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 March 31, 1999

[ ] 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 May 11, 1999 the issuer had outstanding 32,476,292 shares of common stock,
$0.01 par value, its only class of voting stock.

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 6. Exhibits and Reports on Form 8-K............................................... 18

Signatures....................................................................................... 21

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 Subsidiaries as of March 31, 1999 and the related
condensed consolidated statements of operations and cash flows for the three
months ended March 31, 1999 and 1998 and the related condensed consolidated
statement of stockholders' equity for the three months ended March 31, 1999.
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 generally accepted auditing standards, 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 financial statements for them
to be in conformity with generally accepted accounting principles.

We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1998 and the
related consolidated statements of operations and cash flows for the year then
ended (not presented herein); and in our report dated March 1, 1999, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1998 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
April 30, 1999

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, March 31,
1998 1999
-------- --------
(in thousands)

Current assets:
Cash and cash equivalents ............................................................ $ 8,986 $ 12,419
Accounts receivable:
Trade, less allowance for doubtful accounts of $417,519
and $447,519 at December 31, 1998 and March 31, 1999,
respectively ..................................................................... 28,616 23,860
Oil and natural gas sales ......................................................... 426 664
Costs of uncompleted drilling contracts in
excess of related billings ........................................................ 100 417
Accrued federal income taxes receivable .............................................. 8,400 9,115
Inventory ............................................................................ 1,283 963
Deferred income taxes ................................................................ 1,568 1,568
Undeveloped oil and natural gas properties held for resale ........................... 3,214 3,499
Other current assets ................................................................. 890 893
-------- --------
Total current assets ............................................................. 53,483 53,398
Property and equipment, at cost, net ..................................................... 136,677 136,670
Intangible assets, net ................................................................... 45,875 44,960
Other assets ............................................................................. 570 569
-------- --------
Total assets ..................................................................... $236,605 $235,597
======== ========

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, March 31,
1998 1999
-------- --------
(in thousands, except per share data)

Current liabilities:
Current maturities of note payable ............................... $ 8,571 $ 8,571
Accounts payable:
Trade ......................................................... 9,748 8,945
Revenue distribution .......................................... 1,390 1,641
Other ......................................................... 73 110
Accrued expenses ................................................. 3,170 3,403
-------- --------
Total current liabilities .................................... 22,952 22,670
-------- --------

Deferred income taxes, net ........................................... 9,566 10,852
Deferred liabilities ................................................. 92 86
Note payable, less current maturities ................................ 47,143 45,000
-------- --------
56,801 55,938
-------- --------

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 31,671,132 and 32,471,132 issued and outstanding
at December 31, 1998 and March 31, 1999, respectively .......... 317 325
Additional paid-in capital ........................................ 112,544 116,536
Retained earnings ................................................. 43,991 40,128
-------- --------
Total stockholders' equity ................................... 156,852 156,989
-------- --------
Total liabilities and stockholders' equity ................... $236,605 $235,597
======== ========

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
March 31,
----------------------
1998 1999
-------- --------
(in thousands, except per share data)

Operating revenues:
Drilling .................................... $ 54,297 $ 22,457
Drilling fluids ............................. 4,269 2,933
Oil and natural gas sales ................... 1,795 936
Well operation fees ......................... 374 366
Other ....................................... 16 46
-------- --------
60,751 26,738
-------- --------
Operating costs and expenses:
Direct drilling costs ....................... 40,069 19,890
Drilling fluids ............................. 2,971 2,517
Lease operating and production .............. 527 321
Impairment of oil and natural gas
properties ............................... 300 --
Exploration costs ........................... 169 155
Dry holes and abandonments .................. 22 3
Depreciation, depletion and amortization .... 6,171 7,086
General and administrative expense .......... 2,661 1,637
-------- --------
52,890 31,609
-------- --------
Operating income (loss) ......................... 7,861 (4,871)
-------- --------
Other income (expense):
Net gain on sale of assets .................. 159 58
Interest income ............................. 165 100
Interest expense ............................ (899) (1,053)
Other ....................................... 25 17
-------- --------
(550) (878)
-------- --------
Income (loss) before income taxes ............... 7,311 (5,749)
-------- --------
Income tax expense (benefit):
Current ..................................... 1,856 (3,214)
Deferred .................................... 922 1,328
-------- --------
2,778 (1,886)
-------- --------
Net income (loss) .............................. $ 4,533 $ (3,863)
======== ========
Net income (loss) per common share:
Basic ....................................... $ 0.14 $ (0.12)
======== ========
Diluted ..................................... $ 0.14 $ (0.12)
======== ========

