midland Board considered that (i) the Vista Partnership
operated a significant number of its properties, which was consistent with the
Midland
 
                                       25
<PAGE>   29
 
Board's belief that controlling property operations is important, (ii) that a
significant number of both companies' properties were close geographically,
thereby allowing operational efficiencies, and (iii) the long life nature of the
properties, thereby providing for relatively predictable operating conditions.
The Midland Board also considered that Midland's higher gas production would
balance the greater oil production of the Vista Partnership and that the amount
of development potential of Midland's properties would provide the combined
company with future drilling opportunities.
 
     Financial. The Midland Board considered the historical financial
performance of both companies as well as a financial analysis of the impact of
the Merger on the balance sheet and cash flow of the combined company. Based
upon historical operating costs achieved by the Vista Partnership and coupled
with certain anticipated operating efficiencies of the combined company, the
Midland Board believes that the combined company will achieve a greater return
on Midland's currents assets than it has historically achieved. The Midland
Board believes that the combined company will have improved credit ratios from
those it currently has, which it believes will allow the combined company to
have a lower cost of capital and a better ability to withstand a downturn in oil
and gas prices and the business cycle.
 
     Efficiencies. The Midland Board viewed favorably the opportunities for
operating efficiencies that it believes can be achieved from the Merger,
particularly from the integration of office facilities, technical personnel,
support functions and consolidation of certain field operations.
 
     Management. The Midland Board considered the management strengths of the
Vista Partnership and believes C. Randall Hill, Steven D. Gray and R. Cory
Richards, the current Chairman and Chief Executive Officer, President and Vice
President -- Exploration, respectively, of the General Partner of the Vista
Partnership, are highly trained and qualified personnel who have demonstrated an
ability to profitably locate, purchase and produce oil and gas properties.
 
     Access to Capital. The Midland Board considered that the combined company
should have a greater ability to access the capital markets and otherwise
increase its financial flexibility, which would allow capitalizing on
acquisition and development opportunities.
 
     Exchange Ratio/Market Price. The Midland Board considered the Midland
Conversion Number and recent trading prices for Midland Common Stock. The
Midland Board analyzed the ownership structure of the combined company and had
discussions with Midland's management and among the directors, and determined
that the Midland Conversion Number was fair and in the best interests of the
Midland stockholders.
 
     Fairness Opinion. The Midland Board considered analyses provided by Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated, which included
Midland Common Stock trading prices and volumes, financial, operational and
market information and ratios of comparable companies, comparable merger and
acquisition transactions, cash flow analyses and the restructure of stock
options. The Midland Board considered the presentation made by representatives
of Dain Rauscher Wessels at the meeting of the Midland Board on May 21, 1998
regarding its preliminary valuation and financial analysis of the Merger, that
was confirmed by its final valuation and financial analysis presented at a
meeting of the Midland Board on June 25, 1998, and in writing with delivery of
its written fairness opinion on June 30, 1998, that the Merger was fair from a
financial point of view to the holders of Midland Common Stock. See "-- Opinion
of Midland's Financial Advisor."
 
     The Midland Board believes that the Merger offers the opportunity to create
a combined company that will have greater competitive strengths, business
opportunities, financial resources and flexibility than Midland could achieve
alone.
 
OPINION OF MIDLAND'S FINANCIAL ADVISOR
 
     On June 30, 1998, Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated ("DRW"), delivered its written opinion to the Midland Board that as
of the date of such opinion the Merger is fair from a financial point of view to
the holders of the currently outstanding Midland Common Stock. THE FULL TEXT OF
THE WRITTEN OPINION OF DRW DATED JUNE 30, 1998, WHICH SETS FORTH ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION
WITH THE OPINION, IS ATTACHED HERETO AS APPENDIX D-1
                                       26
<PAGE>   30
 
AND D-2 TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY
REFERENCE. STOCKHOLDERS OF MIDLAND ARE URGED TO, AND SHOULD, READ SUCH OPINION
IN ITS ENTIRETY.
 
     In connection with DRW's review of the Merger, and in arriving at its
opinion described below, DRW has reviewed business and financial information
relating to Midland and the Vista Partnership. DRW has, among other things: (i)
reviewed the Merger Agreement; (ii) reviewed the Annual Reports on Form 10-KSB
for the years ended December 31, 1995, 1996 and 1997 and the Quarterly Reports
on Form 10-QSB and related unaudited financial information for certain interim
periods, including the three months ended March 31, 1998, of Midland; (iii)
reviewed the Proxy Statement filed on Schedule 14A dated May 29, 1997 of
Midland; (iv) reviewed the audited financial statements for the years ended
December 31, 1997 and 1996 and the period from inception (September 21, 1995) to
December 31, 1995, audited by Arthur Andersen LLP, independent public
accountants, and the unaudited financial statements for the three months ended
March 31, 1998 of the Vista Partnership; (v) reviewed Midland's proved oil and
gas reserves and the standardized measure of discounted future net cash flows
relating to proved oil and gas reserves as of January 1, 1998, estimated by
Williamson Petroleum Consultants, Inc., independent petroleum engineers; (vi)
reviewed the Vista Partnership's proved oil and gas reserves and the
standardized measure of discounted future net cash flows relating to proved oil
and gas reserves as of January 1, 1998, estimated by Williamson Petroleum
Consultants, Inc., independent petroleum engineers; (vii) met with certain
members of Midland's and the Vista Partnership's senior management to discuss
their respective operations, historical financial statements and future
prospects and their views of the business, operational and strategic benefits,
potential synergies and other implications of the Merger; (viii) reviewed
certain operating and financial information of Midland and the Vista
Partnership, including projections and projected cost savings and operating
synergies, provided to us by Midland's and the Vista Partnership's management
relating to their respective businesses and prospects; (ix) reviewed the
projected consolidated pro forma financial statements for the combined companies
for the years ending December 31, 1998 and 1999 as prepared by Midland's and the
Vista Partnership's management; (x) reviewed historical market prices and
trading volumes for Midland Common Stock; (xi) reviewed publicly available
financial data and stock market performance data of publicly held companies that
we deemed generally comparable to Midland and the Vista Partnership; and (xii)
reviewed the financial terms of certain business combinations of comparable
exploration and production companies. In addition, DRW has considered such other
information and has conducted such other analyses and investigations as it
deemed appropriate under the circumstances.
 
     DRW relied upon the accuracy and completeness of all of the financial and
other information reviewed by it and has assumed such accuracy for purposes of
its opinion. DRW has relied solely upon the reserve reports and internal
estimates prepared by the independent petroleum engineers and managements of
Midland and the Vista Partnership and reviewed by Midland. DRW has assumed with
Midland's consent that such information and the financial forecasts provided to
DRW and discussed with DRW with respect to Midland and the Vista Partnership
after giving effect to the Merger have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of Midland and that such forecasts will be realized in the amounts
and at the times contemplated thereby. DRW's opinion was based upon economic and
market conditions existing on the date of such opinion.
 
     The following is a summary of certain of the financial analyses used by DRW
in its presentations to the Midland Board on May 21, 1998 and June 25, 1998 and
in connection with providing its written opinion to the Midland Board on June
30, 1998.
 
     Historical Trading Analysis. DRW reviewed the daily historical closing
prices and volumes for shares of Midland Common Stock during the period from
January 2, 1998 to June 12, 1998.
 
     Comparable Company Analysis. DRW reviewed and compared certain financial,
operating and market information relating to Midland to corresponding financial
information, ratios and public multiples for six small capitalization,
acquisition and exploitation focused exploration and production companies:
Abraxas Petroleum Corporation; Comstock Resources, Inc.; Costilla Energy, Inc.;
Magnum Hunter Resources, Inc.; Southern Mineral Corporation and Titan
Exploration, Inc. (the "Selected Companies"). The Selected Companies were chosen
because they are publicly traded companies with operations that for purposes of
 
                                       27
<PAGE>   31
 
analysis can be considered similar to Midland. The multiples and ratios for the
Selected Companies were based on DRW estimates and latest public information.
 
     DRW considered certain publicly available information for the Selected
Companies, including, but not limited to, (i) stock price as a multiple of
discretionary cash flow ("DCF") (net income plus depreciation, depletion and
amortization, deferred taxes, exploration expenses and other non-cash items
before changes in working capital) as estimated for the 1998 (the "1998E P/DCF
Multiple") and 1999 (the "1999E P/CF Multiple") calendar years; (ii) market
value of capitalization ("MVC") (market value of equity plus book value of total
debt and liquidation value of preferred stock, less excess cash and equivalents)
as a ratio of 1997 pretax SEC PV-10% Value ("1997 PV-10") (estimated value of
total proved reserves at December 31, 1997 based on oil and gas prices at
December 31, 1997 and applying a 10% discount rate, calculated based on
guidelines promulgated by the Commission) (the "MVC/1997 PV-10 Ratio); and (iii)
MVC as a multiple of earnings before interest, taxes, depreciation, depletion
and amortization and exploration expenses ("EBITDX") as estimated for the 1998
(the "1998E MVC/EBITDX Multiple") and 1999 (the "1999E MVC/EBITDX Multiple")
calendar years.
 
     DRW's analyses indicated (i) 1998E P/DCF Multiples for the Selected
Companies ranged from 2.8x to 15.0x with a mean of 6.8x, compared with 16.5x for
Midland; (ii) 1999E P/DCF Multiples for the Selected Companies ranged from 2.2x
to 7.7x with a mean of 4.3x, compared with 13.3x for Midland; (iii) MVC/1997
PV-10 Ratios for the Selected Companies ranged from 92.8% to 157.4% with a mean
of 125.3%, compared with 126.9% for Midland; (iv) 1998E MVC/EBITDX Multiples for
the Selected Companies ranged from 4.9x to 13.2x with a mean of 8.3x, compared
with 15.1x for Midland; and (v) 1999E MVC/EBITDX Multiples for the Selected
Companies ranged from 4.4x to 9.1x with a mean of 6.2x, compared with 13.5x for
Midland.
 
     No company utilized in the comparable company analysis is identical to
Midland. Accordingly, an analysis of the foregoing is not purely mathematical.
Rather, it involves complex considerations and judgments concerning differences
in financial and operating characteristics of the comparable companies and other
factors that could affect the public trading value of the comparable companies
or company to which they are being compared.
 
     Comparable Merger & Acquisition Transaction Analysis. DRW considered
certain publicly announced completed business combinations in the oil and gas
sector for which terms were publicly available, including the following 21
transactions announced between March 1994 and May 1998: Lomak Petroleum, Inc.'s
acquisition of Domain Energy Corporation; Meridian Resource Corp.'s acquisition
of Shell Oil Co.'s south Louisiana properties; Ocean Energy, Inc.'s acquisition
of United Meridian Corporation; Texoil, Inc.'s acquisition of Cliffwood Oil &
Gas Corp.; Chesapeake Energy Corporation's acquisition of Hugoton Energy Corp.;
Titan Exploration, Inc.'s acquisition of Carrollton Resources, LLC; Belco Oil &
Gas Corp.'s acquisition of Coda Energy, Inc.; Chesapeake Energy Corporation's
acquisition of DLB Oil & Gas, Inc.; Southern Mineral Corporation's acquisition
of Amerac Energy Corporation; Titan Exploration, Inc.'s acquisition of Offshore
Energy Development Corporation; Meridian Resource Corp.'s acquisition of Cairn
Energy USA, Inc.; Louis Dreyfus Natural Gas Corp.'s acquisition of American
Exploration Company; Forcenergy Inc.'s acquisition of Convest Energy
Corporation; Forcenergy Inc.'s acquisition of Edisto Resources Corporation;
Monterey Resources, Inc.'s acquisition of McFarland Energy, Inc.; Columbia
Natural Resources, Inc.'s acquisition of Alamco, Inc.; Forcenergy Inc.'s
acquisition of Great Western Resources, Inc.; Texas Pacific Group, Inc.'s
acquisition of Belden & Blake Corporation; HS Resources, Inc.'s acquisition of
Tide West Oil Company; Key Production Company, Inc.'s acquisition of Brock
Exploration Corporation and Alexander Energy Corporation's acquisition of
American Natural Energy Corporation (the "Selected Transactions").
 
     For purposes of this analysis, DRW assumed Midland was acquiring the Vista
Partnership in a stock transaction (the "Merger Analysis"). DRW considered
certain publicly available information for the Selected Transactions, including,
but not limited to, (i) transaction value to target company total proved
reserves ("Transaction Value/Proved Reserves") and (ii) transaction value to
target company SEC PV-10% Value ("Transaction Value/SEC PV-10"). DRW calculated
multiples based on the consideration attributable to oil and gas reserves for
each of the Selected Transactions to, among other things, such acquired
companies'
 
                                       28
<PAGE>   32
 
respective proved reserves. DRW's analyses indicated (i) Transaction
Value/Proved Reserves for the Selected Transactions ranged from $2.55 to $14.37
per BOE with a mean of $7.09 per BOE, compared with $5.56 per BOE for the Merger
Analysis and (ii) Transaction Value/SEC PV-10 for the Selected Transactions
ranged from 0.6x to 2.2x with a mean of 1.1x, compared with 1.1x for the Merger
Analysis.
 
     No transaction utilized in the comparable merger and acquisition
transaction analysis is identical to the Merger Analysis. In evaluating the
Selected Transactions, DRW made judgments and assumptions with regard to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Midland,
such as the impact of competition on the business of Midland, the Vista
Partnership and the industry generally, industry growth and the absence of any
material change in the financial condition and prospects of Midland or the Vista
Partnership or the industry or in the financial markets in general. Mathematical
analysis is not in itself a meaningful method of using comparable transaction
data.
 
     Contribution Analysis. DRW reviewed certain estimated future operating and
financial information (including, among other things, estimated proved reserves
and future net revenue from oil and gas properties) for Midland and the Vista
Partnership based on reserve studies as of January 1, 1998, estimated by
Williamson Petroleum Consultants, Inc., independent petroleum engineers. Based
on the reserve studies, DRW calculated field cash flow ("Field Cash Flow")
(total net revenue less ad valorem taxes and lease operating expenses) as
estimated for the 1998 ("1998E Field Cash Flow") and 1999 ("1999E Field Cash
Flow") calendar years for Midland and the Vista Partnership. This analysis
indicated that Midland stockholders, who will receive 27.5% of the equity
interest in the combined company, would contribute (i) 35.1% of the 1998E Field
Cash Flow of the combined company and (ii) 32.7% of the 1999E Field Cash Flow of
the combined company. According to Midland management, Midland does not
currently have the capital available to fund future development of its proved
undeveloped reserves. DRW calculated Field Cash Flow, excluding the development
of proved undeveloped reserves, for the same time periods for Midland. Based on
this analysis, Midland stockholders would contribute (i) 29.5% of the 1998E
Field Cash Flow of the combined company and (ii) 23.4% of the 1999E Field Cash
Flow of the combined company.
 
     The preceding contribution analysis was derived from projections of
reserves and future net revenue to the evaluated interests based on economic
parameters and operating conditions considered to be applicable as of January 1,
1998. A base oil price of $18.00 per barrel and a base gas price of $2.40 per
Mcf were provided to Williamson Petroleum Consultants, Inc. by Midland and the
Vista Partnership to be used at the effective date. Adjustments to these price
assumptions were provided to Williamson Petroleum Consultants, Inc. by Midland
and the Vista Partnership based on additional factors on a property-by-property
basis.
 
     Oil and gas prices have declined since the reserve studies were completed.
Average year-to-date through June 12, 1998 WTI Cushing oil price was $14.92 per
barrel and average year-to-date through June 12, 1998 Henry Hub gas price was
$2.24 per MCF. DRW was informed by Midland management that Midland currently has
no hedges in place or contemplated. DRW was informed by management of the Vista
Partnership that the Vista Partnership currently employs two costless collar
NYMEX WTI oil hedges, one expiring December 31, 1998 for 10,000 barrels per
month with put/call prices of $18.00/$19.085 per barrel and one expiring March
31, 1999 for 10,000 barrels per month with put/call prices of $18.50/$19.28 per
barrel. The Vista Partnership also has in effect three natural gas hedging
contracts through September 1998. One is a costless collar (based on NYMEX Henry
Hub Natural Gas) for 80,000 MMBtu per month with put/call prices of $2.20/$2.49
per MMBtu. The other two gas hedges are basis swaps: (i) Houston Ship Channel
Basis for 40,000 MMBtu per month at a fixed price of NYMEX Henry Hub minus
$0.0275 per MMBtu, and (ii) Permian Basin (El Paso) Basis for 40,000 MMBtu per
month at a fixed price of NYMEX Henry Hub minus $0.20 per MMBtu.
 
     Net Asset Value Analysis. DRW calculated net asset values for Midland and
the Vista Partnership based on (i) reserve studies as of January 1, 1998,
estimated by Williamson Petroleum Consultants, Inc., independent petroleum
engineers, and (ii) unaudited balance sheet information as of March 31, 1998.
Utilizing discounted future net revenues generated by Midland and the Vista
Partnership proved reserves, DRW applied additional risk adjustments (100% for
proved developed producing reserves, 75% for proved
 
                                       29
<PAGE>   33
 
developed non-producing reserves and 60% for proved undeveloped reserves) to
arrive at risk-adjusted reserve values of $19.3 million for Midland and $39.4
million for the Vista Partnership. By adding other assets and working capital
(current assets minus current liabilities, excluding short-term debt) and
subtracting long-term debt and estimated off-balance sheet liabilities
(estimated by Midland management), DRW calculated risk-adjusted net asset values
of $8.9 million for Midland and $22.3 million for the Vista Partnership. Based
on this analysis, Midland stockholders, who will receive 27.5% of the equity
interest in the combined company, would contribute 28.6% of the net asset value
of the combined company.
 
     Restructuring of Midland Exchange Stock Options Analysis. In connection
with the Merger, Midland intends to restructure the Midland Exchange Stock
Options issued under the Midland Directors Plan into a restricted version of the
Vista Warrants (being the Midland Exchange). In connection with the analysis of
the Midland Exchange, DRW has, among other things: (i) reviewed the stock option
agreements governing the Midland Exchange Stock Options; (ii) reviewed the 1997
Board of Directors Stock Incentive Plan; (iii) reviewed the agreement governing
the Vista Warrants; (iv) reviewed the registration rights agreement for Midland
securityholders; and (v) reviewed publicly available financial data and stock
market performance data of Midland Common Stock as well as the publicly traded
Midland Warrants. In addition, DRW has considered such other information and has
conducted such other analyses and investigations as it deemed appropriate under
the circumstances.
 
     DRW utilized the Black-Scholes option valuation model to evaluate the
Midland Exchange. The Black-Scholes model, utilizing assumptions as of June 12,
1998, returned a value of $0.848 per option for the existing Midland Exchange
Stock Options and a value of $1.534 per warrant for the publicly traded Midland
Warrants. As of June 12, 1998, the publicly traded Midland Warrants closed at
$1.0625 per warrant. The Black-Scholes option valuation model was developed for
use in estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions including the expected stock
price volatility. Because Midland Exchange Stock Options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, the
existing models do not necessarily provide a reliable single measure of fair
value of the Vista Warrants. Based on the current price levels of Midland Common
Stock, application of the Black-Scholes option pricing model, the restrictions
on the Vista Warrants, and an overall business judgment, an exchange ratio of
0.725 Vista Warrants for one Midland Exchange Stock Option is fair as of the
date hereof from a financial point of view to the holders of the currently
outstanding Midland Common Stock.
 
     The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. No company
or transaction used in the above analyses as a comparison is directly comparable
to Midland or the Vista Partnership or the Merger. The analyses were prepared
solely for purposes of DRW's providing its opinion to the Midland Board as to
the fairness from a financial point of view of the terms of the Merger to the
holders of Midland Common Stock and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities may be sold.
Analyses based upon forecast of future results are not necessarily indicative of
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Because such analyses are inherently subject to
uncertainty, being based upon numerous factors or events beyond the control of
the parties or their respective advisors, none of Midland, the Vista
Partnership, DRW or any other person assumes responsibility if future results
are materially different from those forecast. As described above, DRW's opinion
to the Midland Board was one of many factors taken into consideration by the
Midland Board in making its determination to approve the Merger Agreement. DRW's
opinion was provided to the Midland Board for the information and assistance of
the Midland Board in connection with its consideration of the Merger, and such
opinion does not constitute a recommendation as to how any holder of Midland
Common Stock should vote with respect to the Merger.
 
     DRW, as part of its investment banking business, is continually engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DRW in the normal course of its
business may trade the securities of Midland for its own account and for the
accounts of its customers and, accordingly, may hold a long or short position in
                                       30
<PAGE>   34
 
such securities at any time. DRW was selected to serve as the Midland Board's
financial advisor in connection with the Merger on the basis of DRW's experience
with mergers and acquisitions in the energy industry. Midland paid DRW a
financial advisory fee of $50,000 upon the execution of its engagement letter
and an additional $50,000 at the time DRW delivered the fairness opinion. DRW
also was subsequently engaged to evaluate the Midland Exchange of Midland
Exchange Stock Options. Midland paid DRW a financial advisory fee of $30,000
upon the execution of its engagement letter and an additional $35,000 at the
time DRW delivered the fairness opinion. Midland also agreed to reimburse DRW
for its reasonable out-of-pocket expenses and to indemnify DRW and its
controlling persons against certain liabilities and expenses relating to or
arising out of the consummation of the Merger, including certain liabilities
under U.S. Federal securities laws.
 
OTHER AGREEMENTS
 
     Voting Agreements. Concurrently with execution of the Merger Agreement,
holders of 21.7% of the outstanding shares of Midland Common Stock entered into
voting agreements with Vista, pursuant to which such holders have agreed, at any
meeting of the holders of Midland Common Stock, to vote such holders' shares in
favor of the Merger Agreement and the transactions contemplated thereby. In
addition, such holders have agreed to vote against any proposal that might
materially adversely affect the Merger.
 
     Affiliates Agreements. Rule 145 promulgated under the Securities Act
regulates the disposition of securities by "affiliates" of the Vista Partnership
and Midland in connection with the Merger. Prior to the Effective Time, Vista
will enter into agreements with the affiliates of the Vista Partnership and
Midland, pursuant to which such persons will agree that they will not sell any
shares of Vista Common Stock unless such transaction is (i) pursuant to an
effective registration statement under the Securities Act, (ii) in conformity
with the volume and other limitations of Rule 145 or (iii) in reliance upon an
exemption from registration that is available under the Securities Act.
 
     Midland Resignations and Termination Agreements. Concurrently with
execution of the Merger Agreement, Midland obtained written resignations from
each of its officers and directors under which such persons have resigned as an
officer and/or director of Midland effective as of the Effective Time.
Concurrently with the execution of the Merger Agreement, Midland entered into
termination agreements, effective as of the Effective Time, with Howard E. Ehler
and Marilyn D. Wade. Such termination agreements provide for payment of each
employee's annual salary as consideration for such employee's agreement to
resign from his or her position with Midland. In addition, the employees agreed
to release Midland from any claims relating to the employees' respective
employment with Midland and agreed not to disclose to third parties any
confidential information relating to Midland's business and operations.
 
     Settlement Agreement. Concurrently with execution of the Merger Agreement,
Midland and Mr. Warley executed that certain Warley Settlement Agreement, to be
effective March 27, 1998, in settlement of Mr. Warley's employment contract with
Midland. The settlement agreement contains the following principal terms: (i)
from March 27, 1998, through either the consummation or termination of the
Merger Agreement, Midland shall pay Warley the sum of $11,390 per month; (ii) on
the effective date of the Merger, Midland agrees to pay to Warley the sum of
$1,300,000 (reduced by a payment of $100,000 made by Midland to Marilyn D. Wade
on behalf of Mr. Warley pursuant to the Wade Release (as defined below)),
payable $20,000 a month over sixty (60) months, provided that, after one year,
either Midland or Warley may elect to have such amount paid as a lump sum (using
a discount factor of six percent (6%)); (iii) Warley's existing Midland stock
options for 15,000 shares shall expire on the 120th day following the effective
date of the Merger; (iv) Warley agrees to support the Merger and to take or
refrain from taking actions as contemplated by the Merger Agreement; and (v)
Warley and Midland mutually release one another from all claims which either
party may have (including a release by Warley of Midland's directors and
officers) except pursuant to such Agreement and pursuant to confidentiality and
non-compete provisions in Warley's employment agreement and Warley's rights to
indemnification as officer and director of Midland.
 
     Release and Hold Harmless Agreement. Concurrently with execution of the
Merger Agreement, Midland, Mr. Warley, and Marilyn D. Wade executed that certain
Release and Hold Harmless Agreement
 
                                       31
<PAGE>   35
 
(the "Wade Release") containing the following principal terms and provisions:
(i) Wade agrees to resign her employment upon consummation of the Merger; (ii)
Warley agrees to pay the sum of $100,000 to Wade upon consummation of the
Merger, which payment Midland has agreed to pay to Wade on behalf of Warley
under the Warley Settlement Agreement; (iii) upon execution of the Wade release,
Midland granted Wade options to purchase 137,931 shares of Midland Common Stock
at $2.6875 per share; (iv) within three (3) business days after Wade's
resignation, Midland agrees to pay the sum of $56,590; and (v) Wade releases
Warley, Midland and Midland's directors and officers from all claims which she
may have against them.
 
     Contract Operating Agreement. Effective as of June 1, 1998, Midland's
wholly owned, operating subsidiary, Midland Resources Operating Company, Inc.
("MRO"), and Vista Resources, Inc., the Vista Partnership's wholly owned,
operating subsidiary (the "Vista Operator"), entered into a Contract Operating
Agreement (herein so called) which provides, among other things, that the
Operator will provide various contract operating services for and on behalf of
Midland's oil and gas properties through October 31, 1998 and on a
month-to-month basis thereafter unless otherwise terminated by either party upon
30 days' prior written notice. The services to be provided shall be on an as
requested basis by Midland and shall include, without limitation, field
operations services, engineering supervision and analysis, geological review and
analysis, land and legal analysis, well site supervision, and accounting and
production overview and supervision. All field level services shall be charged
to Midland on an actual cost basis as incurred by the Operator, engineering and
geological review and supervision shall be charged at a flat rate of $400 per
day with a half day minimum charge, and limited general and administrative
assistance will be charged at a flat rate of $1,500 per month (which escalates
to $3,000 per month on November 1, 1998). Any general and administrative
services requested by Midland beyond the limited services set out in the
Contract Operating Agreement shall be charged on agreed upon hourly rates for
the number and type of Operator employees utilized by Midland.
 
     Financial Advisory Agreement. Contemporaneously with the closing of the
Merger, Vista will enter into an Advisory Services Agreement with NGP. Pursuant
to the Advisory Services Agreement, Vista will pay NGP $75,000 per year on a
year-to-year basis and reimburse NGP for certain expenses in consideration for
certain consulting and financial analysis services to be provided by NGP and its
representatives.
 
INTERESTS OF CERTAIN PERSONS IN THE MERGER
 
     Appointment to Vista Board. Prior to the Effective Time, the Midland Board
shall designate one individual who will be appointed as a director to the Vista
Board to serve until Vista's 1999 annual stockholders meeting.
 
     Indemnification of Vista Officers and Directors. As provided in the Merger
Agreement, at the Effective Time, Vista will enter into indemnification
agreements with each of the directors and officers of Vista pursuant to which
Vista will agree to indemnify and hold harmless each such director and officer
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities arising out of the fact that he is
a director or officer of Vista or any of its subsidiaries, to the full extent
permitted under Delaware law, Vista's Bylaws and the indemnification agreements.
 
     Indemnification of Midland Officers and Directors. As provided in the
Merger Agreement, at the Effective Time, Vista will enter into indemnification
agreements with each of the directors and officers of Midland pursuant to which
Vista will agree to indemnify and hold harmless each such director and officer
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities arising out of the fact that he
was a director or officer of Midland or any of its subsidiaries prior to the
Effective Time, to the full extent permitted under Delaware law, Midland's
Bylaws and the indemnification agreements.
 
     Midland Exchange Agreement. During May and June of 1998, and as
contemplated by the Merger Agreement, Sam R. Brock, a director of Midland,
Darrell M. Dillard, a director of Midland, Robert R. Donnelly, president and a
director of Midland, Wayne M. Whitaker, a director of Midland, John Q. Adams, an
advisory director of Midland and Marilyn D. Wade, corporate secretary of
Midland, who hold all issued and outstanding Midland Exchange Stock Options
granted pursuant to the Midland Directors Plan, and 137,931 options granted
pursuant to the Midland Incentive Plan, entered into the Midland Exchange
Agreement.
                                       32
<PAGE>   36
 
Pursuant to the terms of such agreement, at the Effective Time, without any
action on the part of any holder thereof, each Midland Exchange Stock Option
will be exchanged for a Vista Warrant that is exercisable for that whole number
of shares of Vista Common Stock (to the nearest whole share) equal to the
product of (x) .725 times (y) the number of shares of Vista Common Stock into
which the shares of Midland Common Stock subject to such Midland Exchange Stock
Option would be converted pursuant to the Merger. Pursuant to the Midland
Exchange Agreement, no payment shall be made for fractional interests. Pursuant
to the terms of the Midland Exchange Agreement, each Midland Exchange Stock
Option subject thereto shall be terminated immediately following its exchange
for a Vista Warrant.
 
     Pursuant to the terms of the Midland Exchange Agreement, the holders of
Midland Exchange Stock Options will receive warrants exercisable for 995,375
shares of Vista Common Stock, representing 5.8% of such shares outstanding at
the Effective Time (assuming for purposes of this calculation exercise of all
such warrants as of such time).
 
     The following table sets forth (i) the number of shares of Midland Common
Stock underlying the Midland Exchange Stock Options held by Midland directors
and officers and their affiliates and (ii) the number of shares of Vista Common
Stock underlying the Vista Warrants that such persons will receive upon
conversion of their Midland Exchange Stock Options pursuant to the Midland
Exchange.
 
<TABLE>
<CAPTION>
                                   SHARES OF MIDLAND                  SHARES OF VISTA
                                COMMON STOCK UNDERLYING                COMMON STOCK
                                   MIDLAND EXCHANGE       EXERCISE      UNDERLYING       EXERCISE
                                   STOCK OPTIONS(1)        PRICE     VISTA WARRANTS(2)    PRICE
                                -----------------------   --------   -----------------   --------
<S>                             <C>                       <C>        <C>                 <C>
John Q. Adams.................           175,000          $   3.00        126,875         $4.00
Sam R. Brock..................           250,000          $   3.00        181,250         $4.00
Darrell M. Dillard............           250,000          $   3.00        181,250         $4.00
Robert R. Donnelly............           250,000          $   3.00        181,250         $4.00
Marilyn D. Wade...............           197,931          $   3.00        143,500         $4.00
Wayne M. Whitaker.............           250,000          $   3.00        181,250         $4.00
                                       ---------                          -------
          Total...............         1,372,931                          995,375
</TABLE>
 
---------------
 
(1) The original term of the Midland Exchange Stock Options expires March 1,
    2002, except upon a change of control (for which the Merger qualifies), at
    which time the term will be shortened to one year after the date of the
    change of control.
 
(2) The Vista Warrants will expire on November 1, 2002.
 
CERTAIN INCOME TAX CONSEQUENCES
 
     The following discussion is a summary of the material United States federal
income tax consequences of the Merger and the Vista Exchange and is not intended
to be a complete discussion of all potential tax effects that might be relevant
to the Merger and the Vista Exchange. Such discussion deals only with persons
that are citizens or residents of the United States or are entities formed under
the laws of the United States (or any state or locality thereof) This summary
assumes that the holders of Midland Common Stock, GP Common Stock and
Partnership Interests have held such stock or units as a capital asset. The
discussion does not address all aspects of Federal income taxation that may be
important to particular stockholders and unitholders and may not be applicable
to certain special classes of stockholders and unitholders, including without
limitation stockholders and unitholders who are not citizens or residents of the
United States, stockholders and unitholders who acquired their stock or units
pursuant to the exercise of employee stock options or otherwise as compensation,
stockholders and unitholders that are corporations subject to the alternative
minimum tax, insurance companies, tax-exempt organizations, financial
institutions, securities dealers, broker-dealers, or foreign partnerships or
foreign corporations. Moreover, the state, local, foreign and estate tax
consequences of the Merger and the Vista Exchange are not discussed.
 
     This summary is based on laws, regulations, rulings and judicial decisions
in effect at the date of this Proxy Statement/Prospectus. Future legislation or
judicial or administrative changes or interpretations could alter or modify the
statements and conclusions set forth herein. Any such changes or interpretations
may or
 
                                       33
<PAGE>   37
 
may not be retroactive and could affect the tax consequences to stockholders and
unitholders as described herein.
 
     EACH STOCKHOLDER AND UNITHOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER AND
THE VISTA EXCHANGE DESCRIBED HEREIN INCLUDING THE APPLICABILITY AND EFFECT OF
ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF CHANGE OF APPLICABLE TAX LAWS.
 
     General. The Merger should qualify as a reorganization within the meaning
of Section 368(a) of the Code. The Vista Exchange should constitute a transfer
to a controlled corporation within the meaning of Section 351 of the Code.
 
     Midland has received a tax opinion from Arthur Andersen LLP, the tax
advisors to the Vista Partnership, to the effect that the Merger should be
treated as a reorganization within the meaning of Section 368(a) of the Code. No
Private Letter Ruling is being sought from the Internal Revenue Service. No
opinion is to be issued with respect to the Vista Exchange. The opinion is not
binding on the Internal Revenue Service or the courts and therefore the delivery
of such tax opinion cannot assure that the Internal Revenue Service or the
courts should treat the Merger as a reorganization within the meaning of Section
368(a) of the Code. The tax opinion (as well as the description of tax
consequences set forth herein) is based on, among other things, assumptions
relating to certain facts and circumstances of, and the intentions of, the
parties to the Merger, which assumptions either (i) have been made with the
consent of Midland and the Vista Partnership or (ii) are based upon certain
representations of fact made by the Vista Partnership, Midland or management of
the Vista Partnership or Midland. It is a condition to the Merger that the
opinion be delivered on the closing date of the Merger.
 
     The principal Federal income tax consequences of the Merger and the Vista
Exchange should be as follows:
 
     Midland, the Vista Partnership and the General Partner. No gain or loss
should be recognized by Midland, the Vista Partnership, the General Partner or
any of their respective subsidiaries as a result of the Vista Exchange or the
Merger.
 
     Consequences to Holders of Midland Common Stock. Except with respect to
cash received in lieu of fractional shares, no gain or loss should be recognized
by holders of Midland Common Stock upon the receipt of Vista Common Stock in the
Merger. Gain or loss with respect to receipt of any cash in lieu of fractional
shares is equal to the difference between the cash received and that portion of
the stockholder's tax basis in the Midland Common Stock exchanged attributable
to the fractional share interest deemed to have been redeemed in the Merger. The
tax basis of the Vista Common Stock received should be equal to the basis of the
Midland Common Stock surrendered in exchange therefor reduced by the amount of
tax basis allocable to any fractional share interest deemed to have been issued
and redeemed in the Merger. The holding period of the Vista Common Stock
received should assume the holding period of the Midland Common Stock
surrendered in the exchange therefor, provided that the Midland Common Stock
surrendered was a capital asset in the hands of the exchanging shareholder.
 
     Consequences to Holders of Partnership Interests. The exchange of the
Partnership Interests pursuant to the Vista Exchange should constitute a
transfer to a controlled corporation within the meaning of Section 351 of the
Code. Accordingly, under current law, no gain or loss should be recognized by
holders of the Partnership Interests upon the exchange for Vista Common Stock,
except that (i) any gain inherent in the exchange should be recognized to the
extent of the fair market value of any Vista Warrants received and (ii) gain or
loss should be recognized equal to the difference between any cash received in
lieu of fractional share interest and the unitholder's tax basis in the
fractional share deemed to have been redeemed in the Vista Exchange. A holder's
tax basis for the shares of Vista Common Stock received in the Vista Exchange
should be the same as the holder's tax basis of its Partnership Interests
exchanged therefor, decreased by (i) the fair market value of any Vista Warrants
received (which Vista believes would be determined by the trading price of the
Midland Warrants immediately after the Effective Time discounted to reflect that
the Vista Warrants are not publicly traded) and (ii) the tax basis of any
fractional share interest deemed to have been issued and redeemed and increased
by the amount of gain (other than the gain recognized on the deemed redemption
of
 
                                       34
<PAGE>   38
 
any fractional share interest) recognized on the Vista Exchange. The holding
period of the Vista Common Stock received should be a split holding period. The
Vista Common Stock received by the holders of Partnership Interests attributable
to the Vista Partnership's Section 751 assets should begin on the day after the
Effective Time of the Merger. Based on current estimates Vista believes
approximately 20% of the Vista Common Stock received by the holders of
Partnership Interests will have a holding period beginning the day after the
Effective Time of the Merger. The holding period attributable to the remaining
Vista Common Stock should include the holding period of the Partnership
Interests exchanged therefor, provided that the Partnership Interests exchanged
were held as capital assets by the exchanging Vista Partnership limited partner.
The tax basis of Vista Warrants received in the Vista Exchange should be their
fair market value and their holding period should begin on the day after the
Effective Time of the Merger.
 
     Consequences to Holders of GP Common Stock. The exchange of the GP Common
Stock pursuant to the Vista Exchange should constitute a transfer to a
controlled corporation within the meaning of Section 351 of the Code.
Accordingly, under current law, no gain or loss should be recognized by holders
of the GP Common Stock upon the exchange for Vista Common Stock, except that (i)
any gain inherent in the transaction should be recognized to the extent of the
fair market value of any Vista Warrants received and (ii) gain or loss equal to
the difference between any cash received in lieu of fractional share interest
and the stockholder's tax basis in the fractional share deemed to have been
redeemed in the Vista Exchange. A holder's tax basis for the shares of Vista
Common Stock received in the Vista Exchange should be the same as the holder's
tax basis of the shares of its GP Common Stock exchanged therefor, decreased by
(i) the fair market value of any warrants received (which Vista believes would
be determined by the trading price of the Midland Warrants immediately after the
Effective Time discounted to reflect that the Vista Warrants are not publicly
traded) and (ii) the tax basis of any fractional share interest deemed to have
been issued and redeemed and increased by the amount of gain recognized (other
than the gain recognized on the deemed redemption of any fractional share
interest) on the Vista Exchange. The holding period of the Vista Common Stock
should include the holding period of the GP Common Stock exchanged therefor,
provided that the GP Common Stock surrendered was a capital asset in the hands
of the exchanging stockholder. The tax basis of Vista Warrants received in the
Vista Exchange should be their fair market value and their holding period should
begin on the day after the Effective Time of the Merger.
 
ACCOUNTING TREATMENT
 
     The Merger and the Midland Exchange will be accounted for as a purchase of
Midland by Vista for financial accounting purposes. For presentation of certain
anticipated effects of the accounting treatment on the consolidated financial
position and results of operations of Vista after giving effect to the Merger
and the Midland Exchange, see "Unaudited Pro Forma Combined Financial
Statements."
 
REGISTRATION RIGHTS
 
     The Merger Agreement provides that contemporaneously with the Closing,
Vista shall enter into separate registration rights agreements (collectively,
the "Registration Rights Agreements") with each of the stockholders of the
General Partner and each of the limited partners of the Vista Partnership
immediately prior to the Vista Exchange and with each holder of a Midland
Exchange Stock Option covering (i) with respect to the Vista securityholders,
the resale of shares of Vista Common Stock to be received by such
securityholders pursuant to the terms of the Vista Exchange Agreement, together
with all shares of Vista Common Stock issuable to such securityholders upon the
exercise of an Exchange Warrant, (ii) with respect to the Midland
securityholders, the resale of shares of Vista Common Stock issuable to such
securityholders upon the exercise of an Exchange Warrant and (iii) any
securities issued or issuable in respect of any such shares by way of any stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise
((i), (ii) and (iii) above collectively referred to as the "Registrable
Shares").
 
     The Registration Rights Agreements provide that the holders of more than
50% of the Registrable Shares outstanding may, at any time after the first
anniversary of the Effective Time, require Vista to effect the registration
under the Securities Act of Registrable Shares on no more than two occasions by
means of a
                                       35
<PAGE>   39
 
"shelf" registration statement for an offering to be made on a continuous basis
under the Securities Act, subject to certain limitations. The Registration
Rights Agreements also provide certain "piggyback" registration rights to the
holders of Registrable Shares whenever Vista proposes to register an offering of
any of its capital stock under the Securities Act, subject to certain
exceptions, including pro rata reduction if, in the reasonable opinion of the
managing underwriter(s) of the offering, such a reduction is necessary to
prevent an adverse effect on the marketability or offering price of all the
securities proposed to be offered in the offering.
 
     The Registration Rights Agreements contain customary provisions regarding
the payment of expenses by Vista and regarding mutual indemnification agreements
between Vista and the holders of Registrable Shares for certain securities law
violations.
 
STOCK EXCHANGE LISTING
 
     It is a condition to the Merger that the shares of Vista Common Stock be
authorized for listing on the ASE, subject to official notice of issuance.
Application will be made for such listing.
 
RESTRICTIONS ON RESALES BY AFFILIATES
 
     The shares of Vista Common Stock to be received by Midland stockholders in
connection with the Merger have been registered under the Securities Act and,
except as set forth in this paragraph, may be traded without restriction. The
shares of Vista Common Stock to be issued in connection with the Merger and
received by persons who are deemed to be "affiliates" (as that term is defined
in Rule 144 under the Securities Act) of the Vista Partnership or Midland prior
to the Merger may be resold by them only in transactions permitted by the resale
provisions of Rule 145 under the Securities Act (or, in case any such person
should become an affiliate of Vista, Rule 144 under the Securities Act) or as
otherwise permitted under the Securities Act. Accordingly, the Merger Agreement
provides that each of the Vista Partnership and Midland will use all reasonable
efforts to cause its affiliates to execute an agreement to the effect that such
persons will not sell any shares of Vista Common Stock at any time in violation
of the Securities Act or the rules and regulations promulgated thereunder,
including Rule 145.
 
DISSENTERS' RIGHTS
 
     Under Texas law, holders of Midland Common Stock will not be entitled to
any dissenters' rights in connection with the Merger. Section 5.11 of the Texas
Business Corporation Act provides that stockholders have the right to dissent
from any plan of merger that requires stockholder approval. Notwithstanding the
foregoing, however, Section 5.11 provides that a stockholder shall not have the
right to dissent from a plan of merger if (i) the stockholder is not required to
accept for the stockholder's shares any consideration that is different from the
consideration to be provided to any other stockholder and (ii) the stockholder
will receive as consideration shares of stock that are listed, or authorized for
listing upon official notice of issuance, on a national securities exchange.
 
                                       36
<PAGE>   40
 
                                     VISTA
 
GENERAL
 
     Vista is a newly formed Delaware corporation and wholly owned subsidiary of
the Vista Partnership that has not, to date, conducted any significant
activities other than those incident to its formation, its execution of the
Merger Agreement, the Midland Exchange Agreement and the Vista Exchange
Agreement and its participation in the preparation of this Proxy
Statement/Prospectus. Vista has no material assets or liabilities, other than
its rights and obligations under the Merger Agreement, the Midland Exchange
Agreement and the Vista Exchange Agreement, and has not generated any material
revenues or expenses. The Merger, the Midland Exchange and the Vista Exchange
will create a newly formed independent oil and gas company by combining the oil
and gas reserves, operations and businesses of the Vista Partnership and
Midland. Vista's growth strategy involves a coordinated balance of acquisitions,
exploitation and exploration. Drilling and production operations will be located
in Texas and New Mexico.
 
STRENGTHS AND STRATEGIES
 
     Vista's principal strengths and strategies will be the following:
 
  Reserves and Production
 
     - Vista will have over 14.0 MMBOE of total proved reserves, comprised of
       25.2 Bcf of natural gas and 9.9 MMBbls of crude oil, with an SEC PV10 of
       approximately $56.4 million.
 
     - Vista's daily production is expected to be over 1,800 Bbls of oil and
       5,200 Mcf of natural gas.
 
     - Vista's reserve base will be approximately 30% natural gas and 70% crude
       oil.
 
     - Vista's aggregate reserve to production ratio will be approximately 13
       years. A significant benefit of owning long-lived reserves is an enhanced
       ability to provide long-term funding for additional growth opportunities.
 
     - More than 90% of Vista's total proved reserves will be concentrated in
       the Permian Basin of West Texas and Southeastern New Mexico, a premier
       oil and gas producing province typified by numerous long-life, multi-pay
       exploitation and exploration opportunities.
 
     - Vista will operate over 400 producing wells, representing over 92% of its
       total proved reserves and increasing its control over the implementation
       of its strategies and projects.
 
  Management
 
     - Vista's management team will be led by C. Randall Hill, Steven D. Gray
       and R. Cory Richards, the current Chairman and Chief Executive Officer,
       President, and Vice President -- Exploration, respectively, of the
       General Partner of the Vista Partnership.
 
     - Vista's management team is well-rounded and experienced with professional
       backgrounds in law, petroleum engineering and geology, and over 35 years
       of collective experience in the oil and gas industry.
 
     - The members of this management team will collectively own approximately
       13% of the Vista Common Stock, thereby aligning their interests with
       those of the other Vista stockholders. Virtually all of the management
       team's net worth will consist of their respective ownership in Vista and
       they have no outside business interests, making them very focused on
       growing the equity value of Vista.
 
  NGP's Ownership
 
     - NGP will own approximately 52% of the Vista Common Stock and will be
       Vista's largest stockholder upon consummation of the Merger.
 
                                       37
<PAGE>   41
 
     - NGP enjoys a reputation as an active and experienced investor in the oil
       and gas industry.
 
     - Three of NGP's principals, Kenneth A. Hersh, David R. Albin and John S.
       Foster, will serve as directors of Vista. Vista considers NGP's continued
       participation in the ownership and management of Vista to be of
       substantial value, particularly in the areas of corporate finance
       activities, access to financial markets and building sponsorship for
       Vista in the public arena.
 
OBJECTIVES AND GROWTH STRATEGY
 
     - Vista's primary corporate objective will be to rapidly expand its reserve
       base, production capacity, cash flow and earnings in order to
       substantially increase the value of the Vista Common Stock.
 
     - Vista's management will continue to employ the same business
       philosophies, techniques and strategies that have grown the Vista
       Partnership and its predecessor from a start up company with no reserves
       or initial cash flow in December 1992 to a company of over 9.1 MMBOE and
       $3.9 million of EBITDAEX for 1997.
 
     - Vista's strategy involves these basic components: (i) acquiring domestic,
       proved oil and gas properties with realizable upside potential; (ii)
       exploiting such properties through a comprehensive program of workovers,
       recompletions, developmental and exploratory drilling, and secondary
       recovery projects using sophisticated technology; (iii) reducing costs at
       all levels of its business; and (iv) internally generating exploration
       projects where Vista can operate and control the timing and costs of such
       exploration efforts.
 
     - Vista will be committed to continuing to enhance stockholder value
       through adherence to its strategy and believes that its expected
       inventory of development, exploitation and exploratory projects, along
       with strategic acquisition opportunities that may arise in the future,
       may provide significant opportunity for future growth in value. See "Risk
       Factors -- Cautionary Statement Regarding Forward-Looking Information."
 
MANAGEMENT OF VISTA
 
  Directors and Executive Officers
 
     Set forth below is certain information concerning the directors and
executive officers of Vista at the Effective Time. In addition to those
directors listed below, the Midland Board has the right to select one initial
director of Vista to be named prior to the closing of the Merger.
 
<TABLE>
<CAPTION>
        NAME          AGE                          POSITION
        ----          ---                          --------
<S>                   <C>   <C>
C. Randall Hill.....  39    Chairman of the Board, Chief Executive Officer and
                            Chief Financial Officer
Steven D. Gray......  38    President and Director
R. Cory Richards....  37    Executive Vice President -- Exploration Manager and
                              Secretary
Kenneth A. Hersh....  35    Director
David R. Albin......  39    Director
John S. Foster......  40    Director
</TABLE>
 
     Set forth below is a description of the backgrounds of the future directors
and executive officers of Vista.
 
     C. Randall Hill, a graduate of the University of New Mexico with a B.B.A.
and the University of Tulsa with a J.D., has served as Chairman of the Board and
Chief Executive Officer of the General Partner of the Vista Partnership and its
predecessor, Lobo Resources, Inc., since its inception in December 1992. From
1985 through November 1992, Mr. Hill practiced law with the law firms of Weil,
Gotshal & Manges and Johnson & Swanson in Dallas, Texas. Mr. Hill is a director
of Arch Petroleum, Inc.
 
                                       38
<PAGE>   42
 
     Steven D. Gray, a graduate of Texas Tech University with a B.S. degree in
Petroleum Engineering, has served as President and a director of the General
Partner of the Vista Partnership and its predecessor, Lobo Resources, Inc.,
since its inception in December 1992. From 1982 to 1989, Mr. Gray held several
petroleum engineering positions with Texas Oil and Gas Corp. From 1989 to 1992,
Mr. Gray was a petroleum operations and reservoir engineer with Bettis, Boyle
and Stovall, a privately held, independent oil and gas company in Graham, Texas
 
     R. Cory Richards, a graduate of the University of Texas at Austin with a
B.S. degree in Geological Sciences, has served as Vice President and Exploration
Manager of Vista Resources, Inc., the operating subsidiary of the Vista
Partnership, since its inception in 1995. From 1987 until 1995, Mr. Richards was
employed as Exploration Manager with J. McShane, Inc., a privately held,
independent oil and gas company in Monahans, Texas.
 
     Kenneth A. Hersh, a graduate of Princeton University with a B.A. and
Stanford University Graduate School of Business with an M.B.A., has served as a
director of the General Partner since its inception in 1995. Since 1989, Mr.
Hersh has been a manager of the NGP investment funds, which were organized to
make direct equity investments in the oil and gas industry. From 1985 to 1987,
Mr. Hersh was employed as a member of the energy group of Morgan Stanley & Co.
investment banking division. Mr. Hersh serves as a director of Pioneer Natural
Resources Company, HS Resources, Inc., Titan Exploration, Inc. and Petroglyph
Energy, Inc.
 
     David R. Albin, a graduate of Stanford University with a B.S. in Physics
and Stanford University Graduate School of Business with an M.B.A., has served
as a director of the General Partner since its inception in 1995. Since 1988,
Mr. Albin has been a manager of the NGP investment funds, which were organized
to make direct equity investments in the oil and gas industry. From December
1984 until November 1988, Mr. Albin was employed by Bass Investment Limited
Partnership, where he was also responsible for portfolio management. Mr. Albin
serves as a director of Titan Exploration, Inc. and Petroglyph Energy, Inc.
 
     John S. Foster, a graduate of Williams College with a B.A. and New York
University's Stern School of Business with an M.B.A., has served as a director
of the General Partner since its inception in 1995. Since April 1989, Mr. Foster
has been the chief financial officer of the NGP investment funds, which were
organized to make direct equity investments in the oil and gas industry. From
August 1986 to March 1989, Mr. Foster was employed in the corporate bond
research department of Credit Suisse First Boston Corporation, where he focused
on the oil and gas industry.
 
     Vista was incorporated in May 1998 and has not yet paid compensation to its
executive officers. The compensation of the executive officers of Vista will be
initially set at the same level as currently being paid in connection with their
services for the Vista Partnership. After consummation of the Merger, Vista's
Compensation Committee will determine any adjustments to the compensation of
such officers. The executive officers of Vista will be C. Randall Hill, Steven
D. Gray and R. Cory Richards. Each such officer's current annual salary in
connection with his services for the Vista Partnership is $120,000, $120,000 and
$100,000, respectively.
 
  Committees of the Board
 
     Upon consummation of the Merger, the Vista Board intends to establish a
Compensation Committee and an Audit Committee. The Compensation Committee will
exercise the power of the Vista Board in connection with all matters relating to
compensation of executive officers, employee benefit plans and the
administration of Vista's stock option programs. The Audit Committee's primary
responsibilities will be to (i) recommend Vista's independent auditors to the
Vista Board, (ii) review with Vista's auditors the plan and scope of the
auditors' annual audit, the results thereof and the auditors' fees, (iii) review
Vista's financial statements and (iv) take such other action as it deems
appropriate to the accuracy and completeness of financial records of Vista and
financial information gathering, reporting policies and procedures of Vista.
 
                                       39
<PAGE>   43
 
  Director Compensation
 
     Directors who are also employees of Vista will not be separately
compensated for serving on the Vista Board. Directors who are not employees of
Vista will receive $250 per meeting for their services as directors. In
addition, Vista will reimburse directors for the expenses incurred in connection
with attending meetings of the Vista Board and its committees.
 
  Compensation Committee Interlocks and Insider Participation
 
     Vista's Compensation Committee will consist of Messrs. Hersh and Albin and
all determinations concerning executive compensation for Vista's executive
officers will be made by the Compensation Committee. The Compensation Committee
members will abstain from participation in compensation determinations
concerning their own compensation. None of the members of the Compensation
Committee has served on the board of directors or on the compensation committee
of any other entity, any of whose officers served on the Vista Board.
 
  Employee Benefit Plans
 
     The Vista Board and the Vista stockholders approved the adoption of the
Vista Energy Resources, Inc. 1998 Key Employee Stock Option Plan (the "Vista
Stock Option Plan") as of June 1, 1998. The Vista Board, or a committee
delegated by the Vista Board, selects participants in the Vista Stock Option
Plan from among those key employees of Vista whose performance may have a
significant effect on the success of Vista. See "Vista Stock Option Plan" for a
more detailed description of the plan.
 
  Indemnification Agreements
 
     As provided for in the Merger Agreement, at the Effective Time, Vista will
enter into indemnification agreements with the directors and officers of Vista
pursuant to which Vista will agree to indemnify and hold harmless such directors
and officers against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages or liabilities arising out of
the fact that he is a director or officer of Vista or any of its subsidiaries,
to the full extent permitted under Delaware law, Vista's Bylaws and the
indemnification agreements.
 
                                       40
<PAGE>   44
 
                                 CAPITALIZATION
 
     The following table sets forth the capitalization of Vista as of March 31,
1998, on a historical basis and as adjusted to give effect to the Merger, the
Midland Exchange and the Vista Exchange as if such transactions had been
consummated as of March 31, 1998. The Merger and the Midland Exchange will be
accounted for as a purchase of Midland by Vista. Accordingly, the amounts
included under "Actual" at March 31, 1998 are the historical amounts of the
Vista Partnership. The following table should be read in conjunction with the
unaudited Combined Pro Forma Financial Statements of Vista and the related notes
and the other information contained elsewhere in this Proxy
Statement/Prospectus, including the information set forth in "The Vista
Partnership -- Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Vista Partnership."
 
<TABLE>
<CAPTION>
                                                                  MARCH 31, 1998
                                                             -------------------------
                                                               ACTUAL       PRO FORMA
                                                             -----------   -----------
<S>                                                          <C>           <C>
Long-term debt (excluding current portion)(1)..............  $17,900,000   $27,141,188
Owners' equity:
  Partners' capital........................................    7,641,848            --
  Preferred Stock, $0.01 par value, 10,000,000 shares
     authorized; no shares outstanding.....................           --            --
  Common Stock, $0.01 par value, 50,000,000 shares
     authorized; 16,246,178 shares outstanding on a pro
     forma basis(2)........................................           --       162,462
  Additional paid-in capital...............................           --    25,109,939
                                                             -----------   -----------
          Total owners' equity.............................    7,641,848    25,272,401
                                                             -----------   -----------
          Total capitalization.............................  $25,541,848   $52,413,589
                                                             ===========   ===========
</TABLE>
 
---------------
 
(1) As of June 15, the outstanding principal balance of long-term debt
    (excluding current portion) was approximately $17.9 million.
 
(2) Excludes (i) 268,000 shares of Vista Common Stock issuable upon exercise of
    outstanding Midland Stock Options, with exercise prices between $2.375 and
    $4.00, (ii) 3,248,469 shares of Vista Common Stock issuable upon exercise of
    outstanding warrants at an exercise price of $4.00 and (iii) 270,000
    warrants at exercise prices between $2.50 and $3.50.
 
                                       41
<PAGE>   45
 
              UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS OF
                          VISTA ENERGY RESOURCES, INC.
 
     The Vista Partnership has entered into the Merger Agreement with Midland
that provides for Midland to become a subsidiary of Vista, currently a newly
created subsidiary of the Vista Partnership. The Merger will require Merger Sub
to be merged into Midland, resulting in Midland becoming a subsidiary of Vista.
As contemplated by the Merger Agreement, each of the limited partners of the
Vista Partnership and each of the stockholders of the General Partner have
entered into separate exchange agreements pursuant to which each such holder's
Partnership Interests and shares of GP Common Stock will be exchanged for shares
of Vista Common Stock contemporaneously with the Merger. As a result of the
Merger and the Vista Exchange, Vista, a new publicly held oil and gas
exploration and development company will be created.
 
     To date, Vista has no material assets or liabilities, other than its rights
and obligations under the Merger Agreement, and has not generated any material
revenues or expenses.
 
     The unaudited pro forma combined balance sheet and combined statements of
operations have been prepared to give effect to certain transactions as
described below.
 
          The unaudited pro forma combined balance sheet of Vista as of March
     31, 1998, has been prepared to give effect to the Merger, the Midland
     Exchange and the Vista Exchange as if such transactions had occurred on
     March 31, 1998. In accordance with the provisions of APB No. 16, "Business
     Combinations," the Merger and the Midland Exchange have been accounted for
     as a purchase of Midland by the Vista Partnership.
 
          The unaudited pro forma combined statements of operations of Vista for
     the three months ended March 31, 1998, and for the year ended December 31,
     1997, have been prepared to give effect to the Merger, the Midland Exchange
     and the Vista Exchange and certain events described below for the Vista
     Partnership and Midland as if the Merger, the Midland Exchange and the
     Vista Exchange and such events had occurred on January 1, 1997.
 
          The unaudited pro forma combined statement of operations for the year
     ended December 31, 1997, has been prepared to give effect to (i) the
     acquisition of certain oil and gas properties in May and June 1997 by the
     Vista Partnership (the "1997 Assets Acquired") and (ii) the sale of certain
     oil and gas properties by Midland (the "1997 Assets Sold").
 
     The unaudited pro forma combined financial statements included herein are
not necessarily indicative of the results that might have occurred had the
transactions taken place at the beginning of the period specified and are not
intended to be a projection of future results. In addition, future results may
vary significantly from the results reflected in the accompanying unaudited pro
forma combined financial statements because of normal production declines,
changes in product prices, future acquisitions and divestitures, future
development and exploration activities, and other factors.
 
     The following unaudited pro forma combined financial statements should be
read in conjunction with the Consolidated Financial Statements (and the related
notes) of the Vista Partnership and Midland included elsewhere herein for the
year ended December 31, 1997, and the Vista Partnership's and Midland's
quarterly information included elsewhere herein for the three months ended March
31, 1998.
 
                                       42
<PAGE>   46
 
                          VISTA ENERGY RESOURCES, INC.
 
                   UNAUDITED PRO FORMA COMBINED BALANCE SHEET
                              AS OF MARCH 31, 1998
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                              THE VISTA                   PRO FORMA
                                             PARTNERSHIP     MIDLAND     ADJUSTMENTS       PRO FORMA
                                             -----------   -----------   -----------      -----------
<S>                                          <C>           <C>           <C>              <C>
CURRENT ASSETS:
  Cash and cash equivalents................  $   316,566   $   121,946   $        --      $   438,512
  Accounts receivable......................      821,540     1,002,852            --        1,824,392
  Property held for sale...................           --       200,000      (200,000)(a)           --
  Deferred tax asset.......................           --        37,000       (37,000)(a)           --
  Other....................................       63,704        70,891            --          134,595
                                             -----------   -----------   -----------      -----------
                                               1,201,810     1,432,689      (237,000)       2,397,499
                                             -----------   -----------   -----------      -----------
PROPERTY AND EQUIPMENT:
  Oil and gas properties, successful
    efforts accounting.....................   28,610,607    29,106,440     7,556,933(a)    65,273,980
  Other....................................      377,461       573,253      (369,602)(a)      581,112
                                             -----------   -----------   -----------      -----------
                                              28,988,068    29,679,693     7,187,331       65,855,092
                                             -----------   -----------   -----------      -----------
  Less accumulated depreciation, depletion
    and amortization.......................   (3,925,139)  (16,279,676)   16,279,676(a)    (3,925,139)
                                             -----------   -----------   -----------      -----------
         Property and equipment, net.......   25,062,929    13,400,017    23,467,007       61,929,953
                                             -----------   -----------   -----------      -----------
OTHER ASSETS:
  Deferred tax asset.......................           --     1,120,941    (1,120,941)(a)           --
  Goodwill, net............................           --       713,912      (713,912)(a)           --
  Contracts and leases, net................           --       193,769      (193,769)(a)           --
  Note receivable..........................           --       298,786            --          298,786
  Other....................................      288,809       171,691      (171,691)(a)      288,809
                                             -----------   -----------   -----------      -----------
                                             $26,553,548   $17,331,805   $21,029,694      $64,915,047
                                             ===========   ===========   ===========      ===========
                                LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable and accrued expenses....  $ 1,011,700   $ 1,343,301   $ 1,040,000(a)   $ 3,395,001
  Current maturities of long-term debt.....           --       134,000      (134,000)(a)           --
                                             -----------   -----------   -----------      -----------
                                               1,011,700     1,477,301       906,000        3,395,001
                                             -----------   -----------   -----------      -----------
LONG-TERM DEBT.............................   17,900,000     9,107,188       134,000(a)    27,141,188
DEFERRED TAX LIABILITY.....................           --            --     7,000,000(a)     7,932,818
                                                                             932,818(b)
OTHER......................................           --       213,639       960,000(a)     1,173,639
STOCKHOLDER'S EQUITY:
  Common stock.............................           --         4,463       157,999(a)       162,462
  Additional paid-in capital...............           --     8,487,801    17,554,956(a)    25,109,939
                                                                            (932,818)
  Unearned compensation....................           --      (136,817)      136,817(a)            --
  Retained earnings (deficit)..............           --    (1,821,770)    1,821,770(a)            --
  Owner's equity...........................    7,641,848            --    (7,641,848)(a)           --
                                             -----------   -----------   -----------      -----------
                                               7,641,848     6,533,677    11,096,876       25,272,401
                                             -----------   -----------   -----------      -----------
                                             $26,553,548   $17,331,805   $21,029,694      $64,915,047
                                             ===========   ===========   ===========      ===========
</TABLE>
 
     The accompanying notes are an integral part of these unaudited pro forma
combined financial statements.
 
                                       43
<PAGE>   47
 
                          VISTA ENERGY RESOURCES, INC.
 
              UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                   FOR THE THREE MONTHS ENDED MARCH 31, 1998
 
<TABLE>
<CAPTION>
                                                                            PRO FORMA
                                      THE VISTA PARTNERSHIP    MIDLAND     ADJUSTMENTS      PRO FORMA
                                      ---------------------   ----------   -----------     -----------
<S>                                   <C>                     <C>          <C>             <C>
REVENUES:
  Oil and gas sales................        $2,054,168         $1,155,062    $      --      $ 3,209,230
                                           ----------         ----------    ---------      -----------
          Total revenues...........         2,054,168          1,155,062           --        3,209,230
                                           ----------         ----------    ---------      -----------
COSTS AND EXPENSES:
  Lease operating..................           986,728            730,463     (120,240)(c)    1,544,046
                                                                              (52,905)(d)
  Exploration costs................                --              3,126           --            3,126
  Depreciation, depletion and
     amortization..................           494,958            315,859      269,006(e)     1,079,823
  General and administrative,
     net...........................           307,955            205,295     (298,784)(f)      334,706
                                                                              120,240(c)
  Amortization of unit option
     awards........................           166,849                 --           --          166,849
  Impairment of oil and gas
     properties....................                --             34,086      (34,086)(g)           --
                                           ----------         ----------    ---------      -----------
          Total costs and
            expenses...............         1,956,490          1,288,829     (116,769)       3,128,550
                                           ----------         ----------    ---------      -----------
          Total operating income
            (loss).................            97,678           (133,767)     116,769           80,680
                                           ----------         ----------    ---------      -----------
OTHER:
  Interest and other income........            24,121             16,242           --           40,363
  Interest expense.................          (343,452)          (205,271)      28,364(h)      (520,359)
                                           ----------         ----------    ---------      -----------
          Total other..............          (319,331)          (189,029)      28,364         (479,996)
                                           ----------         ----------    ---------      -----------
NET INCOME (LOSS) BEFORE TAXES.....          (221,653)          (322,796)     145,133         (399,316)
  Benefit (provision) for taxes....            77,578            109,748      (47,566)(b)      139,760
                                           ----------         ----------    ---------      -----------
NET INCOME (LOSS)..................        $ (144,075)        $ (213,048)   $  97,567      $  (259,556)
                                           ==========         ==========    =========      ===========
BASIC NET LOSS PER SHARE...........                                                        $     (0.02)
                                                                                           ===========
WEIGHTED AVERAGE SHARES
  OUTSTANDING......................                                                         16,246,178
                                                                                           ===========
</TABLE>
 
    The accompanying notes are an integral part of these unaudited pro forma
                         combined financial statements.
 
                                       44
<PAGE>   48
 
                          VISTA ENERGY RESOURCES, INC.
 
              UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1997
 
<TABLE>
<CAPTION>
                                 THE VISTA                  1997 ASSETS   1997 ASSETS    PRO FORMA
                                PARTNERSHIP     MIDLAND     ACQUIRED(J)     SOLD(K)     ADJUSTMENTS      PRO FORMA
                                -----------   -----------   -----------   -----------   -----------     -----------
<S>                             <C>           <C>           <C>           <C>           <C>             <C>
REVENUES:
  Oil and gas sales...........  $8,874,961    $ 6,396,249   $1,510,975     $(193,041)   $        --     $16,589,144
                                ----------    -----------   ----------     ---------    -----------     -----------
         Total revenues.......   8,874,961      6,396,249    1,510,975      (193,041)            --      16,589,144
                                ----------    -----------   ----------     ---------    -----------     -----------
COSTS AND EXPENSES:
  Lease operating.............   3,688,695      3,088,886      344,175      (117,369)      (553,554)(c)   6,239,213
                                                                                           (211,620)(d)
  Exploration costs...........      97,211        849,534           --                           --         946,745
  Depreciation, depletion and
    amortization..............   2,169,098      1,964,658      162,856       (34,016)       592,835(e)    4,855,431
  General and administrative,
    net.......................     987,020      1,332,392           --       (30,718)    (1,475,388)(f)   1,366,860
                                                                                            553,554(c)
  Amortization of unit option
    awards....................     315,518             --           --            --             --         315,518
  Impairment of oil and gas
    properties................          --      1,371,102           --            --     (1,371,102)(g)          --
                                ----------    -----------   ----------     ---------    -----------     -----------
         Total costs and
           expenses...........   7,257,542      8,606,572      507,031      (182,103)    (2,465,275)     13,723,767
                                ----------    -----------   ----------     ---------    -----------     -----------
         Total operating
           income (loss)......   1,617,419     (2,210,323)   1,003,944       (10,938)     2,465,275       2,865,377
                                ----------    -----------   ----------     ---------    -----------     -----------
OTHER:
  Gain on sale of property....          --        462,571           --            --       (462,571)(i)          --
  Interest and other income...      28,271        117,563           --            --             --         145,834
  Interest expense............  (1,048,009)      (970,430)          --            --        314,405(h)   (1,704,034)
                                ----------    -----------   ----------     ---------    -----------     -----------
         Total other..........  (1,019,738)      (390,296)          --            --       (148,166)     (1,558,200)
                                ----------    -----------   ----------     ---------    -----------     -----------
NET INCOME (LOSS) BEFORE
  TAXES.......................     597,681     (2,600,619)   1,003,944       (10,938)     2,317,109       1,307,177
                                ----------    -----------   ----------     ---------    -----------     -----------
  Benefit (provision) for
    taxes.....................    (211,720)       717,237           --            --       (963,029)(b)    (457,512)
                                ----------    -----------   ----------     ---------    -----------     -----------
NET INCOME (LOSS).............  $  385,961    $(1,883,382)  $1,003,944     $ (10,938)   $ 1,354,080     $   849,665
                                ==========    ===========   ==========     =========    ===========     ===========
BASIC NET INCOME PER SHARE....                                                                          $      0.05
                                                                                                        ===========
WEIGHTED AVERAGE SHARES
  OUTSTANDING.................                                                                           16,246,178
                                                                                                        ===========
</TABLE>
 
    The accompanying notes are an integral part of these unaudited pro forma
                         combined financial statements.
 
                                       45
<PAGE>   49
 
                          VISTA ENERGY RESOURCES, INC.
 
           NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
                     MARCH 31, 1998, AND DECEMBER 31, 1997
1. BASIS OF PRESENTATION:
 
     The Vista Partnership has entered into the Merger Agreement with Midland
that provides for Midland to become a subsidiary of Vista, currently a newly
created subsidiary of the Vista Partnership. The Merger will require Merger Sub
to be merged into Midland, resulting in Midland becoming a subsidiary of Vista.
As contemplated by the Merger Agreement, each of the limited partners of the
Vista Partnership and each of the stockholders of the General Partner have
entered into separate exchange agreements pursuant to which each such holder's
Partnership Interests and shares of GP Common Stock will be exchanged for shares
of Vista Common Stock contemporaneously with the Merger. As a result of the
Merger and the Vista Exchange, Vista, a new publicly held oil and gas
exploration and development company will be created.
 
     The unaudited pro forma combined balance sheet of Vista as of March 31,
1998, has been prepared to give effect to the Merger, the Midland Exchange and
the Vista Exchange as if they had occurred on March 31, 1998. In accordance with
the provisions of APB No. 16, "Business Combinations," the Merger and the
Midland Exchange have been accounted for as a purchase of Midland by the Vista
Partnership.
 
     The unaudited pro forma combined statements of operations of Vista for the
three months ended March 31, 1998, and for the year ended December 31, 1997,
have been presented to give effect to the Merger, the Midland Exchange and the
Vista Exchange and certain events described below for the Vista Partnership and
Midland as if the Merger, the Midland Exchange and the Vista Exchange and such
events had occurred on January 1, 1997.
 
     The following is a description of the individual columns included in these
unaudited pro forma combined financial statements:
 
          THE VISTA PARTNERSHIP -- Represents the consolidated balance sheet of
     the Vista Partnership as of March 31, 1998, and the consolidated statements
     of operations of the Vista Partnership for the three months ended March 31,
     1998, and for the year ended December 31, 1997.
 
          MIDLAND -- Represents the consolidated balance sheet of Midland as of
     March 31, 1998, and the consolidated statements of operations of Midland
     for the three months ended March 31, 1998, and for the year ended December
     31, 1997.
 
          1997 ASSETS ACQUIRED -- Reflects the results of operations for the
     year ended December 31, 1997, from certain oil and gas properties prior to
     their acquisition in 1997. In May 1997, the Partnership acquired interests
     in certain oil and gas properties from Coastal Oil and Gas Corporation for
     a net purchase price of $1.1 million. Also, in July 1997, the Vista
     Partnership acquired interests in certain oil and gas properties from E.G.
     Operating for a net purchase price of $6.1 million. Prior to their
     acquisition in 1997, the oil and gas properties so acquired produced 63,864
     Bbls of oil and 256,440 Mcf of gas. Average prices of $16.15 per Bbl of oil
     and $1.91 per Mcf of gas were received from such production and production
     costs per BOE of $3.23 were incurred.
 
          1997 ASSETS SOLD -- Reflects the results of operations for the year
     ended December 31, 1997, from certain oil and gas properties prior to their
     sale in 1997. During the year ended December 31, 1997, Midland sold certain
     nonstrategic oil and gas properties for aggregate proceeds of approximately
     $563,000. Prior to their sale in 1997, these oil and gas properties
     produced 3,326 Bbls of oil and 56,263 Mcf of gas. Midland received an
     average price of $17.87 per Bbl of oil and $2.37 per Mcf of gas from such
     production and incurred production costs per BOE of $5.79 and depletion
     expense per BOE of $2.27 related to these properties.
 
                                       46
<PAGE>   50
                          VISTA ENERGY RESOURCES, INC.
 
   NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
2. ACQUISITION OF MIDLAND:
 
     The aggregate Vista Common Stock, Midland and Vista warrants, Midland stock
options and Midland common stock warrants purchase consideration is computed in
accordance with the exchange ratios agreed to in the Merger Agreement, the
Midland Exchange Agreement and the Vista Exchange Agreement as follows:
 
<TABLE>
<CAPTION>
                                                                 MIDLAND
                                                                 COMMON
                                                                  STOCK
                                                               -----------
<S>                                                            <C>
Midland Shares outstanding..................................     4,467,699
Exchange ratio to Vista common shares.......................          1.00
                                                               -----------
Vista shares................................................     4,467,699
Value of Vista common stock(i)..............................   $      3.46
                                                               -----------
Vista common stock consideration............................   $15,458,239
                                                               ===========
</TABLE>
 
<TABLE>
<CAPTION>
                                                                 MIDLAND
                                                                AND VISTA
                                                                WARRANTS
                                                               -----------
<S>                                                            <C>
Midland warrants outstanding................................     3,248,469
Exchange ratio to Vista warrants............................          1.00
                                                               -----------
Vista warrants..............................................     3,248,469
Value of Vista warrants(ii).................................   $      0.76
                                                               -----------
Vista warrants consideration................................   $ 2,468,836
                                                               ===========
</TABLE>
 
<TABLE>
<CAPTION>
                                                                 MIDLAND
                                                                  STOCK
                                                                 OPTIONS
                                                               -----------
<S>                                                            <C>
Midland stock options outstanding...........................       268,000
Exchange ratio to employee stock options....................          1.00
                                                               -----------
Employee stock options......................................       268,000
Value of employee stock options(iii)........................   $      2.29
                                                               -----------
Employee stock option consideration.........................   $   613,720
                                                               ===========
</TABLE>
 
<TABLE>
<CAPTION>
                                                                 MIDLAND
                                                                 COMMON
                                                                  STOCK
                                                                WARRANTS
                                                               -----------
<S>                                                            <C>
Midland common stock warrants outstanding...................       255,000
Exchange ratio to Vista common stock warrants...............          1.00
                                                               -----------
Vista common stock warrants.................................       255,000
Value of Vista common stock warrants(iv)....................   $      0.55
                                                               -----------
Vista common stock warrant consideration....................   $   140,250
                                                               ===========
Vista common stock consideration............................   $15,458,239
Vista warrant consideration.................................     2,468,836
Employee stock option consideration.........................       613,720
                                                               -----------
Vista common stock warrant consideration....................       140,250
Cash consideration for non-recurring merger expenses........     2,000,000
                                                               -----------
Aggregate purchase consideration............................   $20,681,045
                                                               ===========
</TABLE>
 
                                       47
<PAGE>   51
                          VISTA ENERGY RESOURCES, INC.
 
   NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
---------------
 
(i)  Vista Common Stock is valued at $3.46 per share which represents Midland's
     seven-day average common stock trading price surrounding the announcement
     of the Merger on May 26, 1998.
 
(ii) Vista warrants are valued at $0.76 per warrant which represents Midland's
     seven-day average stock purchase warrant trading price surrounding the
     announcement of the Merger on May 26, 1998.
 
(iii)Employee Stock Options are valued at $2.29 per option which represents the
     fair value of outstanding Stock Options using the Black-Scholes
     option-pricing model as of the announcement of the Merger on May 26, 1998,
     using the following weighted-average assumptions:
 
<TABLE>
<S>                                                            <C>
Expected Volatility.........................................   78% to 99%
Risk Free Rate..............................................   5.50% to 5.58%
Expected Life...............................................   3 to 5 years
Expected Dividend Yield.....................................   0%
</TABLE>
 
(iv) Vista common stock warrants are valued at $0.55 per warrant which
     represents the average difference of the in-the-money warrant strike prices
     from the value of the Vista Common Stock as defined in (a).
 
     In accordance with the exchange ratios agreed to in the Merger Agreement,
the former holders of Partnership Interests in the Vista Partnership and shares
of GP Common Stock will receive approximately 11,767,406 shares of Vista Common
Stock and the Midland Stockholders will receive approximately 4,463,499 shares
of Vista Common Stock.
 
3. PRO FORMA ENTRIES:
 
     (a) To record the acquisition of Midland using the purchase method of
accounting. The allocation of the purchase price to the acquired assets and
liabilities is preliminary and, therefore, subject to change. Any future
adjustments to the allocation of the purchase price are not anticipated to be
material to the unaudited pro forma combined financial statements (see Note 2
above).
 
     (b) To record deferred taxes and income tax expense to reflect the tax
position of the combined entity.
 
     (c) To reclassify certain amounts to conform with the financial statement
presentation of Vista.
 
     (d) To adjust lease operating expenses for efficiencies expected to be
realized through economies of scale in common operating locations and reductions
of certain field personnel.
 
     (e) To adjust depreciation, depletion and amortization expense for the
additional basis allocated to the oil and gas properties acquired and accounted
for using the successful efforts methods of accounting.
 
     (f) To adjust general and administrative expense from the elimination of
redundant personnel, lease space and other corporate services. Based on an
analysis of the expenses and personnel that will be required to provide the
general and administrative services following the Merger, management has
estimated that future annual recurring general and administrative expenses will
approximate $1.3 million, net of reimbursements.
 
     (g) To adjust impairment of oil and gas properties to reflect the
restatement of the Midland properties to fair market value.
 
     (h) To adjust interest expense to be reflective of the weighted average
interest rate received under the Vista Partnership's Credit Agreement.
 
     (i) To remove gain on sale of property to reflect only recurring items of
income.
 
     (j) To record revenue and direct operating expenses for the 1997 Assets
Acquired based on the actual results of operations prior to their acquisition.
 
                                       48
<PAGE>   52
                          VISTA ENERGY RESOURCES, INC.
 
   NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     (k) To reduce revenue and direct operating expenses for the 1997 Assets
Sold based on the actual results of operations prior to their sale.
 
4. INCOME TAXES:
 
     Vista will account for income tax in accordance with the provisions of SFAS
109. In accordance with SFAS 109, Vista will prepare separate tax calculations
for each tax jurisdiction in which Vista will be subject to income taxes.
 
5. OIL AND GAS RESERVE DATA:
 
     The estimates of Midland's proved oil and gas reserves, which are located
entirely within the United States, were prepared in accordance with the
guidelines established by the Commission and Financial Accounting Standards
Board. The estimates of December 31, 1997 are based on evaluations prepared by
Williamson Petroleum Consultants, Inc., independent petroleum engineers. The
estimates as of December 31, 1996 and 1995, are based on evaluations prepared by
E. Ralph Green and Associates, independent petroleum engineers. For information
concerning costs incurred by Midland for oil and gas operations, net revenues
from oil and gas production, estimated future net revenues attributable to
Midland's oil reserves and present value of future net revenues on a 10%
discount rate and changes therein, see Notes to Midland's consolidated financial
statements. Midland emphasizes that reserve estimates are inherently imprecise
and that estimates of new discoveries are more imprecise than those of producing
oil and gas properties. Accordingly, the estimates are subject to change as
further information becomes available.
 
     The estimates of the Vista Partnership's proved oil and gas reserves, which
are located entirely within the United States, were prepared in accordance with
the guidelines established by the Commission and Financial Accounting Standards
Board. The estimates of December 31, 1997, 1996 and 1995 are based on
evaluations prepared by the Vista Partnership. For information concerning costs
incurred by the Vista Partnership for oil and gas operations, net revenues from
oil and gas production, estimated future net revenues attributable to the Vista
Partnership's oil reserves and present value of future net revenues on a 10%
discount rate and changes therein, see Notes to the Vista Partnership's
consolidated financial statements. The Vista Partnership emphasizes that reserve
estimates are inherently imprecise and that estimates of new discoveries are
more imprecise than those of producing oil and gas properties. Accordingly, the
estimates are subject to change as further information becomes available.
 
     The following unaudited pro forma supplemental information regarding the
oil and gas activities of Vista is presented pursuant to the disclosure
requirements promulgated by the Commission and Statement of Financial Accounting
Standards No. 69, "Disclosures About Oil and Gas Producing Activities."
 
     Management emphasizes that reserve estimates are inherently imprecise and
subject to revision and that estimates of new discoveries are more imprecise
than those of producing oil and gas properties. Accordingly, the estimates are
expected to change as future information becomes available; such changes could
be significant.
 
                                       49
<PAGE>   53
                          VISTA ENERGY RESOURCES, INC.
 
   NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Quantities of oil and gas reserves
 
     Set forth below is a pro forma summary of the changes in the net quantities
of oil and natural gas reserves for the year ended December 31, 1997.
 
<TABLE>
<CAPTION>
                                                                             GAS
                                                                BBLS        (MCF)
                                                              ---------   ----------
<S>                                                           <C>         <C>
Balance, January 1, 1997....................................  7,381,899   25,480,189
  Revisions of previous estimates...........................  1,012,971   (2,939,237)
  Purchase of minerals-in-place.............................    762,282    6,206,929
  Sales of minerals in place................................   (400,989)  (2,170,194)
  New discoveries and extensions............................  1,711,787      349,664
  Production................................................   (596,392)  (1,772,407)
                                                              ---------   ----------
Balance, December 31, 1997..................................  9,871,558   25,154,944
                                                              =========   ==========
</TABLE>
 
  Standardized measure of discounted future net cash flows
 
     The pro forma combined standardized measure of discounted future net cash
flows is computed by applying year-end prices of oil and gas (with consideration
of price changes only to the extent provided by contractual arrangements) to the
estimated future production of oil and gas reserves less estimated future
expenditures (based on year-end costs) to be incurred in developing and
producing the proved reserves discounted using a rate of 10% per year to reflect
the estimated timing of the future cash flows. Future income taxes are
calculated by comparing discounted future cash flows to the tax basis of oil and
gas properties, plus available carryforwards and credits, and applying the
current tax rate to the difference.
 
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                                   1997
                                                               ------------
<S>                                                            <C>
Oil and gas producing activities:
  Future cash inflows.......................................   $208,526,470
  Future production costs...................................    (79,404,664)
  Future development costs..................................    (20,411,169)
  Future income tax expense.................................    (19,648,988)
  10% annual discount factor................................    (36,489,645)
                                                               ------------
  Standardized measure of discounted future net cash
     flows..................................................   $ 52,572,004
                                                               ============
</TABLE>
 
                                       50
<PAGE>   54
                          VISTA ENERGY RESOURCES, INC.
 
   NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Changes relating to the standardized measure of discounted future net cash
flows
 
     The principal sources of the change in the pro forma combined standardized
measure of discounted future net cash flows for the year ended December 31,
1997, are as follows:
 
<TABLE>
<S>                                                            <C>
Oil and gas sales, net of production costs..................   $ (7,585,138)
Net changes in prices and production costs..................    (33,486,325)
Extensions and discoveries..................................      4,902,792
Purchases of minerals-in-place..............................      8,289,041
Sales of Reserves in Place..................................     (3,507,680)
Revisions of estimated future development costs.............     (4,318,823)
Revisions of previous quantity estimates....................      3,573,186
Accretion of discount.......................................      8,066,938
Changes in production rates, timing and other...............     (5,330,746)
Development costs to reduce future development cost.........      5,073,000
Net change in present value of future income taxes..........     14,403,882
Balance, beginning of year..................................     62,491,877
                                                               ------------
Balance, end of year........................................   $ 52,572,004
                                                               ============
</TABLE>
 
                                       51
<PAGE>   55
 
                                    MIDLAND
 
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF MIDLAND
 
     The following table sets forth selected consolidated financial information
of Midland for the three months ended March 31, 1998 and 1997, and for each of
the five fiscal years in the period ended December 31, 1997. This data should be
read in conjunction with the Consolidated Financial Statements of Midland and
the related notes thereto.
 
                           SUMMARY BALANCE SHEET DATA
 
<TABLE>
<CAPTION>
                                     AS OF MARCH 31,                                AS OF DECEMBER 31,
                                -------------------------   -------------------------------------------------------------------
                                   1998          1997          1997          1996          1995          1994          1993
                                -----------   -----------   -----------   -----------   -----------   -----------   -----------
                                       (UNAUDITED)
<S>                             <C>           <C>           <C>           <C>           <C>           <C>           <C>
Current Assets................  $ 1,432,689   $ 1,989,666   $ 2,036,145   $ 3,644,720   $ 2,038,452   $ 1,134,999   $ 1,444,981
Current Liabilities...........    1,477,301     3,012,110     1,564,683     3,268,428     1,950,703     2,152,910     1,864,131
                                -----------   -----------   -----------   -----------   -----------   -----------   -----------
  Working capital.............      (44,612)   (1,022,444)      471,462       376,292        87,749    (1,017,911)     (419,150)
Oil and gas properties
  (net).......................   13,196,366    13,802,163    13,004,527    13,408,878     9,887,998     9,257,900     7,991,304
Other assets..................    2,702,750     2,756,134     2,579,811     1,923,048     2,196,902     2,385,641     2,113,785
Total assets..................   17,331,805    18,547,963    17,620,483    18,976,646    14,123,352    12,778,540    11,550,070
Long-term debt (excluding
  current maturities).........    9,107,188     6,403,327     9,115,370     7,166,421     4,524,617     4,254,042     3,616,628
Other non-current
  liabilities.................      213,639       473,637       221,404       364,537            --            --            --
Stockholders' equity..........  $ 6,533,677   $ 8,658,889   $ 6,719,026   $ 8,177,260   $ 7,648,032   $ 6,371,588   $ 6,069,311
                                ===========   ===========   ===========   ===========   ===========   ===========   ===========
Stockholders' equity per
  common share................  $      1.46   $      1.96   $      1.51   $      1.86   $      1.74   $      1.90   $      1.80
                                ===========   ===========   ===========   ===========   ===========   ===========   ===========
Shares outstanding............    4,463,499     4,411,031     4,463,499     4,401,031     4,386,231     3,362,222     3,373,522
                                ===========   ===========   ===========   ===========   ===========   ===========   ===========
</TABLE>
 
                             SUMMARY OF OPERATIONS
 
<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED                            YEARS ENDED DECEMBER 31,
                                -------------------------   -------------------------------------------------------------------
                                   1998          1997          1997          1996          1995          1994          1993
                                -----------   -----------   -----------   -----------   -----------   -----------   -----------
                                       (UNAUDITED)
<S>                             <C>           <C>           <C>           <C>           <C>           <C>           <C>
Oil and gas sales.............  $ 1,155,062   $ 1,828,255   $ 6,396,249   $ 6,958,491   $ 5,147,033   $ 5,265,759   $ 4,569,022
Other.........................       35,665        29,884       204,238       183,234       231,141       217,884        82,173
                                -----------   -----------   -----------   -----------   -----------   -----------   -----------
  Total operating revenues....    1,190,727     1,858,139     6,600,487     7,141,725     5,378,174     5,483,643     4,651,195
Production costs..............      730,463       737,489     3,088,886     2,981,837     2,509,854     2,423,032     2,091,955
Exploration costs.............        3,126         8,555       849,534       766,855       198,453            --            --
Depreciation, depletion and
  amortization................      315,859       314,781     1,964,658     1,306,287     1,033,905     1,120,841       786,918
Abandonments..................       34,086            --        93,760            --         3,000        41,676        25,732
General and administrative
  expenses....................      232,015       333,849     1,451,404     1,295,298     1,049,904     1,145,719     1,422,094
Impairment costs(a)...........           --            --     1,277,342       114,904     1,020,670            --            --
                                -----------   -----------   -----------   -----------   -----------   -----------   -----------
  Total operating expenses....    1,315,549     1,394,674     8,725,584     6,465,181     5,815,786     4,731,268     4,326,699
                                -----------   -----------   -----------   -----------   -----------   -----------   -----------
                                   (124,822)      463,465    (2,125,097)      676,544      (437,612)      752,375       324,496
Gain (loss) on sale of
  properties(b)...............           --       351,079       462,571        36,308      (102,984)       81,962            --
Other income(c)...............        7,297         9,956        32,337        61,997        38,911       169,174        51,692
Interest expense..............     (205,271)     (212,637)     (970,430)     (722,447)     (611,587)     (473,048)     (296,797)
                                -----------   -----------   -----------   -----------   -----------   -----------   -----------
Income (loss) before income
  taxes and cumulative effect
  of change in accounting
  principle...................     (322,796)      611,863    (2,600,619)       52,402    (1,113,272)      530,463        79,391
Income tax expense
  (benefit)...................     (109,748)      206,125      (717,237)       30,280      (376,241)      204,769        29,457
                                -----------   -----------   -----------   -----------   -----------   -----------   -----------
Income (loss) before
  cumulative effect of change
  in accounting principle.....  $  (213,048)  $   405,738   $(1,883,382)  $    22,122   $  (737,031)  $   325,694   $    49,934
                                ===========   ===========   ===========   ===========   ===========   ===========   ===========
Income (loss) per common share
  before cumulative effect of
  change (basic and
  diluted)....................  $     (0.05)  $      0.09   $     (0.42)  $      0.01   $     (0.22)  $      0.10   $      0.02
                                ===========   ===========   ===========   ===========   ===========   ===========   ===========
Weighted average shares
  outstanding.................    4,463,499     4,406,031     4,433,113     4,395,414     3,381,592     3,368,455     2,267,563
                                ===========   ===========   ===========   ===========   ===========   ===========   ===========
</TABLE>
 
---------------
 
(a)  In 1995, concurrent with Midland's adoption of the Financial Accounting
     Standards Board Statement No. 121, "Accounting for the Impairment of
     Long-Lived Assets and for Long-Lived Assets to Be
 
                                       52
<PAGE>   56
 
     Disposed Of" ("FAS 121"), Midland recognized a charge of $1,020,670 for
     certain properties which were held for sale.
 
(b)  Gain (loss) on sale of properties was principally composed of the loss on
     the sale of Midland's former office facilities in Midland, Texas, in 1995
     and a gain on the sale of a working interest in an oil and gas property to
     Summit Petroleum Corporation in 1994. In 1997, gains were realized
     primarily from the sale of oil and gas properties.
 
(c)  In 1994, there was other income from the settlement of litigation regarding
     a former property operator of $120,090.
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF MIDLAND
 
  Plan of Operations
 
     During 1996 and 1997, Midland's exploration efforts consumed most of its
available resources. While Midland believes its exploratory efforts have
identified possible future drilling opportunities, its ability to actively
pursue these efforts as well as to actively exploit existing developed
properties is dependent upon securing additional capital.
 
     Beginning in early 1997, Midland determined that it should explore
strategic alternatives to raising capital though sales of equity. To assist
Midland, it engaged an investment banking firm. During 1997 and continuing into
1998, Midland considered various alternative transactions, primarily consisting
of the sale of all or substantially all of its assets, acquisitions of another
smaller company, merging with a company of equal size and merging with a larger
company. Midland terminated its contract with its investment banking firm in
December 1997.
 
     On May 22, 1998, Midland entered into the Merger Agreement with the Vista
Partnership. Consummation of the Merger is subject to approval of Midland's
stockholders. If the transaction with Vista is not consummated, Midland expects
to restrict its operations, including future development, to a level that its
current operations can support, and continue to seek a strategic transaction as
well as consider the sale of equity.
 
     Midland's initial capitalization was through the acquisition of interests
of the seven public oil and gas income limited partnerships in exchange for
common stock and warrants of Midland. There were 2,265,522 shares of common
stock issued and, for each share of common stock issued, two warrants were
issued entitling the holder to purchase one share of common stock at $2.50 and
one share at $4.00 during the period November 1990 to November 2002. In October,
1995, Midland called for redemption of its $2.50 warrants. Holders received a
redemption payment of $0.05 per warrant for aggregate payments of $63,373, which
was charged to additional paid in capital. 997,009 of the $2.50 warrants were
exercised, resulting in net proceeds of approximately $1,831,000. As of March
31, 1998, 11,428 of the $4.00 warrants had been exercised.
 
     On December 31, 1993, Midland acquired all of the issued and outstanding
common stock of Midland Resources Operating Company, Inc. ("MRO") through an
agreement of acquisition under which Midland issued 1,110,000 shares of common
stock to Deas H. Warley III and another former officer and director of Midland.
The exchange was based on the relative fair values of Midland and MRO, based on
a determination by the Board of Directors of each respective corporation. The
overall transaction was subject to a fairness opinion provided by an investment
banking firm. The acquisition of MRO expanded Midland's revenue base to include
property operations.
 
     On December 20, 1996, Midland completed the acquisition of Summit Petroleum
Corporation ("Summit"), an affiliated entity engaged in oil and gas acquisition,
development and exploration activities, which owned interests in many of the
same properties as Midland. Midland's total cash investment in acquiring Summit
was approximately $2,011,000. (See Note B of the Notes to the Consolidated
Financial Statements.)
 
                                       53
<PAGE>   57
 
  Capital Resources and Liquidity
 
     Net cash provided by operations decreased from $1,893,641 in 1996 to
$1,393,461 in 1997, for a decrease of $500,180, reflecting decreased oil and gas
production and pricing, and increased production costs and interest expense,
partially offset by lower geological and geophysical costs. Net cash used in
investing activities decreased from 1996 by $3,147,583, reflecting greater
proceeds from property sales in 1997 and the purchase of Summit in 1996. Net
cash provided by financing activities decreased from 1996 by $2,715,257,
reflecting additional borrowings for property acquisition and development in
1997 and greater debt repayments resulting primarily from the sale of the
Redfish Bay properties in 1997. In 1997, acquisition costs for proved properties
were $34,993, acquisition costs for unproven properties were $836,863 and
development costs were $1,716,294. Also, $1,536,130 was invested in an oil and
gas limited partnership in 1997. In 1996, cash payments for oil and gas property
acquisition costs totaled $761,476 for proved properties, $144,100 for unproved
properties, and $2,808,534 for development of properties.
 
     For the first quarter of 1998, cash flow from operations was $405,873,
which represents a decrease of $862,293 for the same period in 1997. This is due
primarily to lower product prices in the first quarter of 1998, partially offset
by lower general and administrative expenses. Cash flow from investing
activities was $19,143 in the first quarter of 1998, for a decrease of $310,894
from the same period in 1997. This was due to lesser proceeds from the sale of
oil and gas properties collected in 1998, which was offset, in part by lower
capital expenditures in 1998. In the first quarter of 1998, capital expenditures
were $468,994, compared to $1,222,345 for the same period in 1997. The 1997
amount includes investments in an oil and gas limited partnership of $602,532.
Net cash used in financing activities was $453,960 in the first quarter of 1998,
for a decrease of $1,168,425 from 1997. This was due primarily to greater
reductions in long-term debt in 1997.
 
