POOL ENERGY SERVICES CO, 424B1, 1996-07-03

POOL ENERGY SERVICES CO
424B1, 1996-07-03
OIL & GAS FIELD SERVICES, NEC

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<PAGE> 1

4,000,000 SHARES

[POOL ENERGY SERVICES, CO. LOGO]

COMMON STOCK

THE 4,000,000 SHARES OF COMMON STOCK, NO PAR VALUE (THE "COMMON STOCK"),
OFFERED HEREBY ARE BEING OFFERED BY POOL ENERGY SERVICES CO. (THE "COMPANY").
THE COMMON STOCK IS QUOTED ON THE NASDAQ NATIONAL MARKET ("NASDAQ") UNDER THE
SYMBOL "PESC." ON JULY 2, 1996, THE LAST REPORTED SALES PRICE OF THE COMMON
STOCK ON NASDAQ WAS $11 5/16 PER SHARE. SEE "PRICE RANGE OF COMMON STOCK AND
DIVIDEND POLICY."

FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE SHARES OF COMMON
STOCK OFFERED HEREBY, SEE "RISK FACTORS" ON PAGES 9-11.

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

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

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

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS* COMPANY+
<S> <C> <C> <C>
PER SHARE......................... $11.00 $0.605 $10.395
TOTAL++........................... $44,000,000 $2,420,000 $41,580,000
</TABLE>

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

* THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933. SEE
"UNDERWRITING."

+ BEFORE DEDUCTING EXPENSES OF THE OFFERING PAYABLE BY THE COMPANY ESTIMATED
TO BE $315,000.

++ THE COMPANY HAS GRANTED THE UNDERWRITERS A 30-DAY OPTION TO PURCHASE UP TO
600,000 ADDITIONAL SHARES OF COMMON STOCK ON THE SAME TERMS PER SHARE SOLELY
TO COVER OVER-ALLOTMENTS, IF ANY. IF SUCH OPTION IS EXERCISED IN FULL, THE
TOTAL PRICE TO PUBLIC WILL BE $50,600,000, THE TOTAL UNDERWRITING DISCOUNTS
AND COMMISSIONS WILL BE $2,783,000 AND THE TOTAL PROCEEDS TO THE COMPANY
WILL BE $47,817,000. SEE "UNDERWRITING."

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

THE COMMON STOCK IS BEING OFFERED BY THE UNDERWRITERS AS SET FORTH UNDER
"UNDERWRITING" HEREIN. IT IS EXPECTED THAT THE DELIVERY OF CERTIFICATES THEREFOR
WILL BE MADE AT THE OFFICES OF DILLON, READ & CO. INC., NEW YORK, NEW YORK, ON
OR ABOUT JULY 9, 1996. THE UNDERWRITERS INCLUDE:

DILLON, READ & CO. INC.
SALOMON BROTHERS INC
JOHNSON RICE & COMPANY L.L.C.

THE DATE OF THIS PROSPECTUS IS JULY 3, 1996
<PAGE> 2

[PHOTO APPEARS HERE]

Rig 489, a state-of-the-art 2,000 horsepower platform drilling rig, is
scheduled to commence operations offshore Australia in the second half of 1996.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE
10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

<PAGE> 3
[PHOTO APPEARS HERE]

Land drilling rig operating in Saudi Arabia.

[PHOTO APPEARS HERE]

Offshore jackup workover rig operating in the
Gulf of Mexico.

[PHOTO APPEARS HERE]

Arctic land development drilling rig operating
on the North Slope of Alaska.

[PHOTO APPEARS HERE]

Domestic onshore production services equip-
ment fleet includes fluid hauling trucks and
frac tanks.

<PAGE> 4

[PHOTO APPEARS HERE]

[Map of principal locations and services]

[PHOTO APPEARS HERE]

Domestic land well-servicing rig leaving yard in route to jobsite.
<PAGE> 5

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Common Stock
offered by this Prospectus. This Prospectus does not contain all the information
set forth in the Registration Statement and the exhibits and schedules thereto
or incorporated by reference therein. For further information with respect to
the Company and the Common Stock, reference is made to the Registration
Statement and to the exhibits and schedules filed therewith. Statements made in
this Prospectus as to the contents of any contract, agreement or document
referred to are not necessarily complete; with respect to each such contract,
agreement or document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Registration Statement, such reports, proxy statements and other
information may be inspected by anyone without charge at the public reference
facilities maintained by the Commission at its principal office located at 450
Fifth Street, N.W., Room 1024, Judiciary Plaza, Washington, D.C. 20549, and at
the regional offices of the Commission located at 7 World Trade Center, Suite
1300, New York, New York 10048, and at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and copies of all such material may be obtained from
the Public Reference Section of the Commission upon payment of prescribed fees.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, which have been filed by the Company with the
Commission, are incorporated in this Prospectus by reference and shall be deemed
part hereof:

(a) Annual Report on Form 10-K for the year ended December 31, 1995;

(b) Quarterly Report on Form 10-Q for the quarter ended March 31,
1996;

(c) the description of the Common Stock appearing in the Company's
Registration Statement on Form 8-A dated April 9, 1990, as
amended, and filed with the Commission under the Exchange Act;

(d) Current Report on Form 8-K filed with the Commission on June 27,
1995, as amended by amendment on Form 8-K/A filed on August 25,
1995; and

(e) Current Report on Form 8-K filed with the Commission on June 11,
1994.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering made hereby shall be deemed to be incorporated
by reference in the Prospectus and to be a part hereof from the date of the
filing of such documents. Any statement contained in this Prospectus, in a
supplement to this Prospectus or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed supplement to this Prospectus or in any document
that also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.

The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, on the written or oral request of any such person, a copy of any or
all of the documents referred to above which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Written or telephone requests for such copies
should be directed to Pool Energy Services Co., 10375 Richmond Ave., Suite 1900,
Houston, Texas 77042, Attention: Mr. David Oatman (telephone number: (713)
954-3316).

3
<PAGE> 6

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified
in its entirety by, the more detailed information and consolidated financial
statements (including the notes thereto) appearing elsewhere in this Prospectus
and in the documents incorporated by reference in this Prospectus. Unless
otherwise indicated, the information in this Prospectus assumes that the
Underwriters' over-allotment option will not be exercised. As used in this
Prospectus, the "Company" refers to Pool Energy Services Co., its subsidiary
corporations and its unconsolidated affiliates.

THE COMPANY

GENERAL

Pool Energy Services Co., founded in 1948, is the largest well-servicing
and workover company in the world based on the number of rigs it operates. The
Company performs the ongoing maintenance and major overhauls necessary to
optimize the level of production from existing oil and natural gas wells and
provides certain ancillary services for the drilling and completion of new oil
and natural gas wells. The Company also provides contract drilling services in
Alaska, the Gulf of Mexico and certain international locations. Typically, the
Company provides a well-servicing, workover or drilling rig, the crew to operate
the rig and such other specialized equipment as may be required. The Company
operates onshore and offshore, both domestically and internationally, providing
services for a diverse group of multi-national, foreign national and independent
oil and natural gas producers.

As of March 31, 1996, the Company's worldwide fleet totaled 723 rigs,
including 678 land well-servicing/workover rigs, 18 land drilling rigs, 19
offshore platform rigs (14 workover rigs and five drilling rigs) and eight
offshore jackup rigs. In the United States, the Company operates in several oil
and natural gas producing states, with specific concentration onshore in Texas,
California, Alaska and Oklahoma and offshore in the Gulf of Mexico. The Company
also owns or leases and operates 263 fluid hauling trucks, 683 frac tanks, ten
salt water disposal wells and other auxiliary equipment in its domestic onshore
operations.

Internationally, the Company has a substantial presence in the Middle East,
principally in Saudi Arabia, where it is one of the largest providers of
workover and drilling services and has been providing such services for
approximately 20 years. Other important international markets where the Company
has an established presence include Ecuador, Trinidad, Malaysia and Pakistan. In
the second half of 1995, the Company reestablished operations in Australia and
has recently entered into a letter of intent to acquire a 51% interest in a
newly formed Argentina corporation. The Company is also currently evaluating new
Southeast Asian and other South American markets.

The Company currently conducts a significant part of its operations through
joint ventures. These ventures are unconsolidated affiliates and the ownership
and operating results are reported using the equity method of accounting. The
Company has acquired the interests of its partners in two of these ventures and
has entered into a letter of intent to acquire its partner's interest in a third
venture. In addition to the business and operational benefits to the Company,
such acquisitions enable the Company to report the revenues and earnings of such
affiliates on a consolidated basis. In the future, it is the intention of the
Company to enter new international markets through wholly-owned subsidiaries,
except where economic, legal and political circumstances dictate otherwise.

4
<PAGE> 7

BUSINESS STRATEGY

- expanding opportunities in existing core market areas through
acquisitions that result in consolidation savings;

- upgrading and enhancing the capabilities of the Company's existing fleet
and building certain specialized rig equipment to operate in markets with
high levels of activity and strong pricing fundamentals;

- entering new foreign markets that offer significant development and
production activity; and

- offering additional core services and equipment that complement the
Company's businesses in its existing field locations.

STRATEGY IMPLEMENTATION

Significant progress has been made in the implementation of the Company's
business strategy. Particularly notable events include:

Acquisitions of joint venture partners' interests:

- In May 1996, the Company entered into a letter of intent to acquire
the 51% interest in its Malaysia joint venture, Antah Drilling Sdn.
Bhd. ("Antah Drilling"), that it does not already own for approximately
$3.7 million in cash. In addition, approximately $5.4 million will be
used to repay indebtedness of Antah Drilling owed to the Company's
partner in that venture. This venture's assets include a new
state-of-the-art 2,000 horsepower platform drilling rig and a platform
workover rig.

- In April 1996, the Company acquired the 51% interest in its Trinidad
joint venture, Pool Santana, Limited, that it did not already own for
$1.2 million in cash. This entity's primary asset is a platform
workover rig and its related equipment.

Expansion and enhancement of rig fleet:

- In June 1996, the Company acquired the operating assets (including
approximately 23 land well-servicing rigs) of Western Oil Well Service
Co. ("Western Oil") in the Williston Basin for approximately $4.0
million in cash. The acquisition will require an additional $0.5
million in working capital. Management believes this acquisition will
enhance the Company's competitive position in the Rocky Mountain
region.

- In May 1996, the Company entered into a letter of intent to acquire a
51% interest in a newly formed Argentina corporation which will provide
drilling, workover and well services in Argentina. This new corporation
will own and operate nine land drilling rigs and 11 land workover rigs.
The Company's investment in this corporation will be approximately $8.7
million and it will contribute $2.2 million for working capital.

5
<PAGE> 8

- In March 1996, the Company received a term contract for Rig 18, a
previously idle platform drilling rig, which is being refurbished at a
cost of approximately $7.5 million plus $1.0 million in working
capital. This 2,000 horsepower rig will be placed in service in the
Gulf of Mexico for Shell Offshore and is expected to begin operations
in the third quarter of 1996. In addition, the Company has implemented
a program to refurbish other platform rigs in its Gulf of Mexico fleet
to benefit from the increased level of activity in this region.

- In March 1996, the Company completed the construction of, and placed
in operation, a multi-purpose, electrically-powered platform workover
rig at a cost of $2.5 million. In addition, this rig has been committed
to Oryx Energy to operate on a floating production platform in the Gulf
of Mexico. Operations for Oryx Energy are expected to commence in the
fourth quarter of 1996.

- In the second half of 1995, the Company reestablished its presence in
Australia by placing in operation a platform workover rig. The Company
also has entered into a term contract through Antah Drilling for a
state-of-the-art 2,000 horsepower platform drilling rig ("Rig 489").
Rig 489 is scheduled to commence operations for Esso Australia, Ltd. in
the third quarter of 1996. Both of these new platform rigs were
designed and constructed by the Company.

- In June 1995, the Company acquired Golden Pacific Corp. ("GPC") for
approximately $18.8 million. This acquisition included, among other
assets, the GPC fleet of approximately 155 land well-servicing rigs in
California. The Company is now the market leader in California with a
total of 260 well-servicing rigs.

The Company's revenues have increased approximately 21% to $277.3 million
in 1995 from $229.2 million in 1994, with an approximate 33% increase in EBITDA
to $21.9 million in 1995 from $16.5 million in 1994. After giving effect to the
June 1995 acquisition of GPC as if it had occurred on January 1, 1995, the pro
forma revenues increased approximately 30% over historical 1994 revenues to
$298.3 million, and pro forma EBITDA increased approximately 57% over historical
1994 EBITDA to $25.8 million. See "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." These
revenue and EBITDA increases are primarily attributable to the progress the
Company has made in implementing its business strategy. EBITDA should not be
considered as an alternative to net income as an indicator of the Company's
operating performance or as an alternative to cash flows as a better measure of
liquidity.

COMPETITIVE ADVANTAGES

The Company believes its competitive advantages include: (i) the
availability and condition of equipment to meet both special and general
customer needs in several domestic and international markets; (ii) the
availability of trained personnel possessing the required specialized skills;
(iii) the geographic diversity of the Company's operations which decreases the
Company's exposure to changing conditions in any particular domestic or
international market; (iv) overall quality of service and safety record; and (v)
domestically, the ability to offer ancillary services that smaller companies
typically do not offer (such as fluid hauling, frac tank rental and salt water
disposal). In addition, as an enhancement to its competitive position, the
Company has been able to establish strategic alliances with major customers in
its domestic onshore, international and Alaska markets, including several
alliances in California that were obtained in the acquisition of GPC. Many
smaller competitors may not be able to allocate the resources necessary to enter
into such alliances.

The Company is a Texas corporation with its principal offices located at
10375 Richmond Avenue, Houston, Texas 77042. Its telephone number is (713)
954-3000.

6
<PAGE> 9

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the
Company..................... 4,000,000 shares(1)

Common Stock to be Outstand-
ing After the Offering...... 18,234,688 shares(1)(2)

Use of Proceeds............... The Company intends to use the net proceeds from the offering
as follows: (i) $10.9 million will be used in connection with
the acquisition of a 51% interest in a newly formed
corporation in Argentina; (ii) $9.1 million will be used in
connection with the acquisition of the 51% interest in Antah
Drilling that the Company does not already own; (iii) $4.5
million will be used in connection with the acquisition of
the operating assets of Western Oil; (iv) approximately $4.4
million will be used to pay the remaining refurbishment costs
and provide working capital for Rig 18, which is to be placed
in service in the Gulf of Mexico for Shell Offshore; and (v)
approximately $5.3 million will be used to replenish working
capital reserves that the Company used in 1996 to fund
refurbishment costs of Rig 18 and the acquisition of Pool
Santana, Limited. In addition, the Company intends to use a
portion of the net proceeds to repay indebtedness incurred
under the Line of Credit (approximately $5.5 million
principal amount outstanding as of June 10, 1996). Any
proceeds remaining after application of the net proceeds as
set forth above (and any portion of the net proceeds that is
not used as a result of a failure to consummate the proposed
Antah Drilling and Argentina transactions) will be used for
general corporate purposes. See "Use of Proceeds".

Nasdaq National Market
symbol...................... PESC
</TABLE>

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

(1) Excludes 600,000 shares of Common Stock subject to the Underwriters'
over-allotment option.

(2) Does not include 1,145,768 shares issuable upon the exercise of outstanding
stock options, of which options to purchase 713,598 shares were exercisable
as of June 28, 1996.

7
<PAGE> 10

SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 YEAR ENDED DECEMBER 31
-------------------- ---------------------------------------------
1995 PRO
1996 1995 FORMA(1) 1995(2) 1994(3) 1993
-------- -------- --------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues...................................... $ 81,682 $ 62,854 $298,325 $277,305 $229,175 $240,524
Earnings Attributable to Unconsolidated
Affiliates.................................. 658 775 2,955 2,955 5,016 6,860
Costs and Expenses:
Operating expenses.......................... 63,581 51,178 236,391 219,074 182,012 187,412
Selling, general and administrative
expenses.................................. 11,298 9,362 40,331 39,927 36,927 37,797
Depreciation and amortization(4)............ 4,253 3,335 16,086 15,002 13,760 16,307
GPC acquisition related costs(5)............ -- -- -- 622 -- --
Provision for leasehold impairment(6)....... -- -- -- -- 23,551 --
-------- -------- -------- -------- -------- --------
Total................................... 79,132 63,875 292,808 274,625 256,250 241,516
-------- -------- -------- -------- -------- --------
Other Income (Expense) -- Net................. 164 481 1,289 1,289 1,202 2,239
Interest Expense.............................. 645 151 2,401 1,811 253 508
-------- -------- -------- -------- -------- --------
Income (Loss) Before Income Taxes............. 2,727 84 7,360 5,113 (21,110) 7,599
Income Tax Provision (Credit)................. 1,304 (131) 2,902 1,981 (8,381) 1,399
-------- -------- -------- -------- -------- --------
Net Income (Loss)............................. $ 1,423 $ 215 $ 4,458 $ 3,132 $(12,729) $ 6,200
======== ======== ======== ======== ======== ========
Earnings (Loss) Per Share of Common Stock..... $ .10 $ .02 $ .32 $ .23 $ (.94) $ .46
======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT PERIOD END):
Cash and Cash Equivalents..................... $ 6,177 $ 2,567 $ 5,492 $ 2,560 $ 4,603
Property, Plant and Equipment -- Net.......... 125,760 105,039 124,024 101,536 85,297
Total Assets.................................. 259,137 215,717 248,443 209,818 193,154
Long-Term Debt and Notes Payable to Related
Parties (excluding current maturities)...... 19,310 336 15,784 369 --
Shareholders' Equity.......................... 137,653 128,854 136,027 128,639 141,345
OTHER DATA:
EBITDA(7)..................................... $ 7,625 $ 3,570 $ 25,847 $ 21,926 $ 16,454 $ 24,414
Property Additions(8)......................... 5,356 8,340 23,436 10,897 14,223
</TABLE>

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

(1) On June 13, 1995, the Company acquired all of the outstanding capital stock
of GPC. The acquisition was accounted for under the purchase method. The
unaudited pro forma summary of financial information presents the Company's
consolidated results of operations as if the acquisition had occurred at
the beginning of 1995, after including the impact of certain adjustments,
such as: additional depreciation expense, amortization of goodwill,
increased interest expense on the acquisition debt, decreased insurance
expense, elimination of certain transactions with affiliates of GPC and
related income tax effects.

(2) Includes the results of GPC since the June 13, 1995 acquisition. See Note 3
of Notes to Consolidated Financial Statements.

(3) Includes the results from Pool Arctic Alaska since the September 28, 1994
acquisition, which was accounted for under the purchase method. See Note 3
of Notes to Consolidated Financial Statements.

(5) See Note 3 of Notes to Consolidated Financial Statements for a discussion of
the GPC acquisition related costs of $0.6 million pretax ($0.4 million, or
$.03 per share, after-tax).

(6) See Note 6 of Notes to Consolidated Financial Statements for a discussion of
the $23.6 million pretax ($15.3 million, or $1.13 per share, after-tax)
provision for leasehold impairment.

(7) EBITDA (earnings before interest, taxes, depreciation and amortization,
provision for leasehold impairment and writedown of assets) is presented
here to provide additional information about the Company's operations.
EBITDA should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to
cash flows as a better measure of liquidity.

(8) Excluding acquisitions of businesses.

8
<PAGE> 11

RISK FACTORS

In addition to considerations bearing on their individual situations, the
information set forth elsewhere herein and the documents incorporated by
reference herein, prospective purchasers should carefully consider the
following:

OIL AND NATURAL GAS MARKET CONDITIONS AFFECT PERFORMANCE

Demand for the Company's services substantially depends on conditions in
the worldwide oil and natural gas industry, particularly on the level of
development, production and exploration activity of, and the corresponding
spending by, oil and natural gas companies. Such activity and expenditure levels
are directly impacted by trends in oil and natural gas prices, expectations
about future prices, governmental regulations, worldwide political, military and
economic conditions, including the ability of the Organization of Petroleum
Exporting Countries ("OPEC") to set and maintain production levels and prices,
the level of production by non-OPEC countries and the policies of various
governments regarding the exploration and development of their oil and natural
gas reserves. These factors have contributed to, and are likely to continue to
contribute to, oil and natural gas price volatility. A substantial amount of the
Company's operations are in United States markets where, despite occasional
upturns, the demand for the Company's well-servicing, workover and production
services has been adversely affected by volatility in oil and natural gas prices
for much of the past decade. In addition, ongoing movement or reactivation of
equipment or new construction of equipment could adversely affect the Company's
rates and utilization levels, even in an environment of stronger oil and natural
gas prices and increased drilling activity. See "Business -- Business by Service
Line."

RISKS INHERENT IN INTERNATIONAL OPERATIONS

The Company's foreign operations are subject to various risks associated
with doing business overseas, such as the possibility of armed conflict and
civil disturbance, the instability of foreign economies, currency fluctuations
and devaluations, adverse tax policies and governmental activities that may
limit or disrupt markets, restrict payments or the movement of funds or result
in the deprivation of contract rights or the expropriation of property.
Additionally, the ability of the Company to compete overseas may be adversely
affected by foreign governmental regulations that encourage or mandate the
hiring of local contractors, or by regulations that require foreign contractors
to employ citizens of, or purchase supplies from, a particular jurisdiction. The
Company is subject to taxation in many jurisdictions, and the final
determination of its tax liabilities involves the interpretation of the statutes
and requirements of various domestic and foreign taxing authorities. Foreign
income tax returns of foreign subsidiaries, unconsolidated affiliates and
related entities are routinely examined by foreign tax authorities.

COMPETITION

Although the number of available rigs has materially decreased over the
past ten years, the well-servicing, workover and drilling markets remain very
competitive. The number of rigs continues to exceed demand, resulting in severe
price competition. Many of the total available contracts are currently awarded
on a bid basis, which further increases competition based on price. In all of
the Company's market areas, competitive factors also include the availability,
condition and type of equipment to meet both special and general customer needs,
the availability of trained personnel possessing the required specialized skills
and the overall quality of service and safety record. See
"Business -- Competitive Conditions."

DEPENDENCE ON CERTAIN CUSTOMER

One customer, Shell Oil Company and its affiliates, accounted for
approximately 11% of the Company's consolidated revenues for the year ended
December 31, 1995 and approximately 12% of consolidated revenues for the three
months ended March 31, 1996. The loss of this customer could have

9
<PAGE> 12

a material adverse effect on the Company's operations and financial condition.
See "Business -- Competitive Conditions."

OPERATING RISKS AND INSURANCE

The Company's operations involve workers conducting activities with and
around machinery and equipment in close proximity to highly flammable oil and
natural gas, and are subject to hazards inherent in the oil and natural gas
industry, including, without limitation, blowouts, fires, explosions and other
casualties. Incidents involving such hazards can cause personal injury or loss
of life, damage to or destruction of property, including equipment, oil and
natural gas production and producing formations and the environment, and
suspension of operations. The frequency and severity of such incidents affect
the Company's operating costs and its relationship with customers, employees and
regulators, and any significant increase in the frequency or severity of such
incidents, or the general level of compensation awards with respect thereto,
could affect the Company's ability to obtain insurance and could have a material
adverse effect on the Company. Although the Company has generally been able to
obtain insurance on terms it considers to be reasonable, there can be no
assurance that insurance will continue to be available on reasonable terms.

