Dailystocks.com - Ticker-based level links to all the information for the Stocks you own. Portal for Daytrading and Finance and Investing Web Sites
DailyStocks.com
What's New
Site Map
Help
FAQ
Log In
Home Quotes/Data/Chart Warren Buffett Fund Letters Ticker-based Links Education/Tips Insider Buying Index Quotes Forums Finance Site Directory
OTCBB Investors Daily Glossary News/Edtrl Company Overviews PowerRatings China Stocks Buy/Sell Indicators Company Profiles About Us
Nanotech List Videos Magic Formula Value Investing Daytrading/TA Analysis Activist Stocks Wi-fi List FOREX Quote ETF Quotes Commodities
Make DailyStocks Your Home Page AAII Ranked this System #1 Since 1998 Bookmark and Share


Welcome!
Welcome to the investing community at DailyStocks where we believe we have some of the most intelligent investors around. While we have had an online presence since 1997 as a portal, we are just beginning the forums section now. Our moderators are serious investors with MBA and CFAs with practical experience wwell-versed in fundamental, value, or technical investing. We look forward to your contribution to this community.

Recent Topics
Article by DailyStocks_admin    (01-12-09 04:11 AM)

Superior Well Services Inc. CEO David E Wallace bought 45596 shares on 12-31-2008 at $9.79

BUSINESS OVERVIEW

Our Company

We are a Delaware corporation formed in 2005 to serve as the parent holding company for an oilfield services business operating under the Superior Well Services name since 1997. In August 2005, we completed our initial public offering of 6,460,000 shares of common stock at a price of $13.00 per share and in December 2006 we completed a follow-on offering of 3,690,000 shares of common stock at a price of $25.50 per share.

We provide a wide range of wellsite solutions to oil and natural gas companies, primarily technical pumping services and down-hole surveying services. We focus on offering technologically advanced equipment and services at competitive prices, which we believe allows us to successfully compete against both major oilfield services companies and smaller, independent service providers.

We identify and pursue opportunities in markets where we can capitalize on our competitive advantages to establish a significant market presence. Since 1997, our operations have expanded from two service centers in the Appalachian region to 26 service centers providing coverage across 38 states. Our customer base has grown from 89 customers in 1999 to over 1,200 customers today. The majority of our customers are regional, independent oil and natural gas companies. We serve these customers in key markets in many of the active domestic oil and natural gas producing regions, including the Appalachian, Mid-Continent, Rocky Mountain, Southeast and Southwest regions of the United States. Historically, our expansion strategy has been to establish new service centers as our customers expand their operations into new markets. Once we establish a service center in a new market, we seek to expand our operations at that service center by attracting new customers and experienced local personnel. New service centers established or acquired in 2007 include: Jane Lew, West Virginia (Appalachian) Clinton, Oklahoma (Mid-Continent) Hays, Kansas (Mid-Continent down-hole acquisition) Artesia, New Mexico (Southwest) Williston, North Dakota (Rocky Mountain down-hole acquisition) Brighton, Colorado (Rocky Mountain) and Rock Springs, Wyoming (Rocky Mountain). We will commence operations during the first and second quarters of 2008 at our Brighton, Colorado, and Rock Springs, Wyoming locations.

Since our inception, we have also completed several selective acquisitions, including (i) our June 2006 acquisition of assets and personnel of Petitt Wireline, Inc., which expanded our operations in Oklahoma, (ii) our October 2006 acquisition of the operating assets of Patterson Wireline, L.L.C., which expanded our operations in the Rocky Mountain region, (iii) our February 2007 acquisition of the operating assets of ELI Wireline Services, Inc., which expanded our operations in the Mid-Continent region, and (iv) our November 2007 acquisition of the operating assets and personnel of Madison Wireline Services, Inc., which expanded our operations in North Dakota. Today, we operate through our 26 service centers located in Pennsylvania, Alabama, West Virginia, Virginia, Mississippi, Texas, New Mexico, Ohio, Oklahoma, Kansas, North Dakota, Utah, Louisiana, Michigan, Arkansas, Wyoming and Colorado.

Our Services and Products

Technical Pumping Services

We offer three types of technical pumping services — stimulation, nitrogen and cementing — which accounted for 54.3%, 12.0% and 20.6% of our revenue for the year ended December 31, 2007 and 58.4%, 10.4% and 21.0% of our revenue for the year ended December 31, 2006, respectively. As of December 31, 2007, we owned a fleet of 976 commercial vehicles through which we provided our technical pumping services.

Stimulation Services. Our fluid-based stimulation services include fracturing and acidizing, which are designed to improve the flow of oil and natural gas from producing zones. Fracturing services are performed to enhance the production of oil and natural gas from formations with low permeability, which restricts the natural flow of the formation. The fracturing process consists of pumping a fluid gel into a cased well at sufficient pressure to fracture the formation. A proppant, typically sand, which is suspended in the gel is pumped into the fracture to prop it open. The size of a fracturing job is generally expressed in terms of pounds of proppant. The main pieces of equipment used in the fracturing process are the blender, which blends the proppant into the fracturing fluid, and the pumping unit, which is capable of pumping significant volumes at high pressures. Our fracturing pump units and blenders are capable of pumping slurries at pressures of up to 10,000 psi and at rates of up to 130 barrels per minute.

Acidizing services are performed to enhance the flow rate of oil and natural gas from wells with reduced flow caused by limestone and other materials that block the formation. Acidizing entails pumping large volumes of specially formulated acids into a carbonate formation to dissolve barriers and enlarge crevices in the formation, thereby eliminating obstacles to the flow of oil and natural gas. We own and operate a fleet of mobile acid transport and pumping units to provide acidizing services.

Our fluid technology expertise and specialized equipment has enabled us to provide stimulation services with relatively high pressures (8,000 to 10,000 psi) that many of our smaller independent competitors currently do not offer. For these higher pressure projects, we typically arrange with third-party, independent laboratories to optimize and verify our fluid composition as part of our pre-job approval process. As of December 31, 2007, we had 31 stimulation crews of approximately six to thirty employees each and a fleet of 767 vehicles that includes high-tech, customized pump trucks, blenders and frac vans for use in our fluid-based stimulation services. In 2007, we provide basic stimulation services from seventeen different service centers: Black Lick, Pennsylvania; Bradford, Pennsylvania; Mercer, Pennsylvania; Norton, Virginia; Kimball, West Virginia; Jane Lew, West Virginia; Columbia, Mississippi; Cleveland, Oklahoma; Clinton, Oklahoma; Vernal, Utah; Cottondale, Alabama; Gaylord, Michigan; Van Buren, Arkansas; Alvarado, Texas; Farmington, New Mexico; Artesia, New Mexico; and Bossier City, Louisiana. We began providing stimulation services in Brighton, Colorado during January 2008.

Nitrogen Services. In addition to our fluid-based stimulation services, we also use nitrogen, an inert gas, to stimulate wellbores. Our foam-based nitrogen stimulation services accounted for substantially all of our total nitrogen services revenue in 2007. Our customers use foam-based nitrogen stimulation when the use of fluid-based fracturing or acidizing could result in damage to oil and natural gas producing zones or in low pressure zones where such fluid-based treatment would not be effective. Liquid nitrogen is transported to the jobsite in truck mounted insulated storage vessels. The liquid nitrogen is then pumped under pressure via a high pressure pump into a heat exchanger, which converts the liquid to a gas at the desired discharge temperature. In addition, we use nitrogen to foam cement slurries and to purge and test pipelines, boilers and pressure vessels.

As of December 31, 2007, we had ten nitrogen crews of approximately three to eight employees each and a fleet of 39 nitrogen pump trucks and 29 nitrogen transport vehicles. We provide nitrogen services from our Mercer, Pennsylvania; Cleveland, Oklahoma; Gaylord, Michigan; Kimball, West Virginia; Jane Lew, West Virginia; Norton, Virginia; Farmington, New Mexico; and Cottondale, Alabama service centers.

Cementing Services. Our cementing services consist of blending high-grade cement and water with various solid and liquid additives to create a cement slurry. The additives and the properties of the slurry are designed to ensure the proper pump time, compression strength and fluid loss control and vary depending on the well depth, down-hole temperatures and pressures and formation characteristics. We have developed a series of proprietary slurry blends. Our field engineers develop job design recommendations to achieve desired porosity and bonding characteristics. We contract with independent, third party regional laboratories to provide testing services to evaluate our slurry properties, which vary with cement supplier and local water properties.

Once blended, this cement slurry is pumped through the well casing into the void between the casing and the bore hole. There are a number of specific applications for cementing services. The principal application is the cementing behind the casing pipe and the wellbore during the drilling and completion phase of a well. This is known as primary cementing. Primary cementing is performed to (1) isolate fluids between the casing and productive formations and other formations that would damage the productivity of hydrocarbon producing zones or damage the quality of freshwater aquifers, (2) seal the casing from corrosive formation fluids and (3) provide structural support for the casing string. Cementing services are also used when recompleting wells from one producing zone to another and when plugging and abandoning wells.

As a complement to our cementing services, we also sell casing attachments such as baffle plates, centralizers, float shoes, guide shoes, formation packer shoes, rubber plugs and wooden plugs. After installation on the tubular being cemented, casing attachments are used to achieve the correct placement of cement slurries in the wellbore. Accordingly, our casing attachments are complementary to, and often bundled with, our cementing services as customers prefer the convenience and efficiencies of sourcing from a single provider. Sales of casing attachments has consistently accounted for less than 1% of our total revenue.

