AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 24, 1996

REGISTRATION NUMBER 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

FORM S-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

ENERGY VENTURES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)

04-2515019
(I.R.S. EMPLOYER IDENTIFICATION NO.)

5 POST OAK PARK, SUITE 1760
HOUSTON, TEXAS 77027-3415
(713) 297-8400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

BERNARD J. DUROC-DANNER
ENERGY VENTURES, INC.
5 POST OAK PARK, SUITE 1760
HOUSTON, TEXAS 77027-3415
(713) 297-8400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:

CURTIS W. HUFF R. JOEL SWANSON
FULBRIGHT & JAWORSKI L.L.P. BAKER & BOTTS, L.L.P.
1301 MCKINNEY, SUITE 5100 ONE SHELL PLAZA, 910 LOUISIANA
HOUSTON, TEXAS 77010-3095 HOUSTON, TEXAS 77002-4995
(713) 651-5151 (713) 229-1234

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
---------------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
---------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

CALCULATION OF REGISTRATION FEE

=============================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, $1.00 par value.............. $127,031,250 $43,804
=============================================================================================

(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(o) of the Securities Act of 1933 and based upon the
average of the high and low sale prices of Common Stock as reported by the
New York Stock Exchange on June 21, 1996.
---------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.

================================================================================
2

***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************

SUBJECT TO COMPLETION, DATED JUNE 24, 1996

PROSPECTUS

3,300,000 SHARES

[ENERGY VENTURES LOGO] ENERGY VENTURES, INC.

COMMON STOCK
---------------------------

Of the 3,300,000 shares of Common Stock, par value $1.00 per share (the
"Common Stock"), of Energy Ventures, Inc. (the "Company") offered hereby (this
"Offering"), 3,000,000 shares are being offered by the Company and 300,000
shares are being offered for the account of a selling stockholder (the "Selling
Stockholder"). See "Selling Stockholder" and "Underwriting".

The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "EVI". On June 20, 1996, the last reported sales price for the
Common Stock as reported on the NYSE was $33 3/4 per share. See "Price Range of
Common Stock and Dividend Policy".
---------------------------

AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 8 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) THE COMPANY(2) STOCKHOLDER(2)
- ------------------------------------------------------------------------------------------------

Per Share....................... $ $ $ $
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Total(3)........................ $ $ $ $
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(1) The Company and the Selling Stockholder have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting".

(2) Before deducting expenses payable by the Company estimated at $450,000 and
before deducting expenses payable by the Selling Stockholder estimated at
$ .

(3) The Company has granted the Underwriters a 30-day option to purchase up to
an aggregate of 450,000 additional shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting".
---------------------------

The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of the
certificates for the shares of Common Stock offered will be made at the offices
of Lehman Brothers Inc., New York, New York on or about , 1996.
---------------------------
LEHMAN BROTHERS
DONALDSON, LUFKIN & JENRETTE
Securities Corporation

JEFFERIES & COMPANY, INC.

PRUDENTIAL SECURITIES INCORPORATED

SCHRODER WERTHEIM & CO.
, 1996
3

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

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and the
Regional Offices of the Commission at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, New York,
New York 10048. Copies of such material can also be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a World Wide Web site on the Internet at http:()(w)ww.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. Such
reports, proxy and information statements and other information concerning the
Company can also be inspected and copied at the offices of the NYSE, 20 Broad
Street, New York, New York 10005, on which the Common Stock is listed.

The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Common Stock offered hereby. This Prospectus, which constitutes a
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement, certain items of which are contained in
exhibits to the Registration Statement as permitted by the rules and regulations
of the Commission. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to the Registration Statement,
including the exhibits thereto, which may be inspected without charge at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Regional Offices of the Commission, and
copies of which may be obtained from the Commission at prescribed rates.
Statements made in this Prospectus concerning the contents of any document
referred to herein are not necessarily complete. With respect to each such
document filed with the Commission as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents are incorporated herein by reference:

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

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

(d) The Company's Current Report on Form 8-K dated July 13, 1995, as
amended by the Current Report on Form 8-K/A dated August 17, 1995, as
amended by Amendment No. 2 to the Form 8-K/A dated May 7, 1996.

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

The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral request of
any such person, a copy of any or all of the documents incorporated by reference
herein, other than the exhibits to such documents, unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates. Written or oral requests for such copies should be directed to the
Company at 5 Post Oak Park, Suite 1760, Houston, Texas 77027-3415, Attention:
Secretary (Telephone number: (713) 297-8400).

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements appearing elsewhere in this
Prospectus. Unless the context otherwise requires, references in this Prospectus
to the "Company" shall mean Energy Ventures, Inc. and its subsidiaries. Unless
otherwise noted herein, the information contained in this Prospectus assumes the
Underwriters' over-allotment option will not be exercised. An investment in the
Common Stock offered hereby involves a high degree of risk, and investors should
carefully consider the information set forth under the heading "Risk Factors".

THE COMPANY

Energy Ventures, Inc. is an international manufacturer and supplier of
oilfield equipment and contract drilling services. The Company operates through
two business segments: oilfield equipment and contract drilling. The oilfield
equipment segment manufactures drill pipe, premium tubulars and a complete line
of downhole tools used in the production of oil and natural gas. The contract
drilling segment primarily provides barge drilling and workover services in the
inland waters of the U.S. Gulf Coast. The Company also provides international
drilling services in Nigeria, Argentina and Peru.

The Company has achieved significant growth in recent years through a
consistent strategy of focused, synergistic acquisitions and internal
development. Acquisitions have sought to take advantage of the consolidating
nature of the industry and have concentrated on under-utilized fixed assets,
proprietary technology and name brand product lines. Internal development has
focused on product development, manufacturing enhancements and international
expansion.

The Company's growth strategy has resulted in the Company becoming the
leader in many of its principal markets. The Company is currently the largest
manufacturer and supplier of drill pipe in the world, the largest manufacturer
of premium tubulars in North America and the second largest operator of barge
rigs in the U.S. Gulf Coast area. The Company also believes that it is one of
the two largest manufacturers of rod lift equipment in the world and the largest
manufacturer of drill collars and heavyweight drill pipe in the world.

The Company's strategy for growth has resulted in substantial increases in
the Company's revenues and income. During 1995, the Company's revenues,
operating income and income from continuing operations were $351.6 million,
$32.4 million and $11.3 million, respectively, up from $248.5 million, $19.5
million and $4.6 million, respectively, in 1994. This growth has continued
through the first quarter of 1996, with the Company reporting revenues,
operating income and income from continuing operations of $110.0 million, $10.8
million and $4.3 million, respectively, compared to $72.7 million, $6.7 million
and $1.6 million, respectively, for the first quarter of 1995.

Tubular Products

The Company's tubular product lines are comprised of drill pipe and premium
tubulars. Both product lines are designed and engineered for high performance
applications. Drill pipe serves as the principal mechanical drilling tool needed
to drill an oil or natural gas well. Drill pipe must be designed and
manufactured to provide a reliable connection from the drilling rig to the drill
bit thousands of feet below the surface. Premium tubulars consist of the tubing
and casing that are used for the production of oil and natural gas in harsh
downhole environments, typically deep natural gas and offshore wells, where
pressure, temperature and corrosive elements are extreme. The term "premium"
refers to seamless tubulars with high alloy chemistry, specific molecular
structure and highly engineered connections. Although all aspects of premium
tubulars have high specifications, the engineered connections have the most
critical performance criteria.

The drill pipe market has recently experienced significant growth as demand
for new drill pipe increased due to a decline in the worldwide inventory of used
drill pipe. The Company is benefitting from this improvement in market
conditions as the largest supplier of drill pipe. The Company's backlog of drill
pipe was $76.6 million at June 1, 1996. The Company is also expanding its
international drill pipe and premium tubular operations through a recently
completed long-term exclusive manufacturing arrangement with Oil

3
5

Country Tubular Limited ("OCTL") in India. This arrangement provides the Company
the potential to materially increase its worldwide production of drill pipe and
premium tubulars and a strategic location to penetrate the growing Eastern
Hemisphere market.

The premium tubular market has also begun to show significant improvement.
This improvement is due in large part to increased offshore drilling activity.
The demand for premium tubular products has historically followed changes in
offshore drilling activity, with a six to 12 month lag. The Company's premium
tubular business is also expected to benefit from the Company's recent
acquisition of ENERPRO International, Inc. ("ENERPRO"), a provider of engineered
connections. The ENERPRO acquisition completed the Company's Atlas Bradford(TM)
line of premium engineered connections. ENERPRO's technologically advanced
designs filled significant gaps in the Company's premium connection product
line. This broader line is expected to allow the Company to penetrate new
markets without the substantial costs and time delays inherent in the
introduction of any new premium connection. In addition, as a result of the
ENERPRO acquisition, the Company has become the largest provider of oilfield
premium connections in North America and has broadened its international
presence.

To further expand the range of premium tubular products that may be
provided by the Company, the Company recently entered into an agreement to
acquire Tubular Corporation of America, Inc. ("TCA"), a manufacturer of premium
casing, for 500,000 shares of Common Stock and approximately $30 million in
cash, notes and assumed debt. The Company intends to integrate the operations of
TCA with those of its tubular products division and offer the TCA line of
premium casing products in conjunction with the Company's Atlas Bradford line of
engineered connections. TCA will provide the Company with significant
incremental production capacity with its current operating rate of approximately
50%. The Company also expects to benefit from the TCA acquisition through
manufacturing cost savings, product line synergies and a consolidation of
overhead. The acquisition of TCA is subject to various conditions, including the
receipt of all required regulatory approvals and the expiration of all waiting
periods, and will be financed with a portion of the net proceeds of this
Offering. Although there can be no assurance that the TCA transaction will
close, the Company currently anticipates that the acquisition will be
consummated shortly after the receipt of such regulatory approvals.

Production Equipment: Artificial Lift and Completion

The Company manufactures a complete line of patented and proprietary
artificial lift and completion products. The Company's artificial lift product
line is focused primarily on rod lift, utilizes patented and proprietary
technology and is fully integrated from the downhole pump to the above-ground
motor and pumping unit. To the Company's knowledge, none of its competitors has
as broad a product line. The Company's completion products are used in the
completion phase and throughout the production life of oil and gas wells. The
Company's completion line covers an increasingly large range of completion and
production applications.

The Company's artificial lift products include fluid packed pumps,
progressive cavity pumps, continuous and coupled sucker rods, pumping units,
motors, control systems and gas lift equipment. The Company also provides
installation and maintenance services for its artificial lift customers. The
Company's completion products include packers, completion systems, flow control
equipment and service tools. Many of the Company's products, such as the
Corod(R) continuous sucker rod and the RotaFlex(TM) pumping unit, are patented
or proprietary and provide the customer with innovative solutions to production
problems.

Contract Drilling

The Company's contract drilling operations are concentrated in the area of
barge drilling and workover in the shallow coastal and inland waters of the U.S.
Gulf Coast where conventional jack-up rigs cannot operate. The Company is the
second largest operator of barge rigs in this market. The Company's domestic
barge rig fleet consists of 16 drilling rigs and 19 workover rigs. The Company
also has a fleet of six platform rigs for use in the Gulf of Mexico. Most of the
Company's rigs were acquired at times when market conditions were depressed and
at prices substantially below replacement costs. The Company was recently
awarded an

4
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exclusive one-year alliance to provide barge rig completion and workover
services for Texaco, Inc. ("Texaco") in the United States Gulf Coast.

Internationally, the Company operates one barge rig in Nigeria, has one
platform rig operating and one platform rig available for operation in Peru and
has four land rigs operating in Argentina. The Company has recently entered into
an agreement with Noble Drilling Corporation ("Noble") to acquire Noble's two
barge rigs that are currently operating in Nigeria for total consideration of
$24.5 million in cash and a $7.5 million drill pipe credit. The Company expects
that both rigs will be placed under three-year contracts currently being
negotiated with The Shell Petroleum Development Company of Nigeria Ltd. ("Shell
Nigeria"). The Company also has entered into a letter of intent with Chevron
Nigeria Limited ("Chevron") to redeploy one of the Company's Gulf Coast barge
rigs from the United States to Nigeria to operate under a three-year contract.
The cost to the Company to retrofit this rig for the Chevron contract is
estimated at $9 million. These transactions will increase the Company's
international presence and expand its fleet of deep drilling barge rigs equipped
for the foreign markets to take advantage of anticipated improvements in
international demand for barge drilling as reserves in the transition zones of
the world's oil and gas producing countries are developed. Each of these
transactions is subject to various conditions, including the receipt of certain
long-term contracts for the rigs. Although there can be no assurance that the
Noble or Chevron transactions will close, the Company currently anticipates that
the Noble acquisition will be consummated in July 1996 and that the Chevron
contract will begin in the fourth quarter of 1996.

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THE OFFERING

Common Stock offered by:
The Company................................ 3,000,000 shares
The Selling Stockholder.................... 300,000 shares
Common Stock outstanding after
this Offering(a)........................... 22,367,797 shares
Use of proceeds.............................. Net proceeds to the Company will be used (i)
to finance the TCA acquisition, including the
payment of up to $30 million cash for the
acquisition and the repayment of debt of TCA,
(ii) to reduce indebtedness of up to $24.5
million that is expected to be incurred as a
result of the Noble rig acquisition, (iii) to
retrofit a barge rig for deployment to Nigeria
for Chevron at a cost of approximately $9
million and (iv) for general corporate
purposes. See "Use of Proceeds".
New York Stock Exchange Symbol............... EVI

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

(a) Includes 500,000 shares of Common Stock to be issued in the TCA acquisition,
but excludes an aggregate of 956,100 shares of Common Stock subject to
outstanding options granted under the Company's 1981 Employee Stock Option
Plan, 1992 Employee Stock Option Plan and Amended and Restated Non-Employee
Director Stock Option Plan. See "Description of Capital Stock".

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table sets forth certain summary historical and pro forma
condensed consolidated financial data of the Company. The unaudited pro forma
condensed consolidated statements of income give effect to the proposed
acquisition of TCA, the acquisition of Prideco, Inc. ("Prideco") on June 30,
1995, and this Offering and the application of the net proceeds to the Company
therefrom as if these transactions occurred on January 1, 1995. The as adjusted
balance sheet data gives effect to the sale of Common Stock from this Offering
and the acquisition of TCA as if these transactions had occurred on March 31,
1996. The unaudited pro forma information set forth below is not necessarily
indicative of the results that actually would have been achieved had such
transactions been consummated as of January 1, 1995, or that may be achieved in
the future. This information should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
Selected Consolidated Financial Data, the Pro Forma Condensed Consolidated
Statements of Income and the Company's Consolidated Financial Statements and the
related notes thereto included elsewhere herein.

PRO
HISTORICAL HISTORICAL FORMA
-------------------------------- ------------------- ---------
PRO FORMA THREE
YEAR ENDED ------------ THREE MONTHS MONTHS
DECEMBER 31, YEAR ENDED ENDED MARCH 31, ENDED
-------------------------------- DECEMBER 31, ------------------- MARCH 31,
1993 1994 1995 1995 1995 1996 1996
-------- -------- -------- ------------ ------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

OPERATING DATA:
Revenues........................... $246,017 $248,537 $351,587 $430,368 $72,660 $110,042 $122,505
Cost of sales...................... 181,742 181,137 262,293 332,504 53,156 83,540 94,482
Selling, general and administrative
expenses......................... 45,720 47,931 56,854 61,408 12,850 15,732 16,347
-------- -------- -------- -------- ------- -------- --------
Operating income................... 18,555 19,469 32,440 36,456 6,654 10,770 11,676
Interest income (expense), net..... (7,209) (13,505) (16,605) (12,179) (3,958) (3,944) (3,046)
Other income (expense), net........ 1,465 484 556 38 (66) (140) (140)
Income tax expense................. (4,864) (1,806) (5,080) (7,339) (999) (2,339) (2,678)
-------- -------- -------- -------- ------- -------- --------
Income from continuing
operations....................... $ 7,947 $ 4,642 $ 11,311 $ 16,976 $ 1,631 $ 4,347 $ 5,812
======== ======== ======== ======== ======= ======== ========
Earnings per share from continuing
operations....................... $ 0.66 $ 0.37 $ 0.77 $ 0.88 $ 0.13 $ 0.24 $ 0.27
Weighted average shares
outstanding...................... 12,067 12,629 14,724 19,336 12,659 18,421 21,921
OTHER DATA:
EBITDA(a).......................... $ 32,301 $ 34,221 $ 53,820 $ 60,925 $11,051 $ 16,810 $ 18,455
Depreciation and amortization...... 12,281 14,268 20,824 25,081 4,463 6,180 6,919
Capital expenditures............... 14,885 19,607 32,690 -- 5,296 7,270 --

MARCH 31, 1996
--------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)

BALANCE SHEET DATA:
Total assets............................................................................ $495,895 $ 608,148
Net working capital..................................................................... 147,363 219,052
Long-term debt.......................................................................... 124,838 124,838
Stockholders' investment................................................................ 232,402 345,015

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

(a) EBITDA, or "earnings from continuing operations before interest expense,
interest income, income taxes, extraordinary items, depreciation and
amortization", is a supplemental financial measurement used by the Company
in the evaluation of its business and should not be construed as an
alternative to income from operations or to cash flow from operations and is
presented solely as a supplemental disclosure.

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RISK FACTORS

An investment in the Common Stock offered hereby involves a high degree of
risk. The following factors should be carefully considered, together with the
information provided elsewhere in this Prospectus, in evaluating an investment
in the Common Stock offered hereby.

DEPENDENCE ON VOLATILE OIL AND GAS INDUSTRY

The demand for and pricing of the Company's products and services are
substantially dependent upon domestic and worldwide levels of exploration and
production, including the number of oil and gas wells being drilled, the depth
and drilling conditions of the wells, the number of well completions and the
level of workover activity. Exploration and development activity is largely
dependent on prevailing oil and natural gas prices. Prices for oil and natural
gas have historically been extremely volatile and have reacted to actual and
perceived changes in demand and supply of oil and natural gas, domestic and
worldwide economic conditions and political instabilities in oil producing
countries.

The demand for the Company's tubular products and contract drilling
services are particularly affected by the price of natural gas and the level of
oil and gas exploration activity, while the demand for the Company's artificial
lift equipment is directly dependent on oil production activity. Sales of the
Company's artificial lift products are currently primarily concentrated in North
America and are affected by the level of oil production from older wells in
addition to oil prices. The Company's international contract drilling services
are affected by the level of exploration activity in the countries in which it
provides those services, while its domestic drilling operations are materially
dependent on the level of exploration activity in the U.S. Gulf Coast and
domestic natural gas prices. Exploration and production activity is also
affected by worldwide economic conditions, supply and demand for oil and natural
gas, seasonal trends and the political stability of oil producing countries.

An agreement for the resumption of export sales of oil from Iraq was
recently reached with the United Nations. This agreement is expected to result
in a marginal increase in the worldwide supply of oil. The impact of the
resumption of export sales of oil by Iraq on the worldwide price of oil and its
related effect on the markets which the Company serves is uncertain.

Prices for oil and natural gas are expected to continue to be volatile and
to affect the demand for and pricing of the Company's products and services. A
material decline in natural gas or crude oil prices could materially adversely
affect the demand for, and sales of, the Company's products and services.
Industry conditions will continue to be influenced by numerous factors over
which the Company has no control. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".

RISKS OF FOREIGN OPERATIONS

During 1995, 1994 and 1993, approximately 38%, 36% and 40%, respectively,
of the Company's total revenues were earned outside the United States based upon
the ultimate destination in which products or services were sold, shipped or
provided to the customer by the Company. Operations and sales in foreign markets
are subject to substantial competition from large multi-national corporations
and government-owned entities and to a variety of local laws and regulations
requiring qualifications, use of local labor, the provision of financial
assurances or other restrictions and conditions on operations. Foreign
operations are also subject to risks associated with doing business outside the
United States, including risk of war, civil disturbances and governmental
activities that may limit or disrupt markets, restrict the movement of funds or
result in the deprivation of contract rights or the taking of property without
fair compensation. Foreign operations may also subject the Company to risks
relating to fluctuations in currency exchange rates. However, to date, currency
fluctuations have not had a material adverse impact on the Company.

The Company's current and proposed Nigerian operations are also subject to
certain risks relating to political instability in Nigeria and the possibility
of the adoption of legislation by the U.S. Congress, which, if enacted, could
restrict the ability of the Company and its customers to engage in trade and
invest in Nigeria. To date, the Company has not been materially affected by the
political instability in Nigeria. Other rig contractors, however, have in the
past experienced work stoppages and delays relating to civil unrest in

8
10

Nigeria. In addition, although no legislation materially restricting United
States trade with Nigeria has been enacted to date, there is currently pending
before the United States Congress legislation that would restrict future trade
and investment in Nigeria. If such legislation were to be enacted, the Company's
rig operations in Nigeria could either be required to be terminated or
materially curtailed. The legislation could also prevent the Company from
operating the Noble rigs if they are acquired. In addition to reducing or
eliminating a source of revenue and income, the Company could be required to
redeploy its rigs out of Nigeria. The costs of such redeployment might not be
reimbursable, and such costs, together with the costs associated with a
termination of operations in Nigeria, could have a material adverse impact on
results. Revenues and operating income attributable to the Company's Nigerian
operations for the year ended December 31, 1995, were $8.8 million and $2.4
million, respectively. Revenues and operating income attributable to the
Company's Nigerian operations for the three months ended March 31, 1996, were
$2.4 million and $0.5 million, respectively.

The Company currently has drill pipe and other products manufactured for it
by OCTL in India under a long-term exclusive manufacturing arrangement with
OCTL. Operations in India are subject to various political and economic risks as
well as financial risks with respect to OCTL. The Company has sought to minimize
the risks of this operation through its manufacturing arrangement and insurance.
In this regard, the Company's arrangement with OCTL is structured to minimize
the Company's risk to its initial $8 million deposit payment with OCTL, the raw
materials provided to OCTL for the manufacture of the Company's products and
working capital associated with the operations.

The Company also has manufacturing operations in Mexico, Brazil and China
and, in addition to Nigeria, has rigs operating in Peru and Argentina. The
Company's operations in each of these countries are subject to various political
and economic conditions which could disrupt operations. The Company generally
seeks to obtain, where economical, insurance against certain political risks and
attempts to structure its contracts and arrangements in the foreign countries in
which it operates in a manner that would minimize the exposure of its assets to
losses in those countries. Such efforts include structuring substantially all of
its sales and service contracts to be in United States dollars and utilizing
lease arrangements and joint ventures for manufacturing facilities, such as the
one with OCTL, so as not to require substantial investment of funds in fixed
assets in foreign countries. Although the Company believes that its exposure to
foreign risks is not materially greater than that of its competitors, there can
be no assurance that disruptions will not occur in the Company's foreign
operations or that any losses that do occur will be covered by insurance. See
"Business -- Foreign Operations".

OPERATING RISKS AND INSURANCE

The Company's operations are subject to hazards inherent in the oil and gas
industry, such as fires, explosions, craterings, blowouts and oil spills, that
can cause personal injury or loss of life, damage to or destruction of property,
equipment, the environment and marine life, and suspension of operations. In
addition, claims for loss of oil and gas production and damages to formations
can occur in the workover business. The Company's offshore operations also are
subject to hazards inherent in marine operations, such as capsizings,
groundings, collisions, damage from weather, sea damage or unsound location.
Litigation arising from an occurrence at a location where the Company's products
or services are used or provided may in the future result in the Company being
named as a defendant in lawsuits asserting potentially large claims. See
"Business -- Insurance".

The Company maintains insurance coverage that it believes to be customary
in the industry against these hazards and, whenever possible, obtains agreements
from customers providing for indemnification against liability to others.
However, insurance and indemnification agreements may not provide complete
protection against casualty losses. The Company is also partially self-insured
for marine workers' compensation claims and has elected to opt out of certain
mandatory workers' compensation pools and secure workers compensation coverage
through outside insurance. Although the Company believes that these actions have
helped the Company minimize the cost of its insurance, any increase in the
number or amount of claims or losses could require greater cash payments and
reserves by the Company and could result in the Company having higher rates,
deductibles and retainages for its insurance coverage. There can be no assurance
that the Company will be able to maintain adequate insurance in the future at
rates it considers reasonable. Further, there can be no

9
11

assurance that insurance will continue to be available on terms as favorable as
those for its existing arrangements. The occurrence of an adverse claim in
excess of the coverage limits maintained by the Company could have a material
adverse effect on the Company's financial condition and results of operations.
See "Business -- Insurance".

RISKS OF ENVIRONMENTAL COSTS AND LIABILITIES

The Company's operations are subject to governmental laws and regulations
relating to the protection of the environment and to public health and safety.
Many of the Company's operations take place in or near ecologically sensitive
areas, such as wetlands, beaches and inland waterways. Numerous federal and
state environmental laws regulate drilling activities and impose liability for
causing pollution in inland, coastal and offshore waters. State and federal
legislation also provide special protection to water quality and animal and
marine life that could be affected by the Company's activities. The regulations
applicable to the Company's operations include certain regulations controlling
the discharge of materials into the environment, requiring removal or
remediation of pollutants and imposing civil and criminal penalties for
violations. Some of the statutory and regulatory programs that apply to the
Company's operations also authorize private suits, the recovery of natural
resource damages by the government, injunctive relief and cease and desist
orders.

Environmental regulation has led to higher drilling costs, a more difficult
and lengthy well permitting process and, in general, has adversely affected many
oil companies' decisions to drill wells in the U.S. Gulf Coast area and, in some
cases, in international markets. Prohibitions on drilling in some areas are
likely to remain in effect or even be extended.

Laws and regulations protecting the environment have generally become more
stringent in recent years and could become more stringent in the future. Some
environmental statutes impose strict liability, rendering a person or entity
liable for environmental damage without regard to negligence or fault on the
part of such person or entity. As a result, the Company could be liable, under
certain circumstances, for environmental damage caused by others or for acts of
the Company that were in compliance with all applicable laws at the time such
acts were performed. See "Business -- Contract Drilling -- Government Regulation
and Environmental Matters" and "Business -- Government Regulation and
Environmental Matters".

SUBSTANTIAL COMPETITION

Competition in the oilfield service and equipment segments of the oil and
gas industry is intense and, in certain markets, is dominated by a small number
of large competitors, many of which have greater financial and other resources
than the Company. See "Business -- Oilfield Equipment -- Tubular
Products -- Competition", "Business -- Oilfield Equipment -- Artificial Lift and
Completion Tool Equipment -- Competition" and "Business -- Contract
Drilling -- Competition and Customers."

DIVIDEND POLICY

10
12

THE COMPANY

The Company was incorporated in 1972 as a Massachusetts corporation and was
reincorporated in Delaware in 1980. The Company's corporate office is located at
5 Post Oak Park, Suite 1760, Houston, Texas 77027-3415, and its telephone number
is (713) 297-8400.

RECENT DEVELOPMENTS

TCA ACQUISITION

On June 21, 1996, the Company entered into an agreement to acquire TCA for
500,000 shares of Common Stock, $15 million cash and assumed debt of
approximately $15 million. The stockholders of TCA may elect to receive up to $5
million of the cash consideration in the form of a note due January 1997. TCA is
a manufacturer of premium casing used in oil and gas exploration and
development. TCA reported revenues and operating income for the year ended
December 31, 1995, of $49.2 million and $3.7 million, respectively, and revenues
and operating income for the quarter ended March 31, 1996, of $12.5 million and
$1.2 million, respectively. The Company intends to integrate the operations of
TCA with those of its tubular products division and to offer TCA's line of
premium casing products in conjunction with the Company's own line of engineered
connections and premium tubulars. TCA will provide the Company with significant
incremental production capacity with its current operating rate of approximately
50%. The Company expects to benefit from the TCA acquisition through
manufacturing cost savings, product line synergies, and a consolidation of
overhead.

Pursuant to the terms of the TCA acquisition agreement, the Company has
agreed to file a shelf registration statement for the resale and distribution of
the shares of Common Stock to be issued in the transaction. The Company,
however, is not required to file such registration statement until 45 days after
the date of this Prospectus, and no sales of shares under such registration
statement may be made until 90 days after the date of this Prospectus. The
acquisition of TCA is subject to various conditions, including the receipt of
all required regulatory approvals and the expiration of all waiting periods, and
will be financed with a portion of the net proceeds of this Offering. Although
there can be no assurance that the TCA transaction will close, the Company
currently anticipates that the acquisition will be consummated shortly after the
receipt of such regulatory approvals.

NOBLE BARGE RIG ACQUISITION; CHEVRON CONTRACT

On June 21, 1996, the Company entered into an agreement with Noble to
acquire two barge drilling rigs that are currently operating in Nigeria. The two
rigs to be acquired were substantially upgraded by Noble for

11
13

international drilling operations in 1990 and 1991 at a cost in excess of $50
million and have been working under contract since 1991. The rigs are designed
to drill wells to depths of up to 30,000 feet in transition zones, typically
shallow inland, coastal and offshore waters. The consideration for the two rigs
will be $32 million consisting of $24.5 million in cash and a $7.5 million drill
pipe credit. The Company is currently negotiating long-term drilling contracts
with Shell Nigeria for the operation of the rigs after closing. The Company has
also recently entered into a letter of intent with Chevron for the redeployment
of one of the Company's rigs in the United States (Rig No. 60) to Nigeria to
operate for Chevron under a three year contract. The cost to retrofit the
Company's rig for international operations is expected to be approximately $9
million. Such costs are expected to be funded with a portion of the net proceeds
of this Offering.

The acquisition of the Noble rigs is being pursued to increase the
Company's international barge drilling rig fleet at what the Company believes
are attractive prices and terms. The Chevron contract similarly provides the
Company with the opportunity to retrofit one of its currently stacked U.S. Gulf
Coast barge rigs for international drilling operations with the costs being
financed through the payments received under a long-term contract with Chevron.
Under both circumstances, the Company's objectives are to expand and enhance its
international fleet to take advantage of anticipated improvements in
international demand for barge drilling rigs as reserves in the transition zones
of the world's oil and gas producing countries are developed. The acquisition of
the Noble rigs is subject to various conditions, including the Company's receipt
of satisfactory drilling contracts with Shell Nigeria and the absence of any
material adverse changes affecting the rigs or the ability of the Company to
operate the rigs in Nigeria. The proposed contract with Chevron for an
additional rig in Nigeria will also be subject to various conditions, including
local governmental approval of the contract. Although there can be no assurance
that the Noble or Chevron transactions will close, the Company currently
anticipates that the Noble acquisition will be consummated in June or July 1996
and that the Chevron contract will begin in the fourth quarter of 1996. The
Company intends to finance the Noble acquisition with its existing cash and
borrowings under its working capital facility. The Company intends to reduce
such indebtedness and to finance the retrofit and redeployment of a fourth barge
rig to Nigeria to operate under the Chevron contract with a portion of the net
proceeds of this Offering. As noted above in "Risk Factors -- Risks of Foreign
Operations", operations in Nigeria are subject to various risks, including
political instability in Nigeria and the possibility of certain trade
legislation affecting the ability of the Company to operate in Nigeria.

ENERPRO ACQUISITION

On May 3, 1996, the Company acquired ENERPRO, a provider of premium
engineered connections, for a total consideration of 312,714 shares of Common
Stock and the assumption of $3.1 million in indebtedness. The ENERPRO
acquisition completed the Company's Atlas Bradford line of premium connections.
ENERPRO's technologically advanced designs filled significant gaps in the
Company's premium connection product line. This broader line is expected to
allow the Company to penetrate new markets without the substantial costs and
time delays inherent in the introduction of any new premium connection. The
ENERPRO acquisition has resulted in the Company becoming the largest provider of
oilfield premium connections in North America and has provided the Company with
a manufacturing base in Aberdeen, Scotland, from which the Company is now
offering its line of premium engineered connections to the North Sea and
European markets. For the year ended December 31, 1995, ENERPRO reported
revenues and operating income of $18.1 million and $0.8 million, respectively.
ENERPRO's revenues and operating income for the first quarter of 1996 were $5.1
million and $0.3 million, respectively.

OCTL MANUFACTURING AGREEMENT

12
14

objective. This expansion is intended to substantially increase the Company's
sales into the growing Eastern Hemisphere markets, which over the last few years
have represented less than 5% of the Company's total revenues. Manufacturing of
casing at OCTL's facility on behalf of the Company began May 1, 1996, with drill
pipe production expected to begin in the third quarter of 1996. The Company
currently expects its sale of products manufactured at the facility will
gradually increase through the remainder of the year.