Weighted average number of common shares
outstanding:
Basic ....................................... 31,566 32,240
======== ========
Diluted ..................................... 31,835 32,240
======== ========

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
Shares Amount paid-in capital earnings Total
--------- --------- --------------- --------- ---------

Balance, December 31, 1998 .... 31,671 $ 317 $ 112,544 $ 43,991 $ 156,852
Issuance of common stock ...... 800 8 3,992 -- 4,000
Net loss ...................... -- -- -- (3,863) (3,863)
------- --------- --------- --------- ---------
Balance, March 31, 1999 ....... 32,471 $ 325 $ 116,536 $ 40,128 $ 156,989
======= ========= ========= ========= =========

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)

Three Months Ended
March 31,
----------------------
1998 1999
-------- --------
(in thousands)

Cash flows from operating activities:
Net income (loss) .................................................. $ 4,533 $ (3,863)
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation, depletion and amortization ........................... 6,171 7,086
Impairment of oil and natural gas properties ....................... 300 --
Net gain on sale of assets ......................................... (159) (58)
Deferred income tax expense ........................................ 922 1,328
Decrease in deferred compensation liabilities ...................... (520) (6)
Change in operating assets and liabilities:
Decrease in trade accounts receivable ................. 511 4,756
Increase in oil and natural gas sales
receivable ........................................ (234) (238)
(Increase) decrease in inventory held for resale ...... (973) 320
Increase in accrued federal income taxes
receivable ........................................ -- (715)
Increase in undeveloped oil and natural gas
properties held for resale ........................ (1,939) (285)
Increase in other current assets ...................... (3,383) (320)
Increase (decrease) in trade accounts payable ......... 1,162 (803)
Increase (decrease) in revenue distribution
payable ........................................... (593) 251
Decrease in accrued state and federal
income taxes payable .............................. (4,096) --
Increase in accrued expenses .......................... 2,718 233
Increase (decrease) in other current payables ......... (183) 37
-------- --------
Net cash provided by operating activities ......... 4,237 7,723
-------- --------
Cash flows from investing activities:
Sales of investment securities ..................................... 566 --
Acquisitions ....................................................... (41,879) --
Purchases of property and equipment ................................ (7,511) (2,260)
Sales of property and equipment .................................... 159 112
Change in other assets ............................................. 413 1
-------- --------
Net cash used in investing activities ............. (48,252) (2,147)
-------- --------
Cash flows from financing activities:
Proceeds from notes payable ........................................ 40,150 --
Payments of notes payable .......................................... (3,400) (2,143)
Proceeds from exercise of stock options ............................ 208 --
-------- --------
Net cash provided by (used in)
financing activities ........................... 36,958 (2,143)
-------- --------
Net increase (decrease) in cash
and cash equivalents ........................... (7,057) 3,433

Cash and cash equivalents at beginning of period ........................ 23,338 8,986
-------- --------
Cash and cash equivalents at end of period .............................. $ 16,281 $ 12,419
======== ========

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ..................................................... $ 899 $ 1,053
Income taxes ................................................. $ 8,000 $ --

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 the three months ended March 31, 1999, the Company issued
800,000 shares of its common stock to acquire certain drilling assets of Padre
Industries, Inc. for an aggregate purchase price of approximately $4.0 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 Drilling Company, Patterson Onshore Drilling Company, Lone Star Mud,
Inc., Patterson Petroleum, Inc., Patterson Petroleum Trading Company, Inc. and
Patterson Drilling Programs, Inc. (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, 1998, 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 months ended March 31, 1998, the
dilutive securities, consisting of certain stock options and warrants, were
approximately 269,000. Dilutive securities of approximately 1.4 million were
excluded from the March 31, 1999 calculation of Diluted EPS as a result of the
Company's net loss for the year.

The results of operations for the three months ended March 31, 1999,
are not necessarily indicative of the results to be expected for the full year.

Certain reclassifications have been made to the 1998 consolidated
financial statements in order for them to conform with the 1999 presentation.