     For 1997, Midland's working capital increased by $95,170 over 1996 to
$471,462. The principal components of this increase was the positive impact of
approximately $400,000 resulting from the sale of the Redfish Bay property in
1997, which was offset by a reduction in current deferred tax assets of
$341,000. At March 31, 1998, Midland's working capital had decreased to a
negative $44,612. This was due to lower product prices and to the funding of
capital expenditures and major repairs from operations in the first quarter of
1998.
 
     Management believes current debt maturities can be funded from cash flow
from operations. Management also believes that its credit facilities and its
cash flow from operations are adequate to meet its liquidity needs and, to the
extent necessary, operational changes will be made. Any future drilling will
depend on Midland's ability to raise additional capital through bank borrowings,
private placements or merger transactions.
 
     At December 31, 1997, Midland has a net deferred tax asset of $1,048,193
which it believes can be realized based on estimates of future income from the
production of existing hydrocarbon reserves. The net asset is primarily composed
of net operating loss carry-forwards which do not begin to expire until 2005.
 
     In October 1996, the borrowing base under Midland's credit facility with
First Union National Bank (FUNB) was increased from $7,000,000 to $9,500,000 and
in March 1997 was reduced to $8,200,000 as a result of the sale of the Redfish
Bay properties. The borrowing base was subsequently increased and, as of
December 1, 1997, was $9,125,000. On December 17, 1997 this credit facility was
replaced with a revolving credit agreement with Compass Bank (Compass) which
provides for a credit facility of $30 million and an initial borrowing base of
$10,500,000. Concurrent with the execution of this agreement, Midland's
outstanding debt to FUNB in the amount of $9,151,615 (including accrued interest
of $26,615), was paid by an advance under the Compass agreement. Amounts
borrowed under the Compass agreement are collateralized by a first lien on
substantially all of Midland's oil and gas properties. Interest under this
agreement is payable monthly at an annual rate which, at Midland's option, is
equal to either (a) the Compass prime lending rate (8.5% at December 31, 1997)
or (b) the London Interbank Offered Rate, plus 2.5%. In addition, a commitment
fee equal to  1/2% per annum on the unused portion of the borrowing base is
required. The borrowing base is reduced at the rate of $120,000 per month
beginning February 1, 1998 and, is subject to redetermination on each April 1
and October 1. This agreement also requires that Midland maintain certain
financial ratios and generally restricts Midland's ability to incur debt, sell
assets, materially change the nature of Midland's
                                       54
<PAGE>   58
 
business or its business structure or pay dividends. At December 31, 1997 the
balance due under this agreement was $9,651,615 and in January, 1998 a principal
reduction in the amount of $551,615 was made from the collection of sales
proceeds from properties sold in December, 1997. As of March 31, 1998, the
balance due under this facility was $9,200,000. As of June 15, 1998, the balance
due was $9,700,000 and the borrowing base was $9,800.000. Borrowing base
reductions are $80,000 per month beginning July 1, 1998.
 
     In March 1, 1995, Midland entered into a one year gas swap agreement to
hedge against a portion of the price risk associated with gas price declines.
This swap agreement expired in February 1996, and Midland has not entered into
another contract. Losses under this contract were $21,109 and $25,860 for 1995
and 1996, respectively.
 
     As of March 31, 1998, Midland was receiving $13.67 per Bbl as compared to
$19.52 at March 31, 1997. At December 31, 1997, Midland was receiving $16.52 per
Bbl compared to $25.00 at December 31, 1996.
 
     The following tables set forth a summary of historical financial
information for Midland. These tables should be read in conjunction with the
consolidated financial statements of Midland Resources, Inc. and Subsidiaries
(and the related notes). It should be noted that there are no audited financial
statements included herein for the year 1994. These tables are not covered by
the reports of independent certified public accountants.
 
                           SUMMARY BALANCE SHEET DATA
 
<TABLE>
<CAPTION>
                                     AS OF MARCH 31,                                AS OF DECEMBER 31,
                                -------------------------   -------------------------------------------------------------------
                                   1998          1997          1997          1996          1995          1994          1993
                                -----------   -----------   -----------   -----------   -----------   -----------   -----------
                                       (UNAUDITED)
<S>                             <C>           <C>           <C>           <C>           <C>           <C>           <C>
Current Assets................  $ 1,432,689   $ 1,989,666   $ 2,036,145   $ 3,644,720   $ 2,038,452   $ 1,134,999   $ 1,444,981
Current Liabilities...........    1,477,301     3,012,110     1,564,683     3,268,428     1,950,703     2,152,910     1,864,131
                                -----------   -----------   -----------   -----------   -----------   -----------   -----------
  Working capital.............      (44,612)   (1,022,444)      471,462       376,292        87,749    (1,017,911)     (419,150)
Oil and gas properties
  (net).......................   13,196,366    13,802,163    13,004,527    13,408,878     9,887,998     9,257,900     7,991,304
Other assets..................    2,702,750     2,756,134     2,579,811     1,923,048     2,196,902     2,385,641     2,113,785
Total assets..................   17,331,805    18,547,963    17,620,483    18,976,646    14,123,352    12,778,540    11,550,070
Long-term debt (excluding
  current maturities).........    9,107,188     6,403,327     9,115,370     7,166,421     4,524,617     4,254,042     3,616,628
Other non-current
  liabilities.................      213,639       473,637       221,404       364,537            --            --            --
Stockholders' equity..........  $ 6,533,677   $ 8,658,889   $ 6,719,026   $ 8,177,260   $ 7,648,032   $ 6,371,588   $ 6,069,311
                                ===========   ===========   ===========   ===========   ===========   ===========   ===========
Stockholders' equity per
  common share................  $      1.46   $      1.96   $      1.51   $      1.86   $      1.74   $      1.90   $      1.80
                                ===========   ===========   ===========   ===========   ===========   ===========   ===========
Shares outstanding............    4,463,499     4,411,031     4,463,499     4,401,031     4,386,231     3,362,222     3,373,522
                                ===========   ===========   ===========   ===========   ===========   ===========   ===========
</TABLE>
 
                                       55
<PAGE>   59
 
                             SUMMARY OF OPERATIONS
 
<TABLE>
<CAPTION>
                                         THREE MONTHS ENDED
                                              MARCH 31,                              YEARS ENDED DECEMBER 31,
                                       -----------------------   ----------------------------------------------------------------
                                          1998         1997         1997          1996         1995          1994         1993
                                       ----------   ----------   -----------   ----------   -----------   ----------   ----------
                                             (UNAUDITED)
<S>                                    <C>          <C>          <C>           <C>          <C>           <C>          <C>
Oil and gas sales....................  $1,155,062   $1,828,255   $ 6,396,249   $6,958,491   $ 5,147,033   $5,265,759   $4,569,022
Other................................      35,665       29,884       204,238      183,234       231,141      217,884       82,173
                                       ----------   ----------   -----------   ----------   -----------   ----------   ----------
  Total operating revenues...........   1,190,727    1,858,139     6,600,487    7,141,725     5,378,174    5,483,643    4,651,195
Production costs.....................     730,463      737,489     3,088,886    2,981,837     2,509,854    2,423,032    2,091,955
Exploration costs....................       3,126        8,555       849,534      766,855       198,453           --           --
Depreciation, depletion and
  amortization.......................     315,859      314,781     1,964,658    1,306,287     1,033,905    1,120,841      786,918
Abandonments.........................      34,086           --        93,760           --         3,000       41,676       25,732
General and administrative
  expenses...........................     232,015      333,849     1,451,404    1,295,298     1,049,904    1,145,719    1,422,094
Impairment costs(a)..................          --           --     1,277,342      114,904     1,020,670           --           --
                                       ----------   ----------   -----------   ----------   -----------   ----------   ----------
  Total operating expenses...........   1,315,549    1,394,674     8,725,584    6,465,181     5,815,786    4,731,268    4,326,699
                                       ----------   ----------   -----------   ----------   -----------   ----------   ----------
                                         (124,822)     463,465    (2,125,097)     676,544      (437,612)     752,375      324,496
Gain (loss) on sale of
  properties(b)......................          --      351,079       462,571       36,308      (102,984)      81,962           --
Other income(c)......................       7,297        9,956        32,337       61,997        38,911      169,174       51,692
Interest expense.....................    (205,271)    (212,637)     (970,430)    (722,447)     (611,587)    (473,048)    (296,797)
                                       ----------   ----------   -----------   ----------   -----------   ----------   ----------
Income (loss) before income taxes and
  cumulative effect of change in
  accounting principle...............    (322,796)     611,863    (2,600,619)      52,402    (1,113,272)     530,463       79,391
Income tax expense (benefit).........    (109,748)     206,125      (717,237)      30,280      (376,241)     204,769       29,457
                                       ----------   ----------   -----------   ----------   -----------   ----------   ----------
Income (loss) before cumulative
  effect of change in accounting
  principle..........................  $ (213,048)  $  405,738   $(1,883,382)  $   22,122   $  (737,031)  $  325,694   $   49,934
                                       ==========   ==========   ===========   ==========   ===========   ==========   ==========
Income (loss) per common share before
  cumulative effect of change (basic
  and diluted).......................  $    (0.05)  $     0.09   $     (0.42)  $     0.01   $     (0.22)  $     0.10   $     0.02
                                       ==========   ==========   ===========   ==========   ===========   ==========   ==========
Weighted average shares
  outstanding........................   4,463,499    4,406,031     4,433,113    4,395,414     3,381,592    3,368,455    2,267,563
                                       ==========   ==========   ===========   ==========   ===========   ==========   ==========
</TABLE>
 
---------------
 
(a)   In 1995, concurrent with Midland's adoption of the Financial Accounting
      Standards Board Statement No. 121, "Accounting for the Impairment of
      Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("FAS
      121"), Midland recognized a charge of $1,020,670 for certain properties
      which were held for sale.
 
(b)   Gain (loss) on sale of properties was principally composed of the loss on
      the sale of Midland's former office facilities in Midland, Texas, in 1995
      and a gain on the sale of a working interest in an oil and gas property to
      Summit Petroleum Corporation in 1994. In 1997, gains were realized
      primarily from the sale of oil and gas properties.
 
(c)   In 1994, there was other income from the settlement of litigation
      regarding a former property operator of $120,090.
 
  Results of Operations -- Years ended December 31, 1995, 1996 and 1997
 
     During 1996, oil and gas sales increased from $5,147,033 in 1995 to
$6,958,491; an increase of $1,811,458 or 35%. Oil production increased from
166,652 Bbls to 215,913 Bbls; an increase of 49,261 Bbls or 30%. Gas production
decreased from 1,268,772 Mcf to 1,002,482 Mcf; a decrease of 266,290 Mcf or 21%.
Sales and net production increases resulted from price increases as well as from
production from wells drilled and completed in the Jameson Field, and the
Wallace and Wilson properties in late 1995 and early 1996. Average gas prices
increased from $1.79 per Mcf in 1995 to $2.39 per Mcf in 1996. Oil prices
increased from $17.28 per Bbl in 1995 to $21.15 per Bbl in 1996.
 
     During 1997, oil and gas sales decreased from $6,958,491 to $6,396,249; a
decrease of $562,242, or 8%. Oil production decreased from 215,913 Bbls to
192,580 Bbls; a decrease of 23,333 Bbls, or 11%. Gas production decreased from
1,002,482 Mcf to 988,109 Mcf; a decrease of 14,373, or 1%. Production declines
 
                                       56
<PAGE>   60
 
were due to the sale of the Redfish Bay properties, as well as normal production
declines on most wells, partially offset by production from new wells drilled in
1997. Average oil prices declined from $21.15 in 1996 to $19.74 in 1997. Average
gas prices increased from $2.39 in 1996 to $2.63 in 1997.
 
     For 1997, Midland's share of income from an oil and gas limited partnership
was $72,275 which included oil and gas sales of $119,356 from approximately
6,400 Bbls of oil produced. There was no similar item in 1996.
 
     In 1996, production costs increased from $2,509,854 in 1995 to $2,981,837,
an increase of $471,983 or 19%. This increase is attributable primarily to
additional producing wells as discussed above, as well as to production taxes
increasing as a result of increased oil and gas prices. In 1997, production
costs increased from $2,981,837 in 1996 to $3,088,886, an increase of $107,049
or 4%. This was due to major repairs and workovers conducted in 1997, partially
offset by decreased production costs resulting from the sale of Redfish Bay.
 
     During 1997 and 1996, exploration costs and abandonments were $943,294 and
$766,855, respectively, which were incurred in connection with the 3-D
exploration projects discussed above. These amounts include dry hole costs of
$796,852 in 1997 and $416,892 in 1996.
 
     In 1996, depreciation depletion and amortization (DD&A) was $1,306,287 as
compared to $1,033,905 in 1995, for an increase of $272,382 or 26%. This was due
primarily to an increase in property investments resulting from the completion
of additional wells and to the acquisition of Summit. In 1997, DD&A was
$1,964,658, an increase of $658,371 from 1996, or 50%. This was due to lower oil
and gas reserves at December 31, 1997, which was due to less than desired
economic success on some wells drilled in 1997 and to lower oil prices.
 
     In 1996, general and administrative (G&A) expenses increased from
$1,049,904 in 1995 to $1,295,298, an increase of $245,394 or 23%. This increase
was attributable primarily to the write off in 1996 of approximately $115,000 of
acquisition costs associated with an attempt to acquire another public
independent oil and gas company, as well as to increased labor costs associated
with Midland's relocation from Midland, Texas, to Houston, Texas. In 1997, G&A
expenses were $1,451,404 for an increase of $156,106, or 12%, over 1996. This
was due primarily to increased legal and consulting fees, and to non-cash stock
based compensation expense of $217,484. These costs were partially offset by
lower costs in other areas due to cost reduction measures.
 
     Impairment losses were $1,020,670 in 1995, $114,904 in 1996 and $1,277,342
in 1997. Impairments are recognized when estimated future net cash flows on
individual properties are less than their net capitalized cost.
 
     In 1997, there were gains of $462,571 primarily from the sales of oil and
gas properties, including $349,000 from the sale of the Redfish Bay property.
 
     In 1996, interest expenses increased to $722,447, an increase of $110,860,
or 18% from 1995. This increase is attributable to additional borrowings to
consummate the Summit acquisition and for property acquisitions and development
projects in 1996. In 1997, interest increased to $970,430, an increase of
$247,983, or 34%, due primarily to additional borrowings to fund Midland's
drilling program in 1997 and to pay $84,800 to close an interest rate swap
contract.
 
     In 1995, the net loss was $737,031 primarily resulting from an impairment
loss of $1,020,670, the loss on sale of properties and equipment of $102,984 and
the incurrence of exploration costs totaling $198,453: In 1996, net income was
$22,122, due primarily to higher prices for oil and gas production and lower
impairment losses, partially offset by increases in production costs, G&A
expenses and other factors discussed above. In 1997, the net loss was
$1,883,382, due primarily to property impairments, DD&A, lower oil and gas
production, exploratory dry holes and other factors discussed above.
 
                                       57
<PAGE>   61
 
  Results of Operations -- Three Months Ended March 31, 1998 and 1997
 
     Net income decreased from $405,738 for the three months ended March 31,
1997 to a net loss of $213,048 for the same period in 1998, a decrease of
$618,786. Individual categories of income and expense are discussed below.
 
     Oil and gas sales decreased from $1,828,255 in the first quarter of 1997 to
$1,155,062 in the same period of 1998. This decrease of $673,193, or 37%,
resulted from decreased oil and gas prices and, to a lesser extent, to decreased
gas production. Oil and gas production quantities were 47,791 Bbls and 218,886
Mcf for the first quarter of 1998 and 47,425 Bbls and 251,073 Mcf in 1997, an
increase of 366 Bbls and a decrease of 32,187 Mcf, or 13%. Average gas prices
decreased from $3.01 per Mcf in 1997 to $2.12 per Mcf in 1998, while average oil
prices decreased from $22.64 per Bbl in 1997 to $14.46 per Bbl in 1998.
 
     Production costs decreased from $737,489 in the first quarter of 1997 to
$730,463 for the same period of 1998, a decrease of $7,026, or 1%. Major repairs
and workovers conducted in 1998 and normal operating costs on wells drilled in
1997 were offset by reductions due to the sale of properties in 1997.
 
     In the first quarter of 1997, Midland realized gains on the sales of oil
and gas properties and equipment of $351,079. There were no sales of properties
in the first quarter of 1998. The 1997 gain includes $349,079 from the sale of
Midland's interest in the Redfish Bay properties.
 
     General and administrative expenses were $232,015 in the first quarter of
1998, a decrease of $101,834 from the first quarter of 1997. This is due
primarily to cost reduction measures implemented in the latter part of 1997.
 
     In the first quarter of 1998, Midland incurred abandonment costs of
$34,086. There was no similar item in the first quarter of 1997.
 
BUSINESS AND PROPERTIES OF MIDLAND
 
  Business Description
 
     Midland is an independent oil and gas company engaged primarily in the
exploration and development of domestic oil and gas. Midland, incorporated June
5, 1989, was organized in 1990 with the issue of common stock and warrants in
exchange for the partnership interests of seven former public oil and gas
limited partnerships.
 
     Midland's initial emphasis was on acquisition and exploitation of oil and
gas properties. In 1995, Midland changed its emphasis to exploration, utilizing
3-D seismic technology.
 
     On December 20, 1996, Midland completed the acquisition of Summit Petroleum
Corporation, an affiliate, for cash. (See Note F. Related Parties, to
Consolidated Financial Statements)
 
     Although Midland's principal properties are located in Texas, Midland also
owns working interest and minor royalty leasehold interests in developed and
undeveloped oil and gas acreage in Illinois and Colorado.
 
  Properties
 
     Reserves. The estimates of Midland's proved oil and gas reserves, which are
located entirely within the United States, were prepared in accordance with the
guidelines established by the Commission and Financial Accounting Standards
Board. The estimates of December 31, 1997 are based on evaluations prepared by
Williamson Petroleum Consultants, Inc., independent petroleum engineers. The
estimates as of December 31, 1996 and 1995, are based on evaluations prepared by
E. Ralph Green and Associates, independent petroleum engineers. For information
concerning costs incurred by Midland for oil and gas operations, net revenues
from oil and gas production, estimated future net revenues attributable to
Midland's oil reserves and present value of future net revenues on a 10%
discount rate and changes therein, see Notes to Midland's consolidated financial
statements. Midland emphasizes that reserve estimates are inherently imprecise
and that estimates of
 
                                       58
<PAGE>   62
 
new discoveries are more imprecise than those of producing oil and gas
properties. Accordingly, the estimates are subject to change as further
information becomes available.
 
     Midland's proved reserves totaled 5.0 million BOE at December 31, 1997 with
an SEC PV10 of $17.8 million. Reserves decreased 16% versus year end 1996. Oil
reserves were 2.7 MBOE (a 7% decrease from 1996) while gas reserves were 13.9
Bcf (a 24% decrease from 1996).
 
     On a BOE basis Midland's proved reserves at December 31, 1997 are 67%
proved developed with 33% being proved undeveloped. 53% of Midland's reserves
are oil and 47% are gas. Over 99% of Midland's reserve value is attributable to
operated properties. Only 1% of Midland's reserve value is attributable to
properties operated by others.
 
     The following table summarizes the estimated proved reserves and estimated
future cash flows associated with Midland's oil and gas properties as estimated
in accordance with the definitional requirements under rule 4-10(a) of
Regulation S-X.
 
<TABLE>
<CAPTION>
                                                                                       1997 AVERAGE DAILY
                                           PROVED RESERVES AS OF DECEMBER 31, 1997         PRODUCTION
                                           ---------------------------------------   ----------------------
                                                      NATURAL              SEC 10             NATURAL
                                             OIL        GAS                VALUE      OIL       GAS
                                           (MBbls)     (Mmcf)     MBOE     (000)     (Bbls)    (Mcf)    BOE
                                           --------   --------   ------   --------   ------   -------   ---
<S>                                        <C>        <C>        <C>      <C>        <C>      <C>       <C>
Total Net to Midland's...................   2,655      13,860    4,965    $17,765     528      2,707    979
</TABLE>
 
     In estimating oil reserves for 1997, a price of $16.52 per barrel was used,
which is the average actual price in effect for Midland's oil production on
January 1, 1998. In estimating gas reserves for 1997, a price of $2.36 per Mcf
was used, based on prices in effect for Midland's gas on January 1, 1998.
 
     As an operator of domestic oil and gas properties, Midland has filed Form
EIA-23, "Annual Survey of Oil and Gas Reserves," with the Department of Energy
as required by Public Law 93-275 and Public Law 95-91. There are differences
between the reserves reported on Form EIA-23 and the reserves reported herein.
These differences are due to the fact that Form EIA-23 requires and operator to
report on total reserves attributable to wells which are operated by it without
regard to ownership. The reserves reported herein are based on Midland's net
ownership interest therein.
 
     Production. Midland's production for 1997 averaged 979 BOE per day.
Production decreased during the year from 1,064 BOE per day in January 1997 to
986 BOE per day average for December 1997 representing a 7% decrease for the
year. Based on end of the year production rates Midland's proved reserves to
production ratio is 13.8 years on a BOE basis. This ratio was up from 12.9 years
for year end 1996.
 
     Description of Properties. Midland's principal properties are located in
Texas. Midland also owns working interest and minor royalty leasehold interests
in developed and undeveloped oil and gas acreage in Illinois and Colorado.
Midland has no properties outside the United States. The following is a general
description of Midland's principal properties.
 
  PERMIAN BASIN
 
     Chalk Mountain 3-D Seismic Exploration and Development Project
 
     Midland held acreage adjoining a project generated by Texland Oil & Gas Co.
as a 3-D seismic exploration project in July 1996 in Sterling, Tom Green and
Reagan Counties, Texas. Midland has acquired a 52.75% working interest in
approximately 3,300 acres in this project. During 1997, Midland invested
approximately $2,000,000 in acquisition costs and drilling of three exploratory
wells and one development well in this project. One of these wells was
successful in the Fusselman formation. One of the wells established production
in the Canyon formation, but due to low production volume, additional Canyon
wells are not economically justified. Two of these wells were dry holes. In the
first quarter of 1998, Midland acquired additional acreage in the project based
on review of 3-D seismic data.
 
                                       59
<PAGE>   63
 
     Latigo 3-D Seismic Exploration and Development Project
 
     This project was defined and acquired as a 3-D seismic exploration project
in 1995 in the Northwest Shelf area of the Permian Basin in Hockley County,
Texas. The seismic survey covered 12 square miles and resulted in the leasing of
approximately 4,700 acres. Two successful exploratory wells were drilled in this
project in 1997 at a cost to Midland of approximately $1,568,000. Average daily
production from the discoveries drilled in this project in 1997 was 163 BOPD.
Midland owns a 55% working interest in this project.
 
     Sunburst 3-D Seismic Exploration and Development Project
 
     The Sunburst project was acquired as a 3-D seismic exploration project in
1995 in the Northwest Shelf area of the Permian Basin in Terry County, Texas.
The prospect was defined with a 14-square mile seismic survey and resulted in
the leasing of approximately 3,640 acres. In 1996, two exploratory wells were
drilled in this project at a cost to Midland of approximately $660,000, with one
completed in the Clearfork area. Average daily production from this well in 1997
was 11 BOE. Neither of these wells produced in economic quantities and in April
1998, Midland sold most of its interest in this project for $200,000 and
retained a 6.875% working interest with Midland's share of the cost of drilling
the next well being paid by the purchaser.
 
     Lakota 3-D Seismic Exploration and Development Project
 
     The Lakota project was acquired as a 3-D seismic exploration project in
1995 in the Northwest Shelf area of the Permian Basin in Terry County, Texas.
The prospect was defined with a 14-square mile seismic survey and resulted in
the leasing of approximately 2,480 acres. In 1997, one exploratory well was
completed in this project as a Wolfcamp discovery at a cost to the company of
$316,000. Midland owns a 30% working interest in this project. Average daily
production from this well in 1997 was 14 BOE. Due to lack of economic success,
no additional wells are currently planned in this project.
 
     Rhoda Walker (Cherry Canyon) Field
 
     This field is located in Ward County, Texas, in which Midland has an
interest in nine wells which are operated by Midland with a combined average
production rate in 1997 of approximately 100 BOPD and 143 MCFD, subject to
normal declines. During the fourth quarter of 1995, three Rhoda Walker Field
development wells were drilled at a cost to Midland of approximately $880,000.
These wells increased oil and gas production from this field by 140%. Midland
owns a 100% working interest in this project.
 
     Ackerly (Dean) Field
 
     This field is located in Dawson County, Texas, in which Midland has an
interest in two wells which are operated by Midland. These wells combined had a
1997 average production rate of approximately 41 BOPD and 20 MCFD gross
production before royalty burdens. Midland owns a 100% working interest in this
project.
 
     Jameson (Strawn) Field
 
     This field is located in Coke and Sterling Counties, Texas in which Midland
has an interest in 58 active wells which are operated by Midland with a combined
1997 average production rate of approximately 120 BOPD and 1,500 MCFD. At the
time Midland acquired the Jameson properties in 1992, there were 21 gross wells
which were shut-in for various reasons by the former operator. Midland has
returned 15 gross wells to production and has converted nearly 40% of the wells
from producing via conventional pumping unit to a less expensive plunger lift
method of artificial lift.
 
     In April and August 1996, Midland completed two field extension development
wells at an aggregate cost of approximately $700,000. Average aggregate gross
production rates in 1997 from these wells was approximately 45 BOPD and 250
MCFD. Effective June 1, 1996, Midland acquired various additional royalty
interests in this field for approximately $500,000. Midland owns a 100% working
interest in this project and net revenue interests on individual leases range
from 90% to 92%.
 
                                       60
<PAGE>   64
 
     Cope Waterflood Unit and Advanced Reservoir Management Project
 
     The Cope Unit is located in Sterling County, Texas. This project
encompasses 2,032 gross acres and at present has 21 gross active wells, seven of
which are injectors. At the time Midland acquired the Cope Unit in 1990,
production had declined to 100 BOPD. Several shut-in wells were reactivated with
total unit production immediately improving to 137 BOPD.
 
     In early 1995, Midland began a joint project with the federal government's
Los Alamos National Laboratory to develop computerized 3-D reservoir modeling
and simulation of Midland-operated Cope Waterflood Unit. Completed in 1997, the
simulation model is being utilized to improve reservoir management, potentially
enhance oil production by locating bypassed oil, determining new infill drilling
locations and designing optimum waterflood injection patterns for increased oil
recovery.
 
     Effective May 1, 1996, Midland acquired an additional 15.75% working
interest for approximately $79,000, and now owns approximately 77% of the
working interest in this property. The Cope Unit produces from the Spraberry
formation. In June 1996, Midland drilled a replacement well for one of the
producing wells in the unit which was producing mostly water. The Cope Unit oil
production has been maintained at approximately 125 barrels of oil per day and
the unit's produced water has been reduced substantially.
 
     Other Properties
 
     In August 1994, Midland acquired working interests in certain oil and gas
properties with 19 gross wells in Coke and Howard Counties, Texas, for
$1,950,000, which was adjusted for revenues and expenses through the closing
date. These wells are operated by Midland and in 1997 had a combined average
production rate of approximately 62 BOPD and 215 MCFD, subject to normal
declines. Midland owns a 100% working interest in these properties.
 
     In May 1995, Midland acquired a 50% working interest and operations in
three State tracts in Redfish Bay Field, Nueces County, Texas in return for a
commitment to expend $1,000,000 in capital expenditures over two years. In
February 1997, Midland sold its interests in this field for $1,647,000. Midland
realized a gain on this sale of approximately $349,000.
 
  TEXAS GULF COAST
 
     Copano Bay 3-D Seismic Exploration and Development Project
 
     The Copano Bay property is located in Aransas County, Texas, approximately
50 miles northeast of Corpus Christi. The leasehold encompasses 2,355 gross
acres and currently has eight gross producing wells. At the time Midland
acquired Copano Bay in 1991, it was producing approximately 65 BOPD and 465
MCFD. Midland conducted several workovers, recompletions and re-entries, and
increased production to average 52 BOPD and 828 MCFD in 1996 and 54 BOPD and 729
MCFD in 1997. During 1995, 1996 and 1997, Copano Bay properties accounted for
approximately 9%, 5% and 6%, respectively, of Midland's total oil production and
approximately 28%, 16% and 16%, respectively, of Midland's total gas production.
 
     Effective June 1, 1996, Midland acquired an additional 5% working interest
in this property for approximately $177,000, and now owns approximately 68% of
the working interest in this property.
 
     In 1997, a 3-D seismic survey was conducted covering a portion of
Midland-owned acreage and, in the beginning of 1998, a second 3-D seismic survey
was conducted covering the remainder of the acreage. Both seismic surveys were
conducted at no cost to Midland and the survey data is currently being
processed. When processing is completed, Midland will be allowed to review the
data to determine if any of the data is of any value to Midland. If Midland
determines this data has any value, Midland will be allowed to purchase the
data.
 
     In addition to the above described properties, Midland owns and operates 21
leases located within a 150-mile radius of Midland, Texas, containing 21 gross
producing wells on 2,778 gross acres. These wells are produced from the Yates,
Spraberry and Pennsylvanian formations at depths ranging from 1,800 feet to
 
                                       61
<PAGE>   65
 
9,000 feet. The production is heavily weighted to oil and some leases have
additional development opportunities.
 
     Finding Cost. Midland's acquisition and finding cost for 1997 was $5.73 per
BOE as compared to the 1996 and 1995 finding costs of $6.68 and $3.96 per BOE
respectively. The average acquisition and finding cost for the three year period
was $5.38 per BOE.
 
     Oil and Gas Mix. Midland's reserves were 53% oil and 47% gas at December
31, 1997 and its production mix was 54% oil and 46% gas during 1997.
 
     Drilling Activities. The following table sets forth the number of gross and
net productive and dry wells in which Midland had an interest that were drilled
and completed during the years ended December 31, 1997, 1996, and 1995. This
information should not be considered indicative of future performance, nor
should it be assumed that there is necessarily any correlation between the
number of productive wells drilled and the oil and gas reserves generated
thereby or the costs to Midland of productive wells compared with the costs of
dry wells.
 
<TABLE>
<CAPTION>
                                                    GROSS WELLS           NET WELLS
                                                 ------------------   ------------------
                                                     YEAR ENDED           YEAR ENDED
                                                    DECEMBER 31,         DECEMBER 31,
                                                 ------------------   ------------------
                                                 1997   1996   1995   1997   1996   1995
                                                 ----   ----   ----   ----   ----   ----
<S>                                              <C>    <C>    <C>    <C>    <C>    <C>
Productive wells
  Development..................................    1      3      4    0.8    2.8    3.7
  Exploratory..................................    5      1      0    2.7    0.6      0
Dry holes
  Development..................................    0      0      0      0      0      0
  Exploratory..................................    2      2      0    1.6    1.7      0
                                                  --     --    ---    ---    ---    ---
          Total................................    8      6      4    5.1    5.1    3.7
Success ratio(a)...............................   75%    67%   100%    69%    67%   100%
</TABLE>
 
---------------
 
(a)  Represents those wells that were successfully completed as productive
     wells.
 
     Marketing of Production and Significant Purchasers. Oil and gas production
from Midland's properties is marketed consistent with usual and customary
industry practices which include the sale of oil at the wellhead to third
parties and the sale of gas at the wellhead to third parties. Sales prices for
both oil and gas production are negotiated based on factors normally considered
in the industry such as the spot price for gas or the posted price for oil,
distance from the well to the pipeline, well pressure, estimated reserves,
quality of the gas or oil and prevailing supply conditions.
 
     During 1997, Midland had sales of oil and gas to marketed its natural gas
and natural gas products to three purchasers that accounted for 10% or more of
Midland's revenues. Those purchasers and their respective percentages were AMOCO
Production Company (12%), Sun Refining Co. (15%), and Western Gas Resources
(18%). Because there is a ready market for oil and gas, Midland is of the
opinion that the loss of any one purchaser would not have an adverse effect on
its ability to sell its oil and gas production.
 
     Hedging Activities. Midland engaged in no oil or gas commodity price
hedging activities in 1997.
 
     Production, Price and Cost Data. The table below sets forth production,
price and cost data with respect to Midland's properties for the years ended
December 31, 1997, 1996 and 1995. These amounts are calculated
 
                                       62
<PAGE>   66
 
without making pro forma adjustments for any acquisitions, divestitures or
drilling activity that occurred during the respective years.
 
<TABLE>
<CAPTION>
                                                     FOR THE YEARS ENDED DECEMBER 31,
                                                   ------------------------------------
                                                      1997         1996         1995
                                                   ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
OIL(A):
  Production (Bbls)..............................     192,580      215,913      166,652
  Revenue........................................  $3,801,850   $4,566,130   $2,879,973
  Average Bbls per day...........................         528          591          457
  Average Sales price per Bbl....................  $    19.74   $    21.15   $    17.28
GAS(B):
  Production (Mcf)...............................     988,109    1,002,482    1,268,772
  Revenue........................................  $2,594,399   $2,392,361   $2,267,060
  Average Mcf per day............................       2,709        2,746        3,476
  Average sales price per Mcf....................  $     2.63   $     2.39   $     1.79
PRODUCTION COSTS:
  Production cost................................  $3,088,886   $2,981,837   $2,509,854
  Equivalent Bbls(c).............................     357,265      382,993      378,114
  Production cost per equivalent Bbl.............  $     8.65   $     7.79   $     6.64
  Production cost per sales dollar...............  $     0.48   $     0.43   $     0.49
          TOTAL REVENUES.........................  $6,396,249   $6,958,491   $5,147,033
</TABLE>
 
---------------
 
(a)  Includes condensate.
 
(b)  Includes natural gas liquids.
 
(c)  Gas production is converted to equivalent Bbls at the rate of 6 Mcf per
     Bbl, representing the estimated relative energy content of natural gas to
     oil.
 
     Productive Wells. The following table sets forth the number of productive
oil and gas wells attributable to Midland's properties as of December 31, 1997,
1996 and 1995.
 
<TABLE>
<CAPTION>
                                             GROSS PRODUCTIVE WELLS     NET PRODUCTIVE WELLS
                                             ----------------------    ----------------------
                                             OIL     GAS     TOTAL     OIL     GAS     TOTAL
                                             ----    ----    ------    ----    ----    ------
<S>                                          <C>     <C>     <C>       <C>     <C>     <C>
December 31, 1997..........................  173       9      182      121       7      128
December 31, 1996..........................  184      39      223      118      19      137
December 31, 1995..........................  172      19      191      109      10      119
</TABLE>
 
---------------
 
(a)  Producing wells consist of producing wells and wells capable of production,
     including shut-in wells. One or more completions in the same well bore are
     counted as one well.
 
(b)  The number of gross wells is the total number of wells in which a working
     interest is owned.
 
(c)  The number of net wells is the sum of the fractional working interests
     owned in gross wells expressed as whole numbers and fractions thereof.
 
     Leasehold Acreage. The following table sets forth information concerning
Midland's developed and undeveloped leasehold acreage as of December 31, 1997.
 
<TABLE>
<CAPTION>
                                                              FOR THE YEAR ENDED
                                                                 DECEMBER 31,
                                                              -------------------
                                                              GROSS(B)    NET(C)
                                                              ---------   -------
<S>                                                           <C>         <C>
Developed Acreage(a)........................................   20,409     15,828
Undeveloped Acreage(d)......................................   12,732      6,937
Net Royalty Acreage.........................................               4,399
</TABLE>
 
                                       63
<PAGE>   67
 
---------------
 
(a)  Developed acreage is acreage spaced for or assignable to productive wells.
 
(b)  A gross acre is an acre in which a working interest is owned. The number of
     gross acres is the total number of acres in which a working interest is
     owned.
 
(c)  A net acre is deemed to exist when the sum of fractional ownership working
     interests in gross acres equals one. The number of net acres is the sum of
     the fractional working interests owned in gross acres expressed as whole
     numbers and fractions thereof.
 
(d)  Undeveloped acreage is oil and gas acreage on which wells have not been
     drilled or to which no Proved Reserves other than Proved Undeveloped
     Reserves have been attributed.
 
  Office Property
 
     On July 11, 1995, Midland's office building located in Midland, Texas was
sold to an unrelated third party and, in September 1995, Midland moved its
executive offices to leased space located at 16701 Greenspoint Park Drive, Suite
200, Houston, Texas 77060. In November 1995, Midland purchased a 3,750 square
foot building and 2.0 acres of land located at 3419 Hwy. 158, Midland, Texas,
from a partnership of which Mr. Warley was a 50% owner, for use as a district
office, warehouse and equipment yard. During 1997 Midland moved its executive
offices to 616 F.M. 1960 West, Suite 600, Houston, Texas 77090, which it
currently occupies under a lease expiring in 2002. The company also sold its
district office and relocated in leased space in Midland, Texas.
 
  Contract Operating Agreement
 
     Effective as of June 1, 1998, Midland's wholly owned, operating subsidiary,
MRO, and the Vista Operator, entered into a Contract Operating Agreement (herein
so called) which provides, among other things, that the Operator will provide
various contract operating services for and on behalf of Midland's oil and gas
properties through October 31, 1998 and on a month-to-month basis thereafter
unless otherwise terminated by either party upon 30 days' prior written notice.
For a more detailed description of such agreement, see "The Merger -- Other
Agreements" and "Certain Transactions."
 
  Competition and Markets
 
     Competition. The oil and gas industry is highly competitive. A large number
of companies and individuals engage in the exploration for and development of
oil and gas properties, and there is a high degree of competition for oil and
gas properties suitable for development or exploration. Acquisitions of oil and
gas properties have been an important element of Midland's growth. The principal
competitive factors in the acquisition of oil and gas properties include the
staff and data necessary to identify, investigate and purchase such properties
and the financial resources necessary to acquire and develop them. Many of
Midland's competitors are substantially larger and have greater financial and
other resources than Midland.
 
     Markets. Midland's ability to produce and market oil and gas profitably
depends on numerous factors beyond Midland's control. The effect of these
factors cannot be accurately predicted or anticipated. In recent years,
worldwide oil production capacity and gas production capacity in certain areas
of the United States have exceeded demand, with resulting declines in the price
of oil and gas. Although Midland cannot predict the occurrence of events that
may affect oil and gas prices or the degree to which oil and gas prices will be
affected, it is possible that prices for any oil or gas that Midland produces
will be lower than those currently available. Any significant decline in the
price of oil or gas would adversely affect Midland's revenues, profitability and
cash flow and could, under certain circumstances, result in a reduction in the
carrying value of Midland's oil and gas properties.
 
  Governmental Regulation
 
     Midland's oil and gas exploration, production and marketing activities are
subject to extensive laws, rules and regulations promulgated by federal and
state legislatures and agencies. Failure to comply with such laws, rules and
regulations can result in substantial penalties. The legislative and regulatory
burden on the oil and
                                       64
<PAGE>   68
 
gas industry increases Midland's cost of doing business and affects its
profitability. Although Midland believes it is in substantial compliance with
all applicable laws and regulations, because those laws and regulations are
frequently amended, interpreted and reinterpreted, Midland is unable to predict
the future cost or impact of complying with such laws and regulations.
 
     The State of Texas and many other states require permits for drilling
operations, drilling bonds and reports concerning operations and impose other
requirements relating to the exploration and production of oil and gas. These
states also have statutes or regulations addressing conservation matters,
including provisions for the unitization or pooling of oil and gas properties,
the establishment of maximum rates of production from wells and the regulation
of spacing, plugging and abandonment of such wells.
 
     The Federal Energy Regulatory Commission ("FERC") regulates interstate gas
transportation rates and service conditions, which affect the marketing of gas
produced by Midland, as well as the revenues received by Midland for sales of
such production. Since the mid-1980s, FERC has issued a series of orders,
culminating in Order Nos. 636, 636-A, 636-B and 636-C ("Order 636"), that have
significantly altered the marketing and transportation of gas. Order 636
mandates a fundamental restructuring of interstate pipeline sales and
transportation service, including the unbundling by interstate pipelines of the
sale, transportation, storage and other components of the city-gate sales
services such pipelines previously performed and the provision of open-access
transportation on a nondiscriminatory basis. One of FERC's purposes in issuing
the order was to increase competition within all phases of the gas industry.
Numerous parties have filed petitions for review of Order 636, as well as orders
in individual pipeline restructuring proceedings. In July 1996, Order 636 was
generally upheld on appeal, and the portions remanded for further action do not
appear to materially affect Midland. Because Order 636 may be modified as a
result of the appeals, it is difficult to predict the ultimate impact of the
orders on Midland and its gas marketing efforts. Generally, Order 636 has
eliminated or substantially reduced the interstate pipelines' traditional role
as wholesalers of gas and has substantially increased competition and volatility
in gas markets.
 
     The FERC frequently reexamines its transportation-related policies,
including the terms and conditions under which interstate pipeline shippers may
release interstate pipeline capacity for resale in the secondary market, the
appropriateness of the use of negotiated and market-based rates, and the
implementation of additional standardized terms and conditions for interstate
gas transmission. In April 1998, the FERC issued a new rule to further
standardize pipeline transportation tariffs that could adversely affect the
reliability of scheduled interruptible transportation service on some pipelines.
While any resulting FERC action would affect Midland only indirectly, any new
rules and policy statements may have the effect of enhancing competition in gas
markets or affecting the cost or availability of pipeline transportation.
 
     The price Midland receives from the sale of oil and gas is affected by the
cost of transporting products to markets. Effective January 1, 1995, FERC
implemented regulations establishing an indexing system for transportation rates
for oil pipelines, which, generally, would index such rates to inflation,
subject to certain conditions and limitations. Midland is not able to predict
with certainty the effect, if any, of these regulations on its operations.
However, the regulations may increase transportation costs or reduce well head
prices for oil and gas. See "Risk Factors -- Governmental Regulation and
Environmental Matters."
 
  Environmental Matters
 
     Midland's operations and properties are, like the oil and gas industry in
general, subject to extensive and changing federal, state and local laws and
regulations relating to environmental protection, including the generation,
storage, handling, emission, transportation and discharge of materials into the
environment, and relating to safety and health. The recent trend in
environmental legislation and regulation generally is toward stricter standards,
and this trend will likely continue. These laws and regulations may require the
acquisition of a permit or other authorization before construction or drilling
commences and for certain other activities; limit or prohibit construction,
drilling and other activities on certain lands lying within wilderness and other
protected areas; and impose substantial liabilities for pollution resulting from
Midland's operations. The permits required for various of Midland's operations
are subject to revocation, modification and renewal by issuing authorities.
Governmental authorities have the power to enforce compliance with their
regulations, and
 
                                       65
<PAGE>   69
 
violations are subject to fines or injunction, or both. In the opinion of
management, Midland is in substantial compliance with current applicable
environmental laws and regulations, and Midland has no material commitments for
capital expenditures to comply with existing environmental requirements.
Nevertheless, changes in existing environmental laws and regulations or in
interpretations thereof could have a significant impact on Midland, as well as
the oil and gas industry in general.
 
     The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") and comparable state statutes impose strict and arguably joint and
several liability on owners and operators of certain sites and on persons who
dispose of or arranged for the disposal of "hazardous substances" found at such
sites. Under CERCLA, such persons may be subject to liability for the costs of
cleaning up the hazardous substances, for damages to natural resources and for
the costs of certain health studies. Furthermore, it is not uncommon for the
neighboring land owners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances related
into the environment. The Resource Conservation and Recovery Act ("RCRA") and
comparable state statutes govern the disposal of "solid waste" and "hazardous
waste" and authorize imposition of substantial fines and penalties for
noncompliance. Although CERCLA currently excludes petroleum from its definition
of "hazardous substance," state laws affecting Midland's operations impose
clean-up liability relating to petroleum and petroleum related products. In
addition, although RCRA classifies certain oil field wastes as "non-hazardous,"
such exploration and production wastes could be reclassified as hazardous wastes
thereby making such wastes subject to more stringent handling, disposal and
cleanup requirements.
 
     Federal regulations require certain owners or operators of facilities that
store or otherwise handle oil, such as Midland, to prepare and implement spill
prevention, control countermeasure and response plans relating to the possible
discharge of oil into surface waters. The Oil Pollution Act of 1990, as amended
("OPA"), contains numerous requirements relating to the prevention of and
response to oil spills into waters of the United States. For onshore and
offshore facilities that may affect waters of the United States, the OPA
requires an operator to demonstrate financial responsibility. Regulations are
currently being developed under federal and state laws concerning oil pollution
prevention and other matters that may impose additional regulatory burdens on
Midland. In addition, the Clean Water Act and analogous state laws require
permits to be obtained to authorize discharge into surface waters or to
construct facilities in wetland areas. With respect to certain of its
operations, Midland is required to maintain such permits or meet general permit
requirements. The Environmental Pollution Agency ("EPA") recently adopted
regulations concerning discharges of storm water runoff. This program requires
covered facilities to obtain individual permits, participate in a group or seek
coverage under an EPA general permit. Midland believes that it will be able to
obtain, or be included under, such permits, where necessary, and to make minor
modifications to existing facilities and operations that would not have a
material effect on Midland.
 
     Midland has acquired leasehold interests in numerous properties that for
many years have produced oil and gas. Although the previous owners of these
interests have used operating and disposal practices that were standard in the
industry at the time, hydrocarbons or other wastes may have been disposed of or
released on or under the properties. In addition, some of Midland's properties
are operated by third parties over whom Midland has no control. Notwithstanding
Midland's lack of control over properties operated by others, the failure of the
operator to comply with applicable environmental regulations may, in certain
circumstances, adversely impact Midland. See "Risk Factors -- Governmental
Regulation and Environmental Matters."
 
  Employees
 
     On June 15, 1998, Midland had 13 full-time employees, none of which are
subject to collective bargaining arrangements. From time to time, Midland
utilizes the services of independent contractors to perform various field and
administrative services. Experienced personnel are available in all disciplines
should the need to hire additional staff arise.
 
                                       66
<PAGE>   70
 
  Litigation
 
     Midland is a defendant in a lawsuit filed on July 31, 1995, which is
currently pending in the 238th Judicial District Court of Midland County, Texas,
styled Manna Oil & Gas, Inc., Dobbs Oil & Gas, Inc. v. Midland Resources, Inc.,
Miresco, Inc. Midland Resources Operating Company, Inc., Cause No. 40,677. The
case involves certain Gulf Coast properties located in Copano Bay wherein
Midland owns a 68% working interest and is the operator of the properties. The
plaintiffs (1) seek a declarative judgment that Midland has failed to meet the
standards and procedures set out in the Operating Agreement; (2) are attempting
to recover approximately $230,000; (3) seek an accounting for the years
1993-1995; and (4) seek attorney fees and costs. Midland believes it has a
defensible position with respect to all of the Plaintiffs' claims and intends to
defend this case very aggressively.
 
     Midland filed a counterclaim against Manna Oil and Gas, Inc. ("Manna") in
which Midland is seeking specific performance of an oral contract that Midland
entered into with Manna, whereby Midland and Manna agreed that if either party
acquired any additional property interest or contract rights of any kind in the
properties that are the subject of the underlying lawsuit that said party would
offer to convey to the other party their proportionate ownership in such newly
acquired property interest or contract rights. In the alternative, Midland
claims that Manna breached such contract, and Midland is seeking monetary
damages, resulting from said breach of contract, as well as attorney fees and
court costs. Management believes that the ultimate resolution of this matter
will not have a material adverse effect on Midland.
 
MANAGEMENT OF MIDLAND
 
  Directors and Executive Officers
 
     Set forth below is certain information concerning the directors and
executive officers of Midland.
 
<TABLE>
<CAPTION>
        NAME           AGE                          POSITION
        ----           ---                          --------
<S>                    <C>      <C>
Deas H. Warley III...  55       Director
Robert R. Donnelly...  49       Director and President
Darrell M. Dillard...  50       Director
Sam R. Brock.........  52       Director
Wayne M. Whitaker....  50       Director and Chairman
                                Chief Financial Officer and Vice President of
Howard E. Ehler......  53       Finance
Marilyn D. Wade......  46       Secretary and Administrative Manager
</TABLE>
 
     Set below is a description of the background of the directors and executive
officers of Midland.
 
     Deas H. (Gene) Warley III has been employed in the oil and gas industry
since 1979. Mr. Warley was the Chairman and President of Midland from its
inception in July 1990 until March 27, 1998. Mr. Warley was the Chairman and
President of Summit Petroleum Corporation, a public oil and gas corporation
until acquired by Midland in December 1996. Mr. Warley received a Bachelor of
Science Degree in Engineering from Arizona State University in 1971 and Master
of Science Degree in Engineering from the Air Force Institute of Technology in
1973. Mr. Warley is a registered Professional Engineer in the state of Texas. He
is a member of the Independent Petroleum Association of America, the Permian
Basin Petroleum Association, the North Texas Oil and Gas Association, the
Society of Petroleum Engineers and the National Petroleum Counsel.
 
     Robert R. Donnelly was elected a director of Midland in July 1990 and
President on March 27, 1998. Mr. Donnelly has been the Corporate Vice President
and Treasurer of Eastland Oil Company since 1988, responsible for gas contracts,
land department, accounting and administration; from 1985 until 1988 he was Vice
President in charge of land management; and from 1983 until 1985 he was land
manager and in charge of partnership relations. Mr. Donnelly has 18 years of
experience in various domestic and international land and land management
positions with major and independent oil and gas companies. He graduated from
the University of Texas in 1973 with a Bachelor of Arts Degree in Economics and
is a Certified Professional Landman. He has served as Director of the
Independent Petroleum Association of America, the Permian Basin Association of
Petroleum Landsmen, and the West Texas Producers Forum.
 
                                       67
<PAGE>   71
 
     Darrell M. Dillard was elected as a director in July 1994. He was Vice
President from April 1995 and Chief Financial Officer from December 1995, in
each case until February 1997. He is an independent Certified Public Accountant
who has been engaged in public and industry accounting for the oil and gas
industry in Midland, Texas since 1980. Prior to 1980, Mr. Dillard worked for the
U.S. Department of Treasury. He served from 1981 to 1982 on the board of
directors and as treasurer for a large independent oil and gas exploration and
production company with operations in various states. He is a member of the
American Institute of Certified Public Accountants, the Texas Society of
Certified Public Accountants, the Petroleum Accountants Society, and the
Independent Petroleum Association of America. Mr. Dillard graduated from
Midwestern State University with a Bachelor's degree in Business Administration
in Accounting in 1975. Mr. Dillard has been a director of Summit Petroleum
Corporation since 1995.
 
     Sam R. Brock was elected as a director on April 10, 1995. He has been
active in the oil and gas industry since 1974. From February 1994 until the
present he has owned and operated NRG Consultants, Inc., a commercial crude oil
trading and transportation consulting company. and since June 1997 he has been
an officer of Citation Crude Oil Marketing, Inc. a crude oil purchasing company.
From 1987 until 1994 he was Vice President -- Gathering Division of Phibro
Energy USA, Inc., a subsidiary of Solomon Brothers, Inc. From 1980 until 1986 he
was President and majority stockholder of NRG Gathering Company, a private oil
and gas gathering company, that was sold in 1986 to Tesoro Petroleum
Corporation. Mr. Brock graduated from Texas Tech University with a Bachelor's
degree in marketing in 1969.
 
     Wayne M. Whitaker was elected as a director in January 1996, Chairman of
Midland on March 27, 1998 and has been a partner in the firm Michener, Larimore,
Swindle, Whitaker, Flowers, Sawyer, Reynolds & Chalk, L.L.P. (and its
predecessor firms) since 1978. He received his business and law degrees from
Baylor University in 1971, and his Master of Laws from Southern Methodist
University in 1972. From 1972 until 1978 he worked for the Securities and
Exchange Commission in Fort Worth, Texas. Mr. Whitaker has been a director of
Summit Petroleum Corporation since 1995.
 
     Howard E. Ehler joined Midland as Chief Financial Officer and Vice
President of Finance on February 14, 1997. Mr. Ehler is a Certified Public
Accountant and, prior to joining Midland, had been engaged in public accounting
for 30 years, with emphasis in auditing and consulting in the oil and gas
industry. Mr. Ehler was formerly a partner with the firm of Grant Thornton LLP.
He is a member of the American Institute of Certified Public Accountants and the
Texas Society of Certified Public Accountants. Mr. Ehler received a BBA degree
from Texas Tech University in 1966.
 
     Marilyn D. Wade who has served as Secretary and Administrative Manager of
Midland since 1992, has been employed in various accounting, administrative and
management positions. Ms. Wade served as Administrative Manager of MRO since
April 1992. Prior to joining MRO, Ms. Wade was the accountant and office manager
with Callaway Oil and Gas from 1988, was self-employed during 1987 and 1988, and
was employed by Midland Resources, Inc. (not the registrant) from 1984 to 1987.
 
  Committees of the Board
 
     The Midland Board has established a Compensation Committee, an Audit
Committee, a Nominating Committee and an Executive Committee. The Compensation
Committee reviews and recommends salaries of the officers and employment
arrangement of the president. The Compensation Committee consists of Messrs.
Brock and Donnelly. The Audit Committee's primary responsibilities are to (i)
recommend an independent auditor for selection by the Midland Board, (ii) review
the arrangements and scope of the independent auditor's examination, and (iii)
review the findings and recommendations of the independent auditor concerning
internal accounting procedures and controls. The Audit Committee consists of
Messrs. Dillard, Donnelly and Whitaker. The Nominating Committee reviews the
qualifications of director candidates on the basis of recognized achievements
and their ability to bring skills and experiences to the deliberations of the
Midland Board. It also recommends qualified candidates to the Midland Board,
including the slate of nominees submitted to the stockholders at the annual
meeting of stockholders. The Nominating Committee consists of Messrs. Brock,
Dillard and Warley. The Executive Committee has such authority as is granted to
it
 
                                       68
<PAGE>   72
 
by the Midland Board from time to time. The Executive Committee consists of
Messrs. Dillard, Warley and Whitaker.
 
  Director Compensation
 
     During the first quarter of 1997, directors who were not officers or
employees of Midland each received a fee of $3,000, and directors who were
employees or officers of Midland received $100 per meeting, and each director
was reimbursed for expenses incurred in attending meetings. Midland also had the
1995 Directors' Stock Option Plan until February 1997, under which directors who
were not employees of Midland received options to acquire an aggregate of 20,000
shares at $2.75 per share and 30,000 at $3.75 per share. Effective February 25,
1997, the Midland Board adopted the 1997 Board of Directors Stock Incentive
Plan, terminated the 1995 Directors' Stock Option Plan and terminated the $3,000
quarterly director's fee effective beginning with the second quarter of 1997.
Each non-employee director received $3,000 as a directors fee in 1997 and Mr.
Warley received a total of $300 for directors fees in 1997. Midland stockholders
ratified the 1997 Board of Directors Stock Incentive Plan at the 1997 Annual
Meeting of Stockholders held May 29, 1997.
 
     Options to the below listed individuals have been granted on the terms
indicated. Options to purchase certain shares of Midland Common Stock ("Shares")
upon the attainment of specified criteria are denominated "Bonus Options." On
February 25, 1997, the date of the grant of the options, the last reported trade
of Midland Common Stock as reported in The Wall Street Journal for NASDAQ
Small-Cap Issues was $3.75 and at December 31, 1997 such last reported trade was
$2.125.
 
<TABLE>
<CAPTION>
                                     NUMBER OF     NUMBER OF BONUS
              NAME                 OPTION SHARES    OPTION SHARES    EXERCISE PRICE   EXPIRATION
              ----                 -------------   ---------------   --------------   ----------
<S>                                <C>             <C>               <C>              <C>
Darrell M. Dillard(1)............     200,000          50,000            $3.00         03/31/02
Robert R. Donnelly(1)............     200,000          50,000            $3.00         03/31/02
Wayne M. Whitaker(1).............     200,000          50,000            $3.00         03/31/02
Sam R. Brock(1)..................     200,000          50,000            $3.00         03/31/02
John Q. Adams(2).................     150,000          25,000            $3.00         03/31/02
Marilyn D. Wade(3)...............      50,000          10,000            $3.00         03/31/02
</TABLE>
 
---------------
 
(1) Director
 
(2) Advisory member of Board of Directors
 
(3) Corporate Secretary, employee
 
  Vesting Schedule:
 
<TABLE>
<S>   <C>
25%   of the Option Shares vest and become exercisable upon the
      Shares trading three out of five consecutive trading days at
      or above $6.50;
50%   of the Option Shares vest and become exercisable upon the
      Shares trading three out of five consecutive trading days at
      or above $7.50;
25%   of the Option Shares vest and become exercisable upon the
      Shares trading three out of five consecutive trading days at
      or above $8.50; and
100%  of the Bonus Option Shares vest and become exercisable upon
      the Shares trading three out of five consecutive trading
      days at or above $10.00.
</TABLE>
 
     During 1997 Shares traded three out of five consecutive trading days at or
above $6.50 and 25% of the Option Shares vested and became exercisable subject
to the further restrictions as follows:
 
          (a) No Option Shares may be exercised prior to March 1, 1998;
 
          (b) Up to 1/3 of Option Shares that have vested may be exercised at
     any time on and after March 1, 1998;
 
                                       69
<PAGE>   73
 
          (c) Up to an additional 1/3 of Option Shares that have vested may be
     exercised at any time on and after March 1, 1999;
 
          (d) Up to an additional 1/3 of Option Shares that have vested may be
     exercised at any time on and after March 1, 2000; and
 
          (e) Bonus Option Shares that have vested may be exercised at any time.
 
     Notwithstanding the above vesting schedule, all Options, including Bonus
Options, vest and become exercisable upon a Change in Control. The term "Change
in Control" shall mean (i) if (A) Deas H. Warley III shall have beneficial
ownership of fewer than 40% of the number of shares of Midland Common Stock (on
a fully diluted basis) beneficially owned by him on January 1, 1997, after
taking into account any subdivision or combination of Midland Common Stock, at
any time prior to the first anniversary of the grant of the Options, or (B) at
any time prior to the second anniversary of the grant of the Options Deas H.
Warley III shall have beneficial ownership of fewer than 30% of the number of
shares of Midland Common Stock beneficially owned by him on January 1, 1997,
after taking into account any subdivision or combination of Midland Common
Stock, (it being understood that Deas H. Warley III shall be deemed to have
beneficial ownership of any shares held by any member of his immediate family or
the trustee of any trust created for the benefit of any such family member), or
(ii) the acquisition in one or more transactions of Midland Common Stock by any
Person or group (within the meaning of Section 13(d)(3) of the Exchange Act)
together with any affiliate of such Person or member of such group of beneficial
ownership, direct or indirect, of securities of Midland representing 25% or more
of the combined voting power of Midland's then outstanding voting securities or
that amount of securities of Midland entitling such Person or group to elect a
majority of the members of the Midland Board, or (iii) the sale, transfer or
other disposition in one or more transactions of all or substantially all of the
assets of Midland or (iv) the merger or consolidation of Midland with or into
another Person, other than a wholly-owned subsidiary of Midland or (v) Midland
proceeds to acquire its common stock (or undertakes a corporate reorganization
or recapitalization or other action) if the effect of such acquisition (or other
action) would be either (1) to reduce substantially or to eliminate any public
market for the shares of Midland Common Stock or (2) to remove Midland from
registration under the Securities Exchange Act of 1934 ("Exchange Act") or (3)
to require Midland to make a filing under Section 13(e) of the Exchange Act or
(4) to cause a delisting of Midland Common Stock from the National Association
of Securities Dealers, Inc. Automated Quotation System (unless such stock is
delisted as a result of being listed on a national securities exchange) or to
cause a delisting of Midland Common Stock from a national securities exchange,
or (vi) either Midland and/or one or more of the significant subsidiaries of
Midland is materially or completely liquidated or is the subject of any
voluntary or involuntary dissolution or winding up.
 
  Compensation Committee Interlocks and Insider Participation
 
     Midland's Compensation Committee consists of Messrs. Brock and Donnelly and
all determinations concerning executive compensation for Midland's executive
officers are made by the Compensation Committee. The Compensation Committee
members abstained from participation in compensation determinations concerning
their own compensation. None of the members of the Compensation Committee has
served on the board of directors or on the compensation committee of any other
entity, any of whose officers served on the Midland Board.
 
                                       70
<PAGE>   74
 
  Executive Compensation
 
     None of the officers of Midland receive direct compensation from Midland
for their service in those capacities. Officers of Midland are also officers of
MRO and receive compensation from that company. As reflected in the table below,
Mr. Warley was the chief executive officer of Midland and no other officer of
Midland received salary and bonus of $100,000 or more during 1997.
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
               NAME AND                                         OTHER ANNUAL            ALL OTHER
          PRINCIPAL POSITION             YEAR   SALARY ($)   COMPENSATION ($)(1)   COMPENSATION ($)(2)
          ------------------             ----   ----------   -------------------   -------------------
<S>                                      <C>    <C>          <C>                   <C>
Deas H. Warley III.....................  1997    214,419                0                10,300(3)
  President, Chairman(4)                 1996    224,840            5,693                17,774
                                         1995    217,350            8,797                19,071
</TABLE>
 
---------------
 
(1) Amounts deferred at the election of the named executive officer pursuant to
    a plan established under Section 401(k) of the Internal Revenue Code.
 
(2) For 1997 includes, discretionary amounts contributed by Company under the
    plan established under Section 401(k) of the Internal Revenue Code of $0 for
    Mr. Warley.
 
(3) Includes Director fees of $300 and health care reimbursement of $10,000 for
    1997.
 
(4) Mr. Warley's position as president and chairman terminated March 27, 1998.
 
     Mr. Warley's employment contract and his ceasing to be president and
chairman is described under "Certain Transactions."
 
     The following table provides the specified information for Midland's chief
executive officer during 1997. Mr. Warley's option exercise price is $2.375 per
share and the closing sales price of the Midland Common Stock on December 31,
1997 was $2.125.
 
                         FISCAL YEAR-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                            NUMBER OF SECURITIES      VALUE OF UNEXERCISED IN-
                                                           UNDERLYING UNEXERCISED         THE MONEY OPTIONS
                             SHARES ACQUIRED    VALUE       OPTION AT FY-END (#)            AT FY-END ($)
           NAME                ON EXERCISE     REALIZED   EXERCISABLE/UNEXERCISABLE   EXERCISABLE/UNEXERCISABLE
           ----              ---------------   --------   -------------------------   -------------------------
<S>                          <C>               <C>        <C>                         <C>
Deas H. Warley III.........         0             0               15,000/0                      $0/0
</TABLE>
 
  Employee Benefit Plans
 
     Midland has two employee stock option plans. The 1994 Midland Resources,
Inc. Long-Term Incentive Plan reserved a total of 300,000 shares of Midland
Common Stock for awards under the plan. As of June 15, 1998, 113,000 options
were outstanding with a weighted average exercise price of $2.95 and 119,300
options were available for issuance. If not exercised, these options are
scheduled to expire in years 1999 through 2001. The 1996 Midland Resources, Inc.
Long-Term Incentive Plan reserved a total of 400,000 shares of Midland Common
Stock for awards under the plan. As of June 15, 1998, 205,000 options were
outstanding with a weighted average exercise price of $3.02 and 193,000 options
were available for issuance. If not exercised, these options are scheduled to
expire in years 2001 through 2003.
 
     Midland, through MRO has a plan (including an employee stock ownership plan
provision) adopted under Section 401(k) of the Code that is open to all
employees.
 
  Indemnification of Midland Officers and Directors
 
     As provided in the Merger Agreement, at the Effective Time, Vista will
enter into indemnification agreements with each of the directors and officers of
Midland pursuant to which Vista will agree to indemnify and hold harmless each
such director and officer against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
arising out of the fact that he was a director or officer of Midland or any of
its subsidiaries prior to the Effective Time, to the full extent permitted under
Delaware law, Midland's Bylaws and the indemnification agreements.
 
                                       71
<PAGE>   75
 
                             THE VISTA PARTNERSHIP
 
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF THE VISTA PARTNERSHIP
 
     The following table sets forth selected consolidated financial information
of the Vista Partnership for the three months ended March 31, 1998 and 1997, and
for the years ended December 31, 1997 and 1996 and the period from inception
(September 21, 1995) to December 31, 1995. This data should be read in
conjunction with the Consolidated Financial Statements of the Vista Partnership
and the related notes thereto incorporated herein by reference.
 
<TABLE>
<CAPTION>
                                                                                                          FOR THE PERIOD
                                                                                                          FROM INCEPTION
                                                    THREE MONTHS ENDED                                      (SEPT. 21,
                                                         MARCH 31,            YEAR ENDED DECEMBER 31,         1995)
                                                 -------------------------   --------------------------    TO DEC. 31,
                                                    1998          1997           1997          1996            1995
                                                 -----------   -----------   ------------   -----------   --------------
                                                        (UNAUDITED)
<S>                                              <C>           <C>           <C>            <C>           <C>
REVENUES:
  Oil and gas sales............................  $ 2,054,168   $ 2,107,166   $  8,874,961   $ 5,537,720    $ 1,348,647
                                                 -----------   -----------   ------------   -----------    -----------
        Total revenues.........................    2,054,168     2,107,166      8,874,961     5,537,720      1,348,647
                                                 -----------   -----------   ------------   -----------    -----------
COSTS AND EXPENSES:
  Lease operating..............................      986,728       903,313      3,688,695     2,544,567        728,540
  Exploration costs............................           --        43,575         97,211       273,843             --
  Depreciation, depletion and amortization.....      494,958       417,168      2,169,098     1,272,316        308,132
  General and administrative...................      307,955       226,445        987,020       581,048        208,509
  Amortization of unit option awards...........      166,849            --        315,518            --             --
                                                 -----------   -----------   ------------   -----------    -----------
        Total costs and expenses...............    1,956,490     1,590,501      7,257,542     4,671,774      1,245,181
                                                 -----------   -----------   ------------   -----------    -----------
        Operating income.......................       97,678       516,665      1,617,419       865,946        103,466
                                                 -----------   -----------   ------------   -----------    -----------
  Interest expense.............................     (343,452)     (180,542)    (1,048,009)     (476,363)       (77,093)
  Other income (loss), net.....................       24,121       (97,289)        28,271         4,699         33,684
                                                 -----------   -----------   ------------   -----------    -----------
NET INCOME (LOSS) BEFORE TAXES(1)..............     (221,653)      238,834        597,681       394,282         60,057
                                                 -----------   -----------   ------------   -----------    -----------
  Pro forma benefit (provision) for taxes......       77,578       (82,307)      (211,720)     (139,284)       (21,190)
                                                 -----------   -----------   ------------   -----------    -----------
PRO FORMA NET INCOME (LOSS)....................  $  (144,075)  $   156,527   $    385,961   $   254,998    $    38,867
                                                 ===========   ===========   ============   ===========    ===========
CASH FLOW DATA:
EBITDAEX(2)....................................      592,636       977,408      3,883,728     2,412,105        411,598
Cash flows from operating activities...........      460,513       767,324      3,469,638     2,072,649        195,878
Cash flows from investing activities...........     (671,076)   (2,026,515)   (12,648,815)   (7,046,720)    (7,948,840)
Cash flows from financing activities...........           --       984,923      9,189,095     5,015,077      8,265,167
Capital expenditures...........................      671,176     2,041,457     13,038,815     7,417,091      7,720,478
Ratio of earnings to fixed charges(3)..........           --           2.3x           1.6x          1.8x           1.8x
BALANCE SHEET DATA (end of period):
Working capital................................      190,110       228,076        421,132       613,666        648,130
Property, plant, and equipment, net............   25,062,929    16,147,491     24,870,766    14,523,202      9,076,679
Total assets...................................   26,553,548    17,445,312     27,036,103    16,259,340     10,364,620
Long-term obligations..........................   17,900,000     9,600,000     17,900,000     8,615,077      3,600,000
Owners' equity.................................    7,641,848     7,022,287      7,696,652     6,783,453      6,389,171
</TABLE>
 
---------------
 
(1) The pro forma benefit (provision) for taxes is the amount that would have
    been recorded in the financial statements had the Vista Partnership been a
    taxable entity.
 
(2) EBITDAEX is presented because of its wide acceptance as a financial
    indicator of a company's ability to service or incur debt. EBITDAEX (as used
    herein) is calculated by adding depletion, depreciation and amortization,
    and exploration costs to operating income. Interest includes accrued
    interest expense and amortization of deferred financing costs. EBITDAEX
    should not be considered as an alternative to net income (loss) or operating
    income (loss), as defined by generally accepted accounting principles, as an
    indicator of the Vista Partnership's financial performance, as an
    alternative to cash flow, as a measure of liquidity or as being comparable
    to other similarly titled measures of other companies.
 
                                       72
<PAGE>   76
 
(3) For purposes of calculating the ratio of earnings to fixed charges, earnings
    are defined as income (loss) before taxes plus fixed charges. Fixed charges
    consist of interest expense. For the three months ended March 31, 1998,
    earnings were insufficient to cover fixed charges by $0.2 million.
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE VISTA PARTNERSHIP
 
  General
 
     Financial Performance For the Three Months Ended March 31, 1998. The Vista
Partnership reported a net loss of $221,653 for the first quarter of 1998 as
compared to net income of $238,834 for the same period in 1997. Average daily
oil production increased 32% to 1,291 Bbls per day for the first quarter of 1998
from 975 Bbls per day for the first quarter of 1997, and average daily gas
production increased 80% to 2,690 Mcf per day from 1,493 Mcf per day for the
same period. As discussed more fully in "-- Results of Operations" below, the
Vista Partnership's financial performance for the first quarter of 1998 was
negatively impacted by the following items: (i) dramatically lower (32%) oil
prices and lower (20%) gas prices received; (ii) increase in gross production
costs due to addition of a significant number of properties as a result of the
E.G. Acquisition (as defined below) made during the third quarter of 1997; (iii)
an increase in interest expense as a result of the additional indebtedness
incurred in respect of the E.G. Acquisition; and (iv) an increase in depletion
expense attributable to the additional properties acquired in the E.G.
Acquisition.
 
     Net cash provided by operating activities decreased 40% to $461,000 for the
first quarter of 1998 as compared to $767,000 for the same period in 1997. This
decrease was primarily attributable to significantly lower commodity prices for
oil and gas and increased production costs and interest expense as a result of
the additional indebtedness incurred in respect of the E.G. Acquisition.
 
     The Vista Partnership strives to maintain its outstanding indebtedness at a
moderate level in order to provide sufficient financial flexibility to fund
future opportunities. The Vista Partnership's total book capitalization at March
31, 1998 was $25.6 million, consisting of total long-term debt of $17.9 million
and partners' equity of $7.7 million. Debt as a percentage of total book
capitalization was 70% at March 31, 1998, which was essentially the same as at
December 31, 1997. The Vista Partnership's debt level is currently high due to
significant borrowings under its bank credit facility for its 1997 acquisitions
and certain drilling and exploitation projects. As the Vista Partnership's
borrowing base under its bank credit facility has grown due to the success of
its acquisition and exploitation efforts, the Vista Partnership has been able to
fund all of its acquisitions and its drilling and exploitation programs from
borrowings under its bank credit facility and cash flow from operations without
raising additional equity capital.
 
     Financial Performance For the Year Ended December 31, 1997. The Vista
Partnership reported net income of $597,681 (inclusive of a $315,518 non-cash,
non-operating charge for amortization of employee unit option awards) for the
year ended December 31, 1997 as compared to net income of $394,282 for the year
ended December 31, 1996. The Vista Partnership's net income for the year ended
December 31, 1997 was positively impacted by the following items: (i)
significantly increased oil and gas revenue attributable to increased production
resulting from the success of the Vista Partnership's drilling program and the
addition of a significant group of properties acquired in the E.G. Acquisition
in the third quarter of 1997; and (ii) a decrease in exploration expenses due to
fewer write offs of expired acreage and less dry hole expenses.
 
     Net cash provided by operating activities increased 67% to $3.5 million for
the year ended December 31, 1997 as compared to $2.1 million for the year ended
December 31, 1996. This increase was primarily attributable to (i) significantly
increased oil and gas revenue attributable to increased production resulting
from the success of the Vista Partnership's drilling program and the addition of
a significant group of properties acquired in the E.G. Acquisition in the third
quarter of 1997; and (ii) the decrease in exploration expenses due to fewer
write offs of expired acreage and less dry hole expenses.
 
     Long-term debt increased by $9.3 million to $17.9 million at December 31,
1997 from $8.6 million at December 31, 1996 principally due to borrowings made
in connection with each of the acquisitions made by the Vista Partnership in
1997 (approximately $7.4 million) and to fund that portion of the Vista
Partnership's
 
                                       73
<PAGE>   77
 
capital budget for drilling and exploitation projects that was not funded from
cash flow (approximately $1.9 million). Consequently, the Vista Partnership's
long-term debt to total book capitalization increased to an historically high
level of 70% at December 31, 1997 from 56% at December 31, 1996.
 
  Significant Activities During the Three Months Ended March 31, 1998
 
     Drilling Activities. During 1998, the Vista Partnership has continued its
emphasis on development, exploration and production activities, with a primary
focus on the exploitation of its current portfolio of drilling locations. This
portfolio was significantly enhanced and expanded by the major acquisitions
completed in 1995, 1996 and 1997 and the Vista Partnership's 1997 drilling
program. These activities have added a significant number of new locations and
opportunities to which new proved undeveloped reserves have been assigned. The
Vista Partnership believes that its current portfolio of undeveloped prospects
and projects provides attractive development and exploration opportunities for
at least the next two to four years. Of the total 1998 capital expenditure
drilling budget of $5.8 million, the Vista Partnership has allocated $4.9
million to exploitation and development activities and $900,000 to exploration
activities. The Vista Partnership does not budget for oil and gas property
acquisitions as they are made on a case by case basis as opportunities arise.
This capital expenditure drilling budget reflects the Vista Partnership's plans
to drill approximately 17 oil and gas wells in 1998. The Vista Partnership
currently expects to fund its 1998 capital expenditure budget primarily with
internally generated cash flow, borrowings under its bank credit facility and
proceeds from the sale of non-strategic assets.
 
     During the first quarter of 1998, the Vista Partnership participated in the
drilling and completion of six gross development wells and no exploration wells.
None of these wells were in progress at December 31, 1997. Of the total wells
completed during the three months ended March 31, 1998, all six were completed
successfully which resulted in a 100% success rate. No wells were drilling at
March 31, 1998.
 
     Acquisition Activities. Although various acquisition candidates were
evaluated during the first quarter of 1998, no significant acquisitions were
made during such time period.
 
  Significant Activities During 1997
 
     Drilling Activities. The Vista Partnership continues to realize the
benefits of its focused activities in the development and exploitation of its
existing core areas. The Vista Partnership devotes significant efforts to
exploitation and exploration of its existing property base and believes that
substantial additional opportunities remain. During 1997, the Vista Partnership
participated in the drilling and completion of 23 gross exploration and
development wells (20 of which were operated by the Vista Partnership). The
Vista Partnership's total capital expenditures during 1997 for exploration and
development activities were $4.7 million.
 
     Acquisition Activities. In addition to acquiring various additional small
working interests and overriding royalty interests in properties already owned
and operated by the Vista Partnership (total purchase prices of about $200,000),
the Vista Partnership closed two significant producing property acquisitions in
1997. In May 1997, the Vista Partnership acquired all of the interests of
Coastal Oil and Gas Corporation in three producing leases located in Howard
Glasscock Field, Howard County, Texas, for a net purchase price of $1.1 million
(the "Coastal Acquisition"). The interests acquired were attributable to leases
already owned and operated by the Vista Partnership. Effective as of July 1,
1997, the Vista Partnership acquired substantially all of the producing oil and
gas properties (representing working interests ranging from 25% to 100% in
approximately 44 wells located in West Texas, South Texas, and Southeastern New
Mexico) from E. G. Operating, a division of FGL, Inc. for a net purchase price
of $6.1 million (the "E.G. Acquisition"). All of the Vista Partnership's 1997
acquisitions were funded through a combination of cash on hand and proceeds from
long-term borrowings under its bank credit facility.
 
     Asset Dispositions. From time to time, the Vista Partnership disposes of
non-strategic assets in order to raise capital for other activities, reduce
indebtedness or eliminate costs associated with non-strategic assets. During
1997, the Vista Partnership sold certain non-strategic assets for a total net
consideration of $390,000, which resulted in a book loss of $87,678.
 
                                       74
<PAGE>   78
 
     Proved Reserves. The Vista Partnership's proved reserves totaled 9.1
million BOE at December 31, 1997, 5.7 million BOE at December 31, 1996, and 3.0
million BOE at December 31, 1995. Total proved reserves increased 59% in 1997
and 90% in 1996. Oil reserves at year end 1997 were 7.2 million Bbls compared to
4.5 million Bbls at year end 1996 and 2.2 million Bbls at year end 1995 (a 60%
increase from 1996 to 1997 and a 200% increase from 1995 to 1996). Natural gas
reserves at year end 1997 were 11.3 Bcf compared to 7.2 Bcf at year end 1996 and
4.8 Bcf at year end 1995 (a 57% increase from 1996 to 1997 and a 50% increase
from 1995 to 1996).
 
     Reserve Replacement. For three years, since inception of the company, the
Vista Partnership has been able to more than replace its annual production
volumes with proved reserves of crude oil and natural gas. During 1997 Vista
added 3,895 MBOE of reserves resulting in reserve replacement of 728% of annual
production. The reserve replacement rate in 1996 was 919%. Of the 3,895 MBOE of
reserves added in 1997, 1,675 MBOE was added through drilling, remedial work and
secondary recovery projects, 1,788 MBOE was added through acquisitions of proved
reserves, and 432 MBOE was added as a result of revisions. Reserve revisions are
a result of either changes in current estimates of reserves or changes in
estimates of reserves that are economical to produce given the current pricing
conditions. The Vista Partnership's reserves as of December 31, 1997 were
estimated using a price of $16.10 per Bbl and $2.01 per Mcf. Should prices
either rise or decline in future years, reserves may be revised either upward or
downward for quantities which may or may not be economical to produce.
 
     Finding Cost. The Vista Partnership's acquisition and finding cost for 1997
was $3.17 per BOE as compared to the 1996 and 1995 finding costs of $2.55 and
$2.90 per BOE, respectively. The average acquisition and finding cost for the
three-year period was $2.90 per BOE.
 
     Cost Reductions. Production costs (being lease operating expenses and
production taxes) per BOE declined 3.9% (from $7.18 to $6.90) for the year ended
December 31, 1997, as compared to the year ended December 31, 1996. This decline
is a result of the Vista Partnership's continued emphasis on cost control
efforts and the disposition of certain high-cost, non-strategic oil and gas
properties during 1997. The Vista Partnership expects production costs per BOE
to continue to decline as further cost reductions are implemented and additional
high-cost, non-strategic properties are sold.
 
     Commodity Prices and Hedging Activities. The Vista Partnership was
negatively impacted by slightly lower oil and gas prices during 1997. In 1997,
the Vista Partnership received an average oil price of $17.63 per Bbl and an
average gas price of $2.22 per Mcf, representing a decrease of 2% for oil and a
slight increase for gas, respectively, from 1996. The oil and gas prices that
the Vista Partnership reports is based on the actual prices received for the
commodities adjusted by the results of the Vista Partnership's hedging
activities. The Vista Partnership periodically enters into commodity derivative
contracts (i.e., swaps and collars) in order to (i) reduce the effect of the
volatility of price changes on the commodities the Vista Partnership produces
and sells, (ii) support the Vista Partnership's annual capital budgeting and
expenditure plans, and (iii) lock in prices to protect the economics related to
certain capital projects. During 1997, the Vista Partnership's hedging
activities reduced the average price received for oil by 3%. The Vista
Partnership engaged in no gas hedging activities in 1997.
 
     Capitalization. The Vista Partnership strives to maintain its outstanding
indebtedness at a moderate level in order to provide sufficient financial
flexibility for future opportunities. The Vista Partnership's total book
capitalization at December 31, 1997, was $25.6 million, consisting of total
long-term debt of $17.9 million and partners' equity of $7.7 million. Debt as a
percentage of total capitalization was 70% at December 31, 1997, up from 56% at
December 31, 1996. This increase is primarily due to borrowings made in
connection with each of the acquisitions made by the Vista Partnership in 1997
(approximately $7.4 million) and to fund that portion of the Vista Partnership's
capital budget for drilling and exploitation projects that was not funded from
cash flow (approximately $1.9 million).
 
     Legal Actions. The only legal matter in which the Vista Partnership is or
has been involved concerns the bankruptcy of a drilling contractor engaged by
the Vista Partnership to drill several wells on a turnkey basis in late 1996.
The Vista Partnership still holds $208,060 owed under the subject turnkey
drilling contract. Claims have been made by various subcontract vendors for the
monies held by the Vista Partnership. On
                                       75
<PAGE>   79
 
November 11, 1997, a company claiming to own the invoices of the bankrupt
drilling contractor through a factoring arrangement filed suit in state district
court in Midland County seeking to collect the monies due under the subject
turnkey drilling contract (the "Southwest Action"). Upon motion by the Vista
Partnership, the district court on January 2, 1998, abated the legal action by
the plaintiff pending the results of the bankruptcy proceedings and a
determination as to which, if any, claimants including the plaintiff are
entitled to the monies held by the Vista Partnership. The Vista Partnership
carries the entire $208,060 as an account payable on its balance sheet.
 
  RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
 
  Oil and Gas Production.
 
<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                                                                     MARCH 31,
                                                              -----------------------
                                                                 1998         1997
                                                              ----------   ----------
<S>                                                           <C>          <C>
Revenues....................................................  $2,054,168   $2,107,166
Costs and expenses:
  Lease operating...........................................     986,728      903,313
  Depletion.................................................     494,958      417,168
  Exploration costs.........................................          --       43,575
                                                              ----------   ----------
                                                               1,481,686    1,364,056
                                                              ----------   ----------
  Operating profit (excluding general and administrative
     expenses and income taxes).............................  $  572,482   $  743,110
                                                              ==========   ==========
Production:
  Oil (MBbls)...............................................     116,180       87,732
  Gas (MMcf)................................................     242,064      134,363
          Total (MBOE)......................................     156,524      110,126
Average Daily Production:
  Oil (Bbls)................................................       1,291          975
  Gas (Mcf).................................................       2,690        1,493
Average Oil Price (Per Bbl).................................  $    13.73   $    19.23
Average Gas Price (Per Mcf).................................  $     1.91   $     2.38
Costs (Per BOE):
  Lease operating expense...................................  $     5.23   $     6.85
  Production taxes..........................................  $     1.08   $     1.35
                                                              ----------   ----------
          Total production costs............................  $     6.31   $     8.20
  Depletion.................................................  $     3.16   $     3.79
</TABLE>
 
     Oil and Gas Revenues. Revenues from oil and gas operations totaled $2.0
million in the first quarter of 1998 compared to $2.1 million in the first
quarter of 1997, representing a decrease of 2.5%. The increase is primarily
attributable to significant increases in production due to the Vista
Partnership's successful acquisition and exploitation activities in 1997, offset
by significantly decreased average prices being received for both oil and gas
production. The average oil prices received for the three months ended March 31,
1998, decreased 29% (from $19.23 to $13.73 for the three months ended March 31,
1997 and 1998, respectively), while the average gas price received decreased 20%
(from $2.38 to $1.91 for the three months ended March 31, 1997 and 1998,
respectively).
 
     Average daily oil production increased 32% from 975 Bbls for the first
quarter of 1997 to 1,291 Bbls for the first quarter of 1998, and average daily
gas production increased 80% from 1,493 Mcf to 2,690 Mcf for the same period.
 
     Hedging Activities. The oil and gas prices that the Vista Partnership
reports is based on the actual prices received for the commodities adjusted for
the results of any of the Vista Partnership's hedging activities. The Vista
Partnership periodically enters into commodity derivative contracts (i.e., swaps
and collars) in order to
 
                                       76
<PAGE>   80
 
(i) reduce the effect of the volatility of price changes on the commodities the
Vista Partnership produces and sells, (ii) support the Vista Partnership's
annual capital budgeting and expenditure plans, and (iii) lock in prices to
protect the economics related to certain capital projects. The Vista Partnership
had no hedging transactions in place for the first quarter of 1998, however, set
forth below is the contract amount and terms of all hedging instruments held by
the Vista Partnership at March 31, 1998 (monthly volumes are expressed in Bbls
and all prices are expressed in the calendar monthly average of daily NYMEX
closing prices for Light Sweet Crude Oil):
 
<TABLE>
<CAPTION>
 TRADE       TYPE       MONTHLY       PUT           CALL
  DATE    TRANSACTION   VOLUME    FLOOR PRICE   CEILING PRICE          TERM
--------  -----------   -------   -----------   -------------   ------------------
<C>       <C>           <C>       <C>           <C>             <S>
12-15-97    Collar      10,000    $18.00 Bbl     $19.805 Bbl    4-1-98 to 12-31-98
12-15-97    Collar      10,000    $18.50 Bbl     $19.280 Bbl    4-1-98 to 3-31-99
</TABLE>
 
     Production Costs. Total production costs per BOE decreased 23% to $6.31
during the three months ended March 31, 1998, as compared to production costs
per BOE of $8.20 during the same period of 1997. These reductions are primarily
due to the Vista Partnership's continued and concentrated efforts to evaluate
and reduce all operating costs, the addition of higher margin properties
acquired by Vista in the E.G. Acquisition, and the sale of certain high
operating cost properties during 1997.
 
     Exploration Costs. Exploration costs (which includes abandonments, dry hole
costs, geological and geophysical costs) decreased to $0 during the first
quarter of 1998 from $43,575 during the same period in 1997 because the Vista
Partnership did not incur any dry hole costs or expired acreage costs in the
first quarter of 1998.
 
     General and Administrative Expense. General and administrative expense was
$307,955 for the quarter ended March 31, 1998, as compared to $226,445 for the
quarter ended March 31, 1997, representing a 36% increase. Such increase was
primarily due to the costs associated with the hiring of additional employees in
1997 as the Vista Partnership's business has grown.
 
     Interest Expense. Interest expense for the quarter ended March 31, 1998
increased to $343,452 as compared to $180,542 for the comparable period in 1997,
representing a 90% increase. This increase is primarily due to additional
borrowings made in connection with each of the acquisitions made by the Vista
Partnership in 1997 (approximately $7.4 million) and to fund that portion of the
Vista Partnership's capital budget for drilling and exploitation projects that
was not funded from cash flow (approximately $1.9 million).
 
     Depletion, Depreciation and Amortization Expense. Depletion expense per BOE
declined to $3.16 during the first quarter of 1998 from $3.79 per BOE during the
first quarter of 1997. The slight decrease in depletion expense per BOE during
1998 is primarily related to increases in oil and gas reserves on certain
properties which resulted in slightly lower depletion rates for such properties.
 
     Income Taxes. Since the Vista Partnership's legal structure is that of a
limited partnership, it records no federal income taxes as these taxes are the
responsibility of the individual partners.
 
                                       77
<PAGE>   81
 
  RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996, AND FOR
  THE PERIOD FROM INCEPTION (SEPTEMBER 21, 1995) TO DECEMBER 31, 1995
 
  Oil and Gas Production.
 
<TABLE>
<CAPTION>
                                                 1997           1996           1995
                                              -----------    -----------    -----------
<S>                                           <C>            <C>            <C>
Revenues...................................   $ 8,874,961    $ 5,537,720    $ 1,348,647
Costs and expenses:
  Lease operating..........................     3,688,695      2,544,567        728,540
  Depletion................................     2,169,098      1,272,316        308,132
  Exploration costs........................        97,211        273,843             --
                                              -----------    -----------    -----------
                                                5,955,004      4,090,726      1,036,672
                                              -----------    -----------    -----------
  Operating profit (excluding general and
     administrative expenses and income
     taxes)................................   $ 2,919,957    $ 1,446,994    $   311,975
                                              ===========    ===========    ===========
Production:
  Oil (MBbls)..............................       403,812        253,321         68,211
  Gas (MMcf)...............................       784,298        458,278        156,515
          Total (MBOE).....................       534,528        329,701         94,297
Average Daily Production:
  Oil (Bbls)...............................         1,107            693            444
  Gas (Mcf)................................         2,148          1,255          1,020
                                              -----------    -----------    -----------
          Total (MBOE).....................         1,465            902            614
Average Oil Price (Per Bbl)................   $     17.63    $     18.04    $     15.70
Average Gas Price (Per Mcf)................   $      2.22    $      2.19    $      1.75
Costs (Per BOE):
  Lease operating expense..................   $      6.90    $      7.72    $      7.73
  Depletion................................   $      4.06    $      3.86    $      3.27
</TABLE>
 
     Oil and Gas Revenues. Revenues from oil and gas operations totaled $8.9
million in 1997, $5.5 million in 1996 and $1.3 million in 1995, representing a
60% increase from 1996 to 1997 and a 310% increase from 1995 to 1996. The
increase from 1996 to 1997 is primarily attributable to significant increases in
production due to the Vista Partnership's successful acquisition and
exploitation activities in 1996 and 1997, offset by significantly decreased
average prices being received for oil production. Due to the Vista Partnership's
formation in September 1995, 1995 production consists of a short year.
Accordingly, the increase from 1995 to 1996 is primarily due to 1996 being a
full year of production and, to a lesser extent, additional oil and gas sales
resulting from successful acquisition and drilling activities in 1996. The
average oil prices received for the year ended December 31, 1997 decreased 2%
(from $18.04 in 1996 to $17.63 in 1997), while the average gas price received
increased slightly (from $2.19 in 1996 to $2.22 in 1997). The average oil prices
received for the year ended December 31, 1996 increased 15% (from $15.70 in 1995
to $18.04 in 1996), while the average gas price received increased 25% (from
$1.75 in 1995 to $2.19 in 1996).
 
     Average daily oil production increased 60% from 693 Bbls for the year ended
December 31, 1996 to 1107 Bbls for the year ended December 31, 1997, and average
daily gas production increased 71% from 1255 Mcf to 2148 Mcf for the same
period. Average daily oil production increased 56% from 444 Bbls for the year
ended December 31, 1995 to 693 Bbls for the year ended December 31, 1996, and
average daily gas production increased 23% from 1020 Mcf to 1255 Mcf for the
same period.
 
     Hedging Activities. The oil and gas prices that the Vista Partnership
reports are based on the actual prices received for the commodities adjusted for
the results of any Vista Partnership hedging activities. The Vista Partnership
periodically enters into commodity derivative contracts (i.e., swaps and
collars) in order to (i) reduce the effect of the volatility of price changes on
the commodities the Vista Partnership produces and sells, (ii) support the Vista
Partnership's annual capital budgeting and expenditure plans, and (iii) lock in
prices to protect the economics related to certain capital projects. The Vista
Partnership had several crude oil hedging arrangements in place during 1997,
1996 and 1995. As a result of such hedging activities, the average
 
                                       78
<PAGE>   82
 
price received for oil was reduced by 3%, 12% and 3%, respectively. The Vista
Partnership engaged in no gas hedging activities in 1997, 1996 or 1995.
 
     Production Costs. Total production costs per BOE decreased 11% (from $7.72
in 1996 to $6.90 in 1997). This significant reduction is primarily due to the
Vista Partnership's continued and concentrated efforts to evaluate and reduce
all operating costs, the addition of higher margin properties acquired in the
E.G. Acquisition, and the sale of certain high operating cost properties. Total
production costs per BOE remained flat in 1996 as compared to 1995 (from $7.73
in 1995 to $7.72 in 1996).
 
     Exploration Costs. Exploration costs (which include abandonments, dry hole
costs and geological and geophysical costs) have not historically been a
material cost to the Vista Partnership. Such costs were $97,211, $273,843 and $0
in 1997, 1996 and 1995, respectively.
 
     General and Administrative Expenses. General and administrative expense
increased 70% in 1997 (from $581,048 in 1996 to $987,020 in 1997). Such increase
was primarily due to the costs associated with the hiring of additional
employees in 1997 as the Vista Partnership's business has grown. General
administrative expenses per BOE were $1.85, $1.76, and $2.21 in 1997, 1996 and
1995 respectively.
 
     Interest Expense. Interest expense totaled $1,048,009, in 1997, $476,363 in
1996 and $77,093 in 1995, representing a 120% increase from 1996 to 1997 and a
518% increase from 1995 to 1996. These increases are a result of increased
borrowings under the Vista Partnership's bank credit facility. As the Vista
Partnership's borrowing base under its bank credit facility has grown due to the
success of its acquisition and exploitation efforts, the Vista Partnership has
been able to fund all of its acquisitions and its drilling and exploitation
programs from borrowings under its bank credit facility and cash flow from
operations without raising additional equity capital.
 
     Depletion, Depreciation and Amortization Expense. Depletion expense per BOE
was $4.06 in 1997, $3.86 in 1996 and $3.27 in 1995, representing a 5% increase
from 1996 to 1997 and a 18% increase from 1995 to 1996 These increases are
primarily related to the addition of shorter life properties in the E.G.
Acquisition.
 
     Income Taxes. Since the Vista Partnership's legal structure is that of a
limited partnership it records no federal income taxes as these taxes are the
responsibility of the individual partners.
 
  Capital Commitments, Capital Resources and Liquidity
 
     Capital Commitments. The Vista Partnership's primary needs for cash are for
acquisitions, development and exploration of oil and gas properties, repayment
of principal and interest on outstanding indebtedness and working capital
obligations. The Vista Partnership's cash expenditures during the first quarter
of 1998 for additions to oil and gas properties totaled $659,782, all of which
related to developmental drilling and exploitation activities. No acquisitions
were made during the first quarter of 1998.
 
     The Vista Partnership's cash expenditures during 1997, 1996 and 1995 for
additions to oil and gas properties (inclusive of producing property
acquisitions) totaled $12.1 million, $6.7 million and $9.3 million,
respectively. The 1997 amount includes $4.7 million for development and
exploratory drilling, the majority of which was spent in the Permian Basin.
 
     The Vista Partnership's 1998 capital expenditure drilling budget is set at
$5.8 million. Pursuant to this budget $4.9 million has been allocated to
exploitation and development activities and $900,000 to exploration activities.
The Vista Partnership does not budget for oil and gas property acquisitions as
they are made on a case by case basis as opportunities arise. The 1998 budget
reflects the Vista Partnership's plans to drill approximately 17 oil and gas
wells in 1998. The Vista Partnership currently expects to fund its 1998 capital
expenditure budget primarily with internally generated cash flow, borrowings
under its bank credit facility and proceeds from the sale of non-strategic
assets.
 