As of December 31, 2007, we had 59 cementing crews of approximately three to six employees each and a fleet of 141 cement trucks. We provide cementing services from sixteen different service centers: Black Lick, Pennsylvania; Bradford, Pennsylvania; Kimball, West Virginia; Jane Lew, West Virginia; Cleveland, Oklahoma; Clinton, Oklahoma; Columbia, Mississippi; Cottondale, Alabama; Gaylord, Michigan; Van Buren, Arkansas; Vernal, Utah; Alvarado, Texas; Norton, Virginia; Farmington, New Mexico; Artesia, New Mexico; and Bossier City, Louisiana.

Down-Hole Surveying Services

We offer two types of down-hole surveying services — logging and perforating. As of December 31, 2007, we owned a fleet of 86 logging and perforating trucks and cranes through which we provided our down-hole surveying services.

We supply wireline logging services primarily to open-hole markets and perforating services to cased-hole markets. Open-hole operations are performed in oil and natural gas wells that are newly drilled. Cased-hole operations are in oil and natural gas wells that have been drilled and cased and are either ready to produce or already producing. These services require skilled operators and typically last for several hours. We purchase our wireline equipment, down-hole tools and data gathering systems from third-parties. Our vendor relationships allow us to concentrate on our operations and limit our costs for research and development.

Logging Services. Our logging services involve the gathering of down-hole information to identify various characteristics of the down-hole rock formations, casing cement bond and mechanical integrity. We lower specialized tools into a wellbore from a truck on an armored electro-mechanical cable, or wireline. These tools communicate across the cable with a truck mounted acquisition unit at the surface that contains considerable instrumentation and computer equipment. The specialized, down-hole tools transmit data to the surface computer, which charts and records down-hole information, that details various characteristics about the formation or zone to be produced, such as rock type, porosity, permeability and the presence of hydrocarbons. As of December 31, 2007, we had 17 logging crews of approximately two to three employees each and 23 logging trucks. We provide logging services from eleven different service centers: Buckhannon, West Virginia; Kimball, West Virginia; Wooster, Ohio; Bradford, Pennsylvania; Black Lick, Pennsylvania; Cottondale, Alabama; Hominy, Oklahoma; Enid, Oklahoma; Hays, Kansas; Williston, North Dakota and Trinidad, Colorado.

Perforating Services. We provide perforating services as the initial step of stimulation by lowering specialized tools and perforating guns into a wellbore by wireline. The specialized tools transmit data to our surface computer to verify the integrity of the cement and position the perforating gun, which fires shaped explosive charges to penetrate the producing zone. Perforating creates a short path between the oil or natural gas reservoir and the wellbore that enables the production of hydrocarbons. In addition, we perform workover services aimed at improving the production rate of existing oil and natural gas wells and by perforating new hydrocarbon bearing zones in a well once a deeper zone or formation has been depleted. As of December 31, 2007, we had 35 perforating crews of approximately two to four employees each and 63 perforating trucks and cranes. We provide perforating services from eleven different service centers: Wooster, Ohio; Mercer, Pennsylvania; Black Lick, Pennsylvania; Buckhannon, West Virginia; Kimball, West Virginia; Cottondale, Alabama; Enid, Oklahoma; Hominy, Oklahoma; Hays, Kansas; Williston, North Dakota; and Trinidad, Colorado.

Competition

Our competition includes small and mid-size independent contractors as well as major oilfield services companies with international operations. We compete with Halliburton Company, Schlumberger Limited, BJ Services Company, RPC, Inc., Weatherford International Ltd., Key Energy Services, Inc. and a number of smaller independent competitors for our technical pumping services. We compete with Schlumberger Limited, Halliburton Company, Weatherford International Ltd., Baker Hughes Incorporated and a number of smaller independent competitors for our down-hole surveying services. We believe that the principal competitive factors in the market areas that we serve are price, product and service quality, availability of crews and equipment and technical proficiency.

Customers and Markets

We serve numerous major and independent oil and natural gas companies that are active in our core areas of operations.

1) We commenced operations in the Rocky Mountain region in the first quarter of 2005 by establishing a service center in Vernal, Utah. We expanded our operations in the Appalachian and the Southeast regions in the second quarter of 2005 by establishing service centers in Gaylord, Michigan and Bossier City, Louisiana, respectively. In the fourth quarter of 2005, we expanded our operations in the Mid-Continent region by establishing a service center in Van Buren, Arkansas.

(2) We expanded the Appalachian region by establishing service centers in Buckhannon, West Virginia and Norton, Virginia during the first and second quarters of 2006, respectively. We expanded the Rocky Mountain and Southwest regions in the third quarter of 2006 by establishing service centers in Farmington, New Mexico and Alvarado, Texas, respectively. Additionally, during the fourth quarter of 2006 we established our first down-hole surveying service center in the Rocky Mountain region when we acquired wireline assets in Trinidad, Colorado.

(3) We expanded the Appalachian region by establishing a service center in Jane Lew, West Virginia during the second quarter of 2007. We expanded the Southwest region in the fourth quarter by establishing a service center in Artesia, New Mexico. We expanded the Mid-Continent region by acquiring wireline assets in Hays, Kansas during the first quarter of 2007 and establishing a service center in Clinton, Oklahoma during the third quarter of 2007. We expanded the Rocky Mountain region by acquiring wireline assets in Williston, North Dakota and establishing service centers in Brighton, Colorado and Rock Springs, Wyoming during the fourth quarter of 2007. The Brighton, Colorado service center began generating revenues in January of 2008 and the Rock Springs, Wyoming location is expected to start generating revenues during the second quarter of 2008.

(1) We service Atlas America, Inc. from our Appalachian region service centers.

(2) We service Chesapeake Energy Corp. from our Appalachian, Mid-Continent, Southwest and Southeast region service centers.

(3) We service EOG Resources, Inc. from our Appalachian, Southwest and Southeast region service centers.

(4) We service CNX Gas Company (a subsidiary of Consol Energy) from our Appalachian region service centers.

(5) We service Consolidation Coal Company (a subsidiary of Consol Energy) from our Appalachian and Southeast region service centers.

Suppliers

We purchase the materials used in our technical pumping services, such as fracturing sand, cement, nitrogen and fracturing and cementing chemicals from various third party and related-party suppliers. Raw materials essential to our business are normally readily available. Where we rely on a single supplier for materials essential to our business, we believe that we will be able to make satisfactory alternative arrangements in the event of interruption of supply.

Operating Risks and Insurance

Our operations are subject to hazards inherent in the oil and natural gas industry, including accidents, blowouts, explosions, craterings, fires and oil spills and hazardous materials spills. These conditions can cause:


• personal injury or loss of life;

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

• suspension of operations.

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

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

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

We maintain insurance coverage of types and amounts that we believe to be customary in the industry, but we are not fully insured against all risks, either because insurance is not available or because of the high premium costs. The insurance coverage that we maintain includes employer’s liability, pollution, cargo, umbrella, comprehensive commercial general liability, workers’ compensation and limited physical damage insurance. We cannot assure you, however, that any insurance obtained by us will be adequate to cover any losses or liabilities, or that this insurance will continue to be available or available on terms that are acceptable to us. Liabilities for which we are not insured, or which exceed the policy limits of our applicable insurance, could have a materially adverse effect on our financial condition and results of operations.

Safety Program

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

Environmental Regulation

Our business is subject to stringent and comprehensive federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to health and safety or the protection of the environment. Federal and state governmental agencies implement and enforce these laws and regulations, which are often difficult and costly to comply with. Failure to comply with these laws and regulations often carries substantial administrative, civil and criminal penalties and may result in the imposition of remedial obligations or the issuance of injunctions limiting or prohibiting some or all our operations.

Some laws and regulations relating to protection of the environment may, in some circumstances, impose joint and several, strict liability for environmental contamination, rendering a person liable for environmental and natural resource damages and cleanup costs without regard to negligence or fault on the part of that person. Strict adherence with these laws and regulations increases our cost of doing business and consequently affects our profitability. We believe that we are in substantial compliance with current applicable environmental laws and regulations and that continued compliance with existing requirements will not have a material adverse impact on our operations but we can provide no assurance that this trend will continue. Moreover, environmental laws and regulations have been subject to frequent changes over the years, and the imposition of more stringent requirements could have a materially adverse effect upon our capital expenditures, earnings or our competitive position.

The following is a summary of the more significant existing environmental laws to which our business operations are subject and with which compliance may have a material adverse effect on our capital expenditures, earnings or competitive position.

The Comprehensive Environmental Response, Compensation and Liability Act, as amended, referred to as CERCLA or the Superfund law, and comparable state laws impose strict liability, without regard to fault or the legality of the original conduct on certain classes of persons that are considered to be responsible for the release of a hazardous substance into the environment. These persons include the current owner and operator of the disposal site or sites where the release occurred and companies that transport or disposed or arranged for the transportation or disposal of the hazardous substances that have been released at the site. Under CERCLA, these persons may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment from properties currently or even previously owned or operated by us as well as from offsite properties where our wastes have been disposed, for damages to natural resources and for the costs of some health studies. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by hazardous substances or other pollutants released into the environment. We have not received notification that we may be potentially responsible for cleanup costs under CERCLA.