Under the terms of the OCTL agreement, the Company has a right to terminate
the agreement on an annual basis. The agreement is for an initial five-year term
and is renewable at the sole option of the Company for successive five-year
terms. The Company considers the OCTL facility and its arrangement with OCTL an
important component of the Company's long-term manufacturing operations. The
agreement may be terminated by OCTL only under certain limited circumstances,
including, beginning December 31, 2000, if certain minimum orders have not been
placed through OCTL and minimum payments have not been made by the Company.
Under the terms of the agreement with OCTL, the Company made a one-time payment
of $8 million for the exclusive right to have Grant Prideco's products
manufactured at the facility. The Company is also required to pay all direct
operating expenses relating to the facility, including the cost of inventory and
raw materials used for the manufacture of the Company's products, as well as
certain other payments associated with the use of the facility.

USE OF PROCEEDS

The net proceeds to the Company from the sale of Common Stock being offered
hereby, assuming an offering price of $ per share, are estimated to be
$ million ($ million if the Underwriters' over-allotment option is
exercised in full). Of such proceeds to the Company, approximately $30 million
will be used to fund the Company's acquisition and repayment of debt of TCA, up
to $24.5 million will be used to reduce indebtedness under the Company's working
capital lines of credit that is expected to be incurred as a result of the Noble
rig acquisition and $9 million will be used to retrofit a fourth barge rig to
meet international drilling standards for use by Chevron in Nigeria. The
remainder of the net proceeds will be used for general corporate purposes,
including acquisitions, production expansion, working capital and debt
reduction. To the extent the above transactions are not consummated, the funds
allocated for such purposes will be used for general corporate purposes.

Pending the use of the net proceeds to the Company from this Offering, such
funds will be used to reduce the Company's working capital lines of credit or
invested in short-term, interest-bearing, investment-grade securities. As of
June 12, 1996, the Company had outstanding approximately $35.6 million under its
existing lines of credit, bearing interest at its lender's prime rate plus
1 1/4% (9.5% at June 12, 1996).

The Company will not receive any of the net proceeds from the sale of
shares of Common Stock by the Selling Stockholder.

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15

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Common Stock is traded on the NYSE under the symbol "EVI". The
following table sets forth, for the periods indicated, the high and low sale
prices per share for the Common Stock as reported on the NYSE from June 1994 and
by the Nasdaq National Market for January through May 1994.

HIGH LOW
---- ----

Year ending December 31, 1996
First quarter..................................................... $28 7/8 $22 1/4
Second quarter (through June 20, 1996)............................ 35 25 3/4
Year ended December 31, 1995
First quarter..................................................... $14 5/8 $11 7/8
Second quarter.................................................... 20 5/8 13 1/4
Third quarter..................................................... 24 17 3/8
Fourth quarter.................................................... 25 1/4 18 3/8
Year ended December 31, 1994
First quarter..................................................... $16 1/4 $12
Second quarter.................................................... 14 3/4 11 1/4
Third quarter..................................................... 15 1/4 12 5/8
Fourth quarter.................................................... 14 3/4 11 1/4

The closing sale price of the Common Stock on June 20, 1996, as reported on
the NYSE, was $33 3/4. As of June 15, 1996, the Company had approximately 1,050
stockholders of record.

The Company has not paid any dividends on the Common Stock since 1984 and
currently anticipates that, for the foreseeable future, any earnings will be
retained for the development of the Company's business. The declaration of all
dividends is at the discretion of the Company's Board of Directors. The
Company's dividend policy will be reviewed by the Board of Directors at such
future time as may be appropriate in light of relevant factors at the time;
however, the Company and the Company's principal operating subsidiaries are
subject to certain prohibitions on the declaration and payment of dividends
under the terms of their existing credit facilities. In addition, under the
terms of the Company's 10 1/4% Senior Notes due 2004 ("Senior Notes"), the
Company is limited in the amount of funds it may distribute as dividends or
distributions to stockholders to an amount generally equal to (a) the sum of (i)
its earnings subsequent to December 31, 1993, (ii) the net consideration
received from certain stock issuances since March 1994, (iii) the value of
certain investments in unrestricted subsidiaries redesignated as restricted
subsidiaries and (iv) $5 million, less (b) the amount of dividends,
distributions and other restricted payments made by the Company since March
1994. As of May 31, 1996, the Company was limited in the amount of dividends,
distributions and other restricted payments that could be made by it to
approximately $148 million.

14
16

CAPITALIZATION

The following table sets forth the historical consolidated capitalization
of the Company at March 31, 1996, and as adjusted to reflect the issuance by the
Company of 3,000,000 shares of Common Stock offered hereby and the pro forma
application of the net proceeds therefrom. This table should be read in
conjunction with the Consolidated Financial Statements and the Pro Forma
Condensed Consolidated Financial Statements of the Company, including the notes
thereto, contained elsewhere in this Prospectus.

MARCH 31, 1996
--------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)

Short-term borrowings and current portion of long-term debt............. $ 24,897 $ 7,951
Long-term debt.......................................................... 124,838 124,838
------- -------
Total debt.................................................... 149,735 132,789
------- -------
Stockholders' investment:
Common stock, $1.00 par value, 40,000,000 shares authorized;
18,542,183 shares issued and outstanding (22,042,183 shares as
adjusted)(a)....................................................... 18,542 22,042
Capital in excess of par.............................................. 158,297 267,410
Retained earnings..................................................... 64,514 64,514
Cumulative foreign currency adjustment................................ (7,047) (7,047)
Treasury stock, at cost............................................... (1,904) (1,904)
------- -------
Total stockholders' investment................................ 232,402 345,015
------- -------
Total capitalization.................................................... $ 382,137 $ 477,804
======= =======

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

(a) Does not include (i) 312,714 shares of Common Stock issued in May 1996 for
the acquisition of ENERPRO and (ii) an aggregate of 684,000 shares of
Common Stock subject to outstanding options granted under the Company's
1981 Employee Stock Option Plan, 1992 Employee Stock Option Plan and
Amended and Restated Non-Employee Director Stock Option Plan. See
"Description of Capital Stock".

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17

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following tables set forth the unaudited pro forma condensed
consolidated balance sheet as of March 31, 1996, and statements of income for
the Company for the year ended December 31, 1995, and the three months ended
March 31, 1996, after giving effect to (i) the Company's acquisition on June 30,
1995, of Prideco, for consideration of approximately 2.25 million shares of
Common Stock, (ii) the proposed acquisition of TCA and (iii) this Offering. The
unaudited pro forma condensed consolidated statements of income assume that the
Prideco and TCA acquisitions and this Offering occurred as of January 1, 1995,
and the unaudited pro forma condensed consolidated balance sheet assumes that
the TCA acquisition and this Offering occurred as of March 31, 1996. The pro
forma financial information also assumes that the TCA acquisition will be
accounted for using the purchase method of accounting. The Prideco acquisition
was accounted for using the purchase method of accounting.

The unaudited pro forma condensed consolidated financial statements are
based upon estimates and assumptions related to the accounting for the proposed
TCA acquisition which are subject to subsequent determination and more detailed
analyses, appraisals and evaluations of the specific assets and liabilities. The
final allocation of the purchase price of the acquisition may differ from the
amounts contained in these unaudited pro forma condensed consolidated financial
statements.

The following unaudited pro forma condensed consolidated statements should
be read in conjunction with (i) the Consolidated Financial Statements of the
Company and the related notes thereto included elsewhere herein, (ii) the
historical financial statements of TCA for the year ended December 31, 1995, and
the quarter ended March 31, 1996, and the related notes thereto, included in the
Company's Current Report on Form 8-K dated June 24, 1996, which is incorporated
herein by reference, and (iii) the audited consolidated financial statements of
Prideco for the fiscal year ended June 30, 1995, and related notes filed with
the Company's Current Report on Form 8-K/A dated August 17, 1995, as amended by
Amendment No. 2 to the Form 8-K/A dated May 7, 1996, which is incorporated
herein by reference. The historical results of Prideco contained in the
unaudited pro forma condensed consolidated statement of income for the
twelve-month period ended December 31, 1995 reflects only the results of
operations for the six-month period ended June 30, 1995, the date on which the
Company acquired Prideco, which differs from the audited June 30, 1995 fiscal
year financial statements of Prideco.

The pro forma information is not necessarily indicative of the results that
might have occurred had the transactions taken place at the beginning of the
period specified and is not intended to be a projection of future results.

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18

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(IN THOUSANDS)

ENERGY PRO FORMA ADJUSTMENTS
VENTURES, INC. ------------------------------
HISTORICAL TCA TCA THIS PRO FORMA
CONSOLIDATED HISTORICAL ACQUISITION(A) OFFERING(B) CONSOLIDATED
-------------- ---------- -------------- ----------- ------------

ASSETS
Current Assets:
Cash and cash equivalents........ $ 5,924 $ 163 $(15,000)(c) $ 63,963 $ 55,050
Accounts receivable, net......... 98,450 6,428 -- -- 104,878
Inventories...................... 117,585 8,986 -- -- 126,571
Prepaid expenses and other....... 24,869 278 (212) -- 24,935
-------- ------- -------- -------- --------
Total current assets..... 246,828 15,855 (15,212) 63,963 311,434
-------- ------- -------- -------- --------
Property, plant and equipment,
net........................... 192,988 17,922 7,078 -- 217,988
Excess of cost over fair value of
net tangible assets of
businesses acquired, net...... 37,419 -- 15,130 (d) -- 52,549
Other assets..................... 18,660 117 7,400 (e) -- 26,177
-------- ------- -------- -------- --------
$495,895 $ 33,894 $ 14,396 $ 63,963 $608,148
======== ======= ======== ======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Short-term borrowings, primarily
under revolving lines of
credit........................ $ 20,772 $ 4,005 $ -- $ (20,951)(f) $ 3,826
Current maturities of long-term
debt.......................... 4,125 7,658 -- (7,658)(f) 4,125
Accounts payable................. 50,828 7,944 -- -- 58,772
Other accrued liabilities........ 23,740 1,719 200 -- 25,659
-------- ------- -------- -------- --------
Total current
liabilities............ 99,465 21,326 200 (28,609) 92,382
-------- ------- -------- -------- --------
Long-term debt................... 124,838 3,166 -- (3,166)(f) 124,838
-------- ------- -------- -------- --------
Deferred income taxes, net....... 33,018 -- 6,700 (e) -- 39,718
Other liabilities................ 6,172 23 -- -- 6,195
-------- ------- -------- -------- --------
Stockholders' Investment:
Common stock..................... 18,542 63 437 (c) 3,000 22,042
Capital in excess of par value... 158,297 8,974 7,401 (c) 92,738 267,410
Retained earnings................ 64,514 342 (342)(c) -- 64,514
Cumulative foreign currency
translation adjustment........ (7,047) -- -- -- (7,047)
Treasury stock, at cost.......... (1,904) -- -- -- (1,904)
-------- ------- -------- -------- --------
Total stockholders'
investment............. 232,402 9,379 7,496 95,738 345,015
-------- ------- -------- -------- --------
$495,895 $ 33,894 $ 14,396 $ 63,963 $608,148
======== ======= ======== ======== ========

17
19

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

PRIDECO PRO FORMA
ENERGY HISTORICAL ADJUSTMENTS
VENTURES, INC. FOR THE --------------------------------
HISTORICAL SIX MONTHS ENDED TCA THIS PRO FORMA
CONSOLIDATED JUNE 30, 1995 HISTORICAL PRIDECO TCA OFFERING CONSOLIDATED
-------------- ---------------- ---------- ------- ------- -------- ------------

Revenues...................... $351,587 $ 29,548 $ 49,233 $ -- $ -- $ -- $430,368
-------- ------- ------- ------ ------- ------ --------
Costs and expenses:
Cost of sales............... 262,293 25,301 43,552 650 (g) 708 (g) -- 332,504
Selling, general and
administrative
attributable to
segments.................. 51,731 1,981 1,938 257 (h) 378 (h) -- 56,285
Corporate, general and
administrative.............. 5,123 -- -- -- -- -- 5,123
-------- ------- ------- ------ ------- ------ --------
319,147 27,282 45,490 907 1,086 -- 393,912
-------- ------- ------- ------ ------- ------ --------
Operating income (loss)....... 32,440 2,266 3,743 (907) (1,086) -- 36,456
-------- ------- ------- ------ ------- ------ --------
Other income (expense):
Interest expense............ (16,723) (700) (742) 685 (i) 742 (j) 4,438 (j) (12,300)
Interest income............. 118 -- 3 -- -- -- 121
Other, net.................. 556 (1,502) (433) 1,417 (k) -- -- 38
-------- ------- ------- ------ ------- ------ --------
(16,049) (2,202) (1,172) 2,102 742 4,438 (12,141)
-------- ------- ------- ------ ------- ------ --------
Income (loss) before income
taxes....................... 16,391 64 2,571 1,195 (344) 4,438 24,315
(Provision) benefit for income
taxes....................... (5,080) (378) (30) (418)(l) 120 (l) (1,553)(l) (7,339)
-------- ------- ------- ------ ------- ------ --------
Income (loss) from continuing
operations.................. $ 11,311 $ (314) $ 2,541 $ 777 $ (224) $ 2,885 $ 16,976
======== ======= ======= ====== ======= ====== ========
Earnings per share from
continuing operations....... $ 0.77 $ 0.88
======== ========
Weighted average shares
outstanding................. 14,724 19,336
======== ========
Other Data:
EBITDA(m)................... $ 53,820 $ 60,925
Depreciation and
amortization.............. 20,824 25,081

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20

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

PRO FORMA
ENERGY ADJUSTMENTS
VENTURES, INC. -----------------------
HISTORICAL TCA THIS PRO FORMA
CONSOLIDATED HISTORICAL TCA OFFERING CONSOLIDATED
-------------- ---------- ----------- -------- ------------

Revenues.............................. $110,042 $ 12,463 $ -- $ -- $122,505
-------- ------- ----- ----- --------
Costs and expenses:
Cost of sales....................... 83,540 10,765 177 (g) -- 94,482
Selling, general and administrative
attributable to segments......... 14,368 520 95 (h) -- 14,983
Corporate, general and
administrative................... 1,364 -- -- -- 1,364
-------- ------- ----- ----- --------
99,272 11,285 272 -- 110,829
-------- ------- ----- ----- --------
Operating income (loss)............... 10,770 1,178 (272) -- 11,676
-------- ------- ----- ----- --------
Other income (expense):
Interest expense.................... (3,973) (301) 301 (j) 898 (j) (3,075)
Interest income..................... 29 -- -- -- 29
Other, net.......................... (140) -- -- -- (140)
-------- ------- ----- ----- --------
(4,084) (301) 301 898 (3,186)
-------- ------- ----- ----- --------
Income before income taxes............ 6,686 877 29 898 8,490
Provision for income taxes............ (2,339) (15) (10)(l) (314)(l) (2,678)
-------- ------- ----- ----- --------
Income from continuing operations..... $ 4,347 $ 862 $ 19 $ 584 $ 5,812
======== ======= ===== ===== ========
Earnings per share from continuing
operations.......................... $ 0.24 $ 0.27
======== ========
Weighted average shares outstanding... 18,421 21,921
======== ========
Other Data:
EBITDA(m)........................... $ 16,810 $ 18,455
Depreciation and amortization....... 6,180 6,919

19
21

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

GENERAL

The following notes set forth the assumptions used in preparing the
unaudited pro forma condensed consolidated financial statements. The pro forma
adjustments are based on estimates made by the Company's management using
information currently available. For purposes of preparing these unaudited pro
forma condensed consolidated financial statements, certain assumptions have been
made in allocating the purchase price of TCA to the assets to be acquired and
liabilities to be assumed. As a result, the pro forma adjustments discussed
below are subject to change pending the completion of the acquisition and of the
detailed evaluation and appraisal of the assets to be acquired and a detailed
evaluation of liabilities to be assumed.

PRO FORMA ADJUSTMENTS

The adjustments to the accompanying unaudited pro forma condensed
consolidated balance sheet as of March 31, 1996, are described below:

(a) To adjust the TCA assets to be acquired to their estimated fair
market value and to adjust the TCA liabilities to be assumed.

(b) To record the sale by the Company of 3,000,000 shares of Common
Stock at $33 3/4 per share in this Offering, after deducting estimated
underwriting discounts and commissions and offering expenses of $4,703,000
and $450,000, respectively.

(c) To record the issuance by the Company of 500,000 shares of Common
Stock at a price of $33 3/4 per share and payment of $15 million cash for
the acquisition of TCA and to eliminate TCA's historical stockholders'
investment. Under the terms of the agreement for the acquisition of TCA,
the TCA stockholders may elect to receive up to $5 million of the cash
consideration in the form of a note due January 1997. The unaudited pro
forma balance sheet assumes the election is not made.

(d) To record the estimated excess of cost over fair value of net
tangible assets of TCA to be acquired.

(e) To record the deferred tax assets of $7.4 million relating to tax
benefits of TCA and to record the deferred tax liability of $6.7 million
relating to differences in the book and tax basis of the net assets of TCA.

(f) To record the assumed reduction of indebtedness of TCA and the
Company through the application of a portion of the net proceeds to the
Company from this Offering.

The adjustments to the accompanying unaudited pro forma condensed
consolidated statements of income are described below:

(g) To adjust the historical amounts for changes in depreciation
expense as a result of the purchase price allocations to property, plant
and equipment of Prideco and the assumed purchase price allocations to
property, plant and equipment of TCA.

(h) To record amortization expense relating to the estimated excess of
cost over fair value of net tangible assets acquired in connection with the
acquisition of Prideco and the proposed TCA acquisition.

(i) To reduce interest expense to reflect the retirement of Prideco's
outstanding debt at the date of acquisition, including revolving lines of
credit.

(j) To reduce interest expense of TCA and of the Company through the
assumed reduction of indebtedness from the application of a portion of the
net proceeds to the Company from this Offering.

(k) To eliminate expenses incurred by Prideco relating to the
Company's acquisition of Prideco.

(l) To record the income tax provision related to the effect of the
pro forma adjustments.

(m) EBITDA, or "earnings from continuing operations before interest
expense, interest income, income taxes, extraordinary items, depreciation
and amortization", is a supplemental financial measurement used by the
Company in the evaluation of its business and should not be construed as an
alternative to income from operations or to cash flow from operations and
is presented solely as a supplemental disclosure.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following selected historical consolidated financial information for
each of the five years ended December 31, 1995, and the unaudited consolidated
financial information for the three-month periods ended March 31, 1995 and 1996,
are derived from the Company's Consolidated Financial Statements. The statement
of operations data for the three months ended March 31, 1996 is not necessarily
indicative of results that may be expected for the year ending December 31,
1996. The consolidated financial information for the three-month periods ended
March 31, 1995 and 1996 are unaudited and, in the opinion of management, include
all adjustments that are of a normal recurring nature and necessary for a fair
presentation. The selected financial data set forth in the table below should be
read in conjunction with the Consolidated Financial Statements, including the
notes thereto, contained in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------------------ ---------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- ------- ---------

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Revenues.......................... $177,794 $190,458 $246,017 $248,537 $351,587 $72,660 $110,042
Cost of sales..................... 132,960 148,881 181,742 181,137 262,293 53,156 83,540
Selling, general and
administrative expenses......... 35,002 36,965 45,720 47,931 56,854 12,850 15,732
-------- -------- -------- -------- -------- ------- --------
Operating income.................. 9,832 4,612 18,555 19,469 32,440 6,654 10,770
Interest income (expense), net.... (2,274) (5,033) (7,209) (13,505) (16,605) (3,958) (3,944)
Other income (expense), net....... 1,045 759 1,465 484 556 (66) (140)
Income tax expense................ (2,774) (57) (4,864) (1,806) (5,080) (999) (2,339)
-------- -------- -------- -------- -------- ------- --------
Income from continuing
operations...................... $ 5,829 $ 281 $ 7,947 $ 4,642 (a) $ 11,311 $ 1,631 $ 4,347
======== ======== ======== ======== ======== ======= ========
Earnings per share from continuing
operations...................... $ 0.51 $ 0.02 $ 0.66 $ 0.37 $ 0.77 $ 0.13 $ 0.24

DECEMBER 31, MARCH 31,
------------------------------------------------------------ ---------
1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

BALANCE SHEET DATA:
Total assets..................... $185,022 $230,596 $277,231 $344,234 $491,060 $495,895
Long-term debt................... 5,878 37,304 38,982 125,690(b) 126,849 124,838
Redeemable common stock(c)....... 1,000 -- -- -- -- --
Stockholders' investment......... 101,123 101,156 107,736 110,913 228,066(d) 232,402
Cash dividends per share......... -- -- -- -- -- --

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

(a) Before nonrecurring charges of $3.8 million, after tax, attributable to the
prepayment penalty on the $34 million of 12.25% senior notes due 1997.

(b) Reflects the issuance of $120 million of Senior Notes in March 1994.

(d) Includes the issuance of 2.25 million shares of Common Stock for the
acquisition of Prideco on June 30, 1995, and 3.45 million shares of Common
Stock in a public offering in September 1995.

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23

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

The following analysis of the financial condition and results of operations
of the Company should be read in conjunction with the Company's Consolidated
Financial Statements, including the notes thereto, included elsewhere in this
Prospectus.

GENERAL

The Company is an international manufacturer and supplier of oilfield
equipment and contract drilling services. The Company manufactures and markets
drill pipe and premium tubular products and production equipment through its
oilfield equipment segment and provides contract drilling and workover services
through its contract drilling segment. In recent periods, the Company has
benefited from the continuing consolidation in the markets in which it competes,
as well as from increased demand for tubular products due to a decline in excess
inventories of used drill pipe.

The demand for the Company's tubular products and contract drilling
services are particularly affected by the price of natural gas and the level of
oil and gas exploration activity, while the demand for the Company's artificial
lift equipment is directly dependent on oil production activity. Sales of the
Company's artificial lift products are currently concentrated in North America
and are affected by the level of oil production from older wells in addition to
oil prices. The Company's international contract drilling services are affected
by the level of exploration activity in the countries in which it provides those
services, while its domestic drilling operations are materially dependent on the
level of exploration activity in the U.S. Gulf Coast and domestic natural gas
prices. Exploration and production activity is also affected by worldwide
economic conditions, supply and demand for oil and natural gas, seasonal trends
and the political stability of oil producing countries.

The Company has achieved significant growth in recent years through a
consistent strategy of focused acquisitions and internal development. This
strategy, combined with a material improvement in the demand for drill pipe due
to a decline in the worldwide inventory of used drill pipe and increased
international demand, has resulted in significantly higher revenues and
operating income. The Company has also begun to see improvements in the premium
tubular markets due in large part to increased offshore drilling and
international activity. In an effort to take advantage of this market trend, the
Company recently completed the acquisition of ENERPRO, a manufacturer of premium
threads and thread connections, for 312,714 shares of Common Stock and the
assumption of approximately $3.1 million in indebtedness. The operations of
ENERPRO are being integrated with those of the Company's tubular division, and
the Company expects that sales of premium tubular connections should materially
increase as a result of this acquisition. The Company is also seeking to expand
the range of its premium tubular product line to add a broader line of premium
casing not currently provided by the Company through its proposed acquisition of
TCA. The TCA acquisition is expected to benefit the Company's premium tubular
business by combining the Company's current threading technology with TCA's
premium casing manufacturing capabilities and eliminating duplicative costs.

Operating income for the first quarter of 1996 was $10.8 million as
compared to $6.7 million for the first quarter of 1995. The 62% increase in
operating income for the first quarter of 1996 as compared to the first quarter
of 1995 was primarily attributable to increased sales and margins for drill pipe
and other tubular products. The increase attributable to the improvement in the
tubular market was partially offset by transitional costs associated with the
Company's decision to concentrate on product design and manufacturing in its
artificial lift and production equipment division and the related sale of its
United States retail distribution system in February 1996. The Company expects
that its artificial lift and production equipment division should begin to
realize the benefits of these actions as the year progresses.

The Company's overall domestic rig utilization was up for the first quarter
of 1996. The Company's contract drilling segment experienced higher domestic
demand and utilization for its workover rigs and reduced utilization of its
drilling rigs in the first quarter of 1996 as compared to the first quarter of
1995. The decline in the number of drilling rigs operating resulted in a
decrease in average margins for services performed in this segment. This segment
was also affected by the high costs relating to its Argentina

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operations and lower operating income in Peru due to the curtailment of
operations by the Company's customer in Peru. The Company is taking action to
improve the results of its operations in Argentina through the addition of
Company owned rig mobilization equipment in Argentina. The proposed addition of
three rigs in Nigeria is also expected to substantially increase the Company's
international drilling revenues and income during the latter part of 1996.
Overall, the Company believes it is well positioned to benefit from any
increased drilling activity in the inland and offshore waters in the U.S. Gulf
Coast region and to take advantage of recently increased drilling activity in
Nigeria.

Income from continuing operations for 1995 was $11.3 million, or $0.77 per
share, on revenues of $351.6 million compared to income from continuing
operations of $4.6 million, or $0.37 per share, on revenues of $248.5 million
for 1994. Operating income for 1995 was $32.4 million compared to $19.5 million
for 1994 which represents a 67% increase. The increase in operating income for
1995 primarily reflects improvements in the Company's tubular products division
coupled with the contribution of operating income attributable to the
acquisition of Prideco on June 30, 1995. Demand for the Company's tubular
products benefited during 1995 from a continuing reduction in the worldwide
inventory of used drill pipe. These trends have resulted in increased drill pipe
demand. The improved results for 1995 also reflected generally improved industry
conditions, the acquisition of the Fluid Packed(TM) pump and sucker rod
businesses from National-Oilwell in August 1994, higher international revenues
and the Company's internal cost saving efforts.

In December 1995, the Company made a strategic decision to dispose of its
Highland Pump Company ("Highland") store distribution system in the United
States, which has been a part of the artificial lift and completion tool
equipment division. This decision reflected the Company's desire to focus its
efforts on manufacturing and to eliminate the substantial cost associated with
serving as a distributor in the United States market. In February 1996, the
Company completed the sale of these operations to Continental Emsco Company
("Continental Emsco") for approximately $3 million in cash, a $4 million vendor
credit with Continental Emsco for future equipment needs of the Company and a
$0.5 million note receivable. The consideration received in the sale
approximated the net book value of the assets sold, resulting in no material
gain or loss.

The disposition by the Company of its U.S. store system provided the
Company with the ability to reduce its work force by over 170 employees,
eliminate the overhead cost of maintaining its own store distribution network
and reduce inventory costs in the U.S. In connection with the disposition,
Continental Emsco was appointed as a non-exclusive distributor in the U.S. for
most of the Company's artificial lift division U.S. manufactured products as
well as an exclusive distributor of the Company's RotaFlex products in the U.S.
The Company believes that this distribution arrangement, together with
arrangements that the Company has with other major distributors, will permit a
broader distribution of the Company's products on a more cost effective basis.
The Company has retained its Canadian distribution system that is used to
service and support its Corod and other product lines.

The Company currently expects that 1996 results will continue to benefit
from strong tubular sales and cost reductions at its production equipment
division and from the Prideco and ENERPRO acquisitions. The proposed TCA and
Noble acquisitions and redeployment of a fourth rig to Nigeria are also expected
to result in increased revenue and income. Results, however, will be dependent
on market conditions, in particular the level of drilling activity in the U.S.
Gulf Coast and demand for drill pipe and other tubular products. Accordingly,
there can be no assurance as to future results or profitability.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995.

For the three months ended March 31, 1996, net income more than doubled to
$4.3 million, or $0.24 per share, on revenues of $110.0 million as compared to
net income of $1.6 million, or $0.13 per share on revenues of $72.7 million for
the first quarter of 1995. The increases in income and revenue were primarily
attributable to a substantial increase in drill pipe and tubular sales in the
Company's oilfield equipment segment. These increases more than offset a $1.3
million decline in operating income in the contract drilling segment.

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25

Oilfield Equipment Segment

Revenues and operating income for the oilfield equipment segment were $90.3
million and $9.5 million, respectively, for the first quarter ended March 31,
1996 as compared to $53.3 million and $4.0 million, respectively, for the first
quarter ended March 31, 1995. The increases in revenue and operating income were
primarily attributable to increased drill pipe sales.

Sales of tubular products in the first quarter of 1996 were $60.6 million
compared to $26.4 million in 1995. Operating income associated with the tubular
products division in the first quarter of 1996 was $8.1 million as compared to
$1.6 million in 1995. First quarter 1996 results reflected a 124% increase in
sales of drill pipe and a 32% increase in sales of premium tubulars. The
increase in drill pipe sales reflected the Company's June 1995 acquisition of
Prideco and an overall increase in demand for drill pipe. The increase in demand
for drill pipe reflected moderately increased drilling activity and the
continuing decline in the supply of used drill pipe inventory, against which the
Company has historically competed. The increase in sales of premium tubulars
reflected an increase in demand associated with increased natural gas and
offshore exploration and production activity. The improvement in operating
income reflected the effects of increased sales, lower average costs and
improved pricing. Price improvements, however, were partially offset by
increases in the price of raw materials, particularly "green" tubing, the
primary material used by the Company in the production of its tubular goods.
Backlog for tubular products at March 31, 1996, was approximately $81.7 million
compared to $78.4 million at December 31, 1995. The Company believes that all of
this backlog will be shipped by year end.

Results for the first quarter of 1996 in the tubular division do not
include any revenues from sales of drill pipe manufactured at the OCTL facility
in India under the manufacturing arrangement entered into with that firm in
January 1996. Sales of products manufactured at this facility on behalf of the
Company began on May 1, 1996, and the Company expects that its sales of tubular
products from this facility will gradually increase through the remainder of the
year as the utilization of this facility increases. The Company, however,
expects some production inefficiencies to occur during the initial stages of
this arrangement. The Company is also pursuing various manufacturing changes at
its tubular division intended to reduce costs and improve efficiencies. The
Company currently expects to incur approximately $1 million in additional
expenses in the third and fourth quarters of 1996 relating to these changes.

Revenues and operating income at the Company's artificial lift and
production equipment division were $30.4 million and $1.7 million, respectively,
for the quarter ended March 31, 1996, compared to $28.5 million and $2.6
million, respectively, for the quarter ended March 31, 1995. Canadian and
international sales in this division were strong during the first quarter of
1996, increasing by approximately 30% from 1995 levels. However, the improved
Canadian and international sales were more than offset by costs associated with
the Company's decision to focus the operations of this division on product
development and manufacturing. The Company is currently in the process of
reorganizing the internal management structure at this division with the
objective of increasing margins and reducing selling, general and administrative
expenses. This transition has resulted in various manufacturing inefficiencies,
transitional costs and sales disruptions associated with the restructuring of
operations and management. The Company believes that once this transition has
been completed, the division will benefit from a reduction in selling, general
and administrative expenses and improved margins.

Contract Drilling Segment

Revenues and operating income for the contract drilling segment were $19.7
million and $2.6 million, respectively, for the first quarter ended March 31,
1996, as compared to $19.4 million and $3.9 million, respectively, for the first
quarter ended March 31, 1995.

The average number of domestic barge rigs working during the first quarter
of 1996 improved by 17% from the first quarter of 1995, resulting in an increase
in domestic revenues of 10% from $12.4 million in the first quarter of 1995 to
$13.6 million in the first quarter of 1996. During the first quarter of 1996,
the Company had more workover rigs and fewer drilling rigs operating as compared
to the first quarter of 1995. The decline

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26

in the number of drilling rigs operating resulted in a decrease in average
margins for services performed in this division. Price competition with respect
to drilling rigs also affected results in this segment.

The contract drilling segment's foreign operations in Nigeria, Peru and
Argentina contributed $6.1 million in revenues for the quarter ended March 31,
1996 compared to $7 million in the first quarter of 1995. The decline in
revenues was primarily attributable to the Company's two rigs in Peru being on
standby status for most of the first quarter in 1996. The Company's Nigerian
rig, however, continued to operate profitably during the quarter and represented
approximately 39% of the international revenues for this division during the
quarter. Operating income from foreign operations in this segment declined from
approximately $1.5 million for the first quarter of 1995 to a $0.1 million loss
for the first quarter of 1996. This decline in operating income was primarily
attributable to the high costs associated with the Company's Argentina
operations.

