BAYARD DRILLING TECHNOLOGIES INC, 424B4, 1997-11-04

BAYARD DRILLING TECHNOLOGIES INC
424B4, 1997-11-04
OIL & GAS FIELD MACHINERY & EQUIPMENT

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<PAGE> 1

Filed pursuant to Rule 424(b)(4)
Registration Number 333-34451

PROSPECTUS
NOVEMBER 4, 1997

9,600,000 SHARES

[BAYARD DRILLING TECHNOLOGIES, INC. LOGO]

COMMON STOCK

Of the 9,600,000 shares of common stock, par value $0.01 per share ("Common
Stock"), of Bayard Drilling Technologies, Inc. ("Bayard" or the "Company")
offered hereby (the "Offering"), 4,000,000 shares are being sold by Bayard and
5,600,000 shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). The Company will not receive any of the proceeds from
the sale of shares of Common Stock by the Selling Stockholders pursuant to the
Offering. See "Use of Proceeds" and "Principal and Selling Stockholders."

Prior to the Offering, there has been no public market for the Common
Stock. For information relating to the factors considered in determining the
initial offering price to the public of the Common Stock, see "Underwriting."

The Common Stock has been approved for listing on the American Stock
Exchange ("AMEX"), subject to official notice of issuance, under the symbol
"BDI."

SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.............................. $23.00 $1.5525 $21.4475 $21.4475
Total(3)............................... $220,800,000 $14,904,000 $85,790,000 $120,106,000
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). See
"Underwriting."
(2) Before deducting expenses estimated at $1,200,000 which will be paid by the
Company.
(3) The Company and certain of the Selling Stockholders have granted the
Underwriters an option, exercisable within 30 days of the date hereof, to
purchase up to 229,050 and 1,210,950 additional shares of Common Stock,
respectively, at the Price to the Public less Underwriting Discounts and
Commissions, solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to the Public, Underwriting Discounts and
Commissions, Proceeds to the Company and Proceeds to the Selling
Stockholders will be $253,920,000, $17,139,600, $90,702,550 and
$146,077,850, respectively. See "Underwriting."

The shares of Common Stock are being offered by the several Underwriters
when, as and if delivered to and accepted by the Underwriters against payment
therefor and subject to various prior conditions, including their right to
reject orders in whole or in part. It is expected that delivery of share
certificates representing the Common Stock will be made in New York, New York on
or about November 7, 1997.

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LEHMAN BROTHERS
PRUDENTIAL SECURITIES INCORPORATED
RAUSCHER PIERCE REFSNES, INC.
RAYMOND JAMES & ASSOCIATES, INC.
<PAGE> 2

[MAP OF OPERATING LOCATIONS]

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus. Unless otherwise indicated, all information contained in this
Prospectus (i) assumes that the Underwriters' over-allotment option is not
exercised, (ii) reflects a two-for-one stock split effected by means of a stock
dividend to stockholders of record on August 22, 1997 and (iii) for the purposes
of operating data, fleet statistics, shares outstanding and, where specified,
operating results, gives pro forma effect to the October 16, 1997 acquisition
(the "Bonray Acquisition") of Bonray Drilling Corporation ("Bonray"), as
described below. Unless the context otherwise requires, the terms "Bayard" and
the "Company" include Bayard Drilling Technologies, Inc. and its predecessors
and subsidiaries.

THE COMPANY

The Company is a leading provider of contract land drilling services to
major and independent oil and gas companies and operates the fifth largest land
drilling fleet in the United States. As of September 30, 1997, the Company's rig
fleet consisted of 54 rigs (including 13 rigs acquired in the Bonray
Acquisition), of which 48 were being marketed and six were to be refurbished and
expected to be placed in operation within the next 12 months. During the nine
months ended September 30, 1997, the Company experienced a utilization rate of
approximately 94% for its marketed rigs.

The Company's fleet consists primarily of rigs capable of deep drilling
applications (well depths of 15,000 feet or greater). The Company believes that
deep rigs are in high demand due to improved deep drilling economics available
to domestic oil and gas companies. Deep drilling targets are more attractive to
oil and gas companies due to new technologies, including (i) three-dimensional
seismic techniques, (ii) increasingly accurate down hole measurement devices and
(iii) improved guidance systems and directional drilling motors for horizontal
and directional wells. Examples of currently active deep drilling areas include
the Tuscaloosa trend in Louisiana, the Pinnacle Reef trend in East Texas, the
Anadarko and Arkoma basins in Oklahoma and the Austin Chalk in Texas and
Louisiana.

The Company's fleet includes 38 rigs capable of drilling to depths of
15,000 feet or greater, 25 of which are capable of drilling to depths of 20,000
feet or greater. Of these 38 rigs, 21 are diesel electric silicon controlled
rectifier ("SCR") rigs which offer operators superior control and efficiency,
particularly in deep, directional or horizontal applications. Of the five
largest domestic land drillers, the Company ranked first in average measured
depth per well drilled for the nine month period ended September 30, 1997.

The Company's fleet is concentrated in its two core operating
regions -- the Mid-Continent region (which includes principally Oklahoma, North
Texas and the Texas Panhandle) and the Gulf Coast region of Texas and Louisiana.
At September 30, 1997, the Company had 35 rigs marketed in Oklahoma (including
11 of the rigs acquired in the Bonray Acquisition) and was the most active land
drilling contractor in the state. In 1996, 1,835 onshore wells were drilled in
Oklahoma, making it the third most active state for domestic onshore drilling.
The Company's rigs operating in the Mid-Continent region are generally capable
of drilling to depths of 10,000 feet or greater and are marketed by the Company
to meet the specific well depth and mobility needs of producers in that region.
At September 30, 1997, the Company had 13 rigs marketed in the Gulf Coast
region, including 11 diesel electric SCR rigs. This region is characterized by
significant drilling activity in deep, technically challenging formations for
which the Company's rigs are particularly well suited. The Company believes that
its high quality equipment, including diesel electric SCR rigs, powerful mud
pumps and high horsepower drawworks, gives the Company a competitive advantage
in attracting premium jobs with customers engaged in multi-well horizontal
drilling programs. In May 1997, one of the Company's rigs drilled a horizontal
well in the Gulf Coast region to a vertical depth of 18,700 feet before
initiating a horizontal lateral of 3,239 feet. The Company believes this to be
the deepest vertical depth at which a horizontal lateral has ever been
initiated.

The Company was formed in December 1996 as the successor to Anadarko
Drilling Company ("Anadarko"), which owned ten rigs, including two rigs
requiring refurbishment. At the time of its formation,
3
<PAGE> 4

the Company also purchased six rigs requiring refurbishment. Since that time,
the Company has aggressively pursued acquisitions of rigs and components, and
through October 16, 1997 had acquired 38 additional rigs (net of sales). Some of
these acquired rigs required refurbishment before the Company placed such rigs
in service. Many of the acquired and refurbished rigs were put into service in
May and June 1997, and therefore did not contribute significantly to operating
results through June 30, 1997. The Company expects these rigs to be operational
and to contribute to its profitability throughout the second half of 1997.

BUSINESS STRATEGY

The Company believes that growth in earnings and cash flow can be achieved
by pursuing the following business strategy:

Operating a Technologically Advanced Rig Fleet. The Company has assembled
its existing rig fleet, and will pursue further acquisitions, with the goal of
operating one of the most technologically sophisticated land drilling fleets in
the United States. Many of the Company's rigs include engines, pumps and
drilling mud systems that represent the best drilling technology available and
that the Company believes offer greater efficiencies for customers than many of
the rigs available from its competitors. For example, by deploying its diesel
electric SCR rigs with two or three high horsepower pumps and top drive drilling
systems in challenging deep and horizontal drilling situations, the Company
believes that it can reduce its customers' overall drilling costs, thus securing
and enhancing its relationships with some of the most active operators in the
domestic market. The Company is committed to making the capital investments
required to maintain, and in appropriate circumstances, increase the
technological sophistication and operational efficiencies of its fleet.

Developing Deep Drilling Capabilities. The Company believes demand has been
particularly strong for rigs capable of drilling deeper, more complex wells,
including 1,500 horsepower and larger rigs, and has focused, and will continue
to focus, on acquiring rigs with these capabilities. Management believes that
demand and utilization rates for these types of rigs, particularly SCR rigs,
will remain higher than for rigs with lesser depth capacities due to their
greater operational flexibility and efficiency. At September 30, 1997, 70% of
the Company's rig fleet had deep drilling capability (15,000 feet or greater).
In the nine months ended September 30, 1997, the Company's average depth per
well drilled was 13,016 feet, compared to the national average of 7,100 feet.

Focusing on Core Markets. The Company believes that its strong asset
position and operating expertise in the Mid-Continent and Gulf Coast regions
enable it to achieve operating efficiencies and to provide premium service to
its customers in these markets. The Company is the largest provider of drilling
rigs in Oklahoma and is among the largest operators of deep rigs in the onshore
Gulf Coast region.

Developing and Maintaining Relationships with Strong Operators. In order to
maximize the utilization rate of its rig fleet and to minimize exposure to
market downturns, the Company seeks to maintain and build relationships with
operators committed to active domestic drilling programs. The Company's largest
current customers include Apache Corporation, Chesapeake Energy Corporation,
Enron Oil and Gas Company, Marathon Oil Company, Sonat Exploration Company and
Union Pacific Resources Corporation. Each of these companies was among the most
active onshore operators in the United States during the last three years.
During the six months ended June 30, 1997 (pro forma for the Consolidation
Transactions, as hereinafter defined), the three largest customers for the
Company's contract drilling services were Chesapeake Energy Corporation,
Marathon Oil Company and Sonat Exploration Company, which accounted for
approximately 22%, 10% and 6% of total revenues, respectively.

Acquiring and Refurbishing Additional Rigs and Related Equipment. The
Company intends to continue acquiring additional rigs and related equipment,
including top drive drilling systems. Additionally, the Company has experience
in the acquisition of component parts from which rigs can be assembled or
refurbished and intends to continue to seek opportunities for the expansion and
enhancement of its rig fleet by such means. Since its formation and through
October 16, 1997, the Company has acquired 38 land rigs (net of sales) in eight
transactions. At June 30, 1997, after giving effect to the application of the
proceeds of the Offering, the Company would have had a total debt to total
capitalization ratio of 8.6% and cash of
4
<PAGE> 5

$58.3 million, positioning the Company with the strong balance sheet needed to
be an active acquiror of rigs and components.

DOMESTIC LAND DRILLING INDUSTRY OVERVIEW

The land drilling industry is experiencing higher utilization, increasing
day rates and improved financial performance as a result of a long-term decline
in the supply of rigs and increased demand for rigs attributable to improved oil
and gas industry fundamentals. Industry sources estimate that from its peak in
1982, the supply of domestic land rigs had fallen by 72% through October 1997 as
a result of normal attrition, cannibalization of components to refurbish rigs,
the inability of smaller competitors to raise capital needed to upgrade and
modernize rigs and the export of rigs to international markets. Greater demand
in the industry is evidenced by the increase in the active domestic land rig
count to 1,032 in September 1997 from 790 in September 1996, according to data
published by Baker Hughes Incorporated. The Company believes that the domestic
land drilling industry is currently experiencing utilization rates of
approximately 86% for actively marketed rigs. While these market conditions have
led to increasing day rates in the Company's core areas, the Company does not
believe that such rates have reached levels that would justify the construction
of new rigs.

Beyond the diminished size of the rig fleet, the domestic land drilling
industry is also benefitting from improved fundamentals among domestic oil and
gas exploration and production companies. In particular, new technologies and
improved operating efficiencies have increased drilling success rates, lowered
finding costs and enhanced the industry's profitability recently as compared to
the late 1980's and early 1990's. In addition, the financial positions of many
domestic oil and gas companies, and their access to additional capital, have
improved in recent years, affording these companies the ability to fund
aggressive drilling programs. From 1992 to 1996, the total equity market
capitalization of 35 of the largest domestic exploration and production
companies grew from approximately $255 billion to approximately $465 billion and
their aggregate annual capital expenditures increased from $10.5 billion to
$16.5 billion. The Company believes that these improved industry fundamentals
have allowed oil and gas companies to maintain more consistently active drilling
programs, even in periods of lower commodity prices.

Much of the new technology being employed in the oil and gas industry has
increased demand for rigs capable of drilling deeper wells efficiently and
accurately. For example, more sophisticated and longer life drilling motors and
measurement-while-drilling devices have made deep horizontal drilling less
expensive and more precise. Three-dimensional seismic techniques have also
increased the demand for deep rigs. This technology permits geoscientists to
develop a more complete understanding of deep, complex geology prior to drilling
a well. As shallower fields continue to deplete, oil and gas companies are
likely to continue to pursue deep drilling prospects to maintain or increase
their production levels. While demand for land rigs capable of drilling greater
than 15,000 feet has grown significantly, the supply of such rigs is limited,
contributing to rapid increases in day rates for rigs with these capabilities.

Driven by expectations of improved economic returns and the fundamentals
discussed above, the domestic land drilling industry has experienced a period of
significant consolidation. In 1996, approximately 33% of the footage drilled in
the United States was drilled by only five contractors, down from 25 in 1993.
This consolidation is ongoing, and the Company believes that approximately 26
transactions involving the acquisition of approximately 404 domestic land rigs
have been announced from September 1996 through September 1997, including
acquisitions by the Company.
5
<PAGE> 6

FORMATION AND ACQUISITIONS

Formation Transactions. The Company was formed in December 1996 through a
series of affiliated entity transactions in which the Company became the
successor to Anadarko, the contract drilling subsidiary of privately held AnSon
Partners Limited Partnership (together with its affiliates, "APLP"). In
connection with the formation of the Company (i) APLP contributed ten drilling
rigs, including two rigs requiring refurbishment, for shares of Common Stock,
(ii) Roy T. Oliver and related entities and Energy Spectrum Partners LP ("Energy
Spectrum") exchanged six additional drilling rigs and cash, respectively, for
shares of Common Stock and (iii) Chesapeake Energy Corporation ("Chesapeake")
entered into drilling contracts with two-year terms for six of the Company's
rigs in consideration for an option to purchase shares of Common Stock
(together, the "Formation Transactions"). See "Business -- Formation and
Acquisitions." Since the Formation Transactions, the Company has enhanced its
original fleet through acquisitions and refurbishment of rigs as described
below.

Trend Acquisition. In May 1997, the Company completed the acquisition of
Trend Drilling Co. ("Trend") for $18 million in cash and 250,000 shares of
Common Stock (the "Trend Acquisition"). Trend has operated a land drilling
business in the Mid-Continent region since 1976. Of the 14 rigs acquired from
Trend, three are diesel electric SCR rigs and seven have depth capacities of
15,000 feet or greater. The Company retained substantially all of Trend's
operating personnel.

Ward Acquisition. Also in May 1997, the Company acquired the assets of Ward
Drilling Company, Inc. ("Ward") for $8 million in cash, 400,000 shares of Common
Stock and warrants to purchase an additional 200,000 shares of Common Stock (the
"Ward Acquisition"). Ward has operated a land drilling business in the
Mid-Continent region since 1981. In the Ward Acquisition, the Company acquired
six drilling rigs, including three rigs with depth capacities of 15,000 feet or
greater, further enhancing its presence in the Mid-Continent region. The Company
retained substantially all of Ward's operating personnel.

Bonray Acquisition. In October 1997, the Company acquired Bonray for
3,015,000 shares of Common Stock. Bonray has operated a land drilling business
in the Mid-Continent region since 1980 and prior to its acquisition by the
Company was a wholly owned subsidiary of DLB Oil & Gas, Inc. ("DLB"). In the
Bonray Acquisition, the Company acquired 13 rigs, including seven rigs with
depth capacities of 15,000 feet or greater and two diesel electric SCR rigs. As
of September 30, 1997, 12 of Bonray's rigs were operating and under contract and
one was awaiting refurbishment. The Bonray Acquisition further strengthens the
Company's presence in the Mid-Continent region, making it the most active
driller in the Oklahoma market. The Company expects to retain substantially all
of Bonray's operating personnel.

Individual Rig Acquisitions. In addition to the Trend, Ward and Bonray
Acquisitions, the Company has invested $5.5 million to acquire six rigs in five
transactions involving purchases of individual rigs or rig components (the
"Individual Rig Acquisitions" and, together with the Formation Transactions, the
Trend Acquisition, the Ward Acquisition and the Bonray Acquisition, the
"Consolidation Transactions").

Refurbishment. The Consolidation Transactions included a number of rigs in
need of refurbishment. From January 1, 1997 through September 30, 1997, the
Company completed refurbishment of 12 rigs at an average cost of approximately
$2.6 million per rig (including drill pipe). These rigs were placed in service
at various dates between January and September 30, 1997. At September 30, 1997,
the Company had six additional rigs in various stages of refurbishment. The
Company expects to place three of such rigs in service during the fourth quarter
of 1997, two in the first quarter of 1998 and one in the second half of 1998.
The Company expects the cost to refurbish these six rigs to average
approximately $3.5 million per rig (including drill pipe).

The Company's principal executive offices are located at 4005 Northwest
Expressway, Suite 550E, Oklahoma City, Oklahoma 73116, and its telephone number
at such offices is (405) 840-9550.
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<PAGE> 7

RIG FLEET INFORMATION

The following table sets forth, as of September 30, 1997, certain
information with respect to the drilling rigs owned by the Company. This table
includes information for the 48 rigs marketed at September 30, 1997 (12 of which
were acquired in the Bonray Acquisition) and the six rigs to be refurbished and
expected to be placed in operation within the next 12 months (one of which was
acquired in the Bonray Acquisition). See "Business -- Drilling Equipment and
Supplies."

<TABLE>
<CAPTION>
DEPTH CAPACITY (FEET) SCR MECHANICAL TOTAL
<S> <C> <C> <C>
GULF COAST REGION
15,000 to 19,999....................................... 1 1 2
20,000 or greater...................................... 13 1 14
MID-CONTINENT REGION
7,000 to 9,999......................................... 0 1 1
10,000 to 14,999....................................... 0 15 15
15,000 to 19,999....................................... 2 9 11
20,000 or greater...................................... 5 6 11
-- -- --
TOTALS......................................... 21 33 54
== == ==
</TABLE>

RISK FACTORS

An investment in the Common Stock offered hereby involves a high degree of
risk. Significant risk factors that should be considered by prospective
investors include, but are not limited to, the following:

- Inclusion in this Prospectus of forward looking information which may
prove inaccurate
- Dependency on the oil and gas industry
- Cyclical conditions in the contract drilling industry
- Limited operating history of the Company
- Risks inherent in the management of growth and an acquisition strategy
- Current shortage of qualified and experienced labor
- Competition
- Concentration of the Company's customer base
- Operating hazards and uninsured risks
- Current shortage of drilling equipment and supplies
- Capital requirements and liquidity
- The Company's reliance on key personnel
- Control by existing management and stockholders and the existence of a
voting agreement among certain stockholders
- Governmental regulation and environmental matters
- Risks associated with footage and turnkey drilling
- Absence of a prior public market for the Common Stock
- Shares eligible for future sale
- Dilution in the net tangible book value of shares of the Common Stock
- Superior rights of preferred stock issuable by the Company
- Effects of certain anti-takeover provisions applicable to the Company

See "Risk Factors" for a discussion of these matters.
7
<PAGE> 8

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered:
By the Company............................. 4,000,000 shares
By the Selling Stockholders................ 5,600,000 shares
Total.............................. 9,600,000 shares
Common Stock to be Outstanding
after the Offering......................... 17,947,000 shares(1)
Use of Proceeds.............................. The net proceeds to the Company from the
Offering will be used for the repayment of
indebtedness, the modification and upgrade of
drilling rigs and other general corporate
purposes, including acquisitions of drilling
rigs and related equipment (including top
drives). The Company will not receive any of
the proceeds from the sale of shares by the
Selling Stockholders. See "Use of Proceeds."
AMEX Symbol.................................. "BDI"
</TABLE>

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

(1) Does not include (i) 742,500 shares of Common Stock subject to issuance
pursuant to outstanding options awarded under the Company's 1997 Stock
Option and Stock Award Plan (the "Employee Stock Plan"), (ii) 60,000 shares
of Common Stock subject to issuance pursuant to options to be granted
contemporaneously with the consummation of the Offering under the Company's
1997 Non-Employee Directors' Stock Option Plan (the "Director Stock Plan")
or (iii) 412,000 shares of Common Stock subject to issuance pursuant to
other outstanding warrants issued by the Company. See "Use of Proceeds,"
"Management -- 1997 Stock Option and Stock Award Plan" and "Certain
Relationships and Related Transactions." Further, this does not include
shares of Common Stock that may be issued, solely at the option of the
Company, to redeem outstanding Subordinated Notes (as defined in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations"). See "Certain Relationships and Related Transactions -- Certain
Financing Arrangements -- Common Stock and Subordinated Notes."
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<PAGE> 9

SUMMARY HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table sets forth summary historical financial and operating
data for the Company for each of the years in the three year period ended
December 31, 1996, for the six months ended June 30, 1996 and 1997, and as of
December 31, 1996 and June 30, 1997. The financial results for the period ended
and as of June 30, 1997 include the results of the Company's consolidated
subsidiary, Trend, beginning May 1, 1997. The Company's historical results
reflect the operations of its predecessor, Anadarko. The consolidated financial
data for the six months ended June 30, 1996 and 1997 is derived from the
unaudited financial statements of the Company. In the opinion of management, the
financial data for the six months ended June 30, 1996 and 1997 reflects all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of such data.

The pro forma consolidated financial and operating data for the year ended
December 31, 1996 and the six months ended June 30, 1997 shown below give effect
to (i) the Consolidation Transactions (to the extent not already reflected in
the historical financial statements), (ii) the Chesapeake Transactions (as
described in "Certain Relationships and Related Transactions -- Chesapeake
Transactions"), (iii) the exercise by The CIT Group/Equipment Financing, Inc.
("CIT") of a warrant for 150,000 shares of Common Stock (the "CIT Exercise"),
and (iv) the Offering and the application of the net proceeds to the Company
therefrom as if they occurred on January 1, 1996 for purposes of operations data
and June 30, 1997 for purposes of balance sheet data. The following information
should be read together with Management's Discussion and Analysis of Financial
Condition and Results of Operations, the historical financial statements of
Bayard, Trend, Ward and Bonray, including the notes thereto, and the Pro Forma
Consolidated Financial Data, including the notes thereto, included elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------- ----------------------------------
1994 1995 1996 1996 1996 1997 1997
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE, RIG AND DAY RATE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues....................... $ 9,910 $ 7,708 $ 9,853 $47,952 $ 4,301 $ 15,107 $35,309
------- ------- -------- ------- ------- -------- -------
Operating expenses:
Drilling and other................. 8,572 6,122 7,699 38,073 3,268 10,897 26,065
Depreciation and amortization...... 1,557 791 1,126 7,866 415 2,645 6,022
General and administrative......... 786 880 658 3,636 323 734 2,057
------- ------- -------- ------- ------- -------- -------
Total operating expenses..... 10,915 7,793 9,483 49,575 4,006 14,276 34,144
------- ------- -------- ------- ------- -------- -------
Operating income (loss).............. (1,005) (85) 370 (1,623) 295 831 1,165
Interest expense and financing
cost............................... (18) (3) (11) (821) -- (982) (860)
Other income (expense)............... 366 (134) 71 601 36 119 139
------- ------- -------- ------- ------- -------- -------
Income (loss) before income taxes.... (657) (222) 430 (1,843) 331 (32) 444
Income tax expense(1)................ -- -- 163 -- 126 (12) 169
------- ------- -------- ------- ------- -------- -------
Net income (loss).................... $ (657) $ (222) $ 267 $(1,843) $ 205 $ (20) $ 275
======= ======= ======== ======= ======= ======== =======
Earnings per share (primary and fully
diluted)........................... $ .02 $ (.11) $ .01 $ 0 $ .02
======== ======= ======= ======== =======
Weighted average shares outstanding
(fully diluted)(2)................. 14,397 16,592 14,397 14,397 16,592
======== ======= ======= ======== =======
CASH FLOWS:
Operating activities............... $ 445 $ 310 $ (462) $ (70) $ 1,029
Investing activities............... (454) (1,710) (10,441) (3,142) (59,265)
Financing activities............... 9 1,400 15,866 3,212 53,513
</TABLE>

(continued on following page)
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<PAGE> 10

<TABLE>
<CAPTION>
DECEMBER 31,
1996 JUNE 30, 1997
------------ -----------------------
HISTORICAL HISTORICAL PRO FORMA
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and investments...................................... $ 4,963 $ 970 $ 58,316
Working capital (deficit), excluding current portion of
long-term debt.......................................... 4,974 (1,277) 57,254
Property, plant and equipment, net........................ 26,973 92,658 127,634
Total assets.............................................. 34,673 113,172 216,179
Long-term debt, including current portion................. 7,000 48,371 16,009
Total stockholders' equity(3)............................. 26,251 44,813 170,682
</TABLE>

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

(1) Income tax expense is presented on a pro forma basis (assuming a 38%
statutory rate) for the year ended December 31, 1996 and for the six months
ended June 30, 1996.

(2) Historical weighted average shares outstanding is calculated using the fully
diluted shares outstanding through October 16, 1997 for the year ended
December 31, 1996 and the six months ended June 30, 1996 and 1997. The pro
forma shares outstanding reflect the sale of a sufficient number of shares
in the Offering to retire certain indebtedness of the Company as described
in "Use of Proceeds." See footnote (g) to "Notes to Unaudited Pro Forma
Consolidated Financial Data."

(3) No dividends were declared through June 30, 1997. See "Dividend Policy."

(4) EBITDA represents operating income (loss) before depreciation and
amortization. EBITDA is frequently used by securities analysts and is
presented herein to provide additional information about the Company's
operations. EBITDA is not a measurement presented in accordance with
generally accepted accounting principles. EBITDA should not be considered in
isolation or as a substitute for net income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
a company's profitability or liquidity.

(5) Rig utilization rates are calculated on a weighted average basis assuming
365 days availability for all rigs available for service. Rigs acquired have
been treated as added to the rig fleet as of the date of acquisition. Rigs
under contract that generate revenues during moves between locations or
during mobilization/ demobilization are also considered to be utilized. Rigs
that are owned but not being marketed, including rigs being refurbished, are
not considered in determining the utilization rate.

(6) Represents total contract drilling revenues (excluding mobilization, cost
reimbursements and fuel), divided by the total number of days the Company's
drilling rig fleet operated during the period, divided by the average number
of rigs in operation.
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RISK FACTORS

An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider and evaluate the following
factors relating to the Company and the Offering, together with the information
and financial data set forth elsewhere in this Prospectus, prior to purchasing
any shares of Common Stock in the Offering.

FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE

This Prospectus contains forward-looking statements and information that
are based on the beliefs of the Company's management as well as assumptions made
by and information currently available to management. All statements other than
statements of historical fact included in this Prospectus are forward-looking
statements, including but not limited to statements identified by the words
"anticipate," "believe," "estimate" and "expect" and similar expressions. Such
statements reflect the Company's current views with respect to future events,
based on what it believes are reasonable assumptions; however, such statements
are subject to certain risks, uncertainties and assumptions, including but not
limited to the risk factors described in this Prospectus. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those in the forward-looking
statements. The Company does not intend to update these forward-looking
statements and information.

DEPENDENCE ON OIL AND GAS INDUSTRY

The Company's revenues, cash flows and earnings are substantially dependent
upon, and affected by, the level of domestic oil and gas exploration and
development activity. Such activity and the resulting level of demand for
contract land drilling and related services are directly influenced by many
factors over which the Company has no control. Such factors include, among
others, the market prices of oil and gas, market expectations about future
prices, the volatility of such prices, the cost of producing and delivering oil
and gas, government regulations and trade restrictions, local and international
political and economic conditions, levels of production by, and other activities
of, the Organization of Petroleum Exporting Countries and other oil and gas
producers, the development of alternate energy sources and the long-term effects
of worldwide energy conservation measures. Substantial uncertainty exists as to
the future level of oil and gas exploration and development activity. There can
be no assurance that the current level of oil and gas exploration and
development activity will be maintained or that demand for the Company's
contract drilling services will reflect the level of such activity.

CYCLICAL CONDITIONS

Historically, the contract drilling industry has been cyclical, with
significant volatility in profitability and rig values. This industry
cyclicality has been due to changes in the level of domestic oil and gas
exploration and development activity and the available supply of drilling rigs.
The market for contract land drilling services has generally been depressed
since 1982, when oil and gas prices began to weaken following a period of
significant increase in new drilling rig capacity. Since that time and except
during occasional upturns, there have been substantially more drilling rigs
available than necessary to meet demand in most operating and geographic
segments of the domestic drilling industry, including the geographic areas in
which the Company operates.

The contract drilling business is currently experiencing increased demand
for drilling services principally due to improved oil and gas drilling and
production economics and a continued reduction in the available supply of rigs
in the domestic land drilling market. Although the Company believes that
improved technologies and stable oil and gas prices have contributed to
increased activity in the exploration and production sector, there can be no
assurance that such factors will continue. In addition, ongoing movement or
reactivation of land drilling rigs (including the movement of rigs from outside
the United States into domestic markets) or new construction of drilling rigs
could increase rig supply and adversely affect contract drilling rates and
utilization levels. The Company cannot predict the future level of demand for
its contract drilling services, future conditions in the contract drilling
industry or future contract drilling rates.

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LIMITED OPERATING HISTORY

The Company was founded in December 1996 as the successor to Anadarko,
which had operated as a contract land drilling rig service company since 1982 in
Oklahoma. Although Anadarko was owned by and provided drilling services to APLP
prior to December 1996, Anadarko had also provided drilling services to 23
different third party customers between 1982 and December 1996. Prior to
December 1996, however, the Company had not operated as an independent entity.
Although the President and Chief Executive Officer of the Company had been
employed by Anadarko for 14 years and several other key employees of the Company
had been with Anadarko for extended periods, much of the Company's management
group has been assembled recently. Despite the extensive experience and
qualifications of many of the recently added individual managers, there can be
no assurance that the management group will be able to manage the stand-alone
entity as a cohesive team or to implement effectively the Company's business
strategy. The pro forma financial results presented herein include the operating
results of drilling rigs which were not under the Company's control and may not
be indicative of the Company's future operating results.

MANAGEMENT OF GROWTH; RISKS OF ACQUISITION STRATEGY

The Company has experienced rapid and substantial growth since its
formation as a result of acquisitions. The Company anticipates the further
expansion of the Company's drilling fleet through additional acquisitions.
Certain risks are inherent in an acquisition strategy, such as increasing
leverage and debt service requirements and combining disparate company cultures,
which could adversely affect the Company's operating results. Continued growth
and the process of integrating such acquired businesses may involve unforeseen
difficulties and may require a disproportionate amount of management's attention
and the Company's financial and other resources. No assurance can be given that
the Company will be able to continue to identify suitable acquisition
opportunities, negotiate acceptable terms, obtain financing for acquisitions on
satisfactory terms or successfully acquire identified targets. There can be no
assurance that the Company will be able to successfully manage and integrate the
acquired businesses and assets into its existing operations or that it will be
able to successfully maintain the market share attributable to operable drilling
rigs acquired by the Company. If the Company is unable to manage its growth and
successfully integrate the acquired businesses into the Company's existing
operations, or if the Company encounters unexpected costs or liabilities in the
acquired businesses, the Company's results of operations or financial condition
could be materially adversely affected. See "Business -- Business Strategy."

Competition in the market for drilling rigs has caused substantial
increases in the acquisition prices paid for rigs in recent months. Such
competition could adversely affect the Company's growth strategy if it is unable
to purchase additional drilling rigs or related equipment on favorable terms.
There can be no assurance that the Company will be able to compete successfully
in the future for acquisitions of available drilling rigs or related equipment,
or that such competition will not have a material adverse effect on the
Company's business, financial condition and results of operations.

SHORTAGE OF QUALIFIED AND EXPERIENCED LABOR

Increases in both onshore and offshore domestic oil and gas exploration and
production since 1995 and resultant increases in contract drilling activity have
created a shortage of qualified drilling rig personnel in the industry. If the
Company is unable to attract and retain sufficient qualified operating
personnel, its ability to market and operate its drilling rigs will be
restricted. In addition, labor shortages could result in wage increases, which
could reduce the Company's operating margins and have a material adverse effect
on the Company's financial condition and results of operations.

COMPETITION

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<PAGE> 13

and, while the Company believes that operators consider factors such as quality
of service, type and location of equipment, or the ability to provide ancillary
services, price and rig availability are the primary factors in determining
which contractor is awarded a job. Certain of the Company's competitors have
greater financial and human resources than the Company, which may enable them to
better withstand periods of low rig utilization, to compete more effectively on
the basis of price and technology, to build new rigs or acquire existing rigs
and to provide rigs more quickly than the Company in periods of high rig
utilization.

CONCENTRATION OF CUSTOMER BASE

During the six months ended June 30, 1997 (pro forma for the Consolidation
Transactions), the three largest customers for the Company's contract drilling
services were Chesapeake, Marathon Oil Company and Sonat Exploration Company,
which accounted for approximately 22%, 10% and 6% of total revenues,
respectively. Chesapeake recently announced that it was reducing its drilling
program in the Gulf Coast region, an area in which it utilizes a number of the
Company's rigs. While the Company does not currently expect its rigs operating
for Chesapeake to be affected, and believes that it could successfully remarket
any rigs that might be affected in the future, there can be no assurance that
Chesapeake or any of the Company's other principal customers will continue to
employ the Company's services or that the loss of any of such customers or
adverse developments affecting any of such customers would not have a material
adverse effect on the Company's financial condition and results of operations.

OPERATING HAZARDS AND UNINSURED RISKS

The Company's operations are subject to many hazards inherent in the land
drilling business, including, for example, blowouts, cratering, fires,
explosions, loss of well control, loss of hole, damaged or lost drill strings
and damage or loss from inclement weather. These hazards could cause personal
injury or death, serious damage to or destruction of property and equipment,
suspension of drilling operations, or substantial damage to the environment,
including damage to producing formations and surrounding areas. Generally,
drilling contracts provide for the division of responsibilities between a
drilling company and its customer, and the Company seeks to obtain
indemnification from its customers by contract for certain of these risks. To
the extent not transferred to customers by contract, the Company seeks
protection against certain of these risks through insurance. Although the
Company believes that it is adequately insured for public liability and property
damage to others and injury or death to persons in accordance with industry
standards with respect to its operations, no assurance can be given that such
insurance will be sufficient to protect the Company against liability for all
consequences of well disasters, personal injury, extensive fire damage or damage
to the environment. No assurance can be given that the Company will be able to
maintain adequate insurance in the future at rates it considers reasonable or
that any particular types of coverage will be available. The occurrence of
events, including any of the above-mentioned risks and hazards, that are not
fully insured or the failure of a customer to meet its indemnification
obligations could subject the Company to significant liability and could have a
material adverse effect on the Company's financial condition and results of
operations. See "Business -- Operating Hazards and Insurance."

SHORTAGE OF DRILLING EQUIPMENT AND SUPPLIES

There is a general shortage of certain drilling equipment and supplies used
in the Company's business and the Company believes these shortages may
intensify. Because, until recent years, the land drilling industry was
characterized by an oversupply of land rigs, rig manufacturers have generally
focused on the production of more expensive offshore rigs and rig equipment. As
a result, most rig manufacturers are not currently building new land rigs and
those manufacturers that are building new land rigs and components charge
premium prices (approximately $13 million for a new 2,000 horsepower rig) and
require that orders be placed at least 120 days in advance of requested
delivery. The limited availability of new rigs and equipment has caused land rig
owners and operators, including the Company, to maintain and enhance their
fleets primarily through acquisitions and refurbishments using previously
manufactured rig components and equipment. As the land drilling industry
continues to refurbish rigs using existing components and equipment, the
available supply of such components and equipment continues to deplete.

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<PAGE> 14

The Company requires a substantial amount of drill pipe in order to achieve
the drilling depths required by its customers. A shortage of drill pipe exists
in the contract drilling industry in the United States. This shortage has caused
the price of drill pipe to increase by more than 54% over the past 24 months and
has required orders for new drill pipe to be placed at least one year in advance
of expected use. The price increase and the delay in delivery has caused the
Company to increase capital expenditures for drill pipe in recent months by 110%
of its original budget. While the Company believes it currently has sufficient
drill pipe for its existing rigs (including those rigs in refurbishment), in the
event the shortage continues, the Company may be unable to obtain the drill pipe
required to expand its contract drilling operations.

CAPITAL REQUIREMENTS AND LIQUIDITY

The oil and gas contract drilling industry is capital intensive. The
Company's cash flow from operations and the continued availability of credit are
subject to a number of variables, including the Company's utilization rate,
operating margins and ability to maintain costs and obtain contracts in a
competitive industry. There can be no assurance that the Company's cash flow
from operations, proceeds from the Offering and present borrowing capacity will
be sufficient to fund its anticipated capital expenditures and working capital
requirements. The Company may from time to time seek additional financing,
either in the form of bank borrowings, sales of the Company's debt or equity
securities or otherwise. Except with respect to the Offering and the Company's
loan agreements with its lenders, the Company has no agreements for any such
financing and there can be no assurance as to the availability or terms of any
such financing. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Financial Condition and Liquidity." To the extent
the Company's capital resources and cash flow from operations are at any time
insufficient to fund its activities or repay its indebtedness as due, the
Company will need to raise additional funds through public or private financings
or additional borrowings. No assurance can be given as to the Company's ability
to obtain any such capital resources. If the Company is at any time not able to
obtain the necessary capital resources, its financial condition and results of
operations could be materially adversely affected. In the event that additional
funds are raised through the issuance of equity securities, the percentage
ownership of the Company's stockholders at that time would be diluted and, in
addition, such equity securities may have rights, preferences or privileges
senior to those of the Common Stock.

RELIANCE ON KEY PERSONNEL

The success of the Company's business is highly dependent upon the
services, efforts and abilities of James E. Brown, the Company's President and
Chief Executive Officer and certain other officers and key employees,
particularly Edward S. Jacob, III, the Company's Executive Vice
President -- Operations & Marketing, David E. Grose, the Company's Vice
President and Chief Financial Officer, and Ron Tyson, the Company's Construction
Manager. The business of the Company could be materially and adversely affected
by the loss of any of these individuals. The Company does not maintain key man
life insurance on the lives of any of its executive officers or key employees.
The Company has employment agreements with Messrs. Brown, Jacob and Grose. See
"Management -- Executive Salaries and Employment Agreements."

CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS; VOTING AGREEMENT AMONG CERTAIN
STOCKHOLDERS

Following the completion of the Offering, the Company's directors,
executive officers and holders of more than 5% of the Common Stock will
beneficially own approximately 34.2% of the outstanding shares of Common Stock
(32.3% if the Underwriters' over-allotment option is exercised in full). In
addition, holders of approximately 31.1% of the outstanding shares of Common
Stock (29.3% if the Underwriters' over-allotment option is exercised in full)
will be party to a stockholders and voting agreement (the "Stockholders and
Voting Agreement") with the Company that provides for, among other things, the
nomination of certain individuals for election to the Board of Directors of the
Company (the "Board"). Pursuant to the Stockholders and Voting Agreement, each
of APLP, Energy Spectrum and DLB will be entitled to nominate one person for
election to the Board, subject to maintaining certain ownership thresholds. Each
of APLP, Energy Spectrum, DLB, Carl B. Anderson, III and Continental Illinois
Property Company #3 will be obligated to vote all of their shares of Common
Stock for the election of such nominees. Accordingly, if such stockholders were
to act in concert, they would be able to nominate up to three members of the
Board and exercise significant influence over the Company's affairs. The
Stockholders and Voting Agreement also requires that any transferee of stock

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<PAGE> 15

from a party thereto (other than sales into the public market) be bound by the
terms thereof as a condition precedent to such transfer. See "Principal and
Selling Stockholders" and "Certain Relationships and Related
Transactions -- Stockholders and Voting Agreement."

GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS

The domestic oil and gas industry is affected from time to time in varying
degrees by political developments and federal, state and local laws and
regulations. In particular, oil and gas production, operations and economics are
or have been affected by price controls, taxes and other laws relating to the
oil and gas industry, by changes in such laws and by changes in administrative
regulations. Except for the handling of solid wastes directly generated from the
operation and maintenance of the Company's drilling rigs, such as waste oils and
wash water, it is the Company's practice to require its customers to
contractually assume responsibility for compliance with environmental
regulations. However, the Company's operations are vulnerable to certain risks
arising from the numerous environmental health and safety laws and regulations.
These laws and regulations may restrict the types, quantities and concentration
of various substances that can be released into the environment in connection
with drilling activities, require reporting of the storage, use or release of
certain chemicals and hazardous substances, require removal or cleanup of
contamination under certain circumstances, and impose substantial civil
liabilities or criminal penalties. Environmental laws and regulations may impose
strict liability, rendering a person liable for environmental damage without
regard to negligence or fault, and could expose the Company to liability for the
conduct of, or conditions caused by, others, or for acts of the Company that
were in compliance with all applicable laws at the time such acts were
performed. Moreover, there has been a trend in recent years toward stricter
standards in environmental, health and safety legislation and regulation which
is likely to continue.