The Resource Conservation and Recovery Act, referred to as RCRA, generally does not regulate most wastes generated by the exploration and production of oil and natural gas because that act specifically excludes drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of oil and natural gas from regulation as hazardous waste. However, these wastes may be regulated by the U.S. Environmental Protection Agency, referred to as the EPA, or state environmental agencies as non-hazardous waste. Moreover, in the ordinary course of our operations, industrial wastes such as paint wastes, waste solvents, and laboratory wastes as well as certain wastes generated in the course of providing well services may be regulated as hazardous waste under RCRA or hazardous substances under CERCLA. We currently own or lease, and have in the past owned or leased, a number of properties that for many years have been used for services in support of oil and natural gas exploration and production activities. We have utilized operating and disposal practices that were standard in the industry at the time, but hydrocarbons or other wastes may have been disposed of or released on or under the properties owned or leased by us or on or under other locations where such wastes have been taken for disposal. In addition, we may own or lease properties that in the past were operated by third parties whose operations were not under our control. Those properties and the hydrocarbons or wastes disposed thereon may be subject to CERCLA, RCRA, and analogous state laws. Under such laws, we could be required to remove or remediate previously disposed wastes or property contamination.

Our operations are subject to the federal Water Pollution Control Act, as amended, referred to as the Clean Water Act and analogous state laws, which impose restrictions and strict controls regarding the discharge of pollutants into state waters or waters of the United States except in accordance with issued permits. These laws also regulate the discharge of stormwater in process areas. Pursuant to these laws and regulations, we are required to obtain and maintain approvals or permits for the discharge of wastewater and stormwater and develop and implement spill prevention, control and countermeasure plans, also referred to as “SPCC plans” in connection with on-site storage of greater than threshold quantities of oil. We believe that our operations are in substantial compliance with applicable Clean Water Act and analogous state requirements, including those relating to wastewater and stormwater discharges and SPCC plans.

The Clean Air Act, as amended, and comparable state laws restrict the emission of air pollutants from many sources in the United States, including bulk cement facilities. These laws and any implementing regulations may require us to obtain pre-approval for the construction or modification of certain projects or facilities expected to produce air emissions, impose stringent air permit requirements, or utilize specific equipment or technologies to control emissions. We believe we are in substantial compliance with the Clean Air Act, including applicable permitting and control technology requirements.

In response to studies suggesting that emissions of certain gases, referred to as “greenhouse gases” and including carbon dioxide and methane, may be contributing to warming of the Earth’s atmosphere, the current session of the U.S. Congress is considering climate change-related legislation to restrict greenhouse gas emissions. One bill recently approved by the U.S. Senate Environment and Public Works Committee, known as the Lieberman-Warner Climate Security Act or S.2191, would require a 70% reduction in emissions of greenhouse gases from sources within the United States between 2012 and 2050. The Lieberman-Warner bill proposes a “cap and trade” scheme of regulation of greenhouse gas emissions — a ban on emissions above a defined reducing annual cap. Covered parties will be authorized to emit greenhouse emissions through the acquisition and subsequent surrender of emission allowances that may be traded or acquired on the open market. Debate and a possible vote on this bill by the full Senate are anticipated to occur before mid-year 2008. In addition, at least one-third of the states have already taken legal measures to reduce emissions of greenhouse gases, primarily through the planned development of greenhouse gas emission inventories and/or regional greenhouse gas cap and trade programs. Depending on the particular program, we could be required to purchase and surrender allowances for greenhouse gas emissions resulting from our operations. Similarly, the oil and natural gas producers whom we serve could be required to obtain and surrender allowances for the combustion of fuels (e.g., oil or natural gas) that they produce. Also, as a result of the U.S. Supreme Court’s decision on April 2, 2007 in Massachusetts, et al. v. EPA, the EPA may regulate carbon dioxide and other greenhouse gas emissions from mobile sources such as cars and trucks, even if Congress does not adopt new legislation specifically addressing emissions of greenhouse gases. The EPA has publicly stated its goal of issuing a proposed rule to address carbon dioxide and other greenhouse gas emissions from vehicles and automobile fuels but the timing for issuance of this proposed rule is unsettled as the agency reviews its mandates under the Energy Independence and Security Act of 2007, which includes expanding the use of renewable fuels and raising the corporate average fuel economy standards. The Court’s holding in Massachusetts that greenhouse gases including carbon dioxide fall under the federal Clean Air Act’s definition of “air pollutant” may also result in future regulation of carbon dioxide and other greenhouse gas emissions from stationary sources under certain CAA programs. New federal or state laws requiring adoption of a stringent greenhouse gas control program or imposing restrictions on emissions of carbon dioxide in areas of the United States in which we conduct business could adversely affect our cost of doing business and demand for the services we provide to oil and gas producers.

Our down-hole surveying operations use densitometers containing sealed, low-grade radioactive sources such as Cesium-137 that aid in determining the density of down-hole cement slurries, waters, and sands as well as help evaluate the porosity of specified subsurface formations. Our activities involving the use of densitometers are regulated by the U.S. Nuclear Regulatory Commission and specified agencies of applicable agreement states that work cooperatively in implementing the federal regulations. In addition, our down-hole surveying services involve the use of explosive charges that are regulated by the U.S. Department of Justice, Bureau of Alcohol, Tobacco, Firearms, and Explosives. Standards implemented by these regulatory agencies require us to obtain licenses or other approvals for the use of such densitometers as well as explosive charges. We have obtained these licenses and approvals when necessary and believe that we are in substantial compliance with these federal requirements.

We maintain insurance against some risks associated with underground contamination that may occur as a result of well services activities. However, this insurance is limited to activities at the wellsite and may not continue to be available or may not be available at premium levels that justify its purchase. The occurrence of a significant event not fully insured or indemnified against could have a materially adverse effect on our financial condition and results of operations.

The federal Department of Homeland Security Appropriations Act of 2007 required the Department of Homeland Security, or DHS, to issue regulations establishing risk-based performance standards for the security of chemical and industrial facilities, including oil and gas facilities that are deemed to present “high levels of security risk.” The DHS issued an interim final rule in April 2007 regarding risk-based performance standards to be attained pursuant to the act and, on November 20, 2007, further issued an Appendix A to the interim rule that established chemicals of interest and their respective threshold quantities that will trigger compliance with the interim rule. Facilities possessing greater than threshold levels of these chemicals of interest were required to prepare and submit to the DHS in January 2008 initial screening surveys that the agency would use to determine whether the facilities presented a high level of security risk. Covered facilities that are determined by DHS to pose a high level of security risk will be notified by DHS and will be required to prepare and submit Security Vulnerability Assessments and Site Security Plans as well as comply with other regulatory requirements, including those regarding inspections, audits, recordkeeping, and protection of chemical-terrorism vulnerability information. We have not yet determined the extent to which our facilities are subject to the interim rule or the associated costs to comply, but it is possible that such costs could be substantial.

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

Employees

As of December 31, 2007, we employed 1,492 people, with approximately 74% employed on an hourly basis. Our future success will depend partially on our ability to attract, retain and motivate qualified personnel. We are not a party to any collective bargaining agreements, and we consider our relations with our employees to be satisfactory.

Available Information

Our website address is www.swsi.com . We make available, free of charge through the Investor Relations portion of this website, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the 1934 Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

CEO BACKGROUND

Charles C. Neal 49 Mr. Neal has served as a director on our Board since June 2005. Mr. Neal is the Chairman of our Nominating and Governance Committee and is a member of our Audit Committee and Compensation Committee. Mr. Neal’s principal occupation is as a director and the President of Chas. A. Neal & Company, a privately held company with investments in oil and gas exploration and production, banking, private equity and marketable securities. He has held this position since 1989. Prior to that, he was with Merrill Lynch & Co. in investment banking. He is also a director of several privately held companies. He is a director and Chairman of The First National Bank & Trust Company of Miami and a director and President of First Miami Bancshares, Inc. Mr. Neal holds a bachelor of arts degree in economics from the University of Oklahoma and a JD/MBA degree from the University of Chicago Law School and Graduate School of Business.

David E. Wallace 53 Mr. Wallace has over 30 years of experience in the oilfield services industry. Mr. Wallace’s principal occupation is as our Chief Executive Officer and Chairman of our Board, a position he has held since our formation in March 2005. Prior to the formation of Superior Well Services, Inc., he co- founded Superior Well Services, Ltd. and had been its Chief Executive Officer since its inception in 1997. Prior to co- founding Superior Well Services, Ltd., Mr. Wallace held various operational management and sales positions at Halliburton Energy Services, Inc. during his 20-year tenure with that company. Mr. Wallace graduated with a bachelor of science in civil engineering degree from the University of Kentucky.

THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF
THE NOMINEES FOR CLASS III DIRECTORS

Mark A. Snyder 52 Mr. Snyder has served as a director on our Board since our formation in March 2005. Mr. Snyder’s principal occupation is as the Secretary of Snyder Associated Companies, Inc. and he has served in that capacity since June 1999. Snyder Associated Companies Inc. is a privately held natural resources and manufacturing company. He has served as a director and executive officer of Snyder Associated Companies, Inc. for over 30 years. Mr. Snyder also serves as the Secretary of each of Armstrong Cement & Supply Corp., Buffalo Valley Real Estate Co., Mark Ann Industries, Inc. and Snyder Brothers, Inc. and has served in that capacity since June 1999. Mr. Snyder serves as the Chairman and Chief Executive Officer for Sylvan, Inc., which is a privately owned international fungal product producer. He serves as a director for The Farmers National Bank of Kittanning, Armstrong County Memorial Hospital, Brayman Construction Corporation, a privately held highway building contractor and Greenleaf Corporation, a privately held tool manufacturer. Mr. Snyder holds an associates degree in mechanical engineering technology from Pennsylvania State University. Mark A. Snyder is the brother of David E. Snyder, who is also a member of our Board.