2. RECENT ACQUISITION

On January 27, 1999, the Company completed the acquisition of five drilling
rigs and other related equipment from Padre Industries, Inc., a privately-held,
non-affiliated entity based in Corpus Christi, Texas. The purchase price
consisted of 800,000 restricted shares of the Company's common stock valued at
$4.00 per share and a contingent payment based on a guarantee that the
Company's common stock will be at least $5.00 per share one year from the
acquisition date. The contingent cash payment will be calculated by multiplying
the 800,000 shares by the difference of the closing sales price of the
Company's common stock one year from the closing date and $5.00. The maximum
cash payment will be $800,000 [($5.00 - $4.00) x 800,000] plus $80,000 of
interest. The ultimate cash payment will be ratably reduced if the price of the
Company's common stock, one year from the acquisition date exceeds $5.00. No
cash payment will be required if the Company's common stock is at least $5.50
per share one year from the acquisition date. In addition, the Company has the
option to purchase from Padre Industries, Inc. up to 300,000 shares of the
Company's common stock at a price of $5.50 per share. The option may only be
exercised one year from the acquisition date. The fair market values of the
assets acquired were estimated and the purchase price of $4.0 million,
representing the guaranteed value of the Company's common stock, was allocated
among such assets.

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

3. INTANGIBLE ASSETS

Intangible assets as of the balance sheet date consist of covenants not
to compete and goodwill arising from the Company's acquisitions completed during
fiscal years 1997 and 1998. The covenants are being amortized on a straight line
basis over their contractual lives of five years. Goodwill, representing the
excess of the purchase price over the estimated fair value of the assets
acquired, is being amortized on a straight line basis over 15 years.

Intangible assets consisted of the following at March 31, 1999 (in
thousands):

Goodwill ......................... $ 47,489
Covenants not to compete ......... 1,673
Other ............................ 979
--------
50,141
Less accumulated amortization .... (5,181)
--------
$ 44,960
========

Management continually reviews the carrying amounts of goodwill for
recoverability based on the anticipated undiscounted cash flows of the assets to
which it relates. The Company considers operating results, trends and prospects
of the Company, as well as competitive comparisons. The Company also takes into
consideration competition within the industry and any other events or
circumstances which might indicate potential impairment. If goodwill is
determined to not be recoverable an impairment charge will be recognized to the
extent that the carrying value of the related assets, including goodwill,
exceeds the estimated fair value.

4. STOCKHOLDERS' EQUITY

During January 1999, the Company issued 800,000 shares of its common
stock as consideration for the Company's acquisition of certain contract
drilling assets of Padre Industries, Inc. (See Note 2). The common stock was
recorded at its guaranteed value of $5.00 per share for purposes of the
transaction. The fair market value of the Company's common stock on the date of
the transaction was $4.00 per share.

5. 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, to a lesser degree,
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.

MARCH 31, MARCH 31,
1998 1999
------- -------

Revenues:
Contract drilling ....... $54,297 $22,457
Oil and natural gas ..... 2,185 1,348
Drilling fluids ......... 4,269 2,933
------- -------
Total operating revenues .... $60,751 $26,738
======= =======

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

5. BUSINESS SEGMENTS - CONTINUED

MARCH 31, MARCH 31,
1998 1999
------- -------

Income (loss) from operations:
Contract drilling ................ $ 7,175 $(4,288)
Oil and natural gas .............. 16 (132)
Drilling fluids .................. 695 (434)
------- -------
7,886 (4,854)
Net gain on sale of assets ........... 159 58
Interest income ...................... 165 100
Interest expense ..................... (899) (1,053)
------- -------
Income (loss) before income taxes .... $ 7,311 $(5,749)
======= =======

6. RECENTLY ISSUED ACCOUNTING STANDARD

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 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The provisions of SFAS No. 133 are not expected
to have a material impact to the Company.

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

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 1999, the Company had working capital of approximately
$30.7 million and cash and cash equivalents of approximately $12.4 million as
compared to a working capital of approximately $30.5 million and cash and cash
equivalents of approximately $9.0 million as of December 31, 1998. For the three
months ended March 31, 1999, the Company generated net cash from operations of
approximately $7.7 million and sold property and equipment for proceeds of
approximately $112,000. The net cash generated from operations was largely
attributable to a $4.5 million reduction in the Company's accounts receivables
and a $2.5 million income tax refund. These funds were used primarily to acquire
and refurbish drilling and other related equipment of approximately $1.87
million, to fund leasehold acquisition, exploration and development of
approximately $390,000 and to reduce certain notes payable by approximately $2.1
million.

