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Article by DailyStocks_admin    (02-12-09 06:29 AM)

Complete Production Services Inc. CEO JOSEPH C WINKLER bought 58000 shares on 2-04-2009 at $4.78

BUSINESS OVERVIEW

Our Company

Complete Production Services, Inc., formerly named Integrated Production Services, Inc., is a Delaware corporation formed on May 22, 2001. We provide specialized services and products focused on helping oil and gas companies develop hydrocarbon reserves, reduce costs and enhance production. We focus on basins within North America that we believe have attractive long-term potential for growth, and we deliver targeted, value-added services and products required by our customers within each specific basin. We believe our range of services and products positions us to meet many needs of our customers at the wellsite, from drilling and completion through production and eventual abandonment. We seek to differentiate ourselves from our competitors through our local leadership, our basin-level expertise and the innovative application of proprietary and other technologies. We deliver solutions to our customers that we believe lower their costs and increase their production in a safe and environmentally friendly manner. Virtually all our operations are located in basins within North America, where we manage our operations from regional field service facilities located throughout the U.S. Rocky Mountain region, Texas, Oklahoma, Louisiana, Arkansas, Kansas, western Canada and Mexico. We also have operations in Southeast Asia.

The Combination

Prior to 2001, SCF Partners, a private equity firm that focuses on investments in the oilfield services segment of the energy industry, began to target investment opportunities in service oriented companies in the North American natural gas market with specific focus on the completion and production phase of the exploration and production cycle. On May 22, 2001, SCF Partners through a limited partnership, SCF-IV, L.P. (“SCF”), formed Saber, a new company, in connection with its acquisition of two companies primarily focused on completion and production related services in Louisiana. In July 2002, SCF became the controlling stockholder of Integrated Production Services, Ltd., a production enhancement company that, at the time, focused its operation in Canada. In September 2002, Saber acquired this company and changed its name to Integrated Production Services, Inc. (“IPS”). Subsequently, IPS began to grow organically and through several acquisitions, with the ultimate objective of creating a technical leader in the enhancement of natural gas production. In November 2003, SCF formed another production services company, Complete Energy Services, Inc. (“CES”), establishing a platform from which to grow in the Barnett Shale region of north Texas. Subsequently, through organic growth and several acquisitions, CES extended its presence to the U.S. Rocky Mountain and the Mid-continent regions. In the summer of 2004, SCF formed I.E. Miller Services, Inc. (“IEM”), which at the time had a presence in Louisiana and Texas. During 2004, IPS and IEM independently began to execute strategic initiatives to establish a presence in both the Barnett Shale and U.S. Rocky Mountain regions.

On September 12, 2005, IPS, CES and IEM were combined and became Complete Production Services, Inc. in a transaction we refer to as the “Combination.” In the Combination, IPS served as the acquirer. Immediately after the Combination, SCF held approximately 70% of our outstanding common stock, the former CES stockholders (other than SCF) in the aggregate held approximately 18.8% of our outstanding common stock, the former IEM stockholders (other than SCF) in the aggregate held approximately 2.4% of our outstanding common stock and the former IPS stockholders (other than SCF) in the aggregate held approximately 8.4% of our outstanding common stock.

On April 20, 2006, we entered into an underwriting agreement in connection with our initial public offering and became subject to the reporting requirements of the Securities Exchange Act of 1934. On April 21, 2006, our common stock began trading on the New York Stock Exchange under the symbol “CPX”. On April 26, 2006, we completed our initial public offering.

Our Operating Segments

Our business is comprised of three segments:

Completion and Production Services. Through our completion and production services segment, we establish, maintain and enhance the flow of oil and gas throughout the life of a well. This segment is divided into the following primary service lines:


• Intervention Services. Well intervention requires the use of specialized equipment to perform an array of wellbore services. Our fleet of intervention service equipment includes coiled tubing units, pressure pumping units, nitrogen units, well service rigs, snubbing units and a variety of support equipment. Our intervention services provide customers with innovative solutions to increase production of oil and gas.

• Downhole and Wellsite Services. Our downhole and wellsite services include electric-line, slickline, production optimization, production testing, rental and fishing services. We also offer several proprietary services and products that we believe create significant value for our customers.

• Fluid Handling. We provide a variety of services to help our customers obtain, move, store and dispose of fluids that are involved in the development and production of their reservoirs. Through our fleet of specialized trucks, frac tanks and other assets, we provide fluid transportation, heating, pumping and disposal services for our customers.

Drilling Services. Through our drilling services segment, we provide services and equipment that initiate or stimulate oil and gas production by providing land drilling, specialized rig logistics and site preparation throughout our service area. Our drilling rigs currently operate exclusively in and around the Barnett Shale region of north Texas.

Product Sales. Through our product sales segment, we provide a variety of equipment used by oil and gas companies throughout the lifecycle of their wells. We sell a full range of oilfield supplies, as well as tubular goods, throughout the United States (north Texas, Louisiana, Arkansas, Oklahoma and the Rocky Mountains), primarily through our supply stores. We also sell products through our Southeast Asia business and through agents in markets outside of North America.

Our Industry

Our business depends on the level of exploration, development and production expenditures made by our customers. These expenditures are driven by the current and expected future prices for oil and gas, and the perceived stability and sustainability of those prices. Our business is primarily driven by natural gas drilling activity in North America. We believe the following two principal economic factors will positively affect our industry in the coming years:


• Higher demand for natural gas in North America. We believe that natural gas will be in high demand in North America over the next several years because of the growing popularity of this clean-burning fuel. According to the International Energy Association’s Energy Outlook 2007, natural gas demand and consumption in North America (United States, Canada and Mexico) is projected to grow through 2020 and remain relatively constant from 2020 through 2030. Overall energy use worldwide is expected to grow by 57% through 2030, with liquid fuels produced from natural gas and other sources accounting for 9% of the world’s liquid fuels supply.

• Constrained North American gas supply. Although the demand for natural gas is projected to increase, supply is likely to be constrained as North American natural gas basins are becoming more mature and experiencing increased decline rates. Even though the number of wells drilled in North America has increased significantly in recent years, a corresponding increase in domestic production has not occurred. As a result, producers are required to increase drilling just to maintain flat production. To supply the growing demand for natural gas, the primary alternatives are to increase drilling, enhance recovery rates or import LNG from overseas. To date minimal increases have occurred, although many forecasts anticipate a material increase of LNG imports in the future.

As a result of the above factors, we expect there to be a long-term tight supply of, and high demand for, natural gas in North America. We believe this will continue to support high natural gas prices and high levels of drilling activity.

Continued demand for natural gas and a constrained gas supply have resulted in higher prices and increased drilling activity. The increase in prices and drilling activity are driving the following long-term trends that we believe will benefit us:

Trend toward drilling and developing unconventional North American natural gas resources. Due to the maturity of conventional North American oil and gas reservoirs and their accelerating production decline rates, unconventional oil and gas resources will comprise an increasing proportion of future North American oil and gas production. Unconventional resources include tight sands, shales and coalbed methane. These resources require more wells to be drilled and maintained, frequently on tighter acreage spacing. The appropriate technology to recover unconventional gas resources varies from region to region; therefore, knowledge of local conditions and operating procedures, and selection of the right technologies is key to providing customers with appropriate solutions.

The advent of the resource play. A “resource play” is a term used to describe an accumulation of hydrocarbons known to exist over a large area which, when compared to a conventional play, has lower commercial development risks and a higher average decline rate. Once identified, resource plays have the potential to make a material impact because of their size and long reserve life. The application of appropriate technology and program execution are important to obtain value from resource plays. Resource play developments occur over long periods of time, well by well, in large-scale developments that repeat common tasks in an assembly-line fashion and capture economies of scale to drive down costs.

Complex technologies and Equipment. Increasing prices and the development of unconventional oil and gas resources are driving the need for complex, new technologies and equipment to help increase recovery rates, lower production costs and accelerate field development.

Although we believe the long-term fundamentals for increased demand for natural gas are positive, natural gas prices will be impacted by the ability to move gas from producing areas to consuming areas of North America. As a result of a significant level of natural gas drilling in western Colorado and southwest Wyoming, pipeline capacity became constrained in late 2006 and continued into 2007, contributing to a decline in natural gas prices in these areas. Major new pipeline capacity in this area is expected to be available in the first half of 2008 which could partially alleviate pricing pressures in the Rocky Mountain area.

Natural gas is generally placed into storage during the warmer months of the year and withdrawn during colder months. The amount of natural gas in storage can impact current natural gas prices and prices quoted on futures exchanges for future periods. These fluctuations in pricing can impact the level of drilling activity by our customers as they adjust investment levels commensurate with their revenues.

Our Business Strategy

Our goal is to build the leading oilfield services company focused on the completion and production phases in the life of an oil and gas well. We intend to capitalize on the emerging trends in the North American marketplace through the execution of a growth strategy that consists of the following components:

Expand and capitalize on local leadership and basin-level expertise. A key component of our strategy is to build upon our base of strong local leadership and basin-level expertise. We have a significant presence in most of the key onshore continental U.S. and Canadian gas plays we believe have the potential for long-term growth. Our position in these basins capitalizes on our strong local leadership that has accumulated a valuable knowledge base and strong customer relationships. We intend to leverage our existing market presence, expertise and customer relationships to expand our business within these gas plays. We also intend to replicate this approach in new regions by building and acquiring new businesses that have strong regional management with extensive local knowledge.