The Company is currently seeking an expansion of its international barge
rig drilling fleet through the acquisition of two barge rigs from Noble and the
retrofit and redeployment of a fourth barge rig to Nigeria to operate for
Chevron under a three year contract. The Company is also negotiating long-term
drilling contracts with Shell Nigeria for the operation of the two barge rigs
proposed to be acquired from Noble. These transactions if completed will
significantly expand the Company's international barge drilling rig fleet and
make the Company one of the two largest providers of barge rigs in the growing
Nigerian market. International drilling revenues and income are expected to
materially increase if these transactions are completed. Operations in Nigeria,
however, are subject to various risks described below under "-- Concentration of
Business and Foreign Operations".

Demand for the Company's domestic contract drilling and workover services
will continue to be materially dependent on levels of exploration and
development in the Gulf of Mexico and coastal and inland waters. The price of
natural gas will also be a material factor affecting that demand.

General

Selling, general and administrative expenses increased approximately 22% to
$15.7 million in the first quarter of 1996 from $12.9 million in the first
quarter of 1995. The increase in 1996 was primarily attributable to the Prideco
acquisition completed in June 1995 as well as the contract drilling services in
Argentina which became operational in June 1995.

The Company's effective tax rate for the quarter ended March 31, 1996 was
approximately 35% as compared to 38% for the quarter ended March 31, 1995. The
decline in such rate primarily reflected the impact of an increase in the
Company's ability to utilize foreign tax credits.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994.

Oilfield Equipment Segment

Revenues and operating income for the oilfield equipment segment were
$271.7 million and $23.1 million, respectively, for the year ended December 31,
1995 as compared to $185.3 million and $8.2 million, respectively, for the year
ended December 31, 1994. The increases in revenues and operating income were
primarily attributable to the contributions from increased drill pipe sales and
higher prices and margins. In addition, the Company's Canadian pump sales were
higher in 1995 as compared to 1994.

The increase in sales of tubulars products in 1995 was $60.6 million
compared to $22.6 million in 1994. The increase in sales for 1995 resulted from
the acquisition of Prideco on June 30, 1995, as well as an overall increase in
demand for drill pipe. Evidence of the improved demand for drill pipe is the
Company's tubular backlog at December 31, 1995, being $78.4 million compared to
$35.2 million at December 31, 1994. The Company anticipates that all of the
backlog existing at December 31, 1995 will be shipped during the next twelve
months. In addition, the Company implemented price increases in the second half
of 1995 which the Company will benefit from in 1996 as the existing backlog
turns.

Results in the oilfield equipment segment include a $0.75 million royalty
payment in the fourth quarter of 1995, which benefited operating income for
1995. The oilfield equipment segment also benefited from lower

25
27

average manufacturing costs for its tubulars associated with increased sales and
higher gross margins at the Company's Mexican facility, which has a lower cost
base than the United States facilities. The Company expects that as production
at the OCTL facility becomes fully operational, average manufacturing costs for
tubulars should decline further as a result of the lower labor costs at that
facility.

In the third quarter of 1995, the Company experienced increases in its cost
of green tubing. To date, the Company has generally been able to pass through
the additional costs of this raw material to its customers. However, there can
be no assurances that it will continue to be able to do so.

Revenues and operating income associated with the Company's artificial lift
division were $106.5 million and $8.0 million, respectively, for 1995 compared
to $85.1 million and $5.3 million, respectively, for 1994. The increases in
revenues and operating income for 1995 were primarily attributable to the
Company's increases in Canadian progressive cavity pump and Corod sales.

Contract Drilling Segment

Revenues and operating income for the contract drilling segment were $79.9
million and $14.5 million, respectively, for 1995, compared to $63.3 million and
$15.8 million respectively, for 1994. The increase in revenues for 1995 reflects
the increase in international operations in Nigeria, Peru and Argentina as new
contracts in Nigeria and Peru did not take effect until late in the third
quarter of 1994. In July 1995, the Company's two platform rigs in Peru were
placed on standby. One of such rigs was placed back into operation in the first
quarter of 1996, with the other rig remaining on standby. In June 1995, the
Company's operations commenced in Argentina covering four land drilling rigs.
The operations in Nigeria, Peru and Argentina contributed $24.6 million in
revenues for 1995 compared to $9.0 million in 1994.

Operating income for the international operations was $3.6 million in 1995
as compared to $5.2 million in 1994. Operating income in 1994 included the
insurance settlement with respect to the National Iranian Oil Company ("NIOC")
contract which increased operating income by $4.8 million and was reduced by
operating losses of $2.6 million relating to the Iranian operations for 1994.
The Argentina operations produced an operating loss of $0.5 million in 1995
attributable to certain initial start-up costs incurred.

Domestic revenues increased 5% in 1995 as compared to 1994 due to an
increase in the average number of domestic barge rigs working during the year.
Operating income in 1995 was $10.8 million as compared to $10.6 million in 1994.
Operating income in the contract drilling segment was reduced by a fourth
quarter increase in reserves for workers' compensation claims on cases settled
as well as unsettled claims. Such expenses were partially offset by a gain on
the sale of a rig. The net effect of these reduced 1995 operating results by
approximately $0.8 million.

On September 30, 1994, the Company settled all of its claims with its
insurance carriers with respect to the termination of its workover drilling
contract with NIOC. Under the terms of the settlement with the Company's
insurance carriers, the Company received a net cash payment of $23 million and
retained all rights to any funds collected or recovered by the Company from NIOC
and to the rigs and equipment deployed in Iran. The Company has since sold or
redeployed to Argentina the rigs and equipment that were in Iran. Although the
Company has been receiving payments on the retained obligations under a four
year extended payment arrangement reached with the Central Bank of Iran and
other local banks, the timing and ultimate recovery is subject to various risks
relating to Iran, including the impact of the recently imposed United States
sanctions and restrictions on trade with and investment in Iran. The net
carrying value after reserves of these obligations as of December 31, 1995, and
March 31, 1996, was approximately $3.6 million.

General

Selling, general and administrative expenses increased approximately 19% to
$56.9 million in 1995 from $47.9 million in 1994. The increase in 1995 was
attributable to the Prideco acquisition and to increased sales and international
expansion.

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28

Interest expense increased during 1995 to $16.7 million from $13.7 million
for 1994. The increase in interest expense is attributable to higher levels of
indebtedness during 1995 under the Company's working capital lines of credit due
to increases in the level of the Company's business. The Company's interest
expense declined in the fourth quarter of 1995 as a result of the reduction in
debt following the Company's public offering of 3.45 million shares of Common
Stock earlier in the same quarter.

The Company's effective tax rate for 1995 was approximately 31% compared to
28% in 1994. The increase in such rate reflects the impact of certain tax
benefits occurring in 1994 associated with net operating loss carryforwards
which was partially offset by foreign losses with no corresponding tax benefit.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

For the year ended December 31, 1994, the Company reported net income and
income from continuing operations of $858,000, or $0.07 per share, and $4.6
million, or $0.37 per share, respectively, on revenues of $248.5 million,
compared with net income and income from continuing operations of $5.9 million,
or $0.49 per share, and $7.9 million, or $0.66 per share, respectively, on
revenues of $246.0 million for fiscal year 1993. In 1994, the Company refinanced
its outstanding indebtedness with the proceeds of a sale of $120 million in
Senior Notes due 2004. As part of the transaction, the Company incurred a first
quarter extraordinary charge of approximately $3.8 million, net of taxes of
approximately $1.9 million, or $0.30 per share. The extraordinary charge
represented the difference between the reacquisition price and the net carrying
value of the Company's $34 million senior notes, including unamortized debt
issuance costs.

For the year ended December 31, 1994, the Company's operating income was
$19.5 million compared with $18.6 million for fiscal year 1993. For 1994,
operating income for the Company's oilfield equipment and contract drilling
segments was $8.2 million and $15.8 million, respectively. For 1993, operating
income for these segments was $10.8 million and $11.8 million, respectively.

On September 30, 1994, the Company settled all of its claims with its
insurance carriers with respect to the termination of its workover contract with
the NIOC. The insurance settlement which increased operating income by $4.8
million was reduced by operating losses of $2.6 million relating to the Iranian
operations for 1994. This benefit was more than offset by the reduction in
operating income in Nigeria and Peru.

Oilfield Equipment Segment

Revenues for the oilfield equipment segment increased by 8% to $185.3
million in 1994 compared to $171.6 million in 1993. The increase was due
primarily to increased sales of tubular products partially offset by reduced
procurement revenues from the operations of International Tool and Supply
Company ("ITS"), which was acquired on June 30, 1993, and sold on December 30,
1993. The increase in tubular products revenues was primarily due to a change in
the sales mix to larger diameter drill pipe.

Operating income for the oilfield equipment segment was $8.2 million in
1994, as compared to $10.8 million in 1993. The reduction in operating income
resulted from costs incurred by the Company in the consolidation of certain
plants and product lines resulting from the acquisition of the Fluid Packed
lines of sucker rod pumps and sucker rods from National-Oilwell. In addition,
the Company experienced reduced margins on tubular products and artificial lift
equipment due to lower oil prices, the steep decline in natural gas prices in
the second half of 1994 and sluggish domestic and international development
activity. The Company, however, benefited from increased utilization of certain
facilities due to increased revenues.

Contract Drilling Segment

Revenues in the contract drilling segment decreased by approximately 15% to
$63.3 million for 1994 compared to $74.4 million for 1993. Domestic revenues
were slightly lower due to reduced drilling activity and international revenues
decreased primarily due to the termination of the land drilling contract with
NIOC in Iran. In addition, international revenues related to the Company's
operations in Peru and Nigeria were lower in 1994 as compared to 1993 as a
result of the Company's rigs in Nigeria and Peru going off contract in the
middle of 1993. The Company's rigs in Peru and Nigeria began new contracts in
the second half of 1994.

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29

The contract drilling segment's operating income was $15.8 million in 1994,
as compared to $11.8 million in 1993. Domestic operating income increased by 36%
in 1994 as compared to 1993, while international operating income increased by
31% in 1994 as compared to 1993. The increase in 1994 was principally due to
higher domestic day rates and the February 1994 acquisition of AWI Drilling &
Workover, Inc. ("AWI") and its 12 rigs. The AWI acquisition improved gross
profit in 1994 because prior to the acquisition, eight of the 12 rigs had been
under charter by the Company. The increase was partially offset by the lower rig
utilization during 1994 of 48% from 52% in 1993 due to reduced activity in the
U.S. Gulf Coast area.

General

Selling, general and administrative expenses increased approximately 5% to
$47.9 million in 1994 from $45.7 million in 1993. The increase in 1994 was
primarily attributable to a full year of operations at the Company's Mexico,
Hungary and China facilities as well as a full year of operations from the
Production Oil Tools acquisition. These increases were partially offset by the
selling, general and administrative costs associated with International Tool and
Supply Company, which was sold December 30, 1993.

Interest expense increased from $7.6 million for the year ended December
31, 1993 to $13.7 million for 1994, reflecting the increased cost associated
with the Company's $120 million Senior Notes due 2004 issued in March 1994. The
net proceeds from the $120 million Senior Notes were used to repay substantially
all of the Company's outstanding indebtedness and for working capital purposes.
The prepayment of the Company's prior indebtedness resulted in an extraordinary
charge, net of taxes, of $3,784,000, or $0.30 per share, during the first
quarter of 1994.

The Company's effective tax rate on income from continuing operations
decreased to 28% in 1994 from 38% in 1993. The favorable impact on the 1994
effective tax rate was obtained through the utilization of net operating loss
carryforwards and was partially offset by foreign losses with no corresponding
tax benefit.

CONCENTRATION OF BUSINESS AND FOREIGN OPERATIONS

Operations and sales in foreign markets are subject to substantial
competition from large multinational corporations and government-owned entities
and to a variety of local laws and regulations requiring qualifications, use of
local labor, the provision of financial assurances or other restrictions and
conditions on operations. Foreign operations are also subject to risks
associated with doing business outside the U.S., including risk of war, civil
disturbances and governmental activities that may limit or disrupt markets,
restrict the movement of funds or result in the deprivation of contract rights
or the taking of property without fair compensation. Foreign operations may also
subject the Company to risks relating to fluctuations in currency exchange
rates. However, to date, currency fluctuations have not had a material adverse
impact on the Company.

The Company's current and proposed Nigerian operations are also subject to
certain risks relating to political instability in Nigeria and the possibility
of the adoption of legislation by the U.S. Congress, which, if enacted, could
restrict the ability of the Company and its customers to engage in trade and
invest in Nigeria. To date, the Company has not been materially affected by the
political instability in Nigeria. Other rig contractors, however, have
experienced work stoppages and delays relating to civil unrest in Nigeria. In

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addition, although no legislation materially restricting United States trade
with Nigeria has been enacted to date, there is currently pending before the
United States Congress legislation that would restrict future trade and
investment in Nigeria. If such legislation were to be enacted, the Company's rig
operations in Nigeria could either be required to be terminated or materially
curtailed. The legislation could also prevent the Company from acquiring the
Noble rigs in Nigeria or from operating those rigs if they are acquired. In
addition to reducing or eliminating a source of revenue and income, the Company
could be required to redeploy its rigs in Nigeria. The costs of such
redeployment might not be reimbursable, and such costs, together with the costs
associated with a termination of operations in Nigeria, could have a material
adverse impact on results. Revenues and operating income attributable to the
Company's Nigerian operations for the year ended December 31, 1995, were $8.8
million and $2.4 million, respectively. Revenues and operating income
attributable to the Company's Nigerian operations for the three months ended
March 31, 1996, were $2.4 million and $0.5 million, respectively.

CHANGE IN ACCOUNTING

The Company adopted Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", effective January 1, 1996. SFAS 121
establishes accounting standards for the impairment of long-lived assets and
certain identifiable intangibles related to those assets to be held and used,
and for long-lived assets and certain identifiable intangibles to be disposed
of. The effect of adoption of SFAS 121 did not affect the Company's consolidated
financial position or results of operations.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1996, the Company had cash and cash equivalents of
approximately $5.9 million compared to approximately $4.5 million and $3.1
million at December 31, 1995, and December 31, 1994, respectively. At March 31,
1996, the Company's working capital was approximately $147 million. At December
31, 1995, the Company's working capital was approximately $152 million compared
to approximately $94 million at December 31, 1994. The increase in working
capital in 1995 was primarily the result of the Company's public offering of
3,450,000 shares of Common Stock in the fourth quarter of 1995. The net proceeds
of that offering were approximately $72.6 million. The funds from that offering
were used to reduce the Company's outstanding debt under its revolving lines of
credit, to finance the expansion of the Company's domestic and international
tubular operations and for general and corporate purposes. At March 31, 1996,
the Company's debt to total capitalization ratio was approximately 39%.

At March 31, 1996, December 31, 1995 and December 31, 1994, the Company had
in place various working capital lines of credit secured by the inventory and
receivables of the Company's subsidiaries, providing for borrowings up to $65.5
million, subject to availability requirements. Borrowings under the Company's
lines of credit are generally based on the lender's determination of the
collateral value of the current assets securing the lines of credit. The lines
of credit bear interest at floating rates ranging from prime to prime plus
1 1/4% and are secured by substantially all of the borrowing subsidiary's
accounts receivable and inventory. The Company and its subsidiaries are required
to comply with various affirmative and negative covenants relating to working
capital, earnings and net worth. The facilities also impose certain limitations
on the use of funds by the Company and its subsidiaries for acquisitions and
capital expenditures, the incurrence of additional indebtedness and other
operational matters and certain expenditures, and certain prohibitions on the
declaration or payment of dividends by the Company. At March 31, 1996, December
31, 1995, and December 31, 1994, approximately $20.8 million, $4.8 million and
$17.3 million, respectively, had been borrowed under its revolving lines of
credit and approximately $3.0 million, $5.1 million and $1 million,
respectively, had been used to support outstanding letters of credit. At March
31, 1996, December 31, 1995, and December 31, 1994, $41.7 million, $55.6 million
and $35.6 million, respectively, was available for additional borrowing under
these credit facilities. The average interest rate under these facilities was
8.8% for fiscal 1994, 10.22% for fiscal 1995 and 9.07% for the first three
months of 1996.

The Company has recently received a commitment from a group of banks that
would provide the Company with a $120 million working capital facility, of which
$90 million would be a revolving line of credit

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and up to $30 million would become fixed at December 31, 1996, and amortized
over a three year period beginning one year after the date of closing of the
facility. Borrowings under the facility would be based on a variable percentage
over LIBOR dependent on certain ratios and would be secured by the Company's
domestic accounts receivables, inventory and stock of various of the Company's
domestic and foreign subsidiaries. If such facility would have been in effect on
June 17, 1996, the interest rate would have been 7.1%. It is anticipated that
the facility will contain customary affirmative and negative covenants relating
to working capital, earnings and net worth. The facility is expected to impose
limitations on the Company's use of funds and its subsidiaries for future
acquisitions and capital expenditures, the incurrence of additional debt and
other operational matters and certain expenditures, as well as prohibitions on
the declaration and payment of dividends by the Company. The proposed facility
will replace the Company's existing U.S. working capital line of credit. The
Company expects to close the facility by the end of the second quarter. The
Company expects to incur approximately $1 million in prepayment and other
expenses relating to the termination of its prior working capital facility in
connection with this transaction.

The Company currently has outstanding $120 million of Senior Notes with
semi-annual interest payments in March and September. The Senior Notes were
issued pursuant to the terms of an Indenture dated as of March 15, 1994. Certain
subsidiaries of the Company have unconditionally guaranteed the Company's
obligations under the Senior Notes. The Indenture relating to the Senior Notes
contains various customary affirmative and negative covenants that, among other
things, limit the ability of the Company and certain of its subsidiaries to: (i)
incur certain additional indebtedness unless the Company's Consolidated Fixed
Charge Coverage Ratio (as defined in the Indenture) is at least 2.0 to 1.0, (ii)
make dividends, distributions and certain other restricted payments, (iii)
create certain liens, (iv) engage in certain transactions with its affiliates,
(v) engage in sale and leaseback transactions, (vi) make certain asset
dispositions and (vii) merge or consolidate with, or transfer all or
substantially all of its assets to another person. The Indenture also limits the
ability of the Company and certain of its subsidiaries to issue preferred stock
and creates restrictions on the ability of certain of its subsidiaries to pay
dividends and make other distributions. At May 31, 1996, the Company was limited
in the amount of dividends, distributions and other restricted payments that
could be made by it to approximately $148 million.

In August 1994, the Company received a letter from the IRS proposing to
increase the gain recognized by the Company upon the dissolution in October 1990
of a joint venture ("COLEVE") with Columbia Gas Development Corporation
("Columbia"). In general, the IRS' proposal seeks payment of a tax liability of
approximately $14.1 million plus accrued interest thereon, and includes $3.4
million of taxes relating to the proposed disallowance of certain interest
deductions taken by the Company with respect to COLEVE that was the subject of a
similar letter received by the Company in the fourth quarter of 1993. The tax
liability with respect to these matters has been previously provided for as a
deferred tax liability in the Company's financial statements. The Company
disagrees with the IRS' position and is currently pursuing its rights of
administrative review and appeal and intends to vigorously contest this matter.
Although the resolution of these remaining issues could affect the timing of the
payment of previously accrued tax liabilities and require the use of a portion
of its available capital, the Company does not believe that the results of the
audit or the ultimate resolution of the IRS' proposed adjustments will have a
material impact on its results of operations or financial position.

CAPITAL EXPENDITURES, ACQUISITIONS AND DISPOSITIONS

On June 30, 1995, the Company acquired Prideco in a transaction which
involved the issuance of approximately 2.25 million shares of Common Stock. The
acquisition has provided the Company with greater manufacturing and marketing
efficiencies by allowing for a consolidation of overhead, reduced distribution
and marketing costs and a rationalization of manufacturing operations. Revenues
and operating income of Prideco for its fiscal year ended June 30, 1995, were
$55.2 million and $4.2 million, respectively.

In July 1995, the Company acquired Engemaq S.A. ("Engemaq"), a Brazilian
completion tool business, for $4 million.

In January 1996, the Company entered into a long-term manufacturing and
sales agreement with OCTL pursuant to which OCTL will manufacture drill pipe and
premium tubulars for the Company on an exclusive basis at OCTL's plant in India.
The OCTL arrangement is being used by the Company to pursue a strategic

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expansion of its sales and operations in the Eastern Hemisphere. The Company
currently expects that its arrangement with OCTL will require an investment
between $20 million and $25 million in 1996, including an $8 million deposit
made by the Company to OCTL in the first quarter. The remainder of such funds
will be used for the purchase of inventory and other working capital
requirements.

In February 1996, the Company completed the sale of its United States
retail store distribution system for approximately $7.5 million. The Company
received $3 million in cash, a $4 million vendor credit with Continental Emsco
for future equipment needs of the Company and a $0.5 million note receivable.
The consideration received in the sale approximated the net book value of the
assets sold, resulting in no material gain or loss.

In April 1996, the Company acquired Production Specialties, Inc.
("Production Specialties"), a manufacturer of gas lift equipment, for
approximately $3.1 million.

On May 3, 1996, the Company acquired ENERPRO, a manufacturer of premium
threads and thread connections, for 312,714 shares of Common Stock and the
assumption of approximately $3.1 million in indebtedness. The operations of
ENERPRO are being combined with the premium thread operations of the Company's
tubular division.

The Company has recently entered into an agreement providing for the
acquisition of TCA for 500,000 shares of Common Stock, $15 million cash and
assumed debt of approximately $15 million. The stockholders of TCA may also
elect to receive up to $5 million of the cash consideration in the form of a
note due in January 1997. In addition, the Company has entered into an agreement
to acquire two barge drilling rigs located in Nigeria from Noble for $24.5
million in cash and a $7.5 million drill pipe credit. The acquisitions of TCA
and the Noble rigs are subject to various conditions and are expected to be
financed with a portion of the net proceeds from this Offering.

The Company has also recently entered into a letter of intent with Chevron
for the redeployment of one of the Company's rigs in the United States (Rig No.
60) to Nigeria to operate for Chevron under a three year contract. The cost to
prepare and enhance this rig for international operations is expected to be
approximately $9 million. Such costs are expected to be funded with a portion of
the net proceeds of this Offering.

In addition to funds used to finance acquisitions, capital expenditures by
the Company during the first quarter of 1996 and for the year ended December 31,
1995, totaled approximately $7.3 million and $32.7 million, respectively. During
1995, capital expenditures included approximately $16 million relating to the
acquisition of a land rig deployed to Argentina, equipment additions to the
three existing land rigs in Argentina and the acquisition of three deep drilling
barge rigs. First quarter 1996 capital expenditures included approximately $3.2
million for refurbishment of three domestic barge rigs, upgrading of a platform
rig and the acquisition of rig moving equipment for Argentina.

Ongoing routine capital expenditures for the last three quarters of 1996
are budgeted at approximately $12.9 million. Capital expenditures are expected
to be funded with available cash, cash flow from operations and borrowings under
lines of credit and other facilities.

The allocations of the purchase price to the fair market values of the net
assets acquired in the 1996 acquisitions are based on preliminary estimates of
the fair market value and may be revised when additional information concerning
asset and liability valuations is obtained.

The Company's current sources of capital are cash generated from operations
and borrowings under its working capital lines of credit. The Company believes
that current reserves of cash and short-term investments, access to existing
credit lines and internally generated cash from operations are sufficient to
finance the projected cash requirements of its current and future operations.

The Company is continually evaluating new acquisitions with a focus on
proprietary technology and under-utilized fixed assets to enhance operations.
Future acquisitions may be funded through cash flow from operations, borrowings
under lines of credit and other facilities, and equity issuances if desirable.

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BUSINESS

GENERAL

The Company is an international manufacturer and supplier of oilfield
equipment and contract drilling services. The Company operates through two
business segments: oilfield equipment and contract drilling. The oilfield
equipment segment manufactures drill pipe, premium tubulars and a complete line
of artificial lift and production equipment. The Company's contract drilling
segment consists primarily of barge rigs used by oil and gas companies for the
exploration and development of natural gas primarily in the inland waters of the
U.S. Gulf Coast. The Company's tubular products and contract drilling operating
divisions provide products and services used primarily for natural gas
exploration and production. The artificial lift and production equipment lines
are primarily related to the aging of oil producing formations.

Tubular products are provided through the Company's Grant Prideco tubular
products division. Tubular products are manufactured at 11 locations throughout
the world, and distribution is effected through a worldwide sales and service
support system. This division's products consist of proprietary drill pipe and
related products such as drill collars and heavy weight drill pipe
(H-Series(TM)) and premium casing and tubing and premium engineered connections
(Atlas Bradford).

Grant Prideco's products are designed and engineered for high performance
applications. Drill pipe serves as the principal mechanical drilling tool needed
to drill an oil or natural gas well. Drill pipe is designed and manufactured to
provide a reliable connection from the drilling rig to the drill bit thousands
of feet below the surface. Grant Prideco is the largest manufacturer and
supplier of drill pipe in the world and the largest manufacturer of premium
tubulars in North America. Grant Prideco is also the largest manufacturer of
drill collars and heavyweight drill pipe in the world.

The Company's EVI Oil Tools division manufactures artificial lift and
production equipment used for the production of crude oil. EVI Oil Tools was
created in early 1996 through the consolidation of the operations of the
Company's Highland and Production Oil Tools divisions. The consolidation was
implemented to provide marketing advantages and manufacturing economies. In
conjunction with the consolidation, the Company sold Highland's United States
retail distribution network to Continental Emsco. This disposition has allowed
the Company to reduce its workforce by over 170 employees and focus the
operations of this division on product line design and manufacturing.

EVI Oil Tools provides a wide variety of proprietary and patented products,
including the RotaFlex pumping unit, the Corod continuous sucker rod (through
the Company's Corod unit), progressive cavity pumps, Fluid Packed pumps, EL(R)
sucker rods, Production Oil Tools packers, Engemaq completion tools, Production
Specialties gas lift equipment and Vitex flow control equipment. EVI Oil Tools
is one of the two largest manufacturers of rod lift equipment in the world and
provides the only integrated product line in this class of lift from the above
ground equipment to the tools submersed in the producing reservoir.

The Company's contract drilling operations are conducted through its
Mallard Drilling division ("Mallard"). Mallard's domestic operations are
concentrated in the area of barge drilling and workover in the shallow coastal
and inland waters of the U.S. Gulf Coast where conventional jack-up rigs cannot
operate. The Company is the second largest operator of barge rigs in this
market. The Company's domestic barge rig fleet consists of 16 drilling rigs and
19 workover rigs. The Company also has a fleet of six platform rigs for use in
the Gulf of Mexico. Internationally, Mallard operates one barge rig in Nigeria,
two platform rigs in Peru and four land rigs in Argentina. The Company also owns
a 49% interest in a joint venture that owns two land rigs in Peru.

The Company is currently seeking to expand its fleet of deep drilling barge
rigs equipped for foreign markets through its proposed acquisition of two barge
rigs from Noble that are currently operating in Nigeria and the retrofit and
redeployment of an additional rig to operate for Chevron in Nigeria. These
transactions will increase the Company's international presence and expand its
fleet of deep drilling barge rigs equipped for the foreign markets. The Company
expects that international demand for barge drilling rigs should substantially
increase as reserves in the transition zones of the world's oil and gas
producing countries are

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developed. Each of these transactions is subject to various conditions,
including the receipt of certain long-term contracts for the rigs. Although
there can be no assurance that the Noble or Chevron transactions will close, the
Company currently anticipates that the Noble acquisition will be consummated in
July 1996 and the Chevron contract will begin in the fourth quarter of 1996.

During 1995, the Company made various acquisitions designed to strengthen
its existing product lines and operations in each of its core businesses. The
most significant of the Company's acquisitions was the acquisition of Prideco.
The Prideco acquisition enhanced the Company's tubular product line by adding
drill collars, heavyweight drill pipe and premium casing to its already
extensive line of tubular products. Prideco was the second largest manufacturer
of drill pipe in the U.S. and one of the two largest manufacturers of drill
collars and heavyweight drill pipe in the Americas. The Company is currently
seeking to expand internationally the market for Grant Prideco's drill collars
and heavyweight drill pipe. The Company has also begun to market Grant Prideco's
premium casing with the Company's previously introduced TC-II(TM) line of
premium casing connectors.

The Company has recently begun a further expansion of its premium tubular
operations to take advantage of increased offshore drilling activity and
international demand. On May 3, 1996, the Company acquired ENERPRO, a
manufacturer of premium threads and thread connections, and is in the process of
integrating the business of ENERPRO with that of the Company. The ENERPRO
acquisition completed the Company's Atlas Bradford line of premium engineered
connections. ENERPRO's technologically advanced designs fill significant gaps in
the Company's premium connection product line. This broader line is expected to
allow the Company to penetrate new markets without the substantial cost and time
delays inherent in the introduction of any new premium connection. The ENERPRO
acquisition has resulted in the Company becoming the largest provider of
oilfield premium connections in North America and has provided the Company with
a manufacturing base in Aberdeen, Scotland, from which the Company is now
offering its line of premium engineered connections to the North Sea and
European markets.

In July 1995, the Company acquired Engemaq, a manufacturer of completion
tools. In the first quarter of 1996, the Company acquired the operating assets
and technology of Vitex Corporation ("Vitex"), a manufacturer of flow equipment.
In April 1996, the Company acquired the operating assets and technology of
Production Specialties, a manufacturer of gas lift equipment located in
Louisiana. The businesses of Engemaq, Vitex and Production Specialties have been
integrated into those of EVI Oil Tools.

From the Company's inception in 1972 through early 1986, the Company was
primarily an oil and gas exploration and production company. In January 1986,
the Company disposed of substantially all of its oil and gas properties other
than a minority interest in COLEVE. In 1990, the Company dissolved COLEVE and in
1992, the Company sold its remaining oil and gas properties (other than an
overriding royalty interest and certain related rights with respect to the
properties received on dissolution of COLEVE) and discontinued its exploration
and production segment.

OILFIELD EQUIPMENT

The Company's oilfield equipment segment manufactures and markets tubular
products and services through Grant Prideco and manufactures and markets
artificial lift and completion tool equipment and services through EVI Oil
Tools.

TUBULAR PRODUCTS

Grant Prideco manufactures and markets two tubular product lines: (i) drill
pipe and related products and (ii) the Atlas Bradford and Prideco lines of
premium tubulars and premium engineered connections. Grant Prideco operates
through 11 manufacturing facilities, of which eight are located in the U.S., one
in Scotland, one in India (through OCTL) and one in Mexico. Grant Prideco also
has over 90 worldwide licensed manufacturing and repair locations. Grant Prideco
markets its product lines through 11 technical support sales offices and a
worldwide network of agents and suppliers. Grant Prideco's tubular products are
either used for drilling and completion of oil and gas wells or for production
of oil and natural gas. Grant Prideco's drilling products include drill pipe,
drill collars, heavyweight drill pipe and kellys. These products

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constitute all components of the drill stem used to drill a well from the rig to
the drill bit. Grant Prideco's production tubulars are primarily premium tubing,
casing and connections.

In January 1996, the Company entered into a long-term manufacturing and
sales agreement with OCTL, an India-based manufacturer of drill pipe and premium
tubulars. The OCTL facility was built in 1990 under the direction of personnel
who are currently employed by Grant Prideco and is one of the most modern
tubular fabricating facilities in the world. The facility is being used by the
Company to pursue a strategic expansion of its sales and operations in the
Eastern Hemisphere. The Company believes that the combination of Grant Prideco's
product line coupled with OCTL's low manufacturing costs and proximity to major
Eastern Hemisphere markets will accomplish this objective. This expansion is
intended to substantially increase the Company's sales into the growing Eastern
Hemisphere markets, which over the last few years have represented less than 5%
of the Company's total revenues. Manufacturing of casing on behalf of the
Company commenced on May 1, 1996, with drill pipe production expected to begin
in the third quarter of 1996.

