UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

(MARK ONE)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-32858

Complete Production Services, Inc.

(Exact name of registrant as specified in its charter)

Delaware		72-1503959
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)
11700 Katy Freeway,
Suite 300
Houston, Texas		77079
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (281) 372-2300

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Number of shares of the common stock, par value $0.01 per share, of the registrant outstanding as of October 26, 2009: 74,893,651

 

 

INDEX TO FINANCIAL STATEMENTS

Complete Production Services, Inc.

		Page
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008 (Revised)			3
Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income for the Quarters and Nine Months Ended September 30, 2009 and 2008 (Revised)			4
Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2009 (Revised)			5
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008 (Revised)			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.			29
Item 3. Quantitative and Qualitative Disclosures About Market Risk.			46
Item 4. Controls and Procedures.			47
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.			48
Item 1A. Risk Factors.			48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			48
Item 3. Defaults Upon Senior Securities.			49
Item 4. Submission of Matters to a Vote of Security Holders.			49
Item 5. Other Information.			49
Item 6. Exhibits.			49
Signature			50
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I—FINANCIAL INFORMATION

Item 1.		Financial Statements.

COMPLETE PRODUCTION SERVICES, INC.

Consolidated Balance Sheets
September 30, 2009 and December 31, 2008 (Revised)
(unaudited)

						Revised
		2009				2008
		(In thousands, except
		share data)
ASSETS
Current assets:
Cash and cash equivalents		$	76,143			$	18,500
Accounts receivable, net			154,112				335,493
Inventory, net			39,426				38,877
Prepaid expenses			19,529				20,606
Income tax receivable			49,028				25,901
Total current assets			338,238				439,377
Property, plant and equipment, net			980,706				1,166,686
Intangible assets, net of accumulated amortization of $15,668 and $9,985, respectively			17,615				23,262
Deferred financing costs, net of accumulated amortization of $5,598 and $4,186, respectively			11,383				12,463
Goodwill			341,512				341,592
Other long-term assets			6,384				3,973
Total assets		$	1,695,838			$	1,987,353
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt		$	274			$	3,803
Accounts payable			24,043				57,483
Accrued liabilities			36,111				38,115
Accrued payroll and payroll burdens			18,134				31,643
Accrued interest			15,783				2,754
Notes payable			3,072				1,353
Income taxes payable			1,053				—
Current deferred tax liabilities			1,437				1,289
Total current liabilities			99,907				136,440
Long-term debt			650,121				843,842
Deferred income taxes			148,198				146,360
Total liabilities			898,226				1,126,642
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value per share, 200,000,000 shares authorized, 75,216,676 (2008 — 74,766,317) issued			752				748
Preferred stock, $0.01 par value per share, 5,000,000 shares authorized, no shares issued and outstanding			—				—
Additional paid-in capital			633,858				623,988
Retained earnings			145,482				223,675
Treasury stock, 53,839 (2008 — 35,570) shares at cost			(328	)			(202	)
Accumulated other comprehensive income			17,848				12,502
Total stockholders’ equity			797,612				860,711
Total liabilities and stockholders’ equity		$	1,695,838			$	1,987,353

See accompanying notes to consolidated financial statements.

COMPLETE PRODUCTION SERVICES, INC.

Consolidated Statements of Operations
Quarters and Nine Months Ended September 30, 2009 and 2008 (Revised)
(unaudited)

		Quarter Ended								Nine Months Ended
		September 30,								September 30,
						Revised								Revised
		2009				2008				2009				2008
		(In thousands, except per share data)
Revenue:
Service		$	223,429			$	481,073			$	767,496			$	1,307,069
Product			6,484				13,237				37,496				40,689
			229,913				494,310				804,992				1,347,758
Service expenses			157,708				294,958				519,694				801,908
Product expenses			4,596				8,888				28,583				27,438
Selling, general and administrative expenses			45,204				46,498				140,115				141,952
Depreciation and amortization			50,379				47,721				153,470				130,058
Impairment loss			36,158				—				36,158				—
Income (loss) before interest and taxes			(64,132	)			96,245				(73,028	)			246,402
Interest expense			13,987				14,052				42,344				44,252
Interest income			(13	)			(85	)			(43	)			(242	)
Income (loss) before taxes			(78,106	)			82,278				(115,329	)			202,392
Taxes			(26,081	)			29,804				(37,136	)			71,822
Income (loss) from continuing operations			(52,025	)			52,474				(78,193	)			130,570
Loss from discontinued operations (net of tax benefit of $0 and $3,865, respectively)			—				(153	)			—				(4,859	)
Net income (loss)		$	(52,025	)		$	52,321			$	(78,193	)		$	125,711
Earnings (loss) per share information:
Continuing operations		$	(0.69	)		$	0.71			$	(1.04	)		$	1.78
Discontinued operations			—				(0.00	)			—				(0.06	)
Basic earnings (loss) per share		$	(0.69	)		$	0.71			$	(1.04	)		$	1.72
Continuing operations		$	(0.69	)		$	0.70			$	(1.04	)		$	1.76
Discontinued operations			—				(0.00	)			—				(0.07	)
Diluted earnings (loss) per share		$	(0.69	)		$	0.70			$	(1.04	)		$	1.69
Weighted average shares:
Basic			75,200				73,935				75,045				73,225
Diluted			75,200				75,008				75,045				74,370

Consolidated Statements of Comprehensive Income (Loss)
Quarters and Nine Months Ended September 30, 2009 and 2008 (Revised)
(unaudited)

		Quarter Ended								Nine Months Ended
		September 30,								September 30,
						Revised								Revised
		2009				2008				2009				2008
		(In thousands)								(In thousands)
Net income (loss)		$	(52,025	)		$	52,321			$	(78,193	)		$	125,711
Change in cumulative translation adjustment			3,002				(2,540	)			5,346				(5,079	)
Comprehensive income (loss)		$	(49,023	)		$	49,781			$	(72,847	)		$	120,632

See accompanying notes to consolidated financial statements.

COMPLETE PRODUCTION SERVICES, INC.

Consolidated Statement of Stockholders’ Equity
Nine Months Ended September 30, 2009 (Revised)
(unaudited)

																						Accumulated
										Additional												Other
		Number				Common				Paid-in				Retained				Treasury				Comprehensive
		of Shares				Stock				Capital				Earnings				Stock				Income				Total
										(In thousands, except share data)
Balance at December 31, 2008 (Revised)			74,766,317			$	748			$	623,988			$	223,675			$	(202	)		$	12,502			$	860,711
Net loss			—				—				—				(78,193	)			—				—				(78,193	)
Cumulative translation adjustment			—				—				—				—				—				5,346				5,346
Issuance of common stock:
Exercise of stock options			63,180				—				197				—				—				—				197
Expense related to employee stock options			—				—				3,259				—				—				—				3,259
Excess tax benefit from share-based compensation			—				—				106				—				—				—				106
Purchase treasury shares			(18,269	)			—				—								(126	)			—				(126	)
Vested restricted stock			405,448				4				(4	)			—				—				—				—
Amortization of non-vested restricted stock			—				—				6,312				—				—				—				6,312
Balance at September 30, 2009			75,216,676			$	752			$	633,858			$	145,482			$	(328	)		$	17,848			$	797,612

See accompanying notes to consolidated financial statements.