Develop and deploy technical and operational solutions. We are focused on developing and deploying technical services, equipment and expertise that lower our customers’ costs.

Capitalize on organic and acquisition-related growth opportunities. We believe there are numerous opportunities to sell new services and products to customers in our current geographic areas and to sell our current services and products to customers in new geographic areas. We have a proven track record of organic growth and successful acquisitions, and we intend to continue using capital investments and acquisitions to strategically expand our business. We employ a rigorous acquisition screening process and have developed comprehensive post-acquisition integration capabilities designed to ensure each acquisition is effectively assimilated. We use a returns method for evaluating capital investment opportunities, and we apply a disciplined approach to adding new equipment.

Focus on execution and performance. We have established and intend to develop further a culture of performance and accountability. Senior management spends a significant portion of its time ensuring that our customers receive the highest quality of service by focusing on the following:

• clear business direction;

• thorough planning process;

• clearly defined targets and accountabilities;
• close performance monitoring;

• safety objectives;

• strong performance incentives for management and employees; and

• effective communication.

Our Competitive Strengths

We believe that we are well positioned to execute our strategy and capitalize on opportunities in the North American oil and gas market based on the following competitive strengths:

Strong local leadership and basin-level expertise. We operate our business with a focus on each regional basin complemented by our local reputations. We believe our local and regional businesses, some of which have been operating for more than 50 years, provide us with a significant advantage over many of our competitors. Our managers, sales engineers and field operators have extensive expertise in their local geological basins and understand the regional challenges our customers face. We have long-term relationships with many customers, and most of the services and products we offer are sold or contracted at a local level, allowing our operations personnel to bring their expertise to bear while selling services and products to our customers. We strive to leverage this basin-level expertise to establish ourselves as the preferred provider of our services in the basins in which we operate.

Significant presence in major North American basins. We operate in major oil and gas producing regions of the U.S. Rocky Mountains, Texas, Louisiana, Arkansas, Kansas and Oklahoma, western Canada and Mexico, with concentrations in key “resource plays” and unconventional basins. Resource plays are expected to become increasingly important in future North American oil and gas production as more conventional resources enter later stages of the exploration and development cycle. We believe we have an excellent position in highly active markets such as the Barnett Shale region of north Texas, the Fayetteville Shale in Arkansas, the Woodford Shale in Oklahoma and the Piceance Basin in Colorado, for example. Each of these markets is among the most active areas for exploration and development of onshore oil and gas. Accelerating production and driving down development and production costs are key goals for oil and gas operators in these areas, resulting in higher demand for our services and products. In addition, our presence in these regions allows us to build solid customer relationships and take advantage of cross-selling opportunities.

Focus on complementary production and field development services. Our breadth of service and product offerings positions us well relative to our competitors. Our services encompass the entire lifecycle of a well from drilling and completion, through production and eventual abandonment. We deliver complementary services and products, which we may provide in tandem or sequentially over the life of the well. This suite of services and products gives us the opportunity to cross-sell to our customer base and throughout our geographic regions. Leveraging our local leadership and basin-level expertise, we are able to offer expanded services and products to existing customers or current services and products to new customers.

Innovative approach to technical and operational solutions. We develop and deploy services and products that enable our customers to increase production rates, stem production declines and reduce the costs of drilling, completion and production. The significant expertise we have developed in our areas of operation offers our customers customized operational solutions to meet their particular needs. Our ability to develop these technical and operational solutions is possible due to our understanding of applicable technology, our basin-level expertise and our close local relationships with customers.

Modern and active asset base. We have a modern and well-maintained fleet of coiled tubing units, pressure pumping equipment, wireline units, well service rigs, snubbing units, fluid transports, frac tanks and other specialized equipment. We believe our ongoing investment in our equipment allows us to better serve the diverse and increasingly challenging needs of our customer base. New equipment is generally less costly to maintain and operate on an annual basis and is more efficient for our customers. Modern equipment reduces the downtime and associated expenditures and enables the increased utilization of our assets. We believe our future expenditures will be used to capitalize on growth opportunities within the areas we currently operate and to build out new platforms obtained through targeted acquisitions.

Experienced management team with proven track record. Each member of our operating management team has extensive experience in the oilfield services industry. We believe that their considerable knowledge of and experience in our industry enhances our ability to operate effectively throughout industry cycles. Our management also has substantial experience in identifying, completing and integrating acquisitions. In addition, our management supports local leadership by developing corporate strategy, implementing corporate governance procedures and overseeing a company-wide safety program.

Overview of Our Segments

We manage our business through three segments: completion and production services, drilling services and product sales. Within each of these segments, we perform services and deliver products, as detailed in the table below. We constantly monitor the North American market for opportunities to expand our business by building our presence in existing regions and expanding our services and products into attractive, new regions.

Completion and Production Services (76% of Revenue for the Year Ended December 31, 2007)

Through our completion and production services segment, we establish, maintain and enhance the flow of oil and gas throughout the life of a well. This segment is divided into intervention services, downhole and wellsite services and fluid handling.

Intervention Services

We use our intervention assets, which include coiled tubing units, pressure pumping equipment, nitrogen units, well service rigs and snubbing units to perform three major types of services for our customers:


• Completion Services. As newly drilled oil and gas wells are prepared for production, our operations may include selectively perforating the well casing to access producing zones, stimulating and testing these zones and installing downhole equipment. We provide intervention services and products to assist in the performance of these services. The completion process typically lasts from a few days to several weeks, depending on the nature and type of the completion. Oil and gas producers use our intervention services to complete their wells because we have good equipment, well trained employees, the experience necessary to perform such services and a strong record for safety and reliability.

• Workover Services. Producing oil and gas wells occasionally require major repairs or modifications, called “workovers.” These services include extensions of existing wells to drain new formations either through deepening wellbores to new zones or by drilling horizontal lateral wellbores to improve reservoir drainage patterns. In less extensive workovers, we provide services and products to seal off depleted zones in existing wellbores and access previously bypassed productive zones. Other workover services which we provide include: major subsurface repairs, such as casing repair or replacement; recovery of tubing and removal of foreign objects in the wellbore; repairing downhole equipment failures; plugging back the bottom of a well to reduce the amount of water being produced; cleaning out and recompleting a well if production has declined; and repairing leaks in the tubing and casing.


• Maintenance Services. Maintenance services are required throughout the life of most producing oil and gas wells to ensure efficient and continuous operation. We provide services that include mechanical repairs necessary to maintain production from the well, such as repairing inoperable pumping equipment or replacing defective tubing, and removing debris from the well. Other services include pulling rods, tubing, pumps and other downhole equipment out of the wellbore to identify and repair a production problem.

The key intervention assets we use to perform the above services are as follows:

Coiled Tubing Units

We are one of the leading providers of coiled tubing services in North America. We operate a fleet of coiled tubing units, as well as nitrogen units. We use these assets to perform a variety of wellbore applications, including foam washing, acidizing, displacing, cementing, gravel packing, plug drilling, fishing and jetting. Coiled tubing is a key segment of the well service industry today, which allows operators to continue production during service operations without shutting in the well, thereby reducing the risk of formation damage. The growth in deep well and horizontal drilling has increased the market for coiled tubing. We provide coiled tubing services primarily in Wyoming, Oklahoma, Texas, Louisiana, Arkansas, Mexico and offshore in the Gulf of Mexico.

Pressure Pumping Services

We operate a fleet of pressure pumping equipment in the Barnett Shale of north Texas through which we provide stimulation and cementing services principally to natural gas drilling and producing companies.

Stimulation services primarily consist of hydraulic fracturing of hydrocarbon bearing formations having permeability that restricts the natural flow. The fracturing process consists of pumping fluids into a cased well at pressures that are sufficient enough to fracture the formation. Materials such as sand and synthetic proppants are pumped into the fracture to prop open the fracture, permitting the hydrocarbons in the formation to flow into the wellbore and ultimately to the surface. Various pieces of specialized equipment are used in the process, including a blender, which is used to blend the proppant into the fluid, multiple high pressure pumping units capable of pumping significant volumes at high pressures, and real time monitoring equipment where the progress of the process is controlled. Our fracturing units are capable of pumping slurries at pressures up to 10,000 pounds per square inch.

Cementing services consist of blending special cement with water and various solid and liquid additives to form a cement slurry that can be pumped into a well between the casing and the wellbore. Cementing services are principally performed in connection with primary cementing, where the casing used to line a wellbore after a well has been drilled is cemented into place. The purpose of primary cementing is to isolate fluids behind the casing between productive formations and non-productive formations that could damage the productivity of the well or damage the quality of freshwater acquifers, seal the casing from corrosive formation fluids, and to provide structural support for the casing string.

Well Service Rigs

We own and operate a large fleet of well service rigs, of which a significant number were either recently constructed or have been rebuilt over the past five years. We believe we have a leading market position in the Barnett Shale region of north Texas and in some of the most active basins of the U.S. Rocky Mountain region. We also operate swabbing units, some of which are highly customized hydraulic units which we use to diagnose and remediate gas well production problems. We provide well service rig operations in Wyoming, Colorado, Utah, Montana, North Dakota, Oklahoma and Texas. These rigs are used to perform a variety of completion, workover and maintenance services, such as installations, completions, assisting with perforating, removing defective equipment and sidetracking wells.

