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

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended June 30, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 0-22664

PATTERSON ENERGY, INC.
(Exact name of registrant as specified in its charter)

DELAWARE
(State or other jurisdiction of 75-2504748
incorporation or organization) (I.R.S. Employer Identification No.)

P. O. BOX 1416, 4510 LAMESA HIGHWAY, SNYDER, TEXAS, 79550
(Address of principal executive offices) (Zip Code)

(915) 573-1104
(Registrant's telephone number, including area code)

No change
(Former name, former address and former fiscal year,
if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes [x] No [ ]

As of August 10, 2000 the issuer had outstanding 32,841,568 shares of common
stock, $0.01 par value, its only class of voting stock.

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2

PATTERSON ENERGY, INC. AND SUBSIDIARIES

INDEX

PAGE

Report of Independent Accountants............................................................... 3

Part I - Financial Information

Item 1. Financial Statements

Unaudited condensed consolidated balance sheets............................... 4

Unaudited condensed consolidated statements of operations..................... 6

Unaudited condensed consolidated statement of stockholders' equity............ 7

Unaudited condensed consolidated statements of cash flows..................... 8

Notes to unaudited condensed consolidated financial statements................ 10

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................... 13

Item 3. Quantitative and Qualitative Disclosures About Market Risk.................... 16

Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of 1995........................ 17

Part II - Other Information

Item 4. Submission of Matters to a Vote of Security Holders........................... 18

Item 6. Exhibits and Reports on Form 8-K.............................................. 19

Signatures...................................................................................... 23

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders
of Patterson Energy, Inc.:

We have reviewed the accompanying condensed consolidated balance sheet of
Patterson Energy, Inc. and its subsidiaries as of June 30, 2000 and the related
condensed consolidated statements of operations for each of the three month and
six month periods ended June 30, 1999 and 2000 and the related condensed
consolidated statement of cash flows for the six month periods ended June 30,
1999 and 2000 and the related condensed consolidated statement of stockholders'
equity for the six month period ended June 30, 2000. These financial statements
are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated interim financial statements
for them to be in conformity with accounting principles generally accepted in
the United States.

We previously audited, in accordance with auditing standards generally accepted
in the United States the consolidated balance sheet as of December 31, 1999, and
the related consolidated statements of operations and cash flows for the year
then ended (not presented herein), and in our report dated February 24, 2000, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet information as of December 31, 1999 is fairly stated
in all material respects in relation to the consolidated balance sheet from
which it has been derived.

/s/ PricewaterhouseCoopers LLP

Dallas, Texas
August 11, 2000

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE FOLLOWING UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
INCLUDE ALL ADJUSTMENTS WHICH IN THE OPINION OF MANAGEMENT ARE NECESSARY IN
ORDER TO MAKE SUCH FINANCIAL STATEMENTS NOT MISLEADING.

PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

(Unaudited)

December 31, June 30,
1999 2000
------------ ------------
(in thousands, except share data)

Current assets:
Cash and cash equivalents ................................... $ 8,792 $ 8,344
Accounts receivable:
Trade, less allowance for doubtful accounts of $365,000
at December 31, 1999 and June 30, 2000 .................. 41,571 54,523
Oil and natural gas sales ................................ 803 1,112
Costs of uncompleted drilling contracts in
excess of related billings ............................... 87 431
Inventory ................................................... 1,970 1,675
Deferred income taxes ....................................... 964 1,154
Undeveloped oil and natural gas properties held for resale .. 2,658 2,669
Other current assets ........................................ 1,919 1,845
------------ ------------
Total current assets .................................... 58,764 71,753
Property and equipment, at cost, net ............................ 133,824 178,819
Intangible assets, net .......................................... 41,818 40,319
Other assets .................................................... 1,851 2,171
------------ ------------
Total assets ............................................ $ 236,257 $ 293,062
============ ============

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

PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED

LIABILITIES AND STOCKHOLDERS' EQUITY

(Unaudited)

December 31, June 30,
1999 2000
------------ ------------
(in thousands, except share data)

Current liabilities:
Current maturities of notes payable .............................. $ -- $ 5,084
Accounts payable:
Trade ......................................................... 23,676 27,831
Revenue distribution .......................................... 2,407 4,206
Other ......................................................... 1,201 2,037
Accrued federal income taxes payable ............................. -- 120
Accrued expenses ................................................. 4,432 7,129
------------ ------------
Total current liabilities .................................... 31,716 46,407
------------ ------------

Deferred income taxes, net ........................................... 1,688 11,395
Deferred liabilities ................................................. 65 251
Notes payable, less current maturities ............................... 50,000 54,825
------------ ------------
51,753 66,471
------------ ------------

Commitments and contingencies ........................................ -- --

Stockholders' equity:
Preferred stock, par value $.01; authorized 1,000,000 shares,
no shares issued ............................................... -- --
Common stock, par value $.01; authorized 50,000,000 shares
with 32,675,678 and 33,980,468 issued at December 31, 1999
and June 30, 2000, respectively ................................ 327 343
Additional paid-in capital ........................................ 117,597 141,908
Retained earnings ................................................. 34,864 39,583
Treasury stock, at cost, 300,000 shares at June 30, 2000 .......... -- (1,650)
------------ ------------
Total stockholders' equity ................................... 152,788 180,184
------------ ------------
Total liabilities and stockholders' equity ................... $ 236,257 $ 293,062
============ ============