Anthony J. Mendicino 60 Mr. Mendicino has served as a director on our Board since August 2005. Mr. Mendicino is the Chairman of our Audit Committee and is a member of our Compensation Committee and Nominating and Corporate Governance Committee. Mr. Mendicino retired in July 2007 from his principal occupation as the Senior Vice President — Finance and Chief Financial Officer of UGI Corporation, a Delaware corporation, a position he had held since December 2002. He previously served as Vice President — Finance and Chief Financial Officer of UGI Corporation from September 1998 to December 2002. UGI Corporation is a distributor and marketer of energy products and services. Mr. Mendicino was also Senior Vice President and Chief Financial Officer and a director from 1987 to 1996 of UTI Energy Corp., a diversified oil field service company. Mr. Mendicino holds a bachelor of science degree in civil engineering from Lehigh University and an MBA from the Wharton School of the University of Pennsylvania.


John A. Staley, IV 64 Mr. Staley has served as a director on our Board since June 2005. Mr. Staley is the Chairman of our Compensation Committee and is a member of our Audit Committee and Nominating and Corporate Governance Committee. Mr. Staley was a director of Boron LePore & Associates, Inc. from May 1997 to 2002. Mr. Staley was Chief Executive Officer of Federated Research Corp., an investment management firm and a subsidiary of Federated Investors Inc., in turn, a wholly owned subsidiary of Federated Investors, a Delaware business trust, from 1984 through November 1994 when he retired. Upon his retirement, Mr. Staley worked as a self-employed financial advisor from November 1994 to November 1996 and has been the Chief Executive Officer of Staley Capital Advisers, Inc., an investment advisory firm, from November 1996 to present. Mr. Staley’s position at Staley Capital Advisors, Inc. is his principal occupation. He is also a director of several private companies and a trustee emeritus of Duquesne University and the Children’s Hospital of Pittsburgh. Mr. Staley is a Certified Public Accountant and holds a bachelor of science degree from Duquesne University and an MBA in finance from Northwestern University’s Kellogg Graduate School of Business.

David E. Snyder 57 Mr. Snyder has served as a director on our Board since our formation in March 2005. Mr. Snyder is the President, Treasurer and a member of the Board of Snyder Associated Companies, Inc., a privately held natural resources and manufacturing company. He has served as President of Snyder Associated Companies Inc. since September 2006, and he has served as a director and executive officer of Snyder Associated Companies, Inc. for over 30 years. Mr. Snyder is also the Treasurer of Armstrong Cement & Supply Corp., the Vice President of Mark Ann Industries, Inc. and the President of Snyder Brothers, Inc. and has served in each capacity since June 1999. He currently serves as a director of The Farmers National Bank of Kittanning and of Sylvan, Inc., a privately owned international fungal products producer. Mr. Snyder holds a bachelor of science degree in business finance from Indiana University of Pennsylvania. David E. Snyder is the brother of Mark A. Snyder, who is also a member of our Board.

Edward J. DiPaolo 55 Mr. DiPaolo has served as a director on our Board since July 2006. Mr. DiPaolo is a member of our Compensation Committee and our Nominating and Corporate Governance Committee. Mr. DiPaolo’s principal occupation is as a consultant to Growth Capital Partners, L.P., an investment and merchant banking firm, and he has served in that capacity since August of 2003. From 1976 to 2002, Mr. DiPaolo was with Halliburton Company, most recently as Group Senior Vice President of Global Business Development. Previously, Mr. DiPaolo was the North American Regional Vice President and Far East Regional Vice President within Halliburton. Mr. DiPaolo currently serves on the Board of Evolution Petroleum Corporation, Boots and Coots International Well Control, Inc. and Innicor Subsurface Technologies, Inc. He is also a director of several privately held companies. He received his undergraduate degree in agricultural engineering from West Virginia University in 1976 and serves on the Advisory Board of the West Virginia University College of Engineering.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

We are a Delaware corporation formed in 2005 to serve as the parent holding company for an oilfield services business operating under the Superior Well Services name since 1997 in many of the major oil and natural gas producing regions in the Appalachian, Mid-Continent, Rocky Mountain, Southwest and Southeast regions of the United States. In August 2005, we completed our initial public offering of 6,460,000 shares of common stock at a price of $13.00 per share and in December 2006 we completed a follow-on offering of 3,690,000 shares of common stock at a price of $25.50 per share. We provide a wide range of wellsite solutions to oil and natural gas companies, primarily technical pumping services and down-hole surveying services. We focus on offering technologically advanced equipment and services at competitive prices, which we believe allows us to successfully compete against both major oilfield services companies and smaller, independent service providers.

Services Offered

We derive our revenue from two primary categories of services — technical pumping services and down-hole surveying services. Substantially all of our customers are domestic oil and natural gas exploration and production companies that typically require both types of services in their operations.

The following is a brief description of our services:

Technical Pumping Services

We offer three types of technical pumping services — stimulation, nitrogen and cementing — which accounted for 54.3%, 12.0% and 20.6% of our revenue for the year ended December 31, 2007 and 58.4%, 10.4% and 21.0% of our revenue for the year ended December 31, 2006, respectively. Our fluid-based stimulation services include fracturing and acidizing, which are designed to improve the flow of oil and natural gas from producing zones. In addition to our fluid-based stimulation services, we also use nitrogen to stimulate wellbores. Our foam-based nitrogen stimulation services accounted for substantially all of our total nitrogen services revenue in 2006 and 2007. Our cementing services consist of blending high-grade cement and water with various additives to create a cement slurry that is pumped through the well casing into the void between the casing and the bore hole. Once the slurry hardens, the cement isolates fluids and gases, which protects the casing from corrosion, holds the well casing in place and controls the well.

Down-Hole Surveying Services

We offer two types of down-hole surveying services — logging and perforating — which collectively accounted for approximately 13.1% and 10.2% of our revenues for years ended December 31, 2007 and 2006, respectively. Our logging services involve the gathering of down-hole information through the use of specialized tools that are lowered into a wellbore from a truck. An armored electro-mechanical cable, or wireline, is used to transmit data to our surface computer that records various characteristics about the formation or zone to be produced. We provide perforating services as the initial step of stimulation by lowering specialized tools and perforating guns into a wellbore by wireline. The specialized tools transmit data to our surface computer to verify the integrity of the cement and position the perforating gun, which fires shaped explosive charges to penetrate the producing zone to create a short path between the oil or natural gas reservoir and the production tubing to enable the production of hydrocarbons. In addition, we also perform workover services aimed at improving the production rate of existing oil and natural gas wells, including perforating new hydrocarbon bearing zones in a well once a deeper zone or formation has been depleted.

How We Generate Our Revenue

The majority of our customers are regional, independent oil and natural gas companies. The primary factor influencing demand for our services by those customers is their level of drilling activity, which, in turn, depends primarily on current and anticipated future natural gas and crude oil commodity prices and production depletion rates.

We generate revenue from our technical pumping services and down-hole surveying services by charging our customers a set-up charge plus an hourly rate based on the type of equipment used. The set-up charges and hourly rates are determined by a competitive bid process and depend upon the type of service to be performed, the equipment and personnel required for the particular job and the market conditions in the region in which the service is performed. Each job is given a base time allotment of six hours. We generally charge an increased hourly rate for each hour worked beyond the initial six hour base time allotment. We also charge customers for the materials, such as stimulation fluids, cement and nitrogen, that we use in each job. Material charges include the cost of the materials plus a markup and are based on the actual quantity of materials used.

How We Evaluate Our Operations

Our management uses a variety of financial and operational measurements to analyze the performance of our services. These measurements include the following: (1) operating income per operating region; (2) material and labor expenses as a percentage of revenue; (3) selling, general and administrative expenses as a percentage of revenue; and (4) EBITDA.

Operating Income per Operating Region.

We currently service customers in five operating regions through our 26 service centers. Our Appalachian region service centers are located in Bradford, Black Lick and Mercer, Pennsylvania; Wooster, Ohio; Kimball, Buckhannon and Jane Lew, West Virginia; Norton, Virginia; and Gaylord, Michigan. Our Southeast region service centers are located in Cottondale, Alabama; Columbia, Mississippi; and Bossier City, Louisiana. Our Mid-Continent region service centers are located in Hominy, Enid, Clinton and Cleveland, Oklahoma; Hays, Kansas; and Van Buren, Arkansas. Our Rocky Mountain region service centers are located in Vernal, Utah; Farmington, New Mexico; Rock Springs, Wyoming; Williston, North Dakota; and Trinidad and Brighton, Colorado. Our Southwest region service centers are located in Alvarado, Texas and Artesia, New Mexico.