COMPLETE PRODUCTION SERVICES, INC.

Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2009 and 2008 (Revised)
(unaudited)

		Nine Months Ended
		September 30,
						Revised
		2009				2008
		(In thousands)
Cash provided by (used in):
Operating activities:
Net income (loss)		$	(78,193	)		$	125,711
Items not affecting cash:
Depreciation and amortization			153,470				132,052
Impairment loss			36,158				—
Deferred income taxes			2,491				29,475
Loss on the sale of discontinued operations			—				6,935
Excess tax benefit from share-based compensation			(106	)			(9,109	)
Non-cash compensation expense			9,571				8,444
Loss on non-monetary asset exchange			4,868				—
Provision for/(recoveries of) bad debt expense			9,311				1,866
Loss on retirement of fixed assets			7,637				1,111
Other			1,412				1,261
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable			173,370				(26,677	)
Inventory			1,666				(5,380	)
Prepaid expense and other current assets			(13,136	)			(3,109	)
Accounts payable			(33,702	)			(3,985	)
Accrued liabilities and other			(4,754	)			7,308
Net cash provided by operating activities			270,063				265,903
Investing activities:
Business acquisitions, net of cash acquired			—				(71,823	)
Additions to property, plant and equipment			(29,094	)			(193,254	)
Proceeds from the sale of discontinued operations			—				50,150
Collection of notes receivable			—				2,016
Proceeds from disposal of capital assets			20,155				4,940
Net cash used in investing activities			(8,939	)			(207,971	)
Financing activities:
Issuances of long-term debt			3,204				208,355
Repayments of long-term debt			(200,454	)			(280,060	)
Repayment of notes payable			(6,241	)			(12,642	)
Proceeds from issuances of common stock			197				11,901
Purchase of treasury shares			(126	)			—
Excess tax benefit from share-based compensation			106				9,109
Net cash used in financing activities			(203,314	)			(63,337	)
Effect of exchange rate changes on cash			(167	)			324
Change in cash and cash equivalents			57,643				(5,081	)
Cash and cash equivalents, beginning of period			18,500				13,034
Cash and cash equivalents, end of period		$	76,143			$	7,953
Supplemental cash flow information:
Cash paid for interest, net of interest capitalized		$	26,744			$	30,179
Net cash paid for income taxes (refunds received)		$	(17,064	)		$	55,077
Non-cash investing and financing activities:
Debt acquired in acquisition		$	—			$	429
Assets received as proceeds from the sale of disposal group		$	—			$	7,987
Note issued to finance insurance premiums		$	7,960			$	—

See accompanying notes to consolidated financial statements.

COMPLETE PRODUCTION SERVICES, INC.

Notes to Consolidated Financial Statements
(Unaudited, in thousands, except share and per share data)

1. General:

(a) Nature of operations:

     Complete Production Services, Inc. is a provider of specialized services and products focused on developing hydrocarbon reserves, reducing operating costs and enhancing production for oil and gas companies. Complete Production Services, Inc. focuses its operations on basins within North America and manages its operations from regional field service facilities located throughout the U.S. Rocky Mountain region, Texas, Oklahoma, Louisiana, Arkansas, Pennsylvania, western Canada, Mexico and Southeast Asia.

     References to “Complete,” the “Company,” “we,” “our” and similar phrases used throughout this Quarterly Report on Form 10-Q relate collectively to Complete Production Services, Inc. and its consolidated affiliates.

     On April 21, 2006, our common stock began trading on the New York Stock Exchange under the symbol “CPX”.

(b) Basis of presentation:

     The unaudited interim consolidated financial statements reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of the financial position of Complete as of September 30, 2009 and the statements of operations and the statements of comprehensive income for the quarters and nine-month periods ended September 30, 2009 and 2008, as well as the statement of stockholders’ equity for the nine months ended September 30, 2009 and the statements of cash flows for the nine months ended September 30, 2009 and 2008. Certain information and disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. These unaudited interim consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2008. We believe that these financial statements contain all adjustments necessary so that they are not misleading. See Note 2, Prior Period Adjustments.

     In preparing financial statements, we make informed judgments and estimates that affect the reported amounts of assets and liabilities as of the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period. We review our estimates on an on-going basis, including those related to impairment of long-lived assets and goodwill, contingencies, and income taxes. Changes in facts and circumstances may result in revised estimates and actual results may differ from these estimates.

     The results of operations for interim periods are not necessarily indicative of the results of operations that could be expected for the full year. Certain reclassifications have been made to 2008 amounts in order to present these results on a comparable basis with amounts for 2009, including a change to the presentation of capitalized interest at one of our subsidiaries for the quarter and nine months ended September 30, 2008, which resulted in a decrease in interest income and an offsetting decrease in interest expense totaling $595 and $1,825, respectively. This change had no impact on net interest expense as previously disclosed.

     In May 2008, our Board of Directors authorized and committed to a plan to sell certain operations in the Barnett Shale region of north Texas, consisting primarily of our supply store business, as well as certain non-strategic drilling logistics assets and other completion and production services assets. On May 19, 2008, we sold these operations to a company owned by a former officer of one of our subsidiaries, for which we received proceeds of $50,150 and assets with a fair market value of $7,987. We have reported the operating results of this disposal group as discontinued operations in our financial statements. See Note 10, Discontinued Operations.

     We performed an evaluation of subsequent events as of October 30, 2009, the date of issuance of these financial statements.

2. Prior period adjustments:

     In June 2009, we discovered accounting errors within one of our operations located in the Rocky Mountain region, which occurred in prior years and would have impacted our reported operating results for the years ended December 31, 2006, 2007 and 2008. The majority of the errors were due to a flawed revenue accrual process and ineffective controls over inventory within this operation. We evaluated the impact that these errors would have had on our financial statements and determined that these errors would not have been material to our financial statements from a quantitative or qualitative perspective for those periods. However, the amount of the adjustment required to correct these errors was deemed to be material to the results for 2009. We corrected these errors as of June 30, 2009 and have made the required adjustments to our reported results for the comparative quarter and nine months ended September 30, 2008. In addition, we have adjusted our previously published balance sheet at December 31, 2008, decreasing beginning retained earnings by $8,405. As applicable, we will revise our published financials in future filings, including our Annual Report on Form 10-K for the year ended December 31, 2009, including comparative results for the years ended December 31, 2008 and 2007. We have labeled our balance sheet, statement of operations and statement of cash flows as “Revised” where applicable.

