Basic Energy Services (BASWQ) 425 Business combination disclosure

Exhibit 99.2

Unaudited Pro Forma Condensed Combined Financial Information

The unaudited pro forma condensed combined financial statements of Horsepower Holdings, Inc. (“Horsepower”) presented below are based on, and should be read together with, the historical information that Basic Energy Services, Inc. (“Basic”) and Grey Wolf, Inc. (“Grey Wolf”) have presented in their respective filings with the Securities and Exchange Commission. The unaudited pro forma condensed combined balance sheet as of March 31, 2008 gives effect to the proposed mergers as if they had occurred on March 31, 2008, and combines the historical balance sheets of Basic and Grey Wolf as of March 31, 2008. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2008, the year ended December 31, 2007 and the twelve months ended March 31, 2008 are presented as if the proposed mergers had occurred on January 1, 2007, and combines the historical results of Basic and Grey Wolf for the year ended December 31, 2007, the three months ended March 31, 2008 and the twelve months ended March 31, 2008. The historical financial information is adjusted to give effect to pro forma events that (1) are directly attributable to the mergers, (2) are factually supportable and (3) with respect to the statements of operations, are expected to have a continuing impact on combined results.

Immediately after the mergers, the financial statements of Grey Wolf will become the financial statements of Horsepower. The mergers will be accounted for using the purchase method of accounting. Under U.S. generally accepted accounting principles (“GAAP”), Grey Wolf has been determined to be the accounting acquirer based on the fact that its stockholders are expected to hold greater than 50% of the Horsepower common stock after the mergers. The pro forma adjustments are based on a preliminary purchase price allocation whereby the cost to acquire Basic was allocated to the assets acquired and the liabilities assumed, based upon their estimated fair values. Actual adjustments will be based on the final purchase price and analyses of fair values of identifiable tangible and intangible assets, deferred tax assets and liabilities, and estimates of the useful lives of tangible and amortizable intangible assets, which will be finalized after completion of the valuation and assessment process using all available data. The final purchase price allocation will be performed using estimated fair values as of the date of the completion of the mergers. Differences between the preliminary and final purchase price allocations could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and Horsepower’s future results of operations and financial position.

The unaudited pro forma condensed combined financial statements do not reflect the realization of potential cost savings, or any related restructuring or integration costs. Although Basic and Grey Wolf believe that certain cost savings may result from the mergers, there can be no assurance that these cost savings will be achieved.

The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the combined financial position or results of operations in future periods or the results that actually would have been realized if the proposed mergers had been completed as of the dates indicated.

The unaudited financial statements assume that the holders of Grey Wolf’s 3.75% Contingent Convertible Senior Notes due 2023 and Floating Rate Contingent Convertible Notes due 2024 do not exercise a special conversion privilege entitling them to convert the principal amount of their notes into Grey Wolf common stock prior to the effective time of the mergers.

Unaudited pro forma condensed combined financial information — (continued)

The estimated purchase price of $1.3 billion has been calculated as follows (in thousands, except per share data and the conversion ratio):

Basic common stock outstanding		41,252
Multiplied by the cash merger consideration per share	$	6.70
Cash merger consideration for outstanding common stock	$	276,388
Less: Cash merger consideration for restricted stock excluded from the purchase price in accordance with GAAP	$	3,298
Total cash merger consideration			$	273,090
Basic common stock outstanding		41,252
Less: Shares of Basic restricted stock outstanding		567
Estimated number of Basic shares of common stock to be converted		40,685
Multiplied by the per share exchange ratio of 0.9195		37,410
Assumed market price of a share of Horsepower common stock that will be issued	$	21.84
Estimated value of the shares of Horsepower common stock that will be issued	$	817,035
Estimated value of the shares of Horsepower restricted stock included in the purchase price in accordance with GAAP	$	1,499
Estimated value of Horsepower stock options included in the purchase price in accordance with GAAP	$	37,374
Total stock merger consideration			$	855,908
Retirement of Basic revolving credit facility				150,000
Pro forma transaction costs				18,000
Total pro forma purchase price			$	1,296,998

Immediately prior to the effective time of the mergers, each outstanding common share of Grey Wolf will be converted into the right to receive (1) 0.2500 shares of Horsepower common stock and (2) $1.82 in cash. Immediately prior to the effective time of the mergers, each outstanding common share of Basic will be converted into the right to receive (1) 0.9195 shares of Horsepower common stock and (2) $6.70 in cash.