     Capital Resources. The Vista Partnership's primary capital resources are
net cash provided by operating activities, borrowings under its bank credit
facility and proceeds from the sale of non-strategic assets.
 
                                       79
<PAGE>   83
 
     Financing Activities. The Vista Partnership had $17.9 million outstanding
under the Credit Facility at March 31, 1998, with a borrowing base thereunder of
$22.3 million, leaving unused availability of $4.4 million. The weighted average
interest rate for the three months ended March 31, 1998 on the Vista
Partnership's indebtedness was 7.67% as compared to 8.20% for the three months
ended March 31, 1997 (taking into account the effect of an interest rate swap).
On August 15, 1997, the Vista Partnership entered into the Credit Facility,
which has a current borrowing base of $22.3 million and an additional $1.0
million letter of credit facility. The Vista Partnership has two options with
respect to interest rate elections on borrowings under the Credit Facility. The
Vista Partnership may either elect an interest rate equal to the bank's prime
rate plus 35 basis points or LIBOR plus 175 basis points (if amounts outstanding
are greater than 50% of the then current borrowing base) or 150 basis points (if
amounts outstanding are 50% or less of the then current borrowing base). The
LIBOR-based option provides for one-, two-, three- or six-month periods. The
weighted average interest rate for the year ended December 31, 1997 on the Vista
Partnership's indebtedness was 7.76% as compared to 7.99% for the year ended
December 31, 1996 and 7.95% for the year ended December 31, 1995.
 
     Liquidity. At March 31, 1998, the Vista Partnership had cash of $316, 566
on hand compared to $527,129 at December 31, 1997 and $517,211 at December 31,
1996. The Vista Partnership's ratio of current assets to current liabilities was
1.19 at March 31, 1998, 1.29 at December 31, 1997 and 1.71 at December 31, 1996.
 
BUSINESS AND PROPERTIES OF THE VISTA PARTNERSHIP
 
  Business Description
 
     General. The Vista Partnership is a privately held independent oil and gas
exploration and production company with operations and properties located in the
Permian Basin of West Texas and Southeastern New Mexico and the onshore Gulf
Coast region of South Texas. The Vista Partnership and its operating subsidiary,
Vista Resources, Inc., were formed by management of the Vista Partnership and
various affiliates of NGP in September 1995 to focus on acquisitions and
exploitation drilling primarily in the Permian Basin of West Texas and Southeast
New Mexico.
 
     The Vista Partnership's main corporate objective is to rapidly expand
reserve base, production capacity, cash flow and earnings in order to
substantially grow the equity value of the company on a per unit of ownership
basis. The Vista Partnership pursues its objectives through a program of
acquisitions of producing oil and gas properties and the exploitation of such
properties primarily through developmental and exploratory drilling coupled with
a concentrated and continuous effort to reduce expenses on a BOE basis at all
levels of its business.
 
     The Vista Partnership had approximately 9.1 million BOE of total proved
reserves at December 31, 1997 and SEC PV10 of approximately $38.6 million. Oil
reserves at year end 1997 were 7.2 million Bbls and natural gas reserves at year
end 1997 were 11.3 Bcf. On a BOE basis 52% of the Vista Partnership's total
proved reserves at December 31, 1997 are proved developed reserves. The Vista
Partnership operates 92% of its total proved reserves. The reserve-to-production
ratio associated with the Vista Partnership's proved reserves is 14 years on a
BOE basis.
 
     Financial Management. The Vista Partnership strives to maintain its
outstanding indebtedness at a moderate level in order to provide financial
flexibility for future acquisition, development and exploration opportunities.
As with any growing organization, the Vista Partnership has experienced various
levels of debt in recent years as it has responded to strategic opportunities.
In 1997, the Vista Partnership's debt increased significantly due to borrowings
made in connection with each of its acquisitions in 1997 ($7.4 million) and to
fund that portion of its capital budget for drilling and exploitation projects
that was not funded from cash flow ($1.9 million). Debt is currently 70% of
total book capitalization. Nevertheless, management's objective of maintaining a
flexible structure and strengthening the Vista Partnership's financial position
dictates reducing debt through an increase in equity capital, the divestiture of
non-strategic assets or a combination of the two in order to maintain debt to
total capitalization of approximately 50%. One result of the Merger will be that
Vista should have a pro forma beginning debt to total capitalization ratio of
52%.
 
                                       80
<PAGE>   84
 
  Properties
 
     Reserves. The estimates of the Vista Partnership's proved oil and gas
reserves, which are located entirely within the United States, were prepared in
accordance with the guidelines established by the Commission and Financial
Accounting Standards Board. The estimates of December 31, 1997, 1996 and 1995
are based on evaluations prepared by the Vista Partnership. For information
concerning costs incurred by the Vista Partnership for oil and gas operations,
net revenues from oil and gas production, estimated future net revenues
attributable to the Vista Partnership's oil reserves and present value of future
net revenues on a 10% discount rate and changes therein, see Notes to the Vista
Partnership's consolidated financial statements. The Vista Partnership
emphasizes that reserve estimates are inherently imprecise and that estimates of
new discoveries are more imprecise than those of producing oil and gas
properties. Accordingly, the estimates are subject to change as further
information becomes available.
 
     The Vista Partnership's proved reserves totaled 9.1 million BOE at December
31, 1997 with an SEC PV10 of $38.6 million. Reserves increased 59% versus year
end 1996. Oil reserves were 7.2 million BOE (a 59% increase over 1996) while gas
reserves were 11.3 BCF (a 57% increase over 1996).
 
     On a BOE basis, the Vista Partnership's reserves at January 1, 1998 are 52%
proved developed with 48% proved undeveloped. Seventy-nine percent of the Vista
Partnership's reserves are oil and 21% are gas. The Vista Partnership prefers to
operate the properties it owns because operational efficiencies are a key part
of the acquisitions targeted by the Vista Partnership. Over 92% of the Vista
Partnership's reserve value is attributable to operated properties. Only 8% of
the Vista Partnership's reserve value is attributable to properties operated by
others.
 
     The following table summarizes the estimated proved reserves and estimated
future cash flows associated with the Vista Partnership's oil and gas properties
as estimated in accordance with the definitional requirements under rule 4-10(a)
of Regulation S-X.
 
<TABLE>
<CAPTION>
   PROVED RESERVES AS OF DECEMBER 31, 1997     1997 AVERAGE DAILY PRODUCTION
  ------------------------------------------   ------------------------------
               NATURAL               SEC 10                NATURAL
     OIL         GAS                 VALUE       OIL         GAS
   (MBbls)     (MMcf)      MBOE      (000)      (Bbls)      (Mcf)      (BOE)
   -------    ---------   -------   --------   --------   ---------   -------
  <S>         <C>         <C>       <C>        <C>        <C>         <C>
   7,217        11,295     9,100     38,581      1,107      2,148      1,465
</TABLE>
 
     Reserve Replacement and Production. For three years, since inception of the
company, the Vista Partnership has been able to more than replace its annual
production volumes with proved reserves of crude oil and natural gas. During
1997, the Vista Partnership added 3,895 MBOE of reserves, resulting in reserve
replacement of 728% of annual production. The reserve replacement rate in 1996
was 919%. Of the 3,895 MBOE of reserves added in 1997, 1,675 MBOE was added
through drilling, remedial work and secondary recovery projects, 1,788 MBOE was
added through acquisitions of proved reserves, and 432 MBOE was added as a
result of revisions. Reserve revisions are a result of either changes in current
estimates of reserves or changes in estimates of reserves which are economical
to produce given the current pricing conditions. For January 1, 1998, the Vista
Partnership received an average oil price of $16.10 per Bbl and an average gas
price of $2.01 per Mcf. Should prices either rise or decline in future years,
reserves may be revised either upward or downward for quantities that may or may
not be economical to produce.
 
     The Vista Partnership's production for 1997 averaged 1,463 BOE per day.
Production increased during the year from 1,100 per day in January 1997 to 1,800
BOE per day average for December 1997, representing a 63% increase for the year.
Based on end of the year production rates, the Vista Partnership's proved
reserves to production ratio is 14 years on a BOE basis. This ratio was up from
11 years for year end 1996.
 
     Description of Properties. The Vista Partnership manages its oil and gas
properties based on geographic areas or producing provinces. The Vista
Partnership's two main areas of producing properties include the Permian Basin
and the onshore Gulf Coast area of South Texas. Approximately 90% of the Vista
Partnership's proved reserves are located in the Permian Basin and 10% are
located in the onshore Gulf Coast area of South Texas. The Vista Partnership has
no properties outside the United States and has no properties in offshore
waters.
 
                                       81
<PAGE>   85
 
  PERMIAN BASIN
 
     The Vista Partnership has a large percentage of its Permian Basin reserves
in several prolific fields, including Howard Glasscock, Sharon Ridge, Cowden
North and Keystone. Cumulative production from these four giant fields to
January 1, 1998 is over 1.3 billion barrels of oil plus 780 billion cubic feet
of natural gas. Each of these fields can be characterized by multiple reservoirs
with substantial primary and secondary reserves remaining to be recovered. The
Vista Partnership is attracted to these types of fields due to the huge reserve
base remaining and the long lived nature of the reserves, as well as the
economies of scale afforded by establishing core areas of operations.
 
     Howard -- Glasscock Field, Howard County, Texas
 
     This field is located 60 miles east of Midland, Texas and was discovered in
1925. The field has produced over 435 million barrels of oil from wells less
than 4,000 feet deep. The Vista Partnership owns a 100% working interest in
eight of the nine leases (1,155 net acres) it operates in this field. The field
contains Vista's greatest concentration of both proved producing reserves (895
MBOE net) and proved undeveloped reserves (2,615 MBOE net). Accordingly, the
Vista Partnership plans to continue to devote a substantial portion of its
capital budget and operating resources to the ongoing development of these low
risk reserves. Since acquiring these leases less than three years ago, the Vista
Partnership has increased gross production by over 300% and expanded or
initiated new secondary recovery projects in the Glorieta formation on the Chalk
"A," E.O. Chalk and H.R. Clay leases, in the San Andres formation on the G.O.
Chalk lease, and in the Middle Clearfork formation on the Douthit, Reed "D" and
G.O. Chalk leases. In addition to future production increases from secondary
recovery projects, the Vista Partnership expects continued growth in production
in this area from development drilling of the San Andres formation on the G.O.
Chalk, Chalk "A" and H.R. Clay leases. The Vista Partnership owns an interest in
58 producing wells in this field.
 
     Sharon Ridge Field, Scurry County, Texas
 
     This field is located 80 miles northeast of Midland and has produced over
100 million barrels of oil from depths as shallow as 1700 feet. The Vista
Partnership owns a 100% working interest in the two leases (227 net acres) it
operates in this field, the Hardee lease and the House lease. These two adjacent
properties are located in the middle of the Sharon Ridge (1700 foot) field and
are surrounded by successful waterfloods. Since acquiring these properties in
1996, the Vista Partnership has successfully drilled the remaining locations
(nine wells) and implemented a full scale waterflood on the two leases. As of
January 1998, through infill drilling and early secondary response, production
has increased over 300% and Vista expects a continued gradual increase in
production as the reservoir is repressured and oil is swept towards the
producing wells. The Vista Partnership operates 17 producing wells in this field
with net proved producing reserves of 424 MBOE.
 
     Cowden North Field, Andrews County, Texas
 
     Although the majority of this field is located in Ector County, the Vista
Partnership owns Cowden North leases located in Andrews County, approximately 30
miles northwest of Midland, Texas. The Vista Partnership's most significant
lease in this field is the Block 9 Unit. This 1,120-acre Grayburg and San Andres
unit has produced over 2.35 million barrels of oil from 29 wells since
production began in 1959. Since acquiring this property in 1996, the Vista
Partnership has drilled three new producing wells which have increased
production by over 50%. The unit has eight producing wells with net proved
producing reserves of 262 MBOE. Four proved undeveloped locations (246 MBOE net)
remain to be drilled as well as several probable locations. The Vista
Partnership owns a 100% working interest (1,120 net acres) in this property.
 
     Keystone Field, Winkler County, Texas
 
     Keystone field is located 50 miles west of Midland and produces from nine
different formations with depths ranging from 3,000 feet to 9,000 feet. Since
discovery in 1927, the various reservoirs of Keystone field have produced over
319 million barrels of oil and 691 billion cubic feet of natural gas. The Vista
Partnership owns a 100% working interest in each of the two leases it operates
in the field, the Waddell lease (2,232 net
 
                                       82
<PAGE>   86
 
acres, 35 producing wells) and the Keystone Cattle Company lease (640 net acres,
21 producing wells). The Waddell lease has net proved developed producing
reserves of 478 MBOE and net proved undeveloped reserves of 43 MBOE. As part of
the ongoing process of high grading the Vista Partnership's properties, the
Keystone Cattle Company lease has been identified as a likely candidate for
future divestment.
 
     Other Permian Basin Properties
 
     One field with significant unproved reserve potential is the Caprito field
in Ward County, Texas. The Vista Partnership owns a 100% working interest in six
operated leases (1,884 net acres, 12 producing wells) in the field as well as a
9.4% non operated working interest in an additional nine leases (180 net acres,
nine producing wells) operated by Titan Exploration Inc. In addition to the
proved developed producing reserves (179 MBOE net from operated and non
operated) and proved undeveloped reserves (281 MBOE net) from this field, the
HBP acreage is located in the War Wink trend which has produced several recent
significant lower Cherry Canyon discoveries. These lower Cherry Canyon sands are
approximately 300 feet below the existing Cherry Canyon producing interval in
the Caprito field.
 
     In Lea County, New Mexico, the Vista Partnership owns a 100% working
interest in two Queen sand waterflood units (collectively, 1,880 net acres, 34
producing wells) which produce from a depth of 3,400 feet. Proved producing
reserves for the two units are 190 MBOE net. Each of the two units have multiple
20-acre infill drilling locations that the Vista Partnership believes can be
developed during periods with favorable commodity prices.
 
  TEXAS GULF COAST
 
     Generally
 
     The Vista Partnership acquired several properties in the onshore Gulf Coast
area of South Texas in 1997 as part of the E.G. Acquisition. The Vista
Partnership plans to continue to add reserves in this gas rich province through
acquisitions and drilling. This area is the subject of very active 3-D seismic
acquisition and exploratory drilling by the industry. The Vista Partnership
intends to enhance the asset value of its existing acreage position in this area
by utilizing 3-D seismic when appropriate as well as expand its acreage
positions to pursue additional opportunities.
 
     North Rucias Field, Brooks County, Texas
 
     The Vista Partnership owns a 50% working interest in the Huerta lease (323
net acres, 1 well) and a 46% working interest in the Deluna lease (298 net
acres, 1 well) in this 70+ Bcf gas field which produces from the Vicksburg
formation at an approximate depth of 10,000 feet. Net proved developed producing
reserves from these two leases are 72 MBOE. The Vista Partnership is currently
purchasing existing 3-D seismic data and additional leasehold acreage in this
area to identify additional drilling opportunities, both on its own acreage and
on outside acreage, in this geologically complex reservoir. Drilling results in
this Vicksburg trend utilizing 3-D seismic have been very good with exploration
activity continuing on all sides of the Vista Partnership's acreage.
 
     Orange Hill, South Field, Austin County, Texas
 
     The Hillboldt lease (916 net acres) has one lower Wilcox well (net proved
developed producing reserves of 268 MBOE) in which the Vista Partnership owns a
91% working interest. The Vista Partnership has contributed some of its acreage
and entered into an Area of Mutual Interest agreement with another company for
the purpose of drilling additional lower Wilcox wells (net proved undeveloped
reserves of 385 MBOE) with the first well scheduled to begin in the summer of
1998. Recent Wilcox completions in this area are having success by adding more
productive sands and using larger stimulations than previous wells. In addition
to the Wilcox, the Vista Partnership plans to increase gas production by
exploiting a known shallow Frio sand with a second quarter 1998 well (net proved
undeveloped reserves of 43 MBOE) which will be a twin to the existing well.
 
                                       83
<PAGE>   87
 
     Finding Cost. The Vista Partnership's acquisition and finding cost for 1997
was $3.17 per BOE as compared to the 1996 and 1995 finding costs of $2.55 and
$2.90 per BOE, respectively. The average acquisition and finding cost for the
three-year period was $2.90 per BOE.
 
     Oil and Gas Mix. The Vista Partnership's reserves were 79% oil and 21% gas
at January 1, 1998 and its production mix was 76% oil and 24% gas during 1997.
Reserve and production mix may vary somewhat on a short-term basis as the Vista
Partnership takes advantage of market conditions and specific acquisition and
development opportunities. Management believes that a relative mix of
approximately 50% oil and 50% gas is in the best long-term interests of the
Vista Partnership and its equity owners. The Vista Partnership intends to
continue to look for opportunities to increase its gas reserves to achieve its
objective of a closer to 50-50 mix.
 
     Drilling Activities. The Vista Partnership seeks to increase its oil and
gas reserves, production and cash flow by concentrating on drilling low-risk
development wells and by conducting additional development activities such as
recompletions on existing wells. In 1997, the company spent approximately $4.7
million on drilling and exploitation. The Vista Partnership has increased its
drilling budget in each of the last three years and projects a drilling budget
of $5.8 million for developmental and exploratory drilling and other
exploitation activities in 1998. At December 31, 1997, the Vista Partnership had
over 40 drilling locations to which proved reserves had been assigned. The vast
majority of these locations are on leases operated by the Vista Partnership and
located in several large fields in the Permian Basin of West Texas and
Southeastern New Mexico.
 
     Production. The following table sets forth the number of gross and net
productive and dry wells in which the Vista Partnership had an interest that
were drilled and completed during the years ended December 31, 1997 and 1996 and
the period from inception (September 21, 1995) to December 31, 1995. This
information should not be considered indicative of future performance, nor
should it be assumed that there is necessarily any correlation between the
number of productive wells drilled and the oil and gas reserves generated
thereby or the costs to the Vista Partnership of productive wells compared to
the costs of dry wells.
 
<TABLE>
<CAPTION>
                                                    GROSS WELLS           NET WELLS
                                                 ------------------   ------------------
                                                 1997   1996   1995   1997   1996   1995
                                                 ----   ----   ----   ----   ----   ----
<S>                                              <C>    <C>    <C>    <C>    <C>    <C>
Productive Wells
  Development..................................   18     15      0    17.5   10.5     0
  Exploratory..................................    1      1      0     0.2    0.2     0
Dry Holes
  Development..................................    0      1      0     0.0    0.2     0
  Exploratory..................................    4      1      0     0.5    0.1     0
          Total................................   23     18      0    18.2     11     0
                                                 ---    ---     --    ----   ----    --
Success ratio(a)...............................   83%    89%    --      97%    97%   --
</TABLE>
 
---------------
 
(a)  Represents those wells that were successfully completed as productive
     wells.
 
     Exploratory Activities. The Vista Partnership is selective with its
exploration budget and prefers exploration opportunities that have multiple well
potential with no less than 1 MMBOE of reserve potential in plays or areas that
the company views as having the ability to provide a near-term impact on the
equity value of the Vista Partnership. Since the primary component of Vista's
business plan is to acquire and exploit producing properties, exploration
activities represent approximately 15% of the Vista Partnership's annual capital
budget; however, that is not to say that the Vista Partnership does not
recognize the importance of exploration, but rather uses exploration as a value
enhancing tool to its existing asset base. The Vista Partnership has
successfully utilized 3-D seismic to record at least one new field discovery in
each of the last two years and plans to continue to apply this technology in its
exploration efforts. The Vista Partnership's expansion into the onshore Gulf
Coast region of South Texas was a deliberate move into a producing province that
can produce a high success rate on exploration efforts and add significant gas
reserves. Exploratory drilling involves greater risks of dry holes and loss of
capital than development drilling or enhanced recovery activities.
 
                                       84
<PAGE>   88
 
     Marketing of Production and Significant Purchasers. Oil and gas production
from the Vista Partnership's properties is marketed consistent with usual and
customary industry practices which include the sale of oil at the wellhead to
third parties and the sale of gas at the wellhead to third parties. Sales prices
for both oil and gas production are negotiated based on factors normally
considered in the industry, such as the spot price for gas or the posted price
for oil, distance from the well to the pipeline, well pressure, estimated
reserves, quality of the gas or oil and prevailing supply conditions.
 
     During 1997, the Vista Partnership marketed its natural gas and natural gas
products to a number of third party purchasers, none of which accounted for 10%
or more of the Vista Partnership's revenues. Oil sales are likewise made to a
number of third party purchasers. The primary purchasers of the company's crude
oil are Genesis Crude Oil, L.P. ("Genesis"), Fina Oil and Chemical Company
("Fina") and Sun Company, Inc. ("Sun"). Approximately 20%, 19% and 18% of the
Vista Partnership's 1997 oil sales volumes were made to Genesis, Fina and Sun,
respectively. The Vista Partnership is of the opinion that the loss of any one
purchaser would not have an adverse effect on its ability to sell its oil and
gas production.
 
     Hedging Activities. The Vista Partnership periodically enters into
commodity derivative contracts (i.e., swaps and collars) in order to (i) reduce
the effect of the volatility of price changes on the commodities the Vista
Partnership produces and sells, (ii) support the Vista Partnership's annual
capital budgeting and expenditure plans, and (iii) lock in prices to protect the
economics related to certain capital projects. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations of the Vista
Partnership -- Results of Operations for the Three Months Ended March 31, 1998
and 1997 -- Hedging Activities."
 
     Production, Price and Cost Data. The table below sets forth production,
price and cost data with respect to the Vista Partnership's properties for the
years ended December 31, 1997 and 1996 and the period from inception (September
21, 1995) to December 31, 1995. These amounts are calculated without making pro
forma adjustments for any acquisitions, divestitures or drilling activity that
occurred during the respective years.
 
<TABLE>
<CAPTION>
                                                      1997         1996         1995
                                                   ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
Revenues.........................................  $8,874,961   $5,537,720   $1,348,647
Costs and expenses:
  Lease operating................................   3,688,695    2,544,567      728,540
  Depletion......................................   2,169,098    1,272,316      308,132
  Exploration costs..............................      97,211      273,843           --
                                                   ----------   ----------   ----------
                                                    5,955,004    4,090,726    1,036,672
                                                   ----------   ----------   ----------
  Operating profit (excluding general and
     administrative expenses and income taxes)...  $2,919,957   $1,446,994   $  311,975
                                                   ==========   ==========   ==========
Production:
  Oil (MBbls)....................................     403,812      253,321       68,211
  Gas (MMcf).....................................     784,298      458,278      156,515
          Total (MBOE)...........................     534,528      329,701       94,297
Average Daily Production:
  Oil (Bbls).....................................       1,107          693          444
  Gas (Mcf)......................................       2,148        1,255        1,020
                                                   ----------   ----------   ----------
          Total (MBOE)...........................       1,465          902          614
Average Oil Price (Per Bbl)......................  $    17.63   $    18.04   $    15.70
Average Gas Price (Per Mcf)......................  $     2.22   $     2.19   $     1.75
Costs (Per BOE):
  Lease operating expense........................  $     6.90   $     7.72   $     7.73
  Depletion......................................  $     4.06   $     3.86   $     3.27
</TABLE>
 
                                       85
<PAGE>   89
 
     Productive Wells. The following table sets forth the number of productive
oil and gas wells attributable to the Vista Partnership's properties as of
December 31, 1997, 1996 and 1995.
 
<TABLE>
<CAPTION>
                                         GROSS PRODUCTIVE WELLS      NET PRODUCTIVE WELLS
                                         ----------------------     ----------------------
                                         OIL     GAS     TOTAL       OIL     GAS     TOTAL
                                         ----    ----    ------     -----    ----    -----
<S>                                      <C>     <C>     <C>        <C>      <C>     <C>
1997...................................  280      35      315       231.8    14.2    246.0
1996...................................  278      30      308       215.6    11.9    227.5
1995...................................  223      26      249       133.2    13.2    146.4
</TABLE>
 
---------------
 
(a)  Producing wells consist of producing wells and wells capable of production,
     including shut-in wells. One or more completions in the same well bore are
     counted as one well.
 
     Leasehold Acreage. The following table sets forth information concerning
the Vista Partnership's developed and undeveloped leasehold acreage as of
December 31, 1997.
 
<TABLE>
<CAPTION>
   DEVELOPED ACREAGE        UNDEVELOPED ACREAGE
-----------------------   -----------------------
GROSS ACRES   NET ACRES   GROSS ACRES   NET ACRES
-----------   ---------   -----------   ---------
<S>           <C>         <C>           <C>
  22,377       11,922       16,421       10,181
</TABLE>
 
  Material Agreements
 
     Contract Operating Agreement. Effective as of June 1, 1998, Midland's
wholly owned, operating subsidiary, MRO, and the Vista Operator, entered into a
Contract Operating Agreement (herein so called) which provides, among other
things, that the Operator will provide various contract operating services for
and on behalf of Midland's oil and gas properties through October 31, 1998 and
on a month-to-month basis thereafter unless otherwise terminated by either party
upon 30 days' prior written notice. For a more detailed description of such
agreement, see "The Merger -- Other Agreements" and "Certain Transactions."
 
     Financial Advisory Agreement. Contemporaneously with the closing of the
Merger, Vista will enter into an Advisory Services Agreement with NGP. Pursuant
to the Advisory Services Agreement, Vista will pay NGP $75,000 per year and
reimburse NGP for certain expenses in consideration for certain consulting and
financial analysis services to be provided by NGP and its representatives.
 
  Competition and Markets
 
     Competition. The oil and gas industry is highly competitive. A large number
of companies and individuals engage in the exploration for and development of
oil and gas properties, and there is a high degree of competition for oil and
gas properties suitable for development or exploration. Acquisitions of oil and
gas properties have been an important element of the Vista Partnership's growth,
and Vista intends to continue to acquire oil and gas properties. The principal
competitive factors in the acquisition of oil and gas properties include the
staff and data necessary to identify, investigate and purchase such properties
and the financial resources necessary to acquire and develop them. Many of the
Vista Partnership's competitors are substantially larger and have greater
financial and other resources than the Vista Partnership.
 
     Markets. The Vista Partnership's ability to produce and market oil and gas
profitably depends on numerous factors beyond the Vista Partnership's control.
The effect of these factors cannot be accurately predicted or anticipated. In
recent years, worldwide oil production capacity and gas production capacity in
certain areas of the United States have exceeded demand, with resulting declines
in the price of oil and gas. Although the Vista Partnership cannot predict the
occurrence of events that may affect oil and gas prices or the degree to which
oil and gas prices will be affected, it is possible that prices for any oil or
gas that the Vista Partnership produces will be lower than those currently
available. Any significant decline in the price of oil or gas would adversely
affect the Vista Partnership's revenues, profitability and cash flow and could,
under certain circumstances, result in a reduction in the carrying value of the
Vista Partnership's oil and gas properties.
 
                                       86
<PAGE>   90
 
  Governmental Regulation
 
     The Vista Partnership's oil and gas exploration, production and marketing
activities are subject to extensive laws, rules and regulations promulgated by
federal and state legislatures and agencies. Failure to comply with such laws,
rules and regulations can result in substantial penalties. The legislative and
regulatory burden on the oil and gas industry increases the Vista Partnership's
cost of doing business and affects its profitability. Although the Vista
Partnership believes it is in substantial compliance with all applicable laws
and regulations, because those laws and regulations are frequently amended,
interpreted and reinterpreted, the Vista Partnership is unable to predict the
future cost or impact of complying with such laws and regulations.
 
     The State of Texas and many other states require permits for drilling
operations, drilling bonds and reports concerning operations and impose other
requirements relating to the exploration and production of oil and gas. These
states also have statutes or regulations addressing conservation matters,
including provisions for the unitization or pooling of oil and gas properties,
the establishment of maximum rates of production from wells and the regulation
of spacing, plugging and abandonment of such wells.
 
     The FERC regulates interstate gas transportation rates and service
conditions, which affect the marketing of gas produced by the Vista Partnership,
as well as the revenues received by the Vista Partnership for sales of such
production. Since the mid-1980s, FERC has issued a series of orders, Order 636,
that have significantly altered the marketing and transportation of gas. Order
636 mandates a fundamental restructuring of interstate pipeline sales and
transportation service, including the unbundling by interstate pipelines of the
sale, transportation, storage and other components of the city-gate sales
services such pipelines previously performed and the provision of open-access
transportation on a nondiscriminatory basis. One of FERC's purposes in issuing
the order was to increase competition within all phases of the gas industry.
Numerous parties have filed petitions for review of Order 636, as well as orders
in individual pipeline restructuring proceedings. In July 1996, Order 636 was
generally upheld on appeal, and the portions remanded for further action do not
appear to materially affect the Vista Partnership. Because Order 636 may be
modified as a result of the appeals, it is difficult to predict the ultimate
impact of the orders on the Vista Partnership and its gas marketing efforts.
Generally, Order 636 has eliminated or substantially reduced the interstate
pipelines' traditional role as wholesalers of gas and has substantially
increased competition and volatility in gas markets.
 
     The FERC frequently reexamines its transportation-related policies,
including the terms and conditions under which interstate pipeline shippers may
release interstate pipeline capacity for resale in the secondary market, the
appropriateness of the use of negotiated and market-based rates, and the
implementation of additional standardized terms and conditions for interstate
gas transmission. In April 1998, the FERC issued a new rule to further
standardize pipeline transportation tariffs that could adversely affect the
reliability of scheduled interruptible transportation service on some pipelines.
While any resulting FERC action would affect the Vista Partnership only
indirectly, any new rules and policy statements may have the effect of enhancing
competition in gas markets or affecting the cost or availability of pipeline
transportation.
 
     The price the Vista Partnership receives from the sale of oil and gas is
affected by the cost of transporting products to markets. Effective January 1,
1995, FERC implemented regulations establishing an indexing system for
transportation rates for oil pipelines, which, generally, would index such rates
to inflation, subject to certain conditions and limitations. The Vista
Partnership is not able to predict with certainty the effect, if any, of these
regulations on its operations. However, the regulations may increase
transportation costs or reduce well head prices for oil and gas. See "Risk
Factors -- Governmental Regulation and Environmental Matters."
 
  Environmental Matters
 
     The Vista Partnership's operations and properties are, like the oil and gas
industry in general, subject to extensive and changing federal, state and local
laws and regulations relating to environmental protection, including the
generation, storage, handling, emission, transportation and discharge of
materials into the environment, and relating to safety and health. The recent
trend in environmental legislation and regulation generally is toward stricter
standards, and this trend will likely continue. These laws and regulations may
require the acquisition of a permit or other authorization before construction
or drilling commences and for certain other activities; limit or prohibit
construction, drilling and other activities on certain lands lying within
                                       87
<PAGE>   91
 
wilderness and other protected areas; and impose substantial liabilities for
pollution resulting from the Vista Partnership's operations. The permits
required for various of the Vista Partnership's operations are subject to
revocation, modification and renewal by issuing authorities. Governmental
authorities have the power to enforce compliance with their regulations, and
violations are subject to fines or injunction, or both. In the opinion of
management, the Vista Partnership is in substantial compliance with current
applicable environmental laws and regulations, and the Vista Partnership has no
material commitments for capital expenditures to comply with existing
environmental requirements. Nevertheless, changes in existing environmental laws
and regulations or in interpretations thereof could have a significant impact on
the Vista Partnership, as well as the oil and gas industry in general.
 
     CERCLA and comparable state statutes impose strict and arguably joint and
several liability on owners and operators of certain sites and on persons who
dispose of or arranged for the disposal of "hazardous substances" found at such
sites. Under CERCLA, such persons may be subject to liability for the costs of
cleaning up the hazardous substances, for damages to natural resources and for
the costs of certain health studies. Furthermore, it is not uncommon for the
neighboring land owners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances related
into the environment. RCRA and comparable state statutes govern the disposal of
"solid waste" and "hazardous waste" and authorize imposition of substantial
fines and penalties for noncompliance. Although CERCLA currently excludes
petroleum from its definition of "hazardous substance," state laws affecting the
Vista Partnership's operations impose clean-up liability relating to petroleum
and petroleum related products. In addition, although RCRA classifies certain
oil field wastes as "non-hazardous," such exploration and production wastes
could be reclassified as hazardous wastes thereby making such wastes subject to
more stringent handling, disposal and cleanup requirements.
 
     Federal regulations require certain owners or operators of facilities that
store or otherwise handle oil, such as the Vista Partnership, to prepare and
implement spill prevention, control countermeasure and response plans relating
to the possible discharge of oil into surface waters. OPA contains numerous
requirements relating to the prevention of and response to oil spills into
waters of the United States. For onshore and offshore facilities that may affect
waters of the United States, the OPA requires an operator to demonstrate
financial responsibility. Regulations are currently being developed under
federal and state laws concerning oil pollution prevention and other matters
that may impose additional regulatory burdens on the Vista Partnership. In
addition, the Clean Water Act and analogous state laws require permits to be
obtained to authorize discharge into surface waters or to construct facilities
in wetland areas. With respect to certain of its operations, the Vista
Partnership is required to maintain such permits or meet general permit
requirements. The EPA recently adopted regulations concerning discharges of
storm water runoff. This program requires covered facilities to obtain
individual permits, participate in a group or seek coverage under an EPA general
permit. The Vista Partnership believes that it will be able to obtain, or be
included under, such permits, where necessary, and to make minor modifications
to existing facilities and operations that would not have a material effect on
the Vista Partnership.
 
     The Vista Partnership has acquired leasehold interests in numerous
properties that for many years have produced oil and gas. Although the previous
owners of these interests have used operating and disposal practices that were
standard in the industry at the time, hydrocarbons or other wastes may have been
disposed of or released on or under the properties. In addition, some of the
Vista Partnership's properties are operated by third parties over whom the Vista
Partnership has no control. Notwithstanding the Vista Partnership's lack of
control over properties operated by others, the failure of the operator to
comply with applicable environmental regulations may, in certain circumstances,
adversely impact the Vista Partnership. See "Risk Factors -- Governmental
Regulation and Environmental Matters."
 
  Employees
 
     On June 15, 1998, the Vista Partnership had 23 full-time employees. None is
represented by any labor union. The Vista Partnership believes that its
relations with its employees are good.
 
                                       88
<PAGE>   92
 
  Litigation
 
     The Vista Partnership is not a party to any material legal proceedings.
 
MANAGEMENT OF THE VISTA PARTNERSHIP
 
  Directors and Executive Officers
 
     The Vista Partnership is managed by the board of directors of the General
Partner. Set forth below is certain information concerning the current directors
and executive officers of the General Partner.
 
<TABLE>
<CAPTION>
       NAME           AGE                           POSITION
       ----           ---                           --------
<S>                   <C>    <C>
C. Randall Hill...    39     Chairman of the Board and Chief Executive Officer
Steven D. Gray....    38     President and Director
Kenneth A.            35     Director
  Hersh...........
David R. Albin....    39     Director
John S. Foster....    40     Director
</TABLE>
 
     Set forth below is a description of the backgrounds of the current
directors and executive officers of the General Partner.
 
     C. Randall Hill, a graduate of the University of New Mexico with a B.B.A.
and the University of Tulsa with a J.D., has served as Chairman of the Board and
Chief Executive Officer of the General Partner of the Vista Partnership and its
predecessor, Lobo Resources, Inc., since its inception in December 1992. From
1985 through November 1992, Mr. Hill practiced law with the law firms of Weil,
Gotshal & Manges and Johnson & Swanson in Dallas, Texas. Mr. Hill is a director
of Arch Petroleum, Inc.
 
     Steven D. Gray, a graduate of Texas Tech University with a B.S. degree in
Petroleum Engineering, has served as President and a director of the General
Partner of the Vista Partnership and its predecessor, Lobo Resources, Inc.,
since its inception in December 1992. From 1982 to 1989, Mr. Gray held several
petroleum engineering positions with Texas Oil and Gas Corp. From 1989 to 1992,
Mr. Gray was a petroleum operations and reservoir engineer with Bettis, Boyle
and Stovall, a privately held, independent oil and gas company in Graham, Texas.
 
     Kenneth A. Hersh, a graduate of Princeton University with a B.A. and
Stanford University Graduate School of Business with an M.B.A., has served as a
director of the General Partner since its inception in 1995. Since 1989, Mr.
Hersh has been a manager of the NGP investment funds, which were organized to
make direct equity investments in the oil and gas industry. From 1985 to 1987,
Mr. Hersh was employed as a member of the energy group of Morgan Stanley & Co.
investment banking division. Mr. Hersh serves as a director of Pioneer Natural
Resources Company, HS Resources, Inc., Titan Exploration, Inc. and Petroglyph
Energy, Inc.
 
     David R. Albin, a graduate of Stanford University with a B.S. in Physics
and Stanford University Graduate School of Business with an M.B.A., has served
as a director of the General Partner since its inception in 1995. Since 1988,
Mr. Albin has been a manager of the NGP investment funds, which were organized
to make direct equity investments in the oil and gas industry. From December
1984 until November 1988, Mr. Albin was employed by Bass Investment Limited
Partnership, where he was also responsible for portfolio management. Mr. Albin
serves as a director of Titan Exploration, Inc. and Petroglyph Energy, Inc.
 
     John S. Foster, a graduate of Williams College with a B.A. and New York
University's Stern School of Business with an M.B.A., has served as a director
of the General Partner since its inception in 1995. Since April 1989, Mr. Foster
has been the chief financial officer of the NGP investment funds, which were
organized to make direct equity investments in the oil and gas industry. From
August 1986 to March 1989, Mr. Foster was employed in the corporate bond
research department of Credit Suisse First Boston Corporation, where he focused
on the oil and gas industry.
 
                                       89
<PAGE>   93
 
  Committees of the Board
 
     No official committees of the board of directors of the General Partner
have been established.
 
  Director Compensation
 
     Pursuant to Article 3, Section 11 of the bylaws of the General Partner,
each non-employee director of the General Partner receives an annual directors
fee of $10,000, paid quarterly in arrears, and is also entitled to be reimbursed
by the General Partner for all reasonable out-of-pocket expenses incurred in
connection with his services as a director of the General Partner.
 
  Executive Compensation
 
<TABLE>
<CAPTION>
                                                                         VISTA PARTNERSHIP
                                                                          CONTRIBUTION TO
                                                                       EMPLOYMENT RETIREMENT
     NAME AND PRINCIPAL POSITION       YEAR   SALARY ($)   BONUS ($)         ACCOUNTS
     ---------------------------       ----   ----------   ---------   ---------------------
<S>                                    <C>    <C>          <C>         <C>
C. Randall Hill......................  1997    $110,000     $25,000           $2,200
                                       1996    $105,000     $15,000               --
                                       1995    $ 17,500          --               --
Steven D. Gray.......................  1997    $110,000     $25,000           $2,200
                                       1996    $105,000     $15,000               --
                                       1995    $ 17,500          --               --
</TABLE>
 
                                       90
<PAGE>   94
 
                        CERTAIN TERMS OF THE AGREEMENTS
 
     THE FOLLOWING DESCRIPTION DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT, THE VISTA EXCHANGE
AGREEMENT AND THE MIDLAND EXCHANGE AGREEMENT, COPIES OF WHICH ARE ATTACHED AS
APPENDICES A, B AND C, RESPECTIVELY, TO THIS PROXY STATEMENT/PROSPECTUS AND ARE
INCORPORATED BY REFERENCE HEREIN.
 
THE MERGER
 
     The Merger Agreement provides that, subject to the approval of the Merger
by the stockholders of Midland and the satisfaction or waiver of the other
conditions to the Merger, Merger Sub will be merged with and into Midland in
accordance with Texas law, whereupon the separate existence of Merger Sub will
cease and Midland will be the Surviving Subsidiary of the Merger. At the
Effective Time, the conversion of Midland Common Stock will be effected as
described below. The Articles of Incorporation of Midland, as in effect
immediately prior to the Effective Time, shall be the Articles of Incorporation
of the Surviving Subsidiary. The Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Subsidiary.
 
     As a result of the Merger, (a) each issued and outstanding share of Midland
Common Stock will be converted into the right to receive one share of Vista
Common Stock, (b) each Midland Stock Option (other than the Midland Exchange
Stock Options) and each outstanding Midland Warrant shall remain outstanding
following the Effective Time, at which time such options and warrants will be
assumed by Vista and will be exercisable for shares of Vista Common Stock and
(c) each Midland Common Stock Warrant shall remain outstanding following the
Effective Time, at which time such warrants will be assumed by Vista and will be
exercisable for shares of Vista Common Stock.
 
EFFECTIVE TIME
 
     Following the adoption of the Merger Agreement and subject to satisfaction
or waiver of certain terms and conditions, including conditions to closing,
contained in the Merger Agreement, the Merger will become effective immediately
upon the filing of the Articles of Merger with the Texas Secretary of State, or
at such later time specified in the Articles of Merger.
 
THE VISTA EXCHANGE AND THE MIDLAND EXCHANGE
 
     The Vista Exchange. During May and June of 1998, and as contemplated by the
Merger Agreement, the holders of all of the outstanding GP Common Stock and the
holders of all of the outstanding Partnership Interests entered into the Vista
Exchange Agreement. Pursuant to the terms of such agreement, at the Effective
Time, without any action on the part of any holder thereof, (a) each share of GP
Common Stock that is issued and outstanding prior to the Effective Time shall be
exchanged for (i) a number of shares of Vista Common Stock equal to the Vista GP
Conversion Stock Number (being 1.60089817) and (ii) a Vista Warrant that is
exercisable for a number of shares of Vista Common Stock equal to the Vista GP
Conversion Warrant Number (being 1.16511028) and (b) each Partnership Interest
that is issued and outstanding prior to the Effective Time shall be exchanged
for (i) a number of shares of Vista Common Stock equal to the Vista LP
Conversion Stock Number (being 117,674.06) and (ii) a Vista Warrant that is
exercisable for a number of shares of Vista Common Stock equal to the Vista LP
Conversion Warrant Number (being 85,641.46). As provided in the Vista Exchange
Agreement, any fractional Partnership Interest shall be likewise exchanged on a
pro rata basis.
 
     Pursuant to the terms of the Vista Exchange Agreement, the holders of GP
Common Stock and Partnership Interests will receive 11,778,479 shares of Vista
Common Stock, representing 72.5% of such shares outstanding at the Effective
Time, and warrants exercisable for 8,564,146 shares of Vista Common Stock,
representing 34.5% of such shares outstanding at the Effective Time (assuming
for purposes of this calculation exercise of all such warrants as of such time).
 
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<PAGE>   95
 
     The Midland Exchange. During May and June of 1998, and as contemplated by
the Merger Agreement, Sam R. Brock, a director of Midland, Darrell M. Dillard, a
director of Midland, Robert R. Donnelly, president and a director of Midland,
Wayne M. Whitaker, a director of Midland, John Q. Adams, an advisory director of
Midland and Marilyn D. Wade, corporate secretary of Midland, who hold all issued
and outstanding Midland Exchange Stock Options granted pursuant to the Midland
Directors Plan, and 137,931 options granted pursuant to the Midland Incentive
Plan, entered into the Midland Exchange Agreement. Pursuant to the terms of such
agreement, at the Effective Time, without any action on the part of any holder
thereof, each Midland Exchange Stock Option will be exchanged for a Vista
Warrant that is exercisable for that whole number of shares of Vista Common
Stock (to the nearest whole share) equal to the product of (x) .725 times (y)
the number of shares of Vista Common Stock into which the shares of Midland
Common Stock subject to such Midland Exchange Stock Option would be converted
pursuant to the Merger. Pursuant to the Midland Exchange Agreement, no payment
shall be made for fractional interests. Pursuant to the terms of the Midland
Exchange Agreement, each Midland Exchange Stock Option subject thereto shall be
terminated immediately following its exchange for a Vista Warrant.
 
     Pursuant to the terms of the Midland Exchange Agreement, the holders of
Midland Exchange Stock Options will receive warrants exercisable for 995,375
shares of Vista Common Stock, representing 5.8% of such shares outstanding at
the Effective Time (assuming for purposes of this calculation exercise of all
such warrants as of such time).
 
CONDITIONS TO THE MERGER
 
  Conditions to Obligation of Each Party to Effect the Merger
 
     The respective obligation of the Vista Partnership, Vista and Midland to
effect the Merger is subject to the satisfaction prior to consummation of the
Merger of the following conditions:
 
     Midland Stockholder Approval. The Merger and the Merger Agreement shall
have been approved and adopted by the holders of at least two-thirds of the
outstanding shares of Midland Common Stock. Directors and executive officers of
Midland, and their affiliates, hold 21.7% of the outstanding shares of Midland
Common Stock entitled to vote on the Merger Agreement and the Merger.
 
     Fairness Opinion. The fairness opinion delivered by Dain Rauscher shall
have been confirmed in writing and shall not have been withdrawn, revoked or
modified.
 
     Tax Opinion. The tax opinion from Arthur Andersen LLP to Midland regarding
the federal income tax consequences of the Merger shall not have been withdrawn,
revoked or modified
 
     Stock Exchange Listing. The shares of Vista Common Stock issuable pursuant
to the Merger and the Vista Exchange and the shares of Vista Common Stock to be
issued upon exercise of stock options or warrants shall have been authorized for
listing on the ASE, subject to official notice of issuance.
 
     Other Approvals. All governmental consents, approvals, permits and
authorizations required to have been obtained prior to the Effective Time shall
have been made or obtained.
 
     Securities Law Matters. The Registration Statement shall have become
effective under the Securities Act and shall be effective at the Effective Time,
and no stop order suspending such effectiveness shall have been issued, no
action, suit, proceeding or investigation by the Commission to suspend such
effectiveness shall have been initiated and be continuing, and all necessary
approvals under state securities laws relating to the issuance or trading of the
Vista Common Stock to be issued in the Merger and the Vista Exchange shall have
been received.
 
     No Injunctions or Restraints. No temporary restraining order, preliminary
or permanent injunction, or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Merger and the Vista Exchange shall be in effect.
 
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<PAGE>   96
 
  Additional Conditions to Obligations of the Vista Partnership and Vista
 
     The obligations of the Vista Partnership and Vista to effect the Merger are
subject to the satisfaction of the following conditions, any or all of which may
be waived in whole or in part by the Vista Partnership:
 
     Representations and Warranties. Each of the representations and warranties
of Midland set forth in the Merger Agreement shall be true and correct in all
material respects (provided that any representation or warranty of Midland
contained therein that is qualified by a materiality standard or a material
adverse effect qualification shall not be further qualified thereby) as of the
date of the Merger Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the Closing Date, and the Vista Partnership shall have received a
certificate signed on behalf of Midland by the chief executive officer and the
chief financial officer to such effect.
 
     Performance of Covenants and Agreements. Midland shall have performed in
all material respects all covenants and agreements required to be performed by
it under the Merger Agreement at or prior to the Closing Date, and the Vista
Partnership shall have received a certificate signed on behalf of Midland by the
chief executive officer and the chief financial officer of Midland to such
effect.
 
     Accounting Comfort Letter. The Vista Partnership shall have received a
letter from Grant Thornton LLP, Midland's independent auditors, of the kind
contemplated by the Statement of Auditing Standards with respect to Letters to
Underwriters promulgated by the American Institute of Certified Public
Accountants, dated as of a date within two business days prior to the Closing
Date, in form and substance reasonably satisfactory to the Vista Partnership, in
connection with the procedures undertaken by them with respect to the financial
statements of Midland and its consolidated subsidiaries included (or
incorporated by reference) in the Registration Statement and the other matters
contemplated by such Statement of Auditing Standards and customarily included in
similar letters relating to transactions similar to the Merger.
 
     Midland Option Exercise Agreements. Midland shall have received an Option
Exercise Agreement executed by each of the holders of issued and outstanding
Midland Stock Options who is an executive officer or director of Midland.
 
  Additional Conditions to Obligation of Midland
 
     The obligation of Midland to effect the Merger is subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by Midland:
 
     Representations and Warranties. Each of the representations and warranties
of the Vista Partnership, Vista and Merger Sub set forth in the Merger Agreement
shall be true and correct in all material respects (provided that any
representation or warranty of the Vista Partnership, Vista or Merger Sub
contained therein that is qualified by a materiality standard or a material
adverse effect qualification shall not be further qualified thereby) as of the
date of the Merger Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though made on
and as of the closing Date, and Midland shall have received a certificate signed
on behalf of the Vista Partnership by the General Partner to such effect.
 
     Performance of Covenants and Agreements. The Vista Partnership, Vista and
Merger Sub shall have performed in all material respects all covenants and
agreements required to be performed by them under the Merger Agreement at or
prior to the Closing Date, and Midland shall have received a certificate signed
on behalf of the Vista Partnership by the General Partner to such effect.
 
     Accounting Comfort Letter. Midland shall have received a letter from Arthur
Andersen LLP, the Vista Partnership's independent certified public accountants,
of the kind contemplated by the Statement of Auditing Standards with respect to
Letters to Underwriters promulgated by the American Institute of Certified
Public Accountants, dated as of a date within two business days prior to the
Closing Date, in form and substance reasonably satisfactory to Midland, in
connection with the procedures undertaken by them with respect to the financial
statements of the Vista Partnership and its consolidated subsidiaries included
in the Registration
 
                                       93
<PAGE>   97
 
Statement and the other matters contemplated by such Statement of Auditing
Standards and customarily included in similar letters relating to transactions
similar to the Merger.
 
REPRESENTATIONS AND WARRANTIES
 
     The Merger Agreement contains various representations and warranties by
each of the Vista Partnership and Midland relating to, among other things, (i)
each of their and certain of their respective subsidiaries' organization and
similar corporate matters, (ii) each of their capital structures and the capital
structures of Vista and Merger Sub, (iii) the authorization, execution,
delivery, performance and enforceability of the Merger Agreement and related
matters with respect to the Vista Partnership, Vista, Merger Sub and Midland,
and the absence of conflicts, violations of or defaults under the charters, as
amended, or bylaws, as amended of each of the Vista Partnership and Midland, or
any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
the Vista Partnership or Midland or any of their respective subsidiaries, or any
joint venture or other ownership arrangement of the Vista Partnership or
Midland, (iv) the documents and reports filed by Midland with the Commission and
the accuracy of the information contained therein, (v) the accuracy of the
information provided by each of them with respect to the Registration Statement
and this Proxy Statement/Prospectus, (vi) the absence of certain events,
changes, or effects, (vii) the absence of undisclosed material liabilities,
(viii) compliance with certain laws, (ix) litigation, (x) taxes, (xi) retirement
and other employee plans and matters relating to the Employee Retirement Income
Security Act of 1974, as amended, (xii) labor matters, (xiii) intellectual
property matters, (xiv) environmental matters, (xv) the maintenance of
insurance, (xvi) title to their respective properties, (xvii) their respective
reserve reports, (xviii) their respective oil and gas operations, (xix) their
respective sales and purchases agreements, (xx) Midland's fairness opinion from
Dain Rauscher, (xxi) the stockholder vote by Midland stockholders required to
approve the Merger Agreement, and (xxii) broker's or similar fees.
 
CERTAIN COVENANTS; CONDUCT OF BUSINESS OF THE VISTA PARTNERSHIP AND MIDLAND
 
     During the period from the date of the Merger Agreement and continuing
until the Effective Time, (i) the Vista Partnership agrees as to itself and
Vista (except as expressly contemplated or permitted by the Merger Agreement, or
to the extent that Midland shall otherwise consent in writing) and (ii) Midland
agrees as to itself and its subsidiaries (except as expressly contemplated or
permitted by the Merger Agreement, or to the extent that Vista shall otherwise
consent in writing) (for purposes of this section, Vista and Midland each being
a "Party") as follows:
 
     Ordinary Course. Each Party and its subsidiaries shall carry on its
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and shall use all commercially reasonable efforts
to preserve intact its present business organizations, keep available the
services of its current officers and employees and endeavor to preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be impaired in
any material respect at the Effective Time.
 
     Dividends, Changes in Stock. Except as contemplated by the Merger
Agreement, neither Party shall, nor shall either Party permit its subsidiaries
to, (i) split, combine or reclassify any of its outstanding capital stock,
partnership interests or other securities, (ii) declare, set aside or pay any
dividends or other distributions (whether payable in cash, property or
securities) with respect to its capital stock, or (iii) purchase, cancel,
retire, redeem or otherwise acquire any of its outstanding equity securities or
other securities.
 
     Issuance of Securities. Neither Party shall, nor shall either Party permit
its subsidiaries to, issue, sell or agree to issue or sell any securities,
including its capital stock or other equity securities, any rights, options or
warrants to acquire its equity securities, or securities convertible into or
exchangeable or exercisable for its equity securities (other than shares of
Midland Common Stock issued pursuant to the exercise of any outstanding Midland
stock options or warrants).
 
     Governing Documents. No Party shall amend its certificate or articles of
incorporation or bylaws or other organizational documents.
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<PAGE>   98
 
     No Acquisitions. Neither Party shall, nor shall either Party permit its
subsidiaries to, acquire any corporation, partnership or other business entity
or any interest therein (other than interests in joint ventures, joint operation
or ownership arrangements or tax partnerships acquired in the ordinary course of
business).
 
     No Dispositions. Neither Party shall, nor shall either Party permit its
subsidiaries to, (i) sell, lease, sublease, transfer, or otherwise dispose of or
mortgage, pledge or otherwise encumber any oil and gas interests that,
individually or in the aggregate, have a value at the time of such sale, lease,
sublease, transfer of disposition of $50,000 or more or any other assets that,
individually or in the aggregate, have a value at the time of such sale, lease,
sublease, transfer or disposition of $50,000 or more (other than the sale of
hydrocarbons in the ordinary course of business), (ii) farm-out any oil and gas
interest of the Vista Partnership or Midland, as applicable, or interest
therein, (iii) sell, transfer or otherwise dispose of or mortgage, pledge or
otherwise encumber any securities of any other person or (iv) make any material
loans, advances or capital contributions to, or investments in, any person
(other than loans or advances in the ordinary course of business and consistent
with past practices).
 
     No Dissolution, Etc. Neither Party shall, nor shall either Party permit its
subsidiaries to, liquidate, wind-up or dissolve (or suffer any liquidation or
dissolution).
 
     Indebtedness. Neither Party shall, nor shall either Party permit its
subsidiaries to, (i) incur any indebtedness for borrowed money or any other
obligation or liability (other than current liabilities incurred in the ordinary
course of business and consistent with past practices) in excess of its then
current borrowing capacity under its existing senior bank facilities, (ii)
assume, endorse (other than endorsements of negotiable instruments in the
ordinary course of business), guarantee or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the liabilities or
obligations of any person or (iii) enter into any contract, agreement,
commitment or arrangement with respect to any of the foregoing.
 
     Certain Employee Matters. Neither Party shall, nor shall either Party
permit its subsidiaries to, (i) enter into, or otherwise become liable or
obligated under or pursuant to (x) any employee benefit, pension or other plan,
(y) any other stock option, stock purchase, incentive or deferred compensation
plans or arrangements or other fringe benefit plan or (z) any consulting,
employment, severance, termination or similar agreement with any person, or
amend or extend any such plan, arrangement or agreement, (ii) hire any key
employee, except for payments made pursuant to terms disclosed in the Merger
Agreement, grant, or otherwise become liable for or obligated to pay, any
severance or termination payments, bonuses or increases in compensation or
benefits (other than payments, bonuses or increases that are mandated by the
terms of written agreements existing as of the date hereof or that are paid in
the ordinary course of business, consistent with past practices, and not
individually or in the aggregate material in amount) to, or forgive any
indebtedness of, any employee or consultant or (iii) enter into any contract,
agreement, commitment or arrangement to do any of the foregoing.
 
     Insurance. Each Party shall, and shall cause its subsidiaries to, maintain
in full force and effect the policies or binders of insurance described in the
Merger Agreement.
 
     Affiliate Transactions. Neither Party shall, nor shall either Party permit
its subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of any assets,
unless otherwise permitted by the Merger Agreement, or the rendering of any
service) with any affiliate of such Party (other than any of its Subsidiaries)
on terms that are less favorable to such Party or any of its subsidiaries, as
the case may be, than those that could be obtained at the time from unaffiliated
third parties.
 
     No Solicitation by the Vista Partnership. From and after the date of the
Merger Agreement, the Vista Partnership will not, and will not authorize or
permit any of its directors, officers, general partner, employees, agents,
advisors (including legal, accounting and financial advisors), affiliates or
other representatives or those of any of its subsidiaries (collectively, "Vista
Partnership Representatives") to, directly or indirectly, solicit or encourage
(including by way of providing information) any prospective acquiror or the
invitation or submission of any inquiries, proposals or offers or any other
efforts or attempts that constitute, or may reasonably be expected to lead to,
any proposal or offer, other than a proposal or offer by Midland or any of its
affiliates, for, or that could be reasonably expected to lead to, a tender or
exchange offer, a merger,
 
                                       95
<PAGE>   99
 
consolidation or other business combination involving the Vista Partnership or
Vista or any proposal to acquire in any manner a substantial equity interest in,
or any substantial portion of the assets of, the Vista Partnership or Vista (a
"Vista Acquisition Proposal") from any person or engage in any discussions or
negotiations with respect thereto or otherwise cooperate with or assist or
participate in, or facilitate any such proposal; provided, however, that,
notwithstanding any other provision of the Merger Agreement, the General Partner
may take and disclose to the limited partners of the Vista Partnership a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act. The
Vista Partnership shall immediately cease and cause to be terminated any
existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted heretofore by the Vista Partnership or
any Vista Partnership Representatives with respect to any Vista Acquisition
Proposal existing on the date of the Merger Agreement. The Vista Partnership
will promptly notify in writing Midland of any receipt by the Vista Partnership
or Vista of a request from a third party for information concerning the Vista
Partnership or Vista and its business, properties and assets or the receipt of
any Vista Acquisition Proposal, including the identity of the person or group
requesting such information or making such Vista Acquisition Proposal, and the
material terms and conditions of any Vista Acquisition Proposal.
 
     No Solicitation by Midland. From and after the date of the Merger
Agreement, Midland will not, and will not authorize or permit any of its
directors, officers, general partner, employees, agents, advisors (including
legal, accounting and financial advisors), affiliates or other representatives
or those of any of its subsidiaries (collectively, "Midland Representatives")
to, directly or indirectly, solicit or encourage (including by way of providing
information) any prospective acquiror or the invitation or submission of any
inquiries, proposals or offers or any other efforts or attempts that constitute,
or may reasonably be expected to lead to, any proposal or offer, other than a
proposal or offer by the Vista Partnership or any of its affiliates, for, or
that could be reasonably expected to lead to, a tender or exchange offer, a
merger, consolidation or other business combination involving Midland or any of
its subsidiaries or any proposal to acquire in any manner a substantial equity
interest in, or any substantial portion of the assets of, Midland or any of its
subsidiaries (a "Midland Acquisition Proposal") from any person or engage in any
discussions or negotiations with respect thereto or otherwise cooperate with or
assist or participate in, or facilitate any such proposal; provided, however,
that, notwithstanding any other provision of the Merger Agreement, Midland's
Board of Directors may take and disclose to the stockholders of Midland a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act.
Midland shall immediately cease and cause to be terminated any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any parties conducted heretofore by Midland or any Midland Representatives
with respect to any Midland Acquisition Proposal existing on the date of the
Merger Agreement. Midland will promptly notify in writing the Vista Partnership
of any receipt by Midland or any of its subsidiaries of a request from a third
party for information concerning Midland (or any of its subsidiaries) and its
business, properties and assets or the receipt of any Midland Acquisition
Proposal, including the identity of the person or group requesting such
information or making such Midland Acquisition Proposal, and the material terms
and conditions of any Midland Acquisition Proposal.
 
ADDITIONAL AGREEMENTS
 
     Pursuant to the Merger Agreement, the Vista Partnership, Vista and Midland
have agreed that (i) they will cooperate and promptly prepare the Registration
Statement and the Vista Partnership shall cause Vista to file the Registration
Statement with the Commission at the earliest practicable date, (ii) they will
each afford to the other access to their respective officers, properties and
other information as the other party may reasonably request, (iii) Midland will
call a meeting of its stockholders to be held as promptly as practicable, (iv)
the Vista Partnership and Midland will each provide a list of persons who may be
"affiliates" as defined in Rule 145 of the Securities Act, and shall use its
reasonable best efforts to obtain from each person an undertaking not to
transfer shares of Vista Common Stock issued to such person pursuant to the
Merger except pursuant to an effective registration statement or in compliance
with Rule 145, (v) Vista will use its reasonable best efforts to cause the
shares of Vista Common Stock to be issued in the Merger to be approved for
listing on the ASE, subject to official notice of issuance, (vi) they will
consult with each other regarding the issuance of press releases or any other
public statements, (vii) they will notify each other of any action reasonably
likely to result in any of the respective representations and warranties being
untrue or inaccurate or
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<PAGE>   100
 
in any of the conditions to the Merger not being satisfied, (viii) after the
Effective Time, Vista will file with the Commission a registration statement on
Form S-8 with respect to shares of Vista Common Stock to be issued upon exercise
of the Midland Stock Options, (ix) Vista shall enter into registration rights
agreements with (a) each of the stockholders of the General Partner and each of
the limited partners of Vista immediately prior to the Vista Exchange and (b)
each holder of a Midland Exchange Stock Option, (x) Midland shall obtain written
resignations from each of its officers and directors effective as of the
Effective Time, (xi) Vista shall approve and adopt the Vista Energy Resources,
Inc. 1998 Key Employees Stock Option Plan (the "Vista Long-Term Incentive
Plan"), (xii) Midland will use its reasonable best efforts to cause each of the
holders of issued and outstanding Midland Stock Options (other than Midland
Exchange Stock Options) to execute an Option Exercise Agreement and (xiii) for a
period of one year following the Effective Time, except for the grant of options
pursuant to the terms of the Vista Long-Term Incentive Plan and the issuance of
shares of Vista Common Stock underlying such options or the Vista Warrants,
Vista shall not issue shares of Vista Common Stock to any affiliate of Vista for
consideration that is less than fair market value of the securities issued.
 
AMENDMENT AND WAIVER
 
     The Merger Agreement may be amended by the parties thereto at any time
before or after approval of the Merger and the Merger Agreement by the
stockholders of Midland and the Vista Exchange by the partners of the Vista
Partnership, provided, however, that after any such approval, no amendment shall
be made that by law requires further approval by such stockholders or partners
without such further approval. The Merger Agreement may not be amended except by
a written instrument signed on behalf of each of the parties thereto.
 
     At any time prior to the Effective Time, the parties to the Merger
Agreement may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
thereto, (ii) waive any inaccuracies in the representations and warranties
contained therein or in any document delivered pursuant thereto, and (iii) waive
performance of any of the covenants or agreements, or satisfaction of any of the
conditions, contained therein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
 
TERMINATION
 
     The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, whether before or after approval of the
Merger and the Merger Agreement by the stockholders of Midland:
 
     (a) By mutual written consent of Vista and Midland;
 
     (b) By either Midland or the Vista Partnership if (i) the Merger has not
been consummated by October 30, 1998 (provided, however, that the right to
terminate the Merger Agreement pursuant to this clause (i) shall not be
available to any party whose breach of any representation or warranty or failure
to perform any covenant or agreement under the Merger Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before such
date), (ii) any Governmental Entity shall have issued an order, decree, or
ruling or taken any other action permanently restraining, enjoining, or
otherwise prohibiting the Merger and such order, decree, ruling, or other action
shall have become final and nonappealable (provided, however, that the right to
terminate the Merger Agreement pursuant to this clause (ii) shall not be
available to any party until such party has used all reasonable efforts to
remove such injunction, order, or decree), or (iii) any required approval of the
stockholders or partners of a party, as applicable, shall not have been obtained
by reason of the failure to obtain the required vote upon a vote held at a duly
held meeting of stockholders of Midland, or at any adjournment thereof
(provided, however, that Midland shall not have the right to terminate the
Merger Agreement pursuant to this clause (iii) if the Vista Partnership then has
the right to terminate the Merger Agreement pursuant to subsection (e) described
below);
 
     (c) By the Vista Partnership if (i) there has been a breach of the
representations and warranties made by Midland in the Merger Agreement or (ii)
Midland has failed to comply in any material respect with any of
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<PAGE>   101
 
its covenants or agreements contained in the Merger Agreement and such failure
has not been, or cannot be, cured within a reasonable time after notice and
demand for cure thereof which period in no event shall extend beyond October 30,
1998.
 
     (d) By Midland if (i) there has been a breach of the representations and
warranties made by the Vista Partnership, Vista or Merger Sub in the Merger
Agreement, (ii) the Vista Partnership, Vista or Merger Sub has failed to comply
in any material respect with any of its covenants or agreements contained in the
Merger Agreement, and, in either such case, such breach or failure has not been,
or cannot be, cured within a reasonable time after notice and a demand for cure
thereof which period in no event shall extend beyond October 30, 1998;
 
     (e) By the Vista Partnership if (i) the Midland Board shall have failed to
recommend adoption of the Merger and the Merger Agreement at the time the Proxy
Statement/Prospectus is first mailed to stockholders of Midland or shall have
amended or withdrawn any such recommendation and such recommendation is not
reinstated in its prior form within five business days after such amendment or
withdrawal or (ii) (x) the stockholders of Midland fail to duly and validly
adopt the Merger and the Merger Agreement at the Midland Meeting or any
adjournment thereof or (y) the Midland Meeting does not occur for any reason
(other than as a result of a breach of this Agreement by the Vista Partnership)
prior to October 29, 1998 (and if this Agreement is terminated pursuant to this
subsection, the Vista Partnership shall have the right to receive from Midland,
and Midland agrees to pay to the Vista Partnership, an amount of cash equal to
$400,000, which amount shall be inclusive of expenses (in an amount up to
$300,000) as set forth in the Merger Agreement);
 
     (f) By the Vista Partnership after June 22, 1998, if on such date Midland
shall not have received an Option Exercise Agreement executed by each of the
holders of issued and outstanding Midland Stock Options who is an executive
officer of director of Midland;
 
     (g) By Midland after June 22, 1998, if on such date the Vista Partnership
shall not have received an Exchange Agreement from each holder of GP Common
Stock and each holder of a Partnership Interest.
 
EXPENSES AND TERMINATION FEE
 
     Each party to the Merger Agreement is required to pay all fees and expenses
incurred by it in connection with the Merger Agreement and the consummation of
the transactions contemplated thereby, whether or not the Merger and the Vista
Exchange shall be consummated, except that (i) the fees and expenses (including
fees and expenses of such parties' attorneys and accountants) incurred by a
party terminating the Merger Agreement and the transactions contemplated therein
(including fees and expenses incurred in connection with the preparation and
filing of the Registration Statement with the Commission and the fees and
expenses incurred in connection with the printing, mailing and distribution of
the Proxy Statement/Prospectus) shall be reimbursed, borne and paid (a) if the
Merger Agreement is terminated by Midland pursuant to item (d) of
"-- Termination," by the Vista Partnership up to $300,000, and (b) if the Merger
Agreement is terminated by the Vista Partnership pursuant to item (c) of
"-- Termination," by Midland up to $300,000 and (ii) if the Merger and the Vista
Exchange are consummated all fees and expenses (including fees and expenses of
such parties' attorneys and accountants) incident to preparing for, entering
into and carrying out the Merger Agreement and the consummation of the
transactions contemplated thereby shall be borne and paid by Vista. The
provisions for reimbursement of fees and expenses in the Merger Agreement shall
be in addition to and not a limitation upon the liabilities or obligations of a
party as a result of a termination pursuant to items (c) or (d) of
"-- Termination."
 
     If the Merger Agreement is terminated pursuant to section (e) above, the
Vista Partnership shall have the right to receive from Midland, and Midland
agrees to pay to the Vista Partnership, an amount of cash equal to $400,000,
which amount shall be inclusive of expenses (in an amount up to $300,000) as set
forth in the Merger Agreement).
 
                                       98
<PAGE>   102
 
INDEMNIFICATION
 
     Indemnification by the Surviving Subsidiary. The Merger Agreement provides
that from and after the Effective Time, the Surviving Subsidiary shall indemnify
and hold harmless each person and shall advance expenses incurred by each person
who is, has been at any time prior to the date hereof, or becomes prior to the
Effective Time an officer or director of Midland or any of its subsidiaries
(collectively, the "Midland Indemnified Parties") against all losses, claims,
damages, liabilities, costs or expenses (including attorney's fees), judgments,
and amounts paid in settlement in connection with any claim, action, suit,
proceeding, or investigation arising out of or pertaining to acts or omissions,
or alleged acts or omissions, by him in his capacity as an officer or director
of Midland or any of its subsidiaries, which acts or omissions occurred prior to
the Effective Time, to the full extent permitted by applicable law and by the
Bylaws of Midland in effect prior to the Effective Time, which Bylaws make
mandatory the indemnification of and advancement of expenses to all Midland
Indemnified Parties to the full extent permitted by the TBCA (as defined
herein). The procedures associated with such indemnification shall be the same
as those associated with the Midland Indemnified Parties' indemnification from
Midland or any of its respective subsidiaries, as the case may be, immediately
prior to the Effective Time (provided, however, that the determination that such
indemnification is permissible under the TBCA shall be made by special legal
counsel selected by the Board of Directors as set forth in the TBCA, such
selection to be subject to the consent of a majority of the Midland Indemnified
Parties in such instance, which consent may not be unreasonably withheld; and,
further provided, however, that the Surviving Subsidiary shall be under no
obligation to deposit trust funds pursuant to any "change-in-control" or similar
provisions). Midland hereby agrees that, from and after the date hereof until
the Effective Time, it will not (and it will cause each of its subsidiaries not
to) amend, modify, or otherwise alter any contractual provision under which any
Midland Indemnified Party is entitled to indemnification from Midland or any of
its subsidiaries, as the case may be, at the time of the execution of the Merger
Agreement. The indemnification provisions of the Merger Agreement are intended
to be for the benefit of, and shall be enforceable by, the parties hereto and
each Midland Indemnified Party and their respective heirs and representatives.
 
     Indemnification by the Vista Partnership. From and after the Effective
Time, the Vista Partnership shall indemnify and hold harmless each person or
entity, and shall advance expenses incurred by each person or entity who is, has
been at any time prior to the date hereof, or becomes prior to the Effective
Time an officer, director or partner of the General Partner, the Vista
Partnership or any of its subsidiaries (collectively, the "Vista Indemnified
Parties") against all losses, claims, damages, liabilities, costs or expenses
(including attorney's fees), judgments, and amounts paid in settlement in
connection with any claim, action, suit, proceeding, or investigation arising
out of or pertaining to acts or omissions, or alleged acts or omissions, by such
Vista Indemnified Party in his or its capacity as an officer, director, or
partner of the General Partner, Vista or any of its subsidiaries, which acts or
omissions occurred prior to the Effective Time to the full extent permitted by
applicable law. The procedures associated with such indemnification shall be the
same as those associated with the Vista Indemnified Parties' indemnification
from the Vista Partnership or any of its subsidiaries, as the case may be,
immediately prior to the Effective Time (provided, however, that the Vista
Partnership shall be under no obligation to deposit trust funds pursuant to any
"change-in-control" or similar provisions). The Vista Partnership hereby agrees
that, from and after the date hereof until the Effective Time, it will not (and
it will cause each of its subsidiaries not to) amend, modify, or otherwise alter
any contractual provision under which any Vista Indemnified Party is entitled to
indemnification from the Vista Partnership or any of its subsidiaries at the
time of the execution of the Merger Agreement. The indemnification provisions of
the Merger Agreement are intended to be for the benefit of, and shall be
enforceable by, the parties hereto and each Vista Indemnified Party and their
respective heirs and representatives.
 
     Indemnification of Vista Officers and Directors. As provided in the Merger
Agreement, at the Effective Time, Vista will enter into indemnification
agreements with each of the directors and officers of Vista pursuant to which
Vista will agree to indemnify and hold harmless each such director and officer
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities arising out of the fact that he is
a director or officer of Vista or any of its subsidiaries, to the full extent
permitted under Delaware law, Vista's Bylaws and the indemnification agreements.
 
                                       99
<PAGE>   103
 
     Indemnification of Midland Officers and Directors. As provided in the
Merger Agreement, at the Effective Time, Vista will enter into indemnification
agreements with each of the directors and officers of Midland pursuant to which
Vista will agree to indemnify and hold harmless each such director and officer
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities arising out of the fact that he
was a director or officer of Midland or any of its subsidiaries prior to the
Effective Time, to the full extent permitted under Delaware law, Midland's
Bylaws and the indemnification agreements.
 
                                       100
<PAGE>   104
 
                  OWNERSHIP OF MIDLAND AND VISTA COMMON STOCK
 
     Midland. The following table sets forth (i) as of June 15, 1998, the number
and percentage of the outstanding shares of Midland Common Stock that is
beneficially owned by the directors and executive officers of Midland, as well
as by each person or entity known by Midland to beneficially own more than 5% of
the Midland Common Stock and (ii) the number and percentage of the outstanding
shares of Vista Common Stock owned by such persons after the Merger. Except as
otherwise indicated below, Midland believes that each individual or entity named
has sole investment and voting power with respect to shares of Midland Common
Stock indicated as beneficially owned by them.
 
<TABLE>
<CAPTION>
                                                         SHARES OF MIDLAND        BENEFICIALLY OWNED
                                                            COMMON STOCK             COMMON STOCK
                                                         BENEFICIALLY OWNED        SHARES OF VISTA
                                                       ----------------------   ----------------------
                                                        NUMBER     PERCENTAGE    NUMBER     PERCENTAGE
                                                       ---------   ----------   ---------   ----------
<S>                                                    <C>         <C>          <C>         <C>
Deas H. Warley III...................................    829,017     18.03%       829,017       5.1%
  8920 Woodlane, Magnolia, Texas 77354
Robbie Jean Warley...................................    784,383     17.05%       784,383       4.8%
  94 Mountain Road, Glastonbury, Conn. 06033
Robert R. Donnelly...................................     42,965         *        207,550      1.26%
  415 West Wall, Suite 1415, Midland, Texas 79701
Sam R. Brock.........................................     41,665         *        206,250      1.25%
  2277 S. Kirkwood, Suite 401, Houston, Texas 77077
Darrell M. Dillard...................................     96,305      2.12%       260,890      1.58%
  415 West Wall, Suite 1510, Midland, Texas 79701
Wayne M. Whitaker....................................     39,965         *        204,550      1.24%
  301 Commerce Street, Suite 3500, Fort Worth, Texas
     76102
John Q. Adams........................................    249,900      5.58%       364,575      2.23%
  2350 Airport Frwy, Suite 280, Bedford, Texas 76022
All officers and directors as a group (7 persons)....  1,197,083     24.27%     3,068,715     17.34%
</TABLE>
 
---------------
 
* Represents less than 1%
 
                                       101
<PAGE>   105
 
     Vista. The following table sets forth as of the Effective Time the number
and percentage of the outstanding shares of Vista Common Stock (including shares
represented by Vista Warrants) that will be beneficially owned by the directors
and executive officers of Vista, as well as by each person or entity known by
Vista that will beneficially own more than 5% of the outstanding Vista Common
Stock.
 
<TABLE>
<CAPTION>
                                                                 SHARES OF VISTA
                                                                   COMMON STOCK
                                                                BENEFICIALLY OWNED
                                                              ----------------------
                                                               NUMBER     PERCENTAGE
                                                              ---------   ----------
<S>                                                           <C>         <C>
Natural Gas Partners II, L.P.
  777 Main Street, Suite 2250, Fort Worth, Texas 76102......  6,121,439        32.52%
Natural Gas Partners III, L.P.
  777 Main Street, Suite 2250, Fort Worth, Texas 76102......  8,366,608        42.32%
C. Randall Hill
  550 West Texas Avenue, Suite 700, Midland, Texas 79701....  1,468,476         8.71%
Steven D. Gray
  550 West Texas Avenue, Suite 700, Midland, Texas 79701....  1,468,476         8.71%
R. Cory Richards
  550 West Texas Avenue, Suite 700, Midland, Texas 79701....    803,492         4.84%
Kenneth A. Hersh
  777 Main Street, Suite 2250, Fort Worth, Texas 76102......         --(1)         --
David R. Albin
  100 N. Guadalupe, Suite 205, Santa Fe, New Mexico 87501...         --(1)         --
John S. Foster
  500 West Putnam Avenue, 4th Floor, Greenwich, Connecticut          --(1)         --
     06830..................................................
</TABLE>
 
---------------
 
(1) Messrs. Hersh, Albin and Foster are principal owners and managers of NGP and
    may be deemed to beneficially own, or otherwise control, the voting of all
    or some portion of the shares of Vista Common Stock owned by Natural Gas
    Partners II, L.P. and Natural Gas Partners III, L.P.
 
                                       102
<PAGE>   106
 
                              CERTAIN TRANSACTIONS
 
     Effective as of June 1, 1998, Midland's wholly owned, operating subsidiary,
MRO, and the Vista Operator entered into a Contract Operating Agreement (herein
so called) which provides, among other things, that the Operator will provide
various contract operating services for and on behalf of Midland's oil and gas
properties through October 31, 1998 and on a month-to-month basis thereafter
unless otherwise terminated by either party upon 30 days' prior written notice.
The services to be provided shall be as requested by Midland and shall include,
without limitation, field operations services, engineering supervision and
analysis, geological review and analysis, land and legal analysis, well site
supervision for drilling activities, and accounting and production overview and
supervision. All field level services shall be charged to Midland on an actual
cost basis as incurred by the Operator, engineering and geological review and
supervision shall be charged at a flat rate of $400 per day with a half day
minimum charge, and limited general and administrative assistance will be
charged at a flat rate of $1,500 per month (which increases to $3,000 per month
on November 1, 1998). Any general and administrative services requested by
Midland beyond the limited services set out in the Contract Operating Agreement
shall be charged on agreed upon hourly rates for the number and type of Operator
employees utilized by Midland.
 
     Contemporaneously with the closing of the Merger, Vista will enter into an
Advisory Services Agreement with NGP. Pursuant to the Advisory Services
Agreement, Vista will pay NGP $75,000 per year on a year-to-year basis and
reimburse NGP for certain expenses in consideration for certain consulting and
financial analysis services to be provided by NGP and its representatives.
 
     During 1996, Midland conducted a cash tender offer for all of the common
stock and options of Summit Petroleum Corporation ("Summit"), a public oil and
gas corporation of which Mr. Warley was President, Treasurer and Chairman and
owned approximately 37.5% of its common stock, and Darrell M. Dillard and Wayne
M. Whitaker were directors, stockholders and option holders. Midland completed
the acquisition of Summit through a merger with a wholly owned subsidiary in
December 1996. Midland received a fairness opinion regarding the tender offer
price of $.70 per share (net of any option exercise prices). As a result of this
offer Messrs. Warley, Dillard and Whitaker received total proceeds of $660,000,
$31,875 and $49,375, respectively.
 
     $479,647 of the proceeds due Mr. Warley from the Summit tender offer
discussed above, were used to repay the balance outstanding under a promissory
note of Mr. Warley due Midland that was entered into in December 1995, whereby
Mr. Warley borrowed $582,805 under an 18-month term note bearing 7.5 % interest,
secured by 287,947 shares of Midland Common Stock. The original proceeds of this
loan were used by Mr. Warley to exercise 233,122 warrants to buy Midland Common
Stock at $2.50 per share that were received in 1990 upon the formation of
Midland.
 
     Midland purchased a building and land in Midland County, Texas for $78,996
from Mr. Warley and another individual for use as a district office, effective
November 1, 1995. Mr. Warley and the other individual each financed 50% of the
purchase price less the down payment of $10,496. The two $34,250 ten-year notes
bore interest at 7.5% and were payable in equal monthly installments of $407,
each. The cost to Midland was based on an independent written appraisal and
certain improvements completed before the property was purchased. The balance of
the note payable to Mr. Warley was netted against his $582,805 note payable
discussed above, together with a cash payment of $95,000, leaving a balance of
$453,641 on Mr. Warley's note due Midland.
 
     Until Midland acquired Summit, MRO had a management agreement with Summit.
Total management fees charged Summit for 1996 were $45,000.
 
     Mr. Warley had a five-year employment contract with Midland that was
terminated by the Midland Board on March 27, 1998. As of that date, the
employment contract provided for an annual salary of $247,963 with a minimum 5%
semi-annual adjustment. Mr. Warley waived such adjustments for 1997. In
addition, the contract provided for medical reimbursement of up to $10,000 for
non-insurance covered medical expenses, disability payments of one-half the
annual salary for 10 years and a covenant not to compete with Midland for six
months. The term of the agreement extended for an additional five years each
January 1, unless notice was
 
                                       103
<PAGE>   107
 
given by either Mr. Warley or Midland. Following termination of Mr. Warley's
contract and pending the conclusion of negotiations with respect to the Merger
Agreement, Midland and Mr. Warley agreed to Midland paying Mr. Warley one-half
of his former monthly salary and providing him the use of a company vehicle. On
May 22, 1998, Midland and Mr. Warley executed that certain Warley Settlement
Agreement, to be effective March 27, 1998, containing the following principal
terms: (i) from March 27, 1998, through either the consummation or termination
of the Merger Agreement, Midland shall pay Warley the sum of $11,390 per month;
(ii) on the effective date of the Merger, Midland agrees to pay to Warley the
sum of $1,300,000 (reduced by a payment of $100,000 made by Midland to Marilyn
D. Wade on behalf of Mr. Warley pursuant to the Wade Release (as defined
below)), payable $20,000 a month over sixty (60) months, provided that, after
one year, either Midland or Warley may elect to have such amount paid as a lump
sum (using a discount factor of six percent (6%)); (iii) Warley's existing
Midland stock options for 15,000 shares shall expire on the 120th day following
the effective date of the Merger; (iv) Warley agrees to support the Merger and
to take or refrain from taking actions as contemplated by the Merger Agreement;
and (v) Warley and Midland mutually release one another from all claims which
either party may have (including a release by Warley of Midland's directors and
officers) except pursuant to such Agreement and pursuant to confidentiality and
non-compete provisions in Warley's employment agreement and Warley's rights to
indemnification as officer and director of Midland.
 
     Mr. Whitaker, a director since 1996, is a partner in the law firm of
Michener, Larimore, Swindle, Whitaker, Flowers, Sawyer, Reynolds & Chalk, L.L.P.
During 1997 and 1996 Midland paid $126,278 and $85,749 respectively, to that
firm for legal services and costs.
 
     Mr. Dillard, a director since 1994, served as Chief Financial Officer
during the period October 31, 1995 until February 1997. Midland paid Mr. Dillard
$46,001 and $4,000 respectively, during 1997 and 1996 for accounting and
consulting services, and officer compensation of $66,543 in 1996.
 
     Mr. Donnelly, a director since 1990, was until November 1997 a partner in
EOC Services Co., which provided oilfield services to Midland and that firm was
paid $26,449 in 1997.
 
     Mr. Brock, a director since 1995, is an officer of Citation Crude Oil
Marketing, Inc. a company which provided crude oil marketing services to Midland
in 1997 and that firm was paid $14,000.
 
     On January 14, 1997 Midland formed Chalk Mountain Exploration, Ltd.
("Partnership"), a Texas limited partnership, and became its general partner,
and sold to that limited partnership certain 3-D seismic data and related
leases. With respect to the specific 3-D seismic project, Midland sold that data
and 100% of its interest in the related leases for $383,975, which represented
its total cost in such project. In addition to providing the funding for the
purchase of the 3-D seismic data and lease costs, the limited partners provided
$366,025 to drill the first exploratory well to completion, with Midland
providing $407,597 for 100% of the completion costs. After the initial
exploratory well, Midland and the limited partners shared costs equally. In
exchange for providing the initial $750,000 of funding to the Partnership, the
limited partners received 50% of its profits and Midland as general partner
received 50%. Two additional exploratory wells and one development well were
drilled in 1997 with Midland bearing 50% of the cost of the drilling of these
wells ($958,164) and the limited partners bearing 50% of such costs, with the
limited partners electing not to participate in the completion of one such
exploratory well. Further, Midland contributed $406,250 as its 50% of additional
acreage costs in 1997. Messrs. Dillard, Whitaker and Adams were limited
partners. Midland acts as operator on the leases and supervises the drilling of
any wells, for which it receives fees from the limited partnership which are
customary within the industry. Effective July 1, 1997 Midland and Mr. Dillard
exchanged substantially all their partnership interests for the direct
assignment of an equivalent working interest in the related leases and Mr.
Whitaker exchanged all of his Partnership interest in exchange for an equivalent
working interest. Thereafter effective October 1, 1997 Messrs. Whitaker and
Dillard sold their working interests in the related wells and leases to Midland
for $57,848 and $87,031 and 5,000 unregistered shares and 10,040 unregistered
shares respectively. Mr. Dillard's sale also included his remaining limited
partner interest in the Partnership. Effective December 31, 1997 Midland
withdrew as the General Partner and conveyed all of its Partnership interest
back to the Partnership in settlement of a dispute involving reimbursement of
the cost of a well drilled through a zone not owned by the Partnership.
 
                                       104
<PAGE>   108
 
     On May 22, 1998, Midland, Mr. Warley, and Marilyn Wade executed that
certain Release and Hold Harmless Agreement (the "Wade Release") containing the
following principal terms and provisions: (i) Wade agrees to resign her
employment upon consummation of the Merger; (ii) Warley agrees to pay the sum of
$100,000 to Wade upon consummation of the Merger, which payment Midland has
agreed to pay to Wade on behalf of Warley under the Warley Settlement Agreement;
(iii) upon execution of the Wade release, Midland granted Wade options to
purchase 137,931 shares of Midland Common Stock at $2.6875 per share; (iv)
within three (3) business days after Wade's resignation, Midland agrees to pay
the sum of $56,590; and (v) Wade releases Warley, Midland and Midland's
directors and officers from all claims which she may have against them.
 
                       DESCRIPTION OF VISTA CAPITAL STOCK
 
     The authorized capital stock of Vista consists of 50,000,000 shares of
common stock, par value $.01 per share, and 10,000,000 shares of preferred
stock, par value $.01 per share.
 
VISTA COMMON STOCK
 
     All shares of Vista Common Stock issued in the Merger will be fully paid
and nonassessable. The holders of Vista Common Stock are entitled to one vote
for each share held on all matters submitted to a vote of common stockholders.
The Vista Common Stock does not have cumulative voting rights or preemptive
rights.
 
     Subject to the rights of the holders of any class of capital stock of Vista
having any preference or priority over the Vista Common Stock, the holders of
Vista Common Stock are entitled to dividends in such amounts as may be declared
by the Vista Board from time to time out of any funds legally available for such
payments and, in the event of liquidation, to share ratably in the assets of
Vista remaining after provision for any liquidation preferences on any
outstanding preferred stock ranking prior to the Vista Common Stock.
 
VISTA PREFERRED STOCK
 
     The Vista Board, without further stockholder action, is authorized to issue
up to 10,000,000 shares of preferred stock, par value $.01 per share ("Vista
Preferred Stock") in one or more series and to fix and determine as to any
series all the relative rights and preferences of shares in the series,
including voting rights, dividend rights, liquidation preferences, terms of
redemption and conversion rights.
 
     Although Vista has no present intention to issue shares of Vista Preferred
Stock, the issuance of shares of Vista Preferred Stock, or the issuance of
rights to purchase such shares, could be used to discourage an unsolicited
acquisition proposal. For instance, the issuance of a series of Vista Preferred
Stock might impede a business combination by including class voting rights that
would enable the holders to block such a transaction; or such issuance might
facilitate a business combination by including voting rights that would provide
a required percentage vote of the stockholders. In addition, under certain
circumstances, the issuance of Vista Preferred Stock could adversely affect the
voting power of the holders of the Vista Common Stock. Although the Vista Board
is required to make any determination to issue such stock based on its judgment
as to the best interests of the stockholders of Vista, the Vista Board could act
in a manner that would discourage an acquisition attempt or other transaction in
that some or a majority of the stockholders might believe to be in their best
interest or in which stockholders might receive a premium for their stock over
the then market price of such stock. The Vista Board does not at present intend
to seek stockholder approval prior to any issuance of currently authorized
stock, unless otherwise required by law or the regulations of the exchange on
which the Vista Common Stock is listed.
 
DELAWARE ANTI-TAKEOVER STATUTE
 
     Vista is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of
Vista's outstanding voting stock) from engaging in a "business combination" (as
defined in Section 203) with Vista for three years following the date that
person becomes an interested stockholder
 
                                       105
<PAGE>   109
 
unless (a) before that person became an interested stockholder, Vista's Board of
Directors approved the transaction in which the interested stockholder became an
interested stockholder or approved the business combination, (b) upon completion
of the transaction that resulted in the interested stockholder's becoming an
interested stockholder, the interested stockholder owns at least 85% of Vista
voting stock outstanding at the time the transaction commenced (excluding stock
held by directors who are also officers of Vista and by employee stock plans
that do not provide employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer),
or (c) following the transaction in which that person became an interested
stockholder, the business combination is approved by Vista's Board of Directors
and authorized at a meeting of stockholders by the affirmative vote of the
holders of at least two-thirds of the outstanding Vista voting stock not owned
by the interested stockholder.
 
     Under Section 203, these restrictions also do not apply to certain business
combinations proposed by an interested stockholder following the announcement or
notification of one of certain extraordinary transactions involving Vista and a
person who was not an interested stockholder during the previous three years or
who became an interested stockholder with the approval of a majority of Vista's
directors, if that extraordinary transaction is approved or not opposed by a
majority of the directors who were directors before any person became an
interested stockholder in the previous three years or who were recommended for
election or elected to succeed such directors by a majority of such directors
then in office.
 
     Section 203 will not be applicable to Vista by reason of consummation of
the Merger or consummation of any of the other the transactions contemplated by
the Merger Agreement. In addition, none of the holders of Vista Common Stock
subsequent to the Effective Time will become an interested stockholder as a
result of such transactions.
 
                            VISTA STOCK OPTION PLAN
 
     The description set forth below represents a summary of the principal terms
and conditions of the Vista Stock Option Plan and does not purport to be
complete. Such description is qualified in its entirety by reference to the
Vista Energy Resources, Inc. 1998 Key Employee Stock Option Plan (the "Vista
Stock Option Plan"), a copy of which is attached as Appendix E to this Proxy
Statement/Prospectus.
 
GENERAL
 
     Vista may grant awards with respect to shares of Vista Common Stock under
the Vista Stock Option Plan to officers, directors and employees of Vista or any
parent or subsidiary corporation of Vista. At the Effective Time, Vista is
expected to have six directors and approximately 24 employees. The awards under
the Vista Stock Option Plan include (i) incentive stock options qualified as
such under U.S. federal income tax laws and (ii) stock options that do not
qualify as incentive stock options. The number of shares of Vista Common Stock
that may be subject to outstanding awards under the Vista Stock Option Plan is
900,000.
 
     The Board of Directors of Vista or any committee designated by it may
administer the Vista Stock Option Plan (as used for the Vista Stock Option Plan,
the "Committee"). The Committee has broad discretion to administer the Vista
Stock Option Plan, interpret its provisions and adopt policies for implementing
the Vista Stock Option Plan. This discretion includes the ability to select the
recipient of an award, determine the type and amount of each award, establish
the terms of each award, accelerate vesting or exercisability of an award,
determine whether performance conditions have been satisfied and otherwise
modify or amend any award under the Vista Stock Option Plan. Nevertheless, no
awards for more than 250,000 shares may be granted to any one employee in a
calendar year.
 
AWARDS
 
     The Committee determines the exercise price of each option granted under
the Vista Stock Option Plan. The exercise price for an incentive stock option
must not be less than the fair market value of the Vista Common Stock on the
date of grant. Stock options may be exercised as the Committee determines, but
not later than ten years from the date of grant in the case of incentive stock
options. At the discretion of the
 
                                       106
<PAGE>   110
 
Committee, holders may use shares of stock to pay the exercise price, including
shares issuable upon exercise of the option.
 
OTHER PROVISIONS
 
     At the Committee's discretion and subject to conditions that the Committee
may impose, a participant's tax withholding with respect to an award may be
satisfied by the withholding of shares of Vista Common Stock issuable pursuant
to the award or the delivery of previously owned shares of Vista Common Stock,
in either case based on the fair market value of the shares.
 
     If a change of control shall occur or Vista shall enter into an agreement
providing for a change of control, then the Committee may declare any or all
options outstanding under the Vista Stock Option Plan to be exercisable in full
at such time or times as the Committee shall determine. Each option accelerated
by the Committee pursuant to the preceding sentence shall terminate on such date
(not later than the stated exercise date) as the Committee shall determine.
 
     Without stockholder approval, the Vista Board may not amend the Vista Stock
Option Plan to increase the total number of shares of Vista Common Stock that
may be issued under the Vista Stock Option Plan. Otherwise, the Vista Board may
at any time alter, amend, modify, suspend or terminate the Vista Stock Option
Plan. No award may be issued under the Vista Stock Option Plan after the tenth
anniversary of stockholder approval of the plan.
 
TAX IMPLICATION OF AWARDS
 
     Set forth below is a summary of the federal income tax consequences to
employees, directors and other participants in the Vista Stock Option Plan
("Vista Employees") and to Vista as a result of the grant and exercise of awards
under the Vista Stock Option Plan. This summary is based on statutory
provisions, Treasury regulations thereunder, judicial consents and IRS rulings
in effect on the date hereof.
 
     Nonqualified Stock Options; Incentive Stock Options. Vista Employees will
not realize taxable income upon the grant of a non-qualified stock option
("NQSO"). Upon the exercise of a NQSO, a Vista Employee will recognize ordinary
compensation income (subject to withholding by Vista) in an amount equal to the
excess of (i) the amount of cash and the fair market value of Vista Common Stock
received, over (ii) the exercise price (if any) paid therefor. A Vista Employee
will generally have a tax basis in any shares of Vista Common Stock received
pursuant to the cash exercise of a NQSO, that equals the fair market value of
such shares on the date of exercise. Subject to the discussion under "-- Tax
Code Limitations on Deductibility," Vista (or a subsidiary) will be entitled to
a deduction for federal income tax purposes that corresponds as to timing and
amount with the compensation income recognized by a Vista Employee under the
foregoing rules.
 