Snubbing Units

We operate a fleet of snubbing units, several of which are rig assist units. Snubbing services use specialized hydraulic well service units that permit an operator to repair damaged casing, production tubing and downhole production equipment in high-pressure, “live-well” environments. A snubbing unit makes it possible to remove and replace downhole equipment while maintaining pressure in the well. Applications for snubbing units include “live-well” completions and workovers, underground blowout control, underbalanced completions, underbalanced drilling and the snubbing of tubing, casing or drillpipe into or out of the wellbore. Our snubbing units operate primarily in Texas and Wyoming.

Downhole and Wellsite Services

We provide an array of complementary downhole and wellsite services that we classify into four groups: wireline services; production optimization services; production testing services; and rental, fishing and pressure testing services.

Wireline Services. We own and operate a fleet of wireline units in North America and provide both electric-line and slickline services. Truck and skid mounted wireline services are used to evaluate downhole well conditions, to initiate production from a formation by perforating a well’s casing, and to provide mechanical services such as setting equipment in the well, or fishing lost equipment out of a well. We provide wireline services in the western Canadian Sedimentary Basin, Oklahoma, Texas, Kansas, Louisiana and offshore in the Gulf of Mexico.

With our fleet of wireline equipment we provide the following services:


• Electric-Line Services:


• Perforating Services. Perforating involves positioning a perforating gun that contains explosive jet charges down the wellbore next to a productive zone. A detonator is fired and primer cord is ignited, which then detonates the jet charges. The resulting explosion burns a hole through the wellbore casing and cement and into the formation, thus allowing the formation fluid to flow into the wellbore and be produced to the surface. The perforating gun may be deployed in a number of ways. The gun can be conveyed by a conventional wireline cable if the wellbore geometry allows, it may be conveyed on coiled tubing, it may be conveyed on conventional tubing or the gun may be “pumped-down” to the correct depth in the wellbore.

• Logging Services. Logging requires the use of a single or multi-conductor, braided steel cable (electric-line), mounted on a hydraulically operated drum, and a specialized logging truck. Electronic instruments are attached to the end of the cable and lowered to the bottom of the well and the line is slowly pulled out of the well transmitting wellbore data up the cable to the surface where the information is processed by a surface computer system and displayed on a paper graph in a logging format. This information is used by customers to analyze different downhole formation structures, to detect the presence of oil, gas and water and to check the integrity of the casing or the cement behind the pipe. Logs are also run to detect gas or fluid migration between zones or to the surface.

• Slickline Services. Slickline services are used primarily for well maintenance. The line used for this application is generally a small single steel line. Typical applications of this service would include bottom hole pressure surveys, running temperature gradients, setting tubing plugs, opening and closing sliding sleeves, fishing operations, plunger lift installations, gas lift installations and other maintenance services that a well might require during its lifecycle.

Production Optimization Services. Our production optimization services provide customers with technical solutions to stem declining production that result from liquid loading, reduced bottom-hole pressures or improper well-bore designs. We assist in identifying candidates, designing solutions, executing on-site and following up to ensure continued performance. We have developed proprietary technologies that allow us to enhance recovery for our customers and provide on-going service. Specific services we provide include:


• Plunger Lift Services and Products. We provide plunger lift candidate selection, installation and maintenance services which may incorporate the use of our patented Pacemaker Plunger Lift System.

Plunger lift systems facilitate the removal of fluids that restrict the production of natural gas wells. Removing fluids that accumulate in wells increases production and in many cases slows decline rates. The proprietary design of our Pacemaker Plunger Lift System incorporates a large bypass area which allows it to make more trips per day and remove more wellbore fluids, versus other plunger lift designs, in wells with certain characteristics.


• Acoustic Pressure Surveys. We provide acoustic pressure surveys, an analytical technique that assists our customers in determining static reservoir pressure and the existence of near wellbore formation damage.

• Dynamometer Analysis. Our dynamometer analysis services include the analysis of reciprocating rod pumping systems (pumpjacks) to determine pump performance and provide our customers with critical information for well performance used to optimize the production and recovery of oil and gas.

• Fluid Level Analysis. We provide fluid level analysis services which record an acoustic pulse as it travels down the wellbore in order to determine the fluid depth.

We offer production optimization services to customers across the United States and in Canada. We provide production optimization services in Canada through our subsidiary, Premier Production Services Ltd.

Production Testing Services. Production testing is a service required by exploration and production companies to evaluate and clean out new and existing wells. We use a proprietary technology and service approach and are a leading independent provider in North America. We provide production testing services throughout the western Canadian Sedimentary Basin and also provide production testing services in Wyoming, Utah, Colorado, Texas and Mexico.

Production testing has the following primary applications:


• Well clean-ups or flowbacks are done shortly after completing or stimulating a well and are designed to remove damaging drilling fluids, completion fluids, sand and other debris. This “clean-up” prevents damage to the permanent production facilities and flowlines, thereby improving production. Our clean-up offering includes our Green Flowback services, which permit the flow of gas to our customers while performing drill-outs and flowback operations, increasing production, accelerating time to production and eliminating the need to flare gas;

• Exploration well testing measures how a reservoir performs under various flow conditions. These measurements allow reservoir and production engineers, and geologists to understand a well’s or reservoir’s production capability. Exploration testing jobs can last from a few days to several months; and

• In-line production testing measures a well’s flow rates, oil, gas and water composition, pressure and temperature. These measurements are used by engineers to identify and solve well and reservoir problems. In-line production testing is performed after a well has been completed and is already producing. In-line tests can run from several hours to more than several months.

Rental Equipment, Fishing and Pressure Testing Services. Oil and gas producers and drilling contractors often find it uneconomical to maintain complete inventories of tools, drillpipe, pressure testing equipment and other specialized equipment and to retain the qualified personnel to operate this equipment. We provide the following services and products:


• Rental Equipment and Services. We rent specialized tools, equipment and tubular goods for the drilling, completion and workover of oil and gas wells. Items rented include pressure control equipment, drill string equipment, pipe handling equipment, fishing and downhole tools, and other equipment, including stabilizers, power swivels and bottom-hole assemblies.

• Fishing Services. We provide highly skilled downhole services, including fishing, milling and cutting services, which consist of removing or otherwise eliminating “fish” or “junk” (a piece of equipment, a tool, a part of the drill string or debris) in a well that is causing an obstruction. We also install whipstocks to sidetrack wells, provide plugging and abandonment services, pipe recovery and wireline recovery services, foam services and casing patch installation.


• Pressure Testing Services. We provide specialized pressure testing services which involve the use of truck mounted equipment designed to carry small fluid volumes with high pressure pumps and hydraulic torque equipment. This equipment is primarily used to perform pressure tests on flow line, pressure vessels, lubricators, well heads and casings and tubing strings. The units are also used to assemble and disassemble blowout preventors (“BOPs”) for the drilling and work over sector. We have developed specialized, multi-service pressure testing units that enable one or two employees to complete multiple services simultaneously. We have multi-service pressure testing units that we operate in Colorado, Utah, Wyoming and Mexico.

Fluid Handling

Oil and gas operations use and produce significant quantities of fluids. We provide a variety of services to assist our customers to obtain, move, store and dispose of fluids that are involved in the development and production of their reservoirs. We provide fluid handling services in Texas, Oklahoma, Colorado, Wyoming, Arkansas, North Dakota and Montana.


• Fluid Transportation. We operate specialized transport trucks to deliver, transport and dispose of fluids safely and efficiently. We transport fresh water, completion fluids, produced water, drilling mud and other fluids to and from our customers’ wellsites. Our assets include U.S. Department of Transportation certified equipment for transportation of hazardous waste.

• Frac Tank Rental. We operate a fleet of frac tanks that are often used during hydraulic fracturing operations. We use our fleet of fluid transport assets to fill and empty these tanks and we deliver and remove these tanks from the wellsite with our fleet of winch trucks.

• Fluid Disposal. We own salt water disposal wells in Oklahoma and Texas and one produced water evaporation facility in Wyoming. These facilities are used to dispose of water from fracturing operations and from fluids produced during the routine production of oil and gas. In addition, we operated two mud disposal facilities that are used to store and ultimately dispose of drilling mud.

• Other Services. We own and operate a fleet of hot oilers and superheaters, which are assets capable of heating high volumes of fluids. We also sell fluids used during well completions, such as fresh water and potassium chloride, and drilling mud, which we move to our customers’ wellsites using our fluid transportation services.

Drilling Services (15% of Revenue for the Year Ended December 31, 2007)

Through our drilling services segment, we deliver services that initiate or stimulate oil and gas production by providing land drilling, specialized rig logistics and site preparation. Our drilling rigs currently operate in and around the Barnett Shale region of north Texas.

Contract Drilling

We provide contract drilling services to major oil companies and independent oil and gas producers in north Texas. Contract drilling services are primarily provided under a standard day rate, and, to a lesser extent, footage or turnkey contracts. Drilling rigs vary in size and capability and may include specialized equipment. The majority of our drilling rig fleet is equipped with mechanical power systems and have depth ratings ranging from approximately 8,000 to 15,000 feet. We placed into service several land drilling rigs during 2006. We invested in two drilling rigs during 2007.

