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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 12, 13, or 15(d) of the Securities
Exchange Act of 1934

DAILEY INTERNATIONAL INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

Commission File No. 001-11963

AMENDMENT NO. 1

The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for the
year ended December 31, 1998 as set forth in the pages attached hereto:

Part III, Items 10, 11, 12 and 13

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS

The Board of Directors of the Company is classified into three classes,
each with a term of three years or until the director's successor is duly
elected and qualified. In February 1999, each of the Company's outside directors
resigned from the Board. The company's current Board currently has not
identified any candidates to replace these outside directors. Set forth below is
certain information concerning the current directors of the Company, with each
person's business experience for at least the past five years. Each of the
individuals listed below have been a director of the Company since 1996.

PRESENT POSITIONS EXPIRATION OF
WITH THE PRESENT
NAME AGE COMPANY TERM
---- --- ----------------- -------------

J.D. Lawrence 53 Chairman of the Board of 1999
Directors and Director

Al Kite (1) 66 Interim President, Chief 2001
Executive Officer and
Director

William D. Sutton (1) 45 Senior Vice President, 2000
General Counsel, Secretary
and Director

(1) Member of the Executive Committee of the Board of Directors.

J. D. Lawrence has been a director of the Company or its predecessor
since 1973 and Chairman of the Board of Directors of the Company or its
predecessor since June 1989. He has been employed by the Company or its
predecessor since 1968, serving as President from 1982 to 1989 and as a Vice
President from 1973 to 1982. Mr. Lawrence is the President and sole director of
Lawrence International, Inc. ("Lawrence?).

Al Kite has been Interim President and Chief Executive Officer of the
Company since August 1998 and a director of the Company since September 1996.
Mr. Kite was President of Halliburton Drilling Systems from 1993 to 1994 and
President of Eastman Christensen from 1986 to 1990. He has served as
International Manager in London and Executive Vice President of Operations for
Smith/Servco, President of Worldwide Operations at Eastman Christensen and
Senior Vice President Eastern Hemisphere for Smith International.

William D. Sutton has been Senior Vice President, General Counsel and
Secretary of the Company or its predecessor since 1984 and a director of the
Company or its predecessor since September 1991. He has served as the Company's
or its predecessor's Secretary and General Counsel since 1980. He also served as
a director of the Company from 1979 to 1990, and as a Vice President from 1982
to 1984. Prior to joining the Company's predecessor in 1979, Mr. Sutton was an
attorney in private practice.

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EXECUTIVE OFFICERS

The following table provides information with respect to the 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.

YEAR FIRST
ELECTED
NAME OF OFFICER POSITION WITH THE COMPANY AGE AS OFFICER
- --------------- ------------------------- --- ----------

J. D. Lawrence Chairman of the Board of Directors 53 1996

Al Kite Interim President, Chief Executive Officer and 66 1998
Director

William D. Sutton Senior Vice President, General Counsel, Secretary 45 1996
and Director

John Beard Interim Chief Financial Officer and Treasurer 50 1999

- ----------

For additional information regarding Messrs. Lawrence, Kite and Sutton,
see "Directors", above.

John Beard has been, Interim Chief Financial Officer and Treasurer of
the Company since January 1999. Mr. Beard joined Dailey in July 1998 as Director
of Internal Audit before being named Interim Chief Financial Officer and
Treasurer in January 1999. Prior to joining Dailey, Mr. Beard was with Western
Atlas, Inc., a geophysical and wire-line company. Mr. Beard was also Chief
Financial Officer for Laurin Maritime (America) Inc., a private, multi-million
dollar ship owner management company from 1994 through 1997. Mr. Beard also has
big five accounting experience.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten-percent shareholders are
required by the regulations promulgated under Section 16(a) to furnish the
Company with copies of all Section 16(a) forms they file.

Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the period from
January 1, 1998 through December 31, 1998, all filing requirements applicable to
officers, directors and greater than ten-percent shareholders were complied
with, except that John W. Sinders reported his appointment to the Board of
Directors and the purchase of 40,000 shares of Class A Common Stock on Form 5,
rather than on Form 3 and Form 4.

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ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation for the
fiscal year ended December 31, 1998, the eight-month transition period (the
?Transition Period?) ended December 31, 1997 and the fiscal years ended April
30, 1997 and 1996, earned by or paid to the Company's Chief Executive Officer,
the other executive officers of the Company and the two other individuals who
would have been included in such table had they been executive officers of the
Company as of December 31, 1998 (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE

LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------- -------------------------
SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTIONS/ ALL OTHER
NAME AND COMPENSATION AWARDS SARS(#) COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS (1) ($) (2) (3) (4)
- ------------------------ ---- --------- -------- ------------- ----------- --------- --------------

J. D. Lawrence.......... 1998 $103,077 -- -- -- $9,234
Chairman of the 1997T 69,370 -- -- -- -- 2,091
Board 1997 221,022 -- * -- 4,265
1996 296,532 -- $29,203 -- -- 5,904
* --

Al Kite..............(5) 1998 143,264 -- -- -- -- 3,150
Interim President
and Chief
Executive Officer

William D. Sutton....... 1998 281,628 $59,457 61,705 -- 137,912 3,860
Senior Vice 1997T 170,943 -- * $828,750 -- 4,862
President 1997 223,936 75,819 36,973 960,000 97,912 4,479
General Counsel 1996 230,896 55,260 * -- -- 5,494
and Secretary

James F. Farr........(6) 1998 248,339 173,619 52,507 -- 147,912 1,147,294
Former President 1997T 215,597 -- * 1,275,000 -- 4,897
and Chief 1997 258,958 93,240 49,131 960,000 97,912 4,596
Executive Officer 1996 248,651 55,500 * -- -- 4,745

David T. Tighe.......(7) 1998 222,646 51,446 45,565 -- 137,912 3,552
Former Senior Vice 1997T 138,600 -- * 828,750 -- 5,285
President?Finance, 1997 186,852 59,940 35,675 960,000 97,912 4,445
Chief Financial 1996 148,671 54,960 21,723 -- -- 4,401
Officer and
Treasurer

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

* Amounts exclude the value of perquisites and personal benefits because the
aggregate amount thereof did not exceed the lesser of $50,000 or 10% of
the total annual salary and bonus reported for each Executive Officer.

(1) Amounts in this column for Messrs. Sutton, Farr and Tighe primarily
represent payments for company automobiles and unused vacation. During
1998, payments to Mr. Sutton, Mr. Farr and Mr. Tighe for company
automobiles and unused vacation were $28,949 and $32,756, respectively,
for Mr. Sutton; $20,199 and $32,308, respectively, for Mr. Farr; and
$28,949 and $16,615, respectively, for Mr. Tighe. During 1997, payments
to Mr. Sutton, Mr. Farr and Mr. Tighe for company automobiles and
unused vacation were $22,208 and $26,923, respectively, for Mr. Sutton;
$19,459 and $17,514, respectively, for Mr. Farr; and $18,367 and
$17,308, respectively, for Mr. Tighe. Payments in 1996 to Mr. Tighe for
company automobiles and unused vacation were $5,105 and $16,618,
respectively. Amount in 1997 for Mr. Lawrence relates to his use of
various company assets.

(2) Effective upon closing of the Company's initial public offering in
August 1996 (the "1996 IPO"), each of Messrs. Farr, Sutton and Tighe
were granted 120,000 shares of restricted stock, which were subject to
vesting requirements that were extinguished during 1997. The value of
such restricted stock awards as of April 30, 1997, was $840,000. During
the Transition Period, Messrs. Farr, Sutton and Tighe were granted an
additional 100,000, 65,000 and 65,000 shares of restricted stock,
respectively, which had a value at December 31, 1997 of $1,087,500,
$706,875 and $706,875, respectively. Mr. Sutton's awards during the
Transition begin vesting in 1999 in one-quarter annual installments
over four years so that all such awards are vested during 2002. Messrs.
Farr and Tighe?s awards were vested in full upon their resignation from
employment with the Company. Based upon the closing price of the
Company's Class A Common Stock on the Nasdaq on December 31, 1998, the
value of all of these restricted stock grants at December 31, 1998 was
$127,650, $151,800, and $127,650 for Messrs. Sutton, Farr and Tighe,
respectively. Mr. Sutton is entitled to receive dividends, to the
extent declared on the Common Stock, on unvested shares of restricted
stock.