     Vista Employees eligible to receive an incentive stock option ("ISO") will
not have taxable income on the grant of an ISO. Upon the exercise of an ISO, a
Vista Employee will not have taxable income, although the excess of the fair
market value of the shares of Vista Common Stock received upon exercise of the
ISO ("ISO Stock") over the exercise price will increase the alternative minimum
taxable income of the Vista Employee, which may cause such Vista Employee to
incur alternative minimum tax. The payment of any alternative minimum tax
attributable to the exercise of an ISO would be allowed as a credit against the
Vista Employee's regular tax liability in a later year to the extent the Vista
Employee's regular tax liability is in excess of the alternative minimum tax for
that year.
 
     Upon the disposition of ISO Stock that has been held for the requisite
holding period (generally, at least two years from the date of grant and one
year from the date of exercise of the ISO), a Vista Employee will generally
recognize capital gain (or loss) equal to the excess (or shortfall) of the
amount received in the disposition over the exercise price paid by the Vista
Employee for the ISO Stock. However, if a Vista Employee disposes of ISO Stock
that has not been held for the requisite holding period (a "disqualifying
disposition"), the Vista Employee will recognize ordinary compensation income in
the year of the disqualifying disposition in an amount equal to the amount by
which the fair market value of the ISO Stock at the time of exercise of the ISO
(or, if less, the amount realized in the case of an arm's length disqualifying
disposition
 
                                       107
<PAGE>   111
 
to an unrelated party) exceeds the exercise price paid by the Vista Employee for
such ISO Stock. A Vista Employee would also recognize capital gain to the extent
the amount realized in the disqualifying disposition exceeds the fair market
value of the ISO stock on the exercise date. If the exercise price paid for the
ISO Stock exceeds the amount realized (in the case of an arm's-length
disposition to an unrelated party), such excess would ordinarily constitute a
capital loss.
 
     Vista and its subsidiaries will generally not be entitled to any federal
income tax deduction upon the grant or exercise of an ISO, unless a Vista
Employee makes a disqualifying disposition of the ISO Stock. If a Vista Employee
makes a disqualifying disposition, Vista (or a subsidiary) will then, subject to
the discussion below under "-- Tax Code Limitations on Deductibility," be
entitled to a tax deduction that corresponds as to timing and amount with the
compensation income recognized by a Vista Employee under the rules described in
the preceding paragraph.
 
     Under current rulings, if a Vista Employee transfers previously held shares
of Vista Common Stock (other than ISO Stock that has not been held for the
requisite holding period) in satisfaction of part or all of the exercise price
of an NQSO or ISO, no additional gain will be recognized on the transfer of such
previously held shares in satisfaction of the NQSO or ISO exercise price
(although a Vista Employee would still recognize ordinary compensation income
upon exercise of an NQSO in the manner described above). Moreover, that number
of shares of Vista Common Stock received upon exercise which equals the number
of shares of previously held Vista Common Stock surrendered therefor in
satisfaction of the NQSO or ISO exercise price will have a tax basis that
equals, and a holding period that includes, the tax basis and holding period of
the previously held shares of Vista Common Stock surrendered in satisfaction of
the NQSO or ISO exercise price. Any additional shares of Vista Common Stock
received upon exercise will have a tax basis that equals the amount of cash (if
any) paid by the Vista Employee, plus the amount of compensation income
recognized by the Vista Employee's transfer of previously held Vista Common
Stock in full or partial satisfaction of the exercise price of an ISO or NQSO,
the tax consequences of the reload option will be as provided above for an ISO
or NQSO, depending on whether the reload option itself is an ISO or NQSO.
 
     A Vista Employee will be subject to withholding for federal, and generally
for state and local, income taxes at the time he recognizes income under the
rules described above with respect to Vista Common Stock or cash received.
Dividends that are received by a Vista Employee prior to the time that the Vista
Common Stock is taxed to the Vista Employee under the rules described in the
preceding paragraph are taxed as additional compensation, not as dividend
income. The tax basis of a Vista Employee in the Vista Common Stock received
will equal the amount recognized by him as compensation income under the rules
described in the preceding paragraph, and the Vista Employee's holding period in
those shares will commence on the date of receipt of the shares.
 
     Subject to the discussion immediately below, Vista (or a subsidiary) will
be entitled to a deduction for federal income tax purposes that corresponds as
to timing and amount with the compensation income recognized by a Vista Employee
under the foregoing rules.
 
     Tax Code Limitations and Deductibility. In order for the amounts described
above to be deductible by Vista (or a subsidiary), such amounts must constitute
reasonable compensation for services rendered or to be rendered and must be
ordinary and necessary business expenses. The ability of Vista (or a subsidiary)
to obtain a deduction for future payments under the Vista Stock Option Plan
could also be limited by the golden parachute payment rules of Section 280G of
the Code, which prevent the deductibility of certain excess parachute payments
made in connection with a change in control of an employer-corporation. Finally,
the ability of Vista (or a subsidiary) to obtain a deduction for amounts paid
under the Vista Stock Option Plan could be limited by Section 162(m) of the
Code, which limits the deductibility, for federal income tax purposes, of
compensation paid to certain executive officers of Vista to $1 million with
respect to any such officer during any taxable year of Vista. However, an
exception applies to this limitation in the case of certain performance-based
compensation. The Vista Stock Option Plan is intended to satisfy the
requirements for the performance-based exception. Vista intends to comply with
the requirements of the Code with respect to awards under the Vista Stock Option
Plan so as to be eligible for the performance-based exception, but Vista
 
                                       108
<PAGE>   112
 
may, in its sole discretion, determine that in one or more cases it is in its
best interests to not satisfy the requirements for the performance-based
exception.
 
                   REGISTRATION RIGHTS FOR VISTA STOCKHOLDERS
 
     The Merger Agreement provides that contemporaneously with the Closing,
Vista shall enter into separate registration rights agreements (collectively,
the "Registration Rights Agreements") with each of the stockholders of the
General Partner and each of the limited partners of the Vista Partnership
immediately prior to the Vista Exchange and with each holder of a Midland
Exchange Stock Option covering (i) with respect to the Vista securityholders,
the resale of shares of Vista Common Stock to be received by such
securityholders pursuant to the terms of the Vista Exchange Agreement, together
with all shares of Vista Common Stock issuable to such securityholders upon the
exercise of an Exchange Warrant, (ii) with respect to the Midland
securityholders, the resale of shares of Vista Common Stock issuable to such
securityholders upon the exercise of an Exchange Warrant and (iii) any
securities issued or issuable in respect of any such shares by way of any stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise
((i), (ii) and (iii) above collectively referred to as the "Registrable
Shares").
 
     The Registration Rights Agreements provide that the holders of more than
50% of the Registrable Shares outstanding may, at any time after the first
anniversary of the Effective Time, require Vista to effect the registration
under the Securities Act of Registrable Shares on no more than two occasions by
means of a "shelf" registration statement for an offering to be made on a
continuous basis under the Securities Act, subject to certain limitations. The
Registration Rights Agreements also provide certain "piggyback" registration
rights to the holders of Registrable Shares whenever Vista proposes to register
an offering of any of its capital stock under the Securities Act, subject to
certain exceptions, including pro rata reduction if, in the reasonable opinion
of the managing underwriter(s) of the offering, such a reduction is necessary to
prevent an adverse effect on the marketability or offering price of all the
securities proposed to be offered in the offering.
 
     The Registration Rights Agreements contain customary provisions regarding
the payment of expenses by Vista and regarding mutual indemnification agreements
between Vista and the holders of Registrable Shares for certain securities law
violations.
 
                        COMPARISON OF STOCKHOLDER RIGHTS
 
     The following is a summary of certain provisions affecting, and the
differences between the rights of holders of the capital stock of Vista and
Midland, respectively. Since Midland is a Texas corporation and Vista is a
Delaware corporation, the differences between the rights of Midland stockholders
and the Vista stockholders will arise from the various differences between the
Texas Business Corporation Act ("TBCA") and the Delaware General Corporation Law
("DGCL") as well as from the differences between the various provisions of the
Midland Articles of Incorporation ("Midland Charter") and the Midland Bylaws
("Midland Bylaws") and the Vista Certificate of Incorporation ("Vista Charter")
and Vista Bylaws ("Vista Bylaws"). The following summary is qualified in its
entirety by reference to the TBCA, the DGCL, the complete text of the Midland
Charter and Bylaws and the Vista Charter and Bylaws. The Vista Charter and the
Vista Bylaws have been filed as exhibits to this Proxy Statement/Prospectus. See
"Available Information."
 
     As a result of the Merger, holders of Midland Common Stock will become
holders of Vista Common Stock. The rights of all former Midland stockholders
will thereafter be governed by the Vista Charter, the Vista Bylaws and the DGCL.
The rights of the holders of Midland Common Stock are currently governed by the
Midland Charter, the Midland Bylaws and the TBCA. The following summary, which
does not purport to be a complete statement of the general differences among the
rights of stockholders of Midland and Vista, sets forth certain differences
between the Midland Charter and the Vista Charter, the Midland Bylaws and the
Vista Bylaws and the TBCA and the DGCL.
 
                                       109
<PAGE>   113
 
AUTHORIZED CAPITAL STOCK
 
     Midland. Midland's authorized capital stock consists of 100,000,000 shares
of common stock, par value $.001 per share. Midland has not authorized the
issuance of shares of preferred stock.
 
     Vista. Vista's authorized capital stock consists of 60,000,000 shares,
divided into 50,000,000 shares of common stock, par value $.01 per share, and
10,000,000 shares of preferred stock, par value $.01 per share.
 
VOTING
 
     Midland. Each share of Midland Common Stock entitles the holder to one vote
on each matter submitted to stockholders.
 
     Vista. Each share of Vista Common Stock entitles the holder to one vote on
each matter submitted to stockholders. Each share of Vista Preferred Stock, when
and if designated and issued, will entitle the holder to such voting rights as
shall be specified in the certificate of designations establishing such shares.
 
SPECIAL MEETINGS OF STOCKHOLDERS
 
     Midland. The Midland Bylaws provide that a special meeting of stockholders
may be called by the chairman of the Midland Board, the president, any one of
the directors or the holders of not less than one-tenth of all the shares having
voting power at such meeting.
 
     Vista. The Vista Bylaws provide that a special meeting of stockholders may
be called only by the Vista Board.
 
DIRECTORS
 
     Midland. The Midland Bylaws provide that the number of directors shall be
not less than three nor more than 11. The exact number of directors shall be
five until changed, within the preceding limits, by resolutions amending such
exact number, duly adopted by at least 75% of the entire Midland Board, or the
affirmative vote of the stockholders holding a majority of the shares entitled
to vote on the election of directors; and provided that no decrease shall effect
a shortening of the term of any incumbent director. The stockholders do not have
the right to cumulate their votes in the election of directors.
 
     Vista. The Vista Charter provides for a Board of Directors consisting of a
number of members to be determined by the resolution of the Board of Directors,
but will in no event be less than two or more than 21. The stockholders do not
have the right to cumulate their votes in the election of directors.
 
REMOVAL OF DIRECTORS
 
     Midland. The Midland Bylaws provide that at any special meeting called for
such purpose, any director or the entire Board of Directors may be removed from
office, with or without cause, by the affirmative vote of a majority of the
shares present in person or by proxy and entitled to vote at such meeting.
 
     Vista. The Vista Bylaws provide that a director may be removed only for
cause and by an affirmative vote of a majority of the shares entitled to vote
thereon cast at the annual meeting of the stockholders or any special meeting of
stockholders called expressly for that purpose by a majority of the members of
the Board of Directors serving at the time of that vote.
 
VACANCIES ON THE BOARD OF DIRECTORS
 
     Midland. The Midland Bylaws provide that any vacancy occurring in the Board
of Directors may be filled by the vote of a majority of the remaining directors,
though less than a quorum. A director elected to fill a vacancy shall be elected
for the unexpired term of his predecessor in office. Any position on the Board
of Directors to be filled by reason of an increase in the number of directors
shall be filled by the vote of a majority of the directors, election at an
annual meeting of the stockholders, or at a special meeting of stockholders,
duly
 
                                       110
<PAGE>   114
 
called for such purpose, provided that the Board of Directors may fill no more
than two such directorships between any two successive annual meetings of the
stockholders.
 
     Vista. The Vista Bylaws provide that any vacancy occurring in the Board of
Directors or any directorship to be filled by reason of an increase in the
number of directors may be filled (a) by no less than a majority of the
remaining directors then in office, though less than a quorum, for a term of
office continuing only until the next election of one or more directors by the
stockholders or (b) by election at an annual or special meeting of stockholders
called for that purpose.
 
MERGERS AND OTHER FUNDAMENTAL TRANSACTIONS
 
     Midland. The TBCA generally requires that a merger, consolidation, sale of
all or substantially all of the assets or dissolution of a corporation be
approved by the holders of at least two-thirds of the outstanding shares of
stock entitled to vote, unless such corporation's articles of incorporation
provide otherwise. The Midland Charter contains no such provision; therefore,
the TBCA provision described above applies to Midland.
 
     Vista. Under the DGCL, mergers, consolidations or sales of substantially
all of the assets or dissolution of a corporation generally must be approved by
the holders of at least a majority of all outstanding shares of stock entitled
to vote, unless the certificate of incorporation requires approval by a greater
number of shares of stock. The Vista Charter contains no such provision;
therefore, the DGCL provision described above applies to Vista.
 
AMENDMENTS TO CERTIFICATE OF INCORPORATION
 
     Midland. Article 4.02 of the TBCA provides that an amendment to a
corporation's articles of incorporation must be approved by the board of
directors and by the affirmative vote of holders of at least two-thirds of the
outstanding shares entitled to vote, unless the corporation's articles of
incorporation provide otherwise. The Midland Charter contains no such provision,
therefore, the TBCA provision described above applies to Midland.
 
     Vista. Section 242 of the DGCL provides that an amendment to a
corporation's certificate of incorporation must be approved by the board of
directors and by the affirmative vote of the holders of at least a majority of
the outstanding stock entitled to vote thereon. The Vista Charter contains no
such provision, therefore, the DGCL provision described above applies to Vista.
 
AMENDMENTS TO BYLAWS
 
     Midland. The Midland Bylaws provide that the Midland Bylaws may be altered,
amended or repealed, or new bylaws may be adopted, by the Midland Board at any
duly held meeting or by the holders of a majority of the shares represented at
any duly held meeting of stockholders.
 
     Vista. The Vista Bylaws provide that the Vista Bylaws may be amended or
repealed, or new bylaws may be adopted, by the affirmative vote of a majority of
the directors present at any meeting of the Vista Board at which a quorum is
present or by unanimous written consent of all the directors, unless (a) by
statute or the Vista Charter the power is reserved exclusively to the
stockholders in whole or in part, or (b) the stockholders in amending, repealing
or adopting a particular bylaw expressly provide that the Vista Board may not
amend or repeal that bylaw. Notwithstanding any provision of law that might
otherwise permit lesser or no vote, but in addition to any affirmative vote of
the holders of any particular class or series of the capital stock of Vista
required by law or by the Vista Charter, the Vista Bylaws shall not be altered,
amended or repealed by the stockholders of Vista except in accordance with the
Vista Bylaws and by the vote of the holders of not less than a majority in
voting power of the outstanding shares of stock then entitled to vote upon the
election of directors, voting together as a single class.
 
                                       111
<PAGE>   115
 
                               DISSENTERS' RIGHTS
 
     Under Texas law, holders of Midland Common Stock will not be entitled to
any dissenter's rights in connection with the Merger. Section 5.11 of the Texas
Business Corporation Act provides that stockholders have the right to dissent
from any plan of merger that requires stockholder approval. Notwithstanding the
foregoing, however, Section 5.11 provides that a stockholder shall not have the
right to dissent from a plan of merger if (i) the stockholder is not required to
accept for the stockholder's shares any consideration that is different from the
consideration to be provided to any other stockholder and (ii) the stockholder
will receive as consideration shares of stock that are listed, or authorized for
listing upon official notice of issuance, on a national securities exchange.
 
                                 LEGAL MATTERS
 
     The validity of the Vista Common Stock be to issued in the Merger has been
passed upon for Vista by Vinson & Elkins L.L.P., Dallas, Texas.
 
                                  TAX OPINION
 
     Arthur Andersen LLP will issue an opinion to Midland regarding the federal
income tax consequences of the Merger.
 
                                    EXPERTS
 
     The consolidated balance sheets of Midland as of December 31, 1997 and
1996, and the consolidated statements of operations, stockholders' equity and
cash flows for each of the years then ended, have been included herein in
reliance on the report of Grant Thornton LLP, independent public accountants,
given on the authority of that firm as experts in auditing and accounting.
 
     The consolidated financial statements for the year ended December 31, 1995
of Midland included in this Proxy Statement/Prospectus have been audited by
Ernst & Young LLP, independent auditors, as indicated in their report with
respect thereto, and are included herein in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
 
     The Consolidated Financial Statements of the Vista Partnership included in
this Proxy Statement/ Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
 
     The estimates of Midland's proved reserves as of December 31, 1997 set
forth in this Proxy Statement/ Prospectus are based upon a reserve report
prepared by Williamson Petroleum Consultants, Inc., independent petroleum
consultants, and are included herein upon the authority of such firm as experts
with respect to such matters covered by such report.
 
                             STOCKHOLDER PROPOSALS
 
     Midland will not hold a 1998 annual meeting of stockholders unless the
Merger is not consummated. If the Merger is consummated, stockholders of Vista
may submit proposals to be included in Vista's proxy materials and considered
for stockholder approval
 
                                       112
<PAGE>   116
 
                               GLOSSARY OF TERMS
 
     The following are abbreviations and definitions of certain terms commonly
used in the oil and gas industry in this Proxy Statement/Prospectus.
 
     "Bbl" means a barrel of oil and condensate or natural gas liquids.
 
     "Bcf" means billion cubic feet of natural gas.
 
     "BOE" means one barrel of oil equivalent.
 
     "Condensate" means a hydrocarbon mixture that becomes liquid and separates
from natural gas when the gas is produced and is similar to crude oil.
 
     "Development well" means a well drilled within the proved area of an oil
and gas reservoir to the depth of a stratigraphic horizon known to be
productive.
 
     "Gross," when used with respect to acres or wells, refers to the total
acres or wells in which Midland or the Vista Partnership has a working interest.
 
     "Infill Drilling" means drilling of an additional well or additional wells
in order to more adequately drain a reservoir.
 
     "MBbls" means thousands of barrels of oil.
 
     "Mcf" means thousand cubic feet of natural gas.
 
     "MMBbls" means millions of barrels of oil.
 
     "MMBOE" means millions of barrels of oil equivalents.
 
     "MMBtu" means one million "British Thermal Units," which means the quantity
of heat required to raise the temperature of one pound of water by one degree
Fahrenheit.
 
     "MMcf" means million cubic feet of natural gas.
 
     "Net," when used with respect to acres or wells, refers to gross acres of
wells multiplied, in each case, by the percentage working interest owned by
Midland or the Vista Partnership, as the case may be.
 
     "Net production" means production that is owned by Midland or the Vista
Partnership, as the case may be, less royalties and production due others.
 
     "Oil" means crude oil or condensate.
 
     "Oil equivalents" means a volume, expressed in Bbls of oil, that includes
not only oil but also natural gas and natural gas liquids converted to an
equivalent quantity of oil on an energy equivalent basis. Equivalent oil
reserves are based on the conversion factor of 6 Mcf of gas per barrel of
liquids.
 
     "Operator" means the individual or company responsible for the exploration,
development and production of an oil or gas well or lease.
 
     "Proved developed reserves" means reserves that can be expected to be
recovered through existing wells with existing equipment and operating methods.
Additional oil and gas expected to be obtained through the application of fluid
injection or other improved recovery techniques for supplementing the natural
forces and mechanisms of primary recovery will be included as "proved developed
reserves" only after testing by a pilot project or after the operation of an
installed program has confirmed through production response that increased
recovery will be achieved.
 
     "Proved reserves" means the estimated quantities of crude oil, natural gas
and natural gas liquids that geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions (i.e., prices and costs as of
the date the
 
                                       113
<PAGE>   117
 
estimate is made). Prices include consideration of changes in existing prices
provided by contractual arrangements, but not on escalation based upon future
conditions.
 
          i. Reservoirs are considered proved if economic productivity is
     supported by either actual production or conclusive formation test. The
     area of a reservoir considered proved includes (A) that portion delineated
     by drilling and defined by gas-oil and/or oil-water contacts, if any; and
     (B) the immediately adjoining portions not yet drilled, but which can be
     reasonably judged as economically productive on the basis of available
     geological and engineering data. In the absence of information on fluid
     contacts, the lowest known structural occurrence of hydrocarbons controls
     the lower proved limit of the reservoir.
 
          ii. Reserves that can be produced economically through application of
     improved recovery techniques (such as fluid injection) are included in the
     "proved" classification when successful testing by a pilot project, or the
     operation of an installed program in the reservoir, provides support for
     the engineering analysis on which the project or program was based.
 
          iii. Estimates of proved reserves do not include the following: (A)
     oil that may become available from known reservoirs but is classified
     separately as "indicated additional reserve"; (B) crude oil, natural gas
     and natural gas liquids, the recovery of which is subject to reasonable
     doubt because of uncertainty as to geology, reservoir characteristics or
     economic factors; (C) crude oil, natural gas and natural gas liquids that
     may occur in undrilled prospects; and (D) crude oil, natural gas and
     natural gas liquids that may be recovered from oil shales, coal, gilsonite
     and other such sources.
 
     "Proved undeveloped reserves" means reserves that are expected to be
recovered from new wells on undrilled acreage, or from existing wells where a
relatively major expenditure is required for recompletion. Reserves on undrilled
acreage is limited to those drilling units offsetting productive units that are
reasonably certain of production when drilled. Proved reserves for other
undrilled units can be claimed only where it can be demonstrated with certainty
that there is continuity of production from the existing productive formation.
Under no circumstances are estimates for proved undeveloped reserves
attributable to any acreage for which an application of fluid injection or other
improved recovery technique is contemplated, unless such techniques have been
proved effective by actual tests in the area and in the same reservoir.
 
     "Reserves" means proved reserves.
 
     "Royalty" means an interest in an oil and gas lease that gives the owner of
the interest the right to receive a portion of the production from the leased
acreage (or of the proceeds of the sale thereof), but generally does not require
the owner to pay any portion of the costs of drilling or operating the wells on
the leased acreage. Royalties may be either landowner's royalties, which are
reserved by the owner of the leased acreage at the time the lease is granted, or
overriding royalties, which are usually reserved by the owner of the leasehold
in connection with a transfer to a subsequent owner.
 
     "SEC PV10" means the present value of estimated future revenues to be
generated from the production of proved reserves calculated in accordance with
Commission guidelines, net of estimated production and future development costs,
using prices and costs as of the date of estimation without future escalation,
except as otherwise provided by contract, 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%.
 
     "3-D seismic" means seismic data that are acquired and processed to yield a
three-dimensional picture of the subsurface.
 
     "Working interest" means an interest in an oil and gas lease that gives the
owner of the interest the right to drill for and produce oil and gas on the
leased acreage and requires the owner to pay a share of the costs of drilling
and production operations. The share of production to which a working interest
owner is entitled will always be smaller than the share of costs that the
working interest owner is required to bear, with the balance of the production
accruing to the owners of royalties. For example, the owner of a 100% working
interest in a lease burdened only by a landowner's royalty of 12.5% would be
required to pay 100% of the costs of a well but would be entitled to retain only
87.5% of the production.
                                       114
<PAGE>   118
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
        (THE INFORMATION AND AMOUNTS FOR INTERIM PERIODS ARE UNAUDITED.)
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
VISTA ENERGY RESOURCES, INC. AND SUBSIDIARIES:
  Report of Independent Public Accountants..................  F-2
  Consolidated Balance Sheets as of March 31, 1998 and
     December 31, 1997 and 1996.............................  F-3
  Consolidated Statements of Operations for the three months
     ended March 31, 1998 and 1997 and the years ended
     December 31, 1997 and 1996 and the period from
     inception (September 21, 1995) to December 31, 1995....  F-4
  Consolidated Statements of Owners' Equity for the three
     months ended March 31, 1998 and the years ended
     December 31, 1997 and 1996 and the period from
     inception (September 21, 1995) to December 31, 1995....  F-5
  Consolidated Statements of Cash Flows for the three months
     ended March 31, 1998 and 1997 and the years ended
     December 31, 1997 and 1996 and the period from
     inception (September 21, 1995) to December 31, 1995....  F-6
  Notes to Consolidated Financial Statements................  F-7
MIDLAND RESOURCES, INC. AND SUBSIDIARIES:
  Report of Independent Certified Public Accountants........  F-17
  Report of Independent Auditors............................  F-18
  Consolidated Balance Sheets as of March 31, 1998 and
     December 31, 1997 and 1996.............................  F-19
  Consolidated Statements of Operations for the three months
     ended March 31, 1998 and 1997 and the years ended
     December 31, 1997, 1996 and 1995.......................  F-20
  Consolidated Statements of Stockholders' Equity for the
     quarter ended March 31, 1998 and the years ended
     December 31, 1997, 1996, 1995 and 1994.................  F-21
  Consolidated Statements of Cash Flows for the three months
     ended March 31, 1998 and 1997 and the years ended
     December 31, 1997, 1996 and 1995.......................  F-22
  Notes to Consolidated Financial Statements................  F-23
</TABLE>
 
                                       F-1
<PAGE>   119
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
     After the conversion transaction discussed in Note 1 to Vista Energy
Resources, Inc.'s consolidated financial statements is effected, we expect to be
in a position to render the following audit report.
 
                                            Arthur Andersen LLP
                                            July 2, 1998
 
To the Board of Directors of
Vista Energy Resources, Inc.:
 
     We have audited the accompanying consolidated balance sheets of Vista
Energy Resources, Inc. as of December 31, 1997 and 1996, and the related
consolidated statements of operations, owners' equity, and cash flows for the
years ended December 31, 1997 and 1996, and for the period from inception
(September 21, 1995), to December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
 
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Vista Energy Resources, Inc. as of December 31, 1997 and 1996, and the results
of its operations and its cash flows for the years ended December 31, 1997 and
1996, and for the period from inception (September 21, 1995), to December 31,
1995, in conformity with generally accepted accounting principles.
 
Dallas, Texas
 
                                       F-2
<PAGE>   120
 
                          VISTA ENERGY RESOURCES, INC.
 
                          CONSOLIDATED BALANCE SHEETS
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                       MARCH 31,     --------------------------
                                                         1998           1997           1996
                                                      -----------    -----------    -----------
                                                      (UNAUDITED)
<S>                                                   <C>            <C>            <C>
CURRENT ASSETS:
  Cash and cash equivalents........................   $   316,566    $   527,129    $   517,211
  Accounts receivable
     Oil and gas sales.............................       703,206      1,113,302        811,404
     Trade.........................................       118,334        136,633         72,936
  Other............................................        63,704         83,519         72,925
                                                      -----------    -----------    -----------
                                                        1,201,810      1,860,583      1,474,476
                                                      -----------    -----------    -----------
PROPERTY AND EQUIPMENT:
  Oil and gas properties, based on successful
     efforts accounting............................    28,610,607     27,943,634     15,861,035
  Other............................................       377,461        373,258        134,199
                                                      -----------    -----------    -----------
                                                       28,988,068     28,316,892     15,995,234
                                                      -----------    -----------    -----------
  Less accumulated depreciation, depletion and
     amortization..................................    (3,925,139)    (3,446,126)    (1,472,032)
                                                      -----------    -----------    -----------
     Property and equipment, net...................    25,062,929     24,870,766     14,523,202
                                                      -----------    -----------    -----------
OTHER ASSETS.......................................       288,809        304,754        261,662
                                                      -----------    -----------    -----------
                                                      $26,553,548    $27,036,103    $16,259,340
                                                      ===========    ===========    ===========
 
LIABILITIES AND OWNERS' EQUITY
 
CURRENT LIABILITIES:
  Accounts payable and accrued expenses............   $ 1,011,700    $ 1,439,451    $   860,810
                                                      -----------    -----------    -----------
                                                        1,011,700      1,439,451        860,810
                                                      -----------    -----------    -----------
LONG-TERM DEBT.....................................    17,900,000     17,900,000      8,615,077
COMMITMENTS AND CONTINGENCIES......................            --             --             --
OWNERS' EQUITY.....................................     7,641,848      7,696,652      6,783,453
                                                      -----------    -----------    -----------
                                                      $26,553,548    $27,036,103    $16,259,340
                                                      ===========    ===========    ===========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-3
<PAGE>   121
 
                          VISTA ENERGY RESOURCES, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                                    FOR THE PERIOD
                               THREE MONTHS ENDED                                   FROM INCEPTION
                                    MARCH 31,          YEAR ENDED DECEMBER 31,   (SEPTEMBER 21, 1995)
                             -----------------------   -----------------------     TO DECEMBER 31,
                                1998         1997         1997         1996              1995
                             ----------   ----------   ----------   ----------   --------------------
                                   (UNAUDITED)
<S>                          <C>          <C>          <C>          <C>          <C>
REVENUES:
  Oil and gas sales........  $2,054,168   $2,107,166   $8,874,961   $5,537,720        $1,348,647
                             ----------   ----------   ----------   ----------        ----------
          Total revenues...   2,054,168    2,107,166    8,874,961    5,537,720         1,348,647
                             ----------   ----------   ----------   ----------        ----------
COSTS AND EXPENSES:
  Lease operating..........     986,728      903,313    3,688,695    2,544,567           728,540
  Exploration costs........          --       43,575       97,211      273,843
  Depreciation, depletion
     and amortization......     494,958      417,168    2,169,098    1,272,316           308,132
  General and
     administrative........     307,955      226,445      987,020      581,048           208,509
  Amortization of unit
     option
     awards................     166,849           --      315,518           --                --
                             ----------   ----------   ----------   ----------        ----------
          Total costs and
            expenses.......   1,956,490    1,590,501    7,257,542    4,671,774         1,245,181
                             ----------   ----------   ----------   ----------        ----------
          Operating
            income.........      97,678      516,665    1,617,419      865,946           103,466
                             ----------   ----------   ----------   ----------        ----------
  Interest expense.........     343,452      180,542    1,048,009      476,363            77,093
  Other income, net........      24,121      (97,289)      28,271        4,699            33,684
                             ----------   ----------   ----------   ----------        ----------
NET INCOME (LOSS)
  BEFORE TAXES.............    (221,653)     238,834      597,681      394,282            60,057
                             ----------   ----------   ----------   ----------        ----------
  Pro forma benefit
     (provision) for
     taxes.................      77,578      (82,307)    (211,720)    (139,284)          (21,190)
                             ----------   ----------   ----------   ----------        ----------
PRO FORMA NET INCOME
  (LOSS)...................  $ (144,075)  $  156,527   $  385,961   $  254,998        $   38,867
                             ==========   ==========   ==========   ==========        ==========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-4
<PAGE>   122
 
                          VISTA ENERGY RESOURCES, INC.
 
                   CONSOLIDATED STATEMENTS OF OWNERS' EQUITY
 
<TABLE>
<S>                                                           <C>
BALANCE, September 21, 1995.................................  $       --
  Net income before taxes...................................      60,057
  Contributions.............................................   6,329,114
                                                              ----------
BALANCE, December 31, 1995..................................   6,389,171
  Net income before taxes...................................     394,282
                                                              ----------
BALANCE, December 31, 1996..................................   6,783,453
  Net income before taxes...................................     597,681
  Unit option awards........................................     315,518
                                                              ----------
BALANCE, December 31, 1997..................................   7,696,652
  Net loss before taxes (unaudited).........................    (221,653)
                                                              ----------
  Unit option awards (unaudited)............................     166,849
                                                              ----------
BALANCE, March 31, 1998 (unaudited).........................  $7,641,848
                                                              ==========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-5
<PAGE>   123
 
                          VISTA ENERGY RESOURCES, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                                       FOR THE PERIOD
                                               THREE MONTHS ENDED                                      FROM INCEPTION
                                                    MARCH 31,           YEAR ENDED DECEMBER 31,     (SEPTEMBER 21, 1995)
                                             -----------------------   --------------------------     TO DECEMBER 31,
                                               1998         1997           1997          1996               1995
                                             ---------   -----------   ------------   -----------   --------------------
                                                   (UNAUDITED)
<S>                                          <C>         <C>           <C>            <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss) before taxes...........  $(221,653)  $   238,834   $    597,681   $   394,282       $    60,057
  Adjustments to reconcile net income
    before taxes to cash provided by
    operating activities
    Depreciation, depletion and
       amortization........................    494,858       417,168      2,169,098     1,272,316           308,132
    Amortization of unit option awards.....    166,849            --        315,518            --                --
    Exploration costs......................         --            --         97,211       273,843                --
    Loss on sale of property...............         --            --         87,678        56,738                --
  Changes in working capital
    Decrease (increase) in accounts
       receivable..........................    428,395       127,228       (365,595)     (385,771)         (199,307)
    Increase in prepaid expenses...........     19,815        21,879        (10,594)      (24,120)          (48,805)
    Decrease (increase) in accounts
       payable.............................   (287,046)      128,928        468,832       324,665               548
    Decrease (increase) accrued expenses...   (140,705)     (166,713)       109,809       160,696            75,253
                                             ---------   -----------   ------------   -----------       -----------
         Net cash provided by operating
           activities......................    460,513       767,324      3,469,638     2,072,649           195,878
                                             ---------   -----------   ------------   -----------       -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property and equipment......   (671,176)   (2,041,457)   (13,038,815)   (7,417,091)       (7,720,478)
  Proceeds from sales of property and
    equipment..............................        100        14,942        390,000       390,371
  Payment of organization costs............         --            --             --       (20,000)         (264,362)
                                             ---------   -----------   ------------   -----------       -----------
         Net cash used in investing
           activities......................   (671,076)   (2,026,515)   (12,648,815)   (7,046,720)       (7,984,840)
                                             ---------   -----------   ------------   -----------       -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Partner contributions....................         --            --             --            --         5,060,000
  Payment of borrowings....................         --            --             --            --          (394,833)
  Proceeds from issuance of debt...........         --       984,923      9,703,572     5,415,077         3,600,000
  Repayments of debt.......................         --            --       (418,649)     (400,000)
  Payments of debt issuance cost...........         --            --        (95,828)           --                --
                                             ---------   -----------   ------------   -----------       -----------
         Net cash provided by financing
           activities......................         --       984,923      9,189,095     5,015,077         8,265,167
                                             ---------   -----------   ------------   -----------       -----------
NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS..............................   (210,563)     (274,268)         9,918        41,006           476,205
CASH AND CASH EQUIVALENTS:
  Beginning of period......................    527,129       517,211        517,211       476,205                --
                                             ---------   -----------   ------------   -----------       -----------
  End of period............................  $ 316,566   $   242,943   $    527,129   $   517,211       $   476,205
                                             =========   ===========   ============   ===========       ===========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       F-6
<PAGE>   124
 
                          VISTA ENERGY RESOURCES, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       DECEMBER 31, 1997, 1996, AND 1995
1. ORGANIZATION:
 
  Organization
 
     Vista Energy Resources, Inc. ("Vista" or the "Company") was incorporated in
Delaware in May 1998 for the purpose of consolidating and continuing the
activities previously conducted by Vista Resources Partners, L.P., a Texas
limited partnership (the "Partnership"). The Partnership was formed on September
21, 1995, for the purpose of acquiring interests in and further developing oil
and natural gas properties ("Properties").
 
     Vista Resources I, Inc., a Texas corporation (the "General Partner"),
served as the sole general partner of the Partnership. Vista Resources, Inc., a
Texas corporation and a wholly owned subsidiary of the Company (the "Operator"),
serves as the operator of Properties in which the Company acquires or otherwise
owns operating working interests.
 
     Pursuant to the terms of an Exchange Agreement dated June 15, 1998 (the
"Exchange Agreement"), the Company will acquire all of the outstanding
partnership interests of the Partnership and all of the outstanding shares of
the General Partner in exchange for shares of Common Stock of the Company (the
"Conversion"). The Conversion and other transactions contemplated by the
Exchange Agreement will be consummated immediately prior to the closing of the
merger (the "Merger") with Midland Resources, Inc. ("Midland"). The Conversion
will be accounted for as a transfer of assets and liabilities between affiliates
under common control and will result in no change in carrying values of these
assets and liabilities.
 
     The accompanying consolidated financial statements include the balances and
results of operations associated with the Company, the Partnership and its
wholly owned subsidiary, Vista Resources, Inc., as of December 31, 1997, and
1996 and for the years ended December 31, 1997 and 1996, and the period from
inception (September 21, 1995), to December 31, 1995. All significant
intercompany transactions and balances have been eliminated in preparation of
the consolidated financial statements.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
  Use of Estimates
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities 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.
 
  Cash and Cash Equivalents
 
     All highly liquid investments with original maturities of three months or
less are considered to be cash equivalents.
 
  Oil and Gas Properties
 
     The Company follows the successful efforts method of accounting for its oil
and gas properties whereby costs of productive wells, developmental dry holes,
and productive leases are capitalized and amortized on a unit-of-production
basis over the respective properties' remaining proved reserves. Amortization of
capitalized costs of oil and gas properties is provided on a
prospect-by-prospect basis.
 
     Leasehold costs are capitalized when incurred. Unproved oil and gas
properties with significant acquisition costs are periodically assessed and any
impairment in value is charged to exploration costs. The
                                       F-7
<PAGE>   125
                          VISTA ENERGY RESOURCES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
costs of unproved properties which are not individually significant are assessed
periodically in the aggregate based on historical experience, and any impairment
in value is charged to exploration costs. The Company recorded $97,211, $273,843
and $0 of such impairments in 1997, 1996 and 1995, respectively. The costs of
unproved properties which are determined to be productive are transferred to
proved oil and gas properties.
 
     Exploration costs, such as geological and geophysical expenses and annual
delay rentals, are charged to expense as incurred. Exploratory drilling costs,
if any, including the costs, if any, including the cost of stratigraphic test
wells, are initially capitalized but charged to expense if and when the well is
determined to be unsuccessful.
 
     The Company has adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." SFAS No. 121 requires that proved
oil and gas properties be assessed for an impairment in their carrying value
whenever events or changes in circumstances indicate that such carrying value
may not be recoverable. SFAS No. 121 requires that this assessment be performed
by comparing the future net cash flows and net carrying value of oil and gas
properties. This assessment must generally be performed on a property by
property basis. No such impairment of the carrying value of oil and gas
properties was required in 1997, 1996 or 1995.
 
  Other Property and Equipment
 
     Other property and equipment are comprised of furniture, fixtures and
automobiles. These items are amortized on a straight-line basis over their
estimated useful lives, which range from five to seven years.
 
  Other Assets
 
     Other assets are primarily comprised of organization costs and deferred
debt issuance costs and are presented net of accumulated amortization in the
financial statements. Organization costs are being amortized on a straight-line
basis over five years. Debt issuance costs are amortized over the life of the
related debt agreements.
 
  Income Taxes
 
     Prior to the Conversion, the results of operations of the Company were
included in the tax returns of its owners. As a result, tax strategies were
implemented that are not necessarily reflective of strategies the Company would
have implemented. In addition, the tax net operating losses generated by the
Company during the period from its inception to date of the Conversion will not
be available to the Company to offset future taxable income as such benefit
accrued to the owners.
 
     In conjunction with the Conversion, the Company will adopt SFAS No. 109,
"Accounting for Income Taxes," which provides for determining and recording
deferred income tax assets or liabilities based on temporary differences between
the financial statement carrying amounts and the tax bases of assets and
liabilities using enacted tax rates. SFAS No. 109 requires that the net deferred
tax liabilities of the Company on the date of the Conversion be recognized as a
component of income tax expense. The Company will be required to recognize
approximately $930,000 in deferred tax liabilities and income tax expense on the
date of the Conversion.
 
     Upon the Conversion, the Company will become taxable as a corporation. Pro
forma income tax information for the years ended December 31, 1997 and 1996 and
for the period from inception (September 21, 1995) to December 31, 1995,
presented in the accompanying consolidated statements of operations and in Note
7, reflects the income tax expense (benefit) and net income (loss) as if all
Partnership income had been subject to corporate federal income tax, exclusive
of the effects of recording the Company's net deferred tax liabilities upon the
Conversion.
                                       F-8
<PAGE>   126
                          VISTA ENERGY RESOURCES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Statement of Cash Flows
 
     Cash paid for interest for the years ended December 31, 1997 and 1996 and
for the period from inception (September 21, 1995) to December 31, 1995 was
$702,251, $240,414 and $1,840, respectively.
 
  Interim Financial Information
 
     In the opinion of the Company, the accompanying consolidated financial
statements as of and for the three month periods ended March 31, 1998 and 1997,
which have not been audited by independent public accountants, contain all
adjustments necessary to present fairly the Company's consolidated financial
position, the results of its operations and its cash flows for the periods
reported. The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions are eliminated. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. Certain prior
amounts have been reclassified to conform to 1998 presentation. It is suggested
that these consolidated financial statements be read in conjunction with the
consolidated financial statements and footnotes thereto included herein. The
results of operations for the three months ended March 31, 1998 and 1997 are not
necessarily indicative of the results to be expected for a full year.
 
  Other
 
     Certain amounts in the prior periods' financial statements have been
reclassified to conform with the current year presentation.
 
3. SIGNIFICANT ACQUISITIONS OF OIL AND GAS PROPERTIES AND OTHER ASSETS:
 
  1997 Acquisitions
 
     In addition to acquiring various additional small working interests and
overriding royalty interests in properties already owned and operated by the
Company, the Company closed two significant producing property acquisitions in
1997. In May 1997, the Company acquired all of the interests of Coastal Oil and
Gas Corporation in three producing leases located in the Howard Glasscock Field,
Howard County, Texas, for a net purchase price of $1,110,920. The interests
acquired were attributable to leases in which the Company already owned
interests and which were operated by the Operator. Effective as of July 1, 1997,
the Company acquired substantially all of the producing oil and gas properties
(representing working interests ranging from 25% to 100% in approximately 44
wells located in West Texas, South Texas, East Texas and Southeastern New
Mexico) from E.G. Operating, a division of FGL, Inc., for a net purchase price
of $6,088,073. All of the Company's 1997 acquisitions were funded through a
combination of proceeds from long-term borrowings and cash on hand.
 
  1996 Acquisitions
 
     In addition to acquiring various additional small working interest in oil
and gas properties already owned and operated by the Company, the Company closed
two significant producing property acquisitions in 1996. Effective as of June 1,
1996, the Company acquired 100% of the working interest in two producing leases
(14 wells) located in the Sharon Ridge Field, Scurry County, Texas, for a net
purchase price of $446,798. Effective as of July 1, 1996, the Company acquired
producing oil and gas properties (representing working interests ranging from
1.4% to 100% in approximately 137 wells located in West Texas and Southeastern
New Mexico) from Merit Energy Company and certain of its partnership affiliates
for a net purchase price of $4,149,754. All of the Company's 1996 acquisitions
were funded through a combination of proceeds from long-term borrowings and cash
provided by operating activities.
 
                                       F-9
<PAGE>   127
                          VISTA ENERGY RESOURCES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  1995 Acquisitions
 
     Effective September 27, 1995, the Company acquired assets comprised
primarily of producing oil and gas properties from J. McShane, Inc. and certain
of its affiliates and co-working interest owners for total consideration of
$7,497,727. The oil and gas assets acquired represent interests in approximately
170 producing wells primarily in the Permian Basin of West Texas and
Southeastern New Mexico. The acquisition was funded through a combination of
capital contributions and proceeds from long-term borrowings.
 
     The 1997, 1996, and 1995 acquisitions were accounted for utilizing the
purchase method of accounting. The accompanying consolidated statements of
operations include the results of operations from the acquired properties
beginning on the dates that the acquisitions were closed. The following table
summarizes the unaudited pro forma effect on the Company's consolidated
statements of operations as if the acquisitions consummated in 1997 had been
closed on January 1, 1997. Future results may differ substantially from pro
forma due to changes in prices received for oil and gas sold, production
declines and other factors. Therefore, the pro forma amounts should not be
considered indicative of future operations.
 
<TABLE>
<CAPTION>
                                                             1997
                                                           PRO FORMA
                                                          -----------
                                                          (UNAUDITED)
<S>                                                       <C>
Total Revenues..........................................  $10,385,936
                                                          ===========
Operating Income........................................  $ 2,621,363
                                                          ===========
</TABLE>
 
4. SALE OF OIL AND GAS PROPERTIES:
 
     During 1997, the Company sold certain oil and gas properties for a total
net consideration of $390,000, which resulted in a book loss of $87,678. During
1996, the Company sold certain oil and gas properties for total net
consideration of $390,371, which resulted in a book loss of $56,738. The Company
sold no oil and gas properties in 1995.
 
5. OIL AND GAS PRODUCING ACTIVITIES:
 
     Set forth below is certain information regarding the aggregate capitalized
costs of oil and gas properties and costs incurred in oil and gas property
acquisition, development and exploration activities:
 
  Capitalized Costs
 
<TABLE>
<CAPTION>
                                                                AS OF DECEMBER 31,
                                                            --------------------------
                                                               1997           1996
                                                            -----------    -----------
<S>                                                         <C>            <C>
Proved properties.........................................  $27,797,268    $15,733,964
Unproved properties.......................................      146,366        127,071
Accumulated depreciation, depletion and amortization......   (3,396,901)    (1,444,887)
                                                            -----------    -----------
                                                            $24,546,733    $14,416,148
                                                            ===========    ===========
</TABLE>
 
                                      F-10
<PAGE>   128
                          VISTA ENERGY RESOURCES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Costs Incurred
 
<TABLE>
<CAPTION>
                                                                           PERIOD FROM
                                                                            INCEPTION
                                            YEAR ENDED DECEMBER 31,    (SEPTEMBER 21, 1995)
                                            ------------------------     TO DECEMBER 31,
                                               1997          1996              1995
                                            -----------   ----------   --------------------
<S>                                         <C>           <C>          <C>
Property acquisitions:
  Proved properties.......................  $ 7,217,464   $4,840,602        $8,664,889
  Unproved properties.....................       19,295           --           397,522
Development costs.........................    5,381,429    2,433,838           138,581
Exploration costs.........................      176,792      359,763                --
                                            -----------   ----------        ----------
                                            $12,794,980   $7,634,203        $9,200,992
                                            ===========   ==========        ==========
</TABLE>
 
6. LONG-TERM DEBT:
 
     As of December 31, 1997, $17,900,000 was outstanding under a $50,000,000
revolving line of credit note (the "Note") with Union Bank of California ("Union
Bank") subject to a borrowing base which is redetermined on a semi-annual basis
beginning April 1, 1998. The Credit Agreement pursuant to which the Note was
originally issued was amended effective as of August 15, 1997 (as further
amended from time to time, the "Credit Agreement"), to, among other things,
provide for an increase in the facility amount of the Credit Agreement from
$15,000,000 to $50,000,000. The borrowing base at December 31, 1997, was
$19,000,000. Borrowings under the Note are to be used for the acquisition and
development of Properties and for other Company purposes.
 
     The Company has two options with respect to interest rate elections on
borrowings under the Note. The Company may either elect an interest rate equal
to (i) Union Bank's reference rate plus 35 basis points ("Prime Basis") or (ii)
a Eurodollar rate (i.e., London Interbank Offered Rate) plus 175 basis points
(if amounts outstanding are 50% or less of the then current borrowing base), in
either case, as adjusted for Union Bank's Reserve Percentage under Regulation D
of the Board of Governors of the Federal Reserve System with respect to
Eurocurrency liabilities ("LIBOR Basis"). The LIBOR Basis option provides for
one-, two-, three-or six-months periods. At year end the Company had the
following amounts outstanding:
 
<TABLE>
<CAPTION>
AMOUNT                                 RATE ELECTION     RATE              TERM
------                                 -------------    -------    --------------------
<S>                                    <C>              <C>        <C>
$4,500,000.........................    LIBOR Basis      7.59375%   10/01/97 to 03/31/98
$5,100,000.........................    LIBOR Basis      7.65234%   11/29/97 to 05/28/98
$7,900,000.........................    LIBOR Basis      7.56250%   08/20/97 to 02/19/98
$400,000...........................    Prime Basis      8.85000%      Not Applicable
</TABLE>
 
     As of December 31, 1997, the Company had accrued interest thereunder of
$345,758.
 
     Unless otherwise extended by Union Bank, the Note converts to a three-year
fully amortizing term loan at March 31, 1999.
 
     The obligations of the Company under the Credit Agreement and Note are
secured by a first lien deed of trust on the Company's interests in certain of
its Properties.
 
     The Credit Agreement includes covenants which, among other things, restrict
the incurrence of additional indebtedness and the sale or acquisition of oil and
gas properties above certain levels without the consent of the lender.
 
                                      F-11
<PAGE>   129
                          VISTA ENERGY RESOURCES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Effective as of December 23, 1997, the Company entered into an interest
rate swap with Union Bank. The swap consists of $10,000,000 notional amount of
indebtedness at a fixed swap rate of 6.021% three month LIBOR for the
partnership. The term of this swap ends on December 23, 1999.
 
7. EMPLOYEE STOCK OPTIONS:
 
     Effective September 26, 1995, the Board of Directors of the General Partner
adopted the original Option Plan (the "Plan") for certain officers and employees
of the Partnership and the Operator. The Plan authorizes the grant of options to
acquire units of limited partnership interests in the Partnership ("Units").
Effective April 1, 1997, the Board of Directors of the General Partner amended
and restated the Plan in order to provide for additional options to be added to
the Plan (the "Amended Plan"). As of December 31, 1997, the Amended Plan
provided for future awards of options of up to 165,000 Units.
 
     The Amended Plan provides for the issuance of 1,580,321 options in six
separate series with an initial exercise price of $1 (series A-D or "$1
options") and $2 (series E-F or "$2 options") which was to be increased 10% per
annum from the initial plan adoption date of September 26, 1995, for the $1
options and April 1, 1997, for the $2 options. Option A series, covering 550,358
units, was to vest at a rate of one-third of the options at each of the dates of
April 1, 1998, 1999 and 2000. Option B, C, D, and E series were to vest on the
dates that the Board determines that the current value of partnership units had
increased by a factor of 3, 4, 5, and 6, respectively, or on the date that such
per unit amounts of cash or other assets have been or are authorized to be
distributed to the partners. Option B, C, D, and E series cover 152,877,
159,826, 167,260, and 350,000, respectively.
 
     The following table summarizes Unit activity during 1995, 1996 and 1997,
under the Amended Plan:
 
<TABLE>
<CAPTION>
                                                                                WEIGHTED
                                                NUMBER OF                       AVERAGE
                                                  UNITS     EXERCISE PRICE   EXERCISE PRICE
                                                ---------   --------------   --------------
<S>                                             <C>         <C>              <C>
Outstanding at September 21, 1995.............         --      $    --           $  --
  Granted.....................................  1,030,321      $  1.00           $1.01
                                                ---------
Outstanding at January 1, 1996................  1,030,321      $  1.03           $1.01
  Granted.....................................         --      $    --           $  --
                                                ---------
Outstanding at January 1, 1997................  1,030,321      $  1.13           $1.08
  Granted.....................................    385,000      $  2.00           $2.02
                                                ---------
Outstanding at December 31, 1997..............  1,415,321   $1.24 to $2.15       $1.49
                                                =========
Exercisable at December 31, 1997..............    366,905      $  1.24           $1.19
                                                =========
</TABLE>
 
     The following table summarized information about the Amended Plan at
December 31, 1997:
 
<TABLE>
<CAPTION>
                 NUMBER OF UNITS   REMAINING LIFE   NUMBER OF UNITS
EXERCISE PRICE     OUTSTANDING        (YEARS)         EXERCISABLE
--------------   ---------------   --------------   ---------------
<S>              <C>               <C>              <C>
    $1.24           1,030,321           3.7             366,905
     2.15             385,000           3.7                  --
                 ---------------                    ---------------
                    1,415,321           3.7             366,905
                 ===============                    ===============
</TABLE>
 
     The Company accounts for the Units issued under the Amended Plan under
Accounting Principles Board Opinion No. 25. Based on the price of $2 options
issued April 1, 1997, the Company recorded a noncash charge for the expected
value of the vested $1 options in the amount of $315,518 for the year ended
December 31, 1997. Had compensation cost for the Amended Plan been determined
consistent with Statement of Financial Accounting Standards No. 123 ("SFAS 123")
"Accounting for Stock-Based Compensation," the Company would not have reported
any compensation cost related to the Amended Plan for any periods presented in
the accompanying Consolidated Statements of Operations.
 
                                      F-12
<PAGE>   130
                          VISTA ENERGY RESOURCES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
8. LEASE COMMITMENTS:
 
     The Operator, for the benefit of itself, the Partnership and the General
Partner, leases 7,505 square feet of office space at 550 West Texas Avenue,
Suite 700 Midland, Texas from Fasken Center, Ltd. under an office lease dated
October 10, 1996 (as amended from time to time, the "Lease"). The Lease is a
typical office lease containing standard and customary lease provisions and runs
from January 1, 1997, through August 31, 2002. The rental payments due under the
Lease are as follows:
 
<TABLE>
<CAPTION>
                         PERIOD                              AMOUNT
                         ------                             --------
<S>                                                         <C>
January 1, 1997 - August 31, 1997........................   $     --
September 1, 1997 - August 31, 1998......................     50,523
September 1, 1998 - August 31, 1999......................     50,523
September 1, 1999 - August 31, 2000......................     55,538
September 1, 2000 - August 31, 2001......................     55,537
September 1, 2001 - August 31, 2002......................     55,537
                                                            --------
                                                            $267,658
                                                            ========
</TABLE>
 
9. SIGNIFICANT CUSTOMERS:
 
     During 1995, 1996 and 1997, sales to three purchasers of oil and gas
accounted for 10% or more of the Company's oil and gas sales. These purchasers
accounted for more than 45%, 54%, and 57% respectively.
 
10. PRO FORMA INCOME TAXES: (UNAUDITED)
 
     The pro forma effective income tax rate for the Company was different than
the statutory federal income tax rate for the periods shown below due to the
following:
 
<TABLE>
<CAPTION>
                                                                              PERIOD FROM
                                                                               INCEPTION
                                                YEAR ENDED DECEMBER 31,   (SEPTEMBER 21, 1995)
                                                -----------------------     TO DECEMBER 31,
                                                   1997         1996              1995
                                                ----------   ----------   --------------------
<S>                                             <C>          <C>          <C>
Pro forma income tax expense at the federal
  statutory rate of 35%.......................   $209,188     $137,999          $21,020
Other.........................................      2,532        1,285              170
                                                 --------     --------          -------
          Pro forma income tax expense........   $211,720     $139,284          $21,190
                                                 ========     ========          =======
</TABLE>
 
     Components of pro forma income tax expense are as follows:
 
<TABLE>
<CAPTION>
                                                                              PERIOD FROM
                                                                               INCEPTION
                                                YEAR ENDED DECEMBER 31,   (SEPTEMBER 21, 1995)
                                                -----------------------     TO DECEMBER 31,
                                                   1997         1996              1995
                                                ----------   ----------   --------------------
<S>                                             <C>          <C>          <C>
Current.......................................   $     --     $     --          $12,279
Deferred......................................    211,720      139,284            8,911
                                                 --------     --------          -------
                                                 $211,720     $139,284          $21,190
                                                 ========     ========          =======
</TABLE>
 
                                      F-13
<PAGE>   131
                          VISTA ENERGY RESOURCES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Deferred tax assets and liabilities are the results of temporary
differences between the financial statement carrying values and tax bases of
assets and liabilities. The Company's pro forma net deferred tax liability
positions are as follows:
 
<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                                   -----------------------------------
                                                      1997          1996        1995
                                                   -----------   ----------   --------
<S>                                                <C>           <C>          <C>
Deferred Tax Liabilities:
  Property and equipment.........................  $ 2,900,251   $1,464,787   $581,814
Deferred Tax Assets:
  Other..........................................         (573)        (786)        --
Net operating losses.............................   (1,966,860)    (742,903)        --
                                                   -----------   ----------   --------
  Pro forma net deferred tax liability...........  $   932,818   $  721,098   $581,814
                                                   ===========   ==========   ========
</TABLE>
 
11. PRICE RISK MANAGEMENT:
 
     The Company periodically uses derivative financial instruments to manage
crude oil and natural gas price risk. These instruments qualify as hedges under
generally accepted accounting principles and are properly recorded as oil and
gas sales in the statements of operations. The Partnership's realized gains and
losses attributable to its price risk management activities are as follows:
 
<TABLE>
<CAPTION>
                                                          1997       1996      1995
                                                        --------   --------   -------
<S>                                                     <C>        <C>        <C>
Realized losses.......................................  $200,828   $601,430   $34,200
</TABLE>
 
     Set forth below is the contract amount and terms of all instruments held
for price risk management purposes at December 31, 1997 and 1996 (all quantities
are expressed in crude oil barrels ("Bbl") and all prices are expressed in the
calendar monthly average of daily NYMEX closing prices for Light Sweet Crude
Oil):
 
<TABLE>
<CAPTION>
                                    TYPE       MONTHLY       PUT           CALL
          TRADE DATE             TRANSACTION   VOLUME    FLOOR PRICE   CEILING PRICE                  TERM
          ----------             -----------   -------   -----------   -------------   ----------------------------------
<S>                              <C>           <C>       <C>           <C>             <C>
December 15, 1997..............    Collar      10,000    $18.00 Bbl     $19.805 Bbl    April 1, 1998 to December 31, 1998
December 15, 1997..............    Collar      10,000    $18.50 Bbl     $19.280 Bbl     April 1, 1998 to March 31, 1999
</TABLE>
 
12. SUPPLEMENTARY QUARTERLY FINANCIAL DATA (UNAUDITED):
 
<TABLE>
<CAPTION>
                                     FIRST        SECOND       THIRD        FOURTH       TOTAL
                                   ----------   ----------   ----------   ----------   ----------
<S>                                <C>          <C>          <C>          <C>          <C>
1997
  Total revenues.................  $2,054,168   $1,639,844   $2,469,147   $2,711,802   $8,874,961
                                   ==========   ==========   ==========   ==========   ==========
  Net income.....................  $  238,834   $  102,141   $  441,929   $ (185,223)  $  597,681
                                   ==========   ==========   ==========   ==========   ==========
1996
  Total revenues.................  $  962,705   $  861,839   $1,677,934   $2,035,242   $5,537,720
                                   ==========   ==========   ==========   ==========   ==========
  Net income.....................  $   44,465   $   11,498   $   88,034   $  250,285   $  394,282
                                   ==========   ==========   ==========   ==========   ==========
</TABLE>
 
13. OIL AND GAS RESERVES INFORMATION (UNAUDITED):
 
     The estimates of proved oil and gas reserves utilized in the preparation of
the financial statements were estimated by the Company in accordance with
guidelines established by the Securities and Exchange Commission and the
Financial Accounting Standards Board, which require that reserve reports be
prepared under existing economic and operating conditions with no provision for
price and cost escalation except by
 
                                      F-14
<PAGE>   132
                          VISTA ENERGY RESOURCES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
contractual agreement. All of the Company's reserves are located onshore in or
offshore to the continental United States.
 
     Future prices received for production and future production costs may vary,
perhaps significantly, from the prices and costs assumed for purposes of these
estimates. There can be no assurance that the proved reserves will be developed
within the periods indicated or that prices and costs will remain constant.
There can be no assurance that actual production will equal the estimated
amounts used in the preparation of reserve projections. In accordance with the
Securities and Exchange Commission's guidelines, the Company's estimates of
future net cash flows from the Company's proved properties and the represent
value thereof are made using oil and natural gas sales prices in effect as of
the dates of such estimates and are held constant throughout the life of the
properties. Average prices used in estimating the future net cash flows at
December 31, 1997, 1996 and 1995 were as follows: $16.10, $23.55 and $17.49 per
barrel for oil in 1997, 1996 and 1995, respectively, and $2.01, $3.43 and $1.84
per Mcf for natural gas in 1997, 1996 and 1995, respectively.
 
     There are numerous uncertainties inherent in estimating quantities of
proved reserves and in projecting future rates of production and timing of
development expenditures. oil and gas reserve engineering must be recognized as
a subjective process of estimating underground accumulations of oil and gas that
cannot be measured in an exact way, and estimates of other engineers might
differ materially from those shown below. The accuracy of any reserve estimate
is a function of the quality of available data and engineering and estimate may
justify revisions. Accordingly, reserves estimates are often materially
different from the quantities of oil and gas that are ultimately recovered.
Reserve estimates are integral in management's analysis of impairments of oil
and gas properties and the calculation of depreciation, depletion and
amortization on those properties.
 
     The following unaudited table sets forth proved oil and gas reserves at
December 31, 1997, 1996 and 1995:
 
<TABLE>
<CAPTION>
                                       1997                    1996                    1995
                              ----------------------   ---------------------   ---------------------
                                 OIL         GAS          OIL         GAS         OIL         GAS
                               (BBLS)       (MCF)       (BBLS)       (MCF)      (BBLS)       (MCF)
                              ---------   ----------   ---------   ---------   ---------   ---------
<S>                           <C>         <C>          <C>         <C>         <C>         <C>
Proved Reserves:
  Beginning of year.........  4,540,419    7,185,636   2,230,190   4,837,030          --          --
  Revisions of previous
     estimates..............  1,304,819     (969,377)    548,009    (458,198)         --          --
  Extensions and
     discoveries............  1,161,953                  205,859      28,442
  Purchases of minerals in
     place..................    762,282    6,206,929   1,838,595   3,339,214   2,298,401   4,993,545
  Sales of minerals in
     place..................   (148,902)    (343,565)    (46,455)   (126,680)         --          --
  Production................   (403,812)    (784,298)   (235,779)   (434,172)    (68,211)   (156,515)
                              ---------   ----------   ---------   ---------   ---------   ---------
  End of year...............  7,216,559   11,295,325   4,540,419   7,185,636   2,230,190   4,837,030
                              =========   ==========   =========   =========   =========   =========
Proved Developed Reserves:
  Beginning of year.........  3,092,149    5,510,499   1,352,870   3,893,360          --          --
                              ---------   ----------   ---------   ---------   ---------   ---------
  End of year...............  3,559,850    7,090,902   3,092,149   5,510,499   1,352,870   3,893,360
                              =========   ==========   =========   =========   =========   =========
</TABLE>
 
                                      F-15
<PAGE>   133
                          VISTA ENERGY RESOURCES, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following table sets forth the standardized measure of discounted
future net cash flows relating to proved reserves at December 31, 1997 and 1996:
 
<TABLE>
<CAPTION>
                                                               1997           1996
                                                           ------------   ------------
<S>                                                        <C>            <C>
Cash Flows Relating to Proved Reserves:
  Future cash flows......................................  $131,921,276   $125,076,627
  Future costs:
     Production..........................................   (45,194,356)   (47,139,363)
     Development.........................................   (12,371,206)    (6,835,546)
                                                           ------------   ------------
  Future net cash flows..................................    74,355,714     71,101,718
  10% discount factor....................................   (35,775,170)   (30,250,175)
                                                           ------------   ------------
Standardized measure of discounted future net cash
  flows..................................................  $ 38,580,544   $ 40,851,543
                                                           ============   ============
</TABLE>
 
     Had the Company been a taxable entity at December 31, 1997, the future
income taxes would have been $14,127,288 on an undiscounted basis and $7,770,008
on a discounted basis, and the standardized measure of discounted future net
cash flows at December 31, 1997 would have been $36,990,032.
 
     The following table sets forth the changes in the standardized measure of
discounted future net cash flows relating to proved reserves for the years ended
December 31, 1997 and 1996 and for the period from inception (September 21,
1995) to December 31, 1995:
 
<TABLE>
<CAPTION>
                                                           1997          1996          1995
                                                        -----------   -----------   -----------
<S>                                                     <C>           <C>           <C>
Standardized Measure, Beginning of Year...............  $40,851,543   $17,242,730   $        --
  Net change in sales prices, net of production
     costs............................................  (12,557,771)    6,601,987
  Development costs incurred during the year which
     were previously estimated........................    5,073,000     2,033,000
  Revisions of quantity estimates.....................    6,325,872     4,182,057            --
  Extensions, discoveries and improved recovery, net
     of future production and development costs.......    2,382,351     1,485,041
  Accretion of discount...............................    4,085,154     1,724,273            --
  Change in future development costs..................   (4,116,068)   (2,598,316)           --
  Change in timing and other..........................   (5,394,793)   (4,484,968)           --
  Purchases of reserves in place......................    8,289,041    17,756,033    17,862,837
  Sales of reserves in place..........................   (1,171,519)      (97,141)           --
  Sales, net of production costs......................   (5,186,266)   (2,993,153)     (620,107)
                                                        -----------   -----------   -----------
Standardized measure, end of year.....................  $38,580,544   $40,851,543   $17,242,730
                                                        ===========   ===========   ===========
</TABLE>
 
                                      F-16
<PAGE>   134
 
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
 
To the Board of Directors and Stockholders
Midland Resources, Inc.
 
     We have audited the accompanying consolidated balance sheets of Midland
Resources, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Midland Resources, Inc. and subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their consolidated cash flows for
each of the two years ended December 31, 1997, in conformity with generally
accepted accounting principles.
 
                                            GRANT THORNTON LLP
 
Houston, Texas
March 13, 1998, except as to
Note N as to which the date is
April 9, 1998
 
                                      F-17
<PAGE>   135
 
                         REPORT OF INDEPENDENT AUDITORS
 
To the Board of Directors and Stockholders
Midland Resources, Inc.
 
     We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Midland Resources, Inc. and subsidiary
for the year ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
 
     We conducted our audit 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 audit provides a reasonable basis for our opinion.
 
     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of their
operations and cash flows of Midland Resources, Inc. and subsidiary for the year
ended December 31, 1995, in conformity with generally accepted accounting
principles.
 
     As discussed in Note A to the consolidated financial statements, the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," in 1995.
 
                                            ERNST & YOUNG LLP
 
Fort Worth, Texas
March 5, 1996
 
                                      F-18
<PAGE>   136
 
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                             ASSETS
                                                                             DECEMBER 31,
                                                          MARCH 31,    -------------------------
                                                            1998          1997          1996
                                                         -----------   -----------   -----------
                                                         (UNAUDITED)
<S>                                                      <C>           <C>           <C>
Current assets:
  Cash.................................................  $   121,946   $   150,890   $   366,677
  Accounts receivable:
     Oil and gas sales.................................      476,803       670,093       834,269
     Related parties...................................      109,111        60,822       360,479
     Sales of properties...............................           --       563,757            --
     Property operations and other.....................      416,938       296,052       359,600
  Property held for sale...............................      200,000       200,000     1,241,515
  Other current assets.................................       70,891        57,531       104,180
  Deferred tax asset...................................       37,000        37,000       378,000
                                                         -----------   -----------   -----------
          Total current assets.........................    1,432,689     2,036,145     3,644,720
  Property and equipment, at cost......................   29,679,693    29,210,699    27,889,580
  Less accumulated depreciation, depletion and
     amortization......................................   16,279,676    15,975,838    14,076,100
                                                         -----------   -----------   -----------
          Property and equipment, net..................   13,400,017    13,234,861    13,813,480
  Deferred tax asset...................................    1,120,941     1,011,193            --
  Goodwill, net of amortization of $106,754 in 1997 and
     $80,067 in 1996...................................      713,912       720,584       747,271
  Contracts and leases, net of amortization of $84,352
     in 1997 and $78,411 in 1996.......................      193,769       199,116       414,633
  Non-current note receivable..........................      298,786       302,490       317,759
  Other assets.........................................      171,691       116,094        38,783
                                                         -----------   -----------   -----------
          Total assets.................................  $17,331,805   $17,620,483   $18,976,646
                                                         ===========   ===========   ===========
                              LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt....................  $   134,000   $   583,481   $ 1,680,830
  Accounts payable and accrued expenses................    1,343,301       981,202     1,194,344
  Drilling advances....................................           --            --       393,254
                                                         -----------   -----------   -----------
          Total current liabilities....................    1,477,301     1,564,683     3,268,428
Long-term debt.........................................    9,107,188     9,115,370     7,166,421
Deferred tax liability.................................           --            --        47,044
Payable for the purchase of subsidiary and other.......      213,639       221,404       317,493
                                                         -----------   -----------   -----------
          Total liabilities............................   10,798,128    10,901,457    10,799,386
Stockholders' equity:
  Preferred stock, $0.01 par value; 20,000,000 shares
     authorized, none issued...........................           --            --            --
  Common stock, $0.001 par value; 80,000,000 shares
     authorized; 4,463,499 and 4,401,031 shares issued
     in 1997 and 1996, respectively....................        4,463         4,463         4,401
  Additional paid in capital...........................    8,487,801     8,487,801     7,898,199
  Unearned compensation................................     (136,817)     (164,516)           --
  Retained earnings (deficit)..........................   (1,821,770)   (1,608,722)      274,660
                                                         -----------   -----------   -----------
          Total stockholders' equity...................    6,533,677     6,719,026     8,177,260
                                                         -----------   -----------   -----------
          Total liabilities and stockholders' equity...  $17,331,805   $17,620,483   $18,976,646
                                                         ===========   ===========   ===========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                      F-19
<PAGE>   137
 
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                    THREE MONTHS ENDED
                                         MARCH 31,                YEARS ENDED DECEMBER 31,
                                  -----------------------   -------------------------------------
                                     1998         1997         1997          1996         1995
                                  ----------   ----------   -----------   ----------   ----------
                                        (UNAUDITED)
<S>                               <C>          <C>          <C>           <C>          <C>
Operating revenue:
  Oil and gas sales.............  $1,155,062   $1,828,255   $ 6,396,249   $6,958,491   $5,147,033
  Management income.............          --           --            --       45,000      102,000
  Property operations income....      26,720       27,079       119,012      111,862       81,036
  Partnership income............          --           --        72,275           --           --
  Other.........................       8,945        2,805        12,951       26,372       48,105
                                  ----------   ----------   -----------   ----------   ----------
          Total operating
            revenue.............   1,190,727    1,858,139     6,600,487    7,141,725    5,378,174
Operating costs and expenses:
  Oil and gas production........     730,463      737,489     3,088,886    2,981,837    2,509,854
  Exploration costs:
     Dry holes..................          --           --       796,852      416,892           --
     Geological and
       geophysical..............       3,126        8,555        52,682      349,963      198,453
  Depreciation, depletion and
     amortization...............     315,859      314,781     1,964,658    1,306,287    1,033,905
  Abandonment costs.............      34,086           --        93,760           --        3,000
  General and administrative....     232,015      333,849     1,451,404    1,295,298    1,049,904
  Impairment of properties......          --           --     1,277,342      114,904    1,020,670
                                  ----------   ----------   -----------   ----------   ----------
          Total operating costs
            and expenses........   1,315,549    1,394,674     8,725,584    6,465,181    5,815,786
                                  ----------   ----------   -----------   ----------   ----------
                                    (124,822)     463,465    (2,125,097)     676,544     (437,612)
Other income and (expenses):
  Gain (loss) on sale of
     property and equipment.....          --      351,079       462,571       36,308     (102,984)
  Interest income...............       7,297        9,956        32,337       61,997       19,374
  Other income..................          --           --            --           --       19,537
  Interest expense..............    (205,271)    (212,637)     (970,430)    (722,447)    (611,587)
                                  ----------   ----------   -----------   ----------   ----------
          Total other income and
            expenses............    (197,974)     148,398      (475,522)    (624,142)    (675,660)
                                  ----------   ----------   -----------   ----------   ----------
Income (loss) before income
  taxes.........................    (322,796)     611,863    (2,600,619)      52,402   (1,113,272)
Income taxes:
  Deferred federal income tax
     expense (benefit)..........    (109,748)     206,125      (717,237)      30,280     (376,241)
                                  ----------   ----------   -----------   ----------   ----------
Net income (loss)...............  $ (213,048)  $  405,738   $(1,883,382)  $   22,122   $ (737,031)
                                  ==========   ==========   ===========   ==========   ==========
Earnings (loss) per share:
  Basic.........................  $    (0.05)  $     0.09   $     (0.42)  $     0.01   $    (0.22)
                                  ==========   ==========   ===========   ==========   ==========
  Diluted.......................  $    (0.05)  $     0.09   $     (0.42)  $     0.01   $    (0.22)
                                  ==========   ==========   ===========   ==========   ==========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                      F-20
<PAGE>   138
 
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                    COMMON STOCK       ADDITIONAL    RETAINED     TREASURY         NOTE
                                 -------------------    PAID IN      EARNINGS      STOCK        RECEIVABLE        UNEARNED
                                   SHARES     AMOUNT    CAPITAL      (DEFICIT)    AT COST    OFFICER/DIRECTOR   COMPENSATION
                                 ----------   ------   ----------   -----------   --------   ----------------   ------------
<S>                              <C>          <C>      <C>          <C>           <C>        <C>                <C>
Balances at December 31,
  1994.........................  $3,374,522   $3,375   $5,404,109   $   989,569   $(25,465)     $      --        $      --
Stock options exercised........      22,000      22        51,072            --         --             --               --
Warrants exercised.............     997,009     997     2,399,787            --         --       (453,641)              --
Warrants redeemed..............          --      --       (63,373)           --                        --               --
Treasury stock contributed to
  ESOP (5,000 shares)..........          --      --         2,577            --     10,412             --               --
Warrants issued to bank........          --      --        65,622            --         --             --               --
Net loss.......................          --      --            --      (737,031)        --             --               --
                                 ----------   ------   ----------   -----------   --------      ---------        ---------
Balances at December 31,
  1995.........................   4,393,531   4,394     7,859,794       252,538    (15,053)      (453,641)              --
Stock options exercised........       7,500       7        17,805            --         --             --               --
Additional proceeds from 1995
  warrants exercised...........          --      --         9,191            --         --             --               --
Treasury stock contributed to
  ESOP (7,300 shares)..........          --      --        11,409            --     15,053             --               --
Reduction of note receivable
  officer/director.............          --      --            --            --         --        453,641               --
Net income.....................          --      --            --        22,122         --             --               --
                                 ----------   ------   ----------   -----------   --------      ---------        ---------
Balances at December 31,
  1996.........................   4,401,031   4,401     7,898,199       274,660         --             --               --
Stock options exercised........      36,000      36       109,276            --         --             --               --
Warrants exercised.............      11,428      11        45,701            --         --             --               --
Stock issued for property......      15,040      15        52,625            --         --             --               --
Stock-based compensation.......          --      --       382,000            --         --             --         (382,000)
Amortization of unearned
  compensation.................          --      --            --            --         --             --          217,484
Net loss.......................          --      --            --    (1,883,382)        --             --               --
                                 ----------   ------   ----------   -----------   --------      ---------        ---------
Balances at December 31,
  1997.........................  $4,463,499   $4,463   $8,487,801   $(1,608,722)  $     --      $      --        $(164,516)
                                 ==========   ======   ==========   ===========   ========      =========        =========
Amortization of stock-based
  compensation (unaudited).....          --      --            --            --         --             --           27,699
Net loss (unaudited)...........          --      --            --      (213,048)        --             --               --
                                 ----------   ------   ----------   -----------   --------      ---------        ---------
Balance at March 31, 1998
  (unaudited)..................  $4,463,499   $4,463   $8,487,801   $(1,821,770)  $     --      $      --        $(136,817)
                                 ==========   ======   ==========   ===========   ========      =========        =========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                      F-21
<PAGE>   139
 
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED
                                                MARCH 31,                 YEARS ENDED DECEMBER 31,
                                         -----------------------   ---------------------------------------
                                           1998         1997          1997          1996          1995
                                         ---------   -----------   -----------   -----------   -----------
                                               (UNAUDITED)
<S>                                      <C>         <C>           <C>           <C>           <C>
Cash flows from operating activities:
  Net income (loss)....................  $(213,048)  $   405,738   $(1,883,382)  $    22,122   $  (737,031)
  Depreciation, depletion and
    amortization.......................    315,859       314,781     1,964,658     1,306,287     1,033,905
  Abandonments and exploratory dry
    holes..............................         --            --       890,612       416,892            --
  Impairment of properties.............         --            --     1,277,342       114,904     1,020,670
  (Gain) loss on sale of properties and
    equipment..........................         --      (351,079)     (462,571)      (36,308)      102,984
  Noncash stock-based compensation.....     27,699        43,078       217,484            --            --
  Deferred income tax expense
    (benefit)..........................   (109,748)      206,125      (717,237)       30,280      (376,241)
  Partnership distributions in excess
    of income..........................         --            --        45,875            --            --
  (Increase) decrease in accounts
    receivable related to operations...     24,115        85,201       166,902      (265,521)      (58,418)
  Decrease (increase) in other current
    assets.............................    (13,360)      (56,323)       22,610        (8,300)      (62,798)
  Increase (decrease) in accounts
    payable and accrued expenses
    related to operations..............    362,099       612,635      (213,142)      218,581       182,293
  Decrease in note receivable..........         --            --            --            --        28,456
  Other................................     12,257         8,010        84,310        94,704        20,963
                                         ---------   -----------   -----------   -----------   -----------
  Net cash provided by operating
    activities.........................    405,873     1,268,166     1,393,461     1,893,641     1,154,783
Cash flows from investing activities:
  Additions to oil and gas
    properties.........................   (467,707)     (980,292)   (2,588,150)   (3,714,110)   (2,720,590)
  Additions to other property and
    equipment..........................     (1,287)           --       (17,765)      (40,554)     (159,805)
  Investment in limited partnership....         --      (602,532)   (1,536,130)           --            --
  Sale and salvage recoveries on oil
    and gas properties.................    563,757     1,649,407     1,657,385        32,975            --
  Sale of other property and
    equipment..........................         --            --       205,851         1,000        14,120
  Reimbursable partnership
    expenditures.......................         --       360,479       360,479      (360,479)           --
  Purchase of marketable securities....         --            --            --      (326,155)           --
  Sale of marketable securities........         --            --            --       350,332            --
  Purchase of Summit, less cash
    acquired...........................     (7,765)      (97,025)      (89,139)   (1,217,280)           --
  Loan origination costs and other.....    (67,855)           --      (119,219)           --            --
                                         ---------   -----------   -----------   -----------   -----------
  Net cash used in investing
    activities.........................     19,143       330,037    (2,126,688)   (5,274,271)   (2,866,275)
Cash flows from financing activities:
  Net proceeds from warrants
    exercised..........................         --            --        45,712         9,191     1,830,997
  Collections on note receivable from
    officer/director...................         --            --            --            --        95,000
  Warrant redemptions..................         --            --            --            --       (63,373)
  Net proceeds from options
    exercised..........................         --        32,813       109,312        29,221        51,094
  Borrowings on long-term debt.........    100,000       406,250     2,617,250     3,770,000     1,821,000
  Principal payments on long-term
    debt...............................   (557,663)   (1,671,614)   (1,876,849)     (983,067)   (1,826,056)
  Drilling advances....................         --      (393,254)     (393,254)      393,254            --
  Other................................      3,703         3,420        15,269        14,098        (9,515)
                                         ---------   -----------   -----------   -----------   -----------
  Net cash provided by financing
    activities.........................   (453,960)   (1,622,385)      517,440     3,232,697     1,899,147
                                         ---------   -----------   -----------   -----------   -----------
Increase (decrease) in cash............    (28,944)      (24,182)     (215,787)     (147,933)      187,655
Cash, beginning of year................    150,890       366,677       366,677       514,610       326,955
                                         ---------   -----------   -----------   -----------   -----------
Cash, end of year......................  $ 121,946   $   342,495   $   150,890   $   366,677   $   514,610
                                         =========   ===========   ===========   ===========   ===========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                      F-22
<PAGE>   140
 
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE A. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 
  Organization and Basis of Presentation
 
     Midland Resources, Inc. ("Company"), was organized in 1990 with the issue
of common stock and warrants in exchange for oil and gas partnership interests.
The Company and its wholly owned subsidiaries are headquartered in Houston,
Texas. The Company is involved in the acquisition, exploration, development and
production of oil and gas and owns producing properties and undeveloped acreage
and royalty interests in Texas, Illinois and Colorado. The majority of its
activities are centered in the Permian Basin of West Texas. Midland Resources
Operating Company Inc. ("MRO"), a wholly owned subsidiary, is in the business of
oil and gas property operations. Summit Petroleum Corporation ("Summit") is a
wholly owned subsidiary engaged in oil and gas acquisition, exploration,
development and production. (See Note B.)
 
  Principles of Consolidation
 
     The accompanying consolidated balance sheets include the accounts of the
Company and its wholly owned subsidiaries. All significant inter-company balance
sheet accounts have been eliminated in consolidation. All significant
inter-company transactions have been eliminated from the consolidated statements
of operations and cash flows for the years ended December 31, 1997, 1996 and
1995.
 
  Reclassifications
 
     Certain reclassifications have been made to conform to the 1997
presentation.
 
  Oil and Gas Operations
 
     The Company follows the "successful efforts" method of accounting for oil
and gas properties. All costs associated with the acquisition and development of
proved oil and gas properties are capitalized.
 
     Costs associated with exploratory drilling are capitalized pending
evaluation of drilling results. Costs of exploratory wells which do not find
proved results are expensed. Geological, geophysical and delay rental costs are
expensed as incurred.
 
     Depreciation, depletion and amortization of oil and gas properties is
computed on a property-by-property basis using the units-of-production method
based upon estimated oil and gas reserve quantities.
 
     Oil and gas revenues are recognized under the sales method at the point of
delivery to the purchaser. No significant over or under produced positions
between the Company and its working interest partners exist.
 
     During the fourth quarter of 1995, the Company adopted the provisions of
the Financial Accounting Standards Board's Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("FAS 121"). FAS 121 requires impairment losses to be recognized on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by these assets are less than
the assets' carrying amount. It also requires assets held for sale to be valued
at the lesser of their original carrying amount or fair value. Concurrent with
the adoption and decision to market certain oil and gas properties, the Company
recognized a write-down of $1,020,670. In 1996 and 1997, the Company recognized
losses of $114,904 and $1,277,342, respectively.
 
  Other Property and Equipment
 
     All other property and equipment is depreciated on the straight-line method
over lives ranging from 5 to 6 years.
 
                                      F-23
<PAGE>   141
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Intangible Assets
 
     Goodwill is amortized on the straight-line method over 30 years. Property
operating contracts are amortized on the straight-line method over the lives of
the respective oil and gas properties which range from 3 to 19 years.
 
  Accounting for Stock Options
 
     The Company accounts for employee stock option grants in accordance with
APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations, whereby compensation costs are recognized only in situations
where stock compensatory plans award intrinsic value to recipients at the date
of grant.
 
  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. The most
significant estimates affecting the Company's financial statements are the
determination of hydrocarbon reserves, the estimated useful lives of depreciable
and amortizable assets, and the fair value of assets held for sale.
 
  Income Taxes
 
     The Company recognizes deferred tax assets and liabilities for the future
tax consequences of differences between the financial statement carrying amounts
of assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates applicable to the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
 
  Earnings (Loss) Per Common Share
 
     Effective December 31, 1997, the Company retroactively adopted the
provisions of Statement of Financial Accounting Standards No. 128 for all
periods presented. Basic earnings per share is calculated by dividing net income
by the weighted average number of common shares outstanding during each year.
Dilutive earnings per share is calculated by dividing net income by the weighted
average number of common and dilutive potential common shares. Stock options and
warrants may be potential dilutive common shares and are therefore considered in
the earnings per share calculation, if dilutive. The number of dilutive
potential common shares is determined using the treasury stock method. Shares
used to compute basic and diluted earnings (loss) per share were 4,433,113,
4,395,414 and 3,381,592 in 1997, 1996 and 1995, respectively.
 
  Employee Benefits
 
     Prior to 1995, the Company maintained a 401(k) Plan which covered
substantially all full-time employees. In 1995, the Board of Directors
authorized the restatement of the plan as the Midland Resources Operating
Company, Inc. 401(k) Employee's Stock Ownership Plan and Trust and the
contribution of 5,000 shares of treasury stock to the restated plan. An
additional 7,300 shares of treasury stock were contributed in 1996. As of
December 31, 1995 and 1996, all shares had been allocated to participants in the
plan. The Company matches employee contributions up to 3 percent of gross
salary. The expense related to the Company's contributions and plan
administration was $26,517, $50,092, and $25,985 in 1997, 1996 and 1995,
respectively.
 
                                      F-24
<PAGE>   142
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Financial Instruments
 
     The carrying amount of cash approximates fair value. Interest rates
associated with substantially all the Company's long-term debt are linked to
current market rates. As a result, management believes that the carrying amount
approximates the fair value of the Company's credit facilities.
 
  Interim Financial Statements
 
     The financial statements as of March 31, 1998 and 1997 and for the three
month periods then ended, included herein, are unaudited. These financial
statements include all adjustments, (consisting only of normal recurring
adjustments), which are, in the opinion of management, necessary for a fair
presentation of the financial statements for these periods. The results of
operations for these three month periods are not necessarily indicative of the
results for a full year.
 
NOTE B. PURCHASE OF SUBSIDIARY CORPORATION
 
     On September 18, 1996, the Company, through MRI Acquisition Corp. (a wholly
owned subsidiary), acquired 81.5% of the issued and outstanding common stock and
all outstanding stock options of Summit Petroleum Corporation (See Note F.) for
cash of $1,081,188 and cancellation of a note receivable from an
officer/stockholder of both the Company and Summit of $479,648. In December
1996, the Summit stockholders approved a plan of merger whereby Summit became a
wholly owned subsidiary of the Company. Pursuant to this plan, stockholders
possessing the remaining 18.5% interest (443,633 shares), upon tendering their
shares, receive $0.70 per share. During 1997, payments of $89,139 were made for
127,341 shares tendered. The Company's liability for the purchase of these
remaining shares, which is being funded through long-term borrowings under the
Company's revolving credit agreement (See Note C.), is included as a non-
current liability in the accompanying balance sheet. The purchase price ($0.70
per share and $0.6375 per option) was based on the fair value of Summit's net
assets as determined by the Board of Directors of each respective corporation.
The transaction was subject to a fairness opinion provided by a recognized
investment banking firm relative to these values. In addition to the purchase
price, the Company incurred $139,254 in costs directly related to this
acquisition, resulting in a total investment through December 31, 1997, of
$2,010,633. This acquisition is accounted for under the purchase method of
accounting, which provides that the results of operations are combined from the
date of acquisition (September 18, 1996). In December 1996, MRI Acquisition
Corp. was dissolved and Summit became a wholly-owned subsidiary of the Company.
 
     The following is a summary of the allocation of the cost to the assets
acquired and liabilities assumed in this acquisition:
 
<TABLE>
<S>                                                           <C>
Current assets, including cash of $3,162....................  $  155,742
Current liabilities.........................................    (250,701)
Oil and gas properties......................................   2,408,259
Other assets................................................      20,773
Contracts and leases........................................     200,000
Deferred income tax liability (non-current).................    (279,729)
Long-term debt..............................................    (243,711)
                                                              ----------
          Total.............................................  $2,010,633
                                                              ==========
</TABLE>
 
                                      F-25
<PAGE>   143
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following is a summary of the pro forma results of operations as though
this transaction had occurred on January 1, 1995.
 
<TABLE>
<CAPTION>
                                                                 1996         1995
                                                              ----------   ----------
<S>                                                           <C>          <C>
Total revenue...............................................  $7,749,621   $5,921,767
                                                              ==========   ==========
Net income (loss)...........................................  $   (7,396)  $ (889,623)
                                                              ==========   ==========
Loss per weighted average common share:
  Basic.....................................................  $       --   $    (0.26)
                                                              ==========   ==========
  Diluted...................................................  $       --   $    (0.26)
                                                              ==========   ==========
</TABLE>
 
NOTE C. LONG-TERM DEBT
 
     The Company's long-term debt consisted of the following at December 31,
1997 and 1996:
 
<TABLE>
<CAPTION>
                                                                 1997         1996
                                                              ----------   ----------
<S>                                                           <C>          <C>
$30 million revolving credit agreement with Compass Bank,
  expiring December 1, 1999.................................  $9,651,615   $       --
Credit facility with First Union National Bank
  Principal balance.........................................          --    8,500,000
  Less discount thereon.....................................          --      (25,863)
Note payable to First Union National Bank...................          --      324,711
Other, primarily secured monthly installment notes..........      47,236       48,403
                                                              ----------   ----------
                                                               9,698,851    8,847,251
Less portion due within one year............................     583,481    1,680,830
                                                              ----------   ----------
Long-Term Portion...........................................  $9,115,370   $7,166,421
                                                              ==========   ==========
</TABLE>
 
     In December, 1997 the Company entered into a revolving credit agreement
with Compass Bank (Compass) which provides for a credit facility of $30 million
and an initial borrowing base of $10,500,000. Concurrent with the execution of
this agreement, the Company's outstanding debt to First Union National Bank
(FUNB) in the amount of $9,151,615 was paid by an advance under the Compass
agreement. Amounts borrowed under the Compass agreement are collateralized by a
first lien on substantially all of the Company's oil and gas properties.
Interest under this agreement is payable monthly at an annual rate which, at the
Company's option, is equal to either (a) the Compass prime lending rate (8.5% at
December 31, 1997) or (b) the London Interbank Offered Rate, plus 2.5%. In
addition, a commitment fee equal to  1/2% per annum on the unused portion of the
borrowing base is required. The borrowing base is reduced at the rate of
$120,000 per month beginning February 1, 1998 and is subject to redetermination
on each April 1st and October 1st. This agreement also requires that the Company
maintain certain financial ratios and generally restricts the Company's ability
to incur debt, sell assets, materially change the nature of the Company's
business structure or pay dividends.
 
     Future maturities of long term debt at December 31, 1997 are as follows:
 
<TABLE>
<S>                                                        <C>
1998.....................................................  $  583,481
1999.....................................................   9,100,918
2000.....................................................      11,083
2001.....................................................       3,369
                                                           ----------
                                                           $9,698,851
                                                           ==========
</TABLE>
 
                                      F-26
<PAGE>   144
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE D. ISSUANCE OF COMMON STOCK AND WARRANTS
 
     In November 1990, the Company issued 2,264,522 shares of common stock, as
discussed in Note A, based on an exchange value of $2.00 per share. For each
share of common stock issued, two warrants were issued entitling the holder to
purchase one share of common stock at $2.50 and one share at $4.00 during the
period from November 1990 to November 2002. On October 6, 1995, the 90 day
common stock market price requirement (as defined in the Warrant Agreement) was
met and the Company called its $2.50 warrants. Holders of record on December 22,
1995 received a redemption payment of $0.05 per warrant for aggregate payments
of $63,373, which was charged to additional paid in capital. 997,009 of the
$2.50 warrants were exercised. As of December 31, 1997, 11,428 of the $4.00
warrants had been exercised.
 
     The warrants are subject to certain antidilution provisions contained in
the warrant agreement, which could cause adjustments to the exercise price and
the number of shares issuable.
 
     The Company has two employee stock option plans which reserve an aggregate
of 700,000 shares of common stock for issuance to officers and other key
employees. As of December 31, 1997 options to acquire 260,000 shares at prices
ranging from $2.375 to $4.00 were outstanding under these plans with scheduled
expiration dates of 1998 through 2002. As of December 31, 1997, 376,500 shares
were available for future grant.
 
     Under the Midland Resources, Inc. 1995 Directors' Stock Option Plan, 20,000
stock options with a five year term were granted to directors in 1995. As of
December 31, 1995, all 20,000 options were outstanding under this plan. In 1996,
an additional 30,000 stock options were granted to directors. Each option
entitles the holder to purchase one share of common stock for the fair market
value of common stock on the date of the grant of the option. As of December 31,
1997, 50,000 options were outstanding under this plan at exercise prices ranging
from $2.75 to $3.75 and 50,000 options were available for future grant. Options
outstanding at December 31, 1997, if not exercised, are scheduled to expire in
1999 through 2001.
 
     In May 1997, the Stockholders ratified the Midland Resources, Inc. 1997
Board of Directors Stock Incentive Plan under which 1,000,000 options were
issued to non-employee directors, 175,000 options were issued to the advisory
director and 60,000 were issued to the corporate secretary, all to acquire
shares at $3.00 per share. These options are vested as certain stipulated
trading prices for the Company's common stock are achieved and, exercisability
is further restricted by time delay provisions which limited the number of
vested shares that may be exercised each year beginning in March 1998. As of
December 31, 1997, 247,000 of these options were vested. Upon a change of
control, as defined, all of these options became exercisable. These options, if
not exercised, expire in March, 2002. Also in February, 1997, the Company issued
a five year warrant to purchase 50,000 shares to a consultant for future
services. These options and warrants are expected to give rise to the
recognition of compensation expenses of up to $616,250 through year 2000. In
1997, stock-based compensation expense of $217,484 was recognized in connection
with these issuances.
 
     In June 1995, the Company issued 150,000 warrants to purchase common stock
at $4.00 per share for a term of seven years to FUNB. In exchange the Company's
credit facility loan agreement was amended to reduce the interest rate by 0.75%
and allow 25% of its borrowing base to be used for working capital purposes. The
fair value of the warrants at the date of grant was recorded as debt discount
and additional paid in capital. None of these warrants have been exercised as of
December 31, 1997.
 
     Warrants to purchase an additional 70,000 shares of common stock were
issued in 1994 through 1996 in exchange for investment banking and other
services, with exercise prices ranging from $2.50 to $2.875.
 