Drilling Logistics

We provide a variety of drilling logistic services as follows:


• Drilling Rig Moving. Through our owned and operated fleet of specialized trucks, we provide drilling rig mobilization services primarily in Louisiana, Texas, Oklahoma, Arkansas and Colorado. Our capabilities allow us to move the largest rigs in the United States. Our operations are strategically located in regions where approximately 50% of the land drilling rigs in the United States are located. We believe our highly skilled personnel position us as one of the leading rig moving companies in the industry.

• Wellsite Preparation and Remediation. We provide equipment and services to build and reclaim drilling wellsites before and after the drilling operations take place. We build roads, dig pits, clear land, move earth and provide a host of construction services to drilling contractors and to oil and gas producers. Our wellsite preparation and remediation services are in Texas, Colorado and Wyoming.

Product Sales (9% of Revenue for the Year Ended December 31, 2007)

Through our product sales segment, we provide a variety of equipment used by oil and gas companies throughout the lifecycle of their wells. We sell a full range of oilfield supplies, as well as tubular goods, throughout the United States (north Texas, Louisiana, Arkansas, Oklahoma and the Rocky Mountains), primarily through our supply stores. We also sell products through agents in markets outside of North America.

Supply Stores

We own and operate supply stores that provide products and services to the oil and gas industry. We have supply stores and sales offices in Texas, Colorado, Louisiana and Oklahoma. We market tubular products, drill pipe, flow control and completion equipment, valves, fittings and other oilfield products.

Overseas Operations

We operate an oilfield sales service and rental business based in Singapore. This business sells new and reconditioned equipment used in the construction and upgrade of offshore drilling rigs; rents mud coolers, tubular handling equipment, BOPs and other service tools; and provides machining and repair services.

MANAGEMENT DISCUSSION FROM LATEST 10K

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes included within this Annual Report. This discussion contains forward-looking statements based on our current expectations, assumptions, estimates and projections about us and the oil and gas industry. These forward-looking statements involve risks and uncertainties that may be outside of our control and could cause actual results to differ materially from those in the forward-looking statements. For examples of those risks and uncertainties, see the cautionary statements contained in Item 1A. “Risk Factors.” Factors that could cause or contribute to such differences include, but are not limited to: market prices for oil and gas, the level of oil and gas drilling, economic and competitive conditions, capital expenditures, regulatory changes and other uncertainties. In light of these risks, uncertainties and assumptions, the forward-looking events discussed below may not occur. Unless otherwise required by law, we undertake no obligation to update publicly any forward-looking statements, even if new information becomes available or other events occur in the future.

The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” “expect” and similar expressions are intended to identify forward-looking statements. All statements other than statements of current or historical fact contained in this Annual Report are forward-looking statements.

Overview

We are a leading provider of specialized services and products focused on helping oil and gas companies develop hydrocarbon reserves, reduce operating costs and enhance production. We focus on basins within North America that we believe have attractive long-term potential for growth, and we deliver targeted, value-added services and products required by our customers within each specific basin. We believe our range of services and products positions us to meet the many needs of our customers at the wellsite, from drilling and completion through production and eventual abandonment. We manage our operations from regional field service facilities located throughout the U.S. Rocky Mountain region, Texas, Oklahoma, Louisiana, Arkansas, Kansas, western Canada, Mexico and Southeast Asia.

On September 12, 2005, we completed the Combination (see Item 1. “Business — The Combination”) of Complete Energy Services, Inc. (“CES”), Integrated Production Services, Inc. (“IPS”) and I.E. Miller Services, Inc. (“IEM”) pursuant to which the CES and IEM shareholders exchanged all of their common stock for common stock of IPS. The Combination was accounted for using the continuity of interests method of accounting, which yields results similar to the pooling of interest method. Subsequent to the Combination, IPS changed its name to Complete Production Services, Inc.

On April 26, 2006, we completed our initial public offering and our common stock is currently trading on the New York Stock Exchange under the symbol “CPX.” The total offering amount was approximately $718 million, consisting of approximately $312 million in a primary offering (less underwriters’ fees and discounts) and approximately $406 million in a secondary offering by selling stockholders.

We operate in three business segments:

Completion and Production Services. Through our completion and production services segment, we establish, maintain and enhance the flow of oil and gas throughout the life of a well. This segment is divided into the following primary service lines:


• Intervention Services. Well intervention requires the use of specialized equipment to perform an array of wellbore services. Our fleet of intervention service equipment includes coiled tubing units, pressure pumping units, nitrogen units, well service rigs, snubbing units and a variety of support equipment. Our intervention services provide customers with innovative solutions to increase production of oil and gas.

• Downhole and Wellsite Services. Our downhole and wellsite services include electric-line, slickline, production optimization, production testing, rental and fishing services. We also offer several proprietary services and products that we believe create significant value for our customers.

• Fluid Handling. We provide a variety of services to help our customers obtain, move, store and dispose of fluids that are involved in the development and production of their reservoirs. Through our fleet of specialized trucks, frac tanks and other assets, we provide fluid transportation, heating, pumping and disposal services for our customers.

Drilling Services. Through our drilling services segment, we provide services and equipment that initiate or stimulate oil and gas production by providing land drilling, specialized rig logistics and site preparation throughout our service area. Our drilling rigs currently operate exclusively in and around the Barnett Shale region of north Texas.

Product Sales. Through our product sales segment, we provide a variety of equipment used by oil and gas companies throughout the lifecycle of their wells. We sell a full range of oilfield supplies, as well as tubular goods, throughout the United States (north Texas, Louisiana, Arkansas, Oklahoma and the Rocky Mountains), primarily through our supply stores. We also sell products through our Southeast Asia business and through agents in markets outside of North America.

Substantially all service and rental revenue we earn is based upon a charge for a period of time (an hour, a day, a week) for the actual period of time the service or rental is provided to our customer. Product sales are recorded when the actual sale occurs and title or ownership passes to the customer.

Our customers include large multi-national and independent oil and gas producers, as well as smaller independent producers and the major land-based drilling contractors in North America (see “Customers” in Item 1 of this Annual Report on Form 10-K). The primary factor influencing demand for our services and products is the level of drilling and workover activity of our customers, which in turn, depends on current and anticipated future oil and gas prices, production depletion rates and the resultant levels of cash flows generated and allocated by our customers to their drilling and workover budgets. As a result, demand for our services and products is cyclical, substantially depends on activity levels in the North American oil and gas industry and is highly sensitive to current and expected oil and natural gas prices.

We consider the drilling and well service rig counts to be an indication of spending by our customers in the oil and gas industry for exploration and development of new and existing hydrocarbon reserves. These spending levels are a primary driver of our business, and we believe that our customers tend to invest more in these activities when oil and gas prices are at higher levels or are increasing. We evaluate the utilization of our assets as a measure of operating performance. This utilization can be impacted by these and other external and internal factors. See Item 1A. “Risk Factors.”

We generally charge for our services on a dayrate basis. Depending on the specific service, a dayrate may include one or more of these components: (1) a set-up charge, (2) an hourly service rate based on equipment and labor, (3) an equipment rental charge, (4) a consumables charge and (5) a mileage and fuel charge. We generally determine the rates charged through a competitive process on a job-by-job basis. Typically, work is performed on a “call out” basis, whereby the customer requests services on a job-specific basis, but does not guarantee work levels beyond the specific job bid. For contract drilling services, fees are charged based on standard dayrates or, to a lesser extent, as negotiated by footage contracts. Product sales are generated through our supply stores, our Southeast Asian business and through wholesale distributors, using a purchase order process and a pre-determined price book.

Outlook

Our growth strategy includes a focus on internal growth in our current basins and seek to maximize our equipment utilization, add additional like-kind equipment and expand service and product offerings. In addition, we identify new basins in which to replicate this approach. We also augment our internal growth through strategic acquisitions.


• Internal Capital Investment. Our internal expansion activities generally consist of adding equipment and qualified personnel in locations where we have established a presence. We expect to grow our operations in each of these locations by expanding services to current customers, attracting new customers and hiring local personnel with local basin-level expertise and leadership recognition. Depending on customer demand, we will consider adding equipment to further increase the capacity of services currently being provided and/or add equipment to expand the services we provide. We invested $803.7 million in equipment additions over the three-year period ended December 31, 2007, which included $621.4 million for the completion and production services segment, $156.7 million for the drilling services segment, $18.1 million for the product sales segment and $7.5 million related to general corporate operations. We expect to invest approximately $150.0 million in capital equipment during the year ended December 31, 2008.

• External Growth. We use strategic acquisitions as an integral part of our growth strategy. We consider acquisitions that will add to our service offerings in a current operating area or that will expand our geographical footprint into a targeted basin. We have completed several acquisitions in recent years. These acquisitions affect our operating performance period to period. Accordingly, comparisons of revenue and operating results are not necessarily comparable and should not be relied upon as indications of future performance. We have invested an aggregate of $601.1 million in acquisitions over the three-year period ended December 31, 2007 excluding the acquisition of minority interests in CES and IEM resulting from the Combination. Of this amount, we invested an aggregate of $49.7 million to acquire 7 businesses during 2007 and $449.9 million to acquire 16 companies during 2006, including the value of equity issued and debt assumed in conjunction with those 2006 acquisitions, a portion of which was associated with earn-out agreements for 2005 and 2004 acquisitions. See “— Significant Acquisitions.”