     The following tables summarize the impact of these accounting errors on our previously published financial statements by caption for each of the comparable periods presented in this Quarterly Report on Form 10-Q (in thousands, except per share data).

STATEMENTS OF OPERATIONS:

		Quarter Ended September 30, 2008												Nine Months Ended September 30, 2008
		Original				Prior Period				Revised				Original				Prior Period				Revised
		Presentation				Adjustments				Presentation				Presentation				Adjustments				Presentation
Service		$	479,996			$	1,077			$	481,073			$	1,310,807			$	(3,738	)		$	1,307,069
Product			13,237				—				13,237				40,689				—				40,689
			493,233				1,077				494,310				1,351,496				(3,738	)			1,347,758
Service expenses			294,097				861				294,958				800,451				1,457				801,908
Product expenses			8,888				—				8,888				27,438				—				27,438
Selling, general and administrative expenses			46,512				(14	)			46,498				141,966				(14	)			141,952
Depreciation and amortization			47,695				26				47,721				129,983				75				130,058
Income from continuing operations before interest and taxes			96,041				204				96,245				251,658				(5,256	)			246,402
Interest expense			14,052				—				14,052				44,252				—				44,252
Interest income			(85	)			—				(85	)			(242	)			—				(242	)
Income from continuing operations before taxes			82,074				204				82,278				207,648				(5,256	)			202,392
Taxes			29,731				73				29,804				73,687				(1,865	)			71,822
Net income from continuing operations		$	52,343			$	131			$	52,474			$	133,961			$	(3,391	)		$	130,570
Earnings per share:
Diluted—continuing operations		$	0.70			$	(0.00	)		$	0.70			$	1.80			$	(0.04	)		$	1.76
Diluted—total		$	0.70			$	(0.00	)		$	0.70			$	1.74			$	(0.05	)		$	1.69

BALANCE SHEET:

		As of December 31, 2008
		Original				Prior Period				Revised
Caption		Presentation				Adjustments				Presentation
Cash		$	19,090			$	(590	)		$	18,500
Trade accounts receivable, net		$	343,353			$	(7,860	)		$	335,493
Income tax receivable		$	21,328			$	4,573			$	25,901
Inventory, net		$	41,891			$	(3,014	)		$	38,877
Prepaid expenses		$	21,472			$	(866	)		$	20,606
Property, plant and equipment, net		$	1,166,453			$	233			$	1,166,686
Accrued liabilities		$	37,585			$	530			$	38,115
Accrued payroll and payroll burdens		$	31,293			$	350			$	31,643
Retained earnings		$	232,080			$	(8,405	)		$	223,675
STATEMENT OF CASH FLOWS:
		For the Nine Months Ended September 30, 2008
		Original				Prior Period				Revised
Caption		Presentation				Adjustments				Presentation
Net income		$	129,102			$	(3,391	)		$	125,711
Depreciation and amortization		$	131,977			$	75			$	132,052
Accounts receivable		$	(30,356	)		$	3,679			$	(26,677	)
Inventory		$	(6,500	)		$	1,120			$	(5,380	)
Prepaid expenses and other current assets		$	(1,417	)		$	(1,692	)		$	(3,109	)
Accrued liabilities and other		$	7,074			$	234			$	7,308
Net cash provided by operating activities		$	265,878			$	25			$	265,903

3. Accounts receivable:

						Revised
		September 30,				December 31,
		2009				2008
Trade accounts receivable		$	140,684			$	285,850
Related party receivables			4,806				11,631
Unbilled revenue			19,451				38,969
Notes receivable			—				283
Other receivables			2,310				4,736
			167,251				341,469
Allowance for doubtful accounts			13,139				5,976
		$	154,112			$	335,493

4. Inventory:

						Revised
		September 30,				December 31,
		2009				2008
Finished goods		$	21,926			$	20,915
Manufacturing parts, materials and other			18,400				15,208
Work in process			130				3,964
			40,456				40,087
Inventory reserves			1,030				1,210
		$	39,426			$	38,877

5. Property, plant and equipment:

						Accumulated
September 30, 2009		Cost				Depreciation				Net Book Value
Land		$	8,919			$	—			$	8,919
Buildings			28,959				2,933				26,026
Field equipment			1,295,925				465,366				830,559
Vehicles			130,029				53,040				76,989
Office furniture and computers			17,047				8,615				8,432
Leasehold improvements			22,433				4,239				18,194
Construction in progress			11,587				—				11,587
		$	1,514,899			$	534,193			$	980,706

						Accumulated
December 31, 2008 (Revised)		Cost				Depreciation				Net Book Value
Land		$	10,078			$	—			$	10,078
Buildings			20,155				2,097				18,058
Field equipment			1,314,252				359,441				954,811
Vehicles			152,258				49,805				102,453
Office furniture and computers			16,069				6,736				9,333
Leasehold improvements			23,925				3,280				20,645
Construction in progress			51,308				—				51,308
		$	1,588,045			$	421,359			$	1,166,686

     Construction in progress at September 30, 2009 and December 31, 2008 primarily included progress payments to vendors for equipment to be delivered in future periods and component parts to be used in the final assembly of operating equipment, which in all cases were not yet placed into service at the time. For the quarter and nine months ended September 30, 2009, we recorded capitalized interest of $108 and $729, respectively, related to assets that we are constructing for internal use and amounts paid to vendors under progress payments for assets that are being constructed on our behalf.

     Effective March 1, 2009, our Canadian subsidiary transferred certain property, plant and equipment used in our production testing business to Enseco, a competitor, in exchange for certain electric line (e-line) equipment. This exchange was determined to have commercial substance for us and therefore we recorded the new assets acquired at the fair market value of the assets surrendered which had a carrying value of $9,284. We incurred costs to sell totaling approximately $71. We determined the fair value of the assets with the assistance of a third-party appraiser, assuming an orderly liquidation methodology, to be $4,487, resulting in a loss on the exchange of $4,868. Of the total value assigned to the new assets, $4,209 was included in property, plant and equipment and $279 was included in inventory in the accompanying balance sheet as of September 30, 2009. The fair market value of the assets received was determined to be $5,497, using the same methodology applied to the assets surrendered. We believe that these e-line assets will generate cash flows in excess of the cash flows that would have been received from the production testing assets due to relatively higher demand from our customers for e-line services.

(a) Sale-Leaseback Transactions:

     Effective March 31, 2009, we entered into a sale-leaseback transaction with Agua Dulce, LLC, through which we sold a facility and approximately 50 acres of real property located near Rock Springs, Wyoming for $3,827. The sales price approximated the net book value of the facility, which is currently under construction, and the land, resulting in an insignificant gain on the transaction which has been included as a component of selling, general and administrative expense in the accompanying statement of operations for the nine months ended September 30, 2009. In addition, the buyer agreed to fund the completion of the construction of the facility. Effective April 1, 2009, we became party to the lease agreement which requires monthly operating lease payments for a term of 10 years, with an option to extend the lease term for an additional 10 years. The rental rate adjusts for construction draws to date divided ratably over the remaining lease term. The lease term began on April 1, 2009 and the first monthly rental was $35. We will also incur additional lease costs related to certain operating costs, taxes and insurance for the facility over

the term of the lease.

