SIERRA WELL SERVICE INC, S-1/A, 2000-05-23

SIERRA WELL SERVICE INC
S-1/A, 2000-05-23
OIL & GAS FIELD SERVICES, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 2000

REGISTRATION NO. 333-33108
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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

BASIC ENERGY SERVICES, INC.*

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 1389 75-2441819
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

406 NORTH BIG SPRING
MIDLAND, TEXAS 79701
(915) 570-0829
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

KENNETH V. HUSEMAN
PRESIDENT
406 NORTH BIG SPRING
MIDLAND, TEXAS 79701
(915) 570-0829
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copies to:

<TABLE>
<S> <C>
ANDREWS & KURTH L.L.P. VINSON & ELKINS L.L.P.
600 TRAVIS, SUITE 4200 2300 FIRST CITY TOWER
HOUSTON, TEXAS 77002 1001 FANNIN
(713) 220-4200 HOUSTON, TEXAS 77002
ATTN: ROBERT V. JEWELL (713) 758-2222
ATTN: JEFFERY B. FLOYD
</TABLE>

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* Formerly known as Sierra Well Service, Inc.

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

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

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

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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
BASIC ENERGY MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION -- MAY 23, 2000

PROSPECTUS
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3,700,000 Shares

[BASIC ENERGY SERVICES, INC. LOGO]

Common Stock

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Basic Energy Services, Inc. is offering 3,700,000 shares of its common stock in
an initial public offering. Prior to this offering, there has been no public
market for Basic Energy's common stock.

Basic Energy provides a range of well site services to oil and gas drilling and
production companies through its fleet of well servicing rigs and fluid services
equipment. Basic Energy believes it operates the third largest fleet of well
servicing rigs in the United States.

It is anticipated that the public offering price will be between $14.00 and
$16.00 per share. Application will be made to include the shares of Basic Energy
for quotation in the Nasdaq National Market under the symbol "BASC".

<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price................................. $ $
Underwriting discounts and commissions................ $ $
Proceeds, before expenses, to Basic Energy............ $ $
</TABLE>

SEE "RISK FACTORS" ON PAGES 6 TO 10 FOR FACTORS THAT SHOULD BE CONSIDERED BEFORE
INVESTING IN THE SHARES OF BASIC ENERGY.

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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.

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The underwriters may, under certain circumstances, purchase up to 555,000
additional shares from Basic Energy at the public offering price, less
underwriting discounts and commissions. Delivery and payment for the shares will
be on , 2000.

PRUDENTIAL SECURITIES
JOHNSON RICE & COMPANY L.L.C.
SIMMONS & COMPANY
INTERNATIONAL

, 2000
<PAGE> 3

CORE OPERATING AREAS

[MAP OF OKLAHOMA, ARKANSAS, LOUISIANA, TEXAS, AND NEW MEXICO,

HIGHLIGHTING CORE OPERATING AREAS OF BASIC ENERGY]

[INSIDE COVER]

[PICTURES OF WELL SERVICING RIGS, FLUID SERVICE TRUCKS]

WELL SERVICING OPERATION IN WEST TEXAS

[PHOTO]

FLUID SERVICES TRUCK LOADING

AT FRESH WATER STATION

[PHOTO]

FLUID SERVICES TRUCKS AND STORAGE

TANKS IN WEST TEXAS

[PHOTO]
<PAGE> 4

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 6
Forward-Looking Statements............ 10
The Company........................... 11
Use of Proceeds....................... 13
Dividend Policy....................... 13
Dilution.............................. 14
Capitalization........................ 15
Selected Consolidated Financial
Data................................ 16
Industry Overview..................... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 32
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management............................ 41
Certain Relationships and Related
Party Transactions.................. 45
Principal Stockholders................ 46
Description of Capital Stock.......... 48
Shares Eligible for Future Sale....... 53
Underwriting.......................... 55
Legal Matters......................... 56
Experts............................... 56
Available Information................. 57
Index to Consolidated Financial
Statements.......................... F-1
Appendix A -- Glossary of Terms....... A-1
</TABLE>

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You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are not
making an offer of these securities in any jurisdiction where the offer or sale
is not permitted. You should not assume that the information contained in this
prospectus is accurate as of any date other than the date on the front cover of
this prospectus.

-ii-
<PAGE> 5

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.
This summary may not contain all of the information that investors should
consider before investing in the common stock of Basic Energy. All numbers of
shares and per share amounts assume a 400-for-1 stock split to be effective
immediately prior to this offering. You should read the entire prospectus
carefully. If you are not familiar with some of the oil and gas industry terms
used in this prospectus, please read our Glossary of Terms included as Appendix
A to this prospectus.

BASIC ENERGY

We provide a range of well site services to oil and gas drilling and
producing companies. These services are fundamental to establishing and
maintaining the flow of oil and gas from a well throughout its life cycle. Our
operations are concentrated in the major United States oil and gas producing
regions of Texas, New Mexico, Oklahoma and Louisiana. We believe we have the
third largest fleet of well servicing rigs in the United States, with 141 well
servicing rigs, including rigs we will acquire upon completion of this offering.
Please read "The Company -- Current Acquisitions" for a description of the
acquisitions and the assets we will acquire.

We operate two business segments. Our well servicing segment utilizes our
fleet of well servicing rigs and related equipment to install and remove
equipment and eliminate obstructions in the well bore to facilitate the flow of
oil and gas from our customers' wells. Our fluid services segment utilizes our
fleet of specialized tank trucks, storage tanks, water wells, disposal
facilities and related equipment to provide, transport, store and dispose of a
variety of fluids used in oil and gas well drilling and production activities.

We have actively participated in the consolidation of the fragmented well
service industry by acquiring smaller regional competitors. Between January 1996
and April 1998, we acquired businesses and equipment in 16 separate
transactions, increasing our revenues from $4.4 million in 1995 to $37.3 million
in 1999. Upon completion of this offering we will acquire five additional
businesses and the stock of a sixth corporation with four inactive rigs for an
aggregate purchase price of approximately $18.8 million. These acquisitions will
add 50 well servicing rigs, 51 fluid service trucks, six support trucks, 38
fluid storage tanks, three salt water disposal wells and two fresh and brine
water stations to our business.

Our business is substantially influenced by prevailing oil and gas prices
and price volatility. As oil and gas prices fell in late 1997 through early
1999, our activity levels also declined. Our activity levels have recently
improved from the low levels experienced in early 1999, as oil and gas prices
have improved. For instance, the utilization rate of our well servicing rigs
increased from a three year low of 49% in the first quarter of 1999, when the
price of oil was below $10 per barrel, to 87% in the first quarter of 2000, as
the price of oil exceeded $30 per barrel. We believe that even in a moderate oil
and gas price environment, demand for our services can continue to escalate as
oil and gas producers return to their historical levels of well maintenance
activity and capital spending.

INDUSTRY

Following several years of growth, the well service industry endured a
substantial decrease in activity during the period from late 1997 through early
1999. With the recovery of oil and gas prices, oilfield spending began to
accelerate during the second half of 1999. These trends are evidenced by the
changes in the well servicing rig utilization rate as reported by Guiberson, a
division of Halliburton, which declined from a peak of 77% in July 1997 to a low
of 50% in February 1999 and has since increased to a rate of 73% in March 2000.

The well servicing business historically has been comprised of a large
number of small local companies, several multi-regional contractors and even
fewer large national companies. Since 1990 and particularly during 1996 and
1997, the industry has substantially consolidated. Two national companies
currently own a combined 2,123 rigs or 57% of the industry's fleet. Although not
as large as these

<PAGE> 6

companies, our fleet of 141 rigs is substantially larger than our other
competitors in the well servicing business. We believe that no other company
currently owns more than 50 rigs.

The fluid services business is comprised of small, locally focused
companies, with a few larger regional companies in each market. There are
currently no companies that have a dominant position on a nationwide basis. We
believe that land drilling activity drives the demand for our fluid services.
The Baker Hughes Domestic Land Drilling Rig Count declined from 881 rigs in
September 1997 to 380 rigs in April 1999 and has since increased to 639 rigs in
March 2000.

BUSINESS STRATEGY

We believe we have become successful in our markets by establishing a
reputation for high-quality equipment and well-trained crews that operate within
stringent safety guidelines. Our business strategy is designed to take advantage
of these strengths and capture growth opportunities within the well service
industry.

PROVIDE COMPLEMENTARY WELL SITE SERVICES. Our ability to provide
complementary services allows our customers to use fewer service providers,
reducing our customers' administrative costs and simplifying their logistics. A
customer typically begins a new maintenance or workover project by securing
access to a well servicing rig. As a result, our rigs are often the first
equipment to arrive at the well site for a job and the last to leave. A project
may then lead to the need for fluid handling or other services. In addition to
the convenience provided to the customer, we believe our complementary well site
services give us a competitive advantage over smaller companies that offer fewer
services. The additional services allow us to generate more business from
existing customers, increase our operating margins and allocate our overhead
costs over a larger revenue base. Our larger competitors, however, may provide a
broader range of services, making it easier for them to obtain business.

GROW THROUGH SELECTIVE ACQUISITIONS. We intend to expand our existing
businesses and add new services through the acquisition of additional well
service companies and equipment. Numerous acquisition candidates exist, and we
believe we are well positioned to take advantage of these opportunities. We seek
to acquire businesses with strong customer relationships, well-maintained
equipment and experienced and skilled personnel. We intend to pursue our
acquisition strategy while maintaining a conservative capital structure. We will
need access to additional capital to continue to grow through acquisitions.

FOCUS OPERATIONS ON AREAS OF HIGHEST CONCENTRATION OF ONSHORE DOMESTIC OIL
AND GAS PRODUCTION. Onshore oil and gas production in the United States is
highly concentrated in Texas, New Mexico, Oklahoma and Louisiana. In 1998, these
states accounted for over 58% and 71% of United States onshore oil and gas
production, respectively, excluding Alaska. We believe that each of our
operating regions provides us with significant opportunities for internal
growth, diversification of services and growth through acquisitions. Our
concentration in these areas makes us more sensitive to local economic
conditions in these areas, including labor availability and costs.

OPERATE AND MARKET THROUGH LOCAL MANAGEMENT. We believe that our
decentralized operating management is consistent with the regional nature of the
well service industry. Well service purchase decisions are typically made on a
local level. Because our managers live and work in these areas and are directly
responsible for all aspects of their area's performance, we believe our
organization is more responsive to our customers' needs than our competitors
with more centralized operations. Moreover, we believe that the autonomy offered
by our local management strategy is attractive to potential sellers of well
service companies and their employees who may consider joining our management
team. Our decentralized operations are supported by our corporate office in
Midland, Texas, which monitors operating performance on a daily basis and
provides risk management and financial controls. Decentralized purchasing
decisions may not provide as much economy of scale.

HOW TO CONTACT BASIC ENERGY

Our principal executive offices are located at 406 North Big Spring,
Midland, Texas 79701, and our telephone number is (915) 570-0829.

2
<PAGE> 7

THE OFFERING

The number of shares that will be outstanding includes:

- 749,264 shares that will be issued upon conversion of the Series B
Convertible Preferred Stock; and

- the issuance of an estimated 168,334 shares of common stock (based on an
assumed initial public offering price of $15.00 per share) that may be
issued automatically within 45 days upon conversion of notes issuable in
connection with acquisitions that are contingent on the closing of this
offering;

The number of shares that will be outstanding does not include:

- up to 555,000 shares of common stock that the underwriters may purchase
if they exercise their over-allotment option;

- an additional 110,001 shares of common stock (based on an assumed initial
public offering price of $15.00 per share) that may be issued at the
option of the holders upon conversion or exercise of notes or warrants
issuable in connection with acquisitions that are contingent on the
closing of this offering; and

- shares issuable upon the exercise of options to purchase shares of common
stock that will be granted under our 2000 Stock Plan effective at the
closing of this offering at the initial public offering price.

Shares offered by Basic Energy.......... 3,700,000 shares

Total shares outstanding after this
offering................................ 6,469,946 shares

Use of proceeds......................... We will use the net proceeds from
the offering, together with
borrowings under a new credit
facility:

- to pay the cash portion of the
purchase price of pending
acquisitions;

- to repay the principal plus
accrued interest of our Senior
Notes due 2004;

- to repay a portion of the
principal plus accrued interest
of our Subordinated Notes due
2004;

- to repay long-term debt assumed
in connection with the
acquisitions;

- to redeem our Series A Cumulative
Preferred Stock plus accrued
dividends to the date of
redemption; and

- to pay remaining expenses in
connection with the foregoing and
for general corporate purposes.

Proposed Nasdaq National Market
symbol.................................. BASC

3
<PAGE> 8

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

The following sets forth our summary historical and pro forma financial and
operating data for the periods indicated. The pro forma income statements and
other financial data give effect to this offering, borrowings under a term note
with CIT and five acquisitions that will be completed with the net proceeds from
this offering as if they had occurred on January 1, 1999. The pro forma
consolidated balance sheet data gives effect to these five acquisitions,
borrowings under the term note and to this offering as if each had been
completed on March 31, 2000. The acquisition of Harrison Well Service, Inc. has
been excluded from the pro forma data because that business is inactive. The pro
forma income statement and other financial data set forth below are not
necessarily indicative of the results that actually would have been achieved had
these transactions been completed as of January 1, 1999, or that may be achieved
in the future. This table is derived from, should be read in conjunction with,
and is qualified in its entirety by reference to our historical and pro forma
financial statements and the accompanying notes included elsewhere in this
prospectus. The amounts in the table below, other than per share data, are in
thousands.

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
YEAR THREE MONTHS THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED MARCH 31, ENDED
------------------------------ DECEMBER 31, ----------------- MARCH 31,
1997 1998 1999 1999 1999 2000 2000
-------- -------- -------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Well servicing.................. $ 20,920 $ 26,687 $ 24,453 $ 33,206 $ 4,728 $ 8,475 $11,102
Fluid services.................. 5,214 18,632 12,878 19,925 2,721 4,405 6,302
-------- -------- -------- -------- ------- ------- -------
Total revenues.................... 26,134 45,319 37,331 53,131 7,449 12,880 17,404
Costs and expenses:
Well servicing.................. 16,534 21,640 20,164 25,557 3,910 6,312 7,827
Fluid services.................. 3,469 13,009 9,613 14,812 2,030 3,123 4,437
General and administrative(1)... 2,785 5,471 5,229 8,376 1,134 2,050 2,747
Depreciation and amortization... 2,931 8,624 6,747 8,665 1,687 1,692 2,122
Impairment of long lived
assets........................ -- 22,671 -- -- -- -- --
-------- -------- -------- -------- ------- ------- -------
Operating income (loss)........... 415 (26,096) (4,422) (4,279) (1,312) (297) 271
Net interest expense.............. (1,423) (6,903) (5,965) (2,998) (1,815) (1,543) (702)
Gain (loss) on sale of assets..... (30) (93) (301) (104) 6 99 128
Other (income) expense............ 11 (974) 45 75 4 3 5
-------- -------- -------- -------- ------- ------- -------
Loss before income taxes.......... (1,027) (34,066) (10,643) (7,306) (3,117) (1,738) (298)
Deferred income tax benefit
(expense)....................... 230 5,770 (2,328) (3,404) (4,771) 566 131
-------- -------- -------- -------- ------- ------- -------
Net loss.......................... $ (797) $(28,296) $(12,971) $(10,710) $(7,888) $(1,172) $ (167)
======== ======== ======== ======== ======= ======= =======
Preferred stock dividend.......... -- -- 430 -- 159
Net loss to common stockholders'
interest........................ $ (797) $(28,296) $(13,401) $ 10,710 $(7,888) $(1,331) $ (167)
Loss per common share(2).......... $ (0.72) $ (16.18) $ (4.51)
Pro forma loss per common
share(2)........................ -- -- $ 5.14 $ (1.69) -- $ (0.46) $ (0.03)
OTHER FINANCIAL DATA:
Adjusted EBITDA(3)................ $ 3,327 $ 4,132 $ 2,069 $ 4,357 $ 385 $ 1,497 $ 2,526
Cash flows from operating
activities...................... (55) (996) 865 267 752
Cash flows from investing
activities...................... (62,822) (3,933) (970) (58) (1,063)
Cash flows from financing
activities...................... 68,853 1,238 (1,679) (859) (231)
Capital expenditures:
Acquisitions, net of cash
acquired...................... 56,076 1,800 -- -- 125
Property and equipment.......... 6,585 2,435 2,287 115 819
</TABLE>

<TABLE>
<CAPTION>
AT MARCH 31, 2000
------------------
PRO
ACTUAL FORMA
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 520 $ 2,540
Working capital (deficit)................................... (245) 5,277
Net property and equipment.................................. 31,155 45,084
Total assets................................................ 47,580 75,169
Total long-term debt less current maturities................ 49,645 26,667
Total stockholders' equity (deficit)........................ (13,811) 33,089
</TABLE>

4
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(1) Includes approximately $390,000 of non-cash stock compensation expense for
the three months ended March 31, 2000.

(2) Pro forma loss per common share is shown rather than loss per common share
for the year ended December 31, 1999 and the three months ended March 31,
2000 in accordance with SEC guidelines. The information gives pro forma
effect to the assumed redemption of the Series A Redeemable Preferred Stock,
the conversion of Series B Convertible Preferred Stock into shares of common
stock and the cancellation of the Series C Convertible Preferred Stock.

(3) Adjusted EBITDA means net income before net interest expense, income taxes,
depreciation and amortization, and impairment charges. Adjusted EBITDA is
presented because of its acceptance as a component of a company's potential
valuation in comparison to companies in the same industry and of a company's
ability to service or incur debt. Management interprets trends indicated by
changes in adjusted EBITDA as an indicator of the effectiveness of its
strategies in achieving revenue growth and controlling direct and indirect
costs of services provided. Investors should consider that this measure does
not take into consideration debt service or interest expenses, costs of
capital, impairments of long lived assets, depreciation of property, the
cost of replacing equipment or income taxes. Adjusted EBITDA should not be
considered as an alternative to net income, income before income taxes, cash
flows from operating activities or any other measure of financial
performance presented in accordance with generally accepted accounting
principles. Adjusted EBITDA is not a measure of financial performance under
generally accepted accounting principles and is not intended to represent
cash flow. Adjusted EBITDA may not be comparable to similarly titled
measures of other companies.

SUMMARY OPERATING DATA

The data presented below reflects the following:

- we charge our customers on an hourly basis -- billed rig hours reflect
actual billed hours;

- our rig utilization rate is calculated using a 55-hour work week per rig;
and

- our fluid services trucks include vacuum, transport, hot oil and kill
trucks but exclude support trucks.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------- -----------------
1997 1998 1999 1999 2000
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
WELL SERVICING
Weighted average number of rigs.............. 51.2 87.6 89.7 89.0 91.0
Billed rig hours............................. 133,716 174,200 168,927 31,454 57,089
Rig utilization rate......................... 90.7% 69.1% 65.4% 49.1% 87.13%
Revenue per rig hour......................... $156.45 $153.20 $144.76 $150.37 $148.44
Operating margin per rig hour................ $ 32.80 $ 28.97 $ 25.39 $ 25.92 $ 37.88
Operating margin............................. 21.0% 18.9% 17.5% 17.2% 25.5%

FLUID SERVICES
Weighted average number of fluid service
trucks..................................... 21.8 103.8 97.7 99.0 97.0
Revenue per fluid service truck per quarter:
Transportation and disposal................ $41,573 $31,516 $26,183 $22,377 $35,576
Fluid storage tank rentals................. 7,341 4,606 2,519 1,951 3,856
Fluid sales and other...................... 10,803 8,773 4,259 3,141 5,984
------- ------- ------- ------- -------
Total................................... $59,718 $44,896 $32,961 $27,469 $45,416
Operating margin per fluid service truck per
quarter.................................... $19,978 $13,550 $ 8,356 $ 7,069 $13,223
Operating margin............................. 33.5% 30.2% 25.4% 25.7% 29.1%
</TABLE>

Please read "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Well Servicing" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Fluid Services" for
an analysis of our well servicing and fluid services operations.

5
<PAGE> 10

RISK FACTORS

Investing in our common stock will provide you with equity ownership in
Basic Energy. As a Basic Energy stockholder, you will be subject to the risks
inherent in our business. The performance of your shares will reflect the
performance of our business relative to, among other things, competition, market
conditions and general economic and industry conditions. You should carefully
consider the following factors in addition to the other information in this
prospectus before deciding to invest in shares of our common stock.

RISKS RELATED TO OUR BUSINESS

A DECLINE IN OR SUBSTANTIAL VOLATILITY OF OIL AND GAS PRICES COULD
ADVERSELY AFFECT THE DEMAND FOR OUR SERVICES.

A decline in oil or gas prices below historic levels or a reduction in
drilling activities could materially adversely affect the demand for our
services and our results of operations. Prices for oil and gas historically have
been extremely volatile and are expected to continue to be volatile. For
example, oil prices fell to approximately $10 per barrel in early 1999 and
recently have exceeded $30 per barrel. Price volatility affects the spending
patterns of our customers and the ability of oil and gas companies to raise
capital. Current levels of oil and gas activities may decline, resulting in
decreased demand for our services.

OUR BUSINESS DEPENDS ON THE OIL AND GAS INDUSTRY. CONDITIONS IN OUR MARKETS
MAY BE ADVERSELY AFFECTED BY INDUSTRY CONDITIONS THAT ARE BEYOND OUR
CONTROL.

Industry conditions are influenced by numerous factors over which we have
no control, such as the supply of and demand for oil and gas, domestic and
worldwide economic conditions, political instability in oil producing countries
and merger and divestiture activity among oil and gas producers. The volatility
of the oil and gas industry and the consequent impact on exploration activity
could adversely impact the level of drilling and workover activity by some of
our customers. This reduction may cause a decline in the demand for our services
or adversely affect the price of our services. In addition, the discovery rate
of new oil and gas reserves in our market areas also may have an impact on our
business, even in an environment of stronger oil and gas prices. We cannot
predict either the future level of demand for our services or future conditions
of the well service industry.

WE HAVE A HISTORY OF OPERATING LOSSES, AND THIS TREND MAY CONTINUE.

The volatility underlying the oil and gas industry prevents us from
accurately predicting future operating conditions and results, and we could have
operating losses in the future. We suffered operating losses, including losses
of $26.1 million, $4.4 million and $297,000 in 1998, 1999 and the first quarter
of 2000, respectively, largely because of the decline in activity by oil and gas
drilling and producing companies caused in response to lower oil and gas prices.
Operating losses in 1998 included a $22.7 million write-down, principally in the
value of assets used in our fluid services business, as conditions in the
industry weakened.

WE MAY NOT BE ABLE TO GROW SUCCESSFULLY THROUGH FUTURE ACQUISITIONS OR
SUCCESSFULLY MANAGE FUTURE GROWTH, AND WE MAY NOT BE ABLE TO EFFECTIVELY
INTEGRATE THE BUSINESSES WE DO ACQUIRE.

Our business strategy includes growth through the acquisition of other
businesses. We may not be able to continue to identify attractive acquisition
opportunities or successfully acquire identified targets. In addition, we may
not be successful in integrating our current or future acquisitions into our
existing operations. This integration may result in unforeseen operational
difficulties or require a disproportionate amount of our management's attention.
Furthermore, competition for acquisition opportunities may escalate, increasing
our cost of making further acquisitions or causing us to refrain from making
additional acquisitions. Our new senior credit agreement with CIT also may
restrict our ability to make acquisitions, including any acquisitions utilizing
secured debt or debt that would cause the structural subordination of debt under
the credit agreement with CIT.

6
<PAGE> 11

WE MAY REQUIRE ADDITIONAL CAPITAL IN THE FUTURE, WHICH MAY NOT BE AVAILABLE
TO US.

Our business is capital intensive, requiring specialized equipment and
trained personnel to provide our services. We may need to raise additional funds
through public or private debt or equity financing. Adequate funds may not be
available when needed or may not be available on favorable terms. If we raise
additional funds by issuing equity securities, dilution to existing stockholders
may result. If funding is insufficient at any time in the future, we may be
unable to fund acquisitions, take advantage of business opportunities or respond
to competitive pressures, any of which could harm our business. Our future
capital requirements primarily depend upon the occurrence, timing, size and
success of any acquisition.

COMPETITION WITHIN THE WELL SERVICE INDUSTRY MAY ADVERSELY AFFECT OUR
ABILITY TO MARKET OUR SERVICES.

The well service industry is highly competitive and fragmented and includes
numerous small companies capable of competing effectively on a local basis as
well as several large companies, such as Key Energy Services, Inc. and Pool Well
Services Co., that possess substantially greater financial and other resources
than we do. These greater resources could allow those competitors to compete
more effectively than we can. The number of rigs available continues to exceed
demand, resulting in active price competition. Many contracts are awarded on a
bid basis, which further increases competition based on price.

WE HAVE EXPERIENCED A HIGH EMPLOYEE TURNOVER RATE IN THE PAST. ANY
DIFFICULTY WE EXPERIENCE REPLACING OR ADDING WORKERS COULD ADVERSELY AFFECT
OUR BUSINESS.

We may not be able to find enough skilled workers to meet our needs, which
could limit our growth. Our business activity historically decreases or
increases with the price of oil and gas. Beginning in the last quarter of 1997,
the price of oil and gas fell to very low levels. In turn, our business activity
levels declined. We were unable to maintain our current employment level and an
industry-wide downsizing caused oilfield workers to look for and secure work in
other industries and locations. With the return of higher oil and gas prices,
our activity level has increased. Although we have been able to procure workers
to meet our current needs, as a result of the employment migration away from our
industry, we may have problems finding enough skilled and unskilled laborers in
the future.

With a reduced pool of workers, it is possible that we will have to raise
wage rates to attract workers from other fields and to retain or expand our
current work force. If we are not able to increase our service rates to our
customers to compensate for wage rate increases, our operating results may be
adversely affected.

Other factors also may inhibit our ability to find enough workers to meet
our employment needs. Our services require skilled workers who can perform
physically demanding work. As a result of the volatility of the industry and the
demanding nature of the work, workers may choose to pursue employment in fields
that offer a more desirable work environment at wage rates that are competitive
with ours. We believe that our success is dependent upon our ability to continue
to employ and retain skilled technical personnel. Our inability to employ or
retain skilled technical personnel generally could have a material adverse
effect on our operations.

OUR SUCCESS DEPENDS ON KEY MEMBERS OF OUR MANAGEMENT, THE LOSS OF WHOM
COULD DISRUPT OUR BUSINESS OPERATIONS.

We depend to a large extent on the services of some of our executive
officers and directors. The loss of the services of any of Kenneth V. Huseman,
Dub W. Harrison or Charles W. Swift could disrupt our operations. We have
entered into employment agreements with Messrs. Huseman, Harrison and Swift that
contain non-compete provisions. Notwithstanding these agreements, we may not be
able to retain our executive officers and may not be able to enforce the
non-compete provisions in the employment agreements. We maintain key person life
insurance on the life of Mr. Huseman; nevertheless, the death or disability of
Mr. Huseman still may adversely affect our operations, and the proceeds from the
insurance policy may not be sufficient to cover our losses.

7
<PAGE> 12

OUR OPERATIONS ARE SUBJECT TO INHERENT RISKS, SOME OF WHICH ARE BEYOND OUR
CONTROL. THESE RISKS MAY NOT BE FULLY COVERED UNDER OUR INSURANCE POLICIES.

The occurrence of a significant event or adverse claim in excess of the
insurance coverage that we maintain or that is not covered by insurance could
have a materially adverse effect on our financial condition and results of
operations. Our operations are subject to hazards inherent in the oil and gas
industry, such as accidents, blowouts, explosions, craterings, fires and oil
spills. These conditions can cause:

- personal injury or loss of life;

- damage to or destruction of property, equipment and the environment; and

- suspension of operations.

In addition, claims for loss of oil and gas production and damage to
formations can occur in the well service industry. Litigation arising from a
catastrophic occurrence at a location where our equipment and services are being
used may result in us being named as a defendant in lawsuits asserting large
claims.

We maintain insurance coverage that we believe to be customary in the
industry against these hazards. However, we may not be able to maintain adequate
insurance in the future at rates we consider reasonable. In addition, our
insurance is subject to coverage limits and some policies exclude coverage for
damages resulting from environmental contamination.

WE ARE SUBJECT TO FEDERAL, STATE AND LOCAL REGULATION REGARDING ISSUES OF
HEALTH, SAFETY AND PROTECTION OF THE ENVIRONMENT. UNDER THESE REGULATIONS,
WE MAY BECOME LIABLE FOR PENALTIES, DAMAGES OR COSTS OF REMEDIATION. ANY
CHANGES IN LAWS AND GOVERNMENT REGULATIONS COULD INCREASE OUR COSTS OF
DOING BUSINESS.

Our operations are subject to federal, state and local laws and regulations
relating to protection of natural resources and the environment, health and
safety, waste management, and transportation of waste and other materials. Our
fluid services segment includes disposal operations into injection wells that
pose some risks of environmental liability. Although we monitor the injection
well process, leakage from the wells to surface or subsurface soils, surface
water or groundwater could occur. Liability under these laws and regulations
could result in cancellation of well operations, fines and penalties,
expenditures for remediation, and liability for property damages and personal
injuries. Sanctions for noncompliance with applicable environmental laws and
regulations also may include assessment of administrative, civil and criminal
penalties, revocation of permits and issuance of corrective action orders.

Laws protecting the environment generally have become more stringent over
time and are expected to continue to do so, which could lead to material costs
for future environmental compliance and remediation in the future. The
modification or interpretation of existing laws or regulations, or the adoption
of new laws or regulations, could curtail exploratory or developmental drilling
for oil and gas and could limit well services opportunities. Some environmental
laws and regulations may impose strict liability, which means that in some
situations we could be exposed to liability as a result of our conduct that was
lawful at the time it occurred or conduct of, or conditions caused by, prior
operators or other third parties. Clean-up costs and other damages arising as a
result of environmental laws, and costs associated with changes in environmental
laws and regulations could be substantial and could have a material adverse
effect on our financial condition. Please read "Business -- Environmental
Regulation" for more information on the environmental laws and government
regulations that are applicable to Basic Energy.

8
<PAGE> 13

ONE PRINCIPAL STOCKHOLDER CAN INFLUENCE THE CORPORATE AND MANAGEMENT
POLICIES OF OUR COMPANY.

After giving effect to this offering, H. H. Wommack, III, our Chairman of
the Board and Chairman of the Board, President and Chief Executive Officer of
Southwest Royalties Holdings, Inc. and Southwest Royalties, Inc., effectively
will control approximately 26.9% of the outstanding common stock on a pro forma
basis, or 24.7% if the underwriters exercise their over-allotment option in
full. Therefore, Mr. Wommack will continue to have the ability to influence
substantially all decisions made by Basic Energy, some of which may conflict
with the interests of public stockholders. Additionally, Mr. Wommack's control
could have a negative impact on any future takeover attempts. Please read
"Principal Stockholders" for a discussion of Mr. Wommack's ownership interest in
Basic Energy.

RISKS RELATED TO THIS OFFERING

THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK AND OUR STOCK
PRICE MAY FLUCTUATE.

There has not been a public market for our common stock. The public
offering price will be negotiated between us and the representatives of the
underwriters. We do not know the extent to which investor interest in Basic
Energy will lead to the development of a trading market for the common stock or
how the common stock will trade in the future. Investors may not be able to
resell their shares at or above the initial public offering price.

The price at which the common stock will trade depends upon a number of
factors, including our historical and anticipated operating results, general
market and economic conditions and factors listed under "Forward-Looking
Statements," some of which are beyond our ability to control. Several factors
could cause the market price of the common stock to fluctuate substantially.
These factors include:

- quarterly fluctuations in our financial and operating results;

- developments affecting us, our customers, the markets in which we compete
or the well service industry;

- announcements by competitors; and

- recommendations by analysts.

In addition, the stock market has experienced from time to time extreme
price and volume fluctuations. These broad market fluctuations may adversely
affect the market price of our common stock.

SHARES ARE RESTRICTED FROM IMMEDIATE RESALE BUT MAY BE SOLD INTO THE MARKET
IN THE NEAR FUTURE. THIS COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK TO
DROP SIGNIFICANTLY.

After this offering, we will have outstanding 6,469,946 shares of common
stock, or 7,024,946 shares if the underwriters exercise their overallotment in
full. Of these shares, the 3,700,000 shares we are selling in this offering, or
4,255,000 shares if the underwriters exercise their over-allotment option in
full, will be freely tradeable without restriction under the Securities Act
except for any shares purchased by one of our "affiliates" as defined in Rule
144 under the Securities Act. A total of 2,769,946 shares will be "restricted
securities" within the meaning of Rule 144 under the Securities Act or subject
to lock up arrangements. Our officers, directors and all stockholders have
entered into lock-up agreements under which we and they have agreed not to offer
or sell any shares of common stock or securities convertible into or
exchangeable or exercisable for shares of common stock for a period of 180 days
from the date of this prospectus without the prior written consent of Prudential
Securities Incorporated, on behalf of the underwriters. Prudential Securities
Incorporated may, at any time and without notice, waive any of the terms of
these lock-up agreements specified in the underwriting agreement. An aggregate
of 2,559,986 of these shares will become available for resale in the public
market as shown in the chart below. In addition, options to purchase an
aggregate of 60,000 shares that will be issued upon the closing of this offering
at the initial public offering price will be exercisable immediately subject to
lock up arrangements and restrictions under Rule 144 under the Securities Act
for "affiliates." As restrictions on resale end, the market price could drop
significantly if the holders of these restricted shares sell them or are
perceived by the market as intending to sell them.

9
<PAGE> 14

<TABLE>
<CAPTION>
DATE OF ELIGIBILITY FOR RESALE
NUMBER OF SHARES INTO PUBLIC MARKET
- ---------------- ------------------------------
<C> <S>
2,533,972 180 days after the date of this prospectus due to a lock-up
agreement these stockholders have with Prudential Securities
Incorporated. However, Prudential Securities Incorporated
can waive this restriction at any time and without notice.
26,014 Between 180 and 365 days after the date of this prospectus
due to the requirements of the federal securities laws.
</TABLE>

PURCHASERS OF COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION.

Purchasers of our common stock in this offering will experience an
immediate and substantial dilution of $11.90 per share in the net tangible book
value per share of common stock from the initial public offering price and our
pro forma net tangible book value as of March 31, 2000 after giving effect to
this offering would be $3.10 per share, in each case based on an estimated
initial public offering price of $15.00 per share. Please read "Dilution" for a
complete description of the calculation of net tangible book value.

OUR CERTIFICATE OF INCORPORATION AND BYLAWS CONTAIN PROVISIONS THAT COULD
DISCOURAGE A TAKEOVER.

Our certificate of incorporation authorizes our Board of Directors to issue
preferred stock without stockholder approval. If our Board of Directors elects
to issue preferred stock, it could be more difficult for a third party to
acquire us. In addition, some provisions of the certificate of incorporation and
bylaws could make it more difficult for a third party to acquire control of us,
even if this change of control would be beneficial to stockholders, including:

- a staggered board of directors;

- limitations on the removal of directors;

- a rights agreement;

- no stockholder action by written consent; and

- limitations on stockholder proposals at meetings of stockholders.

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. We have based these
forward-looking statements largely on our current expectations and projections
about future events and financial trends affecting the financial condition of
our business. These forward-looking statements are subject to a number of risks,
uncertainties and assumptions about Basic Energy, including, among other things,
the risk factors discussed in this prospectus and other factors, most of which
are beyond our control.

In addition, in this prospectus, the words "believe," "may," "will,"
"estimate," "continue," "anticipate," "intend," "expect" and similar
expressions, as they relate to Basic Energy, our business or our management, are
intended to identify forward-looking statements.

Unless otherwise required by law, we undertake no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these risks and
uncertainties, the forward-looking events and circumstances discussed in this
prospectus may not occur and actual results could differ materially from those
anticipated or implied in the forward-looking statements.

10
<PAGE> 15

THE COMPANY

BACKGROUND

Basic Energy Services, Inc. was originally incorporated in Delaware in
1992. As a subsidiary of Southwest Royalties, Inc., a corporation engaged in the
oil and gas business, we initially provided plugging and abandonment services
primarily to Southwest Royalties. As we acquired more equipment, we became a
stand-alone business effective in May 1994. In July 1997, Southwest Royalties
Holdings, Inc., a Delaware corporation, was formed to serve as a holding company
for Sierra, Southwest Royalties and other affiliates. Southwest Royalties
Holdings and its affiliates currently own approximately 66.7% of our common
stock (including the conversion of preferred stock owned by JEDI II as described
below) and will own approximately 15.8% of our common stock after the closing of
this offering. In May 2000, we changed our name to "Basic Energy Services, Inc."
from "Sierra Well Services, Inc."

Since our formation, we have grown primarily through acquisitions,
purchasing businesses and equipment in 16 separate transactions between January
1996 and April 1998. Primarily through these acquisitions, our revenues have
grown from $4.4 million in 1995 to $37.3 million in 1999. In order to finance
some of these acquisitions, during 1996 and 1997 we issued $22 million of common
stock to two limited partnerships for which Southwest Royalties serves as the
general partner. In addition, in September 1997 we borrowed $54.4 million from
Joint Energy Development Investments II Limited Partnership, referred to as
"JEDI II" in this prospectus. This indebtedness was restructured in March 1999
into a senior and subordinated credit facility with $49.4 million outstanding
and three classes of preferred stock issued to JEDI II.

CURRENT ACQUISITIONS

We entered into definitive agreements to acquire five businesses and the
purchase of the stock of a sixth corporation with four inactive rigs during the
last quarter of 1999 and the first quarter of 2000. Each of these acquisitions
is contingent upon the consummation of this offering, and none of the
acquisitions may be terminated after completion of the offering. Each
acquisition provides for payment in both cash and notes or warrants that are
convertible or exercisable for an aggregate of approximately 278,334 shares of
our common stock (based upon an estimated initial public offering price of
$15.00 per share). Of these shares, 168,334 will be issued automatically and not
at the option of the noteholders. We also expect to repay immediately, or to
require the immediate conversion of, notes convertible into 87,334 shares of
common stock (based upon an estimated initial public offering price of $15.00
per share). Other than Trinity Services, which is an asset purchase rather than
a stock purchase, the cash portion of each acquisition will be adjusted to
reflect the net financial assets of the acquired company as of the acquisition
date. Net financial assets is defined as net working capital minus long-term
debt, including leases.

Turn Around Trucking, Inc.

- Purchase Price -- approximately $6.5 million, of which $5.2 million is
payable in cash and $1.3 million is payable in a note that will be
converted within 45 days after the completion of this offering into
shares of our common stock valued at the initial public offering price;
the note accrues interest at a floating rate equal to the prime rate.

- Principal Assets -- 32 fluid service trucks, 2 support trucks, 38 fluid
service tanks, 2 salt water disposal wells and related equipment

- Operating Region -- South Texas

11
<PAGE> 16

Sundown Operating, Inc.

- Purchase Price -- approximately $5.2 million, of which $4.2 million is
payable in cash and $1.0 million is payable in a note that will be
convertible, at the holder's option, into shares of our common stock
valued at the initial public offering price; the note matures on the one
year anniversary of the closing of this offering and accrues interest at
a floating rate equal to the prime rate.

- Principal Assets -- 26 well servicing rigs and related equipment

- Operating Region -- northern Permian Basin

Eunice Well Servicing Co., Inc.

- Purchase Price -- approximately $2.1 million, of which $1.7 million is
payable in cash and $400,000 is payable in a note that will be
convertible, at the holder's option, into shares of our common stock
valued at the initial public offering price; the note matures on the one
year anniversary of the closing of this offering and accrues interest at
a floating rate equal to the prime rate.

- Principal Assets -- 10 well servicing rigs and related equipment

- Operating Region -- western Permian Basin

Gold Star Service Company, Inc.

- Purchase Price -- approximately $1.85 million, of which $1.25 million is
payable in cash and $600,000 is payable in a note that will be converted
within 45 days after the completion of this offering into shares of our
common stock valued at the initial public offering price; the note
accrues interest at a floating rate equal to the prime rate.

- Principal Assets -- 19 fluid service trucks, 4 support trucks, 1 salt
water disposal well, 2 fresh and brine water stations and related
equipment

- Operating Region -- western Permian Basin

Trinity Services

- Purchase Price -- approximately $1.94 million, of which $1.6 million is
payable in cash and $250,000 is payable in a note and a related warrant,
valued at $89,000, that will be exercisable, at the holder's option, into
shares of our common stock valued at the initial public offering price.
The holder has the option to offset any indebtedness under the note
against the exercise price of the warrant. The note matures 15 months
after the closing of this offering and accrues interest at a floating
rate equal to the prime rate. The warrant expires on the later of (1) 18
months after the closing of this offering or (2) one year after the note
is repaid in full.

- Principal Assets -- 10 well servicing rigs and related equipment

- Operating Region -- South Texas

Harrison Well Service, Inc.

- Purchase Price -- approximately $1.225 million, of which $600,000 is
payable in cash and $625,000 is payable in a note that will be converted
within 45 days after the completion of this offering into shares of our
common stock valued at the initial public offering price; the note
accrues interest at a floating rate equal to the prime rate.