The Company has made and will continue to make expenditures to comply with
governmental regulations, including environmental, health and safety
requirements. As part of the Bonray Acquisition, the Company acquired an
equipment yard which may require certain expenditures or remedial actions for
the removal or cleanup of contamination. In exchange for a $1 million cash
payment to the Company at closing, the Company did not require DLB to indemnify
the Company with respect to such expenditures or remedial actions. While the
Company has not yet had an opportunity to review whether and to what extent such
expenditures or remedial actions may be necessary or advisable, based on the
presently available information, the Company does not believe that such
expenditures will exceed $1 million. There can be no assurance, however, that
the Company will not incur material liability with respect to this property or
any of the Company's other properties or operations. The Company cannot predict
how existing laws and regulations may be interpreted by enforcement agencies or
court rulings, whether additional laws and regulations will be adopted, or the
effect such changes may have on the Company's business, financial condition or
results of operations. Because the requirements imposed by such laws and
regulations are subject to change, the Company is unable to forecast the
ultimate cost of compliance with such requirements. The modification of existing
laws and regulations or the adoption of new laws or regulations curtailing
exploratory or development drilling for oil and gas for economic, political,
environmental or other reasons could have a material adverse effect on the
Company by limiting drilling opportunities. See "Business -- Government
Regulation and Environmental Matters."

RISKS ASSOCIATED WITH FOOTAGE AND TURNKEY DRILLING

The Company in the past has performed drilling services under footage and
turnkey contracts and may enter into such arrangements in the future. Revenues
from footage contracts accounted for approximately 6% of total revenues during
the six months ended June 30, 1997 and the Company had no turnkey contracts
during such period. Under footage contracts, the Company is paid a fixed amount
for each foot drilled, regardless of the time required or the problems
encountered in drilling the well. Under turnkey drilling contracts, the Company
contracts to drill a well to an agreed depth under specified conditions for a
fixed price, regardless of the time required or the problems encountered in
drilling the well. In addition, the Company provides technical expertise and
engineering services, as well as most of the equipment required for the well,
and is compensated only when the contract terms have been satisfied. On a
turnkey well, the Company often subcontracts for related services and manages
the drilling process. The risks to the Company under footage and turnkey
contracts are substantially greater than under daywork contracts because the
Company assumes

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<PAGE> 16

most of the risks associated with drilling operations that in a daywork contract
are generally assumed by the operator, including risk of blowout, loss of hole,
stuck drill pipe, machinery breakdowns, abnormal drilling conditions and risks
associated with subcontractors' services, supplies, cost escalation and
personnel. While the Company's current strategy is to operate primarily under
daywork contracts, management continually analyzes market conditions, customer
requirements, rig demand and the experience of its personnel to determine how to
most profitably contract its fleet. If the Company were to encounter less
favorable conditions within its industry, competitive pressures and customer
demands might require it to consider entering into a larger number of footage
and turnkey drilling contracts. Accordingly, there can be no assurance that the
Company will not suffer a loss that is not insured as a result of entering into
such contracts, and any such uninsured loss could have a material adverse effect
on the Company's financial position and results of operations. See
"Business -- Contract Drilling Operations."

ABSENCE OF A PRIOR PUBLIC MARKET FOR THE COMMON STOCK

Prior to the Offering, there has been no public market for the Common
Stock. Although the Common Stock has been approved for listing on the AMEX,
subject to official notice of issuance, there can be no assurance that an active
public market for the Common Stock will develop or be sustained or that the
price at which the Common Stock will trade after the Offering will not be lower
than the initial public offering price. The initial public offering price of the
Common Stock in the Offering will be determined through negotiations between the
Company and the Representatives. See "Underwriting." Market prices for the
Common Stock following the Offering will be influenced by a number of factors,
including the depth and liquidity of the market for the Common Stock, investor
perceptions of the Company and general economic and other conditions.

SHARES ELIGIBLE FOR FUTURE SALE

Future sales of shares of Common Stock by the Company or its existing
stockholders could adversely affect the market price of the Common Stock. Upon
completion of the Offering, the Company will have 17,947,000 shares of Common
Stock outstanding (18,176,050 shares if the Underwriters' over-allotment option
is exercised in full). Additionally, as of the date of this Prospectus, (i)
options for the purchase of 742,500 shares of Common Stock (including options
for 383,900 shares to be priced at the initial public offering price) had been
granted to certain employees of the Company pursuant to the Employee Stock Plan,
(ii) options for the purchase of 60,000 shares of Common Stock (all to be priced
at the initial public offering price) were subject to grant contemporaneously
with the consummation of the Offering to certain non-employee directors of the
Company pursuant to the Director Stock Plan and (iii) 412,000 shares of Common
Stock were subject to outstanding warrants issued by the Company. Except for the
options for 443,900 shares to be priced at the initial public offering price,
the exercise prices of these options and warrants are substantially lower than
the anticipated initial public offering price of the Common Stock. In addition,
certain outstanding Subordinated Notes are convertible, solely at the Company's
option, into shares of Common Stock. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Certain Relationships and Related Transactions -- Certain
Financing Arrangements -- Common Stock and Subordinated Notes."

The Company may in the future issue significant amounts of Common Stock or
options or warrants to acquire Common Stock under stock option plans or to
finance capital projects, including acquisitions of rigs and related equipment.
Of the outstanding shares, the 9,600,000 shares (11,040,000 shares if the
Underwriters' over-allotment option is exercised in full) to be sold in the
Offering will be freely tradeable without restrictions or further registration
under the Securities Act, except for shares purchased by an "affiliate" (as
defined in the Securities Act) of the Company. Following the expiration of the
lock-up agreements with the Underwriters, each of the Company's directors and
executive officers and each of its existing stockholders, who will hold upon
completion of the Offering an aggregate of approximately 47% of the outstanding
shares of Common Stock (39.3% if the Underwriters' over-allotment option is
exercised in full), may sell such shares subject to the requirements of Rule 144
under the Securities Act or pursuant to the terms of a registration rights
agreement. See "Certain Relationships and Related Transactions" and "Shares
Eligible for Future Sale." The Company is also a party to two registration
rights agreements pursuant to which it has

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granted demand and piggyback registration rights which, upon consummation of the
Offering, will cover an aggregate of 9,027,521 shares of Common Stock and Common
Stock Equivalents. The beneficiaries of these agreements include Chesapeake,
Energy Spectrum, APLP, the Oliver Companies and certain of their affiliates,
Ward and certain of its transferees, DLB, Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), Carl B. Anderson, III, a trust of which Harold
G. Hamm is trustee, James E. Brown, Edward S. Jacob, III and David E. Grose. The
terms of these agreements prohibit the exercise of such registration rights for
a period of 180 days following the date of the Offering, subject to certain
exceptions, including granting DLB the ability to distribute its shares of
Common Stock to its shareholders. Additionally, the Company intends to file
registration statements on Form S-8 covering the issuance of shares of Common
Stock pursuant to the Employee Stock Plan and the Director Stock Plan
(collectively, the "Company Stock Plans") within 180 days after completion of
the Offering. Accordingly, shares of Common Stock registered pursuant to the
Company's registration rights agreements or issued pursuant to the Company Stock
Plans will be available for sale in the public market without restriction or
limitation under the Securities Act, except for any shares held by an
"affiliate" of the Company. No prediction can be made as to the effect, if any,
that future sales of shares, the issuance or exercise of options, warrants or
other securities convertible into Common Stock, or the availability of shares
for sale will have on the market price for Common Stock prevailing from time to
time. Sales of a substantial amount of Common Stock, or a perception that such
sales could occur, could adversely affect the prevailing market price of the
Common Stock and could impair the Company's ability to raise additional capital
through the sale of equity securities.

DILUTION

Purchasers of the Common Stock in the Offering will experience immediate
and significant dilution in the net tangible book value of their shares. Based
on the initial public offering price of $23.00 per share, pro forma as of June
30, 1997, such dilution would have been equal to $13.49 per share with respect
to shares purchased pursuant to the Offering. See "Dilution."

SUPERIOR RIGHTS OF PREFERRED STOCK

The Company is authorized to issue preferred stock. The Board, without
stockholder approval, may issue shares of the preferred stock with rights and
preferences adverse to the voting power or other rights of the holders of the
Common Stock. No preferred stock has been issued. See "Description of Capital
Stock -- Preferred Stock."

EFFECTS OF CERTAIN ANTI-TAKEOVER PROVISIONS

The Restated Certificate of Incorporation of the Company (the
"Certificate") (i) contains a "fair price" provision, (ii) does not permit
stockholders to act by written consent, (iii) does not permit stockholders to
call special meetings of stockholders, (iv) requires certain procedures to be
followed and time periods to be met for any stockholder to propose matters to be
considered at annual meetings of stockholders, including nominating directors
for election at those meetings, (v) limits the ability of stockholders to
interfere with the power of the Board in other specified ways, (vi) requires
supermajority votes to amend any of the preceding provisions and (vii)
authorizes the Board to issue up to 20,000,000 shares of preferred stock without
stockholder approval and to set the rights, preferences, and other designations,
including voting rights, of those shares as the Board may determine. See
"Description of Capital Stock -- Certain Provisions of the Certificate and
Bylaws." These provisions, alone or in combination with each other, may
discourage, hinder, delay or prevent transactions involving actual or potential
changes of control of the Company, including transactions that otherwise could
involve payment of a premium over prevailing market prices to holders of Common
Stock. The Company is also subject to provisions of the Delaware General
Corporation Law (the "DGCL") that may make some business combinations more
difficult. See "Description of Capital Stock -- Delaware Anti-Takeover Statute."

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USE OF PROCEEDS

The net proceeds to be received by the Company from the Offering, after
deducting underwriting discounts and commissions and the estimated expenses of
the Offering, are expected to be approximately $84.6 million.

The Company intends to use the net proceeds from the Offering to (i) repay
all amounts outstanding under the revolving loan facility between Fleet Capital
Corporation ("Fleet") and the Company (the "Revolving Loan"), which amount was
$7.9 million at September 30, 1997 and which facility will remain available for
future use by the Company, (ii) redeem in full, through a cash payment of $18.2
million, the Subordinated Notes of the Company held by Chesapeake, (iii) repay
50% of the amount outstanding under the $30.5 million term loan facility between
the Company, CIT and Fleet (the "Term Loan"), which amount was $28.5 million at
September 30, 1997 and which may not be repaid until January 1998, (iv) make a
cash payment to CIT of $1.05 million in connection with the CIT Exercise, (v)
modify, upgrade and refurbish drilling rigs and equipment currently owned by the
Company at an estimated cost of between $16 million and $18 million and (vi)
fund working capital and for general corporate purposes, including acquisitions
of additional drilling rigs and related equipment (including approximately $3.5
million for the purchase of three top drives). See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Certain Relationships and Related
Transactions -- Chesapeake Transactions." Pending such uses, the net proceeds
will be invested in short-term, investment-grade, interest-bearing securities.

Amounts outstanding under the Revolving Loan bear interest based on Fleet's
prime rate and mature in April 2000. Amounts outstanding under the Term Loan
bear interest, at the election of the Company, at floating rates based upon
Chase Manhattan Bank's prime rate or the London Interbank Offered Rate ("LIBOR")
and mature in March 2002. At September 30, 1997, the applicable interest rates
under the Revolving Loan and the Term Loan were 10% and 9.95%, respectively. The
Subordinated Notes to be redeemed from Chesapeake were issued by the Company in
May 1997 in an original principal amount of $18 million, mature on May 1, 2003
and bear interest at the option of the Company at either (i) 11% per annum,
payable in cash, or (ii) 12.875% per annum, payable in the form of additional
Subordinated Notes. See "Certain Relationships and Related
Transactions -- Certain Financing Arrangements."

The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Stockholders. See "Principal and Selling Stockholders."

DIVIDEND POLICY

The Company currently intends to retain all available earnings generated by
its operations for the development and growth of its business and does not
anticipate paying any cash dividends on its Common Stock in the foreseeable
future. Future dividend policy will be made by the Board and will depend on a
number of factors, including the Company's earnings, capital requirements,
financial condition and business prospects and such other factors as the Board
may deem relevant. The payment of cash dividends on Common Stock is restricted
under the terms of the Term Loan and the Revolving Loan. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

18
<PAGE> 19

DILUTION

The pro forma net tangible book value of the Company at June 30, 1997
(adjusted to reflect the issuance of shares pursuant to the Bonray Acquisition,
the Chesapeake Transactions and the CIT Exercise as if they occurred on June 30,
1997) was $92.6 million or $6.64 per share. After giving effect to the sale by
the Company of 4,000,000 shares of Common Stock in the Offering, the adjusted
net tangible book value of the Company at June 30, 1997 would have been $170.7
million or $9.51 per share. This represents an immediate increase in net
tangible book value of $2.87 per share to the Company's existing stockholders
and an immediate dilution in net tangible book value of $13.49 per share to new
investors purchasing Common Stock in the Offering. The following table
illustrates the dilution to new investors purchasing shares in the Offering:

<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $23.00
Pro forma net tangible book value per share at June 30,
1997................................................... $6.64
Increase in net tangible book value per share attributable
to new investors....................................... 2.87
Pro forma net tangible book value per share after the
Offering.................................................. 9.51
------
Dilution in net tangible book value per share to new
investors................................................. $13.49
======
</TABLE>

The following table sets forth, at June 30, 1997 (adjusted to reflect the
issuance of shares pursuant to the Bonray Acquisition, the Chesapeake
Transactions and the CIT Exercise as if they occurred on June 30, 1997), the
differences in the number of shares purchased, the consideration paid and the
average price per share paid to the Company by the existing stockholders and by
investors purchasing shares of Common Stock in the Offering (assuming no
exercise of the Underwriters' over-allotment option and before deducting
underwriting discounts and commissions and estimated offering expenses).

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------- -------------------- PRICE PER
(IN THOUSANDS, EXCEPT PER SHARE DATA) NUMBER PERCENT AMOUNT PERCENT SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)................ 13,947 77.7% $ 92,608 50.2% $ 6.64
New investors(1)........................ 4,000 22.3 92,000 49.8 23.00
------ ----- -------- -----
Total......................... 17,947 100.0% $184,608 100.0%
====== ===== ======== =====
</TABLE>

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

(1) The net effect of sales by the Selling Stockholders in the Offering will
reduce the number of shares held by existing stockholders to 8,347,000 or
47% of the total number of shares of Common Stock outstanding after the
Offering, and will increase the number of shares held by new investors to
9,600,000 or 53% of the total number of shares of Common Stock outstanding
after the Offering.

The preceding tables exclude the effects of (i) 742,500 shares of Common
Stock subject to issuance pursuant to outstanding options awarded under the
Employee Stock Plan, (ii) 60,000 shares of Common Stock subject to issuance
pursuant to options to be granted contemporaneously with the consummation of the
Offering under the Director Stock Plan and (iii) 412,000 shares of Common Stock
subject to issuance pursuant to other outstanding warrants issued by the
Company. See "Management -- 1997 Stock Option and Stock Award Plan," "-- 1997
Non-Employee Directors' Stock Option Plan" and "Certain Relationships and
Related Transactions." Further, these tables do not include shares of Common
Stock that may be issued, solely at the option of the Company, to redeem
outstanding Subordinated Notes for shares of Common Stock. See "Certain
Relationships and Related Transactions -- Certain Financing
Arrangements -- Common Stock and Subordinated Notes." If all of the outstanding
options and warrants were exercised immediately prior to completion of the
Offering, the immediate dilution in net tangible book value to new investors
purchasing Common Stock in the Offering would have been $14.09 per share instead
of $13.49 per share.

19
<PAGE> 20

CAPITALIZATION

The following table sets forth the capitalization of the Company at June
30, 1997 (i) on an historical basis and (ii) on an as adjusted basis after
giving effect to the issuance of shares pursuant to the Bonray Acquisition, the
Chesapeake Transactions and the CIT Exercise and the Offering and the
application of the net proceeds therefrom. The table should be read in
conjunction with "Use of Proceeds," "Pro Forma Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company and related
notes included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
HISTORICAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Cash and investments........................................ $ 970 $ 58,316
======= ========

Current portion of long-term debt........................... $12,869 $ 1,015
------- --------
Long-term debt:
Term Loan................................................. 18,894 12,954(1)
Subordinated Notes........................................ 16,608 2,040(1)
------- --------
Total long-term debt.............................. 35,502 14,994
------- --------
Stockholders' equity:
Preferred Stock, par value $.01 per
share; no shares outstanding........................... -- --
Common Stock, par value $.01 per
share; 7,490,000 shares outstanding, historical; and
17,947,000 shares outstanding as adjusted(2)........... 75 179
Additional paid-in capital................................ 44,792 172,818
Accumulated deficit....................................... (54) (2,315)
------- --------
Total stockholders' equity........................ 44,813 170,682
------- --------
Total capitalization.............................. $93,184 $186,691
======= ========
</TABLE>

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

(1) The Company intends to use a portion of the net proceeds from the Offering
to repay (i) all amounts outstanding under the Revolving Loan, (ii) the
portion of the Subordinated Notes held by Chesapeake and (iii) 50% of the
amount outstanding under the Term Loan. As of September 30, 1997, $7.9
million was outstanding under the Revolving Loan, $18 million was
outstanding under the Subordinated Notes held by Chesapeake and $28.5
million was outstanding under the Term Loan. See "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Certain Relationships
and Related Transactions -- Chesapeake Transactions."

(2) Does not include (i) 742,500 shares of Common Stock subject to issuance
pursuant to outstanding options awarded under the Employee Stock Plan, (ii)
60,000 shares of Common Stock subject to issuance pursuant to options to be
granted contemporaneously with the consummation of the Offering under the
Director Stock Plan or (iii) 412,000 shares of Common Stock subject to
issuance pursuant to outstanding warrants issued by the Company. See
"Management -- 1997 Stock Option and Stock Award Plan," "-- 1997
Non-Employee Directors' Stock Option Plan" and "Certain Relationships and
Related Transactions."

20
<PAGE> 21

PRO FORMA CONSOLIDATED FINANCIAL DATA

The following unaudited pro forma financial statements are derived from the
historical financial statements of Bayard, Trend, Ward and Bonray included
elsewhere in this Prospectus. The Pro Forma Combined Statements of Operations
for the six months ended June 30, 1997 and for the year ended December 31, 1996
reflect (a) in the column entitled "combined," (i) the Trend Acquisition
(acquired on May 1, 1997 and accounted for as a purchase), (ii) the Ward
Acquisition (acquired on May 30, 1997 and accounted for as a purchase), (iii)
the Bonray Acquisition (acquired on October 16, 1997 and accounted for as a
purchase) and (iv) the May Financing related to the Trend and Ward acquisitions
and (b) in the column entitled "as adjusted," the consummation of, and
application of proceeds from, the Offering as if it occurred on January 1, 1996.
The Pro Forma Balance Sheet at June 30, 1997 reflects the consummation of, and
application of proceeds from, the Chesapeake Transactions, the CIT Exercise, the
Bonray Acquisition and the Offering as if they had occurred on June 30, 1997.
The unaudited pro forma combined financial information should be read in
conjunction with the notes thereto and the historical financial statements of
Bayard, Trend, Ward and Bonray, including the notes thereto, which are included
elsewhere in this Prospectus.

The unaudited pro forma combined financial statements do not purport to be
indicative of the results of operations that would actually have occurred if the
transactions described had occurred as presented in such statements or that may
occur in the future. In addition, future results may vary significantly from the
results reflected in such statements due to general economic conditions, oil and
gas commodity prices, the demand and prices for contract drilling services,
changes in the number of rigs available for service, the Company's ability to
successfully integrate the operations of Trend, Ward and Bonray with its current
business and several other factors, many of which are beyond the Company's
control. See "Risk Factors."

21
<PAGE> 22

BAYARD DRILLING TECHNOLOGIES, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------- -----------------------------------------------
ACQUISITION OFFERING AS
BAYARD TREND(A) WARD(A) BONRAY(A) ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
<S> <C> <C> <C> <C> <C> <C> <C> <C>

REVENUES.................. $ 9,853 $15,692 $11,385 $11,022 $ -- $47,952 $ -- $47,952
------- ------- ------- ------- ------- ------- ------ -------
COSTS AND EXPENSES:
Drilling costs.......... 7,653 11,752 9,891 8,731 -- 38,027 -- 38,027
Depreciation and
amortization......... 1,126 1,603 966 1,229 1,893(b) 7,866 -- 7,866
1,049(c)
General and
administrative....... 658 1,647 485 846 3,636 -- 3,636
Other operating......... 46 -- -- -- -- 46 -- 46
------- ------- ------- ------- ------- ------- ------ -------
Total costs and
expenses...... 9,483 15,002 11,342 10,806 2,942 49,575 -- 49,575
------- ------- ------- ------- ------- ------- ------ -------
Operating
income........ 370 690 43 216 (2,942) (1,623) -- (1,623)
------- ------- ------- ------- ------- ------- ------ -------
OTHER INCOME (EXPENSE):
Interest income......... -- 8 34 72 -- 114 -- 114
Interest expense and
financing costs...... (11) (261) (72) (128) (2,928)(d) (3,400) 2,579(h) (821)
Gain (loss) on sale of
assets............... 54 2,055 8 (29) (1,738)(e) 350 -- 350
Other................... 17 53 67 -- -- 137 -- 137
------- ------- ------- ------- ------- ------- ------ -------
Total other
income
(expense)..... 60 1,855 37 (85) (4,666) (2,799) 2,579 (220)
------- ------- ------- ------- ------- ------- ------ -------
Income (loss) before
taxes................... 430 2,545 80 131 (7,608) (4,422) 2,579 (1,843)
Income tax expense
(benefit)............... 17 981 -- 10 (1,008)(f) -- -- --
------- ------- ------- ------- ------- ------- ------ -------
Net income (loss)......... $ 413 $ 1,564 $ 80 $ 121 $(6,600) $(4,422) $2,579 $(1,843)
======= ======= ======= ======= ======= ======= ====== =======
Earnings per share,
primary and fully
diluted................. $ 0.03 $ (0.31) $ (0.11)
======= ======= =======
Weighted average shares
outstanding, primary and
fully diluted(g)........ 14,397 14,397 16,592
======= ======= =======
</TABLE>

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

22
<PAGE> 23

BAYARD DRILLING TECHNOLOGIES, INC.

UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------------------------------- -----------------------------------------------
BAYARD TREND(A) WARD(A) BONRAY(A)
SIX MONTHS FOUR MONTHS FIVE MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, APRIL 30, MAY 31, JUNE 30, ACQUISITION OFFERING AS
1997 1997 1997 1997 ADJUSTMENTS COMBINED ADJUSTMENTS ADJUSTED
<S> <C> <C> <C> <C> <C> <C> <C> <C>

REVENUES................. $15,107 $6,390 $4,957 $8,855 $ -- $35,309 $ -- $35,309
COSTS AND EXPENSES:
Drilling costs......... 10,897 4,845 3,914 6,409 -- 26,065 -- 26,065
Depreciation and
amortization......... 2,645 627 413 1,047 765(b) 6,022 -- 6,022
525(c)
General and
administrative....... 734 515 197 611 -- 2,057 -- 2,057
------- ------ ------ ------ ------- ------- ------ -------
Total costs and
expenses........ 14,276 5,987 4,524 8,067 1,290 34,144 -- 34,144
------- ------ ------ ------ ------- ------- ------ -------
Operating income... 831 403 433 788 (1,290) 1,165 -- 1,165
------- ------ ------ ------ ------- ------- ------ -------
OTHER INCOME (EXPENSE):
Interest income........ 51 -- 16 -- -- 67 -- 67
Interest expense and
financing costs...... (982) (47) (27) (35) (1,464)(d) (2,555) 1,695(h) (860)
Gain (loss) on sale of
assets............... 60 -- -- -- -- 60 -- 60
Other.................. 8 -- 31 (27) -- 12 -- 12
------- ------ ------ ------ ------- ------- ------ -------
Total other income
(expense)....... (863) (47) 20 (62) (1,464) (2,416) 1,695 (721)
------- ------ ------ ------ ------- ------- ------ -------
Income (loss) before
taxes.................. (32) 356 453 726 (2,754) (1,251) 1,695 444
------- ------ ------ ------ ------- ------- ------ -------
Income tax expense
(benefit).............. (12) 135 -- 336 (459)(f) -- 169(i) 169
------- ------ ------ ------ ------- ------- ------ -------
Net income (loss)........ $ (20) $ 221 $ 453 $ 390 $(2,295) $(1,251) $1,526 $ 275
======= ====== ====== ====== ======= ======= ====== =======
Earning per share,
primary and fully
diluted................ $ .00 $ (.09) $ .02
======= ======= =======
Weighted average shares
outstanding, primary
and fully diluted(g)... 14,397 14,397 16,592
======= ======= =======
</TABLE>

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

23
<PAGE> 24

BAYARD DRILLING TECHNOLOGIES, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1997
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------- -----------------------------
BAYARD(1) BONRAY ADJUSTMENTS AS ADJUSTED
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and investments....................... $ 970 $ 167 $ 57,179(j) $ 58,316
Accounts receivable........................ 10,517 4,190 14,707
Other...................................... 559 234 793
-------- ------- -------- --------
Total current assets............... 12,046 4,591 57,179 73,816
Property & Equipment, net.................... 92,658 18,243 16,733(k) 127,634
Goodwill, net................................ 6,402 -- 6,261(k) 12,663
Other........................................ 2,066 -- -- 2,066
-------- ------- -------- --------
Total assets....................... $113,172 $22,834 $ 80,173 $216,179
======== ======= ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable........................... $ 9,632 $ 1,435 $ -- $ 11,067
Accrued liabilities........................ 3,691 1,804 -- 5,495
Current portion of long-term debt.......... 12,869 494 (12,348)(j) 1,015
-------- ------- -------- --------
Total current liabilities.......... 26,192 3,733 (12,348) 17,577
-------- ------- -------- --------
Long-term debt............................... 18,894 74 (6,014)(j) 12,954
-------- ------- -------- --------
Subordinated Notes........................... 16,608 -- (14,568)(j) 2,040
-------- ------- -------- --------
Deferred income tax liabilities.............. 6,665 1,781 4,480(k) 12,926
-------- ------- -------- --------
STOCKHOLDERS' EQUITY:
Common stock............................... 75 424 74(j) 179
(394)(k) --
Additional paid-in capital................. 44,792 16,379 92,296(j) 172,818
19,351(k) --
Retained earnings (accumulated deficit).... (54) 443 (2,261)(j) (2,315)
(443)(k) --
-------- ------- -------- --------
Total stockholders' equity......... 44,813 17,246 108,623 170,682
-------- ------- -------- --------
Total liabilities and stockholders'
equity........................... $113,172 $22,834 $ 80,173 $216,179
======== ======= ======== ========
</TABLE>

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

24
<PAGE> 25

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(TABLES IN THOUSANDS)

(a) Represents the results of operations for Ward, Trend and Bonray prior to
their acquisition by Bayard. Operations subsequent to the date of purchase
of each of Ward and Trend, May 1 and May 30, 1997, respectively, are
included in the Bayard historical results.

(b) To adjust depreciation expense on assets acquired in the Trend, Ward and
Bonray Acquisitions using allocated purchase prices and based on estimated
useful lives of 12 years calculated on a straight-line basis.

(c) To record amortization of goodwill attributable to the Trend and Bonray
Acquisitions over 12 years on a straight-line basis.

(d) To reflect the addition of interest expense on an aggregate principal
amount of $20.5 million of Subordinated Notes issued in the May Financing
with an original issue discount of $4 million.

(e) To eliminate the gain recognized by Trend on a rig sold to Bayard in
December 1996, prior to the Trend Acquisition in May 1997.

(f) To eliminate income tax expense recognized by Bayard, Trend and Bonray to
conform to the Company's pro forma income tax position.

(g) Calculations of weighted average shares outstanding are based upon the
following:

<TABLE>
<S> <C>
Shares outstanding at June 30, 1997......................... 7,490
Energy Spectrum warrant exercise............................ 98
Chesapeake Transactions..................................... 3,194
CIT Exercise................................................ 150
Bonray Acquisition.......................................... 3,015
------
Shares to be outstanding immediately prior to Offering...... 13,947
Common Stock Equivalents (treasury stock method)............ 450
------
Historical and combined fully diluted shares outstanding.... 14,397
Shares issued in the Offering to the extent necessary to
repay the Subordinated Notes, the Term Loan and the
Revolving Loan............................................ 2,195
------
Pro forma shares outstanding................................ 16,592
======
</TABLE>

(h) To eliminate pro forma and historical interest expense based on the assumed
repayment of debt as set forth in Note (j) as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1997
--------------------------------- ---------------------------------
PERCENTAGE PERCENTAGE
INCURRED REPAID* PRO FORMA INCURRED REPAID* PRO FORMA
<S> <C> <C> <C> <C> <C> <C>
Revolving Loan (historical).... $ 0 100.0% $ 0 $ 56 100.0% $ 56
Term Loan (historical)......... 22 50.0% 11 710 50.0% 355
Subordinated Notes (pro
forma)....................... 2,928 87.7% 2,568 1,464 87.7% 1,284
------ ------ ------ ------
$2,950 $2,579 $2,230 $1,695
====== ====== ====== ======
</TABLE>

* Represents the percentage of debt to be repaid from proceeds of the
Offering.

(i) To record a provision for federal and state income tax at the statutory
rate of 38%.

25
<PAGE> 26

(j) To adjust for the Chesapeake Transactions and the CIT Exercise
(collectively, the "Stockholder Exercises"), the Offering and the
application of the net proceeds therefrom, as more completely described
under the caption "Use of Proceeds" herein:

<TABLE>
<S> <C> <C> <C>
Net proceeds from the Offering............................................. $84,590
Stockholder Exercises...................................................... 10,981
-------
95,571
-------
</TABLE>

<TABLE>
<CAPTION>
BALANCE AT
JUNE 30, PERCENTAGE
1997 REPAID
<S> <C> <C> <C>
Less debt retired --
Term Loan..................................... $23,102 50.0% 11,551
Revolving Loan................................ 6,811 100.0% 6,811
Subordinated Notes............................ 16,608 87.7%(1) 14,568
------- -------
$46,521 32,930
Additional amount to be paid to Chesapeake upon debt
retirement as a result of an Offering price of $23.00 per share..... 3,200
Extraordinary loss on early extinguishment of debt..................... 2,262(2)
-------
38,392
-------
Net adjustment to cash................................................. $57,179
=======
</TABLE>

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

(1) Represents repayment of Chesapeake's percentage of the Subordinated
Notes ($18 million/ $20.52 million) as described under the caption "Use
of Proceeds."

(2) The Company estimates that the extraordinary loss from early
extinguishment of the Subordinated Notes, when the notes are retired in
November 1997, will be approximately $1.4 million instead of the $2.3
million reflected in the table above due to the accrual of interest
expense and amortization of original issue discount from July 1997
through November 1997.

(k) To reflect (i) the acquisition of Bonray and the issuance of 3,015,000
shares of Common Stock at $11.86 per share based on the appraisals of the
fair market value of the property and equipment acquired of $35 million,
(ii) the allocation of the purchase price as shown below and (iii) deferred
income taxes related to the book/tax differences in the basis of property
and equipment:

<TABLE>
<S> <C>
Current assets.............................................. $ 4,591
Property and equipment...................................... 34,976
Goodwill.................................................... 6,261
Current liabilities......................................... (3,733)
Long-term liabilities....................................... (74)
Deferred income tax......................................... (6,261)
-------
Purchase price.............................................. $35,760
=======
</TABLE>

(l) On May 1, 1997, the Company completed the Trend Acquisition for $18
million in cash and 250,000 shares of Common Stock, which equates to
$10.64 per share based on the appraisals of the fair market value of the
property and equipment acquired of $21.5 million. The Company incurred
costs of approximately $307,000 in connection with this acquisition.

26
<PAGE> 27

The Trend Acquisition was accounted for as a purchase. The following is an
analysis of the allocation of the purchase price:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Current assets.............................................. $ 2,734
Property and equipment...................................... 21,532
Goodwill.................................................... 6,330
Current liabilities......................................... (2,265)
Long-term liabilities....................................... (1,340)
Deferred income tax liability............................... (6,330)
-------
Purchase price.............................................. $20,661
=======
</TABLE>

On May 30, 1997, pursuant to the Ward Acquisition, the Company acquired six
drilling rigs for approximately $8 million in cash and 400,000 shares of
Common Stock which equates to $8.95 per share based on the appraisal of the
fair market value of the assets acquired of $11.9 million. The Company also
issued warrants to purchase 200,000 shares of Common Stock at $10.00 per
share. The warrant had an estimated fair market value of $294,000 at the
agreement closing date and was recorded as an increase in property and
equipment and additional paid in capital.

27
<PAGE> 28

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The historical financial data presented in the table below for and at the
end of each of the years in the five-year period ended December 31, 1996 are
derived from the financial statements of the Company and relate to the
operations of Anadarko, the predecessor of the Company, and include, generally,
the financial results of the operation of eight rigs.

The financial statements for the years ended December 31, 1994, 1995 and
1996 have been audited by Grant Thornton LLP, independent certified public
accountants. The historical financial data presented in the table below for and
at the end of the six month periods ended June 30, 1997 and 1996 are derived
from the unaudited consolidated financial statements of the Company. In the
opinion of management of the Company, such unaudited consolidated condensed
financial statements include all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation of the financial data for such
periods. The results for the six months ended June 30, 1997 are not necessarily
indicative of the results to be achieved for the full year.

The data presented below should be read in conjunction with the Company's
consolidated financial statements and the notes thereto included elsewhere in
this Prospectus and "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------- ------------------------
1992 1993 1994 1995 1996 1996 1997
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Contract drilling............. $ 9,368 $ 8,349 $ 9,910 $ 7,405 $ 9,793 $ 4,242 $ 15,107
Other......................... -- -- -- 303 60 59 --
--------- --------- --------- --------- ---------- --------- ----------
Total revenues............ 9,368 8,349 9,910 7,708 9,853 4,301 15,107
--------- --------- --------- --------- ---------- --------- ----------
Operating expense:
Drilling...................... 7,835 7,690 8,572 6,075 7,653 3,268 10,897
Depreciation, depletion and
amortization................ 988 1,374 1,557 791 1,126 415 2,645
General and administrative.... 651 819 786 880 658 323 734
Other......................... -- -- -- 47 46 -- --
--------- --------- --------- --------- ---------- --------- ----------
Total operating costs..... 9,474 9,883 10,915 7,793 9,483 4,006 14,276
--------- --------- --------- --------- ---------- --------- ----------
Operating income (loss)......... (106) (1,534) (1,005) (85) 370 295 831
--------- --------- --------- --------- ---------- --------- ----------
Other income and (expense):
Interest expense and financing
cost........................ (8) (30) (18) (3) (11) -- (982)
Interest income............... -- -- -- -- -- -- 51
Gain (loss) on sale of
assets...................... -- -- 366 (131) 54 -- 60
Other income (expense)........ 90 24 -- (3) 17 36 8
--------- --------- --------- --------- ---------- --------- ----------
Income (loss) before income
taxes......................... (24) (1,540) (657) (222) 430 331 (32)
Income tax expense(1)........... -- -- -- -- 163 126 (12)
--------- --------- --------- --------- ---------- --------- ----------
Net income (loss)............... $ (24) $ (1,540) $ (657) $ (222) $ 267 $ 205 $ (20)
========= ========= ========= ========= ========== ========= ==========
Earnings (Loss) Per Common Share:
Primary and fully diluted....... $ .02 $ .01 $ .00
========== ========= ==========
Weighted Average Shares
Outstanding(2): (fully
diluted)........................ 14,397 14,397 14,397
CASH FLOWS:
Operating activities............ $ (786) $ (51) $ 445 $ 310 $ (462) $ (70) $ 1,029
Investing activities............ (1,352) (1,671) (454) (1,710) (10,441) (3,142) (59,265)
Financing activities............ 2,138 1,722 9 1,400 15,866 3,212 53,513
BALANCE SHEET DATA:
Total assets.................... $ 6,858 $ 6,791 $ 6,149 $ 8,054 $ 34,673 $ 11,474 $ 113,172
Working capital (deficit),
excluding current portion of
long-term debt................ 826 711 802 12 4,974 946 (1,277)
Total long-term debt, including
current portion............... 408 365 -- -- 7,000 -- 48,371
Total stockholders' equity(3)... (6,875) (913) (54) (276) 26,251 206 44,813
OTHER FINANCIAL DATA:
EBITDA(4)....................... $ 882 $ (160) $ 552 $ 706 $ 1,496 $ 710 $ 3,476
Capital expenditures............ 1,352 1,671 1,183 2,088 10,578 3,224 67,936
</TABLE>

28
<PAGE> 29

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

(1) Income tax expense is presented on a pro forma basis (assuming a 38%
statutory rate) for the year ended December 31, 1996 and for the six months
ended June 30, 1996.

(2) Historical weighted average shares outstanding is calculated using the fully
diluted shares outstanding through October 16, 1997 for the year ended
December 31, 1996 and six months ended June 30, 1996 and 1997.

(3) No dividends were declared through June 30, 1997. See "Dividend Policy."

29
<PAGE> 30

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

The following discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and notes thereto included
elsewhere in this Prospectus.

GENERAL

The Company's operations have been and will be significantly affected by
the Consolidation Transactions which have transformed the Company from a
regional competitor with ten rigs in late 1996 to its current position of
operating the fifth largest land drilling fleet in the United States, with a
total of 54 rigs. The historical financial results presented herein include the
effects of the Formation Transactions (16 rigs), the Trend Acquisition (14
rigs), the Ward Acquisition (six rigs), the Bonray Acquisition (13 rigs) and the
Individual Rig Acquisitions (six rigs), only for the periods after such
transactions. In addition, the historical financial results include periods in
which a number of rigs were being refurbished and did not contribute to
revenues. Accordingly, the Company does not believe that the historical
statements of operations presented herein are necessarily indicative of the
Company's future operating results, particularly in light of the magnitude of
its recent acquisitions and rig refurbishment projects and the increased demand
and contract rates for drilling rigs in its core Mid-Continent and Gulf Coast
regions. See "Business -- Formation and Acquisitions."

After giving effect to the above mentioned transactions, the Company's pro
forma revenues and operating loss for the year ended December 31, 1996, were $48
million and $1.6 million, respectively, compared to the Company's actual
revenues and operating income of $9.9 million and $370,000, respectively. The
Company's pro forma revenues and operating income for the six months ended June
30, 1997 were $35.3 million and $1.2 million, compared to the Company's actual
revenues and operating income for the period of $15.1 million and $831,000
respectively. These pro forma results are not necessarily indicative of the
Company's future results. See "Pro Forma Consolidated Financial Data."

DOMESTIC LAND DRILLING INDUSTRY OVERVIEW

Demand for the Company's contract land drilling services is substantially
dependent upon, and affected by, the level of domestic oil and gas exploration
and development activity. Industry sources estimate that from its peak in 1982,
the supply of domestic rigs has fallen by 72% through June 1996 as a result of
normal attrition, cannibalization of components to refurbish rigs, the inability
of smaller competitors to raise capital needed to upgrade and modernize rigs and
the export of rigs to international markets. As a result of these factors, the
contract land drilling industry has been cyclical with significant volatility in
profitability and rig values.

The Company's operating margins are influenced by contract drilling rates,
operating costs and drilling rig utilization. The land drilling industry is
experiencing higher utilization, increasing day rates and improved financial
performance as a result of the long term decline in the supply of rigs and
increased demand for rigs attributable to improved oil and gas industry
fundamentals. In addition, the industry is experiencing a period of rapid
consolidation as larger, better-capitalized drilling companies have acquired
smaller operators. The convergence of land drilling rig supply and demand in its
core domestic markets, along with the acquisition and refurbishment of rigs, has
contributed to higher utilization, increasing day rates and improved financial
results for the Company in recent periods.

FINANCIAL CONDITION AND LIQUIDITY

Since December 1996, the Company has completed the Formation Transactions,
the Trend Acquisition, the Ward Acquisition, the Bonray Acquisition and the
Individual Rig Acquisitions. The Formation Transactions involved the issuance of
an aggregate of 5,600,000 shares of Common Stock to existing stockholders in
consideration for the contribution to the Company of 16 rigs and $10 million in
cash. At the

30
<PAGE> 31

time of the Formation Transactions, the Company entered into a $24 million loan
facility with CIT, principally for the refurbishment of certain of the Company's
rigs. In May 1997, contemporaneously with the Trend Acquisition and in
anticipation of the Ward Acquisition, the Company completed a financing
transaction in which it (i) issued to Chesapeake and Energy Spectrum additional
shares of Common Stock, and two series of warrants together with subordinated
notes due May 1, 2003 (the "Subordinated Notes") for $28.5 million in cash and
(ii) increased the availability under its debt facilities from $24 million to
$40.5 million (collectively, the "May Financing"). In addition, the Company
obtained the right, exercisable solely at the Company's option at any time on or
prior to April 30, 1998, to require Chesapeake to provide an additional $3
million in cash in exchange for the issuance to Chesapeake of additional shares
of Common Stock, Subordinated Notes and warrants to purchase Common Stock. The
Company later waived this right in connection with the Chesapeake Transactions.
See "Certain Relationships and Related Transactions -- Chesapeake Transactions."

