W-H ENERGY SERVICES INC, S-1/A, 1998-11-12

W-H ENERGY SERVICES INC
S-1/A, 1998-11-12
OIL & GAS FIELD MACHINERY & EQUIPMENT

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1998

REGISTRATION NO. 333-43411

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------

AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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W-H ENERGY SERVICES, INC.

(Name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
TEXAS 3550 76-0281502
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>

10370 RICHMOND AVENUE

SUITE 990

HOUSTON, TEXAS 77042
(713) 974-9071
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)

KENNETH T. WHITE, JR.
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER

W-H ENERGY SERVICES, INC.

10370 RICHMOND AVENUE

SUITE 990

HOUSTON, TEXAS 77042
(713) 974-9071
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

Copies to:

<TABLE>
<S> <C>
ROBERT H. WHILDEN, JR. WILLIAM N. FINNEGAN, IV
VINSON & ELKINS L.L.P. DAVID P. OELMAN
2300 FIRST CITY TOWER ANDREWS & KURTH L.L.P.
1001 FANNIN 4200 TEXAS COMMERCE TOWER
HOUSTON, TEXAS 77002 600 TRAVIS
(713) 758-2222 HOUSTON, TEXAS 77002
(713) 220-4200
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.

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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED NOVEMBER 12, 1998

PROSPECTUS

, 1999

W-H ENERGY SERVICES, INC.

COMMON STOCK

All of the shares of Common Stock, $1.00 par value (the "Common Stock"), of
W-H Energy Services, Inc. (the "Company") offered hereby are being issued and
sold by the Company (the "Offering"). Prior to the Offering, there has been no
public market for the Common Stock. It is currently estimated that the initial
public offering price will be between $ and $ per share. For
information relating to the factors to be considered in determining the initial
public offering price, see "Underwriting."

Application will be made for quotation of the Common Stock on the New York
Stock Exchange under the symbol " ."

SEE "RISK FACTORS" BEGINNING ON PAGE 8 HEREIN 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.

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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
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Per Share................................ $ $ $
Total(3)................................. $ $ $
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</TABLE>

(1) The Company has 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 $ , which will be paid by
the Company.
(3) The Company has granted to the Underwriters an option exercisable within 30
days after the date hereof to purchase up to additional shares of
Common Stock at the Price to the Public, less the 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 and Proceeds to the Company will be $ , $ and
$ , 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 certain 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 , 1999.

DONALDSON, LUFKIN & JENRETTE JEFFERIES & COMPANY, INC.
SECURITIES CORPORATION
<PAGE> 3

[MAP OF GULF COAST REGION SHOWING OPERATING LOCATION]
[PICTURES OF CERTAIN FACILITIES AND EQUIPMENT]

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."

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the historical and pro forma financial statements, including the
notes thereto, appearing elsewhere in this Prospectus. Unless otherwise
indicated, the information in this Prospectus assumes that the Underwriters'
over-allotment option is not exercised and gives effect to a for 1 split of
the Common Stock to be effected by means of a stock dividend immediately prior
to the Offering. References to the Company in this Prospectus include W-H Energy
Services, Inc. and, unless the context otherwise indicates, its subsidiaries.
Unless otherwise indicated, the financial and operational information contained
herein gives effect to the acquisition of Integrity Industries, Inc. in
September 1997 (the "Integrity Acquisition"), Grinding and Sizing Company, Inc.
in April 1998 ("the Grinding and Sizing Acquisition") and Agri-Empresa, Inc. in
July 1998 ("the Agri-Empresa Acquisition"). The Company also completed the
acquisition of Diamond Wireline Services, Inc. in October 1997 (the "Diamond
Acquisition" and, together with the Integrity Acquisition, the Grinding and
Sizing Acquisition, and the Agri-Empresa Acquisition, the "Recent
Acquisitions").

THE COMPANY

W-H Energy Services, Inc. is a diversified oilfield service company focused
on providing products and services throughout the Gulf Coast region, primarily
offshore in the Gulf of Mexico. The Company's customers are major and
independent oil and gas companies, other independent oilfield service companies
and refining and petrochemical companies. Since the Company's formation in 1989,
it has entered seven lines of business through the acquisition of high quality,
well managed independent companies with strong market share positions and
substantial growth opportunities in the markets in which they operate. These
companies continue to be operated by their former owners and key managers, all
of whom have an equity interest in the Company. The Company focuses on discrete
products and services that provide its customers with attractive alternatives to
certain components of the integrated services packages typically marketed by
larger oilfield service providers. The Company believes that its unique business
approach enables it to compete successfully against these larger providers while
maintaining rapid growth and high profitability.

The Company's operations include specialized oilfield equipment rental,
wireline logging and perforating services and the manufacture and wholesale of
speciality chemical products. Certain of the Company's products, including
downhole drilling motors, high-torque drill pipe and measurement-while-drilling
("MWD") systems, are essential for directional drilling. The Company also rents
equipment and provides services used in connection with the cleaning and
maintenance of refining, petrochemical and oil and gas drilling and production
facilities.

As a result of a series of new product introductions, increased market
share in established product lines and increased onshore and offshore drilling
and production activity, the Company has experienced significant growth in
revenue, EBITDA (as defined herein) and net income. For the fiscal year ended
December 31, 1997, on an historical basis, the Company generated revenue of
$59.8 million, EBITDA of $16.7 million and net income, excluding a non-recurring
compensation expense net of related tax effect, of $4.0 million. These amounts
represent increases of approximately 65%, 70% and 29%, respectively, over the
fiscal year ended September 30, 1996. On a pro forma basis for the fiscal year
ended December 31, 1997, the Company would have generated revenue, EBITDA and
net income of $107.0 million, $24.7 million and $7.7 million, respectively. See
"Selected Historical and Pro Forma Consolidated Financial Data."

The Company is a holding company which operates through its wholly-owned
subsidiaries, the stock ownership of which constitutes substantially all of the
Company's assets. Company operations are conducted through the following
operating businesses:

- THOMAS TOOLS. Thomas Tools, Inc. ("Thomas Tools"), which has been in
business since 1961, provides specialized rental equipment, tools and
tubular goods for drilling, completion and workover applications onshore
and offshore in the Gulf Coast region. Thomas Tools provides a broad
range of drilling equipment, including drill pipe and drill collars,
pressure control equipment, including blowout preventers, and pipe
handling equipment. Thomas Tools maintains an extensive inventory of
drill pipe

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and tools at its facility in southern Louisiana and a facility in South
Texas, which was opened in the fall of 1996.

Thomas Tools also provides MWD systems, a critical component in
directional drilling. Following over two years of research, development
and testing, Thomas Tools entered the MWD business in mid-1997 through
the introduction of The Tracker(R), a proprietary and patent pending MWD
system. The Tracker(R) is used by independent directional drillers to
drill wells for both major and independent oil and gas companies and has
been successfully used in slim-hole (down to a 3 1/2" drilling assembly),
high temperature and high pressure drilling conditions.

- DRILL MOTOR SERVICES. Drill Motor Services, Inc. ("Drill Motor
Services"), which has been in business since 1991, provides drilling
motors to independent directional drillers onshore and offshore in the
Gulf Coast region. Drill Motor Services' products include a full range of
high performance downhole drilling motors and other related tools, which
are used by major and independent oil and gas companies in all
directional drilling applications, including deepwater and harsh
environments. Drill Motor Services has significantly expanded its
inventory of drilling motors from 64 in 1995 to 150 currently.

- PERF-O-LOG. Perf-O-Log, Inc. ("Perf-O-Log"), which has been in business
since 1982, is a provider of wireline logging and perforating services to
oil and gas companies onshore and offshore in the Gulf Coast region.
Perf-O-Log provides services primarily to the existing (cased-hole)
markets and, therefore, is more dependent on maintenance and enhancement
of existing production than new drilling activity. The Company believes
that Perf-O-Log's experienced workforce has established a reputation for
providing high quality services in challenging environments. Perf-O-Log's
fleet of perforating trucks, which operate onshore, and skid units, which
operate in the inland waterways and offshore, are deployed from its
facilities in Louisiana and Mississippi. As a result of the Diamond
Acquisition, which is a land-based wireline logging and perforating
service company operating in South Texas, Perf-O-Log will be able to
expand Diamond's operations to include the inland waterway and offshore
services currently being provided by Perf-O-Log.

- INTEGRITY. Integrity Industries, Inc. ("Integrity"), which has been in
business since 1986, manufactures and wholesales over 50 different
specialty chemical products, which are sold to a broad customer base
comprised largely of retail drilling fluid providers both domestically
and internationally. Consistent with its acquisition strategy, the
Company purchased Integrity based on its history of product innovations,
well established reputation and management expertise. Integrity's access
to the capital resources of the Company has allowed it to take advantage
of the growing drilling fluids market by significantly increasing its
production levels and accelerating its development of new products. One
of Integrity's most recent product innovations is a high performance
lubricant that allows the use of environmentally sensitive water based
drilling fluids in deep, severe drilling environments in the North Sea.

- GRINDING AND SIZING. Grinding and Sizing Company, Inc. ("Grinding and
Sizing") was established in 1947 and manufactures and wholesales private
label seepage control and loss circulation products related to the oil
and gas drilling process. The Company also performs custom (toll)
grinding and produces products to customer specifications through custom
blending and packaging. Additionally, Grinding and Sizing fabricates used
and new grinding, blending and packaging equipment for internal expansion
and capacity as well as for third parties.

- AGRI-EMPRESA. Agri-Empresa, Inc. (Agri-Empresa) which has been in
business since 1977, manufactures, packages, warehouses and transports
over 140 specialty chemicals used primarily in oilfield and industrial
applications. Agri-Empresa primarily converts low-cost by-products and
waste streams into higher quality products for drilling and completion
fluids in the oil and gas industry. Over the past ten years, Agri-Empresa
has aggressively pursued a "one source -- one stop shop" strategy by
increasing the product lines and services offered, enlarging its
manufacturing capacity and expanding its geographical territory while
continuing to provide high quality service and cultivating a strong
customer base. Agri-Empresa offers its oilfield specialty chemicals to

the major and independent mud companies

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and further strengthens the Company's position in specialty chemicals since the
business compliments Integrity and Grinding and Sizing's businesses.

- CHARLES HOLSTON. Charles Holston, Inc. ("Charles Holston"), which has
been in business since 1985, provides integrated cleaning and maintenance
services to refining and petrochemical companies and major and
independent oil and gas companies in Louisiana. Charles Holston's
services include on-site cleaning and waste management, waste
transportation, wastewater services, container cleaning and repair,
emergency spill response services and other general plant support
services. Charles Holston operates a fleet of 65 high velocity vacuum
trucks, 175 rental tanks and other specialty rental equipment from its
Louisiana facility.

- WELL SAFE. Well Safe, Inc. ("Well Safe"), which has been in business
since 1984, provides equipment used in the detection of and protection
from toxic gases encountered by refining and petrochemical companies and
oil and gas companies onshore and offshore in the Gulf Coast region. Well
Safe rents electronic detection and monitoring equipment, breathing units
and other personal safety equipment. In addition, Well Safe provides
comprehensive safety planning services, safety training and safety
supervision. The Company believes that Well Safe is the only ISO 9002
certified provider of these products and services in its areas of
operation.

BUSINESS STRATEGY

The Company's strategy is to grow revenue and earnings through internal
expansion and strategic acquisitions. The key components of this strategy are
set forth below:

Capitalize on Leading Market Positions in Specialized Segments. The
Company's operating subsidiaries maintain leading positions in many of the
specialized market segments and geographic regions in which they operate. The
Company's strategy is to build on the successful experiences of the businesses
it acquires. This strategy is accomplished by retaining key management,
providing them with an equity interest in the Company, and continuing to operate
under the name and with the operating procedures that were in place when the
business was acquired. The Company believes the excellent reputation and
operating expertise of each of its businesses, together with its proprietary
product lines, will provide opportunities to successfully expand its rental
inventory, pursue further geographic expansion and develop and introduce new
products.

Provide an Attractive Alternative to the Major Oilfield Service
Companies. One of the Company's primary business objectives is to provide high
quality products and services which represent attractive alternatives to certain
components of the integrated services packages typically marketed by larger
oilfield service providers. The Company believes its success in competing
against major oilfield services companies is attributable to (i) significant
management expertise in each of its business units, (ii) consistently high
quality products and services provided through its experienced field work force
and (iii) proprietary technology in certain specialized product areas.

Satisfy Increasing Demand for Directional Drilling Products and
Services. Demand for directional drilling products and services has grown over
the past several years. This growth is reflected in the increasing number of
wells using directional drilling technology on an absolute basis and as a
percentage of total wells drilled. The Company believes that its drilling
motors, MWD systems, high torque drill pipe and specialized drilling fluids will
experience increased demand as directional drilling activity increases,
particularly in deepwater locations.

Selectively Acquire Complementary Businesses. The Company will seek
additional acquisitions of high quality, well managed independent companies with
strong market share positions and substantial growth opportunities in the
markets in which they operate. The Company intends to focus on acquisitions that
expand its operations into new products and services, broaden its geographic
scope and increase its market share. The Company will continue to provide
management and key personnel of acquired businesses with stock based incentives.

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THE OFFERING

Common Stock offered by the
Company.......................... shares

Common Stock to be outstanding
after the Offering............... shares(1)

Use of Proceeds.................. The Company intends to
use the net proceeds of
the Offering to repay
indebtedness incurred
in connection with the
Recent Acquisitions and
the Company's
recapitalization
described herein (the
"Recapitalization").
See "The Company --
Recapitalization" and
"Use of Proceeds."

Proposed New York Stock Exchange
symbol......................... " "

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(1) Does not include shares of Common Stock issuable upon the exercise
of outstanding warrants and options. See "Certain
Transactions -- Recapitalization" and "Management."

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SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA

The summary historical consolidated financial data for the Company set
forth below is derived from the consolidated financial statements of the Company
and should be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus. The pro forma financial information set forth below is derived from
the unaudited pro forma financial information that appears elsewhere in this
Prospectus. The unaudited pro forma consolidated balance sheet as of June 30,
1998 gives effect to the Agri-Empresa Acquisition and the Offering and the
application of the estimated net proceeds therefrom, as if such events occurred
on June 30, 1998. The unaudited pro forma consolidated statements of operations
for the year ended December 31, 1997 and the six months ended June 30, 1998 give
effect to: (i) the Integrity Acquisition (ii) the Grinding and Sizing
Acquisition, (iii) the Agri-Empresa Acquisition, (iv) the Recapitalization and
(v) the Offering and the application of the estimated net proceeds therefrom, in
each case as if such events had occurred on January 1, 1997. The pro forma
financial information does not purport to represent what the Company's results
of operations actually would have been had these events, in fact, occurred at
the pro forma dates, nor are they intended to project the Company's results of
operations for any future period or date.

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------------------------------------------------- -----------------------
THREE SIX MONTHS SIX
YEAR ENDED MONTHS ENDED MONTHS
SEPTEMBER 30, ENDED YEAR ENDED JUNE 30, YEAR ENDED ENDED
------------------ DECEMBER 31, DECEMBER 31, ----------------- DECEMBER 31, JUNE 30,
1995 1996 1996 1997 1997 1998 1997 1998
------- ------- ------------ ------------ ------- ------- ------------ --------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues........................ $27,360 $36,215 $10,088 $59,833 $23,834 $42,445 $106,950 $58,353
Operating expenses.............. 11,931 15,447 4,401 25,889 9,523 17,706 60,754 29,736
Depreciation and amortization... 2,489 3,395 1,017 5,870 2,400 4,631 7,713 5,309
Selling, general and
administrative expense........ 9,078 10,955 3,071 30,732(1) 6,883 11,579 21,655 12,594
------- ------- ------- ------- ------- ------- -------- -------
Operating income (loss)......... 3,862 6,418 1,599 (2,658) 5,028 8,529 16,828 10,714
Interest expense................ 1,003 1,301 340 4,733 738 5,482 4,257 2,448
Other (income) expense, net..... 5 18 48 (8) (17) 322 (184) 198
------- ------- ------- ------- ------- ------- -------- -------
Income (loss) before income
taxes......................... 2,854 5,099 1,211 (7,383) 4,307 2,725 12,755 8,068
Provision (benefit) for income
taxes......................... 1,258 1,985 472 (1,714) 1,662 1,035 5,038 3,187
------- ------- ------- ------- ------- ------- -------- -------
Net income (loss)............... $ 1,596 $ 3,114 $ 739 $(5,669) $ 2,645 $ 1,690 $ 7,717 $ 4,881
======= ======= ======= ======= ======= ======= ======== =======
Pro forma diluted earnings per
share......................... $ $
======== =======
Pro forma shares outstanding....
OTHER FINANCIAL DATA:
EBITDA, as adjusted(2).......... $ 6,346 $ 9,795 $ 2,568 $16,673 $ 7,445 $12,838 $ 24,725 $15,825
Cash flows from operations...... $ 4,824 $ 5,314 $ 2,053 $ 4,339 $ 4,877 $ 3,889 $ 8,942 $ 9,980
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
------------------------
ACTUAL PRO FORMA
----------- ---------
<S> <C> <C>
(UNAUDITED)

<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $ 15,069 $ 18,471
Total assets.............................................. 105,287 129,683
Total debt................................................ 122,112 53,887
Total shareholders' equity (deficit)...................... (28,480) 61,285
</TABLE>

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(1) Includes $13.5 million of non-recurring compensation expense resulting from
the redemption of options in connection with the Recapitalization.

(2) The Company calculates EBITDA as earnings before interest expense, income
taxes, depreciation and amortization and non-recurring compensation expense
of $13.5 million in 1997 resulting from the redemption of options in
connection with the Recapitalization. EBITDA should not be considered as an
alternative to net income or any other measure of operating performance
calculated in accordance with generally accepted accounting principles.
EBITDA is widely used by financial analysts as measures of financial
performance. The Company's measurement of EBITDA may not be comparable to
similarly titled measures reported by other companies.

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RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating the Company and its
business before purchasing shares of the Common Stock offered hereby.

THE COMPANY'S BUSINESS IS DEPENDENT ON THE OIL AND GAS INDUSTRY

The Company's business depends in large part on the conditions of the oil
and gas industry, and specifically on the capital investment of the Company's
customers. The demand for oilfield services has traditionally been cyclical, as
purchases of products and services such as those provided by the Company are, to
a substantial extent, deferrable in the event oil and gas companies reduce their
capital investment as a result of conditions existing in the oil and gas
industry or general economic downturns.

Demand for the Company's products and services is primarily a function of
oil and gas exploration and workover activity in the Gulf of Mexico and along
the Gulf Coast. The level of oilfield activity is affected in turn by the
willingness of oil and gas companies to make capital expenditures for the
exploration, development and production of oil and natural gas. The levels of
such capital expenditures are influenced by oil and gas prices, the cost of
exploring for, producing and delivering oil and gas, the sale and expiration
dates of leases for the exploration, drilling and production of oil and gas in
the United States, the discovery rate of new oil and gas reserves, local and
international political and economic conditions and the ability of oil and gas
companies to generate capital. Although the production sector of the oil and gas
industry is less immediately affected by changing prices and, therefore, less
volatile than the exploration sector, producers would likely react to declining
oil and gas prices by reducing expenditures, which could adversely affect the
business of the Company. No assurance can be given as to the future price of oil
and natural gas or the level of oil and gas industry activity.

THE COMPANY'S BUSINESS IS SUBJECT TO VARIOUS OPERATING RISKS

Certain products of the Company are used in potentially hazardous drilling,
completion and production applications, as well as cleaning, maintenance and
safety operations, that can cause personal injury, product liability and
environmental claims. Litigation arising from a catastrophic occurrence at a
location where the Company's equipment and/or services are used may in the
future result in the Company being named as a defendant in lawsuits asserting
potentially large claims.

In addition, certain of the Company's employees who perform services on
offshore platforms and vessels are covered by provisions of the Jones Act, the
Death on the High Seas Act and general maritime law. These laws operate to make
the liability limits established by state workers' compensation laws
inapplicable to these employees and, instead, permit them or their
representatives to pursue actions against the Company for damages on job-related
injuries, with generally no limitations on the Company's potential liability.

The frequency and severity of such incidents affect the Company's operating
costs, insurability and relationships with customers, employees and regulators.
Any increase in the frequency or severity of such incidents, or the general
level of compensation awards with respect thereto, could affect the ability of
the Company to obtain projects from oil and gas companies or insurance and could
have a material adverse effect on the Company.

The Company maintains insurance coverage that it believes is adequate in
amount and type for the risks associated with the Company's business. Such
insurance does not, however, provide coverage for all liabilities (including
liability for certain events involving pollution), and there is no assurance
that its insurance coverage will be adequate to cover claims that may arise or
that the Company will be able to maintain adequate insurance at rates it
considers reasonable. The occurrence of an event not fully covered by insurance
could have a material adverse effect on the financial condition and results of
operations of the Company.

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SEASONALITY AND ADVERSE WEATHER CONDITIONS COULD RESULT IN FLUCTUATIONS IN
OPERATING RESULTS

Demand for the Company's products and services may be affected by the
seasonality of oil and gas drilling activity in the Gulf Coast and offshore in
the Gulf of Mexico. Drilling activity is generally highest in the spring, summer
and fall months with the lowest activity experienced in winter months as a
result of inclement weather. Operations may also be affected by the rainy
weather, hurricanes and other storms prevalent in the Gulf of Mexico and along
the Gulf Coast throughout the year. Accordingly, the Company's operating results
may vary from quarter to quarter, depending upon factors outside of its control,
and full year results are not likely to be a direct multiple of any particular
quarter or combination of quarters.

THE COMPANY'S OPERATIONS DEPEND ON ITS KEY PERSONNEL, SKILLED WORKERS AND
EQUIPMENT

The Company depends to a large extent on the abilities and continued active
participation of its President, Chief Executive Officer and Chairman, Ken White,
Jr., and the management and key employees of its operating subsidiaries. The
loss of the services of any of these persons could have a material adverse
effect on the Company's business and operations. See "Management."

The Company's future growth prospects will also depend substantially on its
ability to attract skilled workers and procure additional rental equipment, and
its ability to maintain its current level of profitability will be largely
dependent on retaining the skilled workers presently employed by the Company.
The demand for skilled workers in the Gulf Coast region is high and the supply
is limited. A significant increase in the wages paid by competing employers
could result in a reduction in the Company's skilled labor force, increases in
the wage rates paid by the Company, or both. Additionally, there is a general
shortage of drilling equipment and supplies. If the Company cannot obtain
adequate sources of additional equipment at reasonable prices, its ability to
meet increased demand for rental equipment may be delayed or adversely affected.
If either of these events occurred, the capacity and profitability of the
Company could be diminished and the growth potential of the Company could be
impaired.

INTENSE COMPETITION COULD ADVERSELY AFFECT THE COMPANY'S RESULTS OF OPERATIONS

The Company competes in highly competitive areas of the energy services
markets. The depressed oil and gas prices and the consequent decline in the oil
and gas industry in the 1980s has led to a consolidation of the number of
companies providing services similar to those provided by the Company. This
reduced number of companies competes intensely for available projects. Many of
the Company's competitors are larger and have greater marketing, distribution,
financial and other resources than the Company. There can be no assurance that
the Company's operations will continue at current volumes or prices if its
current competitors or new market entrants introduce new products or services
with better features, performance, prices or other characteristics than the
Company's products and services. Competitive pressures or other factors also may
result in significant price competition that could have a material adverse
effect on the Company's results of operations and financial condition.
Furthermore, competition among oilfield service and equipment providers is also
based on a provider's reputation for safety and quality. Although the Company
believes that its reputation for safety and quality service is good, there can
be no assurance that the Company will be able to maintain its competitive
position. See "Business -- Competition."

REGULATORY AND ENVIRONMENTAL MATTERS COULD ADVERSELY AFFECT THE COMPANY'S
BUSINESS

The Company's business is significantly affected by foreign, federal, state
and local laws and other regulations relating to the oil and gas industry, the
petrochemical and processing industry, worker safety and environmental
protection, by changes in such laws and by changing administrative regulations
and the level of enforcement thereof. The Company cannot predict the level of
enforcement of existing laws and regulations or how such 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 it,
its businesses or financial condition.

The Company depends on the demand for its products and services from oil
and gas companies and refining and petrochemical companies, and such demand is
affected by changing taxes, price controls and
9
<PAGE> 11

other laws and regulations relating to the oil and gas industry generally. The
adoption of laws and regulations curtailing exploration and development drilling
for oil and gas in the Company's areas of operations for economic, environmental
or other policy reasons would adversely affect the Company's operations by
limiting demand for its services. In addition, the Company's petrochemical
processing services are substantially dependent on the cleaning and maintenance
operations of its customers. Numerous state and federal laws and regulations
affect the necessity, timing and frequency of the cleaning and maintenance
operations of petrochemical and other processors and consequently affect the
demand for the Company's equipment and services. The Company cannot determine
the extent to which its future operations and earnings may be affected by new
legislation, new regulations or changes in existing regulations or enforcement.

The Company's operations are affected by numerous foreign, federal, state
and local environmental laws and regulations. The technical requirements of
these laws and regulations are becoming increasingly expensive, complex and
stringent. These laws may provide for "strict liability" for damages to natural
resources or threats to public health and safety, rendering a party liable for
environmental damage without regard to negligence or fault on the part of such
party. Sanctions for noncompliance may include revocation of permits, corrective
action orders, administrative or civil penalties, and criminal prosecution.
Certain environmental laws provide for joint and several strict liability for
remediation of spills and releases of hazardous substances. In addition,
companies may be subject to claims alleging personal injury or property damage
as a result of alleged exposure to hazardous substances, as well as damage to
natural resources. Such laws and regulations may also 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. See "Business -- Governmental Regulations."

THE COMPANY'S BUSINESS COULD BE ADVERSELY AFFECTED BY NEW TECHNOLOGY

Certain of the Company's operations, primarily its MWD services and
speciality chemical sales, are based substantially on its proprietary
technology. The Company's success in these areas depends to a significant extent
on the development and implementation of new product designs and formulations.
Whether the Company can continue to develop products and technology to meet
evolving industry requirements at levels of capability and prices acceptable to
its customers will be a significant factor in determining the Company's ability
to compete in these areas. Many of the Company's competitors have greater
resources devoted to research and development of new products and technologies
than does the Company. While the Company has patents on certain of its
technologies and products and has applied for patents on others, there is no
assurance that any patents secured by the Company will not be successfully
challenged by others or will protect it from the development of similar products
by others. See "Business -- Properties."

THE COMPANY IS DEPENDENT ON ITS SUBSIDIARIES

The Company is structured as a holding company which owns the stock of the
Company's operating subsidiaries. The Company's current operations are conducted
exclusively through its subsidiaries, and the Company's only significant assets
are the capital stock of its subsidiaries. Substantially all of the assets of
the Company's subsidiaries are pledged as security to the lenders under the
Company's Credit Facility.

CONCENTRATION OF COMMON STOCK OWNERSHIP BY EXISTING STOCKHOLDERS WILL LIMIT THE
INFLUENCE OF PUBLIC STOCKHOLDERS

Upon completion of the Offering, the Company's principal stockholder,
together with such stockholder's officers, directors and affiliates, will
beneficially own approximately % ( % if the Underwriters' over-
allotment option is exercised in full) of the outstanding shares of Common
Stock, assuming the exercise of their outstanding warrants. Accordingly, these
stockholders will have the ability to influence the election of the Company's
directors and the outcome of other matters submitted to a vote of the Company's
stockholders, which may have the effect of delaying or preventing a change of
control of the Company. See "Principal Shareholders."

10
<PAGE> 12

SHARES ELIGIBLE FOR FUTURE SALE COULD ADVERSELY AFFECT THE MARKET PRICES FOR THE
COMMON STOCK

Upon the completion of the Offering, the Company will have a total of
shares of Common Stock outstanding. Of these shares, the
shares of Common Stock offered hereby ( shares if the Underwriters'
over-allotment option is exercised in full) will be freely tradeable without
restrictions or registration under the Securities Act of 1933, as amended (the
"Securities Act"), by persons other than "affiliates" of the Company, as defined
under the Securities Act. The remaining shares of Common Stock
outstanding will be restricted securities as that term is defined by Rule 144 as
promulgated under the Securities Act. In addition shares of Common
Stock may be issued pursuant to options that will be issued under the Company's
stock option plan or pursuant to existing options and warrants. See
"Management -- Executive Compensation."

Under Rule 144 (and subject to the conditions thereof, including volume
limitations), all of the restricted shares will become eligible for
sale within one year of the Offering. However, the directors, officers and
stockholders of the Company have agreed that they will not, directly or
indirectly, sell any shares of Common Stock for a period of 180 days from the
date of this Prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation. Future sales of substantial amounts of Common
Stock in the public market following the Offering could adversely affect the
market price of the Common Stock. For further information concerning Common
Stock available for resale after the Offering, see "Shares Eligible for Future
Sale" and "Underwriting."

Certain of the Company's stockholders have registration rights, which have
been waived for the Offering. In addition, following the consummation of the
Offering, the Company intends to register the issuance of up to shares
of Common Stock purchased by the exercise of options granted under the Company's
1997 Option Plan. All shares issued upon exercise of such options will be freely
tradeable without restrictions or registration under the Securities Act, by
persons other than "affiliates" of the Company, as defined under the Securities
Act. Affiliates of the Company will be able to sell such shares under Rule 144.
See "Principal Shareholders -- Stockholders Agreement."

NO ASSURANCE EXISTS THAT AN ACTIVE PUBLIC MARKET FOR THE COMMON STOCK WILL
DEVELOP AFTER THE OFFERING; POTENTIAL VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiation
between the Company and the Underwriters and may not be indicative of the price
at which the Common Stock will trade following the completion of the Offering.
See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. The completion of the Offering
provides no assurance that an active trading market for the Common Stock will
develop or, if developed, that it will be sustained. The market price of the
Common Stock could also be subject to significant fluctuation and may be
influenced by many factors, including variations in results of operations,
variations in natural gas and oil prices, investor perceptions of the Company
and the oilfield services and refinery and petrochemical services industries,
and general economic and other conditions.

NEW STOCKHOLDERS WILL BE SUBJECT TO IMMEDIATE AND SUBSTANTIAL DILUTION

Purchasers of Common Stock in the Offering will experience immediate and
substantial dilution in the net tangible book value of their stock. See
"Dilution."