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

PATTERSON ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1999 2000 1999 2000
---------- ---------- ---------- ----------
(in thousands, except per share data)

Operating revenues:
Drilling ............................................ $ 26,718 $ 58,379 $ 49,175 $ 109,536
Drilling fluids ..................................... 1,806 5,109 4,739 9,474
Oil and natural gas sales ........................... 1,608 3,194 2,544 5,678
Well operation fees ................................. 371 457 737 1,017
Other ............................................... 41 -- 87 --
---------- ---------- ---------- ----------
30,544 67,139 57,282 125,705
---------- ---------- ---------- ----------
Operating costs and expenses:
Direct drilling costs ............................... 23,243 44,397 43,133 86,232
Drilling fluids ..................................... 1,633 3,987 4,150 7,534
Lease operating and production ...................... 356 788 677 1,420
Exploration costs ................................... 153 154 308 322
Dry holes and abandonments .......................... 38 -- 41 --
Depreciation, depletion and
amortization ..................................... 7,040 8,447 14,126 16,164
General and administrative expense .................. 1,790 2,151 3,427 4,347
---------- ---------- ---------- ----------
34,253 59,924 65,862 116,019
---------- ---------- ---------- ----------
Operating income (loss).................................. (3,709) 7,215 (8,580) 9,686
---------- ---------- ---------- ----------
Other income (expense):
Net gain (loss) on sale of assets ................... (139) 7 (81) 50
Interest income ..................................... 116 124 216 237
Interest expense .................................... (973) (1,532) (2,026) (2,725)
Other................................................ 23 17 40 (3)
---------- ---------- ---------- ----------
(973) (1,384) (1,851) (2,441)
---------- ---------- ---------- ----------
Income (loss) before income taxes ....................... (4,682) 5,831 (10,431) 7,245
---------- ---------- ---------- ----------
Income tax expense (benefit):
Current ............................................. 108 (581) (3,106) 150
Deferred ............................................ (1,648) 2,604 (320) 2,376
---------- ---------- ---------- ----------
(1,540) 2,023 (3,426) 2,526
---------- ---------- ---------- ----------
Net income (loss) ....................................... $ (3,142) $ 3,808 $ (7,005) $ 4,719
========== ========== ========== ==========
Net income (loss) per common share:
Basic ............................................... $ (0.10) $ 0.12 $ (0.22) $ 0.14
========== ========== ========== ==========
Diluted ............................................. $ (0.10) $ 0.11 $ (0.22) $ 0.14
========== ========== ========== ==========

Weighted average number of common shares outstanding:
Basic ............................................... 32,488 32,880 32,365 33,186
========== ========== ========== ==========
Diluted ............................................. 32,488 34,237 32,365 34,577
========== ========== ========== ==========

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

PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(Unaudited)
(in thousands)

Common Stock
--------------------------
Number of Additional Retained Treasury
Shares Amount paid-in capital earnings Stock Total
---------- ---------- --------------- ---------- ---------- ----------

Balance, December 31, 1999 ... 32,676 $ 327 $ 117,597 $ 34,864 $ -- $ 152,788
Issuance of common stock ..... 1,604 16 24,311 -- -- 24,327
Treasury stock acquired ...... (300) -- -- -- (1,650) (1,650)
Net income ................... -- -- -- 4,719 -- 4,719
---------- ---------- ------------ --------- ---------- ----------

Balance, June 30, 2000 ....... 33,980 $ 343 $ 141,908 $ 39,583 $ (1,650) $ 180,184
========== ========== ============ ========= ========== ==========

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

PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended
June 30,
--------------------------
1999 2000
---------- ----------
(in thousands)

Cash flows from operating activities:
Net income (loss) ............................................................... $ (7,005) $ 4,719
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation, depletion and amortization ....................................... 14,126 16,164
Net (gain) loss on sale of assets .............................................. 81 (50)
Deferred income tax (benefit) expense .......................................... (320) 2,376
Increase (decrease) in deferred compensation liabilities ....................... (13) 186
Change in operating assets and liabilities:
(Increase) decrease in trade accounts receivable ......................... 4,988 (12,952)
Increase in oil and natural gas sales receivable ......................... (130) (309)
Decrease in inventory .................................................... 373 295
Decrease in accrued federal income taxes receivable ...................... 2,563 --
Increase in undeveloped oil and natural gas properties ................... (1,051) (11)
(Increase) decrease in other current assets .............................. (459) 74
Increase in cost of uncompleted contracts in excess of related billings .. -- (344)
Increase (decrease) in trade accounts payable ............................ (352) 4,155
Increase in revenue distribution payable ................................. 701 1,799
Increase in accrued expenses ............................................. 553 2,697
Increase in accrued federal income taxes payable ......................... -- 120
Increase in other current payables ....................................... 51 836
---------- ----------
Net cash provided by operating activities ............................. 14,106 19,755
---------- ----------
Cash flows from investing activities:
Purchases of fixed assets through acquisitions ................................. -- (4,058)
Purchases of property and equipment ............................................ (4,297) (25,652)
Sales of property and equipment ................................................ 371 382
Change in other assets ......................................................... (60) (320)
---------- ----------
Net cash used in investing activities ................................. (3,986) (29,648)
---------- ----------
Cash flows from financing activities:
Purchase of treasury stock ..................................................... -- (1,650)
Proceeds from notes payable .................................................... -- 9,909
Payments of notes payable ...................................................... (4,286) --
Proceeds from exercise of stock options ........................................ 62 1,186
---------- ----------
Net cash provided by (used in)
financing activities ............................................... (4,224) 9,445
---------- ----------
Net increase (decrease) in cash and cash
equivalents ........................................................ 5,896 (448)
Cash and cash equivalents at beginning of period .................................... 8,986 8,792
---------- ----------
Cash and cash equivalents at end of period .......................................... $ 14,882 $ 8,344
========== ==========