     Effective July 30, 2009, we entered into a sale-leaseback agreement with Enterprise Leasing Company of Houston to sell over 550 light-vehicles with a net book value of approximately $10,362 as of July 30, 2009. During the third quarter of 2009, we received proceeds from the sale which totaled $10,551. In August 2009, pursuant to this lease agreement, we began making monthly rental payments of approximately $306. The lease terms range from 24 to 36 months.

(b) Impairment of Long-lived Assets:

     During September 2009, we evaluated the fair market value of assets in our contract drilling business with the assistance of a third-party appraiser and determined that the carrying value of certain of these drilling rigs exceeded the fair market value estimates. We projected the undiscounted cash flows associated with these rigs, including an estimate of salvage value, and compared these expected future cash flows to the carrying amount of the rigs. If the undiscounted cash flows exceeded the carrying amount, no further testing was performed and the rig was deemed to not be impaired. If the undiscounted cash flows did not exceed the carrying value, we estimated the fair market value of the equipment based on management estimates and general market data obtained by the third-party appraiser using the sales comparison market approach, which included the analysis of recent sales and offering prices of similar equipment to arrive at an indication of the most probable selling price for the equipment. The result of this analysis was a calculated fixed asset impairment of $36,158, which was recorded as an impairment loss in the accompanying statements of operations for the quarter and nine months ended September 30, 2009. This impairment charge was allocated entirely to the Drilling Services business segment. This impairment was deemed necessary due to an overall decline in oil and gas exploration and production activity in late 2008 which has extended throughout 2009, as well as management’s expectation of future operating results for this business segment for the foreseeable future.

     We continue to evaluate the remaining useful lives of our drilling rigs, and have considered our depreciation methodology and these estimates of useful lives in our projected future cash flows associated with these assets.

     The following tabular presentation is presented for quantitative presentation of our significant fair value measurements at September 30, 2009:

						Quoted
						Prices in
						Active
						Markets				Significant
		Carrying Value				for				Other				Significant
		Prior to				Identical				Observable				Unobservable				Total
		Impairment				Assets				Inputs				Inputs				Gains
Description		Charge				(Level 1)				(Level 2)				(Level 3)				(Losses)
Property, plant and equipment, net		$	136,978				—				—			$	100,820			$	(36,158	)
		$	136,978				—				—			$	100,820			$	(36,158	)

     We have not recorded any other significant adjustments to our financial statements related to fair value measurements during the nine-month periods ended September 30, 2009 and 2008, except as incorporated by reference to our Annual Report on Form 10-K for the year ended December 31, 2008.

6. Notes payable:

     We entered into a note arrangement to finance our annual insurance premiums for the policy term beginning December 1, 2007 and extending through April 30, 2009. As of December 31, 2007, we recorded a note payable totaling $15,354 and an offsetting prepaid asset which included a broker’s fee. At December 31, 2008, this note balance totaled $1,353 and was classified as a current liability. We paid this note in full during the first quarter of 2009. Effective May 1, 2009, we renewed our insurance policies and

entered into a similar financing arrangement through April 2010. We recorded a note payable of $7,960, and have made payments toward this note of $4,888, resulting in a note payable balance of $3,072 at September 30, 2009. In addition, we renewed our workers’ compensation, general liability and auto insurance policies through our insurance broker. We have recorded a prepaid asset of approximately $2,052 associated with these policies and are making monthly premium payments. Our primary insurance policies extend through April 30, 2010.

7. Long-term debt:

     The following table summarizes long-term debt as of September 30, 2009 and December 31, 2008:

		2009				2008
U.S. revolving credit facility (a)		$	—			$	186,000
Canadian revolving credit facility (a)			—				7,495
8.0% senior notes (b)			650,000				650,000
Subordinated seller notes (c)			—				3,450
Capital leases and other			395				700
			650,395				847,645
Less: current maturities of long-term debt and capital leases			274				3,803
		$	650,121			$	843,842

	(a)		Prior to October 13, 2009, we maintained a senior secured credit facility (the “Credit Agreement”) with Wells Fargo Bank, National Association, as U.S. Administrative Agent, and certain other financial institutions. The Credit Agreement provided for a $360,000 U.S. revolving credit facility that was to mature in December 2011 and a $40,000 Canadian revolving credit facility (with Integrated Production Services Ltd., one of our wholly-owned subsidiaries, as the borrower thereof (“Canadian Borrower”)) that was to mature in December 2011. The U.S. revolving credit facility included a provision for a “commitment increase”, as defined in the Credit Agreement, which permitted us to effect up to two separate increases in the aggregate commitments under the facility by designating a participating lender to increase its commitment, by mutual agreement, in increments of at least $50,000, with the aggregate of such commitment increases not to exceed $100,000, and in accordance with other provisions as stipulated in the Credit Agreement. Certain portions of the credit facilities were available to be borrowed in U.S. dollars, Canadian dollars, Pounds Sterling, Euros and other currencies approved by the lenders.
			Subject to certain limitations, we had the ability to elect how interest under the Credit Agreement would be computed. Interest under the Credit Agreement could be determined by reference to (1) the London Inter-bank Offered Rate, or LIBOR, plus an applicable margin between 0.75% and 1.75% per annum (with the applicable margin depending upon our ratio of total debt to EBITDA. EBITDA is defined in the Credit Agreement as consolidated net income for the period plus, to the extent deducted in determining our consolidated net income, interest expense, taxes, depreciation, amortization and other non-cash charges for such period) or (2) the Base Rate (i.e., the higher of the Canadian bank’s prime rate or the CDOR rate plus 1.00%, in the case of Canadian loans or the greater of the prime rate and the federal funds rate plus 0.50%, in the case of U.S. loans), plus an applicable margin between 0.00% and 0.75% per annum. If an event of default existed under the Credit Agreement, advances would bear interest at the then-applicable rate plus 2.00%. Interest was payable quarterly for base rate loans and at the end of applicable interest periods for LIBOR loans, except that if the interest period for a LIBOR loan was nine months, interest would be paid at the end of each three-month period.
			The Credit Agreement also contained various covenants that limited our and our subsidiaries’ ability to: (1) grant certain liens; (2) incur additional indebtedness; (3) make certain loans and investments; (4) make capital expenditures; (5) make distributions; (6) make acquisitions; (7) enter into hedging transactions; (8) merge or consolidate; or (9) engage in certain asset dispositions. The Credit Agreement contained financial maintenance covenants which, among other things, required us and our subsidiaries, on a consolidated basis, to maintain specified ratios or conditions as follows (with such ratios tested at the end of each fiscal quarter): (1) total debt to EBITDA of not more than 3.0 to 1.0 and (2) EBITDA to total interest expense of not less than 3.0 to 1.0., except that EBITDA was subject to pro forma adjustments for acquisitions and non-