(3) 1998 amounts includes options to purchase 97,912 shares of Class A
Common Stock for each of Messrs. Sutton, Tighe and Farr, respectively,
which were granted in the fiscal year ended April 30, 1997 and repriced
during 1998.

(4) Amounts represent employer matching contributions to the Company's
401(k) plan and payments on behalf of the employee for group term life
insurance. Amounts in 1998 for Mr. Farr also include severance payments
made by the Company in the aggregate amount of $1,141,800 relating to
his leaving employment with the Company in August 1998.

(5) Mr. Kite became Interim President and Chief Executive Officer of the
Company in August 1998.

(6) Mr. Farr left the Company in August 1998.

(7) Mr. Tighe left the Company in January 1999.

During 1998, the Company repriced options previously granted in prior
years to the Named Executive Officers, as well as other employees of the
Company. Pursuant to such repricing, the exercise price for such options was
reduced to $6.00 per share. The following table sets forth information for each
of the Named Executive Officers for those options repriced during the year as if
they were new options granted during 1998 and for new options granted to each of
the Named Executive Officers during 1998:

OPTION/SAR GRANTS IN FISCAL 1998

POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL EXERCISE ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS OR PRICE APPRECIATION
UNDERLYING GRANTED TO BASE FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION -------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- -------------------------------- ------------- ------------- ------------ ----------- ----------- ----------

J. D. Lawrence.............. -- -- -- -- -- --

Al Kite..................... -- -- -- -- -- --

William D. Sutton(1)........ 72,912 8.1% $6.00 8/14/06 $ 0 $ 95,346

25,000 2.8% $6.00 3/06/07 0 50,961

40,000 4.5% $3.75 8/11/08 94,344 239,061

James F. Farr(2)............ 72,912 8.1% $6.00 2/17/00 0 0

25,000 2.8% $6.00 2/17/00 0 0

50,000 5.8% $3.75 2/17/00 14,297 29,063

David T. Tighe(3)........... 72,912 8.1% $6.00 8/14/06 0 95,346

25,000 2.8% $6.00 3/06/07 0 50,961

40,000 4.5% $3.75 8/11/08 94,344 239,061

(1) Calculated utilizing the fair market value on the date of repricing or
the date of grant of $3.75 per share.

(2) Upon Mr. Farr's leaving the employment of the Company in August 1998,
all of his stock options became immediately vested.

(3) Upon Mr. Tighe's leaving the employment of the Company in January 1999,
all of his stock options became immediately vested. These options
terminated in April 1999.

The following table summarizes options owned by the Named Executive
Officers as of December 31, 1998:

AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1998
AND DECEMBER 31, 1998 OPTION VALUE

Number of Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Shares December 31, December 31,
Acquired 1998 1998($)
On Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable(1)
- --------------------------- ------------- ------------ -------------- --------------------

J. D. Lawrence........... 0 0 0/0 $0/$0

Al Kite.................. 0 0 30,000/10,000 0/0

William D. Sutton........ 0 0 97,912/40,000 0/0

James F. Farr............ 0 0 147,912/0 0/0

David T. Tighe........... 0 0 97,912/40,000 0/0

(1) None of the options owned by any of the Named Executive Officers were
"in-the-money" on December 31, 1998, utilizing the closing price of
$0.69 for the Class A Common as reported by the NASDAQ Stock Market,
Inc. on December 31, 1998.