     Effective January 1, 1996, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 123, which provides for
an alternative method to valuation of the compensation element of stock based
compensation plans. The Company applies APB 25 and related Interpretations in
accounting for employee stock-based compensation. Had compensation costs been
deter-
 
                                      F-27
<PAGE>   145
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
mined based on the fair value at the grant dates for awards consistent with the
method of FASB Statement 123, the Company's net income (loss) and related per
share amounts would have been reduced to the pro forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                                      1997         1996        1995
                                                   -----------   ---------   ---------
<S>                                                <C>           <C>         <C>
Net income (loss):
  As reported....................................  $(1,883,382)  $  22,122   $(737,031)
  Pro forma......................................   (2,078,360)   (245,366)   (859,861)
Earnings (loss) per share
  As reported:
     Basic.......................................  $     (0.42)  $    0.01   $   (0.22)
     Diluted.....................................        (0.42)       0.01       (0.22)
  Pro forma:
     Basic.......................................  $     (0.47)  $   (0.06)  $   (0.25)
     Diluted.....................................        (0.47)      (0.06)      (0.25)
</TABLE>
 
     The fair value of each option granted is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for the grants issued in 1997, 1996 and 1995:
 
<TABLE>
<S>                                                    <C>
Expected volatility..................................  61% to 110%
Risk free rate.......................................  6.02% to 6.49%
Expected life of options.............................  3 to 5 years
Expected dividend yield..............................  0%
</TABLE>
 
                                      F-28
<PAGE>   146
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     A summary of the status of the Company's stock option plans at December 31,
1995, 1996 and 1997, and changes therein during the years then ended is
presented below:
 
<TABLE>
<CAPTION>
                                                  EMPLOYEE PLANS                DIRECTOR PLANS
                                            --------------------------   ----------------------------
                                                      WEIGHTED AVERAGE               WEIGHTED AVERAGE
                                            SHARES     EXERCISE PRICE     SHARES      EXERCISE PRICE
                                            -------   ----------------   ---------   ----------------
<S>                                         <C>       <C>                <C>         <C>
Year ended December 31, 1995:
  Outstanding, January 1, 1995............       --           --                --           --
  Granted.................................  115,000        $2.48            20,000        $2.75
  Expired.................................       --           --                --           --
  Exercised...............................  (22,000)        2.38                --           --
  Outstanding, December 31, 1995..........   93,000        $2.48            20,000        $2.75
                                            -------        -----         ---------        -----
  Options exercisable at December 31,
     1995.................................   93,000        $2.48            20,000        $2.75
                                            =======        =====         =========        =====
  Weighted average fair value of options
     granted during 1995..................                 $2.15                          $2.04
                                                           =====                          =====
Year ended December 31, 1996:
  Outstanding, January 1, 1996............   93,000        $2.48            20,000        $2.75
  Granted.................................  188,000         3.45            30,000         3.75
  Expired.................................  (22,000)        2.92                --           --
  Exercised...............................   (7,500)        2.38                --           --
  Outstanding, December 31, 1996..........  251,500        $3.18            50,000        $3.35
                                            -------        -----         ---------        -----
  Options exercisable at December 31,
     1996.................................  191,500        $3.01            50,000        $3.35
                                            =======        =====         =========        =====
  Weighted average fair value of options
     granted during 1996..................                 $2.70                          $3.01
                                                           =====                          =====
Year ended December 31, 1997:
  Outstanding, January 1, 1997............  251,500        $3.18            50,000        $3.35
  Granted.................................  123,000         3.33         1,235,000         3.00
  Expired.................................  (78,500)        3.16                --           --
  Exercised...............................  (36,000)        3.06                --           --
  Outstanding, December 31, 1997..........  260,000         3.18         1,285,000         3.01
                                            -------        -----         ---------        -----
  Options exercisable at December 31,
     1997.................................  181,000        $3.07            50,000        $3.00
                                            =======        =====         =========        =====
  Weighted average fair value of options
     granted during 1997..................                 $2.05                          $0.25
                                                           =====                          =====
</TABLE>
 
                                      F-29
<PAGE>   147
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     A summary of the status of stock purchase warrants at December 31, 1995,
1996 and 1997, and changes therein during the years then ended is presented
below:
 
<TABLE>
<CAPTION>
                                                                         WEIGHTED AVERAGE
                                                              SHARES     EXERCISE PRICES
                                                            ----------   ----------------
<S>                                                         <C>          <C>
Year ended December 31, 1995:
  Outstanding, January 1, 1995............................   4,554,044        $3.24
  Issued..................................................     170,000         3.87
  Expired/redeemed........................................  (1,267,513)        2.50
  Exercised...............................................    (997,009)        2.50
  Outstanding, December 31, 1995..........................   2,459,522         3.97
                                                            ----------        -----
  Warrants exercisable at December 31, 1995...............   2,459,522        $3.97
                                                            ==========        =====
  Weighted average fair value of warrants issued during
     1995.................................................                    $0.44
                                                                              =====
Year ended December 31, 1996:
  Outstanding, January 1, 1996............................   2,459,522        $3.97
  Issued..................................................      25,000         3.25
  Expired.................................................          --           --
  Exercised...............................................          --           --
  Outstanding, December 31, 1996..........................   2,484,522         3.97
                                                            ----------        -----
  Warrants exercisable at December 31, 1996...............   2,484,522        $3.97
                                                            ==========        =====
  Weighted average fair value of warrants issued during
     1996.................................................                    $0.45
                                                                              =====
Year ended December 31, 1997:
  Outstanding, January 1, 1997............................   2,484,522        $3.97
  Issued..................................................      50,000         3.00
  Expired.................................................          --           --
  Exercised...............................................     (11,428)        4.00
  Outstanding, December 31, 1997..........................   2,523,094         3.89
                                                            ----------        -----
  Warrants exercisable at December 31, 1997...............   2,523,094        $3.89
                                                            ==========        =====
  Weighted average fair value of warrants issued during
     1997.................................................                    $0.45
                                                                              =====
</TABLE>
 
NOTE E. MAJOR CUSTOMERS
 
     The Company and its subsidiaries operate exclusively within the United
States and their revenues and operating income are derived predominately from
the oil and gas industry. Oil and gas production is sold to various purchasers
and the receivables are generally uncollateralized. The Company has not
experienced significant credit losses on its oil and gas accounts and management
is of the opinion that significant credit risk does not exist. Management is of
the opinion that the loss of any one purchaser would not have an adverse effect
on the ability of the Company to sell its oil and gas production.
 
     In 1997, three purchasers accounted for 18%, 15% and 12%, respectively, of
total oil and gas revenues. In 1996, three purchasers accounted for 18%, 12% and
15%, respectively, of total oil and gas revenues. In 1995, four purchasers
accounted for 18%, 17%, 11% and 11%, respectively, of total oil and gas
revenues.
 
NOTE F. RELATED PARTIES
 
     Until December 1993, MRO was owned 80% by the Company's then President and
Chairman of the Board of Directors, Mr. Deas H. Warley III and 20% by a former
Vice President and Board Member, Sal J.
 
                                      F-30
<PAGE>   148
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Pagano. Mr. Warley currently owns approximately 16% of the Company's outstanding
common stock and 5% of the related $4.00 warrants.
 
     Effective November 1, 1995, the Company purchased a building and land in
Midland County, Texas, for $78,996 from Mr. Warley and another individual for
use as a district office. Mr. Warley and the other individual each financed 50%
of the purchase price less the down payment of $10,496. The two $34,250 ten year
notes bore interest at 7.5% and were payable in equal monthly installments of
$407 each. The cost to the Company was based on an independent written appraisal
and certain improvements completed before the property was purchased. This
property was sold in 1997 at a gain of $46,500.
 
     In December 1995, Mr. Warley borrowed $582,805 from the Company under an
eighteen month term note bearing 7.5% interest, secured by 287,947 shares of the
Company's common stock. Mr. Warley used these funds to exercise his 233,122
warrants to buy common stock at $2.50 per share. The balance of the note payable
to Mr. Warley discussed above was netted against this note receivable and he
made a cash payment of $95,000 leaving a balance of $453,641 at December 31,
1995. This amount was reflected in the financial statements as a reduction of
stockholders' equity at December 31, 1995. This note was paid in full in
September 1996 by offsetting the balance of $479,648 against the payment to Mr.
Warley for his stock and options in Summit Petroleum Corporation (See Note B.).
 
     During 1995, Summit participated with the Company in the acquisition of
certain oil and gas leases and seismic options in the Sunburst Project, Terry
County, Texas, and the Latigo and Lakota Projects, Hockley County, Texas in
exchange for a commitment from the Company and Summit to expend certain monies
in connection with acquiring an interest in certain oil and gas leases, seismic
options, conducting 3-D geological surveys, interpretation of 3-D seismic data
and the drilling of two or more test wells. Summit acquired its five percent
interest working interest in proportion to its share of the commitment.
 
     Effective September 1, 1995, Summit participated with the Company in the
acquisition of additional working interests in certain Redfish Bay properties in
Nueces County, Texas. Summit acquired its four percent working interest on the
same basis as the Company.
 
     The amounts due from a related party at December 31, 1996, represents
reimbursements due for certain acquisition and exploration costs from a limited
partnership, formed in January, 1997, for which the Company served as general
partner. Amounts due from a related party at December 31, 1997 represents
amounts due from this partnership for property operations and drilling costs.
The limited partnership group was initially comprised of 19 individuals of which
18 were also stockholders of the Company. In addition, two of these individuals
are directors of the Company. During 1997, the Company's interest was assigned
to the Company in the form of oil and gas property interests and, effective
December 31, 1997 the Company withdrew from the partnership.
 
     During 1997, the Company acquired working interests from two directors and
a partnership interest from one of these directors for cash consideration of
$144,879 and 15,040 shares of common stock valued at $52,625.
 
NOTE G. COMMITMENTS AND CONTINGENCIES
 
     The Company is involved in litigation arising in the ordinary course of
business. Management believes the ultimate resolution of these matters will not
have a material effect on the consolidated financial statements (see Note N.).
 
                                      F-31
<PAGE>   149
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company leases its executive office space and a field office under
noncancellable operating leases expiring in 2002. Rental expense was $34,560 in
1995, $92,088 in 1996, and $93,988 in 1997. Future minimum rental commitments,
as of December 31, 1997, for these leases are as follows:
 
<TABLE>
<S>                                                         <C>
1998.....................................................   $117,216
1999.....................................................    117,216
2000.....................................................    117,216
2001.....................................................    117,216
2002.....................................................     78,144
                                                            --------
                                                            $547,008
                                                            ========
</TABLE>
 
NOTE H. INCOME TAXES
 
     The deferred tax assets and liabilities reflected in the consolidated
balance sheets as December 31, 1997 and 1996 are as follows:
 
<TABLE>
<CAPTION>
                                                                 1997         1996
                                                              ----------   ----------
<S>                                                           <C>          <C>
Deferred tax assets:
  Tax loss carry-forwards...................................  $1,214,957   $1,193,719
     Less valuation allowance...............................    (146,385)          --
  Other.....................................................      80,579        9,405
                                                               1,149,151    1,203,124
Deferred tax liabilities:
  Property and equipment....................................      33,259      619,975
  Property held for sale....................................          --      108,317
  Contracts and leases......................................      67,699      143,876
                                                              ----------   ----------
                                                                 100,958      872,168
                                                              ----------   ----------
Net deferred tax asset......................................  $1,048,193   $  330,956
                                                              ==========   ==========
</TABLE>
 
     For income tax purposes, the Company has net losses of approximately
$2,963,000 available for carryforward which, if not utilized, will begin to
expire in 2005. Management has determined that, based on future expectations, it
is more likely than not that the Company's future taxable income will be
sufficient to fully utilize these losses prior to their expiration. In addition,
the Company has losses of approximately $610,000 which, if not utilized, will
begin to expire in 1998. Management has determined that, based on future
expectations, it is more likely than not, that approximately $431,000 of this
amount will not be utilized and, accordingly, has established a valuation
allowance.
 
     A reconciliation of the provision for income taxes to the income taxes
computed using the federal statutory rate for the years 1997, 1996 and 1995
follows:
 
<TABLE>
<CAPTION>
                                                        1997       1996       1995
                                                      ---------   -------   ---------
<S>                                                   <C>         <C>       <C>
Amount computed using statutory tax.................  $(884,211)  $17,817   $(378,513)
Increase (reduction) in taxes resulting from:
  Valuation allowance against tax loss
     carry-forwards.................................    146,385        --          --
                                                      ---------   -------   ---------
  Nondeductible expenses............................     10,886     2,642       2,400
  All other.........................................      9,703     9,821        (128)
Federal income tax (benefit)........................  $(717,237)  $30,280   $(376,241)
</TABLE>
 
                                      F-32
<PAGE>   150
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE I. PROPERTY AND EQUIPMENT
 
     Property and equipment at December 31, 1997 and 1996, is comprised of the
following:
 
<TABLE>
<CAPTION>
                                                                1997          1996
                                                             -----------   -----------
<S>                                                          <C>           <C>
Producing oil and gas properties...........................  $27,041,136   $25,809,221
Non-producing oil and gas properties.......................    1,582,364     1,127,605
Transportation equipment...................................      215,749       282,532
Computer equipment and software............................      244,138       229,155
Office furniture and equipment.............................       96,732        94,299
Land and buildings.........................................       14,000        96,545
Leasehold improvements.....................................        1,347         9,014
Wells in progress..........................................       15,233       241,209
                                                             -----------   -----------
                                                             $29,210,699   $27,889,580
                                                             ===========   ===========
</TABLE>
 
NOTE J. HEDGING ACTIVITIES
 
     Effective March 1, 1995, the Company entered into a one year gas swap
agreement to hedge against a portion of the price risk associated with gas price
declines. This agreement covers approximately 50% of the Company's total
estimated gas production. The Company's price under this agreement is a minimum
of $1.50 per Mcf with a 40% participation in prices over $1.50. This swap
agreement expired in February, 1996, and the Company has not entered into
another contract. Losses under this contract were $21,109 and $25,860 for 1995
and 1996, respectively. Gains or losses relating to the swap agreement are
measured, settled and recognized at the end of each month as part of oil and gas
sales.
 
NOTE K. OIL AND GAS INFORMATION
 
     Capitalized costs related to the Company's oil and gas producing activities
are as follows:
 
<TABLE>
<CAPTION>
                                                                1997          1996
                                                             -----------   -----------
<S>                                                          <C>           <C>
Proved producing properties subject to depreciation,
  depletion and amortization...............................  $27,041,136   $25,809,221
Less accumulated depreciation, depletion and
  amortization.............................................   15,634,206    13,769,157
                                                             -----------   -----------
                                                              11,406,930    12,040,064
Wells in progress..........................................       15,233       241,209
Non-producing properties...................................    1,582,364     1,127,605
                                                             -----------   -----------
Net capitalized cost.......................................  $13,004,527   $13,408,878
                                                             ===========   ===========
</TABLE>
 
                                      F-33
<PAGE>   151
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     A summary of costs incurred in acquisition, development and exploration of
oil and gas properties is as follows:
 
<TABLE>
<CAPTION>
                                                      1997         1996         1995
                                                   ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
Incurred directly:
  Acquisition costs -- Proven properties.........  $   57,116   $2,391,228   $  510,832
  Acquisition costs -- Unproven properties.......     296,928      922,607      198,124
  Development costs..............................   1,645,774    2,368,448    2,011,634
  Exploration costs..............................     849,534      766,855      198,453
Share of limited partnership expenditures:
  Acquisition -- Unproven properties.............  $  539,935   $       --   $       --
  Development costs..............................     932,197           --           --
  Exploration costs..............................       2,050           --           --
</TABLE>
 
     Depreciation, depletion and amortization per equivalent barrel of oil
produced (gas is converted to equivalent barrels at the rate of 6 Mcf per
barrel) are as follows:
 
<TABLE>
<CAPTION>
                                                              1997    1996    1995
                                                              -----   -----   -----
<S>                                                           <C>     <C>     <C>
Depreciation, depletion and amortization:
  Based on production.......................................  $4.95   $2.91   $2.73
</TABLE>
 
NOTE L. CASH FLOWS
 
     Supplemental disclosures of cash flow information are as follows:
 
<TABLE>
<CAPTION>
                                                                1997       1996       1995
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Cash paid during the year for:
  Interest..................................................  $896,760   $625,948   $560,456
  Income taxes..............................................        --         --     30,272
Significant non-cash activities:
  Issuance of stock for property............................    52,625         --         --
  Issuance of warrants to bank..............................        --         --     75,000
  Note receivable from sale of building.....................        --         --    344,875
  Note payable from purchase of district office, warehouse
     and yard...............................................        --         --     68,500
  Note receivable from officer/director for exercise of
     warrants, net of note payable..........................        --         --    548,641
  Treasury stock contributed to ESOP........................        --     26,462     12,989
  Development costs incurred, unpaid at year end............        --    110,700         --
  Non-cash reduction in note receivable officer/director....        --    479,648         --
  Proceeds from property sales not collected at year end....   563,757         --         --
</TABLE>
 
NOTE M. OIL AND GAS RESERVES (UNAUDITED)
 
     The estimates of the Company's proved oil and gas reserves, which are
located entirely within the United States, were prepared in accordance with the
guidelines established by the Securities and Exchange Commission and Financial
Accounting Standards Board which require that reserve estimates be prepared
under existing economic and operating conditions, with no provision for price
and cost escalators, except by contractual agreement. These estimates as of
December 31, 1997 are based on evaluations prepared by Williamson Petroleum
Consultants, Inc., Independent Petroleum Engineers. The estimates as of December
31, 1996 and 1995 are based on evaluations prepared by E. Ralph Green and
Associates, Independent Petroleum Engineers.
 
                                      F-34
<PAGE>   152
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Management emphasizes that reserve estimates are inherently imprecise and
are expected to change as new information is available and as economic
conditions in the industry change.
 
  Changes in proved reserve quantities (UNAUDITED):
 
<TABLE>
<CAPTION>
                                                              OIL (BBLS)   GAS (MCF)
                                                              ----------   ----------
<S>                                                           <C>          <C>
Proved reserves, December 31, 1994..........................  2,177,756    17,060,521
Extensions, discoveries and improved recovery...............    298,140       370,722
Revision of previous estimates..............................      8,285       760,412
Purchase of minerals-in-place...............................     70,080     1,545,859
Production..................................................   (166,652)   (1,268,772)
                                                              ---------    ----------
Proved reserves, December 31, 1995..........................  2,387,609    18,468,742
Sales of minerals-in-place..................................     (1,521)      (16,519)
Extensions, discoveries and improved recovery...............    279,444       223,243
Revision of previous estimates..............................    171,677    (1,124,321)
Purchase of minerals-in-place...............................     44,528       327,466
Purchase of Summit..........................................    175,656     1,418,424
Production..................................................   (215,913)   (1,002,482)
                                                              ---------    ----------
Proved reserves, December 31, 1996..........................  2,841,480    18,294,553
Sales of minerals-in-place..................................   (252,087)   (1,826,629)
Extensions, discoveries and improved recovery...............    549,834       349,664
Revision of previous estimates..............................   (291,648)   (1,969,860)
Production..................................................   (192,580)     (988,109)
                                                              ---------    ----------
Proved reserves, December 31, 1997..........................  2,654,999    13,859,619
                                                              ---------    ----------
Proved developed reserves (UNAUDITED):
  December 31, 1995.........................................  1,918,557    14,131,580
  December 31, 1996.........................................  2,061,974    13,821,400
  December 31, 1997.........................................  1,732,544     9,533,072
</TABLE>
 
  Standardized measure of discounted future net cash flows relating to proved
reserves (UNAUDITED):
 
<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                               ----------------------------------------
                                                  1997           1996          1995
                                               -----------   ------------   -----------
<S>                                            <C>           <C>            <C>
Future cash inflows..........................  $76,605,194   $139,037,425   $79,172,668
Future production costs......................   34,210,308     51,857,027    38,818,603
Future development costs.....................    8,039,963      7,231,324     5,691,375
Future income taxes(a).......................    5,521,700     18,372,157     7,360,573
                                               -----------   ------------   -----------
Future net cash flows........................   28,833,223     61,576,917    27,302,117
Annual discount (10%) for estimated timing of
  cash flows.................................   13,251,251     29,984,568    13,001,409
                                               -----------   ------------   -----------
Standardized measure of discounted future net
  cash flows.................................  $15,581,972   $ 31,592,349   $14,300,708
                                               ===========   ============   ===========
</TABLE>
 
---------------
 
(a)  Future income taxes are computed at current statutory rates on future net
     cash flows before income taxes less the income tax bases of the oil and gas
     properties, available loss carry-forwards, and statutory depletion
     carry-forwards.
 
                                      F-35
<PAGE>   153
                    MIDLAND RESOURCES, INC. AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Changes in standardized measure of discounted future net cash flows from
proved reserves (UNAUDITED):
 
<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                               ----------------------------------------
                                                   1997          1996          1995
                                               ------------   -----------   -----------
<S>                                            <C>            <C>           <C>
Sales of oil and gas produced, net of
  production costs...........................  $ (2,398,872)  $(4,722,529)  $(2,386,779)
Net changes in price and production..........   (20,928,554)   19,074,149     1,539,078
Previously estimated development costs
  incurred...................................            --        35,190       120,474
Revisions of estimated future development
  costs......................................      (202,755)      (84,478)      124,763
Revision of quantity estimates...............    (2,752,686)      167,303       722,631
Purchases of minerals-in-place...............            --       840,715     1,070,857
Acquisition of Summit........................            --     2,875,995            --
Sales of minerals-in-place...................    (2,336,161)      (31,888)           --
Extensions and discoveries...................     2,520,441     1,857,974     2,114,257
Net change in income taxes...................     6,042,379    (4,838,537)     (514,350)
Accretion of discount........................     3,981,784     1,768,766     1,541,954
Changes in timing of estimated cash flows and
  other......................................        64,047       348,981    (2,579,120)
                                               ------------   -----------   -----------
Changes in standardized measure..............   (16,010,377)   17,291,641     1,753,765
Standardized measure, beginning of year......    31,592,349    14,300,708    12,546,943
                                               ------------   -----------   -----------
Standardized measure, end of year............  $ 15,581,972   $31,592,349   $14,300,708
                                               ============   ===========   ===========
</TABLE>
 
NOTE N. SUBSEQUENT EVENT (SECOND PARAGRAPH IS UNAUDITED)
 
     On April 9, 1998, The Board of Directors approved a plan to combine with
Vista Resources Partners, L.P., a Midland, Texas based entity engaged in oil and
gas exploration and production. Consummation of any transaction pursuant to
these negotiations depends upon the satisfaction or waiver of a number of
conditions, including, without limitation, stockholder approval, execution of a
definitive agreement and receipt of a fairness opinion.
 
     The Company has been involved in pending litigation, the nature of which is
a claim for damages arising from the Company's actions as operator of certain
properties in which the plaintiff has an interest, and removal of the Company as
operator of the properties. The plaintiff had not specified a damage amount
until subsequent to April 1998, at which time damages of $230,000 were claimed.
The Company has filed a counterclaim against the plaintiff. Management believes
the ultimate resolution of this matter will not have a material adverse effect
on the Company.
 
                                      F-36
<PAGE>   154
 
APPENDIX A
================================================================================
 
                          AGREEMENT AND PLAN OF MERGER
 
                                     AMONG
 
                        VISTA RESOURCES PARTNERS, L.P.,
 
                            MIDLAND RESOURCES, INC.,
 
                         VISTA ENERGY RESOURCES, INC.,
 
                                      AND
 
                               MIDLAND MERGER CO.
 
                            DATED AS OF MAY 22, 1998
 
================================================================================
                                       A-1
<PAGE>   155
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                          PAGE NO.
                                                                          --------
<S>   <C>   <C>                                                           <C>
ARTICLE 1
 
DEFINITIONS
1.1   Defined Terms.....................................................       A-7
1.2   References and Titles.............................................      A-13
 
ARTICLE 2
 
THE MERGER AND EXCHANGES
2.1   The Midland Merger................................................      A-14
2.2   Effect of the Midland Merger......................................      A-14
2.3   Certificates of Incorporation of Newco, Midland and Newco Sub.....      A-14
2.4   Bylaws............................................................      A-14
2.5   Directors.........................................................      A-14
2.6   Officers..........................................................      A-15
2.7   Effect on Securities..............................................      A-15
2.8   Vista Exchange Agreements.........................................      A-16
2.9   Adjustments.......................................................      A-17
2.10  Exchange of Certificates..........................................      A-17
2.11  Closing...........................................................      A-20
2.12  Effective Time of the Merger......................................      A-20
2.13  Shareholder Approvals Obtained....................................      A-20
 
ARTICLE 3
 
REPRESENTATIONS AND WARRANTIES
3.1   Representations and Warranties of Midland.........................      A-20
      (a)   Organization, Standing and Power............................      A-20
      (b)   Capital Structure...........................................      A-21
      (c)   Authority; No Violations; Consents and Approvals............      A-22
      (d)   SEC Documents...............................................      A-23
      (e)   Information Supplied........................................      A-23
      (f)   Absence of Certain Changes or Events........................      A-24
      (g)   No Undisclosed Material Liabilities.........................      A-24
      (h)   No Default..................................................      A-24
      (i)   Compliance with Applicable Laws.............................      A-24
      (j)   Litigation..................................................      A-25
      (k)   Taxes.......................................................      A-25
      (l)   Employee Benefit Matters....................................      A-27
      (m)   Labor Matters...............................................      A-28
      (n)   Intangible Property.........................................      A-29
      (o)   Environmental Matters.......................................      A-29
      (p)   Insurance...................................................      A-31
      (q)   Absence of Certain Changes or Events........................      A-31
      (r)   Governmental Regulation.....................................      A-32
      (s)   No Restrictions.............................................      A-32
      (t)   Audits and Settlements......................................      A-33
      (u)   Employment Contracts and Benefits...........................      A-33
      (v)   Accounts Receivable.........................................      A-33
      (w)   Title to Assets.............................................      A-33
      (x)   Midland Engineering Report..................................      A-33
</TABLE>
 
                                       A-2
<PAGE>   156
 
<TABLE>
<CAPTION>
                                                                          PAGE NO.
                                                                          --------
<S>   <C>   <C>                                                           <C>
      (y)   Oil and Gas Operations......................................      A-34
      (z)   Hydrocarbon Sales and Purchase Agreements...................      A-34
      (aa)  Financial and Commodity Hedging.............................      A-35
      (bb)  Committed Capital Expenditures..............................      A-35
      (cc)  Business Relations..........................................      A-35
      (dd)  Books and Records...........................................      A-35
      (ee)  Brokers.....................................................      A-35
      (ff)  Vote Required...............................................      A-36
      (gg)  Disclosure and Investigation................................      A-36
      (hh)  Fairness Opinion............................................      A-36
3.2   Representations and Warranties of Vista...........................      A-36
      (a)   Organization, Standing and Power............................      A-36
      (b)   Capital Structure...........................................      A-36
      (c)   Authority; No Violations; Consents and Approvals............      A-37
      (d)   Financial Statements and Material Agreements................      A-38
      (e)   Information Supplied........................................      A-38
      (f)   Absence of Certain Changes or Events........................      A-38
      (g)   No Undisclosed Material Liabilities.........................      A-38
      (h)   No Default..................................................      A-39
      (i)   Compliance with Applicable Laws.............................      A-39
      (j)   Litigation..................................................      A-39
      (k)   Taxes.......................................................      A-39
      (l)   Employee Benefit Matters....................................      A-41
      (m)   Labor Matters...............................................      A-42
      (n)   Intangible Property.........................................      A-43
      (o)   Environmental Matters.......................................      A-43
      (p)   Insurance...................................................      A-44
      (q)   Absence of Certain Changes or Events........................      A-44
      (r)   Governmental Regulation.....................................      A-45
      (s)   No Restrictions.............................................      A-45
      (t)   Audits and Settlements......................................      A-46
      (u)   Employment Contracts and Benefits...........................      A-46
      (v)   Accounts Receivable.........................................      A-46
      (w)   Title to Assets.............................................      A-46
      (x)   Vista Engineering Report....................................      A-46
      (y)   Oil and Gas Operations......................................      A-47
      (z)   Hydrocarbon Sales and Purchase Agreements...................      A-47
      (aa)  Financial and Commodity Hedging.............................      A-48
      (bb)  Committed Capital Expenditures..............................      A-48
      (cc)  Business Relations..........................................      A-48
      (dd)  Books and Records...........................................      A-48
      (ee)  Brokers.....................................................      A-49
      (ff)  Disclosure and Investigation................................      A-49
3.3   Representations and Warranties of Newco and Merger Sub............      A-49
      (a)   Organization, Standing and Corporate Power..................      A-49
      (b)   Capital Structure...........................................      A-49
      (c)   Authority; No Violations; Consents and Approvals............      A-50
      (d)   No Prior Activities.........................................      A-50
</TABLE>
 
                                       A-3
<PAGE>   157
 
<TABLE>
<CAPTION>
                                                                          PAGE NO.
                                                                          --------
<S>   <C>   <C>                                                           <C>
ARTICLE 4
 
COVENANTS
4.1   Conduct of Business by Vista and Midland Pending Closing..........      A-50
4.2   Access to Assets, Personnel, and Information......................      A-53
4.3   No Solicitation by Midland........................................      A-55
4.4   No Solicitation by Vista..........................................      A-56
4.5   Midland Shareholders Meeting......................................      A-56
4.6   S-4 and Proxy Statement...........................................      A-57
4.7   Stock Exchange Listing............................................      A-58
4.8   Additional Arrangements...........................................      A-58
4.9   Agreements of Rule 145 Affiliates.................................      A-58
4.10  Public Announcements..............................................      A-58
4.11  Notification of Certain Matters...................................      A-59
4.12  Payment of Expenses...............................................      A-59
4.13  Indemnification...................................................      A-59
4.14  Indemnification Agreements........................................      A-60
4.15  Registration of Shares to be Issued Pursuant to Stock Options.....      A-60
4.16  Registration Rights Agreement.....................................      A-60
4.17  Resignations of Officers and Directors of Midland.................      A-61
4.18  Newco Long-Term Incentive Plan....................................      A-61
4.19  Midland Option Exercise Agreements................................      A-61
4.20  Transactions with Affiliates......................................      A-61
 
ARTICLE 5
 
CONDITIONS
5.1   Conditions to Each Party's Obligation to Effect the Merger........      A-61
      (a)   Shareholder Approval........................................      A-61
      (b)   Fairness Opinion............................................      A-61
      (c)   Tax Opinion.................................................      A-61
      (d)   Exchange Listing............................................      A-61
      (e)   Other Approvals.............................................      A-61
      (f)   Securities Law Matters......................................      A-62
      (g)   No Injunctions or Restraints................................      A-62
5.2   Conditions of Obligations of Vista, Newco, and Merger Sub.........      A-62
      (a)   Representations and Warranties..............................      A-62
      (b)   Performance of Covenants and Agreements.....................      A-62
      (c)   Comfort Letter..............................................      A-62
      (d)   Dissenters' Rights..........................................      A-62
      (e)   Legal Opinion...............................................      A-62
      (f)   No Adverse Change...........................................      A-62
      (g)   Midland Option Exercise Agreements..........................      A-63
5.3   Conditions of Obligations of Midland..............................      A-63
      (a)   Representations and Warranties..............................      A-63
      (b)   Performance of Covenants and Agreements.....................      A-63
      (c)   Legal Opinion...............................................      A-63
      (d)   Comfort Letter..............................................      A-63
      (e)   No Adverse Change...........................................      A-63
      (f)   Exchange Agreements.........................................      A-63
</TABLE>
 
                                       A-4
<PAGE>   158
 
<TABLE>
<CAPTION>
                                                                          PAGE NO.
                                                                          --------
<S>   <C>   <C>                                                           <C>
ARTICLE 6
 
TERMINATION
6.1   Termination Rights................................................      A-64
6.2   Effect of Termination.............................................      A-65
 
ARTICLE 7
 
MISCELLANEOUS
7.1   Amendment.........................................................      A-65
7.2   Extension; Waiver.................................................      A-65
7.3   Nonsurvival of Representations, Warranties, Covenants, and
      Agreements........................................................      A-65
7.4   Notices...........................................................      A-65
7.5   Counterparts......................................................      A-66
7.6   Severability......................................................      A-66
7.7   Entire Agreement; No Third Party Beneficiaries....................      A-66
7.8   Applicable Law....................................................      A-66
7.9   No Remedy in Certain Circumstances................................      A-66
7.10  Enforcement of Agreement..........................................      A-66
7.11  Assignment........................................................      A-67
7.12  Waivers...........................................................      A-67
7.13  Certain Provisions Inapplicable...................................      A-67
7.14  Termination of Letter of Intent and Confidentiality Agreement.....      A-67
EXHIBITS:
  Exhibit A          -- Form of Midland Exchange Agreement
  Exhibit B          -- Form of Midland Voting Agreement
  Exhibit C          -- Form of Newco Warrant
  Exhibit D          -- Form of Midland Option Exercise Agreement
  Exhibit E          -- Form of Vista Exchange Agreement
  Exhibit 3.3(a)     -- Newco Certificate of Incorporation and Bylaws
  Exhibit 4.9(a)     -- Form of Vista Affiliate's Agreement
  Exhibit 4.9(b)     -- Form of Midland Affiliate's Agreement
                     -- Form of Indemnification Agreement for Vista Officers and
  Exhibit 4.14(a)       Directors
                     -- Form of Indemnification Agreement for Midland Officers
  Exhibit 4.14(b)       and Directors
  Exhibit 4.16(a)    -- Form of Vista Registration Rights Agreement
  Exhibit 4.16(b)    -- Form of Midland Registration Rights Agreement
  Exhibit 4.17(a)    -- Form of Termination Agreement for Howard E. Ehler
  Exhibit 4.17(b)    -- Form of Termination Agreement for Marilyn D. Wade
  Exhibit 4.18       -- Form of Newco Long-Term Incentive Plan
  Exhibit 5.2(e)(i)  -- Midland Legal Opinion
  Exhibit            -- Midland 10b-5 Letter
     5.2(e)(ii)
  Exhibit 5.3(c)(i)  -- Vista Legal Opinion
  Exhibit            -- Vista 10b-5 Letter
     5.3(c)(ii)
 
DISCLOSURE SCHEDULES:
  Midland Disclosure Schedule
  Vista Disclosure Schedule
</TABLE>
 
                                       A-5
<PAGE>   159
 
                          AGREEMENT AND PLAN OF MERGER
 
     THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into,
effective as of May 22, 1998, by and among Vista Resources Partners, L.P., a
Texas limited partnership ("Vista"), Midland Resources, Inc., a Texas
corporation ("Midland"), Vista Energy Resources, Inc., a Delaware corporation
and a direct wholly-owned subsidiary of Vista ("Newco"), and Midland Merger Co.,
a Texas corporation and a direct wholly-owned subsidiary of Newco ("Merger
Sub").
 
                                    RECITALS
 
     A. Vista and Midland have determined to engage in a strategic business
combination.
 
     B. In furtherance thereof, Vista Resources I, Inc., the sole general
partner of Vista (the "General Partner"), has approved this Agreement and the
exchange (the "Vista GP Exchange") of shares of Newco common stock, $.01 par
value per share ("Newco Common Stock"), and warrants that are exercisable for
shares of Newco Common Stock ("Newco Warrants") for all of the outstanding
shares of common stock, $.01 par value per share, of the General Partner (the
"GP Common Stock") and the exchange (the "Vista LP Exchange" and, together with
the Vista GP Exchange, the "Vista Exchange") of shares of Newco Common Stock and
Newco Warrants for all of the outstanding Partnership Interests (as hereinafter
defined).
 
     C. Contemporaneously with the execution and delivery of this Agreement,
Newco and each holder of a Midland Exchange Stock Option has entered into a
Midland Exchange Agreement pursuant to which such holder has agreed to exchange
(the "Midland Exchange") his Midland Exchange Stock Options for Newco Warrants.
 
     D. In furtherance thereof, the respective Boards of Directors of Merger Sub
and Midland have approved this Agreement and the merger of Merger Sub with and
into Midland, with Midland being the surviving corporation (the "Midland
Merger").
 
     E. In furtherance thereof, the Board of Directors of Newco has approved the
contribution of the Partnership Interests received by it pursuant to the Vista
LP Exchange to Vista LLC, a Delaware limited liability company and a direct
wholly-owned subsidiary of Newco ("Newco LLC"), effective immediately after the
Midland Merger and the Vista Exchange (the "Newco Contribution").
 
     F. The respective Boards of Directors of Newco, Merger Sub and Midland have
determined that it is in the best interests of their respective shareholders or
stockholders (hereinafter referred to as "shareholders"), and the General
Partner has determined that it is in the best interests of the limited partners
of Vista, for the Midland Merger and the Vista Exchange to be effected upon the
terms and subject to the conditions of this Agreement.
 
     G. For federal income tax purposes, it is intended that (a) the Vista
Exchange shall qualify as a transfer within the meaning of Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code"), (b) the Midland Merger
and the Midland Exchange shall qualify as a reorganization within the meaning of
Section 368(a) of the Code, and (c) this Agreement be, and is adopted as, a plan
of reorganization within the meaning of Treasury Regulation Section 1.368-1(c).
 
     H. Contemporaneously with the execution and delivery of this Agreement,
Newco and each of Deas H. Warley III, Howard E. Ehler, Robert R. Donnelly, Sam
R. Brock, Wayne M. Whitaker, John Q. Adams and Darrell M. Dillard have entered
into separate Midland Voting Agreements (as hereinafter defined).
 
     I. Vista, Newco, Merger Sub and Midland desire to make certain
representations, warranties, covenants and agreements in connection with the
Midland Merger and the Vista Exchange and also to prescribe various conditions
to the Midland Merger and the Vista Exchange.
 
     NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
 
                                       A-6
<PAGE>   160
 
                                   ARTICLE 1
 
                                  DEFINITIONS
 
     1.1 DEFINED TERMS. As used in this Agreement, each of the following terms
has the meaning given in this Section or in the Sections referred to below:
 
     "Affiliate" means, with respect to any Person, each other Person that
directly or indirectly (through one or more intermediaries or otherwise)
controls, is controlled by, or is under common control with such Person. For
purposes of this definition and this Agreement, the term "control" (and
correlative terms) means the power, whether by contract, equity ownership or
otherwise, to direct the policies or management of a Person.
 
     "Affiliate Agreement" has the meaning specified in Section 4.9.
 
     "Agreement" means this Agreement and Plan of Merger, as amended,
supplemented, or modified from time to time.
 
     "Agreement of Limited Partnership" means the Agreement of Limited
Partnership for Vista dated as of September 26, 1995, by and among the General
Partner and the persons who have executed such agreement as limited partners.
 
     "AMEX" means the American Stock Exchange or any successor thereto.
 
     "Audited Financial Statements" has the meaning specified in Section 3.2(d).
 
     "Closing" means the closing of the Midland Merger, the Midland Exchange and
the Vista Exchange and the consummation of the other transactions contemplated
by this Agreement.
 
     "Closing Date" means the date on which the Closing occurs, which date shall
be the first business day following the day on which all of the conditions
provided for in Article 5 have been satisfied or waived as provided therein (or
such later date as is mutually agreed upon by the parties).
 
     "Code" means the Internal Revenue Code of 1986, as amended.
 
     "Defensible Title" means good and defensible right, title, and interest
that is (a) evidenced by an instrument or instruments filed of record in
accordance with the conveyance and recording laws of the applicable jurisdiction
to the extent necessary to prevail against competing claims of bona fide
purchasers for value without notice and (b) subject to Permitted Encumbrances,
free and clear of all Liens, claims, infringements, burdens, or other defects.
 
     "DGCL" means the Delaware General Corporation Law, as amended.
 
     "Effective Time" has the meaning specified in Section 2.12.
 
     "Environmental Laws" has the meaning specified in Section 3.1(o)(i).
 
     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
 
     "Excess Shares" has the meaning specified in Section 2.10(e)(ii).
 
     "Exchange Act" means the Securities Exchange Act of 1934, as amended.
 
     "Exchange Agent" shall mean such agent as is reasonably satisfactory to
Newco and Midland.
 
     "Exchange Fund" has the meaning specified in Section 2.10(a).
 
     "Financial Statements" has the meaning specified in Section 3.2(d).
 
     "First Union" has the meaning specified in Section 3.1(ee).
 
     "Fully Diluted Basis" means as of the date of the calculation thereof the
sum of (a) the number of shares of Newco Common Stock then issued and
outstanding immediately after the Effective Time, plus (b) the number of shares
of Newco Common Stock, if any, issued after the Effective Time as a result of
the exercise of any Midland Stock Options (other than Midland Exchange Stock
Options), plus (c) the number of shares
 
                                       A-7
<PAGE>   161
 
of Newco Common Stock issuable, whether at such time or upon the passage of time
or the occurrence of future events, upon exercise, conversion or exchange of all
Midland Exercisable Warrants outstanding as of the close of business on the
trading day immediately preceding the second business day immediately prior to
the Closing Date.
 
     "GAAP" has the meaning specified in Section 3.1(d).
 
     "General Partner" means has the meaning specified in the Recitals hereto.
 
     "Governmental Action" means any authorization, application, approval,
consent, exemption. filing, license, notice, registration, permit, or other
requirement of, to, or with any Governmental Entity.
 
     "Governmental Entity" has the meaning specified in Section 3.1(c)(iii).
 
     "GP Certificate" means a certificate representing shares of GP Common
Stock.
 
     "GP Common Stock" has the meaning specified in the Recitals hereto.
 
     "Hazardous Materials" has the meaning specified in Section 3.1(o)(ii).
 
     "Hydrocarbon Agreement" means any of the Hydrocarbon Sales Agreements, the
Hydrocarbon Purchase Agreements, and the Hydrocarbon Support Agreements.
 
     "Hydrocarbon Purchase Agreement" means any material sales agreement,
purchase contract, or marketing agreement that is currently in effect and under
which Midland or any of its Subsidiaries (or Vista or Vista Sub, as applicable)
is a buyer of Hydrocarbons for resale (other than purchase agreements entered
into in the ordinary course of business with a term of three months or less,
terminable without penalty on 30 days' notice or less, which provide for a price
not greater than the market value price that would be paid pursuant to an
arm's-length contract for the same term with an unaffiliated third-party seller,
and which do not obligate the purchaser to take any specified quantity of
Hydrocarbons or to pay for any deficiencies in quantities of Hydrocarbons not
taken).
 
     "Hydrocarbon Sales Agreement" means any material sales agreement, purchase
contract, or marketing agreement that is currently in effect and under which
Midland or any of its Subsidiaries (or Vista or Vista Sub, as applicable) is a
seller of Hydrocarbons (other than "spot" sales agreements entered into in the
ordinary course of business with a term of three months or less, terminable
without penalty on 30 days' notice or less, and which provide for a price not
less than the market value price that would be received pursuant to an
arm's-length contract for the same term with an unaffiliated third party
purchaser).
 
     "Hydrocarbon Support Agreement" means any gathering, transportation,
treatment, compression, processing, or similar agreement that is currently in
effect and to which Midland or any of its Subsidiaries (or Vista or Vista Sub,
as applicable) is a party (other than gathering, transportation, treatment,
compression, processing, and similar agreements that have been entered into in
the ordinary course of business and which contain market value prices and terms
of the type found in gathering, transportation, treatment, compression,
processing, and similar agreements entered into between unaffiliated parties in
arm's length transactions).
 
     "Hydrocarbons" means oil, condensate, gas, casinghead gas, and other liquid
or gaseous hydrocarbons.
 
     "Indemnification Agreement" has the meaning specified in Section 4.14.
 
     "IRS" means the Internal Revenue Service.
 
     "Lien" means any lien, trust, mortgage, security interest, pledge, deposit,
production payment, restriction, burden, claim, charge, detriment, option,
encumbrance, voting agreement, preemptive right, shareholder agreement, rights
of a vendor under any title retention or conditional sale agreement, or lease or
other arrangement substantially equivalent to any of the foregoing.
 
     "Material Adverse Change" has the meaning specified in Section 3.1(a).
 
     "Material Adverse Effect" has the meaning specified in Section 3.1(a).
 
                                       A-8
<PAGE>   162
 
     "Merger Sub" means Midland Merger Co., a Texas corporation and a direct
wholly-owned subsidiary of Newco.
 
     "Midland" means Midland Resources, Inc., a Texas corporation.
 
     "Midland Acquisition Proposal" has the meaning specified in Section 4.3(b).
 
     "Midland Articles of Merger" has the meaning specified in Section 2.12.
 
     "Midland Benefit Program or Agreement" has the meaning specified in Section
3.1(l).
 
     "Midland Certificate" means a certificate representing shares of Midland
Common Stock.
 
     "Midland Common Stock" means the common stock, par value $.001 per share,
of Midland.
 
     "Midland Common Stock Warrant" means all Midland Stock Equivalents other
than the Midland Stock Options and Midland Warrants.
 
     "Midland Conversion Number" means one.
 
     "Midland Engineering Report" means the oil and gas reserve engineering
report concerning the Oil and Gas Interests of Midland as of January 1, 1998
prepared by Williamson Petroleum Consultants, Inc., and provided to Vista by or
on behalf of Midland.
 
     "Midland Exchange" has the meaning specified in the Recitals hereto.
 
     "Midland Exchange Agreement" means an Exchange Agreement in the form and
substance of Exhibit A hereto.
 
     "Midland Exchange Stock Options" has the meaning set forth in Section
2.7(b)(v).
 
     "Midland Exercisable Warrants" means all Midland Common Stock Warrants that
have an exercise price per share of Midland Common Stock that is equal to or
less than the closing price for a share of Midland Common Stock, as reported on
AMEX, on any of the five trading days immediately preceding the second business
day immediately prior to the Closing Date.
 
     "Midland Financial Statements" has the meaning specified in Section 3.1(d).
 
     "Midland Group" has the meaning specified in Section 3.1(l).
 
     "Midland Indemnified Parties" has the meaning specified in Section 4.13(a).
 
     "Midland Intangible Property" has the meaning set forth in Section 3.1(n).
 
     "Midland Litigation" has the meaning set forth in Section 3.1(j).
 
     "Midland Material Agreement" means (a) any written or oral agreement,
contract, commitment, or understanding to which Midland or any of its
Subsidiaries is a party, by which Midland is directly or indirectly bound, or to
which any asset of Midland or any of its Subsidiaries may be subject, the
termination or breach of which, individually or in the aggregate, would have or
could reasonably be expected to have a Material Adverse Effect on Midland or (b)
any instrument defining the rights of security holders, including an indenture,
or material contract that is required by Item 601 of Regulation S-K to be filed
with the SEC as an exhibit to Midland's Annual Report on Form 10-K for the year
ended December 31, 1997.
 
     "Midland Meeting" means the meeting of the shareholders of Midland called
for the purpose of voting on the proposal to approve this Agreement and the
Midland Merger.
 
     "Midland Merger" has the meaning specified in the Recitals hereto.
 
     "Midland Option Exercise Agreement" means an Option Exercise Agreement in
the form and substance of Exhibit D hereto.
 
     "Midland Order" has the meaning specified in Section 3.1(j).
 
     "Midland Permits" has the meaning specified in Section 3.1(i).
                                       A-9
<PAGE>   163
 
     "Midland Plan" has the meaning specified in Section 3.1(l).
 
     "Midland Preferred Stock" has the meaning set forth in Section 3.1(b).
 
     "Midland Registration Rights Agreement" has the meaning specified in
Section 4.16(b).
 
     "Midland SEC Documents" has the meaning specified in Section 3.1(d).
 
     "Midland Stock Equivalents" means all rights, warrants (including the
Midland Warrants and Midland Common Stock Warrant), options (including the
Midland Stock Options) convertible securities or indebtedness, exchangeable
securities or other instruments, or other rights that (a) are outstanding
immediately after the Effective Time, (b) immediately prior to the Effective
Time, were exercisable for or convertible or exchangeable into, directly or
indirectly, shares of Midland Common Stock at the time of issuance or upon the
passage of time or occurrence of some future event and (c) immediately after the
Effective Time, are exercisable for or convertible or exchangeable into,
directly or indirectly, shares of Newco Common Stock upon the passage of time or
occurrence of some future event.
 
     "Midland Stock Option" means an issued and outstanding option to acquire
shares of Midland Common Stock granted pursuant to any of the Midland Stock
Plans.
 
     "Midland Stock Plans" has the meaning specified in Section 3.1(b).
 
     "Midland Voting Agreement" means a Voting Agreement and Irrevocable Proxy
in the form and substance of Exhibit B hereto.
 
     "Midland Warrant" means the warrants issued and outstanding under that
certain Warrant Agreement dated as of November 1, 1990 by and between Midland
and Stock Transfer Company of America, Inc.
 
     "MM Surviving Corporation" has the meaning specified in Section 2.2.
 
     "Nasdaq" means the Nasdaq National Market.
 
     "Newco" means Vista Energy Resources, Inc., a Delaware corporation.
 
     "Newco Common Stock" has the meaning specified in the Recitals hereto.
 
     "Newco Contribution" has the meaning specified in the Recitals hereto.
 
     "Newco Director Nominee" has the meaning specified in Section 2.5.
 
     "Newco LLC" has the meaning specified in the Recitals hereto.
 
     "Newco Long-Term Incentive Plan" has the meaning specified in Section 4.18.
 
     "Newco Stock Certificate" means a certificate representing shares of Newco
Common Stock.
 
     "Newco Warrant" means a warrant that is exercisable for shares of Newco
Common Stock and which is evidenced by an agreement in the form and substance of
Exhibit C hereto.
 
     "Oil and Gas Interests" means direct and indirect interests in and rights
with respect to oil, gas, mineral, and related properties and assets of any kind
and nature, direct or indirect, including working, royalty, and overriding
royalty interests, production payments, operating rights, net profits interests,
other nonworking interests, and nonoperating interests; all interests in and
rights with respect to Hydrocarbons and other minerals or revenues therefrom and
all contracts in connection therewith and claims and rights thereto (including
all oil and gas leases, operating agreements, unitization and pooling agreements
and orders, division orders, transfer orders, mineral deeds, royalty deeds, oil
and gas sales, exchange, and processing contracts and agreements, and in each
case, interests thereunder), surface interests, fee interests, reversionary
interests, reservations, and concessions; all easements, rights of way,
licenses, permits, leases, and other interests associated with, appurtenant to,
or necessary for the operation of any of the foregoing; and all interests in
equipment and machinery (including well equipment and machinery), oil and gas
production, gathering, transmission, treating, processing, and storage
facilities (including tanks, tank batteries, pipelines, and gathering systems),
pumps, water injection facilities, electric plants, gasoline and gas processing
plants,
 
                                      A-10
<PAGE>   164
 
refineries, and other tangible personal property and fixtures associated with,
appurtenant to, or necessary for the operation of any of the foregoing.
References in this Agreement to "Oil and Gas Interests" of a specified Person
means the collective Oil and Gas Interests of such Person and its Subsidiaries.
 
     "Party" has the meaning specified in Section 4.1.
 
     "Partnership Interest" (and correlatives thereof) means, with respect to a
limited partner of Vista, each 1% interest in Vista based on sharing ratios
held, or to be held, of record by a limited partner as of the date of
determination.
 
     "PBGC" means the Pension Benefit Guaranty Corporation.
 
     "Permitted Encumbrances" means (a) Liens for Taxes, assessments, or other
governmental charges or levies if the same shall not at the particular time in
question be due and delinquent or (if foreclosure, distraint, sale, or other
similar proceedings shall not have been commenced or, if commenced, shall have
been stayed) are being contested in good faith by appropriate proceedings and if
a specified Person or any of its Subsidiaries shall have set aside on its books
such reserves segregated to the extent required by sound accounting practices)
as may be required by GAAP or otherwise determined by its board of directors or
general partner to be adequate with respect thereto, (b) Liens of carriers,
warehousemen, mechanics, laborers, materialmen, landlords, vendors, workmen, and
operators arising by operation of law in the ordinary course of business or by a
written agreement existing as of the date hereof and necessary or incident to
the exploration, development, operation, and maintenance of Hydrocarbon
properties and related facilities and assets for sums not yet due or being
contested in good faith by appropriate proceedings, if such Person or any of its
Subsidiaries shall have set aside on its books such reserves (segregated to the
extent required by sound accounting practices) as may be required by GAAP or
otherwise determined by its board of directors or general partner to be adequate
with respect thereto, (c) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance, and other social
security legislation (other than ERISA), (d) Liens incurred in the ordinary
course of business to secure the performance of bids, tenders, trade contracts,
leases (statutory only), statutory obligations, surety and appeal bonds,
performance and return-of-money bonds, and other obligations of a like nature,
(e) Liens, easements, rights-of-way, restrictions, servitudes, permits,
conditions, covenants, exceptions, reservations, and other similar encumbrances
incurred in the ordinary course of business or existing on property and not in
the aggregate materially impairing the value of the assets of such Person or any
of its Subsidiaries or interfering with the ordinary conduct of such Person or
any of its Subsidiaries' business or rights to its assets, (f) Liens arising
pursuant to Section 9.319 of the Texas Business and Commerce Code and all other
similar Liens created or arising by operation of law to secure a party's
obligations as a purchaser of oil and gas, (g) all rights to consent by,
required notices to, filings with, or other actions by Governmental Entities to
the extent customarily obtained subsequent to the Closing for transactions
similar to the Midland Merger and the Vista Exchange, (h) farmout, carried
working interest, joint operating, unitization, hedging agreements, royalty,
overriding royalty, sales, and similar agreements relating to the exploration or
development of, or production from, Hydrocarbon properties entered into in the
ordinary course of business and not in violation of Section 4.1, (i) any
defects, irregularities, or deficiencies in title to easements, rights-of-way,
or other surface use agreements that do not have a Material Adverse Effect on
the value of any asset of such Person or any of its Subsidiaries, (j)
preferential rights to purchase and Third-Party Consents that would not be
activated or triggered by either the Midland Merger or the Vista Exchange and
the other transactions contemplated by this Agreement, (k) Liens approved in
writing by or on behalf of Vista, (l) in the case of Vista, Liens and security
interests securing Vista's senior credit facility and (m) in the case of
Midland, Liens and security interests securing Midland's senior credit facility.
 
     "Person" means any natural person, corporation, limited or general
partnership, limited liability company, joint stock company, joint venture,
association, company, trust, bank, trust company, land trust, business trust, or
other entity or organization, whether or not a Governmental Entity.
 
     "Providing Party" has the meaning specified in Section 4.2.
 
     "Proxy Statement" has the meaning specified in Section 3.1(c)(iii).
 
     "Release" has the meaning specified in Section 3.1(o)(iii).
                                      A-11
<PAGE>   165
 
     "Remedial Action" has the meaning set forth in Section 3.1(o)(iv).
 
     "Representative" means, with respect to any Person, any director, officer,
general partner, employee, agent, advisor (including legal, accounting, and
financial advisors), Affiliate, or other representative of such Person or any of
its Subsidiaries.
 
     "Requesting Party" has the meaning specified in Section 4.2.
 
     "Responsible Officer" means, with respect to any corporation, the
President, the Chief Executive Officer, the Chief Operating Officer, the Chief
Financial Officer, or any Vice President or other member of executive management
of such corporation.
 
     "Rule 145 Affiliates" has the meaning specified in Section 4.9.
 
     "S-4" means the Registration Statement on Form S-4 to be filed by Newco in
connection with the issuance of Newco Common Stock pursuant to the Midland
Merger.
 
     "SEC" means the Securities and Exchange Commission.
 
     "Securities Act" means the Securities Act of 1933.
 
     "Subsidiary" (and correlatives thereof) means, with respect to any Person,
any corporation or other organization, whether incorporated or unincorporated,
of which (a) such Person or any other Subsidiary of such Person is a general
partner or (b) at least a majority of the securities or other interests having
by their terms ordinary voting power to elect a majority of the board of
directors or others performing similar functions with respect to such
corporation or other organization is, directly or indirectly, owned or
controlled by such Person or by any one or more of its Subsidiaries, or by such
Person and any one or more of its Subsidiaries.
 
     "Tax" (and, with correlative meaning, "Taxes") has the meaning specified in
Section 3.1(k).
 
     "Tax Returns" has the meaning specified in Section 3.1(k).
 
     "TBCA" means the Texas Business Corporation Act, as amended.
 
     "Termination Agreement" has the meaning specified in Section 4.17.
 
     "Texas Secretary of State" means the Secretary of State of the State of
Texas.
 
     "Third-Party Consent" means the consent or approval of any Person other
than Vista, Midland, Newco, Merger Sub, or any of their respective Subsidiaries,
or any Governmental Entity.
 
     "Vista" means Vista Resources Partners, L.P., a Texas limited partnership.
 
     "Vista Acquisition Proposal" has the meaning specified in Section 4.4(b).
 
     "Vista Benefit Program or Agreement" has the meaning specified in Section
3.2(l).
 
     "Vista Disclosure Schedule" means the Vista Disclosure Schedule attached
hereto and any documents listed on such Vista Disclosure Schedule and expressly
incorporated therein by reference, true and correct copies of which have been
delivered to Midland.
 
     "Vista Engineering Report" means the oil and gas reserve engineering report
concerning the Oil and Gas Interests of Vista as of January 1, 1998 prepared by
Williamson Petroleum Consultants, Inc., and provided to Midland by or on behalf
of Vista.
 
     "Vista Exchange" has the meaning specified in the Recitals hereto.
 
     "Vista Exchange Agreement" means an Exchange Agreement in the form and
substance of Exhibit E hereto.
 
     "Vista GP Conversion Stock Number" means 1.60089817, as such number may be
changed pursuant to Section 2.8.
 
                                      A-12
<PAGE>   166
 
     "Vista GP Conversion Warrant Number" means 1.16511028, as such number may
be changed pursuant to Section 2.8.
 
     "Vista GP Exchange" has the meaning specified in the Recitals hereto.
 
     "Vista Group" has the meaning specified in Section 3.2(l).
 
     "Vista Indemnified Parties" has the meaning specified in Section 4.13(b).
 
     "Vista Intangible Property" has the meaning specified in Section 3.2(n).
 
     "Vista Litigation" has the meaning specified in Section 3.2(j).
 
     "Vista LP Conversion Stock Number" means 117,674.06, as such number may be
changed pursuant to Section 2.8.
 
     "Vista LP Conversion Warrant Number" means 85,641.46, as such number may be
changed pursuant to Section 2.8.
 
     "Vista LP Exchange" has the meaning set forth in the Recitals hereto.
 
     "Vista Material Agreement" means any instrument defining the rights of
security holders, including an indenture, or material contract that would be
required by Item 601 of Regulation S-K to be filed by Vista with the SEC if
Vista were subject to the periodic reporting requirements of Section 12(b),
12(g), or 15(d) of the Exchange Act.
 
     "Vista Order" has the meaning specified in Section 3.2(j).
 
     "Vista Permits" has the meaning specified in Section 3.2(i).
 
     "Vista Plan" has the meaning specified in Section 3.2(l).
 
     "Vista Registration Rights Agreement" has the meaning specified in Section
4.16(a).
 
     "Vista Sub" means Vista Resources, Inc., a Texas corporation and a direct
wholly-owned subsidiary of Vista.
 
     "Voting Debt" has the meaning specified in Section 3.1(b).
 
     1.2 REFERENCES AND TITLES. All references in this Agreement to Exhibits,
Schedules, Articles, Sections, subsections, and other subdivisions refer to the
corresponding Exhibits, Schedules, Articles, Sections, subsections, and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any Articles, Sections, subsections, or other
subdivisions of this Agreement are for convenience only, do not constitute any
part of such Articles, Sections, subsections, or other subdivisions, and shall
be disregarded in construing the language contained in such subdivisions. The
words "this Agreement," "herein," "hereby," "hereunder," and "hereof," and words
of similar import, refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. The words "this Section" and "this
subsection," and words of similar import, refer only to the Sections or
subsections hereof in which such words occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation." Pronouns in masculine, feminine, or neuter genders shall be
construed to state and include any other gender, and words, terms, and titles
(including terms defined herein) in the singular form shall be construed to
include the plural and vice versa, unless the context otherwise expressly
requires.
 
     As used in the representations and warranties contained in this Agreement,
the phrase "to the knowledge of" shall mean, with respect to a specified
representing party, that the Responsible Officers of such representing party,
individually or collectively, have conducted such investigations and inquiries
that they reasonably believe to be most likely to confirm the truth and accuracy
of the matter being represented and warranted (or have caused such
investigations and inquiries to be made under their supervision) and, after
evaluating the findings of such investigations and inquiries, either (a) know
that the matter being represented and warranted is true and accurate or (b) have
no reason to believe that the matter being represented and warranted is not true
and accurate.
 
                                      A-13
<PAGE>   167
 
                                   ARTICLE 2
 
                            THE MERGER AND EXCHANGES
 
     2.1 THE MIDLAND MERGER. Subject to the terms and conditions set forth in
this Agreement, at the Effective Time (as hereinafter defined) Merger Sub shall
be merged with and into Midland in accordance with the provisions of this
Agreement and in accordance with the TBCA.
 
     2.2 EFFECT OF THE MIDLAND MERGER. Upon the effectiveness of the Midland
Merger, the separate existence of Merger Sub shall cease and Midland, as the
surviving corporation in the Midland Merger (the "MM Surviving Corporation"),
shall continue its corporate existence under the laws of the State of Texas. The
Midland Merger shall have the effects specified in the TBCA.
 
     2.3 CERTIFICATES OF INCORPORATION OF NEWCO, MIDLAND AND NEWCO SUB. The
Articles of Incorporation of Midland, as in effect immediately prior to the
Effective Time (as hereinafter defined) shall be the Articles of Incorporation
of the MM Surviving Corporation until thereafter amended in accordance with its
terms and as provided by applicable law.
 
     2.4 BYLAWS. The Bylaws of Merger Sub in effect immediately prior to the
Midland Merger shall be the bylaws of the MM Surviving Corporation, until
thereafter amended in accordance with its terms and as provided by applicable
law. Newco and Merger Sub have delivered true and correct copies of their Bylaws
to each of Vista and Midland.
 
     2.5 DIRECTORS. Immediately prior to the Closing, Vista shall take such
action as may be necessary as the then sole shareholder of Newco so as to cause
the directors of Newco at the Effective Time to be as set forth below:
 
         C. Randall Hill
         Steven D. Gray
         Kenneth A. Hersh
         David R. Albin
         John S. Foster
         Midland representative to be named by Midland's Board of Directors
         prior to Closing Date
 
     Vista as set forth in this Section 2.5 shall have the right to initially
nominate eight of the nine directors and Midland shall have the right to
initially nominate one of the nine directors who shall serve as directors of
Newco commencing as of the Effective Time. Each nominee for director of Newco
identified as such above (a "Newco Director Nominee") will hold office until the
1999 annual meeting of Newco, and in all cases, until his or her respective
successor is duly elected or appointed and qualified in the manner provided in
the Certificate of Incorporation or Bylaws of Newco, or as otherwise provided by
applicable law. If prior to the Effective Time a Newco Director Nominee selected
by Vista or Midland shall decline or be unable to serve as a director of Newco
or whose nomination shall be withdrawn by Vista or Midland, as applicable, then
Vista or Midland, as appropriate, shall be entitled to nominate a replacement
for such Newco Director Nominee, who shall thereafter become a Newco Director
Nominee, provided that such person shall be reasonably acceptable to each of the
other parties to this Agreement and this Agreement shall be amended by the
parties to the extent necessary to reflect such action.
 
     The directors of the MM Surviving Corporation shall be the same as the
directors of Newco set forth in this Section 2.5.
 
                                      A-14
<PAGE>   168
 
     2.6 OFFICERS. The initial senior executive officers of Newco immediately
following the Effective Time shall be as set forth below:
 
<TABLE>
<S>                                           <C>
C. Randall Hill.............................  Chairman, Chief Executive Officer, Chief
                                                Financial Officer, Treasurer and
                                                Assistant Secretary
Steven D. Gray..............................  President, Assistant Treasurer and
                                              Assistant Secretary
R. Cory Richards............................  Executive Vice President -- Exploration
                                              and Secretary
</TABLE>
 
     Each such officer of Newco will hold office from the Effective Time until
his respective successor is duly elected or appointed and qualified in the
manner provided in the Certificate of Incorporation or Bylaws of Newco, or as
otherwise provided by applicable law. The names, titles, and responsibilities of
the other individuals who initially will hold officerships with Newco shall be
determined by Vista prior to the Effective Time, and the election of those
persons shall be considered by the Board of Directors of Newco immediately
following the Effective Time.
 
     The officers of Merger Sub immediately prior to the Effective Time shall be
the initial officers of the MM Surviving Corporation until their respective
successors are duly elected or appointed and qualified in the manner provided in
the Certificate of Incorporation or Bylaws of the MM Surviving Corporation, or
as otherwise provided by applicable law.
 
     2.7 EFFECT ON SECURITIES.
 
          (a) MERGER SUB STOCK. At the Effective Time, by virtue of the Midland
     Merger and without any action on the part of any holder thereof, each share
     of Merger Sub Common Stock outstanding immediately prior to the Effective
     Time shall be converted into and shall become one validly issued, fully
     paid, and nonassessable share of common stock, par value $.01 per share, of
     the MM Surviving Corporation.
 
          (b) MIDLAND SECURITIES.
 
             (i) CONVERSION. At the Effective Time, by virtue of the Midland
        Merger and without any action on the part of any holder thereof (but
        subject to the provisions of Section 2.10(e)), all shares of Midland
        Common Stock that are issued and outstanding immediately prior to the
        Effective Time shall be converted into the right to receive shares of
        Newco Common Stock, with each such share of Midland Common Stock being
        converted into a number of shares of Newco Common Stock equal to the
        Midland Conversion Number. Each such share of Midland Common Stock, when
        so converted, shall automatically be cancelled and retired, shall cease
        to exist, and shall no longer be outstanding; and the holder of any
        certificate representing any such shares shall cease to have any rights
        with respect thereto, except the right to receive the shares of Newco
        Common Stock to be issued in exchange therefor (along with any cash in
        lieu of fractional shares of Newco Common Stock as provided in Section
        2.10(e) and any unpaid dividends and distributions with respect to such
        shares of Newco Common Stock as provided in Section 2.10(c)), without
        interest, upon the surrender of such certificate in accordance with
        Section 2.10.
 
             (ii) MIDLAND TREASURY STOCK. At the Effective Time, by virtue of
        the Midland Merger and without any action on the part of any holder
        thereof, all shares of Midland Common Stock that are issued and held as
        treasury stock shall be cancelled and retired and shall cease to exist
        and no shares of Newco Common Stock, cash, or other consideration shall
        be paid or payable in exchange therefor.
 
             (iii) MIDLAND STOCK OPTIONS. All Midland Stock Options (other than
        the Midland Exchange Stock Options) shall remain outstanding following
        the Effective Time. At the Effective Time, by virtue of the Midland
        Merger and without any action on the part of Midland or any holder
        thereof, each such Midland Stock Option (other than the Midland Exchange
        Stock Options) shall be
 
                                      A-15
<PAGE>   169
 
        assumed by Newco in such manner that Newco is a corporation assuming a
        stock option in a transaction to which Section 424(a) applied within the
        meaning of Section 424 of the Code or, to the extent that Section 424 of
        the Code does not apply to any such Midland Stock Option (other than the
        Midland Exchange Stock Options), would be such a corporation were
        Section 424 applicable to such option. Subject to the terms of the
        Midland Option Exercise Agreement, each Midland Stock Option (other than
        the Midland Exchange Stock Options) assumed by Newco shall be
        exercisable on the same terms and conditions as apply immediately prior
        to the Effective Time, except that each such Midland Stock Option (other
        than the Midland Exchange Stock Options) shall be exercisable for that
        whole number of shares of Newco Common Stock (to the nearest whole
        share) into which the number of shares of Midland Common Stock subject
        to such Midland Stock Option (other than the Midland Exchange Stock
        Options) immediately prior to the Effective Time would be converted
        under paragraph (i) of this subsection and the option price per share of
        Newco Common Stock shall be an amount equal to the option price per
        share of Midland Common Stock subject to such Midland Stock Option
        (other than the Midland Exchange Stock Options) in effect immediately
        prior to the Effective Time divided by the Midland Conversion Number
        (the option price per share, as so determined, being rounded upward to
        the nearest full cent). No payment shall be made for fractional
        interests.
 
             (iv) MIDLAND WARRANTS AND MIDLAND COMMON STOCK WARRANTS. All
        Midland Warrants and Midland Common Stock Warrants shall remain
        outstanding following the Effective Time. At the Effective Time, by
        virtue of the Midland Merger and without any action on the part of
        Midland or any holder thereof, each such Midland Warrant and Midland
        Common Stock Warrant shall be assumed by Newco and shall be exercisable
        on the same terms and conditions as apply immediately prior to the
        Effective Time, except that each Midland Warrant and Midland Common
        Stock Warrant shall be exercisable for that number of shares of Newco
        Common Stock into which the number of shares of Midland Common Stock
        subject to such Midland Warrant or Midland Common Stock Warrant, as
        applicable, immediately prior to the Effective Time would be converted
        under paragraph (i) of this subsection. No payment shall be made for
        fractional interests.
 
             (v) MIDLAND EXCHANGE STOCK OPTIONS. Pursuant to the terms of the
        Midland Exchange Agreement contemporaneously entered into between Newco
        and each holder of the Midland Stock Options described on Schedule 2.7
        of the Midland Disclosure Schedule (the "Midland Exchange Stock
        Options"), at the Effective Time, without any action on the part of any
        holder thereof, each Midland Exchange Stock Option will be exchanged for
        a Newco Warrant that is exercisable for that whole number of shares of
        Newco Common Stock (to the nearest whole share) equal to the product of
        (x) .725 times (y) the number of shares of Newco Common Stock into which
        the shares of Midland Common Stock subject to such Midland Exchange
        Stock Option would be converted under paragraph (i) of this subsection.
        Pursuant to the Midland Exchange Agreement, no payment shall be made for
        fractional interests. Pursuant to the terms of the Midland Exchange
        Agreement, each Midland Exchange Stock Option subject thereto shall be
        terminated immediately following their exchange for a Newco Warrant.
 
     2.8 VISTA EXCHANGE AGREEMENTS. Within 30 days from the date hereof, Newco
and Vista agree to cause Newco to enter into Vista Exchange Agreements in
connection with the Vista GP Exchange and the Vista LP Exchange, respectively,
with all of the holders of the GP Common Stock and all of the Partnership
Interests. Pursuant to such Vista Exchange Agreements at the Effective Time,
without any action on the part of any holder thereof, (a) each share of GP
Common Stock that is issued and outstanding prior to the Effective Time shall be
exchanged for (i) a number of shares of Newco Common Stock equal to the Vista GP
Conversion Stock Number and (ii) a Newco Warrant that is exercisable for a
number of shares of Newco Common Stock equal to the Vista GP Conversion Warrant
Number and (b) each Partnership Interest that is issued and outstanding prior to
the Effective Time shall be exchanged for (i) a number of shares of Newco Common
Stock equal to the Vista LP Conversion Stock Number and (ii) a Newco Warrant
that is exercisable for a number of shares of Newco Common Stock equal to the
Vista LP Conversion Warrant
 
                                      A-16
<PAGE>   170
 
Number. As provided in the Exchange Agreement, any fractional Partnership
Interest shall be likewise exchanged on a pro rata basis.
 
     2.9 ADJUSTMENTS. (a) The parties hereto mutually agree that,
notwithstanding anything in this Agreement to the contrary, each of the Vista GP
Conversion Stock Number, the Vista LP Conversion Stock Number, the Vista GP
Conversion Warrant Number and the Vista LP Conversion Warrant Number shall be
increased or decreased, as necessary, immediately prior to the Effective Time
such that (i) the aggregate percentage of shares of Newco Common Stock that the
holders of GP Common Stock and the holders of Partnership Interests shall be
entitled to receive at the Effective Time shall equal 72.5% of the shares of
Newco Common Stock that will be outstanding calculated on a Fully Diluted Basis
immediately after the Effective Time and (ii) the aggregate percentage of shares
of Newco Common Stock issuable upon exercise of the Newco Warrants that the
holders of GP Common Stock and the holders of Partnership Interests shall be
entitled to receive shall equal 72.5% of the shares of Newco Common Stock that
is issuable upon the exercise of (x) all Midland Warrants outstanding
immediately after the Effective Time, (y) all Newco Warrants issued pursuant to
the Midland Exchange and (z) all Newco Warrants issuable pursuant to the Vista
Exchange. Subject to Section 2.9(b), 2.9(c), any such adjustments to the Vista
GP Conversion Stock Number, the Vista LP Conversion Stock Number, the Vista GP
Conversion Warrant Number or the Vista LP Conversion Warrant Number shall be
made not later than two business days prior to the Closing and shall be
determined by Newco's independent auditors Arthur Andersen LLP.
 
     (b) Pursuant to the Vista Exchange Agreements, effective as of the last day
of the fourth calendar month immediately following the calendar month in which
the Closing Date occurred, Newco shall cause its independent auditors Arthur
Anderson LLP to redetermine the Vista GP Conversion Stock Number and the Vista
LP Conversion Stock Number by redetermining, as of such date, Fully Diluted
Basis only to the extent necessary so as to reflect the number of shares of
Newco Common Stock, if any, issued after the Effective Time as a result of the
exercise of any Midland Stock Options. In the event any such adjustment to the
Vista GP Conversion Stock Number and the Vista LP Conversion Stock Number is
determined appropriate, then pursuant to the Vista Exchange Agreements, Newco
shall promptly issue to the prior holders of the GP Common Stock and Partnership
Interests their pro rata share of a number of shares of Newco Common Stock equal
to an amount equal to (i) the quotient realized by dividing (x) the number of
shares of Newco Common Stock issued after the Effective Time as a result of the
exercise of any Midland Stock Options by (y) .275 minus (ii) the number of
shares of Newco Common Stock described in clause (x) above.
 
     (c) The parties hereto mutually agree that, notwithstanding anything in
this Agreement to the contrary, (i) at the Effective Time, by virtue of the
Midland Merger, the holders of shares of Midland Common Stock shall receive
shares of Newco Common Stock issued in exchange therefor equal to 27.5% of the
shares of Newco Common Stock that will be outstanding immediately after the
Effective Time (calculated giving effect to the shares of Newco Common Stock
issued as a result of the Vista Exchange), and (ii) immediately after the
Effective Time, the aggregate percentage of shares of Newco Common Stock
issuable upon exercise of (a) all Midland Warrants outstanding immediately after
the Effective Time, and (b) all Newco Warrants issued pursuant to the Midland
Exchange, shall equal 27.5% of the shares of Newco Common Stock that is issuable
upon exercise of (x) all Midland Warrants outstanding immediately after the
Effective Time, (y) all Newco Warrants issued pursuant to the Midland Exchange,
and (z) all Newco Warrants issuable pursuant to the Vista Exchange.
 
     2.10 EXCHANGE OF CERTIFICATES.
 
          (a) EXCHANGE FUND. Immediately after the Effective Time, Newco shall
     deposit with the Exchange Agent, for the benefit of the holders of shares
     of Midland Common Stock and for exchange in accordance with this Agreement,
     certificates representing the shares of Newco Common Stock to be issued in
     exchange for shares of Midland Common Stock pursuant to Section 2.7. Such
     shares of Newco Common Stock, together with any dividends or distributions
     with respect thereto (as provided in subSection (c) of this Section 2.10),
     are referred to herein as the "Exchange Fund." The Exchange Agent, pursuant
     to irrevocable instructions consistent with the terms of this Agreement,
     shall deliver the Newco Common Stock to be issued pursuant to Section 2.7
     out of the Exchange Fund, and the Exchange
 
                                      A-17
<PAGE>   171
 
     Fund shall not be used for any other purpose. The Exchange Agent shall not
     be entitled to vote or exercise any rights of ownership with respect to the
     Newco Common Stock held by it from time to time hereunder, except that it
     shall receive and hold all dividends or other distributions paid or
     distributed with respect thereto for the account of Persons entitled
     thereto.
 
          (b) EXCHANGE PROCEDURES.
 
             (i) As soon as reasonably practicable after the Effective Time,
        Newco shall cause the Exchange Agent to mail to each holder of record of
        a Midland Certificate that, immediately prior to the Effective Time,
        represented shares of Midland Common Stock converted into Newco Common
        Stock pursuant to Section 2.7 a letter of transmittal to be used to
        effect the exchange of such Midland Certificate for a Newco Stock
        Certificate and cash in lieu of fractional shares, along with
        instructions for using such letter of transmittal to effect such
        exchange. The letter of transmittal (or the instructions thereto) shall
        specify that delivery of any Midland Certificate shall be effected, and
        risk of loss and title thereto shall pass, only upon delivery of such
        Midland Certificate to the Exchange Agent and shall be in such form and
        have such other provisions as Newco may reasonably specify.
 
             (ii) Upon delivery to the Exchange Agent of, together with the
        surrender of a Midland Certificate, if applicable, a duly completed and
        executed letter of transmittal and any other required documents
        (including, in the case of any Rule 145 Affiliate, an Affiliate
        Agreement from such Person as described in Section 4.9, if not
        theretofore delivered to Newco), (A) the holder of such Midland
        Certificate shall be entitled to receive in exchange therefor a Newco
        Stock Certificate representing the number of whole shares of Newco
        Common Stock that such holder has the right to receive pursuant to
        Section 2.7, any cash in lieu of fractional shares of Newco Common Stock
        as provided in subSection (e) of this Section, and any unpaid dividends
        and distributions that such holder has the right to receive pursuant to
        subSection (c) of this Section (after giving effect to any required
        withholding of taxes) and (B) the Midland Certificate, if any, so
        surrendered shall forthwith be cancelled. No interest shall be paid or
        accrued on the cash in lieu of fractional shares and unpaid dividends
        and distributions, if any, payable to holders of Midland Certificates.
 
             (iii) In the event of a transfer of ownership of Midland Common
        Stock that is not registered in the transfer records of Midland, a Newco
        Stock Certificate representing the appropriate number of shares of Newco
        Common Stock (along with any cash in lieu of fractional shares and any
        unpaid dividends and distributions that such holder has the right to
        receive) may be issued to a transferee if the Midland Certificate
        representing such shares of Midland Common Stock is presented to the
        Exchange Agent accompanied by all documents required to evidence and
        effect such transfer and to evidence that any applicable stock transfer
        taxes have been paid.
 
             (iv) Until surrendered as contemplated by this subsection, each
        Midland Certificate shall be deemed at any time after the Effective Time
        to represent only the right to receive upon such surrender a Newco Stock
        Certificate representing shares of Newco Common Stock (along with any
        cash in lieu of fractional shares and any unpaid dividends and
        distributions).
 
          (c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
     other distributions with respect to Newco Common Stock declared or made
     after the Effective Time with a record date after the Effective Time shall
     be paid to the holder of any unsurrendered Midland Certificate. Subject to
     the effect of applicable laws, (i) at the time of the surrender of a
     Midland Certificate for exchange in accordance with the provisions of this
     Section, there shall be paid to the surrendering holder, without interest,
     the amount of dividends or other distributions (having a record date after
     the Effective Time but on or prior to surrender and a payment date on or
     prior to surrender) theretofore paid with respect to the number of whole
     shares of Newco Common Stock that such holder is entitled to receive (less
     the amount of any withholding taxes that may be required with respect
     thereto) and (ii) at the appropriate payment date, there shall be paid to
     the surrendering holder, without interest, the amount of dividends or other
     distributions (having a record date after the Effective Time but on or
     prior to surrender and a payment
 
                                      A-18
<PAGE>   172
 
     date subsequent to surrender) payable with respect to the number of whole
     shares of Newco Common Stock that such holder receives (less the amount of
     any withholding taxes that may be required with respect thereto).
 
          (d) NO FURTHER OWNERSHIP RIGHTS IN MIDLAND COMMON STOCK. All shares of
     Newco Common Stock issued upon the surrender for exchange of shares of
     Midland Common Stock in accordance with the terms hereof (including any
     cash paid pursuant to subSection (c) or (e) of this Section) shall be
     deemed to have been issued in full satisfaction of all rights pertaining to
     such shares of Midland Common Stock. After the Effective Time, there shall
     be no further registration of transfers on the MM Surviving Corporation's
     stock transfer books of the shares of Midland Common Stock that were
     outstanding immediately prior to the Effective Time. If, after the
     Effective Time, a Midland Certificate is presented to the MM Surviving
     Corporation for any reason, it shall be cancelled and exchanged as provided
     in this Section.
 
          (e) TREATMENT OF FRACTIONAL SHARES.
 
             (i) No Newco Stock Certificates or scrip representing fractional
        shares of Newco Common Stock shall be issued in the Midland Merger, and
        except as provided in this subsection, no dividend or other
        distribution, stock split, or interest shall relate to any such
        fractional share and such fractional share shall not entitle the owner
        thereof to vote or to any other rights of a shareholder of Newco.
 
             (ii) As soon as practicable following the Effective Time, the
        Exchange Agent shall determine the excess of (A) the number of whole
        shares of Newco Common Stock delivered to the Exchange Agent by Newco
        pursuant to subSection (a) of this Section over (B) the aggregate number
        of whole shares of Newco Common Stock issuable to holders of Midland
        Common Stock pursuant to Section 2.7 (such excess being referred to
        herein as the "Excess Shares") and the Exchange Agent, as the agent for
        the former holders of Midland Common Stock, shall sell the Excess Shares
        at the prevailing prices on the securities exchange on which the shares
        of Newco Common Stock are traded. The sale of the Excess Shares by the
        Exchange Agent shall be executed on such securities exchange through one
        or more member firms of such securities exchange and shall be executed
        in round lots to the extent practicable. Newco shall pay all
        commissions, transfer taxes, and other out-of-pocket transaction costs
        incurred in connection with such sale of the Excess Shares.
 
             (iii) In lieu of any fractional share of Newco Common Stock to
        which a holder of Midland Common Stock would otherwise be entitled, such
        holder, upon surrender of a Midland Certificate as described in this
        Section, shall be paid an amount in cash (without interest) equal to
        such holder's proportionate interest in the sum of (A) the net proceeds
        from the sale of the Excess Shares in accordance with the provisions of
        paragraph (2) of this subsection and (B) the aggregate dividends or
        other distributions that are payable with respect to the Excess Shares
        pursuant to subsection (c) of this Section, such proportionate interest
        to be determined by dividing the amount of the fractional share
        interests to which such holder would otherwise be entitled by the
        aggregate amount of fractional share interests to which all holders of
        Midland Common Stock would otherwise be entitled. Until the net proceeds
        of the sale of Excess Shares (along with any dividends or distributions
        with respect thereto have been distributed to the former shareholders of
        Midland), the Exchange Agent will hold such amounts in trust for the
        former holders of Midland Common Stock.
 
          (f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund and
     cash held by the Exchange Agent in accordance with the terms of this
     Section that remains unclaimed by the former shareholders of Midland for a
     period of one year following the Effective Time shall be delivered to
     Newco, upon demand. Thereafter, any former shareholders of Midland who have
     not theretofore complied with the provisions of this Section shall look
     only to Newco for payment of their claim for Newco Common Stock, any cash
     in lieu of fractional shares of Newco Common Stock, and any dividends or
     distributions with respect to Newco Common Stock (all without interest).
 
                                      A-19
<PAGE>   173
 
          (g) NO LIABILITY. None of Newco, the MM Surviving Corporation, the
     Exchange Agent, or any other Person shall be liable to any former holder of
     shares of Midland Common Stock for any amount properly delivered to any
     public official pursuant to any applicable abandoned property, escheat, or
     similar law. Any amounts remaining unclaimed by former holders of shares of
     Midland Common Stock for a period of two years following the Effective Time
     (or such earlier date immediately prior to the time at which such amounts
     would otherwise escheat to or become property of any governmental entity)
     shall, to the extent permitted by applicable law, become the property of
     Newco free and clear of any claims or interest of any such holders or their
     successors, assigns, or personal representative previously entitled
     thereto.
 
          (h) LOST, STOLEN, OR DESTROYED MIDLAND CERTIFICATES. If any Midland
     Certificate shall have been lost, stolen, or destroyed, upon the making of
     an affidavit of that fact by the Person claiming such Midland Certificate
     to be lost, stolen, or destroyed and, if required by Newco, the posting by
     such Person of a bond in such reasonable amount as Newco may direct as an
     indemnity against any claim that may be made against it with respect to
     such Midland Certificate, the Exchange Agent shall issue in exchange for
     such lost, stolen, or destroyed Midland Certificate the shares of Newco
     Common Stock (along with any cash in lieu of fractional shares pursuant to
     subsection (e) of this Section and any unpaid dividends and distributions
     pursuant to subsection (c) of this Section) deliverable with respect
     thereto pursuant to this Agreement.
 
     2.11 CLOSING. The Closing shall take place on the Closing Date. The Closing
shall take place at such time as is agreed upon by Vista and Midland and shall
take place at the offices of Vinson & Elkins, L.L.P., 2001 Ross Avenue, Suite
3700, Dallas, Texas 75201, unless another place is agreed to by Vista and
Midland.
 
     2.12 EFFECTIVE TIME OF THE MERGER. In connection with the Midland Merger,
the parties hereto will file with the Texas Secretary of State on the Closing
Date articles of merger (the "Midland Articles of Merger"). Notwithstanding
anything in this Section to the contrary, the articles of merger referred to in
this Section may be filed prior to the Closing Date or prior to the Closing so
long as it provides for an effective time that occurs on or after the Closing.
The Midland Merger shall become effective immediately upon the filing of the
Midland Articles of Merger with the Texas Secretary of State, or at such later
time specified in the Midland Articles of Merger (the "Effective Time").
 
     2.13 SHAREHOLDER APPROVALS OBTAINED.
 
          (a) Vista, in its capacity as the sole shareholder of Newco, by its
     execution hereof, approves and adopts this Agreement and the transactions
     contemplated hereby.
 
          (b) Newco, in its capacity as the sole shareholder of Merger Sub, by
     its execution hereof, approves and adopts this Agreement and the
     transactions contemplated hereby.
 
                                   ARTICLE 3
 
                         REPRESENTATIONS AND WARRANTIES
 
     3.1 REPRESENTATIONS AND WARRANTIES OF MIDLAND. Midland hereby represents
and warrants to Vista, Newco and Merger Sub as follows:
 
          (a) ORGANIZATION, STANDING AND POWER. Each of Midland and its
     Subsidiaries is a corporation or partnership duly organized, validly
     existing and in good standing under the laws of its state of incorporation
     or organization, has all requisite power and authority to own, lease, and
     operate its properties and to carry on its business as now being conducted,
     and is duly qualified and in good standing to do business in each
     jurisdiction in which the business it is conducting, or the operation,
     ownership, or leasing of its properties, makes such qualification
     necessary, other than in such jurisdictions where the failure so to qualify
     would not have a Material Adverse Effect (as defined below) on Midland.
     Midland has heretofore delivered to Vista and Newco complete and correct
     copies of its and each of its Subsidiaries' Articles of Incorporation and
     Bylaws, each as amended to date. The respective jurisdictions of
     incorporation or organization of Midland's Subsidiaries are identified on
     Schedule 3.1(a) of the
                                      A-20
<PAGE>   174
 
     Midland Disclosure Schedule. Other than Midland's Subsidiaries disclosed on
     Schedule 3.1(a) of the Midland Disclosure Schedule, Midland has no other
     Subsidiary. As used in this Agreement, a "Material Adverse Effect" or
     "Material Adverse Change" shall mean, in respect of Midland or Vista, as
     the case may be, any effect or change that is or, as far as can be
     reasonably determined, may be materially adverse to the business,
     operations, assets, condition (financial or otherwise) or results of
     operations of such party and its Subsidiaries taken as a whole.
 
          (b) CAPITAL STRUCTURE. As of the date hereof, the authorized capital
     stock of Midland consists of 80,000,000 shares of Midland Common Stock and
     20,000,000 shares of preferred stock, par value $.01 per share ("Midland
     Preferred Stock"). At the close of business on April 30, 1998: (i)
     4,463,499 shares of Midland Common Stock were issued and outstanding; (ii)
     no shares of Midland Preferred Stock were issued and outstanding; (iii)
     1,235,000, 236,500, and 398,000 Midland Common Stock were authorized and
     available for grant pursuant to the Midland Resources, Inc. 1997 Board of
     Directors' Stock Incentive Plan, the 1994 Midland Resources, Inc. Long-Term
     Incentive Plan, and the 1996 Midland Resources, Inc. Long-Term Incentive
     Plan (collectively, the "Midland Stock Plans"), respectively; (iv) 123,500,
     236,500, and 398,000 shares of Midland Common Stock were reserved for
     issuance pursuant to each of the Midland Stock Plans, respectively; (v)
     1,603,000 shares of Midland Common Stock were subject to issuance under
     Midland Options outstanding as of the date hereof; (vi) 2,253,094 shares of
     Midland Common Stock were subject to issuance upon exercise of the Midland
     Warrants; (vii) 2,253,094 shares of Midland Common Stock were reserved for
     issuance upon exercise of the Midland Warrants; (viii) no shares of Midland
     Common Stock were held by Midland in its treasury; (ix) 270,000 shares of
     Midland Common Stock were subject to issuance upon exercise of the Midland
     Common Stock Warrants, (x) 270,000 shares of Midland Common Stock were
     reserved for issuance upon exercise of the Midland Common Stock Warrants
     and (xi) no bonds, debentures, notes or other indebtedness having the right
     to vote (or convertible into securities having the right to vote) ("Voting
     Debt") on any matters on which shareholders of Midland may vote were issued
     and outstanding. The Midland Resources, Inc. 1995 Board of Directors' Stock
     Incentive Plan has been terminated, however, options for 50,000 shares of
     Midland Common Stock issued thereunder prior to such termination remain
     outstanding. All outstanding shares of Midland Common Stock are validly
     issued, fully paid, and nonassessable and are not subject to preemptive
     rights. Except as set forth on Schedule 3.1(b) of the Midland Disclosure
     Schedule, all outstanding shares of capital stock of the Subsidiaries of
     Midland are owned by Midland, or a direct or indirect wholly-owned
     Subsidiary of Midland, free and clear of all Liens. Except as set forth in
     this Section 3.1(b) or on Schedule 3.1(b) of the Midland Disclosure
     Schedule, and except for changes since April 30, 1998 resulting from the
     subsequent exercise of Midland Options, Midland Warrants, or Midland Common
     Stock Warrants, there are outstanding: (A) no shares of capital stock,
     Voting Debt or other voting securities of Midland; (B) no securities of
     Midland or any Subsidiary of Midland convertible into or exchangeable for
     shares of capital stock, Voting Debt or other voting securities of Midland
     or any Subsidiary of Midland; and (C) no options, warrants, calls, rights
     (including preemptive rights), commitments, or agreements to which Midland
     or any Subsidiary of Midland is a party or by which it is bound in any case
     obligating Midland or any Subsidiary of Midland to issue, deliver, sell,
     purchase, redeem or acquire, or cause to be issued, delivered, sold,
     purchased, redeemed or acquired, additional shares of capital stock or any
     Voting Debt or other voting securities of Midland or of any Subsidiary of
     Midland, or obligating Midland or any Subsidiary of Midland to grant,
     extend, or enter into any such option, warrant, call, right, commitment, or
     agreement. Except for the Midland Voting Agreements, there are not as of
     the date hereof and there will not be at the Effective Time any shareholder
     agreements, voting trusts or other agreements or understandings to which
     Midland is a party or by which it is bound relating to the voting of any
     shares of the capital stock of Midland that will limit in any way the
     solicitation of proxies by or on behalf of Midland from, or the casting of
     votes by, the shareholders of Midland with respect to the Midland Merger.
     There are no restrictions on Midland to vote the stock of any of its
     Subsidiaries. The exercise price or conversion price of each of the
     outstanding Midland Warrants, Midland Common Stock Warrants, Midland
     Options and other Midland Stock Equivalents is set forth on Schedule
     3.1(b).
 
                                      A-21
<PAGE>   175
 
          (c) AUTHORITY; NO VIOLATIONS; CONSENTS AND APPROVALS.
 
             (i) The Board of Directors of Midland has approved the Midland
        Merger and this Agreement, and declared the Midland Merger and this
        Agreement to be in the best interests of the shareholders of Midland.
        The directors of Midland have advised Midland and Vista that they intend
        (acting in their capacity as a shareholder of Midland and in accordance
        with the applicable Midland Voting Agreement) to vote or cause to be
        voted all of the shares of Midland Common Stock beneficially owned by
        them and their affiliates in favor of approval of the Midland Merger and
        this Agreement. Midland has all requisite corporate power and authority
        to enter into this Agreement and, subject, with respect to consummation
        of the Midland Merger, to approval of this Agreement and the Midland
        Merger by the shareholders of Midland in accordance with the TBCA and
        the Articles of Incorporation and Bylaws of Midland, to consummate the
        transactions contemplated hereby. The execution and delivery of this
        Agreement and the consummation of the transactions contemplated hereby
        have been duly authorized by all necessary corporate action on the part
        of Midland, subject, with respect to consummation of the Midland Merger,
        to approval of this Agreement and the Midland Merger by the shareholders
        of Midland in accordance with the TBCA and the Articles of Incorporation
        and Bylaws of Midland. This Agreement has been duly executed and
        delivered by Midland and, subject, with respect to consummation of the
        Midland Merger, to approval of this Agreement and the Midland Merger by
        the shareholders of Midland in accordance with the TBCA and the Restated
        Certificate of Incorporation and Restated Bylaws of Midland, and
        assuming this Agreement constitutes the valid and binding obligation of
        Vista, Newco and Merger Sub, constitutes a valid and binding obligation
        of Midland enforceable in accordance with its terms, subject, as to
        enforceability, to bankruptcy, insolvency, reorganization, moratorium
        and other laws of general applicability relating to or affecting
        creditors' rights and to general principles of equity (regardless of
        whether such enforceability is considered in a proceeding in equity or
        at law).
 
             (ii) Except as set forth on Schedule 3.1(c) of the Midland
        Disclosure Schedule, the execution and delivery of this Agreement does
        not, and the consummation of the transactions contemplated hereby and
        compliance with the provisions hereof will not, conflict with, or result
        in any violation of, or default (with or without notice or lapse of
        time, or both) under, or give rise to a right of termination,
        cancellation, or acceleration of any material obligation or to the loss
        of a material benefit under, or give rise to a right of purchase under,
        result in the creation of any Lien upon any of the properties or assets
        of Midland or any of its Subsidiaries under, or otherwise result in a
        material detriment to Midland or any of its Subsidiaries under, any
        provision of (A) the Articles of Incorporation or Bylaws of Midland or
        any provision of the comparable charter or organizational documents of
        any of its Subsidiaries, (B) any loan or credit agreement, note, bond,
        mortgage, indenture, lease, or other agreement, instrument, permit,
        concession, franchise, or license applicable to Midland or any of its
        Subsidiaries, (C) any joint venture or other ownership arrangement, or
        (D) assuming the consents, approvals, authorizations or permits and
        filings or notifications referred to in Section 3.1(c)(iii) are duly and
        timely obtained or made and the approval of the Midland Merger and this
        Agreement by the shareholders of Midland has been obtained, any
        judgment, order, decree, statute, law, ordinance, rule or regulation
        applicable to Midland or any of its Subsidiaries or any of their
        respective properties or assets, other than, in the case of clause (B)
        or (C) in this subsection, any such conflicts, violations, defaults,
        rights, Liens that, individually or in the aggregate, would not have a
        Material Adverse Effect on Midland, materially impair the ability of
        Midland to perform its obligations hereunder, or prevent the
        consummation of any of the transactions contemplated hereby.
 