11
<PAGE> 13

FORWARD LOOKING STATEMENTS

All statements, other than statements of historical fact, included in this
Prospectus that address activities, events or developments that the Company
intends, expects, projects, believes or anticipates will or may occur in the
future, including, without limitation, statements regarding the Company's
business strategy, plans and objectives; statements expressing beliefs and
expectations regarding future demand for the Company's products and services and
other events and conditions that may influence the oilfield services and
refinery and petrochemical services markets and the Company's performance in the
future; statements concerning future expansion plans, including the anticipated
level of capital expenditures for, and the nature and scheduling of, purchases
or manufacture of rental tool inventory, wireline equipment or drilling fluids
and other such matters are forward-looking statements. Such statements are based
on certain assumptions and analyses made by management of the Company in light
of its experience and its perception of historical trends, current conditions,
expected future developments and other factors it believes to be appropriate.
The forward-looking statements included in this Prospectus are also subject to a
number of material risks and uncertainties. Important factors that could cause
actual results to differ materially from the Company's expectations are
discussed herein under the captions "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations." Prospective
investors are cautioned that such forward-looking statements are not guarantees
of future performance and that actual results, developments and business
decisions may differ from those anticipated, estimated or expected.

12
<PAGE> 14

THE COMPANY

The Company was incorporated in 1989 under the laws of the State of Texas.
The Company's principal executive offices are located at 10370 Richmond Avenue,
Suite 990, Houston, Texas 77042, and its telephone number is (713) 974-9071.

ACQUISITIONS

Since its formation, the Company has acquired the following nine
businesses:

<TABLE>
<CAPTION>
OPERATING SUBSIDIARY DATE ACQUIRED PRESENT FACILITIES BUSINESS
- -------------------- ------------- ------------------ --------
<S> <C> <C> <C>
Agri-Empresa July 1998 Midland, Abilene, Jacksboro and Specialty Chemicals
Houston, TX, Carlsbad and Hobbs, NM
Grinding and Sizing April 1998 Lufkin and Houston, TX Drilling Mud
Products
Diamond October 1997 Corpus Christi, TX Wireline Services
Integrity September Kingsville, Conroe and Victoria, TX Specialty Chemicals
1997
Drill Motor Services December 1995 Broussard, LA; Elk City, OK Drilling Motors
Thomas Tools June 1994 New Iberia, LA; Victoria, TX Rental Tools
Perf-O-Log December 1990 Lafayette, LA; Laurel, MS Wireline Services
Well Safe May 1990 Mobile and Decatur, AL; Gonzales and Safety Equipment
Sulphur, LA; Beaumont and Houston,
TX
Charles Holston May 1989 Jennings, Eunice, Baton Rouge, Lake Cleaning and
Charles and Lafayette, LA Maintenance
</TABLE>

RECAPITALIZATION

On August 11, 1997, the Company and W-H Investment, L.P. ("W-H Investment")
entered into an Agreement and Plan of Recapitalization, providing for a series
of equity and debt transactions. W-H Investment is a limited partnership
organized by The Jordan Company ("Jordan"), a private merchant banking firm.
Pursuant to the Recapitalization, a substantial portion of the then issued and
outstanding shares of Common Stock (including warrants and options) were
repurchased by the Company and retired. The remaining issued and outstanding
shares were retained by certain shareholders. Certain members of the management
of the Company were issued warrants to purchase Common Stock. Also as part of
the Recapitalization, W-H Investment purchased 80% of the Common Stock and was
issued certain warrants to purchase Common Stock. In connection with the
Recapitalization, the Company entered into a $95.0 million senior secured credit
facility (the "Credit Facility") and issued $24.0 million in aggregate principal
amount of 12 1/2% subordinated debentures due 2007 (the "Subordinated Notes").
See "Principal Shareholders" and "Certain Transactions-Recapitalization."

13
<PAGE> 15

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common
Stock offered by the Company hereby, after deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company, are
estimated to be approximately $ million ($ if the Underwriters'
over-allotment option is exercised in full), based on an assumed initial Price
to the Public of $ per share, the midpoint of the range set forth on
the cover page of this Prospectus.

The Company intends to use the net proceeds of the Offering: (i) to repay
in full, for a cash payment of $ million, the Subordinated Notes; and (ii)
to repay approximately $ million of principal and accrued interest on the
Credit Facility. Pending such uses, the net proceeds will be invested in
short-term, investment grade, interest-bearing securities. See "Managements'
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Certain Transactions."

Upon completion of the Offering and the application of the net proceeds
therefrom, the Company will have approximately $20 million of available
commitments under the Revolving Line of Credit, which may be used for capital
expansion projects, acquisitions, working capital and general corporate
purposes.

The amounts outstanding under the Credit Facility bear interest at floating
rates equal to the London Interbank Offered Rate ("LIBOR") plus a range of 2.75%
to 3.75% and mature between August 2002 and August 2003. At June 30, 1998, the
weighted average applicable interest rate under the Credit Facility was 8.68%.
The Subordinated Notes bear interest at 12 1/2% per annum and are due in
September 2006 and September 2007. The debt incurred under the Subordinated
Notes and the Credit Facility was used to fund the Recapitalization and the
Recent Acquisitions. See "The Company -- Recapitalization" and "Certain
Transactions-Recapitalization."

DIVIDEND POLICY

The Company has never paid cash dividends on its Common Stock and does not
intend to pay cash dividends on the Common Stock in the foreseeable future. The
Company currently intends to retain its cash for the continued development of
its business. In addition, the Credit Facility currently restricts the ability
of the Company to pay dividends. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

14
<PAGE> 16

DILUTION

The net tangible book value of the Company at June 30, 1998 was $
per share of Common Stock. Net tangible book value per share is determined by
dividing the tangible net worth of the Company (tangible assets less total
liabilities) by the total number of outstanding shares of Common Stock. After
giving effect to the sale of the shares offered hereby (at an assumed initial
Price to the Public of $ per share) and the receipt of the estimated net
proceeds (after deducting estimated underwriting discounts and commissions and
estimated expenses of the Offering), the net tangible book value of the Company
at June 30, 1998 would have been $ per share. This represents an
immediate increase in the net tangible book value of $ per share to
existing shareholders and an immediate dilution (i.e., the difference between
the initial public offering price and the pro forma net tangible book value
after the Offering) to new investors purchasing Common Stock in the Offering.
The following table illustrates the per share dilution to new investors
purchasing Common Stock in the Offering of $ per share:

<TABLE>
<S> <C> <C>
Assumed public offering price per share............................... $
Net tangible book value per share at June 30, 1998........ $
Increase per share attributable to new investors..........
Pro forma net tangible book value per share after the Offering........
-------
Dilution per share to new investors................................... $
=======
</TABLE>

The following table sets forth, as of June 30, 1998, the number of shares
of Common Stock purchased from the Company, the total consideration paid
therefor and the average price per share paid by existing shareholders and by
new investors (based on an assumed initial Price to the Public of $ per
share):

<TABLE>
<CAPTION>
TOTAL CASH
SHARES PURCHASED CONSIDERATION AVERAGE
----------------- ------------------ PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
<S> <C> <C> <C> <C> <C>
Existing shareholders............... % $ % $
New investors.......................
------ ----- ------- -----
Total..................... 100.0% $ 100.0%
====== ===== ======= =====
</TABLE>

The foregoing computations assume no exercise of outstanding warrants or
stock options issued by the Company. Warrants to purchase a total of
shares of Common Stock are exercisable at a weighted average of $ per
share and stock options covering shares of Common Stock are exercisable
at a weighted average of $ per share. See "Management." In the event
the shares currently subject to outstanding warrants and stock options
were included in the foregoing calculations, the net tangible book value per
share before the Offering would be $ , the pro forma net tangible book
value per share after the Offering would be $ and the dilution per
share to new investors would be $ . In addition, the average price per
share paid by existing shareholders would increase to $ per share.

15
<PAGE> 17

CAPITALIZATION

The following table sets forth the capitalization of the Company at June
30, 1998 and as adjusted to reflect the sale of the shares of Common Stock
offered hereby (at an assumed initial Price to the Public of $ per
share) and the application of the estimated net proceeds therefrom and the
Agri-Empresa Acquisition. This table should be read in conjunction with "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements of the Company
and the Unaudited Pro Forma Consolidated Statement of Operations and in each
case the related Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AT JUNE 30, 1998
---------------------------
HISTORICAL PRO FORMA
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current maturities:
Credit Facility:
Revolving Line of Credit............................... $ 12,500 $
Term A Facility........................................ 19,250
Term B Facility........................................ 39,700
Term C Facility........................................ 9,975
Delayed Term Facility.................................. 14,925
Subordinated Notes........................................ 24,000
Other long-term debt...................................... 1,762
-------- --------
Total long-term debt, including current
maturities...................................... 122,112
Shareholders' equity (deficit):
Preferred Stock, $1.00 par value per share;
shares authorized; no shares outstanding............... --
Common Stock; $1.00 par value per share; shares
authorized; shares issued and outstanding, historical;
shares issued and outstanding, as adjusted
(1).................................................... 275
Additional paid-in capital................................ 110
Retained deficit.......................................... (28,865)
-------- --------
Total shareholders' equity (deficit).............. (28,480)
-------- --------
Total capitalization.............................. $ 93,632 $
======== ========
</TABLE>

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

(1) Excludes approximately shares of Common Stock issuable upon the
exercise of outstanding stock options and shares of Common Stock
issuable upon the exercise of outstanding warrants.

16
<PAGE> 18

SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA

The selected historical consolidated financial data for the Company set
forth below are derived from the consolidated financial statements of the
Company and should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere herein. The
pro forma financial information set forth below is derived from the unaudited
pro forma financial information that appears elsewhere in this Prospectus. The
unaudited pro forma consolidated balance sheet as of June 30, 1998 gives effect
to the Agri-Empresa Acquisition and the Offering and the application of the
estimated net proceeds therefrom, as if such events occurred on June 30, 1998.
The unaudited pro forma consolidated statements of operations for the year ended
December 31, 1997 and the six months ended June 30, 1998 give effect to; (i) the
Integrity Acquisition (ii) the Grinding and Sizing Acquisition (iii) the Agri-
Empresa Acquisition (iv) the Recapitalization and (v) the Offering and the
application of the estimated net proceeds therefrom, in each case as if such
events had occurred on January 1, 1997. The pro forma financial information does
not purport to represent what the Company's results of operations actually would
have been had these events, in fact, occurred at the beginning of the period,
nor are they intended to project the Company's results of operations for any
future period or date.

<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------------------------------------------------------
SIX MONTHS
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, ENDED YEAR ENDED JUNE 30,
------------------------------------- DECEMBER 31, DECEMBER 31, -----------------
1993 1994 1995 1996 1996 1997 1997 1998
------- ------- ------- ------- ------------ ------------ ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues...................... $15,230 $20,458 $27,360 $36,215 $10,088 $59,833 $23,834 $42,445
Operating expenses............ 7,209 8,949 11,931 15,447 4,401 25,889 9,523 17,706
Depreciation and
amortization................ 1,705 1,835 2,489 3,395 1,017 5,870 2,400 4,631
Selling, general and
administrative expense...... 6,006 6,975 9,078 10,955 3,071 30,732(1) 6,883 11,579
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss)....... 310 2,699 3,862 6,418 1,599 (2,658) 5,028 8,529
Interest expense.............. 906 769 1,003 1,301 340 4,733 738 5,482
Other (income) expense, net... 46 (25) 5 18 48 (8) (17) 322
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) before income
taxes....................... (642) 1,955 2,854 5,099 1,211 (7,383) 4,307 2,725
Provision (benefit)for income
taxes....................... -- 421 1,258 1,985 472 (1,714) 1,662 1,035
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)............. ($ 642) $ 1,534 $ 1,596 $ 3,114 $ 739 $(5,669) $ 2,645 $ 1,690
======= ======= ======= ======= ======= ======= ======= =======
Pro forma diluted earnings per
share.......................
Pro forma shares
outstanding.................
OTHER FINANCIAL DATA:
EBITDA, as adjusted(2)........ $ 1,969 $ 4,559 $ 6,346 $ 9,795 $ 2,568 $16,673 $ 7,445 $12,838
Cash flow from operations..... $ 1,137 $ 3,061 $ 4,824 $ 5,314 $ 2,053 $ 4,339 $ 4,877 $ 3,889

<CAPTION>
PRO FORMA
-------------------------

SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1997 1998
------------ ----------

<S> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues...................... $106,950 $58,353
Operating expenses............ 60,754 29,736
Depreciation and
amortization................ 7,713 5,309
Selling, general and
administrative expense...... 21,655 12,594
-------- -------
Operating income (loss)....... 16,828 10,714
Interest expense.............. 4,257 2,448
Other (income) expense, net... (184) 198
-------- -------
Income (loss) before income
taxes....................... 12,755 8,068
Provision (benefit)for income
taxes....................... 5,038 3,187
-------- -------
Net income (loss)............. $ 7,717 $ 4,881
======== =======
Pro forma diluted earnings per
share....................... $ $
======== =======
Pro forma shares
outstanding.................
======== =======
OTHER FINANCIAL DATA:
EBITDA, as adjusted(2)........ $ 24,725 $15,825
Cash flow from operations..... $ 8,942 $ 9,980
</TABLE>

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------------------------------------ ---------
AS OF AS OF AS OF
AS OF SEPTEMBER 30, DECEMBER 31, JUNE 30, JUNE 30,
------------------------------------- ------------ ----------- ---------
1993 1994 1995 1996 1997 1998 1998
------- ------- ------- ------- ------------ ----------- ---------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................ $ 1,885 $ 2,768 $ 3,888 $ 5,855 $ 12,682 $ 15,069 $ 18,471
Total assets................................... 13,300 21,001 23,137 33,796 82,981 105,287 129,683
Total debt..................................... 11,616 10,987 9,732 15,066 101,668 122,112 53,887
Total shareholders' equity (deficit)........... 226 6,844 8,644 12,285 (30,280) (28,480) 61,285
</TABLE>

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

(1) Includes $13.5 million of non-recurring compensation expense resulting from
the redemption of options in connection with the Recapitalization.

(2) The Company calculates EBITDA as earnings before interest expense, income
taxes, depreciation and amortization and non-recurring compensation expense
of $13.5 million in 1997 resulting from the redemption of options in
connection with the Recapitalization. EBITDA should not be considered as an
alternative to net income or any other measure of operating performance
calculated in accordance with generally accepted accounting principles.
EBITDA is widely used by financial analysts as measures of financial
performance. The Company's calculation of EBITDA may not be comparable to
similarly titled measures reported by other companies.

17
<PAGE> 19

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

The following information should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto presented elsewhere in this
Prospectus.

OVERVIEW

Demand for the Company's services is primarily a function of oil and gas
exploration, development and workover activity in the Gulf of Mexico and along
the Gulf Coast. The level of oilfield activity is affected in turn by the
willingness of oil and gas companies to make capital expenditures for the
exploration, development and production of oil and natural gas. The levels of
such capital expenditures are influenced by oil and gas prices, the cost of
exploring for, producing and delivering oil and gas, the sale and expiration
dates of leases for the exploration, drilling and production of oil and gas in
the United States, the discovery rate of oil and gas reserves, local and
international political and economic conditions and the ability of oil and gas
companies to generate capital. Demand for the Company's cleaning and maintenance
services is driven by scheduled plant turnarounds, unscheduled plant outages and
day to day plant maintenance.

In 1996 and much of 1997, the oil and gas service industry experienced a
general improvement in product demand and pricing as relatively stable and
improved oil and or natural gas prices combined with a strong world economy to
increase exploration and development activity worldwide. This trend benefited
the Company and its results in 1997 and 1996.

The worldwide price of oil has declined significantly since late 1997, with
prices having dropped as much as 40% to under $13 per barrel for spot
deliveries, and prices for natural gas have weakened slightly on a year to year
basis. These declines have been attributed to, among other things, an excess
supply of oil in the world markets, reduced domestic demand associated with an
unseasonably warm winter, high inventory levels of oil and gas and the impact of
the economic downturn in Southeast Asia. The depressed economic conditions in
Southeast Asia also have had a negative effect on the economies in other regions
around the world and the associated demand for oil in those regions. These
conditions have resulted in substantially lower rig utilization rates in the
United States offshore markets as the Company's customers have begun to
reevaluate their exploration and development plans for 1998 in light of current
lower oil prices. Although members of OPEC have recently taken action to reduce
the world supply of oil, the ultimate reduction in supply and its impact on
prices is uncertain and ultimately dependent on worldwide demand.

The Company anticipates that under current market conditions the demand for
its current products and services will decline during the remainder of 1998 on a
consecutive and comparative quarter to quarter basis. The Company also expects
that sales and backlog of drilling products will decline from this year's
previously historical high levels to more moderate levels starting in the fourth
quarter with some downward pressure on prices and margins. The impact of the
current market conditions on 1999 sales and income, however, will be dependent
upon a number of factors outside the control of the Company, including whether
recently announced production cuts by members of OPEC will have a material
impact on oil prices, whether the economic conditions in Asia will stabilize or
further decline and further impact the economy in the United States.

The Company intends to actively monitor market conditions and to react
through reductions in its manufacturing, distribution and sales operations in
order to manage its businesses in a manner consistent with existing market
conditions and activity levels.

RESULTS OF OPERATIONS

Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997

Revenues. Revenues increased by $18.6 million, or approximately 78%, to
$42.4 million for the six months ended June 30, 1998 from $23.8 million for the
six months ended June 30, 1997. This increase was primarily due to the increased
demand for the Company's products and services and the acquisition of Integrity
and Diamond in September and October 1997, respectively, and Grinding and Sizing
in April 1998.

18
<PAGE> 20

Operating Expenses. Operating expenses increased $8.2 million, or 86%, to
$17.7 million for the six months ended June 30, 1998 from $9.5 million for the
six months ended June 30, 1997. Operating expenses increased due to higher sales
volumes and the acquisition of Integrity, Diamond and Grinding and Sizing. As a
percentage of revenues, operating expenses increased to 42% for the six months
ended June 30, 1998 from 40% for the six months ended June 30, 1997.

Depreciation and amortization. Depreciation and amortization increased by
$2.2 million, or 93%, to $4.6 million for the six months ended June 30, 1998
from $2.4 million for the six months ended June 30 1997. This increase was the
result of an increase in the Company's capital expenditures.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $4.7 million, or 68%, to $11.6 million for
the six months ended June 30, 1998 from $6.9 million for the six months ended
June 30, 1997. This increase was primarily due to increased payroll costs from
the larger number of personnel on a company wide basis required to meet higher
sales demand in fiscal 1998. Selling, general and administrative expenses
decreased to 27% of revenue for the six months ended June 30, 1998 from 29% for
the six months ended June 30, 1997.

Interest Expense. Interest expense for the six months ended June 30, 1998
was $5.5 million, an increase of $4.7 million from $.7 million for the six
months ended June 30, 1997. The increase was due primarily to increased
borrowing related to financing the Company's capital expenditures and
acquisitions and the Recapitalization. See "The Company -- Recapitalization."

Net Income. Net income decreased by $.9 million, or 36%, to $1.7 million
for the six months ended June 30, 1998 from $2.6 million for the six months
ended June 30, 1997.

Year Ended December 31, 1997 Compared to Year Ended September 30, 1996

Revenues. Revenues increased by $23.6 million, or approximately 65%, to
$59.8 million for the year ended December 31, 1997 from $36.2 million for fiscal
1996. This increase was primarily due to the increased demand for the Company's
products and services and the geographic expansion of certain of its operating
subsidiaries during fiscal 1997.

Operating Expenses. Operating expenses increased $10.4 million, or 68%, to
$25.9 million for the year ended December 31, 1997 from $15.4 million for fiscal
1996. Operating expenses increased due to higher sales volumes. As a percentage
of revenues, operating expenses remained at 43% in each year.

Depreciation and amortization. Depreciation and amortization increased by
$2.5 million, or 73%, to $5.9 million for the year ended December 31, 1997 from
$3.4 million for fiscal 1996. This increase is the result of an increase in the
Company's capital expenditures.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $6.3 million, or 57%, to $17.3 million for
the year ended December 31, 1997 from $11.0 million for fiscal 1996. This
increase was primarily due to increased payroll costs from the larger number of
personnel on a company wide basis required to meet higher sales demand in fiscal
1997. Selling, general and administrative expenses decreased to 29% of revenue
for the year ended December 31, 1997 from 30% of revenue for fiscal 1996.

Interest Expense. Interest expense for the year ended December 31, 1997 was
$4.7 million, an increase of $3.4 million from $1.3 million for fiscal 1996. The
increase was due primarily to increased borrowing related to financing the
Company's capital expenditures, acquisitions and the Recapitalization. See "The
Company -- Recapitalization."

Net Income. Excluding the non-recurring $13.5 million charge for the
redemption of options in connection with the Recapitalization net of related tax
effects, net income increased by $.9 million, or 29%, to $4.0 million for the
year ended December 31, 1997 from $3.1 million for fiscal 1996.

Year Ended September 30, 1996 Compared to Year Ended September 30, 1995

Revenues. Revenues increased by $8.9 million, or approximately 32%, to
$36.2 million for the year ended September 30, 1996 from $27.4 million for
fiscal 1995. This increase in revenues resulted from the acquisition

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of Drill Motor Services in December 1995, as well as the increased demand
for the Company's products and services and an increase in its capital
expenditures.

Operating Expenses. Operating expenses increased $3.5 million, or 29%, to
$15.4 million for the year ended September 30, 1996 from $11.9 million for
fiscal 1995. Operating expenses increased due to higher sales volumes. As a
percentage of revenues, operating expenses decreased from 44% in fiscal 1995 to
43% in fiscal 1996.

Depreciation and amortization. Depreciation and amortization increased $0.9
million, or 36%, to $3.4 million for the year ended September 30, 1996 from $2.5
million for fiscal 1995. This increase is the result of the Company's increase
in capital expenditures.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1.9 million, or 21%, to $11.0 million for
the year ended September 30, 1996 from $9.1 million for fiscal 1995. This
increase was primarily due to the increased number of personnel required to meet
increasing sales demand in fiscal 1996. Selling, general and administrative
expenses as a percentage of revenue decreased from 33% of revenue for the year
ended September 30, 1995 to 30% for the year ended September 30, 1996.

Interest Expense. Interest expense for the year ended September 30, 1996
was $1.3 million, an increase of $0.3 million, or 30%, from interest expense of
$1.0 million for fiscal 1995. This increase was due primarily to increased
borrowings to finance the Company's fiscal 1996 capital expenditures and the
acquisition of Drill Motor Services.

Net Income. Net income increased by $1.5 million, or 95%, to $3.1 million
for the year ended September 30, 1996 from $1.6 million for fiscal 1995. The
strong earnings growth experienced by the Company is a result of both increased
revenue and a decrease in selling, general and administrative expenses as a
percent of sales.

LIQUIDITY AND CAPITAL RESOURCES

The primary liquidity needs of the Company are to fund capital expansions,
including expanding its rental tool inventory, and to pay principal and interest
on indebtedness. The Company's principal sources of funds have been cash flow
from operations and borrowings under the Credit Facility and Subordinated Notes.
Other sources of cash have included approximately $8.7 million of net proceeds
received from the sale of shares of Common Stock in connection with the
Recapitalization in fiscal 1997. As of June 30, 1998, the Company had net
working capital of approximately $15.1 million.

Net cash provided by operating activities was $5.3 million in fiscal 1996
and $4.3 million in fiscal 1997. Decreases in cash flow from operating
activities are principally the result of working capital requirements
attributable to increases in accounts receivable and inventory.

In August 1997, the Company established the Credit Facility to effectuate
the Recapitalization and fund the Recent Acquisitions. The Recapitalization was
completed to allow the Company's shareholders to liquidate a portion of their
investment in the Company. Certain outstanding securities were repurchased by
the Company for approximately $62 million and was primarily financed through
additional debt. This transaction significantly increased the financial leverage
of the Company. In April and August 1998, the Company amended its Credit
Facility in connection with the Grinding and Sizing and Agri-Empresa
Acquisitions and increased the amount it can borrow under its Credit Facility to
$140 million. As of June 30, 1998, there was $96.4 million outstanding under the
Credit Facility. The Company intends to use the net proceeds of the Offering to
repay a portion of the indebtedness incurred under the Credit Facility. Upon
completion of the Offering and the application of the net proceeds therefrom as
described in the unaudited pro forma financial statements as of June 30, 1998
included elsewhere in this Prospectus, the Company would have approximately $52
million in outstanding indebtedness under the Credit Facility. Management
believes that cash flows anticipated to be generated from operations together
with the Company's existing credit capacity will allow the Company to meet its
debt service obligation. The Credit Facility provides for a Revolving Line of
Credit up to $20.0 million which will mature in August 2002 and bears interest
at an annual rate of LIBOR plus a margin (2.75% at December 31, 1997) that
depends on the Company's debt coverage ratio. As of November 10, 1998,

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<PAGE> 22

the Company had $6.5 million outstanding under the Revolving Line of Credit.
Borrowings under the Revolving Line of Credit are available for letters of
credit, working capital, general corporate purposes and certain acquisitions.
Indebtedness under the Credit Facility is guaranteed by the Company's
subsidiaries and collateralized by accounts receivable, equipment, inventory and
contract rights of the Company and its subsidiaries. Pursuant to the Credit
Facility, the Company has agreed to maintain certain financial ratios. The
Credit Facility also imposes certain limitations on the ability of the Company
to make capital expenditures, pay dividends or other distributions to its
stockholders, make acquisitions or incur indebtedness outside of the Credit
Facility. See "Use of Proceeds."

In September and October 1997, the Company acquired Integrity for $13
million in cash, $200,000 in subordinated debt and warrants with a fair value of
$130,000 and Diamond for approximately $3.1 million in cash. The Company
financed the acquisitions of Integrity and Diamond with its Credit Facility.

In April and July 1998, the Company acquired Grinding and Sizing for $9.25
million in cash, $800,000 in subordinated debt and warrants with a fair value of
$110,000 and Agri-Empresa for $21 million in cash and warrants with a fair value
of $135,000. The Company funded these acquisitions with its Credit Facility.

During fiscal 1997, the Company made capital expenditures of approximately
$20.8 million, primarily for expansion of its rental tool inventory. Management
currently projects capital expenditures of approximately $20.0 million during
fiscal 1998, primarily for additional rental tool inventory and wireline
equipment. The Company believes that cash generated from operations and amounts
available under the Revolving Line of Credit will provide sufficient funds for
the Company's identified capital projects, debt service and working capital
requirements. However, part of the Company's strategy involves the acquisition
of companies which have products and services complementary to the Company's
existing strategic base of operations. Depending on the size of any future
acquisitions, the Company may require additional debt financing, possibly in
excess of the limits of the Credit Facility, or additional equity financing.
Although the Company is continually evaluating potential acquisitions, it does
not have any contracts, understandings or arrangements with respect to any
material acquisitions.

YEAR 2000

The Company continues to identify, evaluate and implement modifications to
its business systems in order to achieve Year 2000 date conversion compliance.
The Company's business systems are comprised of a mix of off-the-shelf and
internally-developed systems that vary greatly in size, complexity and technical
architecture. The Company continues to install new applications and upgrade
existing ones in order to bring applications for its various locations into
compliance. The Company currently believes all significant business systems will
be Year 2000 compliant by mid-1999 with the majority of these in compliance by
the end of 1998.

During the fourth quarter of 1998, the Company intends to communicate with
suppliers, financial institutions and others with whom it does business to
address conversion-related issues. The Company still has not yet determined the
complete status of Year 2000 compliance of its suppliers and financial
institutions or what additional costs, if any might be required by the Company.
Management continues to believe that non-compliance by the Company's suppliers
are insignificant but failure of its financial institutions could have a
material effect on the Company's financial position or results of operations.

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BUSINESS

GENERAL

W-H Energy Services, Inc. is a diversified oilfield service company focused
on providing products and services throughout the Gulf Coast region, primarily
offshore in the Gulf of Mexico. The Company's customers are major and
independent oil and gas companies, other independent oilfield service companies
and refining and petrochemical companies. Since the Company's formation in 1989,
it has entered six lines of business through the acquisition of high quality,
well managed independent companies with substantial growth opportunities in the
markets in which they operate. These companies continue to be operated by their
former owners and key managers, all of whom have an equity interest in the
Company. The Company focuses on discrete products and services that provide its
customers with attractive alternatives to certain components of the integrated
services packages typically marketed by larger oilfield service providers. The
Company believes that its unique business approach enables it to compete
successfully against these larger providers while maintaining rapid growth and
high profitability.

The Company's operations include specialized oilfield equipment rental,
wireline logging and perforating services and the manufacture and wholesale of
specialty chemical products. Certain of the Company's products, including
downhole drilling motors, high-torque drill pipe and measurement-while-drilling
("MWD") systems, are essential for directional drilling. The Company also rents
equipment and provides services used in connection with the cleaning and
maintenance of refining and petrochemical facilities and oil and gas facilities.

Oilfield equipment rental and related services accounted for revenues of
$44.5 million, $8.2 million, $28.1 million and $19.3 million for the year ended
December 31, 1997, the three months ended December 31, 1996 and the years ended
September 30, 1996 and 1995, respectively. Wireline logging and perforating
services accounted for revenues of $9.7 million, $1.9 million, $8.1 million and
$8.1 million for the year ended December 31, 1997, the three months ended
December 31, 1996 and the years ended September 30, 1996 and 1995, respectively.
Product sales accounted for revenues of $5.6 million for the year ended December
31, 1997.

BUSINESS STRATEGY

The Company's strategy is to grow revenue and earnings through internal
expansion and strategic acquisitions. The key components of this strategy are
set forth below:

Expand to Accommodate Increasing Drilling and Workover Activity. The
Company's business activity is directly affected by the volume of drilling,
completion and workover activity in its areas of operations. The onshore and
offshore Gulf Coast region has experienced significant increases in drilling and
workover rig

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counts and utilization during the past five years. Management believes that
drilling and workover activity will continue to increase as improved discovery
rates continue to positively impact the spending plans of major and independent
oil and gas companies. The Company intends to capitalize on such growth through
capital expansion.

Satisfy Increasing Demand for Directional Drilling Products and
Services. Demand for directional drilling products and services has grown
significantly over the past several years. This growth is reflected in the
increasing number of wells using directional drilling technology on an absolute
basis and as a percentage of total wells drilled. The Company believes that its
drilling motors, MWD systems, high torque drill pipe and specialized drilling
fluids will continue to experience increased demand as directional drilling
activity increases, particularly in deepwater locations, and as independent
directional drillers seek to overcome the current shortage of equipment
available to them.