Natural gas prices have declined from historical highs in 2006 and rotary rig counts may have peaked in 2007 and have recently begun to decline, particularly in Canada. This trend could be the result of a number of macro-economic factors, such as a perceived excess supply of natural gas, lower demand for oil and gas or the use of alternate fuels, market expectations of weather conditions and the utilization of heating fuels, the cyclical nature of the oil and gas industry and other general market conditions for the U.S. economy. Although we cannot determine the impact that lower commodity prices and rotary rig counts may have on our business or whether such declines will be long-term, we believe that North American oilfield activity and the overall long-term outlook for our business remains favorable from an activity perspective, especially in the basins in which we operate, including the Piceance, Greater Green River and DJ basins in the Rocky Mountain region, the Barnett Shale of north Texas and Anadarko and Arkoma basins in the Mid-continent region, including the Fayetteville Shale in Arkansas and the Woodford Shale in Oklahoma. We believe that the fundamentals in these markets are favorable, but we have begun to experience less favorable pricing and lower utilization for some service offerings in certain areas in which we operate, which may be due in part to an increase in equipment placed into service in the region by our competitors, a slow-down of activity by our customers due to limited pipeline take-away capacity, particularly in southwest Wyoming, or a belief that current inventory levels of natural gas may exceed expected demand for the short-term.

During 2007, activity levels in Canada have declined significantly compared to recent years. This decline may be partially the result of an excess of natural gas currently in storage in Canada and an overall reluctance of major oil and gas companies to invest as heavily in drilling and exploration efforts due to perceived unfavorable tax treatment related to royalty arrangements and other governmental restrictions. Although we believe that this market will recover in future periods, we cannot determine when this recovery will occur or if such recovery will result in favorable operating results which are comparable to the levels achieved in prior years. Based upon our assessment of our expected future cash flows from operations in Canada, we recorded a non-cash impairment loss related to the write-down of goodwill at our Canadian subsidiary during the fourth quarter of 2007, which resulted in a reduction of operating income and net income by $13.1 million, as we did not receive a tax benefit associated with this impairment loss. We still remain invested in the Canadian market and believe the fundamentals are such to encourage a recovery in this market in the future.

Our business continues to be impacted by seasonality and inclement weather conditions. Our completion and production services business in Canada experienced a slower than expected recovery from the effects of the normal second quarter Canadian “break-up.” Our operations in south Texas, Mexico and the Mid-continent region were also impacted by Gulf of Mexico tropical weather systems and inclement weather during 2007.

As drilling activity has trended upwards the last few years and oilfield activity levels have increased, we, and many of our competitors, have invested in new equipment, some of which requires long lead times to manufacture. As more of this equipment is placed into service, there could be excess capacity in the industry, which we believe may have negatively impacted our utilization rates and pricing for certain service offerings during the latter half of 2007, and may continue to impact our operations in future periods. In addition, as new equipment enters the market, we must compete for employees to crew the equipment, which puts inflationary pressure on labor costs, and higher oil and gas commodity prices have resulted in higher fuel costs to operate our equipment. Our equipment fleet is relatively new, as we made significant investments in new equipment over the past two years and expect to continue to invest in equipment to the extent that we expect demand to remain high for certain of our service offerings, in particular our well service and coiled tubing services. We continue to monitor our equipment utilization and poll our customers to assess demand levels. As more equipment enters the marketplace, we believe our customers will increasingly rely upon service providers with local knowledge and expertise, which we believe we have and which constitutes a fundamental aspect of our strategic acquisition growth strategy.

Significant Acquisitions

During 2007, we acquired substantially all the assets or all of the equity interests in six oilfield service companies, and the remaining 50% interest in our Canadian joint venture, for $49.7 million in cash, resulting in goodwill of approximately $19.4 million. Several of these acquisitions are subject to final working capital adjustments.


• On January 4, 2007, we acquired substantially all of the assets of a company located in LaSalle, Colorado, which provides frac tank rental and fresh water hauling services to customers in the Wattenburg Field of the DJ Basin, which supplements our fluid handling and rental business in the Rocky Mountain region.

• On February 28, 2007, we acquired substantially all of the assets of a company located in Greeley, Colorado, which provides fluid handling and fresh frac water heating services to customers in the Wattenburg Field of the DJ Basin, which also supplements our fluid handling business in the Rocky Mountain region.

• On April 1, 2007, we acquired substantially all of the assets of a company located in Borger, Texas, which provides fluid handling and disposal services to customers in the Texas panhandle. We believe this acquisition complements certain operations that we acquired in 2006 within the Texas panhandle area and broadens our ability to provide fluid handling and disposal services throughout the Mid-continent region.

• On June 8, 2007, we acquired all the membership interests in a business located in Rangely, Colorado, which provides rig workover and roustabout services to customers in the Rangely Weber Sand Unit and northern Piceance Basin area. This acquisition expands our geographic reach in the northern Piceance Basin, expands our workover rig capabilities and provides a beneficial customer relationship.

• On October 18, 2007, we acquired all of the outstanding common stock of a company located in Kilgore, Texas, which provides remedial cement and acid services used in pressure pumping operations to customers throughout the east Texas region. This acquisition supplements our pressure pumping business and expands our presence in east Texas.

• On November 30, 2007, we acquired substantially all of the assets of a company located in Greeley, Colorado, which is an e-line service provider to customers in the Wattenberg Field of the DJ Basin. This acquisition supplements our completion and production services business in the Rocky Mountain region.

• On December 31, 2007, we acquired the remaining 50% interest in our joint venture in Canada for approx. $1.6 million. This transaction resulted in a decrease in goodwill of approx. $0.6 million, as the amount paid was less than the minority interest liability recorded related to this operation. This company provides optimization services in the Canadian market.

We do not consider our acquisitions in 2007 as significant to our overall financial position at December 31, 2007 or our results of operations for the year ended December 31, 2007, individually or in the aggregate.

The following entities were acquired in 2006 and 2005 and are deemed to be our most significant acquisitions in recent years:


• Parchman Energy Group, Inc. On February 11, 2005, we acquired Parchman Energy Group, Inc. (“Parchman”) for $9.8 million in cash, the issuance of common stock totaling $16.9 million, the issuance of a subordinated note totaling $5.0 million and the potential issuance of 1,000,000 shares of our common stock based upon certain operating results. All 1,000,000 such shares of our common stock were issued in the first quarter of 2006. In addition, we granted 344,664 shares of non-vested restricted stock to former Parchman employees. These restricted shares were fully vested as of December 31, 2007, or were forfeited. Parchman performs intervention services and downhole services including coiled tubing, production testing and wireline services, and operates from locations in Texas, Louisiana and Mexico. We recorded $20.3 million of goodwill related to this acquisition in 2005. We recognized additional goodwill associated with the issuance of these 1,000,000 shares in the first quarter of 2006 in an amount equal to the fair value of the shares, or $23.5 million.

• Big Mac. On November 1, 2005, we acquired all of the outstanding equity interests of the Big Mac group of companies (Big Mac Transports, LLC, Big Mac Tank Trucks, LLC and Fugo Services, LLC) for $40.8 million in cash. The Big Mac group of companies (“Big Mac”) is based in McAlester, Oklahoma, and provides fluid handling services primarily to customers in eastern Oklahoma and western Arkansas. Big Mac’s principal assets consist of rolling stock and frac tanks. A final purchase price post-closing adjustment for actual working capital and reimbursable capital expenditures was recorded during 2006 which resulted in a reduction of goodwill of approximately $0.5 million. We recorded $23.7 million of goodwill in connection with this acquisition. We have included the operating results of Big Mac in the completion and production services business segment from the date of acquisition. This acquisition provided a platform to enter the eastern Oklahoma market and new Fayetteville Shale play in Arkansas.

• Arkoma. On June 30, 2006, we acquired certain operating assets of J&M Rental Tool, Inc dba Arkoma Machine & Fishing Tools, Arkoma Machine Shop, Inc. and N&M Supply, LLC, collectively referred to as “Arkoma”, a provider of rental tools, machining and fishing services in the Fayetteville Shale and Arkoma Basin, located in Ft. Smith, Arkansas. We paid $18.0 million in cash to acquire Arkoma and recorded goodwill totaling $9.0 million, which has been allocated entirely to the completion and production services business segment. This acquisition provided a platform to further expand our presence in the Fayetteville Shale and Arkoma Basin and supplements our completion and production services business in that region.

• Turner. On July 28, 2006, we acquired all of the outstanding equity interests of the Turner group of companies (Turner Energy Services, LLC, Turner Energy SWD, LLC, T. & J. Energy, LLC, T. & J. SWD, LLC and Loyd Jones Well Service, LLC) for $54.3 million in cash, after a final working capital adjustment. The Turner Group of Companies (“Turner”) is based in the Texas panhandle in Canadian, Texas, and owns a fleet of well service rigs, and provides other wellsite services such as fishing, equipment rental, fluid handling and salt water disposal services. We recorded goodwill totaling $16.0 million associated with this purchase. We have included the accounts of Turner in our completion and production services business segment from the date of acquisition. We believe this acquisition supplements our completion and production services business in the Mid-continent region.