- Principal Assets -- 4 well servicing rigs and related equipment

- Operating Region -- northern Permian Basin

12
<PAGE> 17

USE OF PROCEEDS

The net proceeds to Basic Energy from this offering are estimated to be
approximately $51.6 million, or $59.4 million if the underwriters exercise their
over-allotment option in full, assuming an initial public offering price of
$15.00 per share and after deducting underwriting discounts and commissions and
estimated offering expenses. We plan to use the net proceeds from this offering,
together with $20.0 million that we intend to borrow under the new CIT credit
facility described later in this prospectus, as follows:

- $16.2 million as the cash consideration, as adjusted for net assets,
including the repayment of $1.65 million of convertible notes if not
converted, to acquire the businesses and assets described under "The
Company -- Current Acquisitions;"

- $24.9 million to repay Senior Notes due 2004, plus accrued interest from
March 31, 2000 to the date of repayment, held by ENA CLO I Holding
Company I L.P., as assignee from JEDI II, referred to as ENA CLO I is
this prospectus;

- $17.3 million to pay down existing Subordinated Notes due 2004, plus
accrued interest from March 31, 2000 to the date of repayment, held by
ENA CLO I;

- $3.3 million to repay long-term debt assumed in connection with the
acquisitions;

- $5.4 million to redeem the Series A Cumulative Preferred Stock, plus
accrued dividends from March 31, 2000 to the date of redemption, held by
JEDI II; and

- $4.5 million for expenses in connection with the foregoing and for
general corporate purposes.

Please read "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources," "Certain
Relationships and Related Party Transactions" and "Principal Stockholders" for a
description of our outstanding indebtedness, our new credit facility with CIT
and our relationship with JEDI II following this offering.

The use of proceeds above does not include up to 500 shares of Series D
Cumulative Preferred Stock that may be issued to Enron North America Corp. (or
its affiliates) at a purchase price of $10,000 per share in the event that the
aggregate purchase price of shares sold in the initial public offering of common
stock is less than $55 million. Please read "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity" below
for a description of the terms of this standby commitment.

DIVIDEND POLICY

We have not declared or paid any dividends on our common stock, and we do
not currently anticipate declaring or paying any dividends on our common stock
in the near future. We currently intend to retain all future earnings to fund
the development and growth of our business. The declaration and payment of any
future dividends will be at the discretion of our board of directors and will
depend on our results of operations, financial condition, capital requirements
and other factors deemed relevant by our board of directors.

13
<PAGE> 18

DILUTION

Purchasers of the common stock in this offering will experience immediate
and substantial dilution in the net tangible book value per share of the common
stock from the initial public offering price. Adjusted net tangible book value
per share represents the amount of the total tangible assets less our total
liabilities, divided by the number of shares of common stock outstanding
assuming the conversion of the Series B Convertible Preferred Stock and
including the shares issued to our Chief Executive Officer. At March 31, 2000,
we had an adjusted net tangible book value of $(20.0) million or $(7.68) per
share of common stock. After giving effect to the sale of 3,700,000 shares of
common stock in this offering at an assumed initial public offering price of
$15.00 per share and after the deduction of underwriting discounts and
commissions and estimated offering expenses, the pro forma net tangible book
value at March 31, 2000 would have been $19.9 million or $3.10 per share. This
represents an immediate increase in such net tangible book value of $11.10 per
share to existing stockholders and an immediate and substantial dilution of
$11.90 per share to new investors purchasing common stock in this offering. The
following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $15.00
Adjusted net tangible book value as of March 31, 2000..... $(7.68)
Increase attributable to new investors including in the
current acquisitions(1)................................ $11.10
Pro forma net tangible book value after this offering(1).... $ 3.10
------
Dilution in pro forma net tangible book value to new
investors................................................. $11.90
======
</TABLE>

The following table summarizes, on the pro forma basis set forth above as
of March 31, 2000, the differences between existing stockholders (including
purchasers in acquisitions that are contingent on the closing of this offering)
and new investors in this offering with respect to the number of shares of
common stock purchased from us, the total consideration paid to us and the
average consideration paid per share (before the deduction of underwriting
discounts and commissions and offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders.......... 2,601,612 40.2% $ 25,335,000 30.4% $ 9.74
Current acquisitions(2)........ 168,334 2.6% 2,525,000 3.0% $15.00
New Public Investors........... 3,700,000 57.2% 55,500,000 66.6% 15.00
--------- ---- ------------ ---- ------
Total................ 6,469,946 100% $ 83,360,000 100%
========= ==== ============ ====
</TABLE>

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

(1) Does not include the acquisition of Harrison Well Service, Inc. because that
business is inactive. We have entered into a definitive agreement to
purchase Harrison for approximately $1.225 million, of which $600,000 is
payable in cash and $625,000 is payable in a note that will be converted
into shares of our common stock valued at the initial public offering price.

(2) Includes shares of common stock to be issued in the acquisition of Harrison.

14
<PAGE> 19

CAPITALIZATION

The following table sets forth the capitalization of Basic Energy at March
31, 2000, (1) on an actual basis (giving effect to a 400-for-1 stock split) and
(2) pro forma for the acquisitions to be completed upon completion of this
offering, the conversion of the Series B Convertible Preferred Stock into common
stock, anticipated borrowings under the CIT credit facility and as adjusted to
give effect to this offering and the application of the estimated net proceeds
from this offering as set forth under "Use of Proceeds" as if each had occurred
on March 31, 2000. The information was derived from and is qualified by
reference to our financial statements included elsewhere in this prospectus.
This information should be read in conjunction with these financial statements,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Use of Proceeds" and "Unaudited Consolidated Pro Forma Financial
Statements" included elsewhere in this prospectus. The amounts in the table
below, other than share data, are in thousands.

<TABLE>
<CAPTION>
MARCH 31, 2000
-------------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)
-------- --------------
<S> <C> <C>
Total debt, including current portion:
Notes payable:
Senior Notes due 2004.................................. $ 24,928 $ --
Subordinated Notes due 2004............................ 27,328 10,000
Term loan under CIT credit facility.................... 20,000
Other debt and obligations under capital leases........... 1,086 --
-------- --------
Total debt, including current portion............. 53,342 30,000
Stockholders' equity:(2)
Series A Cumulative Preferred Stock, $10,000 par value,
1,000 shares authorized, 546 shares issued and
outstanding; 0 shares issued and outstanding pro forma,
as adjusted............................................ 5,464 --
Series B Convertible Preferred Stock, $1 par value, 1,000
shares authorized, 1,000 shares issued and outstanding;
0 shares issued and outstanding pro forma, as
adjusted............................................... 1 --
Series C Convertible Preferred Stock, $1,000 par value,
one share authorized, one share issued and outstanding;
0 shares issued and outstanding, pro forma, as
adjusted............................................... 1 --
Common stock, $.01 par value, 25,000,000 shares
authorized, 1,852,348 shares issued and outstanding;
6,428,279 shares issued and outstanding pro forma, as
adjusted............................................... 19 64
Additional Paid-in capital................................ 25,845 78,405
Deferred compensation..................................... (624) (624)
Retained earnings (deficit)............................... (44,517) (44,756)
-------- --------
Total stockholders' equity........................ (13,811) 33,089
-------- --------
Total capitalization.............................. $ 39,531 $ 63,089
======== ========
</TABLE>

- ---------------
(1) Does not include the acquisition of Harrison because that business is
inactive. We have entered into a definitive agreement to purchase Harrison
for approximately $1.225 million, of which $600,000 is payable in cash and
$625,000 is payable in a note that will be converted into shares of our
common stock valued at the initial public offering price.

(2) Does not include up to 500 shares of Series D Cumulative Preferred Stock
that may be issued to Enron North America Corp. (or its affiliates) at a
purchase price of $10,000 per share in the event that the aggregate purchase
price of shares sold in this initial public offering of common stock is less
than $55 million. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity" below for a description of
the terms of this standby commitment.

15
<PAGE> 20

SELECTED CONSOLIDATED FINANCIAL DATA

The following tables set forth selected historical and pro forma financial
information of Basic Energy for the periods shown. The pro forma income
statement and other financial data reflects the offering of 3,700,000 shares at
$15.00 per share, borrowings under the CIT term note and five acquisitions that
will be completed with the net proceeds from this offering as if they had
occurred on January 1, 1999. The pro forma consolidated balance sheet data gives
effect to these five acquisitions and to this offering as if each had been
completed on March 31, 2000. The acquisition of Harrison Well Services, Inc. has
been excluded from the pro forma data because that business is inactive. The pro
forma income statement and other financial data set forth below is not
necessarily indicative of the results that actually would have been achieved had
these transactions been completed as of January 1, 1999, or that may be achieved
in the future. The following information should be read in conjunction with
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," our Financial Statements and the Unaudited Pro Forma
Combined Financial Statements included elsewhere in this prospectus. The amounts
for each historical annual period presented below were derived from the
Company's audited financial statements. The amounts in the table below, other
than per share data, are in thousands.

<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA THREE MONTHS THREE MONTHS
YEAR ENDED DECEMBER 31, YEAR ENDED ENDED MARCH 31, ENDED
-------------------------------------------------- DECEMBER 31, ----------------- MARCH 31,
1995 1996 1997 1998 1999 1999 1999 2000 2000
------ -------- -------- -------- -------- ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Well servicing............. $4,436 $ 8,273 $ 20,920 $ 26,687 $ 24,453 $ 33,206 $ 4,728 $ 8,475 $11,102
Fluid services............. -- -- 5,214 18,632 12,878 19,925 2,721 4,405 6,302
------ -------- -------- -------- -------- -------- ------- ------- -------
Total revenues............. 4,436 8,273 26,134 45,319 37,331 53,131 7,449 12,880 17,404
Costs and expenses:
Well servicing........... 3,299 6,145 16,534 21,640 20,164 25,557 3,910 6,312 7,827
Fluid services........... -- -- 3,469 13,009 9,613 14,812 2,030 3,123 4,437
General and
administrative(1)...... 866 1,771 2,785 5,471 5,229 8,376 1,134 2,050 2,747
Depreciation and
amortization........... 448 863 2,931 8,624 6,747 8,665 1,687 1,692 2,122
Impairment of long lived
assets................. -- -- -- 22,671 -- -- -- -- --
Operating income (loss).... (177) (506) 415 (26,096) (4,422) (4,279) (1,312) (297) 271
Net interest expense....... (70) (71) (1,423) (6,903) (5,965) (2,998) (1,815) (1,543) (702)
Gain (loss) on sale of
assets................... (1) (31) (30) (93) (301) (104) 6 99 128
Other (income) expenses.... -- -- 11 (974) 45 75 4 3 5
------ -------- -------- -------- -------- -------- ------- ------- -------
Loss before income taxes... (248) (608) (1,027) (34,066) (10,643) (7,306) (3,117) (1,738) (298)
Deferred income tax benefit
(expense)................ 80 160 230 5,770 (2,328) (3,404) (4,771) 566 131
------ -------- -------- -------- -------- -------- ------- ------- -------
Net loss................... $ (168) $ (448) $ (797) $(28,296) $(12,971) $(10,710) $(7,888) $(1,172) $ (167)
====== ======== ======== ======== ======== ======== ======= ======= =======
Preferred stock
dividends................ -- -- -- -- 430 159
------ -------- -------- -------- -------- -------- ------- ------- -------
Net loss to common
stockholders' interest... $ (168) $ (448) $ (797) $(28,296) $(13,401) $(10,710) $(7,888) $(1,331) $ (167)
Loss per common share...... $(0.37) $ (0.66) $ (0.72) $ (16.18) -- -- $ (4.51) -- --
Pro forma net loss per
share(2)................. -- -- -- -- $ (5.14) $ (1.69) $ (0.46) $ (0.03)
OTHER FINANCIAL DATA:
Adjusted EBITDA(3)......... $ 270 $ 326 $ 3,327 $ 4,132 $ 2,069 $ 4,357 $ 385 $ 1,497 $ 2,526
Cash flows from operating
activities............... 104 210 (55) (996) 865 267 752
Cash flows from investing
activities............... (1,433) (3,071) (62,822) (3,933) (970) (58) (1,063)
Cash flows from financing
activities............... 1,291 3,384 68,853 1,238 (1,679) (859) (231)
Capital expenditures:
Acquisitions, net of cash
acquired............... -- -- 56,076 1,800 -- -- 125
Property and equipment... 1,328 3,165 6,585 2,435 2,287 115 819
</TABLE>

16
<PAGE> 21

<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31, 2000
--------------------------------------------- --------------------
1995 1996 1997 1998 1999 ACTUAL PRO FORMA
------ ------ ------- ------- ------- ------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 38 $ 561 $ 6,537 $ 2,846 $ 1,062 $ 520 $ 2,540
Net property and equipment............................ 2,020 4,651 46,163 35,634 31,186 31,155 45,084
Total assets.......................................... 2,993 6,585 87,119 53,327 46,861 47,580 75,169
Total long-term debt.................................. 32 980 52,480 54,664 50,371 49,645 26,667
Total stockholders' equity (deficit).................. 234 6,585 23,360 (4,936) (13,030) (13,811) 33,089
</TABLE>

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

(1) Includes approximately $390,000 of non-cash stock compensation expense for
the three months ended March 31, 2000.

17
<PAGE> 22

INDUSTRY OVERVIEW

INDUSTRY CONDITIONS

The decline in oil and gas prices from late 1997 through early 1999 led to
a substantial decrease in activity in the well service industry. However,
increases in oil and gas prices since early 1999 have led to a rebound in
oilfield activity as oil and gas producers have increased their maintenance
activity and capital spending. This activity has translated into increased
demand for workover services. The Guiberson Well Service Rig Count, which is
indicative of activity in the well service industry, reflects this trend. In
conjunction with lower oil prices, the Guiberson Well Service Rig Count declined
from a peak of 3,766 active rigs in July 1997 to a low of 1904 active rigs in
February 1999 and, as oil prices have increased, has since recovered to 2,734
active rigs in March 2000. From April 1, 2000 through May 19, 2000, the average
daily closing WTI Spot Oil Price was $26.95.

[BAKER HUGHES CHART]

In addition to their initial drilling and completion, most oil and gas
wells will also require workover services during their productive lives.
Drilling and workover services are typically part of the capital spending
projects of oil and gas producers and are normally costly and time intensive.
The return on these expenditures must exceed the producer's investment
parameters before they are approved. Because a significant portion of a well's
total production typically occurs in the first few years of production, near
term expectations for oil and gas prices and the level of price volatility are
the primary drivers of those projects. As prices recover and appear to stabilize
above the producers' investment parameters, new projects are initiated.

18
<PAGE> 23

The Baker Hughes Land Drilling Rig Count is a direct indicator of capital
spending in the oil and gas industry and an indirect indicator of demand for
fluid services because most drilling projects require fluid services. As oil
prices decreased from late 1997 through early 1999, the Baker Hughes Land
Drilling Rig Count declined from 881 rigs in September 1997 to 380 rigs in April
1999. With the increase in oil prices since early 1999, the rig count has
recovered to 639 rigs at the end of March 2000.

[BAKER HUGHES LAND DRILLING RIG COUNT]

COMPETITION AND MARKET

Well Servicing

During the late 1970's, substantial new rig construction increased the
total well servicing rig fleet. Over the last 20 years, the domestic well
servicing fleet has declined substantially and the industry has experienced
considerable consolidation. The excess capacity of rigs that has existed in the
industry since the early 1980s has been reduced due to the lack of new rig
construction, retirements due to mechanical problems, casualties and exports to
foreign markets. We do not believe hourly rates currently charged for well
servicing justify new rig construction.

The industry has been comprised historically of a large number of small
local contractors, several multi-regional contractors and even fewer large
national contractors. However, recent consolidation, particularly during 1996
and 1997, has changed this competitive landscape. The industry consolidation
affected companies of all sizes but mostly eliminated the larger regional
companies.

Based on the membership directory of the Association of Energy Servicing
Companies and publicly available information, management estimates that in 1990
the industry was comprised of 301 contractors that owned approximately 3,846
well servicing rigs. Of these, three national companies controlled 1,249 rigs or
approximately 32% of the total membership's fleet. No other contractor owned
more than 100 rigs. Thirty companies owned fleets of 20 to 99 rigs representing
960 rigs or 25% of the industry's fleet, and the remaining 1,637 rigs or 43%
were owned by 268 contractors.

We believe that by the end of 1999 the industry had consolidated to
approximately 125 contractors that currently own approximately 3,730 rigs. Two
national companies, Key Energy Services, Inc. and Pool Well Services Co., own a
combined 2,123 rigs or approximately 57% of the industry's fleet. We believe we
have the third largest fleet with 141 rigs, or approximately 4% of the
industry's fleet, including rigs that we will acquire upon completion of this
offering. We believe no other company owns more than 50 rigs and a total of
approximately 122 companies own the remaining 1,466 rigs or approximately 39% of
the fleet.

According to the Guiberson Well Service Rig Count, the total available well
servicing rigs in the industry peaked at 8,063 in 1982, declined to 5,733 rigs
in 1990 and currently stands at 3,730 rigs as of March 2000. Management believes
that the actual number that may be put into use without significant

19
<PAGE> 24

capital expenditures may be as much as 20% below these estimates. The well
servicing industry utilization rate bottomed at 50% in February 1999 with 1,904
of 3,775 rigs working. Industry utilization has since recovered to 73% in March
2000 with 2,734 of 3,730 rigs working. The average number of rigs working in
1997 was 3,507 or 94% of the rigs currently available. Should activity levels
return to 1997 levels, we believe the availability of rigs may become
constrained throughout the United States.

[DRESSER CHART]
- ---------------

* Reflects Guiberson's periodic, industry-wide rig census. A rig is defined as
available if it is capable of being on location with a crew, within 48 hours,
with $25,000 or less of capital expenditures.

Fluid Services

Competitors in the fluid services industry are mostly small, regionally
focused companies. There are currently no companies that have a dominant
position on a nationwide basis. The level of activity in the fluid services
industry is comprised of a relatively stable demand for services for the
maintenance of producing wells and a highly variable demand for services used in
the drilling and completion of new wells. As a result, the level of land
drilling activity significantly affects the level of activity in the fluid
services industry. While there are no industry wide statistics, the Baker Hughes
Land Drilling Rig Count is an indirect indication of demand for fluid services
because it directly reflects the level of land drilling activity.

20
<PAGE> 25

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

Our growth strategy has emphasized increasing the breadth of services
offered at the well site and expanding our market presence through acquisitions.
In implementing this strategy we have purchased businesses and equipment in 16
separate transactions from January 1996 to April 1998. We believe this growth
through acquisitions makes comparisons between certain periods not directly
applicable. In addition, our industry experienced a significant downturn in
activity from late 1997 through mid-1999 and has since begun to rebound as oil
and gas prices have recovered.

WELL SERVICING

Revenues in our well servicing segment are derived from maintenance,
workover, completion and plugging and abandonment services. We provide
maintenance-related services as part of the normal, periodic upkeep of producing
oil and gas wells. While these services represent a relatively consistent
component of our business, they generally have lower operating margins. Workover
and completion services are more profitable than maintenance work, but the
demand for these services fluctuates more with the overall activity level in the
industry. Our plugging and abandonment services have become a smaller part of
our business but continue to produce consistent operating margins with stable
demand.

We charge our customers for services on an hourly basis at rates that are
determined by the type of service and equipment required, market conditions in
the region in which the rig operates, the ancillary equipment provided on the
rig and the necessary personnel. We measure our activity levels by the total
number of hours worked by all of the rigs in our fleet. We monitor our fleet
utilization levels, with full utilization deemed to be 55 hours per week per
rig. Through acquisitions of smaller contractors, our fleet has increased from
only 27 rigs at the beginning of 1997 to 141 rigs, including rigs we will
acquire upon completion of this offering.

The following is an analysis of our well servicing operations for each of
the quarters in the three years ended December 31, 1999 and the first quarter of
2000:

<TABLE>
<CAPTION>
1997 1998 1999
------------------------------------- ------------------------------------- -----------------
QUARTER ENDING -- 3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31 3/31 6/30
- --------------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WELL SERVICING:
Weighted average number of
rigs.................... 27.3 40.0 56.4 81.1 84.0 88.2 89.0 89.0 89.0 89.0
Billed rig hours.......... 15,936 25,588 40,340 51,852 51,954 46,652 41,304 34,290 31,454 36,798
Rig utilization rate...... 81.1% 88.8% 99.3% 88.8% 85.9% 73.5% 64.5% 53.5% 49.1% 57.4%
Revenue per rig hour...... $191.29 $160.05 $156.09 $144.25 $148.03 $149.77 $156.71 $161.46 $150.37 $148.44
Operating cost per rig
hour.................... $159.37 $132.10 $123.33 $108.75 $117.21 $116.87 $131.73 $135.85 $124.45 $125.33
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating margin per rig
hour.................... $ 31.92 $ 27.95 $ 32.76 $ 35.50 $ 30.82 $ 32.90 $ 24.98 $ 25.61 $ 25.92 $ 23.11
Operating margin.......... 16.7% 17.5% 21.0% 24.6% 20.8% 22.0% 15.9% 15.9% 17.2% 15.6%

<CAPTION>
1999 2000
----------------- -------
QUARTER ENDING -- 9/30 12/31 3/31
- --------------------------- ------- ------- -------
<S> <C> <C> <C>
WELL SERVICING:
Weighted average number of
rigs.................... 89.0 91.9 91.0
Billed rig hours.......... 48,393 52,282 57,089
Rig utilization rate...... 75.5% 79.0% 87.1%
Revenue per rig hour...... $140.79 $142.46 $148.44
Operating cost per rig
hour.................... $117.71 $113.65 $110.56
------- ------- -------
Operating margin per rig
hour.................... $ 23.08 $ 28.81 $ 37.88
Operating margin.......... 16.4% 20.2% 25.5%
</TABLE>

The extremely low oil prices experienced from late 1997 through mid-1999
and low gas prices experienced during mid-1998 through mid-1999 significantly
reduced demand for our well servicing rigs as many wells were shut in when
mechanical problems developed and oil and gas producers restricted their capital
spending for new drilling and workovers. Our full-fleet average utilization rate
declined from an average of 99.3% in the third quarter of 1997 to 49.1% in the
first quarter of 1999. Our well servicing business has since improved
significantly with the rebound in oil and gas prices and the increase in the
level of oilfield activity. Our well servicing rig utilization rate was 87.1% in
the first quarter of 2000. This increase has been primarily the result of higher
levels of regular maintenance work in addition to oil and gas producers
attempting to rapidly and economically improve production to take advantage of
higher oil and gas prices.

As drilling and maintenance activity and, therefore our utilization,
declined from late 1997 until mid-1999, our hourly rates also declined in
response to attempts by well servicing companies to protect market

21
<PAGE> 26

share amidst shrinking demand for well servicing rigs. Our operating margins
declined significantly during this period, as operating costs could not be
reduced concurrently with the reduced utilization and lower rates. Our average
revenue rates and operating margins declined from $156 per rig hour and 21.0%,
respectively, in the third quarter of 1997 to $141 per rig hour and 16.4% in the
third quarter of 1999. Our market has steadily improved since mid-1999, and we
implemented price increases in October 1999 and January 2000 with little market
resistance. This led to an increase in our average revenue rates and operating
margins to $148 per rig hour and 25.5% in the first quarter of 2000. The
combination of higher overall utilization, improved prices and operating margins
has led to higher well servicing operating profits. Additionally, we implemented
further price increases in April 2000.

FLUID SERVICES

Revenues in our fluid services segment are derived through the sale,
transportation, storage and disposal of fluids used in the drilling, production
and maintenance of oil and gas wells. The fluid services segment has a base
level of business consisting of transporting and disposing of salt water
produced as a by-product of the production of oil and gas. These services are
necessary for our customers and generally have a stable demand but typically
produce lower relative operating margins than other parts of our fluid services
segment. Our services for completion and workover projects are generally the
most profitable part of our fluid services segment. These projects typically
require fresh or brine water for making drilling mud, circulating fluids or frac
fluids used during a job. These fluids require storage tanks and more frequent
hauling and disposal. Because we can provide a full complement of fluid sales,
trucking, storage and disposal required on most drilling and workover projects,
the add-on services associated with increased drilling and workover activity
generate higher margin contributions. The higher margins are due to the
relatively small incremental labor costs associated with providing these
services in addition to our base fluid services segment.

Our fluid services revenues are driven by the number of working fluid
service trucks in our fleet as well as the amount of add-on services required by
our customers. We have increased our fluid service truck fleet through the
acquisition of smaller operators. We started this business segment at the
beginning of 1997 and we now have a total of 148 fluid service trucks, including
trucks acquired with the proceeds from this offering.

The following is an analysis of our fluid services operations for each of
the quarters in the three years ended December 31, 1999 and the first quarter of
2000:

<TABLE>
<CAPTION>
1997 1998 1999
------------------------------------- ------------------------------------- -----------------
3/31 6/30 9/30 12/31 3/31 6/30 9/30 12/31 3/31 6/30
QUARTER ENDING -- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FLUID SERVICES:
Weighted average number of
fluid service trucks.... 3.7 8.7 18.0 56.9 105.7 106.0 103.0 100.3 99.0 97.7
REVENUE PER FLUID SERVICE
TRUCK:
Transportation and
disposal................ $36,028 $46,713 $34,343 $43,435 $39,106 $32,233 $28,169 $26,198 $22,377 $22,866
Fluid storage tank
rentals................. 4,041 3,705 4,281 9,080 6,480 5,112 3,276 3,462 1,951 2,374
Fluid sales and other..... 6,438 9,086 6,891 12,588 10,906 10,162 7,659 6,201 3,141 3,766
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total................... $46,507 $59,504 $45,515 $65,103 $56,492 $47,507 $39,104 $35,861 $27,469 $29,006
Operating cost per
fluid service truck..... 30,578 37,796 28,892 44,064 37,083 31,463 29,749 26,815 20,376 21,558
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Operating margin per
fluid service truck..... 15,929 21,708 16,623 21,038 19,409 16,044 9,355 9,047 7,093 7,448
Operating margin.......... 34.2% 36.5% 36.5% 32.3% 34.4% 33.8% 23.9% 25.2% 25.8% 25.7%

<CAPTION>
1999 2000
----------------- -------
9/30 12/31 3/31
QUARTER ENDING -- ------- ------- -------
<S> <C> <C> <C>
FLUID SERVICES:
Weighted average number of
fluid service trucks.... 97.0 97.0 97.0
REVENUE PER FLUID SERVICE
TRUCK:
Transportation and
disposal................ $26,480 $33,111 $35,576
Fluid storage tank
rentals................. 2,412 3,351 3,856
Fluid sales and other..... 4,122 6,034 5,984
------- ------- -------
Total................... $33,014 $42,496 $45,416
Operating cost per
fluid service truck..... 26,143 30,451 32,193
------- ------- -------
Operating margin per
fluid service truck..... 6,871 12,045 $13,223
Operating margin.......... 20.8% 28.3% 29.1%
</TABLE>

We gauge activity levels in our fluid services segment based on revenues
and operating margin per fluid service truck. Reduced capital spending by oil
and gas producers from late 1997 through early 1999 affected our fluid services
segment more significantly than our well servicing segment. Our fluid services

22
<PAGE> 27

average quarterly revenues and operating margin in the fourth quarter of 1997
were $65,102 per fluid service truck and 32.3%, respectively. In the first
quarter of 1999, our revenues and operating margin were $27,469 per fluid
service truck and 25.8%, respectively. This decline in profitability resulted
from lower tank rental revenues and fluid sales revenues and lower overall
levels of business activity in base fluid services. Increased oilfield activity
since mid-1999 has led to a recovery in our fluid services segment, but
aggressive competition has prevented price increases from being implemented.
Tank rental and fluid sales have shown modest price increases indicating an
increase in drilling and workover activity. In the first quarter of 2000, our
average quarterly revenues and operating margin increased to $45,416 per fluid
service truck and 29.1%, respectively.

OPERATING COSTS

Our operating costs are comprised primarily of labor and maintenance costs.
Labor costs generally are variable and are incurred only while a well servicing
rig is operating or while fluid services are being provided. With a reduced pool
of workers, it is possible that we will have to raise wage rates to attract
workers from other fields and retain or expand our current work force. We
believe we will be able to increase our service rates to our customers to
compensate for wage rate increases. We also incur costs to employ personnel to
sell and supervise our services and perform maintenance on our fleet which are
not directly tied to our level of business activity. Compensation for our
administrative personnel in regional operating yards and in our corporate office
are accounted for as general and administrative expenses. Insurance costs are
generally a fixed cost and relate to the number of active rigs, trucks and other
equipment in our fleet, our employee payroll and our safety record.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2000 Compared to Three Months Ended March 31,
1999

Revenues. Revenues increased 73% to $12.9 million in the first quarter of
2000 from $7.4 million in the first quarter of 1999. This increase was primarily
due to increased oilfield service activity resulting from substantially higher
oil prices and the higher utilization derived from the redeployment of equipment
to take advantage of increasing activity in some of our markets. We operated 91
rigs in the first quarter of 2000 compared to 89 in 1999, which also contributed
to the increase. We operated 97 fluid service trucks during both periods.

Well servicing revenues increased 79% to $8.5 million in the first quarter
of 2000 compared to $4.7 million in the first quarter of 1999. Our full-fleet
utilization rate was 87.1% and revenue per rig hour was $148 in the first
quarter of 2000 compared to 49.1% and $150 respectively for the first quarter of
1999. The higher rig utilization was due to the general increase in oil well
maintenance activity caused by significantly higher oil prices and more
aggressive marketing of our fleet in areas of increasing activity. The revenue
rate per rig hour, while still below the rate per hour in the same period in
1999, increased from the rate of $142 per hour in the fourth quarter of 1999 and
the low point of $141 per hour realized in the third quarter of 1999. The
increasing rate per hour reflects the price increases that we implemented during
the fourth quarter of 1999 and a further increase in January 2000.

Fluid services revenues increased 62% to $4.4 million in the first quarter
of 2000 from $2.7 million in the first quarter of 1999. We monitor fluid
services revenues on an average revenue per truck basis and further categorize
fluid services revenues into the three components of transportation and disposal
revenues, fluid storage tank rentals and fluid sales and other services. For the
first quarter of 2000, our average revenues per fluid service truck totaled
$45,416, comprised of $35,576 for transportation and disposal services, $3,856
for fluid storage tank rentals and $5,984 for fluid sales and other. This
compares to average revenues of $27,469 per truck during the same period in
1999, comprised of $22,377 for transportation and disposal services, $1,951 for
fluid storage tank rentals and $3,141 for fluid sales and other services.

Operating Expenses. Operating expenses, which primarily consist of
labor, maintenance and fuel expenses, increased 59% to $9.4 million in the first
quarter of 2000 from $5.9 million in the first quarter of

23
<PAGE> 28

1999 as a result of higher utilization of our equipment. Operating expenses
decreased to 73% of revenue for the period from 80% in 1999, as fixed operating
costs such as field supervision, insurance and vehicle expenses were spread over
a higher revenue base. We also benefited from tighter expense controls of direct
labor costs that we implemented during the latter part of 1999.

Operating expenses for the well servicing segment increased 61% to $6.3
million in 2000 from $3.9 million in 1999. Operating margins increased to 26% in
the first quarter of 2000 compared to 17% in the same period in 1999.

Operating expenses for the fluid services segment increased 54% to $3.1
million in 2000 from $2.0 million in 1999. Operating margins increased to 29% in
the first quarter of 2000 from 25% in the same period in 1999.

We have historically earned higher margins from the fluid storage tank
rentals and the fluid sales components of our fluid services segment compared to
our trucking and disposal component due to the relatively low labor costs needed
to provide those services. Revenues from the tank rental and fluid sales
components generally increase as drilling activity increases in the areas where
we provide those services. We believe, if the drilling activity in our markets
continues to increase, additional revenue will be generated by these higher
margin components of our business. This should result in an increase in our
fluid services revenues and produce an overall higher margin for this segment of
our business and the total company.

General and Administrative Expenses. General and administrative expenses
increased 81% to $2.1 million in the first quarter of 2000 from $1.1 million in
1999. We recorded a non-cash charge of approximately $390,000 in the first
quarter of 2000 related to a stock award to our CEO at the time of his
employment in April 1999 due to a change in the terms of his employment
contract. Excluding this charge, the increase in general and administrative
expenses would have been $526,000 or 46%. That increase primarily reflects
higher salary and office expenses related to the expansion of our business into
Oklahoma in the second quarter of 1999, additional administrative personnel as
idle equipment was redeployed and activated and costs associated with preparing
for our initial public offering. Excluding the two charges related to the stock
award and the reduction in personnel, general and administrative costs of $1.6
million were 12% of revenue in the first quarter of 2000 compared to 15% of
revenue in the same period in 1999.

We expect our general and administrative costs, as a percent of revenue,
will continue to decline as we integrate the acquisitions to be closed upon the
completion of this offering. Each of the acquisitions have substantial
accounting, legal, management and owner's cost associated with the business that
can be substantially eliminated without affecting the level of service provided
by those companies. We believe we will not have to increase our corporate
overhead significantly to accommodate our larger operation following the
acquisitions.

Depreciation and Amortization Expenses. Depreciation and amortization
expenses were $1.7 million for both the first quarter of 2000 and 1999,
reflecting no significant change in the size or investment in our asset base.

Interest Expense. Interest expense decreased 16% to $1.6 million in 2000
from $1.9 million in 1999, reflecting the lower amount of debt we had in 2000
compared to 1999.

Income Tax Expense (Benefit). Income taxes changed to a $.6 million benefit
in the first quarter of 2000 from a $4.8 million expense for the same period in
1999. The change was due to a one-time deferred tax expense recorded in 1999
that resulted from a limitation on the future usage of our net operating losses
incurred prior to the end of the first quarter of 1999. This limitation was
based on a change of control in our ownership, as defined by the Internal
Revenue Service, that resulted from the issuance of common stock in 1997 in
combination with preferred stock issued in the first quarter of 1999. As of
December 31, 1999, we had a net operating loss carryforward of $7.5 million
available for future use.

24
<PAGE> 29

Net Loss. Our net loss decreased to $1.2 million in 2000 from $7.9 million
in 1999. Excluding the non-cash charge to compensation expense for the stock
award of approximately $390,000 discussed previously, our net loss would have
been $782,000 in the first quarter of 2000. This improvement was due primarily
to our substantial increase in revenue and margins in the first quarter of 2000
compared to the first quarter of 1999 and the effect of the tax adjustment that
increased the net loss in the first quarter of 1999.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Revenues. Revenues decreased 18% to $37.3 million in 1999 from $45.3
million in 1998. This decrease in revenues was primarily attributable to a
severe decline in oil prices, resulting in reduced oilfield service activity. We
operated 92 well servicing rigs and 97 fluid service trucks at December 31, 1999
compared to 89 and 99, respectively, at the end of 1998.

Well servicing revenues decreased 8% to $24.4 million in 1999 from $26.7
million in 1998. Revenues for the four quarters of 1999 were $4.7 million, $5.5
million, $6.8 million and $7.4 million, respectively. Revenues for the four
quarters of 1998 were $7.7 million, $7.0 million, $6.5 million and $5.5 million,
respectively. For the year ended December 31, 1999, our average rig utilization
was 65.4% and our average revenue per rig hour was $145 as compared to 69.1% and
$153, respectively, for the year ended December 31, 1998. Depressed oil prices
and the corresponding reduction in well service activity caused a decrease in
both rig utilization and pricing. As a result, revenues declined throughout 1998
and into early 1999. Revenues increased during the last three quarters of 1999
due to an increase in oil prices, which resulted in increased utilization of our
rigs.

Fluid services revenues decreased 31% to $12.9 million in 1999 from $18.6
million in 1998. Revenues for the four quarters of 1999 were $2.7 million, $2.9
million, $3.2 million and $4.1 million, respectively. Revenues for the four
quarters of 1998 were $6.0 million, $5.0 million, $4.0 million and $3.6 million,
respectively. We categorize truck revenues into three components which include
transportation and disposal revenues directly earned by each fluid service
truck, the revenues per fluid service truck generated by fluid storage tank
rental, and the revenues per fluid service truck generated by fluid sales and
other services. For the year ended December 31, 1999, our total average
quarterly revenues per fluid service truck were $32,961, comprised of $26,183
for transportation and other services, $2,519 for fluid storage tank rentals and
$4,259 for fluid sales and other services. This compares to total average
quarterly revenues of $44,895 for the year ended December 31, 1998, comprised of
$31,516 for transportation and disposal services, $4,606 for fluid storage tank
rentals and $8,773 for fluid sales and other services. Transportation and
disposal revenues per fluid service truck decreased throughout 1998 and early
1999 and then increased during the last nine months of 1999, which corresponded
to the fall and subsequent rise of oil prices. Fluid storage tank rental, fluid
sales and other revenues also declined with falling oil prices but have risen
more slowly than transportation and disposal fluid service truck revenues as oil
prices have risen. These two sources of revenues historically have fluctuated
based on the drilling rig count and are expected to increase as a reflection of
higher oil prices.

Operating Expenses. Operating expenses, which principally consist of labor,
maintenance and fuel expenses, decreased 14% to $29.8 million in 1999 from $34.6
million in 1998. Operating expenses as a percentage of revenues increased from
76% in 1998 to 80% in 1999. The increase was due to certain fixed costs that
remained in 1999 despite the overall business decline and was due to the cost of
putting inactive equipment back into service in the last two quarters of 1999.

Operating expenses for the well servicing segment decreased 7% to $20.2
million in 1999 from $21.6 million in 1998. Well servicing expenses for the four
quarters of 1999 were $3.9 million, $4.6 million, $5.7 million and $6.0 million,
respectively. Well servicing expenses for the four quarters of 1998 were $6.1
million, $5.5 million, $5.4 million and $4.6 million, respectively. Operating
margins for the four quarters of 1999 were 17.2%, 15.6%, 16.4% and 20.2%
compared to 20.8%, 22.0%, 15.9% and 15.9% for the same periods in 1998. We
estimate that $700,000 in expenses were incurred in the well servicing segment
in the last two quarters of 1999 to put inactive rigs and related equipment back
into working condition.

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<PAGE> 30

Operating expenses for the fluid services segment decreased 26% to $9.6
million in 1999 from $13.0 million in 1998. Fluid services expenses for the four
quarters of 1999 were $2.0 million, $2.1 million, $2.5 million $3.0 million,
respectively. Fluid services expenses for the four quarters of 1998 were $3.9
million, $3.3 million, $3.1 million and $2.7 million, respectively. Operating
margins for the four quarters of 1999 were 25.8%, 25.7%, 20.8% and 28.3%
compared to 34.4%, 33.8%, 23.9% and 25.2% for the same periods in 1998. We
estimate that $115,000 in expenses were incurred in the fluid services segment
in the last two quarters of 1999 to put inactive trucks and related equipment
back into working condition and to relocate trucks into areas where their
utilization would be higher.

General and Administrative Expenses. General and administrative expenses
decreased 4% to $5.2 million in 1999 from $5.5 million in 1998. This primarily
reflects cost cutting measures taken after we hired a new chief executive
officer in early 1999. As a percentage of revenues, general and administrative
expenses increased from 12% in 1998 to 14% in 1999 due to certain fixed general
and administrative expenses that remained relatively constant as revenues
declined in 1999 due to depressed oil prices. These cost cutting measures would
have resulted in a net savings of general and administrative salaries expenses
of an additional $125,000 if they had been in effect for the entire year.

Depreciation and Amortization Expenses. Depreciation and amortization
expenses decreased 22% to $6.7 million in 1999 from $8.6 million in 1998. The
decrease in depreciation from 1998 to 1999 was due to a $22.7 million write-down
of assets that occurred at the end of 1998. Only one small acquisition was made
in early 1998 compared to none in 1999, and capital spending was held to minimal
levels due to depressed oil prices, resulting in virtually no increase in
depreciation in 1999 due to capital spending.

Interest Expense. Interest expense for the year ended December 31, 1999
decreased 15% to $6.1 million in 1999 from $7.2 million in 1998. The decrease
was due to a decrease in long-term debt as a result of a refinancing in March
1999 and to a decrease in amortization of debt issuance costs.

Income Tax Expense. Income tax expense totaled $2.3 million for 1999
because of a loss of net operating loss carryforwards as described in Note 6 of
the financial statements. Due to the loss of these net operating loss
carryforwards, a related valuation allowance was also reversed during 1999. As a
result, future taxable income, if any, will be more likely to create current tax
payable. As of December 31, 1999, we had a net operating loss carryforward of
$7.5 million available for future use.

Net Loss. Our net loss decreased 54% to $13.0 million in 1999 from $28.3
million in 1998. This decrease was primarily due to a $22.7 million asset
impairment charge incurred at the end of 1998.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

Revenues. Revenues increased 73% to $45.3 million in 1998 from $26.1
million in 1997. Well servicing revenues increased 28% to $26.7 million in 1998
from $20.9 million in 1997. Fluid services revenues increased 257% to $18.6
million in 1998 from $5.2 million in 1997. Revenues increased in 1998 primarily
because of several acquisitions in late 1997. We operated 89 well servicing rigs
and 99 fluid service trucks at the end of 1998 compared to 84 and 107
respectively at the end of 1997.

In our well servicing segment, rig utilization decreased from 88.8% in the
last quarter of 1997 to 53.5% in the last quarter of 1998 due to a decrease in
oil prices. Even with lower utilization in 1998, our well servicing revenues
increased in 1998 because of the increase in the number of rigs we owned
throughout 1998 compared to 1997. The full service plugging and abandonment
portion of our well servicing segment typically has higher revenues and expenses
per rig hour and a lower percentage of operating margin than our other well
servicing operations. This portion of our business has remained relatively
stable with six rigs operating in this area in both 1997 and 1998. As other well
servicing rigs were added, the relatively lower hourly rates of these rigs
caused a downward trend in both revenues and expenses hourly rates in 1997 and
part of 1998. At the same time, the higher direct margins associated with these
additional well servicing rigs caused an upward trend in operating margin
percentages, with margins increasing from 23.2% in the first quarter of 1997 to
24.5% in the second quarter of 1998. Margin decreases in the last half of 1998
were due to the downturn in business related to declining oil prices.

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<PAGE> 31

We began our fluid services business in 1997 through several acquisitions,
most of which occurred in the fourth quarter of 1997. As a result, quarterly
comparisons of 1998 to 1997 and comparison of our segmented data are not
directly applicable. The decline in oil prices and industry activity decreased
our total quarter revenues for fluid service trucks throughout 1998 from $65,102
in the last quarter of 1997 to $35,862 in the last quarter of 1998. Fluid
services revenues would have also declined in 1998 if we had not had more trucks
available due to acquisitions.