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ..................................................................... $ 2,026 $ 2,217
Income taxes ................................................................. $ -- $ --

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

PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS- CONTINUED

(Unaudited)

Supplemental disclosure of cash flow information - continued:

During March of 2000, the Company issued 53,000 shares of its common
stock valued at $29.0625 per share as partial consideration for 100% of the
outstanding stock of WEK Drilling Co., Inc. In addition, $5.66 million of the
proceeds provided by the Company's credit facility were used to fund the
acquisition for a total purchase price of $7.2 million (See Note 2).

On June 2, 2000, the Company consummated the acquisition of 100% of the
outstanding stock of High Valley Drilling, Inc. The net assets consisted of
eight non-operable drilling rigs and other related equipment. Consideration for
the acquisition included 1,150,000 restricted shares of the Company's common
stock and three-year warrants to acquire an additional 127,000 shares at an
exercise price of $22.00 per share. The Company's common stock was valued at
$18.00 per share for purposes of recording the acquisition as a purchase, which
represents the market price of the stock on the day the acquisition was
announced. The warrants were valued at $900,000 using the Black-Scholes model. A
deferred tax liability was recorded in the amount of approximately $7.2 million
(See Note 2).

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

PATTERSON ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF CONSOLIDATION AND PRESENTATION

The consolidated financial statements include the accounts of Patterson
Energy, Inc. ("Patterson") and its wholly-owned subsidiaries, Patterson (GP)
LLC, Patterson (LP) LLC, Patterson Drilling Company LP, LLLP, Lone Star Mud LP,
LLLP, Patterson Petroleum LP, LLLP, and Patterson Petroleum Trading Company LP,
LLLP (collectively referred to hereafter as the "Company"). All significant
intercompany accounts and transactions have been eliminated.

The interim condensed consolidated financial statements have been
prepared by management of the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations, although the Company believes the
disclosures included herein are adequate to make the information presented not
misleading. In the opinion of management, all adjustments (consisting of only
normal recurring accruals) considered necessary for presentation of the
information have been included. The unaudited condensed consolidated balance
sheet as of December 31, 1999, as presented herein, was derived from the audited
balance sheet, but does not include all disclosures required by generally
accepted accounting principles.

The Company provides a dual presentation of its earnings per share;
Basic Earnings per Share ("Basic EPS") and Diluted Earnings per Share ("Diluted
EPS"). Basic EPS is based on the weighted average number of shares outstanding
during the year. Diluted EPS includes common stock equivalents, which are
dilutive to earnings per share. For the three and six months ended June 30,
2000, the dilutive securities, consisting of certain stock options and warrants,
were approximately 1.4 million for each respective period. Dilutive securities
of approximately 1.4 million were excluded from the three and six months ended
June 30, 1999 calculations of Diluted EPS as a result of the Company's net loss
for the respective periods.

The results of operations for the three and six months ended June 30,
2000, are not necessarily indicative of the results to be expected for the full
year.

Certain reclassifications have been made to the 1999 consolidated
financial statements in order for them to conform with the 2000 presentation.

2. RECENT ACQUISITIONS

On June 2, 2000, the Company consummated the acquisition of 100% of the
outstanding stock of High Valley Drilling, Inc. The net assets consisted of
eight non-operable drilling rigs and other related equipment. The drilling rigs,
when completely refurbished, will have depth capacities equal to or exceeding
15,000 feet with three of the rigs having a depth rating of 25,000 feet.
Consideration for the acquisition included 1,150,000 restricted shares of the
Company's common stock and three-year warrants to acquire an additional 127,000
shares at an exercise price of $22.00 per share. The former shareholders were
granted certain demand and "piggy-back" registration rights with regard to the
Company's shares and warrant shares. The Company's common stock was valued at
$18.00 per share for purposes of recording the acquisition as a purchase, when
represents the market price of the stock on the day the acquisition was
announced. The warrants were valued at $900,000 using the Black-Scholes model. A
deferred tax liability was recorded in the amount of $7.2 million.

On March 31, 2000, the Company acquired 100% of the outstanding stock
of WEK Drilling Company, Inc., a privately held, non-affiliated drilling company
with its principal operations in southeast New Mexico, for an aggregate purchase
price of $7.2 million. The assets acquired included four operable contract
drilling rigs and other related equipment and working capital of approximately
$1.2 million. Three of the rigs have depth capacities greater than 12,000 feet
with the other rig having a depth rating of 10,500 feet. The acquisition was
funded using $5.66 million of proceeds from the Company's credit facility and
53,000 shares of the Company's common stock valued at $29.0625 per share.
Certain assets, unrelated to the contract drilling business, were sold back to
one of the previous owners for a cash payment of $1.0 million.

The above acquisitions were accounted for as purchases and the related
results of operations and cash flows have been included in the condensed
consolidated financial statements since the respective dates of acquisition. No
goodwill was recorded in connection with these acquisitions.