             (iii) No consent, approval, order or authorization of, or
        registration, declaration or filing with, or permit from any court,
        governmental, regulatory or administrative agency or commission or other
        governmental authority or instrumentality, domestic or foreign (a
        "Governmental Entity"), is required by or with respect to Midland or any
        of its Subsidiaries in connection with the execution and delivery of
        this Agreement by Midland or the consummation by Midland of the
        transactions contemplated hereby, as to which the failure to obtain or
        make would have a Material Adverse
 
                                      A-22
<PAGE>   176
 
        Effect on Midland, except for: (A) the filing with the SEC of (1) a
        proxy statement in preliminary and definitive form relating to the
        meeting of the shareholders of Midland to be held in connection with the
        Midland Merger (the "Proxy Statement") and (2) such reports under
        Section 13(a) of the Exchange Act and such other compliance with the
        Exchange Act and the rules and regulations thereunder, as may be
        required in connection with this Agreement and the transactions
        contemplated hereby; (B) the filing of the Midland Articles of Merger
        with the Texas Secretary of State; (C) filings with, and approval of,
        the Nasdaq or the AMEX; (D) such filings and approvals as may be
        required by any applicable state securities, "blue sky" or takeover
        laws, or environmental laws; (E) such filings and approvals as may be
        required by any foreign premerger notification, securities, corporate or
        other law, rule or regulation; and (F) any such consent, approval,
        order, authorization, registration, declaration, filing, or permit that
        the failure to obtain or make would not, individually or in the
        aggregate, have a Material Adverse Effect on Midland, materially impair
        the ability of Midland to perform its obligations hereunder, or prevent
        the consummation of any of the transactions contemplated hereby.
 
          (d) SEC DOCUMENTS. Midland has made available to Vista a true and
     complete copy of each report, schedule, registration statement, and
     definitive proxy statement filed by Midland with the SEC since December 31,
     1995 and prior to or on the date of this Agreement (the "Midland SEC
     Documents"), which are all the documents (other than preliminary material)
     that Midland was required to file with the SEC between December 31, 1995
     and the date of this Agreement. As of their respective dates, the Midland
     SEC Documents complied in all material respects with the requirements of
     the Securities Act or the Exchange Act, as the case may be, and the rules
     and regulations of the SEC thereunder applicable to such Midland SEC
     Documents, and none of the Midland SEC Documents contained any untrue
     statement of a material fact or omitted to state a material fact required
     to be stated therein or necessary to make the statements therein, in light
     of the circumstances under which they were made, not misleading. The
     financial statements of Midland included in the Midland SEC Documents
     complied as to form in all material respects with the published rules and
     regulations of the SEC with respect thereto, were prepared in accordance
     with generally accepted accounting principles in the United States ("GAAP")
     applied on a consistent basis during the periods involved (except as may be
     indicated in the notes thereto or, in the case of the unaudited statements,
     as permitted by Rule 10-01 of Regulation S-X of the SEC) and fairly present
     in accordance with applicable requirements of GAAP (subject, in the case of
     the unaudited statements, to normal, recurring adjustments, none of which
     are material) the consolidated financial position of Midland and its
     consolidated Subsidiaries as of their respective dates and the consolidated
     results of operations and the consolidated cash flows of Midland and its
     consolidated Subsidiaries for the periods presented therein. In addition,
     Midland has made available to Vista the audited consolidated balance sheets
     of Midland and its Subsidiaries as of December 31, 1997, together with the
     audited consolidated statements of operations, shareholder's equity and
     cash flows of Midland and its Subsidiaries for the year then ended (such
     audited consolidated financial statements of Midland being referred to as
     the "Midland Financial Statements"). The Midland Financial Statements were
     prepared in accordance with GAAP applied on a consistent basis during the
     periods involved and fairly present in accordance with applicable
     requirements of GAAP the consolidated financial position of Midland and its
     consolidated Subsidiaries as of its date and the consolidated results of
     operations and the consolidated cash flows of Midland and its Subsidiaries
     for the period presented therein. Except as disclosed in the Midland SEC
     Documents, there are no agreements, arrangements, or understandings between
     Midland and any party who is at the date of this Agreement or was at any
     time prior to the date hereof but after December 31, 1995 an Affiliate of
     Midland that are required to be disclosed in the Midland SEC Documents.
 
          (e) INFORMATION SUPPLIED. None of the information supplied or to be
     supplied by Midland for inclusion or incorporation by reference in the
     Registration Statement on Form S-4 to be filed with the SEC by Newco in
     connection with the issuance of shares of Newco Common Stock in the Midland
     Merger (the "S-4") will, at the time the S-4 becomes effective under the
     Securities Act or at the Effective Time, contain any untrue statement of a
     material fact or omit to state any material fact required
 
                                      A-23
<PAGE>   177
 
     to be stated therein or necessary to make the statements therein not
     misleading, and none of the information supplied or to be supplied by
     Midland and included or incorporated by reference in the Proxy Statement
     will, at the date mailed to shareholders of Midland or at the time of the
     meeting of such shareholders to be held in connection with the Midland
     Merger or at the Effective Time, contain any untrue statement of a material
     fact or omit to state any material fact required to be stated therein or
     necessary in order to make the statements therein, in light of the
     circumstances under which they are made, not misleading. If at any time
     prior to the Effective Time any event with respect to Midland or any of its
     Subsidiaries, or with respect to other information supplied by Midland for
     inclusion in the Proxy Statement or S-4, shall occur which is required to
     be described in an amendment of, or a supplement to, the S-4 or the Proxy
     Statement, such event shall be so described, and such amendment or
     supplement shall be promptly filed with the SEC and, as required by law,
     disseminated to the shareholders of Midland. The Proxy Statement, insofar
     as it relates to Midland or its Subsidiaries or other information supplied
     by Midland for inclusion therein, will comply as to form in all material
     respects with the provisions of the Exchange Act and the rules and
     regulations thereunder.
 
          (f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in, or
     reflected in the financial statements included in the Midland SEC Documents
     or in the Midland Financial Statements, or except as contemplated by this
     Agreement, since December 31, 1997, there has not been: (i) any
     declaration, setting aside, or payment of any dividend or other
     distribution (whether in cash, stock or property) with respect to any of
     Midland's capital stock; (ii) any amendment of any material term of any
     outstanding equity security of Midland or any Subsidiary of Midland; (iii)
     any repurchase, redemption, or other acquisition by Midland or any
     Subsidiary of Midland of any outstanding shares of capital stock or other
     equity securities of, or other ownership interests in, Midland or any
     Subsidiary of Midland; (iv) any material change in any method of accounting
     or accounting practice or any tax method, practice, or election by Midland
     or any Subsidiary of Midland; or (v) any other transaction, commitment,
     dispute or other event or condition (financial or otherwise) of any
     character (whether or not in the ordinary course of business) that is
     reasonably likely to have a Material Adverse Effect on Midland, except for
     general economic changes and changes that may affect the industries of
     Midland or any of its Subsidiaries generally.
 
          (g) NO UNDISCLOSED MATERIAL LIABILITIES. Except as disclosed on
     Schedule 3.1(g)or as disclosed in the Midland SEC Documents or in the
     Midland Financial Statements, as of the date hereof, there are no
     liabilities of Midland or any of its Subsidiaries of any kind whatsoever,
     whether accrued, contingent, absolute, determined, determinable or
     otherwise, that are reasonably likely to have a Material Adverse Effect on
     Midland, other than: (i) liabilities adequately provided for on the balance
     sheet of Midland dated as of December 31, 1997 (including the notes
     thereto) contained in Midland's Annual Report on Form 10-KSB for the year
     ended December 31, 1997; (ii) liabilities incurred in the ordinary course
     of business subsequent to December 31, 1997; and (iii) liabilities under
     this Agreement.
 
          (h) NO DEFAULT. Except as disclosed on Schedule 3.1(h), neither
     Midland nor any of its Subsidiaries is in default or violation (and no
     event has occurred which, with notice or the lapse of time or both, would
     constitute a default or violation) of any term, condition or provision of
     (i) the Articles of Incorporation or Bylaws of Midland or the comparable
     charter or organizational documents of any of its Subsidiaries, (ii) any
     loan or credit agreement, note, bond, mortgage, indenture, lease, or other
     agreement, instrument, permit, concession, franchise, or license to which
     Midland or any of its Subsidiaries is now a party or by which Midland or
     any of its Subsidiaries or any of their respective properties or assets is
     bound or (iii) any order, writ, injunction, decree, statute, rule, or
     regulation applicable to Midland or any of its Subsidiaries, except in the
     case of clauses (ii) and (iii) in this subsection for defaults or
     violations which in the aggregate would not have a Material Adverse Effect
     on Midland.
 
          (i) COMPLIANCE WITH APPLICABLE LAWS. Midland and its Subsidiaries hold
     all permits, licenses, variances, exemptions, orders, franchises and
     approvals of all Governmental Entities necessary for the lawful conduct of
     their respective businesses (the "Midland Permits"), except where the
     failure so to hold would not have a Material Adverse Effect on Midland.
     Midland and its Subsidiaries are in
                                      A-24
<PAGE>   178
 
     compliance with the terms of the Midland Permits, except where the failure
     so to comply would not have a Material Adverse Effect on Midland. Except as
     disclosed in the Midland SEC Documents, the businesses of Midland and its
     Subsidiaries are not being conducted in violation of any law, ordinance, or
     regulation of any Governmental Entity, except for possible violations which
     would not have a Material Adverse Effect on Midland. As of the date of this
     Agreement, no investigation or review by any Governmental Entity with
     respect to Midland or any of its Subsidiaries is pending and of which
     Midland has knowledge or, to the knowledge (as hereinafter defined) of
     Midland as of the date hereof, threatened, other than those the outcome of
     which would not have a Material Adverse Effect on Midland.
 
          (j) LITIGATION. Except as disclosed in the Midland SEC Documents or
     Schedule 3.1(j) of the Midland Disclosure Schedule, as of the date of this
     Agreement there is no suit, action or proceeding pending, or, to the
     knowledge of Midland, threatened against or affecting Midland or any
     Subsidiary of Midland ("Midland Litigation"), and Midland and its
     Subsidiaries have no knowledge of any facts that are likely to give rise to
     any Midland Litigation, that (in any case) is reasonably likely to have a
     Material Adverse Effect on Midland, nor is there any judgment, decree,
     injunction, rule or order of any Governmental Entity or arbitrator
     outstanding against Midland or any Subsidiary of Midland ("Midland Order")
     that is reasonably likely to have a Material Adverse Effect on Midland or
     its ability to consummate the transactions contemplated by this Agreement.
     Schedule 3.1(j) of the Midland Disclosure Schedule contains an accurate and
     complete list of all suits, actions and proceedings pending or, to the
     knowledge of Midland, threatened against or affecting Midland or any of its
     Subsidiaries as of the date hereof.
 
          (k) TAXES. Except as set forth on Schedule 3.1(k) of the Midland
     Disclosure Schedule:
 
             (i) Each of Midland, each of its Subsidiaries and any affiliated,
        consolidated, combined, unitary or similar group of which Midland or any
        of its Subsidiaries is or was a member has (A) duly filed on a timely
        basis (taking into account any extensions) all U.S. federal income Tax
        Returns (as hereinafter defined), and all other material Tax Returns,
        required to be filed or sent by or with respect to it, (B) duly paid or
        deposited on a timely basis all Taxes (as hereinafter defined) that are
        shown to be due and payable on or with respect to such Tax Returns, and
        all material Taxes that are otherwise due and payable (except for audit
        adjustments not material in the aggregate or to the extent that
        liability therefor is reserved for in Midland's most recent audited
        financial statements) for which Midland or any of its Subsidiaries may
        be liable, (C) established reserves that are adequate for the payment of
        all material Taxes not yet due and payable with respect to the results
        of operations of Midland and its Subsidiaries through the date hereof,
        and (D) complied in all material respects with all applicable laws,
        rules and regulations relating to the reporting, payment and withholding
        of Taxes that are required to be withheld from payments to employees,
        independent contractors, creditors, shareholders or any other third
        party and has in all material respects timely withheld from employee
        wages and paid over to the proper governmental authorities all amounts
        required to be so withheld and paid over.
 
             (ii) Schedule 3.1(k) of the Midland Disclosure Schedule sets forth
        (A) the last taxable period through which the federal income Tax Returns
        of Midland and any of its Subsidiaries have been audited by the IRS or
        for which the statute of limitations for assessment has otherwise closed
        and (B) any affiliated, consolidated, combined, unitary or similar group
        or Tax Return in which Midland or any of its Subsidiaries is or has been
        a member or joins or has joined in the filing. Except to the extent
        being contested in good faith, all material deficiencies asserted as a
        result of such examinations and any examination by any applicable taxing
        authority have been paid, fully settled or adequately provided for in
        Midland's most recent audited financial statements. Except as disclosed
        in or adequately provided for in the Midland SEC Documents or disclosed
        in Schedule 3.1(k) of the Midland Disclosure Schedule, no audits or
        other administrative proceedings or court proceedings are presently
        pending, or to the knowledge of Midland, threatened, with regard to any
        Taxes for which Midland or any of its Subsidiaries would be liable, and
        no material deficiency for any Taxes has been proposed, asserted or
        assessed (whether by examination report or prior to completion of
        examination by means of notices of proposed adjustment or other similar
        requests or notices) pursuant to such
                                      A-25
<PAGE>   179
 
        examination against Midland or any of its Subsidiaries by any taxing
        authority with respect to any period.
 
             (iii) Neither Midland nor any of its Subsidiaries has executed or
        entered into with the IRS or any taxing authority (A) any agreement or
        other document extending or having the effect of extending the period
        for assessment or collection of any income or franchise Taxes for which
        Midland or any of its Subsidiaries would be liable or (B) a closing
        agreement pursuant to Section 7121 of the Code or any similar provision
        of state, local, foreign or other income tax law, which will require any
        increase in taxable income or alternative minimum taxable income, or any
        reduction in tax credits, for Midland or any of its Subsidiaries for any
        taxable period ending after the Closing Date.
 
             (iv) Except as set forth in the Midland SEC Documents or disclosed
        in Schedule 3.1(k), neither Midland nor any of its Subsidiaries is a
        party to an agreement that provides for the payment of any amount that
        would constitute a "parachute payment" within the meaning of Section
        280G of the Code or that would constitute compensation whose
        deductibility is limited under Section 162(m) of the Code.
 
             (v) Except as set forth in the Midland SEC Documents, neither
        Midland nor any of its Subsidiaries is a party to, is bound by or has
        any obligation under any tax sharing or allocation agreement or similar
        agreement or arrangement.
 
             (vi) There are no requests for rulings or outstanding subpoenas
        from any taxing authority for information with respect to Taxes of
        Midland or any of its Subsidiaries and, to the knowledge of Midland, no
        material reassessments (for property or ad valorem Tax purposes) of any
        assets or any property owned or leased by Midland or any of its
        Subsidiaries have been proposed in written form.
 
             (vii) Neither Midland nor any of its Subsidiaries has agreed to
        make any adjustment pursuant to Section 481(a) of the Code (or any
        predecessor provision) by reason of any change in any accounting method
        of Midland or any of its Subsidiaries, and neither Midland nor any of
        its Subsidiaries has any application pending with any taxing authority
        requesting permission for any changes in any accounting method of
        Midland or any of its Subsidiaries. To the knowledge of Midland, neither
        the IRS nor any other taxing authority has proposed in writing, and
        neither Midland nor any of its Subsidiaries is otherwise required to
        make, any such adjustment or change in accounting method.
 
             (viii) There are no material excess loss accounts or deferred
        intercompany transactions between Midland and/or any of its Subsidiaries
        within the meaning of Treas. Reg. Section 1.1502-13 or 1.1502-19,
        respectively.
 
          For purposes of this Agreement, "Tax" (and, with correlative meaning,
     "Taxes") means (i) any net income, alternative or add-on minimum tax, gross
     income, gross receipts, sales, use, ad valorem, value added, transfer,
     franchise, profits, license, withholding on amounts paid by Midland or any
     of its Subsidiaries (or Vista or any of its Subsidiaries, as applicable),
     payroll, employment, excise, production, severance, stamp, occupation,
     premium, property, environmental or windfall profit tax, custom, duty or
     other tax, governmental fee or other like assessment or charge of any kind
     whatsoever, together with any interest and/or any penalty, addition to tax
     or additional amount imposed by any taxing authority, (ii) any liability of
     Midland or any of its Subsidiaries (or Vista or any of its Subsidiaries, as
     applicable) for the payment of any amounts of the type described in (i) as
     a result of being a member of an affiliated or consolidated group, or
     arrangement whereby liability of Midland or any of its Subsidiaries (or
     Vista or any of its Subsidiaries, as applicable) for payment of such
     amounts was determined or taken into account with reference to the
     liability of any other person for any period and (iii) liability of Midland
     or any of its Subsidiaries (or Vista or any of its Subsidiaries, as
     applicable) with respect to the payment of any amounts of the type
     described in (i) or (ii) as a result of any express or implied obligation
     to indemnify any other Person.
 
                                      A-26
<PAGE>   180
 
          "Tax Return" means all returns, declarations, reports, estimates,
     information returns and statements required to be filed by or with respect
     to Midland or any of its Subsidiaries (or Vista or any of its Subsidiaries,
     as applicable) in respect of any Taxes, including, without limitation, (i)
     any consolidated Federal Income Tax return in which Midland or any of its
     Subsidiaries (or Vista or any of its Subsidiaries, as applicable) is
     included and (ii) any state, local or foreign Income Tax returns filed on a
     consolidated, combined or unitary basis (for purposes of determining tax
     liability) in which Midland or any of its Subsidiaries (or Vista or any of
     its Subsidiaries, as applicable) is included.
 
          (l) EMPLOYEE BENEFIT MATTERS. (i) Schedule 3.1(l)(i) provides a
     description of each of the following which is sponsored, maintained or
     contributed to by Midland or one of its Subsidiaries (the "Midland Group")
     for the benefit of the employees of the Midland Group, former employees of
     the Midland Group, directors of the Midland Group, former directors of the
     Midland Group, or any agents, consultants, or similar representatives
     providing services to or for the Midland Group, or has been so sponsored,
     maintained or contributed to within six years prior to the Closing Date for
     the benefit of such individuals:
 
             (A) each "employee benefit plan," as such term is defined in
        Section 3(3) of ERISA (including, but not limited to, employee benefit
        plans, such as foreign plans, which are not subject to the provisions of
        ERISA) ("Midland Plan");
 
             (B) except for the Midland Stock Option Plans, each personnel
        policy, stock option plan, stock purchase plan, stock appreciation
        rights, phantom stock plan, collective bargaining agreement, bonus plan
        or arrangement, incentive award plan or arrangement, vacation policy,
        severance pay plan, policy or agreement, deferred compensation agreement
        or arrangement, executive compensation or supplemental income
        arrangement, consulting agreement, employment agreement and each other
        employee benefit plan, agreement, arrangement, program, practice or
        understanding which is not described in Section 3.1(l)(i)(A) (together
        with the Midland Stock Plans, the "Midland Benefit Program or
        Agreement").
 
          (ii) True, correct and complete copies of each of the Midland Plans,
     related trusts, insurance or group annuity contracts and each other funding
     or financing arrangement relating to any Midland Plan, including all
     amendments thereto, have been furnished to Vista. There has also been
     furnished to Vista, with respect to each Midland Plan required to file such
     report and description, the most recent report on Form 5500 and the summary
     plan description. True, correct and complete copies or descriptions of all
     Midland Benefit Programs or Agreements have also been furnished to Vista. A
     schedule of employer expenses with respect to each Midland Plan and Midland
     Benefit Program or Agreement for the current plan year and past plan year
     has been furnished to Vista along with any administration agreement
     associated with any Midland Plan. Additionally, the most recent
     determination letter from the IRS for each of the Midland Plans intended to
     be qualified under Section 401 of the Code, and any outstanding
     determination letter application for such plans has been furnished.
 
          (iii) Except as otherwise set forth on Schedule 3.1(l)(iii),
 
             (A) Each Midland Plan and Midland Benefit Program or Agreement has
        been administered in compliance with its terms, the applicable
        provisions of ERISA, the Code and all other applicable laws and the
        terms of all applicable collective bargaining agreements;
 
             (B) There are no actions, suits or claims pending (other than
        routine claims for benefits) or, to the knowledge of a member of the
        Midland Group, threatened against, or with respect to, any of the
        Midland Plans or Midland Benefit Programs or Agreements or their assets;
 
             (C) As to any Midland Plan intended to be qualified under Section
        401 of the Code, there has been no termination or partial termination of
        the Midland Plan within the meaning of Section 411(d)(3) of the Code;
 
             (D) No act, omission or transaction has occurred which would result
        in imposition on a member of the Midland Group of (1) breach of
        fiduciary duty liability damages under Section 409
                                      A-27
<PAGE>   181
 
        of ERISA, (2) a civil penalty assessed pursuant to subsections (c), (i)
        or (l) of Section 502 of ERISA or (3) a tax imposed pursuant to Chapter
        43 of Subtitle D of the Code;
 
             (E) To the knowledge of a member of the Midland Group, there is no
        matter pending (other than routine qualification determination filings)
        with respect to any of the Midland Plans before the IRS, the Department
        of Labor or the PBGC;
 
             (F) No trust funding a Midland Plan is intended to be exempt from
        federal income taxation pursuant to Section 501(c)(9) of the Code;
 
          (iv) In connection with the consummation of the transaction
     contemplated by this Agreement, no payments have or will be made under the
     Midland Plans or Midland Benefit Programs or Agreements which, in the
     aggregate, would result in imposition of the sanctions imposed under
     Sections 280G and 4999 of the Code.
 
          (v) Except as otherwise set forth in Schedule 3.1(l)(v), no Midland
     Plan or Midland Benefit Program or Agreement provides retiree medical or
     retiree life insurance benefits to any person and a member of the Midland
     Group is not contractually or otherwise obligated (whether or not in
     writing) to provide any person with life insurance or medical benefits upon
     retirement or termination of employment, other than as required by the
     provisions of Section 601 through 608 of ERISA and Section 4980B of the
     Code. Additionally, each Midland Plan which is an "employee welfare benefit
     plan," as such term is defined in Section 3(1) of ERISA, may be
     unilaterally amended or terminated in its entirety without liability except
     as to benefits accrued thereunder prior to such amendment or termination.
 
          (vi) No Midland Plan is a multiemployer plan within the meaning of
     Section 3(37) of ERISA.
 
          (vii) Except for the Midland Stock Plans or as otherwise set forth in
     Schedule 3.1(l)(vii), no Midland Plan or Midland Benefit Program or
     Agreement provides that payments pursuant to such Midland Plan or Midland
     Benefit Program or Agreement may be made in securities of a member of the
     Midland Group or a Commonly Controlled Entity, nor does any trust
     maintained pursuant to any Midland Plan or Midland Benefit Program or
     Agreement hold any securities of a member of the Midland Group.
 
          (m) LABOR MATTERS. Except as set forth on Schedule 3.1(m) of the
     Midland Disclosure Schedule or in the Midland SEC Documents:
 
             (i) neither Midland nor any of its Subsidiaries is a party to any
        collective bargaining agreement or other current labor agreement with
        any labor union or organization, and there is no current union
        representation question involving employees of Midland or any of its
        Subsidiaries, nor does Midland or any of its Subsidiaries know of any
        activity or proceeding of any labor organization (or representative
        thereof) or employee group (or representative thereof) to organize any
        such employees;
 
             (ii) as of the date hereof, there is no unfair labor practice
        charge or grievance arising out of a collective bargaining agreement or
        other grievance procedure against Midland or any of its Subsidiaries
        pending, or, to the knowledge or Midland or any of its Subsidiaries,
        threatened, that has, or is reasonably likely to have, a Material
        Adverse Effect on Midland;
 
             (iii) as of the date hereof, there is no complaint, lawsuit or
        proceeding in any forum by or on behalf of any present or former
        employee, any applicant for employment or any classes of the foregoing
        alleging breach of any express or implied contract of employment, any
        law or regulation governing employment or the termination thereof or
        other discriminatory, wrongful or tortious conduct in connection with
        the employment relationship against Midland or any of its Subsidiaries
        pending, or, to the knowledge of Midland or any of its Subsidiaries,
        threatened, that has, or is reasonably likely to have, a Material
        Adverse Effect on Midland;
 
             (iv) Midland and each of its Subsidiaries are in compliance with
        all applicable laws respecting employment and employment practices,
        terms and conditions of employment, wages, hours of work
                                      A-28
<PAGE>   182
 
        and occupational safety and health, except for non-compliance that does
        not have, and is not reasonably likely to have, a Material Adverse
        Effect on Midland; and
 
             (v) as of the date hereof, there is no proceeding, claim, suit,
        action or governmental investigation pending or, to the knowledge of
        Midland or any of its Subsidiaries, threatened, in respect to which any
        current or former director, officer, employee or agent of Midland or any
        of its Subsidiaries is or may be entitled to claim indemnification from
        Midland or any of its Subsidiaries pursuant to the Articles of
        Incorporation or Bylaws of Midland or any provision of the comparable
        charter or organizational documents of any of its Subsidiaries, as
        provided in any indemnification agreement to which Midland or any
        Subsidiary of Midland is a party or pursuant to applicable law that has,
        or is reasonably likely to have, a Material Adverse Effect on Midland.
 
          (n) INTANGIBLE PROPERTY. Midland and its Subsidiaries possess or have
     adequate rights to use all material trademarks, trade names, patents,
     service marks, brand marks, brand names, computer programs, databases,
     industrial designs and copyrights necessary for the operation of the
     businesses of each of Midland and its Subsidiaries (collectively, the
     "Midland Intangible Property"), except where the failure to possess or have
     adequate rights to use such properties would not reasonably be expected to
     have a Material Adverse Effect on Midland. All of the Midland Intangible
     Property is owned or licensed by Midland or its Subsidiaries free and clear
     of any and all Liens, except those that are not reasonably likely to have a
     Material Adverse Effect on Midland, and neither Midland nor any such
     Subsidiary has forfeited or otherwise relinquished any Midland Intangible
     Property which forfeiture would result in a Material Adverse Effect on
     Midland. To the knowledge of Midland, the use of the Midland Intangible
     Property by Midland or its Subsidiaries does not, in any material respect,
     conflict with, infringe upon, violate or interfere with or constitute an
     appropriation of any right, title, interest or goodwill, including, without
     limitation, any intellectual property right, trademark, trade name, patent,
     service mark, brand mark, brand name, computer program, database,
     industrial design, copyright or any pending application therefor of any
     other person and there have been no claims made and neither Midland nor any
     of its Subsidiaries has received any notice of any claim or otherwise knows
     that any of the Midland Intangible Property is invalid or conflicts with
     the asserted rights of any other person or has not been used or enforced or
     has failed to have been used or enforced in a manner that would result in
     the abandonment, cancellation or unenforceability of any of the Midland
     Intangible Property, except for any such conflict, infringement, violation,
     interference, claim, invalidity, abandonment, cancellation or
     unenforceability that would not reasonably be expected to have a Material
     Adverse Effect on Midland.
 
          (o) ENVIRONMENTAL MATTERS.
 
             For purposes of this Agreement:
 
                (i) "Environmental Laws" means all federal, state and local laws
           (including common laws), rules, regulations, ordinances, orders,
           decrees of any Governmental Entity, whether now in existence or
           hereafter enacted and in effect at the time of Closing, relating to
           pollution or the protection of human health, safety or the
           environment of any jurisdiction in which the applicable party hereto
           owns or operates assets or conducts business or owned or operated
           assets or conducted business (whether or not through a predecessor
           entity) (including, without limitation, ambient air, surface water,
           groundwater, land surface, subsurface strata, natural resources or
           wildlife), including, without limitation, laws and regulations
           relating to Releases or threatened Releases of Hazardous Materials or
           otherwise relating to the manufacture, processing, distribution, use,
           treatment, storage, disposal, transport or handling of solid waste or
           Hazardous Materials, and any similar laws, rules, regulations,
           ordinances, orders and decrees of any foreign jurisdiction in which
           the applicable party hereto owns or operates assets or conducts
           business;
 
                (ii) "Hazardous Materials" means (A) any petroleum or petroleum
           products, radioactive materials (including naturally occurring
           radioactive materials), asbestos in any form that is or could become
           friable, urea formaldehyde foam insulation, polychlorinated biphenyls
           or trans-
 
                                      A-29
<PAGE>   183
 
           formers or other equipment that contain dielectric fluid containing
           polychlorinated biphenyls, (B) any chemicals, materials or substances
           which are now defined as or included in the definition of "solid
           wastes," "hazardous substances," "hazardous wastes," "hazardous
           materials," "extremely hazardous substances," "restricted hazardous
           wastes," "toxic substances" or "toxic pollutants," or words of
           similar import, under any Environmental Law and (C) any other
           chemical, material, substance or waste, exposure to which is now
           prohibited, limited or regulated under any Environmental Law in a
           jurisdiction in which Midland or any of its Subsidiaries operates
           (for purposes of Section 3.1(o)) or in which Vista or any of its
           Subsidiaries operates (for purposes of Section 3.2(o)).
 
                (iii) "Release" means any spill, effluent, emission, leaking,
           pumping, pouring, emptying, escaping, dumping, injection, deposit,
           disposal, discharge, dispersal, leaching or migration into the indoor
           or outdoor environment, or into or out of any property owned,
           operated or leased by the applicable party or its Subsidiaries; and
 
                (iv) "Remedial Action" means all actions, including, without
           limitation, any capital expenditures, required by a Governmental
           Entity or required under any Environmental Law, or voluntarily
           undertaken to (A) clean up, remove, treat, or in any other way
           ameliorate or address any Hazardous Materials or other substance in
           the indoor or outdoor environment; (B) prevent the Release or threat
           of Release, or minimize the further Release of any Hazardous Material
           so it does not endanger or threaten to endanger the public or
           employee health or welfare of the indoor or outdoor environment; (C)
           perform pre-remedial studies and investigations or post-remedial
           monitoring and care pertaining or relating to a Release; or (D) bring
           the applicable party into compliance with any Environmental Law.
 
                Except as disclosed on Schedule 3.1(o) of the Midland Disclosure
           Schedule:
 
                    (v) The operations of Midland and its Subsidiaries have been
               conducted, are and, as of the Closing Date, will be, in
               compliance with all Environmental Laws, except where the failure
               to so comply would not reasonably be expected to have a Material
               Adverse Effect on Midland;
 
                    (vi) Midland and its Subsidiaries have obtained and will
               maintain all permits, licenses and registrations, or applications
               relating thereto, and have made and will make all filings,
               reports and notices required under applicable Environmental Laws
               for the continued operations of their respective businesses,
               except such matters the lack or failure of which would not
               reasonably be expected to lead to a Material Adverse Effect on
               Midland;
 
                    (vii) Midland and its Subsidiaries are not subject to any
               outstanding written orders issued by, or contracts with, any
               Governmental Entity or other person respecting (A) Environmental
               Laws, (B) Remedial Action, (C) any Release or threatened Release
               of a Hazardous Material or (D) an assumption of responsibility
               for environmental liabilities of another person, except such
               orders or contracts the compliance with which would not
               reasonably be expected to have a Material Adverse Effect on
               Midland;
 
                    (viii) Midland and its Subsidiaries have not received any
               written communication alleging, with respect to any such party,
               the violation of or liability under any Environmental Law, which
               violation or liability would reasonably be expected to have a
               Material Adverse Effect on Midland;
 
                    (ix) Neither Midland nor any of its Subsidiaries has any
               contingent liability in connection with the Release of any
               Hazardous Material into the indoor or outdoor environment
               (whether on-site or off-site) or employee or third party exposure
               to Hazardous Materials that would reasonably be expected to lead
               to a Material Adverse Effect on Midland;
 
                    (x) The operations of Midland or its Subsidiaries involving
               the generation, transportation, treatment, storage or disposal of
               hazardous or solid waste, as defined and regulated
                                      A-30
<PAGE>   184
 
               under 40 C.F.R. Parts 260-270 (in effect as of the date of this
               Agreement) or any applicable state equivalent, are in compliance
               with applicable Environmental Laws, except where the failure to
               so comply would not reasonably be expected to have a Material
               Adverse Effect on Midland; and
 
                    (xi) To the knowledge of Midland, there is not now on or in
               any property of Midland or its Subsidiaries or any property for
               which Midland or its Subsidiaries is potentially liable any of
               the following: (A) any underground storage tanks or surface
               impoundments or (B) any on-site disposal of Hazardous Material,
               any of which ((A) or (B) preceding) could reasonably be expected
               to have a Material Adverse Effect on Midland.
 
          (p) INSURANCE. Schedule 3.1(p) of the Midland Disclosure Schedule sets
     forth an insurance schedule of Midland's and each of its Subsidiaries'
     directors' and officers' liability insurance, primary and excess casualty
     insurance policies, providing coverage for bodily injury and property
     damage to third parties, including products liability and completed
     operations coverage, and worker's compensation, in effect as of the date
     hereof. Midland maintains, and through the Closing Date will maintain,
     insurance in such amounts and covering such risks as are in accordance with
     normal industry practice for companies engaged in businesses similar to
     those of Midland and each of its Subsidiaries (taking into account the cost
     and availability of such insurance). Each of Midland and its Subsidiaries
     may terminate each of its insurance policies or binders at or after the
     Closing Date and will incur no penalties or other material costs in doing
     so. None of such policies or binders was obtained through the use of false
     or misleading information or the failure to provide the insurer with all
     information requested in order to evaluate the liabilities and risks
     insured. There is no material default with respect to any provision
     contained in any such policy or binder nor has Midland or any of its
     Subsidiaries failed to give any notice or present any claim under any such
     policy or binder in due and timely fashion. There are no billed but unpaid
     premiums past due under any such policy or binder. Except as otherwise
     disclosed on Schedule 3.1(p) of the Midland Disclosure Schedule, there are
     no outstanding claims under any such policies or binders and, to the
     knowledge of Midland, there has not occurred any event that might
     reasonably form the basis of any claim against or relating to Midland or
     any of its Subsidiaries is not covered by any of such policies or binders.
     No notice of cancellation or non-renewal of any such policies or binders
     has been received. Except as otherwise disclosed on Schedule 3.1(p) of the
     Midland Disclosure Schedule, there are no performance bonds outstanding
     with respect to Midland or any of its Subsidiaries.
 
          (q) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed on
     Schedule 3.1(q) of the Midland Disclosure Schedule or as contemplated by
     this Agreement, since December 31, 1997 none of Midland or any of its
     Subsidiaries has done any of the following:
 
             (i) Discharged or satisfied any Lien or paid any obligation or
        liability, absolute or contingent, other than current liabilities
        incurred and paid in the ordinary course of business and consistent with
        past practices;
 
             (ii) Paid or declared any dividends or distributions, purchased,
        redeemed, acquired, or retired any indebtedness, stock, or other
        securities from its shareholders or other securityholders, made any
        loans or advances or guaranteed any loans or advances to any Person
        (other than loans, advances, or guaranties made in the ordinary course
        of business and consistent with past practices), or otherwise incurred
        or suffered to exist any liabilities (other than current liabilities
        incurred in the ordinary course of business and consistent with past
        practices);
 
             (iii) Except for Permitted Encumbrances suffered or permitted any
        Lien to arise or be granted or created against or upon any of its
        assets;
 
             (iv) Cancelled, waived, or released any rights or claims against,
        or indebtedness owed by, third parties;
 
             (v) Amended its certificate or articles of incorporation or bylaws
        or comparable organizational documents;
 
                                      A-31
<PAGE>   185
 
             (vi) Made or permitted any amendment, supplement, modification, or
        termination of any Midland Material Agreement;
 
             (vii) Paid or made any agreement to pay any severance or
        termination payment to any employee or consultant;
 
             (viii) Sold, transferred, assigned, or otherwise disposed of (A)
        any Oil and Gas Interests of Midland that, individually or in the
        aggregate, had a value at the time of such transfer, assignment, or
        disposition of $50,000 or more or (B) any other assets (including any
        undeveloped leasehold acreage) that, individually or in the aggregate,
        had a value at the time of such transfer, assignment, or disposition of
        $50,000 or more; provided, however, that this paragraph shall not apply
        to Hydrocarbons sold in the ordinary course of business and consistent
        with past practices;
 
             (ix) Made any investment in or contribution, payment, or advance to
        any Person (other than investments, contributions, payments, or
        advances, or commitments with respect thereto, made in the ordinary
        course of business and consistent with past practices).
 
             (x) Granted present or future increases in the rates of
        compensation or other benefits payable to any of its directors,
        officers, or other executive personnel or any consultant or paid any
        bonuses to such Persons;
 
             (xi) Paid, loaned, or advanced (other than the payment, advance or
        reimbursement of expenses in the ordinary course of business) any
        amounts to, or sold, transferred, or leased any of its assets to, or
        entered into any other transactions with, any of its Affiliates;
 
             (xii) Waived any rights of material value;
 
             (xiii) Suffered any material damage, destruction, or loss, whether
        or not covered by insurance, affecting its assets or prospects;
 
             (xiv) Made any change in any of the accounting principles followed
        by it or the method of applying such principles;
 
             (xv) Suffered any material labor trouble or any material
        controversies with any of its employees or collective bargaining
        association representing any of its employees;
 
             (xvi) Entered into any other transactions (other than this
        Agreement) except in the ordinary course of business and consistent with
        past practices;
 
             (xvii) Taken any of the actions referred to in Section 4.1 except
        as would have been permitted or required thereby had such Section been
        applicable at the time of such action;
 
             (xviii) Agreed, whether in writing or otherwise, to do any of the
        foregoing; or
 
             (xix) Suffered any material adverse change or trend in its
        financial position, results of operations, or business (other than
        changes or trends, including changes or trends in commodity prices,
        generally prevalent in or affecting the oil and gas industry).
 
          (r) GOVERNMENTAL REGULATION. None of Midland or any of its
     Subsidiaries is subject to regulation under the Public Utility Holding
     Company Act of 1935, the Federal Power Act, the Interstate Commerce Act,
     the Investment Company Act of 1940, or any state public utilities code.
 
          (s) NO RESTRICTIONS. Except as otherwise disclosed on Schedule 3.1(s)
     of the Midland Disclosure Schedule, none of Midland or any of its
     Subsidiaries is a party to (i) any agreement, indenture, or other
     instrument that contains restrictions with respect to the payment of
     dividends or other distributions with respect to its capital, (ii) any
     financial arrangement with respect to or creating any indebtedness to any
     Person (other than indebtedness reflected in the Midland SEC Documents or
     indebtedness incurred in the ordinary course of business), (iii) any
     agreement, contract, or commitment relating to the making of any advance
     to, or investment in, any Person (other than advances in the ordinary
     course of business), (iv) any guaranty or other contingent liability with
     respect to any indebtedness or obligation of any
                                      A-32
<PAGE>   186
 
     Person (other than guaranties undertaken in the ordinary course of business
     and other than the endorsement of negotiable instruments for collection in
     the ordinary course of business), (v) any management, service, consulting,
     or other contract of a similar nature that cannot be terminated by Midland
     or any of its Subsidiaries, as the case may be, upon written notice of 30
     days or less and without penalty or other obligation, or (vi) any
     agreement, contract, or commitment limiting in any respect its ability to
     compete with any Person or otherwise conduct business of any line or
     nature.
 
          (t) AUDITS AND SETTLEMENTS. Except as otherwise disclosed on Schedule
     3.1(t) of the Midland Disclosure Schedule, none of Midland or any of its
     Subsidiaries is a party or subject to any unresolved or incomplete audit,
     accounting, or other settlement.
 
          (u) EMPLOYMENT CONTRACTS AND BENEFITS. Except as otherwise disclosed
     on Schedule 3.1(u) of the Midland Disclosure Schedule or otherwise provided
     for in any Midland Plan or Midland Benefit Program or Agreement, (i) none
     of Midland or any of its Subsidiaries is subject to or obligated under any
     consulting, employment, severance, termination, or similar arrangement, any
     employee benefit, incentive, deferred compensation plan with respect to any
     Person, or any bonus, profit sharing, pension, stock option, stock
     purchase, or similar plan or other arrangement or other fringe benefit plan
     entered into or maintained for the benefit of employees or any other Person
     and (ii) no employee of Midland or any of its Subsidiaries, or any other
     Person owns, or has any right granted by Midland or any of its Subsidiaries
     to acquire, any interest in any of the assets or business of Midland or any
     of its Subsidiaries.
 
          (v) ACCOUNTS RECEIVABLE. Except as otherwise disclosed on Schedule
     3.1(v) of the Midland Disclosure Schedule, all of the accounts, notes, and
     loans receivable that have been recorded on the books of Midland or any of
     its Subsidiaries are bona fide and represent accounts, notes, and loans
     receivable validly due for goods sold or services rendered and are
     reasonably expected to be collected in full within 90 days after the
     applicable invoice or note maturity date (other than such accounts, notes,
     and loans receivable that, individually or in the aggregate, do not have a
     book value as of the date hereof in excess of $25,000). Except for
     Permitted Encumbrances, all of such accounts, notes, and loans receivable
     are free and clear of any and all Liens and other adverse claims and
     charges, and none of such accounts, notes, or loans receivable is subject
     to any offsets or claims of offset. None of the obligors on such accounts,
     notes, or loans receivable has given notice to Midland or any of its
     Subsidiaries that it will or may refuse to pay the full amount or any
     portion thereof.
 
          (w) TITLE TO ASSETS. Midland and its Subsidiaries (individually or
     collectively) have Defensible Title to all Oil and Gas Interests of Midland
     included or reflected in the Midland Engineering Report or the Midland
     Financial Statements. Each Oil and Gas Interest included or reflected in
     the Midland Engineering Report entitles Midland and its Subsidiaries
     (individually or collectively) to receive not less than the undivided
     interest set forth in (or derived from) the Midland Engineering Report of
     all Hydrocarbons produced, saved, and sold from or attributable to such Oil
     and Gas Interest, and the portion of the costs and expenses of operation
     and development of such Oil and Gas Interest that is borne or to be borne
     by Midland and its Subsidiaries (individually or collectively) is not
     greater than the undivided interest set forth in (or derived from) the
     Midland Engineering Report. Except for Permitted Encumbrances, each of
     Midland and its Subsidiaries has good, marketable, and defensible title to
     its assets (other than the Oil and Gas Interests of Midland). All leases
     pursuant to which Midland or any of its Subsidiaries leases any assets are
     in full force and effect, and neither Midland or any of its Subsidiaries
     has received any notice of default under any such lease.
 
          (x) MIDLAND ENGINEERING REPORT. All information supplied to Williamson
     Petroleum Consultants, Inc. by or on behalf of Midland that was material to
     such firm's evaluation of Midland's Oil and Gas Interests in connection
     with the preparation of the Midland Engineering Report was (at the time
     supplied or as modified or amended prior to the issuance of the Midland
     Engineering Report) true and correct in all material respects. Except for
     changes in classification or values of oil and gas reserve or property
     interests that occurred in the ordinary course of business since December
     31, 1997 and except for changes (including changes in commodity prices)
     generally affecting the oil and gas industry, there has been no Material
     Adverse Change with respect to the matters addressed in the Midland
     Engineering Report.
 
                                      A-33
<PAGE>   187
 
          (y) OIL AND GAS OPERATIONS. Except as otherwise disclosed on Schedule
     3.1(y):
 
             (i) None of the wells included in the Oil and Gas Interests of
        Midland has been overproduced such that it is subject or liable to being
        shut-in or to any overproduction penalty, except where any such
        overproduction could not reasonably be expected to have a Material
        Adverse Effect on Midland;
 
             (ii) There have been no changes proposed in the production
        allowables for any wells included in the Oil and Gas Interests of
        Midland that could reasonably be expected to have a Material Adverse
        Effect on Midland;
 
             (iii) All wells included in the Oil and Gas Interests of Midland
        have been drilled and (if completed) completed, operated, and produced
        in accordance with good oil and gas field practices and in compliance in
        all material respects with applicable oil and gas leases and applicable
        laws, rules, and regulations, except where any failure or violation
        could not reasonably be expected to have a Material Adverse Effect on
        Midland;
 
             (iv) None of Midland or any of its Subsidiaries has agreed to or is
        now obligated to abandon any well operated by any of them and included
        in the Oil and Gas Interests of Midland that is or will not be abandoned
        and reclaimed in accordance with applicable laws, rules, and regulations
        and good oil and gas industry practices;
 
             (v) Proceeds from the sale of Hydrocarbons produced from and
        attributable to Midland's Oil and Gas Interests are being received by
        Midland or its Subsidiaries in a timely manner and are not being held in
        suspense for any reason (except for amounts, individually or in the
        aggregate, not in excess of $25,000 and held in suspense in the ordinary
        course of business); and
 
             (vi) No Person has any call on, option to purchase, or similar
        rights with respect to Midland's Oil and Gas Interests or to the
        production attributable thereto, and upon consummation of the
        transactions contemplated by this Agreement, Midland and its
        Subsidiaries will have the right to market production from Midland's Oil
        and Gas Interests on terms no less favorable than the terms upon which
        such company is currently marketing such production.
 
          (z) HYDROCARBON SALES AND PURCHASE AGREEMENTS. Except as otherwise
     disclosed on Schedule 3.1(z) of the Midland Disclosure Schedule:
 
             (i) None of the Hydrocarbon Sales Agreements of Midland or
        Hydrocarbon Purchase Agreements of Midland has required since December
        31, 1997, or will require as of or after the Closing Date, Midland or
        any of its Subsidiaries (A) to have sold or delivered, or to sell or
        deliver, Hydrocarbons for a price materially less than the market value
        price that would have been, or would be, received pursuant to any
        arm's-length contract for a term of one month with an unaffiliated
        third-party purchaser or (B) to have purchased or received, or to
        purchase or receive, Hydrocarbons for a price materially greater than
        the market value price that would have been, or would be, paid pursuant
        to an arm's-length contract for a term of one month with an unaffiliated
        third-party seller;
 
             (ii) Each of the Hydrocarbon Agreements of Midland is valid,
        binding, and in full force and effect, and no party is in material
        breach or default of any Hydrocarbon Agreement of Midland, and to the
        knowledge of Midland, no event has occurred that with notice or lapse of
        time (or both) would constitute a material breach or default or permit
        termination, modification, or acceleration under any Hydrocarbon
        Agreement of Midland;
 
             (iii) There have been no claims from any third party for any price
        reduction or increase or volume reduction or increase under any of the
        Hydrocarbon Agreements of Midland, and none of Midland or any of its
        Subsidiaries has made any claims for any price reduction or increase or
        volume reduction or increase under any of the Hydrocarbon Agreements of
        Midland;
 
             (iv) Payments for Hydrocarbons sold pursuant to each Hydrocarbon
        Sales Agreement of Midland have been made (subject to adjustment in
        accordance with such Hydrocarbon Sales
                                      A-34
<PAGE>   188
 
        Agreements) materially in accordance with prices or price setting
        mechanisms set forth in such Hydrocarbon Sales Agreements;
 
             (v) No purchaser under any Hydrocarbon Sales Agreement of Midland
        has notified Midland or any of its Subsidiaries (or, to the knowledge of
        Midland, the operator of any property) of its intent to cancel,
        terminate, or renegotiate any Hydrocarbon Sales Agreement of Midland or
        otherwise to fail and refuse to take and pay for Hydrocarbons in the
        quantities and at the price set out in any Hydrocarbon Sales Agreement,
        whether such failure or refusal was pursuant to any force majeure,
        market out, or similar provisions contained in such Hydrocarbon Sales
        Agreement or otherwise;
 
             (vi) None of Midland or any of its Subsidiaries is obligated in any
        Hydrocarbon Sales Agreement by virtue of any prepayment arrangement, a
        "take-or-pay" or similar provision, a production payment, or any other
        arrangements to deliver Hydrocarbons produced from an Oil and Gas
        Interest of Midland at some future time without then or thereafter
        receiving payment therefor;
 
             (vii) Midland and its Subsidiaries, collectively, are not
        obligated, due to production and pipeline gas imbalances, to deliver gas
        having a market value in excess of $50,000 without receiving payment
        therefor; and
 
             (viii) The Hydrocarbon Agreements of Midland are of the type
        generally found in the oil and gas industry, do not (individually or in
        the aggregate) contain unusual or unduly burdensome provisions that may
        have a Material Adverse Effect on Midland, and are in form and substance
        considered normal within the oil and gas industry.
 
          (aa) FINANCIAL AND COMMODITY HEDGING. Schedule 3.1(aa) of the Midland
     Disclosure Schedule accurately summarizes the outstanding Hydrocarbon and
     financial hedging positions of Midland and its Subsidiaries (including
     fixed price controls, collars, swaps, caps, hedges, and puts).
 
          (bb) COMMITTED CAPITAL EXPENDITURES. Schedule 3.1(bb) of the Midland
     Disclosure Schedule is a true, accurate, and complete list of all
     commitments (including AFEs) pursuant to which Midland or any of its
     Subsidiaries has paid or incurred since December 31, 1997, or is obligated
     to pay or incur after the date hereof, drilling or capital expenditures in
     excess of $25,000 with respect to any well, and except as otherwise
     disclosed on Schedule 3.1(bb) of the Midland Disclosure Schedule, the
     aggregate amount of drilling and capital expenditures with respect to oil
     and gas wells that Midland and its Subsidiaries have paid or incurred since
     December 31, 1997 or are obligated to pay or incur after the date hereof
     does not exceed $500,000.
 
          (cc) BUSINESS RELATIONS. To the knowledge of Midland, since December
     31, 1997, there has been no termination, cancellation, or limitation of, or
     any material modification or change in, the material business relationships
     of Midland or any of its Subsidiaries with any material supplier or
     customer or any partner or joint venture partner nor has there been any
     material development relating to any such supplier, customer, partner, or
     joint venture partner that could reasonably be expected to have a Material
     Adverse Effect on Midland.
 
          (dd) BOOKS AND RECORDS. All books, records, and files of Midland and
     its Subsidiaries (including those pertaining to Midland's Oil and Gas
     Interests, wells, and other assets, those pertaining to the production,
     gathering, transportation, and sale of Hydrocarbons, and corporate,
     accounting, financial, and employee records) (i) have been prepared,
     assembled, and maintained in accordance with usual and customary policies
     and procedures and (ii) fairly and accurately reflect the ownership, use,
     enjoyment, and operation by Midland and its Subsidiaries of their
     respective assets.
 
          (ee) BROKERS. Except as disclosed in Schedule 3.1(ee), no broker,
     finder, investment banker, or other Person is or will be, in connection
     with the transactions contemplated by this Agreement, entitled to any
     brokerage, finder's, or other fee or compensation based on any arrangement
     or agreement made by or on behalf of Midland and for which Newco, Midland
     or any Subsidiary of Midland.
 
                                      A-35
<PAGE>   189
 
          (ff) VOTE REQUIRED. The affirmative vote of the holders of at least
     two-thirds of the outstanding shares of Midland Common Stock is the only
     vote of the holders of any class or series of Midland capital stock or
     other voting securities necessary to approve this Agreement, the Midland
     Merger, and the transactions contemplated hereby.
 
          (gg) DISCLOSURE AND INVESTIGATION. No representation or warranty of
     Midland contained in this Agreement contains any untrue statement of a
     material fact or omits to state a material fact necessary in order to make
     the statements contained herein not misleading. The Responsible Officers,
     individually or collectively, of Midland and its Subsidiaries have
     conducted, or have caused the respective officers, employees,
     representatives, or agents of Midland and its Subsidiaries to conduct, such
     investigations and inquiries that they reasonably believe most likely to
     confirm the truth and accuracy of each of the representations and
     warranties contained in this Section.
 
          (hh) FAIRNESS OPINION. Midland has received an oral opinion from Dain
     Rauscher Incorporated to the effect that the consideration to be received
     in the Midland Merger by the holders of shares of Midland Common Stock is
     fair to such holders from a financial point of view and such opinion has
     not been withdrawn, revoked, or modified.
 
     3.2 REPRESENTATIONS AND WARRANTIES OF VISTA. Vista hereby represents and
warrants to Midland as follows:
 
          (a) ORGANIZATION, STANDING AND POWER. Each of Vista, the General
     Partner and Vista Sub is a partnership or corporation duly organized,
     validly existing and in good standing under the laws of its state of
     incorporation, has all requisite power and authority to own, lease, and
     operate its properties and to carry on its business as now being conducted,
     and is duly qualified and in good standing to do business in each
     jurisdiction in which the business it is conducting, or the operation,
     ownership, or leasing of its properties, makes such qualification
     necessary, other than in such jurisdictions where the failure so to qualify
     would not have a Material Adverse Effect on Vista. Vista has heretofore
     delivered to Midland complete and correct copies of its Agreement of
     Limited Partnership, as amended to date. The jurisdiction of incorporation
     of the General Partner and Vista Sub is Texas. Vista has no Subsidiary
     other than Vista Sub.
 
          (b) CAPITAL STRUCTURE.
 
             (i) All outstanding Partnership Interests are validly issued and
        all capital contributions required to be made with respect to such
        Partnership Interests have been made in full. The outstanding
        Partnership Interests are subject to preemptive rights as set forth in
        the Agreement of Limited Partnership. The outstanding Partnership
        Interests have not been issued in violation of such preemptive rights.
        Except as set forth in this Section 3.2(b), the Agreement of Limited
        Partnership, or on Schedule 3.2(b) of the Vista Disclosure Schedule,
        there are outstanding: (1) no Partnership Interests, Voting Debt or
        other voting securities of Vista; (2) no securities of Vista or Vista
        Sub convertible into or exchangeable for Partnership Interests, Voting
        Debt or other voting securities of Vista or Vista Sub; and (3) no
        options, warrants, calls, rights (including preemptive rights),
        commitments, or agreements to which Vista or Vista Sub is a party or by
        which it is bound in any case obligating Vista or Vista Sub to issue,
        deliver, sell, purchase, redeem or acquire, or cause to be issued,
        delivered, sold, purchased, redeemed or acquired, additional Partnership
        Interests or any Voting Debt or other voting securities of Vista or of
        Vista Sub, or obligating Vista or Vista Sub to grant, extend, or enter
        into any such option, warrant, call, right, commitment, or agreement.
        Except for the Agreement of Limited Partnership, there are not as of the
        date hereof and there will not be at the Effective Time any voting
        trusts or other agreements or understandings to which Vista is a party
        or by which it is bound relating to the voting of any Partnership
        Interests that will limit in any way the solicitation of consents by or
        on behalf of Vista from, or the casting of votes by, the partners of
        Vista with respect to the Vista Exchange. All outstanding shares of
        capital stock of Vista Sub are owned by Vista, free and clear of all
        Liens. There are no restrictions on Vista to vote the capital stock of
        Vista Sub
 
                                      A-36
<PAGE>   190
 
             (ii) As of the date hereof, the authorized capital stock of the
        General Partner consists of 100,000 shares of GP Common Stock. At the
        close of business on April 30, 1998, 79,254 shares of GP Common Stock
        were issued and outstanding and no shares of GP Common Stock are held by
        the General Partner in its treasury. No shares of GP Common Stock are
        reserved for issuance for any other purpose. No Voting Debt on any
        matters on which shareholders of the General Partner may vote are issued
        and outstanding. All outstanding shares of GP Common Stock are validly
        issued, fully paid, and nonassessable and are not subject to preemptive
        rights. Except as described above, there are outstanding (A) no shares
        of GP Common Stock, Voting Debt or other voting securities of the
        General Partner; (B) no securities of the General Partner convertible
        into or exchangeable for shares of GP Common Stock, Voting Debt or other
        voting securities of the General Partner; and (C) no options, warrants,
        calls, rights (including preemptive rights), commitments, or agreements
        to which the General Partner is a party or by which it is bound in any
        case obligating the General Partner to issue, deliver, sell, purchase,
        redeem or acquire, or cause to be issued, delivered, sold, purchased,
        redeemed or acquired, additional shares of GP Common Stock or any Voting
        Debt or other voting securities of the General Partner, or obligating
        the General Partner to grant, extend, or enter into any such option,
        warrant, call, right, commitment, or agreement.
 
          (c) AUTHORITY; NO VIOLATIONS; CONSENTS AND APPROVALS.
 
             (i) The General Partner has approved the Vista Exchange and this
        Agreement, and declared the Vista Exchange and this Agreement to be in
        the best interests of the shareholders of the General Partner and the
        limited partners of Vista. Vista has all requisite partnership power and
        authority to enter into this Agreement. The execution and delivery of
        this Agreement and the consummation of the transactions contemplated
        hereby have been duly authorized by all necessary corporate action on
        the part of the General Partner and all necessary partnership action on
        the part of Vista. This Agreement has been duly executed and delivered
        by Vista and, assuming this Agreement constitutes the valid and binding
        obligation of Midland, Newco, and Merger Sub, constitutes a valid and
        binding obligation of Vista enforceable in accordance with its terms,
        subject, as to enforceability, to bankruptcy, insolvency,
        reorganization, moratorium and other laws of general applicability
        relating to or affecting creditors' rights and to general principles of
        equity (regardless of whether such enforceability is considered in a
        proceeding in equity or at law).
 
             (ii) Except as set forth on Schedule 3.2(c) of the Vista Disclosure
        Schedule, the execution and delivery of this Agreement does not, and the
        consummation of the transactions contemplated hereby and compliance with
        the provisions hereof will not, conflict with, or result in any
        violation of, or default (with or without notice or lapse of time, or
        both) under, or give rise to a right of termination, cancellation, or
        acceleration of any material obligation or to the loss of a material
        benefit under, or give rise to a right of purchase under, result in the
        creation of any Lien upon any of the properties or assets of Vista, the
        General Partner or Vista Sub under, or otherwise result in a material
        detriment to Vista, the General Partner or Vista Sub under, any
        provision of (A) the Agreement of Limited Partnership or any provision
        of the Articles of Incorporation or Bylaws the General Partner or Vista
        Sub, (B) any loan or credit agreement, note, bond, mortgage, indenture,
        lease, or other agreement, instrument, permit, concession, franchise, or
        license applicable to Vista, the General Partner or Vista Sub, (C) any
        joint venture or other ownership arrangement, or (D) any judgment,
        order, decree, statute, law, ordinance, rule, or regulation applicable
        to Vista, the General Partner or Vista Sub or any of their respective
        properties or assets, other than, in the case of clause (B) or (C) in
        this subsection, any such conflicts, violations, defaults, rights, Liens
        that, individually or in the aggregate, would not have a Material
        Adverse Effect on Vista, materially impair the ability of Vista to
        perform its obligations hereunder, or prevent the consummation of any of
        the transactions contemplated hereby.
 
             (iii) No consent, approval, order or authorization of, or
        registration, declaration or filing with, or permit from any
        Governmental Entity, is required by or with respect to Vista, the
        General Partner or Vista Sub in connection with the execution and
        delivery of this Agreement by Vista or the consummation by Vista of the
        transactions contemplated hereby, as to which the failure to obtain or
                                      A-37
<PAGE>   191
 
        make would have a Material Adverse Effect on Vista, except for (A) such
        filings and approvals as may be required by any applicable state
        securities, "blue sky" or takeover laws, or environmental laws; (B) such
        filings and approvals as may be required by any foreign premerger
        notification, securities, corporate or other law, rule or regulation;
        and (C) any such consent, approval, order, authorization, registration,
        declaration, filing, or permit that the failure to obtain or make would
        not, individually or in the aggregate, have a Material Adverse Effect on
        Vista, materially impair the ability of Vista to perform its obligations
        hereunder, or prevent the consummation of any of the transactions
        contemplated hereby.
 
          (d) FINANCIAL STATEMENTS AND MATERIAL AGREEMENTS. Vista has made
     available to Midland a true and complete copy of (i) each of the Vista
     Material Agreements and (ii) the audited consolidated balance sheets of
     Vista and its sole Subsidiary as of December 31, 1997, together with the
     audited consolidated statements of operations, partners' capital, and cash
     flows of Vista and its sole Subsidiary for the year then ended, and the
     notes thereto, accompanied by the reports thereon of Arthur Andersen LLP
     (such audited consolidated financial statements of Vista collectively being
     referred to as the "Financial Statements"). The Financial Statements were
     prepared in accordance with GAAP applied on a consistent basis during the
     periods involved (except as may be indicated in the notes thereto) and
     fairly present in accordance with applicable requirements of GAAP the
     consolidated financial position of Vista and its consolidated sole
     Subsidiary as of their respective dates and the consolidated results of
     operations and the consolidated cash flows of Vista and its sole Subsidiary
     for year then ended.
 
          (e) INFORMATION SUPPLIED. None of the information supplied or to be
     supplied by Vista for inclusion or incorporation by reference in the S-4 to
     be filed with the SEC by Newco in connection with the issuance of shares of
     Newco Common Stock in the Midland Merger will, at the time the S-4 becomes
     effective under the Securities Act or at the Effective Time, contain any
     untrue statement of a material fact or omit to state any material fact
     required to be stated therein or necessary to make the statements therein
     not misleading, and none of the information supplied or to be supplied by
     Vista and included or incorporated by reference in the Proxy Statement
     will, at the date mailed to shareholders of Midland or at the time of the
     meeting of such shareholders to be held in connection with the Midland
     Merger or at the Effective Time, contain any untrue statement of a material
     fact or omit to state any material fact required to be stated therein or
     necessary in order to make the statements therein, in light of the
     circumstances under which they are made, not misleading. If at any time
     prior to the Effective Time any event with respect to Vista, the General
     Partner or Vista Sub, or with respect to other information supplied by
     Vista for inclusion in the Proxy Statement or S-4, shall occur which is
     required to be described in an amendment of, or a supplement to, the S-4 or
     the Proxy Statement, such event shall be so described, and such amendment
     or supplement shall be promptly filed with the SEC.
 
          (f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in, or
     reflected in the Financial Statements, or except as contemplated by this
     Agreement, since December 31, 1997, there has not been: (i) any
     declaration, setting aside, or payment of any distribution (whether in
     cash, stock or property) with respect to any of Vista's equity securities;
     (ii) any amendment of any material term of any outstanding equity security
     of Vista, the General Partner or Vista Sub; (iii) any repurchase,
     redemption, or other acquisition by Vista, the General Partner or Vista Sub
     of any outstanding shares of capital stock, Partnership Interests, or other
     equity securities of, or other ownership interests in, Vista, the General
     Partner or Vista Sub; (iv) any material change in any method of accounting
     or accounting practice or any tax method, practice, or election by Vista,
     the General Partner or Vista Sub; or (v) any other transaction, commitment,
     dispute or other event or condition (financial or otherwise) of any
     character (whether or not in the ordinary course of business) that is
     reasonably likely to have a Material Adverse Effect on Vista, except for
     general economic changes and changes that may affect the industries of
     Vista, the General Partner or Vista Sub generally.
 
          (g) NO UNDISCLOSED MATERIAL LIABILITIES. Except as disclosed in the
     Financial Statements, as of the date hereof, there are no liabilities of
     Vista, the General Partner or Vista Sub of any kind whatsoever, whether
     accrued, contingent, absolute, determined, determinable or otherwise, that
     are reasonably likely
 
                                      A-38
<PAGE>   192
 
     to have a Material Adverse Effect on Vista, other than: (i) liabilities
     adequately provided for on the consolidated balance sheet of Vista and its
     sole Subsidiary dated as of December 31, 1997 (including the notes
     thereto), a copy of which has previously been provided to Midland; (ii)
     liabilities incurred in the ordinary course of business subsequent to
     December 31, 1997; and (iii) liabilities under this Agreement. The General
     Partner has not engaged in any business, operations or activities other
     than business, operations and activities undertaken in its capacity as
     general partner of Vista.
 
          (h) NO DEFAULT. Neither Vista, the General Partner nor Vista Sub is in
     default or violation (and no event has occurred which, with notice or the
     lapse of time or both, would constitute a default or violation) of any
     term, condition or provision of (i) the Agreement of Limited Partnership or
     the Articles of Incorporation and Bylaws of the General Partner or Vista
     Sub, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
     lease, or other agreement, instrument, permit, concession, franchise, or
     license to which Vista, the General Partner or Vista Sub is now a party or
     by which Vista, the General Partner or Vista Sub or any of their respective
     properties or assets is bound, or (iii) any order, writ, injunction,
     decree, statute, rule or regulation applicable to Vista, the General
     Partner or Vista Sub, except in the case of clauses (ii) and (iii) in this
     subsection for defaults or violations which in the aggregate would not have
     a Material Adverse Effect on Vista.
 
          (i) COMPLIANCE WITH APPLICABLE LAWS. Vista, the General Partner and
     Vista Sub hold all permits, licenses, variances, exemptions, orders,
     franchises and approvals of all Governmental Entities necessary for the
     lawful conduct of their respective businesses (the "Vista Permits"), except
     where the failure so to hold would not have a Material Adverse Effect on
     Vista. Vista, the General Partner and Vista Sub are in compliance with the
     terms of the Vista Permits, except where the failure so to comply would not
     have a Material Adverse Effect on Vista. The businesses of Vista, the
     General Partner and Vista Sub are not being conducted in violation of any
     law, ordinance, or regulation of any Governmental Entity, except for
     possible violations which would not have a Material Adverse Effect on
     Vista. As of the date of this Agreement, no investigation or review by any
     Governmental Entity with respect to Vista, the General Partner and Vista
     Sub is pending and of which Vista has knowledge or, to the knowledge of
     Vista as of the date hereof, threatened, other than those the outcome of
     which would not have a Material Adverse Effect on Vista.
 
          (j) LITIGATION. Except as disclosed on Schedule 3.2(j) of the Vista
     Disclosure Schedule, as of the date of this Agreement there is no suit,
     action or proceeding pending, or, to the knowledge of Vista, threatened
     against or affecting Vista, the General Partner or Vista Sub ("Vista
     Litigation"), and Vista, the General Partner and Vista Sub have no
     knowledge of any facts that are likely to give rise to any Vista
     Litigation, that (in any case) is reasonably likely to have a Material
     Adverse Effect on Vista, nor is there any judgment, decree, injunction,
     rule or order of any Governmental Entity or arbitrator outstanding against
     Vista, the General Partner or Vista Sub ("Vista Order") that is reasonably
     likely to have a Material Adverse Effect on Vista or its ability to
     consummate the transactions contemplated by this Agreement. Schedule 3.2(j)
     of the Vista Disclosure Schedule contains an accurate and complete list of
     all suits, actions and proceedings pending or, to the knowledge of Vista,
     threatened against or affecting Vista, the General Partner or Vista Sub as
     of the date hereof.
 
          (k) TAXES. Except as set forth on Schedule 3.2(k) of the Vista
     Disclosure Schedule:
 
             (i) Each of Vista, the General Partner and Vista Sub and any
        affiliated, consolidated, combined, unitary or similar group of which
        Vista, the General Partner and Vista Sub is or was a member has (A) duly
        filed on a timely basis (taking into account any extensions) all U.S.
        federal income Tax Returns, and all other material Tax Returns, required
        to be filed or sent by or with respect to it, (B) duly paid or deposited
        on a timely basis all Taxes that are shown to be due and payable on or
        with respect to such Tax Returns, and all material Taxes that are
        otherwise due and payable (except for audit adjustments not material in
        the aggregate or to the extent that liability therefor is reserved for
        in Vista's most recent audited financial statements) for which Vista,
        the General Partner or Vista Sub may be liable, (C) established reserves
        that are adequate for the payment of all material Taxes not yet due and
        payable with respect to the results of operations of
 
                                      A-39
<PAGE>   193
 
        Vista, the General Partner and Vista Sub through the date hereof, and
        (D) complied in all material respects with all applicable laws, rules
        and regulations relating to the reporting, payment and withholding of
        Taxes that are required to be withheld from payments to employees,
        independent contractors, creditors, shareholders or any other third
        party and has in all material respects timely withheld from employee
        wages and paid over to the proper governmental authorities all amounts
        required to be so withheld and paid over.
 
             (ii) Schedule 3.2(k) of the Vista Disclosure Schedule sets forth
        (A) the last taxable period through which the federal income Tax Returns
        of Vista, the General Partner and Vista Sub have been audited by the IRS
        or for which the statute of limitations for assessment has otherwise
        closed and (B) any affiliated, consolidated, combined, unitary or
        similar group or Tax Return in which Vista, the General Partner or Vista
        Sub is or has been a member or joins or has joined in the filing. Except
        to the extent being contested in good faith, all material deficiencies
        asserted as a result of such examinations and any examination by any
        applicable taxing authority have been paid, fully settled or adequately
        provided for in Vista's most recent audited financial statements. Except
        as disclosed in Schedule 3.2(k) of the Vista Disclosure Schedule, no
        audits or other administrative proceedings or court proceedings are
        presently pending, or to the knowledge of Vista, threatened, with regard
        to any Taxes for which Vista, the General Partner or Vista Sub would be
        liable, and no material deficiency for any Taxes has been proposed,
        asserted or assessed (whether by examination report or prior to
        completion of examination by means of notices of proposed adjustment or
        other similar requests or notices) pursuant to such examination against
        Vista, the General Partner or Vista Sub by any taxing authority with
        respect to any period.
 
             (iii) Neither Vista, the General Partner nor Vista Sub has executed
        or entered into (or prior to the close of business on the Closing Date
        will execute or enter into) with the IRS or any taxing authority (A) any
        agreement or other document extending or having the effect of extending
        the period for assessment or collection of any income or franchise Taxes
        for which Vista, the General Partner or Vista Sub would be liable or (B)
        a closing agreement pursuant to Section 7121 of the Code or any similar
        provision of state, local, foreign or other income tax law, which will
        require any increase in taxable income or alternative minimum taxable
        income, or any reduction in tax credits, for Vista, the General Partner
        or Vista Sub for any taxable period ending after the Closing Date.
 
             (iv) Except as disclosed in Schedule 3.2(k) of the Vista Disclosure
        Schedule, neither Vista, the General Partner nor Vista Sub is a party to
        an agreement that provides for the payment of any amount that would
        constitute a "parachute payment" within the meaning of Section 280G of
        the Code or that would constitute compensation whose deductibility is
        limited under Section 162(m) of the Code.
 
             (v) Except as disclosed in Schedule 3.2(k) of the Vista Disclosure
        Schedule, neither Vista, the General Partner nor Vista Sub is a party
        to, is bound by or has any obligation under any tax sharing or
        allocation agreement or similar agreement or arrangement.
 
             (vi) There are no requests for rulings or outstanding subpoenas
        from any taxing authority for information with respect to Taxes of
        Vista, the General Partner or Vista Sub and, to the knowledge of Vista,
        no material reassessments (for property or ad valorem Tax purposes) of
        any assets or any property owned or leased by Vista, the General Partner
        or Vista Sub have been proposed in written form.
 
             (vii) Neither Vista, the General Partner nor Vista Sub has agreed
        to make any adjustment pursuant to Section 481(a) of the Code (or any
        predecessor provision) by reason of any change in any accounting method
        of Vista or any of its Subsidiaries, and neither Vista, the General
        Partner nor Vista Sub has any application pending with any taxing
        authority requesting permission for any changes in any accounting method
        of Vista, the General Partner or Vista Sub To the knowledge of Vista,
        neither the IRS nor any other taxing authority has proposed in writing,
        and neither Vista, the General Partner nor Vista Sub is otherwise
        required to make, any such adjustment or change in accounting method.
                                      A-40
<PAGE>   194
 
             (viii) Vista has properly qualified to be treated as a partnership
        for federal (and, where permissible, state) income Tax purposes and has
        not, at any time, been required to be taxed as an association taxable as
        a corporation for federal income Tax purposes under any provision of the
        Code or elected to be taxable as a corporation for federal income Tax
        purposes.
 
          (l) EMPLOYEE BENEFIT MATTERS. (i) Schedule 3.2(l)(i) provides a
     description of each of the following which is sponsored, maintained or
     contributed to by Vista, the General Partner, or Vista Sub (the "Vista
     Group") for the benefit of the employees of the Vista Group, former
     employees of the Vista Group, directors of the Vista Group, former
     directors of the Vista Group, or any agents, consultants, or similar
     representatives providing services to or for the Vista Group, or has been
     so sponsored, maintained or contributed to within six years prior to the
     Closing Date for the benefit of such individuals:
 
             (A) each "employee benefit plan," as such term is defined in
        Section 3(3) of ERISA (including, but not limited to, employee benefit
        plans, such as foreign plans, which are not subject to the provisions of
        ERISA) ("Vista Plan");
 
             (B) each personnel policy, stock option plan, stock purchase plan,
        stock appreciation rights, phantom stock plan, collective bargaining
        agreement, bonus plan or arrangement, incentive award plan or
        arrangement, vacation policy, severance pay plan, policy or agreement,
        deferred compensation agreement or arrangement, executive compensation
        or supplemental income arrangement, consulting agreement, employment
        agreement and each other employee benefit plan, agreement, arrangement,
        program, practice or understanding which is not described in Section
        3.2(l)(i)(A) ("Vista Benefit Program or Agreement").
 
          (ii) True, correct and complete copies of each of the Vista Plans,
     related trusts, insurance or group annuity contracts and each other funding
     or financing arrangement relating to any Vista Plan, including all
     amendments thereto, have been furnished to Midland. There has also been
     furnished to Midland, with respect to each Vista Plan required to file such
     report and description, the most recent report on Form 5500 and the summary
     plan description. True, correct and complete copies or descriptions of all
     Vista Benefit Programs or Agreements have also been furnished to Midland. A
     schedule of employer expenses with respect to each Vista Plan or Vista
     Benefit Program or Agreement for the current plan year and past plan year
     has been furnished to Midland along with any administration agreement
     associated with any Vista Plan. Additionally, the most recent determination
     letter from the IRS for each of the Vista Plans intended to be qualified
     under Section 401 of the Code, and any outstanding determination letter
     application for such plans has been furnished.
 
          (iii) Except as otherwise set forth on Schedule 3.2(l)(iii),
 
             (A) Each Vista Plan or Vista Benefit Program or Agreement has been
        administered in compliance with its terms, the applicable provisions of
        ERISA, the Code and all other applicable laws and the terms of all
        applicable collective bargaining agreements;
 
             (B) There are no actions, suits or claims pending (other than
        routine claims for benefits) or, to the knowledge of a member of the
        Vista Group, threatened against, or with respect to, any of the Vista
        Plans or Vista Benefit Programs or Agreements or their assets;
 
             (C) As to any Vista Plan intended to be qualified under Section 401
        of the Code, there has been no termination or partial termination of the
        Vista Plan within the meaning of Section 411(d)(3) of the Code;
 
             (D) No act, omission or transaction has occurred which would result
        in imposition on a member of the Vista Group of (1) breach of fiduciary
        duty liability damages under Section 409 of ERISA, (2) a civil penalty
        assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA
        or (3) a tax imposed pursuant to Chapter 43 of Subtitle D of the Code;
 
                                      A-41
<PAGE>   195
 
             (E) To the knowledge of a member of the Vista Group, there is no
        matter pending (other than routine qualification determination filings)
        with respect to any of the Vista Plans before the IRS, the Department of
        Labor or the PBGC;
 
             (F) No trust funding a Vista Plan is intended to be exempt from
        federal income taxation pursuant to Section 501(c)(9) of the Code;
 
          (iv) In connection with the consummation of the transaction
     contemplated by this Agreement, no payments have or will be made under the
     Vista Plans or Vista Benefit Programs or Agreements which, in the
     aggregate, would result in imposition of the sanctions imposed under
     Sections 280G and 4999 of the Code.
 
          (v) Except as otherwise set forth in Schedule 3.2(l)(v), no Vista Plan
     or Vista Benefit Program or Agreement provides retiree medical or retiree
     life insurance benefits to any person and a member of the Vista Group is
     not contractually or otherwise obligated (whether or not in writing) to
     provide any person with life insurance or medical benefits upon retirement
     or termination of employment, other than as required by the provisions of
     Section 601 through 608 of ERISA and Section 4980B of the Code.
     Additionally, each Vista Plan which is an "employee welfare benefit plan,"
     as such term is defined in Section 3(1) of ERISA, may be unilaterally
     amended or terminated in its entirety without liability except as to
     benefits accrued thereunder prior to such amendment or termination.
 
          (vi) No Vista Plan is a multiemployer plan within the meaning of
     Section 3(37) of ERISA.
 
          (vii) Except as otherwise set forth in Schedule 3.2(l)(vii), no Vista
     Plan or Vista Benefit Program or Agreement provides that payments pursuant
     to such Vista Plan or Vista Benefit Program or Agreement may be made in
     securities of a member of the Vista Group or a Commonly Controlled Entity,
     nor does any trust maintained pursuant to any Vista Plan or Vista Benefit
     Program or Agreement hold any securities of a member of the Vista Group.
 
          (m) LABOR MATTERS. Except as set forth on Schedule 3.2(m) of the Vista
     Disclosure Schedule:
 
             (i) neither Vista, the General Partner nor Vista Sub is a party to
        any collective bargaining agreement or other current labor agreement
        with any labor union or organization, and there is no current union
        representation question involving employees of Vista, the General
        Partner or Vista Sub, nor does Vista, the General Partner or Vista Sub
        know of any activity or proceeding of any labor organization (or
        representative thereof) or employee group (or representative thereof) to
        organize any such employees;
 
             (ii) as of the date hereof, there is no unfair labor practice
        charge or grievance arising out of a collective bargaining agreement or
        other grievance procedure against Vista, the General Partner or Vista
        Sub pending, or, to the knowledge of Vista, the General Partner or Vista
        Sub, threatened, that has, or is reasonably likely to have, a Material
        Adverse Effect on Vista;
 
             (iii) as of the date hereof, there is no complaint, lawsuit or
        proceeding in any forum by or on behalf of any present or former
        employee, any applicant for employment or any classes of the foregoing
        alleging breach of any express or implied contract of employment, any
        law or regulation governing employment or the termination thereof or
        other discriminatory, wrongful or tortious conduct in connection with
        the employment relationship against Vista, the General Partner or Vista
        Sub pending, or, to the knowledge of Vista, the General Partner or Vista
        Sub, threatened, that has, or is reasonably likely to have, a Material
        Adverse Effect on Vista;
 
             (iv) Vista, the General Partner and Vista Sub are in compliance
        with all applicable laws respecting employment and employment practices,
        terms and conditions of employment, wages, hours of work and
        occupational safety and health, except for non-compliance that does not
        have, and is not reasonably likely to have, a Material Adverse Effect on
        Vista; and
 
             (v) As of the date hereof, there is no proceeding, claim, suit,
        action or governmental investigation pending or, to the knowledge of
        Vista, the General Partner or Vista Sub, threatened, in
                                      A-42
<PAGE>   196
 
        respect to which any current or former director, officer, employee or
        agent of Vista, the General Partner or Vista Sub is or may be entitled
        to claim indemnification from Vista, the General Partner or Vista Sub
        pursuant to the Agreement of Limited Partnership or any provision of the
        Articles of Incorporation or Bylaws of the General Partner or Vista Sub,
        as provided in any indemnification agreement to which Vista, the General
        Partner or Vista Sub is a party or pursuant to applicable law that has,
        or is reasonably likely to have, a Material Adverse Effect on Vista.
 
          (n) INTANGIBLE PROPERTY. Vista, the General Partner and Vista Sub
     possess or have adequate rights to use all material trademarks, trade
     names, patents, service marks, brand marks, brand names, computer programs,
     databases, industrial designs and copyrights necessary for the operation of
     the businesses of each of Vista, the General Partner and Vista Sub
     (collectively, the "Vista Intangible Property"), except where the failure
     to possess or have adequate rights to use such properties would not
     reasonably be expected to have a Material Adverse Effect on Vista. All of
     the Vista Intangible Property is owned or licensed by Vista, the General
     Partner or Vista Sub free and clear of any and all Liens, except those that
     are not reasonably likely to have a Material Adverse Effect on Vista, and
     neither Vista, the General Partner nor Vista Sub has forfeited or otherwise
     relinquished any Vista Intangible Property which forfeiture would result in
     a Material Adverse Effect on Vista. To the knowledge of Vista, the use of
     the Vista Intangible Property by Vista, the General Partner or Vista Sub
     does not, in any material respect, conflict with, infringe upon, violate or
     interfere with or constitute an appropriation of any right, title, interest
     or goodwill, including, without limitation, any intellectual property
     right, trademark, trade name, patent, service mark, brand mark, brand name,
     computer program, database, industrial design, copyright or any pending
     application therefor of any other person and there have been no claims made
     and neither Vista, the General Partner nor Vista Sub has received any
     notice of any claim or otherwise knows that any of the Vista Intangible
     Property is invalid or conflicts with the asserted rights of any other
     person or has not been used or enforced or has failed to have been used or
     enforced in a manner that would result in the abandonment, cancellation or
     unenforceability of any of the Vista Intangible Property, except for any
     such conflict, infringement, violation, interference, claim, invalidity,
     abandonment, cancellation or unenforceability that would not reasonably be
     expected to have a Material Adverse Effect on Vista.
 
          (o) ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 3.2(o) of
     the Vista Disclosure Schedule:
 
             (i) The operations of Vista, the General Partner and Vista Sub have
        been conducted, are and, as of the Closing Date, will be, in compliance
        with all Environmental Laws, except where the failure to so comply would
        not reasonably be expected to have a Material Adverse Effect on Vista;
 
             (ii) Vista, the General Partner and Vista Sub have obtained and
        will maintain all permits, licenses and registrations, or applications
        relating thereto, and have made and will make all filings, reports and
        notices required under applicable Environmental Laws for the continued
        operations of their respective businesses, except such matters the lack
        or failure of which would not reasonably be expected to lead to a
        Material Adverse Effect on Vista;
 
             (iii) Vista, the General Partner and Vista Sub are not subject to
        any outstanding written orders issued by, or contracts with, any
        Governmental Entity or other person respecting (A) Environmental Laws,
        (B) Remedial Action, (C) any Release or threatened Release of a
        Hazardous Material or (D) an assumption of responsibility for
        environmental liabilities of another person, except such orders or
        contracts the compliance with which would not reasonably be expected to
        have a Material Adverse Effect on Vista;
 
             (iv) Vista, the General Partner and Vista Sub have not received any
        written communication alleging, with respect to any such party, the
        violation of or liability under any Environmental Law, which violation
        or liability would reasonably be expected to have a Material Adverse
        Effect on Vista;
 
             (v) Neither Vista, the General Partner nor Vista Sub has any
        contingent liability in connection with the Release of any Hazardous
        Material into the indoor or outdoor environment (whether on-
 
                                      A-43
<PAGE>   197
 
        site or off-site) or employee or third party exposure to Hazardous
        Materials that would reasonably be expected to lead to a Material
        Adverse Effect on Vista;
 
             (vi) The operations of Vista, the General Partner or Vista Sub
        involving the generation, transportation, treatment, storage or disposal
        of hazardous or solid waste, as defined and regulated under 40 C.F.R.
        Parts 260-270 (in effect as of the date of this Agreement) or any
        applicable state equivalent, are in compliance with applicable
        Environmental Laws, except where the failure to so comply would not
        reasonably be expected to have a Material Adverse Effect on Vista; and
 
             (vii) To the knowledge of Vista, there is not now on or in any
        property of Vista, the General Partner or Vista Sub or any property for
        which Vista, the General Partner or Vista Sub is potentially liable any
        of the following: (A) any underground storage tanks or surface
        impoundments or (B) any on-site disposal of Hazardous Material, any of
        which ((A) or (B) preceding) could reasonably be expected to have a
        Material Adverse Effect on Vista.
 
          (p) INSURANCE. Schedule 3.2(p) of the Vista Disclosure Schedule sets
     forth an insurance schedule of Vista's, the General Partner's and Vista
     Sub's directors' and officers' liability insurance, primary and excess
     casualty insurance policies, providing coverage for bodily injury and
     property damage to third parties, including products liability and
     completed operations coverage, and worker's compensation, in effect as of
     the date hereof. Vista maintains, and through the Closing Date will
     maintain, insurance in such amounts and covering such risks as are in
     accordance with normal industry practice for companies engaged in
     businesses similar to those of Vista, the General Partner and Vista Sub
     (taking into account the cost and availability of such insurance). Each of
     Vista, the General Partner and Vista Sub may terminate each of its
     insurance policies or binders at or after the Closing Date and will incur
     no penalties or other material costs in doing so. None of such policies or
     binders was obtained through the use of false or misleading information or
     the failure to provide the insurer with all information requested in order
     to evaluate the liabilities and risks insured. There is no material default
     with respect to any provision contained in any such policy or binder nor
     has Vista, the General Partner or Vista Sub failed to give any notice or
     present any claim under any such policy or binder in due and timely
     fashion. There are no billed but unpaid premiums past due under any such
     policy or binder. Except as otherwise disclosed on Schedule 3.2(p) of the
     Vista Disclosure Schedule, there are no outstanding claims under any such
     policies or binders and, to the knowledge of Vista, there has not occurred
     any event that might reasonably form the basis of any claim against or
     relating to Vista, the General Partner or Vista Sub that is not covered by
     any of such policies or binders. No notice of cancellation or non-renewal
     of any such policies or binders has been received. Except as otherwise
     disclosed on Schedule 3.2(p) of the Vista Disclosure Schedule, there are no
     performance bonds outstanding with respect to Vista, the General Partner or
     Vista Sub.
 
          (q) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as otherwise
     disclosed on Schedule 3.2(q) of the Vista Disclosure Schedule or as
     contemplated by this Agreement, since December 31, 1997, neither Vista, the
     General Partner nor Vista Sub has done any of the following:
 
             (i) Discharged or satisfied any Lien or paid any obligation or
        liability, absolute or contingent, other than current liabilities
        incurred and paid in the ordinary course of business and consistent with
        past practices;
 
             (ii) Paid or declared any dividends or distributions, purchased,
        redeemed, acquired, or retired any indebtedness, stock, or other
        securities from its partners, shareholders, or other securityholders,
        made any loans or advances or guaranteed any loans or advances to any
        Person (other than loans, advances, or guaranties made in the ordinary
        course of business and consistent with past practices), or otherwise
        incurred or suffered to exist any liabilities (other than current
        liabilities incurred in the ordinary course of business and consistent
        with past practices);
 
             (iii) Except for Permitted Encumbrances, suffered or permitted any
        Lien to arise or be granted or created against or upon any of its
        assets;
 
                                      A-44
<PAGE>   198
 
             (iv) Cancelled, waived, or released any rights or claims against,
        or indebtedness owed by, third parties;
 
             (v) Amended the Agreement of Limited Partnership, in the case of
        Vista, or its articles of incorporation or bylaws, in the case of the
        General Partner and Vista Sub;
 
             (vi) Made or permitted any amendment, supplement, modification, or
        termination of any Vista Material Agreement;
 
             (vii) Paid or made any agreement to pay any severance or
        termination payment to any employee or consultant;
 
             (viii) Sold, transferred, assigned, or otherwise disposed of (A)
        any Oil and Gas Interests of Vista that, individually or in the
        aggregate, had a value at the time of such transfer, assignment, or
        disposition of $50,000 or more or (B) any other assets (including any
        undeveloped leasehold acreage) that, individually or in the aggregate,
        had a value at the time of such transfer, assignment, or disposition of
        $50,000 or more provided, however, that this paragraph shall not apply
        to Hydrocarbons sold in the ordinary course of business and consistent
        with past practices;
 
             (ix) Made any investment in or contribution, payment, or advance to
        any Person (other than investments, contributions, payments, or
        advances, or commitments with respect thereto, made in the ordinary
        course of business and consistent with past practices).
 
             (x) Granted present or future increases in the rates of
        compensation or other benefits payable to any of its directors,
        officers, or other executive personnel or any consultant or paid any
        bonuses to such Persons;
 
             (xi) Paid, loaned, or advanced (other than the payment, advance or
        reimbursement of expenses in the ordinary course of business) any
        amounts to, or sold, transferred, or leased any of its assets to, or
        entered into any other transactions with, any of its Affiliates;
 
             (xii) Waived any rights of material value;
 
             (xiii) Suffered any material damage, destruction, or loss, whether
        or not covered by insurance, affecting its assets or prospects;
 
             (xiv) Made any change in any of the accounting principles followed
        by it or the method of applying such principles;
 
             (xv) Suffered any material labor trouble or any material
        controversies with any of its employees or collective bargaining
        association representing any of its employees;
 
             (xvi) Entered into any other transactions (other than this
        Agreement) except in the ordinary course of business and consistent with
        past practices;
 
             (xvii) Taken any of the actions referred to in Section 4.1 except
        as would have been permitted or required thereby had such Section been
        applicable at the time of such action;
 
             (xviii) Agreed, whether in writing or otherwise, to do any of the
        foregoing; or
 
             (xix) Suffered any material adverse change or trend in its
        financial position, results of operations, or business (other than
        changes or trends, including changes or trends in commodity prices,
        generally prevalent in or affecting the oil and gas industry).
 
          (r) GOVERNMENTAL REGULATION. Neither Vista, the General Partner nor
     Vista Sub is subject to regulation under the Public Utility Holding Company
     Act of 1935, the Federal Power Act, the Interstate Commerce Act, the
     Investment Company Act of 1940, or any state public utilities code.
 
          (s) NO RESTRICTIONS. Except for the Agreement of Limited Partnership
     or as otherwise disclosed on Schedule 3.2(s) of the Vista Disclosure
     Schedule, neither Vista, the General Partner nor Vista Sub is a party to
     (i) any agreement, indenture, or other instrument that contains
     restrictions with respect to the
                                      A-45
<PAGE>   199
 
     payment of dividends or other distributions with respect to its capital,
     (ii) any financial arrangement with respect to or creating any indebtedness
     to any Person (other than indebtedness reflected in the Financial
     Statements or indebtedness incurred in the ordinary course of business),
     (iii) any agreement, contract, or commitment relating to the making of any
     advance to, or investment in, any Person (other than advances in the
     ordinary course of business), (iv) any guaranty or other contingent
     liability with respect to any indebtedness or obligation of any Person
     (other than guaranties undertaken in the ordinary course of business and
     other than the endorsement of negotiable instruments for collection in the
     ordinary course of business), (v) any management, service, consulting, or
     other contract of a similar nature that cannot be terminated by Vista, the
     General Partner or Vista Sub, as the case may be, upon written notice of 30
     days or less and without penalty or other obligation, or (vi) any
     agreement, contract, or commitment limiting in any respect its ability to
     compete with any Person or otherwise conduct business of any line or
     nature.
 
          (t) AUDITS AND SETTLEMENTS. Except as otherwise disclosed on Schedule
     3.2(t) of the Vista Disclosure Schedule, neither Vista, the General Partner
     nor Vista Sub is a party or subject to any unresolved or incomplete audit,
     accounting, or other settlement.
 
          (u) EMPLOYMENT CONTRACTS AND BENEFITS. Except as otherwise disclosed
     on Schedule 3.2(u) of the Vista Disclosure Schedule or otherwise provided
     for in any Vista Plan or Vista Benefit Program or Agreement, (i) neither
     Vista, the General Partner nor Vista Sub is subject to or obligated under
     any consulting, employment, severance, termination, or similar arrangement,
     any employee benefit, incentive, or deferred compensation plan with respect
     to any Person, or any bonus, profit sharing, pension, stock option, stock
     purchase, or similar plan or other arrangement or other fringe benefit plan
     entered into or maintained for the benefit of employees or any other Person
     and (ii) no employee of Vista, the General Partner, Vista Sub, or any other
     Person owns, or has any right granted by Vista, the General Partner or
     Vista Sub to acquire, any interest in any of the assets or business of
     Vista, the General Partner or Vista Sub.
 
          (v) ACCOUNTS RECEIVABLE. Except as otherwise disclosed on Schedule
     3.2(v) of the Vista Disclosure Schedule, all of the accounts, notes, and
     loans receivable that have been recorded on the books of Vista, the General
     Partner or Vista Sub are bona fide and represent accounts, notes, and loans
     receivable validly due for goods sold or services rendered and are
     reasonably expected to be collected in full within 90 days after the
     applicable invoice or note maturity date (other than such accounts, notes,
     and loans receivable that, individually or in the aggregate, do not have a
     book value as of the date hereof in excess of $25,000). Except for
     Permitted Encumbrances, all of such accounts, notes, and loans receivable
     are free and clear of any and all Liens and other adverse claims and
     charges, and none of such accounts, notes, or loans receivable is subject
     to any offsets or claims of offset. None of the obligors on such accounts,
     notes, or loans receivable has given notice to Vista, the General Partner
     or Vista Sub that it will or may refuse to pay the full amount or any
     portion thereof.
 
          (w) TITLE TO ASSETS. Vista and Vista Sub (individually or
     collectively) have Defensible Title to all Oil and Gas Interests of Vista
     included or reflected in the Vista Engineering Report or the Financial
     Statements. Each Oil and Gas Interest included or reflected in the Vista
     Engineering Report entitles Vista and Vista Sub (individually or
     collectively) to receive not less than the undivided interest set forth in
     (or derived from) the Vista Engineering Report of all Hydrocarbons
     produced, saved, and sold from or attributable to such Oil and Gas
     Interest, and the portion of the costs and expenses of operation and
     development of such Oil and Gas Interest that is borne or to be borne by
     Vista and Vista Sub (individually or collectively) is not greater than the
     undivided interest set forth in (or derived from) the Vista Engineering
     Report. Except for Permitted Encumbrances, each of Vista and Vista Sub has
     good, marketable, and defensible title to its assets (other than the Oil
     and Gas Interests of Vista). All leases pursuant to which Vista or Vista
     Sub lease any assets are in full force and effect, and neither Vista nor
     Vista Sub has received any notice of default under any such lease.
 
          (x) VISTA ENGINEERING REPORT. All information supplied to Williamson
     Petroleum Consultants, Inc. by or on behalf of Vista that was material to
     such firm's evaluation of Vista's Oil and Gas Interests in connection with
     the preparation of the Vista Engineering Report was (at the time supplied
     or as modified
 
                                      A-46
<PAGE>   200
 
     or amended prior to the issuance of the Vista Engineering Report) true and
     correct in all material respects. Except for changes in classification or
     values of oil and gas reserve or property interests that occurred in the
     ordinary course of business since December 31, 1997 and except for changes
     (including changes in commodity prices) generally affecting the oil and gas
     industry, there has been no Material Adverse Change with respect to the
     matters addressed in the Vista Engineering Report.
 