The operating income generated in each of our operating regions is an important part of our operational analysis. We monitor operating income separately for each of our operating regions and analyze trends to determine our relative performance in each region. Our analysis enables us to more efficiently evaluate our utilization levels and allocate our equipment and field personnel among our various operating regions, as well as determine if we need to increase our marketing efforts in a particular region. By comparing our operating income on an operating region basis, we can quickly identify market increases or decreases in the diverse geographic areas in which we operate. It has been our experience that when we establish a new service center in a particular operating region, it may take from 12 to 24 months before that service center has a positive impact on the operating income that we generate in the relevant region.

Material and Labor Expenses as a Percentage of Revenue.

Material and labor expenses are composed primarily of cost of materials, maintenance, fuel and the wages of our field personnel. The cost of these expenses as a percentage of revenue has historically remained relatively stable for our established service centers.

Our material costs primarily include the cost of inventory consumed while performing our stimulation, nitrogen and cementing services. Increases in our material and fuel costs are frequently passed on to our customers. However, due to the timing of our marketing and bidding cycles, there is generally a delay of several weeks or months from the time that we incur an actual price increase until the time that we can pass on that increase to our customers.

Our labor costs consist primarily of wages for our field personnel. As a result of on-going shortages of qualified supervision personnel and equipment operators, due to increased activity in the oilfield services and commercial trucking sectors, it is possible that we will have to raise wage rates to attract and train workers from other fields in order to maintain or expand our current work force. Historically, we have been able to increase service rates to our customers to compensate for wage rate increases.

Selling, General and Administrative Expenses as a Percentage of Revenue.

Our selling, general and administrative expenses, or SG&A expenses, include fees for management services and administrative, marketing and maintenance employee compensation and related benefits, office and lease expenses, insurance costs and professional fees, as well as other costs and expenses not directly related to field operations. Our management continually evaluates the level of our general and administrative expenses in relation to our revenue because these expenses have a direct impact on our profitability. Our selling, general and administrative expenses have increased as a result of the growth in operations, as well as a result of our becoming a public company. For a discussion of the increase in costs associated with our public company status, please read “— Items Impacting Comparability of Our Financial Results — Public Company Expenses.”

EBITDA.

We define EBITDA as net income before interest expense, income tax expense and depreciation and amortization expense. Our management uses EBITDA:


• as a measure of operating performance because it assists us in comparing our performance on a consistent basis, since it removes the impact of our capital structure and asset base from our operating results;

• as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations;

• to assess compliance with financial ratios and covenants included in credit facilities;

• in communications with lenders concerning our financial performance; and

• to evaluate the viability of potential acquisitions and overall rates of return.

How We Manage Our Operations

Our management team uses a variety of tools to manage our operations. These tools include monitoring: (1) service crew utilization and performance; (2) equipment maintenance performance; (3) customer satisfaction; and (4) safety performance.

Service Crew Performance.

We monitor our revenue on a per service crew basis to determine the relative performance of each of our crews. We also measure our activity levels by the total number of jobs completed by each of our crews as well as by each of the trucks in our fleet. We evaluate our crew and fleet utilization levels on a monthly basis, with full utilization deemed to be approximately 24 jobs per month for each of our service crews and approximately 30 jobs per month for each of our trucks. By monitoring the relative performance of each of our service crews, we can more efficiently allocate our personnel and equipment to maximize our overall crew utilization.

Equipment Maintenance Performance.

Preventative maintenance on our equipment is an important factor in our profitability. If our equipment is not maintained properly, our repair costs may increase and, during levels of high activity, our ability to operate efficiently could be significantly diminished due to having trucks and other equipment out of service. Our maintenance crews perform monthly inspections and preventative maintenance on each of our trucks and other mechanical equipment. Our management monitors the performance of our maintenance crews at each of our service centers by monitoring the level of maintenance expenses as a percentage of revenue. A rising level of maintenance expenses as a percentage of revenue at a particular service center can be an early indication that our preventative maintenance schedule is not being followed. In this situation, management can take corrective measures, such as adding additional maintenance personnel to a particular service center to help reduce maintenance expenses as well as ensure that maintenance issues do not interfere with operations.

Customer Satisfaction.

Upon completion of each job, we encourage our customers to complete a “pride in performance survey” that gauges their satisfaction level. The customer evaluates the performance of our service crew under various criteria and comments on their overall satisfaction level. Survey results give our management valuable information from which to identify performance issues and trends. Our management also uses the results of these surveys to evaluate our position relative to our competitors in the various markets in which we operate.

Safety Performance.

Maintaining a strong safety record is a critical component of our operational success. Many of our larger customers have safety history standards we must satisfy before we can perform services for them. We maintain an online safety database that our customers can access to review our historical safety record. Our management also uses this safety database to identify negative trends in operational incidents so that appropriate measures can be taken to maintain a positive safety history.

Our Industry and Overview

We provide products and services primarily to domestic onshore oil and natural gas exploration and production companies for use in the drilling and production of oil and natural gas. The main factor influencing demand for well services in our industry is the level of drilling activity by oil and natural gas companies, which, in turn, depends largely on current and anticipated future natural gas and crude oil prices and production depletion rates. Current market indicators suggest an increasing demand for oil and natural gas coupled with a flat or declining production curve, which we believe should result in the continuation of historically high natural gas and crude oil commodity prices. For example, the Energy Information Administration of the U.S. Department of Energy, or EIA, forecasts that U.S. oil and natural gas consumption will increase at an average annual rate of 1.1% through 2025. The EIA also forecasts that U.S. oil production will decline at an average annual rate of 0.5% and natural gas production will increase at an average annual rate of 0.8%.

We anticipate that oil and natural gas exploration and production companies will continue to respond to sustained increases in demand by expanding their exploration and drilling activities and increasing capital spending. In recent years, much of this expansion has focused on natural gas. According to Baker Hughes rig count data, the average total rig count in the United States increased 91.2% from 918 in 2000 to 1,755 through the third week of February 2008, while the average natural gas rig count increased 97.8% from 720 in 2000 to 1,424 through the third week of February 2008. While the number of rigs drilling for natural gas has increased by more than 250% since 1996, natural gas production has decreased by approximately 3% over the same period of time. This is largely a function of increasing decline rates for natural gas wells in the United States. We believe that a continued increase in U.S. drilling and workover activity will be required for the natural gas industry to help meet the expected increased demand for natural gas in the United States.

2008 Business Outlook

Our overall business outlook remains positive and we believe that our activity levels will remain stable during 2008. Although commodity prices and drilling activity remain at relatively high levels, we believe that increased competition due to capacity additions may continue to erode stimulation pricing in certain markets. The new capacity entered the market in 2007 in response to strong demand and favorable margins for oilfield services. In the fourth quarter of 2007, we experienced increased sales discounts in the low- to mid- single digits for our stimulation services. We believe stimulation pricing declines may be partially offset over time by higher asset utilization levels as our newer service centers become more established in their respective markets, as well as improved activity levels if commodity prices and drilling activity levels remain at or near existing levels. Although we experienced increased sales discounts in our other service offerings during 2007, they were less than those experienced in our stimulation business.

Our Growth Strategy

Our growth strategy contemplates engaging in organic expansion opportunities and, to a lesser extent, complementary acquisitions of other oilfield services businesses. Our organic expansion activities generally consist of establishing service centers in new locations, including purchasing related equipment and hiring experienced local personnel. Historically, many of our customers have asked us to expand our operations into new regions that they enter. Once we establish a new service center, we seek to expand our operations by attracting new customers and hiring additional local personnel.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report. This discussion contains forward-looking statements that reflect management’s current views with respect to future events and financial performance. Our actual results may differ materially form those anticipated in these forward-looking statements or as a result of certain factors such as those set forth below under “Cautionary Statement Regarding Forward-Looking Statements.”
Cautionary Statement Regarding Forward-Looking Statements
This report contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements included in this report that are not historical facts, that address activities, events or developments that we expect or anticipate will or may occur in the future, including things such as plans for growth of the business, future capital expenditures, competitive strengths, goals, references to future goals or intentions or other such references are forward-looking statements. These statements can be identified by the use of forward-looking terminology, including “may,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” or similar words. These statements are made by us based on our past experience and our perception of historical trends, current conditions and expected future developments as well as other considerations we believe are appropriate under the circumstances. Whether actual results and developments in the future will conform to our expectations is subject to numerous risks and uncertainties, many of which are beyond our control. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecast in these statements. Any differences could be caused by a number of factors, including, but not limited to:
• a decrease in domestic spending by the oil and natural gas exploration and production industry;

• a decline in or substantial volatility of crude oil and natural gas commodity prices;

• overcapacity and competition in our industry;

• unanticipated costs, delays and other difficulties in executing our growth strategy;

• the loss of one or more significant customers;

• the loss of or interruption in operations of one or more key suppliers;

• the incurrence of significant costs and liabilities in the future resulting from our failure to comply with new or existing environmental regulations or an accidental release of hazardous substances into the environment; and

• other financial, operational and legal risks and uncertainties detailed from time to time in our Securities and Exchange Commission (“SEC”) filings.
When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements set forth in our Annual Report on Form 10-K for the year ended December 31, 2007 and in this Quarterly Report on Form 10-Q, as well as other written and oral statements made or incorporated by reference from time to time by us in other reports and filings with the SEC. All forward-looking statements included in this report and all subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements speak only as of the date made, other than as required by law, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
We are a Delaware corporation formed in 2005 to serve as the parent holding company for an oilfield services business operating under the Superior Well Services name since 1997 in many of the major oil and natural gas producing regions in the Appalachian, Mid-Continent, Rocky Mountain, Southwest and Southeast regions of the United States. In August 2005, we completed our initial public offering of 6,460,000 shares of common stock at a price of $13.00 per share and in December 2006 we completed a follow-on offering of 3,690,000 shares of common stock at a price of $25.50 per share. We provide a wide range of wellsite solutions to oil and natural gas companies, primarily technical pumping services and down-hole surveying services. We focus on offering technologically advanced equipment and services at competitive prices, which we believe allows us to successfully compete against both major oilfield services companies and smaller, independent service providers.
On September 15, 2008, Superior announced that it had entered into a definitive asset purchase agreement (the “Acquisition Agreement”) to acquire certain oilfield service assets, including stimulation and pumping services, fluid logistics and well-site services and completion and production services, from Diamondback Holdings, LLC and subsidiaries (“Diamondback”), a privately-owned company, for a total purchase price of $270 million in cash. As of October 31, 2008 the transaction has not yet closed and the Company is continuing to negotiate additional terms that will facilitate closing of the transaction. The Acquisition Agreement contains termination provisions to the effect that if the Acquisition has not closed by October 31, 2008 and all conditions to closing were satisfied other than Superior’s receipt of third party financing, either party may terminate the Acquisition Agreement and Superior would be required to pay Diamondback a termination fee of $15 million.