COMPENSATION OF DIRECTORS

Employee directors of the Company do not receive any additional
compensation for their services as a director of the Company. The Company pays
an annual retainer of $15,000 to each non-employee director. In addition, each
non-employee director receives $1,500 for each Board of Directors meeting
attended and $750 for each committee meeting attended. The Company also pays
reasonable out-of-pocket expenses incurred by non-employee directors and
advisory directors to attend Board of Directors and committee meetings. For
1998, this amount was paid in shares of Class A Common Stock valued at
approximately $8.25 per share (the market price on the date of grant).
Non-employee directors also are entitled to receive options pursuant to the 1996
Non-Employee Director Stock Plan (the "1996 Director Plan"). Under the 1996
Director Plan, an aggregate of 100,000 shares of Class A Common Stock have been
reserved for grant of options to purchase Class A Common Stock. To date, options
to acquire 70,000 shares of Class A Common Stock at an exercise price equal to
the fair market value of the Class A Common Stock on the date of grant have been
granted pursuant to the 1996 Director Plan..

EMPLOYMENT AGREEMENTS

Each of Messrs. Lawrence, Kite, Sutton and Beard has entered into an
employment with the Company. Mr. Lawrence's employment agreement has an initial
term through December 31, 1999 and provides for a minimum annual salary of
$100,000, and also provides for certain automobile allowances, employee
benefits, vacation and reimbursement of expenses. Mr. Lawrence's employment
agreement may be terminated by the Company with or without cause or by Mr.
Lawrence at any time for any reason. If the Company terminates Mr. Lawrence for
any reason other than for "cause" and such termination is not within one year of
a change in control, the Company is required to pay Mr. Lawrence an amount equal
to the greater of his total base salary for the remainder of the employment
period or three months of his base salary, if greater. If the Company terminates
Mr. Lawrence for any reason other than for "cause" and such termination occurs
within one year of a change in control, or if Mr. Lawrence terminates his
employment for good cause

and such termination occurs within one year of a change in control, the Company
is required to pay to Mr. Lawrence an amount equal to the greater of (i) his
total base salary for the remainder of the employment period; (ii) two times the
greater of (a) his annualized base salary in effect upon the occurrence of the
change in control or (b) his annualized base salary in effect on the date notice
of termination is received; or (iii) one month of base salary for each full year
of service completed with the Company as of the date of termination

Mr. Kite's employment agreement provides for a one year term and that
he receive an annual salary of $386,000, which is payable to him even if his
employment is terminated prior to completion of the one-year term. In addition,
Mr. Kite's employment agreement provides for the following additional
compensation to be paid: (i) if the Company enters into a qualified sales
transaction (a transfer of ownership by sale or merger of 80% or more of the
Company's outstanding common stock) by May 4, 1999, Mr. Kite will receive a
bonus payment of $386,000; and (ii) if the Company sells one or more product
lines, division and/or subsidiaries, but does not enter into a qualified sales
transaction, the compensation committee will review whether a partial payment
under (i) has been earned.

Mr. Sutton's employment agreement has an initial term through December
31, 2000 and provides for a minimum annual salary of $273,000, and also provides
for certain automobile allowances, employee benefits, vacation and reimbursement
of expenses. The employment agreement may be terminated by the Company with or
without cause or by Mr. Sutton at any reason. If the Company terminates Mr.
Sutton for any reason other than for "cause" and such termination is not within
one year of a change in control, the Company is required to pay Mr. Sutton an
amount equal to the greater of his total base salary for the remainder of the
employment period or one month of base salary for each full year of service
completed with the Company as of the date of termination,and (i) to pay an
amount equal to Mr. Sutton's most recent annual bonus and (ii) to cause the Mr.
Sutton to become fully vested in any stock options and stock grants held by him.
If the Company terminates Mr. Sutton for any reason other than for "cause" and
such termination occurs within one year of a change in control, or if Mr. Sutton
terminates the agreement for good cause and such termination occurs within one
year of a change of control, the Company is required (i) to pay Mr. Sutton 2.99
times his annualized base salary in effect upon the occurrence of the change in
control, (ii) to pay Mr. Sutton an amount equal to 2.99 times the greater of his
most recent annual bonus or a target bonus of $50,000 and (iii) to cause Mr.
Sutton to become fully vested in any stock options and stock grants held by him.