The Company maintains insurance coverage of types and amounts that it
believes to be customary in the industry. The Company also endeavors to
negotiate contractual indemnification provisions in its contracts with customers
to cover risks for which the Company is not insured. It is possible, however,
that significant liabilities could arise that would not be covered, and for
which the applicable contract between the Company and its customer would not
provide indemnity protection to the Company for the particular loss involved.
Additionally, it is possible that liabilities could arise that would exceed
applicable policy limits. Liabilities for which the Company is not insured, or
which exceed the policy limits of applicable insurance, and for which the
Company is not otherwise contractually protected through indemnification by a
customer, could have a material adverse effect on the Company.

POSSIBLE IMPACT OF ENVIRONMENTAL REGULATION AND CLAIMS

Laws protecting the environment have generally become more stringent than
in the past and are expected to continue to do so. Environmental laws and
regulations typically impose "strict liability," which means that in some
situations the Company could be exposed to liability for cleanup costs and other
damages as a result of conduct of the Company that was lawful at the time it
occurred or conduct of, or conditions caused by, others. Cleanup 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 the Company's financial condition. From time
to time, claims have been made and litigation has been brought against the
Company under such laws. See "Business -- Environmental Regulation and Claims."

Changes in federal and state environmental regulations may also negatively
impact oil and natural gas exploration and production companies, which in turn
could have a material adverse effect on the Company. For example, legislation
has been proposed from time to time in Congress which would reclassify oil and
natural gas production wastes as "hazardous wastes." If enacted, such
legislation could dramatically increase operating costs for domestic oil and
natural gas companies, and this could reduce the market for the Company's
services by making many wells and/or oilfields uneconomical to operate. To date,
such legislation has not made significant progress toward enactment.

10
<PAGE> 13

DIVIDEND POLICY

No payment of dividends on the Common Stock is anticipated in the
foreseeable future. Certain of the Company's credit facilities prohibit the
payment of dividends. See "Price Range of Common Stock and Dividend Policy."

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS

Certain provisions of the Company's Articles of Incorporation and Bylaws
may have the effect of deterring attempts to gain control of the Company. In
addition, the Company maintains a shareholder rights plan to deter unfair
takeover attempts and has entered into agreements with certain key members of
management providing for the payment of certain severance benefits to such
persons in the event of their termination following a change in control of the
Company. These provisions and arrangements not only could impede a merger,
consolidation, takeover or other business combination involving the Company, but
also could discourage a potential acquiror from making a tender offer or
otherwise attempting to gain control of the Company. See "Description of Capital
Stock -- Provisions Having Anti-Takeover Effect."

11
<PAGE> 14

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby, after deduction of underwriting discounts and commissions and
estimated offering expenses, are estimated to be $41,265,000, (or $47,502,000 if
the Underwriters' over-allotment option is exercised).

The Company intends to use such net proceeds as follows: (i) $10.9 million
will be used in connection with the acquisition of a 51% interest in a newly
formed corporation in Argentina; (ii) $9.1 million will be used in connection
with the acquisition of the 51% interest in Antah Drilling that the Company does
not already own; (iii) $4.5 million will be used in connection with the
acquisition of the operating assets of Western Oil; (iv) approximately $4.4
million will be used to pay the remaining refurbishment costs and provide
working capital for Rig 18, which is to be placed in service in the Gulf of
Mexico for Shell Offshore; and (v) approximately $5.3 million will be used to
replenish working capital reserves that the Company used in 1996 to fund
refurbishment costs of Rig 18 and the acquisition of Pool Santana, Limited. In
addition, the Company intends to use the remaining net proceeds to repay
indebtedness incurred by the Company under its syndicated bank revolving line of
credit (the "Line of Credit") (approximately $5.5 million principal amount
outstanding as of June 10, 1996) and for general corporate purposes as described
below. See "Prospectus Summary" and "Business -- Strategy Implementation."

The Company has entered into separate letters of intent with respect to the
Antah Drilling transaction and the new Argentina corporation. With respect to
these proposed transactions, definitive agreements have not been negotiated and
there can be no assurance that the Company will enter into such agreements or
that either of these transactions will be consummated.

Any proceeds remaining after application of the net proceeds as set forth
above will be used for general corporate purposes, which may include: (a) making
capital improvements to rigs in the Company's Gulf of Mexico fleet; (b)
prepayment of the Alaska Loan (approximately $5.9 million outstanding principal
amount at June 28, 1996); (c) prepayment of the Australia Loan (approximately
$5.5 million outstanding principal amount at June 28, 1996); (d) assuming the
consummation of the Antah Drilling acquisition, repayment of a portion of Antah
Drilling's outstanding bank indebtedness (which will be reduced to approximately
$15.1 million principal amount in September 1996); and (e) pursuing strategic
acquisition opportunities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Financial Condition and
Liquidity -- Pool Arctic Alaska Acquisition" and "-- Credit Facilities and
Long-Term Debt."

The indebtedness outstanding under the Line of Credit bears interest at a
floating rate, which is, at the Company's option, (i) the lenders' prime rate
plus 0.25%, or (ii) the London Interbank Offered Rate ("LIBOR") plus 2.625%,
with the Company's choice of a one-, two-, three- or six-month interest period
and which was 8.5% on June 28, 1996. The Alaska Loan and the Australia Loan bear
interest at floating rates, which are, at the Company's option, (a) the lenders'
prime rate plus 0.5%, or (b) LIBOR plus 2.75%, with the Company's choice of a
one-, two-, three- or six-month interest period. On June 28, 1996, the interest
rate on each of these loans was 8.24%. The Alaska Loan matures on March 31,
1998, and the Australia Loan will be repaid monthly from the related rig
contract proceeds over approximately four years, ending October 1999. The
undrawn balance of the Line of Credit (approximately $21.5 million after
repayment of the outstanding indebtedness) will be available for capital
expenditures and general corporate purposes until its maturity in April 1997.
See Note 5 of Notes to Consolidated Financial Statements.

To the extent the net proceeds from the offering are not used immediately,
such proceeds will be invested in short-term, investment-grade instruments.

12
<PAGE> 15

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Company's Common Stock is traded on the Nasdaq National Market under
the symbol "PESC." The following table sets forth the high and low sale prices
per share of the Common Stock for the periods indicated, as reported by Nasdaq.

<TABLE>
<CAPTION>
PRICE
-------------
HIGH LOW
---- ----
<S> <C> <C>
1996
Second Quarter........................................... $14 5/8 $11
First Quarter............................................ 11 5/8 8 5/8

1995
Fourth Quarter........................................... $ 9 7/8 $ 8 1/2
Third Quarter............................................ 9 7/8 7 7/8
Second Quarter........................................... 9 3/8 7 1/2
First Quarter............................................ 8 5/8 6 5/8

1994
Fourth Quarter........................................... $ 9 $ 6 1/4
Third Quarter............................................ 10 3/8 7 7/8
Second Quarter........................................... 10 1/2 6 3/8
First Quarter............................................ 8 1/2 6 5/8
</TABLE>

On June 28, 1996, the last reported sale price of the Common Stock as
reported by Nasdaq was $11 7/8 per share. At June 28, 1996, the approximate
number of holders of record of the Company's Common Stock was 3,441.

The Company has not paid dividends on its Common Stock. The Board of
Directors currently intends to retain any earnings for use in the Company's
business and does not intend to pay dividends in the foreseeable future. In
addition, certain of the Company's credit facilities prohibit the payment of
dividends. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Financial Condition and Liquidity" and Note 5 of Notes
to the Consolidated Financial Statements.

13
<PAGE> 16

CAPITALIZATION

The following table sets forth the consolidated (i) cash and cash
equivalents, (ii) current portion of long-term debt and (iii) capitalization of
the Company as of March 31, 1996 and as adjusted to give effect to the issuance
and sale of the 4,000,000 shares of Common Stock offered hereby, the application
of the estimated net proceeds therefrom, the consolidation of Antah Drilling
indebtedness upon its acquisition and the consolidation of the newly formed
Argentina corporation and its related minority interest. See "Use of Proceeds."
The table should be read in conjunction with the Consolidated Financial
Statements of the Company and Notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------
AS
ACTUAL ADJUSTED(1)
-------- -----------
(IN THOUSANDS
EXCEPT NUMBER OF SHARES)
<S> <C> <C>
Cash and Cash Equivalents.................................... $ 6,177 $ 13,042
======== =========
Current Portion of Long-Term Debt(2)(3)...................... $ 6,197 $ 19,817
======== =========
Long-Term Debt(2)(3)......................................... $ 19,310 $ 29,592
Minority Interest(4)......................................... -- 8,400
Shareholders' Equity:
Common stock (25,000,000 and 40,000,000 shares authorized;
14,091,183 and 18,091,183 shares issued and
outstanding)(5)......................................... 134,641 175,906
Retained earnings.......................................... 3,334 3,334
Cumulative foreign currency translation adjustments........ (322) (322)
-------- -----------
Total Shareholders' Equity.............................. 137,653 178,918
-------- -----------
Total Capitalization.................................... $156,963 $ 216,910
======== =========
</TABLE>

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

(1) Reflects the sale of the 4,000,000 shares of Common Stock offered hereby at
$11.00 per share, resulting in estimated net proceeds of $41,265,000 (after
deducting underwriting discounts and commissions and estimated offering
expenses), and assumes that the Underwriters' over-allotment option is not
exercised.

(2) See Note 5 of Notes to Consolidated Financial Statements.

(3) The as adjusted long-term debt includes approximately $23.9 million of debt
assumed with the acquisition and resulting consolidation of Antah Drilling.
Approximately $9 million of Antah Drilling's debt is expected to be repaid
by September 30, 1996 from proceeds of a mobilization fee which becomes
payable by Esso Australia upon commencement of operation of Rig 489.

(4) The as adjusted minority interest reflects the 49% outside ownership
interest in the newly formed Argentina corporation.

(5) Excludes 1,473,797 shares of Common Stock currently reserved for issuance
under the Company's stock option and stock incentive plans, under which
options to purchase 1,145,768 shares were outstanding as of June 28, 1996.
The as adjusted authorized shares reflect the increase in authorized shares
approved at the Annual Meeting of Shareholders on May 2, 1996.

14
<PAGE> 17

SELECTED FINANCIAL DATA

The following table sets forth certain historical consolidated financial
data of the Company and should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
Consolidated Financial Statements and Notes thereto included elsewhere herein.
The data for the five years ended December 31, 1995 has been derived from the
Company's audited consolidated financial statements. The data for the three
months ended March 31, 1996 and 1995 has been derived from the Company's
unaudited consolidated financial statements, which in the opinion of management
include all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the data included therein in accordance with
generally accepted accounting principles for interim financial information. Pro
forma and interim information should not be deemed indicative of future
operating results of the Company, and pro forma information may not be
indicative of the results that actually would have occurred if the transaction
included therein had been included in the indicated period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 YEAR ENDED DECEMBER 31
------------------- -------------------------------------------------------------------
1995 PRO
1996 1995 FORMA(1) 1995(2) 1994(3) 1993 1992 1991
-------- -------- ------------ -------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues............................. $ 81,682 $ 62,854 $298,325 $277,305 $229,175 $240,524 $216,512 $225,840
Earnings Attributable to
Unconsolidated Affiliates.......... 658 775 2,955 2,955 5,016 6,860 9,261 5,265
Costs and Expenses:
Operating expenses................. 63,581 51,178 236,391 219,074 182,012 187,412 168,446 168,457
Selling, general and administrative
expenses......................... 11,298.. 9,362 40,331 39,927 36,927 37,797 40,213 42,297
Depreciation and amortization(4)... 4,253 3,335 16,086 15,002 13,760 16,307 18,022 18,337
GPC acquisition related costs(5)... -- -- -- 622 -- -- -- --
Provision for leasehold
impairment(6).................... -- -- -- -- 23,551 -- -- --
Writedown of assets(7)............. -- -- -- -- -- -- 4,617 --
------- ------- -------- -------- -------- -------- -------- --------
Total.......................... 79,132 63,875 292,808 274,625 256,250 241,516 231,298 229,091
------- ------- -------- -------- -------- -------- -------- --------
Other Income (Expense) -- Net........ 164 481 1,289 1,289 1,202 2,239 (288) 471
Interest Expense..................... 645 151 2,401 1,811 253 508 917 695
------- ------- -------- -------- -------- -------- -------- --------
Income (Loss) Before Income Taxes.... 2,727 84 7,360 5,113 (21,110) 7,599 (6,730) 1,790
Income Tax Provision (Credit)........ 1,304 (131) 2,902 1,981 (8,381) 1,399 (3,762) (753)
------- ------- -------- -------- -------- -------- -------- --------
Income (Loss) Before Cumulative
Effect of Accounting Change........ 1,423 215 4,458 3,132 (12,729) 6,200 (2,968) 2,543
Cumulative Effect on Prior Years of
Change in Accounting for Income
Taxes(8)........................... -- -- -- -- -- -- 1,159 --
------- ------- -------- -------- -------- -------- -------- --------
Net Income (Loss).................... $ 1,423 $ 215 $ 4,458 $ 3,132 $(12,729) $ 6,200 $ (1,809) $ 2,543
======= ======= ======== ======== ======== ======== ======== ========
Per Share of Common Stock:
Income (loss) before cumulative
effect of accounting change...... $ .10 $ .02 $ .32 $ .23 $ (.94) $ .46 $ (.22) $ .19
Cumulative effect of accounting
change........................... -- -- -- -- -- -- .09 --
------- ------- -------- -------- -------- -------- -------- --------
Earnings (loss).................... $ .10 $ .02 $ .32 $ .23 $ (.94) $ .46 $ (.13) $ .19
======= ======= ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (AT PERIOD END):
Cash and Cash Equivalents............ $ 6,177 $ 2,567 $ 5,492 $ 2,560 $ 4,603 $ 3,183 $ 8,091
Property, Plant and Equipment --
Net................................ 125,760 105,039 124,024 101,536 85,297 97,198 110,437
Total Assets......................... 259,137 215,717 248,443 209,818 193,154 196,486 197,878
Long-Term Debt and Notes Payable to
Related Parties (excluding current
maturities)........................ 19,310 336 15,784 369 -- -- --
Shareholders' Equity................. 137,653 128,854 136,027 128,639 141,345 135,037 136,846
OTHER DATA:
EBITDA(9)............................ $ 7,625 $ 3,570 $ 25,847 $ 21,926 $ 16,454 $ 24,414 $ 16,826 $ 20,822
Property Additions(10)............... 5,356 8,340 23,436 10,897 14,223 11,581 27,233
</TABLE>

- ---------------
(See footnotes on following page.)

15
<PAGE> 18

(2) Includes the results of GPC since the June 13, 1995 acquisition. See Note 3
of Notes to Consolidated Financial Statements.

(3) Includes the results from Pool Arctic Alaska since the September 28, 1994
acquisition, which was accounted for under the purchase method. See Note 3
of Notes to Consolidated Financial Statements.

(4) At the beginning of the fourth quarter of 1994, the Company revised its
estimate of the remaining depreciable lives of certain rigs and equipment
to better reflect the remaining economic lives of the assets. The effect of
this change in accounting estimate was to increase the 1995 net income by
approximately $2.1 million or $.15 per share and to decrease the 1994 net
loss by approximately $0.5 million or $.04 per share. At the beginning of
the third quarter of 1991, the Company changed the estimated salvage values
and remaining depreciable lives of certain equipment of the Company and its
unconsolidated affiliates to better reflect the remaining economic lives of
the assets and to treat them consistently with similar assets held by the
Company. This change had the effect of decreasing the net loss for the year
ended December 31, 1992 by $2.8 million or $.21 per share and increasing
net income for the year ended December 31, 1991 by $1.2 million or $.09 per
share.

(5) See Note 3 of Notes to Consolidated Financial Statements for a discussion
of the GPC acquisition related costs of $0.6 million pretax ($0.4 million,
or $.03 per share, after-tax).

(6) See Note 6 of Notes to Consolidated Financial Statements for a discussion
of the $23.6 million pretax ($15.3 million, or $1.13 per share, after-tax)
provision for leasehold impairment.

(7) In 1992, the Company recorded a $4.6 million pretax ($3.0 million, or $.23
per share, after-tax) writedown of certain of the Company's domestic
offshore rigs and equipment.

(8) The Company changed its method of accounting for income taxes in 1992.

(9) EBITDA (earnings before interest, taxes, depreciation and amortization,
provision for leasehold impairment and writedown of assets) is presented
here to provide additional information about the Company's operations.
EBITDA should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to
cash flows as a better measure of liquidity.

(10) Excluding acquisitions of businesses.

16
<PAGE> 19

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

QUARTERLY RESULTS

The following table presents information for the first quarter of 1996 and
by quarter for 1995 and 1994:

<TABLE>
<CAPTION>
1996 1995 1994
------- ---------------------------------------- -------------------------------------------
1ST 4TH 3RD 2ND 1ST 4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- -------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.............. $81,682 $75,131 $75,515 $63,805 $62,854 $ 62,771 $56,167 $54,261 $55,976
Earnings Attributable
to Unconsolidated
Affiliates.......... 658 785 752 643 775 883 1,038 1,233 1,862
Gross Profit(a)....... 18,759 17,703 15,963 15,069 12,451 14,396 11,026 13,262 13,495
Income (Loss) Before
Income Taxes........ 2,727 2,746 1,001 1,282 84 (22,652)(b) (230) 847 925
Net Income (Loss)..... 1,423 1,718 644 555 215 (14,794)(b) 571 820 674
Earnings (Loss) per
Share of Common
Stock............... $ .10 $ .12 $ .05 $ .04 $ .02 $ (1.09)(b) $ .04 $ .06 $ .05
EBITDA(c)............. $ 7,625 $ 7,580 $ 5,738 $ 5,038 $ 3,570 $ 4,471 $ 3,210 $ 4,340 $ 4,433
</TABLE>

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

(a) Gross profit is computed as consolidated revenues plus earnings attributable
to unconsolidated affiliates, less operating expenses (which excludes
selling, general and administrative expenses and depreciation and
amortization).

(b) Includes the $23.6 million pretax ($15.3 million, or $1.13 per share,
after-tax) provision for leasehold impairment during the fourth quarter of
1994. See Note 6 of Notes to Consolidated Financial Statements.

(c) EBITDA (earnings before interest, taxes, depreciation and amortization,
provision for leasehold impairment and writedown of assets) is presented
here to provide additional information about the Company's operations.
EBITDA should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to
cash flows as a better measure of liquidity.

RESULTS OF OPERATIONS

Golden Pacific Corp. Acquisition

On June 13, 1995, the Company acquired all of the outstanding capital stock
of GPC. Prior to the acquisition, GPC had annual revenues of approximately $50
million and operated a fleet of approximately 155 land well-servicing rigs in
California. See "-- Financial Condition and Liquidity -- Golden Pacific Corp.
Acquisition" and Note 3 of Notes to Consolidated Financial Statements for a
discussion of this acquisition.

Three Months Ended March 31, 1996 Compared To Three Months Ended March 31, 1995

For the quarter ended March 31, 1996, the Company had consolidated net
income of $1.4 million, reflecting stronger overall market conditions than those
prevailing in the first quarter of 1995, for which the Company reported net
income of $0.2 million. The average price per barrel of West Texas Intermediate
crude oil was higher by approximately 7% in the first quarter of 1996 than in
the first quarter of 1995, and average natural gas prices increased
approximately 105% comparing the same periods. Results from the Company's
domestic operations improved primarily due to higher activity for the Company's
jackup rigs and increased rates for its platform rigs located in the Gulf of
Mexico, increased land drilling activity in Alaska and the inclusion of results
from rigs and equipment acquired

17
<PAGE> 20

in the June 1995 GPC acquisition. The Company's domestic onshore operation
reported first quarter well-servicing rig hours 31% higher than in the
corresponding quarter of 1995, primarily due to the inclusion of rigs acquired
in the GPC acquisition. The Company's offshore operation in the Gulf of Mexico
experienced rig utilization of 66% in the first quarter of 1996, compared to 57%
during the comparable period of 1995; average rig rates were also 26% higher.
Earnings from the Company's Alaska operations increased from the first quarter
of 1995 due to all three of its Arctic land drilling rigs operating during the
first quarter of 1996, whereas only two were working and one was on standby
during the comparable period of 1995. Results from the Company's international
operations decreased primarily due to lower rig activity by its unconsolidated
affiliate in Saudi Arabia and reduced activity in Tunisia and Oman, offset
partly by results from a new offshore platform workover rig in Australia that
began contributing in the second half of 1995.

Revenues. Revenues were $81.7 million in the first quarter of 1996, a 30%
increase compared with revenues of $62.9 million in the first quarter of 1995.
This increase was attributable to the inclusion of revenues from rigs and
equipment acquired in the GPC acquisition, higher activity for the jackup rigs
and rates for the platform rigs located in the Gulf of Mexico, as well as higher
land drilling activity in Alaska. Domestic onshore well-servicing and related
services revenues increased $11.2 million or 36% in the first quarter of 1996
from the corresponding quarter of 1995, chiefly as a result of the GPC
acquisition. Domestic onshore rig utilization was 53% in both the first quarter
of 1996 and the first quarter of 1995. Gulf of Mexico offshore workover and
drilling revenues increased $5.5 million or 77%, and Alaska operations revenues
increased $2.6 million or 40%. International operations revenues were unchanged
from the first quarter of 1995 as the revenues attributable to the new offshore
platform workover rig in Australia were offset by the absence of a rig contract
in Tunisia, lower rig utilization in Oman and the completion of a land drilling
contract in Ecuador. Revenues for international operations do not include
revenues from the Company's foreign joint ventures, which are unconsolidated
affiliates.

Earnings Attributable to Unconsolidated Affiliates. Earnings attributable
to unconsolidated affiliates were $0.7 million in the first quarter of 1996
compared to $0.8 million in the first quarter of 1995. Earnings attributable to
Pool Arabia, Ltd., the Company's Saudi Arabia affiliate, decreased $0.4 million
from the first quarter of 1995 primarily as a result of the completion in March
1995 of a land drilling contract in Saudi Arabia. The decrease in the earnings
of Pool Arabia, Ltd. was mostly offset by better operating results from the
Malaysia joint venture.

Costs and Expenses. The Company's costs and expenses were $79.1 million in
the first quarter of 1996, a 24% increase compared to costs and expenses of
$63.9 million in the corresponding quarter of 1995. Such increase was
attributable to the inclusion of costs and expenses related to the rigs and
equipment obtained in the GPC acquisition as well as costs associated with
higher levels of activity in the Gulf of Mexico and Alaska.

Interest Expense. Interest expense was $0.5 million higher in the first
quarter of 1996 than in the corresponding quarter of 1995 due primarily to
borrowings related to the term loan entered into in April 1995 that was used to
refinance the 1994 acquisition of the 60.7% partnership interest in Pool Arctic
Alaska, the notes payable related to the GPC acquisition and the term loan used
to refinance the construction costs of the new offshore platform workover rig in
Australia, offset partly by lower average borrowings under the Company's
syndicated bank revolving line of credit.