• Pinnacle. On August 1, 2006, we acquired substantially all of the assets of Pinnacle Drilling Co., L.L.C. (“Pinnacle”), a drilling company located in Tolar, Texas, for $32.8 million in cash, which includes $1.1 million related to equipment refurbishment. Pinnacle operates three drilling rigs, two in the Barnett Shale region of north Texas and one in east Texas. We recorded goodwill totaling $1.0 million associated with this purchase. We finalized our purchase price allocation for Pinnacle during 2007 and received $0.6 million from the seller related to pre-acquisition contingencies which resulted in a reduction of goodwill of $0.6 million. We have included the accounts of Pinnacle in our drilling services business segment from the date of acquisition. This acquisition increases our presence in the Barnett Shale of north Texas and the Bossier Trend of east Texas and expands our capacity to drill deep and horizontal wells, which are sought by our customers in this region.

• Femco. On October 19, 2006, we acquired substantially all of the assets of Femco Services, Inc., R&S Propane, Inc. and Webb Dozer Service, Inc. (collectively, “Femco”), a group of companies located in Lindsay, Oklahoma for $36.0 million in cash. Femco provides fluid handling, frac tank rental, propane distribution and fluid disposal services throughout southern central Oklahoma. We recorded goodwill totaling $11.2 million associated with this purchase. We have included the accounts of Femco in our completion and production services business segment from the date of acquisition. We believe this acquisition expands our presence in the Fayetteville Shale and enhances our completion and production services business in the Mid-continent region.

• Pumpco. On November 8, 2006, we acquired all the outstanding equity interests of Pumpco, a company located in Gainesville, Texas for approximately $144.6 million in cash, net of cash acquired, and 1,010,566 shares of our common stock. We also assumed approximately $30.3 million of debt outstanding under Pumpco’s existing credit facility. Pumpco provides pressure pumping, stimulation and cementing services used in the development and completion of gas and oil wells in the Barnett Shale play of north Texas. We recorded goodwill totaling $148.6 million associated with this acquisition. The purchase price allocation for Pumpco was finalized in 2007 which resulted in a reclassification of $2.0 million from goodwill to other intangible assets, and a reduction of goodwill of $3.1 million related the deferred tax liabilities acquired which were deemed unnecessary based on our 2006 tax return filings in 2007. We have included the accounts of Pumpco in our completion and production services business from the date of acquisition. This acquisition expanded our presence in the Barnett Shale and expands the service offerings of our completion and product services business to include pressure pumping.

In addition, we completed several other smaller acquisitions, each of which has contributed to the expansion of our business into new geographic regions or enhanced our service and product offerings.

We have accounted for our acquisitions using the purchase method of accounting, whereby the purchase price is allocated to the fair value of net assets acquired, including intangibles and property, plant and equipment at depreciated replacement costs with the excess to goodwill, with the exception of the Combination, which was accounted for using the continuity of interests accounting method. Results of operations related to each of the acquired companies have been included in our combined operations as of the date of acquisition.

On October 31, 2006, we completed the sale of the disposal group which included certain manufacturing and production enhancement product operations of a subsidiary located in Alberta, Canada, as well as operations in south Texas, for approximately $19.3 million in cash, with an additional amount subject to a working capital adjustment, and a $2.0 million Canadian dollar denominated note which matures on October 31, 2009 and accrues interest at a specified Canadian bank prime rate plus 1.50% per annum. We sold this disposal group to Paintearth Energy Services, Inc., an oilfield service company located in Calgary, Alberta, Canada, that employs two of our former employees as key managers. The carrying value of the related net assets was $21.7 million on October 31, 2006. We recorded a loss on the sale of this disposal group totaling approximately $0.6 million, which included a transaction gain associated with the release of cumulative translation adjustment associated with this business, and a $1.0 million charge to expense related to capital taxes in Canada. The sales agreement allowed Paintearth Energy Services, Inc. to use our subsidiary’s trade name for a period of 120 days from November 1, 2006 through February 28, 2007.

Marketing Environment

We operate in a highly competitive industry. Our competition includes many large and small oilfield service companies. As such, we price our services and products to remain competitive in the markets in which we operate, adjusting our rates to reflect current market conditions as necessary. We examine the rate of utilization of our equipment as one measure of our ability to compete in the current market environment.

Seasonality

Our completion and production services business generally experiences a decline in sales for our Canadian operations during the second quarter of each year due to seasonality, as weather conditions make oil and gas operations in this region difficult during this period. Our Canadian operations accounted for approximately 5%, 7% and 9% of total revenues from continuing operations during the years ended December 31, 2007, 2006 and 2005, respectively.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, and provide a basis for making judgments about the carrying value of assets and liabilities that are not readily available through open market quotes. Estimates and assumptions are reviewed periodically, and actual results may differ from those estimates under different assumptions or conditions. We must use our judgment related to uncertainties in order to make these estimates and assumptions.

In the selection of our critical accounting policies, the objective is to properly reflect our financial position and results of operations for each reporting period in a consistent manner that can be understood by the reader of our financial statements. Our accounting policies and procedures are explained in note 1 of the notes to the consolidated financial statements contained elsewhere in this Annual Report on Form 10-K. We consider an estimate to be critical if it is subjective and if changes in the estimate using different assumptions would result in a material impact on our financial position or results of operations.

We have identified the following as the most critical accounting policies and estimates, and have provided: (1) a description, (2) information about variability and (3) our historical experience, including a sensitivity analysis, if applicable.

Continuity of Interests Accounting

We applied the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations” to account for the formation of Complete. SFAS No. 141 permits us to account for the combination of several predecessor companies using a method similar to a pooling of interests if each is controlled by a common stockholder. In connection with the Combination, we paid a dividend to our stockholders of $2.62 per share and adjusted the number of shares subject to, and exercise price of, outstanding stock options and restricted shares in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 44, “Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of Accounting Principles Board (“APB”) Opinion No. 25.” On September 12, 2005, we completed the transaction, pursuant to which CES and IEM stockholders exchanged all of their common stock for common stock of IPS. CES stockholders received 19.704 shares of IPS common stock for each share of CES common stock, and IEM stockholders received 19.410 shares of IPS common stock for each share of IEM common stock. In connection with the Combination, IPS changed its name to Complete Production Services, Inc. We acquired the interests of the minority stockholders in these predecessor companies as of the date of the consummation and accounted for these transactions using the purchase method of accounting,

resulting in goodwill of $93.8 million, which represented the excess of the purchase price over the carrying value of the net assets acquired.

Application of SFAS No. 141 is required under U.S. GAAP when entities under common control are combined.

Revenue Recognition

We recognize service revenue as services are performed and when realized or earned. Revenue is deemed to be realized or earned when we determine that the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectibility is reasonably assured. These services are generally provided over a relatively short period of time pursuant to short-term contracts at pre-determined dayrate fees, or on a day-to-day basis. Revenue and costs related to drilling contracts are recognized as work progresses. Progress is measured as revenue is recognized based upon dayrate charges. For certain contracts, we may receive lump-sum payments from our customers related to the mobilization of rigs and other drilling equipment. Under these arrangements, we defer revenues and the related cost of services and recognize them over the term of the drilling contract. Costs incurred to relocate rigs and other drilling equipment to areas in which a contract has not been secured are expensed as incurred. Revenues associated with product sales are recorded when product title is transferred to the customer.

Under current GAAP, revenue is to be recognized when it is realized or realizable and earned. The SEC’s rules and regulations provide additional guidance for revenue recognition under specific circumstances, including bill and hold transactions. There is a risk that our results of operations could be misstated if we do not record revenue in the proper accounting period.

The nature of our business has been such that we generally bill for services over a relatively short period of time and record revenues as products are sold. We did not record material adjustments resulting from revenue recognition issues for the years ended December 31, 2007, 2006 and 2005.


MANAGEMENT DISCUSSION FOR LATEST QUARTER

The following discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes as of September 30, 2008 and for the quarters and nine months ended September 30, 2008 and 2007, included elsewhere herein. This discussion contains forward-looking statements based on our current expectations, assumptions, estimates and projections about us and the oil and gas industry. These forward-looking statements involve risks and uncertainties that may be outside of our control and could cause actual results to differ materially from those in the forward-looking statements. For examples of those risks and uncertainties, see the cautionary statement contained in Item 1A. “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2007. Factors that could cause or contribute to such differences include, but are not limited to: market prices for oil and gas, the level of oil and gas drilling, economic and competitive conditions, capital expenditures, availability of credit financing, regulatory changes and other uncertainties. In light of these risks, uncertainties and assumptions, the forward-looking events discussed below may not occur. Unless otherwise required by law, we undertake no obligation to update publicly any forward-looking statements, even if new information becomes available or other events occur in the future.
The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” “expect” and similar expressions are intended to identify forward-looking statements. All statements other than statements of current or historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements.
References to “Complete,” the “Company,” “we,” “our” and similar phrases used throughout this Quarterly Report on Form 10-Q relate collectively to Complete Production Services, Inc. and its consolidated affiliates.
Overview
We are a leading provider of specialized services and products focused on helping oil and gas companies develop hydrocarbon reserves, reduce operating costs and enhance production. We focus on basins within North America that we believe have attractive long-term potential for growth, and we deliver targeted, value-added services and products required by our customers within each specific basin. We believe our range of services and products positions us to meet the many needs of our customers at the wellsite, from drilling and completion through production and eventual abandonment. We manage our operations from regional field service facilities located throughout the U.S. Rocky Mountain region, Texas, Oklahoma, Louisiana, Arkansas, Kansas, North Dakota, Pennsylvania, western Canada, Mexico and Southeast Asia.
We operate in three business segments:
Completion and Production Services. Through our completion and production services segment, we establish, maintain and enhance the flow of oil and gas throughout the life of a well. This segment is divided into the following primary service lines:
• Intervention Services. Well intervention requires the use of specialized equipment to perform an array of wellbore services. Our fleet of intervention service equipment includes coiled tubing units, pressure pumping units, nitrogen units, well service rigs, snubbing units and a variety of support equipment. Our intervention services provide customers with innovative solutions to increase production of oil and gas.