          (y) OIL AND GAS OPERATIONS. Except as otherwise disclosed on Schedule
     3.2(y):
 
             (i) None of the wells included in the Oil and Gas Interests of
        Vista has been overproduced such that it is subject or liable to being
        shut-in or to any owe overproduction penalty, except where any such
        overproduction could not reasonably be expected to have a Material
        Adverse Effect on Vista;
 
             (ii) There have been no changes proposed in the production
        allowables for, any wells included in the Oil and Gas Interests of Vista
        that could reasonably be expected to have a Material Adverse Effect on
        Vista;
 
             (iii) All wells included in the Oil and Gas Interests of Vista have
        been drilled and (if completed) completed, operated, and produced in
        accordance with good oil and gas field practices and in compliance in
        all material respects with applicable oil and gas leases and applicable
        laws, rules, and regulations, except where any failure or violation
        could not reasonably be expected to have a Material Adverse Effect on
        Vista;
 
             (iv) Neither Vista nor Vista Sub has agreed to or is now obligated
        to abandon any well operated by any of them and included in the Oil and
        Gas Interests of Vista that is or will not be abandoned and reclaimed in
        accordance with applicable laws, rules, and regulations and good oil and
        gas industry practices;
 
             (v) Proceeds from the sale of Hydrocarbons produced from and
        attributable to Vista's Oil and Gas Interests are being received by
        Vista or Vista Sub in a timely manner and are not being held in suspense
        for any reason (except for amounts, individually or in the aggregate,
        not in excess of $25,000 and held in suspense in the ordinary course of
        business); and
 
             (vi) No Person has any call on, option to purchase, or similar
        rights with respect to Vista's Oil and Gas Interests or to the
        production attributable thereto, and upon consummation of the
        transactions contemplated by this Agreement, Vista or Vista Sub will
        have the right to market production from Vista's Oil and Gas Interests
        on terms no less favorable than the terms upon which such company is
        currently marketing such production.
 
          (z) HYDROCARBON SALES AND PURCHASE AGREEMENTS. Except as otherwise
     disclosed on Schedule 3.2(z) of the Vista Disclosure Schedule:
 
             (i) None of the Hydrocarbon Sales Agreements of Vista or
        Hydrocarbon Purchase Agreements of Vista has required since December 31,
        1997, or will require as of or after the Closing Date, Vista or Vista
        Sub (A) to have sold or delivered, or to sell or deliver, Hydrocarbons
        for a price materially less than the market value price that would have
        been, or would be, received pursuant to any arm's-length contract for a
        term of one month with an unaffiliated third-party purchaser or (B) to
        have purchased or received, or to purchase or receive, Hydrocarbons for
        a price materially greater than the market value price that would have
        been, or would be, paid pursuant to an arm's-length contract for a term
        of one month with an unaffiliated third-party seller;
 
             (ii) Each of the Hydrocarbon Agreements of Vista is valid, binding,
        and in full force and effect, and no party is in material breach or
        default of any Hydrocarbon Agreement of Vista, and to the knowledge of
        Vista, no event has occurred that with notice or lapse of time (or both)
        would constitute a material breach or default or permit termination,
        modification, or acceleration under any Hydrocarbon Agreement of Vista;
 
                                      A-47
<PAGE>   201
 
             (iii) There have been no claims from any third party for any price
        reduction or increase or volume reduction or increase under any of the
        Hydrocarbon Agreements of Vista, and neither Vista nor Vista Sub has
        made any claims for any price reduction or increase or volume reduction
        or increase under any of the Hydrocarbon Agreements of Vista;
 
             (iv) Payments for Hydrocarbons sold pursuant to each Hydrocarbon
        Sales Agreement of Vista have been made (subject to adjustment in
        accordance with such Hydrocarbon Sales Agreements) materially in
        accordance with prices or price setting mechanisms set forth in such
        Hydrocarbon Sales Agreements;
 
             (v) No purchaser under any Hydrocarbon Sales Agreement of Vista has
        notified Vista or Vista Sub (or, to the knowledge of Vista, the operator
        of any property) of its intent to cancel, terminate, or renegotiate any
        Hydrocarbon Sales Agreement of Vista or otherwise to fail and refuse to
        take and pay for Hydrocarbons in the quantities and at the price set out
        in any Hydrocarbon Sales Agreement, whether such failure or refusal was
        pursuant to any force majeure, market out, or similar provisions
        contained in the Hydrocarbon Sales Agreement or otherwise;
 
             (vi) Neither Vista nor Vista Sub is obligated in any Hydrocarbon
        Sales Agreement of Vista by virtue of any prepayment arrangement, a
        "take-or-pay" or similar provision, a production payment, or any other
        arrangements to deliver Hydrocarbons produced from an Oil and Gas
        Interest of Midland at some future time without then or thereafter
        receiving payment therefor;
 
             (vii) Vista and Vista Sub, collectively, are not obligated, due to
        production and pipeline gas imbalances, to deliver gas having a market
        value in excess of $50,000 without receiving payment therefor; and
 
             (viii) The Hydrocarbon Agreements of Vista are of the type
        generally found in the oil and gas industry, do not (individually or in
        the aggregate) contain unusual or unduly burdensome provisions that may
        have a Material Adverse Effect on Vista, and are in form and substance
        considered normal within the oil and gas industry.
 
          (aa) FINANCIAL AND COMMODITY HEDGING. Schedule 3.2(aa) of the Vista
     Disclosure Schedule accurately summarizes the outstanding Hydrocarbon and
     financial hedging positions of Vista and Vista Sub (including fixed price
     controls, collars, swaps, caps, hedges, and puts).
 
          (bb) COMMITTED CAPITAL EXPENDITURES. Schedule 3.2(bb) of the Vista
     Disclosure Schedule is a true, accurate, and complete list of all
     commitments (including AFEs) pursuant to which Vista or Vista Sub has paid
     or incurred since December 31, 1997, or is obligated to pay or incur after
     the date hereof, drilling or capital expenditures in excess of $25,000 with
     respect to any well, and except as otherwise set forth disclosed on
     Schedule 3.2(bb) of the Vista Disclosure Schedule, the aggregate amount of
     drilling and capital expenditures with respect to oil and gas wells that
     Vista and Vista Sub have paid or incurred since December 31, 1997 or are
     obligated to pay or incur after the date hereof does not exceed $500,000.
 
          (cc) BUSINESS RELATIONS. To the knowledge of Vista, since December 31,
     1997, there has been no termination, cancellation, or limitation of, or any
     material modification or change in, the material business relationships of
     Vista, the General Partner or Vista Sub with any material supplier or
     customer or any partner or joint venture partner nor has there been any
     material development relating to any such supplier, customer, partner, or
     joint venture partner that could reasonably be expected to have a Material
     Adverse Effect on Vista.
 
          (dd) BOOKS AND RECORDS. All books, records, and files of Vista, the
     General Partner and Vista Sub (including those pertaining to Vista's Oil
     and Gas Interests, wells, and other assets, those pertaining to the
     production, gathering, transportation, and sale of Hydrocarbons, and
     corporate, accounting, financial, and employee records) (i) have been
     prepared, assembled, and maintained in accordance with usual and customary
     policies and procedures and (ii) fairly and accurately reflect the
     ownership, use, enjoyment, and operation by Vista, the General Partner and
     Vista Sub of their respective assets.
 
                                      A-48
<PAGE>   202
 
          (ee) BROKERS. No broker, finder, investment banker, or other Person is
     or will be, in connection with the transactions contemplated by this
     Agreement, entitled to any brokerage, finder's, or other fee or
     compensation based on any arrangement or agreement made by or on behalf of
     Vista.
 
          (ff) DISCLOSURE AND INVESTIGATION. No representation or warranty of
     Vista contained in this Agreement contains any untrue statement of a
     material fact or omits to state a material fact necessary in order to make
     the statements contained herein not misleading. The Responsible Officers,
     individually or collectively, of Vista have conducted, or have caused the
     respective officers, employees, representatives, or agents of Vista, the
     General Partner and Vista Sub to conduct, such investigations and inquiries
     that they reasonably believe most likely to confirm the truth and accuracy
     of each of the representations and warranties contained in this Section.
 
     3.3 REPRESENTATIONS AND WARRANTIES OF NEWCO AND MERGER SUB. Newco, Merger
Sub and Vista, jointly and severally, represent and warrant to Midland as
follows:
 
          (a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of Newco and
     Merger Sub is a corporation duly organized, validly existing and in good
     standing under the laws of the its state of incorporation has all requisite
     corporate power and authority to own, lease, and operate its properties and
     to carry on its business as now being conducted and is duly qualified and
     in good standing to do business in each jurisdiction in which the business
     it is conducting, or the operation, ownership or leasing of its properties,
     makes such qualification necessary, other than in such jurisdictions where
     the failure so to qualify would not have a Material Adverse Effect on Newco
     or Merger Sub, as applicable. Merger Sub has heretofore delivered to
     Midland complete and correct copies of its Articles of Incorporation and
     Bylaws. Complete and correct copies of Newco's Certificate of Incorporation
     and Bylaws are attached as Exhibit 3.3(a) hereto.
 
          (b) CAPITAL STRUCTURE.
 
             (i) As of the date hereof, the authorized capital stock of Newco
        consists of (x) 50,000,000 shares of common stock, $0.01 par value,
        1,000 shares of which are issued and outstanding, all of which are owned
        of record and beneficially by Vista and (y) 10,000,000 shares of
        preferred stock, none of which is issued and outstanding. The
        outstanding share of capital stock of Newco is duly authorized, validly
        issued, fully paid and nonassessable and not subject to preemptive
        rights. Upon consummation of the Merger and the Vista Exchange, the
        shares of Newco Common Stock to be issued pursuant to the Merger and the
        Vista Exchange will be duly authorized, and upon their issuance in
        accordance with the terms of this Agreement, validly issued, fully paid
        and nonassessable, and will not have been issued in violation of any
        preemptive rights. Newco does not, and at the Effective Time, except as
        expressly contemplated by this Agreement, Newco will not, have
        outstanding any options, warrants, calls, rights (including preemptive
        rights), commitments or agreements to which Newco or any Subsidiary of
        Newco will be a party or by which it will be bound in any case
        obligating Newco or any Subsidiary of Newco to issue, deliver, sell,
        purchase, redeem, or acquire, or cause to be issued, delivered, sold,
        purchased, redeemed, or acquired, additional shares of capital stock or
        any Voting Debt or other voting securities of Newco or any Subsidiary of
        Newco, or obligating Newco or any Subsidiary of Newco to grant, extend,
        or enter into any such option, warrant, call, right, commitment, or
        agreement.
 
             (ii) The authorized capital stock of Merger Sub consists of 1,000
        shares of common stock, $0.01 par value, all of which are issued and
        outstanding and owned of record and beneficially by Newco. The
        outstanding share of capital stock of Merger Sub is duly authorized,
        validly issued, fully paid and nonassessable and not subject to
        preemptive rights. Merger Sub does not, and at the Effective Time,
        except as contemplated by this Agreement, will not, have outstanding any
        options, warrants, calls, rights (including preemptive rights),
        commitments or agreements to which Merger Sub will be a party or by
        which it will be bound in any case obligating Merger Sub to issue,
        deliver, sell, purchase, redeem or acquire, or cause to be issued,
        delivered, sold, purchased, redeemed or acquired, additional shares of
        capital stock or any Voting Debt or other voting securities of Merger
 
                                      A-49
<PAGE>   203
 
        Sub, or obligating Merger Sub to grant, extend, or enter into any such
        option, warrant, call, right, commitment, or agreement.
 
          (c) AUTHORITY; NO VIOLATIONS; CONSENTS AND APPROVALS. Each of Newco
     and Merger Sub has all requisite corporate power and authority to enter
     into this Agreement and to consummate the transactions contemplated by this
     Agreement. The execution and delivery of this Agreement by Newco and Merger
     Sub, and the consummation by each of them of the transactions contemplated
     by this Agreement, have been duly authorized by all necessary corporate
     action on the part of each of them, including all necessary shareholder
     approval. This Agreement has been duly executed and delivered by each of
     Newco and Merger Sub, and, assuming this Agreement constitutes the valid
     and binding obligation of Vista and Midland, constitutes a valid and
     binding obligation of each of Newco and Merger Sub enforceable against each
     of them in accordance with its terms, subject, as to enforceability, to
     bankruptcy, insolvency, reorganization, moratorium and other laws of
     general applicability relating to or affecting creditors' rights and to
     general principles of equity (regardless of whether such enforceability is
     considered in a proceeding in equity or at law). The execution and delivery
     of this Agreement do not, and the consummation of the transactions
     contemplated hereby and compliance with the provisions hereof will not,
     conflict with, or result in any violation of, or default (with or without
     notice or lapse of time, or both) under, or give rise to a right of
     termination, cancellation or acceleration of any material obligation or to
     the loss of a material benefit under, or give rise to a right of purchase
     under, result in the creation of any Lien upon any of the properties or
     assets of Newco or Merger Sub under, or otherwise result in a material
     detriment to Newco or Merger Sub under, any provision of the Certificate of
     Incorporation or Bylaws of Newco or Merger Sub. No consent, approval, order
     or authorization of, or registration, declaration or filing with, or permit
     from any Governmental Entity is required by or with respect to Newco or
     Merger Sub in connection with the execution and delivery of this Agreement
     by, or the consummation of the transactions contemplated in this Agreement
     by, Newco or Merger Sub, except for: (i) the filing by Newco of the S-4
     with the SEC with respect to the offer and sale of Newco Common Stock
     pursuant to the Midland Merger; (ii) the filing by Newco of a Form D Notice
     of Sale of Securities Pursuant to Regulation D with the SEC, with respect
     to the offer and sale of Newco Common Stock pursuant to the Vista Exchange,
     and such other compliance with the Securities Act and the rules and
     regulations thereunder, as may be required in connection with this
     Agreement and the transactions contemplated hereby; (iii) the filing by
     Merger Sub of the Midland Articles of Merger with the Texas Secretary of
     State; (iv) the filing by Newco of the Vista Certificate of Merger with the
     Delaware Secretary of State and the Vista Articles of Merger with the Texas
     Secretary of State; (v) filings with, and approval of, the AMEX or Nasdaq;
     and (vi) such filings and approvals as may be required by any applicable
     state securities, "blue sky" or takeover laws, or environmental laws.
 
          (d) NO PRIOR ACTIVITIES. Except for this Agreement and the agreements
     and transactions contemplated herein, neither Newco nor Merger (i) Sub has
     entered into any agreements or arrangements with any person or (ii) is
     subject to or bound by any obligation or undertaking. Except as
     contemplated by this Agreement and the agreements and transactions
     contemplated herein, neither Newco nor Merger Sub has engaged, directly or
     indirectly, in any business activities of any type or kind.
 
                                   ARTICLE 4
 
                                   COVENANTS
 
     4.1 CONDUCT OF BUSINESS BY VISTA AND MIDLAND PENDING CLOSING. Prior to the
Effective Time, (a) Midland agrees as to itself and its Subsidiaries that
(except as expressly contemplated or permitted by this Agreement, or to the
extent that Vista shall otherwise consent in writing) and (b)Vista agrees as to
itself and Vista Sub that (except as expressly contemplated or permitted by this
Agreement, or to the extent that Midland shall otherwise consent in writing)
(for purposes of this Section 4.1 Midland and Vista each being a "Party"):
 
          (i) A Party and its Subsidiaries shall carry on its businesses in the
     usual, regular and ordinary course in substantially the same manner as
     heretofore conducted and shall use all commercially
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<PAGE>   204
 
     reasonable efforts to preserve intact its present business organizations,
     keep available the services of its current officers and employees and
     endeavor to preserve its relationships with customers, suppliers and others
     having business dealings with it to the end that its goodwill and ongoing
     business shall not be impaired in any material respect at the Effective
     Time;
 
          (ii) A Party shall not, and it shall not permit its Subsidiaries to,
     engage in any line of business in which it is not engaged as of the date
     hereof;
 
          (iii) A Party shall not, and it shall not permit its Subsidiaries to,
     (A) amend its certificate or articles of incorporation or by-laws or other
     organizational documents, (B)'split, combine, or reclassify any of its
     outstanding capital stock, partnership interests, or other securities,
     (C)'declare, set aside, or pay any dividends or other distributions
     (whether payable in cash, property, or securities) with respect to its
     capital stock, (D) issue, sell, or agree to issue or sell any securities,
     including its capital stock or other equity securities, any rights,
     options, or warrants to acquire its equity securities, or securities
     convertible into or exchangeable or exercisable for its equity securities
     (other than shares of Midland Common Stock issued pursuant to the exercise
     of any Midland Stock Option or any Midland Stock Warrant outstanding as of
     the date hereof), (E) purchase, cancel, retire, redeem, or otherwise
     acquire any of its outstanding equity securities or other securities, (F)
     merge or consolidate with, or transfer all or substantially all of its
     assets to, another corporation or other business entity, (G) liquidate,
     wind-up, or dissolve (or suffer any liquidation or dissolution), or (H)
     enter into any contract, agreement, commitment, or arrangement with respect
     to any of the foregoing;
 
          (iv) A Party shall not, and it shall not permit its Subsidiaries to,
     (A) acquire any corporation, partnership, or other business entity or any
     interest therein (other than interests in joint ventures, joint operation
     or ownership arrangements, or tax partnerships acquired in the ordinary
     course of business), (B) sell, lease or sublease, transfer, or otherwise
     dispose of or mortgage, pledge, or otherwise encumber any Oil and Gas
     Interests that, individually or in the aggregate, had a value at the time
     of such sale, lease, sublease, transfer, or disposition of $50,000 or more
     or any other assets that, individually or in the aggregate, have a value at
     the time of such sale, lease, sublease, transfer, or disposition of $50,000
     or more (except that this clause shall not apply to the sale of
     Hydrocarbons in the ordinary course of business) (C) farm-out any Oil and
     Gas Interest of Midland or Vista, as applicable, or interest therein, (D)
     sell, transfer, or otherwise dispose of or mortgage, pledge, or otherwise
     encumber any securities of any other Person, (E) make any material loans,
     advances, or capital contributions to, or investments in, any Person (other
     than loans or advances in the ordinary course of business and consistent
     with past practices, (F) enter into any material agreement not terminable
     by such Party upon notice of 30 days or less and without penalty or other
     obligation (other than Hydrocarbon Agreements entered into in the ordinary
     course of business and consistent with past practices), (G) enter into any
     material transaction not in the ordinary course of business and not
     contemplated by this Agreement, (H) agree with any Person to limit or
     otherwise restrict in any manner the ability of such Party or any of its
     Subsidiaries to compete or otherwise conduct its business, or (I) enter
     into any contract, agreement, commitment, or arrangement with respect to
     any of the foregoing;
 
          (v) A Party shall not, and it shall not permit its Subsidiaries to,
     (A) incur any indebtedness for borrowed money or any other obligation or
     liability (other than current liabilities incurred in the ordinary course
     of business and consistent with past practices) in excess of its then
     current borrowing capacity under its existing senior bank facilities, (B)
     assume, endorse (other than endorsements of negotiable instruments in the
     ordinary course of business), guarantee, or otherwise become liable or
     responsible (whether directly, contingently, or otherwise) for the
     liabilities or obligations of any Person, or (C) enter into any contract,
     agreement, commitment, or arrangement with respect to any of the foregoing;
 
          (vi) A Party shall, and shall cause its Subsidiaries to, operate,
     maintain, and otherwise deal with the Oil and Gas Interests of such Party
     in accordance with good and prudent oil and gas field practices (including
     the making of all appropriate repairs, renewals, and replacements thereof)
     and in accordance with all applicable oil and gas leases and other
     contracts or agreements and all applicable laws, rules, and regulations;
 
                                      A-51
<PAGE>   205
 
          (vii) A Party shall not, and it shall not permit its Subsidiaries to,
     pay, agree to pay, or incur drilling or other capital expenditures with
     respect to oil and gas wells in excess of ten percent (10%) of its current
     drilling and capital expenditure budget as respectively set forth on
     Schedules 3.1(bb) and 3.2(bb) in the aggregate (in either case, other than
     expenditures necessary for the preservation or protection of the public
     safety or health under emergency circumstances);
 
          (viii) A Party shall not, and it shall not permit its Subsidiaries to,
     resign, or transfer or otherwise voluntarily relinquish any right it has as
     of the date of this Agreement, as operator of any Oil and Gas Interest;
 
          (ix) A Party shall not, and it shall not permit its Subsidiaries
     to,(A) enter into, or otherwise become liable or obligated under or
     pursuant to, (x) any employee benefit, pension, or other plan (whether or
     nor subject to ERISA), (y) any other stock option, stock purchase,
     incentive, or deferred compensation plans or arrangements or other fringe
     benefit plan, or (z) any consulting, employment, severance, termination, or
     similar agreement with any Person, or amend or extend any such plan,
     arrangement, or agreement, (B) hire any key employee, except for payments
     made pursuant to any plan, agreement, or arrangement disclosed on Schedule
     3.1(l) of the Midland Disclosure Schedule or Schedule 3.2(l) of the Vista
     Disclosure Schedule, as applicable, grant, or otherwise become liable for
     or obligated to pay, any severance or termination payments, bonuses, or
     increases in compensation or benefits (other than payments, bonuses, or
     increases that are mandated by the terms of written agreements existing as
     of the date hereof or that are paid in the ordinary course of business,
     consistent with past practices, and not individually or in the aggregate
     material in amount) to, or forgive any indebtedness of, any employee or
     consultant, or (C) enter into any contract, agreement, commitment, or
     arrangement to do any of the foregoing;
 
          (x) A Party shall, and shall cause its Subsidiaries to, keep and
     maintain accurate books, records, and accounts in accordance with GAAP;
 
          (xi) A Party shall not, and it shall not permit its Subsidiaries to,
     create, incur, assume, or permit to exist any Lien on any of its assets,
     except for Permitted Encumbrances;
 
          (xii) A Party shall, and it shall permit its Subsidiaries to, (A) pay
     all Taxes, assessments, and other governmental charges imposed upon any of
     its assets or with respect to its franchises, business, income, or assets
     before any penalty or interest accrues thereon, (B) pay all claims
     (including claims for labor, services, materials, and supplies) that have
     become due and payable and which by law have or may become a Lien upon any
     of its assets prior to the time when any penalty or fine shall be incurred
     with respect thereto or any such Lien shall be imposed thereon, and (C)
     comply in all material respects with the requirements of all applicable
     laws, rules, regulations, and orders of any Governmental Entity, obtain or
     take all Governmental Actions necessary in the operation of its business,
     and comply with and enforce the provisions of all Midland Material
     Agreements or Vista Material Agreements, as applicable, including paying
     when due all rentals, royalties, expenses, and other liabilities relating
     to its business or assets (provided, however, that such Party or any of its
     Subsidiaries may contest the imposition of any such Taxes, assessments, and
     other governmental charges, any such claim, or the requirements of any
     applicable law, rule, regulation, or order or any Midland Material
     Agreement or Vista Material Agreement, as applicable, if done so in good
     faith by appropriate proceedings, if adequate reserves are established in
     accordance with GAAP or as may be determined as sufficient by Midland's
     board of directors or the General Partner of Vista, as applicable, and if
     such contest does not involve a risk of a Material Adverse Effect on
     Midland or Vista, as applicable);
 
          (xiii) A Party shall, and it shall permit its Subsidiaries to,
     maintain in full force and effect the policies or binders of insurance
     described in Section 3.1(p) or Section'3.2(p), as applicable, and
     applicable to it;
 
          (xiv) A Party shall not, and it shall not permit its Subsidiaries to,
     directly or indirectly, enter into or permit to exist any transaction
     (including the purchase, sale, lease, or exchange of any assets, unless
     otherwise permitted hereby, or the rendering of any service) with any
     Affiliate of such Party (other than
 
                                      A-52
<PAGE>   206
 
     any of its Subsidiaries) on terms that are less favorable to such Party or
     any of its Subsidiaries, as the case may be, than those that could be
     obtained at the time from unaffiliated third parties;
 
          (xv) A Party shall not, and it shall not permit its Subsidiaries to,
     enter into, or otherwise be a party to, any, shareholder agreement, voting
     trust, or other agreement or understanding relating to the voting of any
     shares of the capital stock or other securities of such Party or any of its
     Subsidiaries (other than the Midland Voting Agreement); and
 
          (xvi) A Party shall, and it shall permit its Subsidiaries to, at all
     times preserve and keep in full force and effect its corporate existence
     and rights and franchises material to its performance under this Agreement.
 
     4.2 ACCESS TO ASSETS, PERSONNEL, AND INFORMATION. From the date hereof
until the Effective Time, Midland agrees as to itself and its Subsidiaries that,
and Vista agrees as to itself and its Subsidiaries that (for purposes of this
Section 4.2, Midland and Vista each being a "Requesting Party" or the "Providing
Party," as applicable):
 
          (a) A Providing Party shall afford to the Requesting Party and the
     Requesting Party's Representatives, at the Requesting Party's sole risk and
     expense, reasonable access to any of the assets, books and records
     (including files, Tax Returns, and accountants' workpapers), contracts,
     employees, representatives, and agents (including attorneys, accountants,
     and independent engineers) and facilities (including office facilities) of
     such Providing Party and its Subsidiaries, and shall upon request furnish
     promptly to the Requesting Party (at the Requesting Party's expense) a copy
     of any file, book or record, contract, or other written information
     concerning such Providing Party and its Subsidiaries (or any of their
     respective assets) that is within the possession or control of the
     Providing Party; provided, however, that a Providing Party shall not be
     obligated to provide access to or to furnish to a Requesting Party any
     information that the Providing Party is contractually obligated not to so
     disclose under a written confidentiality agreement; provided, further, that
     the Providing Party notifies the Requesting Party of such confidentiality
     agreement. If requested by the Requesting Party, however, the Providing
     Party shall use reasonable efforts to obtain the required consent to
     provide such information. During such period, the Providing Party will make
     available to a reasonable number of the Requesting Party's Representatives
     adequate office space and facilities at the principal office facility of
     such Providing Party and will permit a reasonable number of the Requesting
     Party's Representatives to observe, but not participate in, staff meetings
     at those facilities and other facilities of the Providing Party and its
     Subsidiaries.
 
          (b) As soon as practicable following a Requesting Party's request
     therefor, the Providing Party shall provide the Requesting Party with
     descriptions of all material assets (including such Providing Party's Oil
     and Gas Interests) sufficient to permit such Requesting Party to properly
     identify and evaluate such assets. Such descriptions shall include, with
     respect to the Providing Party's Oil and Gas Interests, an electronic (A)
     listing of all properties by name, well, and internal accounting and land
     number designation and (B) division of interest for all wells and
     properties by field or location and by well by field or location,
     identifiable by reference to the listing described in clause (i) above.
 
          (c) A Requesting Party and the Requesting Party's Representatives
     shall have the right to make an environmental and physical assessment of
     the assets of the Providing Party and its Subsidiaries and, in connection
     therewith, shall have the right to enter and inspect such assets and all
     buildings and improvements thereon, conduct soil and water tests and
     borings, and generally conduct such tests, examinations, investigations,
     and studies as such Requesting Party deems necessary, desirable, or
     appropriate for the preparation of engineering or other reports relating to
     such assets, their condition, and the presence of Hazardous Materials. The
     Providing Party shall be provided 24 hours' prior notice of the activities,
     and the Providing Party's Representatives shall have the right to witness
     all such tests and investigations. The Requesting Party shall (and shall
     cause the Requesting Party's Representatives to) keep any data or
     information acquired by any such examinations and the results of any
     analyses of such data and information strictly confidential and will not
     (and will cause the Requesting Party's Representative not to) disclose any
     of such data, information, or results to any Person unless otherwise
     required by
 
                                      A-53
<PAGE>   207
 
     law or regulation and then only after written notice to the Providing Party
     of the determination of the need for disclosure. The Requesting Party
     hereby indemnifies and holds the Providing Party and its Subsidiaries, and
     the Providing Party's Representatives harmless from and against any and all
     claims arising out of or as a result of the activities of the Requesting
     Party and the Requesting Party's Representatives on the assets of the
     Providing Party and its Subsidiaries in connection with conducting such
     environmental and physical assessment, except to the extent of and limited
     by the gross negligence or willful misconduct of the Providing Party and
     its Subsidiaries, or any of the Providing Party's Representatives or any
     failure of any of them to warn the Requesting Party and the Requesting
     Party's Representatives of known hazardous or dangerous conditions.
 
          (d) A Providing Party will fully and accurately disclose, and will
     cause each of its Subsidiaries to fully and accurately disclose, to the
     Requesting Party and the Requesting Party's Representatives all information
     that is (A) requested by the Requesting Party or any of the Requesting
     Party's Representatives, (B) known (now or hereafter) to the Providing
     Party or any of its Subsidiaries, and (C) relevant in any manner or degree
     to the value, ownership, use, operation, development, or transferability of
     the assets of the Providing Party or any of its Subsidiaries.
 
          (e) A Providing Party shall furnish to the Requesting Party, promptly
     upon receipt or filing (as the case may be), a copy of each communication
     between the Providing Party and the SEC after the date hereof and each
     report, schedule, registration statement, or other document filed by such
     party with the SEC after the date hereof.
 
          (f) A Providing Party will (and will cause its Subsidiaries and
     Representatives to) fully cooperate in all respects with the Requesting
     Party and the Requesting Party's Representatives in connection with the
     Requesting Party's examinations, evaluations, and investigations described
     in this Section, and the Providing Party will (and will cause the Providing
     Party's Representatives to) fully cooperate in all respects with the
     Requesting Party and the Requesting Party's Representatives in connection
     with the Requesting Party's examinations, evaluations, and investigations
     described in this Section.
 
          (g) A Requesting Party agrees that it will not (and will cause the
     Requesting Party's Representatives not to) use any information obtained
     pursuant to this Section for any purpose unrelated to the consummation of
     the transactions contemplated by this Agreement.
 
          (h)(i) A Requesting Party shall not, and shall not permit its
     Affiliates, officers, employees, directors, shareholders or representatives
     to, disclose to any third party (other than such parties' respective legal
     counsel, accountants and other advisors, all of whom shall be required to
     observe the provisions of this Section 4.2(h)) any information received
     from the Providing Party in the course of investigating, negotiating, and
     performing the transactions contemplated by this Agreement; provided,
     however, that this provision shall not be applicable to information which:
     (1) becomes generally available to the public other than as a result of a
     disclosure by the Requesting Party or such Requesting Party's Affiliates,
     officers, directors, employees, shareholders or representatives, (2) was
     available to the Requesting Party on a non-confidential basis prior to its
     disclosure to the Requesting Party by the Providing Party or its
     Affiliates, officers, directors, employees, shareholders or
     representatives, (3) becomes available to the Requesting Party on a
     non-confidential basis from a source other than the Providing Party or its
     Affiliates, officers, directors, employees, shareholders or representatives
     when such source is entitled, to the best of the Requesting Party's
     knowledge, to make the disclosure, or (4) was independently developed by
     the Requesting Party without reference to the information received from the
     Providing Party. If either party or any of their respective Affiliates,
     officers, directors, employees, shareholders or representatives is
     requested or required to disclose any information received by it or to
     disclose any such information which is required to be kept confidential by
     this Section 4.2(h), such party agrees to provide the Providing Party with
     prompt notice of each such request, to the extent practicable, so that the
     Providing Party may seek an appropriate protective order or waive
     compliance by the Requesting Party with the provisions of this Section
     4.2(h) or both. If, absent the entry of a protective order or the receipt
     of a waiver under this Agreement, the Requesting Party, its Affiliates,
     officers, directors, employees, shareholders or representatives are, in the
     opinion of its counsel, legally compelled
 
                                      A-54
<PAGE>   208
 
     to disclose such information, the Requesting Party may disclose such
     information to the persons and to the extent required without liability
     under this Agreement, and such party agrees to exercise its reasonable
     commercial efforts to obtain reasonable assurances that confidential
     treatment will be accorded any such information so furnished.
 
          (ii) Midland and its Subsidiaries have taken, and after the date
     hereof Midland will, and Midland will cause its Subsidiaries to, take all
     steps reasonably necessary to safeguard and maintain the secrecy and
     confidentiality of any of Midland's assets that constitute confidential or
     proprietary information of Midland or its Subsidiaries. From and after the
     date hereof, Midland shall not, and Midland shall cause its Subsidiaries to
     not, disclose to any Person (other than Vista and such authorized
     representatives of Vista as Vista shall identify to Midland in writing) any
     confidential or proprietary information with respect to the business of
     Midland except (i) as otherwise required by law, or (ii) prior to the
     Closing Date, in the ordinary course and consistent with the past business
     practices of Midland and its Subsidiaries;
 
    provided, however, that the provisions of this Section 4.2(h) shall not
    prohibit Midland or Vista from including such confidential or proprietary
    information in the S-4 or any private placement memorandum distributed in
    connection with the Exchange Agreements.
 
          (i) Notwithstanding anything in this Section to the contrary, (A)
     Midland shall not be obligated under the terms of this Section to disclose
     to Vista or Vista's Representatives, or grant Vista or the Vista's
     Representatives access to, information that is within Midland's possession
     or control but subject to a valid and binding confidentiality agreement
     with a third party without first obtaining the consent of such third party,
     and Midland, to the extent reasonably requested by Vista, will use its
     reasonable best efforts to obtain any such consent; and (B) Vista shall not
     be obligated under the terms of this Section to disclose to Midland or
     Midland's Representatives, or grant Midland or Midland's Representatives
     access to, information that is within Vista's possession or control but
     subject to a valid and binding confidentiality agreement with a third party
     without first obtaining the consent of such third party, and Vista, to the
     extent reasonably requested by Midland, will use its reasonable best
     efforts to obtain any such consent.
 
     4.3 NO SOLICITATION BY MIDLAND.
 
          (a) From and after the date hereof, Midland will not, and will not
     authorize or permit any of its Representatives to, directly or indirectly,
     solicit or encourage (including by way of providing information) any
     prospective acquiror or the invitation or submission of any inquiries,
     proposals or offers or any other efforts or attempts that constitute, or
     may reasonably be expected to lead to, any Midland Acquisition Proposal (as
     hereinafter defined) from any person or engage in any discussions or
     negotiations with respect thereto or otherwise cooperate with or assist or
     participate in, or facilitate any such proposal; provided, however, that,
     notwithstanding any other provision of this Agreement, Midland's Board of
     Directors may take and disclose to the shareholders of Midland a position
     contemplated by Rule 14e-2(a) promulgated under the Exchange Act. Midland
     shall immediately cease and cause to be terminated any existing
     solicitation, initiation, encouragement, activity, discussion or
     negotiation with any parties conducted heretofore by Midland or any of its
     Representatives with respect to any Midland Acquisition Proposal existing
     on the date hereof. Midland will promptly notify in writing Vista of any
     receipt by Midland or any of its Subsidiaries of a request from a third
     party for information concerning Midland (or any of its Subsidiaries) and
     its business, properties and assets or the receipt of any Midland
     Acquisition Proposal, including the identity of the person or group
     requesting such information or making such Midland Acquisition Proposal,
     and the material terms and conditions of any Midland Acquisition Proposal.
 
          (b) As used in this Agreement, "Midland Acquisition Proposal" means
     any proposal or offer, other than a proposal or offer by Vista or any of
     its Affiliates, for, or that could be reasonably expected to lead to, a
     tender or exchange offer, a merger, consolidation or other business
     combination involving Midland or any of its Subsidiaries or any proposal to
     acquire in any manner a substantial equity interest in, or any substantial
     portion of the assets of, Midland or any of its Subsidiaries.
                                      A-55
<PAGE>   209
 
     4.4 NO SOLICITATION BY VISTA.
 
          (a) From and after the date hereof, Vista will not, and will not
     authorize or permit any of its Representatives to, directly or indirectly,
     solicit or encourage (including by way of providing information) any
     prospective acquiror or the invitation or submission of any inquiries,
     proposals or offers or any other efforts or attempts that constitute, or
     may reasonably be expected to lead to, any Vista Acquisition Proposal (as
     hereinafter defined) from any person or engage in any discussions or
     negotiations with respect thereto or otherwise cooperate with or assist or
     participate in, or facilitate any such proposal; provided, however, that,
     notwithstanding any other provision of this Agreement, the General Partner
     may take and disclose to the limited partners of Vista a position
     contemplated by Rule 14e-2(a) promulgated under the Exchange Act. Vista
     shall immediately cease and cause to be terminated any existing
     solicitation, initiation, encouragement, activity, discussion or
     negotiation with any parties conducted heretofore by Vista or any of its
     Representatives with respect to any Vista Acquisition Proposal existing on
     the date hereof. Vista will promptly notify in writing Midland of any
     receipt by Vista or Vista Sub of a request from a third party for
     information concerning Vista or Vista Sub and its business, properties and
     assets or the receipt of any Vista Acquisition Proposal, including the
     identity of the person or group requesting such information or making such
     Vista Acquisition Proposal, and the material terms and conditions of any
     Vista Acquisition Proposal.
 
          (b) As used in this Agreement, "Vista Acquisition Proposal" means any
     proposal or offer, other than a proposal or offer by Midland or any of its
     Affiliates, for, or that could be reasonably expected to lead to, a tender
     or exchange offer, a merger, consolidation or other business combination
     involving Vista or Vista Sub or any proposal to acquire in any manner a
     substantial equity interest in, or any substantial portion of the assets
     of, Vista or Vista Sub
 
     4.5 MIDLAND SHAREHOLDERS MEETING.
 
          (a) Midland shall call a meeting of its shareholders to be held as
     promptly as practicable after the date hereof for the purpose of voting
     upon this Agreement and the Midland Merger. Subject to the fiduciary duties
     of the Board of Directors of Midland, Midland will (through its Board of
     Directors) recommend to its shareholders approval of such matters and not
     rescind such recommendation and shall use its reasonable best efforts to
     obtain approval and adoption of this Agreement and the Midland Merger by
     its shareholders. Midland shall use all commercially reasonable efforts to
     hold such meeting as soon as practicable after the date upon which the S-4
     becomes effective.
 
          (b) Notwithstanding clause (a) above, however, the following shall be
     conditions (which shall be for the benefit of both Midland and Vista) to
     the recommendation of the Board of Directors of Midland to the Midland
     shareholders, the holding of the Midland Meeting and the mailing of the
     Proxy Statement:
 
             (i) The fairness opinion described in Section 3.1(hh) shall have
        been confirmed in writing and shall not have been withdrawn, revoked, or
        modified;
 
             (ii) Midland shall have received an opinion (reasonably acceptable
        to Midland and Vista) from Arthur Andersen LLP (or such other firm as is
        reasonably acceptable to Midland and Vista) to the effect that (A) the
        Midland Merger will be treated for federal income tax purposes as a
        reorganization within the meaning of Section 368(a) of the Code, (B)
        each of Newco, Midland, and Merger Sub will be a party to such
        reorganization within the meaning of Section 368(b) of the Code, (C) no
        gain or loss will be recognized by Newco, Midland, or Merger Sub as a
        result of the Midland Merger, and (D) no gain or loss will be recognized
        by a shareholder of Midland as a result of the Midland Merger with
        respect to the shares of Midland Common Stock converted solely into
        shares of Newco Common Stock, and such opinion shall not have been
        withdrawn, revoked, or modified;
 
             (iii) Vista shall have received from Grant Thornton LLP, Midland's
        independent auditors, a letter, dated a date within two business days
        before the date on which the Proxy Statement is first
 
                                      A-56
<PAGE>   210
 
        mailed to the shareholders of Midland, with respect to the financial
        statements of Midland and other financial information about Midland
        included (or incorporated by reference) in the Proxy Statement, such
        letter to be in substantially the form described in Section 5.2(c); and
 
             (iv) Midland shall have received from Arthur Andersen LLP, Vista's
        independent certified public accountants, a letter dated a date within
        two business days before the date on which the Proxy Statement is first
        mailed to the shareholders of Midland, with respect to the Financial
        Statements of Vista and other financial information about Vista included
        in the Proxy Statement, such letter to be in substantially the form
        described in Section 5.3(d).
 
     4.6 S-4 AND PROXY STATEMENT.
 
          (a) Vista, Newco, and Midland shall cooperate and promptly prepare the
     S-4, and Vista shall cause Newco to file the S-4 with the SEC as soon as
     practicable after the date hereof. Vista and Newco shall use their
     reasonable best efforts, and Midland shall cooperate fully with Vista and
     Newco (including furnishing all information concerning Midland and the
     holders of Midland Common Stock as may be reasonably requested by Vista and
     Newco), to have the S-4 declared effective under the Securities Act as
     promptly as practicable after such filing. Newco shall use its reasonable
     best efforts, and Midland shall cooperate fully with Newco, to obtain all
     necessary state securities laws or "blue sky" permits, approvals, and
     registrations in connection with the issuance of Newco Common Stock
     pursuant to the Midland Merger.
 
          (b) Vista, Newco, and Midland will cause the S-4 (including the Proxy
     Statement), at the time it becomes effective under the Securities Act, to
     comply as to form in all material respects with the applicable provisions
     of the Securities Act, the Exchange Act, and the rules and regulations of
     the SEC thereunder.
 
          (c) Midland hereby covenants and agrees with Vista and Newco that (i)
     the S-4 (at the time it becomes effective under the Securities Act and at
     the Effective Time) will not contain an untrue statement of a material fact
     or omit to state a material fact required to be stated therein or necessary
     to make the statements therein not misleading (provided, however, that this
     clause shall apply only to information contained in the S-4 that was
     supplied by Midland specifically for inclusion therein) and (ii) the Proxy
     Statement (at the time it is first mailed to shareholders of Midland, at
     the time of the Midland Meeting, and at the Effective Time) will not
     contain an untrue statement of a material fact or omit to state a material
     fact required to be stated therein or necessary in order to make the
     statements therein, in light of the circumstances under which they are
     made, not misleading provided, however, that this clause shall not apply to
     any information contained in the Proxy Statement that was supplied by Vista
     or Newco specifically for inclusion therein). If, at any time prior to the
     Effective Time, any event with respect to Midland, or with respect to other
     information supplied by Midland specifically for inclusion in the S-4,
     occurs and such event is required to be described in an amendment to the
     S-4, Midland shall promptly notify Vista and Newco of such occurrence and
     shall cooperate with Newco in the preparation and filing of such amendment.
     If, at any time prior to the Effective Time, any event with respect to
     Midland, or with respect to other information included in the Proxy
     Statement, occurs and such event is required to be described in a
     supplement to the Proxy Statement, such event shall be so described and
     such supplement shall be promptly prepared, filed, and disseminated.
 
          (d) Vista and Newco hereby covenant and agree with Midland that (i)
     the S-4 (at the time it becomes effective under the Securities Act and at
     the Effective Time) will not contain an untrue statement of a material fact
     or omit to state a material fact required to be stated therein or necessary
     to make the statements therein not misleading (provided, however, that this
     clause shall not apply to any information contained in the S-4 that was
     supplied by Midland specifically for inclusion therein) and (ii) the Proxy
     Statement (at the time it is first mailed to shareholders of Midland, at
     the time of the Midland Meeting, and at the Effective Time) will not
     contain an untrue statement of a material fact or omit to state a material
     fact required to be stated therein or necessary in order to make the
     statements therein, in light of the circumstances under which they are
     made, not misleading (provided, however, that this clause shall apply only
     to information contained in the Proxy Statement that was supplied by Vista
     or
                                      A-57
<PAGE>   211
 
     Newco specifically for inclusion therein). If, at any time prior to the
     Effective Time, any event with respect to Vista or Newco, or with respect
     to other information included in the S-4, occurs and such event is required
     to be described in an amendment to the S-4, such event shall be so
     described and such amendment shall be promptly prepared and filed. If at
     any time prior to the Effective Time, any event with respect to Vista or
     Newco, or with respect to other information supplied by Vista or Newco
     specifically for inclusion in the Proxy Statement, occurs and such event is
     required to be described in a supplement to the Proxy Statement, Vista or
     Newco shall promptly notify Midland of such occurrence and shall cooperate
     with Midland in the preparation, filing, and dissemination of such
     supplement.
 
          (e) No amendment or supplement to the S-4 or the Proxy Statement will
     be filed or disseminated to the shareholders of Midland without the
     approval of Vista, Newco, and Midland. Newco shall advise Vista and
     Midland, promptly after it receives notice thereof, of the time when the
     S-4 has become effective under the Securities Act, the issuance of any stop
     order with respect to the S-4, the suspension of the qualification of the
     Newco Common Stock issuable in connection with the Merger and the Vista
     Exchange, for offering or sale in any jurisdiction, or any comments or
     requests for additional information by the SEC.
 
     4.7 STOCK EXCHANGE LISTING. Newco shall use its reasonable best efforts to
cause the shares of Newco Common Stock to be issued in the Midland Merger and
the Vista Exchange and upon exercise of the Midland Stock Options, Midland
Warrants or Midland Common Stock Warrants to be approved for listing on the AMEX
or Nasdaq, subject to official notice of issuance prior to the Closing Date.
 
     4.8 ADDITIONAL ARRANGEMENTS. Subject to the terms and conditions herein
provided, each of Midland, Vista and Newco will take, or cause to be taken, all
action and will do, or cause to be done, all things necessary, appropriate, or
desirable under applicable laws and regulations or under applicable governing
agreements to consummate and make effective the transactions contemplated by
this Agreement, including using its reasonable best efforts to obtain all
necessary waivers, consents, and approvals and effecting all necessary
registrations and filings. Each of Midland, Vista, and Newco will take, or cause
to be taken, all action or will do, or cause to be done, all things necessary,
appropriate, or desirable to cause the covenants and conditions applicable to
the transactions contemplated hereby to be performed or satisfied as soon as
practicable. In addition, if any Governmental Entity shall have issued any
order, decree, ruling, or injunction or taken any other action that would have
the effect of restraining, enjoining, or otherwise prohibiting or preventing the
consummation of the transactions contemplated hereby, each of Midland, Vista,
and Newco will use its reasonable best efforts to have such order, decree,
ruling, or injunction or other action declared ineffective as soon as
practicable.
 
     4.9 AGREEMENTS OF RULE 145 AFFILIATES. At least 30 days prior to the
Effective Time, Vista shall cause to be prepared and delivered to Midland, and
Midland shall cause to be prepared and delivered to Vista, a list identifying
all persons who, at the time of the Midland Meeting or the Vista Exchange, as
applicable, may be deemed to be "affiliates" of Midland or Vista, as that term
is used in paragraphs (c) and (d) of Rule 145 under the Securities Act (the
"Rule 145 Affiliates"). Vista shall use its reasonable best efforts to cause
each person who is identified as a Rule 145 Affiliate in such Vista list to
deliver to Vista and Newco, at or prior to the Effective Time, a written
agreement, in the form attached as Exhibit 4.9 hereto (the "Affiliate
Agreement"). Vista and the Rule 145 Affiliates shall be relieved of this
obligation under the foregoing provisions of this Section 4.9 and such written
agreements if, and to the extent, such Rule 145 is amended not to require such
written agreements or any of the covenants contained therein. Midland shall use
its reasonable best efforts to cause each person who is identified as a Rule 145
Affiliate in such Midland list to deliver to Midland and Newco, at or prior to
the Effective Time, an Affiliate Agreement. Midland and the Rule 145 Affiliates
shall be relieved of this obligation under the foregoing provisions of this
Section 4.9 and such written agreements if, and to the extent, such Rule 145 is
amended not to require such written agreements or any of the covenants contained
therein.
 
     4.10 PUBLIC ANNOUNCEMENTS. Prior to the Closing, the parties hereto will
consult with each other before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated by this
Agreement and shall not issue any press release or make any such public
statement prior
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<PAGE>   212
 
to obtaining the approval of the other parties hereto; provided, however, that
such consent shall not be required where such release or announcement is
required by applicable law or stock exchange rule; and provided further,
however, that any of the parties hereto may respond to inquiries by the press or
others regarding the transactions contemplated by this Agreement, so long as
such responses are consistent with such party's previously issued press
releases.
 
     4.11 NOTIFICATION OF CERTAIN MATTERS. Midland shall give prompt notice to
Vista of (a) any representation or warranty contained in Section 3.1 being
untrue or inaccurate when made, (b) the occurrence of any event or development
that would cause (or could reasonably be expected to cause) any representation
or warranty contained in Section 3.1 to be untrue or inaccurate on the Closing
Date, or (c) any failure of Midland to comply with or satisfy any covenant,
condition, or agreement to be complied with or satisfied by it hereunder. Vista
shall give prompt notice to Midland of (i) any representation or warranty
contained in Section 3.2 or 3.3 being untrue or inaccurate when made, (ii) the
occurrence of any event or development that would cause (or could reasonably be
expected to cause) any representation or warranty contained in Section 3.2 or to
be untrue or inaccurate on the Closing Date, or (iii) any failure of Vista,
Newco, or Merger Sub to comply with or satisfy any covenant, condition, or
agreement to be complied with or satisfied by it hereunder.
 
     4.12 PAYMENT OF EXPENSES. Each party hereto shall pay its own fees and
expenses (including fees and expenses of such parties' attorneys and
accountants) incident to preparing for, entering into, and carrying out this
Agreement and the consummation of the transactions contemplated hereby, whether
or not the Merger and the Vista Exchange shall be consummated, except that (a)
the fees and expenses (including fees and expenses of such parties' attorneys
and accountants) incurred by a party terminating this Agreement as provided
below in connection with this Agreement and the transactions contemplated herein
(including fees and expenses incurred in connection with the preparation and
filing of the S-4 with the SEC and the fees and expenses incurred in connection
with the printing, mailing and distribution of the Proxy Statement) shall be
reimbursed, borne and paid (i) if this Agreement is terminated by Midland
pursuant to Section 6.1(d), by Vista up to $300,000, and (ii) if this Agreement
is terminated by Vista pursuant to Section 6.1(c), by Midland up to $300,000 and
(b) if the Merger and the Vista Exchange are consummated all fees and expenses
(including fees and expenses of such parties' attorneys and accountants)
incident to preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby shall be borne and paid by
Newco. The provisions for reimbursement of fees and expenses in this Section
shall be in addition to and not a limitation upon the liabilities or obligations
of a party as a result of a termination pursuant to Section 6.1(c) or 6.1(d).
 
     4.13 INDEMNIFICATION.
 
          (a) From and after the Effective Time, the MM Surviving Corporation
     shall indemnify and hold harmless each person and shall advance expenses
     incurred by each person who is, has been at any time prior to the date
     hereof, or becomes prior to the Effective Time an officer or director of
     Midland or any of its Subsidiaries (collectively, the "Midland Indemnified
     Parties") against all losses, claims, damages, liabilities, costs or
     expenses (including attorney's fees), judgments, and amounts paid in
     settlement in connection with any claim, action, suit, proceeding, or
     investigation arising out of or pertaining to acts or omissions, or alleged
     acts or omissions, by him in his capacity as an officer or director of
     Midland or any of its Subsidiaries, which acts or omissions occurred prior
     to the Effective Time, to the full extent permitted by applicable law and
     by the Bylaws of Midland in effect prior to the Effective Time, which
     Bylaws make mandatory the indemnification of and advancement of expenses to
     all Midland Indemnified Parties to the full extent permitted by Article
     2.02-1 of the TBCA. The procedures associated with such indemnification
     shall be the same as those associated with the Midland Indemnified Parties'
     indemnification from Midland or any of its respective Subsidiaries, as the
     case may be, immediately prior to the Effective Time (provided, however,
     that the determination that such indemnification is permissible under
     Section B of Article 2.02-1 of the TBCA shall be made by special legal
     counsel selected by the Board of Directors as set forth in Section F(3) of
     Article 2.02-1, such selection to be subject to the consent of a majority
     of the Midland Indemnified Parties in such instance, which consent may not
     be unreasonably withheld; and, further provided, however, that the MM
     Surviving Corporation shall be under no
                                      A-59
<PAGE>   213
 
     obligation to deposit trust funds pursuant to any "change-in-control" or
     similar provisions). Midland hereby agrees that, from and after the date
     hereof until the Effective Time, it will not (and it will cause each of its
     Subsidiaries not to) amend, modify, or otherwise alter any contractual
     provision under which any Midland Indemnified Party is entitled to
     indemnification from Midland or any of its Subsidiaries, as the case may
     be, at the time of the execution of this Agreement. The provisions of this
     Section are intended to be for the benefit of, and shall be enforceable by,
     the parties hereto and each Midland Indemnified Party and their respective
     heirs and representatives.
 
          (b) From and after the Effective Time, Vista shall indemnify and hold
     harmless each person or entity, and shall advance expenses incurred by each
     person or entity who is, has been at any time prior to the date hereof, or
     becomes prior to the Effective Time an officer, director or partner of the
     General Partner, Vista or any of its Subsidiaries (collectively, the "Vista
     Indemnified Parties") against all losses, claims, damages, liabilities,
     costs or expenses (including attorney's fees), judgments, and amounts paid
     in settlement in connection with any claim, action, suit, proceeding, or
     investigation arising out of or pertaining to acts or omissions, or alleged
     acts or omissions, by such Vista Indemnified Party in his or its capacity
     as an officer, director, or partner of the General Partner, Vista or any of
     its Subsidiaries, which acts or omissions occurred prior to the Effective
     Time to the full extent permitted by applicable law. The procedures
     associated with such indemnification shall be the same as those associated
     with the Vista Indemnified Parties' indemnification from Vista or any of
     its Subsidiaries, as the case may be, immediately prior to the Effective
     Time (provided, however, that Vista shall be under no obligation to deposit
     trust funds pursuant to any "change-in-control" or similar provisions).
     Vista hereby agrees that, from and after the date hereof until the
     Effective Time, it will not (and it will cause each of its Subsidiaries not
     to) amend, modify, or otherwise alter any contractual provision under which
     any Vista Indemnified Party is entitled to indemnification from Vista or
     any of its Subsidiaries at the time of the execution of this Agreement. The
     provisions of this Section are intended to be for the benefit of, and shall
     be enforceable by, the parties hereto and each Vista Indemnified Party and
     their respective heirs and representatives.
 
     4.14 INDEMNIFICATION AGREEMENTS. Contemporaneously with the Closing, Newco
shall enter into indemnification agreements, substantially in the form attached
hereto as Exhibit 4.14(a)(each an "Indemnification Agreement"), with each of its
officers and directors and with each of the officers and directors listed on
Schedule 4.14 of the Midland Disclosure Schedule, substantially in the form
attached hereto as Exhibit 4.14(b). The provisions of this Section are intended
to be for the benefit of, and shall be enforceable by, the parties hereto and
each of the Persons named in this Section and their respective heirs and
representatives.
 
     4.15 REGISTRATION OF SHARES TO BE ISSUED PURSUANT TO STOCK
OPTIONS. Promptly after the Effective Time, Newco shall file with the SEC a
registration statement on Form S-8, effective as of the Effective Time, with
respect to the shares of Newco Common Stock to be issued upon exercise of the
Midland Stock Options. Newco shall use all reasonable efforts to maintain the
effectiveness of such registration statement (and maintain the current status of
the related prospectus) for so long as any Midland Stock Options remain
outstanding. The provisions of this Section are intended to be for the benefit
of, and shall be enforceable by, the parties hereto and each holder of a Midland
Stock Option and their respective heirs and representatives.
 
     4.16 REGISTRATION RIGHTS AGREEMENT. (a) Contemporaneously with the Closing,
Newco shall enter into a Registration Rights Agreement, substantially in the
form attached hereto as Exhibit 4.16(a) (the "Vista Registration Rights
Agreement"), with each of the shareholders of the General Partner and each of
the limited partners of Vista immediately prior to the Vista Exchange.
 
     (b) Contemporaneously with the Closing, Newco shall enter into a
Registration Rights Agreement, substantially in the form attached hereto as
Exhibit 4.16(b) (the "Midland Registration Rights Agreement") with each holder
of a Midland Exchange Stock Option.
 
     (c) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, the parties hereto and each of the Persons named or
described in this Section and their respective heirs and representatives.
 
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<PAGE>   214
 
     4.17 RESIGNATIONS OF OFFICERS AND DIRECTORS OF MIDLAND. Contemporaneously
with the execution and delivery of this Agreement, Midland shall obtain written
resignations from each of its officers and directors under which such persons
have resigned as an officer and/or director of Midland effective as of the
Effective Time. Contemporaneously with the execution and delivery of this
Agreement, Midland shall enter into a Termination Agreements, substantially in
the forms attached hereto as Exhibits 4.17(a) and 4.17(b) (each a "Termination
Agreement"), with Howard E. Ehler and Marilyn D. Wade, respectively.
 
     4.18 NEWCO LONG-TERM INCENTIVE PLAN. Prior to the Effective Time, but to
become effective immediately after the Effective Time, Newco shall approve and
adopt the Vista Energy Resources, Inc. 1998 Key Employee Stock Option Plan,
substantially in the form attached hereto as Exhibit 4.18 (the "Newco Long-Term
Incentive Plan").
 
     4.19 MIDLAND OPTION EXERCISE AGREEMENTS. Within 30 days from the date
hereof, Midland shall use its reasonable best efforts to cause each of the
holders of issued and outstanding Midland Stock Options (other than Midland
Exchange Stock Options) to execute an Option Exercise Agreement.
 
     4.20 TRANSACTIONS WITH AFFILIATES. For a period of one year following the
Effective Time, except for the grant of options pursuant to the terms of the
Newco Long-Term Incentive Plan and the issuance of shares of Newco Common Stock
underlying such options or the Newco Warrants, Newco shall not issue shares of
Newco Common Stock or securities exchangeable or exercisable for or convertible
into shares of Newco Common Stock to any person or entity that is an affiliate
of Newco for consideration that is less than fair market value of the securities
issued. For a transaction or series of related transactions involving value of
less than $1,000,000, the fair market value of the Newco Common Stock or other
security to be issued will be determined by the Board of Directors of Newco
after taking into consideration the historical trading price of Newco Common
Stock. For a transaction or series of related transactions involving value of
more than $1,000,000, the fair market value of the Newco Common Stock or other
security to be issued will be determined by the Board of Directors of Newco
after (i) taking into consideration the historical trading price of Newco Common
Stock and (ii) receipt of an opinion from a nationally recognized investment
banking firm that such transaction is fair, from a financial point of view, to
Newco.
 
                                   ARTICLE 5
 
                                   CONDITIONS
 
     5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER AND THE
VISTA EXCHANGE. The respective obligations of each party to effect the Merger
and the Vista Exchange shall be subject to the satisfaction, at or prior to the
Closing Date, of the following conditions:
 
          (a) SHAREHOLDER APPROVAL. The Midland Merger and this Agreement shall
     have been duly and validly approved and adopted by the shareholders of
     Midland;
 
          (b) FAIRNESS OPINION. The fairness opinion described in Section
     3.1(hh) shall have been confirmed in writing and shall not have been
     withdrawn, revoked, or modified;
 
          (c) TAX OPINION. The tax opinion described in Section 4.5(b)(ii) shall
     not have been withdrawn, revoked, or modified;
 
          (d) EXCHANGE LISTING. The shares of Newco Common Stock issuable
     pursuant to the Midland Merger and the Vista Exchange and the shares of
     Newco Common Stock to be issued upon exercise of the Midland Stock Options
     and the Midland Warrants shall have been authorized for listing on the AMEX
     or Nasdaq, subject to official notice of issuance;
 
          (e) OTHER APPROVALS. All consents, approvals, permits, and
     authorizations required to be obtained prior to the Effective Time from,
     any Governmental Entity in connection with the execution and delivery of
     this Agreement and the consummation of the transactions contemplated hereby
     by Midland, Vista, Newco, and Merger Sub shall have been made or obtained
     (as the case may be), except where the failure to obtain such consents,
     approvals, permits, and authorizations would not be reasonably likely to
     result in
 
                                      A-61
<PAGE>   215
 
     a Material Adverse Effect on Newco (assuming the Midland Merger and the
     Vista Exchange have taken place) or to materially adversely affect the
     consummation of the Midland Merger and the Vista Exchange;
 
          (f) SECURITIES LAW MATTERS. The S-4 shall have become effective under
     the Securities Act and shall be effective at the Effective Time, and no
     stop order suspending such effectiveness shall have been issued, no action,
     suit, proceeding, or investigation by the SEC to suspend such effectiveness
     shall have been initiated and be continuing, and all necessary approvals
     under state securities laws relating to the issuance or trading of the
     Newco Common Stock to be issued in the Midland Merger and the Vista
     Exchange shall have been received; and
 
          (g) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
     preliminary or permanent injunction, or other order issued by any court of
     competent jurisdiction or other legal restraint or prohibition preventing
     the consummation of the Midland Merger and the Vista Exchange shall be in
     effect; provided, however, that prior to invoking this condition, each
     party shall have complied fully with its obligations under Section 4.8 and,
     in addition, shall use all reasonable efforts to have any such decree,
     ruling, injunction, or order vacated, except as otherwise contemplated by
     this Agreement.
 
     5.2 CONDITIONS OF OBLIGATIONS OF VISTA, NEWCO, AND MERGER SUB. The
obligations of Vista and Newco to effect the Vista Exchange are subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by Vista.
 
          (a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
     warranties of Midland set forth in Section 3.1 shall be true and correct in
     all material respects (provided that any representation or warranty of
     Midland contained herein that is qualified by a materiality standard or a
     Material Adverse Effect qualification shall not be further qualified
     hereby) as of the date of this Agreement and (except to the extent such
     representations and warranties speak as of an earlier date) as of the
     Closing Date as though made on and as of the Closing Date, and Vista shall
     have received a certificate signed on behalf of Midland by the chief
     executive officer and the chief financial officer of Midland to such
     effect;
 
          (b) PERFORMANCE OF COVENANTS AND AGREEMENTS. Midland shall have
     performed in all material respects all covenants and agreements required to
     be performed by it under this Agreement at or prior to the Closing Date,
     and Vista shall have received a certificate signed on behalf of Midland by
     the chief executive officer and the chief financial officer of Midland to
     such effect;
 
          (c) COMFORT LETTER. Vista shall have received a letter from Grant
     Thornton LLP, Midland's independent auditors, of the kind contemplated by
     the Statement of Auditing Standards with respect to Letters to Underwriters
     promulgated by the American Institute of Certified Public Accountants,
     dated as of a date within two business days prior to the Closing Date, in
     form and substance reasonably satisfactory to Vista, in connection with the
     procedures undertaken by them with respect to the financial statements of
     Midland and its consolidated Subsidiaries included (or incorporated by
     reference) in the S-4 and the other matters contemplated by such Statement
     of Auditing Standards and customarily included in similar letters relating
     to transactions similar to the Midland Merger;
 
          (d) DISSENTERS' RIGHTS. The aggregate number of shares of capital
     stock of Midland, which are entitled to vote at the Midland Meeting and are
     held of record by a Person or Persons who exercise their right, if any,
     under the TBCA to dissent from the proposed Midland Merger, shall not
     exceed five percent (5%) of the total number of issued and outstanding
     shares of capital stock of Midland held of record as of the record date for
     the Midland Meeting and entitled to vote on the proposed Midland Merger at
     such meeting.
 
          (e) LEGAL OPINION. At the Closing, Vista shall have received from Law
     Snakard & Gambill, Midland's legal counsel, an opinion dated the Closing
     Date in substantially the form set forth as Exhibit 5.2(e) hereto.
 
          (f) NO ADVERSE CHANGE. From the date of this Agreement through the
     Closing, there shall not have occurred any change in the condition
     (financial or otherwise), operations, or business of Midland
 
                                      A-62
<PAGE>   216
 
     and its Subsidiaries, taken as a whole, that would have or would be
     reasonably likely to have a Material Adverse Effect on Midland (other than
     changes, including changes in commodity prices, generally prevalent
     affecting the oil and gas industry).
 
          (g) MIDLAND OPTION EXERCISE AGREEMENTS. Midland shall have received an
     Option Exercise Agreement executed by each of the holders of issued and
     outstanding Midland Stock Options who is an executive officer or director
     of Midland.
 
     5.3 CONDITIONS OF OBLIGATIONS OF MIDLAND. The obligation of Midland to
effect the Midland Merger is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by Midland:
 
          (a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
     warranties of Vista, Newco, and Merger Sub set forth in Sections 3.2 and
     3.3 shall be true and correct in all material respects (provided that any
     representation or warranty of Vista, Newco, or Merger Sub contained herein
     that is qualified by a materiality standard or a Material Adverse Effect
     qualification shall not be further qualified hereby) as of the date of this
     Agreement and (except to the extent such representations and warranties
     speak as of an earlier date) as of the Closing Date as though made on and
     as of the Closing Date, and Midland shall have received a certificate
     signed on behalf of Vista by the General Partner to such effect;
 
          (b) PERFORMANCE OF COVENANTS AND AGREEMENTS. Vista, Newco, and Merger
     Sub shall have performed in all material respects all covenants and
     agreements required to be performed by them under this Agreement at or
     prior to the Closing Date, and Midland shall have received a certificate
     signed on behalf of Vista by the General Partner to such effect;
 
          (c) LEGAL OPINION. At the Closing, Midland shall have received from
     Vinson & Elkins L.L.P., Vista's legal counsel, an opinion dated the Closing
     Date in substantially the form set forth as Exhibit 5.3(c) hereto.
 
          (d) COMFORT LETTER. Midland shall have received a letter from Arthur
     Andersen LLP, Vista's independent certified public accountants, of the kind
     contemplated by the Statement of Auditing Standards with respect to Letters
     to Underwriters promulgated by the American Institute of Certified Public
     Accountants, dated as of a date within two business days prior to the
     Closing Date, in form and substance reasonably satisfactory to Midland, in
     connection with the procedures undertaken by them with respect to the
     financial statements of Vista and its consolidated Subsidiaries included in
     the S-4 and the other matters contemplated by such Statement of Auditing
     Standards and customarily included in similar letters relating to
     transactions similar to the Midland Merger; and
 
          (e) NO ADVERSE CHANGE. From the date of this Agreement through the
     Closing, there shall not have occurred any change in the condition
     (financial or otherwise), operations, or business of Vista and its
     Subsidiaries, taken as a whole, that would have or would be reasonably
     likely to have a Material Adverse Effect on Vista (other than changes,
     including changes in commodity prices, generally prevalent affecting the
     oil and gas industry).
 
          (f) EXCHANGE AGREEMENTS. Newco shall have received an Exchange
     Agreement from each holder of GP Common Stock and each holder of a
     Partnership Interest.
 
                                      A-63
<PAGE>   217
 
                                   ARTICLE 6
 
                                  TERMINATION
 
     6.1 TERMINATION RIGHTS. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, whether before or after
approval of the Merger and this Agreement by the shareholders of Midland and the
partners of Vista:
 
          (a) By mutual written consent of Vista and Midland;
 
          (b) By either Midland or Vista if (i) the Merger have not been
     consummated by October 30, 1998 (provided, however, that the right to
     terminate this Agreement pursuant to this clause (i) shall not be available
     to any party whose breach of any representation or warranty or failure to
     perform any covenant or agreement under this Agreement has been the cause
     of or resulted in the failure of the Merger to occur on or before such
     date), (ii) any Governmental Entity shall have issued an order, decree, or
     ruling or taken any other action permanently restraining, enjoining, or
     otherwise prohibiting the Merger and such order, decree, ruling, or other
     action shall have become final and nonappealable (provided, however, that
     the right to terminate this Agreement pursuant to this clause (ii) shall
     not be available to any party until such party has used all reasonable
     efforts to remove such injunction, order, or decree), or (iii) any required
     approval of the shareholders or partners of a party, as applicable, shall
     not have been obtained by reason of the failure to obtain the required vote
     upon a vote held at a duly held meeting of shareholders of Midland, or at
     any adjournment thereof (provided, however, that Midland shall not have the
     right to terminate this Agreement pursuant to this clause (iii) if Vista
     then has the right to terminate this Agreement pursuant to subsection (e)
     of this Section);
 
          (c) By Vista if (i) there has been a breach of the representations and
     warranties made by Midland in Section 3.1 of this Agreement or (ii) Midland
     has failed to comply in any material respect with any of its covenants or
     agreements contained in this Agreement and such failure has not been, or
     cannot be, cured within a reasonable time after notice and demand for cure
     thereof which period in no event shall extend beyond October 30, 1998.
 
          (d) By Midland if (i) there has been a breach of the representations
     and warranties made by Vista, Newco, or Merger Sub in Sections 3.2 and 3.3
     of this Agreement, (ii) Vista, Newco, or Merger Sub has failed to comply in
     any material respect with any of its covenants or agreements contained in
     this Agreement, and, in either such case, such breach or failure has not
     been, or cannot be, cured within a reasonable time after notice and a
     demand for cure thereof which period in no event shall extend beyond
     October 30, 1998;
 
          (e) By Vista if (i) the Board of Directors of Midland shall have
     failed to recommend adoption of the Midland Merger and this Agreement at
     the time the Proxy Statement is first mailed to shareholders of Midland or
     shall have amended or withdrawn any such recommendation and such
     recommendation is not reinstated in its prior form within five business
     days after such amendment or withdrawal or (ii) (x) the shareholders of
     Midland fail to duly and validly adopt the Midland Merger and this
     Agreement at the Midland Meeting or any adjournment thereof or (y) the
     Midland Meeting does not occur for any reason (other than as a result of a
     breach of this Agreement by Vista) prior to October 29, 1998 (and if this
     Agreement is terminated pursuant to this subsection, Vista shall have the
     right to receive from Midland, and Midland agrees to pay to Vista, an
     amount of cash equal to $400,000, which amount shall be inclusive of
     expenses as set forth in Section 4.12);
 
          (f) By Vista after June 22, 1998, if on such date Midland shall not
     have received an Option Exercise Agreement executed by each of the holders
     of issued and outstanding Midland Stock Options who is an executive officer
     of director of Midland;
 
          (g) By Midland after June 22, 1998, if on such date Vista shall not
     have received an Exchange Agreement from each holder of GP Common Stock and
     each holder of a Partnership Interest.
 
                                      A-64
<PAGE>   218
 
     6.2 EFFECT OF TERMINATION. If this Agreement is terminated by either
Midland or Vista pursuant to the provisions of Section 6.1, this Agreement shall
forthwith become void except for, and there shall be no further obligation on
the part of any party hereto or its respective Affiliates, directors, officers,
partners, or shareholders except pursuant to, the provisions of Sections 4.12
and 6.1(e), and Article 7; provided, however, that a termination of this
Agreement shall not relieve any party hereto from any liability for damages
(excluding punitive damages which each party hereby waives the right to recover
hereunder) incurred as a result of a breach by such party of its
representations, warranties, covenants, agreements, or other obligations
hereunder occurring prior to such termination.
 
                                   ARTICLE 7
 
                                 MISCELLANEOUS
 
     7.1 AMENDMENT. This Agreement may be amended by the parties hereto at any
time before or after approval of the Midland Merger and this Agreement by the
shareholders of Midland and the Vista Exchange by the partners of Vista;
provided, however, that after any such approval, no amendment shall be made that
by law requires further approval by such shareholders or partners without such
further approval. This Agreement may not be amended except by a written
instrument signed on behalf of each of the parties hereto.
 
     7.2 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, and (c) waive performance
of any of the covenants or agreements, or satisfaction of any of the conditions,
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party.
 
     7.3 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS, AND
AGREEMENTS. All representations, warranties, covenants, and agreements contained
in this Agreement or in any instrument delivered pursuant to this Agreement
shall be deemed to the extent expressly provided herein to be conditions to the
Midland Merger, and none of such representations, warranties, covenants, and
agreements shall survive the consummation of the Merger (except for the
agreements contained in Article 2, in Sections 4.12, 4.13, 4.14, 4.15, 4.16,
4.17, 4.18 and 4.20, and in this Article.
 
     7.4 NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and either delivered personally, by facsimile
transmission, or by registered or certified mail (postage prepaid and return
receipt requested) and shall be deemed given when received (or, if mailed, five
business days after the date of mailing) at the following addresses or facsimile
transmission numbers (or at such other address or facsimile transmission number
for a party as shall be specified by like notice):
 
        (a) If to Vista, Newco, or Merger Sub:
 
          Vista Energy Resources, Inc.
          550 West Texas Avenue, Suite 700
          Midland, Texas 79701
          Attention: C. Randall Hill
          Facsimile No.: (915) 688-0589
 
          with a copy to:
 
          Vinson & Elkins L.L.P.
          3700 Trammell Crow Center
          2001 Ross Avenue
          Dallas, Texas 75201-2975
          Attention: A. Winston Oxley
          Facsimile No.: (214) 220-7716
 
                                      A-65
<PAGE>   219
 
          (b) If to Midland:
 
           616 FM 1960 West
           Suite 600
           Houston, Texas 77090-3027
           Attention: Wayne M. Whitaker
           Facsimile No.: (281) 587-9052
 
           with a copy to:
 
           Law, Snakard & Gambill
           500 Throckmorton, Suite 3200
           Fort Worth, Texas 76102
           Attention: Vernon E. Rew, Jr.
           Facsimile No.: (817) 332-7473
 
     7.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
 
     7.6 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
 
     7.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(together with the documents and instruments delivered by the parties in
connection with this Agreement) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and (b) except as
provided in Section 4.13, is solely for the benefit of the parties hereto and
their respective successors, legal representatives, and assigns and does not
confer on any other person any rights or remedies hereunder.
 
     7.8 APPLICABLE LAW. This Agreement shall be governed in all respects,
including validity, interpretation, and effect, by the laws of the State of
Texas regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
 
     7.9 NO REMEDY IN CERTAIN CIRCUMSTANCES. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or part
hereof to be null, void, or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality, and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby, unless the foregoing inconsistent action or the failure to
take an action constitutes a material breach of this Agreement or makes this
Agreement impossible to perform, in which case this Agreement shall terminate
pursuant to Article 6. Except as otherwise contemplated by this Agreement, to
the extent that a party hereto took an action inconsistent herewith or failed to
take action consistent herewith or required hereby pursuant to an order or
judgment of a court or other competent Governmental Entity, such party shall not
incur any liability or obligation unless such party breached its obligations
hereunder or did not in good faith seek to resist or object to the imposition or
entering of such order or judgment.
 
     7.10 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with the terms hereof or was otherwise
breached. Accordingly, the parties hereto hereby agree that each party hereto
shall be entitled to an injunction to prevent a breach of this Agreement and
shall be entitled to specific performance of the terms and provisions hereof in
addition to any other remedy at law or in equity.
 
                                      A-66
<PAGE>   220
 
     7.11 ASSIGNMENT. Nether this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that Merger Sub may assign, in its sole discretion, any or all
of its rights, interests, and obligations hereunder to any newly-formed direct
or indirect wholly-owned corporate subsidiary of Newco. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by the parties and their respective successors and assigns.
 
     7.12 WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants, or agreements
contained in this Agreement. The waiver by any party hereto of a breach of any
provision hereof shall not operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provisions hereof.
 
     7.13 CERTAIN PROVISIONS INAPPLICABLE. The parties hereby acknowledge and
represent that the Board of Directors of each corporate party hereto has
approved the terms of this Agreement and the consummation of the transactions
contemplated herein and that such approval is sufficient to render the
provisions of Section 203 of the DGCL and Section 13.03 of the TBCA inapplicable
to the transactions contemplated herein.
 
     7.14 TERMINATION OF LETTER OF INTENT AND CONFIDENTIALITY AGREEMENT. The
parties hereby acknowledge and agree that the Letter of Intent dated January 12,
1998 between Vista and Midland and the Confidentiality Agreement dated November
18, 1997 between Vista and Midland are hereby terminated and are of no further
force and effect.
 
                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
 
                                      A-67
<PAGE>   221
 
     IN WITNESS WHEREOF. The parties have caused this Agreement to be executed
by their duly authorized representatives, effective as of the date first written
above.
 
                                            VISTA RESOURCES PARTNERS, L.P.
 
                                            By: Vista Resources I, Inc., its
                                            General Partner
 
                                            By:
                                              ----------------------------------
                                            Name: C. Randall Hill
                                            Title: Chairman of the Board and
                                                   Chief Executive Officer
 
                                            MIDLAND RESOURCES, INC.
 
                                            By:
                                              ----------------------------------
                                            Name:
                                            ------------------------------------
                                            Title:
                                            ------------------------------------
 
                                            VISTA ENERGY RESOURCES, INC.
 
                                            By:
                                              ----------------------------------
                                            Name:
                                            ------------------------------------
                                            Title:
                                            ------------------------------------
 
                                            MIDLAND ACQUISITION CO.
 
                                            By:
                                              ----------------------------------
                                            Name:
                                            ------------------------------------
                                            Title:
                                            ------------------------------------
 
                      [SIGNATURE PAGE TO MERGER AGREEMENT]
 
                                      A-68
<PAGE>   222
 
                                                                      APPENDIX B
 
                            VISTA EXCHANGE AGREEMENT
 
     THIS VISTA EXCHANGE AGREEMENT (this "Agreement") dated as of             ,
1998 is entered into by and among Vista Energy Resources, Inc., a Delaware
corporation (including its successors, the "Company"), and the security holders
(the "Holders") listed on the signature page hereof, who hold (a) shares of
common stock, $.01 par value per share (the "GP Common Stock") of Vista
Resources I, Inc. (the "General Partner"), (b) limited partner interests in
Vista Resources Partners, L.P. ("Vista") (each 1% limited partner interest in
Vista calculated based on the sharing ratio thereof, is referred to herein as a
"Partnership Interest") or (c) shares of GP Common Stock and Partnership
Interest, in each case as shown on Schedule I hereto.
 
                                    RECITALS
 
     A. Vista, and Midland Resources, Inc., a Texas corporation ("Midland"),
have determined to engage in a strategic business combination. Capitalized terms
used but not defined herein shall have the meanings given such terms in the
Merger Agreement.
 
     B. In furtherance thereof, the General Partner has approved the Agreement
and Plan of Merger (the "Merger Agreement") among Vista, Midland, the Company
and Midland Merger Co., a Texas corporation and a direct wholly-owned subsidiary
of the Company ("Merger Sub").
 
     C. In furtherance thereof, the General Partner has approved the exchange
(the "Vista GP Exchange") of shares of the Company's Common Stock, par value
$.01 per share ("Common Stock"), and warrants that are exercisable for shares of
Common Stock ("Newco Warrants") for all of the outstanding shares of GP Common
Stock and the exchange (the "Vista LP Exchange" and, together with the Vista GP
Exchange, the "Vista Exchange") of shares of Common Stock and Newco Warrants for
all of the outstanding Partnership Interest.
 
     D. In furtherance thereof, the respective Boards of Directors of Merger Sub
and Midland have approved Merger Agreement and the merger of Merger Sub with and
into Midland, with Midland being the surviving corporation (the "Midland
Merger").
 
     E. The undersigned desires, concurrently with the Effective Time, to
exchange its or his shares of GP Common Stock, Partnership Interest or both
shares of GP Common Stock and Partnership Interest, as the case may be, for
shares of Common Stock and Newco Warrants as provided herein.
 
     NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
 
                                   ARTICLE 1
 
                                 THE EXCHANGES
 
     1.1 EXCHANGE AGREEMENTS. At the Effective Time, without any action on the
part of any party hereto, each issued and outstanding share of GP Common Stock
held by a Holder shall be exchanged for a number of shares of Common Stock equal
to 1.60089817 (the "Vista GP Conversion Stock Number") and a Newco Warrant that
is exercisable for a number of shares of Common Stock equal to 1.16511028 (the
"Vista GP Conversion Warrant Number") and each issued and outstanding
Partnership Interest that is held by a Holder shall be exchanged for a number of
shares of Common Stock equal to 117,674.06 (the "Vista LP Conversion Stock
Number") and a Newco Warrant that is exercisable for a number of shares of
Common Stock equal to 85,641.46 (the "Vista LP Conversion Warrant Number"). Any
fractional Partnership Interest shall be likewise exchanged on a pro rata basis.
As provided in the Merger Agreement, each of the Vista GP Conversion Stock
Number, the Vista LP Conversion Stock Number, the Vista GP Conversion Warrant
                                       B-1
<PAGE>   223
 
Number and the Vista LP Conversion Warrant Number shall be increased or
decreased, as necessary, immediately prior to the Effective Time such that (i)
the aggregate percentage of shares of Common Stock that the Holders of GP Common
Stock and the Holders of Partnership Interests shall be entitled to receive at
the Effective Time shall equal 72.5% of the shares of Common Stock that will be
outstanding calculated on a Fully Diluted Basis immediately after the Effective
Time and (ii) the aggregate percentage of shares of Newco Common Stock issuable
upon exercise of the Newco Warrants that the Holders of GP Common Stock and the
Holders of Partnership Interests shall be entitled to receive shall equal 72.5%
of the shares of Common Stock that is issuable upon the exercise of (x) all of
the Midland Warrants outstanding immediately after the Effective Time, (y) all
Newco Warrants issued pursuant to the Midland Exchange and (z) all Newco
Warrants issuable pursuant to the Vista Exchange. Subject to Section 1.3, any
such adjustments to the Vista GP Conversion Stock Number, the Vista LP
Conversion Stock Number, the Vista GP Conversion Warrant Number or the Vista LP
Conversion Warrant Number shall be made not later than two business days prior
to the Closing and shall be determined by Newco's independent auditors Arthur
Andersen LLP.
 
     1.2 EXCHANGE OF GP COMMON STOCK CERTIFICATES.
 
          (a) EXCHANGE FUND. Immediately after the Effective Time, the Company
     shall deposit with the Exchange Agent, for the benefit of the Holders of GP
     Common Stock and Partnership Interest and for exchange in accordance with
     this Agreement, (i) certificates representing the shares of Common Stock
     and (ii) certificates representing the Newco Warrants, in each case to be
     issued in exchange for shares of GP Common Stock and Partnership Interest
     pursuant to Section 1.1. Such shares of Common Stock and Newco Warrants,
     together with any dividends or distributions with respect thereto (as
     provided in subsection (c) of this Section 1.2), are referred to herein as
     the "Exchange Fund." The Exchange Agent, pursuant to irrevocable
     instructions consistent with the terms of this Agreement, shall deliver the
     Common Stock and Newco Warrants to be issued pursuant to Section 1.1 out of
     the Exchange Fund, and the Exchange Fund shall not be used for any other
     purpose. The Exchange Agent shall not be entitled to vote or exercise any
     rights of ownership with respect to the Common Stock held by it from time
     to time hereunder, except that it shall receive and hold all dividends or
     other distributions paid or distributed with respect thereto for the
     account of any Person thereto.
 
          (b) EXCHANGE PROCEDURES FOR GP COMMON STOCK.
 
             (i) As soon as reasonably practicable after the Effective Time, the
        Company shall cause the Exchange Agent to mail to each holder of record
        of a certificate representing shares of GP Common Stock (a "GP
        Certificate") that, immediately prior to the Effective Time, represented
             shares of GP Common Stock converted into Common Stock and Newco
        Warrants pursuant to Section 1.1 a letter of transmittal to be used to
        effect the exchange of such GP Certificate for a certificate
        representing shares of Common Stock (a "Company Certificate") and a
        certificate representing a Newco Warrant (a "Warrant Certificate"),
        along with instructions for using such letter of transmittal to effect
        such exchange. The letter of transmittal (or the instructions thereto)
        shall specify that delivery of any GP Certificate shall be effected, and
        risk of loss and title thereto shall pass, only upon delivery of such GP
        Certificate to the Exchange Agent and shall be in such form and have
        such other provisions as the Company may reasonably specify.
 
             (ii) Upon delivery to the Exchange Agent of, together with the
        surrender of a GP Certificate, if applicable, a duly completed and
        executed letter of transmittal and any other required documents, (A) the
        Holder of such GP Certificate shall be entitled to receive in exchange
        therefor (x) a Company Certificate representing the number of shares of
        Common Stock that such Holder has the right to receive pursuant to
        Section 1.1 and any unpaid dividends and distributions that such Holder
        has the right to receive pursuant to subsection (d) of this Section
        (after giving effect to any required withholding of taxes) and (y) a
        Warrant Certificate exercisable for a number of shares of Common Stock
        that such Holder has the right to receive pursuant to Section 1.1, and
        (B) the GP Certificate, if any, so surrendered shall forthwith be
        cancelled. No interest shall be paid or accrued on unpaid dividends and
        distributions, if any, payable to Holders of GP Certificates.
 
                                       B-2
<PAGE>   224
 
             (iii) In the event of a transfer of ownership of GP Common Stock
        that is not registered in the transfer records of the General Partner, a
        Company Certificate and Warrant Certificate representing the appropriate
        number of shares of Common Stock may be issued to a transferee if the GP
        Certificate representing such shares of GP Common Stock is presented to
        the Exchange Agent accompanied by all documents required to evidence and
        effect such transfer and to evidence that any applicable stock transfer
        taxes have been paid.
 
             (iv) Until surrendered as contemplated by this subsection, each GP
        Certificate shall be deemed at any time after the Effective Time to
        represent only the right to receive upon such surrender a Company
        Certificate and Warrant Certificate as provided in this Agreement.
 
          (c) EXCHANGE PROCEDURES FOR PARTNERSHIP INTEREST.
 
             (i) The parties hereby acknowledge and agree that the Partnership
        Interest are uncertificated and that the ownership of the Partnership
        Interest is evidenced by the records of Vista and that such ownership is
        reflected on Exhibit A hereto. As soon as reasonably practicable after
        the Effective Time, the Company shall deliver to the Exchange Agent a
        letter of instruction, directing the Exchange Agent to issue to each
        Holder, who has executed and delivered a counterpart of this Agreement,
        (x) a Company Certificate representing the number of shares of Common
        Stock that such Holder has the right to receive pursuant to Section 1.1
        and any unpaid dividends and distributions that such Holder has the
        right to receive pursuant to subsection (d) of this Section (after
        giving effect to any required withholding of taxes) and (y) a Warrant
        Certificate exercisable for a number of shares of Common Stock that such
        Holder has the right to receive pursuant to Section 1.1.
 
             (ii) From and after the Effective Time, each Partnership Interest
        shall be deemed to represent only the right to receive a Company
        Certificate and Warrant Certificate as provided in this Agreement.
 
          (d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
     other distributions with respect to Common Stock declared or made after the
     Effective Time with a record date after the Effective Time shall be paid to
     the Holder of any unsurrendered GP Certificate or Partnership Interest
     prior to delivery of the exchange instructions by the Company. Subject to
     the effect of applicable laws, (i) at the time of the surrender of a GP
     Certificate for exchange in accordance with the provisions of this Section
     or the delivery of the applicable exchange instructions in the case of the
     Partnership Interest, there shall be paid to the Holder thereof, without
     interest, the amount of dividends or other distributions (having a record
     date after the Effective Time but on or prior to surrender and a payment
     date on or prior to surrender) theretofore paid with respect to the number
     of shares of Common Stock that such Holder is entitled to receive (less the
     amount of any withholding taxes that may be required with respect thereto)
     and (ii) at the appropriate payment date, there shall be paid to the
     Holder, without interest, the amount of dividends or other distributions
     (having a record date after the Effective Time but on or prior to surrender
     and a payment date subsequent to surrender) payable with respect to the
     number of shares of Common Stock that such Holder receives (less the amount
     of any withholding taxes that may be required with respect thereto).
 
          (e) NO FURTHER OWNERSHIP RIGHTS. The shares of Common Stock and Newco
     Warrants issued in exchange of shares of GP Common Stock and Partnership
     Interest in accordance with the terms hereof shall be deemed to have been
     issued in full satisfaction of all rights of the Holders pertaining to such
     shares of GP Common Stock and Partnership Interest.
 
          (f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
     held by the Exchange Agent in accordance with the terms of this Section
     that remains unclaimed by a Holder for a period of one year following the
     Effective Time shall be delivered to the Company, upon demand. Thereafter,
     a Holder who has not theretofore complied with the provisions of this
     Section shall look only to the
 
                                       B-3
<PAGE>   225
 
     Company for their claim for Common Stock and any dividends or distributions
     with respect to Common Stock (all without interest and Newco Warrants).
 
          (g) NO LIABILITY. None of the Company, the General Partner, the
     Exchange Agent, or any other Person shall be liable to any Holder for any
     amount properly delivered to any public official pursuant to any applicable
     abandoned property, escheat, or similar law. Any amounts remaining
     unclaimed by Holders for a period of two years following the Effective Time
     (or such earlier date immediately prior to the time at which such amounts
     would otherwise escheat to or become property of any governmental entity)
     shall, to the extent permitted by applicable law, become the property of
     the Company free and clear of any claims or interest of any such Holders or
     their successors, assigns, or personal representative previously entitled
     thereto.
 
          (h) LOST, STOLEN, OR DESTROYED GP CERTIFICATES. If any GP Certificate
     shall have been lost, stolen, or destroyed, upon the making of an affidavit
     of that fact by the Person claiming such GP Certificate to be lost, stolen,
     or destroyed and, if required by the Company, the posting by such Holder of
     a bond in such reasonable amount as the Company may direct as an indemnity
     against any claim that may be made against it with respect to such GP
     Certificate, the Exchange Agent shall issue in exchange for such lost,
     stolen, or destroyed GP Certificate the shares of Common Stock (along with
     any unpaid dividends and distributions pursuant to subsection (c) of this
     Section) deliverable with respect thereto pursuant to this Agreement.
 
     1.3 POST-EFFECTIVE TIME ADJUSTMENT. Effective as of the last day of the
fourth calendar month immediately following the calendar month in which the
Closing Date occurred, Newco shall cause its independent auditors Arthur
Andersen LLP to redetermine the Vista GP Conversion Stock Number and the Vista
LP Conversion Stock Number by redetermining, as of such date, Fully Diluted
Basis to the extent necessary so as to reflect the number of shares of Newco
Common Stock, if any, issued after the Effective Time as of the result of the
exercise of any Midland Stock Options. In the event any such adjustment to the
Vista GP Conversion Stock Number and the Vista LP Conversion Stock Number is
determined appropriate, then Newco shall promptly issue to each Holder such
Holder's pro rata share of a number of shares of Newco Common Stock equal to an
amount equal to (i) the quotient realized by dividing (x) the number of shares
of Newco Common Stock issued after the Effective Time as a result of the
exercise of any Midland Stock Options by (y) .275 minus (ii) the number of
shares of Newco Common Stock described in clause (x) above.
 
                                   ARTICLE 2
 
                         REPRESENTATIONS AND WARRANTIES
 
     2.1 Each of the undersigned Holders, severally and not jointly, hereby
represents and warrants to the Company as follows:
 
          (a) AUTHORITY. Such Holder has all requisite power and authority to
     enter into this Agreement and to consummate the transactions contemplated
     hereby. The execution and delivery of this Agreement by such Holder and the
     consummation by such Holder of the transactions contemplated hereby have
     been duly authorized by all necessary action on the part of such Holder.
     This Agreement has been, or upon execution and delivery will be, duly
     executed and delivered and constitutes, or upon execution and delivery will
     constitute, the valid and binding obligations of such Holder enforceable
     against such Holder in accordance with their terms, subject as to
     enforceability to applicable bankruptcy, insolvency, fraudulent conveyance,
     reorganization, moratorium and similar laws affecting creditors' rights and
     remedies generally and to general principles of equity (regardless of
     whether enforcement is sought in a proceeding at law or in equity).
 
          (b) NO CONFLICT; REQUIRED CONSENTS. The execution and delivery of this
     Agreement by such Holder does not and the performance by such Holder of the
     transactions contemplated hereby will not, (i) conflict with or violate any
     law, rule, regulation, order, judgment or decree applicable to such Holder,
     (ii) violate, conflict with, result in any breach of or constitute a
     default (or an event that with notice or lapse of time or both would become
     a default) under, or give to others any rights of termination,
                                       B-4
<PAGE>   226
 
     amendment, acceleration or cancellation of, any note, indenture, agreement,
     lease, license, permit or other instrument or obligation to which such
     Holder is a party or by which such Holder is bound, or (iii) require any
     consent, approval, authorization or permit from any governmental regulatory
     body, except in each case where such conflict, violation, breach or default
     or failure to obtain such consents, approvals, authorizations or permits or
     to make such filings would not prevent or delay the performance by such
     Holder of its or his obligations under this Agreement.
 
          (c) NO LIENS OR ENCUMBRANCES. Exhibit A hereto accurately set forth
     the ownership of such Holder's GP Common Stock and Partnership Interest. At
     the Effective Time, all of the shares of GP Common Stock or Partnership
     Interest, as the case may be, to be exchanged by such Holder in accordance
     with the terms of this Agreement will be exchanged free and clear of all
     liens, pledges, claims, security interests, restrictions, options or
     encumbrances of any kind.
 
          (d) INVESTMENT REPRESENTATIONS.
 
             (i) Such Holder is acquiring the Common Stock and Newco Warrants
        for his own account for investment, and not with a view to distribution
        or resale thereof; and such Holder has no present plans to enter into
        any contract (other than the Registration Rights Agreement to be entered
        into between the Company and the holders of GP Common Stock and
        Partnership Interests), undertaking, agreement, or arrangement for the
        distribution or resale of any of the Common Stock or Newco Warrants.
 
             (ii) (1) Such Holder can bear the economic risk of losing its or
        his entire investment; (2) such Holder's overall commitment to
        investments which are not readily marketable is not disproportionate to
        such Holder's net worth, and such Holder's investment in the Common
        Stock and Newco Warrants will not cause such overall commitment to
        become excessive; (3) such Holder has adequate means of providing for
        such Holder's current needs and personal contingencies and has no need
        for liquidity in such Holder's investment in the Common Stock and Newco
        Warrants; (4) such Holder has such knowledge and experience in financial
        and business matters that such Holder is capable of evaluating the risks
        and merits of this investment, or has retained advisors who have such
        knowledge and experience; (5) such Holder is familiar with the business
        and financial condition, properties, operations and prospects of the
        Company and the terms of the Midland Merger and the Vista Exchange; and
        (6) such Holder has been provided with a copy of a private placement
        memorandum (the "Information") in the form of Exhibit B hereto.
 
             (iii) Such Holder and/or his attorney and/or his accountant have
        received a copy of the Information, have thoroughly read the Information
        and understand the nature of the risks involved in the proposed
        investment. Such Holder and/or his attorney and/or his accountant have
        had an opportunity to ask questions of and receive answers from the
        Company, or a person or persons acting on its behalf, concerning the
        terms and conditions of this investment and the Company and the business
        and prospects of the Company, including the effects of the Midland
        Merger and the Vista Exchange and answers have been provided to its or
        his satisfaction to all of his questions related thereto.
 