Operating Expenses. Operating expenses increased 73% to $34.6 million in
1998 from $20.0 million in 1997. Well servicing expenses increased 31% to $21.6
million in 1998 from $16.5 million in 1997. Fluid services expenses increased
275% to $13.0 million in 1998 from $3.5 million in 1997. The change was
primarily due to several acquisitions in both business segments. Operating
expenses as a percentage of revenues was 76.5% in both 1997 and 1998. We believe
that operating expenses would have been higher in 1997 than in 1998 if an equal
amount of equipment had been available for both years due to higher equipment
utilization in 1997 prior to the decline in oil prices.

General and Administrative Expenses. General and administrative expenses
increased 96% to $5.5 million in 1998 from $2.8 million in 1997. This increase
was due primarily to increased staffing and other administrative costs to
accommodate our growth through acquisitions. As a percentage of revenues,
general and administrative expenses increased from 10.7% in 1997 to 12.1% in
1998, as we had certain fixed general and administrative expenses that remained
relatively constant as revenues disproportionately declined in 1998 due to the
lower oil prices.

Depreciation and Amortization Expenses. Depreciation and amortization
expenses increased 194% to $8.6 million in 1998 from $2.9 million in 1997. This
increase was attributable primarily to the impact of the additional equipment
that we were depreciating as a result of acquisitions.

Impairment Charges. At December 31, 1998, we recorded an impairment loss on
our well servicing and fluid services business segments of approximately $1.4
million and $21.3 million, respectively, for a total impairment of approximately
$22.7 million. In determining if an impairment loss was indicated, we projected
future undiscounted cash flows through the estimated life of each asset, for
each of our well servicing rigs and by local service area for our trucks and
water stations, based on generally increasing utilization rates based on
management's expectations, hours, estimated future rates and expenses. If an
impairment was indicated, the carrying value of the related goodwill was reduced
first. If additional impairment was indicated, the related equipment was reduced
to the estimated fair market value, based upon a recent appraisal.

Interest Expense. Interest expense increased 375% to $7.2 million in 1998
from $1.5 million in 1997. This increase was attributable to additional
borrowings incurred to finance acquisitions.

Net Loss. Our net loss increased to $28.3 million in 1998 from $0.8 million
in 1997, primarily due to the $22.7 million asset impairment charge incurred at
the end of 1998.

LIQUIDITY AND CAPITAL RESOURCES

Funding for our business activities has historically been provided by
operating cash flows, bank borrowings and private sales of equity.

Net cash used in our operations was $55,000 in 1997 and $996,000 in 1998.
Net cash provided by our operations was $865,000 in 1999 and $752,000 in the
first quarter of 2000. Growth from well service acquisitions increased net cash,
but was offset by increased working capital needs associated with acquisitions.
Net cash was also affected by an increase in well service rates through 1997
followed by decreases in rates and utilization in 1998 and 1999.

Net cash used in investing activities by Basic Energy was $62.8 million in
1997, $3.9 million in 1998, $970,000 in 1999 and $1.1 million in the first
quarter of 2000. Acquisitions were the primary uses of funds. We expect to
continue to make acquisitions, subject to available financing. During the last
quarter of 1999 and the first quarter of 2000, we entered into definitive
agreements, all of which are contingent upon the

27
<PAGE> 32

consummation of this offering, to acquire five well services businesses and the
stock of a sixth corporation with four inactive rigs for an aggregate cash
purchase price of approximately $14.5 million, as adjusted for the net financial
assets at the closing of this offering, plus $4.3 million in notes or warrants
that are convertible or exercisable into shares of our common stock.

Net cash provided by our financing activities was $68.9 million in 1997 and
$1.2 million in 1998. Private equity issuances and acquisition related
borrowings were the primary sources of funds. Net cash used in financing
activities for our operations for 1999 was $1.7 million, consisting primarily of
$.5 million in repayment of long-term debt, $.1 million in preferred dividends
and $1.1 million in deferred loan costs. Cash used in financing activities for
the first quarter of 2000 was $231,000.

At March 31, 2000, we had net working capital of $(245,000), which included
$3.7 million as the current portion of long-term debt.

On March 31, 1999, we entered into three securities purchase agreements,
referred to collectively as the "Credit Facility" in this prospectus, that
provided $54.4 million in borrowings and issuances of preferred stock. The
proceeds of this Credit Facility were used to retire Senior Secured Increasing
Rate Notes due 1999 issued under a previous facility from JEDI II. The Credit
Facility is comprised of a Senior Credit Facility, a Senior Subordinated Credit
Facility and three classes of preferred stock, as follows:

The senior notes under the Senior Credit Facility are held by ENA CLO I.
JEDI II and Enron North America Corp. transferred the senior notes to ENA
CLO I in December in connection with a securitization transaction in which
ENA CLO I acquired a pool of financial assets, including the senior notes,
from Enron North America Corp., JEDI II and other affiliates of Enron North
America Corp. Substantially all of the economic interest in ENA CLO I and
its assets is owned by parties that are unrelated to Enron North America
Corp., JEDI II and their affiliates. Enron North America Corp. manages the
assets of ENA CLO I, including the senior notes, pursuant to an asset
management and servicing agreement with ENA CLO I. The general partner of
JEDI II is an indirect wholly owned subsidiary of Enron Corp. The limited
partners of JEDI II are CalPERS and an indirect wholly owned subsidiary of
Enron Corp.

The senior notes have a principal balance of $24.4 million, which will be
repaid in their entirety with the net proceeds of this offering and the
term loan from CIT described below, with quarterly interest payable at a
rate per year of 250 basis points above the six month London Interbank
Offered Rate beginning March 31, 1999. ENA CLO I has deferred the interest
payable on March 31, 2000 until the earlier of the closing of this offering
or June 30, 2000. All outstanding principal and accrued and unpaid interest
is due and payable in full on June 30, 2004. The principal is payable
quarterly in the amount of approximately $872,000 beginning September 30,
2000, based on a seven year amortization of principal beginning June 30,
2000 and a final balloon payment due on June 30, 2004 for the remaining
unpaid balance. ENA CLO I has agreed to reduce the principal payable on
September 30, 2000 and December 31, 2000 to approximately $436,000 on each
payment date from approximately $872,000 provided that we repay the
difference between the amortized amounts due and the amounts paid on each
of these dates on or before March 31, 2001.

The subordinated notes under the Senior Subordinated Credit Facility will
be paid down to $10 million with the net proceeds of this offering and the
term loan from CIT described below. These subordinated notes currently have
a principal balance of $25 million with quarterly interest payable at a
rate of 10% per year beginning March 31, 1999 or a rate of 12% if interest
payments were deferred. As amended in connection with this offering,
interest will be payable in cash at a rate of 12% per annum. Basic Energy
deferred the quarterly interest payments due September 30, 1999 through
March 31, 2000. Accrued interest outstanding as of March 31, 2000 was $2.3
million. All deferred interest payments, together with interest on these
payments, will be repaid with the net proceeds of this offering. All
principal and accrued and unpaid interest is due and payable in full on
June 30, 2004.

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<PAGE> 33

JEDI II initially was issued 500 shares of Series A Cumulative Preferred
Stock, $10,000 par value per share ($5,000,000), with a dividend payable
quarterly of 10% per year. We may choose to pay dividends in kind on the
Series A Preferred at a rate of 12% per year. We paid the dividends due
September 30, 1999 through March 31, 2000 in kind. Accordingly, the number
of shares of Series A Cumulative Preferred stock owned by JEDI II as of
March 31, 2000 was 546.5.

We may redeem all of the shares of Series A Preferred at any time, at a
redemption price of $10,000 per share, together with accrued and unpaid
dividends to the date of redemption. The Series A Preferred will be
redeemed with the net proceeds of this offering.

JEDI II owns 1,000 shares of Series B Convertible Preferred Stock, $1 par
value per share, with dividends payable only if dividends are paid on our
common stock. The number of shares of the common stock into which the
Series B Preferred is convertible varies based upon the timing of the
repayment in full of the Series A Preferred. Assuming the repayment of the
Series A Preferred prior to June 30, 2000 with the net proceeds of this
offering, the Series B Preferred will be converted into 749,264 shares of
common stock.

JEDI II also owns one share of Series C Convertible Preferred Stock, $1,000
par value, with dividends payable only if dividends are paid on our common
stock. The number of shares of common stock into which the Series C
Preferred is convertible varies based upon the timing of the redemption of
the Series A Preferred. Assuming the repayment of the Series A Preferred
prior to June 30, 2000 with the net proceeds of this offering, the Series C
Preferred will not be convertible into any shares of common stock. Upon
completion of this offering, the Series C Preferred will be canceled in
exchange for the payment of $1,000. Accordingly, there will be no
outstanding shares of Series A, Series B or Series C Preferred Stock after
the closing of this offering.

The senior notes and subordinated notes contain covenants that, among other
actions, restrict dividends, investments and the sale of assets. Additionally,
the covenants currently require us to maintain a fixed charge coverage ratio of
at least 1:1 for each quarter beginning June 30, 2000. The fixed charge coverage
ratio measures the sum of the company's payments of long term debt principal,
lease expense, interest expense and capital expenditures against adjusted EBITDA
for the latest four fiscal quarters. ENA CLO I recently waived various breaches
of the covenants resulting from the offering, the acquisitions, certain related
party transactions and the capital expenditures made by us in 1999. The credit
facility relating to the subordinated notes will be amended in connection with
the new CIT credit facility to conform the covenants.

The exchange of the Credit Facility in satisfaction of the previous
facility from JEDI II was accounted for as a troubled debt restructuring with no
associated gain or loss. At March 31, 1999, we were experiencing significant
negative cash flow, oil prices were at historic lows and well service and
drilling rig activity was trending toward a historic low. The common equity was
burdened by approximately $49.4 million in debt and $5 million in preferred
equity and had a negative book value, leading to the conclusion that the common
equity had nominal value at that date. We recorded the preferred stock component
of the Credit Facility at an estimated fair value of $5 million, as estimated
considering the liquidation preference associated with the preferred stock and
the nominal value of the common stock conversion provisions.

In addition, and directly as a result of the exchange described above, our
net operating loss carryforwards for federal income taxes were effectively
reduced to zero at March 31, 1999 under Section 382 of the Internal Revenue
Code. The deferred tax asset valuation related to these net operating loss
carryforwards was reversed. These lost carryforwards will no longer be available
to offset future taxable income, therefore, we will be more likely to incur
federal income tax liabilities. Deferred tax assets related to operating loss
carryforwards existing at December 31, 1999 arose from losses occurring
subsequent to March 31, 1999.

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<PAGE> 34

Concurrently with the completion of this offering, we will enter into a $30
million credit facility with The CIT Group. The following is a summary of the
material terms of the CIT credit facility, a copy of which will be filed as an
exhibit to the registration statement of which this prospectus is a part.

The CIT credit facility consists of two tranches:

- a $20 million term loan facility; and

- up to a $10 million revolving credit facility.

The indebtedness under the CIT credit facility will rank senior to the $10
million of outstanding unsecured subordinated notes.

The CIT credit facility will have an initial term of three years with
automatic annual renewals unless terminated by us on the initial anniversary
date in 2003 or any subsequent anniversary date with 60 days notice.

Indebtedness under the revolving loans will bear interest at our option at
either the Chase Bank Rate plus .50% or Libor plus 3.0%, as those terms are
defined in the CIT credit facility. Indebtedness under the term loan will bear
interest at our option at either the Chase Bank Rate plus 1.25% or Libor plus
3.75%.

We will grant CIT a first and exclusive lien on all of our present and
future accounts receivable, inventory and other property. The CIT credit
facility will contain warranties, representations, covenants and events of
default as are customary for financing transactions of this type.

Enron North America Corp. has agreed, if requested by us pursuant to a
subscription agreement, to purchase up to 500 shares of Series D Cumulative
Preferred Stock at a purchase price of $10,000 per share in the event that the
aggregate offering price of shares sold in this initial public offering of
common stock is less than $55 million. If these shares of preferred stock are
sold, the use of proceeds from this sale will be the same as the use of proceeds
from this offering.

If issued, the Series D Preferred Stock will rank senior to all other
classes and series of our equity securities as to redemption, dividends and
liquidation unless the holder of the Series D Preferred Stock approves the
issuance of equity securities that are not junior to the rights of the Series D
Preferred Stock. Dividends on the Series D Preferred Stock will accrue at an
annual rate of 12% until June 30, 2001, 14% after June 30, 2001 until June 30,
2002 and 16% thereafter and will be payable quarterly in cash commencing
September 30, 2000. The Series D Preferred Stock will have a liquidation
preference of $10,000 per share. The Series D Preferred Stock will be redeemable
by us at any time prior to December 31, 2000 for an amount equal to the
liquidation preference plus accrued and unpaid dividends. After December 31,
2000, the Series D Preferred Stock will be redeemable by us for an amount equal
to 110% of the liquidation preference plus accrued and unpaid dividends.
Pursuant to the subscription agreement, we have also agreed that at any time
shares of the Series D Preferred Stock remain outstanding, we will not incur an
aggregate amount of "Indebtedness" (as defined in the subscription agreement) in
excess of $40 million without the consent of Enron North America, unless the
Indebtedness is used to redeem all of the shares of Series D Preferred Stock.

We believe that cash flow from operations, when combined with the net
proceeds from this offering, the sale of Series D Preferred Stock, if
applicable, and availability under the new credit facility with CIT that we will
to enter into prior to the completion of this offering, will be sufficient for
planned operating, capital expenditure and debt service requirements for at
least the next twelve months. We also believe that we will be in compliance with
all covenants under the new CIT credit facility and subordinated notes credit
facility as amended. After applying the net proceeds from the offering, we will
have no current obligations to repay any indebtedness other than approximately
$303,000 per month, plus interest, under the term loan with CIT and indebtedness
incurred in the ordinary course of business. We intend to finance our

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<PAGE> 35

acquisition strategy through borrowings under our new credit facility, cash flow
from operations and the issuance of additional equity.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities", which establishes standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. FAS 133 requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. It establishes conditions under which a
derivative may be designated as a hedge, and establishes standards for reporting
changes in the fair value of a derivative. FAS 133, as amended by FAS 137, is
required to be implemented for all fiscal quarters of all fiscal years beginning
after June 15, 2000. Early adoption is permitted. Basic Energy has not completed
the evaluation of the potential effects of implementing FAS 133.

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<PAGE> 36

BUSINESS

GENERAL

We provide a range of well site services that are fundamental to the
drilling and maintenance of oil and gas wells. Our well servicing business is
performed with well servicing rigs. A well servicing rig facilitates most
procedures performed on existing oil and gas wells and is used to hoist
equipment and tools into and out of the well bore in connection with:

- new well completions;

- well maintenance;

- workovers, including horizontal re-completions; and

- plugging and abandonment services.

Our fluid services business utilizes fluid service trucks, including
vacuum, transport, kill and hot oil trucks, fluid storage tanks, including frac
and test tanks, and fresh water and brine water wells. Fluid services include:

- fresh water and brine water sales from company-owned wells;

- fluids transportation to and from drilling and workover locations;

- fluid storage tank rentals;

- produced salt water transportation for disposal; and

- oilfield fluid disposal well operation.

We have operations in the major United States oil and gas producing regions
of Texas, New Mexico, Oklahoma and Louisiana. We began our operations in West
Texas in 1992 and subsequently expanded to eastern New Mexico, East Texas, South
Texas and Oklahoma.

BUSINESS STRATEGY

We believe we have become successful in our markets by establishing a
reputation for high quality equipment and well-trained crews that operate within
stringent safety guidelines. Our business strategy is designed to take advantage
of those strengths and capture growth opportunities within the well service
industry.

PROVIDE COMPLEMENTARY WELL SITE SERVICES. Our ability to provide
complementary services allows our customers to use fewer service providers,
reducing our customers' administrative costs and simplifying their logistics. A
customer typically begins a new maintenance or workover project by securing
access to a well servicing rig. As a result, our rigs are often the first
equipment to arrive at the well site for a job and the last to leave. A project
may then lead to the need for fluid handling or other services. In addition to
the convenience provided to the customer, our complementary well site services
give us a competitive advantage over smaller companies that offer fewer
services. The additional services allow us to generate more business from
existing customers, increase our operating margins and allocate our overhead
costs over a larger revenue base.

GROW THROUGH SELECTIVE ACQUISITIONS. We intend to expand our existing
businesses and to add new services through the acquisition of additional well
service companies and equipment. Numerous acquisition candidates exist, and we
believe we are well positioned to take advantage of these opportunities. We
intend to pursue our acquisition strategy while maintaining a conservative
capital structure. We seek to acquire businesses with strong customer
relationships, well-maintained equipment and experienced and skilled personnel.
Our objectives for this acquisition strategy are:

- to improve profitability by increasing the breadth of services we offer
at the well site;

- to minimize operating and administrative costs;

- to deploy equipment more efficiently; and

- to increase our marketing effectiveness.

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<PAGE> 37

FOCUS OPERATIONS ON AREAS OF HIGHEST CONCENTRATION OF ONSHORE DOMESTIC OIL
AND GAS PRODUCTION. Onshore oil and gas production in the United States is
highly concentrated in Texas, New Mexico, Oklahoma and Louisiana. In 1998, these
states accounted for over 58% and 71% of the United States onshore oil and gas
production, respectively, excluding Alaska. We estimate there are more than
150,000 oil wells and 50,000 gas wells within our market areas, all of which
require periodic maintenance throughout their productive life. We believe that
each of our operating regions provides us with significant opportunities for
internal growth, diversification of services and growth through acquisitions due
to the following attributes:

- densely drilled reservoirs with numerous producing wells, providing a
large market for our maintenance services;

- further development potential, requiring additional capital spending by
our customers; and

- proximity to one another, allowing for efficient deployment of our
assets.

OPERATE AND MARKET THROUGH LOCAL MANAGEMENT. We believe that our
decentralized operating management is consistent with the regional nature of the
well service industry. Well service purchase decisions typically are made on a
local level. Because our managers live and work in these areas and are directly
responsible for all aspects of their area's performance, we believe our
organization is more responsive to our customers' needs than our competitors
with more centralized operations. Moreover, we believe that the autonomy offered
by our local management strategy is attractive to potential sellers of well
service companies and their employees who may consider joining our management
team. Our decentralized operations are supported by our corporate office in
Midland, Texas, which monitors operating performance on a daily basis and
provides risk management and financial controls.

OVERVIEW OF SERVICES

We provide well site services to a variety of customers ranging from small
local oil and gas producers to large major oil companies. During 1999, we
provided services to more than 1,000 customers, the largest of which accounted
for less than 7% of our total revenues.

Well Servicing Segment

During 1999, our well servicing segment represented approximately 66% of
our revenue. This business segment encompasses a full range of services
performed with a mobile well servicing rig, also commonly referred to as a
workover rig, and ancillary equipment. Our rigs and personnel provide the means
for hoisting equipment and tools into and out of the wellbore as various
operations are performed to maintain and improve production throughout the
productive life of an oil and gas well. We generally charge our customers an
hourly rate for these services, which varies based on a number of considerations
including market conditions in each region, the type of rig and ancillary
equipment required, and the necessary personnel.

The largest portion of our activity in this segment is routine maintenance
work involving removal, repair and replacement of downhole equipment and
restoration of the well to production. We also facilitate the specialized
production enhancement and well repair operations performed by other oilfield
service companies by removing the equipment from the well bore, hoisting the
tools and equipment required by the operation into and out of the well, and
returning the well to production after the operation is completed. Regardless of
the type of work being performed on the well, our personnel and rigs are often
the first to arrive at the well site and the last to leave.

Including rigs that we will acquire upon completion of this offering, our
fleet includes 141 well servicing rigs. Three of these rigs are held under
capital leases with a purchase option. Pro forma for the offering, we operate
from 18 facilities in Texas, New Mexico and Oklahoma, most of which are used
jointly for both our business segments. Our rigs are mobile units that generally
operate within a radius of

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<PAGE> 38

approximately 75 to 100 miles from their respective bases. The average age of
our rigs is approximately 20 years. The following table sets forth the location,
characteristics and number of the 141 well servicing rigs operated by us,
including acquisitions made with the proceeds from this offering:

<TABLE>
<CAPTION>
OPERATING REGION
------------------------------------------------
EAST TEXAS/
RATED PERMIAN NORTH SOUTH
RIG TYPE CAPACITY BASIN LOUISIANA TEXAS OKLAHOMA TOTAL
- -------- -------------- ------- ----------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Swab............................. N/A 2 -- 10 2 14
Light Duty....................... < 100 tons 33 1 3 -- 37
Medium Duty...................... 100-125 tons 61 8 2 7 78
Heavy Duty....................... > 125 tons 12 -- -- -- 12
--- -- -- -- ---
Total by Market............... 108 9 15 9 141
</TABLE>

Maintenance

Regular maintenance on oil wells is generally required throughout the life
of a well to ensure efficient and continuous operation. We believe regular
maintenance comprises the largest portion of our work in this business segment.
We provide well servicing rigs, equipment and crews for these maintenance
services. Maintenance services are often performed on a series of wells in
proximity to each other and typically require less than 48 hours per well. These
services consist of routine mechanical repairs necessary to maintain production
from the wells, such as repairing inoperable pumping equipment in an oil well or
replacing defective tubing in a gas well, and removing debris such as sand and
paraffin from the well. Other services include pulling the rods, tubing, pumps
and other downhole equipment out of the well bore to identify and repair a
production problem. These downhole equipment failures are typically caused by
the repetitive pumping action of an oil well. Corrosion, water cut, grade of
oil, sand production and other factors can also result in frequent failures of
downhole equipment. Few gas wells have mechanical pumping systems in the well
bore, and, as a result, regular maintenance work on gas wells in our markets is
not a significant part of our business.

The need for these services does not directly depend on the level of
drilling activity, although it is somewhat impacted by short-term fluctuations
in oil and gas prices. Our demand for maintenance services is affected by
changes in the total number of producing oil and gas wells in our geographic
service areas. Accordingly, maintenance services generally experiences
relatively stable demand. Maintenance work, however, typically generates low
operating margins due to the limited need for auxiliary equipment and related
services. This is also the most competitive portion of the well servicing market
due to the use of lighter rigs and smaller crews.

Our regular well maintenance services involve relatively low cost, short
duration jobs which are part of normal well operating costs. Demand for well
maintenance is driven primarily by the production requirements of the local oil
or gas fields and, to a lesser degree, the actual prices received for oil and
gas. Well operators cannot delay all maintenance work without a significant
impact on production. Operators may, however, choose to temporarily shut in
producing wells when oil or gas prices are too low to justify additional
expenditures, including maintenance.

Workover

In addition to periodic maintenance, producing oil and gas wells
occasionally require major repairs or modifications called "workovers," which
are typically more complex and more time consuming than maintenance operations.
Workover services include extensions of existing wells to drain new formations
either through perforating the well casing to expose additional productive zones
not previously produced, deepening wellbores to new zones or the drilling of
lateral wellbores to improve reservoir drainage patterns. Our workover rigs are
also used to convert former producing wells to injection wells through which
water or carbon dioxide is then pumped into the formation for enhanced oil
recovery operations. Workovers also include major subsurface repairs such as
repair or replacement of well casing, recovery or replacement of

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<PAGE> 39

tubing and removal of foreign objects from the wellbore. These extensive
workover operations are normally performed by a workover rig with additional
specialized auxiliary equipment, which may include rotary drilling equipment,
mud pumps, mud tanks and fishing tools, depending upon the particular type of
workover operation. Most of our well servicing rigs are designed to perform
complex workover operations. A workover may require a few days to several weeks
and generally requires additional auxiliary equipment. The demand for workover
services is sensitive to oil and gas producers' intermediate and long term
expectations for oil and gas prices. As oil and gas prices increase, the level
of workover activity tends to increase as oil and gas producers seek to increase
output by enhancing the efficiency of their wells.

New Well Completion

New well completion services involve the preparation of newly drilled wells
for production. The completion process may involve selectively perforating the
well casing in the productive zones to allow oil or gas to flow into the
wellbore, stimulating and testing these zones and installing the production
string and other downhole equipment. We provide well servicing rigs to assist in
this completion process. Newly drilled wells are frequently completed by well
servicing rigs to minimize the use of higher cost drilling rigs in the
completion process. The completion process typically requires a few days to
several weeks, depending on the nature and type of the completion, and generally
requires additional auxiliary equipment. Accordingly, completion services
require less well-to-well mobilization of equipment and generally provide higher
operating margins than regular maintenance work. The demand for completion
services is directly related to drilling activity levels, which are sensitive to
expectations relating to and changes in oil and gas prices.

Plugging and Abandonment

Well servicing rigs are also used in the process of permanently closing oil
and gas wells no longer capable of producing in economic quantities at the end
of their productive life. Plugging and abandonment work can be performed with a
well servicing rig along with wireline and cementing equipment; however, this
service is typically provided by companies that specialize in plugging and
abandonment work. Many well operators bid this work on a "turnkey" basis,
requiring the service company to perform the entire job, including the sale or
disposal of equipment salvaged from the well as part of the compensation
received, and complying with state regulatory requirements. The plugging and
abandonment market can provide favorable operating margins and is less sensitive
to oil and gas pricing than drilling and workover activity since well operators
must plug a well in accordance with state regulations when it is no longer
productive. We currently have five rigs equipped to perform full service
plugging and abandonment services in our Permian Basin region. This operation
has the equipment and expertise to handle most plugging and abandonment jobs in
the market and competes for projects many of our well servicing competitors find
too difficult to manage. We also perform plugging and abandonment work
throughout our operations in conjunction with equipment provided by other
service companies.

Fluid Services Segment

During 1999, our fluid services segment represented approximately 34% of
our revenue. This segment includes an integrated mix of liquids handling
services, employing fluid service trucks, fluid storage tanks, Enviro-Vat system
rentals, salt water disposal wells and fresh and brine water stations. Our
breadth of capabilities in this business segment provides us with a competitive
advantage as a one-stop source for our customers. Many of our smaller
competitors in this segment can provide some, but not all, of the equipment and
services required by customers, requiring them to use several companies to meet
their requirements and increasing their administrative burden.

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<PAGE> 40

The following table sets forth the type, number and location of the fluid
services equipment we operated as of December 31, 1999, including acquisitions
made with the proceeds from this offering:

<TABLE>
<CAPTION>
FLUID SALT WATER FRESH AND
SERVICES SUPPORT DISPOSAL BRINE WATER FLUID STORAGE ENVIRO-VAT
OPERATING REGION TRUCKS TRUCKS WELLS STATIONS TANKS SYSTEMS
- ---------------- -------- ------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Permian Basin....................... 95 34 8 54 253 79
East Texas and North Louisiana...... 21 2 3 -- 61 4
South Texas......................... 32 3 2 -- 38 3
Oklahoma............................ -- -- -- -- -- 4
--- -- -- -- --- --
Total..................... 148 39 13 54 352 90
</TABLE>

We believe regular maintenance work comprises about 50% of our activity in
this business segment. As in our well servicing segment, our fluid services
segment has a base level of business volume related to the regular maintenance
of oil and gas wells. Most oil and gas fields produce residual salt water in
conjunction with the oil or gas produced. Fluid service trucks pick up this
fluid from tank batteries at the well site and transport it to a salt water
disposal well for injection. Our "hot oil" trucks are used to remove paraffin, a
by-product of oil production in many fields, from the well bore. If paraffin is
left untreated, it will inhibit production. This regular maintenance work must
be performed if a well is to remain active. We have salt water disposal wells in
most of our markets that allows us to compete effectively for this regular
maintenance work. While relatively stable, this activity typically generates low
operating margins. This is due to competition from numerous fluid service
companies that also own salt water disposal wells or have access to public or
oil and gas well operator-owned salt water disposal wells. Also, because the
disposal of salt water is a significant part of the operating costs of a well,
many oil and gas producers conduct a competitive bid process to select a service
provider.

We provide a full array of fluid sales, transportation, storage and
disposal services required on most workover, drilling and completion projects.
Workover, drilling and completion services also provides the opportunity for
higher operating margins from tank rentals and fluid sales. Drilling and
workover jobs typically require fresh or brine water for drilling mud or
circulating fluid used during the job. Completion and workover procedures often
also require large volumes of water for fracturing operations, a process of
stimulating a well hydraulically to increase production. Spent mud and flowback
fluids are required to be transported from the well site to a disposal well.

Fluid Services Trucks. We own and operate 148 fluid service trucks. A fluid
service truck is a bobtail or tractor/trailer truck with a fluid hauling
capacity of up to 130 55-gallon barrels. Each fluid service truck is equipped to
pump fluids from or into wells, pits, tanks and other storage facilities. The
majority of our fluid service trucks are also used to transport water to fill
frac tanks on well locations, including frac tanks provided by us and others, to
transport produced salt water to disposal wells, including injection wells owned
and operated by us, and to transport drilling and completion fluids to and from
well locations. In conjunction with the rental of our frac tanks, we generally
use our fluid service trucks to transport water for use in fracturing
operations. Following completion of fracturing operations, our fluid service
trucks are used to transport the flowback produced as a result of the fracturing
operations from the well site to disposal wells. Fluid services trucks are
generally provided to oilfield operators within a 50-mile radius of our nearest
yard.

Support Trucks. Our support trucks are used to move our fluid storage tanks
and other equipment to and from the job sites of our customers.

Salt Water Disposal Well Services. We own disposal wells that are permitted
to dispose of salt water and incidental non-hazardous oil and gas wastes. Our
transport trucks frequently transport fluids that are disposed of in the salt
water disposal wells. The disposal wells have injection capacities ranging up to
3,500 barrels per day. Our salt water disposal wells are strategically located
in close proximity to our customers' producing wells. Most oil and gas wells
produce varying amounts of salt water throughout their productive lives. In
Texas and New Mexico, oil and gas wastes and salt water produced from oil and
gas

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<PAGE> 41

wells are required by law to be disposed of in authorized facilities, including
permitted salt water disposal wells. Injection wells are licensed by state
authorities and are completed in permeable formations below the fresh water
table. We maintain separators at each of our disposal wells permitting us to
salvage residual crude oil, which is later sold for our account.

Fresh and Brine Water Stations. Our network of fresh and brine water
stations in the Permian Basin where surface water is generally not available
includes fresh water wells and brine mixing stations that are used to supply
water necessary for the drilling and completion of oil and gas wells. Our
strategic locations, in combination with our other fluids handling services,
gives us competitive advantage over other service providers and expands our
customer base.

Fluid Storage Tanks. Our fluid storage tanks can store up to 500 barrels of
fluid and are used by oilfield operators to store various fluids at the well
site, including water, brine, drilling mud and acid for frac jobs, flowback,
temporary production and mud storage. We transport the tanks on our trucks to
well locations that are usually within a 50-mile radius of our nearest yard.
Frac tanks are used during all phases of the life of a producing well. We
generally rent fluid services tanks at daily rates for a minimum of three days.
A typical fracturing operation can be completed within four days using 10 to 40
frac tanks.

Enviro-Vat System Rentals. The Enviro-Vat system is a unitized,
trailer-mounted system that connects to the wellhead to catch small oil and
other liquid spills that occur during regular maintenance, workover and
completion activities.

PROPERTIES

Our principal executive offices are located at 406 North Big Spring,
Midland, Texas 79701. Pro forma for our pending acquisitions, we will conduct
our business from 18 area offices, ten of which we own and eight of which we
lease. Each office typically includes a yard, administrative office and
maintenance facility. Of our 18 area offices, 14 are located in Texas, two are
in Oklahoma and two are in New Mexico. One area office provides fluid handling
services, three area offices provide well servicing and the remaining 14 area
offices provide both. We believe that our leased and owned properties are
adequate for our current needs.

CUSTOMERS

We serve numerous major and independent oil and gas companies that are
active in the areas in which we operate. During 1999, we provided services to
more than 1,000 customers, the largest of which accounted for less than 7% of
our total revenues. The majority of our business is with independent oil and gas
companies. Our area managers maintain relationships with customers whose
operating decisions are made in the field.

OPERATING RISKS AND INSURANCE

Our operations are subject to hazards inherent in the oil and gas industry,
such as accidents, blowouts, explosions, craterings, fires and oil spills, that
can cause:

- personal injury or loss of life;
- damage or destruction of property, equipment, the environment and marine
life; and
- suspension of operations.

In addition, claims for loss of oil and gas production and damage to
formations can occur in the workover business. If a serious accident were to
occur at a location where our equipment and services are being used, it could
result in our being named as a defendant in lawsuits asserting large claims.

Because our business involves the transportation of heavy equipment and
materials, we may also experience traffic accidents which may result in spills,
property damage and personal injury.

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<PAGE> 42

Despite our efforts to maintain high safety standards, we from time to time
have suffered accidents in the past and anticipate that we could experience
accidents in the future. In addition to the property and personal losses from
these accidents, the frequency and severity of these incidents affect our
operating costs and insurability, and our relationship with customers, employees
and regulatory agencies. Any significant increase in the frequency or severity
of these incidents, or the general level of compensation awards, could adversely
affect the cost of, or our ability to obtain, workers' compensation and other
forms of insurance, and could have other material adverse effects on our
financial condition and results of operations.

Although we maintain insurance coverage of types and amounts that we
believe to be customary in the industry, we are not fully insured against all
risks, either because insurance is not available or because of the high premium
costs. We do maintain physical damage, employer's liability, pollution, cargo,
umbrella, comprehensive commercial general liability and workers' compensation
insurance. There can be no assurance, however, that any insurance obtained by us
will be adequate to cover any losses or liabilities, or that this insurance will
continue to be available or available on terms which are acceptable to us.
Liabilities for which we are not insured, or which exceed the policy limits of
our applicable insurance, could have a materially adverse effect on us.

COMPETITION

The well service industry is highly competitive and fragmented and includes
a number of small companies capable of competing effectively on a local basis
and several large companies which possess substantially greater financial and
other resources than we do. Pool Well Services, a subsidiary of Nabors
Industries, Inc., and Key Energy Service, both provide well servicing and
liquids handling services and are the largest companies in the domestic well
services market. Pool and Key operate in multiple geographic regions and
currently have significantly more domestic well servicing rigs than we do. We
have numerous regional competitors for each of the services we provide. We
believe that we are competitive in terms of pricing, performance, equipment,
safety, availability of equipment to meet customer needs and availability of
experienced, skilled personnel in those areas in which we operate. Excess
capacity in the well service industry resulted in severe price competition
throughout much of the past decade. We expect competition and pricing pressures
to continue for the near future.

SAFETY PROGRAM

In the well service industry, an important competitive factor in
establishing and maintaining long-term customer relationships is having an
experienced and skilled work force. In recent years, many of our larger
customers have placed an emphasis not only on pricing, but also on safety
records and quality management systems of contractors. We believe that these
factors will gain further importance in the future. We have directed substantial
resources toward employee safety and quality management training programs as
well as our employee review process. While our efforts in these areas are not
unique, many competitors, particularly small contractors, have not undertaken
similar training programs for their employees.

ENVIRONMENTAL REGULATION

Extensive federal, state and local laws regulating the discharge of
materials into the environment or otherwise relating to health and safety or the
protection of the environment affect our business. Numerous governmental
departments issue regulations to implement and enforce these laws, which are
often difficult and costly to comply with. Failure to comply with these laws and
regulations often carries substantial administrative, civil and even criminal
penalties. Some laws and regulations relating to protection of the environment
may, in some circumstances, impose strict liability for environmental
contamination, rendering a person liable for environmental damages and cleanup
costs without regard to negligence or fault on the part of that person. Strict
adherence with these regulatory requirements increases our cost of doing
business and consequently affects our profitability. We believe that we are in
substantial compliance with current applicable environmental laws and
regulations and that continued compliance with existing requirements will not
have a material adverse impact on our operations. However, environmental laws
and
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<PAGE> 43

regulations have been subject to frequent changes over the years, and the
imposition of more stringent requirements could have a materially adverse effect
upon our capital expenditures, earnings or our competitive position.

The Comprehensive Environmental Response, Compensation and Liability Act,
referred to as "CERCLA" in this prospectus, and comparable state laws impose
liability, without regard to fault on some classes of persons that are
considered to be responsible for the release of a hazardous substance into the
environment. These persons include the current or former owner or operator of
the disposal site or sites where the release occurred and companies that
disposed or arranged for the disposal of hazardous substances. Under CERCLA,
these persons may be subject to joint and several liability for the costs of
investigating and cleaning up hazardous substances that have been released into
the environment, for damages to natural resources and for the costs of some
health studies. In addition, companies that incur liability frequently also
confront additional claims because it is not uncommon for neighboring landowners
and other third parties to file claims for personal injury and property damage
allegedly caused by hazardous substances or other pollutants released into the
environment from a polluted site.

We generate non-hazardous and hazardous solid wastes that are subject to
the requirements of the federal Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976, referred to as "RCRA" in this
prospectus, and comparable state statutes. Our operations generate minimal
quantities of hazardous wastes because RCRA currently excludes drilling fluids,
produced waters and other wastes associated with the exploration, development or
production of oil and gas from regulation as hazardous waste. Disposal of wastes
from oil and gas exploration, development and production that are non-hazardous
wastes is usually regulated under state law. Other wastes handled at exploration
and production sites or used in the course of providing well services may not
fall within this exclusion from RCRA and may be regulated as hazardous waste. In
addition, stricter standards for waste handling and disposal may be imposed on
the oil and gas industry in the future. For instance, from time to time
legislation has been proposed in Congress that would revoke or alter the current
exclusion of exploration, development and production wastes from the RCRA
definition of "hazardous wastes," potentially subjecting these wastes to more
stringent handling, disposal and cleanup requirements. If this legislation were
enacted it could have a significant adverse impact on our operating costs, as
well as the oil and gas industry and well servicing industry in general.

Our operations are subject to the federal Clean Water Act and analogous
state laws. Under the Clean Water Act, the Environmental Protection Agency has
adopted regulations concerning discharges of storm water runoff. This program
requires covered facilities to obtain individual permits, participate in a group
permit or seek coverage under an Environmental Protection Agency general permit.
Some of our properties may require permits for discharges of storm water runoff
and, as part of our overall evaluation of our current operations, we are
applying for stormwater discharge permit coverage and updating stormwater
discharge management practices at some of our facilities. We believe that we
will be able to obtain, or be included under, these permits, where necessary,
and make minor modifications to existing facilities and operations that would
not have a material effect on us.

The federal Clean Water Act and the federal Oil Pollution Act of 1990,
which contains numerous requirements relating to the prevention of and response
to oil spills into waters of the United States, require some owners or operators
of facilities that store or otherwise handle oil to prepare and implement spill
prevention, control, countermeasure and response plans relating to the possible
discharge of oil into surface waters. We believe we are in substantial
compliance with these regulations.

We have acquired leasehold or ownership interests in a number of properties
that, in some instances, have been operated previously as oil and gas related
service yards by third parties not under our control. Service yards are used
generally as staging areas for rigs and equipment when not in use, and there is
the possibility that repair and maintenance activities on these rigs and
equipment or storage of wellbore fluids at these yards during these prior years
may have resulted in the release of petroleum hydrocarbons or other wastes on or
under these properties. These properties and any wastes released thereon may be
subject to CERCLA, RCRA, and analogous state laws. Notwithstanding our lack of
control over properties operated

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<PAGE> 44

by others, any failure by us to comply with applicable environmental regulations
may, in circumstances, adversely impact upon our operations.

Our underground injection operations are subject to the federal Safe
Drinking Water Act, as well as analogous state and local laws and regulations.
Under Part C of the Safe Drinking Water Act, the United States Environmental
Protection Agency established the Underground Injection Control program, which
established the minimum program requirements for state and local programs
regulating underground injection activities. The Underground Injection Control
program includes requirements for permitting, testing, monitoring, record
keeping and reporting of injection well activities, as well as a prohibition
against the migration of fluid containing any contaminant into underground
sources of drinking water. Although we monitor the injection process of our
wells, any leakage from the subsurface portions of the injection wells could
cause degradation of fresh groundwater resources, potentially resulting in
cancellation of operations of the well, issuance of fines and penalties from
governmental agencies, expenditures for remediation of the affected resource and
liability to third parties for property damages and personal injuries. In
addition, our sales of residual crude oil collected as part of the saltwater
injection process could impose liability on us in the event the entity to which
the oil was transferred fails to manage the material in accordance with
applicable environmental health and safety laws.

We maintain insurance against some risks associated with underground
contamination that may occur as a result of well service activities. However,
this insurance is limited to activities at the wellsite and there can be no
assurance that this insurance will continue to be available or that this
insurance will be available at premium levels that justify its purchase. The
occurrence of a significant event not fully insured or indemnified against could
have a materially adverse effect on our financial condition and operations.

We are also subject to the requirements of the Federal Occupational Safety
and Health Act and comparable state statutes that regulate the protection of the
health and safety of workers. In addition, the Federal Occupational Safety and
Health Act hazard communication standard requires that information be maintained
about hazardous materials used or produced in operations and that this
information be provided to employees, state and local government authorities and
citizens. We believe that our operations are in substantial compliance with the
Federal Occupational Safety and Health Act requirements, including general
industry standards, record keeping requirements, and monitoring of occupational
exposure to regulated substances.

EMPLOYEES

As of March 31, 2000, we employed approximately 650 people, with
approximately 86% employed on an hourly basis. Our future success will depend
partially on our ability to attract, retain and motivate qualified personnel. We
are not a party to any collective bargaining agreements and we consider our
relations with our employees to be satisfactory.

LEGAL PROCEEDINGS

From time to time, we are a party to litigation or other legal proceedings
that we consider to be a part of the ordinary course of our business. We are not
involved currently in any legal proceedings that could reasonably be expected to
have a material adverse effect on our financial condition or results of
operations.