Under the terms of the OCTL agreement, the Company has a right to terminate
the agreement on an annual basis. The agreement is for an initial five-year term
and is renewable at the Company's sole option for successive five-year terms.
The Company considers the OCTL facility and its arrangements with OCTL an
important component of the Company's long-term manufacturing operations. The
agreement may be terminated by OCTL only under certain limited circumstances,
including, beginning December 31, 2000, if certain minimum orders have not been
placed through OCTL and minimum payments have not been made by the Company.
Under the terms of the agreement with OCTL, the Company made a one-time payment
of $8 million for the exclusive right to have Grant Prideco's products
manufactured at the facility. The Company is also required to pay all direct
operating expenses relating to the facility, including the cost of inventory and
raw materials used for the manufacture of the Company's products, as well as
certain other payments associated with the use of the facility.

Drill Pipe

Drill pipe is manufactured within specific metallurgical and engineering
guidelines to meet stringent requirements necessary for its use in the drilling
of oil and natural gas wells. Oil and gas companies consider drill pipe to be a
material portion of their overall drilling costs. Accordingly, purchasing
decisions are sensitive to price, quality, operational needs and fluctuations in
oil and gas prices.

Grant Prideco's drill pipe product line consists primarily of specialty
pipe that is marketed under the H-Series trade name. The H-Series product line
combines the proprietary and patented technology of the Hughes Tool Joint drill
pipe fabrication system (acquired from Baker Hughes Incorporated ("Baker
Hughes") in 1990) with the Company's original drill pipe manufacturing
capabilities. Grant Prideco owns a number of patents on tool joint design and
drill pipe manufacturing processes and has licensed a number of foreign drill
pipe manufacturers for the use of Grant Prideco's H-Series patents, technologies
and hardware.

Drill Collars and Heavyweights

Drill collars are the component of the drill stem generally located
directly above the drill bit in a vertical well. A drill collar is machined from
a solid steel bar and is used to provide weight on the drill bit. Grant
Prideco's heavyweight drill pipe is a seamless tubular product that is less
rigid than a drill collar and provides a transitional zone between the drill
collar in a vertical well and the more flexible drill pipe. Heavyweight drill
pipe also serves to apply weight to the drill bit in a directional well. The
Company's drill collar and heavyweight drill pipe product lines are a
combination of the Company's original drill pipe designs and the Prideco
designs.

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Premium Tubulars and Connections

Grant Prideco's premium tubular product line consists of premium tubing,
casing and premium engineered connections. The product line is marketed under
the trade name Atlas Bradford and utilizes a number of proprietary and patented
processes for threading and manufacturing premium tubulars. The Company's recent
acquisition of ENERPRO has allowed Grant Prideco to expand its line of premium
connections and to become the largest provider of premium connections in North
America. The ENERPRO acquisition completed the Company's line of premium
connections and has provided the Company with an operating base for expansion in
the international markets. Atlas Bradford was a pioneer in the development of
high performance connections for premium tubulars. Premium tubulars, like the
lower performance variety known as API tubulars, are made up of casing and
tubing, products that respectively line the walls of a wellbore and serve as a
conduit for hydrocarbons up the wellbore. Grant Prideco's casing products
consist of larger outside diameter, thinner walled and seamless tubular products
previously manufactured by Prideco. The Company's proposed acquisition of TCA is
intended to expand the range of sizes and types of premium casing that may be
offered by the Company. Casing is used to line and maintain the integrity of a
wellbore. The term "premium" refers to high alloy, seamless tubulars with
specific molecular structure and highly engineered connections. Such tubulars,
whether casing or tubing, are designed and engineered to withstand deep, high
pressure, high temperature and highly corrosive well environments. Premium
tubulars are generally used in deep natural gas and offshore wells.

In 1994, the Company introduced a new line of premium connections by Atlas
Bradford known as the TC-II line. The TC-II line is a highly engineered and
technologically advanced line of premium connections. The product line is the
result of three and a half years of product development and testing. The TC-II
product line was developed to provide superior connection performance and design
under extreme high pressure and temperature conditions. The significance in
developing and introducing the TC-II line was to enhance Grant Prideco's ability
to better compete in international markets, which currently represent three
times the volume of the domestic market. Before the introduction of the TC-II
line, Grant Prideco's primary market for its premium tubulars was in the U.S.
and Canada. Although TC-II testing will continue through 1996, this product line
is now being marketed for selected commercial applications. The Company markets
its TC-II line in conjunction with Grant Prideco's premium casing tubular
product lines in order to provide its customers with a complete product. The
Company's acquisition of ENERPRO has provided the Company with a broader range
of premium connections not previously provided by Grant Prideco. The ENERPRO
line of premium connections is being combined with the Company's Atlas Bradford
line of connections and marketed as an integrated product line. This combined
line provides the Company's customers with a complete line of premium
connections.

Sales and Backlog

Total sales of drill pipe and tubular products for the quarter ended March
31, 1996, and for the years ended December 31, 1995, 1994 and 1993 were $60.6
million, $157.8 million, $97.2 million and $74.6 million, respectively,
representing approximately 55%, 45%, 39% and 30% of the Company's total sales.
The sales backlog for drill pipe and other tubular products at March 31, 1996,
totaled approximately $81.7 million compared to $78.4 million and $35.2 million
at December 31, 1995 and 1994, respectively. The increase in the 1995 and 1996
backlog was primarily due to a large increase in demand for drill pipe during
1995 and the effects of the Prideco acquisition. The Company anticipates that
all of the backlog existing at March 31, 1996, will be shipped during 1996.

Competition

Grant Prideco is the largest manufacturer and supplier of drill pipe in the
world and the largest manufacturer of premium tubulars in North America. Grant
Prideco also is the largest manufacturer of drill collars and heavyweight drill
pipe in the world.

Grant Prideco operates in a highly competitive industry that has
experienced depressed demand, overcapacity and excess supply for the past
several years. Competition is based on price, quality and service.

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The market for the Company's drill pipe is essentially worldwide and the Company
competes with four large international and domestic manufacturers, some of whom
are licensees of the Company, as well as manufacturing operations in China and
the Commonwealth of Independent States ("CIS"). Other large domestic and
international manufacturers not currently in the market also have the ability to
compete with the Company. Market conditions for drill pipe in recent years have
been highly competitive. During 1995, prices for drill pipe began to improve
with the decline in excess inventories of used pipe and the associated increase
in demand for new drill pipe.

In the United States, the Company competes with four major manufacturers of
premium tubular products. Competitors include large domestic and foreign
corporations and small specialty manufacturers. Internationally, the Company
competes with five manufacturers of premium tubulars. Many of the Company's
competitors have greater financial resources than the Company. The Company
continues to expand its market for premium tubulars outside the U.S. through the
OCTL arrangement, the ENERPRO acquisition and the opening of new sales and
service centers.

The market for premium casing is limited to some extent by transportation
costs. As a result, the Company's sales of these products has primarily been
concentrated in North and South America. The manufacturing arrangement with OCTL
has added the Eastern Hemisphere markets to the Company's markets for casing.
The Company currently competes with four large manufacturers for engineered
premium connections and with the integrated steel mills and various other large
providers for semi-finished casing. Casing may also be manufactured by the
integrated steel mills that provide the green tubing for the tubular products
manufactured by the Company.

Raw Materials

The Company uses plain end green steel tubing stock and forging billets as
raw material in the manufacture of drill pipe, casing and premium tubing. The
primary raw material for drill collars is solid steel bars. Heavyweight drill
pipe is manufactured from heavy wall tubular products. The Company's suppliers
are major domestic and international steel mills. The Company has established
relations with several domestic and foreign mill sources that provide a
competitive availability of green tubing stock supplies. Prices for green tubing
and forging billets have recently increased. The Company, however, has been
able, to date, to pass through these increased costs to its customers.

Facilities

The Company's drill pipe and premium tubulars are manufactured at eight
domestic locations in Texas, one location in Scotland, one location in Mexico
and one location (through OCTL) in India. The Company continues to focus on
product development and manufacturing efficiencies. The Company also has sales
offices in Houston and Dallas, Texas; Fribourg, Switzerland; New Orleans,
Louisiana; Abu Dhabi, United Arab Emirates; Aberdeen, Scotland; Moscow, Russia;
Caracas, Venezuela; The Hague, The Netherlands; Kuala Lumpur, Malaysia; and
Shanghai, China.

Customers and Markets

The customers for the Company's tubular products include both domestic and
international oil and gas companies and distributors of oilfield supplies.
Because the Company's tubular products are designed primarily for drilling and
production in deep wells and harsh environments, they are generally used in
connection with the exploration and production of natural gas and international
exploration. Accordingly, sales of these products are sensitive to fluctuations
in the price outlook for natural gas and related levels of exploration activity.

ARTIFICIAL LIFT AND COMPLETION TOOL EQUIPMENT

Artificial lift products and completion systems are manufactured by EVI Oil
Tools. EVI Oil Tools' products are used in the production segment of the oil and
gas industry, with an emphasis on the production of oil. Products manufactured
by the EVI Oil Tools division include a complete line of artificial lift
equipment

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and parts and a line of high performance packers, flow control equipment and
related downhole tools for use by service companies.

The Company's artificial lift equipment emphasizes rod lift products and
utilizes various proprietary and patented technology. Rod lift is one of four
artificial lift technologies currently used for recovering oil from maturing
fields which lack sufficient pressure to flow under their own power. These
methods and related equipment are designed to sustain the flow of oil production
from such fields. Artificial lift technologies include electrical submersible
lift, gas lift and hydraulic lift. Rod lift is a form of artificial lift
technology in which oil is recovered through a suction process utilizing an
above ground drive system connected by sucker rods to a downhole pump placed in
the reservoir. Rod lift is particularly suited for oil wells with depths of up
to 10,000 feet and with production rates of up to 1,000 barrels per day. The
Company estimates that rod lift represents approximately 50% of the total
artificial lift market in the world, with electrical submersible lift having the
next largest share at approximately 40%.

The Company recently acquired the operating assets of Production
Specialties, a manufacturer of gas lift equipment since 1961. Gas lift systems
consist primarily of mandrels containing gas lift valves which are placed in the
production string in an oil well. Gas is then compressed and injected from the
surface down the annulus between the production tubing and casing, enters the
tubing through the gas lift valves and lifts the oil in the production tubing to
the surface. The gas is then separated from the oil at the surface, compressed
and reinjected downhole, thereby forming a closed-loop system. Gas lift is
generally the desirable form of artificial lift when natural gas is produced
with oil or is available from nearby wells for injection. The addition of
Production Specialties' line of gas lift products adds a complete new line of
artificial lift to the Company's already extensive line of rod lift products.
The Company intends to integrate the manufacturing operations of Production
Specialties' with those of EVI Oil Tools in the United States and Brazil. The
Company also intends to expand the market for Production Specialties products
both domestically and internationally and to seek manufacturing alliances with
various service companies for the sale of its products.

EVI Oil Tools' packers and downhole tools include cement retainers,
remedial service tools, production packers and flow control equipment. Downhole
packers are used in the completion and production of oil and gas wells. Packers
maintain the separation between productive zones and seal off the space between
the tubing and casing. EVI Oil Tool's flow control equipment and service tools
are used for a variety of applications from the initial completion of an oil or
natural gas well to the workover and recompletion of an existing well.

EVI Oil Tools distinguishes itself from its competitors in that it has a
fully integrated product line and utilizes new technologies for the production
of oil using artificial lift. EVI Oil Tools' integrated product line offers all
artificial lift equipment from the wellhead to the reservoir. To the Company's
knowledge, none of its competitors has as broad a product line. EVI Oil Tools'
principal products include: (i) RotaFlex pumping units, (ii) Corod continuous
sucker rods and EL sucker rods, (iii) progressive cavity pump systems, (iv)
Fluid Packed pumps, (v) Production Oil Tools packers, (vi) Engemaq completion
tools, (vii) Production Specialties gas lift equipment and (viii) Vitex flow
control equipment.

EVI Oil Tools also distinguishes itself from its competitors by focusing
its efforts on product design and manufacturing and not on being an integrated
service company. This emphasis on product design and manufacturing allows the
Company to form alliances with its service company customers to provide the end
user with a quality product on a timely basis and at competitive prices. This
strategy also expands the potential market for EVI Oil Tools' products by
reducing conflicts that can arise where the Company is competing with its
customers for the same sale. EVI Oil Tools also achieves cost savings in this
strategy by eliminating the substantial overhead costs associated with
maintaining the infrastructure necessary to effectively compete in the service
segment of the market.

In furtherance of the Company's desire to concentrate its efforts on
manufacturing and design, the Company recently disposed of EVI Oil Tools' U.S.
retail distribution system to Continental Emsco. Prior to this disposition, EVI
Oil Tools' products were primarily marketed by it in the U.S. directly to the
end user through this system. Following the sale, EVI Oil Tools products are
sold in the U.S. through the more extensive Continental Emsco distribution
network in the U.S. and other distribution arrangements as well as to oilfield
service companies for use by their customers. The Company believes that this
arrangement provides

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39

the Company with a broader distribution of its products while saving the Company
the overhead cost of maintaining its own retail distribution network. The
Company has retained its Canadian distribution system that is used to service
and support its Corod and other product lines. With the opening of the world oil
markets in China, the CIS and South America, EVI Oil Tools has been taking steps
to introduce its products into these markets where modern artificial lift
equipment and completion tools are both needed and actively sought. The Company
believes that these markets should provide significant opportunities for the
Company.

EVI Oil Tools' products are focused on the production side of the oil and
gas industry, which the Company believes is less volatile than the exploration
segment of the industry. The Company further believes that the crude oil
production side of the industry is a growing market for artificial lift products
in that there is an increasing need for artificial lift to aid production as oil
fields mature worldwide. Thus, although domestic exploration for crude oil has
declined in recent years, this decline is not expected to materially affect the
demand for EVI Oil Tools' products. However, declines in prices of oil may
reduce demand for EVI Oil Tools' products due to reduced capital expenditures by
customers and decisions by customers not to pursue additional work on marginal
wells.

RotaFlex "Pumping Unit"

RotaFlex is a 100% mechanical, long-stroke surface drive pump unit used to
artificially lift oil from deep or high-volume wells as opposed to low-volume
stripper wells. The unique patented design is over 20% more efficient than the
conventional pump drive unit that has been in use for over 50 years. The Company
has actively marketed the RotaFlex system for approximately three years with
increasing market acceptance. The Company also markets the RotaFlex system in
the Canadian, South American and Chinese markets.

The Company's RotaFlex line is marketed in the United States on an
exclusive basis through Continental Emsco. International sales are made through
the Company's own sales force and third party distributors.

Progressive Cavity Pumps and Fluid Packed Pumps

Downhole pumps in rod lift come in one of two forms: progressive cavity
pumps and rod pumps. Progressive cavity pumps lift by using a rotating motion
and elastomer lined cavities. Rod pumps lift by using a vertical motion and a
set of mechanical valves. Both are connected to the prime mover above ground by
either traditional coupled rods or Corod continuous rods. The Company produces
and distributes a complete line of progressive cavity pump systems using
proprietary hydraulic gear boxes and patented vertical electric drives. The
Company's progressive cavity pump is particularly suited for shallow to medium
depth wells with high volumes of produced water, low gravity crude or sandy
conditions. The Company believes that the progressive cavity pump provides a
desirable alternative to the traditional rod pump and electric submersible pumps
in these applications. The rotor and stator components of the Company's
progressive cavity pump are currently supplied for the Company by Robbins &
Myers, Inc. ("Robbins & Myers").

In 1994, the Company added the Fluid Packed line of rod pumps, parts and
accessories and the EL sucker rod business, previously owned by
National-Oilwell, to EVI Oil Tools' product line. As part of this addition, the
Company acquired leased and owned manufacturing facilities in Woodward, Oklahoma
and Santa Teresa, New Mexico, respectively. The Fluid Packed line offers a wide
variety of API pumps, specialty rod pumps and unique accessories. The Fluid
Packed line of specialty rod pumps is designed for pumping applications to meet
special well conditions. The sucker rod business includes both API grades and
the premium Electra(R) Series EL line.

Corod "Continuous Sucker Rods"

The Company manufactures the only continuous sucker rod available in the
industry through its Corod unit located in Canada. A sucker rod is an integral
part of any sucker rod pumping system and is used to connect the surface drive
unit of an oil well, such as the RotaFlex system or a traditional drive system,
to a subsurface pump. The typical sucker rod requires a coupling every
twenty-five to thirty feet. Corod's semi-elliptical smooth and continuous sucker
rod does not have such couplings, which reduces wear and torque and produces a
more efficient and economical form of artificial lift. The manufacturing process
of Corod is

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proprietary and the servicing process is patented. The Company continues to
market Corod's products in foreign markets such as Venezuela and China.

Completion, Gas Lift and Flow Control Equipment

The Company manufactures downhole packers, gas lift products and completion
equipment through its Production Oil Tools, Engemaq, Production Specialties and
Vitex product lines. Downhole packers and flow control equipment are used in the
completion and production process of oil and gas wells. Packers maintain the
separation between productive zones in oil and gas wells and seal off the space
between the tubing and casing to protect the casing from reservoir pressures and
corrosive formation fluids. Gas lift products are used to produce oil through
the recycling and injection of natural gas into the well. EVI Oil Tools' flow
control equipment and service tools are used for a variety of functions in
connection with the completion of oil and gas wells.

The Production Oil Tools and Engemaq downhole packers are compatible with
the packers manufactured by Baker Hughes, which is the largest manufacturer of
packers in the industry. The Company believes that Production Oil Tools and
Engemaq packers are the only ones in the industry that have such compatibility
characteristics. The Company considers this compatibility an important
competitive attribute in that much of the packer business is in the repair or
replacement of existing installations and over half of the existing packers are
believed to be Baker Hughes products. The Company believes that its packers
provide its customers with a viable cost effective alternative to those
manufactured by Baker Hughes.

The Company manufactures packers at its facilities in Powell, Wyoming;
Arlington, Texas and Caxias do Sul, Brazil. Distribution is effected through
sales directly to the customer and through integrated service providers and
third party distributors. The Company is currently reviewing opportunities to
expand this product line internationally.

The Production Specialties line of gas lift equipment is a complete line of
valves, latches, mandrels and other products used for the production of oil
through the use of gas lift. These products are designed to control the flow and
pressure of gas used to produce oil in a variety of downhole environments. The
Company currently manufactures its gas lift equipment at its facility in New
Iberia, Louisiana and intends to begin production of such equipment at its
facilities in Arlington, Texas and in Brazil.

Other Products and Repair Services

Through its Leamco(TM) division, EVI Oil Tools also manufactures and
installs pumping unit replacement parts, primarily bearings and gearboxes, for
both EVI Oil Tools' products and products sold by competitors. Among the
products provided by Leamco is a proprietary line of self-lubricating Teflon(R)
bearings. The Leamco unit repairs, installs and services oilfield pumping units
at 15 locations in Texas, Oklahoma and New Mexico. The market for repair of
pumping units is very fragmented in North America. The Company, however,
believes Leamco is the largest domestic provider of these services. EVI Oil
Tools produces a full line of motor and control units used in connection with
oilfield pumping units. These units include the Sargent(TM) line of ultra
high-slip electric motors and controls that maximize the lift capacity of beam
pumping units while reducing unit load.

Product Sales

Total sales for the Company's subsurface pump group for the quarter ended
March 31, 1996, and the years ended December 31, 1995, 1994 and 1993 were $19
million, $83 million, $59 million and $56 million, respectively, representing
17%, 24%, 24% and 23% of the Company's total sales during such periods.

Competition

The market for artificial lift and completion tool equipment, equipment
parts and repair is very competitive. Competition is based on product design and
quality, ability to meet delivery requirements and pricing. The RotaFlex system
competes with conventional pumping units, which are manufactured by Lufkin

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41

Industries. Corod's continuous sucker rods compete with conventional sucker
rods, which are manufactured and sold by both EVI Oil Tools and three major
competitors. The Company's packers compete with packers manufactured by three
large manufacturing companies as well as various smaller specialty and commodity
manufacturers. There are three competitors for the Company's gas lift products
and three major competitors for the Company's flow control products and service
tools. The Company's progressive cavity pumps compete with three major
competitors. EVI Oil Tools has identified in the industry six large competitors
that individually have significant shares of the entire artificial lift
equipment market (inclusive of all other forms of lift). The Company believes
that it currently has the second or third largest market share for artificial
lift equipment in the world, although its market share varies depending on the
type of product.

Customers and Markets

EVI Oil Tools' products and services are designed primarily for oil
production from maturing fields. Demand is, therefore, not significantly
affected by short-term changes in exploration and drilling activity. As the
average age of oil wells worldwide increases, the market for the Company's
artificial lift equipment is expected to increase. Currently, most of the
Company's artificial lift equipment is sold in the United States and Canada.
However, the Company believes that significant opportunities exist for its
products in other areas with maturing fields such as South America, the CIS and
China. In recognition of this opportunity, the Company has taken extensive
efforts to expand EVI Oil Tools' products internationally. Approximately 8% of
the Company's revenues from the sale of artificial lift equipment for 1995, 1994
and 1993 were derived from sales of equipment provided outside the United States
and Canada.

Facilities

EVI Oil Tools' products are manufactured at nine locations in the United
States, one location in Canada and one location in Brazil.

Backlog

Backlog of artificial lift equipment is generally not considered to be a
meaningful indication of future sales or results due to the nature of the
business.

CONTRACT DRILLING

The Company's contract drilling segment in the United States is primarily
concentrated in the area of barge drilling and workover in the shallow coastal
and inland waters of the U.S. Gulf Coast where conventional jack-up rigs cannot
operate. Mallard is the second largest operator of barge rigs in this market.
Mallard's domestic barge rig fleet consists of 16 drilling rigs and 19 workover
rigs. Mallard also has a fleet of six platform rigs for use in the Gulf of
Mexico.

The domestic barge rig market has for more than a decade been characterized
by overcapacity and a heavy dependence on natural gas drilling. These market
conditions, combined with depressed and volatile natural gas prices, created an
operating environment that was characterized by low day rates and rig
utilization and precipitated a consolidation in the industry. Since the early
1980's, the number of rigs in existence has declined from over 200 to less than
100, and the number of contractors has declined from over 20 to less than five.
As one of the two major surviving contractors, Mallard has begun to benefit from
these conditions through increased revenues and rig utilization. These market
improvements have occurred notwithstanding continued low natural gas prices and
a low domestic rig count. The Company expects domestic results to continue to
benefit from these conditions as well as from increased demand in the U.S. Gulf
Coast. These changes in demand stem from an increase in three-dimensional
seismic survey activity, resulting in the identification of attractive deep
natural gas prospects in the inland and coastal water of Louisiana, and
increased lease activity in these areas following the 1994 settlement of a
production royalty dispute between the State of Louisiana and Texaco, Mallard's
largest barge rig customer. The Company was also recently awarded an exclusive
one-year alliance to provide barge rig completion and workover services for
Texaco.

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Mallard currently operates one rig in the coastal waters of Nigeria, one
platform rig operating and one platform rig available for operation in offshore
Peru and four land rigs in Argentina. International drilling contracts are
generally for longer periods than domestic contracts and at more favorable
rates. International drilling operations represented approximately 31% and 25%
of the revenue and operating income, respectively, for this segment during 1995.

On June 21, 1996, the Company entered into an agreement with Noble to
acquire two barge rigs that are currently operating in Nigeria. The two rigs to
be acquired were substantially upgraded by Noble for international drilling
operations in 1990 and 1991 at a cost in excess of $50 million and have been
working under contract since 1991. The rigs are designed to drill wells to
depths of up to 30,000 feet in transition zones, shallow inland, coastal and
offshore waters. The consideration for the two rigs will be $24.5 million in
cash and a $7.5 million drill pipe credit. The Company is currently negotiating
long-term drilling contracts with Shell Nigeria for the operation of the rigs
after closing. The Company has also recently entered into a letter of intent
with Chevron for the redeployment of one of the Company's rigs in the United
States (Rig No. 60) to Nigeria to operate for Chevron under a three year
contract. The cost to retrofit the Company's rig for international operations is
expected to be approximately $9 million. Such costs are expected to be funded
with a portion of the net proceeds of this Offering. These transactions will
increase the Company's international presence and make the Company one of the
two largest providers of barge drilling services in the Nigerian market.

The acquisition of the Noble rigs is being pursued to increase the
Company's international barge drilling rig fleet at what the Company believes
are attractive prices and terms. The Chevron contract similarly provides the
Company with the opportunity to retrofit one of its currently stacked U.S. Gulf
Coast barge rigs for international drilling operations with the costs being
financed through the payments received under a long-term contract with Chevron.
Under both circumstances, the Company's objectives are to expand and enhance its
international fleet to take advantage of anticipated improvements in
international demand for barge drilling rigs as reserves in the transition zones
of the world's oil and gas producing countries are developed. The acquisition of
the Noble rigs is subject to various conditions, including the Company's receipt
of satisfactory drilling contracts with Shell Nigeria and the absence of any
material adverse changes affecting the rigs or the ability of the Company to
operate the rigs in Nigeria. The proposed contract with Chevron for an
additional rig in Nigeria will also be subject to various conditions, including
local governmental approval of the contract. Both the Noble acquisition and the
rig enhancements for the proposed Chevron contract will be financed with a
portion of the net proceeds of this Offering. Although there can be no assurance
that the Noble or Chevron transactions will close, the Company currently
anticipates that the Noble acquisition will be consummated in June or July 1996
and that the Chevron contract will begin in the fourth quarter of 1996. As noted
above in "Risk Factors -- Risks of Foreign Operations", operations in Nigeria
are subject to various risks, including political instability in Nigeria and the
possibility of trade restrictions affecting the ability of the Company to
operate in Nigeria.

Mallard owns all of its rigs and has a 49% interest in a joint venture that
owns two land rigs in Peru. From its inception in 1987, Mallard has devoted
substantial efforts toward establishing itself as a leader in quality by
upgrading and refurbishing its rigs.

The Company's fleet of barge and other rigs was acquired through a number
of acquisitions made during the last ten years. These acquisitions were
concentrated on barge rigs that could be easily integrated into Mallard's fleet.
Because most of the purchases were made at a time during which there existed
substantial overcapacity and low demand in the barge drilling market and from
companies desiring to leave the market, the rigs were acquired at what the
Company believes to be favorable prices substantially below replacement cost.

The Company has from time to time reviewed the desirability of a potential
spinoff or disposition of all or part of Mallard. The proposed acquisition of
Noble's barge rigs and the retrofit and redeployment of a fourth rig to Nigeria,
a currently stacked U.S. Gulf Coast rig, is expected to increase Mallard's
revenues, cash flow and earnings. It is anticipated that, upon the completion of
these transactions, the Company may again review the desirability of a spinoff
or disposition of Mallard. To date, no decision has been made with respect to
any such spinoff or disposition and any decision in that regard will be made in
the future based on

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existing circumstances, including the tax impact of any such transaction and the
impact from both a business and financial standpoint on the Company and its
shareholders.

MARINE FLEET

As of June 15, 1996, the Company's marine fleet consisted of the following
general types of rigs located in the following regions:

TOTAL
FLEET
-----

Inland Barge:
U.S. Gulf Coast...................................................... 35
Nigeria.............................................................. 1
Platform:
Gulf of Mexico....................................................... 6
Peru................................................................. 2
--
Total........................................................ 44
==

More detailed information with respect to the Company's fleet of marine
drilling and workover rigs, as of June 15, 1996, is set forth in the following
table:

YEAR BUILT MAXIMUM
OR LAST DRILLING
HORSEPOWER REFURBISHED DEPTH(FEET) STATUS(A)
---------- ----------- ----------- ---------

Inland Barge:
Deep Drilling
Rig No. 50............................. 2,000 1993 25,000 Active
Rig No. 51............................. 2,000 1993 25,000 Active
Rig No. 52............................. 2,000 1993 25,000 Active
Rig No. 53............................. 2,000 1995 20,000 Active
Rig No. 54............................. 2,000 1995 30,000 Active
Rig No. 55............................. 2,000 1993 30,000 Active
Rig No. 56............................. 2,000 1992 30,000 Active
Rig No. 57............................. 3,000 1980 30,000 Stacked
Rig No. 58............................. 3,000 1982 30,000 Stacked
Rig No. 59............................. 3,000 1972 30,000 Stacked
Rig No. 60(b).......................... 3,000 1981 30,000 Stacked
Rig No. 71(c).......................... 3,000 1994 30,000 Active
Intermediate Drilling
Rig No. 8.............................. 1,700 1995 15,000 Active
Rig No. 11............................. 1,700 1994 15,000 Active
Rig No. 12............................. 1,200 1990 14,000 Active
Rig No. 17............................. 1,200 1993 13,000 Active
Rig No. 21............................. 1,200 1995 14,000 Active
Heavy Workover and Shallow Drilling
Rig No. 15............................. 800 1991 11,500 Stacked
Rig No. 16............................. 800 1994 11,500 Active
Rig No. 18............................. 800 1993 11,500 Active
Rig No. 19............................. 800 1993 11,500 Stacked
Rig No. 20............................. 800 1995 11,500 Active
Rig No. 23............................. 1,000 1993 13,000 Active
Rig No. 24............................. 1,000 1992 13,000 Active
Rig No. 25............................. 1,000 1993 13,000 Active

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YEAR BUILT MAXIMUM
OR LAST DRILLING
HORSEPOWER REFURBISHED DEPTH(FEET) STATUS(A)
---------- ----------- ----------- ---------

Workover and Other
Rig No. 1.............................. 1,100 1980 -- Stacked
Rig No. 3.............................. 1,000 1980 -- Stacked
Rig No. 4.............................. 1,000 1990 -- Stacked
Rig No. 5.............................. 800 1991 -- Stacked
Rig No. 6.............................. 800 1995 -- Active
Rig No. 7.............................. 800 1995 -- Active
Rig No. 9.............................. 650 1996 -- Active
Rig No. 10............................. 800 1978 -- Stacked
Rig No. 26............................. 650 1996 -- Active
Rig No. 27............................. 800 1987 -- Stacked
Rig No. 28............................. 800 1987 -- Stacked
Platform:
Rig No. 36............................. 500 1977 -- Stacked
Rig No. 41............................. 950 1993 12,500 Active
Rig No. 42E............................ 950 1996 12,500 Active
Rig No. 43............................. 650 1994 -- Stacked
Rig No. 46............................. 650 1988 -- Stacked
Rig No. 47............................. 750 1993 11,000 Active
Rig No. 40(d).......................... 950 1992 11,000 Active
Rig No. 48(d).......................... 950 1992 11,000 Active
Total Rigs........................ 44

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

(a) "Active" denotes that the identified rig is currently under contract or
available for contract. As of June 15, 1996, 21 rigs were under contract.
"Stacked" denotes that the rig is currently cold stacked and would need to
be refurbished before being placed back into service. The Company believes
that its "stacked" rigs could be returned to service at a cost of between $1
million and $5 million per rig.

(b) The Company has entered into a letter of intent to redeploy this rig to
Nigeria.

(d) Located in Peru.

Mallard's domestic operations are primarily conducted in the coastal (bays,
swamps and canals) and offshore waters of Louisiana, Texas and Alabama.
Mallard's business is directly dependent upon the level of oil and gas
exploration, development and workover activity in these geographic markets.
Because most of the current exploration and development activity in the U.S.
Gulf Coast area is concentrated on the exploration for and production of natural
gas, Mallard's operations are materially affected by market conditions for
natural gas.

The U.S. natural gas market has in recent periods been extremely volatile.
In 1994 and through the first half of 1995, natural gas prices declined
significantly. However, beginning in the middle of 1995, prices showed a marked
increase. These increases have resulted in increased exploration and workover
activity in the Gulf of Mexico, which in turn has resulted in increased demand
for barge drilling and workover services. Increased demand, combined with an
overall shrinkage in fleets and a consolidation in the industry, has improved
day rates and margins. Prices for oil and natural gas continue to be extremely
volatile and any material decline in the prevailing price of natural gas could
result in reduced exploration and development activity and related day rates.

Mallard's domestic rigs are primarily barge rigs that are capable of
performing medium and deep drilling operations. Barge rigs are mobile drilling
platforms that are submersible and are built to work in eight to 20 feet of
water. These rigs are towed by tug boats to the drill site with the derrick laid
down. The lower hull is then submerged by flooding until it rests on the sea
floor. The derrick is then raised and drilling and workover

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operations are conducted with the barge in this position. There are two basic
forms of barge rigs: "posted" and "conventional". A posted barge is identical to
a conventional barge except that the hull and super structure are separated by
12 to 14 foot columns, which increases the water depth capabilities of the rig.