			ordinary course asset sales assuming that such transactions occurred on the first day of the determination period, with any such adjustments made in accordance with the guidelines for pro forma presentations set forth by the Securities and Exchange Commission (“SEC”). We were in compliance with all debt covenants under the Credit Agreement as of September 30, 2009.
			Under the Credit Agreement, we are permitted to prepay our borrowings.
			All of the obligations under the U.S. portion of the Credit Agreement were secured by first priority liens on substantially all of the assets of our U.S. subsidiaries as well as a pledge of approximately 66% of the stock of our first-tier foreign subsidiaries. Additionally, all of the obligations under the U.S. portion of the Credit Agreement were guaranteed by substantially all of our U.S. subsidiaries. All of the obligations under the Canadian portion of the Credit Agreement were secured by first priority liens on substantially all of our assets and the assets of our subsidiaries (other than our Mexican subsidiary). Additionally, all of the obligations under the Canadian portion of the Credit Agreement were guaranteed by us as well as certain of our subsidiaries.
			If an event of default existed under the Credit Agreement, as defined therein, the lenders could accelerate the maturity of the obligations outstanding under the Credit Agreement and exercise other rights and remedies. If an event of default was continuing, advances would bear interest at the then-applicable rate plus 2.00%.
			There were no borrowings outstanding under our U.S. or Canadian revolving credit facilities as of September 30, 2009. The weighted average interest rate for our revolving credit facilities during the nine months ended September 30, 2009 was 1.87%. There were letters of credit outstanding under the U.S. revolving portion of the facility totaling $54,649, which reduced the available borrowing capacity as of September 30, 2009. We incurred fees calculated at 1.25% of the total amount outstanding under letter of credit arrangements through September 30, 2009. Our available borrowing capacity under the U.S. and Canadian revolving facilities at September 30, 2009 was $305,351 and $40,000, respectively.
			Amendment Effective October 13, 2009:
			On October 13, 2009, we amended the Credit Agreement (the “Third Amendment” and, the Credit Agreement after giving effect to the Third Amendment, the “Amended Credit Agreement”) and modified the structure of the credit facility to an asset-based facility subject to borrowing base restrictions. Wells Fargo Foothill, LLC replaced Wells Fargo Bank, National Association, as U.S. Administrative Agent and also serves as U.S. Issuing Lender and U.S. Swingline Lender. The banks and financial institutions which comprise the lending group did not change significantly.

			Pursuant to the Third Amendment, our U.S. revolving credit facility was reduced from $360,000 to up to $225,000, and the Canadian revolving credit facility was reduced from $40,000 to up to $15,000, in each case subject to borrowing base limitations (as described in further detail below). The term of the facilities under the Amended Credit Agreement will continue until the earlier of (1) December 6, 2011 or (2) the earlier termination of the U.S. or Canadian lending commitments. Subject to certain limitations, we are permitted to effect up to two increases in the aggregate commitments by designating one or more existing lenders or other banks or financial institutions, subject to the bank’s sole discretion as to participation, to provide additional aggregate financing up to $75,000, with each committed increase equal to at least $25,000 in the U.S., or $5,000 in Canada. New borrowings pursuant to this commitment increase are subject to the same terms as the existing facility borrowings. In addition, we have the right to terminate, in whole or in part, the unused portion of the U.S. commitments in $1,000 increments upon written notice to the U.S. Administrative Agent. If all of the U.S. facility is terminated, the Canadian facility must also be terminated.
			Our U.S. borrowing base is limited to: (1) 85% of U.S. eligible billed accounts receivable, less dilution, if any, plus (2) the lesser of 55% of the amount of U.S. eligible unbilled accounts receivable or $10,000, plus (3) the lesser of the “equipment reserve amount” and 80% times the most recently determined Net Liquidation Percentage, as defined in the Amended Credit Agreement, times the value of our and the U.S. subsidiary guarantors’ equipment, provided that at

			no time shall the amount determined under this clause exceed 50% of the U.S. borrowing base, minus (4) the aggregate sum of reserves established by the U.S. Administrative Agent, if any. The “equipment reserve amount” means $50,000 upon the effective date of the Third Amendment, less $595 for each subsequent month, not to be reduced below zero in the aggregate.
			The Canadian borrowing based is limited to: (1) 80% of Canadian eligible billed accounts receivable, plus (2) if the Canadian Borrower has requested credit for equipment under the Canadian borrowing base, the lesser of (a) $15,000,000, and (b) 80% times the most recently determined Net Liquidation Percentage, as defined in the Amended Credit Agreement, times the value (calculated on a basis consistent with our historical accounting practices) of our and the US subsidiary guarantors’ equipment, minus (3) the aggregate amount of reserves established by Canadian Administrative Agent, if any.
			Subject to certain limitations set forth in the Amended Credit Agreement, we have the ability to elect how interest under the Amended Credit Agreement will be computed. Interest under the Amended Credit Agreement may be determined by reference to (1) the London Inter-bank Offered Rate, or LIBOR, plus an applicable margin between 3.75% and 4.25% per annum (with the applicable margin depending upon our Excess Availability Amount, as defined in the Amended Credit Agreement) or (2) the Base Rate (which means the higher of the Prime Rate, Federal Funds Rate plus 0.50%, 3 month LIBOR plus 1.00% and 3.50%), plus the applicable margin, as described above. For the period from the effective date of the Third Amendment until the six month anniversary of the effective date of the Third Amendment, interest will be computed as described above with an applicable margin rate of 4.00%. If an event of default exists or continues under the Amended Credit Agreement, advances will bear interest as described above with an applicable margin rate of 4.25% plus 2.00%. Interest is payable monthly.
			Letters of credit outstanding under the Credit Agreement prior to the effectiveness of the Third Amendment will be deemed outstanding under the Amended Credit Agreement with fees equal to the applicable margin, as described above. If an event of default exists or continues, such fee will be equal to the applicable margin plus 2.00%.
			Under the Amended Credit Agreement, the only financial covenant to which we are subject is a “Fixed Charge Coverage Ratio” covenant, which must exceed 1.10 to 1.00. This covenant becomes effective only if our Excess Availability Amount, as defined under the Amended Credit Agreement, plus certain qualified cash and cash equivalents is less than $50,000.
			We were in compliance with the Fixed Charge Coverage Ratio covenant described in the Third Amendment as of September 30, 2009.
			Our Fixed Charge Coverage Ratio covenant is calculated as follows: (1) for the fiscal quarter ended September 30, 2009, the ratio of EBITDA, as defined in the Amended Credit Agreement, calculated for the four fiscal quarters then ended minus capital expenditures made in cash or incurred during the three fiscal quarters ended September 30, 2009 multiplied by 4/3, compared to Fixed Charges, as defined in the Amended Credit Agreement, for the four fiscal quarters ended September 30, 2009; (2) for fiscal quarters ending after September 30, 2009, the ratio of EBITDA, as defined in the Amended Credit Agreement, calculated for the four fiscal quarter period ended after September 30, 2009 minus capital expenditures made with cash (to the extent not already incurred in a prior period) or incurred during such four quarter period, compared to Fixed Charges, calculated for the four quarters then ended. The calculation of “EBITDA,” as defined in the Amended Credit Agreement, is substantially consistent with the calculation of EBITDA under the Credit Agreement prior to the effectiveness of the Third Amendment. Fixed Charges, as defined in the Amended Credit Agreement, include interest expense, among other things, reduced by the amortization of transaction fees associated with the Third Amendment.
			In addition to the Fixed Charge Coverage Ratio covenant, we continue to be subject to various other covenants which existed under the Credit Agreement prior to the Third Amendment, excluding the financial maintenance covenants (which have been replaced with the Fixed Charge Coverage Ratio covenant as discussed above), including but not limited to covenants that limit our and our subsidiaries’ ability to: (1) grant certain liens; (2) incur additional indebtedness; (3) make