• Downhole and Wellsite Services. Our downhole and wellsite services include electric-line, slickline, production optimization, production testing, rental and fishing services. We also offer several proprietary services and products that we believe create significant value for our customers.

• Fluid Handling. We provide a variety of services to help our customers obtain, move, store and dispose of fluids that are involved in the development and production of their reservoirs. Through our fleet of specialized trucks, frac tanks and other assets, we provide fluid transportation, heating, pumping and disposal services for our customers.

Drilling Services. Through our drilling services segment, we provide services and equipment that initiate or stimulate oil and gas production by providing land drilling, specialized rig logistics and site preparation throughout our service area. Our drilling rigs primarily operate in and around the Barnett Shale region of north Texas.
Product Sales. We provide oilfield service equipment and refurbishment of used equipment through our Southeast Asia business, and we provide repair work and fabrication services for our customers at a business located in Gainesville, Texas.
Substantially all service and rental revenue we earn is based upon a charge for a period of time (an hour, a day, a week) for the actual period of time the service or rental is provided to our customer. Product sales are recorded when the actual sale occurs and title or ownership passes to the customer.
General
The primary factor influencing demand for our services and products is the level of drilling, completion and maintenance activity of our customers, which in turn, depends on current and anticipated future oil and gas prices, production depletion rates and the resultant levels of cash flows generated and allocated by our customers to their drilling, completion and maintenance budgets. As a result, demand for our services and products is cyclical, substantially depends on activity levels in the North American oil and gas industry and is highly sensitive to current and expected oil and natural gas prices.

Outlook
Our growth strategy includes a focus on internal growth in the basins in which we currently operate and we seek to maximize our equipment utilization, add additional like-kind equipment and expand service and product offerings. In addition, we identify new basins in which to replicate this approach. We also augment our internal growth through strategic acquisitions.
Strategic acquisitions are an integral part of our growth strategy. We consider acquisitions that will add to our service offerings in a current operating area or that will expand our geographical footprint into a targeted basin. We invested $9.5 million to acquire a fishing, rental and foam unit services business in February 2008, and $62.4 million, net of cash acquired, to acquire a pressure pumping business in north Texas in April 2008. In October 2008, we invested $58.0 million to acquire a well service and heavy haul business based in Arkansas, and an additional $49.3 million in cash to acquire a pressure pumping and e-line business in Pennsylvania, as well as issuing shares of our common stock as additional consideration (see “—Acquisitions”).
During the nine months ended September 30, 2008 and 2007, we invested $193.2 million and $274.8 million, respectively, in equipment additions and other capital expenditures. We originally planned to spend approximately $150.0 million on capital expenditures for 2008 compared to actual capital expenditures in 2007 of $372.6 million. This decrease in planned capital expenditures for 2008 was due to concerns of potential equipment over-capacity in the oil and gas industry in the markets in which we serve. During recent months, we increased our projected capital expenditures budget to $250.0 million for fiscal 2008 particularly to expand into basins which we believe to have future growth potential, including the Haynesville Shale of Louisiana, the Bakken Shale area of North Dakota and the Marcellus Shale in the Appalachian region. During the third quarter of 2008, the U.S. financial markets were impacted by the collapse of several large banks and financial institutions which continues to restrict the availability of funds for loans amongst banks and for commercial investment. Although we currently have positive cash flow and sufficient available borrowing capacity under our existing long-term credit facilities, we cannot estimate the impact that this downturn in the U.S. financial markets will have on activity levels or our customers, our operations and our future need and ability to continue to make investments in capital expenditures and acquisitions. Our capital expenditures for the twelve months ended September 30, 2008 were $291.0 million, the majority of which was spent for growth capital, and we expect to invest approximately $150.0 million in capital expenditures during fiscal 2009. We further expect to continue to benefit from equipment placed into service during the past twelve months, assuming that utilization of our equipment remains at current levels or higher. However, our future results remain subject to the risks described in our Annual Report on Form 10-K for the year ended December 31, 2007.
Our customers are directly impacted by the volatility of commodity prices in the oil and gas industry, which affects their spending levels, and directly impacts the use of oilfield service providers. As we have evaluated our business environment, we believe the following trends have emerged: (1) our customers have begun to curtail investment in capital projects as a response to the U.S. financial markets decline, a decrease in available credit financing and lower commodity prices; (2) our competitors have placed additional equipment into service in the markets in which we operate; (3) we have experienced pricing pressure in certain geographic areas for certain business lines due to competitive market forces; (4) oilfield activity has been steady and rig counts trends were favorable throughout the first three quarters of 2008, but have begun to fall in recent weeks; (5) labor costs have risen and inflationary forces may continue to increase our operating costs; and (6) our customers are investing in unconventional resource plays, which may require service companies to provide newer, more complex equipment and to possess more technical expertise to assist the customer to explore and develop these resource plays.
We, and many of our competitors, have invested in new equipment over the past several years, some of which requires long lead times to manufacture. As more of this equipment is placed into service or moved to emerging basins due to lower utilization in more established basins, there could be excess capacity in the industry and, in particular, in the markets we serve, which we believe may negatively impact our utilization rates and pricing for certain service offerings. In addition, as new equipment enters the market, we must compete for employees to crew the equipment, which puts inflationary pressure on labor costs. Our equipment fleet is relatively new, as we made significant investments in new equipment over the past three years and expect to continue to invest in new equipment and maintenance of existing assets. We continue to monitor our equipment utilization and poll our customers to assess demand levels. As more equipment enters the marketplace, we believe our customers will increasingly rely upon service providers with local knowledge and expertise, which we believe we have and which constitutes a fundamental aspect of our strategic acquisition growth strategy.
We continue to believe that the overall long-term outlook for our business remains favorable from an activity perspective, particularly in the basins in which we operate and in the basins in which we intend to make additional investments, including the Haynesville Shale area of Louisiana, the Bakken Shale area of North Dakota and the Marcellus Shale in the Appalachian region. Although we expect a short-term downturn in the oil and gas industry due to the decline in the U.S. economy, weakness of the U.S. financial markets, and lower oil and gas commodity prices, we believe that the fundamentals in the markets which we serve are good. We believe that pricing for our products and services will be less favorable for some product lines and in some geographic regions in the short-term. We believe we are well positioned to pursue our growth strategy because of our position in the markets we serve and our overall capital structure.
Acquisitions
During the period from January 1, 2008 through October 4, 2008, we acquired substantially all the assets of four oilfield service companies for $179.2 million in cash, net of cash acquired, and we issued 588,292 unregistered shares of our common stock. These acquisitions are subject to final working capital adjustments.
• On February 29, 2008, we acquired substantially all the assets of KR Fishing & Rental, Inc., for $9.5 million in cash, resulting in goodwill of $6.4 million. KR Fishing & Rental, Inc. is a provider of fishing, rental and foam unit services in the Piceance Basin and the Raton Basin, and is based in Rangely, Colorado. We believe this acquisition complements our completion and production services business in the Rocky Mountain region.

• On April 15, 2008, we acquired all the outstanding common stock of Frac Source Services, Inc., a provider of pressure pumping services to customers in the Barnett Shale of north Texas, for $62.4 million in cash, net of cash acquired, which includes a working capital adjustment of $1.6 million, and recorded goodwill of $15.4 million. Upon closing this transaction, we entered into a contract with one of our major customers to provide pressure pumping services in the Barnett Shale utilizing three frac fleets under a contract with a term that extends up to three years from the date each fleet is placed into service. We spent an additional $20.0 million in 2008 on capital equipment related to these contracted frac fleets. Thus, our total investment in this operation was approximately $82.4 million. The initial purchase price allocation associated with this acquisition has not yet been finalized. We believe this acquisition expands our pressure pumping business in north Texas and that the related contract provides a stable revenue stream from which to expand our pressure pumping business outside of this region.

• On October 3, 2008, we acquired all of the membership interests of TSWS Well Services, LLC, a limited liability corporation which held substantially all of the well servicing and heavy haul assets of TSWS, Inc., a company based in Magnolia, Arkansas, which provides well servicing and heavy haul services to customers in northern Louisiana, east Texas and southern Arkansas. As consideration, we paid $57.0 million in cash, and prepaid an additional $1.0 million related to an employee retention bonus pool. The purchase price allocation associated with this acquisition has not been completed, but we expect to record goodwill related to this acquisition of approximately $27.5 million in October 2008. We believe this acquisition extends our geographic reach into the Haynesville Shale area.