Internationally, Mallard currently operates one 3,000 HP barge drilling rig
with a Varco TDS-3S Top Drive in the inland and coastal waters of Nigeria and
has two platform drilling rigs available for operation in the offshore waters of
Peru. Mallard's rig in Nigeria was recently awarded a new contract by Chevron
through 1998. In addition, as noted above, the Company is proposing to acquire
two of Noble's rigs operating in Nigeria and has recently entered into a letter
of intent with Chevron for the redeployment of an additional rig to Nigeria that
would operate for Chevron under a three year contract beginning in the fourth
quarter of 1996.

Mallard currently has one platform rig in Peru operating under a one-year
contract expiring in January 1997 and another rig available for operation if
needed by the Company's customer. These rigs did not operate for most of the
second half of 1995 due to cost reductions by the Company's customer. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations". The Company's operations in Peru are
conducted through a partnership. Under the terms of the agreements relating to
this partnership, Mallard is entitled to approximately two-thirds of the income
from the partnership's operations. The Company is currently reviewing its
options with respect to its operations in Peru and the desirability of
relocating one or both of its rigs to other markets.

LAND DRILLING AND WORKOVER RIGS

Mallard currently owns four land drilling rigs. These rigs are under a
two-year drilling contract with Yacimientos Petroliferos Fiscales Sociedad
Anonima ("YPF") in Argentina extending through June 1997. The Company's
operations in Argentina have been adversely affected by high costs associated
with those operations and low margins associated with its workover contracts.
The Company has recently taken action to reduce its costs in Argentina and
improve profitability, including the acquisition of rig mobilization equipment
that is expected to reduce the costs payable to third parties for the movement
of the Company's rigs in Argentina.

In 1994, Mallard acquired a 49% interest in a joint venture that owns two
land rigs in Peru. This venture is actively pursuing land drilling opportunities
in Peru.

COMPETITION AND CUSTOMERS

Drilling in the U.S. Gulf Coast area serviced by Mallard ranges from
shallow wells (up to 12,000 feet) to deep wells (up to 30,000 feet). The shallow
wells generally take up to 20 days to drill and complete. Deeper wells generally
take disproportionately longer to drill than shallow wells due primarily to more
varied and difficult subsurface conditions and the frequent need to run
protective casing.

The Company's drilling rigs are generally operated under individual day
rate contracts between the Company and its customers. Drilling contracts
generally cover either the drilling of a specified well or wells or a stated
term. Historically, most domestic contracts have been on a well-to-well basis
while contracts in the international markets typically are offered on a term
basis. The Company, from time to time, operates under turnkey contracts. The
Company maintains redrill insurance to insure against certain costs in the event
the Company was required to redrill under a turnkey contract.

The Company obtains most of its contracts through competitive bidding
against other contractors in response to solicitations of bids by oil and gas
companies. Under the Company's day rate drilling contracts, it receives a fixed
amount per day for providing the rig, certain related equipment and the rig
operating crew, which works under the direction of a representative of the
customer who is in charge of drilling operations. The customer pays all other
costs of drilling the well. Under most such contracts, the customer also pays,
at a reduced day rate, for periods of travel or when operations are interrupted
or restricted by equipment breakdowns, adverse weather or water conditions or
other conditions beyond the control of the Company. The Company also makes
available the services of its fleet of approximately 55 crew boats as an extra
cost option.

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46

Mallard primarily competes with one other barge competitor in the Gulf of
Mexico, Falcon Drilling Company, Inc., although there exists a number of smaller
companies. Mallard also competes with other types of rigs. The Company estimates
that its share of the barge drilling and workover market in coastal and inland
waters in the Gulf Coast area is approximately 40%.

Mallard's customer base consists of independent and major oil companies.
For 1995, Texaco, Petro-Tech Peruana S.A. and Chevron accounted for 25%, 13% and
11%, respectively, of Mallard's revenues. For 1994, Texaco and Oryx Energy
Company accounted for 15% and 11%, respectively, of Mallard's revenues. For
1993, Texaco accounted for 19% of Mallard's revenues.

GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

The U.S. Gulf Coast market, and particularly the shallow-water areas where
the Company's contract drilling service operations are concentrated, are
ecologically sensitive. As a result, environmental issues have led to higher
drilling costs, a more difficult and lengthy well permitting process and, in
general, have adversely affected decisions of the oil companies to drill in
these areas. U.S. laws and regulations applicable to the Company's operations
include those controlling the discharge of materials into the environment,
requiring removal and cleanup of materials that may harm the environment, or
otherwise relating to the protection of the environment. The Company, as an
operator of drilling rigs in navigable U.S. waters and certain offshore areas,
may be liable for damages and costs incurred in connection with oil spills for
which it is held responsible, subject to certain limitations. An oil spill in a
wetland or inland waterway could produce substantial damage to the environment,
including wildlife and ground water. Laws and regulations protecting the
environment have become more stringent in recent years, and may, in certain
circumstances, impose "strict liability", rendering a person liable for
environmental damage without regard to negligence or fault on the part of such
person. Such laws and regulations may expose the Company to liability for the
conduct of or conditions caused by others, or for acts of the Company which were
in compliance with all applicable laws at the time such acts were performed. The
application of these requirements or the adoption of the new requirements could
have a material adverse effect on the Company.

The drilling of oil and gas wells is subject to various federal, state,
local and foreign laws, rules and regulations. The Company, as an owner or
operator of domestic offshore facilities, may be liable for the costs of removal
and damages arising out of a pollution incident to the extent set forth in the
Federal Water Pollution Control Act, as amended by the Oil Pollution Act of 1990
("OPA") and the Outer Continental Shelf Lands Act. In addition, the Company may
also be subject to applicable state law and other civil claims arising out of
any such incident. Certain of the Company's facilities are also subject to
regulations of the Environmental Protection Agency ("EPA") that require the
preparation and implementation of spill prevention, control and countermeasure
plans relating to possible discharge of oil into navigable waters. Other
regulations of the EPA may require certain precautions in storing, handling and
transporting hazardous wastes. State statutory provisions relating to oil and
natural gas generally include requirements as to well spacing, waste prevention,
production limitations, pollution prevention and cleanup, obtaining drilling and
dredging permits and similar matters. The Company believes that it is in
compliance in all material respects with such laws, rules and regulations.

The OPA and regulations promulgated pursuant thereto impose a variety of
regulations on "responsible parties" related to the prevention of oil spills and
liability for damages resulting from such spills. A "responsible party" includes
the owner or operator of a facility or vessel, or the lessee or permittee of the
area in which an offshore facility is located. The OPA assigns liability to each
responsible party of oil removal costs and a variety of public and private
damages. While liability limits apply in some circumstances, a responsible party
for an Outer Continental Shelf facility must pay all spill removal costs
incurred by a federal, state or local government. The OPA establishes liability
limits (subject to indexing) for offshore drilling rigs. If functioning as an
offshore facility, the offshore drilling rigs are considered "tank vessels" for
spills of oil on or above the water surface, with liability limits of $1,200 per
gross ton or $10 million. To the extent damages and removal costs exceed this
amount, the offshore drilling rigs will be treated as an offshore facility and
the offshore lessee will be responsible up to higher liability limits for all
removal costs plus $75 million. A party cannot take advantage of liability
limits if the spill was caused by gross negligence or willful misconduct or

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47

resulted from violation of a federal safety, construction or operating
regulation. If the party fails to report a spill or to cooperate fully in the
cleanup, liability limits likewise do not apply. Few defenses exist to the
liability imposed by the OPA. The OPA also imposes ongoing requirements on a
responsible party. These include proof of financial responsibility (to cover at
least some costs in a potential spill) and preparation of an oil spill
contingency plan. A failure to comply with ongoing requirements or inadequate
cooperation in a spill may even subject a responsible party to civil or criminal
enforcement actions.

In addition, the Outer Continental Shelf Lands Act authorized regulations
relating to safety and environmental protection applicable to lessees and
permittees operating on the Outer Continental Shelf. Specific design and
operational standards may apply to Outer Continental Shelf vessels, rigs,
platforms, vehicles and structures. Violations of environmental-related lease
conditions or regulations issued pursuant to the Outer Continental Shelf Lands
Act can result in substantial civil and criminal penalties as well as potential
court injunctions curtailing operations and the cancellation of leases. Such
enforcement liabilities can result from either governmental or citizen
prosecution.

The drilling industry is dependent on the demand for services from the oil
and gas exploration and development industry and, accordingly, is affected by
changing tax laws, price controls and other laws relating to the energy
business. The Company's business is affected generally by political developments
and by federal, state, local and foreign laws and regulations that may relate
directly to the oil and gas industry. The adoption of laws and regulations, both
domestic and foreign, that curtail exploration and development drilling for oil
and gas for economic, environmental and other policy reasons may adversely
affect the Company's operations by limiting available drilling opportunities.

The Company believes it is in material compliance with applicable federal,
state, local and foreign legislation and regulations relating to environmental
controls. In this regard, all of Mallard's operating domestic drilling rigs have
zero discharge capabilities as required by law. In addition, in recognition of
environmental concerns regarding dredging of inland waters and permitting
requirements, Mallard conducts minimal dredging operations and approximately
two-thirds of Mallard's drilling contracts involve directional drilling, which
minimizes the need for dredging. However, the existence of such laws and
regulations has had and will continue to have a restrictive effect on the
Company and its customers.

SEASONALITY

The Contract drilling business is subject to seasonal variation.
Historically, the first two quarters of the calendar year are less active, while
the last two quarters usually have a higher level of activity.

FACILITIES

Mallard is headquartered in New Iberia, Louisiana where it operates a yard
and docking facility at the Port of Iberia. Mallard owns the facility and leases
the land on which it is located under a long-term lease, subject to extensions,
that will expire in 2018.

BACKLOG

Other than Mallard's foreign contracts, which are long-term in nature,
drilling and workover servicing contracts have typically been for short-terms,
usually the time required to drill one well.

RAW MATERIALS

The Company purchases a variety of raw materials for its manufacturing
operations, including plain end green tubing stock, steel bars and a variety of
parts and components fabricated by other manufacturers and suppliers. With the
exception of Robbins & Myers, which supplies two material components of EVI Oil
Tools' progressive cavity pumps, the Company is not dependent on any single
source of supply for any of its raw materials and components. A loss of one or
more of the Company's suppliers could disrupt production.

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PATENTS

The Company's oilfield equipment segment utilizes various patents and
proprietary technology in the manufacture of its products. Certain components
currently used in the progressive cavity pump utilize technology owned and
licensed by Robbins & Myers. Although the Company considers its patents
important to the operation of its business and a loss of one or more patents
could adversely affect a particular product, because of the proprietary
processes that the Company has developed in using its patents, and the nature of
the business conducted with the patents, it does not believe that any
significant portion of its business is materially dependent upon any single
patent or group of patents or generally upon patent protection.

INSURANCE

The Company has purchased Operators Extra Expense insurance to insure
itself against exposure to certain hazards unique to drilling and workover
operations and maintains redrill insurance with respect to its exposure relating
to turnkey contracts. There can be no assurance, however, that such insurance
will be sufficient to cover any future losses, or that such insurance will
continue to be available on commercially reasonable terms. The Company's
drilling and workover business is also subject to the usual hazards of oil and
gas drilling operations (including blowouts, fires, cratering, pollution and
environmental damages), plus the additional dangers incident to marine
operations in coastal and offshore waters (including capsizing, collision,
grounding and adverse weather). The Company maintains insurance coverage that it
believes to be customary in the industry against these hazards and whenever
possible obtains agreements from customers providing for indemnification against
liability to others. The Company also maintains political risk insurance to
insure against certain risks of doing business in foreign countries. Although
the Company believes that these actions have helped it to minimize the cost of
its insurance, any increase in the number or amount of claims or losses could
require greater cash payments and reserves by the Company and could result in
the Company having higher rates, deductibles and retainages for its insurance
coverage. However, neither insurance nor indemnity agreements can provide
complete protection against casualty losses. There can be no assurance that such
coverage is adequate for the risks involved, that the coverage limits would not
be exceeded or that such insurance would apply to all such liabilities. Further,
there can be no assurance that such insurance will be sufficient to cover any
future losses, will continue to be available on commercially reasonable terms or
will continue to be available on terms as favorable as those for its existing
arrangements. The occurrence of an adverse claim in excess of the coverage
limits maintained by the Company could have a material adverse effect on the
Company's financial condition and results of operations.

The Company is required to carry workers' compensation insurance to comply
with state laws and customer requirements. Grant Prideco has elected to opt out
of the mandatory workers' compensation pools and secures its workers'
compensation through outside insurance. Although it has been able to reduce
insurance costs through this election, certain benefits provided under the
workers' compensation statutes may not be available to the Company. The cost of
insurance is subject to substantial fluctuation due to a variety of factors,
some of which are beyond the Company's control. Although the Company has
generally been able to obtain insurance on terms it considers to be reasonable,
there can be no assurance that such insurance will continue to be available on
terms as favorable as those for its existing arrangements. The Company is
partially self-insured for employee health insurance claims and certain workers'
compensation claims, including marine workers' compensation claims.

Although the Company maintains product liability insurance with respect to
its products, such insurance is limited in coverage. The occurrence of an
adverse claim in excess of the coverage limits maintained by the Company with
respect to its products could have a material adverse effect on the Company.

GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

The Company's business is affected by changes in public policy and by
federal, state and local laws and regulations relating to the energy industry.
The adoption of laws and regulations curtailing exploration and development
drilling for oil and gas for economic, environmental and other policy reasons
may adversely affect the Company's operations by limiting available drilling and
other opportunities in the energy service industry.

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The Company is also subject to various health and safety regulation as
established by the Occupational Safety and Health Administration.

The Company's operations are subject to federal, state and local laws and
regulations controlling the discharge of materials into or otherwise relating to
the protection of the environment. In recent years, laws and regulations
protecting the environment have generally become more stringent and have sought
to impose greater liability on a larger number of potentially responsible
parties. However, the Company is not currently aware of any situation or
condition that it believes is likely to have a material adverse effect on its
results of operations or financial condition. For information concerning
environmental matters with respect to the contract drilling services provided by
Mallard, see "-- Contract Drilling -- Government Regulation and Environmental
Matters".

The Company's expenditures in 1995 in order to comply with applicable
environmental laws and regulations were not material, and the Company expects
that the costs of compliance with such laws and regulations for 1996 will be
minimal. The Company maintains insurance coverage with respect to environmental
liabilities relating to its marine drilling operations. Although the Company
believes that such coverage is adequate for the risks involved, there can be no
assurance that the coverage limits would not be exceeded or such insurance would
apply to all such liabilities. The Company does not believe that its costs for
compliance with applicable environmental laws and regulations is, on a relative
basis, greater than that of its competitors.

FOREIGN OPERATIONS

The Company's equipment and services are used in approximately 50 countries
by U.S. customers operating abroad and by foreign customers. Sales of equipment
and services outside the U.S. accounted for approximately 38%, 36% and 40% of
total revenues for 1995, 1994 and 1993, respectively, based upon the ultimate
destination in which equipment or services were sold, shipped or provided to the
customer by the Company. The distribution of the Company's revenues by
geographic region is shown below:

WESTERN HEMISPHERE EASTERN HEMISPHERE
------------------------ ---------------------
UNITED STATES OTHER MIDDLE EAST OTHER ELIMINATIONS TOTAL
------------- ------- ----------- ------ ------------ --------
(IN THOUSANDS)

1995
Operating revenues from unaffiliated
customers................................. $ 220,937 $61,293 $ -- $9,921 $ (3,567) $288,584
Export sales to unaffiliated customers...... 63,003 -- -- -- -- 63,003
-------- ------- ------ ------ ------- --------
Total................................. 283,940 61,293 -- 9,921 (3,567) 351,587
1994
Operating revenues from unaffiliated
customers................................. $ 162,344 $34,643 $ 5,801 $5,329 $ (3,304) $204,813
Export sales to unaffiliated customers...... 43,724 -- -- -- -- 43,724
-------- ------- ------ ------ ------- --------
Total................................. 206,068 34,643 5,801 5,329 (3,304) 248,537
1993
Operating revenues from unaffiliated
customers................................. $ 150,729 $31,722 $ 7,967 $4,675 $ (1,983) $193,110
Export sales to unaffiliated customers...... 52,847 -- -- -- 60 52,907
-------- ------- ------ ------ ------- --------
Total................................. 203,576 31,722 7,967 4,675 (1,923) 246,017

See Note 15 to the Consolidated Financial Statements of the Company for
additional financial information related to the Company's revenues by geographic
region.

Operations and sales in foreign markets are subject to substantial
competition from large multi-national corporations and government-owned entities
and to a variety of local laws and regulations requiring qualifications, use of
local labor, the provision of financial assurances or other restrictions and
conditions on operations. Foreign operations are also subject to risks
associated with doing business outside the U.S., including risk of war, civil
disturbances and governmental activities that may limit or disrupt markets,
restrict the movement of funds or result in the deprivation of contract rights
or the taking of property without fair compensation. Foreign operations may also
subject the Company to risks relating to fluctuations in currency exchange
rates. However, to date, currency fluctuations have not had a material adverse
impact on the Company.

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The Company's current and proposed operations in Nigeria are also subject
to certain risks relating to political instability in Nigeria and the
possibility of the adoption of legislation by the U.S. Congress, which, if
enacted, could restrict the ability of the Company and its customers to engage
in trade and invest in Nigeria. To date, the Company has not been materially
affected by the political instability in Nigeria. Other rig contractors,
however, have experienced work stoppages and delays relating to civil unrest in
Nigeria. In addition, although no legislation materially restricting United
States trade with Nigeria has been enacted to date, there is currently pending
before the United States Congress legislation that would restrict future trade
and investment in Nigeria. If such legislation were to be enacted, the Company's
rig operations in Nigeria could either be required to be terminated or
materially curtailed. The legislation could also prevent the Company from
acquiring the Noble rigs in Nigeria or from operating those rigs if they are
acquired. In addition to reducing or eliminating a source of revenue and income,
the Company could be required to redeploy its rigs out of Nigeria. The costs of
such redeployment might not be reimbursable and such costs, together with the
costs with a termination of operations in Nigeria, could have a material adverse
impact on results. Revenues and operating income attributable to the Company's
Nigerian operations for the year ended December 31, 1995, were $8.8 million and
$2.4 million, respectively. Revenues and operating income for the three months
ended March 31, 1996, were $2.4 million and $0.5 million, respectively.

The Company has drill pipe and other products manufactured for it by OCTL
in India under a long-term exclusive manufacturing arrangement with OCTL.
Although the Company has sought to minimize the risks of this operation through
its manufacturing arrangement and insurance, the Company is providing OCTL with
a substantial amount of raw materials and inventory for the products
manufactured for it. Operations in India are subject to various political and
economic risks as well as financial risks with respect to OCTL. The Company's
arrangement with OCTL is structured to minimize the Company's risk to its
initial $8 million deposit with OCTL, the raw materials provided to OCTL for the
manufacture of the Company's products and working capital associated with the
operations.

The Company also has manufacturing operations in Mexico, Brazil and China
and, in addition to Nigeria, has rigs operating in Peru and Argentina. The
Company's operations in each of these countries are subject to various political
and economic conditions existing in them which could disrupt operations. The
Company generally seeks to obtain, where economical, insurance against certain
political risks and attempts to structure its contracts and arrangements in the
foreign countries in which it operates in a manner that would minimize the
exposure of its assets to losses in those countries. Such efforts include
structuring substantially all of its sales and service contracts to be in U.S.
dollars and utilizing lease arrangements and joint ventures for manufacturing
facilities so as not to require substantial investment of funds in fixed assets
in foreign countries. Although the Company believes that its exposure to foreign
risks is not materially greater than that of its competitors, there can be no
assurance that disruptions will not occur in the Company's foreign operations or
that any losses that do occur will be covered by insurance.

EMPLOYEES

As of May 31, 1996, the Company employed approximately 3,900 employees. The
Company considers its relations with its employees to be generally satisfactory.

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FACILITIES

The Principal offices of the Company and facilities used by the Company in
its oilfield equipment and contract drilling segments are set forth in the table
below:

FACILITY
SIZE PROPERTY
(SQ. SIZE
LOCATION FT.) (ACRES) TENURE UTILIZATION
- ------------------------------------ -------- -------- ------ -------------------------------------

OILFIELD EQUIPMENT:
Navasota, Texas................... 251,600 182.80 Owned Manufacture drill pipe, premium
threaded casing, liners and tubing
Vera Cruz, Mexico................. 214,000 42.00 Leased Manufacture drill pipe
Bastrop, Texas.................... 108,300 21.00 Owned Manufacture tool joints
Bryan, Texas...................... 160,000 55.27 Owned Manufacture premium tubing
Houston, Texas.................... 12,400 -- Leased Principal offices of Grant Prideco
68,500 13.50 Owned Manufacture drill pipe, drill
collars, heavyweights and kellys
21,900 11.00 Owned Manufacture drill pipe, drill
collars, heavyweights and kellys
31,500 10.00 Owned Manufacture drill pipe, drill
collars, heavyweights and kellys
162,500 21.00 Leased Threading of premium casing
Channelview, Texas................ 60,600 20.00 Owned Threading of premium casing
Longview, Texas................... 40,000 22.10 Owned Manufacture pump barrels and plungers
Odessa, Texas..................... 97,000 7.20 Owned Manufacture of RotaFlex pumping units
58,000 6.70 Owned Manufacture couplings, tubing anchors
and gears
Oklahoma City, Oklahoma........... 9,500 1.20 Leased Repair pumping unit parts
Morgan City, Louisiana............ 19,300 2.40 Leased Repair drill pipe, drill collars,
heavyweights and kellys
New Iberia, Louisiana............. 17,500 0.90 Leased Manufacture of gas lift equipment
Arlington, Texas.................. 60,000 2.50 Leased Manufacture of downhole packers and
completion systems
Powell, Wyoming................... 16,000 1.80 Leased Manufacture of downhole packers and
completion systems
Midland, Texas.................... 30,000 5.60 Owned Manufacture and repair pumping unit
parts
Woodward, Oklahoma................ 148,800 53.02 Leased Manufacture sucker rod pump parts
Santa Teresa, New Mexico.......... 43,000 7.50 Owned Manufacture sucker rods
Aberdeen, Scotland................ 11,500 5.90 Leased Threading of premium casing
Edmonton, Alberta, Canada......... 40,000 11.00 Leased Manufacture of progressive cavity
pumps
Nisku, Alberta, Canada............ 15,900 8.30 Owned Manufacture continuous rods
Caxias do Sul, Brazil............. 62,400 -- Leased Manufacture downhole packers and
completion systems
Macae, Brazil..................... 10,200 -- Owned Repair facility
Natal, Brazil..................... 2,600 -- Leased Repair facility
CONTRACT DRILLING:
Buenos Aires, Argentina........... 2,500 -- Leased Principal offices of Argentina
operations
Caleta Olivia, Argentina.......... 7,500 5.00 Leased Operating base for Southern Argentina
Rincon de las Sauces, Argentina... 2,500 2.50 Leased Operating base for Western Argentina
Warri, Delta State, Nigeria....... 5,750 0.50 Leased Equipment storage facility
New Iberia, Louisiana............. 54,600 -- Owned Principal offices of Mallard,
warehouse and repair shop
-- 14.00 Leased Docking facility
CORPORATE:
Houston, Texas.................... 14,500 -- Leased Principal offices of the Company

In addition to the above facilities, the Company has an agreement with OCTL
pursuant to which OCTL's manufacturing facility in Narketpally, India is to be
dedicated by OCTL to the production of drill pipe and other tubular products
exclusively for the Company. This facility is owned by OCTL and consists of
262,000 sq. ft. located on 60 acres.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table provides information with respect to the directors and
executive officers of the Company. Each executive officer has been elected to
serve until his or her successor is duly appointed or elected by the Board of
Directors or his or her earlier removal or resignation from office.

NAME OF DIRECTOR OR OFFICER AGE POSITION WITH THE COMPANY
----------------------------------- --- ------------------------------------------------

Bernard J. Duroc-Danner............ 42 President, Chief Executive Officer and Director
Ghazi J. Hashem.................... 61 Senior Vice President, Technical Operations
James G. Kiley..................... 39 Vice President and Chief Financial Officer,
Treasurer and Secretary
Frances R. Powell.................. 41 Vice President -- Accounting and Controller
David J. Butters................... 55 Director and Chairman of the Board
Uriel E. Dutton.................... 65 Director
Eliot M. Fried..................... 63 Director
Sheldon S. Gordon.................. 60 Director
Sheldon B. Lubar................... 67 Director
Robert B. Millard.................. 45 Director
Robert A. Rayne.................... 47 Director

Bernard J. Duroc-Danner joined the Company in May 1987 upon inception of
the Company's strategic redeployment in the oilfield service and equipment
industry. He was elected President of the Company in January 1990 and Chief
Executive Officer in May 1990. In prior years, Mr. Duroc-Danner was with Arthur
D. Little Inc., a management consulting firm in Cambridge, Massachusetts. Mr.
Duroc-Danner holds a Ph.D. in economics from Wharton (University of
Pennsylvania).

Ghazi J. Hashem was elected Senior Vice President, Technical Operations of
the Company in May 1994 and Vice President, Technical Operations in November
1992. Mr. Hashem previously served as Chairman of the Board of Grant Prideco
from May 1992 to November 1992 and as President of Grant Prideco from April 1984
to May 1992.

James G. Kiley was elected Vice President and Chief Financial Officer of
the Company in May 1996 and Vice President -- Finance, Treasurer and Secretary
in May 1994 when he joined the Company. From April 1991 to April 1994, Mr. Kiley
served as Treasurer of Baroid Corporation, a provider of oilfield services.
Prior to his position at Baroid, Mr. Kiley held various positions, including
Assistant Treasurer, at NL Industries, Inc., a manufacturer of titanium dioxide
pigments and specialty chemicals.

Frances R. Powell was elected Vice President -- Accounting of the Company
in May 1994, Controller in November 1991 and has been employed by the Company
since 1990. Ms. Powell was employed with GulfMark International, Inc.
("GulfMark") from 1986 to 1990, where she served as Controller from 1988 to
1990.

David J. Butters is a Managing Director of Lehman Brothers ("Lehman
Brothers"), an investment banking firm and division of Lehman Brothers Inc.,
which is a subsidiary of Lehman Brothers Holdings, Inc. ("Lehman Holdings"),
where he has been employed for more than the past five years. Mr. Butters is
currently Chairman of the Board of Directors of GulfMark, a director of
Anangel-American Shipholdings, Ltd. and BT Shipping Ltd. and a member of the
Board of Advisors of Energy International, N.V. See "Selling Stockholder". Mr.
Butters is also Chairman of the Board of Directors of the Company.

Uriel E. Dutton has been a Partner in Fulbright & Jaworski L.L.P., a law
firm, for more than the past five years.

Eliot M. Fried is a Managing Director of Lehman Brothers, where he has been
employed for more than the past five years. He is Co-Chairman of the firm-wide
Investment Committee and a member of the

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Investment Banking Commitment Committee of Lehman Brothers. Mr. Fried is a
director of Bridgeport Machines, Inc., Lear Corporation, Sun Distributors L.P.,
Walter Industries, Inc. and Vernitron Corporation.

Sheldon S. Gordon has been Chairman of Union Bancaire Privee International,
Inc., a merchant bank, since May 1996. From May 1995 to May 1996, Mr. Gordon was
a Limited Partner of The Blackstone Group, L.P., an investment banking firm. He
was also Chairman of Blackstone Alternative Asset Management L.P. from January
1993 to May 1996 and was employed with The Blackstone Group, L.P. as a general
partner from April 1991 until May 1995. Prior to April 1991, Mr. Gordon was
Chairman and Chief Executive Officer of Stamford Capital Group, Inc. for four
years ending August 1990. Mr. Gordon is a director of Ametek, Inc.,
Anangel-American Shipholdings, Ltd. and Holland Balanced Fund.

Sheldon B. Lubar has been Chairman and Chief Executive Officer of
Christiana Companies, Inc. ("Christiana"), a diversified holding company with
interests in refrigerated and non-refrigerated warehousing and logistic services
and Chairman of Lubar & Co. Incorporated for more than the past five years. Mr.
Lubar is a director of Ameritech Corporation, Massachusetts Mutual Life
Insurance Company, Firstar Corporation and MGIC Investment Corporation. Under
the terms of the agreements relating to the Company's acquisition of Prideco,
Inc. in June 1995, the Company agreed to nominate Mr. Lubar or another
acceptable nominee of Christiana for election to the Board of Directors of the
Company as long as Christiana beneficially owns 8% or more of the outstanding
shares of Common Stock of the Company.

Robert B. Millard is a Managing Director of Lehman Brothers, where he has
been employed for more than the past five years. Mr. Millard is also a director
of GulfMark. See "Selling Stockholder".

Robert A. Rayne has been an Investment Director of London Merchant
Securities plc (property investment and development with major investments in
leisure enterprises), a United Kingdom listed public limited company, for more
than the past five years.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with respect to each
person who as of June 15, 1996, was known by the Company to be the beneficial
owner of more than 5% of the outstanding shares of Common Stock.

NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIALLY OWNED PERCENT OF
BENEFICIAL OWNER AS OF JUNE 15, 1996(A) CLASS (%)
-------------------------------------------------------- ---------------------- ----------

GulfMark International, Inc. ........................... 2,535,572(b) 13.4
5 Post Oak Park, Suite 1170
Houston, Texas 77027
FMR Corp.(c)............................................ 2,097,200 11.1
82 Devonshire Street
Boston, Massachusetts 02109
Christiana Companies, Inc. and Sheldon B. Lubar(d)...... 1,948,731 10.3
777 E. Wisconsin Avenue, #3380
Milwaukee, Wisconsin 53202
Lehman Brothers Holdings Inc. .......................... 1,120,000(b) 5.9
3 World Financial Center
New York, New York 10285

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

(a) Unless otherwise indicated below, the persons or group listed have sole
voting and dispositive power with respect to their shares of Common Stock,
and none of such shares are deemed to be owned because the holder has the
right to acquire the shares within 60 days.

(b) Lehman Holdings beneficially owns 30.4% of the common stock of GulfMark. The
beneficial ownership of Common Stock of Lehman Holdings indicated in the
table above does not include any of the shares of Common Stock held by
GulfMark, beneficial ownership of which is disclaimed. See "Selling
Stockholder."

(c) FMR Corp. has sole power to dispose of all 2,097,200 shares of Common Stock
and sole power to vote 268,400 of such shares.

(d) Sheldon B. Lubar, a Director of the Company, is the Chairman and Chief
Executive Officer of Christiana and is the beneficial owner, through a
voting trust, of 49.9% of the common stock of Christiana.

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SELLING STOCKHOLDER

The following table sets forth certain information with respect to the
shares of Common Stock beneficially owned by the Selling Stockholder as of June
15, 1996. Unless otherwise indicated, the Selling Stockholder has sole voting
and investment power with respect to its shares of Common Stock.

BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING AFTER OFFERING(A)
------------------------ ------------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF
NAME OF SHARES OUTSTANDING SHARES TO SHARES OUTSTANDING
SELLING STOCKHOLDER OWNED SHARES BE SOLD OWNED SHARES
- -------------------------------------- --------- ----------- --------- --------- -----------

GulfMark International, Inc........... 2,535,572 13.4 300,000 2,235,572 10.2

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

(a) Does not include 500,000 shares of Common Stock to be issued in the TCA
transaction.

At June 15, 1996, Lehman Holdings, an affiliate of Lehman Brothers, owned
1,015,113 shares of the outstanding common stock of GulfMark (approximately
30.4% of the shares outstanding) and, as of such date, also owned 1,120,000
shares of the Common Stock of the Company (approximately 5.9% of the shares
outstanding). Messrs. David J. Butters and Robert B. Millard, who are employees
of Lehman Brothers and members of the Board of Directors of the Company,
constitute two of the five members of the Board of Directors of GulfMark.
Additionally, Mr. Butters is Chairman of the Company's and GulfMark's Board of
Directors. See "Management -- Directors and Executive Officers" and
"Underwriting".