Income Taxes. The Company recorded income tax expense of $1.3 million in
the first quarter of 1996 (which included $0.9 million of deferred taxes) on
income before income taxes of $2.7 million, compared to an income tax benefit of
$0.1 million on income before income taxes of $0.1 million in the first quarter
of 1995. This net increase of $1.4 million of income tax expense was due
primarily to stronger domestic operating results in the first quarter of 1996
compared to the first quarter of 1995. The Company's interim period tax expense
is determined by utilizing the aggregate of estimated annual effective tax rates
for each of the Company's domestic and foreign locations.

18
<PAGE> 21

Year Ended December 31, 1995 Compared To Year Ended December 31, 1994

The Company, on a consolidated basis, had net income of $3.1 million in
1995, compared with a net loss of $12.7 million in 1994. The 1995 net income
included a $0.6 million ($0.4 million after-tax) charge for costs related to the
GPC acquisition. The 1994 results included a $23.6 million ($15.3 million
after-tax) provision for leasehold impairment. (See "-- Other Matters -- San
Angelo Lease Commitment.") The average price per barrel of West Texas
Intermediate crude oil was higher by approximately 7% in 1995 than in 1994.
Although average natural gas prices dropped approximately 15% from 1994 to 1995,
natural gas prices in December 1995 rose above $2.00 per mcf, the highest they
had been since the first quarter of 1994. Results from the Company's domestic
operations improved primarily because of increased activity onshore in the lower
48 states, offsetting the effect of reduced operating results in Alaska. The
Company's domestic onshore operation reported rig hours 28% higher for 1995 than
in 1994, primarily due to the inclusion of rigs from the GPC acquisition since
June 14, 1995. The Company's offshore operation in the Gulf of Mexico
experienced rig utilization of 65% in 1995, compared to 53% in 1994; average rig
rates, however, were lower, particularly for the jackup rigs. Earnings from the
Company's Alaska operations decreased from 1994 due to one of its three Arctic
land drilling rigs being on standby status for all of 1995, whereas it operated
for the first four months of 1994 before going on standby status for the
remainder of the year, and due to the completion in late 1994 of a long-term
offshore drilling rig contract. Results from the Company's international
operations decreased primarily due to lower earnings from the Company's
unconsolidated affiliate located in Saudi Arabia, reduced land drilling activity
in Ecuador and the completion in mid-1994 of two rig contracts in Kuwait.

Revenues. Revenues were $277.3 million in 1995, compared to $229.2 million
in 1994. This increase was attributable to the inclusion of revenues for the
entire year of 1995 from rigs and equipment previously owned by the Pool Arctic
Alaska partnership compared to three months of revenues in 1994 (see
"-- Financial Condition and Liquidity -- Pool Arctic Alaska Acquisition"),
revenues from rigs and equipment acquired in the GPC acquisition (see
"-- Financial Condition and Liquidity -- Golden Pacific Corp. Acquisition"), a
higher level of activity by the Company's domestic onshore well-servicing rig
fleet, increased rig activity in Tunisia, Oman and Pakistan, revenues
attributable to a new offshore platform workover rig in Australia and increased
domestic production services activity in 1995. Increased revenues in 1995 were
offset partly by the completion in mid-1994 of two rig contracts in Kuwait which
were not replaced during 1995 and reduced land drilling activity in Ecuador.

Domestic onshore well-servicing and related services revenues increased
$33.5 million or 29% in 1995 from 1994, chiefly as a result of the GPC
acquisition. In addition, domestic production services revenues increased $1.2
million or 3% in 1995 from 1994. Domestic onshore rig utilization was 52% in
1995, compared to 48% in 1994. Domestic onshore well-servicing rig hours worked
increased from approximately 784,000 in 1994 to 1,003,000 in 1995 due primarily
to the purchase of GPC. Gulf of Mexico offshore workover and drilling revenues
in 1995 increased $1.4 million or 4% compared to 1994, due to higher rig
utilization, which was somewhat offset by lower rig rates. Revenues from
international operations increased $1.6 million or 6% in 1995 from 1994, due to
increased rig activity in Tunisia, Oman, Pakistan and Australia, offset partly
by the completion in mid-1994 of two rig contracts in Kuwait which were not
replaced during 1995 and reduced land drilling activity in Ecuador. Revenues for
international operations do not include revenues from the Company's foreign
joint ventures, which are unconsolidated affiliates.

In September 1994, the Company acquired the 60.7% partnership interest in
Pool Arctic Alaska (see "-- Financial Condition and Liquidity -- Pool Arctic
Alaska Acquisition") not already owned by the Company and, accordingly, revenues
generated from Pool Arctic Alaska rigs and equipment have been included in the
Company's consolidated financial statements since the date of such acquisition.
Revenues for Alaska operations included in the Company's consolidated financial
statements were $20.4 million in 1995. Revenues generated by the Company's
wholly-owned operations in Alaska in 1994 were $9.9 million, which included $5.7
million from an offshore rig operating in the Cook Inlet and

19
<PAGE> 22

$4.2 million generated after the acquisition date by the acquired Pool Arctic
Alaska rigs and equipment. Prior to the date of such acquisition, the Company's
revenues did not include revenues of Pool Arctic Alaska, which was an
unconsolidated affiliate, but did include revenues from the Company's wholly-
owned operations in Alaska.

Earnings Attributable to Unconsolidated Affiliates. Earnings attributable
to unconsolidated affiliates were $3.0 million in 1995, compared to $5.0 million
in 1994. Earnings attributable to Pool Arabia, Ltd., the Company's Saudi Arabia
affiliate, decreased $1.3 million from 1994 to $2.3 million in 1995 primarily as
a result of the completion in early 1995 of three land workover rig contracts in
Kuwait and the completion in March 1995 of a land drilling contract in Saudi
Arabia. Earnings attributable to Pool Arctic Alaska in 1994 were $0.5 million
through the date of acquisition (see "-- Financial Condition and
Liquidity -- Pool Arctic Alaska Acquisition"). Earnings from Pool Arctic Alaska
ceased to be included in earnings attributable to unconsolidated affiliates
immediately following the Company's purchase of its partner's interest in
September 1994.

Costs and Expenses. The Company's costs and expenses were $274.6 million in
1995, compared to $232.7 million in 1994 (excluding the provision for leasehold
impairment). Such increase was attributable to (i) the inclusion, for the period
June 14 through December 31, 1995, of costs and expenses related to the rigs and
equipment obtained in the GPC acquisition, (ii) the inclusion in 1995 of a full
year's costs and expenses related to the rigs and equipment previously owned by
the Pool Arctic Alaska partnership, (iii) $0.6 million of expenses related to
the GPC acquisition, primarily for yard closings, and (iv) costs associated with
higher levels of activity in the Company's domestic onshore well-servicing line
as well as in Tunisia, Oman, Pakistan and Australia. Partially offsetting these
higher costs and expenses were lower repair and maintenance expenses for the
Company's Gulf of Mexico offshore fleet, lower costs and expenses in Ecuador due
to a reduced level of land drilling activity and a reduction in the accrued
liability for workers' compensation and property damage claims. For a discussion
of the $23.6 million provision for leasehold impairment included in the
Company's 1994 costs and expenses, see "-- Other Matters -- San Angelo Lease
Commitment." At the beginning of the fourth quarter of 1994, the Company revised
its estimate of the remaining depreciable lives of certain rigs and equipment to
better reflect the remaining economic lives of such assets. Such change
increased net income for 1995 as compared to 1994 by approximately $1.6 million
or $.11 per share.

Other Income - Net. Other income - net in 1994 included a $0.5 million gain
resulting from a settlement related to the sale in 1991 of Libya assets that had
been written off in the mid-1980's when the Company terminated operations in
that country.

Interest Expense. Interest expense was $1.6 million higher in 1995 than in
1994 due primarily to the $10 million term loan to refinance the acquisition of
the 60.7% partnership interest in Pool Arctic Alaska, the GPC acquisition debt
and higher average borrowings under the Company's syndicated bank revolving line
of credit.

Income Taxes. The Company recorded income tax expense of $2.0 million on
income before income taxes of $5.1 million in 1995, compared to an income tax
benefit of $8.4 million on a loss before income taxes of $21.1 million in 1994.
The Company had income tax expense in 1995, compared to an income tax benefit in
1994, primarily as a result of the Company's recording a provision for leasehold
impairment in 1994, which generated a deferred income tax benefit of $8.2
million. The 1995 tax expense was due to stronger domestic operating results in
1995 plus the effect of certain amendments to prior period U.S. federal tax
returns, partly offset by the reversal of no longer needed deferred foreign
taxes for 1990 income tax indemnities and the elimination of the Company's
valuation allowance related to its U.S. federal net operating loss ("NOL")
carryforwards. The 1994 tax benefit also included a net reversal of $0.6 million
of previously accrued foreign income taxes. At December 31, 1995, the Company
had recognized $6.7 million of deferred income tax assets, net of valuation
allowance, in excess of deferred income tax liabilities. The net deferred income
tax assets resulted primarily from the 1994 provision for leasehold impairment
and the Company's U.S. federal income tax NOL carryforwards, which are expected
to be realized within the 15-year carryforward periods. The

20
<PAGE> 23

U.S. NOL carryforwards at December 31, 1995 were $12.0 million from 1991, $18.3
million from 1992, $8.0 million from 1994 and an estimated $5.9 million from
1995; they are available for utilization through the year(s) 2006, 2007, 2009
and 2010, respectively. The NOL carryforwards are expected to be realized
through future increases in taxable income as a result in part of lower tax
depreciation charges due to most existing property becoming fully depreciated
for U.S. tax purposes within the next one to two years and the expected increase
in taxable income resulting from the GPC acquisition. If necessary, the Company
also will consider repatriating future foreign earnings in order to fully
realize the NOL carryforwards before their expiration. See Note 4 of Notes to
Consolidated Financial Statements.

Year Ended December 31, 1994 Compared To Year Ended December 31, 1993

The Company, on a consolidated basis, had a net loss of $12.7 million in
1994 compared with net income of $6.2 million in 1993. The 1994 results included
a $23.6 million ($15.3 million after-tax) provision for leasehold impairment.
(See "-- Other Matters -- San Angelo Lease Commitment.") The 1994 results also
reflected weaker market conditions than those prevailing in the prior year.
Natural gas prices and the average price per barrel of West Texas Intermediate
crude oil were both notably lower in 1994 than in 1993. The drop in the
Company's domestic activity levels resulted primarily from the diminished
interest of its customers in investing in U.S. exploration and production
because of the weaker oil and natural gas prices during 1994. The Company's 1994
domestic onshore well-servicing rig hours were 9% lower than in 1993; however,
rig rates increased slightly. Gulf of Mexico offshore rig utilization was 53% in
1994, compared to 77% in 1993. Despite the decrease in rig utilization, average
rig rates were approximately 8% higher in 1994 than in 1993. Earnings from the
Company's international operations decreased primarily due to the mid-1994
completion of two rig contracts in Kuwait and lower earnings from the Company's
unconsolidated affiliates located in Saudi Arabia and Malaysia, offset partly by
the contribution from increased rig activity in Ecuador. Earnings from the
Company's Alaska operations in 1993 included a $1.1 million net after-tax gain
on the sale of an offshore rig, Rig 428, resulting from the exercise of a
purchase option by a customer.

Revenues. Revenues were $229.2 million in 1994, compared to $240.5 million
in 1993. The decrease in revenues from 1993 to 1994 was attributable to lower
activity by the Company's domestic onshore well-servicing and Gulf of Mexico
offshore rig fleets, lower rig mobilization revenues in Alaska, contracts being
completed during 1993 in the Adriatic Sea and the Ivory Coast, and the mid-1994
completion of two rig contracts in Kuwait. This decrease was offset partly by
higher rig activity in Ecuador, higher domestic production services activity in
1994 and the inclusion since late September 1994 of revenues from rigs
previously owned by Pool Arctic Alaska (see "-- Financial Condition and
Liquidity -- Pool Arctic Alaska Acquisition").

Domestic onshore well-servicing revenues decreased $8.9 million or 7% in
1994 from 1993. This decrease was offset partly by domestic production services
revenues, which increased $4.2 million or 11% in 1994 from 1993. Domestic
onshore rig utilization was 48% in 1994, compared to 51% in 1993. Domestic
onshore well-servicing rig hours worked decreased from approximately 864,000 in
1993 to 784,000 in 1994, due primarily to weaker market conditions than those
prevailing in the prior year. Gulf of Mexico offshore workover and drilling
revenues in 1994 decreased $2.7 million or 7% compared to 1993, due to lower rig
utilization caused by weaker natural gas prices during 1994. Revenues from
international operations decreased $4.1 million or 14% in 1994 from 1993, due
primarily to the completion in 1993 of contracts in the Adriatic Sea and the
Ivory Coast and in mid-1994 of two rig contracts in Kuwait, which were not
replaced during 1994, offset partly by higher rig activity in Ecuador. Revenues
for international operations do not include revenues from the Company's foreign
unconsolidated affiliates.

Beginning in mid-1992, Alaska operations began operating an offshore rig in
the Cook Inlet which earned revenues of $9.9 million in 1993 and $5.7 million in
1994, before coming off contract in late 1994. The utilization of this offshore
rig, reassigned from California, marked the first time the Company had
recognized revenues from its Alaska operations, as previous contracts had been
performed by rigs

21
<PAGE> 24

owned or leased by Pool Arctic Alaska, an unconsolidated affiliate prior to
September 1994. In September 1994, the Company acquired the 60.7% partnership
interest in Pool Arctic Alaska (see "-- Financial Condition and
Liquidity -- Pool Arctic Alaska Acquisition") not already owned by the Company,
and accordingly, revenues of $4.2 million generated from Pool Arctic Alaska rigs
and equipment were included in the Company's consolidated financial statements
from the date of such acquisition. Prior to the date of such acquisition, the
Company's revenues did not include revenues from Pool Arctic Alaska, but did
include revenues from the Company's wholly-owned operations in Alaska.

Earnings Attributable to Unconsolidated Affiliates. Earnings attributable
to unconsolidated affiliates were $5.0 million in 1994, compared to $6.9 million
in 1993. Earnings from Pool Arabia, Ltd., the Company's Saudi Arabia affiliate,
decreased $1.2 million from 1993 to $3.7 million in 1994 primarily as a result
of lower management fees paid to the Company in 1994 and the release of an
offshore rig in early 1994. Earnings from Pool Arctic Alaska in 1994 were $0.5
million through the date of acquisition (see "-- Financial Condition and
Liquidity -- Pool Arctic Alaska Acquisition") as compared to breakeven for the
year ended December 31, 1993. These 1994 earnings were favorably affected by
higher rig activity on the North Slope and improved results from labor and
maintenance contracts in the Cook Inlet compared to the prior year. Earnings
from the Company's Malaysia affiliate in 1994 decreased $1.3 million from 1993
due to the completion of a contract for an offshore rig during the first quarter
of 1994.

Costs and Expenses. The Company's costs and expenses were $232.7 million in
1994 (excluding the provision for leasehold impairment), compared to $241.5
million in 1993. The decrease in costs and expenses from 1993 to 1994 was
attributable to (i) lower levels of activity for the Company's domestic onshore
well-servicing, Gulf of Mexico offshore and international rig fleets, (ii) lower
rig mobilization expenses in Alaska, (iii) lower depreciation expense chiefly
due to assets becoming fully depreciated and to a revision in the estimate of
remaining depreciable lives of certain rigs and equipment and (iv) a $1.0
million pretax charge recorded in 1993 against the carrying value of certain
patent rights related to horizontal drilling technology. These cost reductions
were offset partly by 1994 maintenance and lease expenses related to three Gulf
of Mexico jackup workover rigs which were leased in December 1993. For a
discussion of the $23.6 million provision for leasehold impairment included in
the Company's costs and expenses in 1994, see "-- Other Matters -- San Angelo
Lease Commitment." At the beginning of the fourth quarter of 1994, the Company
revised its estimate of the remaining depreciable lives of certain rigs and
equipment to better reflect the remaining economic lives of such assets. Such
change decreased the net loss for the year ended December 31, 1994 by
approximately $0.5 million or $.04 per share.

Other Income - Net. Other income-net in 1994 included a $0.5 million gain
resulting from a settlement related to the sale in 1991 of Libya assets that had
been written off in the mid-1980's when the Company terminated operations in
that country. Other income-net in 1993 included a $1.2 million pretax gain
related to the sale of Rig 428.

Income Taxes. The Company recorded an income tax benefit of $8.4 million on
a loss before income taxes of $21.1 million in 1994, compared to income tax
expense of $1.4 million on income before income taxes of $7.6 million in 1993.
The Company had an income tax benefit in 1994, compared to income tax expense in
1993 primarily as a result of the Company recording a provision for leasehold
impairment in 1994 which generated a deferred income tax benefit of $8.2
million. The 1994 tax benefit also included a net reversal of $0.6 million of
previously accrued foreign income taxes. The Company's U.S. federal income tax
provision for 1993 reflected the effect, which was not significant, of the
Revenue Reconciliation Act of 1993.

FINANCIAL CONDITION AND LIQUIDITY

The Company had cash and cash equivalents of $6.2 million at March 31, 1996
compared to $5.5 million at December 31, 1995 and $2.6 million at December 31,
1994. Working capital was

22
<PAGE> 25

$29.0 million, $27.0 million and $33.0 million at March 31, 1996 and December
31, 1995 and 1994, respectively.

Cash Flows

For the three months ended March 31, 1996, the Company used a net $4.9
million for investing activities, primarily for capital expenditures of $5.4
million, offset partly by $0.3 million of proceeds from dispositions of
equipment. For the year ended December 31, 1995, net cash flows provided by
operating activities were $20.6 million, compared with $5.3 million and $15.3
million in 1994 and 1993, respectively. The Company used a net $21.2 million for
investing activities in 1995, primarily for capital expenditures of $23.4
million, including $6.9 million for the construction of a new offshore platform
workover rig which began earning revenues in Australia in the third quarter of
1995 and $3.4 million, net of cash acquired, used in connection with the GPC
acquisition and the related direct acquisition costs, partly offset by $2.4
million of proceeds from dispositions of equipment and $2.9 million of dividends
from unconsolidated affiliates. The Company used a net $9.5 million for
investing activities in 1994. This included the purchase of 60.7% of Pool Arctic
Alaska for $11.3 million, net of cash acquired, and $11.4 million of other
capital expenditures, offset partly by $7.0 million of proceeds from the sale
and leaseback of three offshore jackup rigs, $3.4 million of proceeds from sales
of other equipment and the receipt of $2.9 million of dividends from
unconsolidated affiliates. The Company used a net $10.5 million for investing
activities in 1993, including $14.2 million of capital expenditures and $1.4
million placed in escrow as collateral in connection with a sale and leaseback
arrangement, which were partially offset by $2.6 million of proceeds, net of
related construction expenditures, from the sale of Alaska Rig 428, $1.7 million
of proceeds from sales of other equipment and $0.7 million of dividends received
from unconsolidated affiliates.

Golden Pacific Corp. Acquisition

On June 13, 1995, the Company acquired all of the outstanding capital stock
of GPC for approximately $18.8 million, consisting of $11.5 million of
subordinated long-term notes due in 2005, approximately $3.1 million in cash and
493,543 shares of the Company's common stock valued at $4.2 million. See Notes 3
and 5 of Notes to Consolidated Financial Statements for further discussion.

Also in connection with the GPC acquisition, the Company assumed a
liability for certain deferred compensation obligations of GPC. To evidence such
obligations, the Company issued notes aggregating $1.5 million in principal
amount to three employees of GPC. See Note 5 of Notes to Consolidated Financial
Statements for further discussion.

As part of the acquisition of GPC, the Company assumed GPC's debt of $2.0
million, all of which was retired in June 1995.

Pool Arctic Alaska Acquisition

On September 28, 1994, the Company acquired the 60.7% partnership interest
in Pool Arctic Alaska it did not previously own for $12.1 million in cash. The
Company's Alaska operation now includes the three specialized Arctic land
drilling rigs and related equipment formerly owned by the Pool Arctic Alaska
partnership, and provides rig and contract labor services, both onshore and
offshore, in Alaska. This acquisition was accounted for under the purchase
method, and was initially funded from the Company's cash resources and
approximately $6.7 million borrowed under its syndicated bank revolving line of
credit. In April 1995, the Company obtained a three-year loan (the "Alaska
Loan") to refinance $10.0 million of the purchase price. During 1995, the
Company made scheduled principal payments of $2.6 million on the Alaska Loan.
During the first quarter of 1996, the Company made scheduled principal payments
of $0.9 million on the Alaska Loan. See Note 5 of Notes to Consolidated
Financial Statements for further discussion.

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<PAGE> 26

Credit Facilities and Long-Term Debt

The Company has available a syndicated bank revolving line of credit (the
"Line of Credit") to finance temporary working capital requirements and to
support the issuance of letters of credit. During 1995, expiration of the Line
of Credit was extended from April 1996 to April 1997, and the maximum
availability thereunder was increased. The maximum availability is the lesser of
(i) $35.0 million (previously $30.0 million), or (ii) a calculated amount based
on a percentage of domestic receivables meeting certain criteria. At June 10,
1996, the maximum availability was $34.5 million, of which $5.5 million had been
drawn in cash and $13.0 million was being utilized to support the issuance of
letters of credit. The interest rate is a floating rate which is, at the
Company's option, (i) the lenders' prime rate plus 0.25%, or (ii) the London
Interbank Offered Rate (LIBOR) plus 2.625%, with the Company's choice of a one-,
two-, three-, or six-month interest period. There is an approximate 1/2 of 1%
commitment fee on the unutilized portion. The terms of the Line of Credit
include restrictive covenants which, among other things, limit capital
expenditures, prohibit certain liens, prohibit payment of dividends, limit
additional debt and set certain minimum financial requirements. Advances under
the Line of Credit are secured by certain accounts receivable, certain deposit
accounts, all of the stock of the Company's domestic subsidiaries, 66% of the
stock of the Company's consolidated foreign subsidiaries, the property of the
Company's Alaska subsidiary and 13 of the Company's platform rigs located in the
Gulf of Mexico. See Note 5 of Notes to Consolidated Financial Statements for
further discussion.

In January 1996 the Company received $6.5 million under a four-year term
loan agreement in order to refinance the construction costs incurred during 1995
to build a new offshore platform workover rig for a contract in Australia (the
"Australia Loan"). The rig construction costs were initially funded from the
Company's cash resources and borrowings under its Line of Credit. During the
first quarter of 1996, the Company made scheduled principal payments on this
project financing of $0.6 million. See Note 5 of Notes to Consolidated Financial
Statements for further discussion.

In 1995, one of the Company's unconsolidated affiliates entered into loan
agreements which impose restrictions on the ability of such affiliate to
distribute dividends to the Company.

In August 1994, the Company issued a four-year $0.5 million note in
connection with a purchase of eight well-servicing rigs and related equipment.
The note bears interest at 7% and is secured by the eight rigs and equipment
that were purchased.

Modifications to Alaska Rig 428 were funded in 1993 primarily through
approximately $10 million of project financing which was repaid during 1993 from
the proceeds from the sale of such rig to its customer. In May 1992, the Company
entered into a $4.4 million term loan and a $0.5 million revolving line of
credit to finance the upgrade of another rig under contract in Alaska, and both
of these loans were repaid in 1993.

There were no long-term financing activities in 1993 except by
unconsolidated affiliates.