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<PAGE> 45

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES

The directors, executive officers and other key employees of Basic Energy
and their respective ages and positions are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
H. H. Wommack, III(1)................. 44 Director and Chairman of the Board
Kenneth V. Huseman.................... 48 President, Chief Executive Officer and
Vice Chairman of the Board
Ronald T. McClung..................... 49 Chief Financial Officer
Dub W. Harrison....................... 42 Vice President - Regional Operations
Charles W. Swift...................... 51 Vice President - Permian Basin
William M. Kerr, Jr.(1) .............. 42 Director
Paul L. Morris(2)..................... 58 Director
William J. Myers(1)(2)................ 63 Director
J. Steven Person...................... 41 Director
Clifford A. Strozier(2)............... 70 Director
</TABLE>

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

(1) Member of Compensation Committee

(2) Member of Audit Committee

Set forth below is the description of the backgrounds of the directors,
executive officers and other key employees of Basic Energy.

H. H. WOMMACK, III has served as our Chairman of the Board and a Director
of Basic Energy since its inception in 1992. Mr. Wommack has served as Chairman
of the Board, President, Chief Executive Officer and a Director of Southwest
Royalties Holdings since it was formed in July 1997 and of Southwest Royalties
since its founding in 1983. Prior to the formation of Southwest Royalties, Mr.
Wommack was a self-employed independent oil and gas producer.

KENNETH V. HUSEMAN became President and Chief Executive Officer and Vice
Chairman of the Board in April 1999. Prior to joining Basic Energy, Mr. Huseman
was the Chief Operating Officer of Key Energy Services, Inc. from August 1996
until April 1999 and Executive Vice President from March 1996 until August 1996.
Mr. Huseman was the Mid-Continent Region Manager and Vice President of WellTech,
Inc. from August 1993 until March 1996 when WellTech was acquired by Key Energy
Services. Mr. Huseman was employed by Pool Energy Services Co. from January 1978
until April 1993 in financial and operations management positions including
responsibility for well servicing, fluid services and drilling operations
throughout the United States. Key Energy Services, WellTech and Pool Energy
Services provide services to the oil and gas producing industry throughout the
United States that are similar to Basic Energy's services.

RONALD T. MCCLUNG joined Basic Energy in September 1999 as Chief Financial
Officer. Mr. McClung was formerly employed by Key Energy Services from March
1998 until September 1999 in Division and Corporate Controller positions. Mr.
McClung was employed by Robinson, Burdette, Martin and Cowan, LLP (formerly
Coopers & Lybrand L.L.P.) from 1993 until March 1998 and by KPMG LLP from 1991
to 1993. Mr. McClung is a certified public accountant.

DUB W. HARRISON joined Basic Energy in April 1995 and serves as Vice
President with responsibility for regional operations in east and south Texas
and Oklahoma and for Equipment, Maintenance and Safety. Mr. Harrison was
formerly employed by Pool Energy Services from 1987 to April 1995 in various
field operations, maintenance and safety management positions.

CHARLES W. SWIFT serves as Vice President of Basic Energy's Permian Basin
Operations. Mr. Swift was a general partner of S&N Well Servicing, Ltd. of
Midland, Texas from 1986 until July 1997, when

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<PAGE> 46

S&N was acquired by Basic Energy. S&N operated a well servicing business in the
Andrews and Midland, Texas area. Prior to co-founding S&N in 1986, Mr. Swift was
employed in marketing and operations management positions for 15 years with
various energy service companies in United States and international assignments.

WILLIAM M. KERR, JR. became a director of Basic Energy in March 2000. Mr.
Kerr was formerly an Advisory Director from May 1999 until March 2000. Mr. Kerr
previously served as a Director of Basic Energy from January 1998. Mr. Kerr has
been a partner of the law firm of Kerr & Ward, LLP since its founding in 1995.
From 1982 until 1995, Mr. Kerr practiced law with the firm of Kerr, Fitz-Gerald
& Kerr.

PAUL L. MORRIS became a director of Basic Energy in March 2000. Mr. Morris
was formerly an Advisory Director of Basic Energy from May 1999 until March
2000. Mr. Morris previously served as a Director of Basic Energy from January
1998. Since 1988, Mr. Morris has served as President and Chief Executive Officer
of Wagner & Brown, Ltd., an oil and gas company headquartered in Midland, Texas.
Mr. Morris previously served as President and Chief Executive Officer of Banner
Energy, Inc., Vice President of Columbia Gas Development Corporation and in
various other capacities in the oil and gas industry.

WILLIAM J. MYERS became a director of Basic Energy in March 2000. Mr. Myers
also serves as a director of both Bonus Resource Services Corp., a public well
service company in Canada, and Diamond Products International, a diamond bit
manufacturer in Houston, Texas. Prior to retiring in January 1999, Mr. Myers
served as Group Vice President of Pool Energy Services for 11 years.

J. STEVEN PERSON became a director of Basic Energy in March 2000. Mr.
Person has served as Vice President of Marketing for Southwest Royalties Holding
since its formation in July 1997. In addition, Mr. Person has served as Vice
President of Marketing for Southwest Royalties since 1989 and as Vice President
of Marketing for Midland Red Oak Reality since 1996.

CLIFFORD A. STROZIER became a director of Basic Energy in March 2000. Prior
to joining Basic Energy, Mr. Strozier was President of Jet-Lube, Inc., a
speciality lubricant manufacturer headquartered in Houston, Texas, from 1990
until his retirement in 1995. Mr. Strozier previously served as Director of
Domestic Marketing and Vice President of Contracts and Marketing for Pool Well
Servicing Co.

BOARD CLASSES

Our board of directors is divided into three classes. The directors serve
staggered three-year terms. The terms of the directors of each class expire at
the annual meetings of stockholders to be held in 2001 (Class I), 2002 (Class
II) and 2003 (Class III). At each annual meeting of stockholders, one class of
directors will be elected for a full term of three years to succeed that class
of directors whose terms are expiring. The current classification of directors
is as follows:

- Class I -- Messrs. Person and Strozier

- Class II -- Messrs. Huseman and Kerr

- Class III -- Messrs. Wommack, Morris and Myers

COMMITTEES

Our audit committee consists of Messrs. Morris, Myers and Strozier, each of
whom is a non-employee director. The audit committee meets separately with
representatives of our independent auditors and with representatives of senior
management in performing its functions. The audit committee reviews the general
scope of the audit function, matters relating to our internal control systems,
our policies with respect to conflicts of interest, changes in accounting
policies and other matters related to accounting and reporting functions.

Our compensation committee consists of Messrs. Wommack, Huseman and Myers,
each of whom is a non-employee director. The compensation committee administers
our 2000 Stock Plan, and in this capacity

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<PAGE> 47

makes all option grants or awards to our employees, including executive
officers, under the plan. In addition, the compensation committee is responsible
for making recommendations to the board of directors with respect to the
compensation of our chief executive officer and our other executive officers and
for establishing compensation and employee benefit policies.

COMPENSATION OF EXECUTIVE OFFICERS

The following table summarizes all compensation earned by Basic Energy's
Chief Executive Officer. No other executive officer had total annual salary and
bonuses exceeding $100,000 for services rendered in all capacities to Basic
Energy during the year ended December 31, 1999.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
YEAR ENDED DECEMBER 31, ----------------------------
1999 SECURITIES
------------------------ UNDERLYING ALL OTHER
SALARY BONUS OPTIONS(2) COMPENSATION(3)
--------- -------- ---------- ---------------
<S> <C> <C> <C> <C>
Kenneth V. Huseman......................... $180,930 $50,000 0 $13,124
</TABLE>

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

(1) Mr. Huseman became an employee of Basic Energy effective May 1, 1999. Under
the terms of his employment agreement, Mr. Huseman is entitled to the
compensation described under "-- Employment Agreements" below.

(2) For information concerning the aggregate holdings of restricted stock by Mr.
Huseman, see "-- Employment Agreements."

(3) Includes an $8,701 vehicle allowance and a $4,423 life insurance premium.

COMPENSATION OF DIRECTORS

Directors who are our employees do not receive a retainer or fees for
service on the board or any committees. We pay non-employee members of the board
for their service as directors. Directors who are not employees receive a
quarterly fee of $1,500 and a fee of $750 for attendance at each meeting of the
board. In addition, under the 2000 Stock Plan, immediately following completion
of this offering, each then non-employee director will receive, on that date, an
immediately exercisable stock option to purchase 10,000 shares of our common
stock at the market price on the date of grant. Beginning with the regular
annual meeting of stockholders in 2001, and on each annual meeting after that,
each then serving non-employee director will receive a stock option to purchase
1,000 shares of common stock. Directors are reimbursed for reasonable
out-of-pocket expenses incurred in attending meetings of the board or committees
and for other reasonable expenses related to the performance of their duties as
directors.

STOCK PLAN

Basic Energy's 2000 Stock Plan was adopted by the Board of Directors of
Basic Energy and approved by Basic Energy stockholders in March 2000. The stock
plan permits the granting of any or all of the following types of awards:

- stock options;
- restricted stock;
- performance units;
- automatic director options;
- phantom shares;
- other stock-based awards;
- bonus stock; and
- cash tax rights.

All officers and employees of, and any consultants to, Basic Energy or any
affiliate of Basic Energy will be eligible for participation in all of the above
listed awards under the stock plan. The non-employee directors

43
<PAGE> 48

of Basic Energy will receive automatic grants of director options under the
stock plan (as described above) and also will be eligible for participation in
the above listed awards.

The number of shares with respect to which awards may be granted under the
2000 Stock Plan is equal to 10% of the number of shares outstanding at the date
of any grant not to exceed 2,000,000 shares, and an aggregate of up to 2,000,000
shares of common stock have been authorized and reserved for issuance under the
stock plan. Under this stock plan, each non-employee director immediately
following the closing of this offering will automatically receive an option to
purchase 10,000 shares at the initial public offering price. In addition, each
non-employee director will automatically receive an option to purchase 1,000
shares of common stock immediately after each annual meeting of stockholders
beginning in 2001 while this stock plan is in effect. The stock plan is
administered by the compensation committee of Basic Energy's board of directors.
The compensation committee will select the participants who will receive awards,
determine the type and terms of the awards to be granted and interpret and
administer the stock plan. No awards may be granted under the stock plan after
March 21, 2010.

STOCK OPTION GRANTS

Subject to the completion of this offering, we have granted options to
purchase an aggregate of 320,000 shares of common stock with an exercise price
equal to the initial public offering price. Of these options, each of the six
non-employee directors will each hold options to purchase 10,000 shares that are
exercisable immediately. Mr. Huseman will hold options to purchase 50,000
shares, and Mr. McClung will hold options to purchase 20,000 shares, that will
vest in one-quarter increments commencing on the first anniversary of the
closing of the offering.

EMPLOYMENT AGREEMENTS

We have entered into an employment agreement with Mr. Huseman through April
30, 2004 with a minimum annual salary of $250,000 and an annual bonus ranging
from $50,000 to $250,000 based on the level of performance objectives achieved
by us. Under the employment agreement, Mr. Huseman has received a grant of
36,424 shares of stock in 1999. Under this agreement, as amended, Mr. Huseman
has received additional grants during 2000 of an additional 15,608 shares that
are subject to forfeiture if shares are not issued to JEDI II and 52,032 shares
of restricted stock that will vest on anniversaries of his employment
commencement date or earlier upon certain qualified terminations of his
employment, 15,608 shares of which are also subject to forfeiture if shares are
not issued to JEDI II. In addition, upon a qualified termination of employment
Mr. Huseman's base salary would be continued for the remainder of the term or
for 36 months, whichever is less. However, if a qualifying termination were to
occur following a change of control of Basic Energy, the above severance amount
would be paid a lump sum.

We have also entered into employment agreements with Ronald T. McClung, Dub
W. Harrison and Charles W. Swift, other officers through March 21, 2003. Under
these agreements, if the officer's employment is terminated for certain reasons,
he would be entitled to a lump sum severance payment equal to six months' annual
salary, or 18 months annual salary if termination is on or following a change of
control of Basic Energy.

INDEMNIFICATION AGREEMENTS

We intend to enter into indemnification agreements with some of our
directors and officers under which we will indemnify such persons against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement incurred as a result of the fact that such person, in his or her
capacity as a director or officer, is made or threatened to be made a party to
any suit or proceeding. These persons will be indemnified to the fullest extent
now or hereafter permitted by the General Corporation Law of the State of
Delaware. The indemnification agreements will also provide for the advancement
of expenses to these directors and officers in connection with any suit or
proceeding.

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<PAGE> 49

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The descriptions set forth below are qualified in their entirety by
reference to the applicable agreements.

On September 1, 1997, we, along with Southwest Royalties, entered into an
agreement under which Southwest Royalties agreed to provide us with
administrative services, including accounting, bookkeeping, tax preparation and
banking and disbursement services for $12,000 monthly. This service agreement
was terminated December 31, 1999. We now provide our own administrative
services. We performed well servicing and fluid services for Southwest Royalties
based on prices we believe to be comparable to prices charged in the region.
Fees paid to us by Southwest Royalties for these services were $508,000,
$906,000 and $1,010,000 for the years ended 1997, 1998 and 1999, respectively.

Effective January 1996, a subsidiary of Southwest Royalties began
performing computer services for us for $7,500 per month. This agreement is
terminable by either party within 30 days and is on terms management believes
are no less favorable to Basic Energy than prevailing market rates.

William M. Kerr, Jr., a director of Basic Energy since January 1, 1998, is
a partner in the law firm of Kerr & Ward, LLP. During 1998 and 1999, Basic
Energy paid Kerr & Ward, LLP approximately $112,383 and $64,105, respectively,
in fees for legal services performed. Management believes that the fees paid
were no less favorable to Basic Energy than prevailing market rates for these
services.

We lease three well service rigs from Permian Basin Acquisition Group for
$11,000 per month, with an option to purchase the rigs for the lesser of (1) the
fair market value or (2) $180,000 per rig. Permian Basin Acquisition Group is
owned by H.H. Wommack, III, Ken Huseman, Bill Coggin and Steve Person.
Management believes that the terms of the lease are comparable to terms we could
have obtained from unrelated third parties through arms-length negotiation. We
will purchase these rigs with the net proceeds of this offering.

Approximately $47.7 million of the net proceeds from this offering and the
CIT credit facility will be paid to ENA CLO I and JEDI II as a repayment of
senior notes, subordinated notes and the redemption of Series A Cumulative
Preferred Stock, including accrued and unpaid interest on the notes. JEDI II
currently beneficially owns approximately 28.8% of our outstanding common stock
and will own approximately 11.6% of our outstanding common stock upon the
completion of this offering. Please read "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Principal Stockholders" for a description of our relationship
with JEDI II following this offering.

45
<PAGE> 50

PRINCIPAL STOCKHOLDERS

The following tables set forth information with respect to the beneficial
ownership of the common stock of Basic Energy as of May 15, 2000, giving effect
to the conversion of Series B Preferred Stock owned by JEDI II, by each person
who is known by Basic Energy to own beneficially 5% or more of the common stock,
by our named executive officer, our directors and by all of our executive
officers and directors as a group. Unless otherwise indicated, the address of
each stockholder listed below is Southwest Royalties Building, 407 N. Big
Spring, Midland, TX 79701-4326.

<TABLE>
<CAPTION>
SHARES OF PERCENT OF PERCENT OF
COMMON CLASS BEFORE CLASS AFTER
NAME OF BENEFICIAL OWNER STOCK OFFERING OFFERING
- ------------------------ --------- ------------ -----------
<S> <C> <C> <C>
Southwest Royalties Holdings, Inc.(1)....................... 1,736,284 66.7% 26.9%
Southwest Partners II, L.P.(2).............................. 430,284 16.5 6.7
Southwest Partners III, L.P.(3)............................. 802,000 30.8 12.4
Joint Energy Development Investments II Limited
Partnership(4)............................................ 749,264 28.8 11.6
c/o Enron Corp.
1400 Smith Street
Houston, TX 77002
H. H. Wommack, III(5)....................................... 1,746,284 66.8 26.9
Kenneth V. Huseman(6)....................................... 104,064 4.0 1.6
William M. Kerr, Jr.(7)..................................... 10,000 * *
Paul L. Morris(7)........................................... 10,000 * *
William J. Myers(7)......................................... 10,000 * *
J. Steven Person(7)......................................... 10,000 * *
Clifford Strozier(7)........................................ 10,000 * *
Directors and Executive Officers as a Group (10
persons)(8)............................................... 1,910,348 71.8% 29.3
</TABLE>

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

* Less than one percent.

(1) Southwest Royalties, Inc. a wholly-owned subsidiary of Southwest Royalties
Holdings, controls the vote of all shares owned by Southwest Partners II and
Southwest Partners III as general partner of each of the two partnerships.
Southwest Royalties Holdings directly owns 504,000 shares, or 19.4% of total
shares outstanding and indirectly beneficially owns an additional 1,232,284
shares, or 47.3% of total shares outstanding through Southwest Royalties.
The number of beneficially owned shares and percentage of class listed above
reflect this control. The stockholders of Southwest Royalties Holdings who
beneficially own 5% or more of the common stock of Southwest Royalties
Holdings are H. H. Wommack, III and George H. Jewell, who own 72.9% and 5.7%
of its common stock, respectively.

(2) Southwest Royalties owns 15% of the partnership interests in Southwest
Partners II as the general partner. No other person owns 5% or more of the
partnership interests.

(3) Southwest Royalties owns 15% of the partnership interests in Southwest
Partners III as the general partner. No other person owns 5% or more of the
partnership interests.

(4) Reflects the redemption of Series A Cumulative Preferred Stock with the
proceeds of this offering prior to June 30, 2000. JEDI II holds 1,000 shares
of Series B Convertible Preferred Stock. The shares of Series B Convertible
Preferred Stock are convertible into fully paid and non-assessable shares of
common stock, and JEDI II has agreed to the conversion of these shares
effective upon the completion of this offering into 749,264 shares of common
stock and the cancellation of the Series C Convertible Preferred Stock upon
payment of $1,000. The general partner of JEDI II is an indirect wholly
owned subsidiary of Enron Corp. Enron is the holding company of an
integrated natural gas and electricity group headquartered in Houston,
Texas. The limited partners of JEDI II are CalPERS and an indirect wholly
owned subsidiary of Enron. CalPERS is the largest public pension system in
the United States and is headquartered in Sacramento, California.

(5) Reflects the beneficial ownership of H. H. Wommack, III, the majority
shareholder of Southwest Royalties Holdings and the intercompany
relationships discussed in footnotes 1, 2 and 3 above. Also

46
<PAGE> 51

includes 10,000 shares issuable within 60 days underlying options that will be
granted under the 2000 Stock Plan upon completion of this offering at this
initial public offering price.

(6) Includes 41,626 shares of common issued but subject to vesting and
forfeiture pursuant to Mr. Huseman's employment agreement, as amended. Does
not include 50,000 shares of common stock that are not issuable within 60
days underlying options that will be granted under the 2000 Stock Plan upon
completion of this offering.

(7) Includes 10,000 shares issuable within 60 days underlying options that will
be granted under the 2000 Stock Plan upon completion of this offering. The
exercise price for these options will be the initial public offering price.

(8) Includes 60,000 shares issuable within 60 days underlying options that will
be granted under the 2000 Stock Plan upon completion of this offering. The
exercise price for these options will be the initial public offering price.

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<PAGE> 52

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of Basic Energy consists of:

- 25,000,000 shares of common stock, $0.01 par value;

- 5,000,000 shares of preferred stock, $0.01 par value, of which the
following shares have, or, in the case of the Series One Junior
Participating Preferred Stock, will have, the following designations:

- 1,000 shares of Series A Cumulative Preferred Stock, $10,000
liquidation preference;

- 1,000 shares of Series B Convertible Preferred Stock, $1 liquidation
preference;

- one share of Series C Convertible Preferred Stock, $1,000 liquidation
preference; and

- 500,000 shares of Series One Junior Participating Preferred Stock,
$.01 par value.

Immediately prior to the offering, prior to converting the Series B
Convertible Preferred Stock, 1,852,348 shares of common stock will be
outstanding. Five hundred shares of Series A Cumulative Preferred Stock and one
share of Series C Convertible Preferred Stock have been issued but will be
redeemed or cancelled upon the completion of this offering, and 1,000 shares of
Series B Convertible Preferred Stock will be converted into an aggregate of
749,264 shares of common stock. The following description of capital stock gives
effect to the issuance of the preferred share purchase rights, the redemption of
Series A Cumulative Preferred Stock, the conversion of the Series B Convertible
Preferred Stock and the cancellation of the Series C Convertible Preferred
Stock.

The following summarizes the material provisions of our capital stock and
important provisions of our certificate of incorporation and bylaws. This
summary is qualified by our certificate of incorporation and bylaws, copies of
which have been filed as exhibits to the registration statement of which this
prospectus is a part and by the provisions of applicable law.

COMMON STOCK

Following the offering, 6,469,946 shares of common stock will be issued and
outstanding. Holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Because holders of common stock do
not have cumulative voting rights, the holders of a majority of the shares of
common stock can elect all of the members of the board of directors standing for
election. The holders of common stock are entitled to receive dividends as may
be declared by the board of directors. However, no dividends may be paid or
declared until all of the Series A Cumulative Preferred Stock has been redeemed.
The common stock is entitled to receive pro rata all of the assets of Basic
Energy available for distribution to its stockholders. There are no redemption
or sinking fund provisions applicable to the common stock. All outstanding
shares of common stock are fully paid and non-assessable.

PREFERRED STOCK

Subject to the provisions of the certificate of incorporation and
limitations prescribed by law, the board of directors has the authority to issue
up to 5,000,000 shares of preferred stock in one or more series and to fix the
rights, preferences, privileges and restrictions of the preferred stock,
including dividend rights, dividend rates, conversion rates, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of the series, which may be
superior to those of the common stock, without further vote or action by the
stockholders. There will be no

48
<PAGE> 53

shares of Series A Cumulative Preferred Stock, Series B Convertible Preferred
Stock or Series C Convertible Preferred Stock outstanding upon the closing of
the offering. Other than the potential sale of Series D Preferred Stock or in
connection with the preferred share purchase rights, Basic Energy has no present
plans to issue any additional shares of preferred stock.

One of the effects of undesignated preferred stock may be to enable the
board of directors to render more difficult or to discourage an attempt to
obtain control of Basic Energy by means of a tender offer, proxy contest, merger
or otherwise, and as a result, protect the continuity of Basic Energy's
management. The issuance of shares of the preferred stock under the board of
directors' authority described above may adversely affect the rights of the
holders of common stock. For example, preferred stock issued by Basic Energy may
rank prior to the common stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of common stock. Accordingly, the issuance of shares of preferred stock may
discourage bids for the common stock or may otherwise adversely affect the
market price of the common stock.

Series D Cumulative Preferred Stock. Enron North America Corp. has agreed,
if requested by Basic Energy pursuant to a subscription agreement, to purchase
up to 500 shares of Series D Cumulative Preferred Stock at a purchase price of
$10,000 per share in the event that the aggregate offering price of shares sold
in this initial public offering of common stock is less than $55 million. If
issued, the Series D Preferred Stock will rank senior to all other classes and
series of Basic Energy's equity securities as to redemption, dividends and
liquidation unless the holder of the Series D Preferred Stock approves the
issuance of equity securities that are not junior to the rights of the Series D
Preferred Stock. Dividends on the Series D Preferred Stock will accrue at an
annual rate of 12% until June 30, 2001, 14% after June 30, 2001 until June 30,
2002 and 16% thereafter and will be payable quarterly in cash commencing
September 30, 2000. The Series D Preferred Stock will have a liquidation
preference of $10,000 per share. The Series D Preferred Stock will be redeemable
by Basic Energy at any time prior to December 31, 2000 for an amount equal to
the liquidation preference plus accrued and unpaid dividends. After December 31,
2000, the Series D Preferred Stock will be redeemable by Basic Energy for an
amount equal to 110% of the liquidation preference plus accrued and unpaid
dividends. Copies of the subscription agreement and the form of Certificate of
Designations of the Series D Preferred Stock have been filed as exhibits to the
registration statement of which this prospectus is a part, and are incorporated
herein by reference.

DESCRIPTION OF PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS

Written Consent of Stockholders

Our certificate of incorporation and bylaws provide that any action
required or permitted to be taken by our stockholders must be taken at a duly
called meeting of stockholders and not by written consent.

Amendment of the Bylaws

Under Delaware law, the power to adopt, amend or repeal bylaws is conferred
upon the stockholders. A corporation may, however, in its certificate of
incorporation also confer upon the board of directors the power to adopt, amend
or repeal its bylaws. Our charter and bylaws grant our board the power to adopt,
amend and repeal our bylaws at any regular or special meeting of the board on
the affirmative vote of a majority of the directors then in office. Our
stockholders may adopt, amend or repeal our bylaws but only at any regular or
special meeting of stockholders by the holders of not less than 66 2/3% of the
voting power of all outstanding voting stock.

Special Meetings of Stockholders

Our bylaws preclude the ability of our stockholders to call special
meetings of stockholders.

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<PAGE> 54

Other Limitations on Stockholder Actions

Advance notice is required for stockholders to nominate directors or to
submit proposals for consideration at meetings of stockholders. In addition, the
ability of our stockholders to remove directors without cause is precluded.

Classified Board

Only one of three classes of directors is elected each year. See
"Management -- Classified Board."

Limitation of Liability of Officers and Directors

Our certificate of incorporation provides that no director shall be
personally liable to Basic Energy or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability as follows:

- for any breach of the director's duty of loyalty to Basic Energy or its
stockholders;

- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of laws;
- for unlawful payment of a dividend or unlawful stock purchase or stock
redemption; and
- for any transaction from which the director derived an improper personal
benefit.

The effect of these provisions is to eliminate the rights of Basic Energy
and its stockholders, through stockholders' derivative suits on behalf of Basic
Energy, to recover monetary damages against a director or breach of fiduciary
duty as a director, including breaches resulting from grossly negligent
behavior, except in the situations described above.

Business Combination Under Delaware Law

We are subject to Delaware's anti-takeover law, which is Section 203 of the
Delaware General Corporation Law. This law provides that specified persons who,
together with affiliates and associates, own, or within three years did own, 15%
or more of the outstanding voting stock of a corporation may not engage in
certain business combinations with the corporation for a period of three years
after the date on which the person became an interested stockholder. The law
does not include interested stockholders prior to the time our common stock is
listed on the Nasdaq National Market. The law defines the term "business
combination" to encompass a wide variety of transactions with or caused by an
interested stockholder, including mergers, asset sales and other transactions in
which the interested stockholder receives or could receive a benefit on other
than a pro rata basis with other stockholders. This provision has an
anti-takeover effect with respect to transactions not approved in advance by our
board of directors, including discouraging takeover attempts that might result
in a premium over the market price for the shares of our common stock. With
approval of our stockholders, we could amend our Certificate of Incorporation in
the future to elect not to be governed by the anti-takeover law. This election
would be effective 12 months after the adoption of the amendment and would not
apply to any business combination between Basic Energy and any person who became
an interested stockholder of Basic Energy on or before the adoption of the
amendment.

RIGHTS TO PURCHASE PREFERRED STOCK

Prior to the consummation of this offering, our board expects to declare a
dividend of one preferred share purchase right for each outstanding share of
common stock. Our board will also approve the further issuance of rights with
respect to all shares of common stock that we issue after that date and prior to
the rights becoming exercisable. The rights will be issued under a rights
agreement between our company and American Stock Transfer & Trust Company, as
rights agent. The following summary of the rights does not purport to be
complete and is qualified in its entirety by reference to the rights agreement,
a copy of which is filed as an exhibit to the registration statement of which
this prospectus is a part. When the rights become exercisable, each right will
entitle the registered holder to purchase from us one one-hundredth of

50
<PAGE> 55

a share of Series One Preferred Stock at a price of $70.00 in cash, subject to
adjustment. Until the occurrence of specified events, the rights:

- are not exercisable;
- will be evidenced by the certificates for our common stock; and
- will not be transferable apart from our common stock.

Detachment of Rights; Exercise. The rights will attach to all certificates
representing outstanding shares of common stock and no separate right
certificates will be distributed. The rights will separate from the common stock
on a distribution date, which will occur upon the earlier of:

- ten business days following the public announcement that a person or
group, other than exempt persons, has acquired beneficial ownership of
15% or more of our outstanding voting securities; or
- ten business days following the commencement or announcement of an
intention to commence a tender offer or exchange offer, which, if
completed, would result in the beneficial ownership by a person or group,
other than exempt persons, of 15% or more of our outstanding voting
securities.

The rights will not be exercisable until the distribution date. As soon as
practicable following the distribution date, separate certificates evidencing
the rights will be mailed to holders of record of our common stock as of the
close of business on the distribution date. After mailing, the separate
certificates alone will evidence the rights.

If a person or group, other than exempt persons, were to acquire 15% or
more of our voting securities, each right then outstanding would become a right
to buy that number of shares of common stock that at the time of the acquisition
of 15% or more of our voting securities would have a market value of two times
the exercise price of the right. Rights beneficially owned by the acquiring
person or group would, however, become null and void.

If, following the occurrence of a distribution date, we were acquired in a
merger or other business combination transaction, the rights agreement requires
that the documents relating to the business combination must contain provisions
relating to the rights. Those documents must provide that, after the merger or
other business combination, each holder of a right would have the right to
receive, upon exercise at the then current exercise price, that number of shares
of common stock of the acquiring company that at the time would have a market
value of two times the exercise price of the right.

Exempt persons under the rights agreement include (1) Basic Energy and its
subsidiaries, (2) H.H. Womack, III, his spouse, heirs and their affiliates, (3)
Southwest Royalties Holdings, Inc., Southwest Partners II, L.P. and Southwest
Partners III, L.P. and their affiliates and associates, and (4) JEDI II so long
as JEDI II does not own in excess of 15% of the shares of common stock
then-outstanding.

Antidilution and Other Adjustments. The number of shares or fractions of
Series One Preferred Stock or other securities or property issuable upon
exercise of the rights, and the purchase price payable, are subject to customary
adjustments from time to time to prevent dilution. The number of outstanding
rights and the number of shares or fractions of Series One Preferred Stock
issuable upon exercise of each right are also subject to adjustment if any of
the following events occurs prior to the distribution date:

- a stock dividend on our common stock payable in our common stock; or

- any subdivision, consolidation or combination of our common stock.

Exchange Option. At any time after the acquisition by a person or group,
other than an exempt person, of beneficial ownership of 15% or more but less
than 50% of our outstanding voting securities, our board may, at its option,
issue common stock in mandatory redemption of all or part of the rights. Any
rights owned by the acquiring person or group would become null and void. The
redemption must be at an exchange ratio of one share of our common stock for
each two shares of our common stock for which each right is then exercisable,
subject to adjustment.

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<PAGE> 56

Redemption of Rights. At any time prior to the first public announcement
that a person or group has become the beneficial owner of 15% or more of our
outstanding voting securities, our board may redeem all but not less than all
the then outstanding rights at a price of $.01 per right. The redemption of the
rights may be made effective at the time, on the basis and with the conditions
that the board may establish. Immediately after our board's decision to redeem
the rights, the right to exercise the rights will terminate and the only right
of the holders of rights will be to receive the redemption price.

Expiration; Amendment of Rights. The rights will expire at the close of
business on the date ten years from the date the rights are first issued unless
earlier extended, redeemed or exchanged. Our board may amend the terms of the
rights without the consent of the holders of the rights. This includes
amendments to extend the expiration date of the rights, and, if a distribution
date has not occurred, to extend the period during which the rights may be
redeemed. After the first public announcement that a person or group, other than
an exempt person, has become the beneficial owner of 15% or more of our
outstanding voting securities, no amendment may materially and adversely affect
the interests of holders of the rights.

REGISTRATION RIGHTS

Under the terms of a registration rights agreement dated as of March 31,
1999, Basic Energy granted to JEDI II the right to require Basic Energy to
register shares of our common stock. JEDI II may require Basic Energy to
register shares of common stock on up to three occasions after the completion of
an initial public offering. In addition, JEDI II may require Basic Energy to
include shares of common stock in a registration statement filed by Basic Energy
other than on Forms S-4 or S-8 or any successor forms. The rights of JEDI II
will terminate whenever the shares covered by this agreement may be sold under
Rule 144(k) or JEDI II has disposed of these shares in connection with a
registration statement or Rule 144.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the common stock is American Stock
Transfer & Trust Company.

LISTING

Application will be made to include the shares of Basic Energy for
quotation in the Nasdaq National Market under the symbol "BASC".

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<PAGE> 57

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for our common
stock. The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that these sales could
occur. These factors also could make it more difficult to raise funds through
future offerings of common stock.

After this offering, 6,469,946 shares of common stock will be outstanding,
or 7,024,946 shares if the underwriters exercise their over-allotment option in
full. Of these shares, the 3,700,000 shares sold in this offering, or 4,255,000
shares if the underwriters exercise their over-allotment option in full, will be
freely tradable without restriction under the Securities Act except for any
shares purchased by one of our "affiliates" as defined in Rule 144 under the
Securities Act. A total of 2,769,946 shares will be "restricted securities"
within the meaning of Rule 144 under the Securities Act or subject to lock-up
arrangements. An aggregate of 2,559,986 of these shares will become available
for resale in the public market as shown in the chart below:

<TABLE>
<CAPTION>
DATE OF ELIGIBILITY FOR RESALE
NUMBER OF SHARES INTO PUBLIC MARKET
- ----------------- ------------------------------
<C> <S>
2,533,972 180 days after the date of this prospectus due to a lock-up
agreement these stockholders have with Prudential Securities
Incorporated.
26,014 Between 181 and 365 days after the date of this prospectus
due to the requirements of the federal securities laws.
</TABLE>

In addition, options to purchase an aggregate of 60,000 shares that will be
issued upon the closing of this offering at the initial public offering price
will be exercisable immediately subject to lock up arrangements and restrictions
under Rule 144 under the Securities Act for "affiliates."

The restricted securities generally may not be sold unless they are
registered under the Securities Act or are sold under an exemption from
registration, such as the exemption provided by Rule 144 under the Securities
Act.

Our officers and directors and all stockholders have entered into lock-up
agreements under which we and they have agreed not to offer or sell any shares
of common stock or securities convertible into or exchangeable or exercisable
for shares of common stock for a period of 180 days from the date of this
prospectus without the prior written consent of Prudential Securities
Incorporated, on behalf of the underwriters. Prudential Securities Incorporated
may, at any time and without notice, waive any of the terms of these lock-up
agreements specified in the underwriting agreement. Prudential Securities
Incorporated has no present intent or understanding to release any of the shares
subject to the lock-up agreements. Following the lock-up period, these shares
will not be eligible for sale in the public market without registration under
the Securities Act unless these sales meet the conditions and restrictions of
Rule 144 as described below.

As restrictions on resale end, the market price of our common stock could
drop significantly if the holders of these restricted shares sell them, or are
perceived by the market as intending to sell them.

RULE 144

In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for a period of at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of:

- 1% of the then outstanding shares of common stock; and
- the average weekly trading volume in the common stock on the Nasdaq
National Market during the four calendar weeks immediately preceding the
date on which the notice of the sale on Form 144 is filed with the
Securities Exchange Commission.

53
<PAGE> 58

Sales under Rule 144 are also subject to other provisions relating to
notice and manner of sale and the availability of current public information
about us.

RULE 144(k)

Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an "affiliate," is
entitled to sell the shares without complying with the manner of sale, public
information, volume limitation or notice provision of Rule 144.

Upon completion of this offering, 320,000 shares of our common stock will
be subject to stock options, of which options to purchase 60,000 shares will be
immediately exercisable. Additional shares of our common stock have been
reserved for issuance under our stock option plan as described under
"Management -- Executive Compensation -- Stock Option Plans."

54
<PAGE> 59

UNDERWRITING

We have entered into an underwriting agreement with the underwriters named
below, for whom Prudential Securities Incorporated, Johnson Rice & Company
L.L.C. and Simmons & Company International are acting as representatives. We are
obligated to sell and the underwriters are obligated to purchase, all of the
shares offered on the cover page of this prospectus, if any are purchased.
Subject to certain conditions of the underwriting agreement, each underwriter
has severally agreed to purchase the shares indicated opposite its name:

<TABLE>
<CAPTION>
NUMBER
OF SHARES
UNDERWRITERS ---------
<S> <C>
Prudential Securities Incorporated..........................
Johnson Rice & Company L.L.C................................
Simmons & Company International.............................

---------
Total.................................................. 3,700,000
=========
</TABLE>

The underwriters may sell more shares than the total number of shares
offered on the cover page of this prospectus and they have, for a period of 30
days from the date of this prospectus, an over-allotment option to purchase up
to 555,000 additional shares from us. If any additional shares are purchased,
the underwriters will severally purchase the shares in the same proportion as
per the table above.

The representatives of the underwriters have advised us that the shares
will be offered to the public at the offering price indicated on the cover page
of this prospectus. The underwriters may allow to selected dealers a concession
not in excess of $ per share and such dealers may reallow a concession not
in excess of $ per share to certain other dealers. After the shares are
released for sale to the public, the representatives may change the offering
price and the concessions. The representatives have informed us that the
underwriters do not intend to sell shares to any investor who has granted them
discretionary authority.

We have agreed to pay to the underwriters the following fees, assuming both
no exercise and full exercise of the underwriters' over-allotment option to
purchase additional shares:

<TABLE>
<CAPTION>
TOTAL FEES
--------------------------------------------------------
FEE PER WITHOUT EXERCISE OF FULL EXERCISE OF
SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
-------- --------------------- ---------------------
<S> <C> <C> <C>
Fees paid by us.............................. $ $ $
</TABLE>

In addition, we estimate that we will spend approximately $ in expenses
for this offering. We and Southwest Royalties Holdings have agreed to indemnify
the underwriters against certain liabilities, including liabilities under the
Securities Act, or contribute to payments that the underwriters may be required
to make in respect of these liabilities.

We, our officers and directors and all stockholders of Basic Energy have
entered into lock-up agreements in which we and they have agreed not to offer or
sell any shares of common stock or securities convertible into or exchangeable
or exercisable for shares of common stock for a period of 180 days from the date
of this prospectus without the prior written consent of Prudential Securities
Incorporated, on behalf of the underwriters. Prudential Securities Incorporated
may, at any time and without notice, waive the terms of these lock-up agreements
specified in the underwriting agreement.

55
<PAGE> 60

Prior to this offering, there has been no public market for the common
stock of Basic Energy. The public offering price, negotiated between us, and the
representatives, is based upon our financial and operating history and
conditions, its prospects, the prospects for the industry we are in and
prevailing market conditions.

Prudential Securities Incorporated, on behalf of the underwriters, may
engage in the following activities in accordance with applicable securities
rules:

- Over-allotments involving sales in excess of the offering size, creating
a short position. Prudential Securities Incorporated may elect to reduce
this short position by exercising some or all of the over-allotment
option.

- Stabilizing and short cover stabilizing bids to purchase the shares are
permitted if they do not exceed a specified maximum price. After the
distribution of shares has been completed, short covering purchases in
the open market may also reduce the short position. These activities may
cause the price of the shares to be higher than would otherwise exist in
the open market.

- Penalty bids permitting the representatives to reclaim concessions from a
syndicate member for the shares purchased in the stabilizing or short
covering transactions.

These activities, which may be commenced and discontinued at any time, may
be effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.

Each underwriter has represented that it has complied and will comply with
all applicable laws and regulations in connection with the offer, sale or
delivery of the shares and related offering materials in the United Kingdom,
including:

- the Public Offers of Securities Regulations 1995;

- the Financial Services Act 1986; and

- the Financial Services Act 1986, (Investment Advertisements) (Exemptions)
Order 1996 (as amended).

Prudential Securities Incorporated facilitates the marketing of new issues
online through its PrudentialSecurities.com division. Clients of Prudential
Advisor(SM), a full service brokerage firm program, may view offering terms and
a prospectus online and place orders through their financial advisors.

We have asked the underwriters to reserve up to 185,000 shares for sale at
the same offering price directly to our officers, directors, employees and other
business affiliates or related third parties. The number of shares available for
sale to the general public in the offering will be reduced to the extent such
persons purchase the reserved shares. The shares sold will not be subject to
lock-up agreements unless subject to NASD lock-up rules.

LEGAL MATTERS

The validity of the shares of common stock offered by this prospectus will
be passed upon for us by Andrews & Kurth L.L.P., Houston, Texas and passed upon
for the underwriters by Vinson & Elkins L.L.P., Houston, Texas.

EXPERTS

Basic Energy's financial statements as of December 31, 1998 and 1999, and
for each of the years in the three year period ended December 31, 1999, have
been included herein and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.

56
<PAGE> 61

AVAILABLE INFORMATION

We have filed a registration statement on Form S-1 to register with the SEC
the common stock offered by this prospectus. This prospectus is a part of that
registration statement. As allowed by SEC rules, this prospectus does not
contain all of the information contained in the registration statement or the
exhibits to the registration statement.

We are subject to the informational requirements of the Securities Exchange
Act of 1934. Accordingly, we will file annual, quarterly and current reports,
proxy statements, and other information with the SEC. The public may read and
copy any reports, statements, or other information that we file at the SEC's
public reference room at Judiciary Plaza, 450 Fifth Street N.W., Washington,
D.C. 20549. The public may obtain information on the operation of the public
reference room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at "http://www.sec.gov."

You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:

Basic Energy Services, Inc.