PATTERSON ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

3. STOCKHOLDERS' EQUITY

On February 1, 2000, in accordance with the Asset Purchase Agreement
between the Company and Padre Industries, Inc., the Company exercised its option
to buy back 300,000 shares at $5.50 per share, of the 800,000 shares initially
given as consideration for the Company's acquisition of the drilling assets of
Padre Industries, Inc.

On March 31, 2000, the Company issued 53,000 shares of its common stock
as partial consideration for the acquisition of 100% of the outstanding stock of
WEK Drilling Company, Inc. (See Note 2). The common stock was recorded at its
approximate fair market value on the date of the transaction of $29.0625 per
share.

On June 2, 2000, the Company issued 1,150,000 shares of its common
stock and three-year warrants to acquire an additional 127,000 shares at an
exercise price of $22.00 per share as consideration for the acquisition of the
assets of High Valley Drilling, Inc. (See Note 2). The common stock was recorded
at its approximate fair market value on the date of the transaction of $18.00
per share and the warrants were valued at $900,000 using the Black-Scholes
model.

4. BUSINESS SEGMENTS

The Company conducts its business through three distinct operating
activities: contract drilling of oil and natural gas wells, oil and natural gas
exploration, development, acquisition and production and providing drilling
fluid services to operators in the oil and natural gas industry. Separate
financial data for each of the Company's three business segments is provided
below.

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1999 2000 1999 2000
---------- ---------- ---------- ----------
(In thousands)

Revenues:
Contract drilling .................. $ 26,718 $ 58,379 $ 49,175 $ 109,536
Oil and natural gas ................ 2,020 3,651 3,368 6,695
Drilling fluids .................... 1,806 5,109 4,739 9,474
---------- ---------- ---------- ----------
Total operating revenues ............... $ 30,544 $ 67,139 $ 57,282 $ 125,705
========== ========== ========== ==========
Income (loss) from operations:
Contract drilling .................. $ (3,554) $ 6,360 $ (7,842) $ 8,371
Oil and natural gas ................ 413 901 281 1,651
Drilling fluids .................... (545) (29) (979) (339)
---------- ---------- ---------- ----------
(3,686) 7,232 (8,540) 9,683
Net gain (loss) on sale of assets ...... (139) 7 (81) 50
Interest income ........................ 116 124 216 237
Interest expense ....................... (973) (1,532) (2,026) (2,725)
---------- ---------- ---------- ----------
Income (loss) before income taxes ...... $ (4,682) $ 5,831 $ (10,431) $ 7,245
========== ========== ========== ==========

12
5. RECENTLY ISSUED ACCOUNTING STANDARDS

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," ("SFAS No. 133") in June 1998. SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. This
statement, as amended by SFAS No. 138, is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The provisions of SFAS No. 133 are
not expected to have a material impact on the Company's consolidated financial
statements.

In April 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, "Accounting for Certain Transactions Including Stock
Based Compensation: An Interpretation of APB Opinion No. 25." This
interpretation serves to clarify previous stock based compensation guidance,
specifically Accounting Principles Board Opinion No. 25. This interpretation,
which generally provides for prospective application for grants or
modifications to existing stock options or awards made after June 30, 2000, is
not expected to have a material impact on the Company's consolidated financial
statements.

12
13

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2000, our working capital was approximately $25.3 million
and cash and cash equivalents were $8.3 million compared to working capital of
$27.0 million and cash and cash equivalents of $8.8 million at December 31,
1999. For the six months ended June 30, 2000, we generated net cash from
operations of $19.8 million. This was attributable to increased drilling
activity in response to improved utilization rates and the recovery of the
market price for the underlying commodities. We sold property and equipment for
proceeds of approximately $382,000. These funds were used primarily to acquire
and refurbish drilling and other related equipment of approximately $22.2
million and to fund leasehold acquisition, exploration and development of $3.0
million.

On June 2, 2000, we consummated the acquisition of High Valley
Drilling, Inc. The net assets consisted of eight non-operable drilling rigs and
other related equipment. The drilling rigs, when completely refurbished, will
have depth capacities equal to or exceeding 15,000 feet with three of the rigs
having a depth rating of 25,000 feet. Consideration for the acquisition included
1,150,000 restricted shares of our common stock and three-year warrants to
acquire an additional 127,000 shares at an exercise price of $22.00 per share.
The former shareholders were granted certain demand and "piggy-back"
registration rights with regard to the shares and warrant shares issued. Our
common stock was recorded at $18.00 per share for purposes of recording the
acquisition as a purchase, which represents the market price of the stock on the
day the acquisition was announced.

As of June 30, 2000, we expended approximately $3.4 million
refurbishing the above mentioned rigs. One of the rigs was placed into operation
by the end of June 2000. We expect to spend approximately $8 to $10 million of
funds to refurbish the remaining rigs, and anticipate the respective rigs to
become operational at various times over the next twelve months.

On July 20, 2000, we executed an amendment to our existing credit
facility with Transamerica Equipment Financial Services, increasing our credit
facility from $60 million to $70 million. On July 26th, 2000, we drew $5 million
under the credit facility to fund the above mentioned capital expenditures.