The Company's principal requirements for capital, in addition to the
funding of ongoing contract drilling operations, have been capital expenditures,
including the refurbishment of existing rigs and acquisitions. From December
1996 through June 30, 1997, the Company has spent $20.7 million on the Trend
Acquisition, $11.9 million on the Ward Acquisition, $5.5 million on the
Individual Rig Acquisitions and approximately $33 million on refurbishments and
other related equipment purchases, including drill pipe. As a result, the
Company's net property and equipment increased from $27 million at December 31,
1996 to $92.7 million at June 30, 1997. The Company's principal sources of
liquidity have been the issuance of Common Stock, warrants and the Subordinated
Notes, borrowings under the Term Loan and the Revolving Loan (collectively, the
"Loan Agreements").

The following table summarizes the Company's balance sheet on an historical
basis as of December 31, 1996 and June 30, 1997 and on a pro forma basis as of
June 30, 1997, giving effect to the Bonray Acquisition, the Stockholder
Exercises and the Offering as if they occurred on June 30, 1997 (in thousands).

<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------
DECEMBER 31, 1996 HISTORICAL PRO FORMA
(UNAUDITED)
<S> <C> <C> <C>
Working capital (deficit)..................... $ 4,027 $(14,146) $ 56,239
Property and equipment, net................... 26,973 92,658 127,634
Other noncurrent assets....................... 1,652 8,468 14,729
------- -------- --------
Total............................... $32,652 $ 86,980 $198,602
======= ======== ========
Long-term debt, net of current maturities..... $ 6,053 $ 35,502 $ 14,994
Other long-term liabilities................... 348 6,665 12,926
Stockholders' equity.......................... 26,251 44,813 170,682
------- -------- --------
Total............................... $32,652 $ 86,980 $198,602
======= ======== ========
</TABLE>

The most significant change in the Company's balance sheet from December
31, 1996 to June 30, 1997 was a $65.7 million increase in net property and
equipment. During this same period, long-term debt net of current maturities
increased by $29.4 million and stockholders' equity increased by $18.6 million.
These changes are a direct result of the acquisition and financing transactions
described above.

From December 31, 1996 to June 30, 1997, the Company's working capital
position declined by $18.2 million to a deficit of $14.1 million. This decline
was primarily the result of an $11.9 million increase in current maturities of
long-term debt and a $4 million decrease in cash and investments, as the Company
continued to invest in rig acquisitions and the refurbishment of rigs. Pro forma
for the Chesapeake Transactions, the CIT Exercise, the Bonray Acquisition and
the Offering, the Company would have reported working capital of $56.2 million.

31
<PAGE> 32

Operating Activities

During the year ended December 31, 1996, the Company required $462,000 of
cash to fund operating activities. This was the result of $1.5 million of cash
provided by operations, partially offset by changes in working capital items
that required $2 million of cash. Cash required for changes in working capital
items included (i) increase in accounts receivable of $2.1 million, (ii)
increase in other assets totaling $185,000 and (iii) decrease of $383,000 in
accounts payable, which were partially offset by an increase of $663,000 of
other current liabilities.

During the six months ended June 30, 1997, net cash provided from operating
activities totalled $1 million. The Company generated cash from operations of
$2.6 million and working capital changes utilized $1.6 million.

Investing Activities

During 1996, the Company invested $21.7 million in fixed assets, net of
asset sales. The major components of these expenditures were $10.4 million of
cash expenditures to acquire and refurbish five diesel electric SCR rigs and
$9.8 million of Common Stock issued to acquire rigs in the Formation
Transactions.

During the six months ended June 30, 1997, the Company invested $67.5
million in fixed assets, including the Trend Acquisition, the Ward Acquisition
and the Individual Rig Acquisitions. Rig refurbishments consisted of $20.2
million, and $12.9 million was invested in drill pipe and other drilling related
equipment. The acquisitions of Trend and Ward were partially funded through the
issuance of Common Stock valued at $6.6 million.

Financing Activities

During 1996, the Company raised $15.9 million from financing activities.
The Company borrowed $7.0 million during the year under the Term Loan described
below. The Company also issued 3,600,000 shares of Common Stock for assets and
cash and made debt payments totaling $900,000 during the year.

During the six months ended June 30, 1997, the Company obtained $53.5
million from financing activities, including net borrowings under the Loan
Agreements totaling $24.8 million, $8.2 million from the issuance of Common
Stock and $20.5 million from the issuance of the Subordinated Notes and the
associated warrants. The proceeds from these transactions were used to fund the
Company's working capital requirements and capital expenditures as discussed
above.

Following is a summary of certain material terms of the Formation
Transactions, the Loan Agreements and the May Financing.

Formation Transactions. The Company was formed in December 1996 through a
series of affiliated entity transactions in which the Company became successor
to Anadarko, the contract drilling subsidiary of privately held APLP. In
connection with the Formation Transactions (i) APLP contributed ten drilling
rigs in consideration for 2,000,000 shares of Common Stock, (ii) R.T. Oliver
Drilling, Inc. and Mike Mullen Energy Equipment Resource, Inc. and certain of
their affiliated companies (collectively, "the Oliver Companies") exchanged six
drilling rigs for 1,600,000 shares of Common Stock, (iii) Energy Spectrum
contributed $10 million in consideration for 2,000,000 shares of Common Stock
and (iv) Chesapeake entered into drilling contracts with two-year terms for six
of the Company's rigs in consideration for the grant by the Company of the
Chesapeake Option. See "Business -- Formation and Acquisitions."

Loan Agreements. On December 10, 1996, the Company also entered into the
Term Loan. Subsequent to that date and in connection with the May Financing, the
Company increased the Term Loan from $24 million to $30.5 million. The Term Loan
provides the Company up to approximately $30.5 million of borrowing capacity for
the purchase of additional land drilling rigs, the refurbishment of such rigs
and equipment and for working capital purposes. The Company also entered into a
Revolving Loan with Fleet in

32
<PAGE> 33

May 1997. The Revolving Loan provides for revolving credit loans of up to $10
million, and is being used for general corporate purposes. Amounts outstanding
under the Revolving Loan bear interest based on Fleet's prime rate plus 1.5%
(10.0% at June 30, 1997) and mature in April 2000. Amounts outstanding under the
Term Loan bear interest, at the election of the Company, at floating rates equal
to Chase Manhattan Bank's prime rate plus 2.0% or LIBOR plus 4.25% (9.94% at
June 30, 1997) and mature in March 2002. To date, loans under the Revolving Loan
and the Term Loan have been used for capital expenditures and working capital
requirements. The Loan Agreements are secured by substantially all of the assets
of the Company, including all drilling rigs, equipment and drilling contracts,
and contain customary restrictive covenants (including covenants restricting the
ability of the Company to pay dividends and encumber assets) and affirmative
covenants to maintain specified financial ratios.

May Financing. In order to fund the Trend Acquisition and the Ward
Acquisition, on May 1, 1997, the Company completed the May Financing in which
the Company issued shares of Common Stock, Subordinated Notes and warrants to
purchase Common Stock to Chesapeake and Energy Spectrum in exchange for an
aggregate of $28.5 million in cash, as described below. In addition, the Company
modified the Term Loan and entered into the Revolving Loan as described above.

In the May Financing, the Company issued 1,000,000 shares of Common Stock
to Chesapeake in consideration for $7 million in cash and 140,000 shares of
Common Stock to Energy Spectrum in consideration for $980,000 in cash.
Additionally, the Company issued Subordinated Notes due May 1, 2003 in the
original principal amounts of $18 million and $2.52 million (the "Subordinated
Notes") to Chesapeake and Energy Spectrum, respectively. The Subordinated Notes
bear interest at the Company's option at either (i) 11% per annum, payable in
cash, or (ii) 12.875% per annum, payable in the form of additional Subordinated
Notes, which interest is payable quarterly in arrears. The Subordinated Notes
are general unsecured subordinated obligations of the Company that are
subordinated in right of payment to all existing and future senior indebtedness
of the Company, pari passu with all existing and future subordinated
indebtedness of the Company and senior in right of payment to all future junior
subordinated indebtedness of the Company. Chesapeake and the Company have agreed
that, upon consummation of the Offering, the Company will redeem in full the $18
million principal amount of Subordinated Notes issued to Chesapeake in
consideration for the payment by the Company to Chesapeake of $15 million in
cash, subject to adjustment. See "Certain Relationships and Related
Transactions -- Chesapeake Transactions."

In connection with the issuance of the Subordinated Notes, the Company
issued two series of detachable warrants (the "Warrants") for the purchase of
shares of Common Stock, designated as "Series A Warrants" and "Series B
Warrants." The Warrants are exercisable on or prior to May 1, 2003 at a price of
$0.01 per share in the case of the Series A Warrants and $7.50 per share in the
case of the Series B Warrants. In the May Financing, Chesapeake was issued
Series A Warrants and Series B Warrants representing the right to purchase
700,000 shares and 800,000 shares of Common Stock, respectively, and Energy
Spectrum was issued Series A Warrants and Series B Warrants representing the
right to purchase 98,000 shares and 112,000 shares of Common Stock,
respectively. On July 31, 1997, Energy Spectrum exercised in full its Series A
Warrants, but continues to hold all of the Series B Warrants issued to it. In
August 1997, Chesapeake agreed to the relinquishment and cancellation in full of
its Series A Warrants and Series B Warrants in connection with the Chesapeake
Transactions. See "Certain Relationships and Related Transactions -- Chesapeake
Transactions."

Additional Chesapeake Financing. Additionally, in connection with the May
Financing, the Company obtained the right to require Chesapeake, on or before
April 30, 1998, to provide the Company with an additional $3 million in capital
through the purchase of (i) 120,000 shares of Common Stock for a purchase price
of $7.00 per share, (ii) additional Subordinated Notes in the aggregate
principal amount of $2.16 million, (iii) additional Series A Warrants
exercisable for 84,000 shares of Common Stock and (iv) additional Series B
Warrants exercisable for 96,000 shares of Common Stock. In August 1997, the
Company agreed to waive this right in connection with the Chesapeake
Transactions. See "Certain Relationships and Related Transactions -- Chesapeake
Transactions."

33
<PAGE> 34

The foregoing summaries of the material provisions of the Company's
principal financing agreements do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all of the provisions of the
related agreements, copies or forms of which have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.

Recent Events and Future Activities

The Company believes that the balance of the proceeds from the Offering,
cash flow from operations and, to the extent required, borrowings under the Loan
Agreements will be sufficient to fund the Company's 1997 rig refurbishment
program and to meet its other anticipated capital requirements for 1997. Upon
consummation of the Offering and the application of the net proceeds therefrom,
as described under "Use of Proceeds," the Company will have $13.4 million of
borrowings outstanding under the Loan Agreements and $2.5 million of borrowings
outstanding under the Subordinated Notes, with an additional $10 million of
unused borrowing capacity, and cash or cash equivalents of $58.3 million.

In October 1997, the Company acquired Bonray in consideration for the
issuance of 3,015,000 shares of Common Stock. See "Business -- Formation and
Acquisitions -- The Bonray Acquisition."

The Company continues to actively review possible acquisition
opportunities. While the Company has no agreements to acquire additional
businesses or equipment, suitable opportunities may arise in the future. The
timing or success of any acquisition effort and the size of the associated
potential capital commitments cannot be predicted at this time. In addition,
there can be no assurance that adequate funding will be available on terms
satisfactory to the Company.

RESULTS OF OPERATIONS

Comparison of Six Months Ended June 30, 1997 and 1996

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1996 1997
<S> <C> <C>
Rig days worked(1)......................................... 936 2,470
Average revenues per day(2)................................ $ 4,532 $ 6,116

Drilling revenues.......................................... $4,242,000 $15,107,000
Drilling costs(3).......................................... 3,268,000 10,897,000
---------- -----------
Operating Margin........................................... $ 974,000 $ 4,210,000
========== ===========
</TABLE>

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

(1) Rig days worked represents the number of rigs being marketed by the Company
multiplied by the number of days during which such rigs are being operated,
mobilized, assembled or dismantled while under contract. Rig days are a
common measurement of both utilization rates and fleet size.

(2) Represents total contract drilling revenues (including mobilization revenues
and reimbursement for fuel and other costs) divided by the total number of
rig days worked by the Company's drilling rig fleet marketed during the
period.

(3) Drilling costs exclude depreciation and amortization and general and
administrative expenses.

Drilling revenues increased approximately $10.9 million, or 256% to $15.1
million for the six months ended June 30, 1997, from $4.2 million for the six
months ended June 30, 1996. Drilling revenues increased due to a 1,534 day, or
164%, increase in rig days worked, and a $1,584, or 34.9%, increase in the
average revenue per day. The increase in days worked was a result of an increase
in the average number of rigs owned and available for service. As of June 30,
1997, the Company had 34 rigs available for service. The increase in rigs
available for service was principally the result of the Consolidation
Transactions. Rig days worked consisted of 1,305 days worked in the Gulf Coast
region and 1,165 days worked in the Mid-Continent region.

34
<PAGE> 35

Increases in revenues per day were a result of the overall increase in demand
for land drilling rigs as reflected in the utilization rate increasing from 87%
to 97%.

Drilling costs increased by approximately $7.6 million, or 233%, to $10.9
million for the six months ended June 30, 1997, as compared to $3.3 million for
the six months ended June 30, 1996. The increase in drilling operating expenses
was a direct result of the increase in the number of rigs owned and available
for service and the corresponding 1,534 day increase in the days worked.

Depreciation and amortization expense increased by $2.2 million, or 537%,
to $2.6 million for the six months ended June 30, 1997 as compared to $415,000
for the six months ended June 30, 1996. The increase was primarily due to
additional depreciation associated with the Consolidation Transactions.

General and administrative expense increased by $411,000, or 127%, to
$734,000 for the six months ended June 30, 1997, from $323,000 for the same
period of 1996 due primarily to increased payroll costs associated with new
management and increased corporate staff and increased legal fees due to the
Company's acquisition activities.

Interest expense was $982,000 for the six months ended June 30, 1997. The
Company had no outstanding debt for the six months ended June 30, 1996.

Other income decreased for the six months ended June 30, 1997 as compared
to the six months ended June 30, 1996.

For the six months ended June 30, 1997, the income tax benefit was $12,000.
For the first six months of 1996 the Company was not a taxable entity.

Comparison of Years Ended December 31, 1996 and 1995

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1995 1996
<S> <C> <C>
Rig days worked(1).......................................... 1,489 2,029
Average revenues per day(2)................................. $ 4,973 $ 4,826
Drilling revenues........................................... $7,405,000 $9,793,000
Drilling costs(3)........................................... 6,075,000 7,653,000
---------- ----------
Operating Margin............................................ $1,330,000 $2,140,000
========== ==========
</TABLE>

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

(3) Drilling costs exclude depreciation and amortization and general and
administrative expenses.

Drilling revenues increased approximately $2.4 million, or 32%, to $9.8
million for the year ended December 31, 1996 from $7.4 million for the year
ended December 31, 1995. This improvement was due to an increase in the number
of rig days worked offset by a decrease in the average revenue per day. Rig
utilization also improved from 86% to 88% in 1996, due to an overall improvement
in the contract drilling market.

Drilling costs increased by $1.6 million, or 26%, to $7.7 million for the
year ended December 31, 1996, from $6.1 million for the year ended December 31,
1995. This increase was primarily due to increased utilization and, to a lesser
extent, increased direct labor costs.

35
<PAGE> 36

Depreciation and amortization expenses increased by $335,000, or 42%, to
$1.1 million for the year ended December 31, 1996 from $791,000 for the year
ended December 31, 1995. The increase in depreciation expense was primarily
attributable to acquisition and refurbishment costs.

General and administrative expenses decreased by $222,000 to $658,000 for
the year ended December 31, 1996, from $880,000 for the year ended December 31,
1995, due to the discontinued allocation of expenses associated with the
predecessor company.

Interest expense remained fairly constant for the year end December 31,
1996 primarily as a result of the outstanding debt level remaining fairly
constant. Interest rates during these periods remained relatively unchanged.

Other income increased $197,000 from 1995 to 1996, primarily as a result of
a loss recorded in 1995 in connection with the sale of certain assets.

The Company's income tax expense of $163,000 in 1996 was attributable to
the Company's profitable operations.

The Company had net income of $267,000 in 1996 as compared to a net loss of
$222,000 in 1995. The Company's net loss in 1995 includes net losses from the
sale of assets, for which there was no similar transaction in 1996.

Comparison of Years Ended December 31, 1995 and 1994

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1994 1995
<S> <C> <C>
Rig days worked(1).......................................... 2,047 1,489
Average revenues per day(2)................................. $ 4,841 $ 4,973

Drilling revenues........................................... $9,910,000 $7,405,000
Drilling costs(3)........................................... 8,572,000 6,075,000
---------- ----------
Operating Margin............................................ $1,338,000 $1,330,000
========== ==========
</TABLE>

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

(1) Rig days worked represents the number of rigs being marketed by the Company
multiplied by the number of days. during which such rigs are being operated,
mobilized, assembled or dismantled while under contract. Rig days are a
common measurement of both utilization rates and fleet size.

(3) Drilling costs exclude depreciation and amortization and general and
administrative expenses.

Drilling revenues decreased $2.5 million, or 25%, to $7.4 million for the
fiscal year ended December 31, 1995 from $9.9 million for the twelve months
ended December 31, 1994. This decrease was primarily due to a decrease in the
number of rig days worked, offset by an increase in rig utilization from 84% for
the year ended December 31, 1994 to 86% for the year ended December 31, 1995 and
an increase in average revenues per day from $4,841 during 1994 to $4,973 during
1995.

Drilling costs decreased $2.5 million, or 29%, to $6.1 million for the year
ended December 31, 1995, from $8.6 million for the twelve months ended December
31, 1994. This decrease in costs was due to a decrease in the Company's rig days
worked.

Depreciation and amortization expenses decreased $766,000, or 49%, to
$791,000 for the year ended December 31, 1995 from $1.6 million for the twelve
months ended December 31, 1994. This decrease was primarily due to a change in
the estimated remaining lives of the Company's drilling rigs and other related

36
<PAGE> 37

drilling equipment. These changes were made to more closely approximate the
remaining useful lives of such assets.

General and administrative expenses increased approximately $94,000 to
$880,000 for the year ended December 31, 1995 from $786,000 for the twelve
months ended December 31, 1994 primarily due to increased personnel costs.

Interest expense remained fairly constant for the year ended December 31,
1995. Interest rates and borrowings outstanding during these periods remained
relatively unchanged.

Other income decreased $500,000 from $366,000 in 1994 to a loss of $134,000
in 1995, primarily due to a loss on sale of assets for the year ended December
31, 1995 compared to a gain on sale of assets for the prior year.

The Company had a net loss of $222,000 in 1995 as compared to a loss of
$657,000 for the year ended December 31, 1994.

INFLATION AND CHANGING PRICES

Contract drilling revenues do not necessarily track the changes in general
inflation as they tend to respond to the level of activity on the part of the
oil and gas industry in combination with the supply of equipment and the number
of competing companies. Capital and operating costs are influenced to a larger
extent by specific price changes in the oil and gas industry and to a lesser
extent by changes in general inflation.

RECENT ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"). SFAS No. 128, which is effective for periods ending after December 15,
1997, including interim periods, simplifies the standards for computing earnings
per share and replaces the presentation of primary earnings per share with a
presentation of basic earnings per share. Initial adoption of this standard is
not expected to have a material impact on the Company's financial position or
results of operations. Early adoption is not permitted.

37
<PAGE> 38

BUSINESS

GENERAL

The Company is a leading provider of contract land drilling services to
major and independent oil and gas companies and operates the fifth largest land
drilling fleet in the United States. As of September 30, 1997, the Company's rig
fleet consisted of 54 rigs (including 13 rigs acquired in the Bonray
Acquisition), of which 48 were being marketed and six were to be refurbished and
are expected to be placed in operation within the next 12 months. During the
nine months ended September 30, 1997, the Company experienced a utilization rate
of approximately 94% for its marketed rigs.

The Company's fleet consists primarily of rigs capable of deep drilling
applications (well depths of 15,000 feet or greater). The Company believes that
deep rigs are and will continue to be in high demand due to improved deep
drilling economics available to domestic oil and gas companies. Deep drilling
targets are more attractive to oil and gas companies due to new technologies,
including (i) three-dimensional seismic techniques, (ii) increasingly accurate
down hole measurement devices and (iii) improved guidance systems and
directional drilling motors for horizontal and directional wells. Examples of
currently active deep drilling areas include the Tuscaloosa trend in Louisiana,
the Pinnacle Reef trend in East Texas, the Anadarko and Arkoma basins in
Oklahoma and the Austin Chalk in Texas and Louisiana.

The Company's fleet includes 38 rigs capable of drilling to depths of
15,000 feet or greater, 25 of which are capable of drilling to depths of 20,000
feet or greater. Of these 38 rigs, 21 are diesel electric SCR rigs which offer
operators superior control and efficiency, particularly in deep, directional or
horizontal applications. Of the five largest domestic land drillers, the Company
ranked first in average measured depth per well drilled for the nine month
period ended September 30, 1997.

The Company's fleet is concentrated in its two core operating
regions -- the Mid-Continent region (which includes principally Oklahoma, North
Texas and the Texas Panhandle) and the Gulf Coast region of Texas and Louisiana.
At September 30, 1997, the Company had 35 rigs marketed in Oklahoma (including
11 of the rigs acquired in the Bonray Acquisition) and was the most active land
drilling contractor in the state. In 1996, 1,835 onshore wells were drilled in
Oklahoma, making it the third most active state for domestic onshore drilling.
The Company's rigs operating in the Mid-Continent region are generally capable
of drilling to depths of 10,000 feet or greater and are marketed by the Company
to meet the specific well depth and mobility needs of producers in that region.
See "-- Drilling Equipment and Supplies." At September 30, 1997, the Company had
13 rigs marketed in the Gulf Coast region, including 11 diesel electric SCR
rigs. This region is characterized by significant drilling activity in deep,
technically challenging formations for which the Company's rigs are particularly
well suited. The Company believes that its high quality equipment, including
diesel electric SCR rigs, powerful mud pumps and high horsepower drawworks,
gives the Company a competitive advantage in attracting premium jobs with
customers engaged in multi-well horizontal drilling programs. In May 1997, one
of the Company's rigs drilled a horizontal well in the Gulf Coast region to a
vertical depth of 18,700 feet before initiating a horizontal lateral of 3,239
feet. The Company believes this to be the deepest vertical depth at which a
horizontal lateral has ever been initiated.

The Company was formed in December 1996 as the successor to Anadarko, which
owned ten rigs, including two rigs requiring refurbishment. At the time of its
formation, the Company also purchased six rigs requiring refurbishment. See
"-- Formation and Acquisitions." Since that time, the Company has aggressively
pursued acquisitions of additional rigs and components and through October 16,
1997 had acquired 38 additional rigs (net of sales), 32 of which were acquired
in connection with the purchases of Trend, Ward and Bonray and the remaining six
of which were acquired pursuant to individual rig purchases. Some of these
acquired rigs required refurbishment before the Company placed such rigs in
service. Many of the acquired and refurbished rigs were put into service in May
and June 1997, and therefore did not contribute significantly to operating
results through June 30, 1997. The Company expects these rigs to be operational
and to contribute to its profitability throughout the second half of 1997.

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<PAGE> 39

BUSINESS STRATEGY

The Company believes that growth in earnings and cash flow can be achieved
by pursuing the following business strategy:

Operating a Technologically Advanced Rig Fleet. The Company has assembled
its existing rig fleet, and will pursue further acquisitions, with the goal of
operating one of the most technologically sophisticated land drilling fleets in
the United States. Many of the Company's rigs include engines, pumps and
drilling mud systems that represent the best drilling technology available and
that the Company believes offer greater efficiencies for customers than many of
the rigs available from its competitors. For example, by deploying its diesel
electric SCR rigs with two or three high horsepower pumps and top drive drilling
systems in challenging deep and horizontal drilling situations, the Company
believes that it can reduce its customers' overall drilling costs, thus securing
and enhancing its relationships with some of the most active operators in the
domestic market. The Company is committed to making the capital investments
required to maintain the technological sophistication and operational
efficiencies of its fleet.

Developing Deep Drilling Capabilities. The Company believes demand has been
particularly strong for rigs capable of drilling deeper, more complex wells,
including 1,500 horsepower and larger rigs, and has focused, and will continue
to focus, on acquiring rigs with these capabilities. Management believes that
demand and utilization rates for these types of rigs, particularly SCR rigs,
will remain higher than for rigs with lesser depth capacities due to their
greater operational flexibility and efficiency. At September 30, 1997, 70% of
the Company's rig fleet (38 rigs) had deep drilling capability (15,000 feet or
greater). In the nine months ended September 30, 1997, the Company's average
depth per well drilled was 13,016 feet, compared to the national average of
7,100 feet.

Focusing on Core Markets. The Company believes that its strong asset
position and operating expertise in the Mid-Continent and Gulf Coast regions
enable it to achieve operating efficiencies and to provide premium service to
its customers in these markets. The Company is the second largest provider of
drilling rigs in Oklahoma and is among the largest operators of deep rigs in the
onshore Gulf Coast region.

Developing and Maintaining Relationships with Strong Operators. In order to
maximize the utilization rate of its rig fleet and to minimize exposure to
market downturns, the Company seeks to maintain and build relationships with
operators committed to active domestic drilling programs. The Company's largest
current customers include Apache Corporation, Chesapeake, Enron Oil and Gas
Company, Marathon Oil Company, Sonat Exploration Company and Union Pacific
Resources Corporation. Each of these companies was among the most active onshore
operators in the United States during the last three years. During the six
months ended June 30, 1997 (pro forma for the Consolidation Transactions), the
three largest customers for the Company's contract drilling services were
Chesapeake, Marathon Oil Company and Sonat Exploration Company, which accounted
for approximately 22%, 10% and 6% of total revenues, respectively. See "Risk
Factors -- Concentration of Customer Base."

DOMESTIC LAND DRILLING INDUSTRY OVERVIEW

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<PAGE> 40

to improved oil and gas industry fundamentals. Industry sources estimate that
from its peak in 1982, the supply of domestic land rigs had fallen by 72%
through October 1997 as a result of normal attrition, cannibalization of
components to refurbish rigs, the inability of smaller competitors to raise
capital needed to upgrade and modernize rigs and the export of rigs to
international markets. Greater demand in the industry is evidenced by the
increase in the active domestic land rig count to 1,032 in September 1997 from
790 in September 1996, according to data published by Baker Hughes Incorporated.
The Company believes that the domestic land drilling industry is currently
experiencing utilization rates of approximately 86% for actively marketed rigs.
While these market conditions have led to increasing day rates in the Company's
core areas, the Company does not believe that such rates have reached levels
that would justify the construction of new rigs.

Much of the new technology being employed in the oil and gas industry has
increased demand for rigs capable of drilling deeper wells efficiently and
accurately. For example, more sophisticated and, longer life drilling motors and
measurement-while-drilling devices have made deep horizontal drilling less
expensive and more precise. Three-dimensional seismic techniques have also
increased the demand for deep rigs. This technology permits geoscientists to
develop a more complete understanding of deep, complex geology prior to drilling
a well. As shallower fields continue to deplete, oil and gas companies are
likely to continue to pursue deep drilling prospects to maintain or increase
their production levels. While demand for land rigs capable of drilling greater
than 15,000 feet has grown significantly, the supply of such rigs is limited,
contributing to rapid increases in day rates for rigs with these capabilities.

FORMATION AND ACQUISITIONS

Formation Transactions. The Company was formed in December 1996 through a
series of affiliated entity transactions in which the Company became the
successor to Anadarko, the contract drilling subsidiary of privately held APLP.
In connection with the Formation Transactions (i) APLP contributed ten drilling
rigs, including two rigs requiring refurbishment, for 2,000,000 shares of Common
Stock, (ii) the Oliver Companies exchanged six drilling rigs requiring
refurbishment for 1,600,000 shares of Common Stock and (iii) Energy Spectrum
acquired 2,000,000 shares of Common Stock for cash. Additionally, Chesapeake
entered into drilling contracts with two-year terms for six of the Company's
rigs in consideration for an option to purchase 2,000,000 shares of Common Stock
(the "Chesapeake Option").

Since the Formation Transactions, the Company has enhanced its original
fleet through acquisitions and refurbishment of rigs as described below.

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<PAGE> 41

Trend Acquisition. In May 1997, the Company completed the acquisition of
Trend for $18 million in cash and 250,000 shares of Common Stock. Trend has
operated a land drilling business in the Mid-Continent region since 1976. Trend
owned 14 rigs, including three diesel electric SCR rigs and six rigs with depth
capacities of 15,000 feet or greater. The Company retained substantially all of
Trend's operating personnel.

Ward Acquisition. In May 1997, the Company acquired the assets of Ward for
$8 million in cash, 400,000 shares of Common Stock and warrants to purchase an
additional 200,000 shares of Common Stock. Ward has operated a land drilling
business in the Mid-Continent region since 1981. In the Ward Acquisition, the
Company acquired six drilling rigs, including three rigs with depth capacities
of 15,000 feet or greater, further enhancing its presence in the Mid-Continent
region. The Company retained substantially all of Ward's operating personnel.

Bonray Acquisition. In October 1997, the Company acquired Bonray for
3,015,000 shares of Common Stock. Bonray has operated a land drilling business
in the Mid-Continent region since 1980 and prior to its acquisition by the
Company was a wholly owned subsidiary of DLB. In the Bonray Acquisition, the
Company acquired 13 rigs, including seven rigs with depth capacities of 15,000
feet or greater and two diesel electric SCR rigs. As of September 30, 1997, 12
of Bonray's rigs were operating and under contract and one was awaiting
refurbishment. The Bonray Acquisition further strengthens the Company's presence
in the Mid-Continent region, making it the leading competitor in the Oklahoma
market. The Company expects to retain substantially all of Bonray's operating
personnel.

Individual Rig Acquisitions. In addition to the Trend, Ward and Bonray
Acquisitions, the Company has invested $5.5 million to acquire six rigs in five
transactions involving purchases of individual rigs or rig components. In August
1997, the Company sold one rig. See "Certain Relationships and Related
Transactions -- Other Related Party Transactions and Arrangements."

DRILLING EQUIPMENT AND SUPPLIES

A land drilling rig consists of various components, including engines,
drawworks, a derrick or mast, substructure, pumps to circulate drilling fluid,
blowout preventers, drill pipe and related equipment. The actual drilling
capacity of a rig may be more or less than its rated drilling capacity due to
numerous factors, including the length of its drill pipe and the drilling
conditions of any particular well. The intended well depth and the drill site
conditions determine the rig, drill pipe length and other equipment needed to
complete a well. The Company's rigs can be relocated to areas where demand, well
specifications and day rates allow for maximization of gross operating margins
and utilization. Generally, land rigs operate with crews of five to six persons.

The Company's fleet includes 21 rigs that are diesel electric SCR rigs and
33 that are mechanical rigs. Mechanical rigs utilize diesel engines to produce
power that is transferred to drilling equipment, such as drawworks and pumps, by
way of a compound consisting of a series of chains, sprockets and pneumatic
clutches. SCR rigs employ diesel engines that generate alternating current
electricity which is converted and transferred into amps as alternating current
or direct current electricity, which in turn drives electric motors powering the
drilling equipment. The Company believes that SCR rigs offer a number of
advantages over mechanical rigs. SCR rigs enable flexible power distribution to
selected individual drilling equipment components, providing for more precise
drilling control and efficient operation. SCR rigs are also quieter and safer
because the diesel engines are typically located away from the rig floor and
well bore, allowing for better communication among rig crews. SCR rigs are also
more easily adapted to the use of top drive drilling systems

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<PAGE> 42

which are typically electrically powered. The Company has developed a fleet that
uses the advanced drilling technology of diesel electric SCR rigs to provide
greater efficiencies to its customers, especially in deep drilling, horizontal
and directional applications, and uses mechanical rigs primarily in areas such
as the Mid-Continent region where operators target shallower well depths and
require more frequent mobility.

In addition to its SCR rigs, the Company has focused its acquisitions on
rigs with efficient and flexible drilling mud systems as well as high horsepower
drawworks and mud pumps, features which give the Company a competitive advantage
in attracting premium jobs with customers engaged in multi-well horizontal
drilling programs. The majority of the Company's rigs employ diesel engines
manufactured by Caterpillar, Inc. as the rigs' main power sources. The Company
believes that such engines are lighter and more fuel efficient than other
available engines, thus saving the Company and its customers money in terms of
lower trucking costs and reduced fuel consumption.

Finally, the Company has begun equipping certain of its deep drilling rigs
with top drive drilling systems. Top drives provide the Company's customers with
greater control in transferring horsepower to the bit, precise orientation of
drilling tools while drilling complex directional wells, and reduced incidence
of stuck drill pipe in high risk areas. Moreover, top drives enable the
contractor to drill in 90 foot sections (as opposed to conventional 45 foot
sections), a capability which reduces connection time, and are safer for rig
employees and equipment during tubular handling operations and in well control
situations. Currently, the Company has two rigs equipped with top drives, has
two additional top drives on order and anticipates using a portion of the
proceeds of the Offering for the purchase of additional top drives.

RIG FLEET

The following table identifies certain information as of September 30, 1997
regarding the rigs owned and operated by the Company (including 13 rigs acquired
in the Bonray Acquisition).

<TABLE>
<CAPTION>
DEPTH HORSEPOWER
RIG CAPACITY RIG ----------------------- CURRENT CURRENT
NO. (FT.) DRAWWORKS TYPE(1) DRAWWORKS(2) TOTAL(3) OPERATOR STATUS
<C> <C> <S> <C> <C> <C> <C> <C>
GULF COAST REGION
21 30,000 Continental Emsco C-3 SCR 3,000 4,400 UPR Working
24 25,000 National 1320-UE SCR 2,000 3,960 Refurbishing
11 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Chesapeake Working
12 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Chesapeake Working
14 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Chesapeake Working
15 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Chesapeake Working
16 25,000 Mid Continent U-1220-EB(4) SCR 2,500 3,600 Chesapeake Working
17 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 UPR Working
18 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Chesapeake Working
23 25,000 Gardner Denver 1500-E SCR 2,000 3,600 Refurbishing
22 25,000 National 1320-UE (4) SCR 2,000 3,300 Chesapeake Working
40 25,000 National 1320-UE SCR 2,000 3,300 UPR Working
20 20,000 Oilwell 840-E SCR 1,500 2,700 UPR Working
7 20,000 Mid Continent U-914-C Mechanical 1,500 2,700 Oryx Working
4 18,000 Mid Continent U-712-A Mechanical 1,200 2,700 Chesapeake Working
39 16,000 Ideco E-900 SCR 900 2,350 Refurbishing
MID-CONTINENT REGION
10 25,000 Mid Continent U-1220-EB SCR 2,500 3,600 Apache Working
63 25,000 Gardner Denver 1500-E SCR 2,000 3,300 Pioneer Working
46 25,000 BDW 1350 Mechanical 2,000 2,900 Marathon Working
60 25,000 National 1320-M Mechanical 2,000 2,700 SMR Working
52 25,000 National 1320-M Mechanical 2,000 2,700 Toklan Working
</TABLE>

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<PAGE> 43
<TABLE>
<CAPTION>
DEPTH HORSEPOWER
RIG CAPACITY RIG ----------------------- CURRENT CURRENT
NO. (FT.) DRAWWORKS TYPE(1) DRAWWORKS(2) TOTAL(3) OPERATOR STATUS
<C> <C> <S> <C> <C> <C> <C> <C>
35 20,000 National 110-UE SCR 1,500 3,300 Vastar Working
59 20,000 Oilwell 860 Mechanical 1,500 2,700 St. Mary Operating Working
19 20,000 Continental EMSCO C-1 SCR 1,500 2,700 Burlington Working
62 20,000 Mid Continent U914 SCR 1,500 2,700 Unit Petroleum Working
36 20,000 National 110-M Mechanical 1,500 2,700 Sonat Working
61 20,000 National 110-M Mechanical 1,500 2,700 Sanguine Working
5 16,000 Gardner Denver 800 Mechanical 1,000 2,900 Anadarko Working
31 16,000 Gardner Denver 800-E SCR 1,000 2,200 Anadarko Working
27 16,000 National 80-B Mechanical 1,000 1,650 Refurbishing
8 16,000 National 80-B Mechanical 1,000 1,650 Chesapeake Working
51 16,000 Oilwell 760 Mechanical 1,000 1,650 Brigham Working
47 16,000 Ideco H-900 Mechanical 900 1,650 Refurbishing
33 15,000 Brewster N-46 Mechanical 1,000 2,000 Sonat Working
34 15,000 Ideco E-900 SCR 900 1,800 Sonat Working
32 15,000 BDW 800 MI Mechanical 1,000 1,650 Sonat Working
42 15,000 Gardner Denver 700 Mechanical 800 1,650 Seagull Working
44 15,000 Gardner Denver 700 Mechanical 800 1,650 Enron Working
26 14,000 National 610 Mechanical 750 1,650 ONEOK Working
41 14,000 Mid Continent U-36A Mechanical 600 1,650 Enron Working
38 13,000 Mid Continent U-36A Mechanical 600 1,650 Texaco Working
29 13,000 Continental Emsco D-2 Mechanical 750 1,450 National Energy Working
Universal
9 12,000 Gardner Denver 500 Mechanical 650 2,250 Resources Working
57 12,000 National 55 Mechanical 550 2,000 St. Mary Operating Working
53 12,000 Unit U-40 Mechanical 850 1,650 Avalon Working
58 12,000 Ideco 750 Mechanical 750 1,650 Oryx Working
43 12,000 Superior 700 Mechanical 650 1,450 Available
45 12,000 Gardner Denver 500 Mechanical 650 1,450 Anadarko Working
37 11,000 Gardner Denver 500 Mechanical 650 1,900 Available
28 11,000 BDW 650 Mechanical 650 1,350 National Energy Working
56 10,000 Cooper LTD 750 Mechanical 750 1,550 Kilpatrick Working
30 10,000 Brewster N-42 Mechanical 550 1,725 Cross Timbers Working
54 10,000 National 50-A Mechanical 450 900 Refurbishing
55 7,500 Cooper LTD 550 Mechanical 550 1,400 Keener Oil Working
</TABLE>

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

(1) "SCR" denotes a diesel electric silicon controlled rectifier rig.
"Mechanical" denotes a mechanical rig powered by diesel engines.

(2) Drawworks horsepower represents the amount of input power required to
achieve the maximum hoisting capability of the drawworks.

(3) Total horsepower represents the maximum horsepower produced by a rig's
diesel engines for consumption by the drilling equipment.

(4) Rigs 16 and 22 in the Gulf Coast region are each equipped with National
PS350/500 top drives.

Drilling rigs and related equipment deteriorate over time unless they are
operated and maintained properly. The Company strives to keep its drilling rigs
well maintained and technologically competitive. An active maintenance program
during the life of a drilling rig permits the maintenance, replacement and
upgrading of its components on an individual basis. Over the life of a typical
drilling rig, major components, such as engines, pumps, drawworks and drill
pipe, are replaced or rebuilt on a periodic basis as required while other
components, such as the mast and substructure, can be utilized for extended
periods of time with proper maintenance.

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<PAGE> 44

such components and equipment continues to deplete. Additionally, a shortage of
drill pipe in the contract drilling industry has caused the price of drill pipe
to increase by more than 54% over the past 24 months and has required orders for
new drill pipe to be placed at least one year in advance of expected use. The
Company has established arrangements to meet its current needs for certain
necessary drilling equipment and supplies, including drill pipe, on satisfactory
terms, but there can be no assurance that it will continue to be able to do so.
Accordingly, there can be no assurance that the Company will not experience
shortages of, or material price increases in, drilling equipment and supplies,
including drill pipe, in the future. Any such shortages could delay and
adversely affect the Company's ability to refurbish its inventory rigs and
obtain contracts for its marketed rigs.

CONTRACT DRILLING OPERATIONS

The Company's drilling rigs are employed under individual contracts which
extend either over a stated period of time or the time required to drill a well
or a number of wells. Drilling contracts are obtained through either a
competitive bidding process or as a result of direct negotiations with
customers. Terms of the Company's drilling contracts vary based on factors such
as the complexity and risk of operations, on-site drilling conditions, type of
equipment used and the anticipated duration of the work to be performed.
Contracts are typically entered into on a single well basis and obligate the
Company to pay certain operating expenses, including wages of drilling
personnel, maintenance expenses and costs for incidental rig supplies, equipment
and local office facilities. Contracts generally are subject to termination by
the customer on short notice, but are sometimes written on a firm basis for a
specified number of wells or years. The Company has ongoing relationships with a
number of customers that often engage a specific rig for the drilling of
consecutive wells.