• On October 4, 2008, we acquired substantially all of the assets of Appalachian Well Services, Inc. and its wholly-owned subsidiary, each of which is based in Shelocta, Pennsylvania. This business provides pressure pumping, e-line and coiled tubing services in the Appalachian region, and includes a service area which extends through portions of Pennsylvania, West Virginia, Ohio and New York. As consideration for the purchase, we paid $49.3 million in cash and issued 588,292 unregistered shares of our common stock, valued at $15.04 per share. We expect to invest an additional $6.5 million to complete a frac fleet at this location, and have an option to purchase other real property for approximately $0.6 million. In addition, we have entered into an agreement under which we may be required to pay up to an additional $5.0 million in cash consideration during the earn-out period which extends through 2010, based upon the results of operations of various service lines acquired. The purchase price allocation associated with this acquisition has not yet been finalized, but we expect to record goodwill of approximately $29.0 million in October 2008. We believe this acquisition creates a platform for future growth for our pressure pumping and other completion and production service lines in the Marcellus Basin.
We accounted for these acquisitions using the purchase method of accounting, whereby the purchase price was allocated to the fair value of net assets acquired, including intangibles and property, plant and equipment at depreciated replacement costs, with the excess recorded as goodwill. Results for each of these acquisitions have been included in our accounts and results of operations since the date of acquisition, and goodwill associated with these acquisitions was allocated entirely to the completion and production services business segment.
In May 2008, our Board of Directors authorized and committed to a plan to sell certain operations in the Barnett Shale region of north Texas, consisting primarily of our supply store business, as well as certain non-strategic drilling logistics assets and other completion and production services assets. On May 19, 2008, we sold these operations to Select Energy Services, L.L.C., a company owned by a former officer of one of our subsidiaries, for which we received proceeds of $50.2 million in cash and assets with a fair market value of $8.0 million. The carrying value of the net assets sold was approximately $51.4 million, excluding $11.1 million of allocated goodwill associated with the combination that formed Complete Production Services, Inc. in September 2005. We recorded a loss on the sale of this disposal group totaling approximately $6.9 million, which included $2.6 million related to income taxes. In accordance with the sales agreement, we agreed to sublet office space to Select Energy Services, L.L.C. and to provide certain administrative services for an initial term of one year, at an agreed-upon rate.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, and provide a basis for making judgments about the carrying value of assets and liabilities that are not readily available through open market quotes. Estimates and assumptions are reviewed periodically, and actual results may differ from those estimates under different assumptions or conditions. We must use our judgment related to uncertainties in order to make these estimates and assumptions.
For a description of our critical accounting policies and estimates as well as certain sensitivity disclosures related to those estimates, see our Annual Report on Form 10-K for the year ended December 31, 2007. Our critical accounting policies and estimates have not changed materially during the nine months ended September 30, 2008.

CONF CALL

Jose A. Bayardo

Thanks Tanya. Good morning, and thank you for joining us as we host our third quarter 2008 earnings conference call. With me here today are Joe Winkler, Chairman and CEO and Brian Moore, President and Chief Operating Officer.

Before we begin the discussion of our financial results, please note that some of the statements we make during this call may contain projections and estimates, including comments about our outlook for the company's business, which are forward-looking statements within the meaning of the Securities Acts of 1933 and 1934.

These forward-looking statements are based on limited information as of today, which is subject to change. These forward-looking statements are further subject to risks and uncertainties and actual results may differ materially. You should not assume that these forward-looking statements remain valid beyond the current quarter. I'll refer you to our various documents filed with SEC for a more detailed discussion of some of the risk factors that might impact our business.

With that I'll now turn it over to Joe Winkler.

Joseph C. Winkler

Thanks, Jose and good morning to all on the call. We appreciate you've taken the time to join us this morning. 2008 was an excellent year for Complete Production Services. My thanks to all of our dedicated and hardworking people for their efforts and contributions to our success. 2008 revenue $1.839 billion grew $384 million or 23%, EBITDA $507 million was up 15%. EBITDA margins were 27.5 % and earnings per share from continuing operations were $2.30 per share.

Our growth was balanced in discipline with approximately 75% organic and 25% from acquisitions. Our incremental EBITDA margins were 19 % lower than we would expect, but influenced by the negative forces in play in Q4 2008.

During the year, we invested approximately $254 million in CapEx of which approximately 60% was growth and invested approximately $190 million in some very selective strategic acquisitions.

We successfully completed our coil tubing-drilling project, expanded our pressure pumping operations in the Barnett, expanded our service offerings in the Bakken including pressure pumping, expanded our presence in the rapidly growing Haynesville Shale and acquired a platform in the Appalachian region in Marcellus Shale. We grew and strengthened our balance sheet by lowering our year end leverage ratio.

Activity levels through the first 10 months of the year were very good, but dropped off rapidly during November and December.

Looking at our quarterly performance on a sequential basis, revenue of $487.1 million was $6.1 million less than Q3. Momentum from Q3 carried into October which fell rapidly starting in mid November, offsetting the benefit of our Q4 quarter acquisitions.

Margins were significantly impacted due to lower utilization and some pricing pressure declining to 25.6% from 29.1%. This resulted in an EBITDA decrease of $18.8 million. Activity declined so swiftly we could not outrun with cost adjustments.

Completion and Production services revenue $407.3 million declined $10.5 million and EBITDA declined $12.8 million resulting in EBITDA margins of 29.6 %. The impact of two fourth quarter acquisitions and a strong performance in our Mexico coil tubing operation was more than offset business by weak performance in the remaining service lines in the segment.

Our U.S. coil tubing rental well service, fluid handling and too much lesser extent pressure pumping were negatively impacted by the swift negative shift in activity mid quarter and related pricing pressure.

Drilling service revenue of $61.4 million was down slightly from Q3, however, EBITDA was down $3 million due to the impact of lower pricing and lower utilization in our contract drilling business. The message for the quarter is lower utilization with some pricing pressure.

I'll now turn it to Jose and come back for our outlook.

Jose A. Bayardo

It means depreciation and amortization expense increased $3.4 million over the prior quarter to $51.1 million and net interest expense increased $1.5 million sequentially to $15.4 million. Full year 2008 CapEx totaled approximately $254 million and cash paid for acquisitions totaled $180 million.

Strong cash flows from operations during 2008 combined with the proceeds from the divesture of non-core businesses earlier in the year enabled us to make these investments while reducing our leverage ratio to 1.6 times at 1231 '08 from 1.8 at December 31, 2007.

As of December 31, 2008 we had net debt of approximately 828.6 million and cash balance was 19.1 million, and we had 193.5 million drawn on our $400 million revolver.

Additionally, we have letters of credit outstanding which totaled approximately 37.7 million, leaving us with about 168.8 million of availability. Our credit facility runs through December 6, 2011 and our 650 million bonds mature in 2016.

As mentioned in the earnings release, we took 272 million pre-tax non-cash goodwill impairment charge, pursuant to SFAS No.142. Charge affected all three of our reporting segments and our view is largely attributed to the currently depressed valuations in both equity and debt markets, as well as the weaken near-term market outlook.

The 272 million had a limited tax basis resulting in a tax benefit of 19.9 million, excluding the impairment our effective tax rate for the quarter would have been 35.6% and our full year rate would have been 35.5%.

With that, I'll turn it back over to Joe.

Joseph C. Winkler

Thanks. Last quarter, we indicated that in spite of a good start to Q4 we expect that activity levels to decline over the remainder of Q4 into 2009. Visibility of activity for 2009 is still not clear and we expect further declines from current levels along with continued pressure on pricing. Based on the science we see today, it is difficult to imagine a meaningful pickup in activity before the end of the year.

However, we are of the opinion that the deeper and longer of the decline the greater the recovery. The question is when and when will be influenced by decline rates, demand be it whether economy related and L&G imports. And we do not know when this will occur although we believe it to be relatively short-term in duration, perhaps a year to a year and half. We believe the effect of decline rates are real and we'll begin to show up in production.

Our plans for 2009 will be as follows: monitory market activity in our area of operations and adjust accordingly, protect and enhance our market position, focus on improving execution at the field level, where and when appropriate adjust our cost structure to the anticipated activity level, significantly reduce our CapEx, last quarter we said less than 150, current thinking is less than 125 and it may go lower.

No bolt on type acquisitions until market stability, both in operations and capital markets. Pay down debt and our billed cash to be prudent an opportunistic, identify opportunities assess, organic and acquisitions, monitor market and when appropriate to move on them.

We believe 2009 will be a very difficult year, duration of the downturn is difficult to predict. Our balance sheet is well structured to handle this market, as a reminder 650 million of that debt bonds due 2016.

We expect to pay down some additional short-term debt and our billed cash. We have solid market position in the resource plays and we will protect and enhance our position during this period.

We will benefit from our experience local personnel with base and level expertise and knowledge. Long-term fundamentals North America gas are sound with near-term challenged. Resource plays in horizontal wells with their more intent services were likely to lead recovery.

Although a difficult market, it is a unique time to create value for execution and be an opportunistic, and you will hear similar comments from almost everyone, but only those who execute will prevail, this market will differentiate. Tanya, with that we'll open it up for questions.

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