On March 31, 2000, we acquired 100% of the outstanding stock of WEK
Drilling Co., Inc., a privately held, non-affiliated drilling company with its
principal operations in southeast New Mexico, for an aggregate purchase price of
$7.2 million. The assets acquired included four operable contract drilling rigs
and other related equipment and working capital of approximately $1.2 million.
Three of the rigs have depth capacities greater than 12,000 feet with the other
rig having a depth rating of 10,500 feet. The acquisition was funded using $5.66
million of proceeds from our credit facility with Transamerica Equipment
Financial Services Corporation and 53,000 shares of our common stock valued at
$29.0625 per share. Certain assets, unrelated to the contract drilling business,
were sold back to one of the previous owners for a cash payment of $1.0 million.

We believe that the current level of cash and cash equivalents, together
with cash generated from operations should be sufficient to meet any immediate
capital needs. From time to time, we review acquisition opportunities relating
to our business. The timing, size or success of any acquisition and the
associated capital commitments are unpredictable. Should further opportunities
for growth requiring capital arise, we believe we would be able to satisfy these
needs through a combination of working capital, cash from operations, and either
debt or equity financing. However, there can be no assurance that such capital
would be available.

RESULTS OF OPERATIONS

Comparison of the six months ended June 30, 2000 and 1999

For the six months ended June 30, 2000, contract drilling revenues
increased 123% from $49.2 million in 1999 to $109.5 million in the same period
of 2000. The increase in revenues was largely attributable to the increased
demand for our contract drilling services. The increased demand was evidenced by
average rig utilization of 69% for the six months ended June 30, 2000 as
compared to an average rig utilization of 34% for the comparable period in 1999.
Direct contract drilling expenses for the six months ended June 30, 2000, were
$86.2 million, or 79% of the contract drilling revenues, as compared to $43.1
million, or 88% of the contract drilling revenues for the same period in 1999.
General and administrative expense increased 11% for the contract drilling
segment, from $1.8 million for the six months ended June 30, 1999, to
approximately $2.0 million for the same period in 2000. Depreciation and
amortization expense for the contract drilling segment was $12.9 million for the
six months ended June 30, 2000, as compared to $12.1 million for the same period
in 1999. The contract drilling segment generated operating income of $8.4
million for the six months ended

June 30, 2000, as compared to an operating loss of $7.8 million for the same
period in 1999. These results are reflective of increased productivity in the
contract drilling industry as evidenced by the increase in utilization, which is
primarily attributable to increases in oil prices as indicated below.

Oil and natural gas sales revenues were approximately $5.7 million for
the six months ended June 30, 2000, as compared to $2.5 million in 1999. The
volume of oil and natural gas sold increased by 24% for the first six months in
2000, as compared to the same six-month period in 1999. The average price per
Bbl of crude oil received was $28.30 in 2000, as compared to $14.13 in 1999, and
the average price per Mcf of natural gas was $2.84 in 2000, as compared to $1.78
in 1999. General and administrative expenses for the oil and natural gas segment
were $678,000 and $564,000 for the six months ended June 30, 2000 and 1999,
respectively. Exploration costs were $322,000 and $308,000 for the six months
ended June 30, 2000 and 1999, respectively. Depreciation and depletion expense
was $2.6 million in 2000, as compared to $1.5 million in 1999. Other revenues
generated by our oil and natural gas segment, consisting primarily of fees
generated from lease operating activities, were $1.0 million and $824,000 for
the six-months ended June 30, 2000 and 1999, respectively. The oil and natural
gas segment generated income from operations of $1.6 million for the six month
period in 2000, as compared to $281,000 in 1999. The increase in the segment's
operating results was primarily attributable to the increased commodity prices
as stated above.

Operating revenues from our drilling fluid services were approximately
$9.5 million and $4.7 million for the six months ended June 30, 2000 and 1999,
respectively. Related operating costs incurred were $7.5 million for the first
six months of 2000 as compared to $4.2 million in 1999. The increase in
operating margin was principally attributable to the upturn in the oil and
natural gas industry as discussed above. For the six months ended June 30, 2000,
depreciation and amortization expense was $596,000 as compared to $529,000 in
1999. General and administrative expense for the drilling fluids segment
increased 55% to $1.7 million for the six months ended June 30, 2000. For the
six months ended June 30, 2000, the drilling fluids segment generated a loss
from operations of approximately $339,000 as compared to a net operating loss of
approximately $979,000 for the comparative six-month period in 1999.

For the six months ended June 30, 2000, interest expense was $2.7
million as compared to $2.0 million for the same period in 1999. Interest income
for the first six months of 2000 was $237,000 as compared to $216,000 in 1999.

Comparison of the three months ended June 30, 2000 and 1999

For the three months ended June 30, 2000, contract drilling revenues
increased 119% from $26.7 million in the second quarter of 1999 to $58.4 million
in the same period of 2000. This increase in revenues was driven by a rise in
average rig utilization from 36% for the aforementioned period in 1999 to 72% in
2000. Direct contract drilling expenses for the three months ended June 30,
2000, were $44.4 million, or 76% of the contract drilling revenues , as compared
to $23.2 million, or 87% of the contract drilling revenues for the same period
in 1999. General and administrative expense for the contract drilling segment
was $968,000 and $983,000 for the three months ended June 30, 2000 and 1999,
respectively. Depreciation and amortization expense for the contract drilling
segment was $6.7 million for the three months ended June 30, 2000, as compared
to $6.0 million for the same period in 1999. The contract drilling segment
generated operating income of $6.4 million for the three months ended June 30,
2000, as compared to an operating loss of $3.6 million for the same period in
1999. These results are reflective of increased productivity in the contract
drilling industry as evidenced by the increase in utilization, which is
primarily attributable to increases in oil prices as indicated below.