Capital Expenditures

The Company anticipates that 1996 capital expenditures other than the
business acquisitions described in "Use of Proceeds" will consist of (i)
approximately $18.0 million for capital additions and improvements to its
existing rig fleet and (ii) approximately $7.5 million for an extensive
refurbishment and upgrade of Rig 18, a previously idle platform drilling rig in
the Gulf of Mexico. It is anticipated that these expenditures will be financed
chiefly through the net proceeds of this offering and internally generated
funds, although the Company may avail itself of borrowings as needed.
Acquisitions of additional assets and businesses are expected to continue to be
an important part of the Company's strategy for growth.

24
<PAGE> 27

OTHER MATTERS

Accounting Standards

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This statement requires
that long-lived assets and certain identifiable intangibles held and used by the
Company be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
adoption of this statement in the first quarter of 1996 did not have a material
effect on the Company's financial position or results of operations.

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which sets forth alternative accounting and
disclosure requirements for stock-based compensation arrangements. SFAS 123 does
not rescind the existing accounting for employee stock-based compensation under
APB Opinion No. 25. Companies may continue to follow the current accounting to
measure and recognize employee stock-based compensation; however, SFAS 123
requires disclosure of pro forma net income and earnings per share that would
have been reported under the "fair value" based recognition provisions of SFAS
123. The Company has elected to continue to follow the provisions of APB Opinion
No. 25, "Accounting for Stock Issued to Employees" for employee compensation and
will disclose the pro forma information required under SFAS 123.

San Angelo Lease Commitment

The Company has an operating lease, effective through March 2003, for a
65-acre facility at San Angelo, Texas, which it previously used for rig and
equipment manufacturing and storage. Annual lease payments are $2.2 million
through March 1998 and $4.4 million thereafter for the remaining five years of
the lease. Effective October 1, 1994, the Company vacated this facility and
subleased it in its entirety for $0.5 million per year under an operating
sublease which expires in September 1997. Prior to subleasing and vacating this
facility in 1994, the Company beneficially utilized approximately 12% of the
facility and charged to operations a proportionate share of the cost of the
lease. In September 1988, the Company, anticipating that it would not be able to
fully utilize the facility for a period of years, accrued a $15.9 million
liability for the expected underutilization. Since September 1988, the cost
associated with the unutilized portion of the facility has been charged against
this accrued liability, which as of the fourth quarter of 1994, had
substantially been used. In the fourth quarter of 1994 the Company recorded an
additional provision for leasehold impairment of $23.6 million as the Company
does not anticipate utilizing any of this facility in its future operations nor
does it expect to be able to sublease this facility to third parties for an
amount equivalent to the annual lease payments. This provision recognizes all
future lease expense, net of anticipated sublease income. Such provision for
leasehold impairment decreased 1994 net income by $15.3 million, or $1.13 per
share. Future lease payments will be charged against such provision.

25
<PAGE> 28

BUSINESS

Internationally, the Company has a substantial presence in the Middle East,
principally in Saudi Arabia, where it is one of the largest providers of
workover and drilling services and has been providing such services for
approximately 20 years. Other important international markets where the Company
has an established presence include Ecuador, Trinidad, Malaysia and Pakistan. In
the second half of 1995, the Company reestablished operations in Australia, and
has recently entered into a letter of intent to acquire a 51% interest in a
newly formed Argentina corporation. The Company is also currently evaluating new
Southeast Asian and other South American markets.

BUSINESS STRATEGY

In early 1994, the Company developed a strategic plan designed to further
strengthen its competitive position and market share in the oilfield services
industry in order to achieve growth in revenues, EBITDA (earnings before
interest, taxes, depreciation and amortization, provision for leasehold
impairment and writedown of assets) and earnings. Key components of the
Company's business strategy include: (i) expanding opportunities in existing
core market areas through acquisitions that result in consolidation savings;
(ii) upgrading and enhancing the capabilities of the Company's existing fleet
and building certain specialized rig equipment to operate in markets with high
levels of activity and strong pricing fundamentals; (iii) entering new foreign
markets that offer significant development and production activity; and (iv)
offering additional core services and equipment that complement the Company's
businesses in its existing field locations.

STRATEGY IMPLEMENTATION

Significant progress has been made in the implementation of the Company's
business strategy. Particularly notable events include:

Acquisitions of joint venture partners' interests:

- In May 1996, the Company entered into a letter of intent to acquire
the 51% interest in Antah Drilling that it does not already own for
approximately $3.7 million in cash. In addition, approximately $5.4
million will be used to repay indebtedness of Antah Drilling owed to
the Company's partner in that venture. This venture's assets include a
new state-of-the-art 2,000 horsepower platform drilling rig and a
platform workover rig.

26
<PAGE> 29

- In September 1994, the Company acquired the 60.7% partnership interest
that it did not already own in Pool Arctic Alaska for $12.1 million in
cash. This acquisition expanded the Company's Alaska operation to
include the three specialized Arctic land drilling rigs and related
equipment formerly owned by the partnership. The Company is one of
only a few operators with the specialized equipment required to
perform drilling and workover services in the extreme conditions of
the Alaskan market. Furthermore, in late 1995 Congress repealed the
export ban on Alaska North Slope oil, which management believes will
stimulate exploration and development activity in Alaska.

Expansion and enhancement of rig fleet:

- In June 1996, the Company acquired the operating assets (including
approximately 23 land well-servicing rigs) of Western Oil in the
Williston Basin for approximately $4.0 million in cash. The
acquisition will require an additional $0.5 million in working
capital. Management believes this acquisition will enhance the
Company's competitive position in the Rocky Mountain region.

- In May 1996, the Company entered into a letter of intent to acquire a
51% interest in a newly formed Argentina corporation which will
provide drilling, workover and well services in Argentina. This new
corporation will own and operate nine land drilling rigs and 11
land workover rigs. The Company's investment in the venture will be
approximately $8.7 million and it will contribute $2.2 million for
working capital.

- In March 1996, the Company completed the construction of, and placed
in operation, a multi-purpose, electrically-powered platform workover
rig at a cost of $2.5 million. In addition, this rig has been
committed to Oryx Energy to operate on a floating production
platform in the Gulf of Mexico. Operations for Oryx Energy are
expected to commence in the fourth quarter of 1996.

- In the second half of 1995, the Company reestablished its presence in
Australia by placing in operation a platform workover rig. The Company
also has entered into a term contract through Antah Drilling for a
state-of-the-art 2,000 horsepower platform drilling rig, Rig 489. Rig
489 is scheduled to commence operations for Esso Australia, Ltd. in
the third quarter of 1996. Both of these new platform rigs were
designed and constructed by the Company.

- In June 1995, the Company acquired GPC for approximately $18.8
million. This acquisition included, among other assets, the GPC fleet
of approximately 155 land well-servicing rigs in California. The
Company is now the market leader in California with a total of 260
well-servicing rigs. The California market is particularly attractive,
given the mature characteristics of the fields, the proportion of
wells requiring artificial lift and the predominance of oil rather
than natural gas production. Each of these factors contribute to
more frequent use of the Company's well-servicing rigs.

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<PAGE> 30

RIG AND EQUIPMENT FLEET

The following table sets forth the type, number and location of the
domestic onshore equipment operated by the Company (excluding Alaska) as of
March 31, 1996:

<TABLE>
<CAPTION>
WELL- FLUID
SERVICING HAULING FRAC DISPOSAL
RIGS TRUCKS TANKS WELLS
--------- ------- ----- --------
<S> <C> <C> <C> <C>
Central Division:
Western District (West Texas and New Mexico)... 221 139 315 5
Eastern District (Central and East Texas and
Louisiana).................................. 34 55 225 2
South Texas District........................... 45 53 116 1
Rocky Mountain District (North Dakota and
Montana).................................... 29 2 - -
Oklahoma District (North Texas, Arkansas and
Oklahoma)................................... 70 14 27 2
--------- ------- ----- --------
399 263 683 10
--------- ------- ----- --------
California Division:
Northern District.............................. 167 - - -
Southern District.............................. 93 - - -
--------- ------- ----- --------
260 - - -
--------- ------- ----- --------
Total............................................ 659 263 683 10
========= ======= ===== ========
</TABLE>

The following table sets forth the type, number and location of the Alaska,
Gulf of Mexico and International rigs owned by the Company and its joint
ventures as of March 31, 1996:

<TABLE>
<CAPTION>
LAND PLATFORM JACKUP
-------------------- -------------------- --------------------
DRILLING WORKOVER DRILLING WORKOVER DRILLING WORKOVER TOTAL
-------- -------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Alaska................... 3 1(a) 2 - - - 6
Gulf of Mexico........... - - 3 11 - 5 19
International:
Saudi Arabia........... 6 8 - - 3 - 17
Oman................... 2 3 - - - - 5
Ecuador................ 5 5 - - - - 10
Trinidad............... - - - 1 - - 1
Malaysia............... - - - 1 - - 1
Pakistan............... 1 2 - - - - 3
Tunisia................ 1 - - - - - 1
Australia.............. - - - 1 - - 1
-- -- -- -- -- -- --
Total International.... 15 18 - 3 3 - 39
-- -- -- -- -- -- --
Total.................... 18 19 5 14 3 5 64
== == == == == == ==
</TABLE>

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

(a) A multi-purpose workover or drilling rig that can be configured for either
onshore or offshore use.

TYPES OF SERVICES PROVIDED

There are approximately 900,000 producing oil wells in the world today, of
which approximately 570,000 are in the United States. In addition, there are
approximately 290,000 producing natural gas wells in the United States and a
large number of natural gas wells in the rest of the world. While some wells in
the United States flow oil and natural gas to the surface without mechanical
assistance, most are in mature production areas that require pumping or some
other form of artificial lift. Pumping oil wells characteristically require more
maintenance than flowing wells due to the operation of the

28
<PAGE> 31

mechanical pumping equipment installed. The extent and type of services provided
by the Company on producing wells is dependent upon many variables. The
following is a summary of the services the Company provides.

Well-Servicing/Maintenance Services

The Company provides maintenance services on the mechanical apparatus used
to pump or lift oil and natural gas from producing wells. These services
include, among other things, repairing and replacing pumps, sucker rods and
tubing. The Company provides the rigs, equipment and crews for these tasks,
which are performed on both oil and natural gas wells, but which are more
commonly required on oil wells. Well-servicing rigs have the same basic
components as drilling rigs (i.e., a derrick, a hoisting mechanism and an
engine). Many of these rigs also have pumps and tanks that can be used for
circulating fluids into and out of the well. Maintenance jobs typically take
less than 48 hours to complete.

Workover Services

In addition to needing periodic maintenance, producing oil and natural gas
wells occasionally require major repairs or modifications, called "workovers."
Workovers may be done, for example, to remedy equipment failures, deepen a well
in order to complete a new producing reservoir, plug back the bottom of a well
to reduce the amount of water being produced with the oil and natural gas, clean
out and recomplete a well if production has declined, repair leaks, or convert a
producing well to an injection well for secondary or enhanced recovery projects.
These extensive workover operations are normally carried out with a
well-servicing type rig that includes additional specialized accessory
equipment, which may include rotary drilling equipment, mud pumps, mud tanks and
blowout preventers, depending upon the particular type of workover operation.
Most of the Company's well-servicing rigs are designed and equipped to handle
the more complex workover operations. A workover may last anywhere from a few
days to several weeks.

Completion Services

The kinds of activities necessary to carry out a workover operation are
essentially the same as those that are required to "complete" a well when it is
first drilled. The completion process may involve selectively perforating the
well casing at the depth of discrete producing zones, stimulating and testing
these zones and installing down-hole equipment. Independent oil and gas
production companies often find it more efficient to move a larger and more
expensive drilling rig off location after an oil or natural gas well has been
drilled and to move in a specialized well-servicing rig to perform completion
operations. The Company's rigs are often used for this purpose. The completion
process may require from a few days to several weeks.

Contract Drilling Services

The Company provides contract drilling services to oil and natural gas
operators in all the markets it services except onshore markets in the lower 48
states. The Company's workover rigs can be used for drilling, although the
Company typically uses its specialized drilling rigs for such operations. The
Company also provides specialized accessory equipment, including pumps, rotary
drilling equipment, top drive units, trucks, camps and cranes. Several of the
Company's land drilling rigs are equipped for self-sustained operations in
remote areas in Alaska and certain overseas locations.

Offshore Services

The Company generally utilizes its offshore jackup and platform rigs to
service wells located on platforms. Platform rigs consist of well-servicing
equipment and machinery arranged in modular packages which are transported to
and assembled and installed on fixed offshore platforms owned by the customer.
Fixed offshore platforms are steel tower-like structures that stand on the ocean
floor,

29
<PAGE> 32

with the top portion, or platform, above the water level, forming the foundation
upon which the platform rig is placed. Certain of the Company's heavy workover
platform rigs are capable of operating at well depths of up to 18,000 feet.
Several of the Company's platform rigs are specifically designed for drilling.
The Company is performing an increasing amount of drilling and horizontal
re-entry services utilizing portable top drives, enhanced pumps and solids
control equipment for drilling fluids. Jackup rigs are mobile, self-elevating
platforms equipped with legs that can be lowered to the ocean floor until a
foundation is established to support the hull, which contains the drilling
and/or workover equipment, jacking system, crew quarters, loading and unloading
facilities, storage areas for bulk and liquid materials, helicopter landing deck
and other related equipment. The rig legs may operate independently or have a
mat attached to the lower portion of the legs in order to provide a more stable
foundation in soft bottom areas. All of the Company's jackup rigs are cantilever
design; a feature that permits the drilling platform to be extended out from the
hull, allowing it to perform drilling or workover operations over preexisting
platforms or structures.

Production and Other Specialized Services

The Company provides other specialized services that are required, or can
be used effectively, in conjunction with the previously described basic
services. The main additional services are production services, consisting of
the provision of onsite temporary fluid-storage facilities, the provision,
removal and disposal of specialized fluids used during certain completion and
workover operations, and the removal and disposal of salt water that is often
produced in conjunction with the production of oil and natural gas. The Company
also provides plugging services for wells from which the oil and natural gas
have been depleted and further production has become uneconomical.

BUSINESS BY SERVICE LINE

The Company operates in only one business segment -- the oilfield services
industry. Within that segment, the Company conducts business in the following
distinct markets or business lines: domestic onshore well-servicing and
production services, Gulf of Mexico offshore workover/drilling, international
workover/drilling and related services and Alaska onshore and offshore
workover/drilling.

Domestic Onshore Activities

The Company's domestic onshore operation, which provides well-servicing,
workover and production services, has locations in many of the major oil and
natural gas producing fields in the lower 48 states. This operation currently
provides services in 10 states and is divided into two separate geographic
divisions: (i) the Central division (principally Texas and Oklahoma) and (ii)
the California division. The Company's domestic onshore operation has 659
well-servicing rigs, of which 298 are located in Texas, 260 in California, 53 in
Oklahoma and 48 in North Dakota, New Mexico, Arkansas, Montana and Louisiana. In
1995, rig hours were comprised of well-servicing/maintenance (56%), workover
(29%), completion (10%) and plugging operations (5%). In June 1996, the Company
acquired the operating assets (including approximately 23 land well-servicing
rigs) of Western Oil.

In general, well-servicing rigs are provided to customers on a call-out
basis. The Company is paid an hourly rate and work is generally performed five
days a week during daylight hours.

The Company's domestic onshore operation also provides production services
consisting chiefly of fluid hauling and frac tank rental. The production
services assets, located primarily in Texas, consist of 263 fluid hauling trucks
and ten salt water disposal wells, which are utilized for the transportation and
disposal of drilling and used completion fluids and salt water produced from
operating wells, and 683 frac tanks, which are utilized for the storage of
fluids used in the fracturing of producing zones during the completion or
workover of wells.

30
<PAGE> 33

Gulf of Mexico Offshore Activities

Offshore in the Gulf of Mexico, the Company provides workover,
well-servicing, completion and drilling services with its fleet of 14 platform
rigs and five jackup rigs. The Company also provides crews to oil and natural
gas well operators under labor contracts. During the year ended December 31,
1995, approximately 86% of the Company's Gulf of Mexico offshore rig hours were
related to workover, well-servicing and completion operations with the balance
related to contract drilling. Offshore operations are normally conducted 24
hours a day, seven days a week, under a term contract that is either for a
specific period of time or until a program of work is completed. The Company is
paid on a daily rate basis for its services.

International Activities

Internationally, the Company provides workover, well-servicing and drilling
services, both onshore and offshore, with specialized rigs designed and
fabricated to meet various types of operating conditions. During 1995, the
Company operated in ten foreign countries. The Company has 39 rigs in foreign
locations, of which 22 are located in the Middle East, principally in Saudi
Arabia, 11 in South America, four in Asia, one in Africa and one in Australia.
Rig operations are normally conducted 24 hours a day, seven days a week under a
term contract that is for a specific period of time or until a customer's
program is completed. The Company is paid on a daily rate basis for its
services. The Company currently conducts a significant part of its foreign
operations through unconsolidated joint venture companies in each of which it
has approximately a 50% participation. The principal joint venture operations
are conducted in Saudi Arabia (Pool Arabia, Ltd.) and Malaysia (Antah Drilling).
Beginning in mid-1996 Antah Drilling will also operate in Australia using a
newly constructed state-of-the-art platform drilling rig. The Company uses the
equity method to account for its unconsolidated affiliates. See Note 9 of Notes
to Consolidated Financial Statements.

In May 1996, the Company entered into a letter of intent to acquire a 51%
interest in a newly formed Argentina corporation which will provide drilling,
workover and well services in Argentina. This new corporation will own and
operate nine land drilling rigs and 11 land workover rigs.

In May 1996, the Company entered into a letter of intent to acquire the 51%
interest in Antah Drilling that it does not already own. This venture's assets
include a new state-of-the-art 2,000 horsepower platform drilling rig and a
platform workover rig.

Alaska Activities

In Alaska, the Company provides drilling, workover and well-servicing with
its fleet of three specialized Arctic land drilling rigs, two offshore platform
rigs and one multi-purpose rig. The Company also provides crews to oil and
natural gas well operators in Alaska under labor contracts. The Company's
services are principally provided onshore on the North Slope and offshore in the
Cook Inlet. Rig operations are normally conducted 24 hours a day, seven days a
week, under a term contract that is for a specific period of time or until a
program is completed. The Company is paid on a daily rate basis for its
services. On September 28, 1994, the Company acquired the 60.7% partnership
interest not already owned by the Company in Pool Arctic Alaska for $12.1
million in cash. For further information related to this acquisition, see Note 3
of Notes to Consolidated Financial Statements.

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<PAGE> 34

FINANCIAL DATA BY SERVICE LINES

The following table presents information by service lines:

<TABLE>
<CAPTION>
FOR THE THREE
MONTHS
ENDED MARCH 31 FOR THE YEAR ENDED DECEMBER 31
------------------ --------------------------------
1996 1995 1995 1994 1993
------- ------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Domestic onshore well-servicing and production
services:
Central division............................ $32,741 $34,545 $134,423 $131,904 $133,398
California division......................... 19,815 7,156 58,780 26,603 29,781
Gulf of Mexico offshore workover/drilling....... 12,524 7,072 37,415 36,020 38,676
International workover/drilling and related
services...................................... 7,639 7,696 26,260 24,708 28,812
Alaska workover/drilling........................ 8,963 6,385 20,427 9,940 9,857
------- ------- -------- -------- --------
Total.................................... $81,682 $62,854 $277,305 $229,175 $240,524
======= ======= ======== ======== ========
Earnings Attributable to Unconsolidated
Affiliates(1):
International workover/drilling and related
services...................................... $ 658 $ 775 $ 2,955 $ 4,495 $ 6,831
Alaska workover/drilling........................ -- -- -- 521 29
------- ------- -------- -------- --------
Total.................................... $ 658 $ 775 $ 2,955 $ 5,016 $ 6,860
======= ======= ======== ======== ========
Depreciation and Amortization(2):
Domestic onshore well-servicing and production
services:
Central division............................ $ 1,261 $ 1,238 $ 5,238 $ 6,446 $ 7,611
California division......................... 825 275 2,134 1,052 1,240
Gulf of Mexico offshore workover/drilling....... 622 523 2,212 2,283 2,310
International workover/drilling and related
services...................................... 675 592 2,424 2,742 4,415
Alaska workover/drilling........................ 836 669 2,845 1,089 601
Corporate....................................... 34 38 149 148 130
------- ------- -------- -------- --------
Total.................................... $ 4,253 $ 3,335 $ 15,002 $ 13,760 $ 16,307
======= ======= ======== ======== ========
Income (Loss) Before Income Taxes (Excluding
Provision for Leasehold Impairment)(3):
Domestic onshore well-servicing and production
services:
Central division............................ $ 1,555 $ 1,443 $ 5,927 $ 2,799 $ 1,449
California division......................... 322 (130) 3,828 (630) 1,285
Gulf of Mexico offshore workover/drilling....... 1,174 (1,057) 161 (1,307) 2,744
International workover/drilling and related
services...................................... 762 1,200 2,682 4,759 5,756
Alaska workover/drilling........................ 1,095 224 (367) 3,247 3,643
Corporate....................................... (2,181) (1,596) (7,118) (6,427) (7,278)
------- ------- -------- -------- --------
Total.................................... $ 2,727 $ 84 $ 5,113 $ 2,441 $ 7,599
======= ======= ======== ======== ========
</TABLE>

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

(1) A significant part of the operations of the Company is conducted through its
unconsolidated affiliates, which are accounted for using the equity method.
See Note 3 of Notes to Consolidated Financial Statements for information
related to the Pool Arctic Alaska acquisition in 1994.

(2) At the beginning of the fourth quarter of 1994, the Company revised its
estimate of the remaining depreciable lives of certain rigs and equipment to
better reflect the remaining economic lives of the assets. The effect of
this change in accounting estimate was to increase the 1995 net income by
approximately $2.1 million or $.15 per share and to decrease the 1994 net
loss by approximately $0.5 million or $.04 per share.

(3) See Note 6 of Notes to Consolidated Financial Statements for a discussion of
the $23.6 million pretax ($15.3 million, or $1.13 per share, after-tax)
provision for leasehold impairment in 1994.

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<PAGE> 35

LEGAL PROCEEDINGS

The Company from time to time is involved in ordinary and routine
litigation incidental to its business, which often involves claims for
significant monetary amounts, some, but not all, of which would be covered by
insurance. In the opinion of management, none of the existing litigation will
have any material adverse effect on the Company. See also "-- Environmental
Regulation and Claims."

EMPLOYEES

At March 31, 1996, the Company had 5,034 employees, of whom 452 were
employed by unconsolidated affiliates. None of the employees at any of the
Company's locations (except for approximately 32 employees in Australia) is
represented by a collective bargaining unit. Management believes that the
Company's relationship with its employees is excellent.

ENVIRONMENTAL REGULATION AND CLAIMS

The Company's well-servicing, workover and production services operations
routinely involve the handling of significant amounts of waste materials, some
of which are classified as hazardous substances. The Company's operations and
facilities are subject to numerous state and federal environmental laws, rules
and regulations, including, without limitation, laws concerning the containment
and disposal of hazardous materials, oilfield waste and other waste materials,
the use of underground storage tanks and the use of underground injection wells.
The Company employs personnel responsible for monitoring environmental
compliance and arranging for remedial actions that may be required from time to
time and also uses outside experts to advise on and assist with the Company's
environmental compliance efforts. Costs incurred by the Company to investigate
and remediate contaminated sites are expensed unless the remediation extends the
useful lives of the assets employed at the site. Remediation costs that extend
the useful lives of the assets are capitalized and amortized over the remaining
useful lives of such assets. Liabilities are recorded when the need for
environmental assessments and/or remedial efforts becomes known or probable and
the cost can be reasonably estimated.