The Company will pay certain expenses of registering the shares of Common
Stock to be offered by the Selling Stockholder under the Securities Act,
including printing expenses and the fees and disbursements of the counsel and
accountants for the Company. The Selling Stockholder will pay the registration
and filing fees, all fees and disbursements of its counsel and all brokerage
fees, commissions and expenses, if any, applicable to the shares of Common Stock
being sold by it. The Company will indemnify the Selling Stockholder against
certain civil liabilities, including liabilities under the Securities Act, or
contribute to payments the Selling Stockholder may be required to make in
respect thereof. The Selling Stockholder has agreed to indemnify the Company
against certain liabilities, including liabilities under the Securities Act,
with respect to information provided by the Selling Stockholder in connection
with this Offering.

54
56

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock, par value $1.00 per share, and 3,000,000 shares of Preferred
Stock, par value $1.00 per share ("Preferred Stock"). At June 17, 1996,
18,867,797 shares of Common Stock were outstanding. In addition, at June 17,
1996, there were 1,672,100 shares of Common Stock reserved for issuance pursuant
to the Company's 1981 Employee Stock Option Plan, 1992 Employee Stock Option
Plan, Amended and Restated Non-Employee Director Stock Option Plan and
restricted stock plan for foreign key employees, of which 956,100 shares of
Common Stock were reserved for issuance upon exercise of outstanding options. At
June 17, 1996, there were no shares of Preferred Stock issued or outstanding.
The holders of shares of Common Stock are not liable to further calls or
assessments by the Company. The description below is a summary of and is
qualified in its entirety by the provisions of the Company's Restated
Certificate of Incorporation as currently in effect.

Subject to the rights of the holders of any outstanding shares of Preferred
Stock and those rights provided by law, (i) dividends may be declared and paid
or set apart for payment upon the Common Stock out of any assets or funds of the
Company legally available for the payment of dividends and may be payable in
cash, stock or otherwise, (ii) the holders of the Company stock have the
exclusive right to vote for the election of directors and, except as provided
below, on all other matters requiring stockholder action generally, with each
share being entitled to one vote and (iii) upon the voluntary or involuntary
liquidation, dissolution or winding up of the Company, the net assets of the
Company will be distributed pro rata to the holders of the Common Stock in
accordance with their respective rights and interests to the exclusion of the
holders of any outstanding shares of Preferred Stock.

Although the holders of the Common Stock are generally entitled to vote for
the approval of amendments to the Company's Restated Certificate of
Incorporation, the voting rights of the holders of the Common Stock are limited
with respect to certain amendments to the Company's Restated Certificate of
Incorporation that affect only the holders of the Preferred Stock. Specifically,
subject to the rights of any outstanding shares of any series of Preferred
Stock, the Company's Restated Certificate of Incorporation provides that it may
be amended from time to time in any manner that would solely modify or change
the relative powers, preferences and rights and the qualifications or
restrictions of any issued shares of any series of Preferred Stock then
outstanding with the only required vote or consent for approval of such
amendment being the affirmative vote or consent of the holders of a majority of
the outstanding shares of the series of Preferred Stock so affected, provided
that the powers, preferences and rights and the qualifications and limitations
or restrictions of such series after giving effect to such amendment are no
greater than the powers, preferences and rights and qualifications and
limitations or restrictions permitted to be fixed and determined by the Board of
Directors with respect to the establishment of any new series of shares of
Preferred Stock pursuant to the authority vested in the Board of Directors as to
such matters.

Holders of the Common Stock do not have any cumulative voting, redemptive
or conversion rights and have no preemptive rights to subscribe for, purchase or
receive any class of shares or securities of the Company. Holders of the Common
Stock have no fixed dividend rights. Dividends may be declared by the Board of
Directors at its discretion depending on various factors, although no dividends
are anticipated for the foreseeable future. The Company is currently subject to
certain prohibitions on the declaration and payment of cash dividends on the
Common Stock under the terms of the Company's existing credit facilities. In
addition, under the terms of the Company's 10 1/4% Senior Notes due 2004, the
Company is limited in the amount of funds it may distribute as dividends or
distributions to stockholders to an amount generally equal to: (a) the sum of
(i) its earnings subsequent to December 31, 1993, (ii) the net consideration
received from certain stock issuances since March 1994, (iii) the value of
certain investments in unrestricted subsidiaries redesignated as restricted
subsidiaries and (iv) $5 million, less (b) the amount of dividends,
distributions and other restricted payments made by the Company since March
1994. As of May 31, 1996, the Company was limited in the amount of dividends,
distributions and other restricted payments that could be made by it to
approximately $148 million.

55
57

The Preferred Stock may be issued from time to time in one or more series,
with each such series having such powers, preferences and rights and
qualifications and limitations or restrictions as may be fixed by the Board of
Directors pursuant to the resolution or resolutions providing for the issuance
of such series.

Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation, except under certain
circumstances, including a breach of the director's duty of loyalty, acts or
omissions of the director not in good faith or which involve intentional
misconduct or a knowing violation of law, the approval of an improper payment of
a dividend or an improper purchase by the Company of stock or any transaction
from which the director derived an improper personal benefit. The Company's
Restated Certificate of Incorporation provides that the Company's directors are
not liable to the Company or its stockholders for monetary damages for breach of
their fiduciary duty, subject to the above described exceptions specified by
Delaware law.

As a Delaware corporation, the Company is subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined) with a Delaware corporation for three years following
the date such person became an interested stockholder unless (i) before such
person became an interested stockholder, the board of directors of the
corporation approved the transaction in which the interested stockholder became
an interested stockholder or approved the business combination; (ii) upon
consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owns at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide employees with the
rights to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer); or (iii) following the transaction
in which such person became an interested stockholder, the business combination
is approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of two-thirds of
the outstanding voting stock of the corporation not owned by the interested
stockholder. Under Section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested stockholder
following the announcement or notification of one of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or were recommended for
election or elected to succeed such directors by a majority of such directors.
The Company has approved the acquisition by GulfMark and Lehman Holdings of the
shares of Common Stock owned by them under Section 203 and GulfMark and Lehman
Holdings are therefore not subject to the restrictions under Section 203.

The Registrar and Transfer Agent for the Common Stock is American Stock
Transfer and Trust Company, New York, New York.

56
58

UNDERWRITING

Lehman Brothers Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
Jefferies & Company, Inc., Prudential Securities Incorporated and Schroder
Wertheim & Co. Incorporated (the "Underwriters") have severally agreed, subject
to the terms and conditions contained in the Underwriting Agreement, to purchase
from the Company and the Selling Stockholder, and the Company and the Selling
Stockholder have agreed to sell to each Underwriter, the number of shares of
Common Stock set forth opposite their respective names below:

NUMBER OF
UNDERWRITER SHARES
------------------------------------------------------------------ ---------

Lehman Brothers Inc. .............................................
Donaldson, Lufkin & Jenrette Securities Corporation...............
Jefferies & Company, Inc. ........................................
Prudential Securities Incorporated ...............................
Schroder Wertheim & Co. Incorporated .............................

---------
Total................................................... 3,300,000
=========

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to various conditions. The nature of the
Underwriters' obligations are such that they are committed to take and pay for
all of the shares offered hereby if any are purchased.

The Company and the Selling Stockholder have been advised by the
Underwriters that they propose to offer the shares of Common Stock to the public
at the public offering price set forth on the cover page hereof and to certain
selected dealers (who may include the Underwriters) at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain other dealers. After the initial offering, the public offering price,
the concession to selected dealers and the reallowance to other dealers may be
changed by the Underwriters.

The Company has granted to the Underwriters an option to purchase up to an
additional 450,000 shares of Common Stock, at the public offering price less the
underwriting discounts and commissions shown on the cover page of this
Prospectus, solely to cover over-allotments, if any. Such option may be
exercised at any time up to 30 days after the date of this Prospectus. To the
extent that the Underwriters exercise such option, each of the Underwriters will
be committed, subject to certain conditions, to purchase a number of additional
shares that is proportional to such Underwriter's initial commitment.

The Company, the Selling Stockholder and the executive officers and
directors of the Company have agreed that they will not, without the prior
written consent of Lehman Brothers Inc., during the 90 days following the date
of this Prospectus, offer for sale, sell or otherwise dispose of any shares of
Common Stock or any securities convertible into, or exercisable or exchangeable
for, shares of Common Stock, or, as to the Company, sell or grant options,
rights, or warrants with respect to any shares of Common Stock, other than (i)
pursuant to existing benefit plans of the Company or its subsidiaries and (ii)
in accordance with the Underwriting Agreement. Pursuant to the Underwriting
Agreement, the Company has agreed to suspend sales of Common Stock pursuant to
registration rights granted to certain of its stockholders, including the
stockholders of TCA who will receive Common Stock in connection with the
acquisition of TCA, for 90 days after the date of this Prospectus (60 days after
the date of this Prospectus in the case of the former shareholders of ENERPRO
who hold an aggregate of approximately 100,000 shares of Common Stock).

57
59

Jefferies & Company, Inc. has from time to time provided financial advisory
services to the Company for which it has received usual and customary
compensation.

The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.

At June 15, 1996, Lehman Holdings, an affiliate of Lehman Brothers, owned
1,120,000 shares of the Common Stock (approximately 5.9% of the shares
outstanding) and approximately 30.4% of the outstanding common shares of
GulfMark. Messrs. David J. Butters, Eliot M. Fried and Robert B. Millard, who
are employees of Lehman Brothers, constitute three of the eight members of the
Board of Directors of the Company. Messrs. Butters and Millard constitute two of
the five members of the Board of Directors of GulfMark. Mr. Butters is Chairman
of the Company's and GulfMark's Board of Directors. See "Management -- Directors
and Executive Officers" and "Selling Stockholder." As a result of the foregoing
ownership of Common Stock and stock of the Selling Stockholder and director
relationships, the National Association of Securities Dealers, Inc. ("NASD") may
view this Offering as a participation by Lehman Brothers in the distribution in
a public offering of the securities of an affiliate. As a result, this Offering
is being made pursuant to the provisions of Rule 2720 of the NASD's Conduct
Rules. In accordance with such Rule 2720, the Underwriters will not make sales
of shares of Common Stock offered hereby to customers' discretionary accounts
without the prior specific written approval of such customers.

LEGAL MATTERS

In connection with the Common Stock offered hereby, the validity of the
shares being offered will be passed upon for the Company by Fulbright & Jaworski
L.L.P., Houston, Texas. Uriel E. Dutton, a director of the Company, is a partner
of Fulbright & Jaworski L.L.P. Mr. Dutton currently holds options to purchase
30,000 shares of Common Stock, which options were granted to him pursuant to the
Company's Amended and Restated Non-Employee Director Stock Option Plan. Certain
legal matters will be passed upon for the Selling Stockholder by Griggs &
Harrison, P.C. Certain legal matters will be passed upon for the Underwriters by
Baker & Botts, L.L.P., Houston, Texas.

EXPERTS

The Company's consolidated financial statements as of December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995,
included and incorporated by reference in this Prospectus and the Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.

The historical balance sheets of Prideco as of June 30, 1995 and 1994, and
the consolidated statements of income, retained earnings and cash flows for the
fiscal years ended June 30, 1995 and 1994, incorporated by reference into this
Prospectus and the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said reports.

The historical balance sheets of TCA, as of December 31, 1995 and 1994, and
the consolidated statements of income, retained earnings and cash flows for the
fiscal years ended December 31, 1995 and 1994, included in this Prospectus and
the Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated by reference herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.

58
60

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
-----

ENERGY VENTURES, INC. AND SUBSIDIARIES:

Report of Independent Public Accountants.............................................. F-2

Consolidated Balance Sheets at December 31, 1995 and 1994........................... F-3

Consolidated Statements of Income, for each of the three years in the period ended
December 31, 1995................................................................ F-4

Consolidated Statements of Stockholders' Investment, for each of the three years in
the period ended December 31, 1995............................................... F-5

Consolidated Statements of Cash Flows, for each of the three years in the period
ended December 31, 1995.......................................................... F-6

Notes to Consolidated Financial Statements.......................................... F-7

Unaudited Consolidated Condensed Balance Sheet -- March 31, 1996...................... F-30

Unaudited Consolidated Condensed Statements of Income for the three month periods
ended March 31, 1996 and 1995....................................................... F-31

Unaudited Consolidated Condensed Statements of Cash Flows for the three month periods
ended March 31, 1996 and 1995....................................................... F-32

Notes to Unaudited Consolidated Condensed Financial Statements........................ F-33

F-1
61

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Energy Ventures, Inc.

We have audited the accompanying consolidated balance sheets of Energy
Ventures, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of income, stockholders'
investment and cash flows for each of the three years in the period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Energy
Ventures, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
February 26, 1996

F-2
62

ENERGY VENTURES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,
---------------------
1995 1994
-------- --------
(IN THOUSANDS)

ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents............................................ $ 4,517 $ 3,144
Accounts Receivable, Net of Allowance for Uncollectible Accounts of
$615,000 in 1995 and $564,000 in 1994............................. 102,763 72,790
Inventories.......................................................... 117,936 74,938
Materials and Supplies............................................... 10,042 7,687
Prepaid Expenses..................................................... 3,907 3,751
Other Current Assets................................................. 10,409 2,493
-------- --------
249,574 164,803
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land, Buildings and Other Property................................... 33,271 27,278
Rigs, Machinery and Equipment........................................ 201,945 152,096
Furniture and Vehicles............................................... 15,880 17,071
-------- --------
251,096 196,445
Less: Accumulated Depreciation....................................... 58,394 45,550
-------- --------
192,702 150,895
-------- --------
EXCESS OF COST OVER FAIR VALUE OF NET TANGIBLE ASSETS OF BUSINESSES
ACQUIRED, NET........................................................ 37,398 15,606
OTHER ASSETS........................................................... 11,386 12,930
-------- --------
$491,060 $344,234
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings, Primarily Under Revolving Lines of Credit..... $ 4,826 $ 17,265
Current Maturities of Long-Term Debt................................. 5,894 3,189
Accounts Payable..................................................... 53,703 30,741
Accrued Salaries and Benefits........................................ 5,963 3,908
Other Accrued Liabilities............................................ 26,730 15,362
-------- --------
97,116 70,465
-------- --------
LONG-TERM DEBT......................................................... 126,849 125,690
DEFERRED INCOME TAXES, NET............................................. 32,926 30,785
OTHER LIABILITIES...................................................... 6,103 6,381

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' INVESTMENT:
Common Stock, $1 Par Value, Authorized 20,000,000 Shares, Issued
18,522,183 Shares in 1995 and 12,754,249 Shares in 1994........... 18,522 12,754
Capital in Excess of Par Value....................................... 157,953 55,142
Retained Earnings.................................................... 60,167 48,856
Cumulative Foreign Currency Translation Adjustment................... (6,915) (4,536)
Treasury Stock, at Cost.............................................. (1,661) (1,303)
-------- --------
228,066 110,913
-------- --------
$491,060 $344,234
======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-3
63

ENERGY VENTURES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

REVENUES................................................... $351,587 $248,537 $246,017
-------- -------- --------
COSTS AND EXPENSES:
Cost of Sales............................................ 262,293 181,137 181,742
Selling, General and Administrative Attributable to
Segments.............................................. 51,731 43,183 41,690
Corporate General and Administrative..................... 5,123 4,748 4,030
-------- -------- --------
319,147 229,068 227,462
-------- -------- --------
OPERATING INCOME........................................... 32,440 19,469 18,555
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest Income.......................................... 118 210 366
Interest Expense, Net.................................... (16,723) (13,715) (7,575)
Other, Net............................................... 556 484 1,465
-------- -------- --------
(16,049) (13,021) (5,744)
-------- -------- --------
INCOME BEFORE INCOME TAXES................................. 16,391 6,448 12,811
PROVISION FOR INCOME TAXES................................. 5,080 1,806 4,864
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS.......................... 11,311 4,642 7,947
DISCONTINUED OPERATION, NET OF TAXES....................... -- -- (2,057)
-------- -------- --------
INCOME BEFORE EXTRAORDINARY CHARGE......................... 11,311 4,642 5,890
EXTRAORDINARY CHARGE, NET OF TAXES......................... -- (3,784) --
-------- -------- --------
NET INCOME................................................. $ 11,311 $ 858 $ 5,890
======== ======== ========
EARNINGS PER COMMON SHARE:
Continuing Operations.................................... $ .77 $ .37 $ .66
Discontinued Operation, Net of Taxes..................... -- -- (.17)
Extraordinary Charge, Net of Taxes....................... -- (.30) --
-------- -------- --------
Net Income............................................... $ .77 $ .07 $ .49
======== ======== ========
Weighted Average Common Shares Outstanding............... 14,724 12,629 12,067
======== ======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
64

ENERGY VENTURES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT

CUMULATIVE
FOREIGN
COMMON STOCK CAPITAL CURRENCY TREASURY STOCK TOTAL
--------------------- IN EXCESS RETAINED TRANSLATION ------------------- STOCKHOLDERS'
SHARES $1 PAR OF PAR EARNINGS ADJUSTMENT SHARES AMOUNT INVESTMENT
---------- ------- --------- -------- ----------- -------- ------- -------------
(IN THOUSANDS EXCEPT NUMBER OF SHARES)

Balance at December 31,
1992.................... 12,067,670 $12,068 $ 48,421 $42,108 $(1,152) (23,891) $ (289 ) $ 101,156
Net Income.............. -- -- -- 5,890 -- -- -- 5,890
Shares Issued in
Connection with
Acquisition........... 206,849 207 1,826 -- -- -- -- 2,033
Options Exercised....... 41,237 41 195 -- -- -- -- 236
Purchase of Treasury
Stock, at Cost, for
Executive Deferred
Compensation Plan..... -- -- -- -- -- (41,084) (620 ) (620)
Foreign Currency
Translation
Adjustment............ -- -- -- -- (959) -- -- (959)
---------- ------- -------- ------- ------- -------- ------- --------
Balance at December 31,
1993.................... 12,315,756 12,316 50,442 47,998 (2,111) (64,975) (909 ) 107,736
Net Income.............. -- -- -- 858 -- -- -- 858
Shares Issued in
Connection with
Acquisition........... 433,333 433 4,692 -- -- -- -- 5,125
Options Exercised....... 5,160 5 8 -- -- -- -- 13
Purchase of Treasury
Stock, at Cost, for
Executive Deferred
Compensation Plan..... -- -- -- -- -- (29,234) (394 ) (394)
Foreign Currency
Translation
Adjustment............ -- -- -- -- (2,425) -- -- (2,425)
---------- ------- -------- ------- ------- -------- ------- --------
Balance at December 31,
1994.................... 12,754,249 12,754 55,142 48,856 (4,536) (94,209) (1,303 ) 110,913
Net Income................ -- -- -- 11,311 -- -- -- 11,311
Shares Issued in
Connection with
Acquisition............. 2,255,198 2,255 33,020 -- -- -- -- 35,275
Options Exercised....... 62,736 63 593 -- -- -- -- 656
Issuance of Common
Stock................. 3,450,000 3,450 69,198 -- -- -- -- 72,648
Purchase of Treasury
Stock, at Cost, for
Executive Deferred
Compensation Plan..... -- -- -- -- -- (19,392) (358 ) (358)
Foreign Currency
Translation
Adjustment............ -- -- -- -- (2,379) -- -- (2,379)
---------- ------- -------- ------- ------- -------- ------- --------
Balance at December 31,
1995.................... 18,522,183 $18,522 $157,953 $60,167 $(6,915) (113,601) $(1,661) $ 228,066
========== ======= ======== ======= ======= ======== ======= ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
65

ENERGY VENTURES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31,
--------------------------------
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................. $ 11,311 $ 858 $ 5,890
Adjustments to Reconcile Net Income to Net Cash Provided
(Used) by Operations:
Depreciation and Amortization........................... 20,824 14,268 12,281
Deferred Income Tax Provision (Benefit) from Continuing
Operations............................................ 1,980 (1,052) 96
Extraordinary Charge on Prepayment of Debt, Net......... -- 3,784 --
Insurance Settlement, Net............................... -- 23,000 --
Gain on Sale of Business and Disposal of Assets......... (1,424) (100) (1,962)
Provision for Uncollectible Accounts Receivable......... 492 158 204
Decrease to Carrying Value of Accounts Receivable....... -- -- 369
Change in Assets and Liabilities, Net of Effects of
Businesses Acquired:
Accounts Receivable................................... (21,068) (19,718) (1,608)
Inventories........................................... (34,271) (6,686) (24,283)
Prepaid Expenses and Other............................ (10,832) (1,126) 149
Accounts Payable...................................... 18,018 (9,178) 9,926
Accrued Salaries and Benefits and Other............... (6,899) (5,234) 156
Other Assets.......................................... (561) (6,013) (8,432)
Other Liabilities, Net................................ 558 2,281 1,637
-------- -------- --------
Net Cash Used by Operations........................ (21,872) (4,758) (5,577)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Business............................. -- -- 3,500
Proceeds from Sale of Assets............................... 3,369 3,131 754
Acquisition of Businesses, Net of Cash Acquired............ (8,105) (17,076) (933)
Capital Expenditures for Property, Plant and Equipment..... (32,690) (19,607) (14,885)
-------- -------- --------
Net Cash Used by Investing Activities.............. (37,426) (33,552) (11,564)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock, Net.............................. 72,648 -- --
Proceeds from Issuance of Long-Term Debt................... -- 120,000 --
Penalty on Early Retirement of Debt........................ -- (4,872) --
Debt Issuance Costs........................................ -- (4,155) --
Borrowings (Repayments) Under Revolving Lines of Credit,
Net..................................................... (12,439) (28,940) 21,590
Borrowings of Term Debt.................................... 4,536 2,284 3,571
Repayments on Term Debt.................................... (4,453) (46,981) (6,409)
Stock Options Exercised, Purchase of Treasury Stock and
Other, Net.............................................. 298 (381) (384)
-------- -------- --------
Net Cash Provided by Financing Activities.......... 60,590 36,955 18,368
-------- -------- --------
EFFECT OF TRANSLATION ADJUSTMENT ON CASH..................... 81 (300) (468)
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......... 1,373 (1,655) 759
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR.................................................... 3,144 4,799 4,040
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR..................... $ 4,517 $ 3,144 $ 4,799
======== ======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
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ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Energy
Ventures, Inc. and all majority-owned subsidiaries and partnerships (the
"Company"). All material intercompany accounts and transactions have been
eliminated in consolidation.

Nature of Operations

The Company is an international manufacturer and supplier of oilfield
equipment and contract drilling services. The Company operates through two
business segments: oilfield equipment and contract drilling. The oilfield
equipment segment manufactures high performance tubulars and a complete line of
artificial lift equipment as well as completion tools. The Company's contract
drilling rig fleet consists primarily of barge rigs used by major and large
independent oil and gas companies for the exploration and development of natural
gas primarily in the U.S. Gulf Coast area. The Company's tubular products and
contract drilling operating divisions provide products and services used
primarily for natural gas exploration and production. The artificial lift and
completion tool product lines are tied to the maturation of oil producing
formations.

Inventories

Inventories are valued using the first-in, first-out (FIFO) method and are
stated at the lower of cost or market.

Property, Plant and Equipment

Property, plant and equipment is carried at cost. Depreciation of domestic
property, plant and equipment is provided using the straight-line method over
the estimated useful lives for the respective categories. The useful lives of
the major classes of property, plant and equipment are as follows:

LIFE
--------------

Buildings............................................................. 15 - 40 years
Rigs, machinery and equipment......................................... 5 - 20 years
Furniture and vehicles................................................ 3 - 7 years

Due to differences between the international and U.S. rig contracting
markets, depreciation on international drilling rigs and related equipment is
provided using the units-of-production method. Under the units-of-production
method, depreciation is based on the utilization of the drilling rigs with a
minimum provision when the rigs are idle.

Interest costs related to major capital projects are capitalized as a
component of construction costs. Interest costs capitalized were $266,000,
$247,000 and $574,000 in 1995, 1994 and 1993, respectively. Maintenance and
repairs are expensed as incurred. The costs of renewals, replacements and
betterments are capitalized.

Intangible Assets and Amortization

The excess of cost over the fair value of net tangible assets of businesses
acquired is being amortized on a straight-line basis over the lesser of expected
useful lives or 40 years. Other intangible assets, included in other assets, are
amortized over the years expected to be benefited. Amortization expense for
goodwill and other intangible assets was $2,781,000, $996,000 and $1,578,000 for
1995, 1994 and 1993, respectively. Accumulated amortization of goodwill at
December 31, 1995 and 1994 was $1,979,000 and $1,553,000, respectively.

F-7
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ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Foreign Currency Translation

Results of operations for foreign subsidiaries with functional currencies
other than the U.S. dollar are translated using average exchange rates during
the period. Assets and liabilities of these foreign subsidiaries are translated
using the exchange rates in effect at the balance sheet date and the resulting
translation adjustments are included as a separate component of Stockholders'
Investment. Currency transaction gains and losses are reflected in income for
the period. The Company's Nigerian operations are in a "highly inflationary"
economy and use the U.S. dollar as the functional currency. Accordingly, the
gains or losses resulting from balance sheet translation are reflected in income
for the period.

Income Taxes

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 109 ("SFAS No. 109"). The adoption of SFAS No. 109 did
not have a material effect on the Company's consolidated financial position or
results of operations. Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.

Weighted Average Shares

Earnings per share has been computed based on the weighted average number
of common shares outstanding during the respective periods. Stock options
outstanding are excluded from the weighted average number of shares since the
dilutive effect is not material.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Planned Accounting Changes

As of January 1, 1996, SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" will be effective
for the Company. The statement sets forth guidelines regarding when to recognize
an impairment of long-lived assets and how to measure such impairment.
Management believes that the adoption of SFAS No. 121 will not have a
significant effect on the Company's consolidated financial position or results
of operations.

As of January 1, 1996, SFAS No. 123, "Accounting for Stock-Based
Compensation", will be effective for the Company. SFAS No. 123 permits, but does
not require, a fair value based method of accounting for employee stock option
plans which results in compensation expense recognition when stock options are
granted. The Company plans to continue the use of its current intrinsic value
based method of accounting for such plans.

Reclassifications

Certain reclassifications of prior year balances have been made to conform
such amounts to corresponding 1995 classifications.

F-8
68

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUPPLEMENTAL CASH FLOW INFORMATION

For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid investments with original maturities of three months
or less to be cash equivalents.

Cash paid during the years ended December 31, 1995, 1994, and 1993 for
interest (net of amounts capitalized) and income taxes (net of refunds) was as
follows:

1995 1994 1993
------- ------- -------
(IN THOUSANDS)

Interest paid, net of amounts capitalized............. $15,851 $13,487 $ 7,144
Income taxes paid, net of refunds..................... $ 3,088 $ 1,903 $(1,818)

Refer to Note 4 for additional information concerning noncash investing and
financing activities.

3. INVENTORIES

Inventories by category are as follows:

DECEMBER 31,
--------------------
1995 1994
-------- -------
(IN THOUSANDS)

Raw materials and components.................................... $ 61,578 $34,759
Work in process................................................. 17,167 12,861
Finished goods.................................................. 39,191 27,318
-------- -------
$117,936 $74,938
======== =======

Work in process and finished goods inventories include the cost of
materials, labor and plant overhead.

4. ACQUISITIONS AND DISPOSITIONS

In December 1995, the Company made a strategic decision to dispose of its
Highland store distribution system in the United States which has been a part of
the artificial lift and completion tool equipment division. This decision
reflected the Company's desire to focus its efforts on manufacturing and to
eliminate the substantial cost associated with serving as a distributor in the
United States market. Early in 1996, the Company completed the sale of its store
distribution system in the United States to Continental Emsco Company for
approximately $7.5 million. The Company received $3 million in cash, a $4
million vendor credit with Continental Emsco Company for future equipment needs
by the Company and a $0.5 million note receivable. The consideration received in
the sale approximated the net book value of the assets sold, resulting in no
material gain or loss.

In July 1995, the Company acquired Engemaq S.A., a Brazilian completion
tool business, for $4 million.

The allocations of the purchase price to the fair market values of the net
assets acquired in the 1995 acquisitions are based on preliminary estimate of
fair market value and may be revised when additional information concerning
asset and liability valuations is obtained.

On September 1, 1994, the Company completed the acquisition of the Fluid
Packed(TM) pumps line of rod pumps, parts and accessories, and the sucker rod
line from National-Oilwell for $13.5 million in cash. The

F-9
69

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

acquired assets have been integrated into the Company's artificial lift and
completion tool equipment division. Included in the acquisition are
manufacturing facilities and equipment in Woodward, Oklahoma and Santa Teresa,
New Mexico and product inventory.

On July 29, 1994, the Company acquired a tubular finishing facility located
in Bryan, Texas ("Bryan facility"). The Company exchanged Eastman Cherrington
Environmental, Inc. ("Eastman Cherrington") including a cash payment of
approximately $2 million for the Bryan facility. The acquired tubular finishing
mill is a 160,000 square foot industrial facility located on 55 acres. The
facility is being operated as part of the Company's Grant Prideco drill pipe and
tubular products division. The recorded net book value of Eastman Cherrington,
including operations to the date of disposition, approximated the appraised
value of the Bryan facility. As a result, there was no material gain or loss
realized on the exchange. See Note 5 for additional information on Eastman
Cherrington.

On February 9, 1994, the Company purchased all of the outstanding stock of
AWI Drilling & Workover, Inc. ("AWI"), for a purchase price of $1.5 million
cash, $5.0 million in notes payable and 433,333 shares of the Company's Common
Stock, $1.00 par value. The assets of AWI consist primarily of 12 barge drilling
rigs, eight of which were under charter to the Company at the time of
acquisition. Charter fees incurred by the Company were approximately $2.5
million in 1993.

In November 1993, the Company acquired Production Oil Tools, a manufacturer
of downhole packers and completion systems, for approximately $2.2 million,
comprised of cash and shares of the Company's Common Stock.

On June 30, 1993, the Company acquired from Energy Service Company its
International Tool & Supply procurement division ("Procurement Division") and
tubular services division ("Tubular Services") for approximately $4.8 million
consisting of cash, notes payable and other obligations. Tubular Services has a
threading facility for oil country tubulars, specializing in premium tubulars
with large diameters. Tubular Services was integrated into Grant Prideco. On
December 30, 1993, the Company sold the Procurement Division, together with
certain other assets of the Company. Proceeds from the sale were used to repay
the remaining principal balance of notes payable incurred to finance the
acquisitions.

The acquisitions discussed above were accounted for using the purchase
method of accounting, and their results of operations are included in the
Consolidated Statements of Income from the respective dates of acquisition. The
results of operations related to the acquisition of National-Oilwell's Fluid
Packed pump product lines and the Bryan facility are not material, therefore,
pro forma information is not presented.

The following table presents selected unaudited consolidated financial
information for the Company on a pro forma basis assuming the Prideco
acquisition and the sale of the 3,450,000 shares of Common Stock had occurred on
January 1, 1994. The pro forma information set forth below is not necessarily
indicative of the results that actually would have been achieved had such
transactions been consummated as of January 1, 1994, or that may be achieved in
the future.

YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)

Revenues................................................... $381,135 $299,191
Income before extraordinary charge......................... 15,064 7,766
Net income................................................. 15,064 3,982
Earnings per share from continuing operations.............. 0.82 0.42
Net income per share....................................... 0.82 0.22

F-10
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ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. DISCONTINUED OPERATIONS

On July 29, 1994, the Company disposed of Eastman Cherrington, including a
cash payment of approximately $2 million, in exchange for a tubular finishing
facility located in Bryan, Texas. Revenues from the discontinued operation of
Eastman Cherrington for 1994 and 1993 were $1.4 million and $3.3 million,
respectively. The discontinued operation of Eastman Cherrington reflected a net
loss of $797,000 and $2.1 million for 1994 and 1993, respectively. The recorded
net book value of Eastman Cherrington, including operations to the date of
disposition, approximated the appraised value of the Bryan facility. As a
result, there was no material gain or loss realized on the exchange.

The results of operations for Eastman Cherrington are reflected in the
accompanying Consolidated Statements of Income as "Discontinued Operations, Net
of Taxes".