THE COMPANY'S BUSINESSES

The Company's acquisition strategy has targeted high quality, well run
independent companies with strong market share positions and substantial growth
opportunities in the markets in which they operate. The Company conducts its
operations through six operating businesses.

Thomas Tools

Overview of Operations. Thomas Tools, headquartered in New Iberia,
Louisiana, has been a leading provider of specialized rental equipment, tools
and tubular goods for drilling, completion and workover applications onshore and
offshore in the Gulf Coast region since 1961. Thomas Tools provides a broad
range of drilling equipment, including drill pipe and drill collars, pressure
control equipment, including blowout preventers, and pipe handling equipment. In
addition, through its MWD services unit, Thomas Tools provides "steerable"
drilling guidance systems critical in directional drilling. Thomas Tools' latest
technological MWD innovation is The Tracker(R), a proprietary and patent pending
MWD system introduced to the market in mid-1997.

Drilling contractors typically utilize several different sizes of drill
pipe in the drilling of a single well, as pipe diameter is often reduced as the
depth of drilling increases. Thomas Tools' primary rental product line consists
of an extensive inventory of various sizes of drill pipe and related handling
tools, providing its customers with a full range of drill pipe for drilling at a
variety of depths. In response to the growth in directional drilling techniques,
Thomas Tools has expanded its inventory of premium, high torque drill pipe,
which provides operators with the technical characteristics that are demanded by
deeper wells and wells expected to encounter adverse conditions, including
deviated well bores. Thomas Tools also offers complementary handling and
sub-surface tools and pressure control equipment.

Following the Recapitalization, the Company utilized its Credit Facility to
expand Thomas Tools' rental pipe and MWD systems inventory. The Company intends
to focus further capital expansion at Thomas Tools on growing its rental
inventory at its South Texas facility for use in the lower Gulf Coast region and
offshore in the Gulf of Mexico.

Products and Services. Thomas Tools' rental inventory includes blowout
preventers, power tongs, test pumps, drill collars, stabilizers, drill pipe and
other tubular goods. Thomas Tools' products and services are marketed directly
through its sales force and operating managers at its two locations.

In order to ensure optimal performance, Thomas Tools regularly maintains
and inspects its rental fleet. As drill pipe arrives at its facilities, either
from the manufacturer or as it returns from a job, the pipe is
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hydroblasted to remove all harmful deposits on the inside and outside of the
pipe. This hydroblasting procedure ensures that the pipe is free of any
contaminants which might cause decay. Once an individual string of pipe is
cleaned, a third party inspection team inspects each joint of pipe to ensure its
integrity and suitability for use on additional jobs.

Thomas Tools often works with its customers to develop a comprehensive list
of equipment specifications for projects that utilize its equipment. Thomas
Tools works directly with drilling contractors to ensure that all required
equipment is available as it is needed. The coordination and execution of the
drilling plan and Thomas Tools' cleaning and inspection procedures have resulted
in what it believes are strong customer relationships.

As utilization of directional drilling techniques has increased, the need
for sophisticated guidance systems has increased significantly. After two years
of extensive research and development, Thomas Tools recently added an MWD system
to its product line. The Tracker(R), which was developed by Thomas Tools'
internal staff of technicians, provides drillers with a steerable drilling
system which is well suited for work in slim hole (down to a 3 1/2" drilling
assembly), high temperature and high pressure drilling conditions. In the summer
of 1997, Thomas Tools began moving The Tracker(R) system from a field testing
phase, during which six devices had been operated by select customers to drill
wells for both major and independent oil and gas companies, to a full commercial
roll-out of 15 Tracker(R) systems, which was completed by the end of the first
quarter of fiscal 1998. Thomas Tools has applied for a patent on its MWD system
and is currently in a patent pending status.

Facilities. Thomas Tools maintains its inventory of drill pipe and tools at
its leased facilities in New Iberia, Louisiana and, since 1996, in Victoria,
Texas. Thomas Tools assembles and maintains its MWD systems at its Louisiana
facility.

Drill Motor Services

Overview of Operations. Drill Motor Services was established in 1991 to
meet the increasing demand for downhole drilling motors, which are necessary for
directional drilling, and has become a leading provider of drilling motors,
primarily on a rental basis, to independent directional drillers onshore and
offshore in the Gulf Coast region. Drill Motor Services' products include a full
range of high performance downhole drilling motors and other related tools,
which are used by independent directional drillers to drill for major and
independent oil and gas companies in all directional applications, including
deepwater and harsh environments. In recent years, improved directional drilling
techniques have resulted in increased demand for Drill Motor Services' high
performance drilling motors. In addition, increasing day rates for drilling rigs
are causing operators to keep additional drilling motors on location in order to
ensure continuous drilling operations, which the Company believes has resulted
in increasing demand for Drill Motor Services' products.

Products and Services. Drill Motor Services' primary rental product line
consists of a wide range of sizes of downhole drilling motors ranging from 3 1/2
inches to 9 5/8 inches in outside diameter for use at various drilling depths.
Drill Motor Services has significantly expanded its inventory of drilling motors
from 64 in 1995 to 150 currently. Downhole positive displacement drilling motors
consist of four basic elements: the power section, the transmission section, the
output shaft assembly and the motor casing. When attached to the drillstring of
a drilling platform, the drill motor is powered by fluid which is pumped through
the motor and turns the inner components of the drill motor leading to the drill
bit. The components of the drill motor are designed to operate at various speeds
and torque levels and to withstand severe environmental conditions such as high
temperatures, hard rock and abrasive muds.

Drill Motor Services works directly with its customers in the coordination
of a comprehensive drilling plan. Once a job is initiated, a Drill Motor
Services representative works with the drilling contractor to ensure that the
required equipment is available on site when it is needed. Drill Motor Services'
product line is manufactured internally with the exception of the drill motor
power sections. Drill Motor Services has an exclusive supply agreement with an
ISO 9002 certified machine shop for the manufacture, heat-treating, material
control and quality assurance of all major drill motor parts with the exception
of the power sections, which are acquired from other third party sources.

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Drill Motor Services markets and sells its services and products directly
through its sales force and operating managers at its two locations.

Facilities. Based in Broussard, Louisiana, Drill Motor Services expanded
its geographical presence in 1993 through the addition of a location in Elk
City, Oklahoma.

Perf-O-Log

Overview of Operations. Perf-O-Log is a provider of wireline logging and
perforating services to oil and gas companies onshore and offshore in the Gulf
Coast region. Perf-O-Log provides services primarily to the existing
(cased-hole) markets and therefore is more dependent on maintenance and
enhancement of existing production than new drilling activity.

Products and Services. The services provided by Perf-O-Log include the
following:

- Logging Services. Logging services involve the gathering of a variety of
downhole information which identifies various characteristics about the
formation or zone which is to be produced. Logging services are performed
through armored electro-mechanical cable (wireline) which is lowered into
a well from a truck (on land) or a skid unit (offshore). These units
contain considerable instrumentation and computer equipment which is used
to chart and record downhole information.

- Perforating Services. Perforating is the method by which communication is
established between the reservoir and production tubing to enable the
production of oil or gas. A path for oil and gas to flow from the
reservoir through the casing and cement to the tubing is created through
the use of a shaped explosive charge which penetrates into the producing
zone. Wireline is used to position and discharge the perforating guns.

- Other Services. Perf-O-Log performs a variety of other services aimed
primarily at improving the production rate of existing oil and gas wells
and in perforating new zones once a zone or formation is depleted.
Perf-O-Log provides a gravel pack service (the "Thru-Tubing Wireline
Gravel Pack"), which is covered by a patent, that provides operators of
oil and gas wells with a more precise method of installing gravel packs.
A gravel pack involves the use of a slurry-like material which is placed
in the well to restore or improve production in wells that have become
congested by the producing sand.

While each assignment is different, a typical job for Perf-O-Log involves
the use of a logging and perforating unit at a customer's well site to perform
its wireline logging and perforating services. These services require a skilled
operator and typically last several days on land and a week or more offshore.
Perf-O-Log markets and sells its services through an internal sales force, and
its customers typically utilize its services on a per-well basis.

The recent acquisition of Diamond Wireline Services, Inc. ("Diamond"), a
land-based wireline logging and perforating service company currently operating
onshore in South Texas, complements Perf-O-Log's business and is expected to
allow Perf-O-Log to leverage its presence and reputation in the land, inland
waterway and offshore Louisiana, Mississippi and Alabama markets into South
Texas and expand Diamond's operations to include inland waterway and offshore
services.

Facilities. Headquartered in Lafayette, Louisiana, Perf-O-Log was organized
in 1982 to provide wireline logging and perforating services to the oil and gas
industry in Louisiana. In 1987, Perf-O-Log expanded its geographic coverage to
include Mississippi and Alabama by opening an additional facility in Laurel,
Mississippi. As of November 1998, Perf-O-Log's fleet of equipment was comprised
of 12 perforating trucks and 6 skid units. Diamond has a facility in South Texas
and maintains a fleet of 6 perforating trucks.

Integrity

Overview of Operations. Integrity manufactures and wholesales over 50
different specialty chemical products, which are sold to a broad customer base
comprised primarily of retail drilling fluid providers both domestically and
internationally.

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Integrity maintains a highly controlled cost structure, significant
research and development capabilities and new product innovations. Integrity
manufactures over 70% of the products it sells, enabling it to control the cost
and the proprietary nature of these products. Integrity's research and
development department develops products designed specifically for its growing
customer base. One of Integrity's most recent product innovations is a high
performance lubricant that allows the use of environmentally sensitive water
based drilling fluids in deep, severe drilling environments in the North Sea.

Products and Services. Integrity, which was founded in 1986, manufactures
specialty chemicals and additives for drilling fluids. These materials are used
in the production and maintenance of oil based drilling fluids, synthetic
drilling fluids, water based drilling fluids and completion/workover fluids. Oil
based and synthetic drilling fluids are typically used to drill deep wells,
deviated wells to prevent stuck pipe and any well where high performance fluids
are desired. Synthetic drilling fluids are currently the preferred fluids for
high performance drilling in environmentally sensitive areas. Water based
drilling fluids are the most common type of fluids used in normal drilling
environments where operating costs and environmental aspects are the primary
concerns.

Integrity also produces specialty chemicals for niche applications in
various industries. These products include oilfield products (enhanced recovery
chemicals, spotting fluids, well treating chemicals and liquified polymers),
industrial products (cleaners, lubricants and environmentally sensitive
solvents) and environmental remediation products. These products are used in
drilling, refining, transportation, water treatment and environmental clean-up
applications.

Integrity's products are distributed from strategically located facilities
along the Gulf Coast of Texas, Louisiana and Mexico. Fluids and chemicals are
sold both domestically and internationally to customers around the world,
including Canada, Colombia, Indonesia, Trinidad, Venezuela, and Mexico.
International orders are shipped in bulk from major ports, such as the Port of
Houston, to customers overseas.

Facilities. Integrity is headquartered in Kingsville, Texas, where all of
its products are currently manufactured. Additional manufacturing facilities are
located in Conroe, Texas and Victoria, Texas.

Grinding and Sizing

Overview of Operations. Grinding and Sizing was established in 1947 and
manufactures and wholesales private label seepage control and loss circulation
products related to the oil and gas drilling process. Grinding and Sizing also
performs custom (toll) grinding and produces products to customer specifications
through custom blending and packaging. Additionally, Grinding and Sizing
fabricates used and new grinding, blending and packaging equipment for internal
expansion and capacity as well as for third parties.

Products and Services. Grinding and Sizing is primarily in the business of
size reduction (grinding) of different types of products which are primarily
manufactured from agricultural by-products. Grinding and Sizing private labels
these products for its customers and also produces it own trademark products,
Fiberfluid and Pronto Plug. Grinding and Sizing works directly with drilling
fluid companies to develop patented products for seepage and loss circulation
control. Grinding and Sizing procures, processes (grinds, blends, and bags), and
inventories the finished private labeled products. Grinding and Sizings'
manufacturing facilities generate 1,200 horsepower of grinding capacity in order
to keep its 30,000 square feet of warehouse space filled with customer products.
Grinding and Sizing's customers have little advance notice of exactly what
products they need in the production and development of their
wells -- consequently, Grinding and Sizing keeps large inventories on hand for
immediate shipping to fulfill its customers' needs.

In addition, Grinding and Sizing produces products to customer
specifications through custom blending and packaging which includes particle
reduction, classification, blending and packaging of all types of products in
various industries. As a service to its customers, Grinding and Sizing will
warehouse these finished products until shipping is necessary.

Facilities. Grinding and Sizing is headquartered in Lufkin, Texas where
all of its products are manufactured. Additional facilities include a toll
(custom) blending plant located in Houston, Texas and a fabrication plant
located in Lufkin, Texas.

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Agri-Empresa, Inc.

Overview of Operations. Agri-Empresa, Inc. (Agri-Empresa) which has been in
business since 1977, manufactures, packages, warehouses and transports over 140
specialty chemicals used primarily in oilfield and industrial applications.
Agri-Empresa primarily converts low-cost by-products and waste streams into
higher quality products in drilling and completion fluids for the oil and gas
industry. Over the past ten years, Agri-Empresa has aggressively pursued a "one
source -- one stop shop" strategy by increasing the product line and services
offered, enlarging its manufacturing capacity and expanding its geographical
territory while continuing to provide high quality service and cultivating a
strong customer base. Agri-Empresa offers its oilfield specialty chemicals to
the major and independent mud companies and further strengthens the Company's
position in specialty chemicals since the business compliments the business of
Integrity and Grinding and Sizing.

Products and Services. Agri-Empresa is a specialty chemical company that
sells products and services primarily to the oil and gas and industrial markets.
Products are shipped into its facilities via rail and truck. Agri-Empresa then
packages these products in different size bags ranging from 2 pounds to 3,400
pounds. Products are packaged into generic, Agri-Empresa, as well as
private-labeled bags. Agri-Empresa also operates an LCM plant (lost circulation
material). This process involves grinding, sizing, blending and packaging an
array of LCM products. Through its different operations, Agri-Empresa provides
over 140 oilfield chemicals from its facilities. Additionally, Agri-Empresa's
warehousing, transportation, distribution and exporting expertise provides
custom catering to its customer base. Agri-Empresa's client list primarily
consists of the major and leading independent mud companies.

Facilities. Agri-Empresa is headquartered in Midland, Texas where the
majority of its products are manufactured. Additional manufacturing, warehousing
and distribution facilities are located in Houston, Abilene and Jacksboro, Texas
and Hobbs and Carlsbad, New Mexico.

Charles Holston

Overview of Operations. Charles Holston provides integrated cleaning and
maintenance services to refining and petrochemical companies and major and
independent oil and gas companies in Louisiana. Charles Holston's services
include on-site cleaning and waste management, waste transportation, wastewater
services, container cleaning and repair, emergency spill response services and
other general plant support services.

Charles Holston was founded in 1985 with a primary focus on vacuum services
to oil and gas customers in Louisiana. In recent years, Charles Holston has
expanded its fleet and diversified its customer base to include refining and
petrochemical companies.

Products and Services. As of November 1998, Charles Holston's rental fleet
consisted of 65 high velocity vacuum trucks, 175 storage tanks and boxes as well
as a broad selection of specialty equipment. Services provided by Charles
Holston include the following:

- Liquid and Semi-Solid Vacuuming Service. Charles Holston's vacuum trucks
provide an efficient method of removing industrial wastes and fluids
produced in drilling and operating oil and gas wells and in cleaning and
maintaining refining and petrochemical facilities. Typically these
materials are contained in a customer's tanks, containers, or process
equipment.

- Transportation, Roll-off and Tank Rental Service. Charles Holston
provides both short and long distance transportation of liquid and
semi-solid non-hazardous waste and materials from customer sites to
customer designated treatment, storage and disposal facilities,
landfills, and recycling/reclamation facilities. Charles Holston also
rents tanks and boxes which provide temporary storage of waste materials.
These services are provided primarily on a unit-price or daily rental
basis.

- Miscellaneous Cleaning and Remediation Services. Charles Holston provides
several different cleaning and remediation services, depending on the
individual needs of its customers. The cleaning services include
hydroblasting cleaning which is performed using high pressure water
pumps. Hydroblasting is an effective method of removing deposits from
surfaces in above-ground storage tanks, pipelines and

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heat exchangers utilized by refining and petrochemical companies and oil
and gas companies. In addition, Charles Holston performs remediation
projects at oil and gas and petrochemical sites following the spill of
various materials. These materials are removed from the contaminated
area, stored in Charles Holston's storage tanks and then transported to a
proper customer-designated disposal site.

Rental fleets and workers are based at each customer location in accordance
with the customer needs to be serviced from that location. Depending on the
service to be provided, Charles Holston's fleet may be in the field for a few
days on a small cleanup job or several months for large projects in which case a
customer dedicated team may be placed onsite at the customer's facility and
remain until the project is completed. Charles Holston markets and sells its
services and products directly through its sales force and operating managers at
its five locations.

Facilities. Charles Holston, headquartered in Jennings, Louisiana since
1985, has district offices in Eunice, Baton Rouge, Lake Charles, and most
recently in Lafayette, Louisiana.

Well Safe

Overview of Operations. Well Safe provides equipment used in the detection
of and protection from toxic gases encountered by refining and petrochemical
companies and oil and gas companies onshore and offshore in the Gulf Coast
region. Well Safe rents electronic detection and monitoring equipment, breathing
units and other personal safety equipment. In addition, Well Safe provides
comprehensive safety planning services, safety training and safety supervision.

Well Safe was organized in 1984 to primarily serve the oil and gas
exploration market. In 1993, Well Safe expanded its business to include refining
and petrochemical companies in order to capitalize on the safety requirements of
this relatively stable market.

Well Safe markets and sells its services and products directly through its
sales force and operating managers at its six locations.

Facilities. Well Safe is headquartered in Mobile, Alabama and operates
district offices throughout Louisiana, Texas and Alabama.

POTENTIAL LIABILITIES AND INSURANCE

The Company's operations involve a high degree of operational risk,
particularly personal injuries and equipment damage, that are typical of
companies operating in its industry. Failure of the Company's equipment could
result in property damages, personal injury, environmental pollution and
resulting damage for which the Company could be liable. Litigation arising from
a catastrophic occurrence at a location where the Company's equipment or
services are used may in the future result in damage claims. The Company
maintains insurance against risks that are consistent with industry standards
and required by its customers. Although management believes that the Company's
insurance protection is adequate, there can be no assurance that the Company
will be able to maintain adequate insurance at rates which management considers
commercially reasonable, nor can there be any assurance that such coverage will
be adequate to cover all claims that may arise. See "Risk Factors -- Operating
Risks."

GOVERNMENT REGULATION

The Company's business is significantly affected by local, state, federal
and foreign laws and other regulations relating to the oil and gas industry, the
petrochemical and processing industry, worker safety and environmental
protection, by changes in such laws and by changing administrative regulations
and the level of enforcement thereof. The Company cannot predict the level of
enforcement of existing laws and regulations or how such 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 it,
its businesses, results of operations, cash flows or financial condition.

28
<PAGE> 30

The Company depends on the demand for its services from the oil and gas
industry, and such demand is affected by changing taxes, price controls and
other laws and regulations relating to the oil and gas industry generally. The
adoption of laws and regulations curtailing exploration and development drilling
for oil and gas in the Company's areas of operations for economic, environmental
or other policy reasons would adversely affect the Company's operations by
limiting demand for its services. In addition, the Company's petrochemical
processing services are substantially dependent on the cleaning and maintenance
operations of its customers. Numerous local, state and federal laws and
regulations affect the necessity, timing and frequency of the cleaning and
maintenance operations of petrochemical and other processors and consequently
affect the demand for the Company's equipment and services. The Company cannot
determine the extent to which its future operations and earnings may be effected
by new legislation, new regulations or changes in existing regulations or
enforcement.

Certain of the Company's employees who perform services on offshore
platforms and vessels are covered by the provisions of the Jones Act, the Death
on the High Seas Act and general maritime law. These laws operate to make the
liability limits established under state workers' compensation laws inapplicable
to these employees and, instead, permit them or their representatives to pursue
actions against the Company for damages or job related injuries, with generally
no limitations on the Company's potential liability. See "Risk
Factors -- Operating Risks."

The Company's operations are subject to numerous foreign, federal, state,
and local laws and regulations governing the manufacture, management, and/or
disposal of materials and wastes in the environment and otherwise relating to
environmental protection. Numerous governmental departments issue rules and
regulations to implement and enforce such laws which are often difficult and
costly to comply with and the violation of which may result in the revocation of
permits, issuance of corrective action orders, assessment of administrative and
civil penalties and even criminal prosecution. For example, state and federal
agencies have issued rules and regulations pursuant to environmental laws that
regulate environmental and safety matters such as restrictions on the types,
quantities, and concentration of various substances that can be released into
the environment in connection with specialty chemical manufacturing and tank
vacuum or other field service operations, remedial measures to prevent pollution
arising from current and former operations, and requirements for worker safety
training and equipment usage. Management believes the Company is in compliance
in all material respects with applicable environmental laws and regulations to
which it is subject. Management further does not anticipate that compliance with
existing laws and regulations will have a material effect on the Company. See
"Risk Factors -- Regulatory and Environmental Matters."

The Company generates wastes, including hazardous wastes, that are subject
to the federal Resource Conservation and Recovery Act ("RCRA") and comparable
state statutes. The U.S. Environmental Protection Agency and various state
agencies have limited the approved methods of disposal for certain hazardous and
nonhazardous wastes. Furthermore, it is possible that certain wastes handled by
the Company in connection with its tank vacuum or other field service activities
that are currently exempt from treatment as "hazardous wastes" may in the future
be designated as "hazardous wastes" under RCRA or other applicable statutes, and
therefore be subject to more rigorous and costly operating and disposal
requirements.

The federal Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA"), also known as the "Superfund" law, imposes liability,
without regard to fault or legality of the original conduct, on certain classes
of persons that are considered to have contributed to the release of a
"hazardous substance" into the environment. These persons include the owner or
operator of the disposal site or the site where the release occurred and
companies that disposed of or arranged for the disposal of the hazardous
substances at the site where the release occurred. Under CERCLA, such persons
may be subject to joint and several liability for the costs of cleaning up the
hazardous substances that have been released into the environment and for
damages to natural resources, and it is not uncommon for neighboring landowners
and other third parties to file claims for personal injury and property damage
allegedly caused by the hazardous substances released into the environment. The
Company currently leases a number of properties upon which activities involving
the handling of hazardous substances or wastes may have been conducted by third
parties not under the Company's control. These properties may be subject to
CERCLA, RCRA and analogous state laws. Under such laws and implementing
regulations, the Company could be required to remove or remediate
29
<PAGE> 31

previously discarded hazardous substances and wastes or property contamination
that was caused by such third parties. Such laws and regulations may also expose
the Company to liability for acts of the Company that were in compliance with
all applicable laws at the time such acts were performed.

CUSTOMERS

The Company's customers include major and independent oil and gas
companies, other independent oilfield service companies and refining and
petrochemical companies operating throughout the Gulf Coast and offshore in the
Gulf of Mexico. The Company provides services and equipment to a broad range of
customers and, therefore, the Company believes that it is not dependent on any
single customer or group of customers. For the year ended December 31, 1997, no
single customer or group of affiliated customers accounted for 10% or more of
the Company's revenues. The Company generally enters into informal, nonbinding
commitments with its customers, which is customary within the Company's business
lines.

COMPETITION

The Company competes in highly competitive areas of the energy services
industry. The depressed oil and gas prices and the resulting decline in the oil
and gas industry in the 1980s has led to a consolidation of the number of
companies providing services similar to the Company. This reduced number of
companies competes intensely for available projects. Many of the Company's
competitors are larger and have greater marketing, distribution, financial and
other resources than the Company.

There can be no assurance that the Company's operations will continue at
current volumes or prices if its current competitors or new market entrants
introduce new products or services with better features, performance, prices or
other characteristics than the Company's products and services. Competitive
pressures or other factors also may result in significant price competition that
could have a material adverse effect on the Company's results of operations and
financial condition. Furthermore, competition among oilfield service and
equipment providers is also based on the provider's reputation for safety and
quality. Although the Company believes that its reputation for safety and
quality service is good, there can be no assurance that the Company will be able
to maintain its competitive position. See "Risk Factors -- Intense Competition."

EMPLOYEES

At November 12, 1998, the Company and its subsidiaries had approximately
600 employees. None of the Company's employees are represented by a union or
covered by a collective bargaining agreement. The Company believes that its
relations with its employees are good.

PROPERTIES

Facilities. The Company operates out of its headquarters located in
Houston, Texas. Each of the Company's subsidiaries maintains its own
headquarters and operating facilities, which are located throughout the Gulf
Coast area. All of the Company's facilities are leased pursuant to operating
leases for various terms. Certain of the facilities are leased from the former
owners of the Company's subsidiaries. The Company believes that all of its
leases are at competitive or market rates and does not anticipate any difficulty
in leasing suitable additional space upon expiration of its current lease terms.

Intellectual Property. The Company uses several patented and patent-pending
items in its operations, which management believes are important but are not
indispensable to the Company's business as a whole. Although the Company seeks
patent protection when it determines that such protection is commercially
reasonable, it relies to a greater extent on the technical expertise and
know-how of its personnel to maintain its competitive position. See "Risk
Factors -- Technology Risks."

30
<PAGE> 32

LEGAL PROCEEDINGS

The Company is not a party to, nor is any of its property the subject of,
any pending legal proceedings that, in the opinion of management, are expected
to have a material adverse effect on the Company's business or financial
condition.

31
<PAGE> 33

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names, ages and titles of the current
directors and executive officers of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Kenneth T. White, Jr......... 57 Chairman of the Board, President, Chief
Executive Officer and Director
David N. Eliff............... 37 Vice President, Secretary and Chief Financial
Officer
Jeffrey L. Tepera............ 33 Vice President and Treasurer
Jonathan F. Boucher.......... 41 Director
John W. Jordan II............ 51 Director
David W. Zalaznick........... 45 Director
J. Jack Watson............... 70 Director
Christopher Mills............ 46 Director
Robert H. Whilden, Jr........ 63 Director
</TABLE>

Each of the directors and executive officers of the Company will serve
until the next annual meeting of the shareholders or until their death,
resignation or removal, whichever is earlier. Directors are elected annually and
executive officers hold office for such terms as may be determined by the
Company's Board of Directors. Following completion of the Offering, the Company
intends to form audit and compensation committees consisting solely of
non-employee directors.

The Company has agreements with each of its directors to indemnify them for
costs and expenses resulting from their service as directors of the Company to
the fullest extent permitted by law.

Set forth below is a brief description of the business experience of each
director and executive officer of the Company.

MR. WHITE founded the Company, has served as a director since its inception
and serves as its Chairman, President and Chief Executive Officer. Prior to
founding the Company, Mr. White participated in the acquisition, development and
eventual sale of a number of businesses, including an oil and gas service and
equipment business with approximately $50 million in annual revenues, and a
manufacturing and distributing company with annual revenues of approximately
$160 million.

MR. ELIFF, a certified public accountant, joined the Company in July 1995
and from 1984 to 1995 was employed by Arthur Andersen LLP and Price Waterhouse
LLP, independent accountants, in their mergers and acquisitions, corporate
finance, operational productivity and financial consulting segments.

MR. TEPERA, a certified public accountant, joined the Company in December
1997 and from 1989 to 1997 was employed by Arthur Andersen LLP, independent
accountants, serving various positions, most recently as an experienced manager
in the enterprise group, a group specializing in emerging high growth companies.

MR. JORDAN has served as a director of the Company since August 1997. Mr.
Jordan is a managing partner of The Jordan Company, a private merchant banking
firm which he founded in 1982. Mr. Jordan is also a director of American Safety
Razor Company, AmeriKing, Inc., Carmike Cinemas, Inc., Rockshox, Inc., Jordan
Industries, Inc., Motors and Gears, Inc., Jordan Telecommunication Products,
Inc. and Welcome Home, Inc. as well as other privately held companies. In
January 1997, Welcome Home filed a voluntary petition for bankruptcy.

MR. ZALAZNICK has served as a director of the Company since August 1997.
Mr. Zalaznick has been a partner of The Jordan Company since 1982. Mr. Zalaznick
is also a director of Carmike Cinemas, Inc, AmeriKing, Inc., American Safety
Razor Company, Jordan Industries, Inc., Motors and Gears, Inc., Jordan
Telecommunication Products, Inc. and Marisa Christina, Inc., as well as other
privately held companies.

32
<PAGE> 34

MR. BOUCHER has served as a director of the Company since August 1997. Mr.
Boucher has been a partner of The Jordan Company since 1983. Mr. Boucher is also
a director of American Safety Razor Company, Jordan Industries, Inc., Motors and
Gears, Inc. and Jordan Telecommunication Products, Inc. as well as other
privately held companies. In December 1996, Mr. Boucher resigned as a director
and officer of Welcome Home. In January 1997, Welcome Home filed a voluntary
petition for bankruptcy.

MR. WATSON has served as a director of the Company since August 1997. Mr.
Watson was President and Chief Executive Officer of Newflo Corporation from 1987
through 1996. Newflo is a manufacturer of pumps, valves and meters with annual
revenues of approximately $250 million in annual revenues.

MR. MILLS has served as a director of the Company since 1990. Mr. Mills is
a director of Compass Plastics, Horace Small PLC, Oak Industries, Denison
Investments PLC and North Atlantic Smaller Companies Trust. Mr. Mills has been
the Chief Executive Officer of North Atlantic Smaller Companies Trust since
1984.

MR. WHILDEN has served as a director of the Company since its inception.
Mr. Whilden has been a partner in the law firm of Vinson & Elkins L.L.P. in
Houston, Texas since 1970. Mr. Whilden is also a director of Tom Brown, Inc., an
independent oil and gas company.

MANAGEMENT OF OPERATING SUBSIDIARIES

Set forth below is a brief description of each principal executive officer
of each of the Company's main operating subsidiaries:

WILLIAM J. THOMAS III has been the Chief Executive Officer of Thomas Tools
since June 1994 and was a principal shareholder when it was acquired by the
Company. Mr. Thomas has over 20 years of experience in the oil and gas industry
and has been with Thomas Tools since 1974.