The following is a brief description of our services:
Technical Pumping Services
We offer three types of technical pumping services — stimulation, nitrogen and cementing — which accounted for 64.7%, 7.6%, and 17.6% of our revenue for the three months ended September 30, 2008 and 63.0%, 7.1% and 19.3% of our revenue for the nine months ended September 30, 2008, respectively. Our fluid-based stimulation services include fracturing and acidizing, which are designed to improve the flow of oil and natural gas from producing zones. In addition to our fluid-based stimulation services, we also use nitrogen to stimulate wellbores. Our foam-based nitrogen stimulation services accounted for substantially all of our total nitrogen services revenue for the three and nine months ended September 30, 2007 and 2008. Our cementing services consist of blending high-grade cement and water with various additives to create a cement slurry that is pumped through the well casing into the void between the casing and the bore hole. Once the slurry hardens, the cement isolates fluids and gases, which protects the casing from corrosion, holds the well casing in place and controls the well.
Down-Hole Surveying Services
We offer two types of down-hole surveying services — logging and perforating — which collectively accounted for approximately 10.1% of our revenue for the three months ended September 30, 2008 and 10.6% of our revenue for the nine months ended September 30, 2008, respectively. Our logging services involve the gathering of down-hole information through the use of specialized tools that are lowered into a wellbore from a truck. An armored electro-mechanical cable, or wireline, is used to transmit data to our surface computer that records various characteristics about the formation or zone to be produced. We provide perforating services as the initial step of stimulation by lowering specialized tools and perforating guns into a wellbore by wireline. The specialized tools transmit data to our surface computer to verify the integrity of the cement and position the perforating gun, which fires shaped explosive charges to penetrate the producing zone to create a short path between the oil or natural gas reservoir and the production tubing to enable the production of hydrocarbons. In addition, we also perform workover services aimed at improving the production rate of existing oil and natural gas wells, including perforating new hydrocarbon bearing zones in a well once a deeper zone or formation has been depleted.
How We Generate Our Revenue
The majority of our customers are regional, independent oil and natural gas companies. The primary factor influencing demand for our services by those customers is their level of drilling activity, which, in turn, depends primarily on current and anticipated future natural gas and crude oil commodity prices and production depletion rates.
We generate revenue from our technical pumping services and down-hole surveying services by charging our customers a set-up charge plus an hourly rate based on the type of equipment used. The set-up charges and hourly rates are determined by a competitive bid process and depend upon the type of service to be performed, the equipment and personnel required for the particular job and the market conditions in the region in which the service is performed. Each job is given a base time allotment of nine hours. We generally charge an increased hourly rate for each hour worked beyond the initial nine hour base time allotment. We also charge customers for the materials, such as stimulation fluids, cement and nitrogen, that we use in each job. Material charges include the cost of the materials plus a markup and are based on the actual quantity of materials used.
How We Evaluate Our Operations
Our management uses a variety of financial and operational measurements to analyze the performance of our services. These measurements include the following: (1) operating income per operating region; (2) material and labor expenses as a percentage of revenue; (3) selling, general and administrative expenses as a percentage of revenue; and (4) EBITDA, which is not a measure of performance under GAAP and is discussed in more detail below.
Operating Income per Operating Region.
We currently service customers in five operating regions through our 26 service centers. Our Appalachian region service centers are located in Bradford, Black Lick and Mercer, Pennsylvania; Wooster, Ohio; Kimball, Buckhannon and Jane Lew, West Virginia; Norton, Virginia; and Gaylord, Michigan. Our Southeast region service centers are located in Cottondale, Alabama; Columbia, Mississippi; and Bossier City, Louisiana. Our Mid-Continent region service centers are located in Hominy, Enid, Clinton and Cleveland, Oklahoma; Hays, Kansas; and Van Buren, Arkansas. Our Rocky Mountain region service centers are located in Vernal, Utah; Farmington, New Mexico; Rock Springs, Wyoming; Williston, North Dakota; and Trinidad and Brighton, Colorado. Our Southwest region service centers are located in Alvarado, Texas and Artesia, New Mexico.
The operating income generated in each of our operating regions is an important part of our operational analysis. We monitor operating income separately for each of our operating regions and analyze trends to determine our relative performance in each region. Our analysis enables us to more efficiently allocate our equipment and field personnel among our various operating regions and determine if we need to increase our marketing efforts in a particular region. By comparing our operating income on an operating region basis, we can quickly identify market increases or decreases in the diverse geographic areas in which we operate. It has been our experience that when we establish a new service center in a particular operating region, it may take from 12 to 24 months before that service center has a positive impact on the operating income that we generate in the relevant region.
Material and Labor Expenses as a Percentage of Revenue.
Material and labor expenses are composed primarily of cost of materials, maintenance, fuel and the wages of our field personnel. The cost of these expenses as a percentage of revenue has historically remained relatively stable for our established service centers. However, increased competition in a number of our operating areas has recently decreased our ability to mitigate rising costs through price increases for our services and products. As a result, these costs as a percentage of revenues have been increasing.
Our material costs primarily include the cost of inventory consumed while performing our stimulation, nitrogen and cementing services. Increases in our material and fuel costs are typically passed on to our customers. However, due to the timing of our marketing and bidding cycles, there is generally a delay of several weeks or months from the time that we incur an actual price increase until the time that we can pass on that increase to our customers.
Our labor costs consist primarily of wages for our field personnel. As a result of on-going shortages of qualified supervision personnel and equipment operators, due to increased activity in the oilfield services and commercial trucking sectors, it is likely that we will have to raise wage rates to attract and train workers from other fields in order to maintain or expand our current work force. Historically, we have been able to increase service rates to our customers to compensate for wage rate increases. However, increased competition in a number of our operating areas has recently decreased our ability to mitigate rising costs through price increases for our services.
Selling, General and Administrative Expenses as a Percentage of Revenue.
Our selling, general and administrative expenses, or SG&A expenses, include fees for management services and administrative, marketing and maintenance employee compensation and related benefits, office and lease expenses, insurance costs and professional fees, as well as other costs and expenses not directly related to field operations. Our management continually evaluates the level of our general and administrative expenses in relation to our revenue because these expenses have a direct impact on our profitability.
EBITDA.
We define EBITDA as net income before interest expense, income tax expense and depreciation and amortization expense. Our management uses EBITDA:
• as a measure of operating performance because it assists us in comparing our performance on a consistent basis, since it removes the impact of our capital structure and asset base from our operating results;

• as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations;

• to assess compliance with financial ratios and covenants included in credit facilities;

• in communications with lenders concerning our financial performance; and

• to evaluate the viability of potential acquisitions and overall rates of return.
EBITDA is not a measure of financial performance under GAAP and should not be considered in isolation or as an alternative to cash flow from operating activities or as an alternative to net income as indicators of operating performance or any other measures of performance derived in accordance with GAAP. Other companies in our industry may calculate EBITDA differently than we do and EBITDA may not be comparable with similarly titled measures reported by other companies.
How We Manage Our Operations
Our management team uses a variety of tools to manage our operations. These tools include monitoring: (1) service crew utilization and performance; (2) equipment maintenance performance; (3) customer satisfaction; and (4) safety performance.
Service Crew Performance.
We monitor our revenue on a per service crew basis to determine the relative performance of each of our crews. We also measure our activity levels by the total number of jobs completed by each of our crews as well as by each of the trucks in our fleet. We evaluate our crew and fleet utilization levels on a monthly basis, with full utilization deemed to be approximately 24 jobs per month for each of our service crews and approximately 30 jobs per month for each of our trucks. By monitoring the relative performance of each of our service crews, we can more efficiently allocate our personnel and equipment to maximize our overall crew utilization.