6. SHORT-TERM BORROWINGS AND LINES OF CREDIT

The Company's short-term borrowings at December 31, 1995 and 1994 consisted
of the following:

1995 1994
------- -------
(IN THOUSANDS,
EXCEPT PERCENTAGES)

Payable to banks under lines of credit, interest at prime to
prime plus 1 1/4% at December 31, 1995 and December 31, 1994;
principal and interest payable on demand....................... $ 4,826 $17,265
Weighted average interest rate on notes outstanding during the
year........................................................... 10.2% 8.8%
Average borrowings during the year............................... $24,382 $22,026
Maximum outstanding during the year.............................. $43,189 $48,310

At December 31, 1995, the Company had in place various working capital
lines of credit secured by the inventory and receivables of the Company's
subsidiaries providing for borrowings up to $65.5 million subject to
availability requirements. Borrowings under the Company's lines of credit are
generally based on the lender's determination of the collateral value of the
current assets securing the lines of credit. The Company and its subsidiaries
are required to maintain various affirmative and negative covenants relating to
working capital, earnings and net worth. The facilities also impose certain
limitations on the use of funds by the Company and its subsidiaries for
acquisitions and capital expenditures, the incurrence of additional indebtedness
and other operational matters and certain prohibitions on the declaration or
payment of dividends by the Company.

At December 31, 1995, approximately $4.8 million had been borrowed under
the revolving lines of credit and approximately $5.1 million had been used to
support outstanding letters of credit. Additional borrowings of approximately
$55.6 million were available based on collateral values at December 31, 1995.

7. LONG-TERM DEBT

The Company's long-term debt at December 31, 1995 and 1994 consisted of the
following:

1995 1994
-------- --------
(IN THOUSANDS)

Senior Notes due in 2004, interest at 10.25%................... $120,000 $120,000
Capitalized lease obligations under various leases with various
installment amounts.......................................... 5,073 4,530
Other notes payable at various rates........................... 7,670 4,349
-------- --------
132,743 128,879
Less: current maturities of long-term debt..................... 5,894 3,189
-------- --------
$126,849 $125,690
======== ========

F-11
71

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a summary of scheduled debt maturities by year (in
thousands):

1996.............................................................. $ 5,894
1997.............................................................. 5,094
1998.............................................................. 1,464
1999.............................................................. 291
2000.............................................................. --
Thereafter........................................................ 120,000
--------
$132,743
========

On March 24, 1994, the Company sold pursuant to a private placement $120
million of 10.25% Senior Notes due 2004. In July 1994, substantially all of
these notes were exchanged for a substantially identical series of 10.25% Senior
Notes due 2004 with semi-annual interest payments in March and September. Both
issues of Senior Notes were issued pursuant to the terms of an Indenture dated
as of March 15, 1994. Certain subsidiaries of the Company have unconditionally
guaranteed the Company's obligations under the Senior Notes. See Note 17. The
Indenture relating to the Senior Notes contains various customary affirmative
and negative covenants that, among other things, limit the ability of the
Company and certain of its subsidiaries to: (i) incur certain additional
indebtedness unless the Company's Consolidated Fixed Charge Coverage Ratio (as
defined in the Indenture) is at least 2.0 to 1.0, (ii) make dividends,
distributions and certain other restricted payments, (iii) create certain liens,
(iv) engage in certain transactions with its affiliates, (v) engage in sale and
leaseback transactions, (vi) make certain asset dispositions and (vii) merge or
consolidate with, or transfer all or substantially all of its assets to another
person. The Indenture also limits the ability of the Company and certain of its
subsidiaries to issue preferred stock and creates restrictions on the ability of
certain of its subsidiaries to pay dividends and make other distributions. As of
December 31, 1995, the Company was limited in the amount of dividends,
distributions and other restricted payments that could be made by it to
approximately $137 million.

The carrying value of the $120 million Senior Notes approximates fair value
as of December 31, 1994. At December 31, 1995, the fair value of the $120
million Senior Notes, using a rate currently available to the Company for
similar debt, approximates $125 million.

The placement of the $120 million Senior Notes provided the Company with
$116 million in net proceeds that were used to prepay the $34 million 12.25%
senior notes due 1997 and to repay substantially all of the Company's
outstanding indebtedness other than the Senior Notes. The remaining funds were
used for working capital and other general purposes. In connection with the
early retirement, the Company incurred a first quarter extraordinary charge of
approximately $3.8 million, net of taxes of approximately $1.9 million, or $0.30
per share. The extraordinary charge represented the difference between the
reacquisition price and the net carrying value of the $34 million senior notes,
including unamortized debt issuance costs.

Accrued interest payable, which is included in Other Accrued Liabilities in
the consolidated financial statements, was approximately $3.8 million and $3.7
million at December 31, 1995 and 1994, respectively.

8. STOCKHOLDERS' INVESTMENT

Public Stock Offering

Early in the fourth quarter 1995, the Company completed a public offering
of 3,450,000 shares of its Common Stock ("Public Offering"). The net proceeds of
this offering were approximately $72.6 million.

Stock Option Plans

In May 1981, the Company's stockholders approved the Company's Employee
Stock Option Plan ("Option Plan"), a non-qualified stock option plan. The plan
expired in May 1991. Under the Option Plan,

F-12
72

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

options were provided to officers and key employees of the Company (including
directors who are also key employees) and its subsidiaries to purchase up to an
aggregate of 1,000,000 shares of Common Stock of the Company.

In May 1991, the Company's stockholders approved the Company's Non-Employee
Director Stock Option Plan ("Director Plan"), a non-qualified stock option plan.
Under the Director Plan, options to purchase up to an aggregate of 500,000
shares of Common Stock of the Company may be granted to non-employee directors
of the Company. Options to purchase 15,000 shares of Common Stock are
automatically granted to each non-employee director on the date of their initial
election. At December 31, 1995, 365,000 shares were available for the granting
of options.

In May 1992, the Company's stockholders approved the Company's 1992
Employee Stock Option Plan ("ESO Plan"). Under the ESO Plan, options to purchase
up to an aggregate of 600,000 shares of Common Stock of the Company may be
granted to officers and key employees of the Company (including directors who
are also key employees) and its subsidiaries. At December 31, 1995, 136,000
shares were available for granting of such options.

Transactions under the above option plans are summarized as follows:

NUMBER OPTION
OF PRICE/RANGE
SHARES PER SHARE
-------- ---------------

Options outstanding, December 31, 1992................... 653,300 $ 2.69 - $23.88
Granted................................................ 95,000 11.75 - 16.13
Exercised.............................................. (41,237) 2.69 - 11.50
Canceled............................................... (40,000) 16.50 - 18.25
--------
Options outstanding, December 31, 1993................... 667,063 2.69 - 23.88
Granted................................................ 52,000 13.75
Exercised.............................................. (5,160) 2.69
Canceled............................................... (74,167) 11.50 - 18.25
--------
Options outstanding, December 31, 1994................... 639,736 2.69 - 23.88
Granted................................................ 127,000 13.75 - 18.00
Exercised.............................................. (62,736) 2.69 - 16.50
--------
Options outstanding, December 31, 1995................... 704,000 9.38 - 23.88
========
Options exercisable as of December 31, 1995.............. 537,333 9.38 - 23.88
========

Profit Sharing Plans

The Company and certain of its subsidiaries have adopted retirement plans
which qualify under Section 401(k) of the Internal Revenue Code. The plans
generally provide for 20% matching contributions by the Company, up to a maximum
liability of 1.2% of each participating employee's annual compensation. The
Company, under each plan, also has the right to make additional discretionary
matching contributions. Total contributions by the Company under these plans
were $306,000, $193,000 and $383,000 during 1995, 1994 and 1993, respectively.

Executive Deferred Compensation Plan

In May 1992, the Company's stockholders approved the Executive Deferred
Compensation Stock Ownership Plan (the "EDC Plan"). Under the EDC Plan, a
portion of the compensation for certain key employees of the Company and its
subsidiaries, including officers and employee directors, can be deferred for
payment after retirement or termination of employment.

F-13
73

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has established a grantor trust to fund the benefits under the
EDC Plan. The funds provided to such trust are invested by a trustee independent
of the Company primarily in Common Stock of the Company which is purchased by
the trustee on the open market. The assets of the trust are available to satisfy
the claims of all general creditors of the Company in the event of bankruptcy or
insolvency. Accordingly, the Common Stock held by the trust has been
consolidated for accounting purposes and is included in the accompanying
Consolidated Statements of Stockholders' Investment as "Treasury Stock, at Cost"
and reflected as such on the Consolidated Balance Sheets. The compensation
expense related to this plan was not significant for any of the three years in
the period ended December 31, 1995.

9. INCOME TAXES

The domestic and foreign components of Income before Income Taxes from
Continuing Operations consisted of the following:

1995 1994 1993
------- ------ -------
(IN THOUSANDS)

Domestic............................................... $ 7,865 $1,162 $ 6,155
Foreign................................................ 8,526 5,286 6,656
------- ------ -------
$16,391 $6,448 $12,811
======= ====== =======

Total income tax provision (benefit) was recorded as follows:

1995 1994 1993
------ ------- -------
(IN THOUSANDS)

Income from Continuing Operations...................... $5,080 $ 1,806 $ 4,864
Discontinued Operations................................ -- -- (1,185)
Extraordinary Charge................................... -- (1,949) --
------ ------- -------
$5,080 $ (143) $ 3,679
====== ======= =======

The Company's provision for income taxes of continuing operations for the
three years ended December 31, 1995, consisted of:

1995 1994 1993
------ ------- ------
(IN THOUSANDS)

Current
U.S. Federal.......................................... $ 250 $ 648 $1,654
Foreign............................................... 2,090 1,985 3,017
State................................................. 760 225 97
------ ------- ------
3,100 2,858 4,768
------ ------- ------
Deferred
U.S. Federal.......................................... (184) (1,229) (454)
Foreign............................................... 2,126 177 202
State................................................. 38 -- 348
------ ------- ------
1,980 (1,052) 96
------ ------- ------
$5,080 $ 1,806 $4,864
====== ======= ======

F-14
74

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The difference between the tax provision at the statutory federal income
tax rate and the tax provision attributable to income from continuing operations
before income taxes for the three years ended December 31, 1995, in the
accompanying Consolidated Statements of Income is analyzed below:

1995 1994 1993
---- ----- ----

Statutory federal income tax rate............................. 35.0% 34.0% 34.0%
Effect of state income tax, net............................... 3.4 2.3 2.3
Effect of non-deductible expenses............................. 2.2 3.7 .9
Utilization of net operating loss carryforward................ (5.4) (15.5) --
Effect of foreign income tax, net............................. .3 (.1) 2.6
Non-benefitable foreign losses................................ .9 6.2 --
Realization of tax assets..................................... (6.3) -- --
Other......................................................... .9 (2.6) (1.8)
---- ----- ----
31.0% 28.0% 38.0%
==== ===== ====

The deferred income tax provisions for income before income taxes for the
three years ended December 31, 1995, primarily consisted of:

1995 1994 1993
------- ------- ------
(IN THOUSANDS)

Excess of tax over (under) financial deduction related to
depreciation........................................... $ (541) $ 1,262 $1,082
Excess of tax over (under) financial deductions for
reserves............................................... 1,623 1,379 (155)
Benefit provided on losses of subsidiaries not included
in consolidated return................................. -- -- (477)
Alternative minimum tax.................................. 257 (660) (461)
Book accruals (reversals) not currently deductible....... 1,042 (775) (368)
State and foreign income taxes........................... 2,164 177 549
Utilization of net operating loss carryforward........... (890) (997) --
Foreign tax credits, net................................. (414) (1,281) --
Realization of tax assets................................ (1,025) -- --
Other, net............................................... (236) (157) (74)
------- ------- ------
$ 1,980 $(1,052) $ 96
======= ======= ======

F-15
75

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the net deferred tax liability at December 31, 1995 and
December 31, 1994, were as follows:

DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
(IN THOUSANDS)

Deferred tax assets:
Net operating loss carryforwards......................... $ 5,839 $ 5,433
Alternative minimum tax credit carryforward.............. 864 1,121
Book accruals/other...................................... 8,458 2,927
Foreign tax credit carryforwards......................... 5,973 3,074
Valuation allowance...................................... (4,186) (6,101)
-------- --------
Total deferred tax asset......................... 16,948 6,454
-------- --------
Deferred tax liabilities:
COLEVE production payment................................ (14,907) (14,224)
Depreciation............................................. (25,533) (20,105)
Other.................................................... (9,434) (2,910)
-------- --------
Total deferred tax liability..................... (49,874) (37,239)
-------- --------
Net deferred tax liability................................. $(32,926) $(30,785)
======== ========

The amount of federal operating loss carryforwards for tax purposes
generated by certain subsidiaries prior to their acquisition is $17,060,000,
which includes $4,710,000 of federal operating loss carryforwards previously
benefited for book purposes, and if not utilized will expire between 2001 and
2007. The use of pre-acquisition operating losses is subject to limitations
imposed by the Internal Revenue Code. At December 31, 1995, the Company had
$860,000 of alternative minimum tax credit carryforwards, which may be used
indefinitely to reduce regular Federal income taxes. Additionally, at December
31, 1995, the Company, for U.S. Federal income tax purposes, had $760,000 of
foreign tax credit carryforwards, expiring principally between 1996 and 1999.
The realization of a portion of the deferred tax asset is dependent on
generating sufficient taxable income prior to expiration of the carryforward
amounts. Although realization is not assured, management believes it is more
likely than not that the net deferred tax asset will be realized. The amount of
the deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income during the carryforward period
are reduced.

The Company has a valuation allowance to reflect the estimated amount of
deferred tax assets for which realization is uncertain. The net change in the
valuation allowance for the year ended December 31, 1995 was a decrease of
$1,915,000. The net change principally relates to a reduction in the valuation
allowance required for certain deferred tax assets which realization became
certain during 1995.

COLEVE Tax Matter

In August of 1994, the Company received a letter from the United States
Internal Revenue Service ("IRS") proposing to increase the gain recognized by
the Company upon the dissolution in October 1990 of a joint venture ("COLEVE")
with Columbia Gas Development Corporation. In general, the IRS' proposal seeks
payment of a tax liability of approximately $14.1 million plus accrued interest
thereon, and includes $3.4 million of taxes relating to the proposed
disallowance of certain interest deductions taken by the Company with respect to
COLEVE that was the subject of a similar letter received by the Company in the
fourth quarter of 1993. The tax liability with respect to these matters has been
previously provided for as a deferred tax liability in the Company's
consolidated financial statements. The Company disagrees with the IRS' position
and is currently pursuing its rights of administrative review and appeal and
intends to vigorously contest this matter. Although the resolution of these
remaining issues could affect the timing of the payment

F-16
76

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of previously accrued tax liabilities and require the use of a portion of its
available capital, the Company does not believe that the results of the audit or
the ultimate resolution of the IRS' proposed adjustments will have a material
impact on its consolidated results of operations or financial position.

10. DISPUTES, LITIGATION AND CONTINGENCIES

Litigation and Other Disputes

The Company is aware of various disputes and potential claims and is a
party in various litigation involving claims against the Company, some of which
are covered by insurance. Based on facts currently known, the Company believes
that the ultimate liability, if any, which may result from known claims,
disputes and pending litigation would not have a material adverse effect on the
Company's consolidated financial position or its results of operations.

Insurance

The Company is partially self-insured for employee health insurance claims
and for workers' compensation for certain of its employees. Although the Company
believes that adequate reserves have been provided for expected liabilities
arising from its self-insured obligations, it is reasonably possible that
management's estimates of these liabilities will change over the near term as
circumstances develop.

11. INSURANCE SETTLEMENT

On September 30, 1994, the Company settled all of its claims with its
insurance carriers with respect to the termination of its workover drilling
contract with the National Iranian Oil Company ("NIOC"). Under the terms of the
settlement with the Company's insurance carriers, the Company received a net
cash payment of $23 million for reimbursement of certain operating costs
incurred and amounts to be received in accordance with the terms of the workover
drilling contract. The Company also retained all rights to any funds collected
or recovered by the Company from NIOC and to the rigs and equipment deployed in
Iran. The rigs and the related equipment were moved out of Iran by December 31,
1994.

In 1994, the Company adjusted the carrying value of the receivables, rigs
and equipment, and established reserves for demobilization, refurbishment and
contract settlement costs, all of which totaled approximately $18 million. The
insurance settlement which increased operating income by $4.8 million was
reduced by operating losses of $2.6 million relating to the Iranian operations
for 1994.

12. COMMITMENTS

The Company is committed under various noncancelable operating leases which
primarily relate to office space and equipment. Total lease expense incurred
under noncancelable operating leases was approximately $5,124,000, $4,626,000
and $3,055,000 for the years ended December 31, 1995, 1994, and 1993,
respectively.

Future minimum rental commitments under these operating leases are as
follows (in thousands):

1996............................................................... $ 4,367
1997............................................................... 3,620
1998............................................................... 3,161
1999............................................................... 1,055
2000............................................................... 542
Thereafter......................................................... 5,521
-------
$18,266
=======

F-17
77

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. RELATED PARTY TRANSACTIONS

The Company incurred legal fees of $594,000, $748,000, and $582,000 during
1995, 1994 and 1993, respectively, with a law firm in which a director of the
Company is a partner.

The Company paid approximately $4,037,000 in 1995 and $3,300,000 in 1994 in
underwriting fees associated with the Public Offering and the private placement
of the $120 million of 10.25% Senior Notes, respectively. The underwriting group
for each of these transactions included Lehman Brothers, an affiliate of Lehman
Brothers Holdings Inc., a major stockholder of the Company, as well as several
other unrelated underwriters. The fee arrangements associated with these
offerings were on terms standard in the underwriting industry.

14. SUBSEQUENT EVENT

In January 1996, the Company entered into a long-term manufacturing and
sales agreement with Oil Country Tubular, Ltd. ("OCTL"), an India-based
manufacturer of drill pipe and premium tubulars. Manufacturing operations on
behalf of the Company are expected to commence during the second quarter of
1996. In January 1996, under the terms of the agreement with OCTL, the Company
made a one-time payment of $8 million for the exclusive right to have Grant
Prideco's product manufactured at the facility.

15. SEGMENT INFORMATION

Business Segments

The Company operates through two business segments: oilfield equipment and
contract drilling. The oilfield equipment segment manufactures high performance
tubulars and a complete line of artificial lift and completion tool equipment.
The Company's tubular products are used primarily for natural gas exploration
and production. The Company's contract drilling segment consists primarily of a
fleet of barge rigs used by major and large independent oil and gas companies
primarily for the exploration and development of natural gas in the U.S. Gulf
Coast area. Internationally, the contract drilling segment is currently
operating one barge rig in Nigeria, two platform rigs in Peru and four land rigs
in Argentina.

Financial information by industry segment for each of the three years ended
December 31, 1995, is summarized below (in thousands). Identifiable assets
included in the Corporate and Other column includes the elimination of
intercompany transactions.

OILFIELD CONTRACT CORPORATE
EQUIPMENT DRILLING AND OTHER TOTAL
--------- -------- --------- --------

1995
Sales to unaffiliated customers..................... $ 271,675 $ 79,912 $ -- $351,587
Operating income (loss)............................. 23,091 14,475 (5,126) 32,440
Identifiable assets................................. 350,697 151,538 (11,175) 491,060
Depreciation and amortization....................... 12,357 8,378 89 20,824
Capital expenditures and acquisitions............... 33,217 22,898 18 56,133
1994
Sales to unaffiliated customers..................... $ 185,285 $ 63,252 $ -- $248,537
Operating income (loss)............................. 8,226 15,831 (4,588) 19,469
Identifiable assets................................. 230,592 125,927 (12,285) 344,234
Depreciation and amortization....................... 9,302 4,870 96 14,268
Capital expenditures and acquisitions............... 32,533 33,938 91 66,562
1993
Sales to unaffiliated customers..................... $ 171,638 $ 74,379 $ -- $246,017
Operating income (loss)............................. 10,788 11,797 (4,030) 18,555
Identifiable assets................................. 180,862 86,385 9,984 277,231
Depreciation and amortization....................... 7,826 4,381 74 12,281
Capital expenditures and acquisitions............... 13,119 4,468 2,091 19,678

F-18
78

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Major Customers and Credit Risk

Substantially all of the Company's customers are engaged in the energy
industry. This concentration of customers may impact the Company's overall
exposure to credit risk, either positively or negatively, in that customers may
be similarly affected by changes in economic and industry conditions. The
Company performs ongoing credit evaluations of its customers and does not
generally require collateral in support of its trade receivables. The Company
maintains reserves for potential credit losses, and actual losses have
historically been within the Company's expectations. Foreign sales also present
various risks, including risks of war, civil disturbances and governmental
activities that may limit or disrupt markets, restrict the movement of funds or
result in the deprivation of contract rights or the taking of property without
fair consideration. Most of the Company's foreign sales, however, are to large
international companies or are secured by letter of credit or similar
arrangements.

In 1995, 1994 and 1993, there was no individual customer who accounted for
10% of consolidated revenues. With the exception of the contract drilling
segment, whose foreign rigs typically operate under long-term contracts, the
Company does not believe itself to be dependent to any material degree on any
single customer.

Foreign Operations and Export Sales

The Company's equipment and services are used in approximately 50 countries
by U.S. customers operating abroad and by foreign customers. Sales of equipment
and services outside the United States accounted for 38%, 36%, and 40% of total
revenues in 1995, 1994 and 1993, respectively, based upon the ultimate
destination in which equipment or services were sold, shipped or provided to the
customer by the Company.

F-19
79

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Summarized financial information for the three years ended December 31,
1995, by geographic area is as follows:

WESTERN HEMISPHERE EASTERN HEMISPHERE
----------------------- -----------------------
UNITED STATES OTHER MIDDLE EAST OTHER ELIMINATIONS TOTAL
------------- ------- ----------- ------- ------------ --------
(IN THOUSANDS)

1995
Operating revenues from
unaffiliated customers..... $220,937 $61,293 $ -- $ 9,921 $(3,567) $288,584
Export sales to unaffiliated
customers.................. 63,003 -- -- -- -- 63,003
-------- ------- ------- ------- ------- --------
Total revenues................ 283,940 61,293 -- 9,921 (3,567) 351,587
Operating income (loss)....... 17,518 13,733 (262) 2,148 (697) 32,440
Identifiable assets........... 359,696 88,772 4,295 38,297 -- 491,060
1994
Operating revenues from
unaffiliated customers..... $162,344 $34,643 $ 5,801 $ 5,329 $(3,304) $204,813
Export sales to unaffiliated
customers.................. 43,724 -- -- -- -- 43,724
-------- ------- ------- ------- ------- --------
Total revenues................ 206,068 34,643 5,801 5,329 (3,304) 248,537
Operating income (loss)....... 9,511 7,194 3,219 (170) (285) 19,469
Identifiable assets........... 263,192 41,413 12,866 26,763 -- 344,234
1993
Operating revenues from
unaffiliated customers..... $150,729 $31,722 $ 7,967 $ 4,675 $(1,983) $193,110
Export sales to unaffiliated
customers.................. 52,847 -- -- -- 60 52,907
-------- ------- ------- ------- ------- --------
Total revenues................ 203,576 31,722 7,967 4,675 (1,923) 246,017
Operating income.............. 9,744 7,372 802 599 38 18,555
Identifiable assets........... 200,771 32,281 28,316 15,863 -- 277,231

F-20
80

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

16. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following tabulation sets forth unaudited quarterly financial data for
1995 and 1994.

1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. TOTAL
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1995
Revenues............................. $ 72,660 $ 79,747 $ 93,797 $105,383 $351,587
Gross Profit......................... 19,504 20,096 24,256 25,438 89,294
Income before Income Taxes........... 2,630 2,743 4,685 6,333 16,391
Net Income........................... 1,631 1,753 3,556 4,371 11,311
Net Income Per Common Share.......... .13 .14 .24 .24 .77(1)
1994
Revenues............................. $ 55,118 $ 50,566 $ 68,079 $ 74,774 $248,537
Gross Profit......................... 14,927 14,874 18,689 18,910 67,400
Income before Income Taxes........... 1,336 195 2,698 2,219 6,448
Income from Continuing Operations.... 855 127 1,679 1,981 4,642
Extraordinary Charge, Net of Taxes... (3,784) -- -- -- (3,784)
Net Income (Loss).................... (2,929) 127 1,679 1,981 858
Net Income (Loss) Per Common Share:
Continuing Operations............. $ .07 $ .01 $ .13 $ .16 $ .37
Extraordinary Charge, Net of
Taxes........................... (.30) -- -- -- (.30)
-------- -------- -------- -------- --------
Net Income (Loss)................. $ (.23) $ .01 $ .13 $ .16 $ .07
======= ======= ======= ======== ========

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

(1) Net Income Per Common Share for the year ended December 31, 1995, differs
from the summation of the individual quarters within that year due to the
impact of the Public Offering of Common Stock and shares issued in
connection with the Prideco acquisition.

F-21
81

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The $120 million Senior Notes which are described in Note 7 are
unconditionally guaranteed on a joint and several basis, by certain subsidiaries
of the Company. Accordingly, the following condensed consolidating balance
sheets as of December 31, 1995 and 1994, and the related condensed consolidating
statements of income and cash flows for each of the three years in the period
ended December 31, 1995, have been provided. The condensed consolidating
financial statements herein are followed by notes which are an integral part of
these statements.

CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1995
(IN THOUSANDS)

ASSETS

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------

CURRENT ASSETS:
Cash and Cash Equivalents............................. $ 532 $ 2,985 $ 1,000 $ -- $ 4,517
Other Current Assets.................................. 1,564 208,342 35,151 -- 245,057
-------- -------- -------- -------- --------
2,096 211,327 36,151 -- 249,574
-------- -------- -------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST, NET OF
ACCUMULATED DEPRECIATION.............................. 159 177,945 14,598 -- 192,702
INTERCOMPANY AND INVESTMENT IN SUBSIDIARIES, NET........ 342,844 (169,154) 18,417 (192,107) --
OTHER ASSETS............................................ 4,969 47,079 (3,264) -- 48,784
-------- -------- -------- -------- --------
$350,068 $267,197 $ 65,902 $ (192,107) $491,060
======== ======== ======== ======== ========

LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings................................. $ -- $ 795 $ 4,031 $ -- $ 4,826
Current Maturities of Long-Term Debt.................. -- 5,484 410 -- 5,894
Accounts Payable and Other Accrued Liabilities........ 4,055 72,451 9,890 -- 86,396
-------- -------- -------- -------- --------
4,055 78,730 14,331 -- 97,116
-------- -------- -------- -------- --------
LONG-TERM DEBT.......................................... 120,000 6,262 587 -- 126,849
OTHER LIABILITIES....................................... (2,053) 22,394 18,688 -- 39,029
-------- -------- -------- -------- --------
STOCKHOLDERS' INVESTMENT................................ 228,066 159,811 32,296 (192,107) 228,066
-------- -------- -------- -------- --------
$350,068 $267,197 $ 65,902 $ (192,107) $491,060
======== ======== ======== ======== ========

F-22
82

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1994
(IN THOUSANDS)

ASSETS

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------

CURRENT ASSETS:
Cash and Cash Equivalents......................... $ 166 $ 1,593 $ 1,385 $ -- $ 3,144
Other Current Assets.............................. 1,549 135,170 24,940 -- 161,659
-------- -------- ------- --------- --------
1,715 136,763 26,325 -- 164,803
-------- -------- ------- --------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST, NET OF
ACCUMULATED DEPRECIATION.......................... 230 140,024 10,641 -- 150,895
INTERCOMPANY AND INVESTMENT IN SUBSIDIARIES, NET.... 229,873 (134,749) 18,058 (113,182) --
OTHER ASSETS........................................ 4,124 23,496 916 -- 28,536
-------- -------- ------- --------- --------
$235,942 $165,534 $55,940 $(113,182) $344,234
======== ======== ======= ========= ========

LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings............................. $ -- $ 13,627 $ 3,638 $ -- $ 17,265
Current Maturities of Long-Term Debt.............. -- 1,480 1,709 -- 3,189
Accounts Payable and Other Accrued Liabilities.... 5,291 37,748 6,972 -- 50,011
-------- -------- ------- --------- --------
5,291 52,855 12,319 -- 70,465
-------- -------- ------- --------- --------
LONG-TERM DEBT...................................... 120,062 4,605 1,023 -- 125,690
OTHER LIABILITIES................................... (324) 21,829 15,661 -- 37,166
-------- -------- ------- --------- --------
STOCKHOLDERS' INVESTMENT............................ 110,913 86,245 26,937 (113,182) 110,913
-------- -------- ------- --------- --------
$235,942 $165,534 $55,940 $(113,182) $344,234
======== ======== ======= ========= ========

CONDENSED CONSOLIDATING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------

REVENUES............................................. $ -- $289,246 $62,341 $ -- $351,587
COSTS AND EXPENSES................................... 5,123 264,111 49,913 -- 319,147
------- -------- ------- -------- --------
OPERATING INCOME (LOSS).............................. (5,123) 25,135 12,428 -- 32,440
------- -------- ------- -------- --------
OTHER INCOME (EXPENSE)
Interest Income (Expense), Net..................... 2,539 (17,174) (1,970) -- (16,605)
Equity in Subsidiaries, Net of Taxes............... 11,179 -- -- (11,179) --
Other, Net......................................... 360 1,317 (1,121) -- 556
------- -------- ------- -------- --------
INCOME BEFORE INCOME TAXES........................... 8,955 9,278 9,337 (11,179) 16,391
PROVISION (BENEFIT) FOR INCOME TAXES................. (2,356) 4,046 3,390 -- 5,080
------- -------- ------- -------- --------
NET INCOME........................................... $11,311 $ 5,232 $ 5,947 $(11,179) $ 11,311
======= ======== ======= ======== ========

F-23
83

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------

REVENUES............................................. $ -- $211,052 $ 37,485 $ -- $248,537
COSTS AND EXPENSES................................... 4,775 190,924 33,369 -- 229,068
------- -------- ------- -------- --------
OPERATING INCOME (LOSS).............................. (4,775) 20,128 4,116 -- 19,469
------- -------- ------- -------- --------
OTHER INCOME (EXPENSE)
Interest Income (Expense), Net..................... (6,828) (6,187) (490) -- (13,505)
Equity in Subsidiaries, Net of Taxes............... 11,343 -- -- (11,343) --
Other, Net......................................... 35 459 (10) -- 484
------- -------- ------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES.................... (225) 14,400 3,616 (11,343) 6,448
PROVISION (BENEFIT) FOR INCOME TAXES................. (4,867) 4,558 2,115 -- 1,806
------- -------- ------- -------- --------
INCOME FROM CONTINUING OPERATIONS.................... 4,642 9,842 1,501 (11,343) 4,642
EXTRAORDINARY CHARGE, NET OF TAXES................... (3,784) -- -- -- (3,784)
------- -------- ------- -------- --------
NET INCOME........................................... $ 858 $ 9,842 $ 1,501 $(11,343) $ 858
======= ======== ======= ======== ========

CONDENSED CONSOLIDATING STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------

REVENUES................................................. $ -- $205,278 $ 40,739 $ -- $246,017
COSTS AND EXPENSES....................................... 4,226 186,863 36,373 -- 227,462
-------- -------- -------- -------- --------
OPERATING INCOME (LOSS).................................. (4,226) 18,415 4,366 -- 18,555
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest Income (Expense), Net........................... (2,334) (4,980) 105 -- (7,209)
Equity in Subsidiaries, Net of Taxes................... 11,565 -- -- (11,565) --
Other, Net............................................. 1,076 201 188 -- 1,465
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES........................ 6,081 13,636 4,659 (11,565) 12,811
PROVISION (BENEFIT) FOR INCOME TAXES..................... (1,866) 5,213 1,517 -- 4,864
-------- -------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS........................ 7,947 8,423 3,142 (11,565) 7,947
DISCONTINUED OPERATIONS, NET OF TAXES.................... (2,057) -- -- -- (2,057)
-------- -------- -------- -------- --------
NET INCOME............................................... $ 5,890 $ 8,423 $ 3,142 $(11,565) $ 5,890
======== ======== ======== ======== ========