DANIEL M. SPILLER is the Chief Executive Officer of Drill Motor Services.
Mr. Spiller has over 22 years of experience in the design, manufacture, sale and
rental and operation of downhole drilling motors. Mr. Spiller organized Drill
Motor Services in 1991 and, prior to such time, worked with several recognized
leaders in the downhole drilling motor sector.

BILL BOUZIDEN is the President of Perf-O-Log and has over 15 years
experience in the oil and gas industry and wireline business.

WILLIAM MAX DUNCAN, JR. has been the President of Integrity since he
co-founded it in 1986. Mr. Duncan has over 18 years of experience in the
specialty chemicals and drilling fluids business.

STEPHEN T. GOREE has been the Chief Executive Officer of Agri-Empresa since
its formation in 1977. Mr. Goree was the original founder of Agri-Empresa and
has over 20 years of experience in the oil and gas industry.

RONALD A. ROSE has been the President of Grinding and Sizing since Mr. Rose
has over 12 years of experience in the drilling fluids business.

CRAIG HOLSTON is the Chief Executive Officer of Charles Holston and has
been with Charles Holsten since it was founded in 1985.

J.B. WILSON, JR. is the President of Well Safe and has been with Well Safe
since its inception in 1985.

These principal executive officers are generally parties to employment
agreements that contain certain non-competition provisions.

33
<PAGE> 35

EXECUTIVE COMPENSATION

The following table sets forth information with respect to the President
and Chief Executive Officer and Vice President, Secretary and Chief Financial
Officer of the Company:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
NUMBER OF
ANNUAL COMPENSATION SECURITIES
---------------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION OTHER ANNUAL ALL OTHER WARRANT/OPTIONS
IN THE COMPANY YEAR SALARY BONUS COMPENSATION COMPENSATION(1) GRANTED
- --------------------------- ---- -------- -------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth T. White, Jr. 1997 $249,808 $100,000 $ -- $4,525,000
Chairman, President and 1996 200,000 80,000 -- --
Chief Executive Officer 1995 200,000 50,000 -- --
David N. Eliff 1997 $120,000 $ 30,000 $2,042 $ 839,000
Vice President, Secretary 1996 103,231 5,000 665 --
and Chief Financial
Officer 1995 21,538 -- -- --
</TABLE>

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

(1) Consists of proceeds from the redemption of stock options and compensatory
restricted stock pursuant to the Recapitalization.

WARRANT AND OPTION GRANTS, EXERCISES AND HOLDINGS

Fiscal 1997 Warrant and Option Grants. The following table contains certain
information concerning options granted to the named executive officers during
the year ended December 31, 1997.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS WARRANT OR OPTION TERM(2)
------------------------------------------------------------ -------------------------
PERCENT OF TOTAL
WARRANTS WARRANT AND
AND OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION
NAME GRANTED IN 1995 PER SHARE(1) DATE 5% 10%
---- -------- ---------------- ------------ --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth T. White,
Jr. ................ August 11, 2002
David N. Eliff........ August 11, 2002
</TABLE>

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

(1) The warrants and options were granted at or above the fair market value of
the Common Stock on the date of grant with a term of 10 years, unless
otherwise noted.

(2) In accordance with the rules of the Commission, shown are the gains or
"option spreads" that would exist for the respective options granted. These
gains are based on the assumed rates of annual compound stock price
appreciation of 5% and 10% from the date the option was granted over the
full option term. These assumed annual compound rates of stock price
appreciation are mandated by the rules of the Commission and do not
represent the Company's estimate or projection of future Common Stock
prices.

Fiscal 1997 Option Holdings. The following table sets forth certain
information regarding options held at December 31, 1997.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1997 HELD AT DECEMBER 31, 1997
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Kenneth T. White, Jr. ............................
David W. Eliff....................................
</TABLE>

34
<PAGE> 36

EMPLOYMENT AGREEMENT

Mr. White has an employment agreement with the Company for a term expiring
December 31, 2000, which provides for Mr. White's employment as the Chairman of
the Board, President and Chief Executive Officer of the Company. The employment
agreement provides for a base salary of $250,000 for each of the first two years
and $300,000 for the third year, plus such bonus up to 100% of the base salary,
as may be determined in the sole discretion of the Board of Directors.

As an additional incentive for Mr. White to serve as Chief Executive
Officer of the Company and subject to consummation of the Offering, W-H
Investment has agreed to sell warrants to Mr. White for $104,000 to purchase
shares of Common Stock of the Company from WH Investment at an exercise
price of $ per share.

Mr. Eliff has an employment agreement with the Company for a term expiring
April 30, 2000, which provides for Mr. Eliff's employment as an Officer of the
Company. The employment agreement provides for a base salary of $120,000 per
year plus such bonus as may be determined in the sole discretion of the Board of
Directors.

Mr. Tepera has an employment agreement with the Company for a term expiring
December 31, 2000, which provides for Mr. Tepera's employment as an Officer of
the Company. The employment agreement provides for a base salary of $85,000 per
year plus such bonus as may be determined in the sole discretion of the Board of
Directors.

COMPENSATION OF DIRECTORS

Upon completion of the Offering, directors of the Company will receive
$10,000 per year for their services to the Company, plus reimbursement of
out-of-pocket expenses.

STOCK OPTION PLAN

The Board adopted a Stock Option Plan (the "1997 Option Plan") in August
1997. The Board believes that by providing key employees with an opportunity to
acquire a proprietary interest in the Company, the 1997 Option Plan will give
employees a stronger incentive to work for the continued success of the Company.
The Board of Directors also believes that the 1997 Option Plan will be helpful
to the Company in attracting and retaining outstanding personnel. The principal
features of the 1997 Option Plan are described below.

The 1997 Option Plan covers an aggregate of shares of Common Stock
(subject to adjustments in the event of stock dividends, stock splits and
certain other events). The 1997 Option Plan provides for non-qualified stock
options.

The 1997 Option Plan is administered by a committee of the Board appointed
by the Board (the "Committee"). If no Committee is appointed under the 1997
Option Plan, the Board will act as the Committee. The Committee has the power to
determine those employees to be granted options, the price and the number of
shares subject to each option, the time at which each option is granted and
becomes exercisable, the duration of the option period, the inclusion of stock
appreciation rights and such other conditions and limitations as may be
applicable.

Each option granted under the 1997 Option Plan will contain such terms and
conditions as may be approved by the Committee. The Committee has granted
options under the 1997 Option Plan that will vest over a four-year period and
will expire in all cases 10 years from the date the options were granted. Except
in certain circumstances including a merger or consolidation with another
corporation or the sale of substantially all of the Company's assets, no option
will be exercisable as to any share as to which a continuous service requirement
has not been satisfied. If an optionee's employment terminates for any reason,
the option may be exercised during the three-month period following such
termination, but only to the extent vested at the time of such termination.

Each option will be assignable or transferable only by will or by the laws
of descent and distribution or pursuant to a qualified domestic relations order
as defined by the Internal Revenue Code of 1986, as amended,
35
<PAGE> 37

or Title 1 of The Employee Retirement Income Security Act of 1974, as amended,
and will be exercisable during the optionee's lifetime only by the optionee or
the optionee's guardian or legal representative.

No consideration is payable to the Company upon the grant of any option.
The exercise price of any option will be determined by the Committee.

The Board of Directors may amend the 1997 Option Plan as it deems
advisable. The Board may terminate the 1997 Option Plan at any time. Termination
of the 1997 Option Plan will not affect the rights of the optionees or their
successors under any options outstanding and not exercised in full on the date
of termination. Unless earlier terminated by the Board of Directors, the 1997
Option Plan will terminate in August 2007.

As of November , 1998, ten year options have been granted under the 1997
Option Plan with respect to a total of shares of Common Stock, which will
vest over a four-year period, in 25% increments after each full year of service
following the date of grant, beginning in August 1998. At and
contingent upon the consummation of the Offering, the Company granted options
under the 1997 Option Plan to Mr. White for a total of shares of Common
Stock, of which are exercisable at $ per share and the remainder
vest in equal amounts on the first, second and third anniversary of the
consummation of the Offering.

OTHER COMPENSATORY ARRANGEMENTS

Retirement Plan. The Company provides its employees with a 401(k) Plan
pursuant to which the Company contributes $.75 for each $1.00 contribution by
the employee on the first 3% of salary that such employee contributes to the
plan.

Health Plan. The Company provides its employees with a traditional major
medical plan that pays 80% of the employees medical expenses.

Group Life Insurance. The Company provides a group term life insurance for
each of its employees which pays a $20,000 death benefit ($40,000 if death is
the result of an accident) to the employee's estate or beneficiary.

36
<PAGE> 38

CERTAIN TRANSACTIONS

CONSULTING AGREEMENT. On August 11, 1997, the Company entered into a
Consulting Agreement (the "Consulting Agreement") with TJC Management
Corporation ("TJC"), an affiliate of Jordan and W-H Investment, the principal
stockholder of the Company. The Consulting Agreement expires on December 31,
2007, but is automatically renewed for successive one-year terms, unless either
party provides written notice of termination 60 days prior to the scheduled
renewal date; provided, however, the Consulting Agreement will automatically
terminate if substantially all of the stock or assets of the Company are sold
to, or the Company is merged with, an entity unaffiliated with TJC or a majority
of the Company stockholders immediately prior to sale. The Consulting Agreement
provides for an annual consulting fee payable on a quarterly basis equal to 2.5%
of the Company's net income before interest, tax, depreciation, amortization and
other non-cash charges and extraordinary or non-recurring expenses or losses, in
each case, charged, expensed or accrued against such net income.

The Company and TJC have agreed to terminate the Consulting Agreement
concurrently with the Offering. The Company has paid TJC approximately $290,000
pursuant to the Consulting Agreement. The Company expects to pay TJC the
applicable consulting fee through the consummation of the Offering.

TRANSACTION ADVISORY AGREEMENT. On August 11, 1997, the Company entered
into a Transaction Advisory Agreement ("Advisory Agreement") with TJC pursuant
to which TJC shall render consulting services to the Company and its
subsidiaries in connection with their acquisitions, divestitures and
investments. The Advisory Agreement expires on December 31, 2007, but is
automatically renewed for successive one-year terms, unless either party
provides written notice of termination 60 days prior to the scheduled renewal
date; provided, however, the Advisory Agreement will automatically terminate if
substantially all of the stock or assets of the Company are sold to or the
Company is merged with an entity unaffiliated with TJC or a majority of the
Company stockholders immediately prior to sale. The Advisory Agreement provides
for (i) an investment banking and sponsorship fee payable by the Company of up
to 2% of the aggregate consideration paid by the Company for any acquisition
consummated by the Company or any sale by the Company of substantially all of
its stock or assets or the stock or assets of any of its subsidiaries, provided,
such acquisition of or investment in any business by the Company was directly
participated in by TJC, and (ii) a financial consulting fee of up to 1% of the
amount obtained or made available to the Company and/or its subsidiaries
pursuant to any debt or equity financing by the Company and which was arranged
by or completed with the assistance of TJC. Any such fee paid by the Company to
TJC pursuant to the Advisory Agreement shall be paid only upon the prior
approval of a majority of the directors of the Company not affiliated with
Jordan. See Note 8 of Notes to Consolidated Financial Statements.

The Company has paid TJC approximately $1.8 million pursuant to this
Advisory Agreement.

The Board of Directors of the Company has agreed to pay TJC a fee of $1.6
million upon the consummation of the Offering for services rendered to the
Company under the Advisory Agreement.

RECAPITALIZATION. On August 11, 1997, the Company entered into a series of
equity and debt transactions which resulted in a recapitalization and change in
the controlling ownership of the Company. In connection with the
Recapitalization, (i) the Company repurchased and retired shares of its
Common Stock and warrants to purchase shares of Common Stock for
approximately $48.1 million, (ii) repurchased outstanding options for
approximately $13.5 million, (iii) issued new shares of Common Stock and
warrants to purchase shares of Common Stock to W-H Investment at an
exercise price of $ per share for approximately $12.0 million, (iv) issued the
Subordinated Notes to an affiliate of W-H Investment for $24.0 million and (v)
issued warrants to purchase shares of Common Stock at an exercise price
of $ per share to certain members of the Company's management. DLJ Capital
Funding, Inc., an affiliate of Donaldson, Lufkin and Jenrette Securities
Corporation, fully underwrote the $95.0 million Credit Facility, which was
funded in part concurrently with the Recapitalization to repurchase the Common
Stock and options and warrants to purchase Common Stock, to refinance existing
debt and to cash collateralize certain letters of credit. Transaction fees and
expenses relating to the Acquisition totaled approximately $5.9 million, $1.4
million of which was paid to TJC pursuant to the Advisory Agreement. See
"Principal Shareholders," "The Company -- Recapitalization" and "Underwriting."

A portion of the net proceeds to the Company from the Offering will be used
to repay in full the Subordinated Notes, which are held by an affiliate of W-H
Investment. See "Use of Proceeds."

37
<PAGE> 39

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of November 12, 1998, and as adjusted
to reflect the sale of the Common Stock offered hereby, by (i) each director,
(ii) each named executive officer in the Summary Compensation Table, (iii) each
person who is known by the Company to own beneficially 5% or more of the Common
Stock, (iv) all directors and executive officers as a group and (v) all
employees of the Company who own Common Stock as a group (excluding directors
and executive officers). Unless otherwise indicated, each person has sole voting
and dispositive power over the shares indicated as owned by such person.

<TABLE>
<CAPTION>
PERCENTAGE BENEFICIALLY
OWNED(1)
-----------------------
NUMBER BEFORE AFTER
OF SHARES OFFERING OFFERING
<S> <C> <C> <C>
W-H Investment, L.P.(2)..................................... 82%
Kenneth T. White, Jr.(3).................................... 8
David N. Eliff(4)........................................... 2
Jeffrey L. Tepera(5)........................................ -- -- --
John W. Jordan II(6)........................................ -- -- --
David W. Zalaznick(6)....................................... -- -- --
Jonathan F. Boucher(6)...................................... -- -- --
J. Jack Watson(6)........................................... -- -- --
Christopher Mills(7)........................................ 2
Robert H. Whilden, Jr.(8)................................... 1
All directors and officers as a group (9 persons)........... 13
All employees as a group (84 persons)(9).................... 12
</TABLE>

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

* Represents less than 1% of the outstanding Common Stock.

(1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule
13d-3(d), shares not outstanding which are subject to options, warrants,
rights or conversion privileges exercisable within 60 days are deemed
outstanding for the purpose of calculating the number and percentage owned
by such person, but not deemed outstanding for the purpose of calculating
the percentage owned by each other person listed.

(2) Includes warrants to purchase shares of Common Stock. W-H Investment,
L.P. is a limited partnership, for which W-H Investment, G.P. acts as the
General Partner and exercises the voting and investment control over the
Common Stock and warrants. W-H Investment, G.P. is owned by certain
affiliates of The Jordan Company, including John W. Jordan II, David Z.
Zalaznick and Jonathan F. Boucher.

(3) Includes warrants to purchase shares from the Company, warrants to
purchase shares from W-H Investment effective upon consummation of
the Offering and options to purchase shares granted under the 1997
Option Plan which vest upon consummation of the Offering, and excludes
options to purchase shares granted under the 1997 Option Plan.

(4) Includes warrants to purchase shares.

(5) Excludes options to purchase shares granted under the 1997 Option Plan.

(6) Excludes shares and warrants to purchase shares held by W-H
Investment, L.P., of which Mr. Jordan, Mr. Zalaznick, Mr. Boucher and Mr.
Watson are limited partners. Each of Mr. Jordan, Mr. Zalaznick, Mr. Boucher
and Mr. Watson disclaim beneficial ownership of the securities held by W-H
Investment.

(7) Includes warrants to purchase shares.

(8) Includes warrants to purchase shares.

(9) Excludes the shares, warrants to purchase shares and options held by the
directors and executive officers of the Company and options to purchase
shares granted under the 1997 Option Plan.

38
<PAGE> 40

STOCKHOLDERS AGREEMENT

Each holder of outstanding shares of Common Stock of the Company is a party
to a Stockholders Agreement, dated as of August 11, 1997 (the "Stockholders
Agreement"), by and among the Company and such stockholders. The Stockholders
Agreement gives the holders of shares of Common Stock that are a party thereto
certain rights to participate in any registration by the Company of any of the
Company's equity securities for sale to the public pursuant to the Securities
Act, other than in connection with mergers, acquisitions, exchange offers,
dividend reinvestment plans or stock option or other employee benefit plans. The
holders of shares of Common Stock that are a party to the Stockholders Agreement
have waived their rights to participate in the Offering.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of shares of
Common Stock, $1.00 par value per share, and shares of preferred stock,
$1.00 par value per share ("Preferred Stock"). Upon completion of the Offering,
shares of Common Stock will be issued and outstanding ( shares if
the Underwriters exercise their over-allotment option in full) and no shares of
Preferred Stock will be issued and outstanding. As of November 12, 1998, the
Company had outstanding shares of Common Stock held of record by
shareholders.

COMMON STOCK

The rights of the holders of Common Stock are identical in all respects.
All of the shares of Common Stock are validly issued, fully paid and
nonassessable.

The holders of the Common Stock are entitled to one vote for each share
held on all matters submitted to a vote of common shareholders. The shares of
Common Stock do not have cumulative voting rights. Shares of Common Stock have
no preemptive rights, conversion rights, redemption rights or sinking fund
provisions. Except as otherwise required by Texas law, the holders of a majority
of the shares of Common Stock may approve any matter submitted to a vote of the
shareholders of the Company, including the election of directors. The Common
Stock is not subject to redemption by the Company. All shares of Common Stock
issued in the Offering will be validly issued, fully paid and nonassessable.

Subject to the rights of the holders of any class of capital stock of the
Company having 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 of Directors of the Company 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 Company is authorized to issue shares of Preferred Stock. The
Board of Directors of the Company, in its sole discretion, may designate and
issue one or more series of Preferred Stock from the authorized and unissued
shares of Preferred Stock. Subject to limitations imposed by law or the
Company's Restated Articles of Incorporation, the Board of Directors of the
Company is empowered to determine the designation of and the number of shares
constituting a series of Preferred Stock. In addition, the Company's Board of
Directors may designate the dividend rate, the terms and conditions of any
voting and conversion rights, the amounts payable upon redemption or upon
liquidation, dissolution or winding-up of the Company, the provisions of any
sinking fund for the redemption or purchase of shares, and the preferences and
relative rights among the series of Preferred Stock. Such rights, preferences,
privileges and limitations could adversely effect the rights of holders of
Common Stock.

39
<PAGE> 41

CERTAIN PROVISIONS OF THE RESTATED ARTICLES OF INCORPORATION AND BYLAWS

The Company's Restated Articles of Incorporation provide that shareholders
may act by the written consent of holders having not less than the minimum
number of votes necessary to take such action.

TEXAS LAW PROVISION

Generally, Part Thirteen of the Texas Business Corporation Act (the "TBCA")
prohibits a publicly held Texas corporation from engaging in a "business
combination" with an "affiliated shareholder" for a period of three years after
the date of the transaction in which the person became an affiliated
shareholder, unless one of the following events occur: (i) prior to the date of
the business combination, the transaction is approved by the Board of Directors
of the Company; or (ii) no earlier than six months after such date, the business
combination is approved by the affirmative vote of at least two-thirds of the
outstanding voting stock which is not owned by the affiliated shareholder. A
"business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the shareholder. An "affiliated shareholder"
is a person who, together with affiliates and associates, owns (or within three
years, did own) 20% or more of the Company's voting stock.

These and certain other provisions of the TBCA may tend to deter potential
unsolicited offers or other efforts to obtain control of the Company that are
not approved by the Board of Directors. Therefore, the TBCA may deprive the
holders of the Common Stock of opportunities to sell shares of Common Stock at a
premium to then prevailing market prices in connection with a takeover attempt.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is .

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no market for the Common Stock. The
sale, or availability for sale, of substantial amounts of Common Stock in the
public market subsequent to the Offering could adversely affect the prevailing
market price of the shares of Common Stock and could impair the Company's
ability to raise additional capital through the sale of equity securities.

Upon completion of the Offering, the Company will have shares of
Common Stock outstanding. Of these shares, the shares sold in the Offering
will be freely tradable without restriction or further registration under the
Securities Act, except that any shares purchased by "affiliates" of the Company,
as that term is defined under the Securities Act ("Affiliates"), may generally
only be sold in compliance with the limitations of Rule 144 described below.

The remaining shares of Common Stock are deemed "Restricted Shares"
under Rule 144. The number of shares of Common Stock available for sale in the
public market is limited by restrictions under the Securities Act and lock-up
agreements under which the holders of such shares have agreed not to sell or
otherwise dispose of any of their shares for a period of 180 days after the
effective date of this Offering (the "Lock-Up Period") without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Because of these
restrictions, on the date of this Prospectus, no shares other than those offered
hereby will be eligible for sale. Upon expiration of the Lock-Up Period, all of
the Restricted Shares will become available for sale in the public market,
subject to Rule 144 and Rule 701 of the Securities Act.

In general, under Rule 144 of the Securities Act as currently in effect,
beginning 90 days after this Offering, a person (or persons whose shares are
aggregated) who has beneficially owned "restricted" shares for at least one
year, including a person who may be deemed an affiliate of the Company, is
entitled to sell within any three-month period a number of shares of Common
Stock that does not exceed the greater of 1.0% of the then-outstanding shares of
Common Stock ( shares after giving effect to this Offering) or the average
weekly trading volume of the Common Stock during the four calendar weeks
preceding such sale. Sales under Rule 144 of the Securities Act are subject to
certain restrictions relating to manner of sale, notice and the

40
<PAGE> 42

availability of current public information about the Company. In addition, under
Rule 144(k) of the Securities Act, a person who is not an affiliate of the
Company at any time 90 days preceding a sale, and who has beneficially owned
shares for at least one year, would be entitled to sell such shares immediately
following this Offering without regard to the volume limitations, manner of sale
provisions or notice or other requirements of Rule 144 of the Securities Act.

Rule 701 under the Securities Act provides that shares of Common Stock
acquired on the exercise of outstanding options may be resold by persons other
than affiliates beginning 90 days after the date of this Prospectus, subject
only to the manner of sale provisions of Rule 144, and by affiliates, beginning
90 days after the date of this Prospectus, subject to all provisions of Rule 144
except its minimum holding period. The Company intends to register on a
registration statement on Form S-8, shortly after the date of this Prospectus, a
total of shares of Common Stock reserved for issuance under the 1997
Option Plan and its outstanding warrants.

41
<PAGE> 43

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 and
Jefferies & Company, 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 their names below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Jefferies & Company, Inc....................................

Total.............................................
---------
=========
</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 of
Common Stock (other than those covered by the over-allotment option described
below) must be purchased.

The Representatives have advised the Company that the Underwriters propose
to offer the 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 $ per share. The Underwriters may
allow, and such dealers may re-allow to certain other dealers, a concession not
in excess of $ per share. After the initial offering of the Common
Stock, the offering price and the concessions and discounts to dealers may be
changed by the Representatives.

The Company has granted to the Underwriters an option to purchase up to an
aggregate of 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 the Underwriters exercise such option, each of the Underwriters will
be committed, subject to certain conditions, to purchase a number of option
shares proportionate to such Underwriter's initial commitment as indicated in
the preceding table.

The Company has 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.

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 over-allot the Offering,
creating a syndicate short position. The Underwriters may bid for and purchase
Common Stock in the open market to cover such syndicate short position or 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
either of these activities at any time.

The Company, its directors and executive officers, and stockholders have
each agreed that, subject to certain exceptions, during the period beginning on
the date of this Prospectus and continuing to and including the 180th day after
such date, they will not, directly offer, sell, contract to sell or otherwise
dispose of any shares of Common Stock, any securities convertible into or
exercisable or exchangeable for shares of Common Stock or any rights to acquire
shares of Common Stock without the written consent of Donaldson, Lufkin &
Jenrette Securities Corporation.

42
<PAGE> 44

The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.

Prior to the Offering, there has been no public market for the shares of
Common Stock offered hereby. The initial public offering price for the shares
was determined by negotiations between the Company and the Representatives and
does not necessarily reflect the market prices for the Common Stock following
the Offering. Among the principal factors considered in determining the initial
public offering price were prevailing economic prospects, the sales, earnings
and financial and operating performance of the Company in recent periods, the
future prospects of the Company, market valuations of companies in related
businesses and the history and prospects for the industries in which the Company
competes. Additionally, consideration has been given to the general condition of
the securities markets, the market for new issues of securities and the demand
for securities of comparable companies.

Application has been made to list the Common Stock on the New York Stock
Exchange under the symbol " ". The Underwriters have undertaken to
sell the shares of Common Stock in the Offering in such a manner as to ensure
that the New York Stock Exchange distribution standards will be met.

DLJ Capital, Inc. served as the syndication and administrative agent to the
lenders in connection with the Credit Facility funded in October 1997. DLJ
Capital, Inc. is an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation. DLJ Capital, Inc. received customary compensation in connection
with its role in the placement of such facility. In addition, DLJ Capital, Inc.
is the lender of approximately $ million of the amounts currently outstanding
under the Credit Facility. It is currently anticipated that approximately $
million of such indebtedness will be repaid with a portion of the proceeds of
the Offering.

As a result of the repayment of indebtedness owed to DLJ Capital, Inc., the
Offering is subject to the provisions of Section 2720 of the Conduct Rules of
the NASD (formerly Schedule E to the Bylaws of the NASD) ("Section 2720").
Accordingly, the underwriting arrangements for the Offering will conform with
the requirements set forth in Section 2720. In particular, the price at which
the Offering is to be distributed to the public must be a price no higher than
that recommended by a "qualified independent underwriter" who has also
participated in the preparation of the Prospectus and the Registration Statement
of which the Prospectus is a part and who meets certain standards. In accordance
with this requirement, Jefferies & Company, Inc. will serve in such role and
will recommend the public offering price in compliance with the requirements of
Section 2720. Jefferies & Company, Inc., in its role as qualified independent
underwriter, has performed the due diligence investigations and reviewed and
participated in the preparation of the Prospectus and the Registration Statement
of which the Prospectus forms a part.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Vinson & Elkins L.L.P., Houston, 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. Robert H.
Whilden, Jr., a partner of Vinson & Elkins L.L.P., is a director of the Company.
See "Principal Shareholders" for a description of Common Stock and warrants to
purchase Common Stock held by Mr. Whilden.

EXPERTS

The audited financial statements included in this Prospectus and
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein upon the authority of said firm as experts in giving said
reports.

43
<PAGE> 45

AVAILABLE INFORMATION

The Company has not previously been subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended. The Company has filed with
the Securities and Exchange Commission (the "Commission") a Registration
Statement on Form S-1 (the "Registration Statement") under the Securities Act,
with respect to the offer and sale of Common Stock pursuant to this Prospectus.
This Prospectus, filed as a part of the Registration Statement, does not contain
all of the information set forth in the Registration Statement or the exhibits
and schedules thereto in accordance with the rules and regulations of the
Commission and reference is hereby made to such omitted information. Statements
made in this Prospectus concerning the contents of any contract, agreement or
other document filed as an exhibit to the Registration Statement are summaries
of the terms of such contracts, agreements or documents and are not necessarily
complete. Reference is made to each such exhibit for a more complete description
of the matters involved and such statements shall be deemed qualified in their
entirety by such reference. The Registration Statement and the exhibits and
schedules thereto filed with the Commission may be inspected, without charge,
and copies may be obtained at prescribed rates, at the public reference facility
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
7 World Trade Center, 13th Floor, New York, New York 10048 and CitiCorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60621-2511. For further
information pertaining to the Common Stock offered by this Prospectus and the
Company, reference is made to the Registration Statement.

The Company intends to furnish its shareholders with annual reports
containing audited financial statements certified by independent auditors and
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial statements.

44
<PAGE> 46

W-H ENERGY SERVICES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

I. W-H ENERGY SERVICES, INC.

<TABLE>
<S> <C>
Pro Forma:

Unaudited Pro Forma Consolidated Balance Sheet as of June
30, 1998.................................................. F-3
Unaudited Pro Forma Consolidated Statement of Operations for
the Year Ended December 31, 1997.......................... F-4
Unaudited Pro Forma Consolidated Statement of Operations for
the Six Months Ended June 30, 1998........................ F-5
Notes to Unaudited Pro Forma Consolidated Financial
Statements................................................ F-6

Historical:

Report of Independent Public Accountants.................... F-7
Consolidated Balance Sheets as of December 31, 1996 and
1997, and June 30, 1998 (unaudited)....................... F-8
Consolidated Statements of Operations for the Years Ended
September 30, 1995 and 1996, the Three Months Ended
December 31, 1996, the Year Ended December 31, 1997, and
the Six Months Ended June 30, 1997 and 1998 (unaudited)... F-9
Consolidated Statements of Shareholders' Equity (Deficit)
for the Years Ended September 30, 1995 and 1996, the Three
Months Ended December 31, 1996, the Year Ended December
31, 1997, and the Six Months Ended June 30, 1998
(unaudited)............................................... F-10
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1995 and 1996, the Three Months Ended
December 31, 1996, the Year Ended December 31, 1997, and
the Six Months Ended June 30, 1997 and 1998 (unaudited)... F-11
Notes to Consolidated Financial Statements.................. F-12
II. INTEGRITY INDUSTRIES, INC.
Report of Independent Public Accountants.................... F-27
Balance Sheets as of December 31, 1996, and September 24,
1997...................................................... F-28
Statements of Operations for the Year Ended December 31,
1996, and the Eight Months and Twenty-Four Days Ended
September 24, 1997........................................ F-29
Statements of Shareholders' Equity (Deficit) for the Year
Ended December 31, 1996, and the Eight Months and
Twenty-Four Days Ended September 24, 1997................. F-30
Statements of Cash Flows for the Year Ended December 31,
1996, and the Eight Months and Twenty-Four Days Ended
September 24, 1997........................................ F-31
Notes to Financial Statements............................... F-32
III. GRINDING AND SIZING COMPANY, INC. AND AFFILIATES
Report of Independent Public Accountants.................... F-34
Combined Balance Sheets as of December 31, 1996 and 1997,
and March 31, 1998 (unaudited)............................ F-35
Combined Statements of Operations for the Years Ended
December 31, 1996 and 1997, and the Three Months Ended
March 31, 1997 and 1998 (unaudited)....................... F-36
Combined Statements of Shareholders' Equity for the Years
Ended December 31, 1996 and 1997, and the Three Months
Ended March 31, 1998 (unaudited).......................... F-37
Combined Statements of Cash Flows for the Years Ended
December 31, 1996 and 1997, and the Three Months Ended
March 31, 1997 and 1998 (unaudited)....................... F-38
Notes to Combined Financial Statements...................... F-39
</TABLE>

F-1
<PAGE> 47

<TABLE>
<S> <C>
IV. AGRI-EMPRESA INC. AND AFFILIATES
Report of Independent Public Accountants.................... F-44
Combined Balance Sheets as of December 31, 1996 and 1997,
and June 30, 1998 (unaudited)............................. F-45
Combined Statements of Operations for the Years Ended
December 31, 1996 and 1997, and the Six Months Ended June
30, 1997 and 1998 (unaudited)............................. F-46
Combined Statements of Shareholders' Equity for the Years
Ended December 31, 1996 and 1997, and the Six Months Ended
June 30, 1998 (unaudited)................................. F-47
Combined Statements of Cash Flows for the Years Ended
December 31, 1996 and 1997, and the Six Months Ended June
30, 1997 and 1998 (unaudited)............................. F-48
Notes to Combined Financial Statements...................... F-49
</TABLE>

F-2
<PAGE> 48

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma consolidated financial information is
derived from the historical financial statements of W-H, Integrity, Grinding and
Sizing and Agri-Empresa included elsewhere in this Prospectus. The following
unaudited pro forma consolidated balance sheet as of June 30, 1998 gives effect
to the Agri-Empresa Acquisition and the Offering and the application of the
estimated net proceeds therefrom, as if such events occurred on June 30, 1998.
The unaudited pro forma consolidated statements of operations for the year ended
December 31, 1997 and the six months ended June 30, 1998 give effect to: (i) the
Integrity Acquisition, (ii) the Grinding and Sizing Acquisition, (iii) the
Agri-Empresa Acquisition, (iv) the Recapitalization and (v) the Offering and the
application of the estimated net proceeds therefrom, in each case as if such
events had occurred on January 1, 1997.