At September 30, 1997, all of the Company's marketed rigs were operating
under daywork contracts and one rig to be acquired in the Bonray Acquisition was
operating under a footage contract. The Company and its predecessors in the past
have performed drilling services under footage and turnkey contracts and the
Company may do so again in the future. Revenues from daywork contracts accounted
for approximately 96% of total drilling revenues (excluding mobilization
revenues) during the nine months ended September 30, 1997, with the remainder
from footage contracts.

Daywork Contracts. Under daywork contracts, the Company provides a
drilling rig with required personnel to the operator, who supervises the
drilling of the well. The Company is paid based on a negotiated fixed rate per
day while the rig is utilized. The rates for the Company's services depend on
market and competitive conditions, the nature of the operations to be performed,
the duration of the work, the equipment and services to be provided, the
geographic area involved and other variables. Lower rates may be paid when the
rig is in transit, or when drilling operations are interrupted or restricted by
equipment breakdowns, actions of the customer or adverse weather conditions or
other conditions beyond the control of the Company. In addition, daywork
contracts typically provide for a lump sum fee for the mobilization and
demobilization of the drilling rig. Daywork drilling contracts generally specify
the type of equipment to be used, the size of the hole and the depth of the
well. Under a daywork drilling contract, the customer bears a large portion of
out-of-pocket costs of drilling and the Company generally bears no part of the
usual capital risks associated with oil and gas exploration (such as time delays
for various reasons, including stuck drill pipe and blowouts).

Footage and Turnkey Contracts. Under footage contracts, the Company is
paid a fixed amount for each foot drilled, regardless of the time required or
the problems encountered in drilling the well. The Company pays more of the
out-of-pocket costs associated with footage contracts compared to daywork
contracts. Under turnkey contracts, the Company contracts to drill a well to an
agreed depth under specified conditions for a fixed price, regardless of the
time required or the problems encountered in drilling the well. The Company
provides technical expertise and engineering services, as well as most of the
equipment required for the well, and is compensated when the contract terms have
been satisfied. Turnkey contracts afford an opportunity to earn a higher return
than would normally be available on daywork or footage contracts if the contract
can be completed successfully without complications.

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<PAGE> 45

The risks to the Company under footage and turnkey contracts are
substantially greater than under daywork contracts because the Company assumes
most of the risks associated with drilling operations generally assumed by the
operator in a daywork contract, including risk of blowout, loss of hole, lost or
damaged drill pipe, machinery breakdowns, abnormal drilling conditions and risks
associated with subcontractors' services, supplies, cost escalation and
personnel. See "Risk Factors -- Risks Associated with Footage and Turnkey
Drilling."

CUSTOMERS AND MARKETING

The Company's customers include major oil companies and independent oil and
gas producers. During the six months ended June 30, 1997 (pro forma for the
Consolidation Transactions), the three largest customers for the Company's
contract drilling services were Chesapeake, Marathon Oil Company and Sonat
Exploration Company, which accounted for approximately 22%, 10% and 6% of total
revenues, respectively.

In December 1996, Chesapeake and its operating subsidiary (collectively
referred to in this paragraph as "Chesapeake") entered into drilling contracts
(the "Chesapeake Drilling Agreements") with the Company pursuant to which
Chesapeake agreed to engage six of the Company's rigs for two-year terms. Each
of the Chesapeake Drilling Agreements provides that the Company will utilize a
specified rig to drill wells at locations and to well depths as directed by
Chesapeake. The Company is compensated on a daywork basis at rates that are
subject to annual upward adjustments, in November of each year, to approximately
$100 per day less than the average then-current market rates for the areas of
operation. In the event that the Company and Chesapeake are unable to agree on
the appropriate rate adjustment for a particular rig, the Company will have the
option to terminate the contract for such rig at the conclusion of operations at
the well then being drilled. The Company has the option to extend the Chesapeake
Drilling Agreements with respect to any two of the rigs for two additional years
on the same terms provided in the Chesapeake Drilling Agreements. Chesapeake has
the option to extend each of the other four individual drilling contracts for
two additional years on the same terms. Any of the Chesapeake Drilling
Agreements may be terminated by either party in the event of total loss,
destruction or major breakdown of the applicable rig. The Company believes that
the existence of the Chesapeake Drilling Agreements has enabled it to obtain
financing on more favorable terms than would otherwise have been available. See
"Certain Relationships and Related Transactions -- The Formation
Transactions -- Chesapeake Drilling Agreements."

The Company enters into informal, nonbinding commitments with many of its
customers to provide drilling rigs for future periods at agreed upon rates plus
fuel and mobilization charges, if applicable, and escalation provisions. This
practice is customary in the land drilling business during times of tightening
rig supply. Although neither the Company nor the customer is legally required to
honor these commitments, the Company strives to satisfy such commitments in
order to maintain good customer relations.

The Company's sales force consists of industry professionals with
significant land drilling sales experience who utilize industry contacts and
available public data to determine how to most appropriately market available
rigs.

COMPETITION

The contract drilling industry is a highly competitive and fragmented
business characterized by high capital and maintenance costs. As a result, even
though the Company has the fifth largest active land drilling rig fleet in the
United States, the Company believes that such fleet represents a market share of
approximately 6% of the domestic land drilling industry. Drilling contracts are
usually awarded through a competitive bid process and, while the Company
believes that operators consider factors such as quality of service, type and
location of equipment, or the ability to provide ancillary services, price and
rig availability are the primary factors in determining which contractor is
awarded a job. Certain of the Company's competitors have greater financial and
human resources than the Company, which may enable them to better withstand
periods of low rig utilization, to compete more effectively on the basis of
price and technology, to build new rigs or acquire existing rigs and to provide
rigs more quickly than the Company in periods of high rig utilization.

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<PAGE> 46

OPERATING HAZARDS AND INSURANCE

The Company's insurance coverage for property damage to its rigs and
drilling equipment is based on the Company's estimate of the cost of comparable
used equipment to replace the insured property. There is a deductible per
occurrence on rigs and equipment of $500,000.

The Company's third party liability insurance coverage under the general
policy is $1 million per occurrence, with a self insured retention of $100,000
per occurrence. The commercial umbrella policy has a self insured retention of
$10,000 per occurrence with coverage of $5 million per occurrence. The Company
believes that it is adequately insured for public liability and property damage
to others with respect to its operations. However, such insurance may not be
sufficient to protect the Company against liability for all consequences of well
disasters, extensive fire damage or damage to the environment. See "Risk
Factors -- Operating Hazards and Uninsured Risks."

GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

General

The Company's operations are affected from time to time in varying degrees
by political developments and federal, state and local laws and regulations. In
particular, oil and gas production, operations and economics are or have been
affected by price controls, taxes and other laws relating to the oil and gas
industry, by changes in such laws and by changes in administrative regulations.
Although significant capital expenditures may be required to comply with such
laws and regulations, to date, such compliance costs have not had a material
adverse effect on the earnings or competitive position of the Company. In
addition, the Company's operations are vulnerable to risks arising from the
numerous laws and regulations governing the discharge of materials into the
environment or otherwise relating to environmental protection.

Environmental Regulation

The Company's activities are subject to existing federal, state and local
laws and regulations governing environmental quality, pollution control and the
preservation of natural resources. Such laws and regulations concern, among
other things, air emissions, the containment, disposal and recycling of waste
materials, and reporting of the storage, use or release of certain chemicals or
hazardous substances. Numerous federal and state environmental laws regulate
drilling activities and impose liability for discharges of waste or spills,
including those in coastal areas. The Company has conducted drilling activities
in or near ecologically sensitive areas, such as wetlands and coastal
environments, which are subject to additional regulatory requirements. State and
federal legislation also provide special protections to animal and marine life
that could be affected by the Company's activities. In general, under various
applicable environmental programs, the Company may

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<PAGE> 47

potentially be subject to regulatory enforcement action in the form of
injunctions, cease and desist orders and administrative, civil and criminal
penalties for violations of environmental laws. The Company may also be subject
to liability for natural resource damages and other civil claims arising out of
a pollution event.

Except for the handling of solid wastes directly generated from the
operation and maintenance of the Company's drilling rigs, such as waste oils and
wash water, it is the Company's practice to require its customers to
contractually assume responsibility for compliance with environmental
regulations. Laws and regulations protecting the environment have become more
stringent in recent years, and may, in certain circumstances, impose strict
liability, rendering a person liable for environmental damage without regard to
negligence or fault on the part of such person. Such laws and regulations may
expose the Company to liability for the conduct of or conditions caused by
others, or for acts of the Company which were in compliance with all applicable
laws at the time such acts were performed. The application of these requirements
or adoption of new requirements could have a material adverse effect on the
Company.

Environmental regulations that affect the Company's customers also have an
indirect impact on the Company. Increasingly stringent environmental regulation
of the oil and gas industry has led to higher drilling costs and a more
difficult and lengthy well permitting process.

The primary environmental statutory and regulatory programs that affect the
Company's operations include the following:

Oil Pollution Act and Clean Water Act. The Oil Pollution Act of 1990
("OPA") amends certain provisions of the federal Water Pollution Control Act of
1972, commonly referred to as the Clean Water Act ("CWA"), and other statutes as
they pertain to the prevention of and response to spills or discharges of
hazardous substances or oil into navigable waters. Under OPA, a person owning or
operating a facility or equipment (including land drilling equipment) from which
there is a discharge or threat of a discharge of oil into or upon navigable
waters and adjoining shorelines is liable, regardless of fault, as a
"responsible party" for removal costs and damages. Federal law imposes strict,
joint and several liability on facility owners for containment and clean-up
costs and certain other damages, including natural resource damages, arising
from a spill.

The United States Environmental Protection Agency ("EPA") is also
authorized to seek preliminary and permanent injunctive relief and, in certain
cases, criminal penalties and fines. State laws governing the control of water
pollution also provide varying civil and criminal penalties and liabilities in
the case of releases of petroleum or its derivatives into surface waters or into
the ground. In the event that a discharge occurs at a well site at which the
Company is conducting drilling or pressure pumping operations, the Company may
be exposed to claims that it is liable under the CWA or similar state laws.

Certain of the Company's operations are also subject to EPA regulations,
including regulations that require the preparation and implementation of spill
prevention control and countermeasure ("SPCC") plans to address the possible
discharge of oil into navigable waters. Where so required, the Company has SPCC
plans in place.

Superfund. The Comprehensive Environmental, Response, Compensation, and
Liability Act, as amended ("CERCLA"), also known as the "Superfund" Law, imposes
liability, without regard to fault or the legality of the original conduct, on
certain classes of persons with respect to the release of a "hazardous
substance" into the environment. These persons include (i) the current owner and
operator of a facility from which hazardous substances are released, (ii) owners
and operators of a facility at the time any hazardous substances were disposed,
(iii) generators of hazardous substances who arranged for the disposal or
treatment at or transportation to such facility of hazardous substances and (iv)
transporters of hazardous substances to disposal or treatment facilities
selected by them. The Company may be responsible under CERCLA for all or part of
the costs to clean up sites at which hazardous substances have been released. To
date, however, the Company has not been named a potentially responsible party
under CERCLA or any similar state Superfund laws.

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<PAGE> 48

Hazardous Waste Disposal. The Company's operations involve the generation
or handling of materials that may be classified as hazardous waste and subject
to the federal Resource Conservation and Recovery Act and comparable state
statutes. The EPA and various state agencies have limited the disposal options
for certain hazardous and nonhazardous wastes and is considering the adoption of
stricter handling and disposal standards for nonhazardous wastes.

As part of the Bonray Acquisition, the Company acquired an equipment yard
which may require certain expenditures or remedial actions for the removal or
cleanup of contamination. In exchange for a $1 million cash payment to the
Company at closing, the Company did not require DLB to indemnify the Company
with respect to such expenditures or remedial actions. While the Company has not
yet had an opportunity to review whether and to what extent such expenditures or
remedial actions may be necessary or advisable, based on the presently available
information, the Company does not believe that such expenditures will exceed $1
million. Management believes that the Company and its operations are in material
compliance with applicable environmental laws and regulations.

Health and Safety Matters

The Company's facilities and operations are also governed by laws and
regulations, including the federal Occupational Safety and Health Act ("OSHA"),
relating to worker health and workplace safety. As an example, the Occupational
Safety and Health Administration has issued the Hazard Communication Standard
("HCS") requiring employers to identify the chemical hazards at their facilities
and to educate employees about these hazards. HCS applies to all private-sector
employers, including the oil and gas exploration and producing industry. HCS
requires that employers assess their chemical hazards, obtain and maintain
certain written descriptions of these hazards, develop a hazard communication
program and train employees to work safely with the chemicals on site. Failure
to comply with the requirements of the standard may result in administrative,
civil and criminal penalties. The Company believes that appropriate precautions
are taken to protect employees and others from harmful exposure to materials
handled and managed at its facilities and that it operates in substantial
compliance with all OSHA regulations. While it is not anticipated that the
Company will be required in the near future to expend material amounts by reason
of such health and safety laws and regulations, the Company is unable to predict
the ultimate cost of compliance with these changing regulations.

FACILITIES AND OTHER PROPERTY

The Company leases approximately 7,500 square feet of office space for its
principal executive offices in Oklahoma City, Oklahoma at a cost of
approximately $7,000 per month. In addition, the Company owns approximately ten
acres of land in El Reno, Oklahoma and five acres of land in Weatherford,
Oklahoma that it uses for rig storage and maintenance. The Company has
negotiated the lease of a facility in Houston, Texas that includes approximately
5,000 square feet of warehouse space and 1,300 square feet of office space. As
part of the Bonray Acquisition, the Company acquired approximately 40 acres of
land in Oklahoma City with facilities including 3,600 square feet of office
space, an 8,000 square foot repair shop and three warehouses. The Company
considers all of its facilities to be in good operating condition and adequate
for their present uses.

EMPLOYEES

As of September 30, 1997, giving effect to the Bonray Acquisition, the
Company had approximately 910 employees, of which approximately 110 were
salaried and approximately 800 were employed on an hourly basis. None of the
Company's employees is represented by any collective bargaining unit. Management
believes that the Company's relationship with its employees is good.

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LEGAL PROCEEDINGS

The Company is involved in litigation from time to time in the ordinary
course of its business. As of September 30, 1997, the Company was not a party in
any commercial litigation, but was involved in several workers' compensation
claims. Management does not believe that any litigation in which the Company
currently is involved, individually or in the aggregate, is material to the
Company's financial condition or results of operations.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information regarding the Company's
directors and executive officers, including their respective ages.

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
James E. Brown....................... 45 Chairman of the Board, President and Chief
Executive Officer
Edward S. Jacob, III................. 45 Executive Vice President -- Operations &
Marketing
David E. Grose....................... 45 Vice President and Chief Financial Officer
Carl B. Anderson, III................ 42 Director
Merrill A. Miller, Jr................ 47 Director
Sidney L. Tassin..................... 40 Director
Lew O. Ward.......................... 67 Director
</TABLE>

James E. Brown is Chairman of the Board and has served as President and
Chief Executive Officer and as a director of the Company since its formation in
1996. From 1992 until joining the Company in 1996, Mr. Brown served as President
of Anadarko Drilling Company, an Oklahoma general partnership and the
predecessor of the Company. From 1982 through 1992, Mr. Brown served as Chief
Financial Officer of AnSon Gas Corporation and its predecessor entities. From
1979 through 1982, Mr. Brown served as Vice President, Treasurer and Controller
of Blocker Energy Corporation. Prior thereto, Mr. Brown served as an accountant
in various positions with Arthur Andersen & Co.

Edward S. Jacob, III has served as Executive Vice President -- Operations &
Marketing since April 1997 and prior thereto served as Vice President of
Operations and Marketing for the Company since its formation. From 1983 until
joining the Company, Mr. Jacob was employed by Helmerich & Payne International
Drilling Co., serving as U.S. Marketing Manager from 1990 through 1996. Mr.
Jacob is a Director of the International Association of Drilling Contractors
("IADC"), serving on its Contracts and Marketing Committee, and is a former IADC
Chapter Chairman.

David E. Grose has served as Vice President and Chief Financial Officer of
the Company since July 1997. Prior to joining the Company, Mr. Grose was
affiliated with Alexander Energy Corporation from its inception in March 1980,
serving from 1987 through 1996 as a director and Vice President, Treasurer and
Chief Financial Officer. In August 1996, National Energy Group acquired
Alexander Energy Corporation and Mr. Grose served as Vice President -- Finance
and Treasurer through February 1997.

Carl B. Anderson, III has served as a director of the Company since its
formation in December 1996. Since 1994, Mr. Anderson has served as Managing
General Partner and Chief Executive Officer of APLP, a diversified energy
company and parent of Anadarko, the Company's predecessor. From 1978 through
1994, Mr. Anderson served in various capacities for APLP.

Merrill A. Miller, Jr. has served as a director of the Company since
October 1997. Since February 1996, Mr. Miller has served in various capacities
for National-Oilwell, Inc., a publicly traded oilfield services company,
including President of its Products & Technology Group since May 1997, Vice
President and General Manager of Drilling Systems since July 1996 and Vice
President of Marketing, Drilling Systems from February 1996 through July 1996.
Prior thereto, Mr. Miller served in various capacities for Anadarko, the
Company's predecessor, from January 1995 through February 1996. From May 1980
through January 1995, Mr. Miller served in various capacities with Helmerich &
Payne International Drilling Co., including Vice President of U.S. Operations.

Sidney L. Tassin has served as a director of the Company since its
formation in 1996. Since March 1996, Mr. Tassin has been the President of Energy
Spectrum Capital LP, the general partner of Energy Spectrum, an equity fund that
invests in the energy industry. From 1980 to 1994, Mr. Tassin was associated
with MESA

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<PAGE> 51

Inc., serving in various financial executive capacities, including Vice
President -- Finance from 1986 to 1988 and President of BTC Partners Inc., a
financial and strategic consultant to MESA Inc., from 1988 to 1994.

Lew O. Ward has served as a director of the Company since May 1997. Since
1981, Mr. Ward has served as Chairman and Chief Executive Officer of Ward
Petroleum Corporation, an independent oil and gas company founded by Mr. Ward.
Mr. Ward is a former Director and Area Vice President of the Independent
Petroleum Association of America ("IPAA") and currently serves as Chairman of
the IPAA.

BOARD OF DIRECTORS

Board Composition. The Board is currently composed of five directors.
Following consummation of the Offering and pursuant to the Stockholders and
Voting Agreement, DLB will be entitled to nominate a sixth member of the Board.
Directors are elected for one-year terms at each annual meeting of stockholders.
Three of the Company's current directors were elected pursuant to the terms of
the Stockholders and Voting Agreement. See "Certain Relationships and Related
Transactions -- Stockholders and Voting Agreement."

Board Committees. The Company has established two standing committees of
the Board: a Compensation Committee and an Audit Committee. The current members
of the Compensation Committee are Carl B. Anderson, III and Sidney L. Tassin.
The Compensation Committee recommends to the Board the base salaries and
incentive bonuses for the officers of the Company and is charged with
administering the Company Stock Plans. The current members of the Audit
Committee are Sidney L. Tassin and Lew O. Ward. The Audit Committee reviews the
functions of the Company's management and independent auditors pertaining to the
Company's financial statements and performs such other related duties and
functions as are deemed appropriate by the Audit Committee or the Board. The
Board does not have a standing nominating committee or other committee
performing similar functions.

Director Compensation. Directors who are also employees of the Company are
not compensated for service on the Board or on any committee of the Board. Under
the compensation policy to become effective upon consummation of the Offering,
non-employee directors will receive an annual retainer of $10,000. Additionally,
all directors of the Company are entitled to reimbursement for their reasonable
out-of-pocket expenses in connection with their travel to and attendance at
meetings of the Board or committees thereof. In October 1997, the Company
adopted the Director Stock Plan pursuant to which each non-employee director is
entitled to receive (i) upon the later of the consummation of the Offering and
such director's initial election to the Board, an option to purchase 15,000
shares of Common Stock and (ii) immediately following each annual meeting at
which such director is reelected to the Board, an option to purchase 5,000
shares of Common Stock. Such non-employee directors are also entitled under the
Director Stock Plan to elect to receive options to purchase Common Stock in lieu
of their annual cash retainer and to receive certain other stock option awards.
Directors who are also employees of the Company are not eligible to receive
awards under the Director Stock Plan. See "-- 1997 Non-Employee Directors' Stock
Option Plan."

EXECUTIVE COMPENSATION

Because the Company was formed in December 1996, total compensation awarded
to or earned by James E. Brown, the Chairman of the Board, President and Chief
Executive Officer of the Company, for the Company's last fiscal year included
$9,167 in salary, an option to purchase 200,000 shares of Common Stock and $900
in other compensation. No options to purchase Common Stock were exercised by Mr.
Brown at any time during the fiscal year ended December 31, 1996. No executive
officer of the Company received salary and bonus in excess of $100,000 for
services rendered in all capacities during such fiscal year. For anticipated
executive compensation levels in 1997 and beyond, see "-- Executive Salaries and
Employment Agreements."

On December 10, 1996, the Company granted Mr. Brown an option (the "1996
Brown Option") to purchase 200,000 shares of Common Stock at an exercise price
of $5 per share, becoming exercisable with respect to 20% of the underlying
shares each anniversary of the grant date. The option terminates as to any
unexercised portion on December 10, 2002. The potential realizable values of the
1996 Brown Option,

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<PAGE> 52

assuming that the market price of the Common Stock appreciates in value from $5
per share (the estimated market price of the Common Stock based upon the cash
price paid for shares of Common Stock by an independent third party in a
separate transaction consummated on the date of grant) through the end of the
option term at annualized rates of 5% and 10%, would be $340,096 and $771,561,
respectively. If the 1996 Brown Option was fully exercisable and exercised on
the date of the Offering, the realized value of the option would be $3.4
million. The Company did not grant any options to purchase Common Stock to any
other executive officer or other employee of the Company during the fiscal year
ended December 31, 1996. The Company has not granted any stock appreciation
rights.

The Company adopted the Employee Stock Plan in April 1997 and made the
terms thereof applicable to the 1996 Brown Option. Through October 16, 1997 and
including the 1996 Brown Option, the Company had granted to James E. Brown,
Edward S. Jacob, III, and David E. Grose options to purchase 200,000, 50,000 and
50,000 shares of Common Stock, respectively, at exercise prices of $5, $5 and
$10 per share, respectively. Additionally, the Company has granted to Messrs.
Brown, Jacob and Grose, subject to the closing of the Offering, options to
purchase 200,000, 100,000 and 10,000 shares of Common Stock, respectively, at an
exercise price equal to the initial public offering price. None of such options
has been exercised, and all of such options remain outstanding, as of the date
of this Prospectus. Each of the option agreements relating to stock options
granted under the Employee Stock Plan provides for the vesting of 20% of the
shares subject to the option each year beginning on the first anniversary of the
date of grant. The option ceases to be exercisable on the earliest of (i) the
sixth anniversary of the date of grant, (ii) the date of the employee's
voluntary termination of employment with the Company or the Company's
termination of the employee's employment for Due Cause (as defined in the
employee's employment agreement) or (iii) the date that is 90 days after
termination of the employee's employment by means of retirement, disability or
death. In the event of a Change of Control (as defined in the Employee Stock
Plan), the committee that is charged with administering the Employee Stock Plan
(the "Committee") may accelerate the exercisability of the options or take
certain other actions provided in the Employee Stock Plan. See "-- 1997 Stock
Option and Stock Award Plan." The options are exercisable for cash, or in the
Committee's discretion, in an acceptable equivalent, by the assignment of shares
of Common Stock owned by the option holder or the surrender of another Incentive
Award (as hereinafter defined).

The Company and James E. Brown are parties to a restricted stock award
agreement (the "Restricted Stock Award Agreement") pursuant to which Mr. Brown
purchased 100,000 shares (the "Restricted Shares") of Common Stock at a price of
$2.50 per share in February 1997. The Restricted Stock Award Agreement provides
for vesting of the Restricted Shares at a rate of 20% per year beginning on
December 10, 1997. Mr. Brown is required to remain continuously employed by the
Company through each vesting date for the applicable portion of the Restricted
Shares to vest and, prior to vesting, the Restricted Shares are not
transferable. In the event of termination of Mr. Brown's employment due to a
Change of Control (as defined in the Employee Stock Plan), all Restricted Shares
will vest immediately and all restrictions on transfer will terminate. If Mr.
Brown's employment with the Company terminates for any other reason, all
unvested Restricted Shares (the "Unvested Shares") will no longer be eligible
for vesting but, under certain circumstances, will be eligible for purchase by
the Company or Mr. Brown, as applicable. If Mr. Brown resigns or is terminated
by the Company for Due Cause (as defined in the Restricted Stock Award
Agreement), the Company may purchase the Unvested Shares from Mr. Brown for
$2.50 per share. If the Company elects not to purchase the Unvested Shares from
Mr. Brown, Mr. Brown will forfeit such Unvested Shares to the Company without
any payment therefor. If the Company terminates Mr. Brown's employment for any
reason other than Due Cause or if Mr. Brown's employment with the Company
terminates due to the death or disability of Mr. Brown, Mr. Brown may keep the
Unvested Shares by paying the Company an additional $5.00 per share. If Mr.
Brown elects not to make such additional payment, the Company may purchase the
Unvested Shares from Mr. Brown for $2.50 per share or allow Mr. Brown to keep
the Unvested Shares.

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EXECUTIVE SALARIES AND EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with James E. Brown,
Edward S. Jacob, III and David E. Grose. The aggregate of the annual salaries
for all three executive officers (taken as a group) at the completion of the
Offering will be $375,000.

Pursuant to an employment agreement dated December 10, 1996 (the "Brown
Agreement"), James E. Brown is employed as President of the Company and, if
elected by the Board, the Chairman of the Board. The Brown Agreement provides
that Mr. Brown will receive an annual salary of not less than $120,000, subject
to annual adjustment in the sole discretion of the Board based upon the
performance and accomplishments of Mr. Brown. Upon consummation of the Offering,
Mr. Brown's annual salary will be $140,000. If the Company's earnings before
deducting interest, taxes and depreciation during any full quarterly period
equal or exceed the greater of (i) $1.5 million or (ii) 5% of the sum of the
Company's stockholders' equity and long-term debt (averaged on a daily basis
throughout such quarterly period), then Mr. Brown will be eligible to receive a
quarterly bonus of $12,500. The Brown Agreement also provides for the grant of
non-transferrable options to purchase 200,000 shares of Common Stock at an
exercise price of $5 per share, which options are subject to vesting and other
restrictions provided in an option agreement. Pursuant to the Brown Agreement,
Mr. Brown purchased 100,000 shares of restricted Common Stock which are subject
to vesting in equal amounts annually over a five year period and other
restrictions provided in the agreement, including Mr. Brown's continued
employment with the Company and Mr. Brown's right, under certain circumstances,
to purchase unvested shares for $2.50 per share. See "-- Executive
Compensation." Mr. Brown is also entitled to reimbursement of reasonable
business expenses incurred by him in the performance of his duties, as well as
certain fringe benefits. The initial term of the Brown Agreement expires on
November 30, 1998 and is subject to extension for additional one-year periods by
mutual consent of Mr. Brown and the Company. In the event Mr. Brown's employment
is terminated by Mr. Brown voluntarily or by the Company for due cause, Mr.
Brown has agreed, for a period of two years thereafter, not to take certain
actions in competition with the Company in the states of Oklahoma, Texas, New
Mexico, Louisiana or any other state in which the Company then owns, leases or
operates its assets. If, in the event of a Change of Control (as defined in the
Brown Agreement), Mr. Brown is terminated without due cause or Mr. Brown
voluntarily elects to terminate his employment for any reason, then Mr. Brown
will be entitled to continue to receive his base salary and other employee
benefits through the remaining term of the Brown Agreement and to receive a cash
payment in an amount equal to any earned but unpaid quarterly bonus for the
previous quarter.

The Company has entered into employment agreements dated as of January 1,
1997 with Edward S. Jacob, III (the "Jacob Agreement") and July 16, 1997 with
David E. Grose (the "Grose Agreement" and collectively with the Jacob Agreement,
the "Executive Agreements"). Pursuant to the Executive Agreements, Mr. Jacob is
employed as Executive Vice President -- Operations & Marketing and Mr. Grose is
employed as Vice President and Chief Financial Officer. The Jacob Agreement
provides that Mr. Jacob will receive an annual salary of not less than $105,000
in 1997 and $115,000 in 1998, subject to annual adjustment in the sole
discretion of the Board based upon performance and accomplishments of Mr. Jacob.
Upon consummation of the Offering, Mr. Jacob's annual salary will be $130,000.
The Grose Agreement provides that Mr. Grose will receive an annual salary of not
less than $105,000, subject to annual adjustment in the sole discretion of the
Board based upon performance and accomplishments of Mr. Grose. If the Company's
earnings before deducting interest, taxes and depreciation during any full
quarterly period equal or exceed the greater of (i) $1.5 million or (ii) 5% of
the sum of the Company's stockholders' equity and long-term debt (averaged on a
daily basis throughout such quarterly period), then each of Messrs. Jacob and
Grose will be eligible to receive a quarterly bonus of $5,000. The Executive
Agreements also provide for the grant of non-transferrable options to purchase
50,000 shares of Common Stock to each of Messrs. Jacob and Grose at an exercise
price of $5 per share, for Mr. Jacob, and $10 per share, for Mr. Grose. Such
options were granted to Mr. Jacob on January 1, 1997 and to Mr. Grose on July
16, 1997 and are subject to vesting and other restrictions. Such options
generally become exercisable in equal annual amounts over five years. Each of
Messrs. Jacob and Grose are entitled to reimbursement of reasonable business
expenses incurred by him in the performance of his duties, as well as certain
fringe benefits. The Jacob Agreement also provided for payment to Mr. Jacob of a
relocation allowance of $50,000, which was paid by the Company in January 1997.
The initial terms of the

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Jacob Agreement and the Grose Agreement expire on December 31, 1998 and June 30,
1999, respectively, and are subject to extension for additional one-year periods
by mutual consent. Each of the Executive Agreements provides that if the
applicable executive officer's employment is terminated by the executive
voluntarily or by the Company for due cause, for a period of two years
thereafter, the executive will not take certain actions in competition with the
Company in the states of Oklahoma, Texas, New Mexico, Louisiana or any other
state in which the Company then owns, leases or operates its assets. If, in the
event of a Change of Control (as defined in the Executive Agreement), the
executive is terminated without due cause or the executive voluntarily elects to
terminate his employment for any reason, then the executive will be entitled to
continue to receive his base salary and other employee benefits through the
remaining term of his Executive Agreement and to receive a cash payment in an
amount equal to any earned but unpaid quarterly bonus for the previous quarter.

1997 STOCK OPTION AND STOCK AWARD PLAN

The description set forth below represents a summary of the principal terms
and conditions of the Employee Stock Plan and does not purport to be complete.
Such description is qualified in its entirety by reference to the Employee Stock
Plan, a copy of which has been filed as an exhibit to the Registration Statement
of which this Prospectus is a part.

General

Purpose. The Company adopted the Employee Stock Plan for the purposes of
strengthening the ability of the Company and its subsidiaries to attract,
motivate and retain employees of superior capability and encouraging valued
employees to have a proprietary interest in the Company. To accomplish these
purposes, the Employee Stock Plan provides terms upon which certain eligible
employees of the Company and its subsidiaries may be granted stock options
("Options"), stock appreciation rights ("SARs"), restricted stock, performance
units, performance shares or phantom stock rights (collectively, "Incentive
Awards").

Administration. The Employee Stock Plan is administered by a committee (the
"Committee") consisting of two or more non-employee members of the Board elected
to the Committee by a majority of the Board. Presently, the members of the
Committee are Carl B. Anderson, III and Sidney L. Tassin. Subject to the terms
of the Employee Stock Plan, the Committee has the ability to (i) determine,
among other things, which full-time employees (by individual or by class) are
eligible to receive Incentive Awards and the time or times at which Incentive
Awards are granted, (ii) determine the number of shares of Common Stock,
Options, SARs, restricted stock awards, performance units or shares or phantom
stock rights that will be subject to each Incentive Award and the terms and
provisions of each Incentive Award, (iii) interpret the Employee Stock Plan and
agreements thereunder, (iv) prescribe, amend and rescind any rules relating to
the Employee Stock Plan and (v) make all other determinations necessary for
Employee Stock Plan administration.

Shares Subject to Employee Stock Plan. Initially, an aggregate of 1,600,000
shares of Common Stock (subject to certain adjustments) may be issued,
transferred or exercised pursuant to Incentive Awards under the Employee Stock
Plan. If the total number of issued and outstanding shares of Common Stock
increases, (other than any increase due to issuances of Common Stock in
connection with Incentive Awards under the Employee Stock Plan), then the number
of shares reserved under the Employee Stock Plan will be increased one time per
year, each January 1 during the existence of the plan, such that the number of
shares reserved and available for issuance under the Employee Stock Plan will
equal 10% of the total number of shares of issued and outstanding Common Stock.
Notwithstanding the foregoing, only a total of 400,000 of the original 1,600,000
shares of Common Stock reserved under the Employee Stock Plan may be issued,
transferred or exercised pursuant to incentive stock options ("ISOs") that
comply with the requirements of Section 422 of the Code under the Employee Stock
Plan, and the number of shares eligible for such treatment as ISOs shall not be
subject to annual adjustment. At the discretion of the Board or the Committee,
the shares of Common Stock delivered under the Employee Stock Plan may be made
available from (i) authorized but unissued

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shares, (ii) treasury shares or (iii) previously issued but reacquired shares
(or through a combination thereof).

Eligibility and Participation. The Employee Stock Plan authorizes the
Committee to designate, by individual or class, those persons who are eligible
to receive Incentive Awards under the Plan ("Participants"). Participants must
be employed on a full-time basis by the Company or its subsidiaries. Members of
the Board who are not officers or employees of the Company may not be
Participants.

Incentive Awards

Except to the extent that the Committee in a written agreement evidencing
an Incentive Award (an "Incentive Award Agreement") or the Employee Stock Plan
provides otherwise, Incentive Awards vest and become exercisable in equal
amounts on the first, second, third, fourth and fifth anniversaries of their
grant. For purposes of all Incentive Awards under the Employee Stock Plan, the
term "Fair Market Value" means the closing price per share of such Common Stock
on the principal stock exchange or quotation system on which the Common Stock is
traded or listed on the date of grant or other specified measuring date, or, if
there shall have been no such price so reported or listed on that date, on the
last preceding date on which a price was so reported or listed. If Common Stock
is not publicly traded, then "Fair Market Value" shall mean the value of a share
of Common Stock, as determined by the Committee, in the Committee's sole and
absolute discretion, at least annually. The Committee may utilize the services
of an independent third party in determining the Fair Market Value of the Common
Stock for this purpose. The types of Incentive Awards that may be made under the
Employee Stock Plan are as follows:

Options. Options are rights to purchase a specified number of shares of
Common Stock at a specified price. An Option granted pursuant to the Employee
Stock Plan may consist of either an ISO or a non-qualified stock option ("NQSO")
that does not comply with the requirements of section 422 of the Code. ISOs may
not be granted to any employee who owns or would own immediately after the grant
of such ISO, directly or indirectly, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company (unless at the time
of such grant, the incentive stock option price is at least 110% of fair market
value and such Option is not exercisable after the expiration of five years from
the date of grant). The exercise price for an ISO must be at least equal to fair
market value of the Common Stock on the date of grant and the term of such
option cannot be greater than 10 years. The exercise price for a NQSO must be
equal to at least the greater of (i) the par value of the Common Stock or (ii)
50% of the fair market value of the Common Stock on the date of grant. The
exercise price of an Option is payable in cash or an equivalent acceptable to
the Committee. At the discretion of the Committee, the exercise price for an
Option may be paid in Common Stock valued at fair market value on the exercise
date, another Incentive Award valued at fair market value, or a combination
thereof equal in value to the exercise price. Subject to the foregoing, the
exercise price and other terms and conditions relating to each Option are
determined by the Committee at the time of grant.

Stock Appreciation Rights. SARs are rights to receive a payment, in cash or
Common Stock, equal to the excess of the fair market value of a specified number
of shares of Common Stock on the date of exercise over a specified strike price.
The Committee may grant SARs in connection with an Option (either at the time of
grant or at any time during the term of the Option) or without relation to an
Option. For SARs related to Options, the applicable strike price is the exercise
price of the related Stock Option and for SARs granted without relationship to
an Option, the applicable strike price is the fair market value of a share of
Common Stock on the date of grant of the SAR. Options related to SARs cease to
be exercisable when the SAR is exercised. Subject to certain exceptions, an SAR
granted in connection with an Option is exercisable at such time or times and
only to the extent that the related Option is exercisable, and may not be
disposed by the holder except to the extent that such related Option may be
disposed. The Committee may provide at the date of grant of an SAR for a limit
on the amount payable upon exercise of the SAR. Any such limitation must be
noted in the agreement evidencing the holder's SAR.

Restricted Stock Awards. The Committee may grant shares of restricted stock
pursuant to the Employee Stock Plan. Shares of restricted stock may not be
disposed of until the restrictions are removed or expire, and

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the Committee may impose other conditions on such shares as it may deem
advisable. The restrictions upon restricted stock awards lapse as determined by
the Committee, subject to certain other lapse provisions. Shares of restricted
stock may remain subject to certain restrictions as set forth in the restricted
stock agreement. Each restricted stock award may have a different restriction
period, in the discretion of the Committee. The Committee may, in its
discretion, prospectively change the restriction period applicable to a
particular restricted stock award. Subject to certain provisions, the Committee
may, in its discretion, determine what rights, if any, a grantee of a restricted
stock award will have with respect to such stock, including the right to vote
the shares and receive all dividends and other distributions paid or made with
respect thereto.

Performance Awards. Performance units or performance shares (collectively,
"Performance Awards") may be granted under the Employee Stock Plan subject to
the attainment of one or more performance goals. Performance goals may relate to
any financial, production, sales or cost performance objectives determined by
the Committee at the beginning of a designated period. If minimum performance is
achieved or exceeded, the value of a Performance Award will be based on the
degree to which actual performance exceeds the preestablished minimum
performance standards. The Committee may, at any time, modify the performance
measures previously established for a Performance Award as it considers
appropriate and equitable. Payments with respect to Performance Awards are made
in cash or Common Stock valued at fair market value as of the close of the
applicable performance period (or a combination of both) in the discretion of
the Committee following the close of the applicable performance period.

Phantom Stock Rights. Phantom stock rights entitle a holder, upon
conversion, to receive payment of cash or in shares of Common Stock valued at
fair market value on the date of conversion of the phantom stock right (or both)
in the discretion of the Committee. Upon conversion of a phantom stock right,
the Participant shall be entitled to receive payment of an amount determined by
multiplying (i) the fair market value of a share of Common Stock on the date of
conversion, by (ii) the number of shares of Common Stock as to which such
phantom stock right has been converted. Any payment of shares of Common Stock
upon conversion of a phantom stock right may be made in shares of restricted
stock.

Additional Provisions of the Employee Stock Plan

Expiration of Incentive Awards and Effects of Employment Separation. Except
to the extent that the Committee provides otherwise in an Incentive Award
Agreement, Incentive Awards (whether or not vested) expire immediately or are
forfeited by the recipient upon termination of such recipient's employment with
the Company or any subsidiary employing such recipient for any reason other than
death, disability or retirement. Most, if not all, of the Incentive Award
Agreements provide that vested Incentive Awards are not forfeited if the
recipient is terminated for reasons other than Due Cause (as defined in the
Incentive Award Agreement). Upon death, retirement, or disability resulting in
the cessation of an employee's employment with the Company or its subsidiaries,
any unexercised Options or SARs or outstanding phantom stock rights terminate on
the date that is 90 days following the date of death, retirement or disability
(unless it expires by its terms on an earlier date). In the event of death,
disability or retirement, or other reasons that the Committee deems appropriate,
the Performance Awards will continue after the date of the applicable event for
such period of time as determined by the Committee, subject to the terms of the
Incentive Award Agreement or any other applicable agreement, but only to the
extent exercisable on the date of the applicable event.

If a holder of a restricted stock award ceases to be an employee because of
retirement, death, permanent and total disability, or because of other reasons
as the Committee deems appropriate, the Committee may determine that
restrictions on all or some portion of the restricted stock award subject to
restrictions at the time of such employment termination will be deemed to have
lapsed. If an eligible employee who has purchased restricted stock under the
Employee Stock Plan terminates employment with the Company for any reason, then
all shares of restricted stock that have not previously vested will be
repurchased by the Company at the cost paid by such employee. In addition, upon
an eligible employee's termination of employment with the Company and all of its
subsidiaries for any reason (including by reason of death or disability), the

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<PAGE> 57

Company has the right to purchase from such employee all shares of Common Stock
awarded under the Employee Stock Plan on the terms and conditions set forth in
the applicable Incentive Award.