Oil and natural gas sales revenues were approximately $3.2 million for
the three months ended June 30, 2000, as compared to $1.6 million in 1999. The
volume of oil and natural gas sold increased by 27% in the second quarter 2000,
as compared to the same three-month period in 1999. The average price per Bbl of
crude oil received was $28.15 in 2000, as compared to $16.50 in 1999, and the
average price per Mcf of natural gas was $2.99 in 2000, as compared to $1.85 in
1999. General and administrative expenses for our oil and natural gas segment
were $336,000 and $306,000 for the three months ended June 30, 2000 and 1999,
respectively. Exploration costs increased to $154,000 for the three months ended
June 30, 2000, from $153,000 for the same period in 1999. Depreciation and
depletion expense was $1.5 million in 2000, as compared to $753,000 in 1999.
Other revenues generated by our oil and natural gas segment, consisting
primarily of fees generated from lease operating activities, were $457,000 and
$412,000 for the three-months ended June 30, 2000 and 1999, respectively. The
oil and natural gas segment generated income from operations of $901,000 for the
three month period in 2000, as compared to income of $413,000 for that of 1999.
The increase in the segment's operating results was primarily attributable to
the increased commodity prices and production as stated above.

Operating revenues from our drilling fluid services were approximately
$5.1 million and $1.8 million for the quarters ended June 30, 2000 and 1999,
respectively. Related operating costs incurred were $4.0 million for the three
months ended June 30,2000 as compared to $1.6 million in 1999. The increase in
operating margin was principally attributable to the upturn in the oil and gas
industry resulting from increased commodity prices as discussed above in the oil
and natural gas section. For the three months ended June 30, 2000, depreciation
and amortization expense was $312,000 as compared to $240,000 in 1999. General
and administrative expense for the drilling fluids segment increased 69% to
$849,000 for the three months ended June 30, 2000. For the fiscal quarter ended
June 30, 2000, the drilling fluids segment generated a net loss from operations
of approximately $29,000 as compared to a net operating loss of approximately
$545,000 for the comparative three-month period in 1999.

For the three months ended June 30, 2000, interest expense was $1.5
million as compared to $1.0 million for the same period in 1999. Interest income
for the second quarter of 2000 was $124,000 as compared to $116,000 in 1999.

VOLATILITY OF OIL AND NATURAL GAS PRICES AND ITS IMPACT ON OPERATIONS

Our revenue, profitability and future rate of growth are substantially
dependent upon prevailing prices for oil and natural gas, both with respect to
our contract drilling and oil and natural gas segments. Historically, oil and
natural gas prices and markets have been extremely volatile. Prices are affected
by market supply and demand factors as well as actions of state and local
agencies, the United States and foreign governments and international cartels.
All of these are beyond our control. Any significant or extended decline in oil
and/or natural gas prices will have a material adverse effect on our financial
condition and results of operations. Low level commodity prices beginning in the
fourth quarter of 1997 and continuing into mid-1999 adversely impacted
operations. Although there has been significant improvement in oil and natural
gas prices since mid-1999, we expect oil and natural gas prices to continue to
be volatile and therefore to affect our financial condition and operations as
well as our ability to access capital sources.

IMPACT OF INFLATION

We believe that inflation will not have a significant impact on our
financial position.

RECENTLY ISSUED ACCOUNTING STANDARDS

In April 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, "Accounting for Certain Transactions Including Stock
Based Compensation. An Interpretation of APB Opinion No. 25." This
interpretation serves to clarify previous stock based compensation guidance,
specifically Accounting Principles Board Opinion No. 25. This interpretation,
which generally provides for prospective application for grants or modifications
to existing stock options or awards made after June 30, 2000, is not expected to
have a material impact on the Company's consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have exposure to market risk associated with the floating rate
portion of the interest charged on the $60.0 million outstanding under our
credit facility with Transamerica Equipment Financial Services Corporation. This
instrument, which matures on January 1, 2006, bears interest at LIBOR plus 3.10%
to 3.51%. Our exposure to interest rate risk due to changes in LIBOR is not
expected to be material and at June 30, 2000, the fair value of the obligation
approximates its related carrying value because the obligation bears interest at
the current market rate.

----------

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

"Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in Item 2 of this Report contains
forward-looking statements which are made pursuant to the "safe harbor"
provisions of The Private Securities Litigation Reform Act of 1995. These
statements include, without limitation, statements relating to: liquidity;
financing of operations; continued volatility of oil and natural gas prices;
source and sufficiency of funds required for immediate capital needs and
additional rig acquisitions (if further opportunities arise); and such other
matters. The words "believes," "plans," "intends," "expected," "estimates" or
"budgeted" and similar expressions identify forward-looking statements. The
forward-looking statements are based on certain assumptions and analyses made by
the Company in light of its experience and its perception of historical trends,
current conditions, expected future developments and other factors it believes
are appropriate in the circumstances. The Company does not undertake to update,
revise or correct any of the forward-looking information. Factors that could
cause actual results to differ materially from the Company's expectations
expressed in the forward-looking statements include, but are not limited to, the
following: intense competition in the contract drilling industry; low oil prices
and/or natural gas prices; adverse market conditions for contract drilling
services; drill-pipe shortages; labor shortages, primarily qualified drilling
rig personnel; insurance coverage limitations and requirements; inability to
acquire additional drilling rigs on terms favorable to the Company and the loss
of key personnel, particularly Cloyce A. Talbott and A. Glenn Patterson, the
Chairman and Chief Executive Officer and the President and Chief Operating
Officer of the Company, respectively. For a more complete explanation of these
various factors and others, see "Cautionary Statement for Purposes of the 'Safe
Harbor' Provisions of the Private Securities Litigation Reform Act of 1995"
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999, beginning on page 13.