The unaudited pro forma financial information does not purport to represent
what the Company's results of operations actually would have been had these
events, in fact, occurred at the pro forma dates nor are they intended to
project the Company's results of operations for any future period or date. The
unaudited pro forma consolidated financial information should be read in
conjunction with the historical financial statements appearing elsewhere in this
Prospectus.

W-H ENERGY SERVICES, INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

JUNE 30, 1998

(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
HISTORICAL
------------------------ PRO FORMA AS
THE PRO FORMA PRO FORMA OFFERING ADJUSTED FOR
COMPANY AGRI-EMPRESA ADJUSTMENTS BEFORE OFFERING ADJUSTMENTS THE OFFERING
-------- ------------- ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.... $ 904 $ 1,172 $(1,147)(2) $ 929 $ -- $ 929
Accounts receivable, net..... 19,013 3,529 -- 22,542 -- 22,542
Income tax receivable........ 1,605 -- -- 1,605 -- 1,605
Inventories.................. 6,143 2,446 -- 8,589 -- 8,589
Prepaid expenses and other... 315 258 -- 573 -- 573
-------- ------- ------- -------- -------- --------
Total current
assets.............. 27,980 7,405 (1,147) 34,238 -- 34,238
Property and equipment, net.... 45,551 2,634 (1,000)(2) 47,185 -- 47,185
Goodwill and other intangibles,
net.......................... 28,371 -- 16,146(2) 44,517 -- 44,517
Other assets, net.............. 3,385 118 640(3) 4,143 (400)(4) 3,743
-------- ------- ------- -------- -------- --------
Total assets.......... $105,287 $10,157 $14,639 $130,083 $ (400) $129,683
======== ======= ======= ======== ======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of
long-term debt............. $ 2,663 $ 591 $ (591)(2) $ 2,663 $ -- $ 2,663
Accounts payable and accrued
liabilities................ 10,248 2,856 -- 13,104 -- 13,104
-------- ------- ------- -------- -------- --------
Total current
liabilities......... 12,911 3,447 (591) 15,767 -- 15,767
Long-term debt, net of current
maturities................... 119,449 1,026 (1,026)(2) 141,224 (90,000)(1) 51,224
21,775(3)

Deferred income taxes.......... 1,407 -- -- 1,407 -- 1,407
Shareholders' equity
(deficit).................... (28,480) 5,684 (5,684)(2) (28,315) 90,000(1) 61,285
165(2) (400)(4)
-------- ------- ------- -------- -------- --------

Total liabilities and
shareholders'
deficit............. $105,287 $10,157 $14,639 $130,083 $ (400) $129,683
======== ======= ======= ======== ======== ========
</TABLE>

See accompanying notes to the unaudited pro forma consolidated financial
statements.

F-3
<PAGE> 49

W-H ENERGY SERVICES, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1997

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------ PRO FORMA AS
THE GRINDING AGRI- PRO FORMA PRO FORMA OFFERING ADJUSTED FOR
COMPANY INTEGRITY AND SIZING EMPRESA ADJUSTMENTS BEFORE OFFERING ADJUSTMENTS THE OFFERING
------- --------- ---------- ------- ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............... $59,833 $8,331 $7,599 $31,187 $ -- $106,950 $ -- $106,950
Costs and Expenses:
Operating expenses... 25,889 5,578 4,027 25,260 -- 60,754 -- 60,754
Depreciation and
amortization....... 5,870 81 140 530 1,092(5) 7,713 -- 7,713
Selling, general, and
administrative..... 17,279 1,832 959 1,985 (400)(6) 21,655 -- 21,655
Recapitalization
compensation
charge............. 13,453 -- -- -- (13,453)(7) -- -- --
------- ------ ------ ------- -------- -------- ------- --------
Total costs and
expenses..... 62,491 7,491 5,126 27,775 (12,761) 90,122 -- 90,122
Income (loss) from
operations........... (2,658) 840 2,473 3,412 12,761 16,828 -- 16,828
Other expense (income):
Interest expense..... 4,733 164 22 163 4,332(8) 13,145 (8,888)(11) 4,257
3,731(9)
Other (income)
expense, net....... (8) (27) 23 (172) -- (184) -- (184)
------- ------ ------ ------- -------- -------- ------- --------
Income (loss) before
income taxes......... (7,383) 703 2,428 3,421 4,698 3,867 8,888 12,755
Provision (benefit) for
income taxes......... (1,714) -- 116 191 2,934(10) 1,527 3,511(12) 5,038
------- ------ ------ ------- -------- -------- ------- --------
Net income (loss)...... $(5,669) $ 703 $2,312 $ 3,230 $ 1,764 $ 2,340 $ 5,377 $ 7,717
======= ====== ====== ======= ======== ======== ======= ========
Pro forma diluted
earnings per share... $
========
Pro forma shares
outstanding..........
========
</TABLE>

See accompanying notes to the unaudited pro forma consolidated financial
statements.

F-4
<PAGE> 50

W-H ENERGY SERVICES, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 1998

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
HISTORICAL
----------------------------------- PRO FORMA AS
THE GRINDING PRO FORMA PRO FORMA OFFERING ADJUSTED FOR
COMPANY AND SIZING AGRI-EMPRESA ADJUSTMENTS BEFORE OFFERING ADJUSTMENTS THE OFFERING
------- ---------- ------------ ----------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $42,445 $2,050 $13,858 $ -- $58,353 $ -- $58,353
Costs and Expenses:
Operating expenses.... 17,706 917 11,113 -- 29,736 -- 29,736
Depreciation and
amortization........ 4,631 26 292 360(5) 5,309 -- 5,309
Selling, general, and
administrative...... 11,579 233 782 -- 12,594 -- 12,594
------- ------ ------- ------- ------- ------- -------
Total costs and
expenses..... 33,916 1,176 12,187 360 47,639 -- 47,639
Income from
operations............ 8,529 874 1,671 (360) 10,714 -- 10,714
Other expense (income):
Interest expense...... 5,482 3 78 1,313(9) 6,876 (4,428)(11) 2,448
Other expense
(income), net....... 322 -- (124) -- 198 -- 198
------- ------ ------- ------- ------- ------- -------
Income before income
taxes................. 2,725 871 1,717 (1,673) 3,640 4,428 8,068
Provision for income
taxes................. 1,035 40 57 306(10) 1,438 1,749(12) 3,187
------- ------ ------- ------- ------- ------- -------
Net income (loss)....... $ 1,690 $ 831 $ 1,660 $(1,979) $ 2,202 $ 2,679 $ 4,881
======= ====== ======= ======= ======= ======= =======
Pro forma diluted
earnings per share.... $
=======
Pro forma shares
outstanding...........
=======
</TABLE>

See accompanying notes to the unaudited pro forma consolidated financial
statements.

F-5
<PAGE> 51

W-H ENERGY SERVICES, INC.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

BALANCE SHEET

(1) To record the issuance of shares of Common Stock at an assumed
initial offering price of $ per share, resulting in estimated proceeds
of approximately $90 million.

(2) To reflect the allocation of purchase price related to the acquisition of
Agri-Empresa. The purchase price is the sum of $21,135,000 in cash and
warrants with a fair value of $165,000. Cash and property and equipment
reflect reductions for the distribution of certain assets to the former
Agri-Empresa shareholders prior to the acquisition by the Company. All
Agri-Empresa debt has been eliminated as the Company assumed no debt. The
excess purchase price over the fair value of net assets of Agri-Empresa at
June 30, 1998 of approximately $16.1 million was allocated to goodwill and
other intangibles to be amortized over periods ranging from 12 to 40 years.

(3) To reflect $21,775,000 of debt incurred in connection with the Agri-Empresa
acquisition and the related $640,000 in debt offering costs.

(4) Upon consummation of the Offering, and the application of the net proceeds
therefrom, the Company will recognize a charge of approximately $400,000
for the write-off of deferred financing costs related to the repayment of
the Subordinated Debt with the proceeds from the Offering.

STATEMENTS OF OPERATIONS

(5) To reflect the amortization of goodwill and other intangibles over periods
ranging from 12 to 40 years associated with the Integrity, Grinding and
Sizing and Agri-Empresa acquisitions.

(6) To remove $400,000 of payments to Integrity employees as specified in the
acquisition agreement.

(7) To remove $13,453,000 of non-recurring compensation expense resulting from
the Recapitalization in 1997.

(8) To record interest expense for $24 million of subordinated debt at 12.5%
and $60 million of bank debt at 8.66% incurred in connection with the
Recapitalization and record the amortization of debt offering costs as if
the Recapitalization occurred on January 1, 1997.

(9) To record interest expense at an interest rate of 8.92% for bank borrowings
of $44,410,000 incurred to consummate the Integrity, Grinding and Sizing
and Agri-Empresa acquisitions and to reflect the related debt amortization
costs.

(10) To adjust the Company's provision for income taxes to give effect to the
acquisition of Integrity, Grinding and Sizing and Agri-Empresa.

(11) To record a reduction in interest expense as a result of the repayment of
$24 million subordinated debt with an interest rate of 12.5% and bank debt
of $66 million with an interest rate of 8.92% under the Company's senior
credit facility from the net proceeds of the Offering.

(12) To adjust the Company's provision for income taxes to give effect to the
Offering.

F-6
<PAGE> 52

After the stock split discussed in Note 9 has been effected and properly
reflected in the Company's consolidated financial statements and related notes
thereto, we expect to be in a position to render the following audit report.

ARTHUR ANDERSEN LLP

July 27, 1998

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of

W-H Energy Services, Inc.:

We have audited the accompanying consolidated balance sheets of W-H Energy
Services, Inc. (a Texas corporation), as of December 31, 1996 and 1997, and the
related consolidated statements of operations, shareholders' equity (deficit)
and cash flows for the years ended September 30, 1995 and 1996, the three month
period ended December 31, 1996 and the year ended December 31, 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 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 W-H Energy Services, Inc. as
of December 31, 1996 and 1997, and the results of its operations and its cash
flows for the years ended September 30, 1995 and 1996, the three month period
ended December 31, 1996 and the year ended December 31, 1997, in conformity with
generally accepted accounting principles.

Houston, Texas

F-7
<PAGE> 53

W-H ENERGY SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------ JUNE 30,
1996 1997 1998
------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 618 $ 1,670 $ 904
Accounts receivable, net.................................. 7,859 18,403 19,013
Income tax receivable..................................... -- 1,605 1,605
Inventories............................................... 2,015 3,737 6,143
Prepaid expenses and other................................ 360 291 315
------- -------- --------
Total current assets.............................. 10,852 25,706 27,980
PROPERTY AND EQUIPMENT, net................................. 19,235 34,110 45,551
GOODWILL and other intangibles, net......................... 4,310 19,802 28,371
OTHER ASSETS, net........................................... 918 3,363 3,385
------- -------- --------
Total assets...................................... $35,315 $ 82,981 $105,287
======= ======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 2,037 $ 2,106 $ 2,663
Accounts payable and accrued liabilities.................. 4,010 10,918 10,248
------- -------- --------
Total current liabilities......................... 6,047 13,024 12,911
LONG-TERM DEBT, net of current maturities................... 13,541 99,562 119,449
DEFERRED INCOME TAXES....................................... 2,296 557 1,407
OTHER LONG-TERM LIABILITIES................................. 358 118 --
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
Class A common stock, $1.00 par value, 900,000 shares
authorized, 690,906, 275,000 and 275,000 shares issued
and outstanding, respectively.......................... 691 275 275
Class B common stock, $1.00 par value, 100,000 shares
authorized, none issued and outstanding................ -- -- --
Additional paid-in capital................................ 8,713 -- 110
Retained earnings (deficit)............................... 3,669 (30,555) (28,865)
------- -------- --------
Total shareholders' equity (deficit).............. 13,073 (30,280) (28,480)
------- -------- --------
Total liabilities and shareholders' equity
(deficit)....................................... $35,315 $ 82,981 $105,287
======= ======== ========
</TABLE>

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

F-8
<PAGE> 54

W-H ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE FOR THE SIX
ENDED THREE MONTHS FOR THE YEAR MONTHS ENDED
SEPTEMBER 30, ENDED ENDED JUNE 30,
----------------- DECEMBER 31, DECEMBER 31, -----------------
1995 1996 1996 1997 1997 1998
------- ------- ------------ ------------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUES................................... $27,360 $36,215 $10,088 $59,833 $23,834 $42,445
COSTS AND EXPENSES:
Operating expenses....................... 11,931 15,447 4,401 25,889 9,523 17,706
Depreciation and amortization............ 2,489 3,395 1,017 5,870 2,400 4,631
Selling, general and administrative...... 9,078 10,955 3,071 17,279 6,883 11,579
Recapitalization compensation charge..... -- -- -- 13,453 -- --
------- ------- ------- ------- ------- -------
Total costs and expenses.......... 23,498 29,797 8,489 62,491 18,806 33,916
------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM
OPERATIONS............................... 3,862 6,418 1,599 (2,658) 5,028 8,529
OTHER EXPENSE (INCOME):
Interest expense......................... 1,003 1,301 340 4,733 738 5,482
Other expense (income), net.............. 5 18 48 (8) (17) 322
------- ------- ------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES.......... 2,854 5,099 1,211 (7,383) 4,307 2,725
PROVISION (BENEFIT) FOR INCOME TAXES....... 1,258 1,985 472 (1,714) 1,662 1,035
------- ------- ------- ------- ------- -------
NET INCOME (LOSS).......................... $ 1,596 $ 3,114 $ 739 $(5,669) $ 2,645 $ 1,690
======= ======= ======= ======= ======= =======
</TABLE>

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

F-9
<PAGE> 55

W-H HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

(IN THOUSANDS)

<TABLE>
<CAPTION>
CLASS A
COMMON
STOCK ISSUED UNEARNED
-------------- ADDITIONAL PORTION OF RETAINED
PAR PAID-IN RESTRICTED EARNINGS
SHARES VALUE CAPITAL STOCK (DEFICIT) TOTAL
------ ----- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, September 30, 1994................................. 678 $ 678 $ 8,404 $(457) $ (1,780) $ 6,845
RESTRICTED STOCK EXPENSE.................................... -- -- -- 204 -- 204
NET INCOME.................................................. -- -- -- -- 1,596 1,596
---- ----- -------- ----- -------- --------
BALANCE, September 30, 1995................................. 678 678 8,404 (253) (184) 8,645
RESTRICTED STOCK EXPENSE.................................... -- -- -- 204 -- 204
PROCEEDS FROM THE SALE OF COMMON STOCK...................... 3 3 95 -- -- 98
EXERCISE OF STOCK OPTIONS................................... 10 10 123 -- -- 133
INCOME TAX BENEFIT FROM STOCK OPTIONS EXERCISED............. -- -- 91 -- -- 91
NET INCOME.................................................. -- -- -- -- 3,114 3,114
---- ----- -------- ----- -------- --------
BALANCE, September 30, 1996................................. 691 691 8,713 (49) 2,930 12,285
RESTRICTED STOCK EXPENSE.................................... -- -- -- 49 -- 49
NET INCOME.................................................. -- -- -- -- 739 739
---- ----- -------- ----- -------- --------
BALANCE, December 31, 1996.................................. 691 691 8,713 -- 3,669 13,073
INCOME TAX BENEFIT FROM PURCHASE OF RESTRICTED STOCK........ -- -- 984 -- -- 984
ISSUANCE OF STOCK PURCHASE WARRANTS......................... -- -- 130 -- -- 130
CONVERSION OF DEBT TO COMMON STOCK IN CONNECTION WITH
RECAPITALIZATION.......................................... 10 10 490 -- -- 500
PROCEEDS FROM THE SALE OF COMMON STOCK IN CONNECTION WITH
RECAPITALIZATION, net of transaction costs of $3,334...... 220 220 8,490 -- -- 8,710
REPURCHASE OF OUTSTANDING COMMON STOCK AND WARRANTS IN
CONNECTION WITH RECAPITALIZATION.......................... (646) (646) (18,807) -- (28,555) (48,008)
NET LOSS.................................................... -- -- -- -- (5,669) (5,669)
---- ----- -------- ----- -------- --------
BALANCE, December 31, 1997.................................. 275 275 -- -- (30,555) (30,280)
ISSUANCE OF STOCK PURCHASE WARRANTS......................... -- -- 110 -- -- 110
NET INCOME, unaudited....................................... -- -- -- -- 1,690 1,690
---- ----- -------- ----- -------- --------
BALANCE, June 30, 1998, unaudited........................... 275 $ 275 $ 110 $ -- $(28,865) $(28,480)
==== ===== ======== ===== ======== ========
</TABLE>

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

F-10
<PAGE> 56

W-H ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEARS FOR THE FOR THE SIX
ENDED THREE MONTHS FOR THE YEAR MONTHS ENDED
SEPTEMBER 30, ENDED ENDED JUNE 30,
----------------- DECEMBER 31, DECEMBER 31, ------------------
1995 1996 1996 1997 1997 1998
------- ------- ------------ ----------------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................ $ 1,596 $ 3,114 $ 739 $(5,669) $ 2,645 $ 1,690
Adjustments to reconcile net income (loss) to
cash provided by operating activities --
Depreciation and amortization.............. 2,489 3,395 1,017 5,870 2,400 4,631
Deferred tax provision(benefit)............ 1,078 930 125 (1,739) 674 850
Compensation expense incurred in connection
with repurchase of stock options......... -- -- -- 13,453 -- --
Restricted stock expense................... 204 204 49 -- -- --
Change in assets and liabilities, excluding
effects of acquisitions --
(Increase) decrease in accounts
receivable, net........................ (851) (1,825) 440 (7,685) (2,401) (285)
(Increase) decrease in prepaid expenses
and other.............................. (191) 3 29 109 11 (24)
Increase in inventories.................. (48) (483) (440) (167) (96) (1,867)
Increase in income tax receivable........ -- -- -- (1,605) -- --
Decrease (increase) in other assets,
net.................................... 34 -- -- (2,761) 28 (22)
Increase (decrease) in accounts payable,
accrued liabilities and other long-term
liabilities............................ 513 (24) 94 4,533 1,616 (1,084)
------- ------- ------- ------- ------- --------
Net cash provided by operating
activities............................... 4,824 5,314 2,053 4,339 4,877 3,889
------- ------- ------- ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of cash
acquired................................... -- (4,617) -- (16,248) -- (8,775)
Additions to machinery and equipment......... (4,104) (7,146) (3,094) (20,810) (8,003) (15,680)
Proceeds from sale of machinery and
equipment.................................. 482 772 224 1,431 796 156
------- ------- ------- ------- ------- --------
Net cash used in investing activities...... (3,622) (10,991) (2,870) (35,627) (7,207) (24,299)
------- ------- ------- ------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of debt........... 2,800 5,985 2,000 102,950 7,778 20,750
Payments on debt............................. (4,055) (651) (1,488) (18,843) (5,672) (1,106)
Proceeds from the issuance of common stock,
net of offering costs...................... -- 231 -- 8,710 -- --
Repurchase of outstanding common stock, stock
options and warrants....................... -- -- -- (61,461) -- --
Income tax benefit from repurchase of
restricted stock........................... -- 91 -- 984 -- --
------- ------- ------- ------- ------- --------
Net cash (used in) provided by financing
activities............................... (1,255) 5,656 512 32,340 2,106 19,644
------- ------- ------- ------- ------- --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS.................................. (53) (21) (305) 1,052 (224) (766)
CASH AND CASH EQUIVALENTS, beginning of
period....................................... 997 944 923 618 618 1,670
------- ------- ------- ------- ------- --------
CASH AND CASH EQUIVALENTS, end of period....... $ 944 $ 923 $ 618 $ 1,670 $ 394 $ 904
======= ======= ======= ======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid during the period............ $ 1,009 $ 1,304 $ 327 $ 3,267 $ 745 $ 5,077
======= ======= ======= ======= ======= ========
Income taxes paid during the period........ $ 615 $ 718 $ 109 $ 1,052 $ 937 $ 185
======= ======= ======= ======= ======= ========
</TABLE>

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

F-11
<PAGE> 57

W-H ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS ORGANIZATION:

DESCRIPTION OF COMPANY

W-H Energy Services, Inc. (collectively with its subsidiaries, W-H or the
Company), is a diversified energy service company that provides a variety of
services and equipment to the oil and gas industry on the Gulf Coast through its
subsidiaries, Charles Holston, Inc. (Holston), Well Safe, Inc. (Well Safe),
Perf-O-Log, Inc. (POL), Thomas Tools, Inc. (Thomas Tools), Drill Motor Services,
Inc. (DMS), Diamond Wireline, Inc. (Diamond) and Integrity Industries, Inc.
(Integrity). The Company was incorporated on April 10, 1989, under the laws of
the state of Texas. Effective February 6, 1998, the Company changed its name
from W-H Holdings, Inc. to W-H Energy Services, Inc.

In December 1997, the Company filed a registration statement on Form S-1
(the Registration Statement) for the sale of its common stock (the Offering). An
investment in shares of common stock involves a high degree of risk. The
Company's business depends in large part on the conditions of the oil and gas
industry, and specifically on the capital investment of the Company's customers.
The demand for oilfield services has traditionally been cyclical, as purchases
of products and services such as those provided by the Company are, to a
substantial extent, deferrable in the event oil and gas companies reduce their
capital investment as a result of conditions existing in the oil and gas
industry or general economic downturns. The Company's results in recent periods
have benefitted from improved market conditions for the Company's products and
services associated with an increase in drilling and workover activity and the
trend towards the drilling of deeper wells in harsh environments. There can be
no assurance that the current market conditions will continue. Any material
decline in the current level of drilling and workover activity could have a
material adverse impact on the Company's future results. Other risk factors
include, but are not limited to, competition, risks relating to the Company's
acquisition strategy, risks relating to acquisition financing and reliance on
key personnel. Assuming the Offering is delayed or not successful and a downturn
occurs in the oilfield services industry, management believes that cash flows
anticipated to be generated from operations together with the Company's existing
credit capacity will provide sufficient liquidity for its foreseeable needs. See
"Risk Factors" included in this Prospectus.

RECAPITALIZATION OF W-H ENERGY SERVICES, INC.

On August 11, 1997, the Company's Board of Directors approved a series of
equity and debt transactions which resulted in a recapitalization of the Company
and a change in controlling ownership of the common stock outstanding (the
Recapitalization). In connection with the Recapitalization, the Company's Board
of Directors (i) approved the repurchase and retirement of 645,906 shares of
Class A common stock and warrants for the purchase of 15,050 shares of Class A
common stock for approximately $48.1 million, (ii) approved the repurchase of
251,500 outstanding options for approximately $13.5 million which was charged to
operating expenses in the accompanying consolidated statement of operations for
the year ending December 31, 1997, (iii) approved the execution of a $95.0
million senior secured credit facility (the Credit Facility) which was used to
fund the repurchase of the Class A common stock, options, warrants and to retire
the outstanding borrowings under the Company's loan agreement with a bank (See
Note 5), (iv) approved the issuance of 220,000 new shares of Class A common
stock and warrants to purchase 37,813 shares of Class A common stock at an
exercise price of $73 per share for approximately $12.0 million to W-H
Investment L.P., a limited partnership organized by The Jordan Company (Jordan),
a private merchant banking firm, (v) the issuance of subordinated debentures in
the amount of $24.0 million to an affiliate of Jordan, and (vi) the issuance of
warrants to purchase 30,937 shares of Class A common stock to continuing members
of management at an exercise price of $73 per share (See Note 9). After the
Recapitalization, W-H Investments L.P. owned approximately 80% of the
outstanding Class A Common Stock. Expenses of approximately $5.9 million were
incurred in connection with the Recapitalization, of which $3.3 million was
recorded as a reduction to equity and $2.6 million was capitalized as debt
offering costs, which is included in other assets in the accompanying financial
statements, and will be amortized over the term of the applicable

F-12
<PAGE> 58

W-H ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

debt agreements. In connection with the Recapitalization, $500,000 of
convertible debentures were converted into 10,000 shares of Class A common
stock.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CONSOLIDATION AND PRESENTATION

The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated. Effective December 31, 1996, the Company
changed its year end from September 30 to December 31.

INTERIM FINANCIAL INFORMATION

The interim financial information as of June 30, 1998 and for the six
months ended June 30, 1997 and 1998 are unaudited, and certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principals, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position with respect to
the interim financial statements, and of the results of operations and cash
flows for the interim periods then ended, have been included. The results of
operations for the interim periods are not necessarily indicative of the results
for the entire year.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include highly liquid investments with an
original maturity of three months or less.

ACCOUNTS RECEIVABLE

Accounts receivable have a concentration of credit risk in the oil and gas
industry. The Company performs continuing credit evaluations of its customers
and generally does not require collateral. Historically, the Company has not
experienced significant losses related to receivables from individual customers
or groups of customers. Accounts receivable have been recorded net of an
allowance for doubtful accounts of approximately $479,000 and $1,223,000 at
December 31, 1996 and 1997, respectively.

INVENTORIES

Inventory is stated at the lower of cost or market, determined on a
first-in, first-out basis. Inventory consists primarily of equipment parts,
explosives, raw materials and supplies.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Expenditures for major
additions and improvements are capitalized while minor replacements, maintenance
and repairs which do not improve or extend the life of such assets are charged
to operations as incurred. Disposals are removed at cost less accumulated
depreciation, and any resulting gain or loss is reflected in the accompanying
consolidated statements of operations.

F-13
<PAGE> 59

W-H ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Depreciation is calculated using the straight-line method over the
estimated useful lives of the depreciable assets. Capital leases and leasehold
improvements are amortized over the shorter of their useful lives or the term of
the lease. The useful lives of the major classes of property and equipment are
as follows:

<TABLE>
<CAPTION>
LIFE
----
<S> <C>
Machinery and equipment..................................... 2-15
Automobiles and trucks...................................... 5
Office equipment, furniture and fixtures.................... 5
Leasehold improvements...................................... 5-39
</TABLE>

GOODWILL AND OTHER INTANGIBLES

Goodwill represents the excess of the aggregate price paid by the Company
in acquisitions accounted for as purchases over the fair market value of the
tangible and identifiable intangible net assets acquired. Goodwill and other
intangibles are being amortized on a straight-line basis over periods ranging
from 23 to 40 years. Amortization expense charged to operations totaled
approximately $39,000, $96,000 $28,000 and $192,000 for the years ended
September 30, 1995 and 1996, the three months ended December 31, 1996 and the
year ended December 31, 1997, respectively.

Goodwill and other intangibles at December 31, 1996 and 1997 consisted of
the following (in thousands):

<TABLE>
<CAPTION>
1996 1997
------ -------
<S> <C> <C>
Goodwill.................................................... $4,470 $19,654
Workforce................................................... -- 500
------ -------
Total............................................. 4,470 20,154
Less Accumulated amortization............................... (160) (352)
------ -------
Net............................................... $4,310 $19,802
====== =======
</TABLE>

REALIZATION OF LONG-LIVED ASSETS

Effective October 1, 1996, the Company adopted Statement of Financial
Accounting Standard (SFAS) No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." Accordingly, in the event
that facts and circumstances indicate that property and equipment and intangible
or other assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with the asset are compared to the asset's carrying amount to
determine if a write-down to market value is necessary. Adoption of this
standard did not have a material effect on the financial position or results of
operations of the Company.

REVENUE RECOGNITION AND OPERATING EXPENSES

The Company recognizes revenues for services at the time such services are
rendered. The primary components of operating expenses are those salaries,
expendable supplies, repairs and maintenance and general operational costs that
are directly associated with the services performed by the Company for its
customers.

INCOME TAXES

The Company utilizes the liability method of accounting for income taxes as
required by SFAS No. 109, "Accounting for Income Taxes." Under the liability
method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying values of existing assets and liabilities and their respective tax
bases based on enacted tax rates.

F-14
<PAGE> 60

W-H ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

USE OF ESTIMATES

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

FINANCIAL INSTRUMENTS

The Company considers the fair value of all financial instruments not to be
materially different from their carrying values at the end of each fiscal year
based on management's estimate of the Company's ability to borrow funds under
terms and conditions similar to those of the Company's existing debt.

ACCOUNTING FOR STOCK-BASED COMPENSATION

In 1995, the Financial Accounting Standards Board (FASB) issued SFAS No.
123, "Accounting for Stock-Based Compensation," which is effective for the
Company's year ended December 31, 1997. SFAS No. 123 allows the Company to adopt
either of two methods for accounting for stock options. The Company intends to
continue to account for its stock-based compensation plans under APB Opinion No.
25, "Accounting for Stock Issued to Employees." In accordance with SFAS No. 123,
certain pro forma disclosures are provided in Note 9.