			certain loans and investments; (4) make capital expenditures; (5) make distributions; (6) make acquisitions; (7) enter into hedging transactions; (8) merge or consolidate; or (9) engage in certain asset dispositions.
			Events of default under the Amended Credit Agreement remain substantially the same as under the Credit Agreement prior to the Third Amendment.
			The obligations under the U.S. portion of the Amended Credit Agreement continue to be secured by first priority liens on substantially all of our assets and the assets of our U.S. subsidiaries as well as a pledge of approximately 66% of the stock of our first-tier foreign subsidiaries. Additionally, all of the obligations under the U.S. portion of the Amended Credit Agreement continue to be guaranteed by substantially all of our U.S. subsidiaries. The obligations under the Canadian portion of the Amended Credit Agreement continue to be secured by first priority liens on substantially all of our assets and the assets of our subsidiaries (other than our Mexican subsidiary). Additionally, all of the obligations under the Canadian portion of the Amended Credit Agreement continue to be guaranteed by us as well as certain of our subsidiaries.
			We will incur unused commitment fees under the Amended Credit Agreement ranging from 0.50% to 1.00% based on the average daily balance of amounts outstanding.
			To date, we have incurred fees and expenses associated with the execution and effectiveness of the Third Amendment totaling approximately $2,634. These fees and expenses will be included in our consolidated balance sheet as a long-term asset, deferred financing fees, and will be amortized to interest expense over the remaining term of the facility.

	(b)		On December 6, 2006, we issued 8.0% senior notes with a face value of $650,000 through a private placement of debt. These notes mature in 10 years, on December 15, 2016, and require semi-annual interest payments, paid in arrears and calculated based on an annual rate of 8.0%, on June 15 and December 15, of each year, which commenced on June 15, 2007. There was no discount or premium associated with the issuance of these notes. The senior notes are guaranteed by all of our current domestic subsidiaries. The senior notes have covenants which, among other things: (1) limit the amount of additional indebtedness we can incur; (2) limit restricted payments such as a dividend; (3) limit our ability to incur liens or encumbrances; (4) limit our ability to purchase, transfer or dispose of significant assets; (5) limit our ability to purchase or redeem stock or subordinated debt; (6) limit our ability to enter into transactions with affiliates; (7) limit our ability to merge with or into other companies or transfer all or substantially all of our assets; and (8) limit our ability to enter into sale and leaseback transactions. We have the option to redeem all or part of these notes on or after December 15, 2011. We can redeem 35% of these notes on or before December 15, 2009 using the proceeds of certain equity offerings. Additionally, we may redeem some or all of the notes prior to December 15, 2011 at a price equal to 100% of the principal amount of the notes plus a make-whole premium.
			Pursuant to a registration rights agreement with the holders of our 8.0% senior notes, on June 1, 2007, we filed a registration statement on Form S-4 with the SEC which enabled these holders to exchange their notes for publicly registered notes with substantially identical terms. These holders exchanged 100% of the notes for publicly traded notes on July 25, 2007. On August 28, 2007, we entered into a supplement to the indenture governing the 8.0% senior notes, whereby additional domestic subsidiaries became guarantors under the indenture. Effective April 1, 2009, we entered into a second supplement to this indenture whereby additional domestic subsidiaries became guarantors under the indenture.

(c)

We issued subordinated seller notes totaling $3,450 in 2004 related to certain business acquisitions. These notes bore interest at 6% and matured in March 2009. We repaid the outstanding principal associated with these note agreements totaling $3,450 upon maturity.

8. Stockholders’ equity:

(a) Stock-based Compensation—Stock Options:

     We maintain option plans under which stock-based compensation can be granted to employees, officers and directors. Stock option grants under these plans have an exercise price based on the fair value of our common stock on the date of grant. These stock options may be exercised over a five or ten-year period and generally a third of the options vest on each of the first three anniversaries from the grant date. Upon exercise of stock options, we issue our common stock.

     We calculate stock compensation expense for our stock-based compensation awards by measuring the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, with limited exceptions, by using an option pricing model to determine fair value. A further description can be found in our Annual Report on Form 10-K as of December 31, 2008.

     Effective January 30, 2009, the Compensation Committee of our Board of Directors approved the annual grant of stock options and non-vested restricted stock to certain employees, officers and directors. Pursuant to this authorization, we issued 1,287,008 shares of non-vested restricted stock on January 30, 2009 at a grant price of $6.41 per share and 4,000 shares of non-vested restricted stock on March 16, 2009 at a grant price of $2.64 per share. We expect to recognize compensation expense associated with these grants of non-vested restricted stock totaling $8,260 ratably over the three-year vesting periods. In addition, on January 30, 2009, we granted 905,300 stock options to purchase shares of our common stock at an exercise price of $6.41 per share and on July 1, 2009, we granted 10,000 stock options to purchase our common stock at an exercise price of $6.78 per share. These stock options vest ratably over a three-year period. We will recognize compensation expense associated with these stock option grants over the vesting period. The fair value of the stock options granted during the nine months ended September 30, 2009 was determined by applying a Black-Scholes option pricing model based on the following assumptions:

		Nine Months Ended
		September 30,
Assumptions:		2009
Risk-free rate		0.89% to 2.51%
Expected term (in years)			2.2 to 5.1
Volatility		28.6% to 47.1%
Calculated fair value per option		$	1.14 to $3.01

     We completed our initial public offering in April 2006. Prior to the second quarter of 2008, we did not have sufficient historical market data in order to determine the volatility of our common stock. We analyzed the market data of peer companies and calculated an average volatility factor based upon changes in the closing price of these companies’ common stock for a three-year period. This volatility factor was then applied as a variable to determine the fair value of our stock options granted prior to the second quarter of 2008. For stock options granted during or after the second quarter of 2008, we calculated an average volatility factor for our common stock for a three-year period. These volatility calculations were then applied to compute the fair market value of stock option grants during the second quarter of 2008 and thereafter.