Attention:
406 North Big Spring
Midland, Texas 79701
(915) 570-0829

57
<PAGE> 62

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Pro Forma Combined Financial Statements of Basic
Energy Services, Inc. .................................... F1-1
Unaudited Pro Forma Combined Balance Sheet as of March 31,
2000................................................... F1-2
Unaudited Pro Forma Combined Statement of Operations for
the year ended December 31, 1999....................... F1-3
Unaudited Pro Forma Combined Statement of Operations for
the three months ended March 31, 2000.................. F1-4
Notes to Unaudited Pro Forma Combined Financial
Statements............................................. F1-5

Historical Financial Statements of Basic Energy Services,
Inc.
Independent Auditors' Report.............................. F2-1
Balance Sheets at December 31, 1998 and 1999, and March
31, 2000 (unaudited)................................... F2-2
Statements of Operations for the years ended December 31,
1997, 1998 and 1999, and the three months ended March
31, 1999 and 2000 (unaudited).......................... F2-3
Statements of Stockholders' Equity for the years ended
December 31, 1997, 1998 and 1999, and the three months
ended March 31, 2000 (unaudited)....................... F2-4
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999, and the three months ended March
31, 1999 and 2000 (unaudited).......................... F2-5
Notes to Financial Statements............................. F2-6
</TABLE>

F-1
<PAGE> 63

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

Our unaudited pro forma combined balance sheet has been prepared to give
effect to the acquisitions of Turn Around Trucking, Inc., Trinity Services,
Sundown Operating, Inc., Eunice Well Servicing Co., Inc., and Gold Star Service
Company, Inc., which are collectively referred to as the Acquisitions, and to
the issuance of 3,700,000 shares of common stock in an initial public offering
and the application of proceeds therefrom as if these transactions had occurred
on March 31, 2000. Our unaudited pro forma combined statement of operations has
been prepared to give effect to the Acquisitions and to the issuance of
3,700,000 shares of common stock in an initial public offering and the
application of the proceeds thereof as if these transactions had occurred on
January 1, 1999. The acquisition of Harrison Well Service, Inc. has not been
reflected in these pro forma financial statements because that business is
inactive.

Future results may vary significantly from the results reflected in the
accompanying unaudited pro forma combined financial statements because of, among
other factors, changes in product and service prices and future acquisitions.

The unaudited pro forma adjustments relative to the Acquisitions are based
upon preliminary estimates. We do not believe that the actual adjustments will
differ significantly from these preliminary estimates. The only expected
differences relate to changes in working capital items and tax basis of the
companies being acquired prior to their acquisition. Such differences are
expected to be minor. The unaudited pro forma adjustments related to the
anticipated initial public offering are based on preliminary estimates of the
number of shares of common stock to be sold and the price to be received for
each share. The estimates of these amounts may vary significantly and,
therefore, the net proceeds available from the offering may be significantly
different than anticipated herein.

The unaudited pro forma combined financial statements should be read in
conjunction with our financial statements.

F1-1
<PAGE> 64

BASIC ENERGY SERVICES, INC.

PRO FORMA COMBINED BALANCE SHEET

MARCH 31, 2000

(IN THOUSANDS)

<TABLE>
<CAPTION>
TURN EUNICE
BASIC ENERGY AROUND TRINITY WELL GOLD STAR SUNDOWN
SERVICES, INC. TRUCKING SERVICES SERVICING SERVICE OPERATING
-------------- -------- -------- -------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............. $ 520 $ 384 $105 $ 119 $ 99 $ 1,654
Trade accounts receivable, net of
allowance........................... 8,238 932 146 520 307 795
Accounts receivable -- related
party............................... 69 743
Inventories........................... 118 95 -- 5 20 46
Deferred tax asset-current............ -- 72
Other assets.......................... 794 575 13 55 9 76
-------- ------ ---- ------ ------ -------
Total current assets............ 9,739 1,986 264 699 435 3,386
PROPERTY AND EQUIPMENT, NET............. 31,155 2,577 169 915 741 1,384
OTHER ASSETS
Deferred loan costs, net of
amortization........................ 368 -- -- 19 -- --
Goodwill, net of amortization......... 4,542 -- -- -- -- --
Other receivable -- related party..... -- -- -- -- -- 90
Other................................. 1,776 -- -- 39 4 234
-------- ------ ---- ------ ------ -------
Total other assets.............. 6,686 -- -- 58 4 324
TOTAL ASSETS............................ $ 47,580 $4,563 $433 $1,672 $1,180 $ 5,094
======== ====== ==== ====== ====== =======

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt..... $ 3,697 $ 678 $251 $ 223 $ 33 $ --
Accounts payable...................... 4,542 244 2 159 63 96
Accrued expenses...................... 1,745 -- -- 26 34 489
Other current liabilities............. -- -- -- -- 1 --
-------- ------ ---- ------ ------ -------
Total current liabilities....... 9,984 922 253 408 131 585
LONG-TERM DEBT.......................... 49,645 1,631 9 768 -- --
DEFERRED TAX LIABILITY -- NON CURRENT... 1,762 601 44 42
STOCKHOLDERS' EQUITY:
Preferred stock....................... 5,466 -- -- -- -- --
Common stock.......................... 19 1 5 1 3
Additional paid-in capital............ 25,845 9 24 2,563
Treasury stock........................ (10) (2,566)
Deferred compensation................. (624)
Accumulated earnings (deficit)........ (44,517) 1,399 171 501 980 4,467
-------- ------ ---- ------ ------ -------
Total stockholders' equity...... (13,811) 1,409 171 496 1,005 4,467
-------- ------ ---- ------ ------ -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................ $ 47,580 $4,563 $433 $1,672 $1,180 $ 5,094
======== ====== ==== ====== ====== =======

<CAPTION>
PRO FORMA
ADJUSTMENTS
DEBIT (CREDIT) PRO FORMA
-------------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents............. $(17,766)(1) $ 2,540
15,803(2)
1,622(4)
Trade accounts receivable, net of
allowance........................... (146)(1) 10,792
Accounts receivable -- related
party............................... 812
Inventories........................... 284
Deferred tax asset-current............ 72
Other assets.......................... (13)(1) 1,509
--------
Total current assets............ 16,009
PROPERTY AND EQUIPMENT, NET............. 8,143(1) 45,084
OTHER ASSETS
Deferred loan costs, net of
amortization........................ (19)(1) 1,050
1,050(4)
(368)(2)
Goodwill, net of amortization......... 6,141(1) 10,683
Other receivable -- related party..... 90
Other................................. 200(1) 2,253
--------
Total other assets.............. 14,076
TOTAL ASSETS............................ $ 75,169
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt..... 251(1) $ 3,333
4,631(2)
(3,333)(4)
Accounts payable...................... 2(1) 5,104
Accrued expenses...................... 2,294
Other current liabilities............. 1
--------
Total current liabilities....... 10,732
LONG-TERM DEBT.......................... 24,716(2) 26,667
661(4)
9(1)
DEFERRED TAX LIABILITY -- NON CURRENT... (2,361)(1) 4,681
129(2)
STOCKHOLDERS' EQUITY:
Preferred stock....................... 5,465(2) --
1(3)
Common stock.......................... 9(1) 64
--
(37)(2)
(7)(3)
Additional paid-in capital............ 608(1) 78,405
--
(50,578)(2)
6(3)
Treasury stock........................ (2,576)(1) --
Deferred compensation................. (624)
Accumulated earnings (deficit)........ 7,518(1) (44,756)
239(2)
--------
Total stockholders' equity...... 33,089
--------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................ $ 75,169
========
</TABLE>

See accompanying notes to unaudited pro forma combined financial statements

F1-2
<PAGE> 65

BASIC ENERGY SERVICES, INC.

PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
TURN EUNICE
BASIC ENERGY AROUND TRINITY WELL GOLD STAR SUNDOWN
SERVICES, INC. TRUCKING SERVICES SERVICING SERVICE OPERATING
-------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Well servicing............................ 24,453 $ -- $1,148 $2,094 $ -- $ 5,653
Fluid services............................ 12,878 5,288 -- -- 1,759 --
-------- ------ ------ ------ ------ -------
37,331 5,288 1,148 2,094 1,759 5,653
EXPENSES
Well servicing............................ 20,164 -- 501 1,645 -- 3,269
Fluid services............................ 9,613 3,608 -- -- 1,591 --
General and administrative................ 5,229 1,160 275 391 1,321
Depreciation and amortization............. 6,747 504 52 260 114 300
-------- ------ ------ ------ ------ -------
41,753 5,272 828 2,296 1,705 4,890
OPERATING INCOME (LOSS)..................... (4,422) 16 320 (202) 54 763
OTHER INCOME (EXPENSE)
Interest income........................... 100 37 -- 3 -- 105
Interest expense.......................... (6,065) (219) (24) (123) (9) --
Gain (loss) on sale of assets............. (301) 82 (2) 117 -- --
Other, net................................ 45 (6) 1 16 18 1
-------- ------ ------ ------ ------ -------
(6,221) (106) (25) 13 9 106
INCOME (LOSS) BEFORE INCOME TAXES........... (10,643) (90) 295 (189) 63 869
Income tax (expense) benefit.............. (2,328) 23 -- 30 36 (329)
-------- ------ ------ ------ ------ -------
NET INCOME (LOSS)........................... (12,971) (67) $ 295 $ (159) $ 99 $ 540
-------- ------ ------ ------ ------ -------
PREFERRED STOCK DIVIDENDS................... 430 -- -- -- -- --
-------- ------ ------ ------ ------ -------
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS.............................. $(13,401) $ (67) $ 295 $ (159) $ 99 $ 540
======== ====== ====== ====== ====== =======
PRO FORMA NET LOSS PER SHARE................ $ (5.14)
========

<CAPTION>
PRO FORMA
ADJUSTMENTS
DEBIT (CREDIT) PRO FORMA
-------------- ---------
<S> <C> <C>
REVENUES
Well servicing............................ $ 142(6) $ 33,206
Fluid services............................ 19,925
--------
53,131
EXPENSES
Well servicing............................ (22)(6) 25,557
Fluid services............................ 14,812
General and administrative................ 8,376
Depreciation and amortization............. 688(5) 8,665
--------
57,410
OPERATING INCOME (LOSS)..................... (4,279)
OTHER INCOME (EXPENSE)
Interest income........................... 245
Interest expense.......................... (3,197)(7) (3,243)
Gain (loss) on sale of assets............. (104)
Other, net................................ 75
--------
(3,027)
INCOME (LOSS) BEFORE INCOME TAXES........... (7,306)
Income tax (expense) benefit.............. 836(8) (3,404)
--------
NET INCOME (LOSS)........................... (10,710)
--------
PREFERRED STOCK DIVIDENDS................... (430)(3) --
--------
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS.............................. $(10,710)
========
PRO FORMA NET LOSS PER SHARE................ $ (1.69)
========
</TABLE>

See accompanying notes to unaudited pro forma combined financial statements

F1-3
<PAGE> 66

BASIC ENERGY SERVICES, INC.

PRO FORMA COMBINED STATEMENT OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2000

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
BASIC TURN EUNICE
ENERGY AROUND TRINITY WELL GOLD STAR SUNDOWN
SERVICES, INC. TRUCKING SERVICES SERVICING SERVICE OPERATING
-------------- -------- -------- -------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Well servicing........................ 8,475 $ -- $371 $ 684 $ -- $ 1,639
Fluid services........................ 4,405 1,329 -- -- 568 --
-------- ------ ---- ------ ------ -------
12,880 1,329 371 684 568 1,639
EXPENSES
Well servicing........................ 6,312 -- 148 478 -- 894
Fluid services........................ 3,123 825 -- -- 489 --
General and administrative............ 2,050 183 84 113 -- 317
Depreciation and amortization......... 1,692 125 11 61 23 36
-------- ------ ---- ------ ------ -------
13,177 1,133 243 652 512 1,247
OPERATING INCOME (LOSS)................. (297) 196 128 32 56 392
OTHER INCOME (EXPENSE)
Interest income....................... 17 10 -- 2 -- 16
Interest expense...................... (1,560) (55) (6) (28) (3) --
Gain (loss) on sale of assets......... 99 29 -- -- -- --
Other, net............................ 3 (3) -- 2 6 (3)
-------- ------ ---- ------ ------ -------
(1,441) (19) (6) (24) 3 13
INCOME (LOSS) BEFORE INCOME TAXES....... (1,738) 177 122 8 59 405
Income tax (expense) benefit.......... 566 (61) -- -- 11 (151)
-------- ------ ---- ------ ------ -------
NET INCOME (LOSS)....................... (1,172) $ 116 $122 $ 8 $ 70 $ 254
-------- ------ ---- ------ ------ -------
PREFERRED STOCK DIVIDENDS............... 159 -- -- -- -- --
-------- ------ ---- ------ ------ -------
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS.......................... $ (1,331) $ 116 $122 $ 8 $ 70 $ 254
======== ====== ==== ====== ====== =======
PRO FORMA NET LOSS PER SHARE............ $ (0.46)
========

<CAPTION>
PRO FORMA
ADJUSTMENTS
DEBIT(CREDIT) PRO FORMA
-------------- ---------
<S> <C> <C>
REVENUES
Well servicing........................ $ 67(6) $ 11,102
Fluid services........................ 6,302
--------
17,404
EXPENSES
Well servicing........................ (5)(6) 7,827
Fluid services........................ 4,437
General and administrative............ 2,747
Depreciation and amortization......... 174(5) 2,122
--------
17,133
OPERATING INCOME (LOSS)................. 271
OTHER INCOME (EXPENSE)
Interest income....................... 45
Interest expense...................... (905)(7) (747)
Gain (loss) on sale of assets......... 128
Other, net............................ 5
--------
(569)
INCOME (LOSS) BEFORE INCOME TAXES....... (298)
Income tax (expense) benefit.......... 234(8) 131
--------
NET INCOME (LOSS)....................... (167)
--------
PREFERRED STOCK DIVIDENDS............... (159)(3) --
--------
NET INCOME (LOSS) AVAILABLE TO COMMON
STOCKHOLDERS.......................... $ (167)
========
PRO FORMA NET LOSS PER SHARE............ $ (0.03)
========
</TABLE>

See accompanying notes to unaudited pro forma combined financial statements

F1-4
<PAGE> 67

BASIC ENERGY SERVICES, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

The unaudited pro forma combined balance sheet has been prepared to give
effect to the acquisitions of Turn Around Trucking, Inc., Trinity Services,
Sundown Operating Inc., Eunice Well Servicing Co., Inc., and Gold Star Service
Company, Inc., which are collectively referred to as the Acquisitions, the
proceeds of a term note in the amount of $20,000,000 and to the issuance of
3,700,000 shares of common stock in an initial public offering and the
application of proceeds therefrom as if the Acquisitions and the offering had
occurred on March 31, 2000. The unaudited pro forma combined statement of
operations has been prepared to give effect to the Acquisitions, and to the
issuance of 3,700,000 shares of common stock in an initial public offering and
the application of the proceeds therefrom based on an estimated initial public
offering price of $15 per share as if the Acquisitions and the offering had
occurred on January 1, 1999.

2. PRO FORMA ADJUSTMENTS

(1) To record the Acquisitions using the purchase method of accounting. The
purchase price allocations are preliminary, however, no significant
contingencies have been identified or are expected. The following table details
the preliminary purchase price allocation:

<TABLE>
<CAPTION>
EUNICE
TURN AROUND TRINITY WELL GOLD STAR SUNDOWN
TRUCKING SERVICES SERVICING SERVICE OPERATING TOTAL
----------- -------- --------- --------- --------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Assets and liabilities acquired:
Net current assets............... $ 1,064 $ -- $ 291 $ 304 $ 2,801 $ 4,460
Property and equipment........... 3,043 731 2,187 1,433 6,535 13,929
Covenants not to compete......... 50 -- 50 50 50 200
Goodwill......................... 4,166 1,255 43 598 79 6,141
Other assets..................... -- -- 39 4 324 367
Long-term debt, net of current
portion....................... (1,631) -- (768) -- -- (2,399)
Deferred tax liability........... (759) (47) (219) (235) (1,788) (3,048)
------- ------ ------ ------ ------- -------
$ 5,933 $1,939 $1,623 $2,154 $ 8,001 $19,650
======= ====== ====== ====== ======= =======
Consideration given:
Cash............................. $ 4,633 $1,850 $1,623 $1,554 $ 8,001 $17,661
Common stock..................... 1,300 -- -- 600 -- 1,900
Warrants for commons stock....... -- 89 -- -- -- 89
------- ------ ------ ------ ------- -------
$ 5,933 $1,939 $1,623 $2,154 $ 8,001 $19,650
Additional information:
Estimated tax basis of
property...................... $ 809 $ 593 $1,542 $ 742 $ 1,277 $ 4,963
Estimated shares of common stock
to be issued.................. 87 -- -- 40 -- 127
</TABLE>

F1-5
<PAGE> 68

<TABLE>
<CAPTION>
HISTORICAL CONSIDERATION PRO FORMA
TOTAL AMOUNTS SUBTOTAL GIVEN ENTRY
------- ---------- -------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Assets and liabilities acquired:
Net current assets............. $ 4,460 $ 4,471 $ (11) $(17,661) $(17,672)
Property and equipment......... 13,929 5,786 8,143 8,143
Covenants not to compete....... 200 200 200
Goodwill....................... 6,141 -- 6,141 6,141
Other assets................... 367 386 (19) (19)
Long-term debt, net of current
portion..................... (2,399) (2,408) 9 9
Deferred tax liability......... (3,048) (687) (2,361) (2,361)
Common stock................... (10) 10 (1) 9
Additional paid-in-capital..... (2,596) 2,596 (1,988) 608
Treasury stock................. 2,576 (2,576) (2,576)
Accumulated earnings
(deficit)................... (7,518) 7,518 7,518
</TABLE>

Each of the Acquisitions, with the exception of Trinity, is a purchase of
stock. The Trinity acquisition is the purchase only of Trinity's operating
assets. Common Stock to be issued upon conversion of notes is valued at an
estimated offering price of $15.00 per share. Warrants are valued based on
their terms using a Black-Scholes pricing model assuming a stock issuance
and exercise price of $15, a term of 2.25 years, a discount rate of 8% and
volatility of 50%. The income tax rate used in the calculation of the above
deferred tax liabilities is the statutory rate in effect during the
applicable periods.

(2) To reflect the use of the net proceeds of the offering and the
application thereof for the following purposes (in thousands):

<TABLE>
<S> <C>
Gross proceeds of the offering (3,700,000 shares at an
estimated $15.00 per share)............................... $55,500
Less underwriting discounts and estimated expenses........ 4,885
-------
Net proceeds to common stock and additional
paid-in-capital........................................... 50,615
-------
Less:
Repayment of Senior Notes and other indebtedness.......... 29,347
Redemption of Series A Convertible preferred stock........ 5,465
-------
Net cash remaining after repayment and redemption........... $15,803
=======
</TABLE>

Also, to reflect write-off of $368,000 ($239,000 tax effected) in
unamortized deferred loan costs associated with the Subordinated Note.

(3) To reflect the conversion of Series B Convertible Preferred Stock to
749,264 shares of common stock.

(4) These reflect the issuance of a $20,000,000 term loan net of related
debt issuance costs of $550,000 and the repayment of subordinated notes and
accrued interest of $17,328,000 and a payment of $500,000 in fees for amendment
of the Subordinated Notes.

(5) To record incremental depreciation and amortization of assets to be
recorded in the Acquisitions. Depreciation of acquired equipment is calculated
in accordance with Basic Energy's depreciation policies. Amortization of
goodwill is over 15 years, and amortization of covenants not to compete is
calculated over their three-year terms.

(6) This adjustment eliminates the revenues and direct operating expenses
of certain oil and gas properties currently held by Sundown Operating Inc.,
which are not being acquired by Basic Energy.

F1-6
<PAGE> 69

(7) To reflect net interest savings related to the repayment or amendment
of substantially all of the Company's outstanding indebtedness and the issuance
of a $20,000,000 term note as explained below (in thousands).

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1999 2000
------------ ------------
<S> <C> <C>
Reversal of historical interest expense for all entities.... $(6,440) $(1,652)
Interest at prime rate plus 1.25% (currently 10.75%) and
amortization (by the effective interest method) of debt
issuance costs of $550,000 for a newly issued $20,000,000
term note................................................. 2,165 477
Interest on amended Subordinated Notes at 12% plus
amortization of loan fees of $500,000..................... 1,078 270
Pro forma adjustment to reduce interest expense............. $(3,197) $ (905)
</TABLE>

(8) To adjust federal income taxes at the federal rate of 35%.

F1-7
<PAGE> 70

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders

Basic Energy Services, Inc.:

We have audited the accompanying balance sheets of Basic Energy Services,
Inc. (formerly Sierra Well Service, Inc.) as of December 31, 1999 and 1998, and
the related statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1999. These
financial statements are the responsibility of the Company's management.

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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Basic Energy
Services, Inc. as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.

KPMG LLP

Midland, Texas
March 11, 2000, except as to the

fourth paragraph of Note 1

which is as of March 23, 2000.

F2-1
<PAGE> 71

BASIC ENERGY SERVICES, INC.

BALANCE SHEETS

(in thousands, except share data)

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------- MARCH 31, MARCH 31,
1998 1999 2000 2000
-------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS

CURRENT ASSETS
Cash and cash equivalents.............................. $ 2,846 $ 1,062 $ 520 $ 520
Trade accounts receivable, net of allowance of $1,238,
$271 and $349, respectively.......................... 6,534 7,477 8,238 8,238
Accounts receivable-related party...................... 89 73 69 69
Inventories............................................ 158 144 118 118
Other current assets................................... 255 215 794 794
-------- -------- -------- -------
Total current assets............................ 9,882 8,971 9,739 9,739
-------- -------- -------- -------
PROPERTY AND EQUIPMENT, NET.............................. 35,634 31,186 31,155 31,155
-------- -------- -------- -------
OTHER ASSETS
Deferred loan costs, net of amortization of $1,318,
$2,198 and $2,407, respectively...................... 317 494 368 368
Goodwill, net of amortization of $16,660, $17,024 and
$17,116 respectively................................. 4,998 4,633 4,542 4,542
Other.................................................. 2,496 1,577 1,776 1,776
-------- -------- -------- -------
Total other assets.............................. 7,811 6,704 6,686 6,686
-------- -------- -------- -------
TOTAL ASSETS............................................. $ 53,327 $ 46,861 $ 47,580 $47,580
======== ======== ======== =======

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Current portion of long-term debt...................... $ 403 $ 1,164 $ 3,697 $ 3,697
Accounts payable....................................... 1,772 4,281 4,523 4,523
Accounts payable-related party......................... 40 49 19 19
Accrued expenses....................................... 1,384 1,698 1,745 1,745
Deferred income tax.................................... -- 104 -- --
-------- -------- -------- -------
Total current liabilities....................... 3,599 7,296 9,984 9,984
-------- -------- -------- -------
EXPECTED REDEMPTION OF SERIES A REDEEMABLE PREFERRED
STOCK.................................................. -- -- -- 5,464
LONG-TERM DEBT........................................... 54,664 50,371 49,645 49,645
DEFERRED INCOME TAX...................................... -- 2,224 1,762 1,762
COMMITMENTS & CONTINGENCIES.............................. -- -- -- --
STOCKHOLDERS' EQUITY
Series A Redeemable 10% Preferred Stock, $10,000 par,
1,000 shares authorized, 530.45 and 546 shares issued
and outstanding at December 31, 1999 and March 31,
2000, respectively (liquidation
value -- $10,000/share).............................. -- 5,305 5,464 --
Series B Convertible Preferred Stock, $1 par, 1,000
shares authorized, 1,000 issued (liquidation
value -- $1/share)................................... -- 1 1 --
Series C Convertible Preferred Stock, $1,000 par, 1
share authorized, one issued (liquidation
value -- $1,000/share)............................... -- 1 1 --
Common stock -- $.01 par; $1 stated value; 25,000,000
shares authorized; 1,748,284, 1,784,708, 1,852,348
and 2,601,612 shares issued and outstanding at
December 31, 1998 and 1999, March 31, 2000 and pro
forma March 31, 2000, respectively................... 18 18 19 26
Additional paid-in capital............................. 24,831 24,831 25,845 25,840
Deferred compensation.................................. -- -- (624) (624)
Accumulated deficit.................................... (29,785) (43,186) (44,517) (44,517)
-------- -------- -------- -------
Total stockholders' deficit..................... (4,936) (13,030) (13,811) (19,275)
-------- -------- -------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT.............. $ 53,327 $ 46,861 $ 47,580 $47,580
======== ======== ======== =======
</TABLE>

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

F2-2
<PAGE> 72

BASIC ENERGY SERVICES, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------ -----------------------
1997 1998 1999 1999 2000
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Well Servicing................. $ 20,920 $ 26,687 $ 24,453 $ 4,728 $ 8,475
Fluid Services................. 5,214 18,632 12,878 2,721 4,405
---------- ---------- ---------- ---------- ----------
26,134 45,319 37,331 7,449 12,880
EXPENSES
Well Servicing................. 16,534 21,640 20,164 3,910 6,312
Fluid Services................. 3,469 13,009 9,613 2,030 3,123
General and administration,
including management fees
and computer services from
related parties of $136,
$241, and $234,
respectively................ 2,785 5,471 5,229 1,134 2,050
Depreciation and
amortization................ 2,931 8,624 6,747 1,687 1,692
Impairment of long lived assets
(Note 4).................... -- 22,671 -- -- --
---------- ---------- ---------- ---------- ----------
25,719 71,415 41,753 8,761 13,177
---------- ---------- ---------- ---------- ----------
OPERATING INCOME (LOSS).......... 415 (26,096) (4,422) (1,312) (297)
---------- ---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest income................ 85 263 100 39 17
Interest expense............... (1,508) (7,166) (6,065) (1,854) (1,560)
Loss on sale of assets......... (30) (93) (301) 6 99
Other, net..................... 11 (974) 45 4 3
---------- ---------- ---------- ---------- ----------
(1,442) (7,970) (6,221) (1,805) (1,441)
---------- ---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAXES......... (1,027) (34,066) (10,643) (3,117) (1,738)
Deferred income tax (expense)
benefit..................... 230 5,770 (2,328) (4,771) 566
---------- ---------- ---------- ---------- ----------
NET LOSS......................... $ (797) $ (28,296) $ (12,971) $ (7,888) $ (1,172)
---------- ---------- ---------- ---------- ----------
Preferred stock dividend....... -- -- 430 -- 159
---------- ---------- ---------- ---------- ----------
NET LOSS TO COMMON STOCKHOLDERS'
INTEREST....................... $ (797) $ (28,296) $ (13,401) $ (7,888) $ (1,331)
========== ========== ========== ========== ==========
LOSS PER SHARE................... $ (0.72) $ (16.18) $ (4.51)
========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING.................... 1,100,400 1,748,400 1,748,400
========== ========== ==========
Unaudited pro forma loss per
common share................... $ (5.14) $ (0.46)
==========
Unaudited pro forma weighted
average number of shares....... 2,524,866 2,533,972
==========
</TABLE>

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

F2-3
<PAGE> 73

BASIC ENERGY SERVICES, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
REDEEMABLE CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------- --------------- --------------- ------------------ PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
------ ------ ------ ------ ------ ------ --------- ------ ---------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE -- JANUARY 1,
1997...................... -- -- -- -- -- -- 780,000 8 $ 5,145 $ (692)
Stock compensation
granted................. -- -- -- -- -- -- 8,000 -- -- --
Common stock issued....... -- -- -- -- -- -- 960,284 10 19,210 --
Issuance of common stock
warrants................ -- -- -- -- -- -- -- -- 476 --
Net loss.................. -- -- -- -- -- -- -- -- -- (797)
--- ----- ----- -- -- -- --------- -- ------- --------
BALANCE -- DECEMBER 31,
1997...................... -- -- -- -- -- -- 1,748,284 18 24,831 (1,489)
Net loss.................. -- -- -- -- -- -- -- -- -- (28,296)
--- ----- ----- -- -- -- --------- -- ------- --------
BALANCE -- DECEMBER 31,
1998...................... -- -- -- -- -- -- 1,748,284 18 24,831 (29,785)
Stock compensation
granted................. -- -- -- -- -- -- 36,424 0 0 --
Preferred stock issued.... 500 5,000 1,000 1 1 1 -- -- -- --
Preferred stock
dividend -- stock....... 30 305 -- -- -- -- -- -- -- (305)
Preferred stock
dividend -- cash........ -- -- -- -- -- -- -- -- -- (125)
Net loss.................. -- -- -- -- -- -- -- -- -- (12,971)
--- ----- ----- -- -- -- --------- -- ------- --------
BALANCE -- DECEMBER 31,
1999...................... 530 5,305 1,000 1 1 1 1,784,708 18 24,831 (43,186)
Stock compensation granted
(unaudited)............. -- -- -- -- -- -- 67,640 1 1,014 --
Preferred stock
dividend -- stock
(unaudited)............. 16 159 -- -- -- -- -- -- -- (159)
Net loss (unaudited)...... -- -- -- -- -- -- -- -- -- (1,172)
--- ----- ----- -- -- -- --------- -- ------- --------
BALANCE -- MARCH 31, 2000
(UNAUDITED)............... 546 5,464 1,000 1 1 1 1,852,348 19 25,845 (44,517)
=== ===== ===== == == == ========= == ======= ========
</TABLE>

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

F2-4
<PAGE> 74

BASIC ENERGY SERVICES, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.......................................... $ (797) $(28,296) $(12,971) $(7,888) $(1,172)
Depreciation...................................... 2,459 6,322 5,494 1,404 1,388
Amortization...................................... 472 2,302 1,253 283 304
Impairment of long lived assets................... -- 22,671 -- -- --
Bad debt expense.................................. . 475 442 125 74 65
Noncash interest expense.......................... 281 1,435 2,494 356 1,523
Write-off of deferred loan costs.................. -- 655 -- -- --
Loss (gain) on sale of assets..................... 30 93 301 (6) (99)
Deferred income tax expense (benefit)............. (230) (5,770) 2,328 4,771 (566)
Stock compensation................................ -- -- -- -- 390
Changes in operating assets and liabilities, net
of acquisitions --
Accounts receivable............................. (6,489) 1,011 (1,051) 1,249 (822)
Inventories..................................... 15 92 14 6 26
Income tax receivable........................... 15 -- -- -- --
Other current assets............................ 33 (152) 46 (460) (545)
Accounts payable................................ 2,586 (1,333) 2,518 (477) 212
Accrued expenses................................ 1,095 (468) 314 955 48
-------- -------- -------- ------- -------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................... (55) (996) 865 267 752
-------- -------- -------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment................ (6,585) (2,435) (2,287) (115) (819)
Proceeds from sale of property and equipment...... 86 309 1,210 46 117
Collections of notes receivable................... -- -- 3 -- 6
Proceeds from sale of other long-term assets...... -- 85 205 11 --
Payments for other long-term assets............... (247) (92) (101) -- (242)
Payments for businesses, net of cash acquired..... (56,076) (1,800) -- -- (125)
-------- -------- -------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES...... (62,822) (3,933) (970) (58) (1,063)
-------- -------- -------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under long-term debt................... 58,791 2,100 -- -- --
Payments of long-term debt........................ (7,121) (595) (497) (111) (147)
Dividends paid.................................... -- -- (125) -- --
Deferred loan costs............................... (2,037) (267) (1,057) (748) (84)
Proceeds from issuance of common stock............ 19,220 -- -- -- --
-------- -------- -------- ------- -------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES............................... 68,853 1,238 (1,679) (859) (231)
-------- -------- -------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS....................................... 5,976 (3,691) (1,784) (650) (542)
Cash and cash equivalents -- beginning of year.... 561 6,537 2,846 2,846 1,062
-------- -------- -------- ------- -------
CASH AND CASH EQUIVALENTS -- END OF YEAR............ $ 6,537 $ 2,846 $ 1,062 $ 2,196 $ 520
======== ======== ======== ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Interest paid..................................... $ 1,227 $ 5,732 $ 5,106 $ 1,498 $ 37
Income taxes received............................. -- -- -- -- --
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES --
Common stock warrants issued as debt discount..... $ 476 $ -- $ -- $ -- $ --
Capital leases issued for equipment............... 462 252 353 -- 641
Notes receivable-non cash......................... -- -- 83 69 84
Preferred stock dividend.......................... -- -- 305 -- 159
Transfer of debt for preferred stock.............. -- -- 5,002 -- --
Accrued interest capitalized into long-term
debt............................................ -- -- -- 1,614 --
</TABLE>

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

F2-5
<PAGE> 75

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS

(THE INFORMATION AND AMOUNTS FOR THE THREE MONTHS ENDED MARCH 31, 2000 ARE
UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization & Business -- Basic Energy Services, Inc. (the "Company"), a
Delaware corporation, was formed in 1992 as a subsidiary of Southwest Royalties,
Inc. ("SWR"). In June 1997, Southwest Royalties Holding, Inc. ("SRH") was formed
to serve as a holding company for SWR, the Company and other subsidiaries of
SWR. At that time, SWR's investment in the Company was transferred by dividend
to SRH and the Company became a subsidiary of SRH. Due to sales of the Company's
common stock to Southwest Partners II, L.P. and Southwest Partners III, L.P.
(limited partnerships for which SWR serves as general partner) in 1996 and 1997,
SRH's ownership interest in the Company was reduced to a point where the
Company's financial position and results of operations were no longer
consolidated with SRH, effective July 1, 1997.

The Company provides a range of well site services to oil and gas drilling
and producing companies through the Company's fleet of well servicing rigs and
fluid handling assets. The Company's operations are concentrated in the major
United States oil and gas producing regions of Texas, New Mexico, Oklahoma and
Louisiana.

The unaudited financial statements as of and for three month period ended
March 31, 2000 have been prepared on a basis consistent with the audited
financial statements as of and for the period ending December 31, 1999 and, in
the opinion of management, include all adjustments, consisting of normal
recurring accrual adjustments, which are necessary for a fair presentation of
the result for the interim period.

Common Stock Split and Change of Name

On May 23, 2000, the Company filed a restated certificate of incorporation
changing its name to Basic Energy Services, Inc. from Sierra Well Service Inc.
and increasing its authorized common shares to 25,000,000 and completed a
400-for-1 stock split. All share and per share amounts have been restated as if
the stock split had occurred at the beginning of the earliest period presented.

Estimates and Uncertainties -- The preparation of these financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures 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 these
estimates.

Cash and Cash Equivalents -- The Company considers all highly liquid
instruments purchased with a maturity of three months or less to be cash
equivalents. The Company maintains its excess cash in various financial
institutions, where deposits may exceed federally insured amounts at times.

Inventories -- Inventories mainly consist of pipe, are held for use in the
operations of the Company and are stated at the lower of cost or market, with
cost being determined on the first-in, first-out (FIFO) method.

Property and Equipment -- Property and equipment are stated at cost.
Expenditures for repairs and maintenance are charged to expense as incurred and
additions and improvements that significantly extend the lives of the assets are
capitalized. Upon sale or other retirement of depreciable property, the cost and
accumulated depreciation are removed from the related accounts and any gain or
loss is reflected in

F2-6
<PAGE> 76

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

operations. All assets are depreciated on the straight-line method and the
estimated useful lives of the assets are as follows:

<TABLE>
<S> <C>
Buildings and improvements.................................. 20-30 years
Well servicing rigs and equipment........................... 5-15 years
Fluid service equipment..................................... 5-10 years
Brine/fresh water stations.................................. 15 years
Enviro-Vat units and fluid service.......................... 10 years
Disposal facilities......................................... 10 years
Vehicles.................................................... 3-5 years
</TABLE>

The Company reviews property and equipment and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. An impairment loss
is indicated if the sum of the expected undiscounted future cash flows is less
than the carrying amount, including any related goodwill, of such assets.
Expected future cash flows and carrying values are aggregated at their lowest
identifiable level, which is on a rig-by-rig basis for the Company's well
service rigs and by local service area for the Company's truck fleets and water
stations. The Company recognizes an impairment loss for the difference between
the asset's, or group of assets, carrying value and estimated fair value, if the
carrying value exceeds the expected undiscounted future cash flows.

Deferred Debt Costs -- The Company capitalizes certain costs in connection
with obtaining its borrowings, such as lender's fees and related attorney's
fees. These costs are being amortized to interest expense on the straight-line
method over the term of the related debt. Amortization calculated using the
straight line method is not materially different from the amount calculated
using the effective interest method.

Goodwill -- The Company classifies as goodwill the cost in excess of fair
value of the net tangible assets acquired in purchase transactions. Goodwill is
being amortized on a straight-line basis over the estimated period benefited by
it of fifteen years. Management continually evaluates whether events or
circumstances have occurred that indicate the remaining useful life of goodwill
may warrant revision or the remaining balance of goodwill may not be
recoverable.

Income Taxes -- Deferred income taxes are recognized for the tax
consequences of temporary differences between financial statement carrying
amounts and the tax basis of existing assets and liabilities. The measurement of
current and deferred tax assets and liabilities is based on enacted tax law. The
effect on deferred tax assets and liabilities of a change in tax rate is
recognized in income in the period of change. A valuation allowance for deferred
tax assets is recognized when it is "more likely than not" that the benefit of
deferred tax assets will not be realized.

Concentrations of Credit Risk -- Financial instruments, which potentially
subject the Company to concentration risk, consist primarily of temporary cash
investments and trade receivables. The Company restricts investment of temporary
cash investments to financial institutions with high credit standing. The
Company's customer base consists primarily of multi-national and independent oil
and natural gas producers. The Company performs ongoing credit evaluations of
its customers but generally does not require collateral on its trade
receivables. Credit risk is considered by management to be limited due to the
large number of customers comprising the Company's customer base. The Company
maintains reserves for potential credit losses, and such losses have been within
management's expectations.

Loss Per Share -- The Company accounts for loss per share based upon
Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS
128). Under SFAS 128, basic earnings or loss per common share are determined by
dividing net earnings or loss applicable to common stock by the

F2-7
<PAGE> 77

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

weighted average number of common shares actually outstanding during the year.
Diluted earnings per common share is based on the increased number of shares
that would be outstanding assuming conversion of dilutive outstanding
convertible securities using the "as if converted" method. The share effect
related to outstanding common stock warrants is omitted for 1998 and 1997
because they are antidilutive to the periods presented. Such warrants are no
longer outstanding.

Recent Accounting Pronouncements -- In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards No.
133 "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133")
which establishes standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. It establishes conditions under which a derivative may be
designated as a hedge, and establishes standards for reporting changes in the
fair value of a derivative. FAS 133, as amended by FAS 137, is required to be
implemented for all fiscal quarters of all fiscal years beginning after June 15,
2000. Early adoption is permitted. The Company has not completed the evaluation
of the potential effects of implementing FAS 133.

Unaudited Pro Forma Net Income Per Share. The Company plans to redeem the
Series A Cumulative Preferred Stock with the proceeds of a proposed initial
public offering. The Company also intends to convert the Series B Convertible
Preferred Stock into 749,264 shares of common stock and cancel the Series C
Convertible Preferred Stock in connection with the initial public offering.
Unaudited pro forma net loss per share amounts include the effect of these
transactions and are calculated by adjusting the net loss for the year ended
December 31, 1999 and 3 months ended March 31, 2000 by $430,000 and $159,000,
respectively, for the effect of not paying preferred stock dividends. Unaudited
pro forma numbers of weighted average common shares include the effect of the
conversion of the Series B Preferred Stock into 749,264 common shares plus
weighted average common shares outstanding for the periods.

Unaudited Pro Forma Balance Sheet. The unaudited pro forma balance sheet as
of March 31, 2000 gives pro forma effect to the assumed redemption of the Series
A Redeemable Preferred Stock for $5,464,000, the conversion of Series B
Convertible Preferred Stock to 749,264 shares of common stock and the
cancellation of the Series C Convertible Preferred Stock as discussed in the
preceding paragraph, as though these transactions had occurred as of that date.

F2-8
<PAGE> 78

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

2. ACQUISITIONS

In 1997 and 1998, Basic Energy acquired for cash either substantially all
of the assets or all of the outstanding capital stock of each of the following
businesses, which were accounted for using the purchase method of accounting:

<TABLE>
<CAPTION>
TOTAL
CLOSING DATE CASH PAID
------------- --------------
(IN THOUSANDS)
<S> <C> <C>
East Texas Vac. Service, L.C. .......................... June 1997 $ 3,046
S&N Well Servicing, Ltd. ............................... July 1997 5,388
Lonnies Well Service Co. ............................... August 1997 714
Harrison Rig Service, Inc. ............................. August 1997 475
DKB Enterprises, Inc. .................................. October 1997 5,602
Diamond Rental, Inc. ................................... October 1997 3,574
Larry O'Connor, Inc. ................................... October 1997 3,608
Aries Well Service, Inc. ............................... October 1997 1,481
Trans-Texas Operating, Inc. ............................ October 1997 6,789
Smith Brothers Casing Pullers, Inc. .................... October 1997 1,293
Mansell Brine Sales, Inc. .............................. November 1997 6,297
Bobby Herricks Trucking, Inc. .......................... December 1997 12,327
Ackerly Service Company, Inc. and Enviro-Vat, Inc. ..... December 1997 5,482
-------
Total 1997......................................... $56,076
-------

Accurate Petroleum Services, Inc. ...................... April 1998 $ 1,800
</TABLE>

The Company sold 960,284 shares of common stock from February to December
1997 totaling $19,219,500 to Southwest Partners II, Southwest Partners III and
SWR and borrowed a total of $49,408,000 from Joint Energy Development
Investments Limited Partnership II during 1997 and 1998 in order to fund the
acquisitions and purchase additional well servicing equipment. The remainder of
the proceeds was used for working capital. The operations of each of the
aforementioned acquisitions are included in the Company's statement of
operations as of each respective closing date.

In 1998, the Company expensed previously deferred costs from foregone
acquisitions and costs associated with a proposed debt offering not consummated,
totaling approximately $990,000.