F-24
84

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------

CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income............................................ $ 11,311 $ 5,232 $ 5,947 $(11,179) $ 11,311
Equity in Earnings of Subsidiaries.................. (11,179) -- -- 11,179 --
Other Adjustments and Charges....................... (3,808) (39,633) 10,258 -- (33,183)
-------- -------- -------- -------- --------
Net Cash Provided (Used) by Operations.......... (3,676) (34,401) 16,205 -- (21,872)
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Business and Assets............. -- 2,880 489 -- 3,369
Acquisition of Businesses............................. -- (4,007) (4,098) -- (8,105)
Capital Expenditures for Property, Plant and
Equipment........................................... (19) (28,689) (3,982) -- (32,690)
-------- -------- -------- -------- --------
Net Cash Used by Investing Activities........... (19) (29,816) (7,591) -- (37,426)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock.............................. 73,304 -- (656) -- 72,648
Borrowings (Repayments) Under Revolving Lines of
Credit, Net......................................... -- (12,832) 393 -- (12,439)
Borrowings Under Term Debt............................ -- 3,848 688 -- 4,536
Repayment on Term Debt................................ -- (3,412) (1,041) -- (4,453)
(Increase) Decrease in amounts Due to and from
Subsidiaries, Net................................... (68,885) 78,005 (9,120) -- --
Other, Net............................................ (358) -- 656 -- 298
-------- -------- -------- -------- --------
Net Cash Provided (Used) by Financing
Activities.................................... 4,061 65,609 (9,080) -- 60,590
-------- -------- -------- -------- --------
Effect of Translation Adjustment on Cash................ -- -- 81 -- 81
-------- -------- -------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents.... 366 1,392 (385) -- 1,373
Cash and Cash Equivalents at Beginning of Year.......... 166 1,593 1,385 -- 3,144
-------- -------- -------- -------- --------
Cash and Cash Equivalents at End of Year................ $ 532 $ 2,985 $ 1,000 $ -- $ 4,517
======== ======== ======== ======== ========

F-25
85

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income........................................ $ 858 $ 9,842 $ 1,501 $(11,343) $ 858
Insurance Settlement, Net......................... -- 23,000 -- -- 23,000
Equity in Earnings of Subsidiaries................ (11,343) -- -- 11,343 --
Other Adjustments and Changes..................... 11,329 (37,044) (2,901) -- (28,616)
-------- -------- ------- -------- --------
Net Cash Provided (Used) by Operations...... 844 (4,202) (1,400) -- (4,758)
-------- -------- ------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Business and Assets......... -- 3,103 28 -- 3,131
Acquisition of Businesses......................... -- (17,076) -- -- (17,076)
Capital Expenditures for Property, Plant and
Equipment....................................... (91) (16,441) (3,075) -- (19,607)
-------- -------- ------- -------- --------
Net Cash Used by Investing Activities....... (91) (30,414) (3,047) -- (33,552)
-------- -------- ------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Long-Term Debt.......... 120,000 -- -- -- 120,000
Short-Term Borrowings, Net........................ -- (27,894) (1,046) -- (28,940)
Repayments on Term Debt, Net...................... (34,442) (8,188) (2,067) -- (44,697)
(Increase) Decrease in amounts Due to and from
Subsidiaries, Net............................... (78,181) 70,091 8,090 -- --
Other, Net........................................ (9,408) -- -- -- (9,408)
-------- -------- ------- -------- --------
Net Cash Provided (Used) by Financing
Activities................................ (2,031) 34,009 4,977 -- 36,955
-------- -------- ------- -------- --------
Effect of Translation Adjustment on
Cash.............................................. -- -- (300) -- (300)
-------- -------- ------- -------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents....................................... (1,278) (607) 230 -- (1,655)
Cash and Cash Equivalents at Beginning of Year...... 1,444 2,200 1,155 -- 4,799
-------- -------- ------- -------- --------
Cash and Cash Equivalents at End of Year............ $ 166 $ 1,593 $ 1,385 $ -- $ 3,144
======== ======== ======= ======== ========

F-26
86

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1993
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income........................................ $ 5,890 $ 8,423 $ 3,142 $(11,565) $ 5,890
Equity in Earnings of Subsidiaries................ (11,565) -- -- 11,565 --
Other Adjustments and Changes .................... (1,780) (1,037) (12,202) 3,552 (11,467)
-------- -------- -------- -------- --------
Net Cash Provided (Used) by Operations...... (7,455) 7,386 (9,060) 3,552 (5,577)
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Business and Assets......... 3,500 447 307 -- 4,254
Acquisition of Businesses......................... (633) 51 (351) -- (933)
Capital Expenditures for Property, Plant and
Equipment....................................... -- (9,615) (5,270) -- (14,885)
-------- -------- -------- -------- --------
Net Cash Provided (Used) by Investing
Activities................................ 2,867 (9,117) (5,314) -- (11,564)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-Term Borrowings, Net........................ -- 17,283 4,307 -- 21,590
(Repayments)/Borrowings of Term Debt.............. (3,801) (1,795) 2,758 -- (2,838)
(Increase) Decrease in Amounts Due to and from
Subsidiaries, Net............................... 9,434 (14,344) 8,462 (3,552) --
Other, Net........................................ (384) -- -- -- (384)
-------- -------- -------- -------- --------
Net Cash Provided by Financing Activities... 5,249 1,144 15,527 (3,552) 18,368
-------- -------- -------- -------- --------
Effect of Translation Adjustment on
Cash.............................................. -- -- (468) -- (468)
-------- -------- -------- -------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents....................................... 661 (587) 685 -- 759
Cash and Cash Equivalents at Beginning of Year...... 783 2,787 470 -- 4,040
-------- -------- -------- -------- --------
Cash and Cash Equivalents at End of Year............ $ 1,444 $ 2,200 $ 1,155 $ -- $ 4,799
======== ======== ======== ======== ========

F-27
87

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)

A. SIGNIFICANT ACCOUNTING POLICIES

Reclassifications

Certain reclassifications of prior year balances have been made to conform
such amounts to corresponding 1995 classifications.

Elimination Entries

Revenues and related Cost of Sales by individual category have been
presented net of intercompany transactions.

B. LONG-TERM DEBT

The Company's summary of scheduled debt maturities by year, description of
debt and other information is disclosed in Note 7.

C. COLEVE TAX MATTER

The Company received a letter from the IRS seeking payment of a tax
liability of approximately $14.1 million plus accrued interest thereon with
respect to COLEVE. See Note 9 for additional information regarding this tax
matter.

D. INSURANCE SETTLEMENT

On September 30, 1994, the Company received net proceeds of $23 million
from its insurance carriers as settlement for the termination of its workover
drilling contract with NIOC. See Note 11 for additional information regarding
this settlement.

E. OTHER

Notes 1 through 16 should be read in conjunction with the Condensed
Consolidating Financial Statements.

F-28
88

ENERGY VENTURES, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
AS OF MARCH 31, 1996

F-29
89

ENERGY VENTURES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)

ASSETS

MARCH 31,
1996
--------------
(IN THOUSANDS)

CURRENT ASSETS:
Cash and Cash Equivalents.................................................. $ 5,924
Accounts Receivable, Net of Allowance for Uncollectible Accounts of
$654,000 at March 31, 1996 and $615,000 at December 31, 1995............ 98,450
Inventories................................................................ 117,585
Materials and Supplies..................................................... 10,556
Prepaid Expenses and Other................................................. 14,313
--------
246,828
--------
PROPERTY, PLANT AND EQUIPMENT, AT COST, NET OF ACCUMULATED DEPRECIATION...... 192,988
EXCESS OF COST OVER FAIR VALUE OF NET TANGIBLE ASSETS OF BUSINESSES ACQUIRED,
NET........................................................................ 37,419
OTHER ASSETS................................................................. 18,660
--------
$495,895
========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings, Primarily Under Revolving Lines of Credit........... $ 20,772
Current Maturities of Long-Term Debt....................................... 4,125
Accounts Payable........................................................... 50,828
Other Accrued Liabilities.................................................. 23,740
--------
99,465
--------
LONG-TERM DEBT............................................................... 124,838
DEFERRED INCOME TAXES, NET................................................... 33,018
OTHER LIABILITIES............................................................ 6,172
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' INVESTMENT:
Common Stock............................................................... 18,542
Capital in Excess of Par Value............................................. 158,297
Retained Earnings.......................................................... 64,514
Cumulative Foreign Currency Translation Adjustment......................... (7,047)
Treasury Stock, at Cost.................................................... (1,904)
--------
232,402
--------
$495,895
========

The accompanying notes are an integral part of these consolidated condensed
financial statements.

F-30
90

ENERGY VENTURES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)

THREE MONTHS
ENDED MARCH 31,
--------------------
1996 1995
-------- -------
(IN THOUSANDS,
EXCEPT
PER SHARE AMOUNTS)

REVENUES................................................................ $110,042 $72,660
-------- -------
COSTS AND EXPENSES:
Cost of Sales......................................................... 83,540 53,156
Selling, General and Administrative Attributable to Segments.......... 14,368 11,594
Corporate General and Administrative.................................. 1,364 1,256
-------- -------
OPERATING INCOME........................................................ 10,770 6,654
-------- -------
OTHER INCOME (EXPENSE):
Interest Expense, Net................................................. (3,973) (3,965)
Other, Net............................................................ (111) (59)
-------- -------
INCOME BEFORE INCOME TAXES.............................................. 6,686 2,630
PROVISION FOR INCOME TAXES.............................................. 2,339 999
-------- -------
NET INCOME.............................................................. $ 4,347 $ 1,631
======== =======
NET INCOME PER COMMON SHARE............................................. $ 0.24 $ 0.13
======== =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.............................. 18,421 12,659
======== =======

The accompanying notes are an integral part of these consolidated condensed
financial statements.

F-31
91

ENERGY VENTURES, INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

THREE MONTHS
ENDED MARCH 31,
-------------------
1996 1995
------- -------
(IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................................................. $ 4,347 $ 1,631
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by
Operations:
Depreciation and Amortization....................................... 6,180 4,463
Deferred Income Tax Provision....................................... 37 197
Oil Country Tubular Ltd. Deposit.................................... (8,000) --
Gain on Sale of Assets.............................................. (38) (19)
Provision for Uncollectible Accounts Receivable..................... 201 72
Change in Operating Assets and Liabilities, Net of Effects of
Business Acquired.................................................. (7,025) (6,839)
------- -------
Net Cash Used by Operating Activities.......................... (4,298) (495)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Business, Net of Cash Acquired.......................... (608) --
Capital Expenditures for Property, Plant and Equipment................. (7,270) (5,296)
Other, Net............................................................. 228 302
------- -------
Net Cash Used by Investing Activities.......................... (7,650) (4,994)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings Under Revolving Lines of Credit, Net........................ 15,946 4,781
Repayments on Term Debt................................................ (2,720) (895)
Other, Net............................................................. 123 (38)
------- -------
Net Cash Provided by Financing Activities...................... 13,349 3,848
------- -------
EFFECT OF TRANSLATION ADJUSTMENT ON CASH................................. 6 (193)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................... 1,407 (1,834)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD......................... 4,517 3,144
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................... $ 5,924 $ 1,310
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest Paid, Net of Amounts Capitalized.............................. $ 6,980 $ 6,962
Income Taxes Paid, Net of Refunds...................................... $ 929 $ 392

The accompanying notes are an integral part of these consolidated condensed
financial statements.

F-32
92

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

(1) GENERAL

The unaudited consolidated condensed financial statements included herein
have been prepared by Energy Ventures, Inc. (the "Company") pursuant to the
rules and regulations of the Securities and Exchange Commission. These financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, which the Company considers necessary for the fair presentation of
such financial statements for the interim periods presented. Although the
Company believes that the disclosures in these financial statements are adequate
to make the interim information presented not misleading, certain information
relating to the Company's organization and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted in this Form 10-Q pursuant
to such rules and regulations. These financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1995.
The results of operations for the three month period ended March 31, 1996 are
not necessarily indicative of the results expected for the full year.

(2) INVENTORIES

Inventories by category are as follows:

MARCH 31, DECEMBER 31,
1996 1995
--------- ----------
(IN THOUSANDS)

Raw materials and components................................... $ 54,945 $ 61,578
Work in process................................................ 17,716 17,167
Finished goods................................................. 44,924 39,191
-------- --------
$117,585 $117,936
======== ========

Work in process and finished goods inventories include the cost of
materials, labor and plant overhead.

(3) ACQUISITION

On June 30, 1995, the Company acquired Prideco, Inc. ("Prideco") in a
transaction which involved the issuance of approximately 2.25 million shares of
Common Stock. The acquisition is expected to provide the Company with greater
manufacturing and marketing efficiencies by allowing for a consolidation of
overhead, reduced distribution and marketing costs and a rationalization of
manufacturing operations. The allocation of the purchase price to the fair
market value of the net assets acquired is based on the preliminary estimate of
fair market value and may be revised when additional information concerning
asset and liability valuations is obtained.

The following table presents selected unaudited consolidated financial
information for the Company on a pro forma basis assuming the Prideco
acquisition had occurred on January 1, 1995. The pro forma information set forth
below is not necessarily indicative of the results that actually would have been
achieved had such transactions been consummated as of January 1, 1995, or that
may be achieved in the future.

QUARTER ENDED
MARCH 31, 1995
-------------------------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNT)

Revenues........................................................ $86,881
Net Income...................................................... $ 2,234
Net Income Per Common Share..................................... $ 0.15

F-33
93

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

(4) LONG-TERM DEBT

(5) CONTINGENCIES

(6) RECLASSIFICATIONS

Certain reclassifications of prior period balances have been made to
conform such amounts to corresponding March 31, 1996 classifications.

(7) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The $120 million Senior Notes which are described in Note 4 are
unconditionally guaranteed on a joint and several basis by certain subsidiaries
of the Company. Accordingly, the following condensed consolidating balance
sheets as of March 31, 1996 and December 31, 1995, and the related condensed
consolidating statements of income and cash flows for the three month periods
ended March 31, 1996 and 1995, have been provided. The condensed consolidating
financial statements herein are followed by notes which are an integral part of
these statements.

F-34
94

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

(7) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEETS
MARCH 31, 1996
(IN THOUSANDS)

ASSETS

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------

CURRENT ASSETS:
Cash and Cash Equivalents......................... $ 78 $ 4,721 $ 1,125 $ -- $ 5,924
Other Current Assets.............................. 1,567 200,452 38,885 -- 240,904
-------- --------- ------- --------- --------
1,645 205,173 40,010 -- 246,828
-------- --------- ------- --------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST, NET
OF ACCUMULATED
DEPRECIATION...................................... 1,068 176,094 15,826 -- 192,988
INTERCOMPANY AND INVESTMENT IN SUBSIDIARIES, NET.... 342,884 (161,218 ) 16,682 (198,348) --
OTHER ASSETS........................................ 4,838 53,848 (2,607) -- 56,079
-------- --------- ------- --------- --------
$350,435 $ 273,897 $ 69,911 $ (198,348) $495,895
======== ========= ======= ========= ========

LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings............................. $ -- $ 16,946 $ 3,826 $ -- $ 20,772
Current Maturities of Long-Term
Debt............................................ -- 3,916 209 -- 4,125
Accounts Payable and Other Accrued Liabilities.... 2,291 61,864 10,413 -- 74,568
-------- --------- ------- --------- --------
2,291 82,726 14,448 -- 99,465
-------- --------- ------- --------- --------
LONG-TERM DEBT...................................... 120,000 4,279 559 -- 124,838
OTHER LIABILITIES................................... (4,258) 23,530 19,918 -- 39,190
-------- --------- ------- --------- --------
STOCKHOLDERS' INVESTMENT............................ 232,402 163,362 34,986 (198,348) 232,402
-------- --------- ------- --------- --------
$350,435 $ 273,897 $ 69,911 $ (198,348) $495,895
======== ========= ======= ========= ========

F-35
95

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

(7) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1995
(IN THOUSANDS)

ASSETS

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
-------- ---------- ---------- ------------ ------------

CURRENT ASSETS:
Cash and Cash Equivalents............................. $ 532 $ 2,985 $ 1,000 $ -- $ 4,517
Other Current Assets.................................. 1,564 208,342 35,151 -- 245,057
-------- -------- ------- --------- --------
2,096 211,327 36,151 -- 249,574
-------- -------- ------- --------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST, NET OF
ACCUMULATED DEPRECIATION.............................. 159 177,945 14,598 -- 192,702
INTERCOMPANY AND INVESTMENT IN SUBSIDIARIES, NET........ 342,844 (169,154 ) 18,417 (192,107) --
OTHER ASSETS............................................ 4,969 47,079 (3,264) -- 48,784
-------- -------- ------- --------- --------
$350,068 $ 267,197 $ 65,902 $ (192,107) $491,060
======== ======== ======= ========= ========

LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings................................. $ -- $ 795 $ 4,031 $ -- $ 4,826
Current Maturities of Long-Term Debt.................. -- 5,484 410 -- 5,894
Accounts Payable and Other Accrued Liabilities........ 4,055 72,451 9,890 -- 86,396
-------- -------- ------- --------- --------
4,055 78,730 14,331 -- 97,116
-------- -------- ------- --------- --------
LONG-TERM DEBT.......................................... 120,000 6,262 587 -- 126,849
OTHER LIABILITIES....................................... (2,053) 22,394 18,688 -- 39,029
-------- -------- ------- --------- --------
STOCKHOLDERS' INVESTMENT................................ 228,066 159,811 32,296 (192,107) 228,066
-------- -------- ------- --------- --------
$350,068 $ 267,197 $ 65,902 $ (192,107) $491,060
======== ======== ======= ========= ========

CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------

REVENUES................................................. $ -- $ 90,305 $ 19,737 $ -- $110,042
COSTS AND EXPENSES....................................... 1,364 82,767 15,141 -- 99,272
-------- -------- -------- -------- --------
OPERATING INCOME (LOSS).................................. (1,364) 7,538 4,596 -- 10,770
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest Income (Expense), Net......................... (3,326) (639) 21 -- (3,944)
Equity in Subsidiaries, Net of Taxes................... 6,393 -- -- (6,393) --
Other, Net............................................. 6 (31) (115) -- (140)
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES............................... 1,709 6,868 4,502 (6,393) 6,686
PROVISION (BENEFIT) FOR INCOME TAXES..................... (2,638) 3,316 1,661 -- 2,339
-------- -------- -------- -------- --------
NET INCOME............................................... $ 4,347 $ 3,552 $ 2,841 $ (6,393) $ 4,347
======== ======== ======== ======== ========

F-36
96

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

(7) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1995
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------

REVENUES................................................. $ -- $ 60,413 $ 12,247 $ -- $ 72,660
COSTS AND EXPENSES....................................... 1,256 54,537 10,213 -- 66,006
-------- -------- -------- -------- --------
OPERATING INCOME (LOSS).................................. (1,256) 5,876 2,034 -- 6,654
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest Income (Expense), Net ........................ (2,133) (1,927) 102 -- (3,958)
Equity in Subsidiaries, Net of Taxes................... 4,082 -- -- (4,082) --
Other, Net............................................. 3 158 (227) -- (66)
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES............................... 696 4,107 1,909 (4,082) 2,630
PROVISION (BENEFIT) FOR INCOME TAXES..................... (935) 1,471 463 -- 999
-------- -------- -------- -------- --------
NET INCOME............................................... $ 1,631 $ 2,636 $ 1,446 $ (4,082) $ 1,631
======== ======== ======== ======== ========

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................................. $ 4,347 $ 3,552 $ 2,841 $ (6,393) $ 4,347
Equity in Earnings of Subsidiaries..................... (6,393) -- -- 6,393 --
Other Adjustments and Changes.......................... (5,813) (1,579) (1,253) -- (8,645)
------- ------- ------- ------- -------
Net Cash Provided (Used) by Operations........... (7,859) 1,973 1,588 -- (4,298)
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Business, Net of Cash Acquired.......... -- (608) -- -- (608)
Capital Expenditures for Property, Plant and
Equipment............................................ (33) (5,420) (1,817) -- (7,270)
Other, Net............................................. -- 224 4 -- 228
------- ------- ------- ------- -------
Net Cash Used by Investing
Activities..................................... (33) (5,804) (1,813) -- (7,650)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings Under Revolving Lines
of Credit............................................ -- 16,130 (184) -- 15,946
Repayments on Term Debt................................ -- (2,627) (93) -- (2,720)
(Increase) Decrease in amounts due to and from
Subsidiaries, Net.................................... 7,318 (7,936) 618 -- --
Other, Net............................................. 120 -- 3 -- 123
------- ------- ------- ------- -------
Net Cash Provided by Financing Activities........ 7,438 5,567 344 -- 13,349
------- ------- ------- ------- -------
Effect of Translation Adjustment on Cash................. -- -- 6 -- 6
------- ------- ------- ------- -------
Net Increase (Decrease) in Cash and Cash Equivalents..... (454) 1,736 125 -- 1,407
Cash and Cash Equivalents at Beginning of Period......... 532 2,985 1,000 -- 4,517
------- ------- ------- ------- -------
Cash and Cash Equivalents at End of Period............... $ 78 $ 4,721 $ 1,125 $ -- $ 5,924
======= ======= ======= ======= =======

F-37
97

ENERGY VENTURES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

(7) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995
(IN THOUSANDS)

NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
------- ---------- ---------- ------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................................. $ 1,631 $ 2,636 $ 1,446 $(4,082) $ 1,631
Equity in Earnings of Subsidiaries..................... (4,082) -- -- 4,082 --
Other Adjustments and Changes.......................... (6,823) 5,070 (373) -- (2,126)
------- ------- ------- ------- -------
Net Cash Provided (Used) by Operations................. (9,274) 7,706 1,073 -- (495)
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Business and Assets.............. -- 290 12 -- 302
Capital Expenditures for Property, Plant and
Equipment............................................ -- (4,368) (928) -- (5,296)
------- ------- ------- ------- -------
Net Cash Used by Investing Activities............ -- (4,078) (916) -- (4,994)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings Under Revolving Lines of Credit............. -- 3,631 1,150 -- 4,781
Repayments on Term Debt................................ -- (727) (168) -- (895)
(Increase) Decrease in amounts due to and from
Subsidiaries, Net.................................... 9,151 (7,577) (1,574) -- --
Other, Net............................................. (38) -- -- -- (38)
------- ------- ------- ------- -------
Net Cash Provided (Used) by Financing
Activities..................................... 9,113 (4,673) (592) -- 3,848
------- ------- ------- ------- -------
Effect of Translation Adjustment on Cash................. -- -- (193) -- (193)
------- ------- ------- ------- -------
Net Decrease in Cash and Cash Equivalents................ (161) (1,045) (628) -- (1,834)
Cash and Cash Equivalents at Beginning of Period......... 166 1,593 1,385 -- 3,144
------- ------- ------- ------- -------
Cash and Cash Equivalents at End of Period............... $ 5 $ 548 $ 757 $ -- $ 1,310
======= ======= ======= ======= =======

A. SIGNIFICANT ACCOUNTING POLICIES

Reclassifications

Certain reclassifications of prior year balances have been made to conform
such amounts to corresponding March 31, 1996 classifications.

Elimination Entries

Revenues and related Cost of Sales by individual category have been
presented net of intercompany transactions.

B. OTHER

Notes 1 through 6 should be read in conjunction with the Condensed
Consolidating Financial Statements.

F-38
98

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

NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND,
IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
ON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION IN SUCH STATE. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------------
TABLE OF CONTENTS

PAGE
----

Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Company........................... 11
Recent Developments................... 11
Use of Proceeds....................... 13
Price Range of Common Stock and
Dividend Policy..................... 14
Capitalization........................ 15
Pro Forma Condensed Consolidated
Statements of Income................ 16
Selected Consolidated Financial
Data................................ 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 22
Business.............................. 32
Management............................ 51
Principal Stockholders................ 53
Selling Stockholder................... 54
Description of Capital Stock.......... 55
Underwriting.......................... 57
Legal Matters......................... 58
Experts............................... 58
Index to Consolidated Financial
Statements.......................... F-1

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

3,300,000 SHARES

[ENERGY VENTURES, INC. LOGO]

ENERGY VENTURES, INC.

COMMON STOCK

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

PROSPECTUS

, 1996

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

LEHMAN BROTHERS

DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

JEFFERIES & COMPANY, INC.

PRUDENTIAL SECURITIES INCORPORATED

SCHRODER WERTHEIM & CO.

- ------------------------------------------------------
- ------------------------------------------------------
99

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses in connection with this Offering are:

Securities and Exchange Commission Registration Fee....................... $ 43,804*
New York Stock Exchange Listing Fee....................................... 14,500
NASD Filing Fee........................................................... 13,204
Legal Fees and Expenses................................................... 100,000
Accounting Fees and Expenses.............................................. 100,000
Blue Sky Fees and Expenses (including legal fees)......................... 7,000*
Printing Expenses......................................................... 80,000
Transfer Agent and Registrar Fees......................................... 5,000
Miscellaneous............................................................. 86,492
--------
Total................................................................ $450,000
========

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

* The Selling Stockholder will pay its pro rata portion of such expenses.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Under Delaware law, a corporation may include provisions in its certificate
of incorporation that will relieve its directors of monetary liability for
breaches of their fiduciary duty to the corporation, except under certain
circumstances, including a breach of the director's duty of loyalty, acts or
omissions of the director not in good faith or which involve intentional
misconduct or a knowing violation of law, the approval of an improper payment of
a dividend or an improper purchase by the corporation of stock or any
transaction from which the director derived an improper personal benefit. The
Company's Restated Certificate of Incorporation provides that the Company's
directors are not liable to the Company or its stockholders for monetary damages
for breach of their fiduciary duty, subject to the described exceptions
specified by Delaware law.

Section 145 of the Delaware General Corporation Law grants to the Company
the power to indemnify each officer and director of the Company against
liabilities and expenses incurred by reason of the fact that he is or was an
officer or director of the Company if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Company
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The By-laws of the Company provide for
indemnification of each officer and director of the Company to the fullest
extent permitted by Delaware law. Messrs. David J. Butters, Eliot M. Fried and
Robert B. Millard, employees of Lehman Brothers Inc. ("Lehman"), constitute
three of the eight members of the Board of Directors of the Company. Under the
restated certificates of incorporation, as amended to date, of Lehman and its
parent, Lehman Brothers Holdings Inc. ("Holdings"), both Delaware corporations,
Messrs. Butters, Fried and Millard, in their capacity as directors of the
Company, are to be indemnified by Lehman and Holdings to the fullest extent
permitted by Delaware law. Messrs. Butters, Fried and Millard are serving as
directors of the Company at the request of Lehman and Holdings.

Section 145 of the Delaware General Corporation Law also empowers the
Company to purchase and maintain insurance on behalf of any person who is or was
an officer or director of the Company against liability asserted against or
incurred by him in any such capacity, whether or not the Company would have the
power to indemnify such officer or director against such liability under the
provisions of Section 145. The Company has purchased and maintains a directors'
and officers' liability policy for such purposes. Messrs. Butters, Fried and
Millard are insured against certain liabilities which they may incur in their
capacity as directors pursuant to insurance maintained by Holdings.

II-1
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ITEM 16. EXHIBITS.

+1.1 -- Form of Underwriting Agreement.
2.1 -- Agreement and Plan of Merger dated as of May 22, 1995, as amended by
Amendment No. 1 dated as of June 30, 1995, by and among Prideco,
Inc., Christiana Companies, Inc., William Chunn, Donald Morris,
Sandra Hamilton, Energy Ventures, Inc. and Grant Acquisition Company
(incorporated by reference to Exhibit No. 2.1 to Form 8-K, File
0-7265, filed July 12, 1995).
2.2 -- Agreement and Plan of Merger dated as of June 21, 1996, between
Energy Ventures, Inc., TCA Acquisition, Inc. and Tubular Corporation
of America (incorporated by reference to Exhibit 2.1 to Form 8-K,
File 0-7265, filed June 24, 1996).
2.3 -- Form of Stockholder Agreement and Representation Letter dated June
21, 1996, between Energy Ventures, Inc. and stockholders of Tubular
Corporation of America (incorporated by reference to Exhibit 2.2 to
Form 8-K, File 0-7265, filed June 24, 1996).
2.4 -- Asset Purchase Agreement dated as of June 21, 1996, by and between
Energy Ventures, Inc. and Mallard Bay Drilling, Inc. and Noble
Drilling (West Africa) Inc. and Noble Drilling Corporation
(incorporated by reference to Exhibit 2.3 to Form 8-K, File 0-7265,
filed June 24, 1996).
3.1 -- Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit No. 3.1 to the Registration Statement on Form
S-3; Registration No. 333-03407).
3.2 -- By-laws of the Company, as amended (incorporated by reference to
Exhibit No. 3.2 to Form 10-K, File 0-7265, filed March 1, 1994).
4.1 -- See Exhibits Nos. 3.1 and 3.2 for provisions of the Restated
Certificate of Incorporation and amended By-laws of the Company
defining the rights of the holders of Common Stock.
4.2 -- Indenture dated March 15, 1994, among Energy Ventures, Inc., as
Issuer, the Subsidiary Guarantors party thereto, as Guarantors, and
Chemical Bank, as Trustee (incorporated by reference to Form 8-K,
File 0-7265, filed April 5, 1994).
4.3 -- Specimen 10 1/4% Senior Note due 2004 of Energy Ventures, Inc.
(incorporated by reference to Form 8-K, File 0-7265, filed April 5,
1994).
4.4 -- First Supplemental Indenture by and among Energy Ventures, Inc.,
Prideco and Chemical Bank, as trustee, dated June 30, 1995
(incorporated by reference to Exhibit No. 4.4 to the Registration
Statement on Form S-3; Registration No. 33-61933).
+5.1 -- Opinion of Fulbright & Jaworski L.L.P.
+23.1 -- Consent of Fulbright & Jaworski L.L.P. (included in Exhibit 5.1).
*23.2 -- Consent of Arthur Andersen LLP.
*23.3 -- Consent of Arthur Andersen LLP, with respect to the financial
statements of Prideco, Inc.
*23.4 -- Consent of Arthur Andersen LLP, with respect to the financial
statements of Tubular Corporation of America.
*24.1 -- Powers of Attorney from certain members of the Board of Directors of
the Company (contained on page II-4).

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

* Filed herewith.

+ To be filed by amendment.

As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrant
has not filed with this Registration Statement certain instruments defining the
rights of holders of long-term debt of the Registrant

II-2
101

and its subsidiaries because the total amount of securities authorized under any
of such instruments does not exceed 10% of the total assets of the Registrant
and its subsidiaries on a consolidated basis. The Registrant agrees to furnish a
copy of any such agreement to the Commission upon request.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Securities Act or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
the Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
102
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on June 24, 1996.

ENERGY VENTURES, INC.

By: /s/ BERNARD J. DUROC-DANNER
-------------------------------
Bernard J. Duroc-Danner
President, Chief Executive
Officer and Director
(Principal Executive Officer)

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Bernard J. Duroc-Danner and James G.
Kiley, or any of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same
and all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting said attorney-in-fact and agent,
and any of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or any of them, or his
or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------------- ---------------

/s/ BERNARD J. DUROC-DANNER President, Chief Executive June 24, 1996
- ------------------------------------------- Officer and Director
Bernard J. Duroc-Danner (Principal Executive Officer)

/s/ JAMES G. KILEY Vice President and Chief June 24, 1996
- ------------------------------------------- Financial Officer (Principal
James G. Kiley Financial Officer)

/s/ FRANCES R. POWELL Vice President, Accounting and June 24, 1996
- ------------------------------------------- Controller (Principal
Frances R. Powell Accounting Officer)

/s/ DAVID J. BUTTERS Director and Chairman of the June 24, 1996
- ------------------------------------------- Board
David J. Butters

/s/ URIEL E. DUTTON Director June 24, 1996
- -------------------------------------------
Uriel E. Dutton

/s/ ELIOT M. FRIED Director June 24, 1996
- -------------------------------------------
Eliot M. Fried

II-4
103

SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------------- ---------------

/s/ SHELDON S. GORDON Director June 24, 1996
- --------------------------------------------
Sheldon S. Gordon

/s/ SHELDON B. LUBAR Director June 24, 1996
- --------------------------------------------
Sheldon B. Lubar

/s/ ROBERT B. MILLARD Director June 24, 1996
- --------------------------------------------
Robert B. Millard

/s/ ROBERT A. RAYNE Director June 24, 1996
- --------------------------------------------
Robert A. Rayne

II-5
104

INDEX TO EXHIBITS

NUMBER EXHIBIT
- ---------- ------------------------------------------------------------------------

23.2 -- Consent of Arthur Andersen LLP.
23.3 -- Consent of Arthur Andersen LLP, with respect to the financial
statements of Prideco, Inc.
23.4 -- Consent of Arthur Andersen LLP, with respect to the financial
statements of Tubular Corporation of America.
24.1 -- Powers of Attorney from certain members of the Board of Directors of
the Company (contained on page II-4).