On January 27, 1999, the Company completed the acquisition of five
drilling rigs and other related equipment from Padre Industries, Inc., a
privately-held, non-affiliated entity based in Corpus Christi, Texas. The
purchase price of approximately $4.0 million consisted of 800,000 restricted
shares of the Company's common stock valued at $4.00 per share and a contingent
payment based on a guarantee that the Company's common stock will be trading at
$5.00 per share one year from the acquisition date. The contingent cash payment
will be calculated by multiplying the 800,000 shares by the difference of the
closing sales price of the Company's common stock one year from the closing
date and $5.00. The maximum cash payment will be $800,000 [($5.00 - $4.00) x
800,000] plus $80,000 of interest accrued thereon. The ultimate cash payment
will be ratably reduced if the price of the Company's common stock, one year
from the acquisition date exceeds $5.00. No cash payment will be required if
the Company's common stock is at least $5.50 per share one year from the
acquisition date.

Management believes that the current level of cash and short-term
investments, together with cash generated from operations should be sufficient
to meet the Company's immediate capital needs. From time to time, the Company
reviews acquisition opportunities relating to its business. The timing, size or
success of any acquisition and the associated capital commitments are
unpredictable. Should further opportunities for growth requiring capital arise,
the Company believes it 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 three months ended March 31, 1999 and 1998

For the three months ended March 31, 1999, contract drilling revenues
were approximately $22.5 million as compared to $54.3 million for the same
period in 1998; a decrease of 59%. Average rig utilization was 32% for the three
months ended March 31, 1999, as compared to 70% for the same period in 1998.
Direct contract drilling expenses for the three months ended March 31, 1999 were
approximately $19.9 million, or 88% of the contract drilling revenues, as
compared to approximately $40.0 million, or 74% of the contract drilling
revenues, for the same period in 1998. General and administrative expense for
the contract drilling segment was approximately $815,000 for the three months
ended March 31, 1999 as compared to $1.9 million for the same period in 1998.
The decrease in general and administrative expense was largely attributable to
the Company's decision during July 1998 to close its administrative office in
Dallas, Texas. The Dallas office was acquired during February 1998 in the
Company's acquisition of Robertson Onshore Drilling Company. Additionally, the
Company imposed a company-wide compensation reduction and certain layoffs during
January 1999 in an effort to reduce its overhead costs. Depreciation and
amortization expense for the contract drilling segment was approximately $6.1
million for the three months ended March 31, 1999 as compared to approximately
$5.1 million for the same period in 1998. For the three months ended March 31,
1999, the contract drilling segment generated an operating loss of approximately
$4.3 million as compared to operating income of approximately $7.2 million for
the same three-month period in 1998. The decline in the contract drilling
segment's operating results for the first quarter in 1999 was reflective of the
significantly weakened commodity prices, particularly for crude oil (as further
discussed below), and the resulting 38% decrease in the Company's utilization
rate.

Oil and natural gas sales revenues were approximately $936,000; for the
three months ended March 31, 1999, as compared to approximately $1.8 million in
1998. The volume of oil and natural gas sold by the Company decreased by
approximately 29% for the first three months in 1999, as compared to the same
three-month period in 1998. The average price per Bbl of crude oil received by
the Company was $10.08 in 1999, as compared to $13.83 in 1998, and the average
price per Mcf of natural gas was $1.71 in 1999, as compared to $2.31 per Mcf in
1998. General and administrative expense for the oil and natural gas segment was
approximately $258,000 and $310,000 for the three month's ended March 31, 1999
and 1998, respectively. Exploration costs were approximately $155,000 and
$169,000 for the quarters ended March 31, 1999 and 1998, respectively.
Depreciation and depletion expense was approximately $744,000 in 1999, as
compared to approximately $852,000 in 1998. The Company incurred $300,000 of
impairment costs during the first quarter of 1998 associated with certain of its
oil and natural gas properties. Other revenues generated by the oil and natural
gas segment, consisting primarily of fees generated from lease operating
activities, were approximately $412,000 and $390,000 for the three-months ended
March 31, 1999 and 1998, respectively. For the three months ended March 31,
1999, the oil and natural gas segment generated a loss from operations of
approximately $132,000 as compared to income of approximately $16,000 for the
same three-month period in 1998. The decrease in the segment's operating results
was primarily attributable to the decrease in the underlying commodity prices,
particularly the 27% decrease in the price received for crude oil, as discussed
above.