Laws protecting the environment have generally become more stringent than
in the past and are expected to continue to do so. Environmental laws and
regulations typically impose "strict liability," which means that in some
situations the Company could be exposed to liability for cleanup costs and other
damages as a result of conduct of the Company that was lawful at the time it
occurred or conduct of, or conditions caused by, others. Cleanup 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 the Company's financial condition. From time
to time, claims have been made and litigation has been brought against the
Company under such laws. However, the costs incurred in connection with such
claims and other costs of environmental compliance have not had any material
adverse effect on the Company's operations, financial condition or competitive
position in the past, and management is not currently aware of any situation or
condition that it believes is likely to have any such material adverse effect in
the future.

Under the Comprehensive Environmental Response, Compensation and Liability
Act, also known as "Superfund," and related state laws and regulations,
liability can be imposed without regard to fault or the legality of the original
conduct on certain classes of persons that contributed to the release of a
"hazardous substance" into the environment. The Company has been notified of its
possible involvement with respect to the cleanup of two Superfund sites which
were formerly operated by parties unrelated to the Company as oilfield waste
disposal facilities, and has been named as a potentially responsible party with
respect to the cleanup of one other Superfund site which was formerly operated
by various parties unrelated to the Company as an oil refining and reclamation
facility. Although at this time information about these matters has not been
fully developed and it is not feasible to predict their outcome with certainty,
management is of the opinion that their ultimate resolution should not have a
material adverse effect on the Company's financial condition.

33
<PAGE> 36

Changes to federal and state environmental regulations may also negatively
impact oil and natural gas exploration and production companies, which in turn
could have a material adverse effect on the Company. For example, legislation
has been proposed from time to time in Congress which would reclassify oil and
natural gas production wastes as "hazardous wastes." If enacted, such
legislation could dramatically increase operating costs for domestic oil and
natural gas companies and this could reduce the market for the Company's
services by making many wells and/or oilfields uneconomical to operate. To date,
such legislation has not made significant progress toward enactment.

PATENTS AND TRADEMARKS

The Company owns several U.S. patents on designs for various types of
oilfield equipment and on methods for conducting certain oilfield activities.
The Company uses some of these designs and methods in the conduct of its
business. The patents expire at various times through 2014. The Company also has
several trademarks and service marks that it uses in various aspects of its
business. While management believes the Company's patent and trademark rights
are valuable, the expiration or loss thereof would not have a material adverse
effect on the Company's financial condition or results of operations.

COMPETITIVE CONDITIONS

Although the number of available rigs has materially decreased over the
past ten years, the well-servicing, workover and drilling industry remains very
competitive. The number of rigs continues to exceed demand, resulting in severe
price competition. Many of the total available contracts are currently awarded
on a bid basis, which further increases competition based on price. In all of
the Company's market areas, competitive factors also include: the availability
and condition of equipment to meet both special and general customer needs; the
availability of trained personnel possessing the required specialized skills;
the overall quality of service and safety record; and domestically, the ability
to offer ancillary services such as fluid hauling, frac tank rental and salt
water disposal. As an enhancement to its competitive position, the Company has
been able to establish strategic alliances with major customers in its domestic
onshore, international and Alaska markets, including several alliances in
California which were obtained upon the acquisition of GPC. Many smaller
competitors may not be able to allocate the resources necessary to enter into
such alliances. One customer, Shell Oil Company and its affiliates, accounted
for approximately 11% of the Company's consolidated revenues during 1995 and
approximately 12% for the first quarter of 1996.

Certain competitors are present in more than one of the Company's markets,
although no one competitor operates in all of these areas. With 659 rigs, the
Company has the most well-servicing rigs of any company in the domestic onshore
market. In this market, the second largest competitor has approximately 400
rigs, two competitors have 100 to 200 rigs each, and several hundred competitors
have smaller regional or local rig operations. In each of its domestic onshore
locations, the Company competes with several firms of varying size. In the Gulf
of Mexico, the Company is among five principal competitors providing
workover/maintenance services, the two largest of which are Pride Petroleum
Services, Inc. and Nabors Industries, Inc. Internationally, the Company competes
directly with various competitors at each location where it operates, none of
which is dominant. In Alaska, the Company has six major competitors, the largest
of which are Nabors Industries, Inc. and Doyon Drilling, Inc.

34
<PAGE> 37

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth the names, ages and positions of the
executive officers and directors of the Company as well as the years in which
they commenced serving as executive officers or directors of the Company or the
Company's predecessor, Pool Company.

<TABLE>
<CAPTION>
EXECUTIVE OFFICER
OR DIRECTOR
NAME AGE POSITION SINCE
- --------------------------------- --- ------------------------------- -----------------
<S> <C> <C> <C>
James T. Jongebloed.............. 54 Chairman, President and Chief 1981
Executive Officer
William J Myers.................. 59 Group Vice President -- 1988
U.S. Operations
Ronald G. Hale................... 47 Group Vice President -- 1989
International Operations
Ernest J. Spillard............... 56 Senior Vice President, Finance 1986
G. Geoffrey Arms................. 52 Vice President and General 1985
Counsel; Corporate Secretary
Louis E. Dupre................... 49 Vice President, Human Resources 1994
W. C. McCord..................... 67 Director 1971
William H. Mobley................ 54 Director 1990
Joseph R. Musolino............... 59 Director 1994
Gary D. Nicholson................ 59 Director 1996
James L. Payne................... 59 Director 1992
Donald D. Sykora................. 65 Director 1989
</TABLE>

Set forth below are descriptions of the backgrounds of the executive
officers and directors of the Company and their principal occupations for at
least the past five years.

Mr. Jongebloed has been Chairman of the Board of Directors since 1994 and
President and Chief Executive Officer of the Company since 1990. He was
President and Chief Operating Officer from 1989 to 1990. He served Pool Company
from 1978 to 1989 as Executive Vice President, Western Hemisphere, President of
Pool -- Intairdril and Group Vice President -- International Operations.

Mr. Myers has been Group Vice President -- U.S. Operations of the Company
since 1988. From 1985 to 1987, he was self employed, and from 1976 to 1985 he
was the President and Chief Executive Officer of Anderson-Myers Drilling Company
in Denver, Colorado.

Mr. Hale has served in various management and executive positions with the
Company for more than 15 years. From 1985 to 1989, he served as Vice President,
Mid-East and Africa Region, International Operations. He became Group Vice
President -- International Operations in 1989.

Mr. Spillard served from 1979 to 1981 as Controller of Pool Arabia, Ltd.
From 1981 to 1986, he held various executive positions with the Company. He was
Senior Vice President, Corporate Services, from 1986 to 1987 and has been Senior
Vice President, Finance of the Company since 1987.

Mr. Arms has been Vice President and General Counsel of the Company since
1985 and has been Corporate Secretary since 1990. He has served the Company as
an attorney in various other positions since 1978.

Mr. Dupre has been Vice President, Human Resources of the Company since
1994. From 1986 to 1994, he served as the Company's Controller. He has been an
employee of the Company since 1978.

Mr. McCord retired as Chairman and Chief Executive Officer of ENSERCH
Corporation in 1993 and has been a director of that company since 1970. From
1977 to 1991, he served as Chairman,

35
<PAGE> 38

President and Chief Executive Officer of ENSERCH Corporation. Mr. McCord is also
a director of Lone Star Technologies, Inc.

Dr. Mobley is a professor in the Graduate School of Business at Texas A&M
University. From 1993 to 1994, he was Chancellor of the Texas A&M University
System. From 1988 to 1993 he was President of Texas A&M University. He is also a
director of DaVinci Scientific Corporation.

Mr. Musolino has been Vice Chairman of NationsBank of Texas, N.A. for more
than the last five years. He also serves as a director of Justin Industries,
Inc. and of Paragon Group, Inc.

Mr. Nicholson is Chairman of the Board of Directors, President and Chief
Executive Officer of Camco International Inc., an oilfield services company. Mr.
Nicholson joined Camco in October 1992 as Executive Vice President and Chief
Operating Officer, became President and Chief Executive Officer on January 1,
1993 and Chairman of the Board of Directors in October 1994. Mr. Nicholson was
an independent consultant from 1991 to 1992 and was President and Chief
Executive Officer of LTV Energy Products Company, an operating unit of LTV
Corporation, Inc. from 1986 to 1991.

Mr. Payne has been Chairman of the Board, President and Chief Executive
Officer and a director of Santa Fe Energy Resources, Inc., an oil and gas
exploration and production company, since 1990. He was President of Santa Fe
Energy Company from 1986 to 1990, and prior to that time served as its Senior
Vice President -- Exploration and Land.

Mr. Sykora currently serves in an executive advisory capacity in the Office
of the Chairman of Houston Industries Incorporated, an electric utility holding
company. He was President and Chief Operating Officer of Houston Industries from
1993 to 1995 and served as a director of Houston Industries from 1982 to 1995.
From 1982 to 1993 he served as President and Chief Operating Officer of Houston
Lighting and Power Company. He is also a director of TransTexas Gas Corporation
and Powell Industries, Inc.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of (i) 40,000,000
shares of Common Stock, no par value, of which 14,234,688 shares were issued and
outstanding, 1,473,797 shares were reserved for issuance under the Company's
stock option and stock incentive plans and 4,450,737 shares were reserved for
issuance upon exercise of the Shareholders Rights Plan at June 28, 1996 and (ii)
1,000 shares of Preferred Stock, no par value, none of which is outstanding as
of the date of this Prospectus. All of the outstanding shares of Common Stock
are, and the shares of Common Stock offered hereby will be, duly and validly
issued, fully paid and nonassessable. The description below is a summary of and
is qualified in its entirety by the provisions of the Company's Articles of
Incorporation, as amended, a copy of which has been filed as an exhibit to the
Company's Quarterly Report on Form 10-Q for the period ended March 31, 1996.

COMMON STOCK

Holders of the Common Stock are entitled to one vote per share on all
matters on which shareholders are entitled or permitted to vote, including the
election of directors. Each holder of Common Stock is entitled to participate
ratably in any distribution of assets to shareholders in the event of
liquidation, dissolution or winding up of the Company, subject in all cases to
any prior rights of outstanding shares of Preferred Stock.

Holders of Common Stock do not have any cumulative voting, redemptive or
conversion rights and have no preemptive rights to subscribe for, purchase or
receive any class of shares or securities of the Company. Holders of Common
Stock also have no fixed dividend rights. Dividends may be declared by the Board
of Directors at its discretion depending upon the earnings, capital
requirements, financial condition of the Company and other relevant factors. See
"Price Range of Common Stock and Dividend Policy."

36
<PAGE> 39

The Common Stock is traded on the Nasdaq National Market.

PREFERRED STOCK

The Preferred Stock has preference equal to its stated value of $1.00 per
share over the Common Stock as to the distribution of assets on liquidation,
dissolution or winding up of the affairs of the Company. The Preferred Stock
does not have dividend rights and, except to the extent described below or
provided by Texas law, does not have voting rights. Holders of a majority of the
Preferred Stock must approve any amendment to the Articles of Incorporation of
the Company that would (i) authorize or create, or increase the authorized
amount of, any class of stock which is entitled to voting rights inconsistent
with any outstanding Preferred Stock, (ii) increase the authorized number of
shares of Preferred Stock, (iii) change any of the rights and preferences of any
outstanding Preferred Stock or (iv) materially alter any other provisions of any
outstanding Preferred Stock or the Common Stock. No shares of preferred stock
are currently outstanding.

LIMITATION ON LIABILITY OF DIRECTORS

The Company's Articles of Incorporation limit the personal liability of
directors to the fullest extent permitted by Texas law. Specifically, a director
of the Company will not be personally liable to the Company or its shareholders
for monetary damages for an act or omission in the director's capacity as a
director, except for liability: (i) for a breach of the director's duty of
loyalty to the Company or its shareholders, (ii) for an act or omission not in
good faith or that involves intentional misconduct or a knowing violation of the
law, (iii) for a transaction from which the director derived an improper
personal benefit, whether or not the benefit resulted from an action taken
within the scope of the director's office, or (iv) an act or omission for which
the liability of the director is expressly provided by an applicable statute,
such as a corporation's unlawful stock repurchase or payment of a dividend. This
provision is intended to afford directors additional protection from, and limit
their potential liability for, suits alleging a breach of the duty of care by a
director. The Company believes that this provision will assist it in securing
and retaining the services of directors who are not employees of the Company. As
a result of the inclusion of this provision, shareholders may be unable to
recover monetary damages against directors for actions taken by them that
constitute negligence or gross negligence or that are in violation of their
fiduciary duties, although it may be possible to obtain injunctive or other
equitable relief with respect to such actions. If equitable remedies are found
not to be available to shareholders for any particular case, shareholders may
not have any effective remedy against the challenged conduct.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Common Stock is The First National
Bank of Boston, Boston, Massachusetts.

PROVISIONS HAVING ANTI-TAKEOVER EFFECT

Provisions contained in the Company's Articles of Incorporation and Bylaws
that may be deemed, whether or not intended for that purpose, to be
anti-takeover in nature are (i) a provision in the Company's Articles of
Incorporation prohibiting cumulative voting for the election of directors; (ii)
a provision in the Company's Bylaws providing for the existence of a classified
Board of Directors divided into three classes, with the members of each class
serving for staggered periods of three years; (iii) a provision in the Articles
of Incorporation reserving to the directors the power to amend the Bylaws of the
Company and a Bylaw provision requiring a two-thirds vote of the Board to
authorize certain such amendments; and (iv) provisions in the Company's Bylaws
providing that a director may be removed only for cause and only by the
affirmative vote of at least two-thirds of the shares entitled to vote with
respect to the election of directors. Additionally, the Company has an existing
shareholder rights plan providing special acquisition rights and other features
designed to deter unfair or abusive takeover attempts, to prevent a person or
group from gaining control of the Company without offering fair value

37
<PAGE> 40

to all shareholders and to deter other abusive takeover tactics which are not in
the best interest of shareholders.

The Company also has change in control agreements with each of its
executive officers (the "Agreements") that set forth certain benefits that the
Company will provide in the event their employment is terminated subsequent to a
change in control of the Company (as defined in the Agreements). The Agreements
continue in effect until terminated by the Company upon specified notice and
continue for three years following a change in control of the Company. The
Agreements each provide that if the officer is terminated or if the officer
elects to terminate employment under certain circumstances within three years
following a change in control of the Company, the officer shall be entitled to a
lump sum severance payment equal to (i) three times the officer's annual base
salary (but not in excess of the aggregate base salary that could be earned up
to the officer's normal retirement date), (ii) an amount equal to the largest
bonus paid to him during the preceding three years, prorated for the current
year, and (iii) the value over exercise price of unexercised stock options. In
addition, the officer shall be entitled to a three-year continuation of certain
employee benefits, two additional years of service credit under the Company's
retirement program, and reimbursement of certain legal fees, expenses, and any
applicable excise taxes.

38
<PAGE> 41

UNDERWRITING

The names of the underwriters of the shares of Common Stock offered hereby
(the "Underwriters") and the aggregate number of shares which each has severally
agreed to purchase from the Company (subject to the terms and conditions
specified in the Underwriting Agreement) are as follows:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
----------------------------------------------------------------- ---------
<S> <C>
Dillon, Read & Co. Inc. ......................................... 794,000
Salomon Brothers Inc ............................................ 793,000
Johnson Rice & Company L.L.C. ................................... 793,000
Auerbach Pollak & Richardson Inc. ............................... 25,000
Robert W. Baird & Co. Incorporated............................... 35,000
CS First Boston Corporation...................................... 85,000
Donaldson, Lufkin & Jenrette Securities Corporation.............. 85,000
A.G. Edwards & Sons, Inc. ....................................... 85,000
First Southwest Company.......................................... 25,000
Gabelli & Company, Inc........................................... 25,000
Goldman, Sachs & Co. ............................................ 85,000
Hanifen, Imhoff Inc. ............................................ 35,000
Hoak Securities Corp. ........................................... 25,000
Howard, Weil, Labouisse, Friedrichs Incorporated................. 85,000
Huberman Financial, Inc. ........................................ 25,000
Huntleigh Securities Corporation................................. 25,000
Jefferies & Company.............................................. 85,000
Josephthal Lyon & Ross Incorporated.............................. 35,000
Lehman Brothers Inc. ............................................ 85,000
Morgan Keegan & Company, Inc. ................................... 35,000
Morgan Stanley & Co., Incorporated............................... 85,000
David A. Noyes & Company......................................... 25,000
Oppenheimer & Co., Inc. ......................................... 85,000
Pennsylvania Merchant Group Ltd. ................................ 25,000
Petrie Parkman & Co. ............................................ 35,000
Principal Financial Securities, Inc. ............................ 85,000
Prudential Securities Incorporated............................... 35,000
Raymond James & Associates, Inc. ................................ 35,000
The Robinson-Humphrey Company, Inc. ............................. 35,000
Rodman & Renshaw, Inc. .......................................... 35,000
Schroder Wertheim & Co. Incorporated............................. 85,000
Simmons & Company International.................................. 25,000
Smith Barney Inc. ............................................... 85,000
Southcoast Capital Corporation................................... 35,000
Wellington (H.G.) & Co. Inc. .................................... 25,000
---------
Total.................................................. 4,000,000
=========
</TABLE>

The Managing Underwriters are Dillon, Read & Co. Inc., Salomon Brothers Inc
and Johnson Rice & Company L.L.C.

If any shares of Common Stock offered hereby are purchased by the
Underwriters, all such shares will be so purchased. The Underwriting Agreement
contains certain provisions whereby if any Underwriter defaults in its
obligation to purchase such shares and if the aggregate obligations of the
Underwriters so defaulting do not exceed 10% of the shares offered hereby, the
remaining Underwriters, or some of them, must assume such obligations.

39
<PAGE> 42

The shares of Common Stock offered hereby are being offered severally by
the Underwriters for sale at the price set forth on the cover page hereof, or at
such price less a concession not to exceed $0.36 per share on sales to certain
dealers. The Underwriters may allow, and such dealers may reallow, a concession
not to exceed $0.10 per share on sales to certain dealers. The offering of the
shares of Common Stock is made for delivery when, as, and if accepted by the
Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offer without notice. The Underwriters reserve the right to
reject any order for the purchase of the shares. After the shares are released
for sale to the public, the public offering price, the concession and the
reallowance may be changed by the Managing Underwriters.

The Company has granted to the Underwriters on option to purchase up to an
additional 600,000 shares of Common Stock on the same terms per share. If the
Underwriters exercise this option, each of the Underwriters will have a firm
commitment, subject to certain conditions, to purchase approximately the same
proportion of the aggregate shares so purchased as the number of shares to be
purchased by it shown in the above table bears to the total number of shares in
such table. The Underwriters may exercise such option on or before the thirtieth
day from the date of the public offering of the shares offered hereby and only
to cover the over-allotments made of the shares in connection with this
offering.

The Company has agreed that it will not, without the prior written consent
of Dillon, Read & Co. Inc., sell, grant any option to sell, transfer or
otherwise dispose of, directly or indirectly, any shares of the Common Stock, or
any securities convertible into, or exercisable or exchangeable for, Common
Stock or warrants or other rights to purchase Common Stock, prior to the
expiration of 90 days from the date of the consummation of the offering of
shares contemplated hereby, except shares of Common Stock issued pursuant to the
provisions of existing stock incentive plans. The Company's directors and
certain officers, who beneficially own an aggregate of 570,978.855 shares of
Common Stock, have agreed that they will not, without the prior written consent
of Dillon, Read & Co. Inc., sell, grant any option to sell, transfer or
otherwise dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into, or exercisable or exchangeable for, Common Stock or
warrants or other rights to purchase Common Stock, prior to the expiration of 90
days from the date of the consummation of the offering of shares contemplated
hereby.

The Company has agreed in the Underwriting Agreement to indemnify the
Underwriters against certain civil liabilities, including liabilities under the
Securities Act, or to payments that the Underwriters may be required to make in
respect thereof.

In connection with this Offering, certain Underwriters or their affiliates
may engage in passive market making transactions in the Common Stock on the
Nasdaq National Market in accordance with Rule 10b-6A under the Exchange Act
during the two business day period before the commencement of sales in the
offering of shares of Common Stock offered hereby. Passive market making
consists of, among other things, displaying bids on the Nasdaq National Market
limited by the bid prices of independent market makers and purchases limited by
such prices and effected in response to order flow. Net purchases by a passive
market maker in each day are limited to a specified percentage of the passive
market maker's average daily trading volume in the Common Stock during a
specified prior period and all possible market making activity must be
discontinued when such limit is reached. Passive market making may stabilize the
market price of the Common Stock at a level above that which might otherwise
prevail and, if commenced, may be discontinued at any time.

LEGAL MATTERS

In connection with the Common Stock offered hereby, the validity of the
shares being distributed will be passed upon for the Company by Covington &
Burling, Washington, D.C. Certain legal matters will be passed upon for the
Underwriters by Gardere Wynne Sewell & Riggs, L.L.P., Houston, Texas.

40
<PAGE> 43

EXPERTS

The financial statements and the related financial statement schedules of
the Company and Pool Arabia, Ltd. as of December 31, 1995 and 1994 and for each
of the three years in the period ended December 31, 1995 included and
incorporated by reference in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are included
and incorporated by reference herein, and have been so included and incorporated
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.

41
<PAGE> 44

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pool Energy Service Co.
Annual Consolidated Financial Statements:
Independent Auditors' Report..................................................... F-2
Statements of Consolidated Operations for the Three Years Ended December 31,
1995............................................................................ F-3
Statements of Consolidated Cash Flows for the Three Years Ended December 31,
1995............................................................................ F-4
Consolidated Balance Sheets, December 31, 1995 and 1994.......................... F-5
Notes to Consolidated Financial Statements....................................... F-6

Interim Condensed Consolidated Financial Statements (Unaudited):
Condensed Statements of Consolidated Operations for the Three Months Ended March
31, 1996 and 1995............................................................... F-28
Condensed Statements of Consolidated Cash Flows for the Three Months Ended March
31, 1996 and 1995............................................................... F-29
Condensed Consolidated Balance Sheet, March 31, 1996............................. F-30
Notes to Condensed Consolidated Financial Statements............................. F-31
</TABLE>

F-1
<PAGE> 45

INDEPENDENT AUDITORS' REPORT

Pool Energy Services Co.:

We have audited the accompanying consolidated balance sheets of Pool Energy
Services Co. and its subsidiaries (the "Company") as of December 31, 1995 and
1994, and the related statements of consolidated operations and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.

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

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Pool Energy Services Co. and
its subsidiaries at December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Houston, Texas
February 22, 1996

F-2
<PAGE> 46

POOL ENERGY SERVICES CO.