Mr. Beard's employment agreement has an initial term through June 30,
2000 and provides for a minimum annual salary of $140,000, and also provides for
certain automobile allowances, employee benefits, vacation and reimbursement of
expenses. The employment agreement may be terminated by the Company with or
without cause or by Mr. Beard at any reason. If Mr. Beard is terminated without
cause and such termination was not within one year of a change of control, then
Mr. Beard is entitled to (i) receive an amount equal to his total base salary
for the greater of the remainder of his employment period or twelve months; (ii)
continue participation in the Company's health and benefit plans for the greater
of the remainder of his employment term or twelve months; and (iii) cause Mr.
Beard to become fully vested in any stock options or stock grants made by the
Company. If the Company terminates Mr. Beard for any reason other than for
"cause" and such termination occurs within one year of a change in control, or
if Mr. Beard terminates the agreement for good cause and such termination occurs
within one year of a change of control, the Company is required (i) to pay Mr.
Beard 2.99 times his annualized base salary in effect upon the occurrence of the
change in control, (ii) to pay Mr. Beard an amount equal to 2.99 times the
greater of his most recent annual bonus or a target bonus of $20,000 and (iii)
to cause Mr. Beard to become fully vested in any stock options and stock grants
held by him.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, as of April 30, 1999, with
respect to the beneficial ownership of Common Stock by (a) each director, (b)
each named executive officer in the Summary Compensation Table, (c) each
shareholder known by the Company to be the beneficial owner of more than 5% of
the Common Stock and (d) all officers and directors of the Company as a group.

SHARES BENEFICIALLY OWNED(1)
----------------------------
CLASS A CLASS B PERCENT(2)
NAME AND ADDRESS OF COMMON PERCENT COMMON PERCENT VOTING
BENEFICIAL OWNER STOCK CLASS A STOCK CLASS B POWER
- ----------------------------------------- ------------ --------- ------------ ----------- -------------

J.D. Lawrence(3)....................... -- -- 5,000,000 100% 86.0%

Metropolitan Life Insurance
Company LLP(4)....................... 655,400 12.8 -- -- 1.6

Robertson, Stephens & Co. Investment
Management L.P.(5)................... 292,400 -- -- -- *

Wellington Management
Company LLP(6)....................... 669,600 13 -- -- 1.7

William D. Sutton(7)................... 215,240 4.2 -- -- *

Al Kite(8)............................. 31,819 * -- -- *

James F. Farr(9)....................... 291,896 5.7 -- -- *

David Tighe ........................... 258,334 5.0 -- -- *

All executive officers and directors
as a Group (4 Persons)(3), (7), (8).... 505,393 9.8 5,000,000 100% 87.2

- ----------
* Less than 1%.

(1) The Commission has defined beneficial ownership to include sole or
shared voting or investment power with respect to a security or the
right to acquire beneficial ownership of a security within 60 days. The
number of shares indicated are owned with sole voting and investment
power unless otherwise noted.

(2) Percent based upon both Class A Common Stock and Class B Common Stock,
combined.

(3) Represents shares owned directly by Mr. Lawrence and trusts for his
children located at 2507 North Frazier, Conroe, Texas 77305. Mr.
Lawrence and trusts for his children own all of the voting stock of
Lawrence. Because of these relationships, Mr. Lawrence may be deemed to
be the beneficial owner of all shares of Class B Common Stock owned by
Lawrence.

(4) Based solely upon a Schedule 13G and all amendments thereto filed on
behalf of Metropolitan Life Insurance Company. Metropolitan Life
Insurance Company's business address is One Madison Avenue, New York,
New York 10010.