Adjustment Provisions. The Employee Stock Plan provides that upon the
dissolution or liquidation of the Company, certain types of reorganizations,
mergers or consolidations, the sale of all or substantially all of the assets of
the Company, or a "change of control" (as defined in the Employee Stock Plan),
the Committee may determine (without stockholder approval), subject to the terms
of any applicable agreement evidencing an Incentive Award, that (i) all or some
Incentive Awards then outstanding under the Employee Stock Plan will be fully
vested and exercisable or convertible, as applicable, (ii) some or all
restrictions on restricted stock lapse immediately, or (iii) there will be a
substitution of new Incentive Awards by such successor employer corporation or a
parent or subsidiary company therefor, with appropriate adjustments as to the
number and kind of shares or units subject to such awards and prices. In
addition, in the event of a "change of control," the Committee may take certain
actions, without stockholder approval, including but not limited to (i)
acceleration of the exercise dates of any outstanding SARs or Options or
immediate vesting, (ii) acceleration of the restriction (lapse of forfeiture
provision) period of any restricted stock award, (iii) grants of SARs to holders
of outstanding Options, (iv) payment of cash to holders of Options in exchange
for the cancellation of their outstanding Options, (v) payment for outstanding
Performance Awards, (vi) acceleration of the conversion dates of outstanding
phantom stock rights, (vii) grants of new Incentive Awards or (viii) other
adjustments or amendments to outstanding Incentive Awards.

Transfer of Incentive Awards. No Incentive Award and no right under the
Employee Stock Plan, contingent or otherwise, may be assigned, transferred or
otherwise disposed by a recipient other than pursuant to a court order, by will
or beneficiary designation, or pursuant to the laws of descent and distribution.
Pursuant to the Employee Stock Plan, so long as the Common Stock has not been
publicly traded for at least 90 days, any Common Stock obtained pursuant to an
Incentive Award will be subject to the Company's right of first purchase for the
price and upon the other terms provided in the Incentive Award agreement if the
holder of such shares intends to transfer them. In addition, upon an employee's
death, the Company has the right to purchase all or some of the Common Stock
that such employee obtained pursuant to an Incentive Award at its fair market
value within nine months of the employee's death.

Amendment and Termination of the Employee Stock Plan. Subject to
stockholder approval where expressly required by law, the Board may amend,
suspend or terminate the Employee Stock Plan at any time. No amendment, unless
approved by the holders of a majority of the outstanding shares of voting stock
of the Company may (i) change the class of persons eligible to receive Incentive
Awards, (ii) materially increase the benefits accruing to Participants, (iii)
increase by more than 10% the number of shares of Common Stock subject to the
Employee Stock Plan (except for certain adjustments required by the Employee
Stock Plan) or (iv) transfer the administration of the Employee Stock Plan to
any person who is not a nonemployee director. Except as otherwise provided in
the Employee Stock Plan, the Committee may not, without the Participant's
consent, modify the terms and conditions of an Incentive Award. No amendment,
suspension, or termination of the Employee Stock Plan may, without the
Participant's consent, alter, terminate or impair any right or obligation under
any Incentive Award previously granted under the Employee Stock Plan. Unless
previously terminated, the Employee Stock Plan will terminate and no more
Incentive Awards may be granted after the tenth anniversary of the adoption of
the Employee Stock Plan by the Board. The Employee Stock Plan will continue in
effect with respect to Incentive Awards granted before termination of the
Employee Stock Plan and until such Incentive Awards have been settled,
terminated or forfeited.

1997 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

The description set forth below represents a summary of the principal terms
and conditions of the Director Stock Plan and does not purport to be complete.
Such description is qualified in its entirety by reference to the Director Stock
Plan, a copy of which has been filed as an exhibit to the Registration Statement
of which this Prospectus is a part.

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<PAGE> 58

General

Purpose. The Company adopted the Director Stock Plan for the purposes of
strengthening the ability of the Company to attract and retain experienced and
knowledgeable independent individuals to act as non-employee directors of the
Company and encouraging such directors to have a proprietary interest in the
Company. To accomplish these purposes, the Director Stock Plan provides terms
upon which members of the Board who are not employees of the Company or any of
its subsidiaries ("non-employee directors") will be granted non-qualified
Options.

Administration. The Director Stock Plan is administered by a committee (the
"Director Plan Committee") consisting of two or more non-employee directors
elected to the Committee by a majority of the Board. Currently, the members of
the Director Plan Committee are Carl B. Anderson, III and Sidney L. Tassin.
Subject to the terms of the Director Stock Plan, the Director Plan Committee has
the ability to (i) determine the terms and provisions of the agreements under
which Options are granted under the Director Stock Plan, (ii) to interpret the
Director Stock Plan and the agreements thereunder, (iii) to prescribe, amend and
rescind any rules relating to the Director Stock Plan and (iv) to make all other
determinations necessary for the administration of the Director Stock Plan. The
Director Plan Committee does not have discretion or authority to disregard or
change any of the terms and conditions under which Options are granted to non-
employee directors.

Shares Subject to Director Stock Plan. Initially, an aggregate of 200,000
shares of Common Stock may be issued, transferred or exercised pursuant to
Options under the Director Stock Plan (the "Authorized Shares"). If the total
number of issued and outstanding shares of Common Stock increases after the
consummation of the Offering (other than any increase due to issuances of Common
Stock in connection with awards of Options under the Director Stock Plan), then
the number of Authorized Shares will automatically increase one time per year,
commencing January 1, 1998 and occurring each January 1 thereafter during the
existence of the Director Stock Plan, by a sufficient number of shares of Common
Stock such that the number of Authorized Shares reserved and available for
issuance under the Plan shall equal 1.2% of the total number of shares of issued
and outstanding Common Stock. At the discretion of the Board or the Director
Plan Committee, the shares of Common Stock delivered under the Director Stock
Plan may be made available from (i) authorized but unissued shares, (ii)
treasury shares or (iii) previously issued but reacquired shares (or through a
combination thereof).

Eligibility and Participation. Each non-employee director is automatically
eligible to participate in the Director Stock Plan unless he does not retain the
annual retainer to which he is entitled for service on the Board. No
non-employee director may be issued an Option to acquire more than 15,000 shares
of Common Stock in any plan year.

Options

Automatic Initial and Annual Awards of Options. Upon the consummation of
the Offering, each person who is then a non-employee director will receive, and
thereafter on the date at which a person first becomes a non-employee director,
such non-employee director will receive, a one-time grant of an Option to
acquire 15,000 shares of Common Stock (an "Initial Award"). In each year
succeeding the year in which a non-employee director receives an Initial Award,
the non-employee director, if reelected to the Board, will be granted an
additional Option to acquire 5,000 shares of Common Stock (an "Annual Award").
Annual Awards will be made as of the date of the Company's regular annual
meeting of stockholders and will be immediately exercisable. No Option granted
as an Initial Award or Annual Award will be exercisable after the tenth
anniversary of the date of grant.

Retainer Options. Under the Director Stock Plan, a non-employee director
may elect to receive, in lieu of any or all of the annual cash retainer he would
otherwise receive in cash during the succeeding plan year (currently $10,000
annually), Options for the purchase of a number of shares equal to the amount of
the annual retainer so forgone divided by the fair market value of the Common
Stock on the date of grant.

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<PAGE> 59

Exercise Price. Each Option granted pursuant to the Director Stock Plan
will be exercisable at a per share price equal to the fair market value of a
share of Common Stock as of the date of grant. Such price may be paid in cash
or, in the discretion of the Director Plan Committee, by assigning to the
Company shares equal in value to the exercise price.

Termination. Except to the extent the Director Plan Committee provides
otherwise in the agreement evidencing an Option under the Director Stock Plan,
all Options granted under the Director Stock Plan that are held by a
non-employee director will expire and be forfeited upon the date of resignation
or removal from the Board of such non-employee director, unless such resignation
or removal results from the death or permanent and total disability of the
director, or resignation upon the attainment of 65 years. Upon such death,
disability or resignation at age 65, such Options will remain exercisable and
effective for six months following the date of the event causing the
non-employee director to cease membership on the Board.

Effect of Corporate Changes. In the event of certain significant corporate
changes, including (i) dissolution or liquidation of the Company, (ii) a
reorganization, merger or consolidation (other than for purposes of
reincorporation in a different state) in which the Company is not the survivor,
(iii) the sale of all or substantially all of the assets of the Company, or (iv)
a Change of Control (as defined in the Director Stock Plan), subject to the
terms of any applicable agreement, the Director Plan Committee may, in its
discretion, without obtaining stockholder approval, take any one or more of the
following actions: (i) determine that all or some Options then outstanding will
be fully vested and exercisable, (ii) substitute new Options by a successor
employer with appropriate adjustments as to the number and kind of shares
subject to such awards and prices or (iii) cancel such Options and pay the
non-employee directors or their beneficiaries the difference between the
exercise price and the fair market value of the shares subject to the Option as
of the date of such corporate change.

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

Certain of the directors and executive officers of the Company are
beneficial owners of shares of Common Stock. See "Principal and Selling
Stockholders."

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the fiscal year ended December 31, 1996, the Company had no
compensation committee or other committee of the Board performing similar
functions and no executive officer of the Company participated in deliberations
of the Board concerning executive officer compensation. Decisions concerning
compensation of executive officers during 1996 were made by, and the Company's
Compensation Committee currently consists of, Carl B. Anderson, III and Sidney
L. Tassin, both of whom are nonemployee directors. See "-- Board of
Directors -- Board Committees." Mr. Anderson and Mr. Tassin each had direct or
indirect interests in certain transactions described in "Certain Relationships
and Related Transactions."

INDEMNIFICATION AGREEMENTS

The Company has entered into Indemnification Agreements (the
"Indemnification Agreements") with its directors and certain of its officers
(the "Indemnitees"), a form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. Under the terms of
the Indemnification Agreements, the Company is required to indemnify the
Indemnitees against certain liabilities arising out of their services for the
Company. The Indemnification Agreements require the Company to indemnify each
Indemnitee to the fullest extent permitted by law and to advance certain
expenses incurred by an Indemnitee. The Indemnification Agreements provide
limitations on the Indemnitees' rights to indemnification in certain
circumstances. To the extent that indemnification provisions contained in the
Indemnification Agreements purport to include indemnification for liabilities
arising under the Securities Act, the Company has been informed that in the
opinion of the Securities and Exchange Commission (the "Commission"), such
indemnification is contrary to public policy and is therefore unenforceable.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of October 16, 1997 and as adjusted to reflect
the Offering by (i) each person known by the Company to own more than 5% of the
outstanding shares of Common Stock, (ii) each of the Company's directors, (iii)
each named executive officer, (iv) all executive officers and directors as a
group and (v) each Selling Stockholder. All persons listed have an address in
care of the Company's principal executive offices and have sole voting and
investment power with respect to their shares unless otherwise indicated.

<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
BEFORE THE OFFERING(1) AFTER THE OFFERING(1)(4)
NAME AND ADDRESS --------------------------- SHARES TO BE SOLD -------------------------
OF BENEFICIAL OWNER NUMBER PERCENTAGE(2) IN THE OFFERING(3) NUMBER PERCENTAGE(2)
<S> <C> <C> <C> <C> <C>
Chesapeake Energy Corporation
P.O. Box 18496
Oklahoma City, Oklahoma 73154...... 4,194,000 30.1% 3,400,000 794,000 4.4%
DLB Oil & Gas, Inc.
1601 Northwest Expressway, Suite
700
Oklahoma City, Oklahoma 73118...... 2,955,000(5) 21.2 -- 2,955,000 16.5
Energy Spectrum LLC
5956 Sherry Lane, Suite 600
Dallas, Texas 75225................ 2,350,000(6) 16.7 1,022,669 1,327,331 7.3
Carl B. Anderson, III
c/o AnSon Partners Limited
Partnership
4005 Northwest Expressway, Suite
400E
Oklahoma City, Oklahoma 73116...... 2,000,000(7) 14.3 362,000 1,341,000(8) 7.5
Mike Mullen
c/o Mike Mullen Energy Equipment
Resource, Inc.
8411 Preston Road, Suite 730, LB2
Dallas, Texas 75225................ 1,250,000(9) 8.9 370,881 879,119 4.9
Roy T. Oliver
c/o R.T. Oliver Drilling, Inc.
6601 S.W. 29th Street
Oklahoma City, Oklahoma 73179...... 1,250,000(10) 8.9 370,881 879,119 4.9
Continental Illinois Property
Corporation #3
231 South LaSalle Street
Chicago, Illinois 60697............ 624,000(11) 4.5 312,000 312,000 1.7
Harold G. Hamm
302 North Independence
Enid, Oklahoma 73702............... 250,000(12) 1.8 227,267 22,733 *
The CIT Group/Equipment Financing,
Inc.
1211 Avenue of the Americas
New York, New York 10036........... 150,000 1.1 150,000 -- --
A. Brad Curtis, II
c/o Ward Petroleum Corporation
502 South Fillmore Road
Enid, Oklahoma 73703............... 1,000 * 193 807 *
Richard R. Tozzi
c/o Ward Petroleum Corporation
502 South Fillmore Road
Enid, Oklahoma 73703............... 5,800 * 328 5,472 *
James E. Brown....................... 310,000(13) 2.2 -- 310,000 1.7
Edward S. Jacob, III................. --(14) * -- -- *
David E. Grose....................... --(15) * -- -- *
Merrill A. Miller, Jr.
c/o National-Oilwell, Inc.
5555 San Felipe
Houston, Texas 77056............... -- -- -- 15,000(8) *
Sidney L. Tassin
c/o Energy Spectrum Partners LP
5956 Sherry Lane, Suite 600
Dallas, Texas 75225................ 2,350,000(16) 16.7 1,022,669 1,342,331(8) 7.4
</TABLE>

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<PAGE> 61
<TABLE>
<CAPTION>
SHARES OWNED SHARES OWNED
BEFORE THE OFFERING(1) AFTER THE OFFERING(1)(4)
NAME AND ADDRESS --------------------------- SHARES TO BE SOLD -------------------------
OF BENEFICIAL OWNER NUMBER PERCENTAGE(2) IN THE OFFERING(3) NUMBER PERCENTAGE(2)
<S> <C> <C> <C> <C> <C>
Lew O. Ward
c/o Ward Petroleum Corporation
502 South Fillmore Road
Enid, Oklahoma 73703............... 600,000(17) 4.2 67,183 488,338(8) 2.7
All parties to the Stockholders and
Voting Agreement (post-Offering) as
a group(18)........................ 7,305,000 52.0 1,384,669 5,623,331 31.1
All directors and executive officers
as a group (7 persons)............. 5,090,000(19) 35.6% 1,451,852 3,326,669 18.1%%
</TABLE>

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

* Less than 1%

(1) The information contained in this table with respect to beneficial
ownership reflects "beneficial ownership" as defined in Rule 13d-3 under
the Exchange Act. In computing the number of shares beneficially owned by
a person and the percentage ownership of that person, shares of Common
Stock subject to options or warrants held by that person that are
exercisable on October 16, 1997 or become exercisable within 60 days
following October 16, 1997 are deemed outstanding. However, such shares
are not deemed outstanding for the purpose of computing the percentage
ownership of any other person. All information with respect to the
beneficial ownership of any stockholder has been furnished by such
stockholder and, unless otherwise indicated, each stockholder has sole
voting and investment power with respect to the shares listed as
beneficially owned by such stockholder, subject to community property laws
where applicable.

(2) Percentage of ownership is based on 13,947,000 shares of Common Stock
outstanding before the Offering and 17,947,000 shares of Common Stock
outstanding after the Offering.

(3) Assumes no exercise of the Underwriters' over-allotment option. If the
over-allotment option is exercised in full, then the following Selling
Stockholders will sell the following number of additional shares of Common
Stock: Chesapeake Energy Corporation -- 794,000; Energy Spectrum LLC --
227,331; Carl B. Anderson, III -- 38,000; Mike Mullen -- 109,119; Roy T.
Oliver -- 109,119; Harold G. Hamm -- 22,733; A. Brad Curtis, II -- 57;
Richard R. Tozzi -- 97; Sidney L. Tassin -- 227,331; Lew O.
Ward -- 19,767.

(4) Assumes no exercise of the Underwriters' over-allotment option. If the
Underwriters' over-allotment option is exercised in full, after the
Offering 18,176,050 shares of Common Stock will be outstanding and the
Selling Stockholders will beneficially own the following number of shares
which represent the percentage ownership indicated: Energy Spectrum
LLC -- 1,100,000 (112,000 of such shares may be acquired in the next 60
days upon the exercise of outstanding options), 6.0%; Carl B. Anderson,
III -- 1,303,000 (Mr. Anderson has been granted an irrevocable voting
proxy for 170,000 of these shares by Mr. Brown), 7.2%; Mike
Mullen -- 770,000, 4.2%; Roy T. Oliver -- 770,000, 4.2%; A. Brad Curtis,
II -- 750, less than 1%; Richard R. Tozzi -- 5,375, less than 1%; Sidney
L. Tassin -- 1,115,000 (112,000 of such shares may be acquired in the next
60 days upon the exercise of outstanding options), 6.1%; Lew O.
Ward -- 468,725, 2.5%; all parties to the Stockholders and Voting
Agreement (post-Offering) -- 5,358,000, 29.3%; all directors and executive
officers as a group (7 persons) -- 3,041,725 shares, 16.4%. Chesapeake
Energy Corporation and Harold G. Hamm will not own any shares of Common
Stock if the Underwriters' over-allotment option is exercised in full. No
other share numbers or percentages set forth in the above table will
change as a result of the exercise of the Underwriters' over-allotment
option.

(5) Represents shares of Common Stock issued to DLB in connection with the
Bonray Acquisition, less 60,000 shares subsequently transferred by DLB to
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"). Charles E.
Davidson, Chairman of the Board of DLB, is the beneficial owner of a
majority of the outstanding common stock of DLB and may be deemed to have
beneficial ownership

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<PAGE> 62

of the shares of Common Stock held by DLB. Mark Liddell and Michael Liddell, as
executive officers and significant stockholders of DLB, also may be deemed to
have beneficial ownership of these shares.

(6) Represents shares of Common Stock (including 112,000 shares of Common
Stock that may be acquired within the next 60 days upon exercise of
outstanding Series B Warrants) held of record by Energy Spectrum Partners
LP, of which Energy Spectrum Capital LP is the sole general partner.
Energy Spectrum LLC is the sole general partner of Energy Spectrum Capital
LP and possesses sole voting and investment power with respect to such
shares. Sidney L. Tassin, as President and a member of Energy Spectrum
LLC, may be deemed to have beneficial ownership of these shares. Mr.
Tassin disclaims beneficial ownership of such shares.

(7) Includes (i) 1,106,000 shares held of record by APLP, of which Mr.
Anderson is managing general partner, (ii) 624,000 shares held of record
by Continental Illinois Property Corporation #3 that are subject to voting
rights retained by Mr. Anderson pursuant to an irrevocable proxy that will
expire upon consummation of the Offering, (iii) 170,000 shares held of
record by James E. Brown that are subject to voting rights retained by Mr.
Anderson pursuant to an irrevocable proxy and (iv) 100,000 shares held of
record and beneficially by Mr. Anderson.

(8) Includes 15,000 shares of Common Stock that may be acquired within the
next 60 days upon exercise of options to be granted contemporaneously with
the consummation of the Offering pursuant to the Director Stock Plan.

(9) Includes (i) 480,000 shares held of record by Mullen-Oliver Partnership,
Ltd., a limited partnership partially owned and indirectly controlled by
Mr. Mullen, (ii) 400,000 shares held of record by Mr. Mullen, (iii)
320,000 shares held of record by Grupo de Hercules, Ltd., a limited
partnership partially owned and indirectly controlled by Mr. Mullen and
(iv) 50,000 shares that may be acquired within the next 60 days upon the
exercise of outstanding Warrants held by Mr. Mullen.

(10) Includes (i) 480,000 shares held of record by Mullen-Oliver Partnership,
Ltd., a limited partnership partially owned and indirectly controlled by
Mr. Oliver, (ii) 200,000 shares held of record by RR&T, Inc., a
corporation owned and controlled by Mr. Oliver, (iii) 200,000 shares held
of record by Oliver Family Trust, (iv) 320,000 shares held of record by
Grupo de Hercules, Ltd., a limited partnership partially owned and
indirectly controlled by Mr. Oliver and (v) 50,000 shares that may be
acquired within the next 60 days upon the exercise of outstanding Warrants
held by RR&T, Inc.

(11) All shares held by Continental Illinois Property Corporation #3 are
subject to voting rights retained by Carl B. Anderson, III pursuant to an
irrevocable proxy that will expire upon completion of the Offering.

(12) Harold G. Hamm holds all of all such shares as Trustee of the Harold G.
Hamm Revocable Inter Vivos Trust dated April 23, 1984.

(13) Includes (i) 100,000 shares of Common Stock held by Mr. Brown which vest
pro rata over five years starting on December 10, 1997 and are subject to
certain restrictions on resale and provisions for the repurchase by the
Company at a specified price and upon certain conditions, including
termination of employment with the Company, (ii) 170,000 shares for which
an irrevocable voting proxy has been granted to Carl B. Anderson, III and
(iii) 40,000 shares subject to options granted pursuant to the Employee
Stock Plan that vest within the next 60 days. Excludes options to purchase
an aggregate of 360,000 shares held by Mr. Brown which were granted
pursuant to the Employee Stock Plan, subject to vesting and other
conditions contained in stock option agreements, none of which options are
exercisable within the next 60 days.

(14) Excludes options to purchase 150,000 shares held by Mr. Jacob which were
granted pursuant to the Employee Stock Plan, subject to vesting and other
conditions contained in stock option agreements. None of such options are
exercisable within the next 60 days.

(15) Excludes options to purchase 50,000 shares held by Mr. Grose which were
granted pursuant to the Employee Stock Plan, subject to vesting and other
conditions contained in a stock option agreement. None of such options are
exercisable within the next 60 days.

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<PAGE> 63

(16) Represents shares held of record by Energy Spectrum Partners LP and
beneficially by Energy Spectrum LLC. Mr. Tassin, a director of the
Company, is the President of Energy Spectrum LLC, which is the ultimate
general partner of Energy Spectrum Partners LP. Mr. Tassin disclaims
beneficial ownership of such shares. See note (6) above.

(17) Includes (i) 338,300 shares held of record by Wil-Cas Investments, L.P., a
family limited partnership controlled by Lew O. Ward and a family trust
for the benefit of Mr. Ward's children, William C. Ward and Casidy Ward,
of which Bank of Oklahoma, N.A. is trustee, (ii) 1,700 shares held of
record by Mr. Ward, (iii) 60,000 shares held of record by certain current
and former employees of Ward Drilling Company, Inc. that are subject to
voting rights retained by Mr. Ward pursuant to an irrevocable proxy that
will expire upon consummation of the Offering and (iv) 200,000 shares that
may be acquired within the next 60 days upon the exercise of outstanding
warrants held in the name of Ward Drilling Company, Inc., of which Mr.
Ward is the Chairman.

(18) Upon consummation of the Offering, the stockholders party to the
Stockholders and Voting Agreement will be DLB, Energy Spectrum, APLP and
Carl B. Anderson, III. See "Certain Relationships and Related
Transactions -- Stockholders and Voting Agreement."

(19) Includes (i) 112,000 shares that may be acquired by Energy Spectrum
Partners LP within the next 60 days upon the exercise of outstanding
Series B Warrants, (ii) 794,000 shares subject to voting rights retained
by Mr. Anderson (such voting rights will expire with respect to 624,000
shares upon completion of the Offering), (iii) 100,000 shares of
restricted stock held by Mr. Brown, (iv) 40,000 shares subject to options
granted to Mr. Brown pursuant to the Employee Stock Plan that vest within
the next 60 days and (v) 200,000 shares that may be acquired by Ward
Drilling Company, Inc. within the next 60 days upon the exercise of
outstanding warrants.

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<PAGE> 64

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The following discussion identifies certain of the Company's relationships
and related transactions in which any founder, director or executive officer of
the Company, any person known to the Company to own of record or beneficially
over 5% of the Common Stock, or any member of the immediate family of any such
persons had, or has, a direct or indirect material interest. Chesapeake, DLB,
Energy Spectrum, APLP and the Oliver Companies are each record or beneficial
owners of over 5% of the Common Stock. APLP, Energy Spectrum, the Oliver
Companies and Chesapeake participated in the Formation Transactions as founders
of the Company. Three of the Company's former directors, Aubrey K. McClendon,
Tom L. Ward and Marcus C. Rowland, are stockholders, executive officers and/or
directors of Chesapeake. One of the Company's directors, Sidney L. Tassin, and
one of the Company's former directors, James W. Spann, are executive officers
and partners of the ultimate general partner of Energy Spectrum. Roy T. Oliver,
a former director of the Company, is a director, executive officer and
significant stockholder of certain of the Oliver Companies. Mike Mullen is a
director, executive officer and significant stockholder of certain of the Oliver
Companies. Prior to the Ward Acquisition, Lew O. Ward, a director of the
Company, was a director, executive officer and significant stockholder of Ward.
Carl B. Anderson, III, a director of the Company, and Robert E. Bell, a former
director of the Company, are directors, executive officers and holders of
substantial ownership interests in APLP (of which Anadarko is a subsidiary).
James E. Brown is a director and executive officer of the Company and, prior to
the formation of the Company, was a director and executive officer of Anadarko.
Edward S. Jacob, III and David E. Grose are each executive officers of the
Company. Each of such persons and entities has or had a direct or indirect
material interest in one or more of the arrangements and transactions described
below.

REGISTRATION RIGHTS AGREEMENTS

The Company and certain of its investors, including certain directors,
officers and significant stockholders, are party to a Registration Rights
Agreement (the "Registration Rights Agreement") covering shares of Common Stock,
including the shares of Common Stock issuable upon the exercise of options,
warrants and other Company securities (collectively, "Common Stock
Equivalents"), owned by such investors (the "Registrable Securities"). The
Registration Rights Agreement applies to Registrable Securities owned by
Chesapeake, Energy Spectrum, APLP, the Oliver Companies and certain of their
affiliates, Ward and certain of its transferees, Carl B. Anderson, III, a trust
of which Harold G. Hamm is trustee, James E. Brown, Edward S. Jacob, III and
David E. Grose. After giving effect to the consummation of the Stockholder
Exercises and the Offering, 4,960,521 outstanding shares of Common Stock
(3,749,725 shares if the Underwriters' over-allotment option is exercised in
full) and 1,052,000 shares of Common Stock Equivalents (610,000 of which remain
subject to further vesting pursuant to the Employee Stock Plan) will be subject
to the Registration Rights Agreement. Additionally, any shares issued by the
Company upon conversion of the Subordinated Notes will be subject to the
Registration Rights Agreement. All of the shares of Common Stock offered hereby
by the Selling Stockholders are being registered pursuant to the terms of the
Registration Rights Agreement.

The Registration Rights Agreement provides, among other things, that, at
any time after 180 days following the Offering (subject to customary "black-out"
periods) certain holders of Registrable Securities with a minimum aggregate
share value of at least $20 million may require the Company to effect the
registration under the Securities Act of the Registrable Securities owned by
such holders, subject to certain limitations. The Registration Rights Agreement
also provides certain "piggyback" registration rights to the holders of
Registrable Securities whenever the Company 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 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 such offering.

The Registration Rights Agreement contains customary provisions regarding
the payment of expenses by the Company and regarding mutual indemnification
agreements between the Company and the holders of Registrable Securities for
certain securities law violations.

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In connection with the Bonray Acquisition, the Company entered into a
registration rights agreement (the "DLB Registration Rights Agreement") for the
benefit of DLB and its financial advisor with respect to such transaction. The
DLB Registration Rights Agreement covers 3,015,000 shares of Common Stock issued
in the Bonray Acquisition. The DLB Registration Rights Agreement provides, among
other things, that, at any time (subject to customary "black-out" periods
following 120 days after the Offering) DLB may request the Company to register
the distribution of Common Stock to DLB's stockholders. In addition, at any time
after 180 days following the Offering, certain of DLB's stockholders together
with DLB's financial advisor holding Common Stock with a minimum aggregate value
of at least $20 million may require the Company to effect up to two
registrations under the Securities Act, subject to certain limitations. The DLB
Registration Rights Agreement also provides certain "piggyback" registration
rights to the holders of Registrable Securities whenever the Company 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 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 such offering.

The DLB Registration Rights Agreement requires the Company to pay expenses
associated with any registration of a distribution of Common Stock to DLB
stockholders. The beneficiaries of the DLB Registration Rights Agreement are
obligated to reimburse the Company in connection with the exercise of any other
demand registration. In addition, the DLB Registration Statement contains
customary provisions regarding mutual indemnification agreements between the
Company and the holders of Registrable Securities for certain securities law
violations.

The foregoing summary of the principal provisions of the Company's
registration rights agreements does not purport to be complete and is subject
to, and qualified in its entirety by reference to, all of the provisions of the
Registration Rights Agreement and the DLB Registration Rights Agreement, copies
of which have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.

STOCKHOLDERS AND VOTING AGREEMENT

The Company is party to a Stockholders and Voting Agreement ("Stockholders
and Voting Agreement") with DLB, Energy Spectrum, APLP and Carl B. Anderson, III
(the "Bound Stockholders") that provides for certain agreements regarding the
corporate governance of the Company, transfer restrictions on shares of Common
Stock and Common Stock Equivalents, and other customary terms and conditions.
Immediately following the Offering, the parties to the Stockholders and Voting
Agreement will beneficially own 5,623,331 shares of Common Stock, representing
31.1% of the issued and outstanding shares of Common Stock (5,358,000 shares
representing 29.3% if the Underwriters' over-allotment option is exercised in
full). The Stockholders and Voting Agreement will terminate on the tenth
anniversary of the Offering.

Board Representation. The Stockholders and Voting Agreement provides that
the Board shall not consist of more than ten members. In addition, the
Stockholders and Voting Agreement provides that, upon the consummation of the
Offering, certain stockholders will have the right to designate a specified
number of persons to be nominated for election as directors. Upon effectiveness
of the Stockholders and Voting Agreement, each of Energy Spectrum, Anadarko and
DLB will have the right to designate one nominee for director as follows: (i)
Energy Spectrum will have the right to designate one nominee for director as
long as it owns at least (a) 5% of the outstanding Common Stock of the Company,
(b) 50% in principal amount of the Subordinated Notes purchased by it in the May
Financing or (c) 600,000 shares of Common Stock, (ii) Anadarko will have the
right to designate one nominee for director as long as it owns at least (a) 5%
of the outstanding Common Stock of the Company or (b) 600,000 shares of Common
Stock, and (iii) DLB will have the right to designate one nominee for director
as long as it owns at least 5% of the outstanding Common Stock of the Company.
The Bound Stockholders are obligated to vote all of their voting securities
(including certain Common Stock Equivalents) of the Company for these designees.

Certain Transfer Restrictions. In accordance with the Stockholders and
Voting Agreement and in connection with the Offering, the Bound Stockholders
have agreed to a "lock-up" period of up to 180 days,

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during which such stockholders will not transfer any Common Stock or Common
Stock Equivalents without the prior written consent of the Board, with any
members of the Board designated by such Bound Stockholder abstaining. Following
completion of the Offering, the Bound Stockholders have agreed that any such
Bound Stockholder holding 5% or more of the Common Stock (on a fully diluted
basis) shall not, subject to certain exceptions, transfer 5% or more of the
Common Stock (on a fully diluted basis) unless such Bound Stockholder has
received the prior written consent of the Board, with any member of the Board
designated by such Bound Stockholder abstaining.

The foregoing summary of the material provisions of the Stockholders and
Voting Agreement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of such
agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.

CERTAIN ARRANGEMENTS RELATED TO THE CONSOLIDATION TRANSACTIONS

The Formation Transactions

The Company was formed in December 1996 through a series of affiliated
entity transactions in which the Company became the successor to Anadarko, the
contract drilling subsidiary of privately held APLP. In connection with the
Formation Transactions (i) APLP contributed ten drilling rigs, including two
rigs requiring refurbishment, for 2,000,000 shares of Common Stock, (ii) the
Oliver Companies exchanged six drilling rigs requiring refurbishment for
1,600,000 shares of Common Stock and (iii) Energy Spectrum acquired 2,000,000
shares of Common Stock for $10 million. Additionally, Chesapeake entered into
drilling contracts with two-year terms for six of the Company's rigs in
consideration for the Chesapeake Option. See "Business -- Formation and
Acquisitions." In connection with the Formation Transactions, the ten rigs
acquired from APLP were valued at an aggregate of $10.8 million, the six rigs
acquired from the Oliver Companies were valued at an aggregate of $9.5 million
and the six Chesapeake Drilling Agreements were valued at an aggregate of $1.1
million. The valuations of the rigs acquired in the Formation Transactions from
APLP and the Oliver Companies, the values placed upon the Chesapeake Drilling
Agreements and the consideration to be received by each such founder were
determined and established through negotiations among representatives of APLP
and Anadarko (including Carl B. Anderson, III), Energy Spectrum (including
Sidney L. Tassin), the Oliver Companies (including Roy T. Oliver and Mike
Mullen) and Chesapeake (including Aubrey McClendon), taking into account the
then existing market values of available rigs, the anticipated costs to complete
the necessary refurbishment of the contributed rigs and the expected values of
revenues to be received by the Company from the Chesapeake Drilling Agreements.

Three of the rigs acquired by the Company from APLP were acquired by APLP
within the two years prior to their contribution to the Company. APLP acquired
one rig in each of August, September and October 1996 for $1.3 million, $922,000
and $450,000, respectively. At the time of their contribution to the Company,
such rigs were valued on the books of the Company at $2.7 million. Four of the
rigs acquired by the Company from the Oliver Companies were acquired by the
contributing founder within the two years prior to their contribution to the
Company at an aggregate cost of $2.6 million. At the time of their contribution
to the Company, such rigs were valued on the books of the Company at $4.4
million.

Chesapeake Option. Upon issuance by the Company, the Chesapeake Option
provided Chesapeake with the right to purchase up to 2,000,000 shares of Common
Stock from the Company at an exercise price of $6 per share. The Chesapeake
Option would have expired (i) as to 668,000 shares, on December 5, 2000 and (ii)
as to 1,332,000 shares, on December 5, 1998, subject to extension to December 5,
2000 if Chesapeake extends four of the Chesapeake Drilling Agreements for
additional two-year terms. In August 1997, Chesapeake relinquished the
Chesapeake Option in connection with the Chesapeake Transactions. See
"-- Chesapeake Transactions."

Chesapeake Drilling Agreements. In December 1996 in connection with the
Formation Transactions, Chesapeake and its operating subsidiary (collectively
referred to in this discussion as "Chesapeake") entered into the Chesapeake
Drilling Agreements with the Company pursuant to which Chesapeake agreed to
engage

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six of the Company's rigs for two-year terms. The Company has the option to
extend the Chesapeake Drilling Agreements with respect to any two of the rigs
for two additional years on the same terms provided in the Chesapeake Drilling
Agreements. Chesapeake has the option to extend each of the other four
Chesapeake Drilling Agreements for two additional years on the same terms.

Each of the Chesapeake Drilling Agreements provides that the Company will
utilize a specified rig to drill wells at locations and to well depths as
directed by Chesapeake. The Company is compensated for each day that a rig is in
operation at specified rates. The day rates for three of the rigs are subject to
additional charges for each rig in which the actual cost of drill pipe exceeds
$20 per foot, unless standard day rates are adjusted upward by certain amounts
under the terms of the Chesapeake Drilling Agreements. Reduced day rates are
applicable when the rig is in transit, when the Company's crew is standing by
for directions from Chesapeake and during periods when normal operations are
suspended due to certain conditions outside the control of the parties, such as
inclement weather, labor strikes and inability to obtain fuel or materials.
Through July 31, 1997, the Company had recognized aggregate revenues of $6.2
million from the Chesapeake Drilling Agreements.

The standard day rates are subject to upward, but not downward, adjustment
annually in November to the average then-current market rates for the areas of
operation, less $100 per day. The Company and Chesapeake are required to
consider such adjustment each November during the term of the particular
Chesapeake Drilling Agreement and if no agreement is timely reached as to the
appropriate rate adjustment, the Company will have the option to terminate the
contract for such rig at the conclusion of operations at the well then being
drilled. Any agreed rate adjustment will apply to wells spudded after each
December 1 that the contract remains in effect.

The Company is also entitled to reimbursement of 110% of the costs of
material, equipment, work or services that are required to be furnished by
Chesapeake but are instead furnished by the Company at the request of
Chesapeake. The rates provided in the individual contracts will be revised to
reflect changes if certain costs such as labor, insurance and fuel vary by more
than 5% from such costs on the date the contract was entered into or any date
such rates are revised.

Any of the Chesapeake Drilling Agreements may be terminated by either party
in the event of total loss, destruction or major breakdown of the applicable
rig. Unless so terminated, a lump sum demobilization fee of $10,000 will be
payable to the Company for each rig after the last well is drilled under the
applicable Chesapeake Drilling Agreement.

In addition to the Chesapeake Drilling Agreements, between December 1996
and July 31, 1997, Chesapeake engaged five of the Company's rigs under short
term drilling contracts on standard daywork terms. The Company recognized
aggregate revenues of $3.4 million from such contracts over that period. The
Company recognized aggregate revenues of $9.6 million over that period from all
drilling contracts with Chesapeake.

Oliver Companies' Put Rights. Also in connection with the Formation
Transactions, the Company granted the Oliver Companies a right, exercisable at
any time between June 2, 1998 and July 2, 1998 if the Company had not previously
completed an IPO (as defined in the Master Agreement providing for such right),
to require the Company to either (at the Company's option) (i) repurchase all
1,600,000 of the shares of Common Stock held by the Oliver Companies for an
aggregate purchase price of $12 million ($7.50 per share) in cash or (ii) issue
to the Oliver Companies an aggregate of 400,000 additional shares of Common
Stock. This right will terminate upon consummation of the Offering.

Fees Paid to Energy Spectrum. In January 1997, the Company paid Energy
Spectrum Capital LP ("ESC"), the general partner of Energy Spectrum, a fee in
the amount of $300,000 in consideration for assistance provided by Energy
Spectrum in the structuring of the Formation Transactions and arrangement and
negotiation of external financing. The Company also reimbursed ESC for expenses
incurred in connection with the rendering of such services.

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The Ward Acquisition

On May 31, 1997, the Company completed the Ward Acquisition involving the
acquisition by the Company of all of the issued and outstanding common units of
a subsidiary of Ward that held six drilling rigs in consideration for $8 million
in cash, 400,000 shares of Common Stock and a warrant (the "Ward Warrant") to
purchase up to 200,000 shares of Common Stock at an exercise price of $10 per
share. The Ward Warrant is exercisable at any time on or before the later of (i)
May 30, 2000 or (ii) one year after the completion of an initial public offering
of the Common Stock (which would be satisfied by the Offering), but no later
than June 1, 2003.

In connection with the Ward Acquisition, the Company entered into an
agreement (the "Ward Transportation Agreement") with Geronimo Trucking Company
("Geronimo"), a company owned and controlled by Lew O. Ward, a director of the
Company. The Ward Transportation Agreement provides that the Company will have a
preferential right to engage Geronimo's trucking services for covered
transportation needs and that Geronimo will make its trucking services available
to the Company at rates that are competitive in the area. The Ward
Transportation Agreement also provides Geronimo with the preferential right to
perform trucking services contracted for by the Company for the movement of the
rigs acquired by the Company in the Ward Acquisition. The Company is obligated
to allow Geronimo to bid on any covered rig movement required by the Company and
to allow Geronimo the opportunity to match or better any bid received from a
third party. Unless earlier terminated by the parties, the Ward Transportation
Agreement is effective through May 2000. Through July 31, 1997, the Company paid
an aggregate of $71,000 under the Ward Transportation Agreement.

The Bonray Acquisition

In October 1997, the Company acquired all of the issued and outstanding
capital stock of Bonray from DLB in consideration for the issuance of 3,015,000
shares of Common Stock. In connection with the Bonray Acquisition, DLB obtained
certain rights to require the Company to effect the registration under the
Securities Act of the shares of Common Stock acquired by DLB in the Bonray
Acquisition. See "-- Registration Rights Agreements." Additionally, DLB is a
party to the Stockholders and Voting Agreement and following the Offering will
be entitled to designate one Board nominee as long as DLB owns at least 10% of
the Common Stock of the Company. See "-- Stockholders and Voting Agreement."

Individual Rig Acquisitions

In May 1997, the Company purchased from R.T. Oliver Drilling, Inc. two
drilling rigs for an aggregate purchase price consisting of $3.3 million in cash
and warrants (the "Oliver Warrants") for the purchase of an aggregate of 100,000
shares of Common Stock at an exercise price of $8 per share. One of the Oliver
Warrants was issued to RR&T, Inc. and the other was issued to Mike Mullen. Each
of the Oliver Warrants expires on May 1, 2000 and is separately exercisable for
50,000 shares of Common Stock.