F2-9
<PAGE> 79

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following as of December 31 (in
thousands):

<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Land........................................................ $ 831 $ 236
Buildings and improvements.................................. 1,973 1,673
Well service units and equipment............................ 21,523 22,507
Water hauling equipment..................................... 7,049 7,052
Brine/fresh water stations.................................. 8,429 8,620
Enviro-Vat units and frac/test tanks........................ 3,211 3,211
Disposal facilities......................................... 5,348 5,348
Vehicles.................................................... 4,429 4,389
Other....................................................... 631 672
------- -------
53,424 53,708
Less accumulated depreciation............................... 17,790 22,522
------- -------
Property and equipment, net................................. $35,634 $31,186
======= =======
</TABLE>

The Company is obligated under various capital leases for certain vehicles
and equipment that expire at various dates during the next nine years. The gross
amount of property and equipment and related accumulated amortization recorded
under capital leases and included above consists of the following as of December
31 (in thousands):

<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
Vehicles................................... $ 592 $ 924
Water hauling equipment.................... 447 375
Other...................................... 41 44
------ ------
1,080 1,343
Less accumulated amortization.............. 493 594
------ ------
$ 587 $ 749
====== ======
</TABLE>

Amortization of assets held under capital leases of approximately $273,000
and $155,000 for the years ended December 31, 1998 and 1999, respectively, is
included with depreciation expense.

4. IMPAIRMENT

At December 31, 1998, the Company recorded an impairment loss on its well
servicing and fluid services business segments of approximately $1,392,000 and
$21,280,000, respectively, for a total impairment of approximately $22,672,000.
In determining if an impairment loss was indicated, management projected future
undiscounted cash flows through the estimated life of each asset, for each of
the Company's well service rigs and by local service area for the Company's
trucks and water stations, based on generally increasing utilization rates based
on management's expectations, hours, estimated future rates and expenses. Where
an impairment was indicated, the carrying value of the related goodwill was
first reduced. If additional impairment was indicated the related equipment was
reduced to estimated fair market value, based upon a recent appraisal.

F2-10
<PAGE> 80

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------- MARCH 31,
1998 1999 2000
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Credit Facility....................................... $54,331 $ -- $ --
New Credit Facility
Senior Notes........................................ -- 24,408 24,928
Subordinated Notes.................................. -- 26,535 27,328
Capital leases and equipment notes.................... 736 592 1,086
------- ------- -------
55,067 51,535 53,342
Less current portion, determined based on the terms of
the New Credit Facility (see discussion below)...... 403 1,164 3,697
------- ------- -------
$54,664 $50,371 $49,645
======= ======= =======
</TABLE>

On September 30, 1997, the Company signed a loan agreement (the "Credit
Facility") that provided up to $60,000,000 for acquisitions and refinancing
existing debt. The agreement required monthly interest payments with the
outstanding principal balance and accrued interest due on March 31, 1999. The
loan consisted of two tranches (Tranche A and Tranche B) totaling $30,000,000
each. As of December 31, 1998, Tranche A had an outstanding balance of
$30,000,000 and Tranche B had an outstanding balance of $24,410,000. The initial
interest rates for Tranche A and B were prime plus 1% and 3%, respectively.
Interest on Tranche B, if not retired in whole by October 1998, increased by 1%
at the end of each subsequent two-month period. The Credit Facility contained
various restrictive covenants which included restrictions on the incurrence of
additional indebtedness and limitations on the amount of capital lease
obligations. Certain covenants also placed restrictions on dividends, stock
redemptions, investments and sales of assets.

As part of the agreement, the Company issued common stock warrants to the
lender which were exercisable in whole or in part any time prior to October
2002. As of December 31, 1998, the lender was entitled to 182,800 warrants at
exercise prices ranging from $21.25 to $28.75 per share. These warrants had
estimated fair value of $476,400 at time of issuance and a carrying value of
$79,400 as of December 31, 1998. The fair value of the warrants were calculated
using the Black-Scholes option model assuming no expected volatility and a risk
free interest rate of 5%. On March 31, 1999 the outstanding warrants associated
with the Credit Facility were cancelled.

In October 1997, the Company repaid approximately $6,000,000 of short-term
debt, including accrued interest, with proceeds from the Credit Facility.

On March 31, 1999, the Company entered into three security purchase
agreements (collectively, the "New Credit Facility") with the same lender that
provided up to $54,410,000, the proceeds of which were used to retire amounts
outstanding under the Credit Facility. The Company has accounted for this
restructuring under FAS 15, "Accounting by Debtors and Creditors for Troubled
Debt Restructuring" because the maturity of the debt was extended from March 31,
1999 to June 2004 and the interest rate was maintained at a level below the rate
that the Company could have obtained from an alternate lender. In fact, it would
have been unlikely that the Company could have obtained alternative financing
from any source. In addition, the lender accepted preferred stock in exchange
for $5 million of the debt. The Company issued preferred stock with an estimated
fair value of $5 million to the lender on March 31, 1999, as partial settlement
of the outstanding balance of the Credit Facility. In accordance with FAS 15, no
gain or loss was recognized on the restructuring because there was not a
complete settlement of the

F2-11
<PAGE> 81

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

outstanding debt and the total of the future payments under the terms of the
restructured debt exceed the carrying value.

The New Credit Facility is comprised of a senior credit facility (the
"Senior Notes"), a senior subordinated credit facility (the "Subordinated
Notes") and three classes of preferred stock, as follows:

The Senior Notes have a principal balance of $24,408,000 with
quarterly interest payable at a rate per annum of 250 basis points above
the six month London Interbank Offered Rate beginning March 31, 1999. All
outstanding principal and accrued and unpaid interest is due and payable in
full on June 30, 2004. The principal is payable quarterly beginning
September 30, 2000, based on a seven year amortization of principal
beginning June 30, 2000 and a final balloon payment due on June 30, 2004
for the unpaid balance.

The Subordinated Notes have a principal balance of $25,000,000 with
quarterly interest payable at a rate of 10% per annum beginning March 31,
1999. The Company may defer interest payments due prior to September 30,
2001, at a rate of 12% per annum. All accrued and unpaid interest is due on
September 30, 2001. The Company chose to defer the interest payments due
September 30, 1999, December 31, 1999 and March 31, 2000. All principal and
accrued and unpaid interest is due and payable in full on June 30, 2004.

The Senior and Subordinated Notes contain covenants which restrict
dividends, investments, and the sale of assets. At December 31, 1999, the
Company was not in compliance with certain debt covenants of the Senior and
Subordinated Notes. The Company has obtained an amendment to the New Credit
Facility to cure those events of non-compliance. Additionally, the covenants
require the Company to maintain a fixed charge coverage ratio (as defined) of at
least 1.00:1 for each quarter beginning June 30, 2000.

The aggregate maturities of debt, including capital leases, for each of the
five years subsequent to December 31, 1999 and March 31, 2000, are as follows
(in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
----------------------
DECEMBER 31 MARCH 31
----------- --------
<S> <C> <C>
2000........................................................ $ 1,165 $ --
2001........................................................ 6,070 3,697
2002........................................................ 3,608 6,129
2003........................................................ 3,488 3,697
2004........................................................ 37,204 3,487
2005........................................................ -- 36,332
------- -------
$51,535 $53,342
======= =======
</TABLE>

500 shares of Series A Cumulative Preferred Stock ("Series A"), $10,000 per
share liquidation preference ($5,000,000) with a dividend payable quarterly at
10% per annum. The Company may choose to pay dividends in-kind at a rate of 12%
per annum. The Company paid dividends in-kind on the September 30, 1999,
December 31, 1999 and March 31, 2000 payment dates.

The Company may redeem all of the shares of Series A at any time, at a
redemption price of $10,000 per share, together with accrued and unpaid
dividends to the date of redemption; provided, however, that in accordance with
the Company's Senior Subordinated Credit Facility, the Company is not entitled
to redeem shares of Series A unless and until all outstanding principal and
accrued and unpaid interest under the Subordinated Note has been paid in full.

Series A ranks senior to all other classes and series of the stock in all
respects, including as to redemption and payment of dividends and distributions
(including upon liquidation or winding up).

F2-12
<PAGE> 82

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Series A may be redeemed by the Issuer at any time after the Subordinated Notes
have been paid in full for an amount equal to par plus all accrued and unpaid
dividends. Upon redemption, all conversion, voting, and other rights of Series A
shall terminate.

1,000 shares of Series B Convertible Preferred Stock ("Series B"), $1 per
share liquidation value ($1000), with dividends payable only if dividends are
paid on the Company's common stock. The number of shares of the common stock
into which Series B is convertible varies based upon the timing of the repayment
of Series A, but represents, at a minimum, 25% of the Company's outstanding
common stock. Series B may be converted, at the holders option, into the number
of shares of the Company's common stock necessary to equal the following
percentages of total, post-conversion common shares calculated on a fully
diluted basis:

Series B ranks senior to all other classes and series of the Company's
stock except Series A, in all respects, including as to redemption and payment
of dividends and distributions (including upon liquidation or winding up).

One share of Series C Convertible Preferred Stock ("Series C"), $1,000 per
share liquidation preference, with dividends payable only if dividends are paid
on the Company's common stock. The number of shares of the Company's common
stock into which Series C is convertible varies based upon the timing of the
redemption of Series A. Series C may be converted, at the option of the holder,
into the number of shares of common stock necessary to equal the following
percentages of total, post-conversion common shares calculated on a fully
diluted basis:

<TABLE>
<CAPTION>
CONVERSION AMOUNT AS
TIMING OF REPAYMENT A PERCENTAGE OF POST-
OF SERIES A ISSUE CONVERSION OUTSTANDING
ON OR BEFORE COMMON STOCK
- ------------------- ----------------------
<S> <C>
June 30, 2000............................................ 0%
June 30, 2001............................................ 10%
June 30, 2002............................................ 20%
June 30, 2003............................................ 30%
June 30, 2004............................................ 40%
After June 30, 2004...................................... 65%
</TABLE>

Series C ranks senior to all other classes and series of the Company's
stock except for Series A and Series B, in all respects, including as to
redemption and payment of dividends and distributions (including upon
liquidation or winding up).

F2-13
<PAGE> 83

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. INCOME TAXES

The provision (benefit) for income taxes consists of the following as of
December 31 (in thousands):

<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Deferred................................................ 1,204 (2,924) 5,392
Benefit of net operating loss carryforward.............. (1,434) (3,355) (2,555)
Change in valuation allowance........................... -- 509 (509)
------- ------- -------
$ (230) $(5,770) $ 2,328
======= ======= =======
</TABLE>

A reconciliation between the amount determined by applying the federal
statutory rate with the provision (benefit) for income taxes is as follows as of
December 31 (in thousands):

<TABLE>
<CAPTION>
1997 1998 1999
----- -------- -------
<S> <C> <C> <C>
Statutory federal income tax............................. $(350) $(11,582) $(3,619)
Amortization of non-deductible goodwill and property..... 74 5,195 227
Meals and entertainment.................................. 46 95 75
Change in valuation allowance............................ -- 509 (509)
Reduction in net operating loss carryforwards............ -- -- 6,101
Other.................................................... -- 13 53
----- -------- -------
$(230) $ (5,770) $ 2,328
===== ======== =======
</TABLE>

As a result of issuing preferred stock and convertible preferred stock to
its primary lender on March 31, 1999, the Company's net operating loss
carryforwards accumulated prior to that date were effectively reduced to zero
under Section 382 of the Internal Revenue Code. Deferred tax assets related to
operating loss carryforwards existing at December 31, 1999 arose from losses
occurring subsequent to March 31, 1999. The valuation allowance at December 31,
1998 was reduced because the net operating loss carryforwards to which it
related were lost as described above.

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are as follows as of
December 31 (in thousands):

<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Deferred tax assets:
Operating loss carryforwards.............................. $ 5,082 $ 2,555
Receivables............................................... 148 --
Other..................................................... 1 202
Valuation allowance....................................... (509) --
------- -------
Total deferred tax assets................................. 4,722 2,757
------- -------
Deferred tax liabilities:
Property and equipment.................................... (4,505) (4,794)
Real estate investments................................... (23) --
Goodwill.................................................. (157) (145)
Other intangibles......................................... (37) (42)
Receivables............................................... -- (104)
------- -------
Total deferred tax liabilities............................ (4,722) (5,085)
------- -------
Net deferred tax liability........................ $ -- $(2,328)
======= =======
</TABLE>

F2-14
<PAGE> 84

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax assets will not be realized. The valuation allowance
relates primarily to the uncertainty of the realizability of the Company's
carryforwards. The amount of the valuation allowance could be reduced if
estimates of future taxable income during the carryforward period are increased.

As of December 31, 1999, the Company had net operating loss carryforwards
for U.S. federal income tax purposes of approximately $7,514,107, which are
available to offset future regular taxable income, if any. The net operating
loss carryforwards expire in various periods through 2020. As described above,
this amount relates only to tax losses since March 31, 1999.

7. COMMITMENTS AND CONTINGENCIES

Environmental

The Company is subject to various federal, state and local environmental
laws and regulations which establish standards and requirements for protection
of the environment. The Company cannot predict the future impact of such
standards and requirements which are subject to change and can have retroactive
effectiveness. The Company continues to monitor the status of these laws and
regulations. Management does not believe that the disposition of any of these
items will result in a material adverse impact to the financial position,
liquidity, capital resources or future results of operations of the Company.

Currently, the Company has not been fined, cited or notified of any
environmental violations which would have a material adverse effect upon the
financial position, liquidity or capital resources of the Company. However,
management does recognize that by the very nature of its business, material
costs could be incurred in the near term to bring the Company into total
compliance. The amount of such future expenditures is not determinable due to
several factors including the unknown magnitude of possible contamination, the
unknown timing and extent of the corrective actions which may be required, the
determination of the Company's liability in proportion to other responsible
parties and the extent to which such expenditures are recoverable from insurance
or indemnification.

Litigation

From time to time, the Company is a party to litigation or other legal
proceedings that the Company considers to be a part of the ordinary course of
business. The Company is not currently involved in any legal proceedings that
could reasonably be expected to have a material adverse effect on the Company's
financial condition or results of operations.

Leases

The Company leases certain equipment under non-cancelable operating leases
which expire at various dates through December 2001. The term of the operating
leases generally run from 36 to 60 months with varying payment dates throughout
each month.

F2-15
<PAGE> 85

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

As of December 31, 1999, the future minimum lease payments under
non-cancelable operating leases are as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, LEASE PAYMENTS
------------ --------------
<S> <C>
2000........................................................ $291
2001........................................................ 176
2002........................................................ 142
2003........................................................ 142
2004........................................................ 118
----
Total....................................................... $869
====
</TABLE>

Rent expense approximated $962,000 for 1997, $979,000 for 1998, and
$942,000 for 1999. The Company rents various equipment for short-term periods in
order to assist day-to-day operations.

8. STOCK COMPENSATION

The Company granted an officer 36,424 common shares with nominal value, in
March of 1999. The value of these shares was determined to be nominal because of
the Company's financial condition and prospects at the time of issuance. The
Company was experiencing significant negative cash flow, all of its debt was
scheduled for repayment on March 31, 1999 and the Company had no source of funds
for the repayment, and there was no expectation that the Company would have the
ability to meet interest requirements. The Company granted two employees 4,000
shares of common stock each, effective January 1, 1997. Compensation expense
related to the 1997 issuances was determined at the date of the grant based on
the estimated fair value of the Company as determined by an independent
investment advisor.

9. RELATED PARTY TRANSACTIONS

The Company provided services and products for workover, maintenance and
plugging of existing oil and gas wells to a related party for $508,000,
$906,000, $1,010,000 and $276,000 in 1997, 1998, 1999 and for the three months
ended March 31, 2000, respectively. The Company has receivables from this
related party of $89,000, $73,000 and $69,000 as of December 31, 1998, December
31, 1999 and March 31, 2000, respectively.

The Company paid a related party management fees for accounting,
bookkeeping, tax preparation, banking and computer services in 1999. All
services, except for computer services, were terminated by the Company as of
December 31, 1999. Since January 1996, this related party has performed computer
services for the Company for $7,500 per month.

The Company leases three well service rigs from a related party under an
operating lease entered into in October 1999. The lease requires monthly
payments of approximately $11,000 and expires in October 2004. Rent expense
related to this lease approximated $24,000 for 1999 and for the three months
ended March 31, 2000.

A director of the Company is a partner in a law firm that provides legal
services to the Company. During 1998, 1999 and for the three months ended March
31, 2000, the Company paid approximately $112,000, $64,000 and $66,000,
respectively in fees for legal services performed.

10. PROFIT SHARING PLAN

The Company has a contributory retirement plan that covers substantially
all employees. Employees may contribute up to 15% of their base salary with the
maximum amount determined by law. Employee

F2-16
<PAGE> 86

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

contributions are fully vested at all times and discretionary employer
contributions are fully vested upon the first to occur of retirement and five
years of service. Employer contributions to the 401(k) plan approximated $13,000
for 1997, $18,000 for 1998 and $56,000 for 1999.

11. MAJOR CUSTOMERS

No customers accounted for over 10% sales in 1997, 1998 or 1999 or for the
three months ended March 31, 2000. The Company performs ongoing evaluations of
its customers' financial condition and generally requires no collateral to
secure outstanding receivables.

12. BUSINESS SEGMENT INFORMATION

Information about the Company's operations by business segment is as
follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------- -------------------
1997 1998 1999 1999 2000
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Well servicing................... $20,920 $ 26,687 $ 24,453 $ 4,728 $ 8,475
Fluid services................... 5,214 18,632 12,878 2,721 4,405
------- -------- -------- ------- -------
$26,134 $ 45,319 $ 37,331 $ 7,449 $12,880
======= ======== ======== ======= =======
INCOME (LOSS) BEFORE INCOME TAXES:
Well servicing................... $ 4,388 $ 5,741 $ 4,553 $ 818 $ 2,163
Fluid services................... 1,744 5,943 3,382 691 1,282
Interest expense................. (1,508) (7,166) (6,065) (1,854) (1,560)
General corporate................ (5,651) (38,584) (12,513) (2,772) 3,623
------- -------- -------- ------- -------
$(1,027) $(34,066) $(10,643) $(3,117) $(1,738)
======= ======== ======== ======= =======
</TABLE>

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
IDENTIFIABLE ASSETS:
Well servicing........................................ $28,613 $25,531 $23,855
Fluid services........................................ 46,287 20,888 18,893
General corporate..................................... 12,219 6,908 4,113
------- ------- -------
$87,119 $53,327 $46,861
======= ======= =======
CAPITAL EXPENDITURES:
Well servicing........................................ $ 5,883 $ 1,747 $ 1,715
Fluid services........................................ 338 536 469
General corporate..................................... 364 152 103
------- ------- -------
$ 6,585 $ 2,435 $ 2,287
======= ======= =======
DEPRECIATION:
Well servicing........................................ $ 1,941 $ 3,849 $ 3,829
Fluid services........................................ 907 4,593 2,721
General corporate..................................... 83 182 197
------- ------- -------
$ 2,931 $ 8,624 $ 6,747
======= ======= =======
</TABLE>

The Company's well servicing business line offers a broad range of services
including well maintenance, workover of existing wells, new well completions and
plug and abandonment services. The Company's fluid services business line
complements the well service operations by providing liquids handling, water
supply and disposal services.

F2-17
<PAGE> 87

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

13. SUBSEQUENT EVENTS

The Company entered into definitive agreements to acquire five businesses
and the stock purchase of a sixth corporation with four inactive rigs during the
last quarter of 1999 and the first quarter of 2000. Funding of each of these
acquisitions is contingent upon the consummation of the Company's initial public
offering. The following described acquisitions were not completed as of December
31, 1999 and are not included in the Company's results of operations for the
twelve months ended December 31, 1999. Other than Trinity Services, which is an
asset purchase rather than a stock purchase, the cash portion of each
acquisition will be adjusted to reflect the net financial assets of the acquired
company as of the acquisition date. Net financial assets is defined as net
working capital minus long-term debt, including leases.

TAT (Turn Around Trucking), Inc.

The Company has entered into a definitive agreement for the acquisition of
TAT (Turn Around Trucking), Inc. ("TAT") for cash and a note with an total
estimated value of approximately $6.5 million. The note will be converted within
45 days after the completion of the offering into shares of the Company's common
stock valued at the initial public offering price; the note accrues interest at
a floating rate equal to the prime rate. TAT operates 32 fluid service trucks, 2
support trucks, 38 fluid service tanks, 2 salt water disposal wells and related
equipment in south Texas.

Sundown Operating Company, Inc.

The Company has entered into a definitive agreement for the acquisition of
Sundown Operating Company, Inc. ("Sundown") for cash and a note with an
estimated value of approximately $5.2 million. The note will be convertible, at
the holder's option, into shares of the Company's common stock valued at the
initial public offering price; the note matures on the one year anniversary of
the closing of the proposed initial public offering and accrues interest at a
floating rate equal to the prime rate. Sundown operates 26 well servicing rigs
and related equipment in the northern Permian Basin.

Eunice Well Service Company

The Company has entered into a definitive agreement for the acquisition of
Eunice Well Service Company ("Eunice") for cash and a note with an estimated
value of approximately $2.1 million. The note will be convertible, at the
holder's option, into shares of the Company's common stock valued at the initial
public offering price; the note matures on the one year anniversary of the
closing of this offering and accrues interest at a floating rate equal to the
prime rate. Eunice operates 10 well servicing rigs and related equipment in the
western Permian Basin.

Gold Star Service Company, Inc.

The Company has entered into a definitive agreement for the acquisition of
Gold Star Service Company, Inc. ("Gold Star") for cash and a note with an
estimated value of approximately $1.85 million. The note will be converted into
shares of our common stock valued at the initial public offering price within 45
days after the completion of the proposed initial public offering; the note
accrues interest at a floating rate equal to the prime rate. Gold Star operates
19 fluid service trucks, 4 support trucks, 1 salt water disposal well, 2 fresh
and brine water stations and related equipment in the western Permian Basin.

Trinity Services

The Company has entered into a definitive agreement for the acquisition of
Trinity Services ("Trinity") for cash, a note and warrants with an estimated
value of approximately $1.94 million. The warrants will be exercisable, at the
holder's option, into shares of the Company's common stock valued at

F2-18
<PAGE> 88

BASIC ENERGY SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

the initial public offering price. The holder has the option to offset any
indebtedness under the note against the exercise price of the warrant. The note
matures 15 months after the closing of this offering and accrues interest at a
floating rate equal to the prime rate. The warrant expires on the later of (1)
18 months after the closing of the proposed offering or (2) one year after the
note is repaid in full. Trinity operates 10 well servicing rigs and related
equipment in south Texas.

Harrison Well Service, Inc.

The Company has entered into a definitive agreement for the acquisition of
Harrison Well Service, Inc. ("Harrison") for cash and a note with an estimated
value of approximately $1.225 million. The note will be converted into shares of
the Company's common stock at the initial public offering price within 45 days
after the completion of the proposed offering; the note accrues interest at a
floating rate equal to the prime rate. Harrison operates 4 well servicing rigs
and related equipment in the northern Permian Basin.

F2-19
<PAGE> 89

APPENDIX A

GLOSSARY OF TERMS

Blowout preventer: A series of valves installed on the wellhead to prevent
the escape of pressure either in the annular space between the casing and tubing
or drill pipe or in open hole during drilling or completion operations.

Brine water: Water that is heavily saturated with salt used in various well
completion and workover activities.

Casing: Steel pipe placed in an oil or gas well as drilling progresses to
prevent the wall of the hole from caving in, to prevent seepage of fluids, and
to provide a means of extracting petroleum if the well is productive.

Drilling mud: The fluid pumped down the drilling string and up the wellbore
to bring debris from the drilling and workover operators to the surface.
Drilling muds also cool and lubricate the bit, protect against blowouts by
holding back underground pressures and, in new well drilling, deposit a mud cake
on the wall of the borehole to minimize loss of fluid to the formation.

Flow back: The re-entry of fluid from the formation into the wellbore
previously pumped into the formation during a frac job or other procedure to
stimulate production. This fluid is allowed to flow out of the wellbore to the
surface where it is then transported offsite to a disposal well.

Frac job or fracturing operations: A procedure to stimulate production of
oil or gas from a well by pumping fluids from the surface under high pressure
into the well bore to induce fractures in the formation.

Frac tank: A steel tank used to store fluids at the well location to
facilitate completion and workover operations. The largest demand is related to
the storage of fluid used in fracturing operations.

Hot oil truck: A truck mounted pump, tank and heating element used to melt
paraffin accumulated in the well bore by pumping heated oil or water through the
well.

Kill truck: A truck with a high pressure pump used to circulate fluid into
the well to overcome formation pressure and stop the flow of oil or gas so that
other well procedures can be performed on the well; also used to pressure test
tubing, flow lines etc.

Plugging and abandonment activities: Activities to remove production
equipment and seal off a well at the end of a well's economic life.

Power swivel: An independently powered rotary tool that is hung from the
traveling block to suspend and permit free rotation of the drill string for
drilling through cement, plugs and other obstructions in the well bore and for
deepening existing well bores. It also provides a connection for the rotary hose
and a passageway for the flow of drilling/circulating fluid into the drill.

Well completion: The activities and procedures necessary to prepare a well
for the production of oil and gas after the well has been drilled to its
targeted depth. Well completions establish a flow path for hydrocarbons between
the reservoir and the surface.

Well servicing: The maintenance work performed on an oil or gas well to
improve or maintain the production from a formation already producing. It
usually involves repairs to the downhole pump, rods, tubing, and so forth or
removal of sand, paraffin or other debris which is preventing or restricting
production of oil or gas.

Well workover: Refers to a broad category of procedures preformed on an
existing well to correct a major downhole problem, such as collapsed casing, or
to establish production from a formation not previously produced, including
deepening the well from its originally completed depth.

A-1
<PAGE> 90
[INSIDE OF BACK COVER]

Sierra's Complementary Services on Location in West Texas
[PHOTO]

[PHOTO] Recompletion Project in East Texas

Swab Rig in Oklahoma [PHOTO]
<PAGE> 91

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

Until , 2000 all dealers effecting transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the obligations of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotment or subscriptions.

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

[BASIC ENERGY SERVICES, INC. LOGO]

PRUDENTIAL SECURITIES

JOHNSON RICE & COMPANY L.L.C.

SIMMONS & COMPANY
INTERNATIONAL

- --------------------------------------------------------------------------------
<PAGE> 92

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

Set forth below are the expenses (other than underwriting discounts and
commissions) expected to be incurred in connection with the issuance and
distribution of the securities registered hereby. With the exception of the
Securities and Exchange Commission registration fee, the NASD filing fee and the
Nasdaq filing fee, the amounts set forth below are estimates:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 15,939
NASD filing fee............................................. 6,537
Nasdaq listing fee.......................................... 48,750
Printing and engraving expenses............................. 400,000
Legal fees and expenses..................................... 200,000
Accounting fees and expenses................................ 150,000
Transfer agent and registrar fees........................... 3,500
Miscellaneous............................................... 175,274
----------
TOTAL............................................. $1,000,000
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law ("DGCL") provides that
a corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 145 further
provides that a corporation similarly may indemnify any such person serving in
any such capacity who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or such other
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper. Basic Energy's certificate of incorporation and bylaws
provide that indemnification shall be to the fullest extent permitted by the
DGCL for all current or former directors or officers of Basic Energy. As
permitted by the DGCL, the certificate of incorporation provides that directors
of Basic Energy shall have no personal liability to Basic Energy or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except (1) for any breach of the director's duty of loyalty to Basic Energy or
its stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of II-1 law, (3) under Section 174
of the DGCL or (4) for any transaction from which a director derived an improper
personal benefit.

II-1
<PAGE> 93

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The following information relates to our securities issued or sold within
the past three years which were not registered under the Securities Act of 1933
(giving effect to a 400-for-1 stock split in 2000):

(i) In January 1997, we issued 4,450 shares of common stock to each
Joey D. Fields and Dub W. Harrison as a bonus for services rendered as
employees;

(ii) In February 1997, we issued 88,555 shares of common stock to
Southwest Royalties, Inc. for a total purchase price of $500,000;

(iii) In July and August 1997, we issued an aggregate of 87,665 shares
of common stock to Southwest Partners II, L.P. for a total purchase price
of $1,672,000;

(iv) In July, August, September and December 1997, we issued an
aggregate of 892,225 shares of common stock to Southwest Partners III,
L.P., for a total purchase price of $17,048,000;

(v) In September 1997, we issued warrants (the "Warrants") to Joint
Energy Development Investments Limited Partnership pursuant to a loan
agreement as partial consideration for the loan, which Warrants were
cancelled in March 1999; and

(vi) In March 1999, we issued 500 shares of Series A Preferred Stock,
1,000 shares of Series B Preferred Stock and 1 share of Series C Preferred
Stock to Joint Energy Development Investments II Limited Partnership in
exchange for the cancellation of the Warrants.

Simultaneously with the completion of this offering, we will issue notes
and warrants convertible or exercisable into an aggregate of 278,334 shares of
common stock (based on a estimated public offering price of $15.00 per share),
valued at the initial public offering price, in connection with the acquisition
of five well services businesses and the stock of one other corporation with
four inactive rigs.

We also may, at our discretion, issue and sell up to 500 shares of Series D
Cumulative Preferred Stock at a purchase price of $10,000 per share to Enron
North America Corp. or its affiliates on or about the time of the completion of
this offering.

Each of these transactions was effected without registration of the
relevant security under the Securities Act in reliance upon the exemption
provided by Section 4(2) of the Securities Act for transactions not involving a
public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

a. Exhibits:

<TABLE>
<C> <S>
1.1** -- Form of Underwriting Agreement
3.1* -- Amended and Restated Certificate of Incorporation
3.2* -- Restated Bylaws
3.3+ -- Certificate of Designations of Series A Cumulative
Preferred Stock
3.4+ -- Certificate of Designations of Series B Convertible
Preferred Stock
3.5+ -- Certificate of Designations of Series C Convertible
Preferred Stock
3.6** -- Form of Certificate of Designations for Series One Junior
Participating Preferred Stock
3.7** -- Form of Certificate of Designations for Series D
Cumulative Preferred Stock
4.1** -- Form of Stock Certificate representing one share of
common stock
4.2** -- Form of Stockholder Rights Agreement dated as of May ,
2000 between the Registrant and American Stock Transfer &
Trust Company
4.3** -- Form of Rights Certificate (filed as Exhibit B to Exhibit
4.2)
5.1** -- Opinion of Andrews & Kurth L.L.P.
10.1* -- Form of Indemnification Agreement
</TABLE>

II-2
<PAGE> 94

<TABLE>
<S> <C>
10.2+ -- 2000 Stock Option Plan
10.3+ -- Employment Agreement dated as of March 16, 1999 with Kenneth V. Huseman
10.4+ -- First Amendment to Employment Agreement dated as of March 21, 1999 with Kenneth V.
Huseman
10.5** -- Employment Agreement with Dub W. Harrison
10.6** -- Employment Agreement with Charles W. Swift
10.7** -- Employment Agreement with Ronald T. McClung
10.8+ -- Securities Purchase Agreement dated as of March 31, 1999 with JEDI II
10.9+ -- Registration Rights Agreement dated as of March 31, 1999 with JEDI II
10.10+ -- Stockholders' Agreement dated as of March 31, 1999 with JEDI II and other stockholders
named therein
10.11+ -- Stockholders' Agreement dated as of March 21, 2000 with JEDI II and other stockholders
named therein
10.12+ -- Subordinated Loan Agreement dated as of March 31, 1999 with JEDI II
10.13+ -- $25,000,000 Subordinated Note dated as of March 31, 1999 to JEDI II
10.14+ -- Senior Loan Agreement dated as of March 31, 1999 with JEDI II as Senior Agent and the
Senior Lender
10.15+ -- $24,408,000 Senior Note dated as of March 31, 1999 to JEDI II
10.16** -- Subscription Agreement dated as of May , 2000 between Basic Energy and Enron North
America Corp.
10.17+ -- Stock Purchase Agreement dated as of March 1, 2000, as amended, with Turn Around
Trucking and other sellers named therein
10.18+ -- Asset Purchase Agreement dated as of February 10, 2000 with Trinity
10.19+ -- Acquisition Agreement dated as of March 14, 2000, as amended, with Gold Star and other
sellers named therein
10.20+ -- Stock Purchase Agreement dated as of February 29, 2000, as amended, with Eunice and the
other sellers named therein
10.21+ -- Stock Purchase Agreement dated as of December 29, 1999, as amended, with Harrison and
the other sellers named therein
10.22+ -- Stock Purchase Agreement dated as of February 8, 2000, as amended, with Sundown and the
other sellers named therein
10.23+ -- First Amendment to Loan Agreement dated as of March 31, 2000
10.24** -- Amended and Restated Subordinated Loan Agreement dated as of May , 2000, with JEDI II
10.25** -- Financing Agreement with CIT dated as of May , 2000
21.1+ -- Subsidiaries of Basic Energy
23.1* -- Consent of KPMG LLP
23.4** -- Consent of Andrews & Kurth L.L.P. (Contained in Exhibit 5.1)
24.1+ -- Power of Attorney (included on signature page)
27.1+ -- Financial Data Schedule
</TABLE>

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

+ Previously filed

* Filed herewith

** To be filed by amendment

b. Financial Statement Schedules

II-3
<PAGE> 95

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes:

(a) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions described
in Item 14, 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 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

(b) To provide to the underwriter(s) at the closing specified in the
underwriting agreements, certificates in such denominations and registered
in such names as required by the underwriter(s) to permit prompt delivery
to each purchaser.

(c) For purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the 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.

(d) For the purpose of determining any liability under the Securities
Act of 1933, 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> 96

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston, in
the State of Texas, on May 22, 2000.

BASIC ENERGY SERVICES, INC.

By: /s/ RONALD T. MCCLUNG
----------------------------------
Name: Ronald T. McClung
Title: Chief Financial Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED BELOW.

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

* Chairman and Director May 22, 2000
- -----------------------------------------------------
H.H. Wommack, III

/s/ KENNETH V. HUSEMAN President, Chief Executive May 22, 2000
- ----------------------------------------------------- Officer and Vice Chairman
Kenneth V. Huseman

/s/ RONALD T. MCCLUNG Chief Financial Officer May 22, 2000
- ----------------------------------------------------- (Principal Accounting Officer)
Ronald T. McClung

* Director May 22, 2000
- -----------------------------------------------------
William M. Kerr, Jr.

/s/ PAUL L. MORRIS Director May 22, 2000
- -----------------------------------------------------
Paul L. Morris

* Director May 22, 2000
- -----------------------------------------------------
William J. Myers

* Director May 22, 2000
- -----------------------------------------------------
Steve Person

* Director May 22, 2000
- -----------------------------------------------------
Clifford Strozier

*By: /s/ RONALD T. MCCLUNG
------------------------------------------------
Ronald T. McClung
Attorney-in-Fact
</TABLE>

II-5
<PAGE> 97

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
1.1** -- Form of Underwriting Agreement
3.1* -- Amended and Restated Certificate of Incorporation
3.2* -- Restated Bylaws
3.3+ -- Certificate of Designations of Series A Cumulative
Preferred Stock
3.4+ -- Certificate of Designations of Series B Convertible
Preferred Stock
3.5+ -- Certificate of Designations of Series C Convertible
Preferred Stock
3.6** -- Form of Certificate of Designations for Series One Junior
Participating Preferred Stock
3.7** -- Form of Certificate of Designations for Series D
Cumulative Preferred Stock
4.1** -- Form of Stock Certificate representing one share of
common stock
4.2** -- Form of Stockholder Rights Agreement dated as of May ,
2000 between the Registrant and American Stock Transfer &
Trust Company
4.3** -- Form of Rights Certificate (filed as Exhibit B to Exhibit
4.2)
5.1** -- Opinion of Andrews & Kurth L.L.P.
10.1* -- Form of Indemnification Agreement
10.2+ -- 2000 Stock Option Plan
10.3+ -- Employment Agreement dated as of March 16, 1999 with
Kenneth V. Huseman
10.4+ -- First Amendment to Employment Agreement dated as of March
21, 1999 with Kenneth V. Huseman
10.5** -- Employment Agreement with Dub W. Harrison
10.6** -- Employment Agreement with Charles W. Swift
10.7** -- Employment Agreement with Ronald T. McClung
10.8+ -- Securities Purchase Agreement dated as of March 31, 1999
with JEDI II
10.9+ -- Registration Rights Agreement dated as of March 31, 1999
with JEDI II
10.10+ -- Stockholders' Agreement dated as of March 31, 1999 with
JEDI II and other stockholders named therein
10.11+ -- Stockholders' Agreement dated as of March 21, 2000 with
JEDI II and other stockholders named therein
10.12+ -- Subordinated Loan Agreement dated as of March 31, 1999
with JEDI II
10.13+ -- $25,000,000 Subordinated Note dated as of March 31, 1999
to JEDI II
10.14+ -- Senior Loan Agreement dated as of March 31, 1999 with
JEDI II as Senior Agent and the Senior Lender
10.15+ -- $24,408,000 Senior Note dated as of March 31, 1999 to
JEDI II
10.16** -- Subscription Agreement dated as of May , 2000 between
Basic Energy and Enron North America Corp.
10.17+ -- Stock Purchase Agreement dated as of March 1, 2000, as
amended, with Turn Around Trucking and other sellers
named therein
10.18+ -- Asset Purchase Agreement dated as of February 10, 2000
with Trinity
10.19+ -- Acquisition Agreement dated as of March 14, 2000, as
amended, with Gold Star and other sellers named therein
10.20+ -- Stock Purchase Agreement dated as of February 29, 2000,
as amended, with Eunice and the other sellers named
therein
</TABLE>

<PAGE> 98

<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
10.21+ -- Stock Purchase Agreement dated as of December 29, 1999,
as amended, with Harrison and the other sellers named
therein
10.22+ -- Stock Purchase Agreement dated as of February 8, 2000, as
amended, with Sundown and the other sellers named therein
10.23+ -- First Amendment to Loan Agreement dated as of March 31,
2000
10.24** -- Amended and Restated Subordinated Loan Agreement dated as
of May , 2000, with JEDI II
10.25** -- Financing Agreement with CIT dated as of May , 2000
21.1+ -- Subsidiaries of Basic Energy
23.1* -- Consent of KPMG LLP
23.4** -- Consent of Andrews & Kurth L.L.P. (Contained in Exhibit
5.1)
24.1+ -- Power of Attorney (included on signature page)
27.1+ -- Financial Data Schedule
</TABLE>

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

+ Previously filed

* Filed herewith

** To be filed by amendment

<PAGE> 1
EXHIBIT 3.1

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SIERRA WELL SERVICE, INC.

(RENAMED HEREIN AS BASIC ENERGY SERVICES, INC.)

Sierra Well Service, Inc. (the "Corporation"), a corporation organized
and existing under and by virtue of the General Corporation Law of the State of
Delaware ("DGCL"), hereby certifies as follows pursuant to Sections 242 and 245
of the DGCL:

1. The original Certificate of Incorporation of the Corporation was
filed under the name "Sierra Well Service, Inc." in the Office of the Secretary
of State of the State of Delaware (the "Secretary of State") on August 26, 1992.

2. This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with Sections 242 and 245 of the DGCL. The Board of
Directors duly adopted resolutions setting forth and declaring advisable this
Amended and Restated Certificate of Incorporation, and in lieu of a meeting of
the stockholders, written consent to this Amended and Restated Certificate of
Incorporation was given by the holders of a majority of the outstanding stock of
the Corporation in accordance with Section 228 of the DGCL.

3. The Certificate of Incorporation of the Corporation is hereby
amended and restated to read in its entirety as follows:

FIRST: The name of the corporation is:

BASIC ENERGY SERVICES, INC.

SECOND: The address of the Corporation's registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County
of New Castle, Delaware 19801. The name of the registered agent of the
corporation at such address is The Corporation Trust Company.

THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.

FOURTH: The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 25,000,000, of which
5,000,000 shares shall be Preferred Stock, and 20,000,000 shares shall be Common
Stock par value $.01 per share. All designations of Series of Preferred Stock
pursuant to the Certificate of Designations of Series A Cumulative Preferred
Stock, the Certificate of Designations of Series B Convertible Preferred

<PAGE> 2

Stock and the Certificate of Designations of Series C Convertible Preferred
Stock shall continue to be integrated into this Amended and Restated Certificate
of Incorporation until eliminated by the Corporation's Board of Directors in
accordance with Section 151(g) of the DGCL. As permitted under Section 242(a)(3)
of the DGCL, the par value of shares of Common Stock no par value outstanding on
the effective date of this amended Certificate of Incorporation is hereby
changed to par value $.01 per share.

A. Preferred Stock. (1) Preferred Stock may be issued from time to time
in one or more series and in such amounts as may be determined by the
Board of Directors. The voting powers, designations, preferences and
relative, participating, optional or other special rights, if any, and
the qualifications, limitations or restrictions thereof, if any, of the
Preferred Stock of each series shall be such as are fixed by the Board
of Directors, authority so to do being hereby expressly granted, and as
are stated and expressed in a resolution or resolutions adopted by the
Board of Directors providing for the issue of such series of Preferred
Stock (herein called the "Directors' Resolution"). Such Directors'
Resolution may (i) limit the number of shares of such series that may
be issued, (ii) provide for a sinking fund for the purchase or
redemption of shares of such series and specify the terms and
conditions governing the operations of any such fund, (iii) grant
voting rights to the holders of shares of such series, (iv) impose
conditions or restrictions upon the creation of indebtedness of the
Corporation or upon the issuance of additional Preferred Stock or other
capital stock ranking on a parity therewith, or prior thereto, with
respect to dividends or distribution of assets upon liquidation, (v)
impose conditions or restrictions upon the payment of dividends upon,
or the making of other distributions to, or the acquisition of, shares
ranking junior to the Preferred Stock or to any series thereof with
respect to dividends or distributions of assets upon liquidation, (vi)
state the time or times, the price or prices or the rate or rates of
exchange and other terms, conditions and adjustments upon which shares
of any such series may be made convertible into, or exchangeable for,
at the option of the holder or the Corporation or upon the occurrence
of a specified event, shares of any other class or classes or of any
other series of Preferred Stock or any other class or classes of stock
or other securities of the Corporation, and (vii) grant such other
special rights and impose such qualifications, limitations or
restrictions thereon as shall be fixed by the Board of Directors, to
the extent not inconsistent with this Article FOURTH and to the full
extent now or hereafter permitted by the laws of the State of Delaware.