(5) Based solely on a Schedule 13D and all amendments thereto (the
"Schedule 13D") filed on behalf of the Robertson Stephens Orphan Fund,
Robertson, Stephens & Company Investment Management, L.P. ("RS&Co.,
L.P."), Bayview Investors, Ltd., The Robertson Stephens & Company
Global Natural Resources Fund (the "Natural Resources Fund"), The
Robertson Stephens Partners Fund (the "Partners Fund"), Robertson,
Stephens & Company, Inc. ("RS&Co. Inc.") and RS&Co., Inc.'s five
shareholders, Messrs. Sanford R. Robertson, Paul H. Stephens, Michael
G. McCaffery, G. Randy Hecht, and Kenneth R. Fitzsimmons (collectively,
the "Robertson Shareholders"). Based on the Schedule 13D, RS&Co., L.P.,
as general partner of the Natural Resources Fund and the Partners Fund,
beneficially owns the 161,400 shares and 131,000 shares of Class A
Common Stock owned by the Natural Resources Fund and Partners Fund,
respectively. RS&Co, Inc., as general partner of RS&Co., L.P. is deemed
to beneficially own the 292,400 shares of Class A Common Stock
beneficially owned by RS&Co., L.P. Based on the Schedule 13D, the
Robertson Shareholders disclaim any ownership of the shares of Common
Stock beneficially owned by RS&Co., Inc. The business address for these
individuals and entities is 555 California Street, Suite 2600, San
Francisco, CA 94104.

(6) Based solely upon a Schedule 13G and all amendments thereto filed by
Wellington Management Company LLP. Wellington Management's business
address is 75 State Street, Boston, Massachusetts 02109.

(7) Includes presently exercisable options to purchase 97,912 shares of
Class A Common Stock. Excludes options to purchase 40,000 shares of
Class A Common Stock that are not exercisable within 60 days.

(8) Includes presently exercisable options to purchase 30,000 shares of
Class A Common Stock. Excludes options to purchase 10,000 shares of
Class A Common Stock that are not exercisable within 60 days.

(9) Includes presently exercisable options to purchase 147,912 shares of
Class A Common Stock.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PRINCIPAL STOCKHOLDER

Lease Agreements. The Company maintains executive offices in a building
located in Conroe, Texas and occupies four adjacent manufacturing and
maintenance research and development, and storage facilities, all of which are
owned by Lawrence. In 1998, the Company incurred rent expense of $941,000
relating to such properties. The rental rates under these new lease agreements
were determined by the Company and Lawrence based upon a survey of rental rates
prepared by an independent firm. Based upon this survey, the Company believes
that the rental rates and other terms under these lease agreements are
comparable to those that would be obtained in an arm's-length transaction with
an independent third party.

The Office Lease Agreement is for a five-year term effective as of May
1996, and covers all of the 64,368 square feet of office space in the Conroe
building, as well as the use of access roads and an adjacent outdoor parking
lot. Rent is payable monthly at the rate of $48,276 per month for the first two
years of the lease, $51,226 per month for the third year, $52,781 per month for
the fourth year and $54,390 per month for the fifth year.

The Service Center Lease Agreement is for a five-year term effective as
of May 1996. This lease covers the combined square feet of the district facility
building, 31,316 square feet; the manufacturing building, 31,373 square feet;
the open storage building, 17,000 square feet and the separator building, 1,530
square feet. The use of access roads and immediately surrounding grounds is also
included. Rent is $28,000 per month for all four buildings in the aggregate.