     We projected a rate of stock option forfeitures based upon historical experience and management assumptions related to the expected term of the options. After adjusting for these forfeitures, we expect to recognize expense totaling $1,497 over the vesting period of these 2009 stock option grants. For the quarter and nine months ended September 30, 2009, we have recognized expense related to these stock option grants totaling $125 and $329, respectively, which represents a reduction of net income before taxes. The impact on the net loss for the quarter and nine months ended September 30, 2009 was an increase of $83 and $223, respectively, with no impact on diluted earnings per share as reported. The unrecognized compensation costs related to the non-vested portion of these awards was $1,168 as of September 30, 2009 and will be recognized over the applicable remaining vesting periods.

     For the quarters ended September 30, 2009 and 2008, we recognized compensation expense associated with all stock option awards totaling $869 and $1,332, respectively, resulting in an increase in net loss of $579 and a reduction in net income of $850, respectively, and a $0.01 reduction in diluted earnings per share for each of the quarters ended September 30, 2009 and 2008. For the nine-month periods ended

September 30, 2009 and 2008, we recognized compensation expense associated with all stock option awards totaling $3,259 and $3,898, respectively, resulting in an increase in net loss of $2,210 and a reduction in net income of $2,514, respectively, and a $0.03 reduction in diluted earnings per share for each of the nine-month periods ended September 30, 2009 and 2008. Total unrecognized compensation expense associated with outstanding stock option awards at September 30, 2009 was $2,804, or $1,901, net of tax.

     The following tables provide a roll forward of stock options from December 31, 2008 to September 30, 2009 and a summary of stock options outstanding by exercise price range at September 30, 2009:

		Options Outstanding
						Weighted
						Average
						Exercise
		Number				Price
Balance at December 31, 2008			2,746,512			$	15.33
Granted			915,300			$	6.41
Exercised			(63,182	)		$	3.11
Cancelled			(81,766	)		$	21.86
Balance at September 30, 2009			3,516,864			$	13.07

		Options Outstanding												Options Exercisable
						Weighted				Weighted								Weighted				Weighted
		Outstanding at				Average				Average				Exercisable at				Average				Average
		September 30,				Remaining				Exercise				September 30,				Remaining				Exercise
Range of Exercise Price		2009				Life (months)				Price				2009				Life (months)				Price
$2.00			14,793				1			$	2.00				14,793				1			$	2.00
$4.48 — $4.80			48,602				5			$	4.79				48,602				5			$	4.79
$5.00			114,115				36			$	5.00				68,282				30			$	5.00
$6.41 — $8.16			1,519,533				94			$	6.53				597,637				65			$	6.69
$11.66			282,088				72			$	11.66				282,088				72			$	11.66
$15.90			345,000				100			$	15.90				115,000				88			$	15.90
$17.60 — $19.87			636,187				88			$	19.83				383,674				88			$	19.83
$22.55 — $24.07			456,046				79			$	23.95				453,213				79			$	23.95
$26.26 — $27.11			45,000				92			$	26.35				30,000				92			$	26.35
$29.88			40,000				104			$	29.88				13,333				104			$	29.88
$34.19			15,500				105			$	34.19				5,167				105			$	34.19
			3,516,864				87			$	13.07				2,011,789				73			$	15.33

     The total intrinsic value of stock options exercised during the quarter and nine months ended September 30, 2009 was $108 and $280, respectively. The total intrinsic value of all in-the-money vested outstanding stock options at September 30, 2009 was $884. Assuming all stock options outstanding at September 30, 2009 were vested, the total intrinsic value of all in-the-money outstanding stock options would have been $1,173.

(b) Non-vested Restricted Stock:

     We recognize compensation expense associated with grants of non-vested restricted stock, based on the fair value of the shares on the date of grant, ratably over the applicable vesting periods. At September 30, 2009, amounts not yet recognized related to non-vested restricted stock totaled $11,926, which represented the unamortized expense associated with awards of non-vested stock granted to employees, officers and directors under our compensation plans, including $6,083 related to grants during the nine months ended September 30, 2009. We recognized compensation expense associated with non-vested restricted stock totaling $1,998 and $2,070 for the quarters ended September 30, 2009 and 2008, respectively, and $6,312 and $4,321 for the nine-month periods ended September 30, 2009 and 2008, respectively.

     The following table summarizes the change in non-vested restricted stock from December 31, 2008 to September 30, 2009:

		Non-vested
		Restricted Stock
						Weighted
						Average
		Number				Grant Price
Balance at December 31, 2008			789,191			$	19.95
Granted			1,301,008			$	6.41
Vested			(405,355	)		$	16.78
Forfeited			(16,266	)		$	11.17
Balance at September 30, 2009			1,668,578			$	10.25

(c) Treasury Shares:

     In accordance with the provisions of the 2008 Incentive Award Plan, holders of unvested restricted stock were given the option to either remit to us the required withholding taxes associated with the vesting of restricted stock, or to authorize us to repurchase shares equivalent to the cost of the withholding tax and to remit the withholding taxes on behalf of the holder. Pursuant to this provision, we repurchased the following shares during the nine months ended September 30, 2009:

						Price Paid				Extended
Period		Purchased				per Share				Amount
January 1 — 31, 2009			10,662			$	6.37			$	68
May 1 — 31, 2009			6,623			$	7.84			$	52
June 1— 30, 2009			436			$	7.66			$	3
July 1— 31, 2009			392			$	6.22			$	2
August 1 — 31, 2009			156			$	8.82			$	1
			18,269							$	126

     These shares were included as treasury stock at cost in the accompanying balance sheet as of September 30, 2009. We expect to purchase additional shares in the future pursuant to this plan provision.

9. Earnings per share:

     We compute basic earnings per share by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common and potential common share includes the weighted average of additional shares associated with the incremental effect of dilutive employee stock options and non-vested restricted stock, as determined using the treasury stock method. The following table reconciles basic and diluted weighted average shares used in the computation of earnings per share for the quarters and nine months ended September 30, 2009 and 2008:

		Quarter Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
						(In thousands)
Weighted average basic common shares outstanding			75,200				73,935				75,045				73,225
Effect of dilutive securities:
Employee stock options			—				747				—				814
Non-vested restricted stock			—				326				—				331
Weighted average diluted common and potential common shares outstanding			75,200				75,008				75,045				74,370

     For the quarter and nine months ended September 30, 2009, we incurred a net loss and thus all potential common shares were deemed to be anti-dilutive. We excluded the impact of anti-dilutive potential common shares from the calculation of diluted weighted average shares for the quarters and nine months ended September 30, 2009 and 2008. If these potential common shares were included in the calculation, the impact would have been a decrease in diluted weighted average shares outstanding of 1,253,920 shares and 24,160 shares for the quarters ended September 30, 2009 and 2008, respectively, and 3,060,105 shares and 137,289 shares for the nine months ended September 30, 2009 and 2008, respectively.