STATEMENTS OF CONSOLIDATED OPERATIONS
(IN THOUSANDS EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Revenues............................................. $ 277,305 $ 229,175 $ 240,524
Earnings Attributable to Unconsolidated Affiliates... 2,955 5,016 6,860
---------- ---------- ----------
Total...................................... 280,260 234,191 247,384
---------- ---------- ----------
Costs and Expenses:
Operating expenses................................. 219,074 182,012 187,412
Selling, general and administrative expenses....... 39,927 36,927 37,797
Depreciation and amortization...................... 15,002 13,760 16,307
GPC acquisition related costs...................... 622 -- --
Provision for leasehold impairment................. -- 23,551 --
---------- ---------- ----------
Total...................................... 274,625 256,250 241,516
---------- ---------- ----------
Other Income (Expense) -- Net........................ 1,289 1,202 2,239
Interest Expense..................................... 1,811 253 508
---------- ---------- ----------
Income (Loss) Before Income Taxes.................... 5,113 (21,110) 7,599
Income Tax Provision (Credit)........................ 1,981 (8,381) 1,399
---------- ---------- ----------
Net Income (Loss).................................... $ 3,132 $ (12,729) $ 6,200
========== ========== ==========
Earnings (Loss) Per Share of Common Stock............ $ .23 $ (.94) $ .46
========== ========== ==========
Average Common Shares Outstanding.................... 13,840,122 13,559,108 13,526,429
========== ========== ==========
</TABLE>

See Notes to Consolidated Financial Statements.

F-3
<PAGE> 47

POOL ENERGY SERVICES CO.

STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Operating Activities:
Net Income (Loss)...................................... $ 3,132 $(12,729) $ 6,200
Noncash items included above:
Depreciation and amortization....................... 15,002 13,760 16,307
Deferred income taxes (credit)...................... 1,261 (9,155) 1,310
Undistributed earnings of unconsolidated
affiliates........................................ (2,895) (5,055) (6,778)
Provision for leasehold impairment.................. -- 23,551 --
Performance of prepaid rig services................. -- (1,000) (1,000)
Other -- net........................................ (218) (921) 2,260
Payment of pre-1990 personal injury and property damage
claims.............................................. (37) (322) (816)
Payment for lease of manufacturing facility............ (2,148) (2,148) (2,148)
Proceeds from sublease of manufacturing facility....... 88 544 --
Other -- net........................................... (786) (964) (341)
Net effect of changes in operating working capital..... 7,209 (224) 325
-------- -------- --------
Net Cash Flows Provided by Operating Activities........ 20,608 5,337 15,319
-------- -------- --------
Investing Activities:
Property additions..................................... (23,436) (10,897) (14,223)
Expenditures for the acquisition of GPC, including
acquisition costs, less cash acquired............... (3,431) -- --
Payment for purchase of Pool Arctic Alaska, net of cash
acquired............................................ -- (11,250) --
Proceeds from sale of Alaska Rig 428................... -- -- 16,857
Expenditures for modification of Alaska Rig 428........ -- (527) (14,304)
(Increase) decrease in restricted cash................. 154 110 (1,400)
Proceeds from disposition of property, plant and
equipment........................................... 2,400 3,383 1,681
Proceeds from sale of rigs to leasing company.......... -- 7,000 --
Cash dividends received from unconsolidated
affiliates.......................................... 2,885 2,918 683
Other -- net........................................... 204 (257) 177
-------- -------- --------
Net Cash Flows Used for Investing Activities........... (21,224) (9,520) (10,529)
-------- -------- --------
Financing Activities:
Proceeds from exercise of stock options................ 61 45 404
Proceeds and repayments of short-term
borrowings -- net................................... (1,600) 1,600 (2,475)
Retirement of debt assumed in GPC acquisition.......... (1,962) -- --
Proceeds and repayments of project financing -- net.... -- -- (1,298)
Proceeds from long-term debt........................... 10,000 545 --
Principal payments on long-term debt................... (2,751) (50) --
Principal payments on notes payable to related
parties............................................. (200) -- --
Repurchase of preferred stock.......................... -- -- (1)
-------- -------- --------
Net Cash Flows Provided by (Used for) Financing
Activities.......................................... 3,548 2,140 (3,370)
-------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents..... 2,932 (2,043) 1,420
Cash and Cash Equivalents at January 1,.................. 2,560 4,603 3,183
-------- -------- --------
Cash and Cash Equivalents at December 31,................ $ 5,492 $ 2,560 $ 4,603
======== ======== ========
</TABLE>

See Notes to Consolidated Financial Statements.

F-4
<PAGE> 48

POOL ENERGY SERVICES CO.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT NUMBER OF SHARES)

<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................................... $ 5,492 $ 2,560
Restricted cash.................................................... 163 153
Accounts and notes receivable (net of allowance for doubtful
accounts of $1,059 and $1,622).................................. 47,941 45,159
Other receivables.................................................. 3,754 3,177
Accounts receivable from affiliates................................ 3,289 1,702
Inventories........................................................ 10,516 10,571
Deferred income tax asset (net of $407 and $423 allowance)......... 3,469 3,275
Other current assets............................................... 3,525 3,821
-------- --------
Total current assets....................................... 78,149 70,418
Property, Plant and Equipment -- Net................................. 124,024 101,536
Investment in and Noncurrent Receivables from Unconsolidated
Affiliates......................................................... 26,001 26,042
Goodwill, net........................................................ 11,174 --
Noncurrent Deferred Income Tax Asset (net of $6,314 and $8,483
allowance)......................................................... 5,528 8,713
Noncurrent Receivables (net of allowance for doubtful accounts of
$2,824 and $3,667) and Other Assets................................ 2,594 1,972
Noncurrent Restricted Cash........................................... 973 1,137
-------- --------
Total...................................................... $248,443 $209,818
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term bank loans.............................................. $ -- $ 1,600
Current portion of long-term debt.................................. 4,385 126
Current portion of notes payable to related parties................ 400 --
Trade accounts payable............................................. 24,123 16,053
Accrued liabilities................................................ 19,615 17,200
Accrued taxes...................................................... 2,647 2,409
-------- --------
Total current liabilities.................................. 51,170 37,388
Long-Term Debt....................................................... 14,859 369
Notes Payable to Related Parties..................................... 925 --
Deferred Income Taxes................................................ 2,323 1,872
Other Liabilities.................................................... 43,139 41,550
Shareholders' Equity:
Common stock, no par value:
25,000,000 shares authorized; 14,063,983 and 13,561,440 shares
issued and outstanding......................................... 134,438 130,177
Retained earnings (deficit)........................................ 1,911 (1,221)
Cumulative foreign currency translation adjustments................ (322) (317)
-------- --------
Total shareholders' equity................................. 136,027 128,639
-------- --------
Total...................................................... $248,443 $209,818
======== ========
</TABLE>

See Notes to Consolidated Financial Statements.

F-5
<PAGE> 49

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

All dollar amounts in the tabulations in the notes to the consolidated
financial statements are stated in thousands unless otherwise indicated. All
dollar amounts included in the text are in whole dollars, unless otherwise
indicated. Certain reclassifications have been made in the 1993 and 1994
consolidated financial statements to conform with the 1995 presentation.

The Company

Pool Energy Services Co. (the "Company") was formed in November 1988 to
acquire all of the oilfield services business of ENSERCH Corporation
("ENSERCH"), and that acquisition was consummated on April 24, 1990. As used
herein, except where the context otherwise requires, the term "Company" refers
to Pool Energy Services Co., its subsidiary corporations and its unconsolidated
affiliates. The Company operates in only one business segment -- the oilfield
services industry. Within the oilfield services industry, the Company provides
services and products to oil and natural gas well operators for the workover,
maintenance and plugging of existing oil and natural gas wells and for the
drilling and completion of new oil and natural gas wells. The Company operates
in the United States, South America, the Middle East, Asia, Africa and
Australia.

Basis of Financial Statements

The consolidated financial statements include the financial statements of
the Company and its wholly owned subsidiaries, and all significant intercompany
accounts and transactions have been eliminated in consolidation. The Company
uses the equity method to account for affiliates in which it does not have
voting control. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company generally recognizes revenue when services are rendered or
products are shipped.

Foreign Currency Gains and Losses

The U.S. dollar is the functional currency for most of the Company's
foreign operations, and for those operations, foreign currency gains and losses
are included in the statement of consolidated operations as incurred. The
functional currency of Pool Santana, Limited, the Company's unconsolidated
affiliate in Trinidad, is the Trinidad and Tobago dollar, and the Company's
share of Pool Santana's cumulative translation gains and losses is carried as an
adjustment in the shareholders' equity section of the consolidated balance
sheets.

Property, Plant and Equipment

Depreciation of plant and equipment is provided on a straight-line basis
over the estimated useful lives of the assets. The components of a rig that
generally require replacement during the rig's life have useful lives that range
from three to 12 years. The basic rigs, excluding such components, have
estimated useful lives from date of original manufacture ranging from 22 to 35
years. Other property and equipment have useful lives that range from three to
seven years. Estimated salvage values are assigned to the rigs based on an
individual assessment of each rig and generally approximate 15% of cost. The
estimated remaining depreciable lives of certain rigs and equipment were revised
in

F-6
<PAGE> 50

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

October 1994 to better reflect their remaining economic lives. The effect of
this change in accounting estimate was to increase 1995 net income by
approximately $2.1 million or $.15 per share and to decrease the 1994 net loss
by approximately $0.5 million or $.04 per share.

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This statement requires
that long-lived assets and certain identifiable intangibles held and used by the
Company be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
adoption of this statement in the first quarter of 1996 will not have a material
effect on the Company's financial position or results of operations.

The Company capitalizes interest applicable to the construction of
significant additions to property and equipment. Interest capitalized for the
year ended December 31, 1995 was $0.1 million. No interest was capitalized in
1994 or 1993.

Goodwill

Goodwill represents the excess of the aggregate price paid by the Company
in the 1995 acquisition of Golden Pacific Corp. ("GPC"), accounted for as a
purchase, over the fair market value of the net assets acquired. Goodwill is
being amortized on a straight-line basis over a period of 30 years. The carrying
amount of unamortized goodwill is reviewed for potential impairment loss when
events or changes in circumstances indicate that the carrying amount of goodwill
may not be recoverable. Goodwill amortization expense totaled $0.2 million for
the year ended December 31, 1995.

Environmental Remediation and Compliance

Costs incurred to investigate and remediate contaminated sites are expensed
unless the remediation extends the useful lives of the assets employed at the
site. Remediation costs that extend the useful lives of the assets are
capitalized and amortized over the remaining economic lives of such assets.
Liabilities are recorded when the need for environmental assessments and/or
remedial efforts becomes known or probable and the cost can be reasonably
estimated.

Income Taxes

The Company accounts for income taxes based upon Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109") which
requires recognition of deferred income tax liabilities and assets for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. Under this method, deferred
income tax liabilities and assets are determined based on the temporary
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities and available tax credit carryforwards.

Inventories

Inventories of spare parts, materials and supplies held for consumption are
stated principally at average cost.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to
concentrations of credit 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 and by policy
limits the amount of credit exposure to any one financial institution. The
Company's customer

F-7
<PAGE> 51

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

base consists primarily of multi-national, foreign national and independent oil
and natural gas producers. During 1995, one customer accounted for approximately
11% of the Company's consolidated revenues. During 1994 and 1993, no customer
accounted for more than 10% of consolidated revenues. The Company performs
ongoing credit evaluations of its customers and generally does not require
collateral on its trade receivables. Such 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.

Fair Values of Financial Instruments

Except for investments in its unconsolidated affiliates, which are
accounted for under the equity method, the Company's financial instruments
consist primarily of short-term, variable rate items for which management
believes fair value approximates carrying value.

Foreign Exchange Risk Management

The Company operates internationally, giving rise to exposure to market
risks from changes in foreign exchange rates. The Company uses forward exchange
contracts as economic hedges of exposed net investments in foreign entities in
which that exposure exceeds $0.2 million and in currencies for which such
contracts are available. At December 31, 1995 and 1994, only the Company's
exposed net investment in its Malaysia affiliate was hedged. The Company's
foreign exchange contracts do not subject the Company to the risk of exchange
rate movements because gains and losses on these contracts offset gains and
losses on the exposed investments being hedged. Realized and unrealized gains
and losses on these contracts are recognized currently in the statement of
consolidated operations. The forward exchange contracts generally have
maturities which do not exceed 30 days. The Company had forward exchange
contracts to purchase $3.3 million and $4.8 million in Malaysian ringgits at
December 31, 1995 and 1994, respectively. The Company does not hold or issue
financial instruments for trading purposes.

Stock Incentive Plans

The Company accounts for stock option grants using the intrinsic value
method of accounting prescribed by APB Opinion No. 25, "Accounting for Stock
Issued to Employees." Under the Company's stock incentive plans, the price of
the stock on the grant date is the same as the amount an employee must pay to
exercise the option to acquire the stock; accordingly, the options have no
intrinsic value at grant date, and in accordance with the provisions of APB
Opinion No. 25 no compensation cost is recognized.

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which sets forth alternative accounting and
disclosure requirements for stock-based compensation arrangements. SFAS 123 does
not rescind the existing accounting for employee stock-based compensation under
APB Opinion No. 25. Companies may continue to follow the current accounting to
measure and recognize employee stock-based compensation; however, SFAS 123
requires disclosure of pro forma net income and earnings per share that would
have been reported under the "fair value" based recognition provisions of SFAS
123. The Company has elected to continue to follow the provisions of APB Opinion
No. 25 for employee compensation and will disclose the pro forma information
required under SFAS 123.

F-8
<PAGE> 52

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Cash Flows

For cash flow purposes, the Company considers all unrestricted highly
liquid investments with less than a three-month maturity when purchased as cash
equivalents.

Earnings Per Share of Common Stock

Earnings per share is based on the average number of common shares and
common equivalent shares outstanding during the year.

2. SHAREHOLDERS' EQUITY

The following is a summary of transactions affecting shareholders' equity
for the last three fiscal years:

<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
RETAINED CURRENCY
COMMON PREFERRED EARNINGS TRANSLATION
STOCK STOCK (DEFICIT) ADJUSTMENTS
-------- --------- -------- -----------
<S> <C> <C> <C> <C>
Balance, January 1, 1993................ $129,728 $ 1 $ 5,308 $ --
Net income............................ -- -- 6,200 --
Common stock options exercised........ 404 -- -- --
Repurchase of preferred stock......... -- (1) -- --
Translation adjustment................ -- -- -- (295)
-------- --- -------- -----
Balance, December 31, 1993.............. 130,132 -- 11,508 (295)
Net loss.............................. -- -- (12,729) --
Common stock options exercised........ 45 -- -- --
Translation adjustment................ -- -- -- (22)
-------- --- -------- -----
Balance, December 31, 1994.............. 130,177 -- (1,221) (317)
Net income............................ -- -- 3,132 --
Issuance of common stock for:
Stock options exercised............ 61 -- -- --
Business acquisition............... 4,200 -- -- --
Translation adjustment................ -- -- -- (5)
-------- --- -------- -----
Balance, December 31, 1995.............. $134,438 $-- $ 1,911 $(322)
======== === ======== =====
</TABLE>

Preferred Stock

At the time of the Company's 1990 purchase of ENSERCH's oilfield services
business, ENSERCH acquired 1,000 shares of the Company's preferred stock, with a
total stated value of $1,000. The preferred stock was repurchased by the Company
in October 1993 and is currently held in treasury.

Shareholder Rights Plan

The Company maintains a Shareholder Rights Plan (the "Rights Plan") that is
designed to deter coercive or unfair takeover tactics, to prevent a person or
group from gaining control of the Company without offering fair value to all
shareholders and to deter other abusive takeover tactics which are not in the
best interests of shareholders. The Company's Board of Directors adopted the
Rights Plan on June 7, 1994 and declared a dividend of one right ("Right") for
each outstanding share of the Company's common stock to shareholders of record
on June 23, 1994. The Rights only become exercisable, and transferable apart
from the Company's common stock, ten business days following a public
announcement that a person or group ("Acquirer") has acquired beneficial
ownership of, or has commenced a tender or exchange offer for, 15% or more of
the Company's common stock (each a "Triggering Event").

F-9
<PAGE> 53

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Each Right initially entitles the holder to purchase one-third of one share
of the Company's common stock at a price of $9.00, subject to adjustment. Upon
the occurrence of a Triggering Event, each Right, in the absence of timely
redemption of the Rights by the Company, will entitle the holder thereof (other
than the Acquirer), instead, to receive upon exercise of the Right a number of
the Company's common shares (or, in certain circumstances, cash, property or
other securities of the Company) having a current market price equal to twice
the exercise price for a full share. Following the occurrence of a Triggering
Event, if the Company is acquired in a merger or other business combination, or
50% or more of the Company's assets or earning power are sold or transferred,
each Right, in the absence of timely redemption of the Rights by the Company,
will entitle the holder thereof (other than the Acquirer) to receive a number of
shares of common stock of the acquiring company having a current market price
equal to twice the exercise price for a full share.

The Rights may be redeemed by the Company in whole, but not in part, at a
redemption price of $.01 per Right at any time prior to the Rights becoming
exercisable. The Rights will expire on June 7, 2004. Until the Rights become
exercisable, they have no dilutive effect on earnings per share. As of December
31, 1995, a total of 4,413,337 shares of the Company's common stock were
reserved for issuance upon exercise of Rights.

The description and terms of the Rights are set forth in a Rights Agreement
between the Company and the First National Bank of Boston, as Rights Agent.

Stock Incentive Plans

In December 1993 the Company adopted the 1993 Employee Stock Incentive Plan
for officers and key employees, which plan reserved for issuance up to 600,000
shares of the Company's common stock. The shares may be issued upon the exercise
of non-qualified stock options granted under the plan or may be granted as
restricted stock awards or bonus stock awards. Stock options are exercisable
over a ten-year term and, unless specified otherwise at the time of the grant,
vest at the rate of 25 percent per year of continuous employment following the
grant of the options. Shares of common stock awarded as restricted stock are
subject to restrictions on transfer and subject to risk of forfeiture until
earned by continued employment or the achievement of specific goals. During the
restriction period, holders of restricted stock have the rights of stockholders,
including the right to vote and receive cash dividends, except for the right to
transfer ownership.

In April 1990 the Company adopted the 1990 Employee Stock Option Plan for
key employees, which plan reserved for issuance up to 1,000,000 shares of the
Company's common stock, of which 62,830 had been purchased as of December 31,
1995 through the exercise of options. Options are exercisable over a ten-year
term and, unless specified otherwise at the time of the grant, vest at the rate
of 25 percent per year of continuous employment following the grant of the
options. Since the adoption of the 1993 Employee Stock Incentive Plan no
additional options may be granted under the 1990 Employee Stock Option Plan.

Effective October 1991, the Company adopted the 1991 Directors' Stock
Option Plan for members of its Board of Directors who are not full-time
employees of the Company. The plan provides for the granting of options to
purchase a maximum of 150,000 shares of the Company's common stock, of which
7,000 had been purchased as of December 31, 1995 through the exercise of
options. The plan provides for each eligible director to receive automatically
an initial option for 5,000 shares and to receive automatically an additional
option for 2,000 shares on the date of each Annual Meeting of Shareholders after
the initial grant at which such director is reelected. Options expire ten years
after the date of the grant. Each option becomes exercisable as to 50% of the
shares covered thereby at the end of one year from the date of grant and as to
the remaining 50% at the end of two years from the date of grant.

F-10
<PAGE> 54

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The exercise price of options under all plans is the fair market value per
share on the date the option is granted. The following table summarizes the
stock option activity related to the Company's plans:

<TABLE>
<CAPTION>
1995 1994 1993
------------------------ ------------------------ -------------------------
PRICE PRICE PRICE
SHARES PER SHARE SHARES PER SHARE SHARES PER SHARE
------ --------------- ------ --------------- ------ ----------------
(IN THOUSANDS EXCEPT PRICE PER SHARE)
<S> <C> <C> <C> <C> <C> <C>
Outstanding, January 1...... 1,000 $6.125-$10.625 901 $6.125-$10.625 928 $ 6.125-$10.250
Granted................... 205 $7.625-$ 9.250 118 $7.125-$ 9.625 41 $10.000-$10.625
Cancelled................. (54) $6.500-$10.250 (12) $6.500-$10.625 (27) $ 6.375-$10.250
Exercised................. (9) $6.375-$ 7.125 (7) $6.500 (41) $ 6.375-$10.250
----- ----- ---
Outstanding, December 31.... 1,142 $6.125-$10.625 1,000 $6.125-$10.625 901 $ 6.125-$10.625
===== ===== ===
Exercisable, December 31.... 799 $6.125-$10.625 768 $6.125-$10.625 670 $ 6.125-$10.250
===== ===== ===
</TABLE>

3. BUSINESS ACQUISITIONS

Golden Pacific Corp. Acquisition

On June 13, 1995, the Company acquired all of the outstanding capital stock
of GPC, a privately-owned California well-servicing company with a fleet of
approximately 155 rigs and related equipment, for $18.8 million, consisting of
long-term notes in the amount of $11.5 million, 493,543 shares of the Company's
common stock valued at $4.2 million and $3.1 million in cash. The cash paid in
the transaction was provided by the Company's existing syndicated bank revolving
line of credit.

The acquisition was accounted for under the purchase method, and
accordingly the results of the acquired company have been included in the
accompanying consolidated financial statements since the date of acquisition.
The purchase price was allocated on the basis of the estimated fair market value
of the assets acquired and the liabilities assumed as of the date of
acquisition. This allocation resulted in goodwill of approximately $11.4
million, which is being amortized on a straight-line basis over 30 years. In
connection with the purchase of GPC, the Company recorded acquisition related
costs totaling $0.6 million, primarily for yard closings. The fair values of the
assets acquired and liabilities assumed were as follows:

<TABLE>
<S> <C>
Fair value of assets acquired, including $654 of cash and cash
equivalents..................................................... $ 37,808
Long-term notes issued for capital stock of GPC................... (11,500)
Company's common stock issued for capital stock of GPC............ (4,200)
Cash paid for capital stock of GPC................................ (3,078)
Acquisition related expenditures.................................. (924)
--------
Liabilities assumed............................................... $ 18,106
========
</TABLE>

F-11
<PAGE> 55

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following unaudited pro forma summary of financial information presents
the Company's consolidated results of operations as if the acquisition had
occurred at the beginning of the periods indicated, after including the impact
of certain adjustments, such as: additional depreciation expense, amortization
of goodwill, increased interest expense on the acquisition debt, decreased
insurance expense, elimination of certain transactions with affiliates of GPC
and related income tax effects.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1995 1994
-------- --------
(IN THOUSANDS EXCEPT
EARNINGS PER SHARE)
<S> <C> <C>
Revenues..................................................... $298,325 $278,831
======== ========
Net Income................................................... $ 4,458 $(10,214)
======== ========
Earnings Per Share of Common Stock........................... $ .32 $ (.73)
======== ========
Average Shares Outstanding................................... 14,061 14,053
======== ========
</TABLE>

The above pro forma financial information is presented for informational
purposes only and is not necessarily indicative of the operating results that
would have occurred if the acquisition had taken place at the beginning of the
periods presented, nor is it necessarily indicative of future operating results.

Pool Arctic Alaska Acquisition

On September 28, 1994, the Company acquired the 60.7% interest not already
owned by the Company in Pool Arctic Alaska, a partnership, for $12.1 million in
cash. The Company's Alaska operation now includes the three highly specialized
Arctic land drilling rigs and related equipment formerly owned by the
partnership. It provides rig and contract labor services, both onshore and
offshore, in Alaska. The acquisition was funded from the Company's existing
syndicated bank revolving line of credit and cash resources. During 1995, the
Company obtained a three-year term loan to refinance $10 million of the purchase
price (see Note 5).