Relationship Agreement. Under the terms of a relationship agreement
between the Company and Lawrence International Inc. (the "Relationship
Agreement"), the Company has agreed to provide to Lawrence and its affiliates,
upon their request and on an as-available basis, various administrative and
management services including cash management, accounting, tax, data processing,
human resources and legal services. Lawrence pays for such services at rates
calculated to recover the Company's reasonable costs of providing such services.
The Relationship Agreement also provides that Lawrence will render to the
Company technical consulting services when requested by the Company. In return,
the Company will pay Lawrence approximately $250,000 per year for the term of
the Relationship Agreement. The Relationship Agreement commenced upon the
closing of the 1996 IPO and terminates on April 30, 1999. In addition, under the
Relationship Agreement, Lawrence and the Company have agreed to reimburse each
other for the costs of certain insurance policies purchased by one party on
behalf of the other. As of December 31, 1998, Lawrence owed the Company
approximately $362,000, for products and services rendered pursuant to the
Relationship Agreement.

Registration Rights Agreement. Pursuant to the terms of a registration
rights agreement with Mr. Lawrence (the "Lawrence Registration Rights
Agreement"), upon the request of Mr. Lawrence (or certain assignees) for a
period of ten years (beginning in 1996), the Company has agreed to register, on
up to two occasions, the sale of a minimum of 500,000 shares and up to all
5,000,000 shares of Class B Common Stock beneficially owned by Mr. Lawrence that
Mr. Lawrence (or such assignees) requests to be registered under the Securities
Act and applicable state securities laws. The Company will become obligated to
register the sale of the Class B Common Stock on one additional occasion if Mr.
Lawrence dies during the term of the Lawrence Registration Rights Agreement and
Mr. Lawrence previously has exhausted its two demand registrations. The Company
also is obligated to offer Mr. Lawrence and certain assignees the right to
include shares of the Class B Common Stock owned by it in certain registration
statements filed by the Company. The Company is obligated to pay all expenses
incidental to such registrations, excluding fees of counsel to Mr. Lawrence,
underwriters' discounts and commissions, and transfer fees.

During 1998, the Company paid an aggregate of $167,000 to relatives of,
and entities controlled by, the company's Chairman of the Board relating to
miscellaneous goods and services.

OTHER

In January 1997, the Company loaned Mr. Farr $250,000 pursuant to a
five-year promissory note. Interest accrues at the prime rate and is payable
monthly by Mr. Farr. The note is secured by a pledge of 36,000 shares of Class A
Common Stock held by Mr. Farr. In connection with Mr. Farr's leaving the
Company's employment, the promissory note was repaid.

In August 1997, John W. Sinders, Jr., and Executive Vice President of
Jefferies, accepted his appointment as a non-voting advisory director of the
Board of Directors of the Company. In June 1998, Mr. Sinders became a director
of the Company. He subsequently resigned in February 1999. Jefferies has
provided investment banking services to the Company in the past, including
serving as lead underwriter in the Company's initial public offering and as the
initial purchaser in the sale and issuance of $115 million principal amount of
the Company's 9?% Senior Notes due 2007 (the "Old Notes") in August 1997, for
which Jefferies has received usual and customary fees. In February 1998,
Jefferies sold the Old Notes to the Company contemporaneously with the closing
of the issuance of the Company's 9?% Senior Notes due 2008 (the "Outstanding
Notes") at an aggregate price of 111% of their principal amount, plus accrued
and unpaid interest up to, but not including, the date of payment. Jefferies
also acted as the initial purchaser in the sale of the Outstanding Notes, for
which it received usual and customary fees. Pursuant to a letter agreement
between the Company and Jefferies, Jefferies has acted as a financial advisor to
the Company in connection with the acquisition of, merger or other combination
with certain potential acquisition targets. Except for usual and customary fees
paid in connection with the acquisitions of Directional Wireline Services, Inc.,
DAMCO Services, Inc. and DAMCO Tong Services, Inc. and $1.0 million in
connection with other financial advisory services, the Company has not paid
Jefferies and is not obligated to pay Jefferies any compensation for services
rendered under this agreement or otherwise to date.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

DAILEY INTERNATIONAL INC.

By: /s/ WILLIAM D. SUTTON
-----------------------------------------
William D. Sutton
Senior Vice President, General
Counsel and Secretary
(Principal Executive Officer)