An independent appraisal firm has been engaged to assist in finalizing the allocation of the purchase price. The preliminary purchase price allocations are subject to change based on finalization of the fair values of the tangible and intangible assets acquired and liabilities assumed as described above. The estimated purchase price has been preliminarily assigned to the net tangible and intangible assets acquired and liabilities assumed as follows (in thousands):

	Preliminary
	Fair Value
Current assets	$	284,393
Property, plant and equipment		1,008,635
Goodwill		518,365
Other intangible assets		194,068
Other assets		6,495
Current liabilities		(107,165	)
Long-term debt		(260,179	)
Deferred income taxes		(343,811	)
Other liabilities		(3,803	)
Total pro forma purchase price	$	1,296,998

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Unaudited Pro Forma Condensed Combined Balance Sheet

As of March 31, 2008

	Historical				Pro forma
								Horsepower
	Grey Wolf		Basic		Adjustments			Combined
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	286,569	$	100,174	$	(617,091	)(a)	$	194,527
						600,000	(b)
						(25,125	)(c)
						(150,000	)(d)
Accounts receivable, net		168,804		148,828		—			317,632
Other current assets		11,703		24,984		—			36,687
Deferred tax assets		5,351		10,407		—			15,758
Total current assets		472,427		284,393		(192,216	)		564,604
Property and equipment, net		755,472		649,987		358,649	(f)		1,764,108
Goodwill		10,377		218,430		299,935	(g)		528,742
Other intangible assets, net of amortization		—		26,431		167,637	(e)		194,068
Other assets, net		21,431		8,136		25,125	(c)		53,051
						(1,641	)(d)
TOTAL ASSETS	$	1,259,707	$	1,187,377	$	657,489		$	3,104,573
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	—	$	18,886	$	16,250	(b)	$	35,136
Trade accounts payable		65,242		20,629		—			85,871
Other current liabilities		55,129		67,650		—			122,779
Total current liabilities		120,371		107,165		16,250			243,786
Long-term debt, net of current portion		275,000		410,179		583,750	(b)		1,118,929
						(150,000	)(d)
Other long term liabilities		17,064		3,803		—			20,867
Deferred income tax		157,153		120,479		223,332	(h)		500,964
Stockholders’ equity:		690,119		545,751		(326,000	)(a)		1,220,027
						855,908	(i)
						(545,751	)(j)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,259,707	$	1,187,377	$	657,489		$	3,104,573

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Unaudited Pro Forma Condensed Combined Statement of Operations

For the three months ended March 31, 2008

	Historical						Pro forma
										Horsepower
	Grey Wolf			Basic			Adjustments			Combined
	(in thousands, except per share data)
Revenues	$	201,522		$	229,873		$	—		$	431,395
Costs and expenses:
Operating expenses, excluding depreciation and amortization		113,546			137,972			—			251,518
Depreciation and amortization		27,759			28,032			3,481	(k)		62,066
								2,794	(o)
General and administrative		8,612			25,852			—			34,464
		149,917			191,856			6,275			348,048
Operating income		51,605			38,017			(6,275	)		83,347
Other income (expense):
Interest income		2,487			701			—			3,188
Interest expense		(3,337	)		(7,349	)		(10,542	)(l)		(20,316	)
								(1,343	)(m)
								2,255	(n)
Other income (expense)		—			38			—			38
Income before income taxes		50,755			31,407			(15,905	)		66,257
Income tax provision (benefit)		19,432			11,751			(6,044	)(p)		25,139
Net income	$	31,323		$	19,656		$	(9,861	)	$	41,118
Basic income per common share	$	0.18		$	0.48					$	0.51
Diluted income per common share	$	0.15		$	0.47					$	0.45
Weighted average common shares outstanding:
Basic		175,771			40,577			37,412	(q)		81,355
Diluted		219,332			41,464			40,765	(q)		95,598
Basic income per common share, restated for reverse stock-split	$	0.71	(r)
Diluted income per common share, restated for reverse stock-split	$	0.61	(r)
Weighted average common shares outstanding, restated for reverse stock-split:
Basic		43,943	(r)
Diluted		54,833	(r)

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Unaudited Pro Forma Condensed Combined Statement of Operations