PER SHARE DATA

The Company, as required, adopted SFAS No. 128, "Earnings Per Share" in
1997. SFAS No. 128 revised the historical methodology used in computing earnings
per share (EPS) such that the computations required for primary and fully
diluted EPS were replaced with basic and diluted EPS. Basic EPS is computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the year. Diluted EPS is computed in the same manner as fully
diluted EPS, except that, among other changes, the average share price for the
period is used in all cases when applying the treasury stock method to
potentially dilutive outstanding options. As a result of the impact of the
Recapitalization on the Company's historical results of operations and equity
structure, no historical per share information is reflected herein. Reference is
made to pro forma per share information included in the unaudited pro forma
financial statements included herein.

SEGMENT REPORTING

The Company will adopt SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information" in 1998. SFAS No. 131 provides revised
disclosure guidelines for segments of an enterprise based on a management
approach to defining operating segments.

F-15
<PAGE> 61

W-H ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. ACQUISITIONS:

DIAMOND WIRELINE, INC.

On October 14, 1997, the Company acquired all of the outstanding stock of
Diamond for consideration of approximately $3.1 million in cash resulting in
goodwill of approximately $2.3 million which is being amortized over 40 years on
a straight-line basis. Diamond provides wireline services to the oil and gas
industry along the Texas and Louisiana Gulf Coast. The Diamond acquisition has
been accounted for as a purchase; therefore, the accompanying statements of
operations reflect the results of Diamond's operations since its acquisition
date. The purchase price and direct acquisition costs were allocated based on
the fair value of the assets acquired and liabilities assumed.

INTEGRITY INDUSTRIES, INC.

On September 25, 1997, W-H acquired 100 percent of the issued and
outstanding stock of Integrity for total consideration of approximately $13.4
million resulting in goodwill of approximately $13.4 million which is being
amortized over 40 years on a straight-line basis. The Integrity acquisition was
funded by the senior secured delayed term loan facility (see Note 5). Integrity
is a manufacturer and wholesaler of specialty chemicals and drilling fluid
products. The former shareholders of Integrity agreed to indemnify the Company
for any aggregate liabilities in excess of $50,000 that occurred prior to the
Company's purchase of Integrity but were not reflected on the acquisition
financial statements. This indemnification liability shall not exceed the
purchase price.

The purchase price and estimated fair market value of the assets acquired
and liabilities assumed with the Integrity acquisition are as follows (in
thousands):

<TABLE>
<S> <C>
Cash paid................................................... $13,000
Debt issued................................................. 200
Warrants issued to former owners............................ 130
Acquisition costs........................................... 27
-------
Total purchase price.............................. $13,357
=======
Net assets acquired
Current assets............................................ $ 3,900
Property and equipment, net............................... 314
Goodwill and other intangibles............................ 13,386
Current liabilities....................................... (1,895)
Other liabilities......................................... (2,348)
-------
Net assets acquired............................... $13,357
=======
</TABLE>

The Integrity acquisition has been accounted for as a purchase; therefore,
the accompanying statements of operations reflect the results of Integrity's
operations since its acquisition date. The purchase price and direct acquisition
costs were allocated based on the fair value of the assets acquired and
liabilities assumed.

The following table reflects on an unaudited consolidated pro forma basis
the results of operations as though Integrity had been acquired as of the
beginning of the Company's fiscal years 1996 and 1997. Appropriate adjustments
have been made to reflect the accounting basis used in recording the Integrity
acquisition. These pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of the results of operations that would
have resulted had the combination been in effect on the date indicated, that
have resulted since the date of acquisition or that may result in the future.

F-16
<PAGE> 62

W-H ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1996 1997
------------- ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Total revenues................................... $47,117 $12,659 $68,164
Net income (loss)................................ 2,735 665 (5,909)
</TABLE>

DRILL MOTOR SERVICES, INC.

On December 15, 1995, the Company acquired all of the outstanding stock of
DMS, a Louisiana-based company engaged in the rental and sale of fluid-driven
drilling motors to end-users. This transaction has been accounted for as a
purchase, and the accompanying financial statements include the results of
operations of DMS from the date of purchase. The purchase price of $4.5 million
was paid in cash, and resulted in approximately $2.9 million of goodwill which
is being amortized over 40 years on a straight-line basis. The purchase price
and direct acquisition costs were allocated based on the fair value of the
assets acquired and liabilities assumed. The former shareholders of DMS agreed
to indemnify the Company for any aggregate liabilities in excess of $50,000 that
occurred prior to the Company's purchase of DMS but were not reflected on the
acquisition financial statements. This indemnification liability shall not
exceed the purchase price.

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS:

Activity in the Company's allowance for doubtful accounts consists of the
following (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1996 1997
------------- ------------ ------------
<S> <C> <C> <C>
Balance, beginning of period.................... $ 379 $426 $ 479
Deductions for uncollectible receivables written
off........................................... (183) (7) (105)
Additions charged to expense.................... 230 60 174
Additions due to acquisition.................... -- -- 675
----- ---- ------
Balance, end of period.......................... $ 426 $479 $1,223
===== ==== ======
</TABLE>

The major components of inventories as of December 31, 1996 and 1997 are as
follows (in thousands):

<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Finished Goods.............................................. $ -- $ 432
Raw materials and supplies.................................. 2,015 3,305
------ ------
Inventories............................................... $2,015 $3,737
====== ======
</TABLE>

Property and equipment at December 31, 1996 and 1997 consist of the
following (in thousands):

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Machinery and equipment..................................... $ 27,787 $ 46,547
Automobiles and trucks...................................... 571 1,174
Office equipment, furniture and fixtures.................... 705 1,253
Leasehold improvements...................................... 669 950
-------- --------
Total............................................. 29,732 49,924
Less Accumulated depreciation............................... (10,497) (15,814)
-------- --------
Property and equipment, net....................... $ 19,235 $ 34,110
======== ========
</TABLE>

F-17
<PAGE> 63

W-H ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Depreciation expense charged to operations totaled approximately
$2,162,000, $2,967,000, $921,000 and $5,348,000 for the years ended September
30, 1995 and 1996, the three months ended December 31, 1996 and the year ended
December 31, 1997, respectively.

Accounts payable and accrued liabilities at December 31, 1996 and 1997
consist of the following (in thousands):

<TABLE>
<CAPTION>
1996 1997
------ -------
<S> <C> <C>
Accounts payable............................................ $2,182 $ 6,447
Accrued compensation and benefits........................... 804 1,104
Other accrued liabilities................................... 1,024 3,367
------ -------
$4,010 $10,918
====== =======
</TABLE>

5. DEBT:

Long-term debt at December 31, 1996 and 1997, consisted of the following:

<TABLE>
<CAPTION>
1996 1997
------- --------
(IN THOUSANDS)
<S> <C> <C>
Revolving line of credit to a bank, bearing interest at
prime (8.25% at December 31, 1996) plus 1%, repaid in
1997...................................................... $ 4,619 $ --
Term loan payable to a bank, bearing interest at prime plus
1%, repaid in 1997........................................ 10,389 --
12% convertible subordinated debenture, convertible at a
rate of one share of Class A common stock for each $50
principal amount thereof, converted to 10,000 shares in
1997...................................................... 500 --
Notes payable to financial institutions, bearing interest at
9.0%, repaid in 1997...................................... 70 --
Senior secured term A loan facility to financial
institutions payable in equal quarterly installments
equivalent to 5% of principal through August 1998, 10%
through August 1999, 15% through August 2000, 30% through
August 2001 and 40% through August 2002, bearing interest
at LIBOR (5.72% at December 31, 1997) plus 2.75%, which is
payable monthly, maturing at August 11, 2002.............. -- 19,750
Senior secured term B loan facility to financial
institutions payable in equal quarterly installments
equivalent to 1% of principal annually through August 2002
and 95% of principal through August 2003, bearing interest
at LIBOR plus 3.25%, which is payable monthly, maturing at
August 11, 2003........................................... -- 39,900
Senior secured delayed term loan facility to financial
institutions payable in equal quarterly installments
equivalent to 1% of principal annually through August 2002
and 95% of principal through August 2003, bearing interest
at LIBOR plus 3.25%, which is payable monthly, maturing at
August 11, 2003........................................... -- 15,000
Revolving credit facility to financial institutions bearing
interest at LIBOR plus 2.75%, which is payable monthly,
maturing at August 11, 2002............................... -- 1,750
</TABLE>

F-18
<PAGE> 64

W-H ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
1996 1997
------- --------
(IN THOUSANDS)
<S> <C> <C>
Subordinated notes payable to a financial institution with
$12,000,000 due at September 15, 2006 and 2007,
respectively, bearing interest at 12.5%, which is payable
semiannually on March 15 and September 15................. -- 24,000
Notes payable to prior owners of Integrity, $200,000 due in
1998 with remainder due October 1, 2001, bearing interest
at 10%, which is payable annually on September 30......... -- 1,162
Notes payable to financial institutions, bearing interest at
7.75% to 11.5%, primarily due in 1998..................... -- 106
------- --------
Total long-term debt.............................. 15,578 101,668
Less -- Current maturities of long-term debt................ (2,037) (2,106)
------- --------
$13,541 $ 99,562
======= ========
</TABLE>

CREDIT FACILITY

In connection with the Recapitalization (see Note 1), the Company obtained
$95 million in senior secured financing (the Credit Facility). The Credit
Facility is comprised of a $20 million revolving credit facility, a $20 million
term A loan facility, a $40 million term B loan facility and a $15 million
delayed term loan facility. The term A loan facility and term B loan facility
were used primarily to finance the Recapitalization and related fees and
expenses. The delayed term loan facility was used to finance the acquisition of
Integrity. The revolving credit facility and term A loan facility mature on
August 11, 2002, and incur interest at LIBOR plus 2.75%, subject to reductions
determined by a debt coverage ratio based pricing grid. The term B loan facility
and delayed term loan facility mature on August 11, 2003 and incur interest at
LIBOR plus 3.25%, subject to reductions determined by a debt coverage ratio
based pricing grid. The Company is subject to a .25%-.5% commitment fee for all
unused balances on the delayed term loan facility and the revolving credit
facility. The Credit Facility is secured by substantially all assets of the
Company.

Effective April 15, 1998 and July 27, 1998 the Company amended the Credit
Facility to include a $10 million term C and $25 million term D loan facility,
respectively. These facilities were used to fund the acquisitions of GSI and
Agri-Empresa as described in Note 11. Additionally, on August 20, 1998, the
Company amended the Credit Facility to include a $10 million term E loan
facility which was used to pay down the revolving credit facility. The term C, D
and E facilities have the same terms as the term B and delayed term loan
facilities except that the term D and term E loan facilities incur interest at
LIBOR plus 3.75%.

SUBORDINATED DEBT

In connection with the Recapitalization, the Company issued $24 million in
subordinated unsecured notes (Subordinated Debt) to an affiliate of Jordan. The
Subordinated Debt is subordinated in right of payment and liquidation preference
to the Credit Facility.

Both the Credit Facility and Subordinated Debt agreements contain
restrictions which, among other things, require maintenance of certain financial
ratios, restrict encumbrance of assets, creation of indebtedness, capital
expenditures, investing activities and payment of dividends.

F-19
<PAGE> 65

W-H ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<TABLE>
<S> <C>
For the year ending December 31, 1997
1998...................................................... $ 2,106
1999...................................................... 2,800
2000...................................................... 4,300
2001...................................................... 8,012
2002...................................................... 17,700
Thereafter................................................ 66,750
--------
$101,668
========
</TABLE>

LINE OF CREDIT AND TERM LOAN

In December 1995, and in connection with the acquisition of DMS, the
Company amended its loan agreement with a bank by increasing its term loan from
$6,500,000 to $11,000,000 and its revolving line of credit from $3,500,000 to
$5,000,000. In August 1996, the revolving line of credit was increased to
$6,500,000. The Company used a portion of the proceeds from the Credit Facility
and Subordinated Debt to retire both the term loan and the revolving line of
credit in August 1997.

6. COMMITMENTS AND CONTINGENCIES:

OPERATING LEASES

The Company leases certain real estate properties and automobiles under
operating leases. Future minimum lease payments under noncancelable operating
leases are as follows (in thousands):

<TABLE>
<S> <C>
For the year ending December 31 --
1998...................................................... $1,082
1999...................................................... 923
2000...................................................... 796
2001...................................................... 558
2002...................................................... 188
Thereafter................................................ --
------
$3,547
======
</TABLE>

Rental expense under operating leases was approximately $640,000, $760,000,
$230,000 and $933,000 for the years ended September 30, 1995 and 1996, the three
months ended December 31, 1996 and the year ended December 31, 1997.

EMPLOYMENT AGREEMENTS

The Company and/or its subsidiaries have employment agreements with certain
of its employees. These agreements expire through September 2002 and provide for
a base annual salary ranging from approximately $41,000 to $300,000. The
agreements also provide for severance pay in the event of involuntary
termination.

The Company has also entered into a royalty agreement with an employee
which provides for a maximum payment of approximately $1.7 million upon the
occurrence of certain events. This maximum payment is reduced over time by
royalties received from recurring operations.

F-20
<PAGE> 66

W-H ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NONCOMPETE AGREEMENT

In connection with the Company's acquisition of Thomas Tools on June 14,
1994, the former owners have agreed not to engage in any business of the type
engaged in by Thomas Tools in the states of Mississippi and Alabama and in
certain areas of the Gulf of Mexico and Louisiana for a period of five years in
exchange for $950,000 which is reflected in other assets in the accompanying
consolidated balance sheets and is being amortized ratably over the life of the
contract. The $950,000 will be paid in equal monthly installments through June
1999.

LITIGATION

The Company is involved in various lawsuits arising from normal business
activities. Management has reviewed pending litigation with legal counsel and
believes that the ultimate liability, if any, resulting from such actions will
not have a material adverse effect on the Company's financial position or
results of operations.

7. INCOME TAXES:

The components of the Company's income tax provision (benefit) are as
follows (in thousands):

<TABLE>
<CAPTION>
THREE
YEARS ENDED MONTHS
SEPTEMBER 30, ENDED YEARS ENDED
---------------- DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------ ------ ------------ ------------
<S> <C> <C> <C> <C>
Federal --
Current................................. $ 50 $ 800 $315 $ (728)
Deferred................................ 1,023 930 108 (648)
------ ------ ---- -------
1,073 1,730 423 (1,376)
------ ------ ---- -------
State --
Current................................. 130 255 32 (230)
Deferred................................ 55 -- 17 (108)
------ ------ ---- -------
185 255 49 (338)
------ ------ ---- -------
Total provision (benefit)............ $1,258 $1,985 $472 $(1,714)
====== ====== ==== =======
</TABLE>

The provision (benefit) for income taxes differs from an amount computed at
the statutory rate as follows (in thousands):

<TABLE>
<CAPTION>
THREE
YEARS ENDED MONTHS
SEPTEMBER 30, ENDED YEARS ENDED
------------------ DECEMBER 31, DECEMBER 31,
1995 1996 1996 1997
------ ------ ------------ ------------
<S> <C> <C> <C> <C>
Federal income tax at statutory rates... $ 970 $1,734 $412 $(2,458)
State income taxes...................... 186 255 42 (217)
Nondeductible items..................... 73 66 18 74
NOL utilization......................... (58) (129) -- --
Restricted stock........................ 69 69 17 (210)
Increase in valuation allowance......... -- -- -- 871
Other................................... 18 (10) (17) 226
------ ------ ---- -------
$1,258 $1,985 $472 $(1,714)
====== ====== ==== =======
</TABLE>

F-21
<PAGE> 67

W-H ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The significant components of the deferred tax assets and liabilities at
December 31, 1996 and 1997, are as follows (in thousands):

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Deferred tax assets --
Net operating loss carryforwards.......................... $ 243 $ 4,251
Accruals not currently deductible for tax purposes and
other.................................................. 472 424
Amortization of intangible assets......................... -- 73
Write-off of bad debts.................................... -- 164
------- -------
Total gross deferred tax assets................... 715 4,912
Less -- Valuation allowance............................... (110) (981)
------- -------
Net deferred tax assets........................... 605 3,931
------- -------
Deferred tax liabilities --
Tax depreciation in excess of book depreciation........... (2,865) (4,395)
Other..................................................... (36) (93)
------- -------
Total gross deferred tax liabilities.............. (2,901) (4,488)
------- -------
Net deferred tax liabilities...................... $(2,296) $ (557)
======= =======
</TABLE>

The Company has recorded a valuation allowance to reflect the estimated
amount of deferred tax assets which may not be realized due to the expiration of
net operating losses and tax credit carryforwards. The change in the valuation
allowance for the three months ended December 31, 1996 and the year ended
December 31, 1997, is as follows (in thousands):

<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
Balance at beginning of period.............................. $110 $110
Increase in valuation allowance............................. -- 871
---- ----
Balance at end of period.................................... $110 $981
==== ====
</TABLE>

The Company and its subsidiaries file a consolidated federal tax return. At
December 31, 1997, the Company had a net operating loss (NOL) carryforward for
federal income tax purposes of approximately $10.6 million. The carryforward is
available through 2012 to offset future taxable income. As a result of the
purchase of Holston and other material changes in the ownership of the Company,
the utilization of certain carryforwards is subject to annual limitations and
has not been tax benefited for financial statement purposes. In addition, the
Company has net operating loss carryforwards in various state jurisdictions in
an aggregate amount of approximately $14.7 million. The utilization of these
losses is limited to the jurisdiction in which they arose.

The income tax receivable of $1.6 million included in the accompanying
balance sheet is the direct result of the compensation change incurred in
connection with the Recapitalization (See Note 1).

8. RELATED-PARTY TRANSACTIONS:

NOTES TO FORMER OWNERS OF INTEGRITY

At December 31, 1997, the Company had approximately $1.2 million in notes
payable due to the former owners of Integrity which bear interest at a rate of
10% per year. A portion of the balance, $200,000, is due in 1998 with the
remainder of the principal balance due in its entirety on October 1, 2001.

F-22
<PAGE> 68

W-H ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SUBORDINATED DEBT

In connection with the Recapitalization, the Company issued $24,000,000 in
Subordinated Debt to an affiliate of Jordan (See Note 5).

CONSULTING AND ADVISORY AGREEMENTS

On August 11, 1997, the Company entered into a consulting agreement with an
affiliate of Jordan which provides for an annual fee payable on a quarterly
basis equal to 2.5% of the Company's net income before interest, tax,
depreciation and amortization and other non-cash or non-recurring expenses.
Under this agreement, the Company paid Jordan approximately $120,000 for the
year ended December 31, 1997. This agreement expires on December 31, 2007. This
agreement will be terminated upon completion of the Offering.

On August 11, 1997, the Company entered into a Transaction Advisory
Agreement (Advisory Agreement) with an affiliate of Jordan which expires on
December 31, 2007. The Advisory Agreement provides for an investment banking and
financial consulting fee ranging up to 1% to 2% of the aggregate transaction
size for equity, debt, acquisitions, divestitures and other transactions.

9. SHAREHOLDERS' EQUITY:

CAPITAL STOCK

The Company has authorized 900,000 shares of Class A common stock of which
690,906 and 275,000 were outstanding at December 31, 1996 and 1997,
respectively. The Company has authorized 100,000 shares of Class B common stock
of which no shares were outstanding at December 31, 1996 and 1997.

The Company effected a -for-one stock split on . The
effect of the common stock split has been accounted for as a stock dividend in
the accompanying financial statements. On , the Board of
Directors increased the authorized number of common shares of common stock from
to and authorized the issuance of up to shares of
preferred stock.

STOCK OPTIONS AND STOCK PURCHASE WARRANTS

In August 1997, the Company adopted a stock option plan (the 1997 Option
Plan) to provide non-qualified stock options to employees and authorized 40,000
shares to be issued under the Plan. The Board of Directors or Compensation
Committee (the Committee) has the power to determine those employees to be
granted options, the price and the number of shares subject to each option, the
time at which each option is granted and becomes exercisable, the duration of
the option period, and such other conditions and limitations as may be
applicable.

Each option granted under the 1997 Option Plan will contain such terms and
conditions as may be approved by the Committee. As of December 31, 1997 the
Committee has granted options under the 1997 Option Plan at exercise prices
equal to the fair market value at the Company's common stock at date of grant.
These options vest over a four-year period and will expire ten years from the
date the options were granted. These options will vest in 25% increments after
each full year of service following the date of grant. If an optionee's
employment terminates for any reason, the option may be exercised during the
three-month period following such termination, but only to the extent vested at
the time of such termination.

F-23
<PAGE> 69

A summary of the Company's stock options and warrants at December 31, 1996
and 1997, and changes during the years then ended is presented below:

<TABLE>
<CAPTION>
NUMBER OF SHARES
-------------------- PRICE
OPTIONS WARRANTS PER SHARE
------- -------- ---------
<S> <C> <C> <C>
Outstanding September 30, 1995.................. 218,500 15,050 $10 to $30
Granted......................................... 43,000 -- $30 and $40
Exercised....................................... (10,000) -- $10 to $16
-------- --------
Outstanding December 31, 1996................... 251,500 15,050 $10 to $40
Repurchased in Recapitalization................. (251,500) (15,050) $73
Granted......................................... 17,375 81,218 $73
-------- --------
Outstanding December 31, 1997................... 17,375 81,218 $73
======== ========
</TABLE>

On January 5, 1998 the Company granted 10,000 stock options to an officer
of the Company at an exercise price of $100 per share. Vesting of the options is
contingent upon successful completion of the Offering or other qualifying change
in control of the Company as defined in the option agreement. If such event does
not occur prior to December 31, 1998 the stock options will automatically
terminate and expire. Upon consummation of the Offering, these stock options
will vest as follows: 30% upon successful completion of the Offering and the
remainder ratably over the first, second and third anniversaries of the
Offering. The Company will recognize compensation expense equal to the
difference between the exercise price and the Offering price for these options
which will be amortized over the vesting period of the options.

Under SFAS No. 123, the fair value of each option and warrant grant was
estimated on the date of grant using the Black-Scholes option pricing model. The
following assumptions were used for the grants in the fiscal years ended
September 30, 1996 and December 31, 1997: risk-free interest rates of between
5.8%-6.9%; dividend rates of zero; expected lives of between five and ten years
and expected volatilities of 43.7%-73.1%. The 17,375 options and 30,938 warrants
outstanding to employees at December 31, 1997 have a remaining contractual life
of 9.6 years.

The Black-Scholes option valuation model and other existing models were
developed for use in estimating the fair value of traded options that have no
vesting restrictions and are fully transferable. In addition, option valuation
models require the input of and are highly sensitive to subjective assumptions
including the expected stock price volatility. The Company's stock options have
characteristics significantly different from those of traded options, and
changes in the subjective input assumptions can materially affect the fair value
estimate.

Had compensation cost for the stock options and warrants granted to
employees been determined under SFAS No. 123, net income (loss) and net income
(loss) per share would have changed as indicated in the following pro forma
amounts:

<TABLE>
<CAPTION>
THREE MONTHS YEAR
YEAR ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1996 1997
------------- ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net income (loss) --
As reported................................. $3,114 $(5,669) $739
Pro forma................................... 2,954 (5,886) 664
</TABLE>

ISSUANCE OF RESTRICTED STOCK TO EMPLOYEES

On November 3, 1993, the board of directors agreed to issue 46,300
restrictive Class A common shares to the management of the Company, the majority
of which vested after three and one-half years, and 24,000 of these shares were
contingent upon the accomplishment of certain milestones which were achieved in
fiscal

F-24
<PAGE> 70

year 1994. Unearned compensation was charged for the market value of the
restricted shares as these shares were issued or as milestones were achieved.
The unearned compensation was amortized ratably over the restricted period. The
unamortized unearned compensation value was shown as a reduction of
shareholders' equity in the accompanying consolidated balance sheets and
statements of shareholders' equity (deficit). During the years ended September
30, 1995 and 1996, three months ended December 31, 1996 and the year ended
December 31, 1997, the Company recognized approximately $204,000, $204,000,
$51,000 and $49,000, respectively, as compensation expense which is included in
selling, general and administrative expense in the accompanying consolidated
statements of operations. In connection with the Recapitalization, these shares
were repurchased by the Company (See Note 1).

10. 401(K) PLAN:

The Company adopted a 401(k) plan in 1993. Under the plan, employees can
contribute specified percentages of their annual compensation. The Company may
contribute a matching amount for each participant equal to a discretionary
percentage determined annually by the Company. The Company may also contribute
additional amounts at its sole discretion. Company matching contributions were
approximately $30,000, $53,000, $31,000 and $107,000 for the years ended
September 30, 1995 and 1996 and, three months ended December 31, 1996 and year
ended December 31, 1997, respectively.

11. SUBSEQUENT EVENTS:

On April 24, 1998, W-H acquired 100 percent of the issued and outstanding
stock of Grinding and Sizing Company, Inc., Houston Bagging and Blending, Inc.
and Reliable Equipment, Inc. (collectively GSI), for consideration of $9.25
million in cash, a note of $800,000 and 6,000 warrants. GSI is in the business
of size reduction (grinding) of products primarily for the drilling and
specialty chemical fluids industry. The Company funded this acquisition with a
$10 million term C loan facility under the Company's Credit Facility (see Note
5).

On July 27, 1998, W-H acquired 100 percent of the issued and outstanding
stock of Agri-Empresa, Inc., Lone Star Distribution, Inc., STG and Agri-Empresa
Transportation and Superior Packaging & Distribution (collectively
Agri-Empresa), for $21 million in cash and 7,500 warrants. Agri-Empresa
manufactures, packages, distributes and transports chemicals used in oilfield
and industrial applications. The Company funded this acquisition with a $25
million term D loan facility under the Company's Credit Facility (see Note 5).

The following table reflects on an unaudited consolidated pro forma basis
the results of operations as though Integrity, GSI and Agri-Empresa had been
acquired as of the beginning of the Company's fiscal year 1997. Appropriate
adjustments have been made to reflect the accounting basis used in recording the
acquisitions. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
that would have resulted had the combination been in effect on the date
indicated, that have resulted since the date of acquisition or that may result
in the future.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- -------------
<S> <C> <C>
Total revenues.......................................... $106,950 $58,353
Net income (loss)....................................... (4,381) 2,202
</TABLE>

F-25
<PAGE> 71

The Integrity, GSI and Agri-Empresa acquisitions have been accounted for as
purchases; therefore, the accompanying statements of operations reflect the
results of operations since their respective acquisition dates. The allocation
of purchase prices to the assets acquired and liabilities assumed in the GSI and
Agri-Empresa acquisitions has been initially assigned and recorded based on
preliminary estimates of fair value and may be revised as additional information
concerning the valuation of such assets and liabilities becomes available.

F-26
<PAGE> 72

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Integrity Industries, Inc.:

We have audited the accompanying balance sheets of Integrity Industries,
Inc., as of December 31, 1996, and September 24, 1997, and the related
statements of operations, shareholders' equity (deficit) and cash flows for the
year ended December 31, 1996, and the eight months and twenty-four days ended
September 24, 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 audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Integrity Industries, Inc.,
as of December 31, 1996, and September 24, 1997, and the results of its
operations and its cash flows for the year ended December 31, 1996, and the
eight months and twenty-four days ended September 24, 1997, in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
December 10, 1997

F-27
<PAGE> 73

INTEGRITY INDUSTRIES, INC.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 24,
1996 1997
------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash...................................................... $ 67,153 $ --
Accounts receivable, net.................................. 2,138,238 2,431,169
Inventories............................................... 897,952 1,554,366
Prepaid expenses and other................................ 17,135 13,774
----------- -----------
Total current assets.............................. 3,120,478 3,999,309
PROPERTY AND EQUIPMENT, net................................. 468,730 313,659
OTHER ASSETS................................................ 32,601 --
----------- -----------
Total assets...................................... $ 3,621,809 $ 4,312,968
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 767,947 $ 1,347,502
Accounts payable and accrued liabilities.................. 2,185,475 1,894,779
----------- -----------
Total current liabilities......................... 2,953,422 3,242,281
LONG-TERM DEBT, net of current maturities................... 97,263 --
LOANS FROM SHAREHOLDERS..................................... 916,000 962,000
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, par value $.01 per share, 10,000,000 shares
authorized, 125,000 shares issued...................... 1,250 1,250
Additional paid-in capital................................ 400,066 400,066
Retained earnings......................................... 279,808 733,371
Less- Treasury stock (60,000 shares)...................... (1,026,000) (1,026,000)
----------- -----------
Total shareholders' equity (deficit).............. (344,876) 108,687
----------- -----------
Total liabilities and shareholders' equity
(deficit)...................................... $ 3,621,809 $ 4,312,968
=========== ===========
</TABLE>

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

F-28
<PAGE> 74

INTEGRITY INDUSTRIES, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE EIGHT
MONTHS AND
FOR THE YEAR TWENTY-FOUR
ENDED DAYS ENDED
DECEMBER 31, SEPTEMBER 24,
1996 1997
------------ -------------
<S> <C> <C>
REVENUES.................................................... $9,345,030 $8,331,018
COSTS AND EXPENSES:
Operating expenses........................................ 6,117,636 5,578,347
Depreciation and amortization............................. 74,326 81,191
Selling, general and administrative expenses.............. 3,337,330 1,831,669
---------- ----------
INCOME (LOSS) FROM OPERATIONS............................... (184,262) 839,811
OTHER INCOME (EXPENSE):
Interest expense.......................................... (210,698) (163,625)
Other income.............................................. 21,384 26,415
---------- ----------
NET INCOME (LOSS)........................................... $ (373,576) $ 702,601
========== ==========
</TABLE>

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

F-29
<PAGE> 75

INTEGRITY INDUSTRIES, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED SHAREHOLDERS'
------------------- PAID-IN EARNINGS TREASURY EQUITY
SHARES PAR VALUE CAPITAL (DEFICIT) STOCK (DEFICIT)
------- --------- ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996................ 125,000 $1,250 $400,066 $ 653,384 $(1,026,000) $ 28,700
Net loss.............................. -- -- -- (373,576) -- (373,576)
------- ------ -------- --------- ----------- ---------
BALANCE, December 31, 1996.............. 125,000 1,250 400,066 279,808 (1,026,000) (344,876)
Net income............................ -- -- -- 702,601 -- 702,601
Distribution of property to
shareholders........................ -- -- -- (249,038) -- (249,038)
------- ------ -------- --------- ----------- ---------
BALANCE, September 24, 1997............. 125,000 $1,250 $400,066 $ 733,371 $(1,026,000) $ 108,687
======= ====== ======== ========= =========== =========
</TABLE>

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

F-30
<PAGE> 76

INTEGRITY INDUSTRIES, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE EIGHT
MONTHS AND
FOR THE YEAR TWENTY-FOUR
ENDED DAYS ENDED
DECEMBER 31, SEPTEMBER 24,
1996 1997
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ (373,576) $ 702,601
Adjustments to reconcile net income (loss) to cash
provided by operating activities --
Depreciation and amortization.......................... 74,326 81,191
(Gain) loss on sale of assets.......................... 31,443 (4,601)
Bad debts.............................................. 274,472 150,482
Net (increase) decrease in accounts receivables........... 297,669 (443,413)
Net (increase) decrease in inventory...................... 44,749 (656,414)
Net decrease in prepaid expenses.......................... 9,323 3,361
Net decrease in accrued expenses.......................... (429,439) (290,696)
----------- -----------
Net cash flows used in operating activities....... (71,033) (457,489)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital additions......................................... (208,164) (175,163)
Proceeds from sale of assets.............................. -- 4,606
----------- -----------
Net cash flows used in investing activities....... (208,164) (170,557)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans received............................................ 6,249,814 5,322,595
Payments on long-term debt................................ (5,917,120) (4,794,803)
Loans to others........................................... (35,869) 33,101
----------- -----------
Net cash flows provided by financing activities... 296,825 560,893
----------- -----------
NET INCREASE (DECREASE) IN CASH............................. 17,628 (67,153)
CASH, beginning of period................................... 49,525 67,153
----------- -----------
CASH, end of period......................................... $ 67,153 $ --
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the year............................. $ 210,569 $ 163,625
=========== ===========
</TABLE>

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

F-31
<PAGE> 77

INTEGRITY INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS ORGANIZATION:

Integrity Industries, Inc. (the Company), a Texas corporation, is engaged
primarily in the business of supplying oil and gas companies with drilling mud
and other related products. The Company also sells to various supply outlets.
The majority of its sales are in Texas.