CERTAIN FINANCING ARRANGEMENTS

On May 1, 1997, the Company completed a financing transaction (the "May
Financing") in which the Company issued shares of Common Stock, subordinated
notes and warrants to purchase Common Stock to certain significant stockholders
in exchange for an aggregate of $28.5 million in cash, as described below. The
following summary of terms of the May Financing does not purport to be complete
and is qualified in its entirety by reference to the Securities Purchase
Agreement, dated as of April 30, 1997, the Subordinated Notes, Series A Warrants
and Series B Warrants, copies or forms of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part.

Common Stock and Subordinated Notes. In the May Financing, the Company
issued 1,000,000 shares of Common Stock to Chesapeake in consideration for $7
million in cash and 140,000 shares of Common Stock to Energy Spectrum in
consideration for $980,000 in cash. Additionally, the Company issued
Subordinated

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Notes due May 1, 2003 in the original principal amounts of $18 million and $2.52
million (the "Subordinated Notes") to Chesapeake and Energy Spectrum,
respectively. The Subordinated Notes bear interest at the Company's option at
either (i) 11% per annum, payable in cash, or (ii) 12.875% per annum, payable in
the form of additional Subordinated Notes, which interest is payable quarterly
in arrears. On each quarterly interest payment date, the Company may make an
election as to the interest rate to be applied for the previous quarter. The
Subordinated Notes are redeemable, solely at the option of the Company, in whole
or in part, at any time at varying redemption prices. The Company must offer to
redeem the Subordinated Notes upon the occurrence of certain events constituting
a "Change of Control" (as defined in the Subordinated Notes) at a redemption
price equal to 100% of the principal amount thereof, together with accrued and
unpaid interest, if any, to the date of redemption. The Subordinated Notes are
convertible into Common Stock at the option of the Company, in whole or in part,
in conjunction with a "Convertible Event" (as defined in the Subordinated
Notes), which includes certain underwritten public offerings (including the
Offering), mergers, consolidations and other business combination transactions.
The Subordinated Notes are general unsecured subordinated obligations of the
Company that are subordinated in right of payment to all existing and future
senior indebtedness of the Company, pari passu with all existing and future
subordinated indebtedness of the Company and senior in right of payment to all
future junior subordinated indebtedness of the Company. See "Use of Proceeds."
Chesapeake and the Company have agreed that, upon consummation of the Offering,
the Company will redeem in full the $18 million principal amount of Subordinated
Notes issued to Chesapeake in consideration for the payment by the Company to
Chesapeake of $18.2 million in cash, based on the price to public in the
Offering. See "-- Chesapeake Transactions." In May 1997, the Company paid
Chesapeake a commitment fee of $250,000 in connection with the funding of the
Common Stock and Subordinated Notes in the May Financing.

Warrants. In the May Financing, the Company also issued two series of
detachable warrants (the "Warrants") for the purchase of shares of Common Stock,
designated as "Series A Warrants" and "Series B Warrants." The Warrants are
exercisable on or prior to May 1, 2003 at a price of $0.01 per share in the case
of the Series A Warrants and $7.50 per share in the case of the Series B
Warrants. In the May Financing, Chesapeake was issued Series A Warrants and
Series B Warrants representing the right to purchase 700,000 shares and 800,000
shares of Common Stock, respectively, and Energy Spectrum was issued Series A
Warrants and Series B Warrants representing the right to purchase 98,000 shares
and 112,000 shares of Common Stock, respectively. The Warrants expire on May 1,
2003 and are exercisable (i) at any time with a cash payment or (ii) pursuant to
a cashless exercise at any time after the completion of a "Qualified IPO" (as
defined in the Warrants), which includes certain underwritten public offerings
(including the Offering), mergers, consolidations and other business combination
transactions. The exercise prices, as well as the number and kind of shares
issuable under the Warrants, are subject to adjustment upon the happening of
certain events described in the Warrants, including, the payment of in-kind
dividends or distributions and the subdivision, reclassification or
recapitalization of the Common Stock, whether in connection with a consolidation
or merger or otherwise. On July 31, 1997, Energy Spectrum exercised in full its
Series A Warrants. On the date hereof, Energy Spectrum holds all of the Series B
Warrants issued to it in the May Financing. In August 1997, Chesapeake
relinquished its Series A Warrants and Series B Warrants as part of the
Chesapeake Transactions. See "-- Chesapeake Transactions."

CHESAPEAKE TRANSACTIONS

In August 1997, Chesapeake and the Company agreed to complete a series of
transactions (the "Chesapeake Transactions") pursuant to which the Company has
issued 3,194,000 shares of Common Stock to Chesapeake in consideration for (i)
$9 million in cash, (ii) the relinquishment and cancellation of the Chesapeake
Option and the Warrants issued to Chesapeake in connection with the May
Financing and (iii) the redemption in full of the $18 million principal amount
of Subordinated Notes held by Chesapeake at a cash redemption price of $18.2
million to be paid from the proceeds of the Offering. Also in connection with
the Chesapeake Transactions, the Company waived its right under the Securities
Purchase Agreement to require Chesapeake to purchase additional Common Stock,
Warrants and Subordinated Notes for $3 million.

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OTHER RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

Weatherford Storage Yard. In connection with the Formation Transactions,
Anadarko granted the Company a transferrable option, exercisable at any time
prior to June 30, 1998, to either purchase from Anadarko a storage yard located
in Weatherford, Oklahoma (the "Weatherford Storage Yard") for a price of $1,000
in cash or lease from Anadarko, for any period specified by the Company through
a date not later than December 31, 1999, the Weatherford Storage Yard for a
lease price of $100 per year. In August 1997, the Company acquired from Anadarko
approximately five acres of land also in Weatherford, Oklahoma, in consideration
for the relinquishment of the Company's option to acquire or lease the
Weatherford Storage Yard.

Fees Paid to Energy Spectrum. In May 1997, the Company paid ESC a fee in
the amount of $220,000 for financial advisory and other services rendered to the
Company in connection with the valuation, negotiation and closing of the Trend
Acquisition, for assistance in the arrangement of alternative financing sources,
and for structuring, negotiating and closing the amended financing arrangements
with CIT and Fleet. The Company also reimbursed ESC for expenses incurred in
connection with the rendering of such services.

Transactions with Affiliates of Roy T. Oliver. The Company has in the past
purchased drilling rig equipment from U.S. Rig & Equipment, Inc., an affiliate
of Roy T. Oliver, a former director of the Company and control person of certain
of the Oliver Companies. From December 1996 through July 31, 1997, the Company
paid U.S. Rig & Equipment, Inc. an aggregate of $1.3 million in connection with
such purchases. Additionally, in August 1997, the Company sold to an affiliate
of Mr. Oliver one rig acquired in the Trend Acquisition that did not meet the
Company's operational and technical standards. The Company believes that the
$500,000 price received by the Company in that sale is equivalent to the price
that would have been received from an unaffiliated third party.

APLP Trucking Services. The Company has engaged affiliates of APLP for the
provision of trucking services related to the movement of the Company's rigs on
numerous occasions. From December 1996 through July 31, 1997, the Company paid
such affiliates of APLP an aggregate of $245,000 in consideration for such
trucking services.

APLP Administrative Services. Since December 13, 1996, APLP has made
available to the Company certain of APLP's employees, office space and
administrative equipment, such as computer and telephone systems. In
consideration for such assistance, through June 30, 1997, the Company had
reimbursed APLP an aggregate of $135,000. APLP continues to provide certain
computer services to the Company.

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DESCRIPTION OF CAPITAL STOCK

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

The authorized capital stock of the Company consists of 100,000,000 shares
of common stock, par value $0.01 per share, and 20,000,000 shares of preferred
stock, par value $0.01 per share ("Preferred Stock"). Upon the consummation of
the Offering, 17,947,000 shares of Common Stock (18,176,050 shares if the
Underwriters' over-allotment option is exercised in full) and no shares of
Preferred Stock will be outstanding. The following summary is qualified in its
entirety by reference to the Certificate and Bylaws, copies of which are filed
as exhibits to the Registration Statement of which this Prospectus is a part.

COMMON STOCK

All shares of Common Stock issued in the Offering will be fully paid and
nonassessable. As of October 16, 1997, there were 13,947,000 shares of Common
Stock outstanding held of record by 30 stockholders. The holders of Common Stock
are entitled to one vote for each share held on all matters submitted to a vote
of common stockholders of the Company. The Common Stock does not have cumulative
voting rights in the election of directors. Shares of Common Stock have no
preemptive rights, conversion rights, redemption rights or sinking fund
provisions. The Common Stock is not subject to redemption by the Company.

Subject to the rights of the holders of any class of capital stock of the
Company having any preference or priority over the Common Stock, the holders of
Common Stock are entitled to dividends in such amounts as may be declared by the
Board from time to time out of funds legally available for such payments and, in
the event of liquidation, to share ratably in any assets of the Company
remaining after payment in full of all creditors and provision for any
liquidation preferences on any outstanding preferred stock ranking prior to the
Common Stock.

PREFERRED STOCK

The Certificate authorizes the Board, subject to limitations prescribed by
law, to provide for the issuance of up to 20,000,000 shares of Preferred Stock
in one or more series. The Board is authorized to establish the number of shares
to be included in any such series and to fix the designations, powers,
preferences and rights of the shares of each such series, and any
qualifications, limitations or restrictions thereof.

The Company believes that the ability of the Board to issue one or more
series of Preferred Stock will provide the Company with flexibility in
structuring possible future financings and acquisitions, and in meeting other
corporate needs which might arise from time to time. The authorized shares of
Preferred Stock, as well as shares of Common Stock, will be available for
issuance without further action by the Company's stockholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on which the Company's securities may be listed or
traded. If the approval of the Company's stockholders is not required for the
issuance of shares of Preferred Stock or Common Stock, the Board may determine
not to seek stockholder approval.

Although the Board has no intention at the present time of doing so, it
could issue a series of Preferred Stock that may, depending on the terms of such
series, hinder, delay or prevent the completion of a merger, tender offer or
other takeover attempt. Among other things, the Board could issue a series of
Preferred Stock having terms that could discourage an acquisition attempt
through which an acquirer may be able to change the composition of the Board,
including a tender offer or other transaction that some, or a majority, of the
Company's stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then current
market price of such stock.

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CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS

The Board consists of directors who are elected for one-year terms at each
annual meeting of stockholders. Stockholders may remove a director only for
cause. In general, the Board, not the stockholders, has the right to appoint
persons to fill vacancies on the Board.

The Certificate contains a "fair price" provision that requires the
affirmative vote of the holders of at least 80% of the Company's voting stock
and the affirmative vote of at least 66 2/3% of the Company's voting stock not
owned, directly or indirectly, by a Company Related Person (hereinafter defined)
to approve any merger, consolidation, sale or lease of all or substantially all
of the Company's assets, or certain other transactions involving a Company
Related Person. For purposes of this fair price provision, a "Company Related
Person" is any person beneficially owning 10% or more of the voting power of the
outstanding capital stock of the Company who is a party to the transaction at
issue. The voting requirement is not applicable to certain transactions,
including those that are approved by the Company's Continuing Directors (as
defined in the Certificate) or that meet certain "fair price" criteria contained
in the Certificate.

The Certificate further provides that stockholders may act only at annual
or special meetings of stockholders and not by written consent, that special
meetings of stockholders may be called only by the Board, and that only business
proposed by the Board may be considered at special meetings of stockholders.

The Certificate also provides that the only business (including election of
directors) that may be considered at an annual meeting of stockholders, in
addition to business proposed (or persons nominated to be directors) by the
directors of the Company, is business proposed (or persons nominated to be
directors) by stockholders who comply with the notice and disclosure
requirements set forth in the Certificate. In general, the Certificate requires
that a stockholder give the Company notice of proposed business or nominations
no later than 60 days before the annual meeting of stockholders (meaning the
date on which the meeting is first scheduled and not postponements or
adjournments thereof) or (if later) ten days after the first public notice of
the annual meeting is sent to common stockholders. In general, the notice must
also contain information about the stockholder proposing the business or
nomination, his interest in the business, and (with respect to nominations for
director) information about the nominee of the nature ordinarily required to be
disclosed in public proxy solicitations. The stockholder also must submit a
notarized letter from each of his nominees stating the nominee's acceptance of
the nominations and indicating the nominee's intention to serve as director if
elected.

The Certificate also restricts the ability of stockholders to interfere
with the powers of the Board in certain specified ways, including the
constitution and composition of committees and the election and removal of
officers.

The Certificate provides that approval by the holders of at least 66 2/3%
of the outstanding voting stock of the Company is required to amend the
provisions of the Certificate discussed above and certain other provisions,
except that (i) approval by the holders of at least 80% of the outstanding
voting stock of the Company, together with approval by the holders of at least
66 2/3% of the outstanding voting stock not owned, directly or indirectly, by
the Company Related Person, is required to amend the fair price provisions and
(ii) approval of the holders of at least 80% of the outstanding voting stock is
required to amend the provisions prohibiting stockholders from acting by written
consent.

DELAWARE ANTI-TAKEOVER STATUTE

The Company is a Delaware corporation and is subject to Section 203 of the
DGCL. In general, Section 203 prevents an "interested stockholder" (defined
generally as a person owning 15% or more of the outstanding voting stock of the
Company) from engaging in a "business combination" (as defined in Section 203)
with the Company for three years following the date that person becomes an
interested stockholder unless (i) before that person became an interested
stockholder, the Board approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination, (ii) upon completion of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85% of the Company's voting stock outstanding

72
<PAGE> 73

at the time the transaction commenced (excluding stock held by directors who are
also officers of the Company 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 (iii) following
the transaction in which that person became an interested stockholder, the
business combination is approved by the Board and authorized at a meeting of
stockholders by the affirmative vote of the holders of at least two-thirds of
the outstanding voting stock of the Company 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 the Company
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
the Company'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.

LIABILITY OF DIRECTORS; INDEMNIFICATION

The Certificate provides, as authorized by Section 102(b)(7) of the DGCL,
that a director of the Company will not be personally liable to the Company or
any of its stockholders for monetary damages for breach of fiduciary duty as a
director involving any act or omission of any such director, except that such
provisions do not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
as it now exists or hereafter may be amended, or (iv) for any transaction from
which the director derived an improper personal benefit. The Certificate also
provides that if the DGCL is amended after the date of filing of the Certificate
to authorize corporate action further limiting or eliminating the personal
liability of directors, then the liability of a director of the Company, in
addition to the limitation on personal liability provided for already, shall be
limited to the fullest extent permitted by the DGCL as so amended. Any repeal or
modification of such provision in the Certificate by the stockholders of the
Company will be effective prospective only, and will not adversely affect any
limitation on the personal liability of a director of the Company existing at
the time of such repeal or modification.

The Certificate also provides for indemnification of directors to the
fullest extent permitted by the DGCL. Such indemnification may be available for
liabilities arising in connection with this Offering. Insofar as indemnification
for liabilities under the Securities Act may be permitted to directors, officers
or persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. Pursuant to its Certificate, the Company may
indemnify its officers, employees, agents and other persons to the fullest
extent permitted by the DGCL. The Company's Bylaws obligate the Company, under
certain circumstances, to advance expenses to its directors and officers in
defending an action, suit or proceeding for which indemnification may be sought.
The Company has entered into Indemnification Agreements with certain of its
directors and officers. See "Management -- Indemnification Agreements."

The Company's Bylaws also provide that the Company shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Company, or who, while a director,
officer, employee or agent, is or was serving as a director, officer, trustee,
general partner, employee or agent of one of the Company's subsidiaries or, at
the request of the Company, of any other organization, against any liability
asserted against such person or incurred by such person in any such capacity,
where the Company would have the power to indemnify such person against such
liability under the DGCL.

TRANSFER AGENT AND REGISTRAR

Norwest Bank Minnesota, N.A. will be the transfer agent and registrar for
the Common Stock.

73
<PAGE> 74

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 17,947,000 shares of
Common Stock outstanding (18,176,050 shares if the Underwriters' over-allotment
option is exercised in full). Additionally, as of the date of this Prospectus,
(i) options for the purchase of 742,500 shares of Common Stock (including
options for the purchase of 383,000 shares to be priced at the initial public
offering price) had been granted to certain employees of the Company pursuant to
the Employee Stock Plan, (ii) options for the purchase of 60,000 shares of
Common Stock (all to be priced at the initial public offering price) were
subject to grant contemporaneously with the consummation of the Offering to
certain non-employee directors of the Company pursuant to the Director Stock
Plan and (iii) 412,000 shares of Common Stock were subject to outstanding
warrants issued by the Company. Except for the options for the purchase of
443,900 shares to be priced at the initial public offering price, the exercise
prices of these options and warrants are substantially lower than the
anticipated initial public offering price of the Common Stock. In addition, the
Subordinated Notes are convertible, solely at the Company's option, into shares
of Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Certain Relationship and Related Transactions -- Certain Financing
Arrangements -- Common Stock and Subordinated Notes."

Of the outstanding shares, the 9,600,000 shares of Common Stock (11,040,000
shares if the Underwriters' over-allotment option is exercised in full) sold in
the Offering will be freely tradeable in the public market without restriction
or limitation under the Securities Act, except for any shares purchased by an
"affiliate" (as defined in the Securities Act) of the Company. The shares of
Common Stock that continue to be held by the existing stockholders of the
Company after the Offering will constitute "restricted shares" for purposes of
Rule 144 under the Securities Act, and may not be sold by such persons other
than in compliance with the registration requirements of the Securities Act or
pursuant to an available exemption therefrom. The Company, its officers,
directors and the Selling Stockholders have agreed that they will not offer or
sell any shares of Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of the Representatives. See
"Underwriting." Following the expiration of the lock-up agreements with the
Underwriters, each of the Company's directors and executive officers and each of
its existing stockholders, who will hold upon completion of the Offering an
aggregate of approximately 47% of the outstanding shares of Common Stock (39.3%
if the Underwriters' over-allotment option is exercised in full), may sell such
shares subject to the requirements of Rule 144 under the Securities Act or
pursuant to the terms of a registration rights agreement. See "Certain
Relationships and Related Transactions -- Registration Rights Agreement." The
Company is also a party to certain registration rights agreements pursuant to
which it has granted demand and piggyback registration rights which, upon
consummation of the Offering, will cover an aggregate of 9,027,521 shares of
Common Stock and Common Stock Equivalents. The beneficiaries of the agreements
include Chesapeake, Energy Spectrum, APLP, the Oliver Companies and certain of
their affiliates, Ward and certain of its transferees, DLB, DLJ, Carl B.
Anderson, III, a trust of which Harold G. Hamm is trustee, James E. Brown,
Edward S. Jacob, III and David E. Grose. The terms of these agreements prohibit
the exercise of such registration rights for a period of 180 days following the
date of the Offering, subject to certain exceptions, including DLB's ability to
distribute its shares of Common Stock to its shareholders. In addition, the
Company intends to file registration statements on Form S-8 covering the
issuance of shares of Common Stock registered pursuant to the Company Stock
Plans within 180 days after completion of the Offering. Accordingly, shares of
Common Stock issued pursuant to the Company Stock Plans will be available for
sale in the public market without restriction or limitation under the Securities
Act, except for any shares held by an "affiliate" of the Company.

In general, under Rule 144 as currently in effect, an "affiliate" of the
Company may sell within any three-month period a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of such class or
(ii) the average weekly trading volume on the AMEX during the four calendar
weeks preceding the date on which a notice of sale is filed with the Commission
with respect to the proposed sale. Sales under Rule 144 are subject to certain
restrictions relating to the manner of sale, notice and the availability of
current public information about the issuer. A person who has not been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned shares for at least two years (including the holding
period of any prior owner other than an affiliate), would be entitled to sell
such shares without regard to the volume limitations, manner of sale provisions,
notice or other requirements of Rule 144.

74
<PAGE> 75

UNDERWRITING

Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), each of the underwriters named below (the
"Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), Lehman Brothers, Prudential Securities Incorporated, Rauscher Pierce
Refsnes, Inc. and Raymond James & Associates, Inc. are acting as representatives
(the "Representatives"), has severally agreed to purchase from the Company the
respective number of shares of Common Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......... 1,896,500
Lehman Brothers Inc. ....................................... 1,706,850
Prudential Securities Incorporated.......................... 1,706,850
Rauscher Pierce Refsnes, Inc. .............................. 1,137,900
Raymond James & Associates, Inc. ........................... 1,137,900
BT Alex. Brown Incorporated................................. 106,000
A.G. Edwards & Sons, Inc. .................................. 106,000
Goldman, Sachs & Co. ....................................... 106,000
Howard, Weil, Labouisse, Friedrichs Incorporated............ 106,000
Morgan Stanley & Co. Incorporated........................... 106,000
PaineWebber Incorporated.................................... 106,000
SBC Warburg Dillon Read Inc. ............................... 106,000
Smith Barney Inc. .......................................... 106,000
Robert W. Baird & Co. Incorporated.......................... 53,000
Barington Capital Group, L.P. .............................. 53,000
George K. Baum & Co. ....................................... 53,000
Chatsworth Securities, Llc.................................. 53,000
Hanifen, Imhoff Inc. ....................................... 53,000
Janney Montgomery Scott Inc. ............................... 53,000
Jefferies & Company......................................... 53,000
Johnson Rice & Company L.L.C. .............................. 53,000
Kirkpatrick, Pettis, Smith, Polian Inc. .................... 53,000
Ladenburg Thalmann & Co. Inc. .............................. 53,000
Loewenbaum & Company Incorporated........................... 53,000
McDonald & Company Securities, Inc. ........................ 53,000
Morgan Keegan & Company, Incorporated....................... 53,000
Nesbitt Burns Securities Inc. .............................. 53,000
Ormes Capital Markets, Inc. ................................ 53,000
Petrie Parkman & Co. ....................................... 53,000
Principal Financial Securities, Inc. ....................... 53,000
The Robinson-Humphrey Company, LLC.......................... 53,000
Sanders Morris Mundy........................................ 53,000
Simmons & Company International............................. 53,000
Stephens Inc. .............................................. 53,000
Wm Smith Securities, Inc. .................................. 53,000
---------
Total............................................. 9,600,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. If any of the shares of Common Stock are purchased
by the Underwriters pursuant to the Underwriting Agreement, all such shares
(other than those covered by the over-

75
<PAGE> 76

allotment option described below) must be so purchased. The offering price and
underwriting discounts and commissions per share for Common Stock sold by the
Company and the Selling Stockholders are identical.

The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public initially at the Price to the
Public set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession not in excess of $0.93 per share, and that the
Underwriters may allow, and such dealers may re-allow, a discount not in excess
of $0.10 per share on sales to other dealers. After the Offering, the offering
price and the concessions and discounts to dealers may be changed by the
Representatives.

The Company and certain of the Selling Stockholders have granted to the
Underwriters an option to purchase up to an aggregate of 1,440,000 additional
shares of Common Stock at the Price to the Public set forth on the cover page
hereof, less underwriting discounts and commissions, solely for the purpose of
covering over-allotments. Such option may be exercised at any time until 30 days
after the date of this Prospectus. To the extent that such option is exercised,
each Underwriter will be committed, subject to certain conditions, to purchase a
number of shares proportionate to such Underwriter's initial commitment as
indicated in the preceding table.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof. Such indemnification provisions would
require the Company and the Selling Stockholders to hold the Underwriters
harmless from and against any and all losses, claims, damages, liabilities and
judgments caused by any untrue statement contained in this Prospectus or by any
omission to state a material fact herein, except for untrue statements or
omissions based upon information relating to any Underwriter furnished in
writing to the Company by such Underwriter expressly for use in this Prospectus,
and subject to certain other limitations.

The Company, its executive officers and directors and the Selling
Stockholders have agreed with the Underwriters not to offer, sell, pledge,
contract to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of directly or indirectly any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
in any manner transfer all or a portion of the economic consequences associated
with the ownership of any Common Stock for a period of 180 days after the date
of the Prospectus without the prior written consent of DLJ and subject to
certain limited exceptions. See "Shares Eligible for Future Sale."

No action has been taken in any jurisdiction by the Company, the Selling
Stockholders or the Underwriters that would permit a public offering of the
Common Stock offered pursuant to the Offering in any jurisdiction where action
for that purpose is required, other than the United States. The distribution of
this Prospectus and the offering or sale of the shares of Common Stock offered
hereby in certain jurisdictions may be restricted by law. Accordingly, the
shares of Common Stock offered hereby may not be offered or sold, directly or
indirectly, and neither this Prospectus nor any other offering material or
advertisements in connection with the Common Stock may be distributed or
published, in or from any jurisdiction, except under circumstances that will
result in compliance with applicable rules and regulations of any such
jurisdiction. Such restrictions may be set out in applicable Prospectus
supplements. Persons into whose possession this Prospectus comes are required by
the Company, the Selling Stockholders and the Underwriters to inform themselves
about and to observe any applicable restrictions. This Prospectus does not
constitute an offer of, or an invitation to subscribe for purchase of, any
shares of Common Stock and may not be used for the purpose of an offer to, or
solicitation by, anyone in any jurisdiction or in any circumstances in which
such offer or solicitation is not authorized or is unlawful.

The Representatives have advised the Company that the Underwriters will not
confirm sales of shares of Common Stock to accounts over which they exercise
discretionary authority.

Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price for the shares of Common Stock will be
negotiated among the Company, the Selling Stockholders and

76
<PAGE> 77

the Representatives. The factors to be considered in determining the initial
public offering price of the Common Stock, in addition to the prevailing market
conditions, will be the Company's historical performance, estimates of the
business potential and earnings prospects of the Company, an assessment of the
Company's management and the consideration of the above factors in relation to
market valuation of companies in related businesses.

In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may bid for and purchase shares of
Common Stock in the open market to cover syndicate short positions. In addition,
the Underwriters may bid for and purchase shares of Common Stock in the open
market to stabilize the price of the Common Stock. These activities may
stabilize or maintain the market price of the Common Stock above independent
market levels. The Underwriters are not required to engage in these activities
and may end these activities at any time.

The Common Stock has been approved for listing on the AMEX, subject to
notice of official issuance, under the symbol "BDI."

DLJ served as the financial advisor to DLB in connection with the Bonray
Acquisition and as compensation therefor received 60,000 shares of Common Stock,
a customary fee for a transaction of this type. The Company has granted DLJ
certain registration rights and DLJ has agreed to certain transfer restrictions
with respect to these shares. See "Certain Relationships and Related
Transactions -- Registration Rights Agreements."

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered by this
Prospectus will be passed upon for the Company by Baker & Botts, L.L.P., Dallas,
Texas. Certain legal matters in connection with the sale of the Common Stock
offered hereby will be passed upon for the Underwriters by Andrews & Kurth
L.L.P., Houston, Texas.

INDEPENDENT PUBLIC ACCOUNTANTS

The financial statements of the Company as of December 31, 1994, 1995 and
1996 and for the fiscal years then ended included in this Prospectus and
elsewhere in the Registration Statement have been audited by Grant Thornton LLP,
independent public accountants, as stated in their reports thereon appearing
elsewhere herein, and are so included in reliance on such reports given upon the
authority of that firm as experts in auditing and accounting. The financial
statements of the Company as of June 30, 1997 and for the six months then ended,
the financial statements of Trend as of December 31, 1995 and 1996 and for the
three fiscal years ended December 31, 1996, 1995 and 1994, and the financial
statements of Ward as of December 31, 1996 and for the fiscal year then ended,
included in this Prospectus and elsewhere in the Registration Statement have
been included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent public accountants, given upon the authority of that firm as experts
in auditing and accounting. The financial statements of Bonray as of December
31, 1996 and June 30, 1996 and for the six-month period ended December 31, 1996
and years ended June 30, 1996 and 1995 included in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance on such report given upon the authority of such firm as
experts in accounting and auditing.

In preparation for its initial public offering, the Board appointed Coopers
& Lybrand L.L.P. as auditors for the Company's financial statements for the six
months ended June 30, 1997, and for the year ending December 31, 1997. During
the period Grant Thornton LLP was engaged by the Company and up to and including
March 7, 1997, the date of the Coopers & Lybrand engagement, there were no
disagreements with Grant Thornton LLP on any matter of accounting principles or
practices, financial statement disclosure or

77
<PAGE> 78

auditing scope or procedure and there were no "reportable events" as the term is
defined under the Securities Act. The audit reports previously issued by Grant
Thornton LLP with respect to the Company's financial statements did not contain
an adverse opinion or a disclaimer of opinion, nor were such reports qualified
or modified as to uncertainty, audit scope or accounting principles.

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act with respect to the
shares of Common Stock offered by this Prospectus. This Prospectus constitutes a
part of the Registration Statement and does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted from
this Prospectus as permitted by the rules and regulations of the Commission.
Statements made in this Prospectus regarding the contents of any contract,
agreement or other document are not necessarily complete. With respect to each
contract, agreement or other document filed with the Commission as an exhibit to
the Registration Statement, reference is made to the exhibit for further
information regarding the contents thereof, and each such statement is qualified
in its entirety by such reference. For further information regarding the Company
and the shares of Common Stock offered hereby, reference is made to the
Registration Statement, including the exhibits and schedules thereto.

The Registration Statement, including the exhibits and schedules thereto,
are available for inspection at, and copies of such materials may be obtained at
prescribed rates from, the public reference facilities maintained by the
Commission at its principal offices located at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at its regional offices located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60601 and 7 World Trade Center, New York, New York 10048. The
Commission also makes electronic filings publicly available on the Internet at
http://www.sec.gov and the Registration Statement, including the exhibits and
schedules thereto, may be inspected at such site.

The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the Offering, the Company will become subject to the informational
requirements of the Exchange Act. The Company will fulfill its obligations with
respect to such requirements by filing periodic reports and other information
with the Commission. In addition, the Company intends to furnish to its
stockholders annual reports containing consolidated financial statements
examined by an independent public accounting firm.

78
<PAGE> 79

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF BAYARD DRILLING
TECHNOLOGIES, INC.
Report of Independent Certified Public Accountants........ F-2
Report of Independent Accountants......................... F-3
Balance Sheets as of December 31, 1995 and 1996 and six
months ended June 30, 1997............................. F-4
Statements of Operations for the years ended December 31,
1994, 1995 and 1996 and six months ended June 30, 1996
and 1997............................................... F-5
Statements of Equity (Deficit) for the years ended
December 31, 1994, 1995 and 1996 and six months ended
June 30, 1997.......................................... F-6
Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996 and six months ended June 30, 1996
and 1997............................................... F-7
Notes to Financial Statements............................. F-9
FINANCIAL STATEMENTS OF TREND DRILLING COMPANY
Report of Independent Accountants......................... F-21
Balance Sheets as of December 31, 1995 and 1996 and as of
April 30, 1997......................................... F-22
Statements of Operations for the years ended December 31,
1994, 1995 and 1996 and four months ended April 30,
1997 (unaudited)....................................... F-23
Statements of Stockholders' Equity for the years ended
December 31, 1994, 1995 and 1996....................... F-24
Statements of Cash Flows for the years ended December 31,
1994, 1995 and 1996 and four months ended April 30,
1997 (unaudited)....................................... F-25
Notes to the Financial Statements......................... F-26
FINANCIAL STATEMENTS OF WARD DRILLING COMPANY, INC.
Report of Independent Accountants......................... F-30
Balance Sheet as of December 31, 1996 and May 31, 1997.... F-31
Statements of Operations and Retained Earnings for the
year ended December 31, 1996 and five months ended May
31, 1997 (unaudited)................................... F-32
Statements of Cash Flows for the year ended December 31,
1996 and five months ended May 31, 1997 (unaudited).... F-33
Notes to Financial Statements............................. F-34
FINANCIAL STATEMENTS OF BONRAY DRILLING CORPORATION
Report of Independent Auditors............................ F-37
Balance Sheets as of June 30, 1997 (unaudited) and
December 31, 1996...................................... F-38
Statements of Operations and Accumulated Deficit for the
six-month periods ended June 30, 1997 (unaudited) and
December 31, 1996 and years ended June 30, 1996 and
1995................................................... F-39
Statements of Cash Flows for the six-month periods ended
June 30, 1997 (unaudited) and December 31, 1996 and
years ended June 30, 1996 and 1995..................... F-40
Notes to Financial Statements............................. F-41
</TABLE>

F-1
<PAGE> 80

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Bayard Drilling Technologies, Inc.

We have audited the accompanying balance sheets of Bayard Drilling
Technologies, Inc. (Note A), as of December 31, 1996 and 1995, and the related
statements of operations, equity (deficit), and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bayard Drilling
Technologies, Inc., as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.

GRANT THORNTON LLP

Oklahoma City, Oklahoma
January 20, 1997

F-2
<PAGE> 81

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors
Bayard Drilling Technologies, Inc.

We have audited the accompanying balance sheet of Bayard Drilling
Technologies, Inc., as of June 30, 1997, and the related statements of
operations, equity (deficit), and cash flows for the six months ended June 30,
1997. 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 provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bayard Drilling
Technologies, Inc., as of June 30, 1997 and the results of its operations and
its cash flows for the six months ended June 30, 1997 in conformity with
generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Oklahoma City, Oklahoma
October 3, 1997

F-3
<PAGE> 82

BAYARD DRILLING TECHNOLOGIES, INC.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
CURRENT ASSETS:
Cash...................................................... $ -- $ 4,963 $ 240
Restricted investments.................................... -- -- 730
Accounts receivable....................................... 1,692 286 5,993
Accounts receivable -- affiliate.......................... -- 798 4,524
Other current assets...................................... 19 1 559
------ ------- --------
Total current assets.............................. 1,711 6,048 12,046
Property, plant and equipment, net.......................... 6,343 26,973 92,658
Goodwill, net of accumulated amortization of $98............ -- -- 6,402
Other assets................................................ -- 1,652 2,066
------ ------- --------
Total assets...................................... $8,054 $34,673 $113,172
====== ======= ========

LIABILITIES AND EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable.......................................... $1,219 $ 409 $ 8,794
Accounts payable -- affiliate............................. -- -- 838
Payable to affiliate...................................... 433 412 --
Accrued liabilities....................................... 47 253 3,691
Current portion of long-term debt......................... -- 947 12,869
------ ------- --------
Total current liabilities......................... 1,699 2,021 26,192
------ ------- --------
Payable to affiliate........................................ 6,631 -- --
------ ------- --------
Deferred income tax liabilities............................. -- 348 6,665
------ ------- --------
Long-term debt, less current maturities..................... -- 6,053 18,894
------ ------- --------
Subordinated notes.......................................... -- -- 16,608
------ ------- --------

Commitments and Contingencies

EQUITY (DEFICIT):
Partners' deficit......................................... (276) -- --
Stockholders' equity
Preferred stock, $.01 par value, 20,000,000 shares
authorized; none issued or outstanding............... -- -- --
Common stock, $.01 par value, 100,000,000 shares
authorized; 5,600,000 shares issued and outstanding
at December 31, 1996; 7,490,000 at June 30, 1997..... -- 56 75
Additional paid-in capital (net of deferred compensation
of $292 at June 30, 1997).............................. -- 26,229 44,792
Accumulated deficit....................................... -- (34) (54)
------ ------- --------
Total equity (deficit)............................ (276) 26,251 44,813
------ ------- --------
Total liabilities and equity (deficit)............ $8,054 $34,673 $113,172
====== ======= ========
</TABLE>

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

F-4
<PAGE> 83

BAYARD DRILLING TECHNOLOGIES, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------- ---------------------
1994 1995 1996 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Drilling...................................... $ 7,842 $5,491 $ 8,995 $4,242 $ 7,029
Drilling -- affiliate......................... 2,068 1,914 798 -- 8,078
Other......................................... -- 303 60 59 --
------- ------ ------- ------ -------
Total revenues............................. 9,910 7,708 9,853 4,301 15,107
------- ------ ------- ------ -------
COSTS AND EXPENSES:
Drilling...................................... 8,572 6,075 7,653 3,268 10,897
General and administrative.................... 786 880 658 323 734
Depreciation and amortization................. 1,557 791 1,126 415 2,645
Other......................................... -- 47 46 -- --
------- ------ ------- ------ -------
Total costs and expenses................... 10,915 7,793 9,483 4,006 14,276
------- ------ ------- ------ -------
Operating income (loss).................... (1,005) (85) 370 295 831
------- ------ ------- ------ -------
OTHER INCOME (EXPENSE):
Interest expense.............................. (18) (3) (11) -- (982)
Interest income............................... -- -- -- -- 51
Gain (loss) on sale of assets................. 366 (131) 54 -- 60
Other......................................... -- (3) 17 36 8
------- ------ ------- ------ -------
Total other income (expense)............... 348 (137) 60 36 (863)
------- ------ ------- ------ -------
Earnings (loss) before income taxes............. (657) (222) 430 331 (32)
Income tax provision (benefit) -- deferred...... -- -- 17 -- (12)
------- ------ ------- ------ -------
Net earnings (loss)............................. $ (657) $ (222) $ 413 $ 331 $ (20)
======= ====== ======= ====== =======
Net earnings (loss) per share................... $ .00
=======
PRO FORMA INFORMATION:
Additional income tax expense................. -- -- 146 126
------- ------ ------- ------
Pro forma net earnings (loss)................. $ (657) $ (222) $ 267 $ 205
------- ------ ------- ------
Pro forma earnings per share.................. $ (.05) $ (.02) $ .02 $ .01
======= ====== ======= ======
Weighted average common shares outstanding...... 14,397 14,397 14,397 14,397 14,397
======= ====== ======= ====== =======
</TABLE>

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

F-5
<PAGE> 84

BAYARD DRILLING TECHNOLOGIES, INC.

STATEMENTS OF EQUITY (DEFICIT)
(IN THOUSANDS)

<TABLE>
<CAPTION>
STOCKHOLDERS' EQUITY
---------------------------------------------------
PARTNERS ADDITIONAL
CAPITAL COMMON PAID-IN DEFERRED RETAINED
(DEFICIT) STOCK CAPITAL COST EARNINGS TOTAL
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994............... $ (912) $ -- $ -- $ -- $ -- $ --
Net loss............................... (657) -- -- -- -- --
Capital contribution................... 1,515 -- -- -- -- --
------- ---- ------- ----- ---- -------
Balance at December 31, 1994............. (54) -- -- -- -- --
Net loss............................... (222) -- -- -- -- --
------- ---- ------- ----- ---- -------
Balance at December 31, 1995............. (276) -- -- -- -- --
Net earnings through date of corporate
capitalization...................... 447 -- -- -- -- --
Net increase in equity arising from
affiliate transactions.............. 5,285 -- -- -- -- --
Issuance of stock in corporate
capitalization...................... (5,456) 20 5,436 -- -- 5,456
Sale of stock.......................... -- 20 9,980 -- -- 10,000
Issuance of stock options and warrants
for drilling agreements and debt.... -- -- 1,319 -- -- 1,319
Issuance of stock and options for
property and equipment.............. -- 16 9,494 -- -- 9,510
Net loss from date of corporate
capitalization to December 31,
1996................................ -- -- -- -- (34) (34)
------- ---- ------- ----- ---- -------
Balance at December 31, 1996............. -- 56 26,229 -- (34) 26,251
Net earnings........................... -- -- -- -- (20) (20)
Issuance of stock options to
employees........................... -- -- 60 (59) -- 1
Sale of stock.......................... -- 12 8,218 -- -- 8,230
Issuance of stock options and
warrants............................ -- -- 4,023 -- -- 4,023
Executive compensation agreements...... -- -- 250 (233) -- 17
Issuance of stock for acquisitions..... -- 7 6,304 -- -- 6,311
------- ---- ------- ----- ---- -------
Balance at June 30, 1997................. $ -- $ 75 $45,084 $(292) $(54) $44,813
======= ==== ======= ===== ==== =======
</TABLE>

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

F-6
<PAGE> 85

BAYARD DRILLING TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------- ----------------------
1994 1995 1996 1996 1997
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss).................................. $ (657) $ (222) $ 413 $ 331 $ (20)
Adjustments to reconcile net earnings (loss) to net
cash (used in) provided by operating activities --
Depreciation and amortization...................... 1,557 791 1,126 415 2,645
(Gain) loss on sale of assets...................... (366) 131 (54) 0 (60)
Compensation expense............................... -- -- -- -- 18
Deferred income taxes (benefit).................... -- -- 17 -- (12)
Change in assets and liabilities, net of effects of
affiliate transactions --
Decrease (increase) in accounts receivable....... (96) 242 (2,059) (556) (5,707)
(Increase) in accounts receivable from
affiliate..................................... -- -- -- -- (3,726)
Decrease (increase) in other assets.............. 2 (6) (185) 13 (1,608)
Increase (decrease) in accrued liabilities....... (101) (237) 251 44 3,438
Increase (decrease) in accounts payable.......... 106 (389) (383) (324) 5,635
Increase in accounts payable to affiliate........ -- -- -- -- 838
Increase (decrease) in payable to affiliate...... -- -- 412 7 (412)
------- ------- -------- ----------- --------
Net cash (used in) provided by operating
activities.................................. 445 310 (462) (70) 1,029
------- ------- -------- ----------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment................ (1,183) (2,088) (10,578) (3,278) (32,539)
Acquisition of businesses............................ -- -- -- -- (26,056)
Proceeds from sale of assets......................... 729 378 137 136 60
Purchase of investments.............................. -- -- -- -- (730)
------- ------- -------- ----------- --------
Net cash used in investing activities......... (454) (1,710) (10,441) (3,142) (59,265)
------- ------- -------- ----------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments made to affiliates.......................... (16,608) (8,828) (19,719) (4,496) --
Advances received from affiliates.................... 16,982 10,228 18,791 7,708 --
Retirement of notes payable.......................... (365) -- -- -- --
Proceeds from borrowings............................. -- -- 7,000 -- 41,044
Proceeds from issuance of stock...................... -- -- 10,000 -- 8,230
Debt issuance costs.................................. -- -- (206) --
Payments on long-term debt........................... -- -- -- -- (2,572)
Borrowings under line of credit...................... -- -- -- -- 6,811
------- ------- -------- ----------- --------
Net cash provided by financing activities..... 9 1,400 15,866 3,212 53,513
------- ------- -------- ----------- --------
Net change in cash..................................... -- -- 4,963 -- (4,723)
Cash at beginning of period............................ -- -- -- -- 4,963
------- ------- -------- ----------- --------
Cash at end of period.................................. $ -- $ -- $ 4,963 $ -- $ 240
======= ======= ======== =========== ========
Cash paid during the period for interest............... $ 20 $ -- $ -- $ -- $ 653
Cash paid during the period for income taxes........... $ -- $ -- -- -- --
======= ======= ======== =========== ========
</TABLE>

Continued

F-7
<PAGE> 86

BAYARD DRILLING TECHNOLOGIES, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

Continued

Supplemental noncash activity:

During 1994 certain affiliate payables were extinguished resulting in a
$1,515 capital contribution to the Company.