Operating revenues from the Company's drilling fluid services were
approximately $2.9 million and approximately $4.3 million for the quarters ended
March 31, 1999 and 1998, respectively. Operating costs incurred by the drilling
fluids segment were approximately $2.5 million for the first three months March
31, 1999 as compared to costs of approximately $3.0 million in 1998. The
decrease in operating margin was principally attributable to the negative impact
of the significantly weakened commodity prices had on the oil and natural gas
industry. For the three months ended March 31, 999 depreciation and amortization
expense was $289,000 as compared to $204,000 in 1998. General and administrative
expense for the drilling fluids segment increased approximately 40% to $564,000
for the three months ended March 31, 1999. This increase was primarily due to
the addition of the administrative office in Corpus Christi, Texas acquired
during September 1998 with the Company's purchase of Tejas Drilling Fluids, Inc.
For the fiscal quarter ended March 31, 1999, the drilling fluids segment
generated a net loss from operations of approximately $434,000 as compared to
net operating income of approximately $695,000 for the comparative three-month
period in 1998. The net loss from operations was consistent with the decline in
the segment's operating margin as discussed above and reflective of the
deterioration in the industry's commodity prices.

For the three months ended March 31, 1999, interest expense was
approximately $1.1 million as compared to $899,000 for the same period in 1998.
The increased interest expense was attributable to three full months of expense
incurred on the $36.75 million borrowed to partially fund the Company's
acquisition of Robertson Onshore during February 1998. Interest income for the
first three months of 1999 was approximately $100,000 as compared to
approximately $165,000 in 1998.

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

The Company's revenue, profitability and future rate of growth are
substantially dependent upon prevailing prices for oil and natural gas, both
with respect to its contract drilling and its 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 the control of the Company.
Any significant or extended decline in oil and/or natural gas prices will have a
material adverse effect on the Company's financial condition and results of
operations. The sharp decline in crude oil prices beginning in the fourth
quarter of 1997 and continuing through February 1999 has materially adversely
impacted the Company's operations. Although commodity prices have made a
significant recovery since then, the benefit of this recovery to the Company's
operations has not yet been realized. Furthermore, if these higher prices are
not sustained, the Company's rig utilization rate and related contract services
will continue to be adversely affected.

IMPACT OF INFLATION

The Company believes that inflation will not have a significant impact
on its financial position.

RECENTLY ISSUED ACCOUNTING STANDARD

YEAR 2000 COMPLIANCE PROGRAM

During fiscal year 1997, the Company began implementation of its
program for alleviating potential business interruptions that could be caused by
the year 2000. The Company's program identified two principal areas of concern:
supporting information technology systems ("IT systems") and the Company's
related vulnerability to external providers of services and materials.

The Company currently maintains three separate infrastructures to
facilitate the processing of daily transactions and financial reporting. Each of
the lines of business engaged in by the Company function separately from the
other and therefore operates on individual computer platforms. The Company has
completed its conversion of each of the computer platforms resulting in the
replacement and modification of certain hardware and software applications that
previously were determined not to be compliant with year 2000 issues.

The ability of the Company to conduct its business efficiently and
productively requires that providers of services and materials to the Company,
as well as, major customers to the Company (collectively referred to herein as
"external agents") be year 2000 compliant. The Company has implemented a process
whereby external agents are identified and prioritized by level of exposure.
Management of the Company is in the process of assessing the readiness and
effectiveness of its external agents for the year 2000. Surveys, solicitations
and other forms of inquiry are being used to make this determination. Management
intends to interpret the responses and information gathered and determine on an
individual basis whether the Company is vulnerable to that external agent. This
process will continue through January 2000 as a means to provide a continuous
update as to the external agents' status and success.

The Company does not expect the total cost associated with the
Company's efforts to become year 2000 compliant to be material to the Company's
financial position. The total amount expended on the project through March 31,
1999 was approximately $1.75 million. The Company expects to significantly
reduce its level of uncertainty about year 2000 issues and, in particular, about
the year 2000 compliance and readiness of its external agents. Accordingly, the
Company does not deem it necessary to formally adopt a contingency plan.