On September 25, 1997, the Company completed negotiations with W-H Energy
Services, Inc. (W-H), for the sale of 100 percent of the outstanding stock of
the Company in exchange for cash consideration of approximately $13,200,000 and
warrants valued at $130,000 convertible into the common stock of W-H. W-H is a
diversified energy service company that provides a variety of services and
equipment to the oil and gas industry on the Gulf Coast through its various
subsidiaries. The accompanying financial statements were prepared in connection
with the transaction with W-H.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

ACCOUNTS RECEIVABLE

Accounts receivable have a concentration of credit risk in the oil and gas
industry. The Company performs continuing credit evaluations of its customers
and generally does not require collateral. Historically, the Company has not
experienced significant losses related to receivables from individual customers
or groups of customers. Accounts receivable have been recorded net of an
allowance for doubtful accounts of approximately $150,000 and $300,000 at
December 31, 1996, and September 24, 1997, respectively.

INVENTORIES

Inventory consists of raw materials and proprietary products used in the
completion of oil and gas wells and is stated at the lower of cost or market,
determined on a first-in, first-out basis.

PROPERTY AND EQUIPMENT

Depreciation is calculated using the double declining-balance method over
the estimated useful lives of the depreciable assets which range from five to
31.5 years. Depreciation expense for the year ended December 31, 1996, and the
eight months and twenty-four days ended September 24, 1997, were $74,326 and
$81,191, respectively. Capital leases and leasehold improvements are amortized
over the shorter of their useful lives or the term of the lease.

REVENUE RECOGNITION AND OPERATING EXPENSE

FEDERAL INCOME TAXES

The Company has elected S Corporation status, as defined by the Internal
Revenue Code, whereby the Company is not subject to federal taxation. Under S
Corporation status, the shareholders report their proportionate shares of the
Company's taxable earnings on their personal tax returns.

F-32
<PAGE> 78
INTEGRITY INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

USE OF ESTIMATES

3. LONG-TERM DEBT:

At December 31, 1996, and September 24, 1997, long-term debt consisted of
the following:

<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
Note payable to bank under a $1,500,000 line of credit,
interest payable monthly, expiring 1997, interest 9.25%,
secured by accounts receivable, inventory and personal
guarantees of shareholders................................ $727,656 $1,347,502
Note payable to bank, payable monthly, maturing 2000,
interest 9.75%, secured by vehicles and trailers.......... 90,000 --
Notes payable to credit company, payable monthly, maturing
1997, 1999 and 2000, interest 8.5% to 9.5%, secured by
trucks and forklifts...................................... 47,554 --
-------- ----------
865,210 1,347,502
Less- Current portion....................................... 767,947 1,347,502
-------- ----------
$ 97,263 $ --
======== ==========
</TABLE>

4. LOANS FROM SHAREHOLDERS:

Loans from shareholders represent amounts loaned to the Company by the
shareholders for working capital purposes. The loans bear interest at 9.25
percent and are payable on demand. At December 31, 1996, and September 24, 1997,
accrued expenses included $1,037,060 and $-, respectively, in accrued wages to
shareholders.

5. PROFIT-SHARING PLAN:

The Company has a profit-sharing plan which covers all eligible employees.
The Company's contributions are subject to determination by the shareholders and
certain limitations on an annual basis. There are no required annual
contributions. Plan contributions for 1996 and 1997 were $146,000 and $75,000,
respectively.

F-33
<PAGE> 79
INTEGRITY INDUSTRIES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
W-H Energy Services, Inc.:

We have audited the accompanying combined balance sheets of Grinding and
Sizing Company, Inc., and affiliates, all Texas corporations (Grinding and
Sizing Company, Inc.), as of December 31, 1996 and 1997, and the related
combined statements of operations, shareholders' equity and cash flows for the
years then ended. These combined financial statements are the responsibility of
Grinding and Sizing Company, Inc.'s management. Our responsibility is to express
an opinion on these combined 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Grinding
and Sizing Company, Inc., and affiliates as of December 31, 1996 and 1997, and
the combined results of their operations and cash flows for the years then ended
in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
May 29, 1998

F-34
<PAGE> 80

GRINDING AND SIZING COMPANY, INC., AND AFFILIATES

COMBINED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31
----------------------- MARCH 31,
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash................................................... $ 393,985 $ 426,972 $ 603,122
Accounts receivable.................................... 554,976 972,429 966,072
Inventories............................................ 253,827 307,974 411,254
Prepaid expenses and other............................. 1,040 3,699 2,286
---------- ---------- ----------
Total current assets........................... 1,203,828 1,711,074 1,982,734
PROPERTY AND EQUIPMENT, net.............................. 433,886 488,767 453,624
OTHER ASSETS, net........................................ 2,299 2,150 2,089
---------- ---------- ----------
Total assets................................... $1,640,013 $2,201,991 $2,438,447
========== ========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Current maturities of notes payable.................... $ 52,887 $ 95,941 $ 50,000
Current maturities of related-party debt............... 27,204 9,387 --
Accounts payable and accrued liabilities............... 301,549 372,175 424,359
---------- ---------- ----------
Total current liabilities...................... 381,640 477,503 474,359
---------- ---------- ----------
NOTES PAYABLE, net of current maturities................. 37,834 30,310 20,272
RELATED-PARTY NOTES, net of current maturities........... 233,101 14,919 --
---------- ---------- ----------
Total long-term liabilities.................... 270,935 45,229 20,272
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock........................................... 471,523 471,623 471,623
Additional paid-in capital............................. 5,607 27,507 27,507
Retained earnings...................................... 934,246 1,604,067 1,868,624
Less -- Treasury stock................................. (423,938) (423,938) (423,938)
---------- ---------- ----------
Total shareholders' equity..................... 987,438 1,679,259 1,943,816
---------- ---------- ----------
Total liabilities and shareholders' equity..... $1,640,013 $2,201,991 $2,438,447
========== ========== ==========
</TABLE>

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

F-35
<PAGE> 81

GRINDING AND SIZING COMPANY, INC., AND AFFILIATES

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE THREE-MONTH
DECEMBER 31 PERIOD ENDED MARCH 30
------------------------- -----------------------
1996 1997 1997 1998
----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES................................... $ 5,080,257 $ 7,598,908 $1,470,912 $2,049,944
COSTS AND EXPENSES:
Operating expenses....................... (2,778,403) (4,026,458) (744,270) (917,294)
Depreciation and amortization............ (106,562) (140,281) (23,595) (26,199)
Selling, general and administrative
expenses.............................. (732,958) (958,812) (242,667) (232,407)
----------- ----------- ---------- ----------
INCOME FROM OPERATIONS..................... 1,462,334 2,473,357 460,380 874,044
OTHER INCOME (EXPENSE):
Interest expense......................... (27,281) (21,838) (3,990) (2,972)
Other.................................... 6,483 (23,798) 1,277 (113)
----------- ----------- ---------- ----------
NET INCOME BEFORE TAXES.................... 1,441,536 2,427,721 457,667 870,959
INCOME TAXES:
Federal.................................. -- (5,963) -- --
State.................................... (64,025) (109,605) (21,102) (40,049)
----------- ----------- ---------- ----------
NET INCOME................................. $ 1,377,511 $ 2,312,153 $ 436,565 $ 830,910
=========== =========== ========== ==========
</TABLE>

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

F-36
<PAGE> 82

GRINDING AND SIZING COMPANY, INC., AND AFFILIATES

COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------ PAID-IN RETAINED TREASURY SHAREHOLDERS'
SHARES PAR VALUE CAPITAL EARNINGS STOCK EQUITY
------ --------- ---------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1996....... 38,523 $469,130 $ -- $ 646,708 $(423,938) $ 691,900
NET INCOME..................... -- -- -- 1,377,511 -- 1,377,511
CONTRIBUTED CAPITAL............ -- 2,393 5,607 -- -- 8,000
DISTRIBUTIONS TO
SHAREHOLDERS................. -- -- -- (1,089,973) -- (1,089,973)
------ -------- ------- ----------- --------- -----------
BALANCE, December 31, 1996..... 38,523 471,523 5,607 934,246 (423,938) 987,438
CONTRIBUTED CAPITAL............ 100 100 21,900 -- -- 22,000
NET INCOME..................... -- -- -- 2,312,153 -- 2,312,153
DISTRIBUTIONS TO
SHAREHOLDERS................. -- -- -- (1,642,332) -- (1,642,332)
------ -------- ------- ----------- --------- -----------
BALANCE, December 31, 1997..... 38,623 471,623 27,507 1,604,067 (423,938) 1,679,259
NET INCOME (Unaudited)......... -- -- -- 830,910 -- 830,910
DISTRIBUTIONS TO SHAREHOLDERS
(Unaudited).................. -- -- -- (566,353) -- (566,353)
------ -------- ------- ----------- --------- -----------
BALANCE, MARCH 31, 1998
(Unaudited).................. 38,623 $471,623 $27,507 $ 1,868,624 $(423,938) $ 1,943,816
====== ======== ======= =========== ========= ===========
</TABLE>

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

F-37
<PAGE> 83

GRINDING AND SIZING COMPANY, INC., AND AFFILIATES

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE THREE-MONTH
DECEMBER 31 PERIOD ENDED MARCH 31
------------------------- ---------------------
1996 1997 1997 1998
----------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................ $ 1,377,511 $ 2,312,153 $ 436,565 $ 830,910
Adjustments to reconcile net income to
cash provided by operating
activities --
Depreciation and amortization.......... 106,562 140,281 23,595 26,199
(Gain) loss on sale of assets.......... (999) 18,141 5,967 4,944
Net increase in accounts receivable....... (155,590) (417,453) (211,666) 6,357
Net increase in inventories............... (61,889) (54,147) (66,635) (103,280)
Net (increase) decrease in prepaid
expenses and other assets.............. 2,375 (2,510) (25,051) 1,474
Net increase in accounts payable and
accrued liabilities.................... 78,271 70,626 127,552 52,184
----------- ----------- --------- ---------
Net cash flows provided by
operating activities............ 1,346,241 2,067,091 290,327 818,788
----------- ----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital additions......................... (186,258) (213,303) (49,328) --
Proceeds from sale of assets.............. 19,674 -- -- 4,000
----------- ----------- --------- ---------
Net cash flows (used in) provided
by investing activities......... (166,584) (213,303) (49,328) 4,000
----------- ----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt................ (268,413) (327,778) (33,706) (80,285)
Borrowings under notes payable............ 92,199 127,309 50,000 --
Formation of Reliable Equipment, Inc...... -- 22,000 -- --
Distributions to shareholders............. (1,089,973) (1,642,332) (278,649) (566,353)
----------- ----------- --------- ---------
Net cash flows used in financing
activities...................... (1,266,187) (1,820,801) (262,355) (646,638)
----------- ----------- --------- ---------
NET INCREASE (DECREASE) IN CASH............. (86,530) 32,987 (21,356) 176,150
CASH, beginning of period................... 480,515 393,985 393,985 426,972
----------- ----------- --------- ---------
CASH, end of period......................... $ 393,985 $ 426,972 $ 372,629 $ 603,122
=========== =========== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid during the year............. $ 27,281 $ 21,838 $ 3,990 $ 2,972
=========== =========== ========= =========
Income taxes paid during the year......... $ 8,796 $ 63,960 $ -- $ 7,901
=========== =========== ========= =========
NONCASH TRANSACTIONS:
Equipment contributed to Houston Bagging
and Blending, Inc...................... $ 8,000 $ -- $ -- $ --
=========== =========== ========= =========
</TABLE>

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

F-38
<PAGE> 84

GRINDING AND SIZING COMPANY, INC., AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS

1. BUSINESS ORGANIZATION AND BASIS OF PRESENTATION:

These financial statements represent the combined financial statements of
Grinding and Sizing Company, Inc., Houston Bagging and Blending, Inc. and
Reliable Equipment, Inc. and are herein referred to as the Combined Companies.
Each of the Combined Companies share common ownership with varying relative
ownership percentages. Grinding and Sizing Company, Inc., incorporated on June
29, 1979, and Houston Bagging and Blending, Inc., incorporated on April 5, 1994,
are both Texas Corporations and are primarily engaged in the business of
producing additives for drilling mud used in the exploration for oil and gas.
Reliable Equipment, Inc., incorporated on December 5, 1996, is primarily a metal
fabrication company which manufactures parts for the machinery used to produce,
bag and blend the additives. The majority of the Combined Companies sales are in
Texas. All significant transactions between the Combined Companies have been
eliminated in the combination.

On April 24, 1998, the shareholders of the Combined Companies completed the
sale of all of the outstanding stock of the Combined Companies to Drill Motor
Services, a subsidiary of W-H Energy Services, Inc. (W-H), for cash
consideration of $9,250,000, $800,000 in notes to be paid in April 2002 and
warrants valued at $115,000 convertible into the common stock of W-H. The
shareholders of the Combined Companies placed in escrow $1,000,000 for a period
of two years following the closing date for potential claims and damages as
agreed to by the shareholders of the Combined Companies and W-H. The
accompanying combined financial statements were prepared in conjunction with the
acquisition by W-H. Effective April 29, 1998, as part of the acquisition by W-H,
Houston Bagging and Blending, Inc., and Reliable Equipment, Inc., were merged
into Grinding and Sizing Company, Inc.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

INTERIM FINANCIAL STATEMENTS

The interim financial statements at March 31, 1998, and for the three
months ended March 31, 1998 and 1997, are unaudited, and certain information and
footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.

ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION

The Combined Companies record revenue when inventory is shipped to the
customer for the production, bagging and blending of additives. The Combined
Companies ship inventory F.O.B. shipping point. Accounts receivable represent
amounts recorded for inventory shipped. Reliable Equipment, Inc., records
accounts receivable and recognizes revenue based on contractual terms with the
customer which approximates the percentage of completion method for contract
accounting.

The Combined Companies use the specific identification method of write off
of accounts receivable and, therefore, no allowance for doubtful accounts exists
at December 31, 1996 or 1997. Management of the Combined Companies do not
believe that an allowance for doubtful accounts is necessary. The Combined
Companies provide products to primarily the oil and gas industry and as such are
subject to the credit risks that apply in that industry. Specifically,
management of the Combined Companies do not believe the general decline in the
oil and gas industry during the second quarter of 1998 will have a material
impact on the collectibility of accounts receivable as of December 31, 1997.

F-39
<PAGE> 85
GRINDING AND SIZING COMPANY, INC., AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

INVENTORIES

Inventories are stated at the lower of cost or market using the first
in-first out method of accounting for inventory. The Combined Companies
capitalize overhead costs related to inventory as part of inventory costs
including labor and other general expenses as considered necessary. Raw
materials and supplies represent the materials used to manufacture the additives
for drilling mud and the bags used for bagging. Work-in-process inventory
represents inventory in the process of grinding, sizing and blending. Finished
goods inventory represents amounts which have completed all processing and are
bagged or awaiting bagging for customer order.

PROPERTY AND EQUIPMENT, NET

Property and equipment are recorded at cost. Expenditures for major assets
and equipment are capitalized and minor replacements, maintenance and repairs
are expensed as incurred. Gains and losses resulting from dispositions are
reported in the statement of income in the period in which they are incurred.

Depreciation is calculated using the double-declining balance method over
the estimated useful lives of the depreciable assets which range from five to 30
years.

FEDERAL INCOME TAXES

Grinding and Sizing Company, Inc. and Houston Bagging and Blending Company,
Inc., have individually elected S Corporation status, as defined by the Internal
Revenue Code, whereby they are not subject to federal taxation. Under S
Corporation status, the shareholders report their proportionate share of taxable
earnings on their personal tax returns.

Reliable Equipment, Inc. (REI) elected C Corporation status at start up and
effective January 1, 1998, changed their filing status to S Corporation status.
Federal income taxes for REI for the year ended December 31, 1997, are reported
in the statement of income.

USE OF ESTIMATES

3. INVENTORIES:

Inventories consist of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Raw materials and supplies.................................. $ 70,682 $ 79,006
Work-in-process............................................. 60,003 99,686
Finished goods.............................................. 123,142 129,282
-------- --------
$253,827 $307,974
======== ========
</TABLE>

F-40
<PAGE> 86
GRINDING AND SIZING COMPANY, INC., AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. PROPERTY AND EQUIPMENT (NET):

Property and equipment consist of the following at December 31:

<TABLE>
<CAPTION>
USEFUL LIFE 1996 1997
----------- ---------- ----------
<S> <C> <C> <C>
Buildings......................................... 30 $ 272,789 $ 294,479
Building improvements............................. 30 50,169 58,216
Machinery and equipment........................... 7-10 1,442,920 1,501,849
Automobiles....................................... 5 100,895 102,564
Office furniture and equipment.................... 7 16,089 6,732
Land.............................................. -- 14,438 46,570
---------- ----------
1,897,300 2,010,410
Less -- Accumulated depreciation.................. 1,463,414 1,521,643
---------- ----------
$ 433,886 $ 488,767
========== ==========
</TABLE>

The Combined Companies recorded depreciation expense of $106,562 and
$140,281 for the years ended December 31, 1996 and 1997, for these assets. Of
these amounts, $98,491 and $129,563 for the years ended December 31, 1996 and
1997, respectively, were capitalized as part of inventory costs and later
expensed as inventory is sold.

5. NOTES PAYABLE:

At December 31, 1996 and 1997, the Combined Companies notes payable
consisted of the following:

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Note payable to a bank under a $50,000 line of credit;
accruing interest initially at 9.25% and thereafter at 1%
over prime payable quarterly; secured by accounts
receivable, inventory and property and equipment of
Reliable Equipment, Inc. and guaranteed by Grinding and
Sizing Company, Inc. and Houston Bagging and Blending,
Inc. and personally by two shareholders; matures 1998..... $ -- $ 50,000
Note payable to a bank under a $200,000 line of credit for
working capital; accruing interest initially at 10% and
thereafter at 1% over prime due quarterly; secured by
accounts receivable and inventory of Grinding and Sizing
Company, Inc. and certain land and two life insurance
policies for shareholders................................. 25,000 --
Note payable to one shareholder collateralized by an auto,
accruing interest at 9.25%; maturing 2000................. -- 24,306
Notes payable to banks, collateralized by autos and
equipment, accruing interest at 7.99% to 9.8% due monthly;
maturing 1997-2000........................................ 65,721 76,251
Note payable to a former shareholder for purchase of shares
held, secured by land, property and equipment, inventory
and accounts receivable of Grinding and Sizing Company,
Inc. accruing interest at 6% annually..................... 260,305 --
-------- --------
Total outstanding................................. 351,026 150,557
Less -- Current maturities.................................. 80,091 105,328
-------- --------
Total notes payable............................... $270,935 $ 45,229
======== ========
</TABLE>

Interest expense recorded for the years ended December 31, 1996, and
December 31, 1997, is $27,281 and $21,838, respectively.

F-41
<PAGE> 87
GRINDING AND SIZING COMPANY, INC., AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

Total notes payable at December 31, 1997, matures as follows:

<TABLE>
<S> <C>
1998...................................................... $105,328
1999...................................................... 33,057
2000...................................................... 12,172
--------
Total........................................... $150,557
========
</TABLE>

In April 1998, the Combined Companies paid off all notes payable
outstanding at December 31, 1997, prior to the acquisition by W-H.

6. COMMITMENTS AND CONTINGENCIES:

Grinding and Sizing Company, Inc., has an agreement to pay a shareholder
royalties for use of a patent of $1 per each 25 pounds of pecan pith product (a
raw material input) sold expiring in 2013. Payments made under this agreement
totaled $15,768 and $29,544 for the years ended December 31, 1996 and 1997,
respectively.

Grinding and Sizing Company, Inc., has an agreement with an unrelated third
party for use of a license to produce a drilling additive from corn cob outers.
Payments made under this agreement totaled $151,013 and $200,591 for the years
ended December 31, 1996 and 1997, respectively.

Grinding and Sizing Company, Inc., has a life insurance policy for one
shareholder in the amount of $500,000 payable to Grinding and Sizing Company,
Inc.

The Combined Companies are involved in lawsuits from time to time arising
from normal business activities. Management has reviewed any pending litigation
with legal counsel and believes that the ultimate liability, if any, resulting
from such actions will not have a material adverse effect on the Combined
Companies' financial position or results of operations.

7. SHAREHOLDERS' EQUITY:

The components of capital stock as of December 31, 1996 and 1997, are as
follows:

<TABLE>
<CAPTION>
PAR
CLASS SHARES SHARES VALUE
COMPANY OF SHARES AUTHORIZED ISSUED PER SHARE
------- --------- ---------- ------ ---------
<S> <C> <C> <C> <C>
December 31, 1996
Grinding and Sizing Company, Inc........... Common 1,000,000 30,000 No Par
Houston Bagging and Blending, Inc.......... Common 100,000 8,523 $1
------
Total capital stock................ 38,523
======
December 31, 1997
Grinding and Sizing Company, Inc........... Common 1,000,000 30,000 No Par
Houston Bagging and Blending, Inc.......... Common 100,000 8,523 $1
Reliable Equipment, Inc.................... Common 100,000 100 $1
------
Total capital stock................ 38,623
======
</TABLE>

F-42
<PAGE> 88
GRINDING AND SIZING COMPANY, INC., AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

8. SIGNIFICANT SUPPLIERS AND CUSTOMERS:

The Combined Companies have one significant supplier that represents 13
percent of purchases for the year ended December 31, 1996, and two significant
suppliers that represent 16 percent and 14 percent of purchases for the year
ended December 31, 1997.

The Combined Companies have sales to two significant customers that
represent 31 percent and 10 percent of revenues for the year ended December 31,
1996. The Combined Companies had revenues to two significant customers that
represent 33 percent and 16 percent of revenues for the year ended December 31,
1997.

F-43
<PAGE> 89

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
W-H Energy Services, Inc.:

We have audited the accompanying combined balance sheets of Agri-Empresa,
Inc., and Affiliates, all Texas corporations, as of December 31, 1996 and 1997,
and the related combined statements of operations, shareholders' equity and cash
flows for the years then ended. These combined financial statements are the
responsibility of Agri-Empresa, Inc., and Affiliates' management. Our
responsibility is to express an opinion on these combined 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of
Agri-Empresa, Inc., and Affiliates as of December 31, 1996 and 1997, and the
combined results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
August 28, 1998

F-44
<PAGE> 90

AGRI-EMPRESA, INC., AND AFFILIATES

COMBINED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31
------------------------- JUNE 30,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................... $ 906,851 $ 1,079,102 $ 1,171,905
Accounts receivable, net of allowance of $244,246,
$311,871 and $277,168............................ 3,577,520 5,735,667 3,529,300
Related-party notes receivable...................... 765,534 298,209 74,995
Income taxes receivable............................. 108,005 -- --
Inventories......................................... 2,006,123 2,308,147 2,446,406
Prepaid expenses and other.......................... 164,911 122,605 182,545
----------- ----------- -----------
Total current assets........................ 7,528,944 9,543,730 7,405,151
PROPERTY AND EQUIPMENT, net........................... 2,690,810 2,856,466 2,634,182
OTHER ASSETS.......................................... 28,727 69,040 117,349
----------- ----------- -----------
Total assets................................ $10,248,481 $12,469,236 $10,156,682
=========== =========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Current maturities of notes payable................. $ 946,048 $ 378,431 $ 584,920
Current maturities of related-party notes payable... 112,999 21,133 6,432
Advances from related parties....................... 70,000 -- --
Accounts payable and accrued liabilities............ 2,407,572 3,165,507 2,568,949
Income taxes payable................................ 122,750 219,316 286,814
----------- ----------- -----------
Total current liabilities................... 3,659,369 3,784,387 3,447,115
----------- ----------- -----------
NOTES PAYABLE, net of current maturities.............. 919,943 1,311,007 1,015,506
----------- ----------- -----------
RELATED-PARTY NOTES PAYABLE, net of current
maturities.......................................... 28,380 13,393 10,434
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock........................................ 5,389 5,389 5,389
Additional paid-in capital.......................... 116,600 116,600 116,600
Retained earnings................................... 5,518,800 7,238,460 5,561,638
----------- ----------- -----------
Total shareholders' equity.................. 5,640,789 7,360,449 5,683,627
----------- ----------- -----------
Total liabilities and shareholders'
equity.................................... $10,248,481 $12,469,236 $10,156,682
=========== =========== ===========
</TABLE>

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

F-45
<PAGE> 91

AGRI-EMPRESA, INC., AND AFFILIATES

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS
DECEMBER 31 ENDED JUNE 30
------------------------- -------------------------
1996 1997 1997 1998
----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES................................. $24,424,559 $31,187,087 $14,484,096 $13,858,389
COSTS AND EXPENSES:
Operating expenses..................... 20,427,381 25,260,141 11,906,025 11,112,775
Depreciation........................... 443,475 529,376 245,257 291,872
Selling, general and administrative
expenses............................ 2,378,325 1,985,243 865,027 782,586
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS................... 1,175,378 3,412,327 1,467,787 1,671,156
OTHER (EXPENSE) INCOME:
Interest expense....................... (161,627) (163,321) (82,161) (77,525)
Other income........................... 89,888 172,075 96,050 123,657
----------- ----------- ----------- -----------
NET INCOME BEFORE TAXES.................. 1,103,639 3,421,081 1,481,676 1,717,288
INCOME TAXES............................. 453,595 191,421 87,056 57,006
----------- ----------- ----------- -----------
NET INCOME............................... $ 650,044 $ 3,229,660 $ 1,394,620 $ 1,660,282
=========== =========== =========== ===========
</TABLE>

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

F-46
<PAGE> 92

AGRI-EMPRESA, INC., AND AFFILIATES

COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------- PAID-IN RETAINED SHAREHOLDERS'
SHARES VALUE CAPITAL EARNINGS EQUITY
------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995............ 102,389 $3,389 $116,600 $ 4,868,756 $ 4,988,745
NET INCOME............................ -- -- -- 650,044 650,044
ISSUANCE OF COMMON STOCK.............. 11,000 2,000 -- -- 2,000
------- ------ -------- ----------- -----------
BALANCE, December 31, 1996............ 113,389 5,389 116,600 5,518,800 5,640,789
NET INCOME............................ -- -- -- 3,229,660 3,229,660
DISTRIBUTIONS TO SHAREHOLDERS......... -- -- -- (1,510,000) (1,510,000)
------- ------ -------- ----------- -----------
BALANCE, December 31, 1997............ 113,389 5,389 116,600 7,238,460 7,360,449
NET INCOME, unaudited................. -- -- -- 1,660,282 1,660,282
DISTRIBUTIONS TO SHAREHOLDERS,
unaudited........................... -- -- -- (3,337,104) (3,337,104)
------- ------ -------- ----------- -----------
BALANCE, June 30, 1998, unaudited..... 113,389 $5,389 $116,600 $ 5,561,638 $ 5,683,627
======= ====== ======== =========== ===========
</TABLE>

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

F-47
<PAGE> 93

AGRI-EMPRESA, INC., AND AFFILIATES

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS
DECEMBER 31 ENDED JUNE 30
------------------------ -------------------------
1996 1997 1997 1998
---------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................ $ 650,044 $ 3,229,660 $ 1,394,620 $ 1,660,282
Adjustments to reconcile net income to cash
provided by operating activities --
Depreciation.................................... 443,475 529,376 245,257 291,872
Loss (gain) on sale of assets................... 44,116 (10,187) (10,187) 3,826
Net change in deferred taxes.................... (27,286) 30,556 12,604 (1,488)
Net (increase) decrease in accounts receivable.... (968,227) (2,158,147) (1,097,908) 2,206,367
Net (increase) decrease in inventories............ (30,960) (302,024) 350,216 (138,259)
Net decrease (increase) in prepaid expenses and
other assets.................................... 13,447 (27,888) (227,736) (97,758)
Net (increase) decrease in income taxes
receivable...................................... (108,005) 108,005 108,005 --
Net increase in income taxes payable.............. 85,657 95,891 9,480 58,494
Net increase (decrease) in accounts payable and
accrued liabilities............................. 650,205 757,935 454,890 (596,557)
---------- ----------- ----------- -----------
Net cash flows provided by operating
activities............................... 752,466 2,253,177 1,239,241 3,386,779
---------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital additions................................. (810,182) (684,845) (212,442) (73,414)
Proceeds from sale of assets...................... 110,000 -- -- --
---------- ----------- ----------- -----------
Net cash flows used in investing
activities............................... (700,182) (684,845) (212,442) (73,414)
---------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable....................... (765,592) (1,501,553) (568,286) (200,478)
Repayments of related-party notes payable......... (211,789) (106,853) (63,412) (17,660)
Borrowings under notes payable.................... 1,504,000 1,325,000 660,000 111,466
Loans made to related parties..................... (412,071) (187,582) (36,031) (187,971)
Loan repayments from related parties.............. 189,312 654,907 47,435 411,185
Advances received from related parties............ 70,000 -- -- --
Repayment of advances from related parties........ -- (70,000) (70,000) --
Issuance of common stock.......................... 2,000 -- -- --
Distributions to shareholders..................... -- (1,510,000) (510,000) (3,337,104)
---------- ----------- ----------- -----------
Net cash flows provided by (used in)
financing activities..................... 375,860 (1,396,081) (540,294) (3,220,562)
---------- ----------- ----------- -----------
NET INCREASE IN CASH................................ 428,144 172,251 486,505 92,803
CASH, beginning of period........................... 478,707 906,851 906,851 1,079,102
---------- ----------- ----------- -----------
CASH, end of period................................. $ 906,851 $ 1,079,102 $ 1,393,356 $ 1,171,905
========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the year..................... $ 161,627 $ 163,321 $ 82,161 $ 77,525
========== =========== =========== ===========
Income taxes paid (refunded) during the year...... $ 460,216 $ (37,113) $ 98,526 $ 94,388
========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
TRANSACTION:
Trade-in value received for trucks................ $ -- $ 15,000 $ 15,000 $ --
========== =========== =========== ===========
</TABLE>

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

F-48
<PAGE> 94

AGRI-EMPRESA, INC., AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS

1. BUSINESS ORGANIZATION AND BASIS OF PRESENTATION:

The accompanying combined financial statements include the accounts of
Agri-Empresa, Inc. (Agri), STG Transportation (STG), Agri-Empresa Transportation
(AET), Lonestar Distribution, Inc. (LDI), and Superior Packaging & Distribution
(SPD) (collectively, AEI or the Company). Each of the companies share common
ownership, with varying relative ownership percentages. Agri was founded and
incorporated in Texas in 1977 and is the Permian Basin's largest manufacturer,
packager and distributor of chemicals used in oilfield and industrial
applications. Agri also operates in the Carlsbad, New Mexico, area. STG, founded
and incorporated in Texas in 1995, and AET, founded and incorporated in Texas in
1987, offer delivery of oilfield chemicals in the Permian Basin. LDI was founded
and incorporated in Texas in 1981 to provide outsourcing to oilfield companies
of noncore activities including warehousing, material handling and
transportation. LDI operates in the Permian Basin, Abilene and Jacksboro, Texas,
and Hobbs, New Mexico. SPD, founded and incorporated in Texas in 1996, provides
chemical warehousing, bagging and export services in the Houston, Texas, area.
All significant transactions between the combined companies have been
eliminated.