             (iv) Such Holder recognizes that an investment in the Company
        involves certain risks, and such Holder has taken full cognizance of and
        understands all of the risks related to the acquisition of the Common
        Stock and Newco Warrants.
 
             (v) Such Holder is an "Accredited Investor" (as defined in Rule
        501(a) of Regulation D promulgated under the Securities Act of 1933 (the
        "Securities Act")).
 
             (vi) The address set forth below such Holder's name on the
        signature page hereto is its or his true and correct residence.
 
             (vii) Such Holder understands, agrees and acknowledges that (1) it
        has been disclosed to it or him that the Common Stock and Newco Warrants
        have not been registered under the Securities Act, or applicable state
        securities laws and that the economic risk of the investment must be
        borne
 
                                       B-5
<PAGE>   227
 
        indefinitely by such Holder, and neither the Common Stock nor the Newco
        Warrants (nor the Common Stock issuable upon exercise of the Newco
        Warrants) can be sold, pledged, hypothecated or otherwise transferred
        unless subsequently registered under the Securities Act and such laws,
        or an exemption from such registration is available, (2) except as
        provided in the Registration Rights Agreement the Company is not
        obligated to file a notification under Regulation A of the Securities
        Act or a registration statement under the Securities Act or any state
        securities laws, (3) the benefits of Rule 144 under the Securities Act
        governing the possible disposition of the Common Stock and Newco
        Warrants (and the Common Stock issuable upon exercise of the Newco
        Warrants) are not currently available, and the Company has not
        covenanted to take any action necessary to make such Rule 144 available
        for a limited resale of the Common Stock and Newco Warrants (and the
        Common Stock issuable upon exercise of the Newco Warrants), and (4) it
        is not anticipated that there will be any market for resale of the
        Common Stock and Newco Warrants (and the Common Stock issuable upon
        exercise of the Newco Warrants).
 
             (viii) Holder understands, agrees and acknowledges that the
        following restrictions and limitations are applicable to Holder's
        purchase and resales, pledges, hypothecations or other transfers of the
        Common Stock and Newco Warrants (and the Common Stock issuable upon
        exercise of the Newco Warrants), and, therefore, that Holder must bear
        the economic risk of investment in the Common Stock and Newco Warrants
        (and the Common Stock issuable upon exercise of the Newco Warrants) for
        an indefinite period of time as described in Section 2.1(d)(vii):
 
                (1) A legend will be placed on the certificates representing the
           Common Stock and Newco Warrants (and the Common Stock issuable upon
           exercise of the Newco Warrants) in substantially the following form:
 
               THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
               REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
               STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR
               SALE, SOLD, PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL
               THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER
               (WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION
               OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE,
               PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE
               FEDERAL OR STATE SECURITIES LAWS.
 
                (2) Stop transfer instructions have been or will be placed with
           respect to the Common Stock and Newco Warrants (and the Common Stock
           issuable upon exercise of the Newco Warrants) so as to restrict the
           resale, pledge, hypothecation or other transfer thereof in accordance
           with the above legend.
 
                (3) The legend and stop transfer instructions described in
           Sections 2.1(d)(viii)(1) and (2) above will be placed with respect to
           any new certificate issued upon presentment by Holder of a
           certificate for transfer.
 
                (4) Any applicable blue sky or state securities laws legends
           shall also be placed on the certificates representing the Common
           Stock.
 
             (ix) The foregoing representations and warranties are true and
        accurate as of the date hereof and shall be true and accurate as of the
        Effective Time. If in any respect such representations and warranties
        shall not be true and accurate prior thereto, such Holder will give
        written notice of such fact to the Company specifying which
        representations and warranties are not true and accurate and the reasons
        therefor.
 
                                       B-6
<PAGE>   228
 
                                   ARTICLE 3
 
                                 MISCELLANEOUS
 
     3.1 REGISTRATION RIGHTS AGREEMENT. Concurrently with the execution of this
Agreement, the Company and each Holder shall execute and deliver a counterpart
of the Registration Rights Agreement in the form and substance of Exhibit C
hereto.
 
     3.2 WARRANTS. Attached as Exhibit D hereto is the form of Newco Warrant to
be issued pursuant to the terms of this Agreement.
 
     3.3 AMENDMENT. This Agreement may be amended by the parties hereto at any
time; provided, however, that this Agreement may not be amended by the parties
hereto in any way that would be adverse to the interests of Midland or its
shareholders without the consent of Midland. This Agreement may not be amended
except by a written instrument signed on behalf of each of the parties hereto.
 
     3.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, and (c) waive performance
of any of the covenants or agreements, or satisfaction of any of the conditions,
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party.
 
     3.5 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS, AND
AGREEMENTS. All representations, warranties, covenants, and agreements contained
in this Agreement or in any instrument delivered pursuant to this Agreement
shall be deemed to the extent expressly provided in the Merger Agreement, to be
conditions to the Midland Merger, and none of such representations, warranties,
covenants, and agreements shall survive the consummation of the Merger (except
for the agreements contained in Articles 1 and 3).
 
     3.6 NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and either delivered personally, by facsimile
transmission, or by registered or certified mail (postage prepaid and return
receipt requested) and shall be deemed given when received (or, if mailed, five
business days after the date of mailing) at the following addresses or facsimile
transmission numbers (or at such other address or facsimile transmission number
for a party as shall be specified by like notice):
 
          (a) If to the Company:
 
          Vista Energy Resources, Inc.
          550 West Texas Avenue, Suite 700
          Midland, Texas 79701
          Attention: C. Randall Hill
          Facsimile No.: (915) 688-0589
 
          with a copy to:
 
          Vinson & Elkins L.L.P.
          3700 Trammell Crow Center
          2001 Ross Avenue
          Dallas, Texas 75201-2975
          Attention: A. Winston Oxley
          Facsimile No.: (214) 220-7716
 
          (b) If to a Holder:
 
           At the address specified for such
           Holder on the signature pages hereto.
 
     3.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been
 
                                       B-7
<PAGE>   229
 
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
 
     3.8 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
 
     3.9 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(together with the documents and instruments delivered by the parties in
connection with this Agreement) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and (b) is solely
for the benefit of the parties hereto and their respective successors, legal
representatives, and assigns and does not confer on any other person any rights
or remedies hereunder; provided that Midland shall be deemed a third party
beneficiary of the provisions contained in Section 3.3.
 
     3.10 APPLICABLE LAW. This Agreement shall be governed in all respects,
including validity, interpretation, and effect, by the laws of the State of
Texas regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
 
     3.11 NO REMEDY IN CERTAIN CIRCUMSTANCES. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or part
hereof to be null, void, or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality, and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby, unless the foregoing inconsistent action or the failure to
take an action constitutes a material breach of this Agreement or makes this
Agreement impossible to perform, in which case this Agreement shall terminate.
Except as otherwise contemplated by this Agreement, to the extent that a party
hereto took an action inconsistent herewith or failed to take action consistent
herewith or required hereby pursuant to an order or judgment of a court or other
competent court, governmental, regulatory or administrative agency or commission
or other governmental authority or instrumentality, domestic or foreign, such
party shall not incur any liability or obligation unless such party breached its
obligations under this Agreement or did not in good faith seek to resist or
object to the imposition or entering of such order or judgment.
 
     3.12 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with the terms hereof or was otherwise
breached. Accordingly, the parties hereto hereby agree that each party hereto
shall be entitled to an injunction to prevent a breach of this Agreement and
shall be entitled to specific performance of the terms and provisions hereof in
addition to any other remedy at law or in equity.
 
     3.13 ASSIGNMENT. Nether this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by the parties and their respective
successors and assigns.
 
     3.14 WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants, or agreements
contained in this Agreement. The waiver by any party hereto of a breach of any
provision hereof shall not operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provisions hereof.
 
     3.15 TERMINATION. Upon any termination of the Merger Agreement, this
Agreement shall terminate without any further action on the part of any party
hereto.
 
                                       B-8
<PAGE>   230
 
     IN WITNESS WHEREOF. The parties have caused this Agreement to be executed
by their duly authorized representatives, effective as of the date first written
above.
 
                                            VISTA ENERGY RESOURCES INC.
 
                                            By:
                                              ----------------------------------
                                            Name: C. Randall Hill
                                            Title: Chairman of the Board and
                                                   Chief Executive Officer
 
                                            HOLDERS
 
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                  [SIGNATURE PAGE TO VISTA EXCHANGE AGREEMENT]
 
                                       B-9
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                  [SIGNATURE PAGE TO VISTA EXCHANGE AGREEMENT]
 
                                      B-10
<PAGE>   232
 
                                                                      SCHEDULE I
 
                               [To be completed]
 
                                      B-11
<PAGE>   233
 
                                                                      APPENDIX C
 
                           MIDLAND EXCHANGE AGREEMENT
 
     THIS MIDLAND EXCHANGE AGREEMENT (this "Agreement") dated as of
            , 1998 is entered into by and among Vista Energy Resources, Inc., a
Delaware corporation (including its successors, the "Company"), and the security
holders (the "Holders") listed on the signature page hereof, who hold options as
shown on Exhibit A hereto ("Midland Exchange Stock Options") to acquire shares
of common stock, par value $.001 per share, of Midland Resources, Inc., a Texas
corporation ("Midland").
 
                                    RECITALS
 
     A. Vista Resources Partners, L.P. ("Vista"), and Midland have determined to
engage in a strategic business combination. Capitalized terms used but not
defined herein shall have the meanings given such terms in the Merger Agreement.
 
     B. In furtherance thereof, Vista Resources I, Inc. (the "General Partner")
has approved the Agreement and Plan of Merger (the "Merger Agreement") among
Vista, Midland, the Company and Midland Merger Co., a Texas corporation and a
direct wholly-owned subsidiary of the Company ("Merger Sub").
 
     C. In furtherance thereof, the Holders have approved the exchange (the
"Midland Exchange") of warrants ("Newco Warrants") that are exercisable for
shares of the Company's common stock, par value $.01 per share (the "Common
Stock") for all of the outstanding Midland Exchange Stock Options.
 
     D. In furtherance thereof, the respective Boards of Directors of Merger Sub
and Midland have approved Merger Agreement and the merger of Merger Sub with and
into Midland, with Midland being the surviving corporation (the "Midland
Merger").
 
     E. The undersigned desires, concurrently with the Effective Time, to
exchange its or his Midland Exchange Stock Options for Newco Warrants as
provided herein.
 
     F. Whereas, Marilyn D. Wade joins as a Holder herein as a part of the
transactions contemplated by the Release and Hold Harmless Agreement of even
date herewith entered into between Marilyn D. Wade, Deas H. Warley III and
Midland Resources, Inc.
 
     NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
 
                                   ARTICLE 1
 
                                 THE EXCHANGES
 
     1.1 EXCHANGE AGREEMENTS. At the Effective Time, without any action on the
part of any party hereto, each Midland Exchange Stock Option shall be exchanged
for a Newco Warrant that is exercisable for that whole number of shares of
Common Stock (to the nearest whole share) equal to the product of (x) .725 times
(y) the number of shares of Newco Common Stock into which the shares of Midland
Common Stock subject to such Midland Exchange Stock Option would be converted
pursuant to the terms of the Merger Agreement. No payment shall be made for
fractional interests.
 
     1.2 EXCHANGE OF MIDLAND EXCHANGE STOCK OPTIONS.
 
          (a) EXCHANGE FUND. Immediately after the Effective Time, the Company
     shall deposit with the Exchange Agent, for the benefit of the Holders and
     for exchange in accordance with this Agreement, certificates representing
     the Newco Warrants to be issued in exchange for Midland Exchange Stock
     Options pursuant to Section 1.1. Such Newco Warrants, together with any
     dividends or distributions with respect thereto (as provided in subsection
     (c) of this Section 1.2), are referred to herein as the
 
                                       C-1
<PAGE>   234
 
     "Exchange Fund." The Exchange Agent, pursuant to irrevocable instructions
     consistent with the terms of this Agreement, shall deliver the Newco
     Warrants to be issued pursuant to Section 1.1 out of the Exchange Fund, and
     the Exchange Fund shall not be used for any other purpose.
 
          (b) EXCHANGE PROCEDURES FOR MIDLAND EXCHANGE STOCK OPTIONS.
 
             (i) As soon as reasonably practicable after the Effective Time, the
        Company shall cause the Exchange Agent to mail to each Holder a letter
        of transmittal to be used to effect the exchange of such Holder's
        Midland Exchange Stock Options for a certificate representing a Newco
        Warrant (a "Warrant Certificate"), along with instructions for using
        such letter of transmittal to effect such exchange. The letter of
        transmittal (or the instructions thereto) shall specify that delivery of
        such Holder's Midland Exchange Stock Options shall be effected, and risk
        of loss and title thereto shall pass, only upon delivery of such
        Holder's Midland Exchange Stock Options to the Exchange Agent and shall
        be in such form and have such other provisions as the Company may
        reasonably specify.
 
             (ii) Upon delivery to the Exchange Agent of, together with the
        surrender of a Holder's Midland Exchange Stock Options, if applicable, a
        duly completed and executed letter of transmittal and any other required
        documents, the Holder of such Exchange Stock Options shall be entitled
        to receive in exchange therefor a Warrant Certificate exercisable for a
        number of shares of Common Stock that such Holder has the right to
        receive pursuant to Section 1.1.
 
             (iii) From and after the Effective Time, each Midland Exchange
        Stock Option shall be deemed to represent only the right to receive a
        Warrant Certificate as provided in this Agreement.
 
          (c) NO FURTHER OWNERSHIP RIGHTS. The Newco Warrants issued in exchange
     of Midland Exchange Stock Options in accordance with the terms hereof shall
     be deemed to have been issued in full satisfaction of all rights of the
     Holders pertaining to such Midland Exchange Stock Options. Each Midland
     Exchange Stock Option shall be terminated immediately following their
     exchange for a Newco Warrant.
 
          (d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
     held by the Exchange Agent in accordance with the terms of this Section
     that remains unclaimed by a Holder for a period of one year following the
     Effective Time shall be delivered to the Company, upon demand. Thereafter,
     a Holder who has not theretofore complied with the provisions of this
     Section shall look only to the Company for their claim for Newco Warrants.
 
          (e) NO LIABILITY. None of the Company, the General Partner, the
     Exchange Agent, or any other Person shall be liable to any Holder for any
     amount properly delivered to any public official pursuant to any applicable
     abandoned property, escheat, or similar law. Any amounts remaining
     unclaimed by Holders for a period of two years following the Effective Time
     (or such earlier date immediately prior to the time at which such amounts
     would otherwise escheat to or become property of any governmental entity)
     shall, to the extent permitted by applicable law, become the property of
     the Company free and clear of any claims or interest of any such Holders or
     their successors, assigns, or personal representative previously entitled
     thereto.
 
                                   ARTICLE 2
 
                         REPRESENTATIONS AND WARRANTIES
 
     2.1 Each of the undersigned Holders, severally and not jointly, hereby
represents and warrants to the Company as follows:
 
          (a) AUTHORITY. Such Holder has all requisite power and authority to
     enter into this Agreement and to consummate the transactions contemplated
     hereby. The execution and delivery of this Agreement by such Holder and the
     consummation by such Holder of the transactions contemplated hereby have
     been duly authorized by all necessary action on the part of such Holder.
     This Agreement has been, or upon execution and delivery will be, duly
     executed and delivered and constitutes, or upon execution and
 
                                       C-2
<PAGE>   235
 
     delivery will constitute, the valid and binding obligations of such Holder
     enforceable against such Holder in accordance with their terms, subject as
     to enforceability to applicable bankruptcy, insolvency, fraudulent
     conveyance, reorganization, moratorium and similar laws affecting
     creditors' rights and remedies generally and to general principles of
     equity (regardless of whether enforcement is sought in a proceeding at law
     or in equity).
 
          (b) NO CONFLICT; REQUIRED CONSENTS. The execution and delivery of this
     Agreement by such Holder does not and the performance by such Holder of the
     transactions contemplated hereby will not, conflict with or violate any
     law, rule, regulation, order, judgment or decree applicable to such Holder,
     violate, conflict with, result in any breach of or constitute a default (or
     an event that with notice or lapse of time or both would become a default)
     under, or give to others any rights of termination, amendment, acceleration
     or cancellation of, any note, indenture, agreement, lease, license, permit
     or other instrument or obligation to which such Holder is a party or by
     which such Holder is bound, or require any consent, approval, authorization
     or permit from any governmental regulatory body, except in each case where
     such conflict, violation, breach or default or failure to obtain such
     consents, approvals, authorizations or permits or to make such filings
     would not prevent or delay the performance by such Holder of its or his
     obligations under this Agreement.
 
          (c) NO LIENS OR ENCUMBRANCES. Exhibit A hereto accurately set forth
     the ownership of such Holder's Midland Exchange Stock Options. At the
     Effective Time, all of the Midland Exchange Stock Options to be exchanged
     by such Holder in accordance with the terms of this Agreement will be
     exchanged free and clear of all liens, pledges, claims, security interests,
     restrictions, options or encumbrances of any kind.
 
          (d) INVESTMENT REPRESENTATIONS.
 
             (i) Such Holder is acquiring the Newco Warrants (and the Common
        Stock issuable thereunder) for his own account for investment, and not
        with a view to distribution or resale thereof; and such Holder has no
        present plans to enter into any contract (other than the Registration
        Rights Agreement to be entered into between the Company and the holders
        of Midland Exchange Stock Options), undertaking, agreement, or
        arrangement for the distribution or resale of any of the Newco Warrants
        (or the Common Stock issuable thereunder).
 
             (ii) (1) Such Holder can bear the economic risk of losing its or
        his entire investment; (2) such Holder's overall commitment to
        investments which are not readily marketable is not disproportionate to
        such Holder's net worth, and such Holder's investment in the Newco
        Warrants (or the Common Stock issuable thereunder) will not cause such
        overall commitment to become excessive; (3) such Holder has adequate
        means of providing for such Holder's current needs and personal
        contingencies and has no need for liquidity in such Holder's investment
        in the Newco Warrants (or the Common Stock issuable thereunder); (4)
        such Holder has such knowledge and experience in financial and business
        matters that such Holder is capable of evaluating the risks and merits
        of this investment, or has retained advisors who have such knowledge and
        experience; and (5) such Holder is familiar with the business and
        financial condition, properties, operations and prospects of the Company
        and the terms of the Midland Merger and the Vista Exchange.
 
             (iii) Such Holder and/or his attorney and/or his accountant have
        thoroughly understand the nature of the risks involved in the proposed
        investment. Such Holder and/or his attorney and/or his accountant have
        had an opportunity to ask questions of and receive answers from the
        Company, or a person or persons acting on its behalf, concerning the
        terms and conditions of this investment and the Company and the business
        and prospects of the Company, including the effects of the Midland
        Merger and the Vista Exchange and answers have been provided to its or
        his satisfaction to all of his questions related thereto.
 
             (iv) Such Holder recognizes that an investment in the Company
        involves certain risks, and such Holder has taken full cognizance of and
        understands all of the risks related to the acquisition of the Newco
        Warrants and the Common Stock issuable thereunder.
 
                                       C-3
<PAGE>   236
 
             (v) Such Holder is an "Accredited Investor" (as defined in Rule
        501(a) of Regulation D promulgated under the Securities Act of 1933 (the
        "Securities Act")).
 
             (vi) The address set forth below such Holder's name on the
        signature page hereto is its or his true and correct residence.
 
             (vii) Such Holder understands, agrees and acknowledges that (1) it
        has been disclosed to it or him that the Common Stock underlying the
        Newco Warrants have not been registered under the Securities Act, or
        applicable state securities laws and that the economic risk of the
        investment must be borne indefinitely by such Holder, and the Newco
        Warrants (and the Common Stock issuable upon exercise of the Newco
        Warrants) cannot be sold, pledged, hypothecated or otherwise transferred
        unless subsequently registered under the Securities Act and such laws,
        or an exemption from such registration is available, (2) except as
        provided in the Registration Rights Agreement the Company is not
        obligated to file a notification under Regulation A of the Securities
        Act or a registration statement under the Securities Act or any state
        securities laws, (3) the benefits of Rule 144 under the Securities Act
        governing the possible disposition of the Newco Warrants (and the Common
        Stock issuable upon exercise of the Newco Warrants) are not currently
        available, and the Company has not covenanted to take any action
        necessary to make such Rule 144 available for a limited resale of the
        Newco Warrants (and the Common Stock issuable upon exercise of the Newco
        Warrants), and (4) it is not anticipated that there will be any market
        for resale of the Newco Warrants (and the Common Stock issuable upon
        exercise of the Newco Warrants).
 
             (viii) Holder understands, agrees and acknowledges that the
        following restrictions and limitations are applicable to Holder's
        purchase and resales, pledges, hypothecations or other transfers of the
        Newco Warrants (and the Common Stock issuable upon exercise of the Newco
        Warrants), and, therefore, that Holder must bear the economic risk of
        investment in the Newco Warrants (and the Common Stock issuable upon
        exercise of the Newco Warrants) for an indefinite period of time as
        described in Section 2.1(d)(vii):
 
                (1) A legend will be placed on the certificates representing the
           Newco Warrants (and the Common Stock issuable upon exercise of the
           Newco Warrants) in substantially the following form:
 
               THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
               REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
               STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR
               SALE, SOLD, PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL
               THE HOLDER HEREOF PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER
               (WHICH, IN THE DISCRETION OF THE ISSUER, MAY INCLUDE AN OPINION
               OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH OFFER, SALE,
               PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE
               FEDERAL OR STATE SECURITIES LAWS.
 
                (2) Stop transfer instructions have been or will be placed with
           respect to the Newco Warrants (and the Common Stock issuable upon
           exercise of the Newco Warrants) so as to restrict the resale, pledge,
           hypothecation or other transfer thereof in accordance with the above
           legend.
 
                (3) The legend and stop transfer instructions described in
           Sections 2.1(d)(viii)(1) and (2) above will be placed with respect to
           any new certificate issued upon presentment by Holder of a
           certificate for transfer.
 
                (4) Any applicable blue sky or state securities laws legends
           shall also be placed on the certificates representing the Newco
           Warrant (and the Common Stock issuable thereunder).
 
             (ix) The foregoing representations and warranties are true and
        accurate as of the date hereof and shall be true and accurate as of the
        Effective Time. If in any respect such representations and
                                       C-4
<PAGE>   237
 
        warranties shall not be true and accurate prior thereto, such Holder
        will give written notice of such fact to the Company specifying which
        representations and warranties are not true and accurate and the reasons
        therefor.
 
                                   ARTICLE 3
 
                                 MISCELLANEOUS
 
     3.1 REGISTRATION RIGHTS AGREEMENT. Concurrently with the execution of this
Agreement, the Company and each Holder shall execute and deliver a counterpart
of the Registration Rights Agreement in the form and substance of Exhibit B
hereto.
 
     3.2 WARRANTS. Attached as Exhibit C hereto is the form of Newco Warrant to
be issued pursuant to the terms of this Agreement.
 
     3.3 AMENDMENT. This Agreement may be amended by the parties hereto at any
time; provided, however, that this Agreement may not be amended by the parties
hereto in any way that would be adverse to the interests of Midland or its
shareholders without the consent of Midland. This Agreement may not be amended
except by a written instrument signed on behalf of each of the parties hereto.
 
     3.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, and (c) waive performance
of any of the covenants or agreements, or satisfaction of any of the conditions,
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party.
 
     3.5 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS, AND
AGREEMENTS. All representations, warranties, covenants, and agreements contained
in this Agreement or in any instrument delivered pursuant to this Agreement
shall be deemed to the extent expressly provided in the Merger Agreement, to be
conditions to the Midland Merger, and none of such representations, warranties,
covenants, and agreements shall survive the consummation of the Merger (except
for the agreements contained in Articles 1 and 3).
 
     3.6 NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and either delivered personally, by facsimile
transmission, or by registered or certified mail (postage prepaid and return
receipt requested) and shall be deemed given when received (or, if mailed, five
business days after the date of mailing) at the following addresses or facsimile
transmission numbers (or at such other address or facsimile transmission number
for a party as shall be specified by like notice):
 
          (a) If to the Company:
 
          Vista Energy Resources, Inc.
          550 West Texas Avenue, Suite 700
          Midland, Texas 79701
          Attention: C. Randall Hill
          Facsimile No.: (915) 688-0589
 
          with a copy to:
 
          Vinson & Elkins L.L.P.
          3700 Trammell Crow Center
          2001 Ross Avenue
          Dallas, Texas 75201-2975
          Attention: A. Winston Oxley
          Facsimile No.: (214) 220-7716
 
                                       C-5
<PAGE>   238
 
          (b) If to a Holder:
 
              At the address specified for such
           Holder on the signature pages hereto.
 
     3.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
 
     3.8 SEVERABILITY. Any term or provision of this Agreement that is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
 
     3.9 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(together with the documents and instruments delivered by the parties in
connection with this Agreement) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and (b) is solely
for the benefit of the parties hereto and their respective successors, legal
representatives, and assigns and does not confer on any other person any rights
or remedies hereunder; provided that Midland shall be deemed a third party
beneficiary of the provisions contained in Section 3.3.
 
     3.10 APPLICABLE LAW. This Agreement shall be governed in all respects,
including validity, interpretation, and effect, by the laws of the State of
Texas regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
 
     3.11 NO REMEDY IN CERTAIN CIRCUMSTANCES. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or part
hereof to be null, void, or unenforceable, or order any party to take any action
inconsistent herewith or not to take an action consistent herewith or required
hereby, the validity, legality, and enforceability of the remaining provisions
and obligations contained or set forth herein shall not in any way be affected
or impaired thereby, unless the foregoing inconsistent action or the failure to
take an action constitutes a material breach of this Agreement or makes this
Agreement impossible to perform, in which case this Agreement shall terminate.
Except as otherwise contemplated by this Agreement, to the extent that a party
hereto took an action inconsistent herewith or failed to take action consistent
herewith or required hereby pursuant to an order or judgment of a court or other
competent court, governmental, regulatory or administrative agency or commission
or other governmental authority or instrumentality, domestic or foreign, such
party shall not incur any liability or obligation unless such party breached its
obligations under this Agreement or did not in good faith seek to resist or
object to the imposition or entering of such order or judgment.
 
     3.12 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with the terms hereof or was otherwise
breached. Accordingly, the parties hereto hereby agree that each party hereto
shall be entitled to an injunction to prevent a breach of this Agreement and
shall be entitled to specific performance of the terms and provisions hereof in
addition to any other remedy at law or in equity.
 
     3.13 ASSIGNMENT. Nether this Agreement nor any of the rights, interests, or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of, and be enforceable by the parties and their respective
successors and assigns.
 
     3.14 WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants, or agreements
contained in
 
                                       C-6
<PAGE>   239
 
this Agreement. The waiver by any party hereto of a breach of any provision
hereof shall not operate or be construed as a waiver of any prior or subsequent
breach of the same or any other provisions hereof.
 
     3.15 TERMINATION. Upon any termination of the Merger Agreement, this
Agreement shall terminate without any further action on the part of any party
hereto.
 
                                       C-7
<PAGE>   240

     IN WITNESS WHEREOF. The parties have caused this Agreement to be executed
by their duly authorized representatives, effective as of the date first written
above.
 
                                            VISTA ENERGY RESOURCES, INC.
 
                                            By:
                                              ----------------------------------
                                            Name: C. Randall Hill
                                            Title: Chairman of the Board and
                                                   Chief Executive Officer
  
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                 [SIGNATURE PAGE TO MIDLAND EXCHANGE AGREEMENT]
 
                                       C-9
<PAGE>   242
 
                                                                      SCHEDULE I
 
                               [TO BE COMPLETED]
 
                                      C-10
<PAGE>   243
 
                                                                    APPENDIX D-1
 
                       [DAIN RAUSCHER WESSELS LETTERHEAD]
 
                                 June 30, 1998
 
Board of Directors
Midland Resources, Inc.
616 F.M. 1960 West
Suite 600
Houston, TX 77090-3027
 
Gentlemen:
 
     You have requested our opinion, as of the date hereof, as to the fairness,
from a financial point of view, to the common stockholders of Midland Resources,
Inc., a Texas corporation ("Midland"), of the proposed merger (the "Merger") of
Midland with Vista Resources Partners, L.P., a Texas limited partnership
("Vista"). The terms of the Merger are set forth in the Agreement and Plan of
Merger dated May 22, 1998 (the "Agreement"). Following the Merger, Midland
stockholders will control 27.5% and the owners of Vista will control 72.5% of
the common stock of the combined company.
 
     Dain Rauscher Wessels, a division of Dain Rauscher Incorporated ("Dain
Rauscher Wessels"), as part of its investment banking services, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, corporate restructurings, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. We have acted as financial
advisor to the Board of Directors of Midland in connection with the Merger, and
will receive a fee for our services. In the ordinary course of business, Dain
Rauscher Wessels and its affiliates at any time may hold long or short
positions, and may trade or otherwise effect transactions as principal or for
the accounts of customers, in debt or equity securities or options on securities
of Midland.
 
     In connection with our review of the Merger, and in arriving at our opinion
described below, we have reviewed business and financial information relating to
Midland and Vista. We have, among other things: (i) reviewed the Agreement and
related documents; (ii) reviewed the Annual Reports on Form 10-KSB for the years
ended December 31, 1995, 1996 and 1997 and the Quarterly Reports on Form 10-QSB
and related unaudited financial information for certain interim periods,
including the three months ended March 31, 1998, of Midland; (iii) reviewed the
Proxy Statement filed on Schedule 14A dated May 29, 1997 of Midland; (iv)
reviewed the audited financial statements for the years ended December 31, 1995,
1996 and 1997, prepared by Arthur Andersen LLP, independent public accountants,
and the unaudited financial statements for the three months ended March 31, 1998
of Vista; (v) reviewed Midland's proved oil and gas reserves and the
standardized measure of discounted future net cash flows relating to proved oil
and gas reserves as of January 1, 1998, estimated by Williamson Petroleum
Consultants, Inc., independent petroleum engineers; (vi) reviewed Vista's proved
oil and gas reserves and the standardized measure of discounted future net cash
flows relating to proved oil and gas reserves as of January 1, 1998, estimated
by Williamson Petroleum Consultants, Inc., independent petroleum engineers;
(vii) met with certain members of Midland's and Vista's senior management to
discuss their respective operations, historical financial statements and future
prospects and their views of the business, operational and strategic benefits,
potential synergies and other implications of the Merger; (viii) reviewed
certain operating and financial information of Midland and Vista, including
projections and projected cost savings and operating synergies, provided to us
by Midland's and Vista's management relating to their respective businesses and
prospects; (ix) reviewed the projected consolidated pro forma financial
statements for the combined companies for the years ending December 31, 1998 and
1999 as prepared by Midland's and Vista's management; (x) reviewed historical
market prices and trading volumes for Midland Common Stock; (xi) reviewed
publicly available financial data and stock market performance data of publicly
held companies that we deemed generally comparable to Midland and Vista; and
(xii) reviewed the financial terms of certain business combinations of
comparable exploration and production
                                      D-1-1
<PAGE>   244
 
companies. In addition, we have considered such other information and have
conducted such other analyses and investigations as we deemed appropriate under
the circumstances.
 
     In connection with our review, we have relied upon and assumed the accuracy
and completeness of the financial and other information publicly available or
furnished to us by Midland and Vista or their representatives. We have not
independently verified the accuracy or completeness of such information and we
have further relied upon assurances of the management of Midland and Vista that
they are unaware of any facts that would make the information provided to us
incomplete or misleading. We have not made or obtained any independent
evaluations or appraisals of any of the properties, assets or facilities of
Midland or Vista. With respect to the financial projections of Midland and
Vista, we have assumed that they have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of management as
to the future financial performance of Midland and Vista, and we express no
opinion with respect to such forecasts or the assumptions on which they are
based.
 
     Our opinion is based solely upon the information set forth herein as
reviewed by us and circumstances, including economic, market and financial
conditions, existing as of the date hereof. Events occurring after the date
hereof could materially affect the assumptions used both in preparing this
opinion and in the documents reviewed by us. We have not undertaken to reaffirm
or revise this opinion or otherwise comment upon any events occurring after the
date hereof.
 
     It is understood that this letter is for the information of the Board of
Directors of Midland only and, without our prior written consent, other than as
required by law or judicial process, is not to be quoted or referred to, in
whole or in part, in any registration statement, prospectus or proxy statement,
or in any other written document used in connection with the offering or sale of
securities, nor shall this letter be used for any other purposes.
 
     Subject to the foregoing and based upon our experience as investment
bankers, the matters described above and other factors we deemed relevant, we
are of the opinion that as of the date hereof, the Merger is fair from a
financial point of view to the holders of the currently outstanding Midland
Common Stock.
 
                                            Very truly yours,
 
                                            Dain Rauscher Wessels
                                            a division of Dain Rauscher
                                            Incorporated
 
                                      D-1-2
<PAGE>   245
 
                                                                    APPENDIX D-2
 
                       [DAIN RAUSCHER WESSELS LETTERHEAD]
 
                                 June 30, 1998
 
Board of Directors
Midland Resources, Inc.
616 F.M. 1960 West
Suite 600
Houston, TX 77090-3027
 
Gentlemen:
 
     We understand that Midland Resources, Inc., a Texas corporation
("Midland"), intends to restructure the options issued under the Midland
Resources, Inc. 1997 Board of Directors Stock Incentive Plan (the "Director
Options") in connection with its proposed merger (the "Merger") with Vista
Resources Partners, L.P., a Texas limited partnership ("Vista"). The Director
Options are being restructured (the "Restructuring") into a restricted version
of the current issue of Class B Warrants of Midland (the "Director Warrants").
You have requested that we render our opinion as to whether the Restructuring is
fair from a financial point of view to the holders of the currently outstanding
Midland Common Stock.
 
     Dain Rauscher Wessels, a division of Dain Rauscher Incorporated ("Dain
Rauscher Wessels"), as part of its investment banking services, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, corporate restructurings, negotiated underwritings,
secondary distributions of listed and unlisted securities private placements and
valuations for corporate and other purposes. We have acted as financial advisor
to the Board of Directors of Midland in connection with the Merger, and will
receive a fee for our services. In the ordinary course of business, Dain
Rauscher Wessels and its affiliates at any time may hold long or short
positions, and may trade or otherwise effect transactions as principal or for
the accounts of customers, in debt or equity securities or options on securities
of Midland.
 
     In connection with our review of the Restructuring, and in arriving at our
opinion described below, we have reviewed business and financial information
relating to Midland. We have, among other things: (i) reviewed the Stock Option
Agreement; (ii) reviewed the 1997 Board of Directors Stock Incentive Plan; (iii)
reviewed the Warrant Agreement; (iv) reviewed the Registration Rights Agreement
for Midland Holders; and (v) reviewed publicly available financial data and
stock market performance data of Midland Common Stock as well as the publicly
traded Class B Warrants. In addition, we have considered such other information
and have conducted such other analyses and investigations as we deemed
appropriate under the circumstances.
 
     In connection with our review, we have relied upon and assumed the accuracy
and completeness of the financial and other information publicly available or
furnished to us by Midland or their representatives. We have not independently
verified the accuracy or completeness of such information and we have further
relied upon assurances of the management of Midland that they are unaware of any
facts that would make the information provided to us incomplete or misleading.
 
     Our opinion is based solely upon the information set forth herein as
reviewed by us and circumstances, including economic, market and financial
conditions, existing as of the date hereof. Events occurring after the date
hereof could materially affect the assumptions used both in preparing this
opinion and in the documents reviewed by us. We have not undertaken to reaffirm
or revise this opinion or otherwise comment upon any events occurring after the
date hereof.
 
     It is understood that this letter is for the information of the Board of
Directors of Midland only and, without our prior written consent, other than as
required by law or judicial process, is not to be quoted or
 
                                      D-2-1
<PAGE>   246
 
referred to, in whole or in part, in any registration statement, prospectus or
proxy statement, or in any other written document used in connection with the
offering or sale of securities, nor shall this letter be used for any other
purposes.
 
     Based on the current price levels of Midland Common Stock, application of
the Black-Scholes option pricing model, the restrictions on the new Director
Warrants and an overall business judgment, an exchange ratio of 0.725 new
Director Warrants for one Director Option is fair as of the date hereof from a
financial point of view to the holders of the currently outstanding Midland
Common Stock.
 
                                            Very truly yours,
 
                                            Dain Rauscher Wessels
                                            a division of Dain Rauscher
                                            Incorporated
 
                                      D-2-2
<PAGE>   247
 
                                                                      APPENDIX E
 
                          VISTA ENERGY RESOURCES, INC.
 
                      1998 KEY EMPLOYEE STOCK OPTION PLAN
 
     1. PURPOSE.
 
          Vista Energy Resources, Inc., a Delaware corporation (herein, together
     with its successors, referred to as the "Company"), by means of this 1998
     Stock Option Plan (the "Plan"), desires to afford certain individuals and
     key employees of the Company and any parent corporation or subsidiary
     corporation thereof now existing or hereafter formed or acquired (such
     parent and subsidiary corporations sometimes referred to herein as "Related
     Entities") who are responsible for the continued growth of the Company an
     opportunity to acquire a proprietary interest in the Company, and thus to
     create in such persons an increased interest in and a greater concern for
     the welfare of the Company and any Related Entities. As used in the Plan,
     the terms "parent corporation" and "subsidiary corporation" shall mean,
     respectively, a corporation within the definition of such terms contained
     in Sections 424(e) and 424(f), respectively, of the Internal Revenue Code
     of 1986, as amended (the "Code").
 
          The stock options described in Sections 6 and 7 (the "Options"), and
     the shares of Common Stock (as hereinafter defined) acquired pursuant to
     the exercise of such Options are a matter of separate inducement and are
     not in lieu of any salary or other compensation for services.
 
     2. ADMINISTRATION.
 
          (a) COMMITTEE. The Board of Directors of the Company (the "Board of
     Directors" shall administer the Plan with respect to all Key Employees (as
     hereinafter defined) or Eligible Non-Employees (as hereinafter defined) or
     may delegate all or part of its duties under this Plan to any committee
     appointed by the Board of Directors (the "Committee") or to any officer or
     committee of officers of the Company, subject in each case to such
     conditions and limitations as the Board of Directors may establish and
     subject to the following sentence. Unless a majority of the members of the
     Board of Directors determines otherwise: (a) the Committee shall be
     constituted in a manner that satisfies the requirements of Rule 16b-3,
     which Committee shall administer the Plan with respect to all Key Employees
     or Eligible Non-Employees who are subject to Section 16 of the Exchange Act
     in a manner that satisfies the requirements of Rule 16b-3; and (b) the
     Committee shall be constituted in a manner that satisfies the requirements
     of Section 162(m), which Committee shall administer the Plan with respect
     to "performance-based compensation" for all Key Employees or Eligible
     Non-Employees who are reasonably expected to be "covered employees" as
     those terms are defined in Section 162(m). The number of persons that shall
     constitute the Committee shall be determined from time to time by a
     majority of all the members of the Board of Directors. Except for
     references in Sections 2(a), 2(b), and 2(c) and unless the context
     otherwise requires, references herein to the Committee shall also refer to
     the Board of Directors as administrator of the Plan for Key Employees or
     Eligible Non-Employees or to the appropriate delegate of the Committee or
     the Board of Directors.
 
          (b) DURATION, REMOVAL, ETC. The members of the Committee shall serve
     at the pleasure of the Board of Directors, which shall have the power, at
     any time and from time to time, to remove members from or add members to
     the Committee. Removal from the Committee may be with or without cause. Any
     individual serving as a member of the Committee shall have the right to
     resign from membership in the Committee by written notice to the Board of
     Directors. The Board of Directors, and not the remaining members of the
     Committee, shall have the power and authority to fill vacancies on the
     Committee, however caused.
 
          (c) MEETINGS AND ACTIONS OF COMMITTEE. The Board of Directors shall
     designate which of the Committee members shall be the chairman of the
     Committee. If the Board of Directors fails to designate a Committee
     chairman, the members of the Committee shall elect one of the Committee
     members as chairman, who shall act as chairman until he ceases to be a
     member of the Committee or until the Board
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     of Directors elects a new chairman. The Committee shall hold its meetings
     at those times and places as the chairman of the Committee may determine.
     At all meetings of the Committee, a quorum for the transaction of business
     shall be required, and a quorum shall be deemed present if at least a
     majority of the members of the Committee are present. At any meeting of the
     Committee, each member shall have one vote. All decisions and
     determinations of the Committee shall be made by the majority vote or
     majority decision of all of its members present at a meeting at which a
     quorum is present; provided, however, that any decision or determination
     reduced to writing and signed by all of the members of the Committee shall
     be as fully effective as if it had been made at a meeting that was duly
     called and held. The Committee may make any rules and regulations as it may
     deem advisable for the conduct of its business that are not inconsistent
     with the provisions of the Plan, the certificate of incorporation of the
     Company, the by-laws of the Company, Rule 16b-3 so long as it is
     applicable, and Section 162(m) so long as it is applicable.
 
     3. SHARES AVAILABLE.
 
          Subject to the adjustments provided in Section 10, the maximum
     aggregate number of shares of Common Stock, $.01 par value, of the Company
     ("Common Stock") in respect of which Options may be granted for all
     purposes under the Plan shall be 900,000 shares. If, for any reason, any
     shares as to which Options have been granted cease to be subject to
     purchase thereunder, including the expiration of such Option, the
     termination of such Option prior to exercise, or the forfeiture of such
     Option, such shares shall thereafter be available for grants under the
     Plan. Options granted under the Plan may be fulfilled in accordance with
     the terms of the Plan with (i) authorized and unissued shares of the Common
     Stock, (ii) issued shares of such Common Stock held in the Company's
     treasury, or (iii) issued shares of Common Stock reacquired by the Company
     in each situation as the Board of Directors or the Committee may determine
     from time to time.
 
     4. ELIGIBILITY AND BASES OF PARTICIPATION.
 
          Grants of Incentive Options (as hereinafter defined) and Non-Qualified
     Options (as hereinafter defined) may be made under the Plan, subject to and
     in accordance with Section 6, to Key Employees. As used herein, the term
     "Key Employee" shall mean any employee of the Company or any Related
     Entity, including officers and directors of the Company or any Related
     Entity who are also employees of the Company or any Related Entity, who is
     regularly employed on a salaried basis and who is so employed on the date
     of such grant, whom the Committee identifies as having a direct and
     significant effect on the performance of the Company or any Related Entity.
 
          Grants of Non-Qualified Options may be made, subject to and in
     accordance with Section 7, to any Eligible Non-Employee. As used herein,
     the term "Eligible Non-Employee" shall mean any person or entity of any
     nature whatsoever, specifically including an individual, a firm, a company,
     a corporation, a partnership, a trust, or other entity (collectively, a
     "Person"), that the Committee designates as eligible for a grant of Options
     pursuant to this Plan because such Person performs bona fide consulting,
     advisory, or other services for the Company or any Related Entity (other
     than services in connection with the offer or sale of securities in a
     capital-raising transaction) and the Board of Directors or the Committee
     determines that the Person has a direct and significant effect on the
     financial development of the Company or any Related Entity.
 
          The adoption of this Plan shall not be deemed to give any Person a
     right to be granted any Options.
 
          Notwithstanding any other provision of this Plan to the contrary, with
     respect to the grant of any Options to any Key Employee or Eligible
     Non-Employee, the Committee shall first determine the number of shares in
     respect of which Options are to be granted to such Key Employee or Eligible
     Non-Employee and shall then cause to be granted to such Key Employee or
     Eligible Non-Employee an Option exercisable for such shares. The exercise
     price per share of Common Stock under each Option shall be fixed by the
     Committee at the time of grant of the Option and shall equal at least 100%
     of the Fair Market Value of a share of Common Stock on the date of grant.
 
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     5. AUTHORITY OF COMMITTEE.
 
          Subject to the express provisions of the Plan and any applicable law
     with which the Company intends the Plan to comply, the Committee shall have
     the authority, in its sole and absolute discretion, (a) to adopt, amend,
     and rescind administrative and interpretive rules and regulations relating
     to the Plan, including without limitation to adopt and observe such
     procedures concerning the counting of Options against the Plan and
     individual maximums as it may deem appropriate from time to time; (b) to
     determine the Key Employees or Eligible Non-Employees to whom, and the time
     or times at which, Options shall be granted; (c) to determine the amount of
     cash and the number of shares of Common Stock, that shall be the subject of
     each Option; (d) to determine the terms and provisions of each award
     evidencing Options granted hereunder (which need not be identical),
     including provisions defining or otherwise relating to (i) the term and the
     period or periods and extent of exerciseability of the Options, (ii) the
     extent to which the transferability of shares of Common Stock issued or
     transferred pursuant to any Option is restricted, (iii) the effect of
     termination of employment on the Option, and (iv) the effect of approved
     leaves of absence (consistent with any applicable regulations of the
     Internal Revenue Service); (e) to accelerate, pursuant to Section 8, the
     time of exerciseability of any Option that has been granted; (f) to
     construe the respective awards evidencing Options granted hereunder and the
     Plan; (g) to make determinations of the Fair Market Value of the Common
     Stock pursuant to the Plan; (h) to delegate its duties under the Plan to
     such agents as it may appoint from time to time, subject to the second
     sentence of Section 2(a); and (i) to make all other determinations, perform
     all other acts, and exercise all other powers and authority necessary or
     advisable for administering the Plan, including the delegation of those
     ministerial acts and responsibilities as the Committee deems appropriate.
     The Committee may correct any defect, supply any omission or reconcile any
     inconsistency in the Plan, in any Option, or in any awards evidencing
     Options granted hereunder in the manner and to the extent it deems
     necessary or desirable to carry the Plan into effect, and the Committee
     shall be the sole and final judge of that necessity or desirability. The
     determinations of the Committee on the matters referred to in this Section
     5 shall be final and conclusive. The Committee shall not have the power to
     appoint members of the Committee or to terminate, modify, or amend the
     Plan. Those powers are vested in the Board of Directors.
 
          From time to time, the Board of Directors and appropriate officers of
     the Company shall be and are authorized to take whatever actions are
     necessary to file required documents with governmental authorities, stock
     exchanges, and other appropriate Persons to make shares of Common Stock
     available for issuance pursuant to awards evidencing Options granted
     hereunder.
 
     6. INCENTIVE OPTIONS.
 
          Subject to the express provisions of this Plan, the Committee shall
     have the authority to grant incentive stock options pursuant to Section 422
     of the Code ("Incentive Options"), to grant non-qualified stock options
     (options which do not qualify under Section 422 of the Code)
     ("Non-Qualified Options"), and to grant both types of Options to Key
     Employees. No Incentive Option shall be granted pursuant to this Plan after
     the earlier of ten years from the date of adoption of the Plan or ten years
     from the date of approval of the Plan by the stockholders of the Company.
     Notwithstanding anything in this Plan to the contrary, Incentive Options
     may be granted only to Key Employees. The terms and conditions of Incentive
     Options granted under this Section 6 shall be determined from time to time
     by the Committee; provided, however, that Incentive Options granted under
     this Section 6 shall be subject to all terms and provisions of the Plan
     (other than Section 7), including the following:
 
             (a) OPTION EXERCISE PRICE. Subject to Section 4, the Committee
        shall establish Incentive Option exercise price at the time any
        Incentive Option is granted at such amount as the Committee shall
        determine; provided, that such price shall not be less than the Fair
        Market Value per share of Common Stock at the date Incentive Option is
        granted; and provided, further, that in the case of an Incentive Option
        granted to a person who, at the time such Incentive Option is granted,
        owns shares of the Company or any Related Entity which possess more than
        10% of the total combined voting power of all classes of shares of the
        Company or of any Related Entity, the option exercise price shall
 
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        not be less than 110% of the Fair Market Value per share of Common Stock
        at the Incentive Option is granted. The Incentive Option exercise price
        shall be subject to adjustment in accordance with the provisions of
        Section 9 of the Plan.
 
             (b) PAYMENT. The price per share of Common Stock with respect to
        Incentive Option exercise shall be payable at the time of such exercise.
        Such price shall be payable in cash or by any other means acceptable to
        the Committee, including delivery to the Company of shares of Common
        Stock owned by the optionee or by the delivery or withholding of shares
        pursuant to a procedure created pursuant to Section 5.d. of the Plan.
        Shares delivered to or withheld by the Company in payment of Incentive
        Option exercise price shall be valued at the Fair Market Value of the
        Common Stock on the day preceding the date of the exercise of Incentive
        Option.
 
             (c) CONTINUATION OF EMPLOYMENT. Each Incentive Option shall require
        the optionee to remain in the continuous employ of the Company or any
        Related Entity from the date of grant of the Incentive Option until no
        more than three months prior to the date of exercise of the Incentive
        Option.
 
             (d) EXERCISEABILITY OF STOCK OPTION. Subject to Section 8, each
        Incentive Option shall be exercisable in one or more installments as the
        Committee may determine at the time of the grant. No Incentive Option by
        its terms shall be exercisable after the expiration of ten years from
        the date of grant of the Incentive Option; provided, however, that no
        Incentive Option granted to a person who, at the time such Incentive
        Option is granted, owns stock of the Company, or any Related Entity,
        possessing more than 10% of the total combined voting power of all
        classes of stock of the Company, or any Related Entity, shall be
        exercisable after the expiration of five years from the date such
        Incentive Option is granted.
 
             (e) DEATH. If any optionee's employment with the Company or a
        Related Entity terminates due to the death of such optionee, the estate
        of such optionee, or a Person who acquired the right to exercise such
        Incentive Option by bequest or inheritance or by reason of the death of
        the optionee, shall have the right to exercise such Incentive Option in
        accordance with its terms at any time and from time to time within 180
        days after the date of death unless a longer or shorter period is
        expressly provided in such Incentive Option or established by the
        Committee pursuant to Section 8 (but in no event after the expiration
        date of such Incentive Option).
 
             (f) DISABILITY. If the employment of any optionee terminates
        because of his Disability (as defined in Section 18), such optionee or
        his legal representative shall have the right to exercise the Incentive
        Option in accordance with its terms at any time and from time to time
        within 180 days after the date of such termination unless a longer or
        shorter period is expressly provided in such Incentive Option or
        established by the Committee pursuant to Section 8 (but not after the
        expiration date of the Incentive Option); provided, however, that in the
        case of an Incentive Option, the optionee or his legal representative
        shall in any event be required to exercise the Incentive Option within
        one year after termination of the optionee's employment due to his
        Disability.
 
             (g) TERMINATION FOR CAUSE; VOLUNTARY TERMINATION. Unless an
        optionee's Incentive Option expressly provides otherwise, such optionee
        shall immediately forfeit all rights under his Incentive Option, except
        as to the shares of stock already purchased thereunder, if the
        employment of such optionee with the Company or a Related Entity is
        terminated by the Company or any Related Entity for Good Cause (as
        defined below) or if such optionee voluntarily terminates employment
        without the consent of the Company or any Related Entity. The
        determination that there exists Good Cause for termination shall be made
        by the Committee (unless otherwise agreed to in writing by the Company
        and the optionee).
 
             (h) OTHER TERMINATION OF EMPLOYMENT. If the employment of an
        optionee with the Company or a Related Entity terminates for any reason
        other than those specified in subsections 6(e), (f) or (g) above, such
        optionee shall have the right to exercise his Incentive Option in
        accordance with its terms, within 30 days after the date of such
        termination, unless a longer or shorter period is expressly
 
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        provided in such Incentive Option or established by the Committee
        pursuant to Section 8 (but not after the expiration date of the
        Incentive Option); provided, that no Incentive Option shall be
        exercisable more than three months after such termination.
 
             (i) MAXIMUM EXERCISE. The aggregate Fair Market Value of stock
        (determined at the time of the grant of the Incentive Option) with
        respect to which Incentive Options are exercisable for the first time by
        an optionee during any calendar year under all plans of the Company and
        any Related Entity shall not exceed $100,000.
 
     7. NON-QUALIFIED OPTIONS.
 
          (a) Subject to the express provisions of this Plan, the Committee
     shall have the authority to grant Non-Qualified Options to Key Employees
     and Eligible Non-Employees. The terms and conditions of the Non-Qualified
     Options granted under this Section 7 shall be determined from time to time
     by the Committee; provided, however, that the Non-Qualified Options granted
     under this Section 7 shall be subject to all terms and provisions of the
     Plan (other than Section 6), including the following:
 
             (i) OPTION EXERCISE PRICE. Subject to Section 4, the Committee
        shall establish the Non-Qualified Option exercise price at the time any
        Non-Qualified Option is granted at such amount as the Committee shall
        determine. The Non-Qualified Option exercise price shall be subject to
        adjustment in accordance with the provisions of Section 9 of the Plan.
 
             (ii) PAYMENT. The price per share of Common Stock with respect to
        each Non-Qualified Option exercise shall be payable at the time of such
        exercise. Such price shall be payable in cash or by any other means
        acceptable to the Committee, including delivery to the Company of shares
        of Common Stock owned by the optionee or by the delivery or withholding
        of shares pursuant to a procedure created pursuant to Section 5.d. of
        the Plan. Shares delivered to or withheld by the Company in payment of
        the Non-Qualified Option exercise price shall be valued at the Fair
        Market Value of the Common Stock on the day preceding the date of the
        exercise of the Non-Qualified Option.
 
             (iii) EXERCISEABILITY OF STOCK OPTION. Subject to Section 8, each
        Non-Qualified Option shall be exercisable in one or more installments as
        the Committee may determine at the time of the grant. No Non-Qualified
        Option shall be exercisable after the expiration of five years from the
        date of grant of the Non-Qualified Option, unless otherwise expressly
        provided in such Non-Qualified Option.
 
             (iv) DEATH. If the retention by the Company or any Related Entity
        of the services of any Eligible Non-Employee terminates because of his
        death, the estate of such optionee, or a Person who acquired the right
        to exercise such Non-Qualified Option by bequest or inheritance or by
        reason of the death of the optionee, shall have the right to exercise
        such Non-Qualified Option in accordance with its terms, at any time and
        from time to time within 180 days after the date of death unless a
        longer or shorter period is expressly provided in such Non-Qualified
        Option or established by the Committee pursuant to Section 8 (but in no
        event after the expiration date of such Non-Qualified Option).
 
             (v) DISABILITY. If the retention by the Company or any Related
        Entity of the services of any Eligible Non-Employee terminates because
        of his Disability, such optionee or his legal representative shall have
        the right to exercise the Non-Qualified Option in accordance with its
        terms at any time and from time to time within 180 days after the date
        of the optionee's termination unless a longer or shorter period is
        expressly provided in such Non-Qualified Option or established by the
        Committee pursuant to Section 8 (but not after the expiration of the
        Non-Qualified Option).
 
             (vi) TERMINATION FOR CAUSE; VOLUNTARY TERMINATION. If the retention
        by the Company or any Related Entity of the services of any Eligible
        Non-Employee is terminated (i) for Good Cause, (ii) as a result of
        removal of the optionee from office as a director of the Company or of
        any Related Entity for cause by action of the stockholders of the
        Company or such Related Entity in accordance with the by-laws of the
        Company or such Related Entity, as applicable, and the corporate law of
        the
 
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        Jurisdiction of incorporation of the Company or such Related Entity, or
        (iii) as a result of the voluntarily termination by optionee of
        optionee's service without the consent of the Company or any Related
        Entity, then such optionee shall immediately forfeit his rights under
        his Non-Qualified Option except as to the shares of stock already
        purchased. The determination that there exists Good Cause for
        termination shall be made by the Option Committee (unless otherwise
        agreed to in writing by the Company and the optionee).
 
             (vii) OTHER TERMINATION OF RELATIONSHIP. If the retention by the
        Company or any Related Entity of the services of any Eligible
        Non-Employee terminates for any reason other than those specified in
        subsections 7(d), (e) or (f) above, such optionee shall have the right
        to exercise his or its Non-Qualified Option in accordance with its terms
        within 30 days after the date of such termination, unless a longer or
        shorter period is expressly provided in such Non-Qualified Option or
        established by the Committee pursuant to Section 8 (but not after the
        expiration date of the Non-Qualified Option).
 
             (viii) INELIGIBILITY FOR OTHER GRANTS. Any Eligible Non-Employee
        who receives a Non-Qualified Option pursuant to this Section 7 shall be
        ineligible to receive any Options under any other Section of the Plan.
 
     8. CHANGE OF CONTROL.
 
          If (i) a Change of Control shall occur or (ii) the Company shall enter
     into an agreement providing for a Change of Control, then the Committee may
     declare any or all Options outstanding under the Plan to be exercisable in
     full at such time or times as the Committee shall determine,
     notwithstanding the express provisions of such Options. Each Option
     accelerated by the Committee pursuant to the preceding sentence shall
     terminate, notwithstanding any express provision thereof or any other
     provision of the Plan, on such date (not later than the stated exercise
     date) as the Committee shall determine.
 
     9. ADJUSTMENT OF SHARES.
 
          Unless otherwise expressly provided in a particular Option, in the
     event that, by reason of any merger, consolidation, combination,
     liquidation, reorganization, recapitalization, stock dividend, stock split,
     split-up, split-off, spin-off, combination of shares, exchange of shares or
     other like change in capital structure of the Company (collectively, a
     "Reorganization"), the Common Stock is substituted, combined, or changed
     into any cash, property, or other securities, or the shares of Common Stock
     are changed into a greater or lesser number of shares of Common Stock, the
     number and/or kind of shares and/or interests subject to an Option and the
     per share price or value thereof shall be appropriately adjusted by the
     Committee to give appropriate effect to such Reorganization. Any fractional
     shares or interests resulting from such adjustment shall be eliminated.
     Notwithstanding the foregoing, (i) each such adjustment with respect to an
     Incentive Option shall comply with the rules of Section 424(a) of the Code,
     and (ii) in no event shall any adjustment be made which would render any
     Incentive Option granted hereunder other than an "incentive stock option"
     for purposes of Section 422 of the Code. The maximum aggregate number of
     shares of Common Stock in respect of which Options may be granted under
     this Plan as provided for in Section 3 shall be subject to adjustment as
     contemplated above.
 
          In the event the Company is not the surviving entity of a
     Reorganization (not involving a Change of Control) and, following such
     Reorganization, any optionee will hold Options issued pursuant to this Plan
     which have not been exercised, canceled, or terminated in connection
     therewith, the Company shall cause such Options to be assumed (or canceled
     and replacement Options issued) by the surviving entity or a Related
     Entity. A Reorganization involving a Change of Control in which the Company
     is not the surviving entity shall be governed by Section 8.
 
     10. ASSIGNMENT OR TRANSFER.
 
          (a) Except as otherwise expressly provided in any Non-Qualified
     Option, no Option granted under the Plan or any rights or interests therein
     shall be assignable or transferable by an optionee except by will or the
     laws of descent and distribution, and during the lifetime of an optionee,
     Options granted to him or
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     her hereunder shall be exercisable only by the optionee or, in the event
     that a legal representative has been appointed in connection with the
     Disability of an optionee, such legal representative.
 
          (b) Notwithstanding any limitation on a Key Employee's or Eligible
     Non-Employee's right to transfer an Option, the Committee may (in its sole
     discretion) permit a Key Employee or Eligible Non-Employee to transfer an
     Option, or may cause the Company to grant an Option that otherwise would be
     granted to a Key Employee or Eligible Non-Employee, in any of the following
     circumstances: (a) pursuant to a qualified domestic relations order, (b) to
     a trust established for the benefit of the Key Employee or Eligible
     Non-Employee or one or more of the children, grandchildren, or spouse of
     the Key Employee or Eligible Non-Employee, as applicable; (c) to a limited
     partnership in which all the interests are held by the Key Employee or
     Eligible Non-Employee and that Person's children, grandchildren or spouse;
     or (d) to another Person in circumstances that the Committee believes will
     result in the Option continuing to provide an incentive for the Key
     Employee or Eligible Non-Employee to remain in the service of the Company
     or its Subsidiaries and apply his or her best efforts for the benefit of
     the Company or its Subsidiaries. If the Committee determines to allow such
     transfers or issuances of Option, any Key Employee or Eligible Non-Employee
     desiring such transfers or issuances shall make application therefor in the
     manner and time that the Committee specifies and shall comply with such
     other requirements as the Committee may require to assure compliance with
     all applicable laws, including securities laws, and to assure fulfillment
     of the purposes of this Plan. The Committee shall not authorize any such
     transfer or issuance if it may not be made in compliance with all
     applicable federal, state and foreign securities laws. The granting of
     permission for such an issuance or transfer shall not obligate the Company
     to register the shares of Common Stock to be issued under the applicable
     Option.
 
     11. COMPLIANCE WITH SECURITIES LAWS.
 
          The Company shall not in any event be obligated hereunder to file any
     registration statement under the Securities Act or any applicable state
     securities law to permit exercise of any option or to issue any Common
     Stock in violation of the Securities Act or any applicable state securities
     law. Each optionee (or, in the event of his death or, in the event a legal
     representative has been appointed in connection with his Disability, the
     Person exercising the Option) shall, as a condition to his right to
     exercise any Option, deliver to the Company an agreement or certificate
     containing such representations, warranties and covenants as the Company
     may deem necessary or appropriate to ensure that the issuance of shares of
     Common Stock pursuant to such exercise is not required hereunder to be
     registered under the Securities Act or any applicable state securities law.
 
          Certificates for shares of Common Stock, when issued, may have
     substantially the following legend, or statements of other applicable
     restrictions, endorsed thereon, and may not be immediately transferable:
 
        THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
        REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES
        LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, TRANSFERRED
        OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE
        SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE ISSUER, MAY
        INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH
        OFFER, SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT VIOLATE
        APPLICABLE FEDERAL OR STATE LAWS.
 
          This legend shall not be required for shares of Common Stock issued
     pursuant to an effective registration statement under the Securities Act
     and in accordance with applicable state securities laws.
 
     12. WITHHOLDING TAXES.
 
          By acceptance of the Option, the optionee will be deemed to (i) agree
     to reimburse the Company or Related Entity by which the optionee is
     employed for any federal, state, or local taxes required by any government
     to be withheld or otherwise deducted by such corporation in respect of the
     optionee's exercise of all or a portion of the Option; (ii) authorize the
     Company or any Related Entity by which the optionee
 
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     is employed to withhold from any cash compensation paid to the optionee or
     in the optionee's behalf, an amount sufficient to discharge any federal,
     state, and local taxes imposed on the Company, or the Related Entity by
     which the optionee is employed, and which otherwise has not been reimbursed
     by the optionee, in respect of the optionee's exercise of all or a portion
     of the Option; and (iii) agree that the Company may, in its discretion,
     hold the stock certificate to which the optionee is entitled upon exercise
     of the Option as security for the payment of the aforementioned withholding
     tax liability, until cash sufficient to pay that liability has been
     accumulated, and may, in its discretion, effect such withholding by
     retaining shares issuable upon the exercise of the Option having a Fair
     Market Value on the date of exercise which is equal to the amount to be
     withheld.
 
     13. COSTS AND EXPENSES.
 
          The costs and expenses of administering the Plan shall be borne by the
     Company and shall not be charged against any Option nor to any employee
     receiving an Option.
 
     14. FUNDING OF PLAN.
 
          The Plan shall be unfunded. The Company shall not be required to make
     any segregation of assets to assure the payment of any Option under the
     Plan.
 
     15. OTHER INCENTIVE PLANS.
 
          The adoption of the Plan does not preclude the adoption by appropriate
     means of any other incentive plan for employees.
 
     16. EFFECT ON EMPLOYMENT.
 
          Nothing contained in the Plan or any agreement related hereto or
     referred to herein shall affect, or be construed as affecting, the terms of
     employment of any Key Employee except to the extent specifically provided
     herein or therein. Nothing contained in the Plan or any agreement related
     hereto or referred to herein shall impose, or be construed as imposing, an
     obligation on (i) the Company or any Related Entity to continue the
     employment of any Key Employee, and (ii) any Key Employee to remain in the
     employ of the Company or any Related Entity.
 
     17. DEFINITIONS.
 
          In addition to the terms specifically defined elsewhere in the Plan,
     as used in the Plan, the following terms shall have the respective meanings
     indicated:
 
             (a) "Affiliate" shall mean, as to any Person, a Person that
        directly, or indirectly through one or more intermediaries, controls, or
        is controlled by, or is under common control with, such Person.
 
             (b) "Board of Directors" shall have the meaning set forth in
        Section 2 hereof.
 
             (c) "Change of Control" shall mean the first to occur of the
        following events: (i) any sale, lease, exchange, or other transfer (in
        one transaction or series of related transactions) of all or
        substantially all of the assets of the Company to any Person or group of
        related Persons for purposes of Section 13(d) of the Exchange Act, (ii)
        a majority of the Board of Directors of the Company shall consist of
        Persons who are not Continuing Directors; or (iii) the acquisition by
        any Person or Group (other than Natural Gas Partners II, L.P., Natural
        Gas Partners III, L.P. or any Affiliate thereof) of the power, directly
        or indirectly, to vote or direct the voting of securities having more
        than 50% of the ordinary voting power for the election of directors of
        the Company.
 
             (d) "Code" shall have the meaning set forth in Section 1 hereof.
 
             (e) "Committee" shall have the meaning set forth in Section 2
        hereof.
 
             (f) "Common Stock" shall have the meaning set forth in Section 3
        hereof.
 
                                       E-8
<PAGE>   255
 
             (g) "Company" shall have the meaning set forth in Section 1 hereof.
 
             (h) "Continuing Director" shall mean, as of the date of
        determination, any Person who (i) was a member of the Board of Directors
        of the Company immediately after the Effective Time or (ii) was
        nominated for election or elected to the Board of Directors of the
        Company with the affirmative vote of a majority of the Continuing
        Directors who were members of such Board of Directors at the time of
        such nomination or election.
 
             (i) "Disability" shall mean permanent disability as defined under
        the appropriate provisions of the long-term disability plan maintained
        for the benefit of employees of the Company or any Related Entity who
        are regularly employed on a salaried basis unless another meaning shall
        be agreed to in writing by the Committee and the optionee; provided,
        however, that in the case of an Incentive Option "disability" shall have
        the meaning specified in Section 22(e)(3) of the Code.
 
             (j) "Effective Time" shall mean the time that the proposed merger
        of Midland Merger Co. and Midland Resources, Inc. is effective as such
        merger is contemplated by that certain Agreement and Plan of Merger,
        dated as of May 22, 1998, among Vista Resources Partners, L.P., Midland
        Resources, Inc., Vista Energy Resources, Inc. and Midland Merger Co.
 
             (k) "Eligible Non-Employee" shall have the meaning set forth in
        Section 4 hereof.
 
             (l) "Exchange Act" shall mean the Securities Exchange Act of 1934,
        as amended.
 
             (m) "Fair Market Value" shall, as it relates to the Common Stock,
        mean the average of the high and low prices of such Common Stock as
        reported on the principal national securities exchange on which the
        shares of Common Stock are then listed on the date specified herein, or
        if there were no sales on such date, on the next preceding day on which
        there were sales, or if such Common Stock is not listed on a national
        securities exchange, the last reported bid price in the over-the-
        counter market, or if such shares are not traded in the over-the-counter
        market, the per share cash price for which all of the outstanding Common
        Stock could be sold to a willing purchaser in an arms length transaction
        (without regard to minority discount, absence of liquidity, or transfer
        restrictions imposed by any applicable law or agreement) at the date of
        the event giving rise to a need for a determination. Except as may be
        otherwise expressly provided in a particular Option, Fair Market Value
        shall be determined in good faith by the Committee.
 
             (n) "Good Cause", with respect to any Key Employee, shall mean
        (unless another definition is agreed to in writing by the Company and
        the optionee) termination by action of the Board of Directors because
        of: (A) the optionee's conviction of, or plea of nolo contendere to, a
        felony or a crime involving moral turpitude; (B) the optionee's personal
        dishonesty, incompetence, willful misconduct, willful violation of any
        law, rule, or regulation (other than minor traffic violations or similar
        offenses) or breach of fiduciary duty which involves personal profit;
        (C) the optionee's commission of material mismanagement in the conduct
        of his duties as assigned to him by the Board of Directors or the
        optionee's supervising officer or officers of the Company or any Related
        Entity; (D) the optionee's willful failure to execute or comply with the
        policies of the Company or any Related Entity or his stated duties as
        established by the Board of Directors or the optionee's supervising
        officer or officers of the Company or any Related Entity, or the
        optionee's intentional failure to perform the optionee's stated duties;
        (E) substance abuse or addiction on the part of the optionee. "Good
        Cause", with respect to any Eligible Non-Employee, shall mean (unless
        another definition is agreed to in writing by the Company and the
        optionee) termination by action of the Board of Directors because of:
        (A) the optionee's conviction of, or plea of nolo contendere to, a
        felony or a crime involving moral turpitude; (B) the optionee's personal
        dishonesty, incompetence, willful misconduct, willful violation of any
        law, rule, or regulation (other than minor traffic violations or similar
        offenses) or breach of fiduciary duty which involves personal profit;
        (C) the optionee's commission of material mismanagement in providing
        services to the Company or any Related Entity; (D) the optionee's
        willful failure to comply with the policies of the Company in providing
        services to the Company or any Related Entity, or the optionee's
        intentional failure to perform the
 
                                       E-9
<PAGE>   256
 
        services for which the optionee has been engaged; (E) the optionee's use
        of an unlawful substance on the Company's premises or while performing
        the optionee's duties or responsibilities; or (F) the optionee's
        willfully making any material misrepresentation or willfully omitting to
        disclose any material fact to the board of directors of the Company or
        any Related Entity with respect to the business of the Company or any
        Related Entity. Notwithstanding the foregoing, in the case of any
        optionee who has an employment agreement with the Company or any Related
        Entity that contains a definition of "Good Cause" (or any similar
        definition), then during the term of such employment agreement the
        definition contained in such employment agreement shall be the
        applicable definition of "Good Cause" under the Plan as to such
        optionee.
 
             (o) "Incentive Options" shall have the meaning set forth in Section
        6 hereof.
 
             (p) The term "included" when used herein shall mean "including, but
        not limited to".
 
             (q) "Key Employee" shall have the meaning set forth in Section 4
        hereof.
 
             (r) "Non-Qualified Options" shall have the meaning set forth in
        Section 6 hereof.
 
             (s) "Options" shall have the meaning set forth in Section 1 hereof.
 
             (t) "Person" shall have the meaning set forth in Section 4 hereof,
 
             (u) "Plan" shall have the meaning set forth in Section 1 hereof.
 
             (v) "Related Entities" shall have the meaning set forth in Section
        1 hereof.
 
             (w) "Reorganization" shall have the meaning set forth in Section 9
        hereof.
 
             (x) "Rule 16b-3" shall mean Rule 16b-3, as amended, or other
        applicable rules under Section 16(b) of the Exchange Act.
 
             (y) "Section 162(m)" means Section 162(m) of the Code and the rules
        and regulations adopted from time to time thereunder, or any successor
        law or rule as it may be amended from time to time.
 
             (z) "Securities Act" shall mean the Securities Act of 1933.
 
             (aa) "Subsidiary" shall mean, with respect to any Person, any other
        Person of which such first Person owns or has the power to vote,
        directly or indirectly, securities representing a majority of the votes
        ordinarily entitled to be cast for the election of directors or other
        governing Persons.
 
     18. AMENDMENT OF PLAN.
 
          The Board of Directors shall have the right to amend, modify, suspend
     or terminate the Plan at any time; provided, that no amendment shall be
     made which shall increase the total number of shares of the Common Stock
     which may be issued and sold pursuant to Options granted under the Plan
     unless such amendment is made by or with the approval of the stockholders.
     The Board of Directors shall have the right to amend the Plan and the
     Options outstanding thereunder, without the consent or joinder of any
     optionee or other Person, in such manner as may be determined necessary or
     appropriate by the Board of Directors in order to cause the Plan and the
     Options outstanding thereunder (i) to qualify as "incentive stock options"
     within the meaning of Section 422 of the Code, (ii) to comply with Rule
     16b-3 (or any successor rule) under the Exchange Act (or any successor law)
     and the regulations (including any temporary regulations) promulgated
     thereunder, or (iii) to comply with Section 162(m) of the Code (or any
     successor section) and the regulations (including any temporary
     regulations) promulgated thereunder. Except as provided above, no
     amendment, modification, suspension or termination of the Plan shall alter
     or impair any Options previously granted under the Plan, without the
     consent of the holder thereof.
 
                                      E-10
<PAGE>   257
 
     19. INDIVIDUAL LIMITATIONS ON AWARDS.
 
          No Person may be granted during any one year period, Options with
     respect to more than 250,000 shares of Common Stock. If an Option is
     canceled, the canceled Option shall continue to be counted against the
     maximum number of shares of Common Stock for which Options may be granted
     to such Person under the Plan. If, after grant, the exercise price of an
     Option is reduced, the transaction shall be treated as a cancellation of
     the Option and the grant of a new Option. In such case, both the Option
     that is deemed to be canceled and the Option that is deemed to be granted
     reduce the maximum number of shares for which Options may be granted to
     such Person under the Plan.
 
     20. EFFECTIVE DATE.
 
          The Plan shall become effective at the Effective Time.
 
                                      E-11
<PAGE>   258
 
                                    PART II
 
                   INFORMATION NOT REQUIRED IN THE PROSPECTUS
 
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     Section 145 of the Delaware General Corporation Law, inter alia, authorizes
a corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding (other than an action by or in the right of the corporation) because
the person is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
enterprise against expenses (including attorneys fees), judgment, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with the suit or proceeding if the person acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reason to believe his conduct was unlawful. Similar indemnity is authorized
against expenses (including attorneys fees) actually and reasonably incurred in
defense or settlement of any pending, completed or threatened action or suit by
or in the right of the corporation if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and provided further that (unless a court of competent
jurisdiction otherwise provides) the person shall not have been adjudged liable
to the corporation. The indemnification may be made only as authorized in each
specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct.
 
     Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him in any capacity,
or arising out of his status as such, whether or not the corporation would
otherwise have the power to indemnify him. Vista will maintain policies insuring
the officers and directors of Vista and its subsidiaries against certain
liabilities for actions taken in their capacities, including liabilities under
the Securities Act.
 
     Article Twelve of Vista's Certificate of Incorporation provides as follows:
 
          A director of the Corporation shall not be personally liable to the
     Corporation or its stockholders for monetary damages for breach of
     fiduciary duty as a director, except for liability (1) for any breach of
     the director's duty of loyalty to the Corporation or its stockholders, (2)
     for acts or omissions not in good faith or which involve intentional
     misconduct or knowing violation of law, (3) under Section 174 of the DGCL,
     as the same exists or as such provision may hereafter be amended,
     supplemented or replaced, or (4) for any transaction from which the
     director derived an improper personal benefit. Any repeal or amendment of
     this Article Twelfth by the stockholders of the Corporation shall be
     prospective only, and shall not adversely affect any limitation on the
     personal liability of a director of the Corporation arising from an act or
     omission occurring prior to the time of such repeal or amendment. In
     addition to the circumstances in which a director of the Corporation is not
     personally liable as set forth in the foregoing provisions of this Article
     Twelfth, a director shall not be liable to the Corporation or its
     stockholders to such further extent as permitted by any law hereafter
     enacted, including without limitation any subsequent amendment to the DGCL.
     Notwithstanding any other provisions of this Certificate of Incorporation
     or any provision of law that might otherwise permit a lesser or no vote,
     but in addition to any affirmative vote of the holders of any particular
     class or series of the capital stock of the Corporation required by law or
     by this Certificate of Incorporation, the affirmative vote of the holders
     of not less than two-thirds in voting power of the shares of the
     Corporation then entitled to be voted in an election of directors, voting
     together for a single class, shall be required to amend or repeal or to
     adopt any provision inconsistent with this Article Twelfth.
 
                                      II-1
<PAGE>   259
 
     Article Eleven of Vista's Certificate of Incorporation provides as follows:
 
          The Corporation shall indemnify any person who was, is, or is
     threatened to be made a party to a proceeding (as hereinafter defined) by
     reason of the fact that he or she (1) is or was a director or officer of
     the Corporation or (2) while a director or officer of the Corporation, is
     or was serving at the request of the Corporation as a director, officer,
     partner, venturer, proprietor, trustee, employee, agent or similar
     functionary of another foreign or domestic Corporation, limited liability
     company, association, partnership, joint venture, sole proprietorship,
     trust, employee benefit plan or other enterprise, entity or organization,
     to the fullest extent permitted under the DGCL, as the same exists or may
     hereafter be amended. Such right shall be a contract right as such shall
     run to the benefit of any director or officer who is elected and accepts
     the position of director or officer of the Corporation or elects to
     continue to serve as a director or officer of the Corporation while this
     Article Eleventh is in effect. Any repeal or amendment of this Article
     Eleventh shall be prospective only and shall not limit the rights of any
     such director or officer or the obligations of the Corporation with respect
     to any claim arising from or related to the services of such director or
     officer in any of the foregoing capacities prior to any such repeal or
     amendment to this Article Eleventh. Such right shall include the right to
     be paid by the Corporation expenses (including attorneys' fees) incurred in
     defending any such proceeding in advance of its final disposition to the
     maximum extent permitted under the DGCL, as the same exists or may
     hereafter be amended. If a claim for indemnification or advancement of
     expenses hereunder is not paid in full by the Corporation within sixty days
     after a written claim has been received by the Corporation, the claimant
     may at any time thereafter bring suit against the Corporation to recover
     the unpaid amount of the claim, and, if successful in whole or in part, the
     claimant shall also be entitled to be paid the expenses of prosecuting such
     claim. It shall be a defense to any such action that such indemnification
     is not permitted under the DGCL, but the burden of proving such defense
     shall be on the Corporation. Neither the failure of the Corporation
     (including its board of directors or any committee thereof, independent
     legal counsel or stockholders) to have made its determination prior to the
     commencement of such action that indemnification of the claimant is
     permissible in the circumstances nor an actual determination by the
     Corporation (including its board of directors or any committee thereof,
     independent legal counsel or stockholders) that such indemnification is not
     permissible shall be a defense to the action or create a presumption that
     such indemnification is not permissible. In the event of the death of any
     person having a right of indemnification under the forgoing provisions,
     such right shall inure to the benefit of his or her heirs, executors,
     administrators, and personal representatives. The rights conferred above
     shall not be exclusive of any other right which any person may have or
     hereafter acquire under any statute, bylaw, resolution of stockholders or
     directors, agreement or otherwise.
 
     The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
 
     As used herein, the term "proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative, any appeal in such an action, suit or proceeding,
and any inquiry or investigation that could lead to such an action, suit or
proceeding.
 
INDEMNIFICATION AGREEMENTS
 
     Vista will enter into indemnification agreements with each of its directors
and officers. These agreements will require Vista to indemnify its directors and
officers to the fullest extent permitted by the Delaware General Corporation Law
and to advance expenses in connection with certain claims against directors and
officers.
 
     Under the terms of the Indemnification Agreements, Vista will agree to
indemnify and hold harmless its directors and officers against any costs or
expense (including reasonable attorneys fees), judgments, fines, losses, claims,
damages or liabilities arising out of the fact that he is or was a director or
officer of Vista or any of its subsidiaries.
 
                                      II-2
<PAGE>   260
 
     The Indemnification Agreements will also include provisions that specify
the procedures and presumptions that are to be employed to determine whether an
Indemnitee is entitled to indemnification thereunder. In some cases, the nature
of the procedures specified in the Indemnification Agreements varies depending
on whether there has occurred a "Change of Control" (as defined in the
Indemnification Agreements) of Vista.
 
     Vista intends to maintain in effect director's and officer's liability
insurance policies providing customary coverage for its directors and officers
against losses resulting from wrongful acts committed by them in their
capacities as directors and officers of Vista.
 
     The above discussion of Vista's Certificate of Incorporation and of Section
145 of the Delaware General Corporation Law is not intended to be exhaustive and
is respectively qualified in its entirety by the Vista Certificate of
Incorporation and such statute.
 
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
     The following exhibits are filed herewith unless otherwise indicated:
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                            DESCRIPTION OF DOCUMENT
        -------                            -----------------------
<C>                      <S>
           2.1           -- Agreement and Plan of Merger, dated as of May 22, 1998,
                            among Vista Resources Partners, L.P., Midland Resources,
                            Inc., Vista Energy Resources, Inc. and Midland Merger Co.
                            (included as Appendix A to the Proxy
                            Statement/Prospectus).
           2.2           -- Form of Midland Exchange Agreement by and among Vista
                            Energy Resources, Inc. and certain securityholders of
                            Midland Resources, Inc. (included as Appendix B to the
                            Proxy Statement/Prospectus).
           2.3           -- Form of Vista Exchange Agreement by and among Vista
                            Energy Resources, Inc. and securityholders of Vista
                            Resources I, Inc. and Vista Resources Partners, L.P.
                            (included as Appendix C to the Proxy
                            Statement/Prospectus).
           3.1           -- Certificate of Incorporation of Vista Energy Resources,
                            Inc.
           3.2           -- Bylaws of Vista Energy Resources, Inc.
          *4.1           -- Specimen Stock Certificate for the Common Stock, par
                            value $.01 per share, of Vista Energy Resources, Inc.
           4.2           -- Form of Registration Rights Agreement by and among Vista
                            Energy Resources, Inc. and certain securityholders of
                            Vista Resources I, Inc. and Vista Resources Partners,
                            L.P.
           4.3           -- Form of Registration Rights Agreement by and among Vista
                            Energy Resources, Inc. and certain securityholders of
                            Midland Resources, Inc.
           4.4           -- Form of Vista Warrant of Vista Energy Resources, Inc.
          *5.1           -- Opinion of Vinson & Elkins L.L.P. regarding legality of
                            securities being registered.
          *8.1           -- Opinion of Arthur Andersen LLP regarding tax matters.
          10.1           -- Contract Operating Agreement, effective as of June 1,
                            1998, by and between Vista Resources, Inc. and Midland
                            Resources Operating Company, Inc.
          10.2           -- Warley Settlement Agreement, dated May 22, 1998, between
                            Midland Resources, Inc. and Deas H. Warley III.
          10.3           -- Release and Hold Harmless Agreement, dated May 22, 1998,
                            between Marilyn D. Wade, Deas H. Warley III and Midland
                            Resources, Inc.
          10.4           -- Form of Advisory Services Agreement between Vista Energy
                            Resources, Inc., Natural Gas Partners II, L.P. and
                            Natural Gas Partners III, L.P.
          10.5           -- Amended and Restated Credit Agreement, dated August 15,
                            1997, between Vista Resources Partners, L.P. and Union
                            Bank of California, N.A.
</TABLE>
 
                                      II-3
<PAGE>   261
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                            DESCRIPTION OF DOCUMENT
        -------                            -----------------------
<C>                      <S>
          10.6           -- Amendment No. 1, dated May 12, 1998, to the Amended and
                            Restated Credit Agreement between Vista Partners, L.P.
                            and Union Bank of California, N.A.
          10.7           -- Vista Energy Resources, Inc. 1998 Key Employee Stock
                            Option Plan (included as Appendix E to the Proxy
                            Statement/Prospectus.
          10.8           -- Form of Midland Option Exercise Agreement.
          10.9           -- Form of Indemnification Agreement by and between Vista
                            Energy Resources, Inc. and each of its directors and
                            executive officers.
          10.10          -- Form of Indemnification Agreement by and between Vista
                            Energy Resources, Inc. and each of the directors and
                            executive officers of Midland Resources, Inc.
          10.11          -- Termination Agreement, dated May 22, 1998, by and among
                            Vista Energy Resources, Inc., Midland Resources, Inc. and
                            Howard E. Ehler.
          10.12          -- Termination Agreement, dated May 22, 1998, by and among
                            Vista Energy Resources, Inc., Midland Resources, Inc. and
                            Marilyn D. Wade.
          10.13          -- Office Lease dated October 10, 1996 between Vista
                            Resources, Inc. and Fasken Center, Ltd.
          10.14          -- Lease Amendment dated September 18, 1997 between Vista
                            Resources, Inc. and Fasken Center, Ltd.
          21.1           -- Subsidiaries of Vista Energy Resources, Inc.
          23.1           -- Consent of Arthur Andersen LLP.
          23.2           -- Consent of Grant Thornton LLP.
          23.3           -- Consent of Ernst & Young LLP.
          23.4           -- Consent of Williamson Petroleum Consultants, Inc.
          24.1           -- Power of Attorney (included herein on signature page).
          27.1           -- Financial Data Schedule for the three months ended March
                            31, 1998.
          27.2           -- Financial Data Schedule for the year ended December 31,
                            1997.
          99.1           -- Opinion dated June 30, 1998 of Dain Rauscher Wessels, a
                            division of Dain Rauscher Incorporated (included as
                            Appendices D-1 and D-2 to the Proxy
                            Statement/Prospectus).
         *99.2           -- Consent of C. Randall Hill as a Person About to Become a
                            Director.
         *99.3           -- Consent of Steven D. Gray as a Person About to Become a
                            Director.
         *99.4           -- Consent of Kenneth A. Hersh as a Person About to Become a
                            Director.
         *99.5           -- Consent of David R. Albin as a Person About to Become a
                            Director.
         *99.6           -- Consent of John S. Foster as a Person About to Become a
                            Director.
         *99.7           -- Consent of Midland Appointee as a Person About to Become
                            a Director.
          99.8           -- Form of Proxy for Stockholders of Midland Resources, Inc.
</TABLE>
 
---------------
 
* To be filed by Amendment
 
ITEM 22. UNDERTAKINGS
 
     The undersigned registrant hereby undertakes as follows:
 
          (a) (1) That prior to any public reoffering of the securities
     registered hereunder through use of a prospectus that is a part of this
     registration statement, by any person who is deemed to be an underwriter
     within the meaning of Rule 145(c), the issuer undertakes that such
     reoffering prospectus will contain information called for by the applicable
     registration form with respect to reofferings by persons who may
                                      II-4
<PAGE>   262
 
     be deemed underwriters, in addition to the information called for by the
     other Items of the applicable form;
 
          (2) That every prospectus (i) that is filed pursuant to paragraph (1)
     immediately preceding, or (ii) that purports to meet the requirements of
     Section 10(a)(3) of the Securities Act, and is used in connection with an
     offering of securities subject to Rule 415, will be filed as a part of an
     amendment to the registration statement and will not be used until such
     amendment is effective, and that, for purposes of determining any liability
     under the Securities Act, each such post-effective amendment shall be
     deemed to be a new registration statement relating to the securities
     offered therein, and the offering of such securities at that time shall be
     deemed to be the initial bona fide offering thereof;
 
          (b) Insofar as indemnification for liabilities arising under the
     Securities Act may be permitted to directors, officers and controlling
     persons of the registrant pursuant to the foregoing provisions, or
     otherwise, the registrant has been advised that in the opinion of the
     Securities and Exchange Commission such indemnification is against public
     policy as expressed in the Securities Act and is, therefore, unenforceable.
     In the event that a claim for indemnification against such liabilities
     (other than the payment by the registrant of expenses incurred or paid by a
     director, officer or controlling person of the registrant in the successful
     defense of any action, suit or proceeding) is asserted by such director,
     officer or controlling person in connection with the securities being
     registered, the registrant will, unless in the opinion of its counsel the
     matter has been settled by controlling precedent, submit to a court of
     appropriate jurisdiction the question whether such indemnification by it is
     against public policy as expressed in the Securities Act and will be
     governed by the final adjudication of such issue;
 
          (c) To supply by means of a post-effective amendment all information
     concerning a transaction, and the company being acquired involved therein,
     that was not the subject of and included in the registration statement when
     it became effective.
 
                                      II-5
<PAGE>   263
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act, the registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Midland, State of Texas,
on the 2nd day of July, 1998.
 
                                            VISTA ENERGY RESOURCES, INC.
 
                                            By:     /s/ C. RANDALL HILL
                                              ----------------------------------
                                                       C. Randall Hill
                                                 Chairman and Chief Executive
                                                            Officer
 
                               POWER OF ATTORNEY
 
     KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints C. Randall Hill his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments to this Proxy Statement/Prospectus, including post-effective
amendments, and to file the same, with all exhibits thereto, and all documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, and hereby ratifies and confirms that said attorney-in-fact and agent
may lawfully do or cause to be done.
 
     Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                     DATE
                      ---------                                     -----                     ----
<C>                                                    <S>                                <C>
                 /s/ C. RANDALL HILL                   Chief Executive Officer and        July 2, 1998
-----------------------------------------------------    Chairman of the Board
                   C. Randall Hill                       (Principal Executive Officer
                                                         and Principal Accounting
                                                         Officer)
 
                /s/ KENNETH A. HERSH                   Director                           July 2, 1998
-----------------------------------------------------
                  Kenneth A. Hersh
</TABLE>
 
                                      II-6
<PAGE>   264
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                            DESCRIPTION OF DOCUMENT
        -------                            -----------------------
<C>                      <S>
           2.1           -- Agreement and Plan of Merger, dated as of May 22, 1998,
                            among Vista Resources Partners, L.P., Midland Resources,
                            Inc., Vista Energy Resources, Inc. and Midland Merger Co.
                            (included as Appendix A to the Proxy
                            Statement/Prospectus).
           2.2           -- Form of Midland Exchange Agreement by and among Vista
                            Energy Resources, Inc. and certain securityholders of
                            Midland Resources, Inc. (included as Appendix B to the
                            Proxy Statement/Prospectus).
           2.3           -- Form of Vista Exchange Agreement by and among Vista
                            Energy Resources, Inc. and securityholders of Vista
                            Resources I, Inc. and Vista Resources Partners, L.P.
                            (included as Appendix C to the Proxy
                            Statement/Prospectus).
           3.1           -- Certificate of Incorporation of Vista Energy Resources,
                            Inc.
           3.2           -- Bylaws of Vista Energy Resources, Inc.
          *4.1           -- Specimen Stock Certificate for the Common Stock, par
                            value $.01 per share, of Vista Energy Resources, Inc.
           4.2           -- Form of Registration Rights Agreement by and among Vista
                            Energy Resources, Inc. and certain securityholders of
                            Vista Resources I, Inc. and Vista Resources Partners,
                            L.P.
           4.3           -- Form of Registration Rights Agreement by and among Vista
                            Energy Resources, Inc. and certain securityholders of
                            Midland Resources, Inc.
           4.4           -- Form of Vista Warrant of Vista Energy Resources, Inc.
          *5.1           -- Opinion of Vinson & Elkins L.L.P. regarding legality of
                            securities being registered.
          *8.1           -- Opinion of Arthur Andersen LLP regarding tax matters.
          10.1           -- Contract Operating Agreement, effective as of June 1,
                            1998, by and between Vista Resources, Inc. and Midland
                            Resources Operating Company, Inc.
          10.2           -- Warley Settlement Agreement, dated May 22, 1998, between
                            Midland Resources, Inc. and Deas H. Warley III.
          10.3           -- Release and Hold Harmless Agreement, dated May 22, 1998,
                            between Marilyn D. Wade, Deas H. Warley III and Midland
                            Resources, Inc.
          10.4           -- Form of Advisory Services Agreement between Vista Energy
                            Resources, Inc., Natural Gas Partners II, L.P. and
                            Natural Gas Partners III, L.P.
          10.5           -- Amended and Restated Credit Agreement, dated August 15,
                            1997, between Vista Resources Partners, L.P. and Union
                            Bank of California, N.A.
          10.6           -- Amendment No. 1, dated May 12, 1998, to the Amended and
                            Restated Credit Agreement between Vista Partners, L.P.
                            and Union Bank of California, N.A.
          10.7           -- Vista Energy Resources, Inc. 1998 Key Employee Stock
                            Option Plan (included as Appendix E to the Proxy
                            Statement/Prospectus).
          10.8           -- Form of Midland Option Exercise Agreement.
          10.9           -- Form of Indemnification Agreement by and between Vista
                            Energy Resources, Inc. and each of its directors and
                            executive officers.
          10.10          -- Form of Indemnification Agreement by and between Vista
                            Energy Resources, Inc. and each of the directors and
                            executive officers of Midland Resources, Inc.
          10.11          -- Termination Agreement, dated May 22, 1998, by and among
                            Vista Energy Resources, Inc., Midland Resources, Inc. and
                            Howard E. Ehler.
</TABLE>
<PAGE>   265
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                            DESCRIPTION OF DOCUMENT
        -------                            -----------------------
<C>                      <S>
          10.12          -- Termination Agreement, dated May 22, 1998, by and among
                            Vista Energy Resources, Inc., Midland Resources, Inc. and
                            Marilyn D. Wade.
          10.13          -- Office Lease dated October 10, 1996 between Vista
                            Resources, Inc. and Fasken Center, Ltd.
          10.14          -- Lease Amendment dated September 18, 1997 between Vista
                            Resources, Inc. and Fasken Center, Ltd.
          21.1           -- Subsidiaries of Vista Energy Resources, Inc.
          23.1           -- Consent of Arthur Andersen LLP.
          23.2           -- Consent of Grant Thornton LLP.
          23.3           -- Consent of Ernst & Young LLP.
          23.4           -- Consent of Williamson Petroleum Consultants, Inc.
          24.1           -- Power of Attorney (included herein on signature page).
          27.1           -- Financial Data Schedule for the three months ended March
                            31, 1998.
          27.2           -- Financial Data Schedule for the year ended December 31,
                            1997.
          99.1           -- Opinion dated June 30, 1998 of Dain Rauscher Wessels, a
                            division of Dain Rauscher Incorporated (included as
                            Appendices D-1 and D-2 to the Proxy
                            Statement/Prospectus).
         *99.2           -- Consent of C. Randall Hill as a Person About to Become a
                            Director.
         *99.3           -- Consent of Steven D. Gray as a Person About to Become a
                            Director.
         *99.4           -- Consent of Kenneth A. Hersh as a Person About to Become a
                            Director.
         *99.5           -- Consent of David R. Albin as a Person About to Become a
                            Director.
         *99.6           -- Consent of John S. Foster as a Person About to Become a
                            Director.
         *99.7           -- Consent of Midland Appointee as a Person About to Become
                            a Director.
          99.8           -- Form of Proxy for Stockholders of Midland Resources, Inc.
</TABLE>
 
---------------
 
* To be filed by Amendment