The failure to correct a material year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the year 2000 problem, resulting in part from the
uncertainty of the year 2000 readiness of third-party suppliers and customers,
the Company is unable to determine at this time whether the consequences of year
2000 failures will have a material impact on the Company's results of
operations, liquidity or financial condition. The Company believes that, with
the implementation of new business systems and completion of its program as
scheduled, the possibility of significant interruptions of normal operations
should be reduced.

The foregoing disclosure constitutes "Year 2000 Readiness Disclosure"
within the meaning of the Year 2000 Information and Readiness Disclosure Act.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has exposure to market risk associated with the floating
rate portion of the interest charged on its term loan with Norwest Bank Texas,
N.A. The term loan, which matures on January 1, 2001, bears interest at LIBOR
plus 2.375%. The Company's exposure to interest rate risk due to changes in
LIBOR is not expected to be material and at March 31, 1999, 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; continued low
level oil prices and/or fall of natural gas prices; continued 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, 1998,
beginning on page 13.

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

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 April 22, 1997, among and between
Patterson Drilling Company and Ziadril, Inc. (4)

2.4 Asset Purchase Agreement, dated June 4, 1997, among Patterson Energy
Inc., Patterson Drilling Company and Wes-Tex Drilling Company. (3)

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

2.5 Agreement, dated June 4, 1997, among Patterson Energy Inc., Patterson
Drilling Company, Greathouse Foundation and Myrle Greathouse, Trustee
under Agreement dated June 2, 1997. (5)

2.6 Asset Purchase Agreement, dated September 4, 1997, among Patterson
Energy Inc., Patterson Drilling Company and McGee Drilling Company.
(4)

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

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

2.9 Stock Purchase Agreement, dated September 17, 1998, among Lone Star
Mud, Inc. and Mark Campbell (shareholder of Tejas Drilling Fluids,
Inc.). (20)

2.10 Asset Purchase Agreement, dated January 27, 1999, among Patterson
Energy, Inc., Patterson Drilling Company and Padre Industries, Inc.
(20)

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)

4.2 Registration Rights Agreement, dated June 12, 1997, among Patterson
Energy Inc. and Wes-Tex Drilling Company, Greathouse Foundation and
Myrle Greathouse, Trustee under Agreement dated June 2, 1997. (11)

4.3 Stock Purchase Warrant of Patterson Energy, Inc., dated June 12, 1997.
(11)

10.1 Credit Agreement dated December 9, 1997 among Patterson Energy, Inc.,
Patterson Drilling Company, Patterson Petroleum, Inc., Patterson
Trading Company, Inc. and Norwest Bank Texas, N.A. (6)

10.1.1 Promissory Note dated December 9, 1997 among Patterson Energy, Inc.
and Norwest Bank Texas, N.A. (6)

10.1.2 Security Agreement dated December 9, 1997 between Patterson Drilling
Company and Norwest Bank Texas, N.A. (6)

10.1.3 Corporate Guarantees of Patterson Drilling Company, Patterson
Petroleum, Inc. and Patterson Petroleum Trading Company, Inc. (6)

10.1.4 Amendment to Credit Agreement dated March 4, 1999 among Patterson
Energy, Inc., Patterson Drilling Company, Patterson Petroleum, Inc.,
Patterson Trading Company, Inc. and Norwest Bank Texas, N.A. (20)

10.2 Aircraft Lease, dated December 20, 1998, (effective January 1, 1999)
between Talbott Aviation, Inc. and Patterson Energy, Inc. (20)

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. (14)

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 March 31, 1999 and for the three months
then ended.

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

(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 16, "Exhibits" to Amendment
No. 1 to Registration Statement on Form S-3 (File No. 333-29035);
filed August 5, 1997.

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

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

(b) REPORTS ON FORM 8-K.

No reports on Form 8-K were filed with the Securities and Exchange
Commission during the fiscal quarter ended March 31, 1999.

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/ JAMES C. BROWN
-------------------------------------
James C. Brown
Vice President-Finance

DATED: May 14, 1999

EXHIBIT INDEX

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

15.1 Awareness Letter of Independent Accountants, PricewaterhouseCoopers LLP

27.1 Financial Data Schedule as of March 31, 1999 and for the three months
then ended.