For the year ended December 31, 2007

	Historical						Pro forma
										Horsepower
	Grey Wolf			Basic			Adjustments			Combined
	(in thousands, except per share data)
Revenues	$	906,577		$	877,173		$	—		$	1,783,750
Costs and expenses:
Operating expenses, excluding depreciation and amortization		513,672			519,394			—			1,033,066
Depreciation and amortization		97,361			93,048			32,482	(s)		234,067
								11,176	(w)
General and administrative		29,439			99,042			—			128,481
		640,472			711,484			43,658			1,395,614
Operating income		266,105			165,689			(43,658	)		388,136
Other income (expense):
Interest income		13,202			2,280			—			15,482
Interest expense		(13,910	)		(27,416	)		(42,811	)(t)		(81,718	)
								(5,376	)(u)
								7,795	(v)
Loss on early extinguishment of debt		—			(230	)		—			(230	)
Other income (expense)		—			176			—			176
Income before income taxes		265,397			140,499			(84,050	)		321,846
Income tax provision (benefit)		95,505			52,766			(31,939	)(x)		116,332
Net income	$	169,892		$	87,733		$	(52,111	)	$	205,514
Basic income per common share	$	0.93		$	2.19					$	2.49
Diluted income per common share	$	0.79		$	2.13					$	2.21
Weighted average common shares outstanding:
Basic		182,006			40,013			37,083	(y)		82,584
Diluted		225,649			41,112			40,446	(y)		96,858
Basic income per common share, restated for reverse stock-split	$	3.73	(z)
Diluted income per common share, restated for reverse stock-split	$	3.16	(z)
Weighted average common shares outstanding, restated for reverse stock-split:
Basic		45,502	(z)
Diluted		56,412	(z)

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Unaudited Pro Forma Condensed Combined Statement of Operations

For the twelve months ended March 31, 2008

							Pro Forma
	Historical									Horsepower
	Grey Wolf			Basic			Adjustments			Combined
	(In thousands, except per share data)
Revenues	$	866,086		$	908,116		$	—		$	1,774,202
Costs and expenses:
Operating expenses, excluding depreciation and amortization		506,318			540,880			—			1,047,198
Depreciation and amortization		103,706			101,855			23,675	(aa)		240,412
								11,176	(ee)
General and administrative		30,652			102,245			—			132,897
Total costs and expenses		640,676			744,980			34,851			1,420,507
Operating income		225,410			163,136			(34,851	)		353,695
Other income (expense):
Interest income		12,530			2,511			—			15,041
Interest expense		(13,755	)		(29,171	)		(42,554	)(bb)		(80,611	)
								(5,376	)(cc)
								10,245	(dd)
Other income (expense)		—			153			—			153
Income before income taxes		224,185			136,629			(72,536	)		288,278
Income tax provision (benefit)		81,548			51,313			(27,564	)(ff)		105,297
Net income	$	142,637		$	85,316		$	(44,972	)	$	182,981
Basic income per common share	$	0.79		$	2.11					$	2.24
Diluted income per common share	$	0.67		$	2.06					$	1.99
Weighted average common shares outstanding:
Basic		180,206			40,522			36,742	(gg)		81,794
Diluted		223,850			41,501			40,101	(gg)		96,064
Basic income per common share, restated for reverse stock-split	$	3.17	(hh)
Diluted income per common share, restated for reverse stock-split	$	2.69	(hh)
Weighted average common shares outstanding, restated for reverse stock-split:
Basic		45,052	(hh)
Diluted		55,963	(hh)

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Notes to Unaudited Pro Forma Condensed Combined Financial Statements

The historical condensed combined balance sheet and statements of income of Grey Wolf and Basic have been prepared in accordance with accounting principles generally accepted in the United States of America. Transactions between Grey Wolf and Basic were not material individually or in the aggregate. The following notes set forth the assumptions used in preparing the unaudited pro forma condensed combined financial statements. The pro forma adjustments are based on estimates made by Grey Wolf’s and Basic’s management that are preliminary and subject to change based upon the final purchase price allocation.

The adjustments to the accompanying unaudited pro forma condensed combined balance sheet as of March 31, 2008 are described below:

(a)  To record the payment of estimated cash consideration to Basic stockholders of $273.1 million, estimated cash to Grey Wolf stockholders of $326.0 million, and an estimate of Grey Wolf’s out-of-pocket transaction costs associated with the acquisition totaling $18.0 million.

(b)  To reflect borrowings of approximately $600.0 million to satisfy the cash purchase price obligation to Basic stockholders and Grey Wolf stockholders consisting of (i) a $325.0 million term loan A facility under a proposed six-year, senior secured term loan facility, of which $16.3 million is expected to be paid within one year of issuance (the “Term Loan A Facility”) and (ii) the $275 million of additional indebtedness. Horsepower will have a senior secured revolving credit facility in an aggregate principal amount of up to $325.0 million (the “Revolving Credit Facility”), which is expected to be undrawn at the closing of the mergers.