(2) Except as expressly provided by law, or except as may be provided
in any Directors' Resolution, the Preferred Stock shall have no right
or power to vote on any question or in any proceeding or to be
represented at, or to receive notice of, any meeting of stockholders of
the Corporation.

(3) Preferred Stock that is redeemed, purchased or retired by the
Corporation shall assume the status of authorized but unissued
Preferred Stock and may thereafter, subject

-2-
<PAGE> 3

to the provisions of any Directors' Resolution providing for the issue
of any particular series of Preferred Stock, be reissued in the same
manner as authorized but unissued Preferred Stock.

B. Common Stock. All shares of the Common Stock of the Corporation
shall be identical and except as otherwise required by law or as
otherwise provided in the Directors' Resolution or Resolutions, if any,
adopted by the Board of Directors with respect to any series of
Preferred Stock, the holders of the Common Stock shall exclusively
possess all voting power, and each share of Common Stock shall have one
vote.

FIFTH: The business and affairs of the Corporation shall be managed and
controlled by its Board of Directors. The number of directors constituting the
Board of Directors shall be fixed by the Board of Directors, but shall not be
less than three or more than 15. The directors shall be divided into three
classes, designated Class I, Class II and Class III. The initial term for
directors in Class I shall expire at the annual meeting of stockholders to be
held in 2001; the initial term for directors in Class II shall expire at the
annual meeting of stockholders to be held in 2002; and the initial term for
directors in Class III shall expire at the annual meeting of stockholders to be
held in 2003.

At the expiration of the initial term of each class of directors, and
of each succeeding term of each class, each class of directors shall be elected
to serve until the annual meeting of stockholders held three years from such
expiration and until their successors are elected and qualified or until their
earlier death, resignation, removal or retirement. Any increase or decrease in
the number of directors constituting the Board shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly as
possible to one-third the whole number of directors as so adjusted. Any director
elected or appointed to fill a vacancy shall hold office for the remaining term
of the class to which such directorship is assigned. No decrease in the number
of directors constituting the Corporation's Board of Directors shall shorten the
term of any incumbent director. Any vacancy in the Board of Directors, whether
arising through death, resignation or removal of a director, or through an
increase in the number of directors of any class, shall be filled by the
majority vote of the remaining directors. The Bylaws may contain any provision
regarding classification of the Corporation's directors not inconsistent with
the terms hereof.

A director of the Corporation may be removed only for cause and only
upon the affirmative vote of the holders of a majority of the outstanding
capital stock of the Corporation entitled to vote at an election of directors,
subject to further restrictions on removal, not inconsistent with this Article
FIFTH, as may be contained in the Bylaws.

Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of

-3-
<PAGE> 4

office, filling of vacancies and other features of such directorships shall be
governed by the terms of this Certificate of Incorporation applicable thereto,
and such directors so elected shall not be divided into classes pursuant to this
Article FIFTH unless expressly provided by such terms.

SIXTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:

A. The Board of Directors is authorized to alter, amend or repeal the
Bylaws or adopt new Bylaws of the Corporation. The stockholders shall
not repeal or change the Bylaws of the Corporation unless such repeal
or change is approved by the affirmative vote of the holders of not
less than 80% of the total voting power of all shares of stock of the
Corporation entitled to vote in the election of directors, considered
for the purposes of this paragraph A as a single class.

B. Election of directors need not be by written ballot unless the
Bylaws so provide.

C. In addition to the powers herein or by statute expressly conferred
upon the Corporation's directors, the Corporation's directors are
hereby empowered to exercise all such powers and do all such acts and
things as may be exercised or done by the Corporation, subject,
nevertheless, to the provisions of the statutes of Delaware, this
Certificate of Incorporation, and any Bylaws adopted by the
stockholders; provided, however, that no Bylaws hereafter adopted shall
invalidate any prior act of the directors which would have been valid
if such Bylaws had not been adopted.

D. Any vote or votes authorizing liquidation of the Corporation or
proceedings for its dissolution may provide, subject to (i) any
agreements among and between stockholders, (ii) the rights of creditors
and (iii) rights expressly provided for particular classes or series of
stock, for the distribution pro rata among the stockholders of the
Corporation of assets of the Corporation, wholly or in part in kind,
whether such assets be in cash or other property, and may authorize the
Board of Directors of the Corporation to determine the value of the
different assets of the Corporation for the purpose of such liquidation
and may divide, or authorize the Board of Directors of the Corporation
to divide, such assets or any part thereof among the stockholders of
the Corporation in such manner that every stockholder will receive a
proportionate amount in value (determined as aforesaid) of cash or
property of the Corporation upon such liquidation or dissolution even
though each stockholder may not receive a strictly proportionate part
of each such asset.

E. Subject to the rights of the holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon
liquidation to elect additional directors under specific circumstances:

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<PAGE> 5

(1) any action required or permitted to be taken by
the stockholders of the Corporation must be effected at a duly
called annual or special meeting of stockholders of the
Corporation and may not be effected by any consent in writing
of such stockholders;

(2) special meetings of the stockholders of the
Corporation may be called only by the Chairman of the Board of
Directors and shall be called within ten (10) days after the
written request, or by resolution adopted by the affirmative
vote, of a majority of the Board of Directors; and

(3) the business permitted to be conducted at any
special meeting of the stockholders is limited to the business
brought before the meeting by the Chairman or by the Secretary
at the request of a majority of the Board of Directors.

SEVENTH: The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the Bylaws of the Corporation.

EIGHTH: The Board of Directors is hereby authorized to create and
issue, whether or not in connection with the issuance and sale of any of its
stock or other securities, rights (the "Rights") entitling the holders thereof
to purchase from shares of capital stock or other securities of the Corporation.
The times at which and the terms upon which the Rights are to be issued will be
determined by the Board of Directors and set forth in the contracts or
instruments that evidence the Rights. The authority of the Board of Directors
with respect to the Rights shall include, but not be limited to, determination
of the following:

(a) the initial purchase price per share of the capital stock or other
securities of the Corporation to be purchased upon exercise of the
Rights;

(b) provisions relating to the times at which and the circumstances
under which the Rights may be exercised or sold or otherwise
transferred, either together with or separately from, any other
securities of the Corporation.

(c) provisions that adjust the number or exercise price of the Rights
or amount or nature of the securities or other property receivable upon
exercise of the Rights in the event of a combination, split or
recapitalization of any capital stock of the Corporation, a change in
ownership of the Corporation's securities or a reorganization, merger,
consolidation, sale of assets or other occurrence relating to the
Corporation or any capital stock of the Corporation, and provisions
restricting the ability of the Corporation to enter into any such
transaction absent an assumption by the other party or parties thereto
of the obligations of the Corporation under such Rights.

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<PAGE> 6

(d) provisions that deny the holder of a specified percentage of the
outstanding securities of the Corporation the right to exercise the
Rights and/or cause the Rights held by such holder to become void;

(e) provisions that permit the Corporation to redeem the Rights;

(f) the appointment of one or more agents to take specified actions on
behalf of the Corporation with respect to the Rights; and

(g) such other provisions relating to the Rights as may be determined
by the Board of Directors.

NINTH: No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty by such director as a director; provided, however, that this Article NINTH
shall not eliminate or limit the liability of a director to the extent provided
by applicable law (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or (iv) for
any transaction from which the director derived an improper personal benefit. No
amendment to or repeal of this Article NINTH shall apply to, or have any effect
on, the liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal. If the General Corporation Law of the State of Delaware is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended.

TENTH: To the maximum extent permitted by Delaware law in effect from
time to time, the Corporation shall indemnify and, without requiring a
preliminary determination of the ultimate entitlement to indemnification, shall
pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any individual who is a present or former director or officer
of the Corporation and who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a director of the
Corporation and at the request of the Corporation, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or other enterprise and who is made a
party to the proceeding by reason of his service in that capacity against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by them, unless it is established that (i) the act or omission of the
director or officer was material to the matter giving rise to the proceeding and
(A) was committed in bad faith or (B) was the result of active and deliberate
dishonesty, (ii) the director or officer actually received an improper personal
benefit, or (iii) in the case of any criminal proceeding, the director or
officer had reasonable cause to believe that the act or

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<PAGE> 7

omission was unlawful. The Corporation may, with the approval of its Board of
Directors, provide such indemnification and advance for expenses to a person who
served a predecessor of the Corporation in any of the capacities described in
(a) or (b) above and to any employee or agent of the Corporation or a
predecessor of the Corporation.

The Corporation shall, as a condition to advancing expenses to a
director or officer, obtain a written undertaking by or on behalf of such
director or officer to repay the amount paid or reimbursed by the Corporation if
it shall ultimately be determined that such persons are not entitled to be
indemnified by the Corporation under Delaware law or any applicable contract.

Neither the amendment nor repeal of this Article TENTH, nor the
adoption or amendment of any other provision of the Bylaws of the Corporation
inconsistent with this Article TENTH, shall apply to or affect in any respect
the applicability of the preceding paragraph with respect to any act or failure
to act which occurred prior to such amendment, repeal or adoption.

ELEVENTH: At any time after the closing of an initial public offering
of the Corporation's common stock with gross proceeds in excess of $40 million,
the provisions set forth in this Article ELEVENTH and Articles FIFTH, SIXTH,
EIGHTH and NINTH hereof may not be amended, altered, changed, repealed or
rescinded in any respect unless such action is approved by the affirmative vote
of the holders of not less than 80 percent of the total voting power of all
shares of stock of the Corporation entitled to vote in the election of
directors, considered for purposes of this Article ELEVENTH as a single class.
The voting requirements contained in this Article ELEVENTH and in Article SIXTH
hereof shall be in addition to voting requirements imposed by law, other
provisions of this Certificate of Incorporation or any designation of
preferences in favor of certain classes or series of shares of capital stock of
the Corporation.

TWELFTH: The Corporation is to have perpetual existence.

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<PAGE> 8

IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been executed for and on behalf of the Corporation by its
officers thereunto duly authorized as of May 23, 2000.

/s/ Kenneth V. Huseman
--------------------------------------
Name: Kenneth V. Huseman
Title: President, Chief Executive
Officer and Vice Chairman

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<PAGE> 1
EXHIBIT 3.2

RESTATED BYLAWS

BASIC ENERGY SERVICES, INC.

PREAMBLE

These Bylaws are subject to, and governed by, the General Corporation
Law of the State of Delaware ("DGCL") and the Certificate of Incorporation of
Basic Energy Services, Inc. ("the Corporation"), as amended (the "Certificate of
Incorporation", such term to include the resolutions of the Board of Directors
of the Corporation creating any series of preferred stock, par value $0.01 per
share, of the Corporation). In the event of a direct conflict between the
provisions of these Bylaws and the mandatory provisions of the DGCL or the
provisions of the Certificate of Incorporation, such provisions of the DGCL and
the Certificate of Incorporation, as the case may be, will be controlling.

ARTICLE I

Offices and Records

Section 1.1. Registered Office and Agent. The registered office and
registered agent of the Corporation shall be as designated from time to time by
the appropriate filing by the Corporation in the office of the Secretary of
State of the State of Delaware.

Section 1.2. Other Offices. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors of the Corporation (the "Board of Directors") may from time to time
determine or the business of the Corporation may require.

Section 1.3. Books and Records. The books and records of the
Corporation may be kept at the Corporation's principal office in Midland, Texas
or at such other locations outside the State of Delaware as may from time to
time be designated by the Board of Directors.

ARTICLE II

Meetings of Stockholders

Section 2.1. Annual Meetings. An annual meeting of the Corporation's
stockholders (the "Stockholders") shall be held each calendar year for the
purposes of (i) electing directors as provided in Article III and (ii)
transacting such other business as may properly be brought before the meeting.
Each annual meeting shall be held on such date (no later than 13 months after
the date of the last

<PAGE> 2
annual meeting of Stockholders) and at such time as shall be designated by the
Board of Directors and stated in the notice or waivers of notice of such
meeting.

Section 2.2. Special Meetings. Special meetings of the Stockholders,
for any purpose or purposes, may be called at any time by the Chairman of the
Board (if any) or the Chief Executive Officer and shall be called by the
Secretary at the written request, or by resolution adopted by the affirmative
vote, of a majority of the total number of directors which the Corporation would
have if there were no vacancies (the "Whole Board"), which request or resolution
shall fix the date, time and place, and state the purpose or purposes, of the
proposed meeting. Except as provided by applicable law, these Bylaws or the
Certificate of Incorporation, Stockholders shall not be entitled to call a
special meeting of Stockholders or to require the Board of Directors or any
officer to call such a meeting or to propose business at such a meeting.
Business transacted at any special meeting of Stockholders shall be limited to
the purposes stated in the notice or waivers of notice of such meeting.

Section 2.3. Place of Meetings. The Board of Directors may designate
the place of meeting (either within or without the State of Delaware) for any
meeting of Stockholders. If no designation is made by the Board of Directors,
the place of meeting shall be held at the principal executive office of the
Corporation.

Section 2.4. Notice of Meetings. (a) Written notice of each meeting of
Stockholders shall be delivered to each Stockholder of record entitled to vote
thereat, which notice shall (i) state the place, date and time of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called and (ii) be given not less than 10 nor more than 60 days
before the date of the meeting.

(b) Each notice of a meeting of Stockholders shall be given as provided
in Section 9.1, except that if no address appears on the Corporation's books or
stock transfer records with respect to any Stockholder, notice to such
Stockholder shall be deemed to have been given if sent by first-class mail or
telecommunication to the Corporation's principal executive office or if
published at least once in a newspaper of general circulation in the county
where such principal executive office is located.

(c) If any notice addressed to a Stockholder at the address of such
Stockholder appearing on the books of the Corporation is returned to the
Corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the Stockholder
at such address, all further notices to such Stockholder at such address shall
be deemed to have been duly given without further mailing if the same shall be
available to such Stockholder upon written demand of such Stockholder at the
principal executive office of the Corporation for a period of one year from the
date of the giving of such notice.

<PAGE> 3
(d) Any previously scheduled meeting of the Stockholders may be
postponed by resolution of the Board of Directors upon public notice given prior
to the time previously scheduled for such meeting.

Section 2.5. Voting List. At least 10 days before each meeting of
Stockholders, the Secretary or other officer or agent of the Corporation who has
charge of the Corporation's stock ledger shall prepare a complete list of the
Stockholders entitled to vote at such meeting, arranged in alphabetical order
and showing, with respect to each Stockholder, his address and the number of
shares registered in his name. Such list shall be open to the examination of any
Stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice or waivers of notice of the meeting or, if not so specified, at
the place where the meeting is to be held. The list shall also be produced and
kept open at the time and place of the meeting during the whole time thereof,
and may be inspected by any Stockholder who is present. The stock ledger of the
Corporation shall be the only evidence as to who are the Stockholders entitled
to examine any list required by this Section 2.5 or to vote at any meeting of
Stockholders.

Section 2.6. Quorum and Adjournment. The holders of a majority of the
voting power of the outstanding shares of the Corporation entitled to vote
generally in the election of directors (the "Voting Stock"), present in person
or by proxy, shall constitute a quorum at any meeting of Stockholders, except as
otherwise provided by applicable law, the Certificate of Incorporation or these
Bylaws. If a quorum is present at any meeting of Stockholders, such quorum shall
not be broken by the withdrawal of enough Stockholders to leave less than a
quorum and the remaining Stockholders may continue to transact business until
adjournment. If a quorum shall not be present at any meeting of Stockholders,
the holders of a majority of the voting stock represented at such meeting or, if
no Stockholder entitled to vote is present at such meeting, any officer of the
Corporation may adjourn such meeting from time to time until a quorum shall be
present. Notwithstanding anything in these Bylaws to the contrary, the chairman
of any meeting of Stockholders shall have the right, acting in his sole
discretion, to adjourn such meeting from time to time.

Section 2.7. Adjourned Meetings. When a meeting of Stockholders is
adjourned to another time or place, unless otherwise provided by these Bylaws,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken; provided,
however, if an adjournment is for more than 30 days or if after an adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Stockholder entitled to vote thereat. At any
adjourned meeting at which a quorum shall be present in person or by proxy, the
Stockholders entitled to vote thereat may transact any business which might have
been transacted at the meeting as originally noticed.

Section 2.8. Voting. (a) Election of directors at all meetings of
Stockholders at which directors are to be elected shall be by written ballot
and, except as otherwise provided in the Certificate of Incorporation, a
plurality of the votes cast thereat shall elect. Except as otherwise

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provided by applicable law, the Certificate of Incorporation or these Bylaws,
all matters other than the election of directors submitted to the Stockholders
at any meeting shall be decided by a majority of the votes cast with respect to
such matter. Except as otherwise provided in the Certificate of Incorporation or
by applicable law, (i) no Stockholder shall have any right of cumulative voting
and (ii) each outstanding share, regardless of class, shall be entitled to one
vote on each matter submitted to a vote at a meeting of Stockholders.

(b) Shares standing in the name of another corporation (whether
domestic or foreign) may be voted by such officer, agent or proxy as the bylaws
of such corporation may prescribe or, in the absence of such provision, as the
board of directors of such corporation may determine. Shares standing in the
name of a deceased person may be voted by the executor or administrator of such
deceased person, either in person or by proxy. Shares standing in the name of a
guardian, conservator or trustee may be voted by such fiduciary, either in
person or by proxy, but no fiduciary shall be entitled to vote shares held in
such fiduciary capacity without a transfer of such shares into the name of such
fiduciary. Shares standing in the name of a receiver may be voted by such
receiver. A Stockholder whose shares are pledged shall be entitled to vote such
shares, unless in the transfer by the pledgor on the books of the Corporation he
has expressly empowered the pledgee to vote thereon, in which case only the
pledgee (or his proxy) may represent the stock and vote thereon.

(c) If shares or other securities having voting power stand of record
in the name of two or more persons (whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise) or if two or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary is given written notice to the
contrary and is furnished with a copy of the instrument or order appointing them
or creating the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect:

(i) if only one votes, his act binds all;

(ii) if more than one votes, the act of the majority so voting
binds all; and

(iii) if more than one votes but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionately or any person voting the shares, or a beneficiary, (if
any) may apply to the Delaware Court of Chancery or such other court as
may have jurisdiction to appoint an additional person to act with the
person so voting the shares, which shall then be voted as determined by a
majority such persons and the person so appointed by the court.

If the instrument so filed shows that any such tenancy is held in unequal
interests, a majority or even-split for the purpose of the paragraph (c) shall
be a majority or even-split in interest.

Section 2.9. Proxies. (a) At any meeting of Stockholders, each
Stockholder having the right to vote thereat may be represented and vote either
in person or by proxy executed in writing by such Stockholder or by his duly
authorized attorney-in-fact. Each such proxy shall be filed with the

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<PAGE> 5
Secretary of the Corporation at or before the beginning of each meeting at which
such proxy is to be voted. Unless otherwise provided therein, no proxy shall be
valid after three years from the date of its execution. Each proxy shall be
revocable unless expressly provided therein to be irrevocable and coupled with
an interest sufficient in law to support an irrevocable power or unless
otherwise made irrevocable by applicable law.

(b) A proxy shall be deemed signed if the Stockholder's name is placed
on the proxy (whether by manual signature, telegraphic transmission or
otherwise) by the Stockholder or his attorney-in-fact. In the event any proxy
shall designate two or more persons to act as proxies, a majority of such
persons present at the meeting (or, if only one shall be present, then that one)
shall have and may exercise all the powers conferred by the proxy upon all the
persons so designated unless the proxy shall otherwise provide.

(c) Except as otherwise provided by applicable law, by the Certificate
of Incorporation or by these Bylaws, the Board of Directors may, in advance of
any meeting of Stockholders, prescribe additional regulations concerning the
manner of execution and filing of proxies (and the validation of same) which may
be voted at such meeting.

Section 2.10. Record Date. For the purpose of determining the
Stockholders entitled to notice of or to vote at any meeting of Stockholders (or
any adjournment thereof) or to receive payment of any dividend or other
distribution or allotment of any rights or to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date on which the resolution fixing the record date is
adopted by the Board of Directors or be more than 60 nor less than 10 days prior
to the date of such meeting nor more than 60 days prior to any other action. If
no record date is fixed, (i) the record date for determining Stockholders
entitled to notice of or to vote at a meeting of Stockholders shall be at the
close of business on the day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held and (ii) the record date for determining
Stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. A
determination of Stockholders of record entitled to notice of or to vote at a
meeting of Stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.

Section 2.11. Conduct of Meetings; Agenda. (a) Meetings of the
Stockholders shall be presided over by the officer of the Corporation whose
duties under these Bylaws require him to do so; provided, however, if no such
officer of the Corporation shall be present at any meeting of Stockholders, such
meeting shall be presided over by a chairman to be chosen by a majority of the
Stockholders entitled to vote at the meeting who are present in person or by
proxy. At each meeting of Stockholders, the officer of the Corporation whose
duties under these Bylaws require him to do so shall act as secretary of the
meeting; provided, however, if no such officer of the Corporation shall be
present at any meeting of Stockholders, the chairman of such meeting shall
appoint a secretary. The order of business at each meeting of Stockholders shall
be as determined by the chairman of the

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meeting, including such regulation of the manner of voting and the conduct of
discussion as seems to him in order.

(b) The Board of Directors may, in advance of any meeting of
Stockholders, adopt an agenda for such meeting, adherence to which the chairman
of the meeting may enforce.

Section 2.12. Inspectors of Election; Opening and Closing of Polls. (a)
Before any meeting of Stockholders, the Board of Directors may, and if required
by law shall, appoint one or more persons to act as inspectors of election at
such meeting or any adjournment thereof. If any person appointed as inspector
fails to appear or fails or refuses to act, the chairman of the meeting may, and
if required by law or requested by any Stockholder entitled to vote or his proxy
shall, appoint a substitute inspector. If no inspectors are appointed by the
Board of Directors, the chairman of the meeting may, and if required by law or
requested by any Stockholder entitled to vote or his proxy shall, appoint one or
more inspectors at the meeting. Notwithstanding the foregoing, inspectors shall
be appointed consistent with the mandatory provisions of Section 231 of the
DGCL.

(b) Inspectors may include individuals who serve the Corporation in
other capacities (including as officers, employees, agents or representatives);
provided, however, that no director or candidate for the office of director
shall act as an inspector. Inspectors need not be Stockholders.

(c) The inspectors shall (i) determine the number of shares of capital
stock of the Corporation outstanding and the voting power of each, the number of
shares represented at the meeting, the existence of a quorum and the validity
and effect of proxies and (ii) receive votes or ballots, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes and ballots, determine the results and do such acts as are
proper to conduct the election or vote with fairness to all Stockholders. On
request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. The inspectors shall have such other
duties as may be prescribed by Section 231 of the DGCL.

(d) The chairman of the meeting may, and if required by the DGCL shall,
fix and announce at the meeting the date and time of the opening and the closing
of the polls for each matter upon which the Stockholders will vote at the
meeting.

Section 2.13. Procedures for Bringing Business before Annual Meetings.
(a) Notwithstanding anything in these Bylaws to the contrary, no business shall
be conducted at an annual meeting of Stockholders except in accordance with the
procedures hereinafter set forth in this Section 2.13; provided, however, that
nothing in this Section 2.13 shall be deemed to preclude discussion by any
Stockholder of any business properly brought before any annual meeting of
Stockholders in accordance with such procedures.

(b) At any annual meeting of Stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting,

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business must be (i) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (ii) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors or (iii) properly brought before the meeting by a Stockholder. In
addition to any other applicable requirements, for business to be properly
brought before an annual meeting by a Stockholder, the Stockholder must have
given timely notice thereof in writing to the Secretary. To be timely, a
Stockholder's notice must be delivered to or mailed and received at the
principal executive office of the Corporation not less than 120 days nor more
than 150 days in advance of the first anniversary of the date of the
Corporation's proxy statement released to Stockholders in connection with the
previous year's annual meeting of Stockholders; provided, however, that if no
annual meeting was held in the previous year or the date of the annual meeting
of Stockholders has been changed by more than 30 calendar days from the date
contemplated at the time of the previous year's proxy statement, the notice must
be received by the Corporation at least 80 days prior to the date the
Corporation intends to distribute its proxy statement with respect to such
meeting. Any meeting of Stockholders which is adjourned and will reconvene
within 30 days after the meeting date as originally noticed shall, for purposes
of any Stockholder's notice contemplated by this paragraph (b), be deemed to be
a continuation of the original meeting, and no business may be brought before
such adjourned meeting by any Stockholder unless timely notice of such business
was given to the Secretary of the Corporation for the meeting as originally
noticed.

(c) Each notice given by a Stockholder as contemplated by paragraph (b)
above shall set forth, as to each matter the Stockholder proposes to bring
before the annual meeting, (i) the nature of the proposed business with
reasonable particularity, including the exact text of any proposal to be
presented for adoption and any supporting statement, which proposal and
supporting statement shall not in the aggregate exceed 500 words, and his
reasons for conducting such business at the annual meeting, (ii) any material
interest of the Stockholder in such business, (iii) the name, principal
occupation and record address of the Stockholder, (iv) the class and number of
shares of the Corporation which are held of record or beneficially owned by the
Stockholder, (v) the dates upon which the Stockholder acquired such shares of
stock and documentary support for any claims of beneficial ownership and (vi)
such other matters as may be required by the Certificate of Incorporation.

(d) The foregoing right of a Stockholder to propose business for
consideration at an annual meeting of Stockholders shall be subject to such
conditions, restrictions and limitations as may be imposed by the Certificate of
Incorporation. Nothing in this Section 2.13 shall entitle any Stockholder to
propose business for consideration at any special meeting of Stockholders.

(e) The chairman of any meeting of Stockholders shall determine whether
business has been properly brought before the meeting and, if the facts so
warrant, may refuse to transact any business at such meeting which has not been
properly brought before the meeting.

(f) Notwithstanding any other provision of these Bylaws, the
Corporation shall be under no obligation to include any Stockholder proposal in
its proxy statement or otherwise present any such proposal to Stockholders at a
meeting of Stockholders if the Board of Directors reasonably

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believes that the proponents thereof have not complied with Sections 13 and 14
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder, and the Corporation shall not be
required to include in its proxy statement to Stockholders any Stockholder
proposal not required to be included in its proxy statement to Stockholders in
accordance with the Exchange Act and such rules or regulations.

(g) Nothing in this Section 2.13 shall be deemed to affect any rights
of Stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 of the Exchange Act.

(h) Reference is made to Section 3.6 for procedures relating to the
nomination of any person for election or reelection as a director of the
Corporation.

Section 2.14. Action without Meeting. No action shall be taken by
Stockholders except at a meeting of Stockholders. Stockholders may not act by
written consent in lieu of a meeting.

ARTICLE III

Board of Directors -- Powers, Number, Classification,
Nominations, Resignations, Removal, Vacancies and Compensation

Section 3.1. Management. The business and property of the Corporation
shall be managed by and under the direction of the Board of Directors. In
addition to the powers and authorities expressly conferred upon the Board of
Directors by these Bylaws, the Board of Directors may exercise all the powers of
the Corporation and do all such lawful acts and things as are not by law, by the
Certificate of Incorporation or by these Bylaws directed or required to be
exercised or done by the Stockholders.

Section 3.2. Number and Qualification. The number of directors shall be
fixed from time to time exclusively pursuant to resolution adopted by a majority
of the Whole Board, but shall consist of not less than three nor more than 12
directors, subject, however, to increases above 12 members as may be required in
order to permit the holders of any series of preferred stock of the Corporation
to elect directors under specified circumstances. The directors need not be
Stockholders or residents of the State of Delaware. Each director must have
attained 21 years of age.

Section 3.3 Classes of Directors. The Board of Directors shall be
divided into three classes designated as Class I, Class II and Class III,
respectively, all as nearly equal in number as possible, with each director then
in office receiving the classification to be determined with respect to such
director by the Board of Directors.

Section 3.4. Election; Term of Office. (a) The initial term of office
of Class I directors shall expire at the annual meeting of the Corporation's
stockholders in 2001. The initial term of office

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of Class II directors shall expire at the annual meeting of stockholders in
2002. The initial term of office of Class III directors shall expire at the
annual meeting of stockholders in 2003. Subject to Sections 3.9 and 3.10, each
director elected at an annual meeting of stockholders to succeed a director
whose term is expiring shall hold office until the third annual meeting of
stockholders after his election or until his successor is elected and qualified
or until his earlier death, resignation or removal.

(b) Directors shall be elected by Stockholders only at annual meetings
of Stockholders, except that if any such annual meeting is not held or if any
director to be elected thereat is not elected, such director may be elected at
any special meeting of Stockholders held for that purpose.

(c) No decrease in the number of directors constituting the Whole Board
shall have the effect of shortening the term of any incumbent director.

Section 3.5 Allocation of Directors Among Classes in the Event of
Increases or Decreases in the Number of Directors. In the event of any increase
or decrease in the authorized number of directors, (i) each director then
serving as such shall nevertheless continue as a director of the class of which
he is a member and (ii) the newly created or eliminated directorships resulting
from such increase or decrease shall be apportioned by the Board of Directors
among the three classes of directors so as to ensure that no one class has more
than one director more than any other class. To the extent possible, consistent
with the foregoing rule, any newly created directorships shall be added to those
classes whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of office are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.

Section 3.6. Nominations. (a) Notwithstanding anything in these Bylaws
to the contrary, only persons who are nominated in accordance with the
procedures hereinafter set forth in this Section 3.6 shall be eligible for
election as directors of the Corporation.

(b) Nominations of persons for election to the Board of Directors at a
meeting of Stockholders may be made only (i) by or at the direction of the Board
of Directors or (ii) by any Stockholder entitled to vote for the election of
directors at the meeting who satisfies the eligibility requirements (if any) set
forth in the Certificate of Incorporation and who complies with the notice
procedures set forth in this Section 3.6 and in the Certificate of
Incorporation; provided, however, Stockholders may not nominate persons for
election to the Board of Directors at any special meeting of Stockholders unless
the business to be transacted at such special meeting, as set forth in the
notice of such meeting, includes the election of directors. Nominations by
Stockholders shall be made pursuant to timely notice in writing to the
Secretary. To be timely, a Stockholder's notice given in the context of an
annual meeting of Stockholders shall be delivered to or mailed and received at
the principal executive office of the Corporation not less than 120 days nor
more than 150 days in advance of the first anniversary of the date of the
Corporation's proxy statement released to Stockholders in connection with the
previous year's annual meeting of Stockholders; provided,

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however, that if no annual meeting was held in the previous year or the date of
the annual meeting of Stockholders has been changed by more than 30 calendar
days from the date contemplated at the time of the previous year's proxy
statement, the notice must be received by the Corporation at least 80 days prior
to the date the Corporation intends to distribute its proxy statement with
respect to such meeting. To be timely, a Stockholder's notice given in the
context of a special meeting of Stockholders shall be delivered to or mailed and
received at the principal executive office of the Corporation not earlier than
the ninetieth day prior to such special meeting and not later than the close of
business on the later of the seventieth day prior to such special meeting or the
tenth day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such special meeting. For purposes of the foregoing,
"public announcement" means the disclosure in a press release reported by the
Dow Jones News Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. Any meeting
of Stockholders which is adjourned and will reconvene within 30 days after the
meeting date as originally noticed shall, for purposes of any notice
contemplated by this paragraph (b), be deemed to be a continuation of the
original meeting and no nominations by a Stockholder of persons to be elected
directors of the Corporation may be made at any such reconvened meeting other
than pursuant to a notice that was timely for the meeting on the date originally
noticed.

(c) Each notice given by a Stockholder as contemplated by paragraph (b)
above shall set forth the following information, in addition to any other
information or matters required by the Certificate of Incorporation:

(i) as to each person whom the Stockholder proposes to
nominate for election or re-election as a director, (A) the exact name
of such person, (B) such person's age, principal occupation, business
address and telephone number and residence address and telephone
number, (C) the number of shares (if any) of each class of stock of the
Corporation owned directly or indirectly by such person and (D) all
other information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors
pursuant to Regulation 14A under the Exchange Act or any successor
regulation thereto (including such person's notarized written
acceptance of such nomination, consent to being named in the proxy
statement as a nominee and statement of intention to serve as a
director if elected);

(ii) as to the Stockholder giving the notice, (A) his name and
address, as they appear on the Corporation's books, (B) his principal
occupation, business address and telephone number and residence address
and telephone number, (C) the class and number of shares of the
Corporation which are held of record or beneficially owned by him and
(D) the dates upon which he acquired such shares of stock and
documentary support for any claims of beneficial ownership; and

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(iii) a description of all arrangements or understandings
between the Stockholder giving the notice and each nominee and any
other person or persons (naming such person or persons) pursuant to
which the nomination or nominations are to be made by such Stockholder.

At the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a Stockholder's notice
of nomination which pertains to the nominee.

(d) The foregoing right of a Stockholder to nominate a person for
election or reelection to the Board of Directors shall be subject to such
conditions, restrictions and limitations as may be imposed by the Certificate of
Incorporation.

(e) Nothing in this Section 3.6 shall be deemed to affect any rights of
Stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 of the Exchange Act.

(f) The chairman of a meeting of Stockholders shall have the power and
duty to determine whether a nomination was made in accordance with the
procedures set forth in this Section 3.6 and, if any nomination is not in
compliance with this Section 3.6, to declare that such defective nomination
shall be disregarded.

Section 3.7. Resignations. Any director may resign at any time by
giving written notice to the Board of Directors or the Secretary. Such
resignation shall take effect at the date of receipt of such notice or at any
later time specified therein. Acceptance of such resignation shall not be
necessary to make it effective. When one or more directors shall resign from the
Board of Directors, effective at a future date, a majority of the directors then
in office, including those who have so resigned, shall have the power to fill
such vacancy or vacancies, the vote thereon to take effect when such resignation
or resignations shall become effective, and each Director so chosen shall hold
office for the unexpired portion of the term of the Director whose place shall
be vacated and until his successor shall have been duly elected and qualified.

Section 3.8. Removal. No director may be removed before the expiration
of his term of office except for cause and then only by the affirmative vote of
the holders of not less than a majority of the voting power of all outstanding
Voting Stock, voting together as a single class. The Board of Directors may not
remove any director, and no recommendation by the Board of Directors that a
director be removed may be made to the Stockholders unless such recommendation
is set forth in a resolution adopted by the affirmative vote of not less than
66-2/3% of the Whole Board.

Section 3.9. Vacancies. (a) In case any vacancy shall occur on the
Board of Directors because of death, resignation or removal, such vacancy may be
filled by a majority of the directors remaining in office (though less than a
quorum) or by the sole remaining director. The director so appointed shall serve
for the unexpired term of his predecessor or until his successor is elected and

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qualified or until his earlier death, resignation or removal. If there are no
directors then in office, an election of directors may be held in the manner
provided by applicable law.

(b) Any newly-created directorship resulting from any increase in the
number of directors constituting the Whole Board may be filled by a majority of
the directors then in office (though less than a quorum), or by the sole
remaining director. The director so appointed shall be assigned to such class of
directors as such majority of directors, or the sole remaining director, as the
case may be, shall determine; provided however, that newly-created directorships
shall be apportioned among the classes of directors so that all classes will be
as nearly equal in number as possible. Each director so appointed shall hold
office until his successor is elected and qualified or until his earlier death,
resignation or removal.

(c) Except as expressly provided in these Bylaws or the Certificate of
Incorporation or as otherwise provided by law, Stockholders shall not have any
right to fill vacancies on the Board of Directors, including newly-created
directorships.

(d) If, as a result of a disaster or emergency (as determined in good
faith by the then remaining directors), it becomes impossible to ascertain
whether or not vacancies exist on the Board of Directors and a person is or
persons are elected by the directors, who in good faith believe themselves to be
a majority of the remaining directors, or the sole remaining director, to fill a
vacancy or vacancies that such remaining directors in good faith believe exists,
then the acts of such person or persons who are so elected as directors shall be
valid and binding upon the Corporation and the Stockholders, although it may
subsequently develop that at the time of the election (i) there was in fact no
vacancy or vacancies existing on the Board of Directors or (ii) the directors,
or the sole remaining director, who so elected such person or persons did not in
fact constitute a majority of the remaining directors.

Section 3.10. Subject to Rights of Holders of Preferred Stock.
Notwithstanding the foregoing provisions of this Article III, if the resolutions
of the Board of Directors creating any series of preferred stock of the
Corporation entitle the holders of such preferred stock, voting separately by
series, to elect additional directors under specified circumstances, then all
provisions of such resolutions relating to the nomination, election, term of
office, removal, filling of vacancies and other features of such directorships
shall, as to such directorships, govern and control over any conflicting
provisions of this Article III.

Section 3.11. Compensation. The Board of Directors shall have the
authority to fix, and from time to time to change, the compensation of
directors. Each director shall be entitled to reimbursement from the Corporation
for his reasonable expenses incurred in attending meetings of the Board of
Directors (or any committee thereof) and meetings of the Stockholders. Nothing
contained in these Bylaws shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.

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ARTICLE IV

Board of Directors -- Meetings and Actions

Section 4.1. Place of Meetings. The directors may hold their meetings
and have one or more offices, and keep the books of the Corporation, in such
place or places, within or without the State of Delaware, as the Board of
Directors may from time to time determine.

Section 4.2. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and place, within or without
the State of Delaware, as shall from time to time be determined by the Board of
Directors. Except as otherwise provided by applicable law, any business may be
transacted at any regular meeting of the Board of Directors.

Section 4.3. Special Meetings. Special meetings of the Board of
Directors shall be called by the Secretary at the request of the Chairman of the
Board (if any) or the Chief Executive Officer on not less than 24 hours' notice
to each director, specifying the time, place and purpose of the meeting. Special
meetings shall be called by the Secretary on like notice at the written request
of any two directors, which request shall state the purpose of the meeting.

Section 4.4. Quorum; Voting. (a) At all meetings of the Board of
Directors, a majority of the Whole Board shall be necessary and sufficient to
constitute a quorum for the transaction of business. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time (without notice other than
announcement at the meeting) until a quorum shall be present. A meeting of the
Board of Directors at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors; provided,
however, that no action of the remaining directors shall constitute the act of
the Board of Directors unless the action is approved by at least a majority of
the required quorum for the meeting or such greater number of directors as shall
be required by applicable law, by the Certificate of Incorporation or by these
Bylaws.

(b) The act of a majority of the directors present at any meeting of
the Board of Directors at which there is a quorum shall be the act of the Board
of Directors unless by express provision of law, the Certificate of
Incorporation or these Bylaws a different vote is required, in which case such
express provision shall govern and control.

Section 4.5. Conduct of Meetings. At meetings of the Board of
Directors, business shall be transacted in such order as shall be determined by
the chairman of the meeting unless the Board of Directors shall otherwise
determine the order of business. The Board of Directors shall keep regular
minutes of its proceedings which shall be placed in the minute book of the
Corporation.

Section 4.6. Presumption of Assent. A director who is present at a
meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to such action unless his dissent shall
be entered in the minutes of the meeting or unless he shall file his

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written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward any dissent by certified
or registered mail to the Secretary immediately after the adjournment of the
meeting. Such right to dissent shall not apply to any director who voted in
favor of such action.

Section 4.7. Action without Meeting. Unless otherwise provided in the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if all directors consent thereto in writing. All such written consents
shall be filed with the minutes of proceedings of the Board of Directors.

Section 4.8. Telephonic Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of Directors
may participate in a meeting of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at such meeting.

ARTICLE V

Committees of the Board of Directors

Section 5.1. Executive Committee. (a) The Board of Directors may, by
resolution adopted by the affirmative vote of a majority of the Whole Board,
designate an Executive Committee which, during the intervals between meetings of
the Board of Directors and subject to Section 5.11, shall have and may exercise,
in such manner as it shall deem to be in the best interests of the Corporation,
all of the powers of the Board of Directors in the management or direction of
the business and affairs of the Corporation, except as reserved to the Board of
Directors or as delegated by the Board of Directors to another committee of the
Board of Directors or as may be prohibited by law. The Executive Committee shall
consist of not less than two directors, the exact number to be determined from
time to time by the affirmative vote of a majority of the Whole Board. None of
the members of the Executive Committee need be an officer of the Corporation.

(b) Meetings of the Executive Committee may be called at any time by
the Chairman of the Board (if any) or the Chief Executive Officer on not less
than one day's notice to each member given verbally or in writing, which notice
shall specify the time, place and purpose of the meeting.

Section 5.2. Other Committees. The Board of Directors may, by
resolution adopted by a majority of the Whole Board, establish additional
standing or special committees of the Board of Directors, each of which shall
consist of two or more directors (the exact number to be determined from time to
time by the Board of Directors) and, subject to Section 5.11, shall have such
powers and functions as may be delegated to it by the Board of Directors. No
member of any such additional committee need be an officer of the Corporation.

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Section 5.3. Term. Each member of a committee of the Board of Directors
shall serve as such until the earliest of (i) his death, (ii) the expiration of
his term as a director, (iii) his resignation as a member of such committee or
as a director and (iv) his removal as a member of such committee or as a
director.

Section 5.4. Committee Changes; Removal. The Board of Directors shall
have the power at any time to fill vacancies in, to change the membership of and
to abolish any committee of the Board of Directors; provided, however, that no
such action shall be taken in respect of the Executive Committee unless approved
by a majority of the Whole Board.

Section 5.5. Alternate Members. The Board of Directors may designate
one or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. If no alternate
members have been so appointed or each such alternate committee member is absent
or disqualified, the committee member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member.

Section 5.6. Rules and Procedures. (a) The Board of Directors may
designate one member of each committee as chairman of such committee; provided,
however, that, except as provided in the following sentence, no person shall be
designated as chairman of the Executive Committee unless approved by a majority
of the Whole Board. If a chairman is not so designated for any committee, the
members thereof shall designate a chairman.

(b) Each committee shall adopt its own rules (not inconsistent with
these Bylaws or with any specific direction as to the conduct of its affairs as
shall have been given by the Board of Directors) governing the time, place and
method of holding its meetings and the conduct of its proceedings and shall meet
as provided by such rules.