Equipment Maintenance Performance.
Preventative maintenance on our equipment is an important factor in our profitability. If our equipment is not maintained properly, our repair costs may increase and, during levels of high activity, our ability to operate efficiently could be significantly diminished due to having trucks and other equipment out of service. Our maintenance crews perform monthly inspections and preventative maintenance on each of our trucks and other mechanical equipment. Our management monitors the performance of our maintenance crews at each of our service centers by monitoring the level of maintenance expenses as a percentage of revenue. A rising level of maintenance expenses as a percentage of revenue at a particular service center can be an early indication that our preventative maintenance schedule is not being followed. In this situation, management can take corrective measures, such as adding additional maintenance personnel to a particular service center to help reduce maintenance expenses as well as ensure that maintenance issues do not interfere with operations.
Customer Satisfaction.
Upon completion of each job, we encourage our customers to complete a ''pride in performance survey’’ that gauges their satisfaction level. The customer evaluates the performance of our service crew under various criteria and comments on their overall satisfaction level. Survey results give our management valuable information from which to identify performance issues and trends. Our management also uses the results of these surveys to evaluate our position relative to our competitors in the various markets in which we operate.
Safety Performance.
Maintaining a strong safety record is a critical component of our operational success. Many of our larger customers have safety history standards we must satisfy before we can perform services for them. We maintain an online safety database that our customers can access to review our historical safety record. Our management also uses this safety database to identify negative trends in operational incidents so that appropriate measures can be taken to maintain a positive safety history.
Our Industry
We provide products and services primarily to domestic onshore oil and natural gas exploration and production companies for use in the drilling and production of oil and natural gas. The main factor influencing demand for well services in our industry is the level of drilling activity by oil and natural gas companies, which, in turn, depends largely on current and anticipated future natural gas and crude oil prices and production depletion rates. Current market indicators suggest an increasing demand for oil and natural gas coupled with a flat or declining production curve, which we believe should result in the continuation of historically high natural gas and crude oil commodity prices. For example, the Energy Information Administration of the U.S. Department of Energy, or EIA, forecasts that U.S. oil and natural gas consumption will increase at an average annual rate of 1.1% through 2025. The EIA also forecasts that U.S. oil production will decline at an average annual rate of 0.5% and natural gas production will increase at an average annual rate of 0.8%.
The recent drop in commodity prices for oil and gas, coupled with the volatility in the equity and credit markets have caused some exploration and production companies to announce reductions in their capital spending. Over the long-term, we believe that oil and natural gas exploration and production companies will continue to expand their exploration and drilling activities to replace production from the high decline rate reservoirs. In recent years, much of this expansion has focused on natural gas. According to Baker Hughes rig count data, the average total rig count in the United States increased 117% from 918 in 2000 to 1,990 through the second week of October 2008, while the average natural gas rig count increased 115% from 720 in 2000 to 1,548 through the second week of October 2008. While the number of rigs drilling for natural gas has increased by more than 250% since 1996, natural gas production has decreased by approximately 3% over the same period of time. This is largely a function of increasing decline rates for natural gas wells in the United States. We believe that a continued increase in U.S. drilling and workover activity will be required for the natural gas industry to help meet the expected increased demand for natural gas in the United States.

Our Growth Strategy
Our growth strategy contemplates engaging in organic expansion opportunities and complementary acquisitions of other oilfield services assets or businesses. Our organic expansion activities generally consist of establishing service centers in new locations, including purchasing related equipment and hiring experienced local personnel. Historically, many of our customers have asked us to expand our operations into new regions that they enter. Once we establish a new service center, we seek to expand our operations by attracting new customers and hiring additional local personnel.
We also pursue selected acquisitions of complementary businesses both in existing operating regions and in new geographic areas in which we do not currently operate. In analyzing a particular acquisition, we consider the operational, financial and strategic benefits of the transaction. Our analysis includes the location of the acquisition, strategic fit of the acquisition in relation to our business strategy, expertise required to manage the acquisition, capital required to integrate and maintain the acquired assets, the strength of any customer relationships associated with the acquisition and the competitive environment of the area where the acquisition is located. From a financial perspective, we analyze the rate of return the acquisition will generate under various scenarios, the comparative market parameters applicable to the acquisition and the cash flow capabilities of the acquisition.
To successfully execute our growth strategy, we will require access to capital on competitive terms to the extent that we do not generate sufficient cash from operations. We intend to finance future acquisitions primarily by using cash flow from operations, available under our bank credit facility and, to the extent we are able to access the capital markets, equity or debt offerings or a combination of both. Equity and debt financing in the capital markets is not currently available on acceptable terms and may not be available for some time, which will limit our growth and reduce our expansion capital expenditures. For a more detailed discussion of our capital resources, please read “ — Liquidity and Capital Resources”.
Business Environment
We operate in the continental United States and our operations are primarily driven by the number of newly drilled oil and gas wells and, to a much lesser extent, the recompletion of existing oil and gas wells. The majority of our revenues are derived from services and products consumed during performance of our service processes. As a result, our operations are heavily dependent on our customers’ activity levels and the pricing we receive for performance of our services. Activity levels are dependent on our customers’ spending on oil and gas exploration. Drilling activity is largely dependent on the price of crude oil and natural gas. Our customers’ cash flow, in many instances, is dependent upon the revenue they generate from the sale of oil and natural gas. Higher oil and gas prices generally translate into higher drilling budgets and the opposite when oil and gas prices are lower. Recently, oil and natural gas prices have been extremely volatile and have declined substantially. On October 27, 2008, the price of oil on the New York Mercantile Exchange (“NYMEX”) fell to $61.30 per barrel for December 2008 delivery, declining to a 17-month low and from a high of $147.27 per barrel in July 2008. Also, on October 27, 2008, the Henry Hub natural gas spot price fell to $6.27 per million British thermal units (mmBtu), declining to a 12-month low and from a high of $13.31 per mmBtu in July 2008. The recent drop in commodity prices for oil and gas, coupled with the volatility in the equity and credit markets have caused some of our customers to announce reductions in their drilling plans. If commodity prices remain at lower pricing levels for a sustained period of time we anticipate our activity levels and profitability would be negatively impacted.
Our results of operations are derived primarily by three interrelated variables: (1) market price for the services we provide; (2) drilling activities of our customers; and (3) cost of materials and labor. To a large extent, the pricing environment for our services dictates our level of profitability. Our pricing is also dependent upon the prices and market demand for oil and natural gas, which affect the level of demand for, and pricing of, our services and fluctuates with changes in market and economic condition and other factors. The degree of pricing acceptance varies by customer and depends on activity levels and competitive pressures. Over the last 18 months, increased capacity in certain of our operating regions has resulted in significant downward pricing pressure and increased discounts in our service prices. During the third quarter of 2008 we began to see pricing and margins stabilize. We expect pricing in the fourth quarter of 2008 to remain generally comparable to what we experienced in the third quarter. Additionally, seasonality can affect our operations in the Appalachian region and certain parts of the Mid-Continent and Rocky Mountain regions, which may be subject to periods of diminished activity during spring thaw, due to road restrictions and adverse winter weather conditions. Historically, because the Appalachian region has comprised a significant percentage of our revenues its seasonality has impacted operating results.

CONF CALL

Dave Wallace

Thanks, Erica. Good morning, everyone, and welcome to the Superior Well Services third quarter 2008 earnings call. Joining me today is Tom Stoelk, our Chief Financial Officer. I would like to remind all those participating on the call today that a replay of our conference call will be available to listen to through November 18, 2008 by dialing 888-286-8010 and referencing the conference ID number 88050296. The webcast will be archived for replay on the company's website for 15 days. Additionally, our Form 10-Q was filed this morning and will be posted on the company's website.

Before I begin with comments on our third quarter operating performance, I would like to make the following disclaimer regarding our call today. Except for historical information, statements made in this presentation, including those relating to acquisition or expansion opportunity, future earnings, cash flow and capital expenditures are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934.

All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that Superior expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made by Superior based on our management's experience and reception of historical trends, current conditions, expected future developments and other factors that are believed appropriate in the circumstances.

Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond Superior’s control, which may cause Superior’s actual results to differ materially from those implied or expressed by the forward-looking statements. These risks are detailed in Superior's Securities and Exchange Commission filings. The company undertakes no obligation to publicly update or review any forward-looking statements.

I will now provide an overview of our third quarter operation. The third quarter was very strong and we generated a new quarterly revenue record of $146 million, a 22% sequential increase over the second quarter and a 55% increase year-over-year. Third quarter EBITDA was $35.6 million, a sequential increase of 37% over the second quarter and a year-over-year increase of 39%. In response to increasing commodity prices in the first half of the year, many of our customers significantly increased their drilling budget, driving demand higher for a well completion and stimulation services, increasing utilization and spreading fixed cost over more jobs.

The (inaudible) used US land rig count increased 12% in the fourth quarter 2007 to the third quarter of this year, with the biggest increases occurring in our core markets. On the cost side, we were also successful in passing along material cost increases and fuel surcharges, helping alleviate some of the pressure of cost increases on margins that we experienced over the past few quarters.

Operating margins were 17% for the third quarter, up 320 basis points sequentially from the second quarter of 2008. Our stimulation job count for the quarter is up 46% year-over-year. Higher overall activity, improved pricing, stronger utilization, maturing of our new service centers and high service quality throughout all of our locations combined to improve profitability.

Although the overall pricing environment has improved from earlier this year, each market is different depending on job type and competitive factors. In response to lower natural gas prices and the credit crisis, some operators have announced reductions in their drilling budget and we’re expecting a reduction in the overall rig count, although we believe some regions will be softer than others. As a result, we anticipate a reduction in this industry demand and the potential for near-term pricing pressure. However, we believe our current operational footprint is good exposure to the most profitable and technical plays in the country, which plays to our strength and competitive differentiation regardless of the cycle.