(c)  Reflects the adjustment to record debt issuance costs of $8.1 million incurred under the Term Loan A Facility, $8.1 million incurred under a Revolving Credit Facility and $8.9 million incurred in connection with the additional indebtedness.

(d)  To reflect the repayment of Basic’s outstanding balances associated with its existing revolving credit facility that will terminate upon consummation of the acquisition totaling $150.0 million and to write-off Basic’s remaining long-term deferred debt issuance costs related to the facility in the amount of $1.6 million.

(e)  To record a preliminary estimate of separately identifiable intangible assets related primarily to customer relationships with an expected useful life of approximately 15 years.

(f)  Reflects the adjustment to record the difference between the preliminary estimate of the fair value and the historical amount of Basic’s property, plant and equipment.

(g)  To record the excess purchase price over the estimated fair value of Basic’s net assets.

(h)  To reflect the adjustment of approximately $223.3 million required under Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” to record the estimated incremental deferred income taxes. The adjustment reflects the difference between the preliminary fair value of Basic’s assets, other than goodwill, and liabilities recorded under purchase accounting and the carryover tax basis of those assets and liabilities. A combined statutory federal and blended state income tax rate of 38.0% was used for these adjustments.

(i)  To record the issuance of approximately 37.4 million shares of Horsepower common stock, par value $0.01 per share, at an assumed price of $21.84 per share, which was based on the average closing price of Grey Wolf common stock for the two trading days before through the two trading days after the announcement of the mergers on April 21, 2008. In addition to the common stock issuance, approximately $37.4 million and $1.5 million was recorded to additional paid-in capital related to the conversion of certain of Basic’s stock options and restricted stock awards, respectively.

(j)  Reflects the adjustment to eliminate Basic’s historical equity accounts.

The adjustments to the accompanying unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2008 are described below:

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Notes to Unaudited Pro Forma Condensed Combined Financial Statements — (continued)

(k)  To reflect the additional depreciation expense of $3.5 million for the increase in estimated fair value of the acquired assets. For purposes of this adjustment, Basic’s historical carrying values of its fixed assets were analyzed and these historical carrying values were adjusted to estimated fair value.

(l)  To reflect interest expense of $4.9 million related to the $325.0 million Term Loan A Facility estimated at 6.31% per annum and interest expense of $5.7 million related to the $275.0 million of additional indebtedness, estimated at 8.25% per annum, to satisfy approximately $600.0 million of cash obligations associated with the mergers. If the interest rates on each of the Term Loan A Facility and the additional indebtedness increased or decreased by 0.125%, the interest expense would increase or decrease by $187,500.

(m)  To reflect the increase to interest expense associated with the amortization, over a six-year term, of the anticipated debt issuance costs incurred with the Term Loan A Facility; the amortization, over a five-year term, of the anticipated debt issuance costs incurred with the Revolving Credit Facility; the amortization, over a10-year term, of the anticipated debt issuance costs associated with the additional indebtedness; and letter of credit fees and commitment fees associated with the Revolving Credit Facility.

(n)  Reflects the adjustment to eliminate $2.3 million of Basic’s historical interest expense, letter of credit fees, and amortization of debt issuance costs associated with Basic’s existing revolving credit facility that were assumed to be repaid at the beginning of the period presented.

(o)  To record amortization expense over an estimated useful life of 15 years for the estimated intangible assets separately identified primarily related to customer relationships.

(p)  To record the income tax benefit related to the effect of the pro forma adjustments at a combined statutory federal and blended state income tax rate of 38.0%.

(q)  Pro forma weighted average shares outstanding have been adjusted to reflect the conversion of Basic’s outstanding common stock, stock options and restricted stock to shares of Horsepower common stock and reflect the Grey Wolf exchange ratio, which is deemed to be a reverse stock split, associated with the acquisition assuming the transaction was consummated at the beginning of the period presented.

(r)  Historical shares outstanding and earnings per share are restated to reflect the deemed reverse stock split resulting from the transaction. Restated shares outstanding are calculated based on the ratio of 0.2500 for each share outstanding in accordance with the merger agreement.

The adjustments to the accompanying unaudited pro forma condensed combined statement of operations for the year ended December 31, 2007 are described below:

(s)  To reflect additional depreciation expense of $32.5 million for the increase in estimated fair value of the acquired assets. For purposes of this adjustment, Basic’s historical carrying values of its fixed assets were analyzed and these historical carrying values were adjusted to estimated fair value.