(c) If a committee is comprised of an odd number of members, a quorum
shall consist of a majority of that number. If a committee is comprised of an
even number of members, a quorum shall consist of one-half of that number. If a
committee is comprised of two members, a quorum shall consist of both members.
If a quorum is not present at a meeting of any committee, a majority of the
members present may adjourn the meeting from time to time, without notice other
than an announcement at the meeting, until a quorum is present. The act of a
majority of the members present at any meeting at which a quorum is in
attendance shall be the act of a committee, unless the act of a greater number
is required by law, the Certificate of Incorporation, these Bylaws or the
committee's rules as adopted in Section 5.6(b).

(d) Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when requested.

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(e) Unless otherwise provided by these Bylaws or by the rules adopted
by any committee, notice of the time and place of each meeting of such committee
shall be given to each member of such committee as provided in these Bylaws with
respect to notices of special meetings of the Board of Directors.

Section 5.7. Presumption of Assent. A member of a committee of the
Board of Directors who is present at a meeting of such committee at which action
on any corporate matter is taken shall be presumed to have assented to such
action unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as secretary of the meeting before the adjournment thereof or shall forward any
dissent by certified or registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to any member who voted in favor of such action.

Section 5.8. Action without Meeting. Unless otherwise provided in the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of a committee of the Board of Directors may be taken
without a meeting if all members of such committee consent thereto in writing.
All such written consents shall be filed with the minutes of proceedings of such
committee.

Section 5.9. Telephonic Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of any committee of the
Board of Directors may participate in a meeting of such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
in a meeting shall constitute presence in person at such meeting.

Section 5.10. Resignations. Any committee member may resign at any time
by giving written notice to the Board of Directors or the Secretary. Such
resignation shall take effect at the date of receipt of such notice or at any
later time specified therein. Acceptance of such resignation shall not be
necessary to make it effective.

Section 5.11. Limitations on Authority. Unless otherwise provided in
the Certificate of Incorporation, no committee of the Board of Directors shall
have the power or authority to (i) authorize an amendment to the Certificate of
Incorporation, (ii) adopt an agreement of merger or consolidation, recommend to
the Stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, (iii) recommend to the Stockholders a
dissolution of the Corporation or a revocation of a dissolution, (iv) amend
these Bylaws, (v) declare a dividend or other distribution on, or authorize the
issuance, purchase or redemption of, securities of the Corporation, (vi) elect
any officer of the Corporation or (vii) approve any material transaction between
the Corporation and one or more of its directors, officers or employees or
between the Corporation and any corporation, partnership, association or other
organization in which one or more of its directors, officers or employees are
directors or officers or have a financial interest; provided, however, that the
Executive Committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of preferred stock adopted by
the Board of Directors as provided in the

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Certificate of Incorporation, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes of stock of
the Corporation or fix the number of shares of any series of stock or authorize
the decrease or increase of the shares of any such series.

ARTICLE VI

Officers

Section 6.1. Number; Titles; Qualification; Term of Office. (a) The
officers of the Corporation shall be a Chief Executive Officer, a President, a
Secretary and a Treasurer. The Board of Directors from time to time may also
elect such other officers (including, without limitation, a Chairman of the
Board and one or more Vice Presidents) as the Board of Directors deems
appropriate or necessary. Each officer shall hold office until his successor
shall have been duly elected and shall have been qualified or until his earlier
death, resignation or removal. Any two or more offices may be held by the same
person, but no officer shall execute any instrument in more than one capacity if
such instrument is required by law or any act of the Corporation to be executed
or countersigned by two or more officers. None of the officers need be a
Stockholder or a resident of the State of Delaware. No officer (other than the
Chairman of the Board, if any) need be a director.

(b) The Board of Directors may delegate to the Chairman of the Board
(if any) and/or the Chief Executive Officer the power to appoint one or more
employees of the Corporation as divisional or departmental vice presidents and
fix their duties as such appointees. However, no such divisional or departmental
vice presidents shall be considered an officer of the Corporation, the officers
of the Corporation being limited to those officers elected by the Board of
Directors.

Section 6.2. Election. At the first meeting of the Board of Directors
after each annual meeting of Stockholders at which a quorum shall be present,
the Board of Directors shall elect the officers of the Corporation.

Section 6.3. Removal. Any officer may be removed, either with or
without cause, by the Board of Directors; provided, however, that (i) the
Chairman of the Board (if any) and the Chief Executive Officer may be removed
only by the affirmative vote of a majority of the Whole Board and (ii) the
removal of any officer shall be without prejudice to the contract rights, if
any, of such officer. Election or appointment of an officer shall not of itself
create contract rights.

Section 6.4. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors, the Chairman of the Board (if any) or
the Chief Executive Officer. Any such resignation shall take effect on receipt
of such notice or at any later time specified therein. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it

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effective. Any such resignation is without prejudice to the rights, if any, of
the Corporation under any contract to which the officer is a party.

Section 6.5. Vacancies. If a vacancy shall occur in any office because
of death, resignation, removal, disqualification or any other cause, the Board
of Directors may elect or appoint a successor to fill such vacancy for the
remainder of the term.

Section 6.6. Salaries. The salaries of all officers of the Corporation
shall be fixed by the Board of Directors or pursuant to its direction, and no
officer shall be prevented from receiving such salary by reason of the fact that
he is also a director of the Corporation.

Section 6.7. Chairman of the Board. The Chairman of the Board (if any)
shall have all powers and shall perform all duties incident to the office of
Chairman of the Board and such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws. The Chairman of the Board, if present,
shall preside at all meetings of the Board of Directors and of the Stockholders.
During the time of any vacancy in the office of Chief Executive Officer or in
the event of the absence or disability of the Chief Executive Officer, the
Chairman of the Board shall have the duties and powers of the Chief Executive
Officer unless otherwise determined by the Board of Directors. In no event shall
any third party having dealings with the Corporation be bound to inquire as to
any facts required by the terms of this Section 6.7 for the exercise by the
Chairman of the Board of the powers of the Chief Executive Officer.

Section 6.8. Chief Executive Officer. (a) The Chief Executive Officer
shall be the chief executive officer of the Corporation and, subject to the
supervision, direction and control of the Board of Directors, shall have general
supervision, direction and control of the business and officers of the
Corporation with all such powers as may be reasonably incident to such
responsibilities. He shall have the general powers and duties of management
usually vested in the chief executive officer of a corporation.

(b) During the time of any vacancy in the office of the Chairman of the
Board or in the event of the absence or disability of the Chairman of the Board,
the Chief Executive Officer shall have the duties and powers of the Chairman of
the Board unless otherwise determined by the Board of Directors. During the time
of any vacancy in the office of President or in the event of the absence or
disability of the President, the Chief Executive Officer shall have the duties
and powers of the President unless otherwise determined by the Board of
Directors. In no event shall any third party having any dealings with the
Corporation be bound to inquire as to any facts required by the terms of this
Section 6.8 for the exercise by the Chief Executive Officer of the powers of the
Chairman of the Board or the President.

Section 6.9. President. (a) The President shall be the chief operating
officer of the Corporation and, subject to the supervision, direction and
control of the Chief Executive Officer and the Board of Directors, shall manage
the day-to-day operations of the Corporation. He shall have the general powers
and duties of management usually vested in the chief operating officer of a

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corporation and such other powers and duties as may be assigned to him by the
Board of Directors, the Chief Executive Officer or these Bylaws.

(b) During the time of any vacancy in the offices of the Chairman of
the Board and Chief Executive Officer or in the event of the absence or
disability of the Chairman of the Board and the Chief Executive Officer, the
President shall have the duties and powers of the Chief Executive Officer unless
otherwise determined by the Board of Directors. In no event shall any third
party having any dealings with the Corporation be bound to inquire as to any
facts required by the terms of this Section 6.9 for the exercise by the
President of the powers the Chief Executive Officer.

Section 6.10. Vice Presidents. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors, or if not ranked, the Vice President designated by the
President, shall perform all the duties of the President as chief operating
officer of the Corporation, and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the President as chief operating
officer of the Corporation. In no event shall any third party having dealings
with the Corporation be bound to inquire as to any facts required by the terms
of this Section 6.10 for the exercise by any Vice President of the powers of the
President as chief operating officer of the Corporation. The Vice Presidents
shall have such other powers and perform such other duties as from time to time
may be assigned to them by the Board of Directors, the Chief Executive Officer
or the President.

Section 6.11. Treasurer. The Treasurer shall (i) have custody of the
Corporation's funds and securities, (ii) keep full and accurate account of
receipts and disbursements, (iii) deposit all monies and valuable effects in the
name and to the credit of the Corporation in such depository or depositories as
may be designated by the Board of Directors and (iv) perform such other duties
as may be prescribed by the Board of Directors or the Chief Executive Officer.

Section 6.12. Assistant Treasurers. Each Assistant Treasurer shall have
such powers and duties as may be assigned to him by the Board of Directors, the
Chief Executive Officer or the President. In case of the absence or disability
of the Treasurer, the Assistant Treasurer designated by the President (or, in
the absence of such designation, the Treasurer) shall perform the duties and
exercise the powers of the Treasurer during the period of such absence or
disability. In no event shall any third party having dealings with the
Corporation be bound to inquire as to any facts required by the terms of this
Section 6.12 for the exercise by any Assistant Treasurer of the powers of the
Treasurer under these Bylaws.

Section 6.13. Secretary. (a) The Secretary shall keep or cause to be
kept, at the principal office of the Corporation or such other place as the
Board of Directors may order, a book of minutes of all meetings and actions of
the Board of Directors, committees of the Board of Directors and Stockholders,
with the time and place of holding, whether regular or special, and, if special,
how authorized, the notice thereof given, the names of those present at meetings
of the Board of Directors and committees thereof, the number of shares present
or represented at Stockholders' meetings and the proceedings thereof.

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<PAGE> 20
(b) The Secretary shall keep, or cause to be kept, at the principal
office of the Corporation or at the office of the Corporation's transfer agent
or registrar, a share register, or a duplicate share register, showing the names
of all Stockholders and their addresses, the number and classes of shares held
by each, the number and date of certificates issued for the same and the number
and date of cancellation of every certificate surrendered for cancellation.

(c) The Secretary shall give, or cause to be given, notice of all
meetings of the Stockholders and of the Board of Directors required by these
Bylaws or by law to be given, and he shall keep the seal of the Corporation, if
one be adopted, in safe custody, and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors, the Chairman
of the Board (if any), the Chief Executive Officer, the President or these
Bylaws.

(d) The Secretary may affix the seal of the Corporation, if one be
adopted, to contracts of the Corporation.

Section 6.14. Assistant Secretaries. Each Assistant Secretary shall
have such powers and duties as may be assigned to him by the Board of Directors,
the Chairman of the Board (if any), the Chief Executive Officer or the
President. In case of the absence or disability of the Secretary, the Assistant
Secretary designated by the President (or, in the absence of such designation,
the Secretary) shall perform the duties and exercise the powers of the Secretary
during the period of such absence or disability. In no event shall any third
party having dealings with the Corporation be bound to inquire as to any facts
required by the terms of this Section 6.14 for the exercise by any Assistant
Secretary of the powers of the Secretary under these Bylaws.

ARTICLE VII

Stock

Section 7.1. Certificates. Certificates for shares of stock of the
Corporation shall be in such form as shall be approved by the Board of
Directors. The certificates shall be signed (i) by the Chairman of the Board (if
any), the President or a Vice President and (ii) by the Secretary, an Assistant
Secretary, the Treasurer or an Assistant Treasurer.

Section 7.2. Signatures on Certificates. Any or all of the signatures
on the certificates may be a facsimile and the seal of the Corporation (or a
facsimile thereof), if one has been adopted, may be affixed thereto. In case any
officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, such
certificate may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.

Section 7.3. Legends. The Board of Directors shall have the power and
authority to provide that certificates representing shares of stock of the
Corporation bear such legends and statements

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<PAGE> 21
(including, without limitation, statements relating to the powers, designations,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions of the shares represented by such
certificates) as the Board of Directors deems appropriate in connection with the
requirements of federal or state securities laws or other applicable laws.

Section 7.4. Lost, Stolen or Destroyed Certificates. The Board of
Directors, the Secretary and the Treasurer each may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, in each case upon the making of an affidavit of that fact by the
owner of such certificate, or his legal representative. When authorizing such
issue of a new certificate or certificates, the Board of Directors, the
Secretary or the Treasurer, as the case may be, may, in its or his discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as the Board of Directors,
the Secretary or the Treasurer, as the case may be, shall require and/or to
furnish the Corporation a bond in such form and substance and with such surety
as the Board of Directors, the Secretary or the Treasurer, as the case may be,
may direct as indemnity against any claim, or expense resulting from any claim,
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.

Section 7.5. Transfers of Shares. Shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal
representatives. Upon surrender to the Corporation, or the transfer agent of the
Corporation, of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, the Corporation or
its transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon the Corporation's
books.

Section 7.6. Registered Stockholders. The Corporation shall be entitled
to treat the holder of record of any share of stock of the Corporation as the
holder in fact thereof and, accordingly, shall not be bound to recognize any
equitable or other claim or interest in such share on the part of any other
person, whether or not the Corporation shall have express or other notice
thereof, except as expressly provided by the laws of the State of Delaware.

Section 7.7. Regulations. The Board of Directors shall have the power
and authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer and registration or the replacement of
certificates for shares of stock of the Corporation. The Board of Directors may
(i) appoint and remove transfer agents and registrars of transfers and (ii)
require all stock certificates to bear the signature of any such transfer agent
and/or any such registrar of transfers.

Section 7.8. Stock Options, Warrants, etc. Unless otherwise expressly
prohibited in the resolutions of the Board of Directors creating any class or
series of preferred stock of the Corporation, the Board of Directors shall have
the power and authority to create and issue (whether

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or not in connection with the issue and sale of any stock or other securities of
the Corporation) warrants, rights or options entitling the holders thereof to
purchase from the Corporation any shares of capital stock of the Corporation of
any class or series or any other securities of the Corporation for such
consideration and to such persons, firms or corporations as the Board of
Directors, in its sole discretion, may determine, setting aside from the
authorized but unissued stock of the Corporation the requisite number of shares
for issuance upon the exercise of such warrants, rights or options. Such
warrants, rights and options shall be evidenced by one or more instruments
approved by the Board of Directors. The Board of Directors shall be empowered to
set the exercise price, duration, time for exercise and other terms of such
warrants, rights and operations; provided, however, that the consideration to be
received for any shares of capital stock subject thereto shall not be less than
the par value thereof.

ARTICLE VIII

Indemnification

Section 8.1. Third Party Actions. The Corporation (i) shall, to the
maximum extent permitted from time to time under the laws of the State of
Delaware, indemnify every person who is or was a party or is or was threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation), by reason of the fact that
such person is or was a director or officer of the Corporation or any of its
direct or indirect subsidiaries or is or was serving at the request of the
Corporation or any of its direct or indirect subsidiaries as a director, officer
or fiduciary of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, and (ii) may, to the maximum extent permitted
from time to time under the laws of the State of Delaware, indemnify every
person who is or was a party or is or was threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation), by reason of the fact that such person is or was an
employee or agent of the Corporation or any of its direct or indirect
subsidiaries or is or was serving at the request of the Corporation or any of
its direct or indirect subsidiaries as an employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including counsel fees), judgments, fines and
amounts paid or owed in settlement, actually and reasonably incurred by such
person or rendered or levied against such person in connection with such action,
suit or proceeding, if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent shall not, in itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
Corporation or, with respect to any criminal action or proceeding, that the
person had reasonable cause to believe that his conduct was unlawful. Any person
seeking indemnification under this

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Section 8.1 shall be deemed to have met the standard of conduct required for
such indemnification unless the contrary is established.

Section 8.2. Actions By or in the Right of the Corporation. The
Corporation (i) shall, to the maximum extent permitted from time to time under
the laws of the State of Delaware, indemnify every person who is or was a party
or who is or was threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of the Corporation or any of its direct or indirect
subsidiaries or is or was serving at the request of the Corporation or any of
its direct or indirect subsidiaries as a director, officer or fiduciary of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, and (ii) may, to the maximum extent permitted from time to
time under the laws of the State of Delaware, indemnify every person who is or
was a party or who is or was threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that such person is or was
an employee or agent of the Corporation or any of its direct or indirect
subsidiaries or is or was serving at the request of the Corporation or any of
its direct or indirect subsidiaries as an employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including counsel fees) actually and reasonably
incurred by such person in connection with the defense or settlement or such
action or suit if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation; provided, however, that no indemnification shall be made with
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnification.

Section 8.3. Expenses. Expenses incurred by a director or officer of
the Corporation or any of its direct or indirect subsidiaries in defending a
civil or criminal action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article VIII. Such expenses
incurred by other employees and agents of the Corporation and other persons
eligible for indemnification under this Article VIII may be paid upon such terms
and conditions, if any, as the Board of Directors deems appropriate.

Section 8.4. Non-exclusivity. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article VIII shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any provision of law, the
Certificate of Incorporation, the certificate of incorporation or bylaws or
other governing documents of any direct or indirect subsidiary of the
Corporation, under any agreement, vote of stockholders or disinterested
directors or under any policy or policies of insurance maintained by the
Corporation on behalf of any person or otherwise, both as to action in his
official capacity and

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as to action in another capacity while holding any of the positions or having
any of the relationships referred to in this Article VIII.

Section 8.5. Enforceability. The provisions of this Article VIII (i)
are for the benefit of, and may be enforced directly by, each director or
officer of the Corporation the same as if set forth in their entirety in a
written instrument executed and delivered by the Corporation and such director
or officer and (ii) constitute a continuing offer to all present and future
directors and officers of the Corporation. The Corporation, by its adoption of
these Bylaws, (A) acknowledges and agrees that each present and future director
and officer of the Corporation has relied upon and will continue to rely upon
the provisions of this Article VIII in becoming, and serving as, a director or
officer of the Corporation or, if requested by the Corporation, a director,
officer or fiduciary or the like of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, (B) waives reliance
upon, and all notices of acceptance of, such provisions by such directors and
officers and (C) acknowledges and agrees that no present or future director or
officer of the Corporation shall be prejudiced in his right to enforce directly
the provisions of this Article VIII in accordance with their terms by any act or
failure to act on the part of the Corporation.

Section 8.6. Insurance. The Board of Directors may authorize, by a vote
of the majority of the Whole Board, the Corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article VIII.

Section 8.7. Survival. The provisions of this Article VIII shall
continue as to any person who has ceased to be a director or officer of the
Corporation and shall inure to the benefit of the estate, executors,
administrators, heirs, legatees and devisees of any person entitled to
indemnification under this Article VIII.

Section 8.8. Amendment. No amendment, modification or repeal of this
Article VIII or any provision hereof shall in any manner terminate, reduce or
impair the right of any past, present or future director or officer of the
Corporation to be indemnified by the Corporation, nor the obligation of the
Corporation to indemnify any such director or officer, under and in accordance
with the provisions of this Article VIII as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising, in whole or in
part, from a state of facts extant on the date of, or relating to matters
occurring prior to, such amendment, modification or repeal, regardless of when
such claims may arise or be asserted.

Section 8.9. Definitions. For purposes of this Article VIII, (i)
reference to any person shall include the estate, executors, administrators,
heirs, legatees and devisees of such person, (ii) "employee benefit plan" and
"fiduciary" shall be deemed to include, but not be limited to, the meaning set
forth, respectively, in sections 3(3) and 21(A) of the Employee Retirement
Income

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Security Act of 1974, as amended, (iii) references to the judgments, fines and
amounts paid or owed in settlement or rendered or levied shall be deemed to
encompass and include excise taxes required to be paid pursuant to applicable
law in respect of any transaction involving an employee benefit plan and (iv)
references to the Corporation shall be deemed to include any predecessor
corporation or entity and any constituent corporation or entity absorbed in a
merger, consolidation or other reorganization of or by the Corporation which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees, agents and fiduciaries so that any
person who was a director, officer, employee, agent or fiduciary of such
predecessor or constituent corporation or entity, or served at the request of
such predecessor or constituent corporation or entity as a director, officer,
employee, agent or fiduciary of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, shall stand in the same
position under the provisions of this Article VIII with respect to the
Corporation as such person would have with respect to such predecessor or
constituent corporation or entity if its separate existence had continued.

ARTICLE IX

Notices and Waivers

Section 9.1. Methods of Giving Notices. Whenever, by applicable law,
the Certificate of Incorporation or these Bylaws, notice is required to be given
to any Stockholder, any director or any member of a committee of the Board of
Directors and no provision is made as to how such notice shall be given,
personal notice shall not be required and such notice may be given (i) in
writing, by mail, postage prepaid, addressed to such Stockholder, director or
committee member at his address as it appears on the books or (in the case of a
Stockholder) the stock transfer records of the Corporation or (ii) by any other
method permitted by law (including, but not limited to, overnight courier
service, telegram, telex or telecopier). Any notice required or permitted to be
given by mail shall be deemed to be delivered and given at the time when the
same is deposited in the United States mail as aforesaid. Any notice required or
permitted to be given by overnight courier service shall be deemed to be
delivered and given one business day after delivery to such service with all
charges prepaid and addressed as aforesaid. Any notice required or permitted to
be given by telegram, telex or telecopy shall be deemed to be delivered and
given at the time transmitted with all charges prepaid and addressed as
aforesaid.

Section 9.2. Waiver of Notice. Whenever any notice is required to be
given to any Stockholder, director or member of a committee of the Board of
Directors by applicable law, the Certificate of Incorporation or these Bylaws, a
waiver thereof in writing signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be equivalent to
the giving of such notice. Attendance of a Stockholder (whether in person or by
proxy), director or committee member at a meeting shall constitute a waiver of
notice of such meeting, except where such person attends for the express purpose
of objecting to the transaction of any business on the ground that the meeting
is not lawfully called or convened.

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ARTICLE X

Miscellaneous Provisions

Section 10.1. Dividends. Subject to applicable law and the provisions
of the Certificate of Incorporation, dividends may be declared by the Board of
Directors at any meeting and may be paid in cash, in property or in shares of
the Corporation's capital stock. Any such declaration shall be at the discretion
of the Board of Directors. A director shall be fully protected in relying in
good faith upon the books of account of the Corporation or statements prepared
by any of its officers as to the value and amount of the assets, liabilities or
net profits of the Corporation or any other facts pertinent to the existence and
amount of surplus or other funds from which dividends might properly be
declared.

Section 10.2. Reserves. There may be created by the Board of Directors,
out of funds of the Corporation legally available therefor, such reserve or
reserves as the Board of Directors from time to time, in its absolute
discretion, considers proper to provide for contingencies, to equalize dividends
or to repair or maintain any property of the Corporation, or for such other
purpose as the Board of Directors shall consider beneficial to the Corporation,
and the Board of Directors may thereafter modify or abolish any such reserve in
its absolute discretion.

Section 10.3. Checks. All checks, drafts or other orders for payment of
money, notes or other evidences of indebtedness, issued in the name of or
payable to the Corporation shall be signed by such officer or officers or by
such employees or agents of the Corporation as may be designated from time to
time by the Board of Directors.

Section 10.4. Corporate Contracts and Instruments. Subject always to
the specific directions of the Board of Directors, the Chairman of the Board (if
any), the President, any Vice President, the Secretary or the Treasurer may
enter into contracts and execute instruments in the name and on behalf of the
Corporation. The Board of Directors and, subject to the specific directions of
the Board of Directors, the Chairman of the Board (if any) or the President may
authorize one or more officers, employees or agents of the Corporation to enter
into any contract or execute any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances.

Section 10.5. Attestation. With respect to any deed, deed of trust,
mortgage or other instrument executed by the Corporation through its duly
authorized officer or officers, the attestation to such execution by the
Secretary or an Assistant Secretary of the Corporation shall not be necessary to
constitute such deed, deed of trust, mortgage or other instrument a valid and
binding obligation of the Corporation unless the resolutions, if any, of the
Board of Directors authorizing such execution expressly state that such
attestation is necessary.

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Section 10.6 Securities of Other Corporations. The Chairman of the
Board, the Chief Executive Officer, the President or any Vice President of the
Corporation shall have the power and authority to transfer, endorse for
transfer, vote, consent or take any other action with respect to any securities
of another issuer which may be held or owned by the Corporation and to make,
execute and deliver any waiver, proxy or consent with respect to any such
securities.

Section 10.7. Fiscal Year. The fiscal year of the Corporation shall be
January 1 through December 31, unless otherwise fixed by the Board of Directors.

Section 10.8. Seal. The seal of the Corporation shall be such as from
time to time may be approved by the Board of Directors.

Section 10.9. Invalid Provisions. If any part of these Bylaws shall be
invalid or inoperative for any reason, the remaining parts, so far as is
possible and reasonable, shall remain valid and operative.

Section 10.10. Headings. The headings used in these Bylaws have been
inserted for administrative convenience only and shall not limit or otherwise
affect any of the provisions of these Bylaws.

Section 10.11. References/Gender/Number. Whenever in these Bylaws the
singular number is used, the same shall include the plural where appropriate.
Words of any gender used in these Bylaws shall include the other gender where
appropriate. In these Bylaws, unless a contrary intention appears, all
references to Articles and Sections shall be deemed to be references to the
Articles and Sections of these Bylaws.

Section 10.12. Amendments. These Bylaws may be altered, amended or
repealed or new bylaws may be adopted by the affirmative vote of a majority of
the Whole Board; provided, however, that no such action shall be taken at any
special meeting of the Board of Directors unless notice of such action is
contained in the notice of such special meeting. These Bylaws may not be
altered, amended or rescinded, nor may new bylaws be adopted, by the
Stockholders except by the affirmative vote of the holders of not less than
66-2/3% of the voting power of all outstanding Voting Stock, voting together as
a single class. Each alteration, amendment or repeal of these Bylaws shall be
subject in all respects to Section 8.8.

<PAGE> 1
EXHIBIT 10.1

INDEMNIFICATION AGREEMENT

This INDEMNIFICATION AGREEMENT is made as of March , 2000, and is
entered into by and between Sierra Well Service, Inc., a Delaware corporation
(the "Company"), and ______________________ ("Indemnitee").

R E C I T A L S:

WHEREAS, the certificate of incorporation and bylaws of the
Company provide for the indemnification of its directors and executive officers
to the maximum extent permitted from time to time under applicable law and,
along with the Delaware General Corporation Law, contemplate that the Company
may enter into agreements with respect to such indemnification; and

WHEREAS, the Board of Directors of the Company has concluded that
it is reasonable, prudent and in the best interests of the Company*s
stockholders for the Company to contractually obligate itself to indemnify
certain of its Authorized Representatives (defined below) so that they will
serve or continue to serve with greater certainty that they will be adequately
protected.

NOW, THEREFORE, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Indemnitee hereby agree as follows:

1. Definitions. For purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires, the
following terms shall have the following respective meanings:

"Authorized Representative" means (i) a director, officer,
employee, agent or fiduciary of the Company or any Subsidiary and (ii) a
person serving at the request of the Company or any Subsidiary as a
director, officer, employee, fiduciary or other representative of
another Enterprise.

"Enterprise" means any corporation, partnership, limited
liability company, association, joint venture, trust, employee benefit
plan or other entity.

"Expenses" means all expenses, including (without limitation)
reasonable fees and expenses of counsel.

"Liabilities" means all liabilities, including (without
limitation) the amounts of any judgments, fines, penalties, excise taxes
and amounts paid in settlement.

<PAGE> 2

"Proceeding" means any threatened, pending or completed claim,
action (including any action by or in the right of the Company), suit or
proceeding (whether formal or informal, or civil, criminal,
administrative, legislative, arbitrative or investigative) in respect of
which Indemnitee is, was or at any time becomes, or is threatened to be
made, a party, witness, subject or target, by reason of the fact that
Indemnitee is or was an Authorized Representative or a prospective
Authorized Representative.

"Subsidiary" means, at any time, (i) any corporation of which at
least a majority of the outstanding voting stock is owned by the Company
at such time, directly or indirectly through subsidiaries, and (ii) any
other Enterprise in which the Company, directly or indirectly, owns more
than a 50% equity interest at such time.

2. Interpretation. (a) In this Agreement, unless a clear
contrary intention appears:

(i) the singular number includes the plural number and vice
versa;

(ii) reference to any gender includes each other gender;

(iii) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to
any particular Section or other subdivision;

(iv) unless the context indicates otherwise, reference to any
Section means such Section hereof; and

(v) the words "including" (and with correlative meaning
"include") means including, without limiting the generality of any
description preceding such term.

(b) The Section headings herein are for convenience only and
shall not affect the construction hereof.

(c) No provision of this Agreement shall be interpreted or
construed against any party solely because that party or its legal
representative drafted such provision.

(d) In the event of any ambiguity, vagueness or other similar
matter involving the interpretation or meaning of this Agreement, this Agreement
shall be liberally construed so as to provide to Indemnitee the full benefits
contemplated hereby.

(e) If the indemnification to which Indemnitee is entitled as
respects any aspect of any claim varies between two or more provisions of this
Agreement, that provision providing the most comprehensive indemnification shall
apply.

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<PAGE> 3

3. Limitation on Personal Liability. To the fullest extent
permitted by applicable law, Indemnitee shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director of the Company, provided that the foregoing shall not eliminate or
limit the liability of Indemnitee (i) for any breach of Indemnitee's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law relating to
unlawful dividend payments and unlawful stock purchases or redemptions or (iv)
for any transaction from which Indemnitee derived an improper personal benefit.

4. Indemnity. (a) Subject to the following provisions of this
Agreement, the Company shall hold harmless and indemnify Indemnitee against all
Expenses and Liabilities actually incurred by Indemnitee in connection with any
Proceeding; provided, however, that no indemnity shall be paid by the Company
pursuant to this Agreement:

(i) for amounts actually paid to Indemnitee pursuant to one or
more policies of directors and officers liability insurance maintained
by the Company or pursuant to a trust fund, letter of credit or other
security or funding arrangement provided by the Company; provided,
however, that if it should subsequently be determined that Indemnitee is
not entitled to retain any such amount, this clause (i) shall no longer
apply to such amount;

(ii) in respect of remuneration paid to Indemnitee if it shall be
determined by a final judgment or other final adjudication that payment
of such remuneration was in violation of applicable law;

(iii) on account of Indemnitee*s conduct which is finally
adjudged to constitute willful misconduct or to have been knowingly
fraudulent, deliberately dishonest or from which the Indemnitee derives
an improper personal benefit; or

(iv) on account of any suit in which final judgment is rendered
against Indemnitee for an accounting of profits made from the sale or
purchase by Indemnitee of securities of the Company pursuant to the
provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended.

(b) If Indemnitee is entitled under any provision of this
Agreement to indemnification by the Company for only a portion (but not,
however, for the total amount) of any Expenses or Liabilities actually incurred
by Indemnitee in connection with any Proceeding, the Company shall nevertheless
indemnify Indemnitee for the portion of such Expenses and Liabilities to which
Indemnitee is entitled. If the indemnification provided for herein in respect of
any Expenses or Liabilities actually incurred by Indemnitee in connection with
any Proceeding is finally determined by a court of competent jurisdiction to be
prohibited by applicable law, then the Company, in lieu of indemnifying
Indemnitee, shall contribute to the amount paid or payable by Indemnitee as a
result of such Expenses and Liabilities in such proportion as is appropriate to
reflect (i) the relative benefits

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<PAGE> 4

received by the Company on the one hand and Indemnitee on the other hand from
the events, circumstances, conditions, happenings, actions or transactions from
which such Proceeding arose, (ii) the relative fault of the Company (including
its other Authorized Representatives) on the one hand and of Indemnitee on the
other hand in connection with the events, circumstances and happenings which
resulted in such Expenses and Liabilities, such relative fault to be determined
by reference to, among other things, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent the events,
circumstances and/or happenings resulting in such Expenses and Liabilities, and
(iii) any other relevant equitable considerations, it being agreed that it would
not be just and equitable if such contribution were determined by pro rata or
other method of allocation which does not take into account the foregoing
equitable considerations.

(c) The indemnification provided herein shall be applicable only
to Proceedings commenced after the date hereof, regardless, however, of whether
they arise from acts, omissions, facts or circumstances occurring before or
after the date hereof.

(d) The indemnification provided herein shall be applicable
whether or not negligence of Indemnitee is alleged or proved, and regardless of
whether such negligence be contributory or sole.

(e) Amounts paid by the Company to Indemnitee under this Section
4 are subject to refund by Indemnitee as provided in Section 8.

5. Notification and Defense of Claims. (a) Promptly after the
receipt by Indemnitee of notice of the commencement of any Proceeding,
Indemnitee will, if a claim in respect thereof is to be made against the Company
under this Agreement, notify the Company of the commencement of such Proceeding;
provided, however, that the omission to so notify the Company will not relieve
the Company (i) from any liability which it may have to Indemnitee under this
Agreement unless, and then only to the extent that, such omission results in
insufficient time being available to permit the Company or its counsel to
effectively defend against or make timely response to any loss, claim, damage,
liability or expense resulting from such Proceeding or otherwise has a material
adverse effect on the Company's ability to promptly deal with such loss, claim,
damage, liability or expense or (ii) from any liability which it may have to
Indemnitee otherwise than under this Agreement.

(b) The following provisions shall apply with respect to any such
Proceeding as to which Indemnitee notifies the Company of the commencement
thereof:

(i) The Company shall be entitled to participate therein at its
own expense.

(ii) Except as otherwise provided below, to the extent it may
elect to do so, the Company (jointly with any other indemnifying party
similarly notified) will be entitled to assume the defense thereof, with
counsel of its own selection reasonably satisfactory to Indemnitee.
After notice from the Company to Indemnitee of its election so to assume
the defense thereof, the Company will not be liable to Indemnitee under
this Agreement for any

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<PAGE> 5

Expenses subsequently incurred by Indemnitee in connection with the
defense of such Proceeding other than reasonable costs of
investigation or as otherwise provided below. Indemnitee shall have
the right to employ separate counsel in such Proceeding but the fees
and expenses of such counsel incurred after notice from the Company of
its assumption of the defense thereof shall be at the expense of
Indemnitee unless (1) the employment of separate counsel by Indemnitee
has been authorized by the Company; (2) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between
the Company and Indemnitee in the conduct of the defense of such
Proceeding; or (3) the Company shall not in fact have employed counsel
to assume the defense of such Proceeding, in each of which cases the
reasonable fees and expenses of Indemnitee's counsel shall be borne by
the Company. The Company shall not be entitled to assume the defense
of any Proceeding brought by or on behalf of the Company or as to
which Indemnitee shall have made the conclusion provided for in (2)
above. Nothing in this subparagraph (ii) shall affect the obligation
of the Company to indemnify Indemnitee against Expenses and
Liabilities paid in settlement for which it is otherwise obligated
hereunder.

(iii) The Company shall not be liable to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any
Proceedings or claims effected without its prior written consent. The
Company shall not settle any Proceeding or claim in any manner which
would impose any penalty or limitation on Indemnitee without
Indemnitee's prior written consent. Neither the Company nor Indemnitee
will unreasonably withhold or delay its consent to any proposed
settlement.

6. Advancement of Expenses, etc. If requested to do so by
Indemnitee with respect to any Proceeding, the Company shall advance to or for
the benefit of Indemnitee, in reasonable intervals prior to the final
disposition of such Proceeding, the Expenses actually incurred by Indemnitee in
investigating, defending or appealing such Proceeding. Any judgments, fines or
amounts to be paid in settlement of any Proceeding shall also be advanced by the
Company upon request by Indemnitee. Advances made by the Company under this
Section 6 are subject to refund by Indemnitee as provided in Section 8.

7. Right of Indemnitee to Bring Suit. (a) If a claim for
indemnification or a claim for an advance under this Agreement is not paid in
full by the Company within 30 days after receipt by the Company from Indemnitee
of a written request or demand therefor, Indemnitee may bring suit against the
Company to recover the unpaid amount of the claim. If, in any such action,
Indemnitee makes a prima facie showing of entitlement to indemnification under
this Agreement, the Company shall have the burden of proving that
indemnification is not required under this Agreement. The only defense to any
such action shall be that indemnification is not required by this Agreement.

(b) In the event that any action is instituted by Indemnitee to
enforce Indemnitee's rights or to collect monies due to Indemnitee under this
Agreement and if Indemnitee is successful in such action, the Company shall
reimburse Indemnitee for all Expenses incurred by Indemnitee with respect to
such action.

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<PAGE> 6

8. Repayment Obligation of Indemnitee. If the Company advances or
pays any amount to Indemnitee under Section 4, 6 or 7 and if it shall thereafter
be finally adjudicated that Indemnitee was not entitled to be indemnified
hereunder for all or any portion of such amount, Indemnitee shall promptly repay
such amount or such portion thereof, as the case may be, to the Company. If the
Company advances or pays any amount to Indemnitee under Section 4, 6 or 7 and if
Indemnitee shall thereafter receive all or a portion of such amount under one or
more policies of directors and officers liability insurance maintained by the
Company or pursuant to a trust fund, letter of credit or other security or
funding arrangement provided by the Company, Indemnitee shall promptly repay
such amount or such portion thereof, as the case may be, to the Company.

9. Changes in Law. If any change after the date of this Agreement
in any applicable law, statute or rule expands the power of the Company to
indemnify Authorized Representatives, such change shall be within the purview of
Indemnitee's rights and the Company's obligations under this Agreement. If any
change after the date of this Agreement in any applicable law, statute or rule
narrows the right of the Company to indemnify an Authorized Representative, such
change shall, to the fullest extent permitted by applicable law, leave this
Agreement and the parties' rights and obligations hereunder unaffected.

10. Continuation of Indemnity. All agreements and obligations of
the Company hereunder shall continue during the period Indemnitee is an
Authorized Representative, and shall continue after Indemnitee has ceased to
occupy such position or have such relationship so long as Indemnitee shall be
subject to any possible Proceeding.

11. Maintenance of Insurance. (a) The Company represents that it
presently maintains in force and effect the following directors and officers
liability insurance ("D&O Insurance") policies (the "Insurance Policies"):

<TABLE>
<CAPTION>
Insurer Policy No. Coverage
------- ---------- --------
<S> <C> <C>

</TABLE>

Subject only to the provisions of Section 11(b) hereof, the Company hereby
agrees that, so long as Indemnitee shall continue to serve as an Authorized
Representative and thereafter so long as Indemnitee shall be subject to any
possible Proceeding, the Company shall use its best efforts to purchase and
maintain in effect for the benefit of Indemnitee one or more valid and
enforceable policy or policies of D&O Insurance providing, in all respects,
coverage at least comparable to that currently provided pursuant to the
Insurance Policies, provided that the Company shall have no obligation to
provide primary coverage in excess of $_____ million or excess coverage in
excess of $______ million.

(b) The Company shall not be required to purchase and maintain
the Insurance Policies in effect if D&O Insurance is not reasonably available or
if, in the reasonable business judgement of the then directors of the Company,
either (i) the premium cost for such insurance is excessive in light of the
amount of coverage or (ii) the coverage provided by such insurance is so

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<PAGE> 7

limited by exclusions, retentions, deductibles or otherwise that there is
insufficient benefit from such insurance.

12. Nonexclusivity. The indemnification and other rights provided
by any provision of this Agreement shall not be deemed exclusive of any other
rights to which Indemnitee may be entitled under (i) any statutory or common
law, (ii) the Company's certificate of incorporation, (iii) the Company's
bylaws, (iv) any other agreement or (v) any vote of stockholders or
disinterested directors or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while occupying any of the
positions or having any of the relationships referred to in this Agreement.
Nothing in this Agreement shall in any manner affect, impair or compromise any
indemnification Indemnitee has or may have by virtue of any agreement previously
entered into between Indemnitee and the Company.

13. Severability. If any provision of this Agreement shall be
held to be invalid, illegal or unenforceable (i) the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be in any
way affected or impaired thereby and (ii) to the fullest extent possible, the
provisions of this Agreement shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable. Each
provision of this Agreement is a separate and independent portion of this
Agreement.

14. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties. No waiver of any of the provisions of this Agreement shall be
binding unless executed in writing by the person making the waiver nor shall
such waiver constitute a continuing waiver.

15. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be addressed (i) if to
the Company, at its principal office address as shown on the signature page
hereof or such other address as it may have designated by written notice to
Indemnitee for purposes hereof, directed to the attention of the Secretary and
(ii) if to Indemnitee, at Indemnitee's address as shown on the signature page
hereof or to such other address as Indemnitee may have designated by written
notice to the Company for purposes hereof. Each such notice or other
communication shall be deemed to have been duly given if (a) delivered by hand
and receipted for by the party to whom said notice or other communication shall
have been directed, (b) transmitted by facsimile transmission, at the time that
receipt of such transmission is confirmed, or (c) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed.

16. Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER, AND SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.

17. Heirs, Successors and Assigns. (a) This Agreement shall be
binding upon, inure to the benefit of and be enforceable by (i) Indemnitee and
Indemnitee's personal or legal

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<PAGE> 8

representatives, executors, administrators, heirs, devisees and legatees and
(ii) the Company and its successors and assigns. This Agreement shall not inure
to the benefit of any other person or Enterprise.

(b) The Company agrees to require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used herein, the term "Company" shall include any successor
to its business and/or assets as aforesaid which executes and delivers the
assumption and agreement provided for in this Section 17 or which otherwise
becomes bound by all terms and provisions of this Agreement by operation of law.

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<PAGE> 9

ENTERED into on the day and year first above written.

SIERRA WELL SERVICE, INC.

By:
-------------------------
Name:
Title:
Address:
Telecopier:

INDEMNITEE:

-----------------------------
[OFFICER/DIRECTOR]

Address:
Telecopier:

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<PAGE> 1
EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Basic Energy Services, Inc.:

We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.

/s/ KPMG LLP
-----------------------------
KPMG LLP

Midland, Texas
March 23, 2000