We have made significant strides in improving our capability for completing and stimulating the high pressure wells throughout the year. Today we don’t believe there is any customer that we could not work for capably. Investments in new and reliable equipment coupled with our technical fluid pumping expertise gives us an edge in the more technical plays that are seeing significant increases in activity.

I will now briefly run through some operational highlights by region and then turn the call over to Tom for a financial overview. In Appalachia, third quarter is traditionally the strongest quarter in terms of revenue for Appalachia. Our home market, and this year is no exception. This quarter Appalachia contributed 37% of total revenues. Revenues in the region are up 18% year-over-year and 17% sequentially.

Activity in the emerging Marcellus shale continues to pick up, and we see no indication that activity associated with that play is going to slow any time soon. We began catching Marcellus jobs in the first quarter of 2008, and our job count keeps increasing. Our work in Southern Appalachia continues to grow steadily. Our existing presence in the region with cost saving infrastructure gives us an operational edge here.

Revenues in the Southeast region are up 21% year-over-year and 4% sequentially as a result of increased drilling activity in the Cotton Valley Trend and the emerging Haynesville Shale plays. Based on the initial data we’ve seen, the Haynesville Shale play possesses excellent well economics and we expect the activity in this play to be resilient to softer natural gas prices.

The Haynesville is tailor-made for us, as it requires our technical pumping expertise for submitting and stimulating deeper, harder and higher pressure formation. These wells demonstrate the move in our industry towards applying more technology and services to each completion to maximize the productive capacity of a well on its reserve. The use of multi-stage fracs and specialized fluid for stimulation means the average revenue per well for Haynesville work is above average.

High strength prop and shortages have been an issue in the Hayneville and deep lifter [ph] plays and have limited our ability to increase our share of this market. We have taken steps to try to secure additional supplies, but we expect this will be an issue for us and other pressure pumpers until additional product is brought into the country and/or increased production capacity is placed on line.

Revenues in the Southwest region are up 129% year-over-year and 43% sequentially. Most of our work in this area is associated with the continued development of the Barnett Shale. We continued to see strong price competition in this low tech market, but work has been steady although activity could drop if operators lay down rig figure as a result of low natural gas prices.

Our Artesia service center had a very good quarter with revenues up 89% over the second quarter. We made operational efficiency improvement over the past two quarters in this area. We should start to benefit from those if we can maintain our utilization here. Revenues in the Mid-Continent region have increased 109% year-over-year and 27% sequentially. We service the Anadarko and Arkoma Basins, as well as the Woodford Shale from our five service centers in this region.

While high price differentials have caused some operators in these regions to lay down rig, we have yet to experience a significant reduction in demand for our services. We’ve been using one of our crews from our Van Buren, Arkansas service center to assist us in the Marcellus when needed.

Revenues in the Rocky Mountain region have increased 190% year-over-year and 36% sequentially. Despite seasonally soft regional gas prices, we have continued to pick up new work in the Rocky. We are very happy with the performance of our new service centers in the region and are working to commission our cement bulk plant in Rock Springs some time in the fourth quarter.

I’ll now turn the call over to Tom for a few of our financial results.

Tom Stoelk

Thanks, Dave. Net income for the third quarter of 2008 was $14.9 million or $0.64 per diluted share compared to $11.6 million or $0.50 per diluted share in the third quarter of 2007 and $9.6 million or $0.41 per diluted share sequentially from the second quarter of 2008.

Third quarter revenue was $146 million. That was up 55% year-over-year and up 22% sequentially. The sequential increase in revenues can be attributed to strong activity increases in our stimulation and cementing services. Approximately $25.2 million or 49% of the total increase in year-over-year revenues was attributable to service centers that have less than one year of operating activity with Superior.

Stimulation, nitrogen, cementing and down-hole surveying revenues amounted to 65%, 8%, 18% and 10% of revenue in the third quarter of 2008, respectively. Cost of revenue increased to $109.7 million. That was up 66% from the third quarter of 2007 and up 19% sequentially. Approximately $20.8 million or 48% of the total increase in year-over-year costs was attributable to the establishment of new service centers, with the balance related to higher material, labor, fuel and transportation expenses that could not be passed to our customers as price increases because of the current competitive environment.

As a result of those increases, total cost of revenue as a percentage of revenue increased to 75% for the third quarter of 2008 compared to 70% in the same quarter last year, but it was down from 77% in the second quarter of 2008. Here is some additional information on those costs. Material costs as a percentage of revenues increased 5.5% in the third quarter of 2008 compared to the same quarter last year and 1.1% sequentially due to higher proppant, chemical and cement costs as well as transportation expenses associated with the delivery of those materials.

Labor expense as a percentage of revenue decreased 2.4% in both the third quarter of 2008 compared to the same quarter last year and sequentially due to increased utilization on a higher revenue base. Diesel prices as a percentage of revenue increased by 2% in the third quarter of 2008 compared to the same quarter last year and decreased seven-tenths of 1% sequentially.

As a percentage of revenue, non-cash depreciation expense increased one-tenth of 1% in the third quarter of 2008 compared to the same quarter last year due to the investments we made to expand our national fleet. Depreciation expense as a percentage of revenues decreased point – eight-tenths of 1% in the third quarter of ‘08 compared to the second quarter of 2008 as a result of spreading the fixed cost component of these expenses over a higher revenue base. Increased capacity and increased competition in certain operating areas resulted in downward pricing pressure on our service prices.

As a percentage of revenue, sales discounts increased by 6.1% in the third quarter of 2008 as compared to the same period in 2007. During the third quarter of 2008 we saw the positive impact from fuel surcharges negotiated with several of our customers earlier in the year. Discounts remained relatively steady when compared to the second quarter of 2008.

Our margins improved significantly over the second quarter, but we still have some room for improvement, as not all of our service centers opened in 2007 are operating in the black yet, although they are all showing improvements.

SG&A expenses increased to $11.4 million. That was up 22% as compared to the third quarter of 2007 and up 7% sequentially. Labor increased $1.5 million in the third quarter of 2008 compared to the third quarter of 2007. The majority of that increase was really due to the hiring of additional personnel to manage the growth in our operations and service centers.

Operating income for the third quarter of 2008 came in at $24.9 million compared to $18.9 million a year ago and $16.6 million in the second quarter of 2008. This translates into increases of 32% and 50% respectively. EBITDA for the third quarter of 2008 came in at $35.6 million, an increase of $10 million or 39% from the same quarter last year.

Net income for the third quarter of 2008 increased to $14.9 million. That’s an increase of $3.3 million from the third quarter of 2007 due to the increased activity levels I just described. We ended the quarter with approximately $72 million of working capital. Total debt at the end of the quarter was approximately $51.6 million, and the company's debt-to-book capitalization was 15%. At September 30, 2008, we had approximately $194.4 million of availability under our syndicated credit facility.

Capital expenditures for the quarter were approximately $30.9 million, and $81.5 million on a year-to-date basis. Presently, we have approximately $19.8 million of capital expenditure commitments for 2008 or 2009 equipment orders that have been placed but the equipment is yet to be delivered.

At this point I’m going to turn the call back over to Dave for some additional comments.

Dave Wallace

At this point, I’d like to give an update on our acquisition of certain assets from Diamondback Holdings, which we announced in the middle of September. Both companies are working diligently to get the deal closed as soon as possible. Despite the turmoil in the financial markets, the deal’s strategic rationale still makes sense with this potential to significantly expand our operations without adding industry capacity. Diamondback’s high quality assets and people will fit well with our organization and enhance our operational footprint in an accretive way. We hope to make an announcement before the end of this month.

To summarize the quarter, an upswing in commodity prices brought an increase in drilling activity and greater demand for our services. The result was higher revenues, margins and operating income. Our new service centers opened in 2007 continued to mature nicely and show improvements in customer acceptance, utilization, and now starting to contribute to the bottom line.

New and more technical plays are beginning to show strong increases in development drilling activity, further driving demand for our technical fluid pumping expertise. While we can’t predict where natural gas prices will go, we like where we are sitting today. Our large and diversified geographic footprint gives us added flexibility to weather a downturn or take advantage of an upswing. Even with the growth we have exhibited over the past years, we still have locations that are asking for additional equipment and people, and we plan to cautiously backfill those needs as 2009 comes in a greater focus.

We are strategically positioned in the most attractive development drilling markets in the country and we will continue to focus on maintaining high service quality for earning more higher tech, higher margin completion work. We are concurrently performing deeper, higher pressure, higher temperature job in the Rockies, Mid-Con and Southwest regions, and we expect to add the Southeast region to this list before year-end.

Our crews continue to build our reputation one job at a time, and I’d like to take this opportunity to thank our people for all of their hard work. Our internal goal in 2005 was to achieve $500 million in revenues by 2010. We are well on our way to achieving that goal ahead of schedule. Despite the uncertainty about the economy, commodity prices and rig counts, we believe we have the right people, equipment, operational footprint, and technical fluids expertise to be the provider of choice for the best customers regardless of the cycle.

That concludes our prepared remarks. I’ll now open the call for questions. Erica?


SHARE THIS PAGE:  Add to Delicious Delicious  Share    Bookmark and Share



 
Icon Legend Permissions Topic Options
You can comment on this topic
Print Topic

Email Topic

1538 Views