10. Discontinued operations:

     In May 2008, our Board of Directors authorized and committed to a plan to sell certain business assets located primarily in north Texas which included our product supply stores, certain drilling logistics assets and other completion and production services assets. Although this sale did not represent a material disposition of assets relative to our total assets as presented in the accompanying balance sheets, the disposal group did represent a significant portion of the assets and operations which were attributable to our product sales business segment for the periods presented, and therefore, was accounted for as a disposal group that is held for sale. We revised our financial statements and reclassified the assets and liabilities of the disposal group as held for sale as of the date of each balance sheet presented and removed the results of operations of the disposal group from net income from continuing operations, and presented these separately as income from discontinued operations, net of tax, for each of the accompanying statements of operations. We ceased depreciating the assets of this disposal group in May 2008 and adjusted the net assets to the lower of carrying value or fair value less selling costs, which resulted in a pre-tax charge of approximately $200. In addition, we allocated $11,109 of goodwill associated with the original formation of Complete Production Services, Inc. to this business. Our company was formed from the combination of three entities under common control in September 2005, which resulted in goodwill of $93,792. Of this amount, $11,109 was deemed to be attributable to this disposal group and was impaired as of the date of the transaction. Thus, this amount has been included in the calculation of the loss on the sale of this disposal group.

     On May 19, 2008, we completed the sale of the disposal group for $50,150 in cash and we received assets with a fair market value of $7,987. In addition, we retained the receivables and payables associated with the operating results of these entities as of the date of the sale. The carrying value of the related net assets was approximately $51,353 on May 19, 2008, excluding allocated goodwill of $11,109. We recorded a loss of $6,935 associated with the sale of this disposal group, which represents the excess of the carrying value of the assets less selling costs over the sales price and a charge of approximately $2,610 related to income tax on the transaction. The income tax on the disposal was primarily attributable to the $11,109 of allocated goodwill which was non-deductible for tax purposes and resulted in a taxable gain on the disposal. We sold this disposal group to Select Energy Services, L.L.C., an oilfield service company located in Gainesville, Texas which is owned by a former officer of one of our subsidiaries. Pursuant to the agreement, we sublet office space to Select Energy Services, L.L.C., and provided certain administrative functions for a period of one year at an agreed-upon rate for services per hour. Proceeds from the sale of this disposal group were used to repay outstanding borrowings under our U.S. revolving credit facility and for other general corporate purposes.

     The following table summarizes operating results for the disposal group for the applicable period in 2008:

		Period
		January 1,
		2008 through
		May 19,
		2008
Revenue		$	59,553
Income before taxes		$	3,330
Net income before loss on disposal in 2008		$	2,076
Net loss		$	(4,706	)

     We incurred additional fees of $153 related to the sale of the disposal group in the third quarter of 2008.

11. Segment information:

     We have determined what segment information to report based on the way our management organizes the operating segments for making operational decisions and assessing financial performance. We evaluate performance and allocate resources based on net income (loss) from continuing operations before net interest expense, taxes, depreciation and amortization, minority interest and impairment loss (“Adjusted EBITDA”). The calculation of Adjusted EBITDA should not be viewed as a substitute for calculations under U.S. GAAP, in particular net income. Adjusted EBITDA calculated by us may not be comparable to

the EBITDA calculation of another company or to the calculation of EBITDA under our credit facilities (see Note 7 for a description of the calculation of EBITDA under our existing credit facility, as amended). See also the table below for a reconciliation of Adjusted EBITDA to operating income (loss) by segment.

     We have three reportable operating segments: completion and production services (“C&PS”), drilling services and product sales. The accounting policies of our reporting segments are the same as those used to prepare our unaudited consolidated financial statements as of September 30, 2009. Inter-segment transactions are accounted for on a cost recovery basis.

						Drilling				Product
		C&PS				Services				Sales				Corporate				Total
Quarter Ended September 30, 2009
Revenue from external customers		$	198,014			$	25,415			$	6,484			$	—			$	229,913
Inter-segment revenues		$	1,211			$	122			$	1,295			$	(2,628	)		$	—
Adjusted EBITDA, as defined		$	31,396			$	(3,757	)		$	1,791			$	(7,025	)		$	22,405
Depreciation and amortization		$	43,744			$	5,466			$	603			$	566			$	50,379
Impairment charge		$	—			$	36,158			$	—			$	—			$	36,158
Operating income (loss)		$	(12,348	)		$	(45,381	)		$	1,188			$	(7,591	)		$	(64,132	)
Capital expenditures		$	3,844			$	1,912			$	18			$	561			$	6,335
Quarter Ended September 30, 2008 (Revised)
Revenue from external customers		$	418,865			$	62,208			$	13,237			$	—			$	494,310
Inter-segment revenues		$	—			$	486			$	15,002			$	(15,488	)		$	—
Adjusted EBITDA, as defined		$	133,459			$	17,005			$	3,387			$	(9,885	)		$	143,966
Depreciation and amortization		$	41,195			$	5,223			$	657			$	646			$	47,721
Operating income (loss)		$	92,264			$	11,782			$	2,730			$	(10,531	)		$	96,245
Capital expenditures		$	51,486			$	6,581			$	592			$	187			$	58,846
As of September 30, 2009
Segment assets		$	1,350,965			$	170,400			$	40,577			$	133,896			$	1,695,838
Nine Months Ended September 30, 2009
Revenue from external customers		$	681,981			$	85,515			$	37,496			$	—			$	804,992
Inter-segment revenues		$	4,460			$	734			$	3,581			$	(8,775	)		$	—
Adjusted EBITDA, as defined		$	129,044			$	6,698			$	6,427			$	(25,569	)		$	116,600
Depreciation and amortization		$	133,393			$	16,502			$	1,861			$	1,714			$	153,470
Impairment charge		$	—			$	36,158			$	—			$	—			$	36,158
Operating income (loss)		$	(4,349	)		$	(45,962	)		$	4,566			$	(27,283	)		$	(73,028	)
Capital expenditures		$	25,267			$	3,004			$	175			$	648			$	29,094
Nine Months Ended September 30, 2008 (Revised)
Revenue from external customers		$	1,134,358			$	172,711			$	40,689			$	—			$	1,347,758
Inter-segment revenues		$	370			$	758			$	25,541			$	(26,669	)		$	—
Adjusted EBITDA, as defined		$	347,759			$	44,733			$	10,209			$	(26,241	)		$	376,460
Depreciation and amortization		$	111,972			$	14,527			$	1,762			$	1,797			$	130,058
Operating income (loss)		$	235,787			$	30,206			$	8,447			$	(28,038	)		$	246,402
Capital expenditures		$	157,890			$	31,816			$	2,317			$	1,231			$	193,254
As of December 31, 2008
Segment assets		$	1,631,875			$	251,015			$	52,048			$	52,415			$	1,987,353