(t)  To reflect interest expense of $20.1 million related to the $325.0 million Term Loan A Facility estimated at 6.31% per annum and interest expense of $22.7 million related to the additional indebtedness, estimated at 8.25% per annum, to satisfy approximately $600.0 million of cash obligations associated with the mergers. If the interest rates on each of the Term Loan A Facility and the additional indebtedness increased or decreased by 0.125%, the interest expense would increase or decrease by $750,000.

(u)  To reflect the increase to interest expense associated with the amortization, over a six-year term, of the anticipated debt issuance costs incurred with the Term Loan A Facility; the amortization, over a five-year term, of the anticipated debt issuance costs incurred with the Revolving Credit Facility; the amortization, over a10-year term, of the anticipated debt issuance costs associated with the additional indebtedness; and letter of credit fees and commitment fees associated with the Revolving Credit Facility.

(v)  Reflects the adjustment to eliminate $7.8 million of Basic’s historical interest expense, letter of credit fees, and amortization of debt issuance costs associated with Basic’s existing revolving credit facility that were assumed to be repaid at the beginning of the period presented.

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Notes to Unaudited Pro Forma Condensed Combined Financial Statements — (continued)

(w)  To record amortization expense over an estimated useful life of 15 years for the estimated intangible assets separately identified primarily related to customer relationships.

(x)  To record the income tax benefit related to the effect of the pro forma adjustments at a combined statutory federal and blended state income tax rate of 38.0%.

(y)  Pro forma weighted average shares outstanding have been adjusted to reflect the conversion of Basic’s outstanding common stock, stock options and restricted stock to shares of Horsepower common stock and reflect the Grey Wolf exchange ratio, which is deemed to be a reverse stock split, associated with the acquisition assuming the transaction was consummated at the beginning of the period presented.

(z)  Historical Grey Wolf shares outstanding and earnings per share are restated to reflect the deemed reverse stock split resulting from the transaction. Restated shares outstanding are calculated based on the Grey Wolf exchange ratio of 0.2500 for each Grey Wolf share outstanding in accordance with the merger agreement.

The adjustments to the accompanying unaudited pro forma condensed combined statement of operations for the twelve months ended March 31, 2008 are described below:

(aa)  To reflect additional depreciation expense of $23.7 million for the increase in estimated fair value of the acquired assets. For purposes of this adjustment, Basic’s historical carrying values of its fixed assets were analyzed and these historical carrying values were adjusted to estimated fair value.

(bb)  To reflect interest expense of $19.9 million related to the $325.0 million Term Loan A Facility estimated at 6.31% per annum and interest expense of $22.7 million related to the additional indebtedness, estimated at 8.25% per annum, to satisfy approximately $600.0 million of cash obligations associated with the mergers. If the interest rates on each of the Term Loan A Facility and the additional indebtedness increased or decreased by 0.125%, the interest expense would increase or decrease by $750,000.

(cc)  To reflect the increase to interest expense associated with the amortization, over a six-year term, of the anticipated debt issuance costs incurred with the Term Loan A Facility; the amortization, over a five-year term, of the anticipated debt issuance costs incurred with the Revolving Credit Facility; the amortization, over a10-year term, of the anticipated debt issuance costs associated with the additional indebtedness; and letter of credit fees and commitment fees associated with the Revolving Credit Facility.

(dd)  Reflects the adjustment to eliminate $10.2 million of Basic’s historical interest expense, letter of credit fees, and amortization of debt issuance costs associated with Basic’s existing revolving credit facility that were assumed to be repaid at the beginning of the period presented.

(ee)  To record amortization expense over an estimated useful life of 15 years for the estimated intangible assets separately identified primarily related to customer relationships.

(ff)  To record the income tax benefit related to the effect of the pro forma adjustments at a combined statutory federal and blended state income tax rate of 38.0%.

(gg)  Pro forma weighted average shares outstanding have been adjusted to reflect the conversion of Basic’s outstanding common stock, stock options and restricted stock to shares of Horsepower common stock and reflect the Grey Wolf exchange ratio, which is deemed to be a reverse stock split, associated with the acquisition assuming the transaction was consummated at the beginning of the period presented.

(hh)  Historical Grey Wolf shares outstanding and earnings per share are restated to reflect the deemed reverse stock split resulting from the transaction. Restated shares outstanding are calculated based on the Grey Wolf exchange ratio of 0.2500 for each Grey Wolf share outstanding in accordance with the merger agreement.

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