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18
PART II - OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held its Annual Meeting of Stockholders on June 22, 2000
The following table sets forth certain information relating to each of the
matters voted upon at the meeting.

VOTES
----------------------------------------------------
WITHHELD/ BROKER
MATTERS VOTED UPON FOR AGAINST ABSTAIN NON-VOTES
------------------ ---------- ------- ------- ---------

1. Ratification of PricewaterhouseCoopers LLP
as the independent auditors for the
Company for the fiscal year ended
December 31, 2000..................................... 28,636,842 31,621 10,678 --

2. Election of the following persons to the
Company's Board of Directors:
Cloyce A. Talbott................................... 27,700,587 -- 978,554 --
A. Glenn Patterson.................................. 27,700,587 -- 978,554 --
Robert L. Gist...................................... 26,848,205 -- 1,830,936 --
Spencer A. Armour, III.............................. 28,157,386 -- 521,755 --
Vincent A. Rossi, Jr................................ 28,116,886 -- 562,255 --

18
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) EXHIBITS.

The following exhibits are filed herewith or incorporated by reference:

2.1 Plan and Agreement of Merger dated October 14, 1993, between Patterson
Energy, Inc., a Texas corporation, and Patterson Energy, Inc., a
Delaware corporation, together with related Certificates of Merger. (1)

2.2 Agreement and Plan of Merger, dated April 22, 1996 among Patterson
Energy, Inc., Patterson Drilling Company and Tucker Drilling Company,
Inc. (2)

2.2.1 Amendment to Agreement and Plan of Merger, dated May 16, 1996 among
Patterson Energy, Inc., Patterson Drilling Company and Tucker Drilling
Company, Inc. (3)

2.3 Asset Purchase Agreement, dated June 4, 1997, among Patterson Energy,
Inc., Patterson Drilling Company and Wes-Tex Drilling Company. (5)

2.3.1 Amendment to Asset Purchase Agreement, dated June 4, 1997, among
Patterson Energy Inc., Patterson Drilling Company and Wes-Tex Drilling
Company. (5)

2.4 Agreement and Plan of Merger, dated January 20, 1998, among Patterson
Energy, Inc., Patterson Onshore Drilling Company and Robertson Onshore
Drilling Company. (7)

2.5 Stock Purchase Agreement, dated January 5, 1998, among Patterson
Energy, Inc., Spencer D. Armour, III. And Richard G. Price. (19)

2.6 Stock Purchase Agreement, dated September 17, 1998, among Lone Star
Mud, Inc. and Mark Campbell (shareholder of Tejas Drilling Fluids,
Inc.). (4)

2.7 Asset Purchase Agreement, dated January 27, 1999, among Patterson
Energy, Inc., Patterson Drilling Company and Padre Industries, Inc. (4)

2.8 Agreement and Plan of Merger, dated April 3, 2000, among Patterson
Energy, Inc. and High Valley Drilling, Inc. (20)

2.9 Stock purchase agreement, dated March 31, 2000, among Patterson Energy,
Inc., Patterson Drilling Company LP, LLLP, Kenneth Reynolds and Gary
Chappell. (21)

3.1 Restated Certificate of Incorporation. (8)

3.1.1 Certificate of Amendment to the Certificate of Incorporation. (9)

3.2 Bylaws. (1)

4.1 Excerpt from Restated Certificate of Incorporation of Patterson Energy,
Inc. regarding authorized Common Stock and Preferred Stock. (10)

19
20
10.1 Loan and Security Agreement dated December 21, 1999 among Patterson
Drilling Company and Transamerica Equipment Financial Services
Corporation. (18)

10.1.1 Promissory Note dated December 21, 1999 between Patterson Drilling
Company and Transamerica Equipment Financial Services Corporation. (18)

10.1.2 Corporate guarantees of Lone Star Mud, Inc. and Patterson Energy, Inc.
(18)

10.1.3 Amendment to Loan and Security Agreement dated July 20, 2000 among
Patterson Drilling Company and Transamerica Equipment Financial
Services Corporation.