During 1995 an affiliate transferred drilling equipment to the Company at
the affiliate's basis totaling $173, net of accumulated depreciation of $1,306,
which has been reflected as an increase in payable to affiliate. Additionally,
the Company acquired property and equipment through trade payables totaling
$1,180.

During 1996 the Company acquired property and equipment totaling $9,841
through the issuance of stock and options and assumed a net deferred income tax
liability of $331. The Company acquired property and equipment through trade
payables and payables to affiliates totaling $1,390. The Company transferred
property and equipment totaling $29, net of accumulated depreciation of $1,254
to an affiliate which has been reflected as a decrease in payables to
affiliates. The Company issued stock options and warrants in exchange for
certain drilling agreements and debt. The stock options were valued at $1,100
and the warrants associated with the debt were valued at $219.

Additionally in 1996, the Company transferred the following assets and
liabilities to affiliates which resulted in a net increase in equity at the time
of corporate capitalization, effective December 1, 1996.

<TABLE>
<S> <C>
Accounts receivable......................................... $ 2,667
Other assets................................................ 17
Cash........................................................ 9,252
Accounts payable and accrued liabilities.................... (1,799)
Payable to affiliates....................................... (15,422)
--------
$ (5,285)
========
</TABLE>

During 1997 the Company acquired property and equipment through the
issuance of stock and options for $6,591 and through issuance of trade payables
of $2,750.

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

F-8
<PAGE> 87

BAYARD DRILLING TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS
INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED

NOTE A -- NATURE OF OPERATIONS

Bayard Drilling Technologies, Inc. together with its predecessor, (the
"Company"), a Delaware corporation, is the successor to the drilling operations
of Anadarko Drilling Company ("Anadarko"), which began drilling operations in
1980. The Company provides land-based contract drilling services primarily to
independent oil and gas companies in the Mid-Continent and Gulf Coast regions of
the United States whose level of drilling activity is related to oil and gas
prices, among other factors.

Beginning in October 1996, AnSon Partners Limited Partnership ("APLP")
initiated a series of transactions among its wholly owned affiliates, Anadarko,
a partnership, and Bayard Drilling Company ("BDC"), a corporation, and the
Company. These series of transactions resulted in the corporate capitalization
of the Company in December 1996 with net assets, primarily drilling rigs,
previously owned by Anadarko. Such transactions were accounted for as a
reorganization of entities under common control.

NOTE B -- SUMMARY OF ACCOUNTING POLICIES

The summary of significant accounting policies applied in the preparation
of the accompanying financial statements follows.

1. Basis of Presentation and Consolidation

The financial statements and information for periods prior to December 1,
1996 represent those of the predecessor. The consolidated financial statements
for periods after December 31, 1996 include the accounts of the Company and its
wholly-owned subsidiaries, Trend Drilling Company ("Trend") and WD Equipment,
L.L.C. All significant intercompany accounts and transactions have been
eliminated.

2. Cash

The Company considers all cash and investments with an original maturity of
90 days or less to be cash equivalents. The Company maintains its cash in a bank
deposit account which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts and believes it is not
exposed to any significant credit risk on cash.

3. Investments

Investments consist of certificates of deposits pledged to state insurance
departments and insurance companies to support payment of workers compensation
claims.

4. Concentration of Credit Risk

The primary market for the Company's services are independent oil and gas
companies whose level of activities are related to, among other things, oil and
gas prices. The Company performs ongoing credit evaluations of its customers and
provides for potential credit losses when necessary. No allowance was required
at December 31, 1996 and 1995 or June 30, 1997. At June 30, 1997, approximately
71% of the Company's trade receivables and over 80% of total revenues were
derived from five customers.

F-9
<PAGE> 88

BAYARD DRILLING TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED

5. Property and Equipment

Property and equipment are stated at cost, reduced by provisions to
recognize economic impairment in value when management determines that such
impairment has occurred. Drilling equipment is depreciated using the declining
balance method over the estimated useful lives from five to twelve years. Other
property and equipment are depreciated on a declining balance basis over
estimated useful lives from three to ten years. Refurbishments and betterments
on drilling equipment are capitalized if such expenditures are significant and
extend the lives of the equipment. Maintenance and repairs are expensed as
incurred. When assets are sold, retired or disposed of, the cost and related
accumulated depreciation are eliminated from the accounts and the gain or loss
is recognized.

6. Revenue Recognition

Revenues generated from the Company's dayrate drilling contracts are
recognized as services are performed. For all drilling contracts under which the
Company bears the risk of completion (such as footage and turnkey contracts)
revenues and expenses are recognized using the completed contracts method. When
estimates of projected revenues and expenses indicate a loss, the total
estimated loss is accrued.

7. Net Earnings (Loss) Per Share

Earnings per common and equivalent shares is computed based on the weighted
average number of common and equivalent shares outstanding during the period.
Pro forma net earnings (loss) per share are presented to reflect the provision
for income taxes for periods Anadarko was a partnership. Pro forma net earnings
(loss) per share is computed by dividing the pro forma net earnings (loss) by
the weighted average number of shares of common stock and equivalent shares
outstanding during the period.

Under guidelines issued by the Securities and Exchange Commission, common
shares, options and warrants issued prior to a public offering at prices below
the initial offering price are treated as outstanding for all periods presented
(using the Treasury stock method) in computing net earnings (loss) per share.

8. Income Taxes

Income taxes were not provided in the financial statements for earnings
attributable to Anadarko since the partners would pay income taxes or receive as
a deduction their distributive share of Anadarko's taxable income or loss. Pro
forma adjustments are reflected on the statement of operations to provide for
income taxes in accordance with Statement of Financial Accounting Standards No.
109 at an effective rate of 38%.

The Company uses the liability method of accounting for deferred income
taxes under SFAS No. 109, whereby deferred tax assets and liabilities are
recognized based upon differences between the financial statement and tax bases
of assets and liabilities using presently enacted tax rates. If it is more
likely that not some portion or all of a deferred tax asset will not be
realized, a valuation allowance is recognized.

9. Goodwill and Other Assets

Goodwill related to the acquisition of Trend is being amortized over twelve
years. Amortization expense of $97,527 has been recognized as of June 30, 1997.

Other assets consist of (i) organizational costs incurred for the
organization of Bayard, (ii) debt issuance costs incurred on the term loan
disclosed in Note G, and (iii) deferred contract costs related to options

F-10
<PAGE> 89

BAYARD DRILLING TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED

granted to a related party. Amortization expense for such other assets is
recognized over one to five years on a straight-line basis. $667,626 of
amortization expense has been recognized for the six months ended June 30, 1997
for these costs.

On an ongoing basis, management reviews the valuation and amortization of
goodwill and other intangibles to determine possible impairment. The
recoverability of these assets is assessed by determining whether the
amortization can be recovered from undiscounted future cash flows.

10. Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain 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; accordingly actual results could differ from those estimates.

11. Fair Value of Financial Instruments

The Company's financial instruments consist of cash and investments which
approximate fair value because of the short maturity of those instruments, a
payable to an affiliate which approximates fair value due to the demand nature
of this obligation and a floating rate term loan which approximates fair value
because the interest rate adjusts to the market rate, and notes payable which
approximate fair value because the interest rates on these notes reflects the
borrowing terms currently available to the Company.

12. Interim Financial Statements and Disclosures

In the opinion of management, the unaudited interim financial statements
for June 30, 1997 and 1996 and unaudited interim financial statement disclosures
subsequent to December 31, 1996 include all adjustments, consisting of normal
recurring accruals, necessary to present fairly the Company's financial position
as of June 30, 1997 and results of operations and cash flows for the six months
ended June 30, 1997 and 1996. Results for the period ended June 30, 1997 are not
necessarily indicative of the results to be expected for the entire fiscal year.

13. Stock Based Compensation

The Company applies APB Opinion 25 in accounting for its stock option
plans. Under this standard, compensation expense is only recognized for grants
of options which include an exercise price less than the market price of the
stock on the date of grant. Accordingly, based on the Company's grants for 1996
and for the six months ended June 30, 1997, the Company recognized $0 and
approximately $292,000 of deferred compensation and $0 and approximately $18,000
of compensation expense, respectively. For grants of options which include an
exercise price equal to or greater than the market price of the stock on the
date of grant, the Company has disclosed the pro forma effects of recording
compensation based on fair value in Note N to the financial statements as
allowed by Financial Accounting Standard No. 123 "Accounting for Stock-Based
Compensation."

F-11
<PAGE> 90

BAYARD DRILLING TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED

NOTE C -- ACQUISITIONS

On May 1, 1997, the Company completed the acquisition of the common stock
of Trend ("Trend Acquisition") for $18 million in cash and 250,000 shares of
common stock which equates to $10.64 per share based on the appraisals of the
fair market value of the property and equipment acquired of $21,532,000. The
Company incurred costs of approximately $307,000 in connection with this
acquisition.

The Trend Acquisition was accounted for as a purchase. The following is an
analysis of the allocation of the purchase price:

On May 30, 1997, the Company acquired WD Equipment, L.L.C. (which owned six
drilling rigs, but had no operations) from Ward Drilling Company, Inc. ("Ward
Acquisition") for approximately $8 million in cash and 400,000 shares of common
stock which equates to $8.95 per share based on the appraisal of the fair market
value of the assets acquired of $11,931,000. The Company also issued warrants to
purchase 200,000 shares of common stock at $10.00 per share. The warrant had an
estimated fair market value of $294,000 at the agreement closing date and was
recorded as an increase in property and equipment and additional paid in
capital.

The following is the unaudited pro forma results of operations as if Trend
and Ward had been acquired January 1, 1996 (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1997
<S> <C> <C>
Revenues............................................. $36,930 $26,454
======= =======
Net Loss............................................. $(2,347) $(1,305)
======= =======
Loss per common share................................ $ (.16) $ (.09)
======= =======
</TABLE>

F-12
<PAGE> 91

BAYARD DRILLING TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED

NOTE D -- PROPERTY AND EQUIPMENT

Major classes of property and equipment consist of the following:

<TABLE>
<CAPTION>
SIX MONTHS
DECEMBER 31, ENDED
----------------- JUNE 30,
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Drilling rigs and components............................ $21,152 $42,303 $108,486
Automobiles, trucks, and trailers....................... 1,546 431 1,332
Buildings and property.................................. -- -- 277
Furniture, fixtures, and other.......................... 69 7 208
------- ------- --------
22,767 42,741 110,303
Less accumulated depreciation......................... 16,424 15,768 17,645
------- ------- --------
$ 6,343 $26,973 $ 92,658
======= ======= ========
</TABLE>

NOTE E -- CHANGE IN ESTIMATED LIVES

Effective January 1, 1995, the Company changed the estimated remaining
lives of its drilling rigs and other related drilling equipment to 84 months
from remaining lives which ranged from 31 months to 113 months. The Company also
changed the estimated remaining life of drill collars from 20 months to 36
months. These changes were made to more closely approximate the remaining useful
lives of such assets. The effect of this change was to decrease the historical
net loss by approximately $539,000 and to reduce the pro forma net loss by
approximately $539,000 or $.05 per share (Note B(7)) for the year ended December
31, 1995.

Effective January 1, 1996, the Company changed the estimated remaining
lives of certain drilling component equipment from 84 months to 120 months and
changed the estimated remaining life of drill collars and pipe from 36 months to
60 months. After review and study by the Company, the useful lives of drilling
rigs acquired after January 1, 1996 were changed from 84 months to 144 months.
These changes were made to more closely approximate the remaining useful lives
of such assets. The effect of these changes was to increase the historical net
earnings by approximately $405,000 and to increase pro forma net earnings by
approximately $251,000, net of pro forma income taxes of $154,000, or $.02 per
share (Note B(7)) for the year ended December 31, 1996.

NOTE F -- INCOME TAXES

On October 28, 1996, Anadarko conveyed its operating assets to its
wholly-owned subsidiary, BDC, which caused a change in tax status of the
drilling operations from a partnership to a taxable corporation. A deferred tax
asset was recognized for the temporary differences which existed at the date of
conveyance together with a related valuation allowance. At December 31, 1996,
the Company has net operating loss carry forwards of approximately $418,000
which will expire in 2011 if unused.

F-13
<PAGE> 92

BAYARD DRILLING TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED

Components of net deferred income tax liabilities are as follows:

<TABLE>
<CAPTION>
OCTOBER 28, DECEMBER 31,
1996 1996
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets (liabilities)
Operating loss carryforwards.............................. $ -- $ 167
Property and equipment.................................... 1,818 (515)
Total valuation allowance................................. (1,818) --
------- -----
Net deferred tax liabilities........................... $ -- $(348)
======= =====
</TABLE>

The Company's effective income tax rate differed from the federal statutory
rate of 34% as follows for the years ended December 31: (in thousands)

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Income tax expense (benefit) at federal statutory rate...... $ (75) $ 146
Income tax (expense) benefit attributable to individual
partners.................................................. 75 (129)
-------- ---------
$ -- $ 17
======== =========
</TABLE>

The Company's valuation allowance on tax assets was established October 28,
1996 due to a change in taxable status and decreased $1,818,000 during the
period from October 28, 1996 to December 31, 1996. The Company was not a taxable
entity in 1995 and had no valuation allowance. Effective December 1, 1996, the
Company acquired assets with deferred tax liabilities of approximately $2
million in which the purchase price allocation resulted in the reduction of the
Company's tax asset valuation allowance of approximately $1,724,000.

NOTE G -- LONG-TERM DEBT AND SUBORDINATED NOTES

Long-term debt at December 31, 1996 consisted of borrowings under loan
agreements (the "Loan Agreements") which provide for a term loan (the "Term
Loan") and a revolving loan (the "Revolving Loan"). The Term Loan of $7,000,000
bears interest at the Company's choice of LIBOR plus 4.25% (9.65% at December
31, 1996) or the prime rate of Chase Manhattan Bank, N.A. and requires monthly
payments of principal and interest in amounts sufficient to repay borrowings at
maturity on March 31, 2002. The Loan Agreements permit borrowings to a maximum
of $20 million under the Term Loan if defined collateral provisions are met. The
loan is collateralized by drilling equipment.

The Loan Agreements also permit borrowings up to $4 million under the
Revolving Loan through December 31, 1998 subject to a $2 million limitation if
the borrowings under the Term Loan exceed $17 million. Amounts advanced under
the Revolving Loan, if any, will be converted to a term loan on December 31,
1998 and will be repaid in monthly installments until maturity on January 31,
2002.

Starting in 1997, the Loan Agreements require the maintenance of defined
collateral values, cash flow and liquidity ratios, financial reporting
requirements, and the maintenance of total liabilities to tangible net worth not
greater than 1.25 and imposes certain limitations on capital expenditures and
incurrence of additional debt.

F-14
<PAGE> 93

BAYARD DRILLING TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED

A December 31, 1996, the aggregate yearly maturities on long-term
obligations are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
<S> <C>
1997................................................... $ 947,000
1998................................................... 1,240,000
1999................................................... 1,365,000
2000................................................... 1,503,000
2001................................................... 1,654,000
Thereafter............................................. 291,000
----------
$7,000,000
==========
</TABLE>

In May 1997, the Company amended and increased the availability under the
Loan Agreements. The Term Loan provides the Company up to $30.5 million for the
purchase of additional land drilling rigs, the refurbishment of such rigs and
equipment and for working capital purposes. The Revolving Loan provides the
revolving credit loans of up to $10 million, $2 million of which is available
for the issuance of letters of credit, and which is being used for general
corporate purposes. Amounts outstanding under the Revolving Loan bear interest
based on Fleet National Bank's prime rate plus 1.5% (10% at June 30, 1997) and
mature in April 2000. Amounts outstanding under the Term Loan bear interest, at
the election of the Company, at floating rates equal to Chase Manhattan Bank's
prime rate plus 2.0% or LIBOR plus 4.25% (9.94% at June 30, 1997) and mature in
March 2002. The Loan Agreements are collateralized by substantially all of the
assets of the Company, including all drilling rigs, equipment and drilling
contracts, and contain customary restrictive covenants (including covenants
restricting the ability of the Company to pay dividends or encumber assets) and
an affirmative covenant to maintain Total Available Liquidity (as defined in the
Loan Agreements) of at least $4.5 million through December 31, 1997 and $3
million through December 31, 1998. Pursuant to the Loan Agreements, the Company
must maintain certain financial ratios, including a Cash Flow Coverage ratio (as
defined in the Loan Agreements) of at least 1.25 to 1 until December 1997, 1.5
to 1 in 1998 and 1.75 to 1 thereafter and a ratio of Total Liabilities (as
defined in the Loan Agreements) to Tangible Net Worth no greater than 1.25 to 1
in 1997 and 1 to 1 in 1998. Under the Loan Agreements the Company is obligated
to pay certain fees, including an annual commitment fee in an amount equal to
0.5% of the unused portion of the commitment.

Additionally, the Company issued Subordinated Notes due May 1, 2003 in the
original principal amounts of $18 million and $2.52 million (the "Subordinated
Notes") to Chesapeake Energy Corporation ("Chesapeake") and Energy Spectrum
Partners LP ("Energy Spectrum"), respectively. The Subordinated Notes bear
interest at either (i) 11% per annum, payable in cash or (ii) 12.875% per annum,
payable in the form of additional Subordinated Notes, which interest is payable
quarterly in arrears. On each quarterly interest payment date, the Company may
make an election as to the interest rate to be applied for the previous quarter.
The Subordinated Notes are redeemable, solely at the option of the Company, in
whole or in part, at any time after May 31, 1998 at varying redemption prices.
The Company must offer to redeem the Subordinated Notes upon the occurrence of
certain events constituting a "Change of Control" (as defined in the
Subordinated Notes) at a redemption price equal to 100% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the date of
redemption. The Subordinated Notes are convertible into Common Stock at the
option of the Company, in whole or in part, in conjunction with a "Convertible
Event" (as defined in the Subordinated Notes), which includes certain
underwritten public offerings (including the Offering), mergers, consolidations
and other business combination transactions. The Subordinated Notes are general
unsecured subordinated obligations of the Company that are subordinated in
rights of payment to all existing and future senior indebtedness of the Company,
pari passu with all existing and future subordinated

F-15
<PAGE> 94

BAYARD DRILLING TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED

indebtedness of the Company and senior in right of payment to all future junior
subordinated indebtedness of the Company.

NOTE H -- RELATED PARTY TRANSACTIONS

Before the corporate capitalization, Anson Gas Corporation served as the
managing general partner responsible for all management and operational
functions of the Company and charged the Company for such expenses. The Company
expensed approximately $198,000, $390,000 and $435,000 for such services
received in 1996, 1995 and 1994, respectively.

Prior to December 31, 1996, the Company and its affiliates made advances to
each other from time to time which generally had no specific repayment terms.
The Company's payable to affiliate at December 31, 1995 was in the form of a
noninterest-bearing payable to APLP.

The Company purchased drilling equipment and supplies from an affiliate
totaling $2,862,000, $779,000 and $904,000 in 1996, 1995 and 1994, respectively.
The Company also transferred drilling equipment to an affiliate at the Company's
basis totaling $29,000, net of accumulated depreciation, which resulted in a
decrease in payable to affiliate.

An affiliate transferred drilling equipment to Anadarko at the affiliates
basis totaling $173,000, net of accumulated depreciation, during 1995 which has
been reflected as an increase in payable to affiliate.

In December 1996, Anadarko granted the Company a transferrable option,
exercisable at any time prior to June 30, 1998, to either purchase from Anadarko
a storage yard located in Weatherford, Oklahoma (the "Weatherford Storage Yard")
for a price of $1,000 in cash or lease from Anadarko, for any period specified
by the Company through a date not later than December 31, 1999, the Weatherford
Storage Yard for a lease price of $100 per year. In August 1997, the Company
acquired from Anadarko approximately 5 acres of land also in Weatherford,
Oklahoma, in consideration for the relinquishment by the Company of the option
to acquire or lease the Weatherford Storage Yard.

In May 1997, the Company paid Energy Spectrum a fee in the amount of
$220,000 for financial advisory and other services rendered to the Company in
connection with the completion of the Trend Acquisition, including the valuation
and negotiation of the Trend Acquisition and for assistance in the arrangement
of alternative financing sources and structuring, negotiating and closing the
amended financing arrangements with CIT and Fleet. The Company also reimbursed
Energy Spectrum for expenses incurred in connection with the rendering of such
services.

The Company has in the past purchased rigs and related equipment from U.S.
Rig & Equipment, Inc., an affiliate of Roy T. Oliver, a director of the Company.
From January 1997 through June 30, 1997, the Company paid U.S. Rig & Equipment,
Inc. an aggregate of $1.3 million in connection with such purchases.
Additionally, in August 1997, the Company sold one of its rigs to an affiliate
of Mr. Oliver for $500,000. The Company believes that this sale price is
equivalent to the price that would have been received from an unaffiliated third
party.

The Company has engaged affiliates of APLP for the provision of trucking
services related to the movement of the Company's rigs on numerous occasions.
From January 1997 through June 30, 1997, the Company paid such affiliates of
APLP an aggregate of $225,000 in consideration for such trucking services.

Since December 13, 1996, APLP has made available to the Company certain of
APLP's employees, office space and administrative equipment, such as computer
and telephone systems. In consideration for such

F-16
<PAGE> 95

BAYARD DRILLING TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED

assistance, the Company had reimbursed APLP an aggregate of $135,000 as of June
30, 1997 and APLP continues to provide certain computer services to the Company.

Accounts receivable at June 30, 1997 included $4.5 million of receivables
from affiliates. Accounts payable at June 30, 1997 included $838,000 owed to
affiliates. Interest expense at June 30, 1997 included $330,000 to affiliates.

NOTE I -- SIGNIFICANT CUSTOMERS

During the first six months of 1997, 51% of revenues was generated from an
affiliated customer and 10% of revenues was generated from an unaffiliated
customer. During 1996, sales to two customers were, respectively, 75% (inclusive
of $798,000 attributable to Chesapeake, which became an affiliate in December
1996) and 18% of drilling revenues. During 1995, sales to one customer totaled
36% of drilling revenue. During 1994, sales to two customers totaled 34% and 11%
of total drilling revenues.

NOTE J -- STOCKHOLDER'S EQUITY AND OPTIONS

In December 1996, the Company issued 2,000,000 shares of Common Stock to
Anadarko for the operating assets of BDC, Anadarko's subsidiary. Further, the
Company issued 2,000,000 shares of Common Stock to Energy Spectrum for $10
million cash. The Company also acquired six drilling rigs and related equipment
by the issuance of 1,600,000 shares of Common Stock and put options on the
Company's common stock. The drilling rigs were recorded in accordance with
appraisals of the estimated fair value of the assets acquired ($9,500) and the
net deferred income tax liability assumed. If the Company does not complete an
initial public stock offering prior to June 2, 1998, the holder of the options
has a thirty-day period in which to request that the Company purchase the
1,600,000 shares of Common Stock at $7.50 per share. The Company, at its option,
can either purchase the shares or issue 400,000 additional shares of Common
Stock to the holder. The estimated fair value of the put options are recorded as
additional contributed capital to the Company.

The Company executed in December 1996 certain drilling agreements to supply
six drilling rigs to Chesapeake at rates equal to defined comparable market
rates but not less than $5,000 per day per rig. The Company granted the operator
an option to purchase 2,000,000 shares of Common Stock at $6 per share, subject
to performance of the operator under the drilling agreement. The estimated fair
value of the options of $1,100,000 was recorded as additional paid-in capital
and a deferred charge to be amortized over a twelve month period consistent with
the annual negotiations of contract terms.

In February 1997, the Company sold 100,000 shares of Common Stock at $2.50
per share to the President of the Company, which are subject to the terms of a
Restricted Stock Award Agreement. Deferred compensation in the amount of
$250,000 was recorded related to this stock grant as the purchase price was
below the fair market value of the Company's Common Stock at the date of grant.
See Note N.

On December 10, 1996, the Company granted the issuer of the Term Loan (Note
G) warrants to immediately purchase up to 290,000 shares of the Company's Common
Stock at $8 per share or up to 300,000 shares at $8 per share when total
outstanding Common Stock exceeds 6,000,000 shares. The warrants expire at the
earlier of December 13, 2001 or eighteen months after completion of the initial
public stock offering by the Company. The warrant holder can also elect to
receive in stock the excess of the stock market value over the warrant exercise
price. These warrants have an estimated fair value of $219,000, which has been
recorded as debt issue costs and is being amortized over the term of the loan.

The Company purchased during May 1997, two drilling rigs from U.S. Rig &
Equipment, Inc. for cash and granted options to purchase 100,000 shares of
Common Stock at $8 per share.

F-17
<PAGE> 96

BAYARD DRILLING TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED

In connection with the issuance of Subordinated Notes executed in May 1997,
the Company issued 1,140,000 shares of Common Stock at $7 per share.
Additionally, the Company issued two series of detachable Warrants, designated
as Series A Warrants and Series B Warrants. The Series A Warrants are
exercisable at a price of $.01 per share and the Series B Warrants are
exercisable at $7.50 per share. Both Warrants expire 72 months from issuance.
The Company issued Series A Warrants and Series B Warrants representing the
right to purchase 798,000 shares and 912,000 shares of Common Stock,
respectively. The fair market value of these warrants at the agreement closing
date was $6 million, $4,024,000 of which was attributable to the Subordinated
Notes. The warrant value applicable to the Subordinated Notes was allocated
between the Subordinated Notes and warrants and recorded as a discount to the
Subordinated Notes and additional paid in capital.

In October, 1995 SFAS No. 123 "Accounting for Stock Based Compensation" was
issued. The statement required the computation of compensation expense for
stock, stock options and other equity instruments issued to employees based on
the fair value of the instrument at the date the instrument was granted. The
compensation is to be recorded as an expense in the financial statements or
alternatively, disclosed. The Company has elected to disclose such information.

In June 1997, the Company granted options to employees to purchase 59,600
shares of Common Stock at $8 per share. Deferred compensation in the amount of
$59,600 was recorded related to these stock options as the exercise price was
below the fair market value of the Company's Common Stock at the date of grant.
See Note N. During 1996 and 1997, the Company issued stock options to three
executive officers pursuant to the 1997 Stock Option and Stock Award Plan to
purchase 200,000, 50,000 and 50,000 shares of Common Stock, respectively, at an
exercise price of $5, $5 and $10 per share, respectively. None of such options
has been exercised, and all of such options remain outstanding.

NOTE K -- COMMITMENTS AND CONTINGENCIES

In December 1996, the Company entered into a drilling agreement whereby
Chesapeake agreed to engage six of the Company's rigs for two-year terms,
subject to annual negotiations. The Company has the option to extend the
agreement with respect to any two of the rigs for two additional years on the
same terms. Chesapeake has the option to extend each of the other four
individual drilling rigs for two additional years on the same terms. The
agreement provides standard day rates, subject to upward, but not downward,
adjustment annually to approximately $100 per day less than the average
then-current market rates for the areas of operation. This adjustment is
determined each November during the term of the agreement and becomes effective
for any wells spudded after December 1, while such agreement remains in effect.
If a timely agreement is not reached as to a rate adjustment, the Company will
have the option to terminate the contract for the respective rig at the
conclusion of operations for the related well being drilled.

The Company has entered into two year employment agreements with three
executive officers, which provide for the payment of the remaining term of each
agreement upon a change of control. As of June 30, 1997, benefits under such
agreements, assuming a change of control, would aggregate approximately
$547,500.

As of June 30, 1997, the Company had construction commitments totaling
approximately $3.5 million for five rigs in various stages of refurbishment.

A shortage of drill pipe exists in the contract drilling industry in the
United States. This shortage has caused the price of drill pipe to increase
significantly over the past 24 months and has required orders for new drill pipe
to be placed at least one year in advance of expected use. The price increase
and the delay in delivery has caused the Company to substantially increase
capital expenditures for drill pipe in recent months. In the

F-18
<PAGE> 97

BAYARD DRILLING TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED

event the shortage continues, the Company may be unable to obtain the drill pipe
required to expand its contract drilling operations.

NOTE L -- SUBSEQUENT EVENTS

In August 1997, the Company issued 3,149,000 shares of Common Stock to
Chesapeake for $9 million in cash and the relinquishment by Chesapeake of its
right to exercise the Chesapeake Option and the warrants issued to it in
connection with the May Financing (the "Chesapeake Transactions"). In connection
with the Chesapeake Transactions, the Company agreed that, simultaneously with
the Offering, the Company will redeem in full the $18 million principal amount
of Subordinated Notes held by Chesapeake at a cash redemption price of $15
million, subject to adjustment. The Company estimates a $1.4 million
extraordinary loss from early extinguishment of debt on the Subordinated Notes,
which estimate may change in connection with the adjustment. Also in connection
with the Chesapeake Transactions, the Company waived its right under the
Securities Purchase Agreement to require Chesapeake to purchase additional
Common Stock, Warrants and Subordinated Notes for $3 million.

At the August 19, 1997 Board of Directors meeting, the number of authorized
shares of Common Stock was increased from 10,000,000 to 100,000,000 and the
number of authorized shares of preferred stock was increased from 2,000,000 to
20,000,000. Additionally, a two-for-one stock split effected as a stock dividend
on an August 22, 1997 record date was approved. All stock option data, per share
earnings and references to common stock have been restated to give effect to the
stock split.

On July 31, 1997, Energy Spectrum exercised in full its Series A Warrants,
at a price of $0.01 per share, for 98,000 shares of Common Stock.

SUBSEQUENT EVENTS -- UNAUDITED

On October 16, 1997, the Company acquired Bonray Drilling Corporation
("Bonray") for 3,015,000 shares of Common Stock, subject to certain working
capital adjustments. The acquisition will be accounted for as a purchase.

NOTE M -- EMPLOYEE BENEFIT PLAN

The Company has a profit sharing plan for certain eligible employees who
have attained the age of 21 and completed at least one year of service.
Participants may contribute up to 20% of compensation for any plan year. The
Company's discretionary contribution is based on the participants total years of
service. The Company has made contributions of approximately $9,000 through June
30, 1997.

NOTE N -- BENEFIT AND COMPENSATION PLAN

In April 1997, the Board of Directors approved the adoption of an Employee
Stock Plan ("the Plan") whereby 1,600,000 shares of Common Stock are authorized
for issuance under the Plan to officers and employees. The Plan permits the
issuance of qualified or nonqualified stock options, as well as granting of
certain other awards, including shares of restricted stock. Options granted
become vested at the rate of 20% per year one year after being granted, with the
options expiring six years from the original grant date. The exercise price for
options granted through June 30, 1997 was based on the Company's estimate of the
fair market value on the date of the grant. Through June 30, 1997, 309,600
options and 100,000 shares of restricted stock (denoted below) were issued under
the Plan, none of which were exercisable at June 30, 1997.

F-19
<PAGE> 98

BAYARD DRILLING TECHNOLOGIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION FOR THE PERIOD ENDED JUNE 30, 1996 IS UNAUDITED

Activity pertaining to the Plan is as follows:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Outstanding at
December 10, 1996......................................... -- $ --
Granted................................................ 200,000 5.00
Exercised.............................................. -- --
-------
Outstanding at
January 1, 1997........................................... 200,000 5.00
Granted................................................ 209,600 4.66
Exercised.............................................. -- --
-------
June 30, 1997............................................. 409,600 $4.83
=======
</TABLE>

<TABLE>
<CAPTION>
WEIGHTED AVERAGE FAIR MARKET
WEIGHTED AVERAGE FAIR VALUE OF VALUE OF DEFERRED
EXERCISE NUMBER OF REMAINING WEIGHTED AVERAGE STOCK OPTIONS ON COMMON STOCK COMPENSATION
PRICE RANGE SHARES CONTRACTUAL LIFE EXERCISE PRICE DATE OF GRANT AT DATE OF GRANT COST
----------- --------- ---------------- ---------------- ---------------- ---------------- ------------
<C> <C> <C> <C> <C> <C> <C>
$2.50 100,000(1) 0 $2.50 $ -- $5.00 $233,000
5.00 250,000 5.46 5.00 2.09 5.00 --
8.00 59,600 5.96 8.00 4.18 9.00 59,000
</TABLE>

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

(1) Unvested restricted stock.

The Company applies APB Opinion 25 in accounting for the Plan. Had
compensation been determined on the basis of fair value pursuant to FASB
Statement No. 123, net income and earnings per share would have been reduced as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ --------
<S> <C> <C>
Net Income (In thousands):
As reported............................................... 413 (20)
Pro forma (net of effective tax of 38%)................... 407 (90)
Primary Earnings per Share, Primary and Fully Diluted:
As reported............................................... .03 (.00)
Pro forma................................................. .03 (.01)
</TABLE>

The fair value of each option granted is estimated using the Black-Scholes
model. This model includes, among others, a variable of stock volatility. As the
Company is not yet public, the volatility used in the model was .40 based on
volatilities of a similar entity that is currently publicly traded. Dividend
yield was estimated to remain at zero with risk free interest rates ranging
between 5.72 and 6.31 percent. As there is no prior experience available to use
in estimating an expected life for the options, an average of the time between
the vesting and expiration dates of the options was used in determining the
expected lives of the options ranging from 3.5 to 5.5 years. Fair value of
options granted during 1997 and 1996 under the Plan were $415,990 and $354,590,
respectively.

F-20
<PAGE> 99

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Bayard Drilling Technologies, Inc.

We have audited the accompanying balance sheets of Trend Drilling Company
as of December 31, 1996 and 1995, and the related statements of operations,
stockholder's equity, and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respect, the financial position of Trend Drilling Company as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.

COOPERS & LYBRAND, L.L.P.

Oklahoma City, Oklahoma
April 28, 1997

F-21
<PAGE> 100

TREND DRILLING COMPANY

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------ AS OF
1995 1996 APRIL 30, 1997
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................... $ 448,857 $ 570,873 $ 149,352
Accounts receivable................................. 2,398,231 3,474,043 2,544,526
Other current assets................................ 34,899 40,661 40,661
Deferred tax asset.................................. 175,593 -- --
---------- ---------- ----------
Total current assets........................ 3,057,580 4,085,577 2,734,539
Property, plant and equipment, net.................... 4,781,019 4,176,964 4,133,639
Goodwill, net of accumulated amortization of $60,000,
$84,000 and $92,000, respectively................... 60,000 36,000 28,000
Deferred tax asset.................................... 186,688 379,850 379,850
---------- ---------- ----------
Total assets................................ $8,085,287 $8,678,391 $7,276,028
========== ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable.................................... $2,358,575 $1,424,415 $ 583,405
Accrued liabilities................................. 626,883 1,049,338 280,049
Income taxes payable................................ -- 986,834 1,157,103
Current portion of long-term debt................... 1,457,976 415,445 232,394
Deferred tax liability.............................. -- 11,939 11,939
---------- ---------- ----------
Total current liabilities................... 4,443,434 3,887,971 2,264,890
---------- ---------- ----------
Long-term debt........................................ 1,755,437 1,339,992 1,339,992
---------- ---------- ----------

Commitments and contingencies

STOCKHOLDERS' EQUITY:
Common stock, $1 par value, 25,000 shares
authorized; 500 shares issued and outstanding.... 500 500 500
Additional paid-in capital.......................... 2,483,880 2,483,880 2,483,880
Retained earnings (accumulated deficit)............. (597,964) 966,048 1,186,766
---------- ---------- ----------
Stockholders' equity........................ 1,886,416 3,450,428 3,671,146
---------- ---------- ----------
Total liabilities and stockholders'
equity.................................... $8,085,287 $8,678,391 $7,276,028
========== ========== ==========
</TABLE>

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

F-22
<PAGE> 101

TREND DRILLING COMPANY

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------- FOUR MONTHS ENDED
1994 1995 1996 APRIL 30, 1997
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Drilling contracts.............. $12,563,991 $12,283,649 $15,692,056 $6,389,703
----------- ----------- ----------- ----------
OPERATING EXPENSES:
Drilling........................ 10,070,842 9,218,081 11,752,135 4,844,669
General and administrative...... 1,415,842 1,878,347 1,647,330 514,937
Depreciation and amortization... 1,077,292 1,344,835 1,602,832 627,350
----------- ----------- ----------- ----------
Total operating
expenses.............. 12,563,976 12,441,263 15,002,297 5,986,956
----------- ----------- ----------- ----------
Operating income (loss)........... 15 (157,614) 689,759 402,747
----------- ----------- ----------- ----------
OTHER INCOME (EXPENSE):
Interest expense................ (183,768) (280,741) (261,331) (46,750)
Interest income................. 5,880 17,380 8,035 --
Other........................... 140,021 43,673 53,523 --
Gain on disposition of
equipment.................... 71,366 42,573 2,055,230 --
----------- ----------- ----------- ----------
Total other income
(expense)............. 33,499 (177,115) 1,855,457 (46,750)
----------- ----------- ----------- ----------
Income (loss) before income
taxes........................... 33,514 (334,729) 2,545,216 355,997
Income tax benefit (expense)...... (17,177) 112,906 (981,204) (135,279)
----------- ----------- ----------- ----------
Net Income (loss)................. $ 16,337 $ (221,823) $ 1,564,012 $ 220,718
=========== =========== =========== ==========
</TABLE>

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

F-23
<PAGE> 102

TREND DRILLING COMPANY

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
RETAINED
CAPITAL IN EARNINGS
COMMON EXCESS OF (ACCUMULATED
STOCK PAR VALUE DEFICIT) TOTAL
<S> <C> <C> <C> <C>
Balance, December 31, 1993.................. $500 $2,483,880 $ (392,478) $2,091,902
Net income................................ -- -- 16,337 16,337
---- ---------- ---------- ----------
Balance, December 31, 1994.................. 500 2,483,880 (376,141) 2,108,239
Net loss.................................. -- -- (221,823) (221,823)
---- ---------- ---------- ----------
Balance, December 31, 1995.................. 500 2,483,880 (597,964) 1,886,416
Net income................................ -- -- 1,564,012 1,564,012
---- ---------- ---------- ----------
Balance, December 31, 1996.................. $500 $2,483,880 $ 966,048 $3,450,428
==== ========== ========== ==========
</TABLE>

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

F-24
<PAGE> 103

TREND DRILLING COMPANY

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------- FOUR MONTHS ENDED
1994 1995 1996 APRIL 30, 1997
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................... $ 16,337 $ (221,823) $ 1,564,012 $ 220,718
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization...... 1,077,292 1,344,836 1,602,832 627,350
Gain on disposition of property,
plant and equipment.............. (71,366) (42,573) (2,055,230) --
Deferred tax expense (benefit)..... 17,177 (112,906) (5,630) --
Change in assets and liabilities:
Accounts receivable.............. (1,436,642) (120,759) (1,075,812) 929,517
Prepaid expenses................. 2,867 (19,349) (5,762) --
Accounts payable and accrued
liabilities................... 903,866 929,719 (511,705) (1,610,299)
Income taxes payable............. -- -- 986,834 170,269
Deferred revenue................. (172,250) -- -- --
----------- ----------- ----------- ----------
Net cash provided by operating
activities.................. 337,281 1,757,145 499,539 337,555
----------- ----------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of equipment... 264,219 42,573 2,872,647 --
Capital expenditures.................. (3,645,969) (1,552,257) (1,792,194) (576,027)
----------- ----------- ----------- ----------
Net cash provided by (used in)
investing activities........ (3,381,750) (1,509,684) 1,080,453 (576,027)
----------- ----------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt........ 3,000,000 850,000 775,000 --
Principal payments under debt
obligations........................ (299,809) (658,104) (2,232,976) (183,049)
----------- ----------- ----------- ----------
Net cash provided by (used in)
financing activities........ 2,700,191 191,896 (1,457,976) (183,049)
----------- ----------- ----------- ----------
Net increase (decrease) in cash and cash
equivalents........................... (344,278) 439,357 122,016 (421,521)
Cash and cash equivalents, beginning of
period................................ 353,778 9,500 448,857 570,873
----------- ----------- ----------- ----------
Cash and cash equivalents, end of
period................................ $ 9,500 $ 448,857 $ 570,873 $ 149,352
=========== =========== =========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest........................... $ 136,857 $ 232,553 $ 254,110 $ 46,750
=========== =========== =========== ==========
Income taxes....................... $ -- $ -- $ -- $ 275,000
=========== =========== =========== ==========
</TABLE>

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

F-25
<PAGE> 104

TREND DRILLING COMPANY

NOTES TO THE FINANCIAL STATEMENTS
INFORMATION RELATING TO THE FOUR MONTHS ENDED APRIL 30, 1997 IS UNAUDITED

(A) NATURE OF OPERATIONS

Trend Drilling Company (the "Company"), an Oklahoma corporation, began
operations in 1981. The Company provides contract drilling services in the
Mid-Continent region of the United States. The Company's customers are primarily
independent oil and gas companies.