On July 27, 1998, the shareholders of the Company completed the sale of all
of the outstanding stock of Agri, STG, AET, LDI and SPD to Drill Motor Services,
Inc., a subsidiary of W-H Energy Services, Inc. (W-H), for cash consideration of
$21,000,000 and warrants valued at approximately $165,000 convertible into the
common stock of W-H. The shareholders of the Company have placed in escrow
$2,000,000 for a period of two years following the closing date to provide for
potential claims and damages as agreed to by the shareholders of the Company and
W-H. The accompanying combined financial statements were prepared in conjunction
with the acquisition by W-H.

The interim combined financial statements for the six months ended June 30,
1997 and 1998, are unaudited and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company's management, the
accompanying combined financial statements as of June 30, 1998, and for the six
months ended June 30, 1997 and 1998, contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the Company's
financial position as of June 30, 1998, and the results of operations and cash
flows for the six months ended June 30, 1997 and 1998. The results of operations
and cash flows for the six months ended June 30, 1997 and 1998, are not
necessarily indicative of the operating results for the full years.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CASH AND CASH EQUIVALENTS

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

ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION

Revenue is recognized when inventory is delivered to the customer.

The Company provides for uncollectible accounts receivable as a percentage
of revenue. This provision has historically been adequate to cover the write-off
of accounts receivable. AEI provides services to the oil and gas industry and,
as such, is subject to the credit risks that apply in that industry.
Specifically, management at the Company does not believe the general decline in
the oil and gas industry in the second and third quarters of 1998 will have a
material impact on the collectibility of accounts receivable as of December 31,
1997.

F-49
<PAGE> 95
AGRI-EMPRESA, INC., AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

INVENTORIES

Inventories are stated at the lower of cost or market using the first-in,
first-out method of accounting for inventory. AEI capitalizes overhead costs
related to inventory as part of inventory costs including direct labor,
packaging and other direct expenses.

PROPERTY AND EQUIPMENT, NET

Property and equipment are recorded at cost. Expenditures for major assets,
and betterments that extend the useful lives of property and equipment are
capitalized, and minor replacements, maintenance and repairs are expensed as
incurred. Gains and losses resulting from dispositions are reported in the
statement of income in the period in which they are incurred.

Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets as follows:

<TABLE>
<S> <C>
Buildings............................................. 12-31.5 years
Machinery and equipment............................... 5-12 years
</TABLE>

FEDERAL INCOME TAXES

Effective January 1, 1997, Agri and LDI individually elected S Corporation
status, as defined by the Internal Revenue Code, whereby they are not subject to
federal taxation. Under S Corporation status, the shareholders report their
proportionate share of taxable earnings on their personal tax returns. SPD
elected S Corporation status in the year of its inception.

AET and STG are C Corporations for federal taxation purposes and, as such,
are subject to federal taxation.

USE OF ESTIMATES

3. INVENTORIES:

Inventories consist of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Raw materials and supplies........................... $ 52,500 $ 75,000
Finished goods....................................... 1,953,623 2,233,147
---------- ----------
$2,006,123 $2,308,147
========== ==========
</TABLE>

F-50
<PAGE> 96
AGRI-EMPRESA, INC., AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. PROPERTY AND EQUIPMENT, NET:

Property and equipment, net, consist of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Buildings.......................................... $ 1,190,030 $ 1,208,514
Machinery and equipment............................ 3,589,981 4,244,795
Land............................................... 156,490 156,490
----------- -----------
4,936,501 5,609,799
Less -- Accumulated depreciation................... (2,245,691) (2,753,333)
----------- -----------
$ 2,690,810 $ 2,856,466
=========== ===========
</TABLE>

5. NOTES PAYABLE:

Notes payable consist of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Note payable to a bank, due in monthly installments of
$8,334 plus interest at prime, maturing July 2002, secured
by personal guarantee of shareholder...................... $ 420,000 $ 449,996
Note payable to a bank, due in monthly payments of $7,100
plus interest at prime (8.50% at December 31, 1997),
maturing July 1999, secured by real property.............. 318,400 233,200
Note payable to a bank, due in monthly installments of
$3,929 plus interest at prime, maturing November 2002,
secured by trucks and personal guarantee of shareholder... 274,994 227,845
Note payable to a bank, due in monthly installments of
$1,385 plus interest at prime, maturing August 2001,
secured by real property.................................. 243,460 226,840
Revolving line of credit with a stated credit maximum of
$600,000 and $3,000,000, respectively, interest at prime
due monthly, maturing July 1997 and July 1998,
respectively, secured by substantially all assets of Agri
and personal guarantee of shareholder..................... 200,000 --
Note payable to a bank, due in monthly installments of
$2,500 plus interest at prime, maturing April 2001,
secured by substantially all assets of STG and personal
guarantee of shareholder.................................. 127,500 97,500
Note payable to a bank, due in monthly installments of
$1,250 including interest at prime, maturing July 1999,
secured by real property.................................. 113,507 108,007
Revolving line of credit with a stated credit maximum of
$200,000 and $200,000, respectively, interest at prime due
monthly, maturing April 1997 and July 1998, respectively,
secured by substantially all assets of SPD and personal
guarantee of shareholder.................................. 90,000 --
Note payable to a bank, due in monthly payments of $4,340
plus interest at prime, maturing July 1998, secured by
life insurance policy on a shareholder.................... 78,130 26,050
Note payable to a bank, due in monthly installments of
$5,334 plus interest at prime, maturing December 2002,
secured by substantially all equipment of LDI and personal
guarantee of shareholder.................................. -- 320,000
---------- ----------
1,865,991 1,689,438
Less -- Current maturities.................................. (946,048) (378,431)
---------- ----------
Long-term debt.................................... $ 919,943 $1,311,007
========== ==========
</TABLE>

F-51
<PAGE> 97
AGRI-EMPRESA, INC., AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's revolving line-of-credit arrangements are summarized in the
following table:

<TABLE>
<CAPTION>
1996 1997
------------------------------ ----------------------------------
AGRI SPD TOTAL AGRI SPD TOTAL
-------- -------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Facility amount...................... $600,000 $200,000 $800,000 $3,000,000 $200,000 $3,200,000
Borrowings........................... 200,000 90,000 290,000 -- -- --
-------- -------- -------- ---------- -------- ----------
Amount available to borrow........... $400,000 $110,000 $510,000 $3,000,000 $200,000 $3,200,000
======== ======== ======== ========== ======== ==========
</TABLE>

Total notes payable at December 31, 1997, mature as follows:

<TABLE>
<S> <C>
1998..................................................... $ 378,431
1999..................................................... 499,059
2000..................................................... 257,784
2001..................................................... 395,644
2002..................................................... 158,520
----------
Total.......................................... $1,689,438
==========
</TABLE>

The Company paid off all outstanding notes payable in July 1998, prior to
the acquisition by W-H.

6. LEASES:

The minimum future lease payments for equipment and facilities under
noncancelable operating leases at December 31, 1997, are as follows:

Subsequent to December 31, 1997, the Company renewed a lease shown as
expiring during 1998 in the above table. As a result of this renewal, minimum
future lease payments shown in the above table would increase by approximately
$24,300 in 1998, $32,400 in 1999-2002 and $8,100 thereafter.

7. SHAREHOLDERS' EQUITY:

The components of capital stock as of December 31, 1996 and 1997, are as
follows:

<TABLE>
<CAPTION>
PAR
CLASS SHARES SHARES VALUE
COMPANY OF SHARES AUTHORIZED ISSUED PER SHARE
------- --------- ---------- ------- ---------
<S> <C> <C> <C> <C>
Agri........................................ Common 10,000 1,389 $1.00
STG......................................... Common 1,000,000 10,000 $ .10
AET......................................... Common 1,000,000 100,000 $ .01
LDI......................................... Common 500,000 1,000 $1.00
SPD......................................... Common 100,000 1,000 $1.00
-------
Total capital stock............... 113,389
=======
</TABLE>

F-52
<PAGE> 98
AGRI-EMPRESA, INC., AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

8. SIGNIFICANT SUPPLIERS AND CUSTOMERS:

The Company had one significant supplier that represented approximately 33
percent and 24 percent of purchases for the years ended December 31, 1996 and
1997, respectively.

The Company had sales to one significant customer that represented
approximately 17 percent and 20 percent of revenues for the years ended December
31, 1996 and 1997, respectively.

9. RELATED-PARTY TRANSACTIONS:

The following transactions have occurred between the Company and related
parties:

(1) A shareholder's stepfather renders accounting and other consulting
services to the Company. The aggregate charges for these services during
1996 and 1997 were approximately $106,000 and $92,160, respectively.

(2) A company owned by two shareholders leases hunting land to the
Company for approximately $17,500 a year.

(3) A shareholder of the Company serves as a director of a bank to
which the following notes payable were due by the Company at December 31,
1996 and 1997:

<TABLE>
<CAPTION>
1996 1997
--------- --------
<S> <C> <C>
Note payable, due in monthly installments of $6,867
including interest at 7.5%, maturing March 1998, secured
by trucks................................................. $ 92,707 $ 14,701
Note payable, due in monthly installments of $663 including
interest at prime plus 1%, maturing January 2001, secured
by an automobile.......................................... 25,370 19,825
Note payable, due in monthly installments of $4,725
including interest at 8.25%, maturing May 1997, secured by
trucks and trailers....................................... 23,302 --
--------- --------
141,379 34,526
Less -- Current maturities.................................. (112,999) (21,133)
--------- --------
$ 28,380 $ 13,393
========= ========
</TABLE>

Related-party notes payable at December 31, 1997, mature as follows:

F-53
<PAGE> 99
AGRI-EMPRESA, INC., AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

(4) Notes and other receivables at December 31, 1996 and 1997, were
due from the following related parties:

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
7.5% notes payable from shareholder, payable in one annual
installment of principal plus interest, unsecured......... $237,650 $ 29,653
7.5% note payable from corporation owned by two
shareholders, payable in one annual installment of
principal plus interest, unsecured........................ 200,000 --
7.5% note payable from partnership owned by two
shareholders, payable in one annual installment of
principal plus interest, unsecured........................ 146,402 159,136
7.5% notes payable from shareholder, payable in one annual
installment of principal plus interest, unsecured......... 68,950 2,925
7.5% note payable from a company owned by two shareholders,
payable in one annual installment of principal plus
interest, unsecured....................................... 55,830 37,731
7.5% notes payable from a shareholder's mother and
stepfather, payable in one annual installment of principal
plus interest, unsecured.................................. 51,531 55,395
Other....................................................... 5,171 13,369
-------- --------
$765,534 $298,209
======== ========
</TABLE>

(5) A shareholder contributed his shares in STG to the capital of AET
as of January 1, 1997. This transfer was not made for cash consideration
but to allow the owners to operate these two entities as a single-operating
unit for tax purposes.

(6) SPD leases a warehouse from a corporation owned by two of the
Company's shareholders. Rent expense totaled approximately $140,000 and
$288,000 in 1996 and 1997, respectively.

(7) During 1996, two shareholders each advanced the Company $35,000.
These advances were repaid in full during 1997 and did not bear interest.

(8) The Company advances funds to its employees from time to time.
These advances are repaid by the employees through payroll deductions. Such
advances totaled $68,756 and $61,529 at December 31, 1996 and 1997, and
were included within "prepaid expenses and other" in the accompanying
combined balance sheets.

10. INCOME TAXES:

Income tax expense consisted of the following:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
-------------------
1996 1997
-------- --------
<S> <C> <C>
Federal --
Current....................................... $428,026 $ 2,472
Deferred...................................... (25,893) 33,441
-------- --------
402,133 35,913
-------- --------
State --
Current....................................... 52,855 158,393
Deferred...................................... (1,393) (2,885)
-------- --------
51,462 155,508
-------- --------
$453,595 $191,421
======== ========
</TABLE>

F-54
<PAGE> 100
AGRI-EMPRESA, INC., AND AFFILIATES

NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation of the U.S. statutory tax rate to the effective income tax
rate is as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
----------------------
1996 1997
-------- -----------
<S> <C> <C>
Income tax expense at the statutory rate.................... $408,939 $ 1,027,677
State income taxes, net of federal income tax benefit....... 32,513 157,239
Nondeductible expenses...................................... 12,143 116
Change in sales tax rate.................................... -- 72,662
Effect of S Corporation election............................ -- (1,066,273)
-------- -----------
$453,595 $ 191,421
======== ===========
</TABLE>

The following summarizes the tax effect of significant cumulative temporary
differences that are included in the net deferred income tax asset at December
31:

<TABLE>
<CAPTION>
1996 1997
-------- -------
<S> <C> <C>
Deferred income tax assets --
Allowance for doubtful accounts........................... $ 93,577 $15,955
Accrued expenses.......................................... 7,242 3,612
Net operating loss........................................ 18,823 58,357
-------- -------
119,642 77,924
-------- -------
Deferred income tax liabilities --
Insurance expense......................................... (9,459) (1,062)
Other..................................................... (3,627) (862)
-------- -------
(13,086) (1,924)
-------- -------
$106,556 $76,000
======== =======
</TABLE>

11. 401(k) PLAN:

Effective June 1, 1993, the Company established a 401(k) plan which covers
all employees who choose to contribute a portion of their salary to the plan.
All contributions from Company funds are discretionary. Company discretionary
contributions totaled $28,359 and $35,003 for the plan years ended December 31,
1996 and 1997, respectively.

F-55
<PAGE> 101

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES UNDER ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. 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.......................... 8
Forward Looking Statements............ 12
The Company........................... 13
Use of Proceeds....................... 14
Dividend Policy....................... 14
Dilution.............................. 15
Capitalization........................ 16
Selected Historical and Pro Forma
Consolidated Financial Data......... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 18
Business.............................. 21
Management............................ 33
Certain Transactions.................. 38
Principal Shareholders................ 39
Description of Capital Stock.......... 40
Shares Eligible for Future Sale....... 41
Underwriting.......................... 43
Legal Matters......................... 44
Experts............................... 44
Available Information................. 45
Index to Financial Statements......... F-1
</TABLE>

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

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS 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.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

W-H ENERGY SERVICES, INC.

COMMON STOCK

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

JEFFERIES & COMPANY, INC.

, 1999

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 102

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The expenses of the offering are estimated to be as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 23,748
NASD filing fee............................................. 8,550
NASDAQ listing fee.......................................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses (including legal fees)........... *
Printing expenses........................................... *
Transfer Agent fees......................................... *
Miscellaneous............................................... *
--------
TOTAL............................................. $ *
========
</TABLE>

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

* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Bylaws of the Company provide that the Company shall indemnify (i) its
directors, (ii) its directors serving at its request as a director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary
of another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust employee benefit plan or other enterprise and (iii) its
officers, against reasonable expenses incurred by them in connection with the
defense of any threatened, pending, or completed action, suit or proceeding,
whether civil, criminal, administrative, arbitrative, or investigative, any
appeal in such an action, suit, or proceeding, and any inquiry or investigation
that could lead to such an action, suit, or proceeding, where the person who
was, is, or is threatened to be made defendant or respondent in a proceeding was
named because the person is or was a director or an officer of the Company. The
foregoing indemnification is conditioned upon a determination (i) by a majority
vote of a quorum consisting of directors who at the time of the vote are not
named defendants or respondents in the proceeding, (ii) if such a quorum cannot
by obtained, by a majority vote of a committee of the Board of Directors,
designated to act in the matter by a majority vote of all directors who at the
time of the vote are not named defendants or respondents in the proceeding,
(iii) by special legal counsel selected by the Board of Directors or a committee
of the Board by vote as set forth in subsection (i) or (ii), or, if such a
quorum cannot be obtained and such a committee cannot be established, by a
majority vote of all directors, or (iv) by the stockholders in a vote that
excludes the shares held by directors who are named defendants or respondents in
the proceeding, that such person (1) conducted himself in good faith, (2)
reasonably believed, in the case of conduct in his official capacity as a
director or officer of the Company, that his conduct was in the Company's best
interest, and in all other cases, that his conduct was at least not opposed to
the Company's best interest, and (3) in the case of any criminal proceeding, had
no reasonable cause to believe his conduct was unlawful. Notwithstanding the
foregoing, the Company shall indemnify each director and officer against
reasonable expenses incurred by him in connection with a proceeding in which he
is a party because he is a director or officer if he has been wholly successful,
on the merits or otherwise, in the defense of the proceeding. A director or
officer, found liable on the basis that personal benefit was improperly received
by him, or found liable to the Company, may be indemnified but the
indemnification is limited to reasonable expenses actually incurred by the
person in connection with the proceeding and shall not be made in respect of any
proceeding in which the person shall have been found liable for willful or
intentional misconduct in the performance of his duty to the Company.

The Company's Bylaws also provide that reasonable expenses incurred by a
director or officer who was, is or is threatened to be named a defendant or
respondent in a proceeding may be paid or reimbursed by the

II-1
<PAGE> 103

Company in advance of the final disposition of the proceeding after (i) the
Company receives a written affirmation by the director or officer of his good
faith belief that he has met the standard of conduct necessary for
indemnification under the Company's Bylaws and a written undertaking by or on
behalf of the director or officer to repay the amount paid or reimbursed if it
is ultimately determined that he has not met that standard or if it is
ultimately determined that indemnification of the director against expenses
incurred by him in connection with that proceeding is prohibited by law and (ii)
a determination is made that the facts then known to those making the
determination would not preclude indemnification under the Company's Bylaws. The
Bylaws of the Company also provide that the Company may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Company or who is or was serving at the Company's request as a
director, officer, partner, venturer, proprietor, trustee, employee or similar
functionary of another foreign or domestic corporation, partnership, joint
venture, sole proprietorship, trust, employee benefit plan or other enterprise,
in accordance with Article 2.02-1 of the Texas Business Corporation Act.

In addition, the Company's Restated Articles of Incorporation provide that
a director of the Company will not be liable to the Company or its stockholders
for monetary damages for an act or omission in the director's capacity as a
director, except in the case of (i) a breach of the director's duty of loyalty
to the Company or its stockholders, (ii) an act or omission not in good faith
that constitutes a breach of duty of the director to the Company or an act or
omission that involves intentional misconduct or a knowing violation of the law,
(iii) a transaction from which the director received an improper benefit,
whether or not the benefit resulted from an action taken within the scope of the
director's office, or (iv) an act or omission for which the liability of a
director is expressly provided by an applicable statute. The Restated Articles
of Incorporation also excuse a director from liability to the fullest extent
permitted by any provisions of the statutes of Texas enacted in the future that
further limit the liability of a director.

The Company has agreements with each of its directors to indemnify them for
costs and expenses resulting from their service as directors of the Company to
the fullest extent permitted by law.

The Company has director and officer insurance in the amount of $2 million
per occurrence and $2 million in the aggregate.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The securities of the registrant which were sold by the registrant since
January 1995 and not registered under the Securities Act are as follows:

(i) On July 27, 1998, the registrant issued warrants to purchase 7,500
shares of its Common Stock to Stephen T. Goree, Travis Gorce and E. Ashford
Brock as partial consideration for the acquisition of all of the
outstanding stock of Agri-Empresa Inc. pursuant to the exemption from the
registration requirements of Section 5 of the Securities Act offered by
Section 4(2) of the Securities Act.

(ii) On April 24, 1998, the registrant issued warrants to purchase
3,000 shares of its Common Stock and $800,000 of Subordinated Notes to
Ronald A. Rose, Ron Chastain and James Witliff as partial consideration for
the acquisition of all of the outstanding stock of Grinding and Sizing
Company, Inc. pursuant to the exemption from the registration requirements
of Section 5 of the Securities Act offered by Section 4(2) of the
Securities Act.

(iii) In September 1997, the registrant issued warrants to purchase
12,468 shares of Common Stock and $1,200,000 of Subordinated Notes to
William Max Duncan, Burt Bull and Billy Saul as partial consideration for
the acquisition of all of the outstanding stock of Integrity Industries,
Inc., a Texas corporation, pursuant to the exemption from the registration
requirements of Section 5 of the Securities Act offered by Section 4(2) of
the Securities Act.

(iv) On August 11, 1997, the registrant sold 220,000 shares of Common
Stock for $12,045,000 and warrants to purchase 37,812.5 shares of Common
Stock to W-H Investment, L.P., a Delaware limited partnership, and issued
$24 million of Subordinated Notes to an affiliate of W-H Investment, L.P.
Each of the foregoing sales of Common Stock, warrants and Subordinated
Notes was issued pursuant to the

II-2
<PAGE> 104

exemption from the registration requirements of Section 5 of the Securities
Act offered by Section 4(2) of the Securities Act.

(v) On February 12, 1996, the registrant sold 3,286 shares of Common
Stock to Daniel M. Spiller for $98,580, pursuant to the exemption from the
registration requirements of Section 5 of the Securities Act offered by
Section 4(2) of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits:

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>

1.1 -- Form of Underwriting Agreement*

3.1 -- Restated Articles of Incorporation of the Company*

3.2 -- Bylaws of the Company*

4.1 -- Specimen Common Stock certificate*

5.1 -- Opinion of Vinson & Elkins L.L.P.*

9.1 -- Stockholders Agreement*

10.1 -- Employment Agreement of Kenneth T. White, Jr.*

10.2 -- Employment Agreement of David N. Eliff*

10.3 -- Employment Agreement of Jeffery L. Tepera*

10.4 -- 1997 Stock Option Plan*

10.5 -- Form of Stock Option Agreement*

10.6 -- Agreement and Plan of Recapitalization*

10.7 -- Senior Unsecured Credit Facility*

10.8 -- Transaction Advisory Agreement*

10.9 -- Consulting Agreement*

10.10 -- Integrity Stock Purchase Agreement*

10.11 -- Subordinated Notes Purchase Agreement*

10.12 -- Form of Subordinated Notes*

10.13 -- Form of Director Indemnity Agreement*

10.14 -- Form of Warrant Agreement*

10.15 -- Grinding and Sizing, Inc. Stock Purchase Agreements*

10.16 -- Agri-Empresa Stock Purchase Agreements*

11.1 -- Computation of Per Share Earnings*

11.2 -- Computation of Ratio of Earnings per Share*

21.1 -- List of subsidiaries of the Company
</TABLE>

II-3
<PAGE> 105

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
23.1 -- Consent of Arthur Andersen LLP

23.2 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1 hereto)

24.1 -- Power of Attorney (included on the signature page to this
Registration Statement)

27.1 -- Financial Data Schedule
</TABLE>

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

* To be filed by amendment.

(b) Consolidated Financial Statement Schedules, Years ended September 30,
1995, 1996, and 1997.

All schedules are omitted because the required information is inapplicable
or the information is presented in the Consolidated Financial Statements or
related notes.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby undertakes to provide at the closing
specified in the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 106

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, State of Texas, on the 12th day of November, 1998.

W-H ENERGY SERVICES, INC.

By: /s/ KENNETH T. WHITE, JR.
------------------------------------
Kenneth T. White, Jr.
Chairman and President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ KENNETH T. WHITE, JR. Chairman of the Board, November 12, 1998
- ----------------------------------------------------- President and Chief
Kenneth T. White, Jr. Executive Officer

/s/ DAVID N. ELIFF Vice President and Chief November 12, 1998
- ----------------------------------------------------- Financial Officer
David N. Eliff (Principal Financial
and Accounting Officer)

/s/ JOHN W. JORDAN II* Director November 12, 1998
- -----------------------------------------------------
John W. Jordan II

/s/ DAVID W. ZALAZNICK* Director November 12, 1998
- -----------------------------------------------------
David W. Zalaznick

/s/ JONATHAN F. BOUCHER* Director November 12, 1998
- -----------------------------------------------------
Jonathan F. Boucher

/s/ J. JACK WATSON* Director November 12, 1998
- -----------------------------------------------------
J. Jack Watson

/s/ CHRISTOPHER MILLS* Director November 12, 1998
- -----------------------------------------------------
Christopher Mills

/s/ ROBERT H. WHILDEN, JR.* Director November 12, 1998
- -----------------------------------------------------
Robert H. Whilden, Jr.

/s/ DAVID N. ELIFF
- -----------------------------------------------------
David N. Eliff, as Attorney-in-Fact
Pursuant to Power of Attorney previously
filed with the Commission
</TABLE>

II-5
<PAGE> 107

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>

1.1 -- Form of Underwriting Agreement*

3.1 -- Restated Articles of Incorporation of the Company*

3.2 -- Bylaws of the Company*

4.1 -- Specimen Common Stock certificate*

5.1 -- Opinion of Vinson & Elkins L.L.P.*

9.1 -- Stockholders Agreement*

10.1 -- Employment Agreement of Kenneth T. White, Jr.*

10.2 -- Employment Agreement of David N. Eliff*

10.3 -- Employment Agreement of Jeffery L. Tepera*

10.4 -- 1997 Stock Option Plan*

10.5 -- Form of Stock Option Agreement*

10.6 -- Agreement and Plan of Recapitalization*

10.7 -- Senior Unsecured Credit Facility*

10.8 -- Transaction Advisory Agreement*

10.9 -- Consulting Agreement*

10.10 -- Integrity Stock Purchase Agreement*

10.11 -- Subordinated Notes Purchase Agreement*

10.12 -- Form of Subordinated Notes*

10.13 -- Form of Director Indemnity Agreement*

10.14 -- Form of Warrant Agreement*

10.15 -- Grinding and Sizing Company Inc. Stock Purchase
Agreements*

10.16 -- Agri-Empresa, Inc. Stock Purchase Agreements*

11.1 -- Computation of Per Share Earnings*

11.2 -- Computation of Ratio of Earnings per Share*

21.1 -- List of subsidiaries of the Company

23.1 -- Consent of Arthur Andersen LLP

23.2 -- Consent of Vinson & Elkins L.L.P. (contained in Exhibit
5.1 hereto)

24.1 -- Power of Attorney (included on the signature page to this
Registration Statement)

27.1 -- Financial Data Schedule
</TABLE>

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

* To be filed by amendment.

<PAGE> 1

SCHEDULE 21.1
SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY ORGANIZATION TRADE NAMES
<S> <C> <C>
Thomas Tools, Inc......................................... Louisiana Thomas MWD Service
Drill Motor Services, Inc................................. Louisiana N/A
Perf-O-Log, Inc........................................... Louisiana N/A
Integrity Industries, Inc................................. Texas N/A
Charles Holston, Inc...................................... Louisiana Holston
Well Safe, Inc............................................ Texas WSI Industrial
Diamond Wireline Services, Inc............................ Texas N/A
Grinding and Sizing Company, Inc. ........................ Texas N/A
Agri-Empresa, Inc. ....................................... Texas N/A
Agri-Empresa Transportation, Inc. ........................ Texas N/A
</TABLE>

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.

ARTHUR ANDERSEN LLP

Houston, Texas

November 12, 1998

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 DEC-31-1997
<CASH> 904 1,670
<SECURITIES> 0 0
<RECEIVABLES> 20,563 19,626
<ALLOWANCES> 1,550 1,223
<INVENTORY> 6,143 3,737
<CURRENT-ASSETS> 27,980 25,706
<PP&E> 65,053 49,924
<DEPRECIATION> 19,502 15,814
<TOTAL-ASSETS> 105,287 82,981
<CURRENT-LIABILITIES> 12,911 13,024
<BONDS> 0 0
0 0
0 0
<COMMON> 275 275
<OTHER-SE> (28,755) (30,555)
<TOTAL-LIABILITY-AND-EQUITY> 105,287 82,981
<SALES> 0 0
<TOTAL-REVENUES> 42,445 59,833
<CGS> 0 0
<TOTAL-COSTS> 17,706 25,889
<OTHER-EXPENSES> 16,532 36,594
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,482 4,733
<INCOME-PRETAX> 2,725 (7,383)
<INCOME-TAX> 1,035 (1,714)
<INCOME-CONTINUING> 1,690 (5,669)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,690 (5,669)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0

</TABLE>