10.2 Aircraft Lease, dated December 20, 1999, (effective January 1, 2000)
between Talbott Aviation, Inc. and Patterson Energy, Inc. (18)

10.3 Participation Agreement, dated October 19, 1994, between Patterson
Petroleum Trading Company, Inc. and BHT Marketing, Inc. (12)

10.3.1 Participation Agreement dated October 24, 1995, between Patterson
Petroleum Trading Company, Inc. and BHT Marketing, Inc. (13)

10.4 Crude Oil Purchase Contract, dated October 19, 1994, between Patterson
Petroleum, Inc. and BHT Marketing, Inc. (12)

10.4.1 Crude Oil Purchase Contract, dated October 24, 1995, between Patterson
Petroleum, Inc. and BHT Marketing, Inc. (13)

10.5 Patterson Energy, Inc. 1993 Stock Incentive Plan, as amended. (15)

10.6 Patterson Energy, Inc. Non-Employee Directors' Stock Option Plan, as
amended. (16)

10.7 Model Form Operating Agreement. (17)

10.8 Form of Drilling Bid Proposal and Footage Drilling Contract. (17)

10.9 Form of Turnkey Drilling Agreement. (17)

15.1 Awareness Letter of Independent Accountants - PricewaterhouseCoopers
LLP

21.1 Subsidiaries of the registrant. (18)

27.1 Financial Data Schedule as of June 30, 2000 and for the three and six
months then ended.

20
21
- ----------

(1) Incorporated herein by reference to Item 27, "Exhibits" to Amendment
No. 2 to Registration Statement on Form SB-2 (File No. 33-68058-FW);
filed October 28, 1993.

(2) Incorporated by reference to Item 7, "Financial Statements and
Exhibits" to Form 8-K dated April 22, 1996 and filed on April 30, 1996.

(3) Incorporated by reference to Item 7, "Financial Statements and
Exhibits" to Form 8-K dated May 16, 1996 and filed on May 22, 1996.

(4) Incorporated herein by reference to Item 14, "Exhibits, Financial
Statement Schedules and Reports on Form 8-K", to Form 10-K dated
December 31, 1998.

(5) Incorporated herein by reference to Item 7, "Financial Statements and
Exhibits", to Form 8-K dated June 3, 1997; filed June 11, 1997.

(6) Incorporated herein by reference to Item 7, "Financial Statements and
Exhibits" to Form 8-K dated November 14, 1997 and filed December 24,
1997.

(7) Incorporated herein by reference to Item 7, "Financial Statements and
Exhibits," to Form 8-K dated January 23, 1998; filed February 3, 1998.

(8) Incorporated herein by reference to Item 6, "Exhibits and Reports on
Form 8-K" to Form 10-Q for the quarterly period ended June 30, 1996;
filed August 12, 1996.

(9) Incorporated herein by reference to Item 6. "Exhibits and Reports on
Form 8-K" to Form 10-Q for the quarterly period ended June 30, 1997;
filed August 14, 1997.

(10) Incorporated herein by reference to Item 16, "Exhibits" to Registration
Statement on Form S-3 filed with the Securities Exchange Commission on
December 18, 1996.

(11) Incorporated herein by reference to Item 7, "Financial Statements and
Exhibits", to Form 8-K dated September 12, 1997; filed September 19,
1997.

(12) Incorporated herein by reference to Item 27, "Exhibits" to Post
Effective Amendment No. 1 to Registration Statement on Form SB-2 (File
No. 33-68058-FW).

(13) Incorporated by reference to Item 7, "Financial Statements and
Exhibits" to Form 10-KSB for the year ended December 31, 1995.

(14) Incorporated by reference to Item 5, "Other Items" to Form 8-K dated
December 1, 1995 and filed on January 16, 1996.

(15) Incorporated herein by reference to Item 8, "Exhibits" to Registration
Statement on Form S-8 (File No. 333-47917); filed March 13, 1998.

(16) Incorporated herein by reference to Item 8, "Exhibits" to Registration
Statement on Form S-8 (File No. 33-39471); filed November 4, 1997.

(17) Incorporated by reference to Item 27, "Exhibits" to Registration
Statement filed with the Securities and Exchange Commission on August
30, 1993.

(18) Incorporated by reference to Item 14, "Exhibits, Financial Statement
Schedules and Reports on Form 8-K" to Form 10-K dated December 31,
1999.

21
22

(19) Incorporated herein by reference to Item 16, "Exhibits" to Registration
Statement on Form S-3 filed with the Securities Exchange Commission on
January 5, 1998.

(20) Incorporated herein by reference to Item 6. "Exhibits and Reports on
Form 8-K" to Form 10-Q for the quarterly period ended March 31, 2000;
filed May 15, 2000.

(21) Incorporated herein by reference to Item 16, "Exhibits" to Registration
Statement on Form S-3 filed with the Securities Exchange Commission on
April 4, 2000.

(b) REPORTS ON FORM 8-K.

The following reports on Form 8-k were filed:

(1) Report dated June 2, 2000 announcing the Company's
consummation of the merger between Patterson Energy, Inc., and
High Valley Drilling, Inc. filed June 2, 2000.

(2) Report dated May 15, 2000 announcing the Company's results
from operations for the period ended March 31, 2000 filed May
15, 2000.

SIGNATURE

In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

PATTERSON ENERGY, INC.

By: /s/ Cloyce A. Talbott
------------------------
Cloyce A. Talbott
Chairman of the Board and
Chief Executive Officer

By: /s/ Jonathan D. Nelson
-------------------------
Jonathan D. (Jody) Nelson
Vice President-Finance
Chief Financial Officer

DATED: August 14, 2000

EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION
----------- -----------

10.1.3 Amendment to Loan and Security Agreement dated July
20, 2000 among Patterson Drilling Company and
Transamerica Equipment Financial Services
Corporation.

15.1 Awareness Letter of Independent Accountants,
PricewaterhouseCoopers LLP

27.1 Financial Data Schedule as of June 30, 2000 and for
the three and six months then ended.