The acquisition has been accounted for under the purchase method and,
accordingly, the results of Pool Arctic Alaska have been included in the
accompanying consolidated financial statements since the date of acquisition.
Prior to the date of acquisition, Pool Arctic Alaska was accounted for under the
equity method based upon the Company's 39.3% partnership interest. The cost of
the acquisition has been allocated on the basis of the estimated fair market
value of the assets acquired and the liabilities assumed. The fair values of the
assets acquired and liabilities assumed were as follows:

<TABLE>
<S> <C>
Fair value of assets acquired, including $890 of cash.............. $13,761
Cash paid.......................................................... 12,140
-------
Liabilities assumed................................................ $ 1,621
=======
</TABLE>

The Company also reclassified its investment in Pool Arctic Alaska of $10.9
million to its related assets and liabilities at the time of the acquisition.

F-12
<PAGE> 56

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. INCOME TAXES

Provision (credit) for income taxes is summarized below:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
------ ------- ------
<S> <C> <C> <C>
Current:
Federal.............................................. $ -- $ 57 $ 47
State................................................ 270 380 156
Foreign.............................................. 450 337 (114)
------ ------- ------
Total current................................ 720 774 89
------ ------- ------
Deferred:
Federal.............................................. 1,564 (8,674) 1,546
State................................................ -- 96 --
Foreign.............................................. (303) (577) (236)
------ ------- ------
Total deferred............................... 1,261 (9,155) 1,310
------ ------- ------
Provision (credit) for income taxes........ $1,981 $(8,381) $1,399
====== ======= ======
</TABLE>

The 1995 deferred income tax provision resulted primarily from the effect
of certain amendments to prior period U.S. federal tax returns, partly offset by
the reversal of no longer needed deferred foreign taxes for 1990 income tax
indemnities and the elimination of the Company's valuation allowance related to
the U.S. federal net operating loss ("NOL") carryforwards. The 1994 deferred
income tax benefit resulted primarily as a result of the Company's recording a
provision for leasehold impairment which generated an income tax benefit of $8.2
million. The 1994 tax benefit also included a net reversal of $0.6 million of
previously accrued foreign income taxes. The 1993 deferred income tax provision
resulted primarily from an increase in deferred tax liabilities arising from the
use of different depreciation methods for book and tax purposes. It also
reflects the effect, which was not significant, of the Revenue Reconciliation
Act of 1993.

Temporary differences and carryforwards which gave rise to deferred tax
assets and liabilities as of December 31, 1995 and 1994 were as follows:

<TABLE>
<CAPTION>
1995 1994
---------------------------- ----------------------------
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
ASSETS LIABILITIES ASSETS LIABILITIES
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Investment in subsidiaries and
affiliates...................... $ 2,192 $ 1,821 $ 2,196 $ 1,982
Property.......................... -- 27,393 -- 21,700
Personal injury and property
damage claims................... 4,004 -- 4,094 --
Leases............................ 9,574 -- 10,989 --
Accrued liabilities............... 4,356 -- 2,773 --
Inventory valuation............... 453 27 449 31
Accounts receivable valuation..... 467 -- 956 --
Net operating loss carryforward... 21,448 -- 21,369 --
Other............................. 386 244 198 289
-------- ------- ------- --------
Subtotal........................ 42,880 29,485 43,024 24,002
Valuation allowance............... (6,721) -- (8,906) --
-------- ------- ------- --------
Total........................... $ 36,159 $ 29,485 $34,118 $ 24,002
======== ======= ======= ========
</TABLE>

F-13
<PAGE> 57

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The total valuation allowance decreased a net $2.2 million in 1995 and $0.6
million in 1994.

In 1995, the Company eliminated the valuation allowance related to its U.S.
federal NOL carryforwards. Management believes that it is now more likely than
not that the Company will generate taxable income sufficient to realize the tax
benefit of the NOL carryforwards prior to their expiration due to among other
factors, anticipated lower tax depreciation charges within the next one to two
years as a result of most existing property becoming fully depreciated for U.S.
tax purposes, the expected increase in taxable income resulting from the GPC
acquisition and consideration of available tax planning strategies. If
necessary, the Company also will consider repatriating future foreign earnings
in order to fully realize the NOL carryforwards before their expiration.

At December 31, 1995, the Company had $44.2 million of NOL available for
carryforward to reduce U.S. federal income taxes payable in future years. The
U.S. NOL carryforwards were $12.0 million from 1991, $18.3 million from 1992,
$8.0 million from 1994 and an estimated $5.9 million from 1995; they are
available for utilization through the year(s) 2006, 2007, 2009 and 2010,
respectively. State and foreign NOL carryforwards have been fully reserved for
in the Company's consolidated balance sheet.

A reconciliation between income taxes computed at the U.S. federal
statutory rate and the Company's income taxes for financial reporting purposes
is shown below:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
------------------------------
1995 1994 1993
------ ------- -------
<S> <C> <C> <C>
U.S. federal statutory tax rate....................... 35% 35 % 35%
Provision (credit) for income taxes computed at U.S.
federal statutory tax rate.......................... $1,790 $(7,389) $ 2,660
Effect of:
Foreign tax rates different than U.S. federal
statutory
tax rate......................................... (132) (1,086) (1,728)
Alternative minimum tax............................. -- 57 47
State income taxes.................................. 175 414 101
Other -- net........................................ 148 (377) 319
------ ------- -------
Provision (credit) for income taxes................... $1,981 $(8,381) $ 1,399
====== ======= =======
Effective income tax rate............................. 38.7% (39.7)% 18.4%
====== ======= =======
</TABLE>

Foreign income before income taxes is defined as income generated from
operations in a foreign country, regardless of whether it is currently
reportable for U.S. tax purposes. Components of income (loss) before income
taxes are as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
------ -------- -------
<S> <C> <C> <C>
Domestic............................................. $ 513 $(27,075) $(1,003)
Foreign.............................................. 4,600 5,965 8,602
------ -------- -------
Total...................................... $5,113 $(21,110) $ 7,599
====== ======== =======
</TABLE>

The earnings of the Company's foreign subsidiaries and affiliates are
indefinitely invested outside the United States, and the Company estimates that
no U.S. income taxes would be payable upon distribution of those unremitted
earnings.

The Company is subject to taxation in many jurisdictions, and the final
determination of its tax liabilities involves the interpretation of the statutes
and requirements of various domestic and foreign

F-14
<PAGE> 58

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

taxing authorities. At December 31, 1995, foreign income tax returns for prior
years of certain foreign subsidiaries, unconsolidated affiliates and related
entities were under examination and/or tax deficiencies had been assessed. In
the opinion of management, any additional provisions for taxes which may
ultimately be determined to be required as a result of such examinations or
assessments will not be material to the Company's financial position or
operations.

5. LONG-TERM DEBT AND LINES OF CREDIT

Lines of Credit

The Company has a syndicated bank revolving line of credit (the "Line of
Credit") to finance temporary working capital requirements and to support the
issuance of letters of credit. During 1995 the expiration date of the Line of
Credit was extended from April 1996 to April 1997, and the maximum availability
thereunder was increased. The maximum availability under the Line of Credit is
the lesser of (i) $35 million (previously $30 million), or (ii) a calculated
amount based upon a percentage of domestic receivables which meet certain
criteria. At December 31, 1995, the Company had $30.0 million available under
the Line of Credit of which none had been drawn in cash and $13.7 million was
being utilized to support the issuance of letters of credit, including $5.9
million in letters of credit issued in connection with the GPC acquisition as
security for the acquisition debt and for obligations to GPC's insurers. The
Line of Credit provides for certain restrictions on the Company, including a
prohibition against additional debt (excluding $7 million of overdraft
facilities), a prohibition on payment of dividends, a prohibition on certain
liens, a limitation on capital expenditures, and minimum net worth and working
capital covenants. Advances under the Line of Credit are secured by certain
accounts receivable, certain deposit accounts, all of the stock of the Company's
domestic subsidiaries, 66% of the stock of the Company's consolidated foreign
subsidiaries, the property owned by the Company's Alaska subsidiary (net book
value of $26.8 million at December 31, 1995) and the Company's 13 platform rigs
located in the Gulf of Mexico (net book value of $6.1 million at December 31,
1995). The interest rate for the Line of Credit is a floating rate which is, at
the Company's option, (i) the lenders' prime rate plus 0.25%, or (ii) the London
Interbank Offered Rate (LIBOR) plus 2.625%, with the Company's choice of a one-,
two-, three-, or six-month interest period. The applicable interest rate was
8.75% and 9.625% at December 31, 1995 and 1994, respectively. There is an
approximate 1/2 of 1% commitment fee on the unutilized portion of the Line of
Credit.

At December 31, 1995, the Company's unconsolidated affiliates had $5.2
million of unused short-term lines of credit and overdraft facilities.

Long-Term Debt

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

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
10% Subordinated Notes (GPC)..................................... $11,500 $ --
$10 Million Term Loan (Alaska)................................... 7,375 --
Other............................................................ 369 495
------- -------
19,244 495
Less current maturities of long-term debt........................ 4,385 126
------- -------
$14,859 $ 369
======= =======
</TABLE>

In June 1995 as partial consideration for the acquisition of GPC, the
Company issued 10% subordinated notes aggregating $11.5 million which are due in
2005. These notes are subordinate to the Company's Line of Credit and $10
million term loan and are collateralized by (i) the well-servicing rigs

F-15
<PAGE> 59

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and related equipment of the acquired business which had an aggregate net book
value of $9.3 million at December 31, 1995, (ii) a second priority security
interest in certain real property of the acquired business which had a carrying
value of $1.4 million at December 31, 1995 and (iii) a $5 million letter of
credit. The agreement pertaining to the subordinated notes contains various
restrictive covenants, including covenants pertaining to the creation of certain
encumbrances, the transaction of certain mergers or sales of assets, the
creation of certain additional debt and other matters.

In April 1995 the Company obtained a three-year term loan (the "Alaska
Loan") to refinance $10 million of the purchase price for the 60.7% partnership
interest in Pool Arctic Alaska which was acquired in September 1994. This
acquisition was originally funded from the Company's cash resources and
approximately $6.7 million borrowed under the Line of Credit. The Alaska Loan
agreement contains restrictive covenants similar to those pertaining to the Line
of Credit and, in addition, includes a fixed charge coverage ratio covenant. At
the Company's option, interest accrues at a floating rate based upon (i) the
lenders' prime rate plus 0.5%, or (ii) LIBOR plus 2.75%, with the Company's
choice of a one-, two-, three-, or six-month interest period. The applicable
interest rate on amounts outstanding at December 31, 1995 was 8.5%. The Alaska
Loan is cross-collateralized to the Line of Credit.

In August 1994 the Company issued a four-year $0.5 million note in
connection with a purchase of eight rigs and related equipment. The note bears
interest at 7% and is secured by the eight rigs and equipment purchased, which
had an aggregate net book value of $0.6 million at December 31, 1995.

The annual maturities of long-term debt outstanding as of December 31, 1995
(including current portion) are as follows:

<TABLE>
<S> <C>
1996............................................................... $ 4,385
1997............................................................... 3,270
1998............................................................... 2,839
1999............................................................... 625
2000............................................................... 625
Thereafter......................................................... 7,500
-------
$19,244
=======
</TABLE>

Based on rates currently available to the Company for debt with similar
terms and remaining maturities, the Company believes that the recorded value of
long-term debt approximates fair market value at December 31, 1995.

In January 1996 the Company received $6.5 million under a term loan
agreement in order to refinance the construction costs incurred during 1995 to
build a new offshore platform workover rig under contract in Australia. The rig
construction costs were initially funded from the Company's cash resources and
borrowings under its Line of Credit. The loan will be repaid monthly, beginning
in January 1996, from the rig contract proceeds over approximately four years.
At the Company's option, interest accrues at a floating rate based upon (i) the
lenders' prime rate plus 0.5% or (ii) LIBOR plus 2.75%, with the Company's
choice of a one-, two-, three- or six-month interest period. The loan is
collateralized by the offshore platform workover rig (net book value of $6.8
million at December 31, 1995) and all payments under, and proceeds of, the rig
contract.

Notes Payable to Related Parties

In connection with the GPC acquisition in June 1995 the Company issued
notes to three employees related to certain deferred compensation obligations of
GPC. These 10% two-year promissory notes

F-16
<PAGE> 60

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

aggregating $1.5 million in principal amount are secured by a first priority
security interest in certain real property of the acquired business, which had a
carrying value of $1.4 million at December 31, 1995.

6. COMMITMENTS AND CONTINGENT LIABILITIES

Legal Proceedings

The Company is routinely involved in litigation incidental to its business,
which often involves claims for significant monetary amounts, some, but not all,
of which would be covered by insurance. In the opinion of management, none of
the existing litigation will have any material adverse effect on the Company.

Personal Injury and Property Damage Liability Claims

Some of the operations of the Company are hazardous, and the Company has
experienced personal injury and property damage incidents. For claims prior to
1990, the Company maintains a reserve for the self-insured portion of its
personal injury and property damage coverage. Periodically, the Company
evaluates the adequacy of this reserve as compared with estimated settlements
for filed and anticipated claims. Estimated settlements for claims are based on
the Company's historical experience, type of claim, knowledge of the specific
circumstances of the claim and judgment of the possible effect that future
economic and legal factors might have on the ultimate settlement of the claim.
The Company believes that for claims prior to 1990, the accrued liability for
personal injury and property damage claims aggregating $2.7 million at December
31, 1995 is adequate.

Beginning in 1990, the Company obtained workers' compensation and
third-party liability insurance under which its exposure to the risks covered by
those policies is significantly lower than under the pre-1990 coverage. The
Company provided $4.0 million, $3.1 million and $2.9 million in 1995, 1994 and
1993, respectively, as estimates of the aggregate uninsured portion of claims
for those years. The accrued liability for the uninsured portion of workers'
compensation and third-party claims incurred after 1989 was $7.4 million at
December 31, 1995, of which $0.9 million was held in a deposit account
accessible by the insurance underwriters. In addition, at December 31, 1995 the
Company had a $0.9 million receivable related to claims payments made by the
Company that are reimbursable by insurance.

In connection with the GPC acquisition the Company assumed a liability for
the uninsured portion of workers' compensation and third-party claims incurred
prior to the June 13, 1995 acquisition date. At December 31, 1995, the accrued
liability for such claims was $1.0 million.

Lease Commitments

At December 31, 1995, the Company had a number of noncancelable long-term
operating leases, principally for yards and office space, rigs, computer
equipment, and a manufacturing and storage facility, with various expiration
dates. Future minimum net rentals under such leases aggregate $6.3 million for
1996; $5.8 million for 1997; $5.6 million for 1998; $5.9 million for 1999; $5.8
million for 2000; and $10.9 million thereafter. Rental expense incurred under
operating leases aggregated $13.3 million in 1995, $11.2 million in 1994 and
$9.4 million in 1993.

The Company has an operating lease, effective through March 2003, for a
65-acre facility at San Angelo, Texas which it previously used for rig and
equipment manufacturing and storage. The annual lease payments, which are
included in future minimum net rentals above, are $2.2 million through March
1998 and $4.4 million thereafter for the remaining five years of the lease.
Effective October 1, 1994, the Company vacated this facility and subleased it in
its entirety under an operating sublease which expires in September 1997. The
sublease provides for minimum sublease payments of $0.5 million per year for
three years. Prior to subleasing and vacating this facility in 1994, the Company

F-17
<PAGE> 61

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

beneficially utilized approximately 12% of the facility and charged to
operations a proportionate share of the cost of the lease. In September 1988,
the Company, anticipating that it would not be able to fully utilize the
facility for a period of years, accrued a $15.9 million liability for the
expected underutilization. Since September 1988, the cost associated with the
unutilized portion of the facility has been charged against this accrued
liability, which as of the fourth quarter of 1994, had substantially been used.
For the remainder of the lease term, the Company does not anticipate utilizing
any of this facility in its future operations nor does it expect to be able to
sublease this facility to third parties for an amount equivalent to the annual
lease payments; therefore, in the fourth quarter of 1994 the Company recorded a
provision for leasehold impairment of $23.6 million (see Note 10). The provision
recognizes all future lease expense, net of anticipated sublease income. The
impact of the provision for leasehold impairment was to decrease 1994 net income
by $15.3 million, or $1.13 per share.

In December 1993 the Company entered into sale/leaseback agreements with a
leasing company with respect to three offshore jackup rigs located in the Gulf
of Mexico. The three jackup rigs had been purchased from a third party for $7.0
million and were sold to the leasing company for $7.0 million in cash, which was
received in early 1994. The leases, classified as operating leases, have an
aggregate annual lease rate of approximately $1 million per year for seven years
and are included in the future minimum net rentals above. The sale and leaseback
agreements required the Company to place cash in a restricted investment account
which serves as collateral for the leases and will reduce as lease payments are
made. As of December 31, 1995, the Company had $1.1 million of restricted cash
of which $1.0 million was classified as noncurrent.

Employment contracts

In connection with the GPC acquisition, the Company entered into three-year
employment contracts in June 1995 with three key employees previously employed
by GPC. The Company's minimum aggregate salary and bonus obligation remaining at
December 31, 1995 under such contracts was approximately $1.2 million.

7. PENSION, POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS

Pension Plans

The Pool Company Retirement Income Plan, a defined benefit plan, covers
substantially all of the Company's domestic employees. The Company's policy is
to fund the minimum amount required by the Employee Retirement Income Security
Act of 1974. The benefits are based on years of service and the average of the
highest five consecutive years of compensation during the final ten years of
employment.

Effective January 1, 1993, the Company established a Supplementary
Executive Retirement Plan to provide certain management employees with defined
benefits in excess of those provided by the Retirement Income Plan. The
Company's policy is to fund annually, within 60 days following the end of the
plan year, the amount necessary to make plan assets sufficient to pay each
participant or beneficiary the benefits payable as of the close of that plan
year. The benefits are based on years of service and the average of the five
highest years of compensation during the final ten years of employment.

F-18
<PAGE> 62

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a summary of the components of net pension cost:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service cost -- benefits earned during the period....... $1,580 $1,336 $1,236
Interest cost on projected benefit obligation........... 525 425 292
Actual loss (return) on plan assets..................... (869) 26 (220)
Net amortization and deferral........................... 509 (256) 99
------ ------ ------
Net pension cost.............................. $1,745 $1,531 $1,407
====== ====== ======
</TABLE>

The following table sets forth the funded status of the plans and amounts
recognized in the Company's consolidated balance sheets at December 31:

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation..................................... $(4,936) $(3,322)
======= =======
Accumulated benefit obligation................................ $(6,911) $(3,874)
======= =======
Projected benefit obligation.................................. $(9,285) $(6,237)
Plan assets at fair value....................................... 5,557 4,509
------- -------
Projected benefit obligation in excess of plan assets........... (3,728) (1,728)
Unrecognized net loss........................................... 1,464 572
Unrecognized prior service cost................................. 591 704
Adjustment to recognize minimum liability....................... (406) (327)
------- -------
Net pension liability........................................... $(2,079) $ (779)
======= =======
</TABLE>

Assumptions used in the accounting at December 31 were:

<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Pool Company Retirement Income Plan:
Weighted average discount rate................................... 7.25% 8.50%
Annual rate of increase in future compensation levels............ 4.50% 6.00%
Expected long-term rate of return on plan assets................. 9.00% 8.50%
Supplementary Executive Retirement Plan:
Weighted average discount rate................................... 7.25% 8.50%
Annual rate of increase in future compensation levels............ 6.00% 6.00%
Expected long-term rate of return on plan assets................. 9.00% 8.50%
</TABLE>

Postretirement Benefits Other Than Pensions

The Company provides certain health care and life insurance benefits to all
of its retirees who meet eligibility requirements based on age and years of
service. The benefits are paid from the general funds of the Company and, in the
case of the health care benefits, are partially funded by contributions from the
retirees.

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" ("SFAS 106"). SFAS 106 requires the Company to accrue the
estimated cost of its retiree health care and life insurance benefits during the
years the employees provide services entitling them to the benefits. The

F-19
<PAGE> 63

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company previously expensed the cost of these benefits as they were paid. In
accordance with the provisions of SFAS 106, the Company has elected to recognize
the liability of approximately $2.9 million at the implementation date over a
period of twenty years.

The following table sets forth certain information with respect to the
Company's postretirement benefits obligation at December 31:

<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation (a):
Retirees...................................................... $(1,472) $(1,730)
Other fully eligible plan participants........................ (1,876) (1,059)
Other active plan participants................................ (4,708) (2,502)
------- -------
Total accumulated postretirement benefit obligation............. (8,056) (5,291)
Unrecognized transition obligation.............................. 2,376 3,019
Unamortized net loss............................................ 2,963 1,178
------- -------
Accrued postretirement benefit liability........................ $(2,717) $(1,094)
======= =======
</TABLE>

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

(a) Includes effect of June 13, 1995 GPC acquisition. See Note 3.

Net postretirement benefit cost consisted of the following components:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
--------------------------
1995 1994 1993
------ ------ ----
<S> <C> <C> <C>
Service cost -- benefits earned during the year.......... $ 750 $ 534 $393
Interest cost on accumulated postretirement benefit
obligation............................................. 461 405 313
Net amortization and deferral............................ 93 79 --
Amortization of transition obligation.................... 140 168 168
------ ------ ----
Net periodic postretirement benefit cost................. $1,444 $1,186 $874
====== ====== ====
</TABLE>

The assumed health care cost trend rate used to measure the expected cost
of the benefits was 6.5% for 1995 and thereafter. If the assumed health care
cost trend rate were increased by one percent, the accumulated postretirement
benefit obligation as of December 31, 1995 would have increased by 14%, and the
aggregate of service and interest cost components for 1995 would have increased
17%. The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 7.25% in 1995, 8.5% in 1994 and 8% in
1993.

Postemployment Benefits

The Company adopted Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits," which requires the accrual
of benefits provided after employment but before retirement to former or
inactive employees, their beneficiaries, and covered dependents. The adoption of
this statement in 1993 had no significant effect on the Company's financial
condition or results of operations.

8. TRANSACTIONS WITH ENSERCH

ENSERCH leases office space to the Company and previously provided claims
handling services, both at negotiated rates. Total direct costs charged by
ENSERCH were $0.8 million in 1995, $0.9 million in 1994 and $0.9 million in
1993.

F-20
<PAGE> 64

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In connection with the Company becoming an independent public company,
ENSERCH and the Company entered into a contingent support agreement (the
"Contingent Support Agreement") by which ENSERCH is providing the Company with
limited financial support, including (a) continuing contingent obligations under
a letter of credit in support of the refinancing of debt of the Company's Saudi
Arabia affiliate, until July 1996, and (b) continuing a guarantee of the
Company's lease obligations with respect to the facility in San Angelo, Texas,
through March 2003. At December 31, 1995, the amounts outstanding under (a) and
(b) were $0.6 million and $26.6 million, respectively. As required by the
Contingent Support Agreement, the Company in early 1993 replaced certain
guarantees provided by ENSERCH with respect to (c) the Company's obligations
with respect to letters of credit, bank guarantees and bid and performance bonds
and (d) standby letters of credit in favor of the Company's insurers. The
Company pays ENSERCH an annual fee under the Contingent Support Agreement for
(a) and paid fees for (c) and (d) through April 1993; such fees are based upon
the amount of ENSERCH's guarantees. These fees approximated $2,000 in 1995,
$3,000 in 1994 and $7,000 in 1993. The Company is also obligated to reimburse
ENSERCH for any amounts paid out under the guarantees. The Company has pledged
the stock of Pool International, Inc., the holder of the Company's interest in
Pool Arabia, Ltd., as collateral under the Contingent Support Agreement.