On February 13, 1997, the owner of the Company and sole stockholder,
entered into a stock purchase agreement (the "Agreement"), with Bayard Drilling
Technologies, Inc. ("Bayard") for the sale of the Company (the "Bayard
Acquisition"). The executed agreement states a purchase price of $18 million
plus shares of Bayard stock, adjusted for changes in working capital as of the
closing date compared to December 31, 1996.

(B) SUMMARY OF SIGNIFICANT ACCOUNT POLICIES

REVENUE RECOGNITION

The Company recognizes revenue and expenses on dayrate contracts as the
drilling progresses (percentage-of-completion method). For footage and turnkey
contracts, the Company recognizes the revenue and expenses upon completion of
the well (completed-contract method).

Revenue earned of $279,390, but not billed, is included in accounts
receivable at December 31, 1996.

CASH AND CASH EQUIVALENTS

For purposes of the balance sheet, the Company considers cash equivalents
to be all instruments that had a remaining maturity of three months or less at
the date of purchase.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is recorded at cost. Depreciation of
property, plant and equipment is determined primarily on the straight-line
method over the estimated useful lives of the assets at the following rates:

<TABLE>
<CAPTION>
YEARS
<S> <C>
Buildings................................................... 15-39
Drilling rigs and related equipment......................... 5-14
Vehicles.................................................... 5
Furniture and office equipment.............................. 5-10
</TABLE>

Upon retirement or disposal, the related cost and accumulated depreciation
are removed from the accounts and any gain or loss is included in operations.
Repairs and maintenance, which extend the useful life of property, plant and
equipment, are capitalized.

GOODWILL

The excess of the purchase price over the fair value of assets acquired is
amortized on the straight-line method over five years. Amortization expense was
$24,000 for the years-ended December 31, 1996, 1995 and 1994.

INCOME TAXES

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). Accordingly, deferred taxes are determined based on the difference
between the financial statement and tax bases of assets and liabilities using

F-26
<PAGE> 105

TREND DRILLING COMPANY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
INFORMATION RELATING TO THE FOUR MONTHS ENDED APRIL 30, 1997 IS UNAUDITED

the enacted tax rate in effect in the years in which the differences are
expected to reverse. Deferred tax expense represents the change in the deferred
tax liability balance.

CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables with oil
and natural gas companies. For the years ended December 31, 1996 and 1995 over
ninety-five percent of the Company's trade receivables were from ten or less
customers. These customers also represented 63%, 51% and 54% of total revenues
for 1996, 1995 and 1994, respectively.

At December 31, 1996 and 1995, the Company had deposits in domestic banks
in excess of federally insured limits of approximately $467,000 and $348,000,
respectively.

ACCOUNTING 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 for certain revenues and expenses during the
reporting period. Actual results could differ from those estimates.

INTERIM FINANCIAL STATEMENTS AND DISCLOSURES

In the opinion of management, the unaudited interim financial statements
for the period ended April 30, 1997 and unaudited interim financial statement
disclosures subsequent to December 31, 1996 include all adjustments, consisting
of normal recurring accruals, necessary to present fairly the Company's results
of operations for the four months ended April 30, 1997.

Property, plant and equipment consist of the following at December 31,

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Building.................................................. $ 295,946 $ 295,946
Drilling rigs and related equipment....................... 12,323,939 12,887,107
Vehicles.................................................. 233,018 227,018
Furniture and office equipment............................ 153,984 141,131
Leasehold costs........................................... -- 9,290
----------- -----------
13,006,887 13,560,492
Less accumulated depreciation............................. 8,225,868 9,383,528
----------- -----------
$ 4,781,019 $ 4,176,964
=========== ===========
</TABLE>

(D) LONG-TERM DEBT

Long-term debt consisted of the following at December 31,

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Notes payable to banks...................................... $3,213,413 $1,755,437
Less current portion........................................ 1,457,976 415,445
---------- ----------
Total long-term debt.............................. $1,755,437 $1,339,922
========== ==========
</TABLE>

F-27
<PAGE> 106

TREND DRILLING COMPANY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
INFORMATION RELATING TO THE FOUR MONTHS ENDED APRIL 30, 1997 IS UNAUDITED

On March 26, 1996, the Company entered into a term loan (the "Note") of
$3,098,058, which consolidated all of the Company's bank borrowings into one
term loan. At December 31, 1996, long-term debt consisted of borrowings under
this note of $1,755,437 which bears an interest rate at the prime rate, adjusted
quarterly (8.25% at December 31, 1996). The Note contains a subjective
acceleration clause which allows the lender to demand payment of the Note when
the lender, at its sole discretion, determines that the Note is impaired.
However, the Note has been classified based on the scheduled maturities in the
accompanying balance sheet as management does not believe such impairment has
occurred. The Note requires the maintenance of financial reporting requirements
and annual personal financial statements from the owner of the Company.

The Note requires monthly payments of principal and interest in amounts
sufficient to repay borrowings at maturity on March 26, 2001. The Note is
collateralized by Accounts Receivable and Property, Plant and Equipment and is
personally guaranteed by the owner of the Company.

At December 31, 1995, long-term debt consisted of borrowings under four
bank notes with an aggregate amount of $3,213,413 which bore interest at a rate
of 1% over prime (which was 8.75% on December 31, 1995).

At December 31, 1996, the aggregate scheduled yearly maturities on
long-term obligations are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
1997................................................... $ 415,445
1998................................................... 373,762
1999................................................... 406,799
2000................................................... 442,757
2001................................................... 116,674
----------
$1,755,437
==========
</TABLE>

(E) INCOME TAXES

Income tax expense (benefit) for the years ended December 31, 1994, 1995
and 1996 is summarized as follows:

<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Current:
Federal......................................... $ -- $ -- $882,957
State........................................... -- -- 103,877
Deferred:
Federal......................................... 15,369 (101,021) (5,037)
State........................................... 1,808 (11,885) (593)
-------- --------- --------
$ 17,177 $(112,906) $981,204
======== ========= ========
</TABLE>

F-28
<PAGE> 107

TREND DRILLING COMPANY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
INFORMATION RELATING TO THE FOUR MONTHS ENDED APRIL 30, 1997 IS UNAUDITED

Total income tax expense (benefit) differs from the amount computed by
multiplying income (loss) before income taxes by the U.S. federal income tax
statutory rate. The reasons for this difference are as follows:

<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Computed expected tax expense (benefit)........... $11,394 $(113,807) $ 865,373
State income taxes................................ 1,340 (13,389) 101,808
Non-deductible business meals and entertainment
expense......................................... 4,443 14,290 14,023
------- --------- ---------
$17,177 $(112,906) $ 981,204
======= ========= =========
</TABLE>

The components of the deferred tax assets and (liabilities) consisted of
the following at December 31:

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Deferred tax assets:
Net operating loss and tax credit carry-forwards.......... $ 38,549 $ --
Excess of book basis over tax basis of current
liabilities............................................ 112,054 --
Excess of tax basis over book basis of current assets..... 24,990 --
Depreciation of property, plant and equipment............. 190,488 383,650
Deferred tax liabilities:
Excess of tax basis over book basis of current
liabilities............................................ -- (11,939)
Amortization of goodwill.................................. (3,800) (3,800)
-------- --------
Net deferred tax asset...................................... $362,281 $367,911
======== ========
</TABLE>

(F) RELATED PARTIES

The Company has several affiliates in the oil and gas industry with which
the Company does business throughout the year. The type of transactions with
these related parties varies from the Company drilling wells for affiliates to
affiliates moving rigs from one well site to another, as well as receiving
certain administrative support for which the Company was not billed (i.e.,
computer support).

As of December 31, 1996 and 1995, the Company had trade receivables with
related parties in the amount of $375,016 and $32,633, respectively, and trade
payables with related parties of $168,169 and $505,426, respectively.

For the period ended December 31, 1996, 1995 and 1994 the Company had
revenues of $462,535, $917,743 and $1,422,658, respectively and expenses of
$2,121,975, $2,003,356 and $1,660,169, respectively, with related parties.

The Company leases office space from an affiliate. For the years ended
December 31, 1996, 1995 and 1994, the Company paid rent of approximately
$10,000.

The Company has an agreement for 1997 to continue renting this office space
for approximately $1,000 per month.

(G) EMPLOYEE BENEFIT PLAN

The Company has a profit sharing plan ("the Plan") for certain eligible
employees who have attained the age of 21 and completed at least six months of
service. Participants may contribute up to 15% of compensation for any Plan
year. The Company's discretionary contribution is allocated to each
participant's account in the proportion which that participant's compensation
bears to the total compensation of all eligible participants. The Company made
contributions of approximately $130,000, $35,000 and $20,000 to the Plan in
1996, 1995 and 1994, respectively.

F-29
<PAGE> 108

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
Bayard Drilling Technologies, Inc.

We have audited the accompanying balance sheet of Ward Drilling Company,
Inc. as of December 31, 1996, and the related statement of operations and
retained earnings, and cash flows for the year ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Ward Drilling Company as of
December 31, 1996, and the results of its operations and its cash flows for the
year ended December 31, 1996, in conformity with generally accepted accounting
principles.

COOPERS & LYBRAND, L.L.P.

Oklahoma City, Oklahoma
August 22, 1997

F-30
<PAGE> 109

WARD DRILLING COMPANY, INC.

BALANCE SHEET

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, MAY 31,
1996 1997
<S> <C> <C>
CURRENT ASSETS:
Cash...................................................... $ 7,038 $ --
Accounts receivable....................................... 1,733,647 1,287,069
Prepaids and other assets................................. 781,470 520,204
----------- ----------
Total current assets.............................. 2,522,155 1,807,273
----------- ----------
EQUIPMENT:
Drilling equipment........................................ 14,701,019 14,843,582
Other equipment........................................... 444,606 448,918
Other..................................................... 373,263 376,882
----------- ----------
15,518,888 15,669,382
Less accumulated depreciation............................. 8,569,372 8,509,445
----------- ----------
Net equipment.......................................... 6,949,516 7,159,937
----------- ----------
Total assets................................. $ 9,471,671 $8,967,210
=========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Book overdraft............................................ $ 118,765 $ 5,295
Accounts payable.......................................... 1,246,022 383,329
Accrued expenses.......................................... 590,161 474,582
Advances from affiliate and stockholder................... 3,265,480 3,899,629
----------- ----------
Total current liabilities......................... 5,220,428 4,762,835
----------- ----------
Note payable to bank........................................ 500,000 --
----------- ----------
Commitments and contingencies
STOCKHOLDER'S EQUITY:
Common stock of $1 par value. Authorized 25,000 shares;
issued and outstanding 1,000 shares.................... 1,000 1,000
Additional paid-in capital................................ 99,014 99,014
Retained earnings......................................... 3,651,229 4,104,361
----------- ----------
Total stockholder's equity........................ 3,751,243 4,204,375
----------- ----------
Total liabilities and stockholder's equity... $ 9,471,671 $8,967,210
=========== ==========
</TABLE>

See accompanying notes to financial statements.

F-31
<PAGE> 110

WARD DRILLING COMPANY, INC.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

<TABLE>
<CAPTION>
DECEMBER 31, FIVE MONTHS ENDED
1996 MAY 31, 1997
(UNAUDITED)
<S> <C> <C>

DRILLING REVENUES........................................... $11,384,944 $4,956,971
----------- ----------
OPERATING EXPENSES:
Drilling.................................................. 9,890,597 3,914,240
Depreciation.............................................. 966,328 413,249
General and administrative................................ 484,748 196,747
----------- ----------
Total operating expenses.......................... 11,341,673 4,524,236
----------- ----------
Operating income.................................. 43,271 432,735
----------- ----------
OTHER INCOME (EXPENSE):
Interest income........................................... 34,536 16,810
Interest expense.......................................... (72,056) (27,224)
Gain on sale of assets.................................... 7,895 --
Miscellaneous income...................................... 66,678 30,810
----------- ----------
Total other income................................ 37,053 20,396
----------- ----------
Net income (loss)................................. $ 80,324 $ 453,131
=========== ==========

Retained earnings at beginning of year...................... $ 3,570,905
===========

Retained earnings at end of year............................ $ 3,651,229
===========
</TABLE>

See accompanying notes to financial statements.

F-32
<PAGE> 111

WARD DRILLING COMPANY, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
DECEMBER 31, FIVE MONTHS ENDED
1996 MAY 31, 1997
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 80,324 $ 453,131
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation........................................... 966,328 413,249
Gain on sale of assets................................. (7,895) --
Change in assets and liabilities:
(Increase) decrease in accounts receivable........... (485,735) 446,578
(Increase) decrease in prepaids and other assets..... (330,577) 261,266
Decrease in cost incurred or contracts in progress... 463,588 --
Decrease in accounts payable......................... (75,797) (862,693)
Increase (decrease) in accrued expenses.............. 250,400 (115,579)
----------- ---------
Net cash provided by operating activities.............. 860,636 595,952
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, including major
repairs and betterments................................ (1,564,162) (623,669)
Proceeds from sale of assets.............................. 21,034 --
----------- ---------
Net cash used in investing activities.................. (1,543,128) (623,669)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on revolving line of credit...................... 50,000
Payments on revolving line of credit...................... -- (500,000)
Advances from affiliate and stockholder................... 1,301,282 634,149
Payments to affiliates.................................... (616,136) --
Decrease in book overdraft................................ (52,671) (113,470)
----------- ---------
Net cash provided by financing activities.............. 682,475 20,679
----------- ---------
Net decrease in cash........................................ (17) (7,038)
Cash at beginning of year................................... 7,055 7,038
----------- ---------
Cash at end of year......................................... $ 7,038 $ --
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 57,244 $ 20,000
=========== =========
</TABLE>

See accompanying notes to financial statements.

F-33
<PAGE> 112

WARD DRILLING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS
INFORMATION RELATING TO THE FIVE MONTHS ENDED MAY 31, 1997 IS UNAUDITED

(A) NATURE OF OPERATIONS

Ward Drilling Company (the "Company"), an Oklahoma corporation, began
operations in 1981. The Company provides contract drilling services in the
Mid-Continent region of the United States for independent oil and gas companies.

In May 1997, the Company's parent, L.O. Ward Revocable Trust transferred
all the fixed assets of the Company into WD Equipment L.L.C. in anticipation of
the sale of these assets to Bayard Drilling Technologies, Inc. ("Bayard"), which
was consummated on May 31, 1997 (the "Bayard Acquisition"). The Company and
Bayard agreed to a purchase price of approximately $8 million plus 400,000
shares of Bayard stock plus warrants to purchase up to 200,000 shares of Bayard
stock in exchange for the purchase of WD Equipment L.L.C.

(B) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION

The Company recognizes revenue and expenses on dayrate contracts as the
drilling progresses (percentage-of-completion method). For turnkey and footage
contracts, the Company recognizes the revenue and expenses upon completion of
the well (completed-contract method).

CASH AND CASH EQUIVALENTS

The Company considers cash equivalents to be all instruments that had a
remaining maturity of three months or less at the date of purchase.

EQUIPMENT

Equipment is recorded at cost. Depreciation on drilling equipment is
determined using the units-of-production method based upon management's
estimates of remaining drilling days by rig. Depreciation on all other equipment
is determined using the straight-line method over the estimated useful lives of
the assets ranging from three to seven years. Upon retirement or disposal, the
related cost and accumulated depreciation are removed from the accounts and any
gain or loss is included in operations.

The costs of major repairs and overhauls which extend the useful life of
drilling equipment are capitalized by charges to the allowance for accumulated
depreciation. Other additions and improvements are charged to the applicable
equipment account.

INCOME TAXES

The Company is an electing S corporation for federal and state income tax
purposes. The Company's taxable income or loss will be included in its
stockholder's income tax return. Accordingly, no provision for income taxes has
been included in these financial statements.

CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade receivables with oil
and natural gas companies. At December 31, 1996 over ninety-eight percent of the
Company's trade receivables were from four customers. For the year ended
December 31, 1996 the ten largest customers account for over 96% of total
revenues.

At December 31, 1996 the Company had deposits in domestic banks in excess
of federally insured limits of approximately $156,000.

F-34
<PAGE> 113

WARD DRILLING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION RELATING TO THE FIVE MONTHS ENDED MAY 31, 1997 IS UNAUDITED

ACCOUNTING ESTIMATES

The Company has available a line of credit with a bank for $500,000 which
expires in March 1998. The line of credit is collateralized by inventory,
accounts receivable, and other miscellaneous assets. Interest is at the bank's
base rate plus one percent (9.25% and 9.5% at December 31, 1996 and 1995,
respectively.) Upon consummation of the sale of the Company on May 31, 1997,
this line of credit was extinguished.

(D) RELATED PARTIES

The Company conducts drilling activities for companies owned or controlled
by L.O. Ward, one of the trustees of the L.O. Ward Revocable Trust (the Related
Parties); however no drilling activities were conducted for the Related Parties
in 1996.

General and administrative expense in the accompanying statement of
operations is net of management fee income received from one of the Related
Parties aggregating $10,320 in 1996.

The Company allocates office space and administrative expenses directly to
Related Parties. Amounts allocated under this arrangement aggregated
approximately $25,000 for 1996.

The Company paid approximately $75,000 in 1996 to one of the Related
Parties for services which includes finding drilling contracts for the Company
and certain other administrative services. Certain expenses incurred by the
Related Parties and attributable to the Company's operations are not billed to
the Company.

Accounts receivable at December 31, 1996 included $8,446 of receivables
from affiliated entities. Accounts payable at December 31, 1996 included
$241,233 owed to affiliated entities.

(E) EMPLOYMENT AGREEMENTS

The Company has issued stock appreciation rights to certain employees which
may entitle them to receive bonuses. These bonuses are based on net income and
the ratio of stock appreciation rights owned by the employees to total
outstanding shares of common stock at year end. Ninety-nine stock appreciation
rights were outstanding at December 31, 1996. A bonus payment of approximately
$37,500 was payable to employees at December 31, 1996.

(F) SAVINGS PLAN

The Company participates in a salary deferral retirement plan which is
available to substantially all employees. Participants in the plan may make
contributions to the plan, with the Company matching up to 25% of the employee's
basic contribution. The basic contribution cannot exceed 5% of the employee's
base salary. Total contributions by the Company were approximately $10,000 in
1996.

F-35
<PAGE> 114

WARD DRILLING COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INFORMATION RELATING TO THE FIVE MONTHS ENDED MAY 31, 1997 IS UNAUDITED

(G) CONTINGENCIES

The Company maintains a self insurance plan for workers' compensation and
is liable for claims up to $400,000 per-occurrence. The Company is involved in
legal actions arising out of workers' compensation claims. In the opinion of
management, the ultimate disposition of these matters will not have a material
adverse effect on the Company's financial position. Total expense for workers'
compensation was approximately $335,000 in 1996, and accrued liabilities
included a reserve for unpaid and incurred but not reported claims of $310,000
at December 31, 1996.

F-36
<PAGE> 115

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Bonray Drilling Corporation

We have audited the accompanying balance sheets of Bonray Drilling
Corporation as of December 31, 1996 and June 30, 1996, and the related
statements of operations and accumulated deficit and cash flows for the
six-month period ended December 31, 1996 and the years ended June 30, 1996 and
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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bonray Drilling Corporation
at December 31, 1996 and June 30, 1996, and the results of its operations and
its cash flows for the six-month period ended December 31, 1996 and the years
ended June 30, 1996 and 1995, in conformity with generally accepted accounting
principles.

Ernst & Young LLP

Oklahoma City, Oklahoma
April 17, 1997

F-37
<PAGE> 116

THE ACQUISITION OF BONRAY DRILLING CORPORATION WAS ACCOUNTED FOR USING THE
PURCHASE METHOD OF ACCOUNTING. ACCORDINGLY, THE PURCHASE PRICE WAS "PUSHED-DOWN"
AND RECORDED IN THE ACCOMPANYING FINANCIAL STATEMENTS WHICH AFFECTS THE
COMPARABILITY OF THE JUNE 30, 1997 FINANCIAL POSITION, RESULTS OF OPERATIONS AND
CASH FLOWS.

BONRAY DRILLING CORPORATION

BALANCE SHEETS

ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31, JUNE 30,
1996 1996 1997
<S> <C> <C> <C>
(UNAUDITED)

<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................... $ 187 $ 58 $ 167
Accounts receivable (Note 5)............................ 2,172 2,100 4,190
Drilling contracts in progress.......................... 20 -- 62
Prepaid expenses........................................ 89 166 172
------- ------- -------
Total current assets............................ 2,468 2,324 4,591
Properties and equipment:
Drilling equipment (Notes 1 and 3)...................... 20,411 20,927 18,463
Land.................................................... 110 110 110
Buildings............................................... 356 356 73
Other equipment......................................... 1,145 1,006 475
------- ------- -------
22,022 22,399 19,121
Less accumulated depreciation (Note 1).................. 14,179 14,210 878
------- ------- -------
Net properties and equipment.............................. 7,843 8,189 18,243
------- ------- -------
Total assets.................................... $10,311 $10,513 $22,834
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 689 $ 871 $ 1,435
Notes payable (Note 3):
Short-term line of credit............................ 555 -- 322
Other................................................ 189 343 172
Accrued liabilities:
Salaries and wages................................... 246 268 317
Payroll and other taxes.............................. 57 17 95
Workers' compensation insurance (Note 4)............. 446 768 1,245
Income taxes payable................................. -- 4 19
Other................................................ 120 120 128
------- ------- -------
Total current liabilities....................... 2,302 2,391 3,733
Obligations due after one year:
Workers' compensation insurance (Note 4)................ 75 75 74
Other................................................... 28 14 --
Deferred income taxes................................... -- -- 1,781
Stockholders' equity:
Common stock, $1.00 par value; 800,000 shares
authorized; 432,740 shares issued at December 31,
1996 and June 30, 1996; 423,540 shares issued at June
30, 1997............................................. 433 433 424
Capital in excess of par value.......................... 12,497 12,497 16,379
Retained earnings (accumulated deficit) (Note 1)........ (4,932) (4,805) 443
------- ------- -------
7,998 8,125 17,246
Less 9,200 shares of treasury stock, at cost............ 92 92 --
------- ------- -------
Total stockholders' equity...................... 7,906 8,033 17,246
------- ------- -------
Total liabilities and stockholders' equity...... $10,311 $10,513 $22,834
======= ======= =======
</TABLE>

See accompanying notes.

F-38
<PAGE> 117

BONRAY DRILLING CORPORATION

STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT

<TABLE>
<CAPTION>
YEAR ENDED SIX-MONTH SIX-MONTH
------------------- PERIOD ENDED PERIOD ENDED
JUNE 30, JUNE 30, DECEMBER 31, JUNE 30,
1995 1996 1996 1997
(DOLLARS IN THOUSANDS, (UNAUDITED)
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:
Contract drilling operations (Note 5).......... $ 8,486 $ 10,257 $ 6,004 $ 8,855
Gain (loss) on sales of assets................. 1,029 (66) 27 --
Interest and other income...................... 172 89 27 36
-------- -------- -------- --------
Total revenues......................... 9,687 10,280 6,058 8,891
Costs and expenses (Note 4):
Contract drilling operations................... 6,865 8,189 4,836 6,409
General and administrative..................... 752 864 473 611
Interest and other expense..................... 39 85 43 98
Depreciation................................... 1,130 1,284 569 1,047
-------- -------- -------- --------
8,786 10,422 5,921 8,165
-------- -------- -------- --------
Income (loss) before provision for income
taxes.......................................... 901 (142) 137 726
Provision for income taxes (Note 2).............. 35 -- 10 336
-------- -------- -------- --------
Net income (loss)................................ 866 (142) 127 390
Accumulated deficit at beginning of period....... (5,656) (4,790) (4,932) (4,805)
Elimination of accumulated deficit from purchase
adjustment (Note 1)............................ -- -- -- 4,858
-------- -------- -------- --------
Retained earnings (accumulated deficit) at end of
period......................................... $ (4,790) $ (4,932) $ (4,805) $ 443
======== ======== ======== ========
Net income (loss) per share...................... $ 2.05 $ (0.34) $ 0.30 $ 0.92
======== ======== ======== ========
Weighted average shares outstanding.............. 423,540 423,540 423,540 423,540
======== ======== ======== ========
</TABLE>

See accompanying notes.

F-39
<PAGE> 118

BONRAY DRILLING CORPORATION

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED SIX-MONTH SIX-MONTH
-------------------- PERIOD ENDED PERIOD ENDED
JUNE 30, JUNE 30, DECEMBER 31, JUNE 30,
1995 1996 1996 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers.......................... $ 10,910 $10,628 $ 6,457 $ 7,523
Cash paid to suppliers and employees.................. (10,178) (9,662) (5,325) (6,753)
Interest received..................................... 36 5 -- 8
Interest paid......................................... (27) (66) (27) (20)
Income taxes paid..................................... (30) (5) (6) --
Other cash receipts................................... 152 85 61 11
-------- ------- ------- -------
Net cash provided by operating activities............. 863 985 1,160 769
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of assets......................... 1,659 27 43 --
Capital expenditures.................................. (2,120) (987) (931) (4,772)
-------- ------- ------- -------
Net cash used by investing activities................. (461) (960) (888) (4,772)
CASH FLOWS FROM FINANCING ACTIVITIES
Contributed capital................................... -- -- -- 3,961
Borrowings on notes payable........................... -- -- 395 --
Payments on notes payable............................. (86) (553) (241) (171)
Net increase (decrease) in borrowings on short-term
line
of credit........................................... (165) 555 (555) 322
-------- ------- ------- -------
Net cash provided (used) by financing activities...... (251) 2 (401) 4,112
-------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents......................................... 151 27 (129) 109
Cash and cash equivalents at beginning of period...... 9 160 187 58
-------- ------- ------- -------
Cash and cash equivalents at end of period............ $ 160 $ 187 $ 58 $ 167
======== ======= ======= =======
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income (loss)..................................... $ 866 $ (142) $ 127 $ 390
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation........................................ 1,130 1,284 569 1,047
(Gain) loss on sales of assets...................... (1,029) 66 (27) --
Deferred income taxes............................... -- -- -- 314
Change in assets and liabilities:
Decrease (increase) in current assets:
Accounts receivable............................. (434) (33) 72 (2,090)
Drilling contracts in progress.................. 13 1 20 (62)
Prepaid expenses................................ 9 5 (77) (6)
Increase (decrease) in current liabilities:
Accounts payable.................................. 68 (276) 182 564
Accrued liabilities............................... (48) 479 308 627
Accrued workers' compensation insurance and other
due after one year.............................. 288 (399) (14) (15)
-------- ------- ------- -------
Total adjustments............................ (3) 1,127 1,033 379
-------- ------- ------- -------
Net cash provided by operating activities.... $ 863 $ 985 $ 1,160 $ 769
======== ======= ======= =======
</TABLE>

DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITY

During the year ended June 30, 1995, the Company acquired property, plant
and equipment by issuing a note payable of $828,050.

See accompanying notes.

F-40
<PAGE> 119

BONRAY DRILLING CORPORATION

NOTES TO FINANCIAL STATEMENTS
SIX-MONTH PERIODS ENDED JUNE 30, 1997 AND DECEMBER 31, 1996
AND YEARS ENDED JUNE 30, 1996 AND 1995

INFORMATION RELATING TO THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 IS UNAUDITED

1. BASIS OF FINANCIAL STATEMENTS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Bonray Drilling Corporation (the "Company") is engaged in domestic onshore
contract drilling of oil and gas wells. The Company currently owns and has
available for operation fifteen drilling rigs located in Oklahoma, having depth
capabilities ranging from 7,000 to 25,000 feet.

On February 10, 1997, substantially all of the Company's shares of
outstanding common stock were purchased by DLB Oil & Gas, Inc. ("DLB") for $30
per share or approximately $12,700,000. As a result of the completed
transaction, the Company became a subsidiary of DLB. Effective on the date of
the acquisition, the Company changed its fiscal year end from June 30 to
December 31 to correspond with the year end of DLB.

The transaction was accounted for as a purchase using push down accounting
treatment. This resulted in a step up in the basis of the acquired assets and
the elimination of the previously recorded balance of accumulated depreciation
and amortization. Additionally, the accumulated deficit was eliminated as a
result of a new basis established for the acquired assets and liabilities.

Cash and Cash Equivalents

Cash and cash equivalents include cash deposits in banks and short-term
investments with original maturities of three months or less from the date of
purchase by the Company.

Contract Drilling Operations

Revenue earned from footage and turnkey contracts is recognized by the
completed contract method, while revenue earned from daywork contracts is
recognized by the percentage-of-completion method. Provision is made for the
entire amount of expected losses on contracts, if any, in the period in which
such losses are first determined.

Valuation of Properties and Equipment

Drilling equipment is stated at amounts representing historical cost
adjusted by prior year write-downs based on the expected future economic value
of such equipment. This value was determined by projecting the estimated future
undiscounted cash flows generated by drilling equipment based on the Company's
historical utilization rates and profit margins as well as consideration of the
economic conditions of the industry. The Company continues to review these
assets for possible impairment based on expected future cash flows and other
available information and has determined that no impairment in the value of the
assets exists at December 31, 1996 or June 30, 1997, 1996 or 1995. However, due
to the uncertainty of such factors it is reasonably possible that the estimated
future cash flows may change. Additions to drilling equipment, land, buildings
and other equipment are reported at cost.

F-41
<PAGE> 120

BONRAY DRILLING CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

INFORMATION RELATING TO THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 IS UNAUDITED

Depreciation

Depreciation of drilling equipment is computed on an operating day basis
(net of estimated salvage value), except for drilling rigs and related equipment
which are "mothballed" or otherwise not expected to be used for an extended
period of time. During the year ended June 30, 1996, there was a decrease in the
estimated salvage value of these inactive drilling rigs and equipment. As a
result, depreciation on this equipment was increased during the year ended June
30, 1996 to reduce the net book value of these assets to their estimated salvage
value. Depreciation recorded on these inactive rigs and equipment was $269,000
and $36,000 for the years ended June 30, 1996 and 1995, respectively (none for
the six-month period ended December 31, 1996). The net book value of such
drilling equipment is $457,000, which approximates the estimated salvage value
of the equipment at December 31, 1996.

Depreciation of buildings and other equipment is computed by the
straight-line method over the estimated useful lives of the assets.

Income (Loss) Per Share

Income (loss) per share is computed on the basis of weighted average number
of shares of common stock and dilutive common stock equivalents outstanding.

Credit Risk

The Company operates its rigs in the state of Oklahoma and grants credit,
which is generally unsecured, to its customers (Note 5). At December 31, 1996,
approximately 90% of the Company's accounts receivable were from five customers.
The Company has not experienced any significant credit losses in the six-month
periods ended December 31, 1996 and June 30, 1997, or the years ended June 30,
1996 or 1995 and is not aware of any significant uncollectible accounts at
December 31, 1996.

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.

Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in
estimating their fair values of financial instruments: Cash and cash equivalents
are estimated to have a fair value approximating the carrying amount due to the
short maturity of those instruments. Notes payable have variable interest rates
with carrying values approximating fair values.

Interim Financial Statements and Disclosures

In the opinion of management, the unaudited interim financial statements as
of and for the six-month period ended June 30, 1997 and unaudited interim
financial statement disclosures subsequent to December 31, 1996 include all
adjustments, consisting of normal recurring accruals, necessary to present
fairly the Company's financial position as of June 30, 1997 and results of
operations and cash flows for the six-month period ended June 30, 1997. Results
for the period ended June 30, 1997 are not necessarily indicative of the results
to be expected for the entire year.

F-42
<PAGE> 121

BONRAY DRILLING CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

INFORMATION RELATING TO THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 IS UNAUDITED

2. INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1996 and
June 30, 1996 are as follows (dollars in thousands):

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1996
<S> <C> <C>
Deferred tax liability --
Tax depreciation over book depreciation and
write-downs....................................... $ 658 $ 629
====== ======
Deferred tax assets:
Net revenues and expenses recognized for tax purposes
which are deferred for financial purposes......... $ 25 $ 25
Net operating loss carryforwards..................... 2,073 1,999
------ ------
Total deferred tax assets before valuation allowance... 2,098 2,024
Less valuation allowance recognized.................. 1,440 1,395
------ ------
Net deferred tax assets................................ $ 658 $ 629
====== ======
</TABLE>

The deferred tax assets and liability are offset and, therefore, no
deferred tax asset or liability is reflected in the Company's balance sheets at
December 31, 1996 and June 30, 1996.

The difference between the amount of the provision for income taxes and the
amount which would result from the application of the statutory rate to income
(loss) before provision for income taxes is analyzed as follows (dollars in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED SIX-MONTH
JUNE 30, PERIOD ENDED
------------ DECEMBER 31,
1995 1996 1996
<S> <C> <C> <C>
Provision (credit) for income taxes at a statutory
rate................................................... $ 306 $(48) $ 47
Difference resulting from:
Increase (decrease) in valuation allowance for net
deferred tax assets................................. (330) 24 (45)
Alternative minimum tax................................ 35 -- --
Other.................................................. 24 24 8
----- ---- ----
Provision for income taxes............................... $ 35 $ -- $ 10
===== ==== ====
</TABLE>

At December 31, 1996, the Company has net operating loss carryforwards for
federal tax purposes of approximately $4,600,000 which will expire beginning in
the year 2001 if not used. At December 31, 1996, the net operating loss
carryforwards for state tax purposes amounted to approximately $12,100,000.

3. NOTES PAYABLE

During the six-month period ended December 31, 1996, the Company acquired
drilling equipment with the proceeds from two notes with a bank in the amounts
of $245,000 and $150,000, respectively. The notes are payable in monthly
installments of principal and interest in the amounts of $21,415 and $13,102,
respectively, until paid in full with interest at a rate of 1/2% above the
national prime lending rate (aggregate rate of 8.75% at

F-43
<PAGE> 122

BONRAY DRILLING CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

INFORMATION RELATING TO THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 IS UNAUDITED

December 31, 1996) and are secured by the equipment purchased as well as other
specific drilling equipment owned by the Company. The balances of the two notes
at December 31, 1996 are $205,000 and $138,000, respectively, all of which is
due within one year. Subsequent to June 30, 1997, all outstanding note balances
were retired by DLB.

The Company has a revolving line of credit agreement (the "credit
agreement") with a bank. Credit availability is subject to a monthly borrowing
base determination calculated as 75% of the Company's accounts receivable less
than 90 days old, not to exceed $750,000. At December 31, 1996, no borrowings
were outstanding under the revolving line of credit ($555,000 outstanding at
June 30, 1996). The credit agreement, which expires November 3, 1997 unless
renewed, provides for monthly interest payments, which accrue at a rate of 1/2
of 1% over the lender's national prime rate (aggregate rate of 8.75% at December
31, 1996). Outstanding advances and accrued interest are due in full upon
expiration of the credit agreement. The credit agreement is secured by the
Company's accounts receivable.

During the year ended June 30, 1995, the Company acquired drilling and
other equipment by issuing a note payable to the seller of the equipment. The
$189,000 balance on the note at June 30, 1996 was paid by the Company during the
six-month period ended December 31, 1996.

4. WORKERS' COMPENSATION

The Company is covered by a workers' compensation insurance plan for its
employees under which the Company is responsible for claims up to $100,000 per
incident.

At December 31, 1996 and June 30, 1996, the Company has an estimated net
liability for accrued workers' compensation costs totaling $843,000 and $521,000
respectively. Under the plan, the Company is to reimburse the administrator for
costs as the administrator pays those costs, normally over a five-year period.
Accordingly, at both December 31, 1996 and June 30, 1996, $75,000 is classified
as due after one year, in the accompanying balance sheets.

Total workers' compensation costs incurred by the Company were $538,000 for
the six-month period ended December 31, 1996 and $597,000 and $979,000 for the
years ended June 30, 1996 and 1995, respectively, and were based on actual and
estimated claims incurred. For the six-month period ended December 31, 1996 and
the year ended June 30, 1996, workers' compensation expense was reduced by
$38,000 and $48,000 ($0.09 and $0.11 per share, respectively) for changes in
estimates of claims relating to prior fiscal years. Workers' compensation
expense for the year ended June 30, 1995 was increased by $40,000 ($0.09 per
share), for changes in the estimated costs of claims that occurred in prior
fiscal years.

The Company accrues losses for workers' compensation based on management's
estimate of the expected cost of claims incurred. The estimates are based upon
known information, historical experiences and consideration of risk reduction
techniques, when applicable, such as stop loss insurance on individual claims.
Due to uncertainties inherent in the estimation process, it is reasonably
possible that these estimates will be revised in the near-term; however,
management does not expect that such changes will be material to the financial
position or results of operations of the Company.

F-44
<PAGE> 123

BONRAY DRILLING CORPORATION

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

INFORMATION RELATING TO THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 IS UNAUDITED

5. MAJOR CUSTOMERS

Contract drilling operations revenues include revenues from certain
customers, which individually account for 10% or more of contract drilling
operations revenues as follows (dollars in thousands):

<TABLE>
<CAPTION>
YEAR ENDED SIX-MONTH
------------------------------ PERIOD ENDED
CUSTOMER JUNE 30, 1995 JUNE 30, 1996 DECEMBER 31, 1996
<S> <C> <C> <C>
A....................................... $ 879 $3,333 $1,301
B....................................... 2,561 1,881 1,166
C....................................... -- -- 728
D....................................... 2,082 1,042 721
E....................................... -- -- 695
------ ------ -------
$5,522 $6,256 $4,611
====== ====== =======
</TABLE>

6. SUBSEQUENT EVENTS

In July 1997, the Company entered into a $23 million credit agreement in
connection with which substantially all of the Company's assets were pledged as
collateral. Additionally, the company's parent, DLB, pledged as collateral all
of the outstanding common stock of the Company. Upon consummation of the
acquisition of the Company by Bayard, the shares of common stock of the Company
will be released by the lender and the shares of common stock of Bayard acquired
by DLB in the acquisition will be pledged in lieu thereof.

7. CONTINGENCIES

During the normal course of business, the Company enters into agreements
and executes transactions that may result in a contingent liability to the
Company. At June 30, 1997, management does not believe such contingencies would
be material to the financial statements.

F-45
<PAGE> 124

[INTENTIONALLY LEFT BLANK]
<PAGE> 125

[INTENTIONALLY LEFT BLANK]
<PAGE> 126

[INTENTIONALLY LEFT BLANK]
<PAGE> 127

[PICTURE OF RIG]
<PAGE> 128

======================================================

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

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 11
Use of Proceeds....................... 18
Dividend Policy....................... 18
Dilution.............................. 19
Capitalization........................ 21
Pro Forma Consolidated Financial
Data................................ 22
Selected Consolidated Financial and
Operating Data...................... 28
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 30
Business.............................. 38
Management............................ 50
Principal and Selling Stockholders.... 60
Certain Relationships and Related
Transactions........................ 64
Description of Capital Stock.......... 71
Shares Eligible for Future Sale....... 74
Underwriting.......................... 75
Legal Matters......................... 77
Independent Public Accountants........ 77
Available Information................. 78
Index to Financial Statements......... F-1
</TABLE>

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

UNTIL NOVEMBER 29, 1997 (25 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

======================================================

9,600,000 SHARES

BAYARD LOGO

COMMON STOCK
-------------------------

PROSPECTUS
-------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

LEHMAN BROTHERS

PRUDENTIAL SECURITIES INCORPORATED

RAUSCHER PIERCE REFSNES, INC.

RAYMOND JAMES &
ASSOCIATES, INC.
November 4, 1997
======================================================