Under the Contingent Support Agreement, ENSERCH advanced $4.0 million in
cash to the Company in 1990 in payment of future domestic onshore well-servicing
and production services to be applied annually against the first $1.0 million of
such services. During the years 1991 through 1994, the Company performed $1.0
million of such services in each year and has now fulfilled its obligation.

Certain oilfield services are performed for various affiliates and entities
managed by affiliates of ENSERCH at prices comparable to those received from
nonaffiliated customers. Revenues from the performance of those services,
including the $1.0 million of prepaid services in both 1994 and 1993, amounted
to $1.8 million in 1995, $2.9 million in 1994 and $3.4 million in 1993.

9. UNCONSOLIDATED AFFILIATES

A significant part of the operations of the Company is conducted through
the following unconsolidated affiliates, in which the Company held the indicated
ownership interest at December 31, 1995: Pool Arabia, Ltd. -- 51%; Intairdril
Oman L.L.C. -- 49%; Pool Santana, Limited -- 49%; and Antah Drilling Sdn.
Bhd. -- 49%. The Company charges its unconsolidated affiliates for the provision
of management services and, in some cases, financing and equipment rental.

F-21
<PAGE> 65

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth certain summarized financial information of
the Company's unconsolidated affiliates as shown by the financial statements of
the affiliates. In September 1994 the Company acquired the 60.7% interest not
already owned by the Company in Pool Arctic Alaska. Prior to the date of
acquisition, Pool Arctic Alaska was accounted for under the equity method based
upon the Company's 39.3% partnership interest (see Note 3). Pool Arctic Alaska's
1994 net income included a $1.0 million gain on debt restructuring. Included in
Pool Arctic Alaska's net income for 1993 was a $0.4 million gain on debt
restructuring and a $1.4 million loss on disposal of equipment.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31
-----------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Revenues:
Pool Arabia, Ltd............................................. $28,150 $36,281 $40,129
Pool Arctic Alaska(b)........................................ -- 20,693 25,590
Antah Drilling Sdn. Bhd...................................... 4,218 3,654 7,431
Pool Santana, Limited........................................ 5,785 4,916 4,219
Intairdril Oman L.L.C........................................ 434 856 1,398
------- ------- -------
Total................................................ $38,587 $66,400 $78,767
======= ======= =======
Gross profit(a):
Pool Arabia, Ltd............................................. $10,106 $13,583 $15,926
Pool Arctic Alaska(b)........................................ -- 5,330 5,257
Antah Drilling Sdn. Bhd...................................... 2,357 2,570 5,154
Pool Santana, Limited........................................ 2,522 2,183 1,638
Intairdril Oman L.L.C........................................ 223 543 815
------- ------- -------
Total................................................ $15,208 $24,209 $28,790
======= ======= =======
Net income (loss):
Pool Arabia, Ltd............................................. $ (536) $ 1,640 $ 3,998
Pool Arctic Alaska(b)........................................ -- 1,903 (2,125)
Antah Drilling Sdn. Bhd...................................... (210) 386 1,144
Pool Santana, Limited........................................ 927 853 486
Intairdril Oman L.L.C........................................ (392) (57) 80
------- ------- -------
Total................................................ $ (211) $ 4,725 $ 3,583
======= ======= =======
</TABLE>

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

(a) Gross profit is computed as revenues less operating expenses (which exclude
depreciation and general and administrative expenses).

(b) On September 28, 1994, the Company acquired the 60.7% interest not already
owned by the Company in Pool Arctic Alaska, a partnership. The results of
Pool Arctic Alaska have been included in the accompanying consolidated
financial statements since the date of such acquisition. See Note 3.

F-22
<PAGE> 66

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's investment in its unconsolidated affiliates differs from its
ownership percentage of the affiliates' equity based on the financial statements
of the affiliates chiefly because of the allocation of the purchase price for
the 1990 purchase of ENSERCH's oilfield services business, unrecognized gains on
asset sales and other transactions as set forth below.

<TABLE>
<CAPTION>
AS OF DECEMBER 31
---------------------
1995 1994
-------- --------
<S> <C> <C>
Combined Balance Sheet Data of Unconsolidated Affiliates:
Current assets..................................................... $ 19,229 $ 23,382
Noncurrent assets.................................................. 88,197 81,110
-------- --------
Total assets............................................... 107,426 104,492
-------- --------
Current liabilities................................................ 18,046 14,084
Noncurrent liabilities............................................. 56,876 55,088
-------- --------
Total liabilities.......................................... 74,922 69,172
-------- --------
Net assets of unconsolidated affiliates............................ $ 32,504 $ 35,320
======== ========
Investment in and Noncurrent Receivables from Unconsolidated
Affiliates:
The Company's portion of net assets................................ $ 16,414 $ 17,847
Writedown of net assets............................................ (11,347) (12,307)
Deferred gain on sale of assets.................................... (3,182) (3,395)
Basis difference in equity contributions........................... (1,080) (1,378)
Long-term advances................................................. 19,396 19,453
Other-net.......................................................... 42 64
-------- --------
Equity in net assets............................................... 20,243 20,284
Noncurrent receivables............................................. 5,758 5,758
-------- --------
Total...................................................... $ 26,001 $ 26,042
======== ========
</TABLE>

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
------------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Earnings Attributable to Unconsolidated Affiliates:
The Company's portion of net income (loss).................... $ (114) $2,163 $2,042
Adjustment to depreciation recorded by affiliates to the
Company's basis............................................ 1,252 1,466 4,558
Other......................................................... 1,757 1,426 178
------ ------ ------
Equity in income.............................................. 2,895 5,055 6,778
Management fee (expense)...................................... 7 (387) 46
Interest income............................................... 50 211 140
Other......................................................... 3 137 (104)
------ ------ ------
Total................................................. $2,955 $5,016 $6,860
====== ====== ======
</TABLE>

At December 31, 1995, the Company's investment in unconsolidated affiliates
included $13.2 million of net undistributed earnings of the affiliates. Antah
Drilling Sdn. Bhd. and Pool Arabia, Ltd. are parties to agreements which contain
covenants restricting the ability to distribute, by dividend or otherwise, their
respective earnings to the Company. The Company received dividends from
unconsolidated affiliates of $2.9 million in 1995, $2.9 million in 1994 and $0.7
million in 1993.

Principal payments required on long-term debt of unconsolidated affiliates
are $12.8 million in 1996 and $1.2 million in 1997.

F-23
<PAGE> 67

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At December 31, 1995, the Company had agreed to guarantee certain
borrowings of its unconsolidated affiliates up to an aggregate of $0.6 million,
of which all was outstanding.

In management's opinion, the Company has no significant exposure from
currency restrictions on its foreign subsidiaries and affiliates. See Note 1.

10. SUPPLEMENTAL FINANCIAL INFORMATION

<TABLE>
<CAPTION>
AS OF DECEMBER 31
---------------------
1995 1994
-------- --------
<S> <C> <C>
BALANCE SHEET ITEMS:

Property, plant and equipment comprised the following:
Rigs and related equipment...................................... $180,240 $151,050
Transportation equipment........................................ 4,955 5,129
Other machinery and equipment................................... 4,803 3,246
Land and buildings.............................................. 6,587 4,356
Leasehold improvements.......................................... 2,300 2,022
Furniture and office equipment.................................. 2,221 1,829
-------- --------
Total................................................. 201,106 167,632
Accumulated depreciation........................................ 77,082 66,096
-------- --------
Property, plant and equipment -- net.................. $124,024 $101,536
======== ========
Accrued liabilities are summarized below:
Accrued compensation and benefits............................... $ 10,386 $ 9,431
Personal injury and property damage claims...................... 1,648 1,976
Other accruals.................................................. 7,581 5,793
-------- --------
Total................................................. $ 19,615 $ 17,200
======== ========
Other liabilities (noncurrent) are summarized below:
Accrued rental cost of underutilized facilities................. $ 25,750 $ 27,774(a)
Personal injury and property damage claims -- noncurrent........ 9,660 9,199
Other........................................................... 7,729 4,577
-------- --------
Total................................................. $ 43,139 $ 41,550
======== ========
</TABLE>

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

(a) A provision for leasehold impairment of $23.6 million was recorded in 1994
to offset all future lease expense, net of anticipated sublease income,
related to the facility in San Angelo, Texas. See Note 6.

F-24
<PAGE> 68

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
INCOME STATEMENT ITEMS:

Revenues:
Domestic onshore
Central division well-servicing..................... $ 86,880 $ 84,988 $ 90,887
California division well-servicing.................. 52,511 24,471 27,057
Production services................................. 43,221 42,067 37,853
Gulf of Mexico offshore workover and drilling.......... 37,415 36,020 38,676
International workover and drilling.................... 23,579 19,866 23,644
Alaska workover and drilling........................... 20,427 9,940 9,857
Other services......................................... 13,272 11,823 12,550
-------- -------- --------
Total.......................................... $277,305 $229,175 $240,524
======== ======== ========
Operating expenses included:
Provision (credit) for uncollectible accounts.......... $ 765 $ (59) $ 549

Other income (expense) -- net:
Interest income........................................ $ 435 $ 418 $ 529
Gain (loss) on disposal of assets...................... 1,164 359 617
Gain on sale of Alaska Rig 428......................... -- -- 1,157
Settlement related to sale of Libya assets............. -- 500 --
Foreign currency gain (loss)........................... (285) (72) (29)
Other.................................................. (25) (3) (35)
-------- -------- --------
Total.......................................... $ 1,289 $ 1,202 $ 2,239
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:

Federal, state and foreign income tax payments (refunds),
net.................................................... $ 138 $ 150 $ 299
Interest payments, net of amounts capitalized, to third
parties................................................ 1,458 100 641

Net changes in the components of operating working
capital were as follows:
Receivables............................................ $ 5,653 $ (3,080) $ 1,256
Accounts receivable from affiliates.................... (1,587) (468) (132)
Inventories............................................ (38) (612) 754
Other current assets................................... 84 (68) 599
Trade accounts payable and accrued liabilities......... 5,295 3,419 (1,815)
Accrued taxes.......................................... (2,198) 585 (337)
-------- -------- --------
Total.......................................... $ 7,209 $ (224) $ 325
======== ======== ========
</TABLE>

In December 1993, the Company entered into agreements with a leasing
company to sell for $7.0 million and lease back three offshore jackup rigs which
the Company had recently purchased from a third party; the sales proceeds were
received in January 1994 (see Note 6). See Note 3 for non-cash investment
activity related to the Company's business acquisitions.

F-25
<PAGE> 69

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

BUSINESS BY GEOGRAPHIC AREA:

The following table sets forth certain financial data of the Company by
geographic area:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31
------------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Revenues:
United States........................................ $252,056 $206,301 $213,988
Europe and Africa.................................... 1,865 897 6,947
Middle East.......................................... 4,358 1,827 3,232
Asia................................................. 3,515 2,149 3,029
Australia............................................ 2,248 -- --
South America........................................ 13,263 18,001 13,328
-------- -------- --------
Total........................................ $277,305 $229,175 $240,524
======== ======== ========
Earnings Attributable to Unconsolidated Affiliates:
United States........................................ $ -- $ 521 $ 29
Middle East.......................................... 2,163 3,688 4,928
Asia................................................. 271 146 1,438
South America........................................ 521 661 465
-------- -------- --------
Total........................................ $ 2,955 $ 5,016 $ 6,860
======== ======== ========
Operating Income (Loss)(a):
United States........................................ $ 1,105 $(29,347)(b) $ (2,391)
Europe and Africa.................................... (430) (140) (187)
Middle East.......................................... 524 870 1,699
Asia................................................. 402 374 278
Australia............................................ 902 -- --
South America........................................ 177 1,168 (391)
-------- -------- --------
Total........................................ $ 2,680 $(27,075) $ (992)
======== ======== ========
Income (Loss) Before Income Taxes:
United States........................................ $ 513 $(27,075)(b) $ (1,003)
Europe and Africa.................................... (441) (79) (46)
Middle East.......................................... 2,874 3,681 6,699
Asia................................................. 674 518 1,722
Australia............................................ 891 -- --
South America........................................ 602 1,845 227
-------- -------- --------
Total........................................ $ 5,113 $(21,110) $ 7,599
======== ======== ========
</TABLE>

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

(a) Operating income (loss) is revenues less related costs and expenses; it
excludes earnings attributable to unconsolidated affiliates.

(b) A provision for leasehold impairment of $23.6 million was recorded in 1994
to offset all future lease expense, net of anticipated sublease income,
related to the facility in San Angelo, Texas. See Note 6.

F-26
<PAGE> 70

POOL ENERGY SERVICES CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
AS OF DECEMBER 31
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Identifiable Assets:
United States.......................................... $183,850 $149,058 $131,603
Europe and Africa...................................... 2,003 3,507 7,889
Middle East............................................ 23,335 24,978 24,815
Asia................................................... 11,355 10,385 9,543
Australia.............................................. 8,334 -- --
South America.......................................... 19,566 21,890 19,304
-------- -------- --------
Total.......................................... $248,443 $209,818 $193,154
======== ======== ========
</TABLE>

11. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of unaudited quarterly financial data for 1995
and 1994.

<TABLE>
<CAPTION>
4TH 3RD 2ND 1ST
QUARTER QUARTER QUARTER QUARTER
-------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1995:
Revenues.............................. $ 75,131 $75,515 $63,805 $62,854
Earnings Attributable to
Unconsolidated Affiliates.......... 785 752 643 775
Gross Profit(a)....................... 17,703 15,963 15,069 12,451
Income Before Income Taxes............ 2,746 1,001 1,282(b) 84
Net Income............................ 1,718 644 555(b) 215
Earnings Per Share of Common Stock.... $ .12 $ .05 $ .04(b) $ .02
1994:
Revenues.............................. $ 62,771 $56,167 $54,261 $55,976
Earnings Attributable to
Unconsolidated Affiliates.......... 883 1,038 1,233 1,862
Gross Profit(a)....................... 14,396 11,026 13,262 13,495
Income (Loss) Before Income Taxes..... (22,652)(c) (230) 847 925
Net Income (Loss)..................... (14,794)(c) 571 820 674
Earnings (Loss) Per Share of Common
Stock.............................. $ (1.09)(c) $ .04 $ .06 $ .05
</TABLE>

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

(b) Includes GPC acquisition related costs of $0.6 million pretax ($0.4 million,
or $.03 per share, after-tax). See Note 3.

(c) Includes the $23.6 million pretax ($15.3 million, or $1.13 per share,
after-tax) provision for leasehold impairment during the fourth quarter of
1994. See Note 6.

F-27
<PAGE> 71

POOL ENERGY SERVICES CO.

CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(UNAUDITED)

(IN THOUSANDS EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues........................................................ $ 81,682 $ 62,854
Earnings Attributable to Unconsolidated Affiliates.............. 658 775
---------- ----------
Total................................................. 82,340 63,629
---------- ----------
Costs and Expenses:
Operating expenses............................................ 63,581 51,178
Selling, general and administrative expenses.................. 11,298 9,362
Depreciation and amortization................................. 4,253 3,335
---------- ----------
Total................................................. 79,132 63,875
---------- ----------
Other Income (Expense) -- Net................................... 164 481
Interest Expense................................................ 645 151
---------- ----------
Income Before Income Taxes...................................... 2,727 84
Income Tax Provision (Credit)................................... 1,304 (131)
---------- ----------
Net Income...................................................... $ 1,423 $ 215
========== ==========
Earnings Per Share of Common Stock.............................. $ .10 $ .02
========== ==========
Average Common Shares Outstanding............................... 14,074,006 13,561,440
========== ==========
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

F-28
<PAGE> 72

POOL ENERGY SERVICES CO.

CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)

(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-------------------
1996 1995
------- -------
<S> <C> <C>
Operating Activities:
Net Income............................................................ $ 1,423 $ 215
Noncash items included above:
Depreciation and amortization...................................... 4,253 3,335
Deferred income taxes (credit)..................................... 940 (266)
Undistributed earnings of unconsolidated affiliates................ (674) (776)
Other -- net....................................................... (102) (297)
Refund (payment) of pre-1990 personal injury and property damage
claims............................................................. 4 (20)
Payment for lease of manufacturing facility........................... (537) (537)
Other -- net.......................................................... (262) (39)
Net effect of changes in operating working capital.................... (4,427) 942
------- -------
Net Cash Flows Provided by Operating Activities............... 618 2,557
------- -------
Investing Activities:
Property additions.................................................... (5,356) (8,340)
Expenditures for the acquisition of GPC, including acquisition
costs.............................................................. (68) --
Proceeds from disposition of property, plant and equipment............ 276 329
Cash dividends received from unconsolidated affiliates................ -- 98
Other -- net.......................................................... 270 207
------- -------
Net Cash Flows Used in Investing Activities................... (4,878) (7,706)
------- -------
Financing Activities:
Proceeds and repayments of short-term borrowings -- net............... -- 5,200
Proceeds from exercise of stock options............................... 203 --
Payments for debt financing costs..................................... (196) (13)
Proceeds from project financing....................................... 6,500 --
Principal payments on project financing............................... (554) --
Principal payments on long-term debt.................................. (1,008) (31)
------- -------
Net Cash Flows Provided by Financing Activities............... 4,945 5,156
------- -------
Net Increase in Cash and Cash Equivalents............................... 685 7
Cash and Cash Equivalents at January 1,................................. 5,492 2,560
------- -------
Cash and Cash Equivalents at March 31,.................................. $ 6,177 $ 2,567
======= =======
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

F-29
<PAGE> 73

POOL ENERGY SERVICES CO.

CONDENSED CONSOLIDATED BALANCE SHEET

MARCH 31, 1996
(UNAUDITED)

(IN THOUSANDS EXCEPT NUMBER OF SHARES)

ASSETS

<TABLE>
<S> <C>
Current Assets:
Cash and cash equivalents....................................................... $ 6,177
Restricted cash................................................................. 166
Accounts and notes receivable (net of allowance for doubtful accounts of
$1,153)...................................................................... 58,647
Inventories..................................................................... 10,925
Deferred income tax asset (net of $319 allowance)............................... 3,865
Other current assets............................................................ 6,839
--------
Total current assets.................................................... 86,619
Property, Plant and Equipment -- Net.............................................. 125,760
Investment in and Noncurrent Receivables from Unconsolidated Affiliates........... 26,673
Goodwill, net..................................................................... 11,321
Noncurrent Deferred Income Tax Asset (net of $6,075 allowance).................... 4,728
Noncurrent Receivables (net of allowance for doubtful accounts of $2,230) and
Other Assets.................................................................... 3,105
Noncurrent Restricted Cash........................................................ 931
--------
Total................................................................... $259,137
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt............................................... $ 6,197
Trade accounts payable.......................................................... 22,726
Accrued liabilities............................................................. 24,344
Accrued taxes................................................................... 4,346
--------
Total current liabilities............................................... 57,613
Long-Term Debt.................................................................... 19,310
Deferred Income Taxes............................................................. 2,480
Other Liabilities................................................................. 42,081
Shareholders' Equity:
Common stock, no par value:
25,000,000 shares authorized; 14,091,183 shares issued and outstanding....... 134,641
Retained earnings............................................................... 3,334
Cumulative foreign currency translation adjustments............................. (322)
--------
Total shareholders' equity.............................................. 137,653
--------
Total................................................................... $259,137
========
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

F-30
<PAGE> 74

POOL ENERGY SERVICES CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The condensed consolidated financial statements included in this report are
unaudited but in the opinion of management include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
financial information for the periods indicated. All dollar amounts in the
tabulations in the notes to the financial statements are stated in thousands
unless otherwise indicated. Certain reclassifications have been made in the 1995
financial statements to conform with the 1996 presentation. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted.

2. UNCONSOLIDATED AFFILIATES

The following table sets forth certain summarized financial information of
the Company's unconsolidated affiliates as shown by the financial statements of
the affiliates.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
1996 1995
------ -------
<S> <C> <C>
Revenues:
Pool Arabia, Ltd............................................... $6,718 $ 8,057
Antah Drilling Sdn. Bhd........................................ 1,048 1,043
Pool Santana, Limited.......................................... 960 1,236
Intairdril Oman L.L.C.......................................... 265 118
------ -------
Total.................................................. $8,991 $10,454
====== =======
Gross profit(a):
Pool Arabia, Ltd............................................... $2,346 $ 3,133
Antah Drilling Sdn. Bhd........................................ 596 609
Pool Santana, Limited.......................................... 333 511
Intairdril Oman L.L.C.......................................... 115 79
------ -------
Total.................................................. $3,390 $ 4,332
====== =======
Net income (loss):
Pool Arabia, Ltd............................................... $ (291) $ 415
Antah Drilling Sdn. Bhd........................................ 59 (27)
Pool Santana, Limited.......................................... 89 151
Intairdril Oman L.L.C.......................................... 36 (242)
------ -------
Total.................................................. $ (107) $ 297
====== =======
</TABLE>

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

(a) Gross profit is computed as revenues less operating expenses (which excludes
depreciation and general and administrative expenses).

F-31
<PAGE> 75

POOL ENERGY SERVICES CO.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

Earnings attributable to unconsolidated affiliates is summarized below:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31
-------------
1996 1995
---- ----
<S> <C> <C>
The Company's portion of net income (loss)........................... $(57) $154
Adjustment to depreciation recorded by affiliates to the Company's
basis.............................................................. 354 224
Other................................................................ 377 398
---- ----
Equity in income..................................................... 674 776
Management fee....................................................... -- 9
Interest income...................................................... -- 15
Other................................................................ (16) (25)
---- ----
Total...................................................... $658 $775
==== ====
</TABLE>

In April 1996, the Company acquired the 51% interest, not already owned by
the Company in Pool Santana, Limited, a Trinidad corporation, for $1.2 million
in cash. The assets of the Company's Trinidad operation consist primarily of a
platform workover rig and its related equipment.

F-32
<PAGE> 76
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, SHARES OF
COMMON STOCK IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................... 3
Incorporation of Certain Documents by
Reference.............................. 3
Prospectus Summary....................... 4
Risk Factors............................. 9
Use of Proceeds.......................... 12
Price Range of Common Stock and Dividend
Policy................................. 13
Capitalization........................... 14
Selected Financial Data.................. 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 17
Business................................. 26
Management............................... 35
Description of Capital Stock............. 36
Underwriting............................. 39
Legal Matters............................ 40
Experts.................................. 41
Index to Consolidated Financial
Statements............................. F-1
</TABLE>

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[POOL ENERGY SERVICES CO. LOGO]

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4,000,000 SHARES

COMMON STOCK

PROSPECTUS

JULY 3, 1996

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DILLON, READ & CO. INC.

SALOMON BROTHERS INC

JOHNSON RICE & COMPANY L.L.C.

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