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

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, 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 August 13, 1999 the issuer had outstanding 32,635,568 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, PricewaterhouseCoopers LLP......................................... 3

Part I - Financial Information

Item 1. Financial Statements

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
Condition and Results of Operations................................................ 13

Item 3. Quantitative and Qualitative Disclosures about Market Risk......................... 17

Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of 1995........................... 18

Part II - Other Information

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 30,1999 and the related
condensed consolidated statements of operations for each of the three and six
month periods ended June 30, 1999 and 1998 and the related condensed
consolidated statement of cash flows for the six month period ended June 30,
1999 and 1998 and the related condensed consolidated statement of stockholders'
equity for the six month period ended June 30, 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 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 upon 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 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 income 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
July 29, 1999

3
4

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

Current assets:
Cash and cash equivalents ..................................................... $ 8,986 $ 14,882
Accounts receivable:
Trade, less allowance for doubtful accounts of $417,519 and $477,519 at
December 31, 1998 and June 30, 1999,
respectively .............................................................. 28,616 23,628
Oil and natural gas sales .................................................. 426 556
Costs of uncompleted drilling contracts in
excess of related billings ................................................. 100 168
Accrued federal income taxes receivable ....................................... 8,400 5,837
Inventory ..................................................................... 1,283 910
Deferred income taxes ......................................................... 1,568 1,568
Undeveloped oil and natural gas properties held for resale .................... 3,214 4,265
Other current assets .......................................................... 890 1,281
------------ ----------
Total current assets ...................................................... 53,483 53,095
Property and equipment, at cost, net .............................................. 136,677 132,304
Intangible assets, net ............................................................ 45,875 44,092
Other assets ...................................................................... 570 630
------------ ----------
Total assets .............................................................. $ 236,605 $ 230,121
============ ==========

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

4
5

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

LIABILITIES AND STOCKHOLDERS' EQUITY

(Unaudited)
December 31, June 30,
1998 1999
------------- -----------
(in thousands, except per share data)

Current liabilities:
Current maturities of note payable............................. $ 8,571 $ 8,571
Accounts payable:
Trade....................................................... 9,748 9,396
Revenue distribution........................................ 1,390 2,091
Other....................................................... 73 124
Accrued expenses............................................... 3,170 3,723
------------- -----------
Total current liabilities.................................. 22,952 23,905
------------- -----------

Deferred income taxes, net......................................... 9,566 9,163
Deferred liabilities............................................... 92 79
Note payable, less current maturities.............................. 47,143 42,857
------------- -----------
56,801 52,099
------------- -----------

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 32,517,028 issued and outstanding
at December 31, 1998 and June 30, 1999, respectively......... 317 325
Additional paid-in capital...................................... 112,544 116,806
Retained earnings............................................... 43,991 36,986
------------- -----------
Total stockholders' equity................................. 156,852 154,117
------------- -----------
Total liabilities and stockholders' equity................. $ 236,605 $ 230,121
============= ===========

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

5
6

PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
1998 1999 1998 1999
--------- --------- --------- ---------
(in thousands, except per share data)

Operating revenues:
Drilling .............................. $ 45,913 $ 26,718 $ 100,210 $ 49,175
Drilling fluids ....................... 3,520 1,806 7,789 4,739
Oil and natural gas sales ............. 1,324 1,608 3,120 2,544
Well operation fees ................... 361 371 735 737
Other ................................. 32 41 48 87
--------- --------- --------- ---------
51,150 30,544 111,902 57,282
--------- --------- --------- ---------
Operating costs and expenses:
Direct drilling costs ................. 34,342 23,243 74,411 43,133
Drilling fluids ....................... 2,772 1,633 5,743 4,150
Lease operating and production ........ 418 356 945 677
Impairment of oil and natural gas
properties ......................... 489 -- 790 --
Exploration costs ..................... 168 153 336 308
Dry holes and abandonments ............ 121 38 143 41
Depreciation, depletion and
amortization ....................... 6,428 7,040 12,599 14,126
General and administrative expense .... 2,881 1,790 5,542 3,427
--------- --------- --------- ---------
47,619 34,253 100,509 65,862
--------- --------- --------- ---------
Operating income (loss) ................... 3,531 (3,709) 11,393 (8,580)
--------- --------- --------- ---------
Other income (expense):
Net gain (loss) on sale of assets ..... 213 (139) 372 (81)
Interest income ....................... 282 116 446 216
Interest expense ...................... (1,266) (973) (2,165) (2,026)
Other ................................. 68 23 93 40
--------- --------- --------- ---------
(703) (973) (1,254) (1,851)
--------- --------- --------- ---------
Income (loss) before income taxes ......... 2,828 (4,682) 10,139 (10,431)
--------- --------- --------- ---------
Income tax expense (benefit):
Current ............................... -- 108 1,850 (3,106)
Deferred .............................. 1,107 (1,648) 2,035 (320)
--------- --------- --------- ---------
1,107 (1,540) 3,885 (3,426)
--------- --------- --------- ---------
Net income (loss) ......................... $ 1,721 $ (3,142) $ 6,254 $ (7,005)
========= ========= ========= =========
Net income (loss) per common share:
Basic ................................. $ 0.05 $ (0.10) $ 0.20 $ (0.22)
========= ========= ========= =========
Diluted ............................... $ 0.05 $ (0.10) $ 0.20 $ (0.22)
========= ========= ========= =========

Weighted average number of common
shares outstanding:
Basic ................................. 31,669 32,488 31,618 32,365
========= ========= ========= =========
Diluted ............................... 31,989 32,488 31,888 32,365
========= ========= ========= =========

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

6
7

PATTERSON ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
(in thousands)

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

Balance, December 31, 1998........ 31,671 $ 317 $ 112,544 $ 43,991 $ 156,852
Issuances of common stock......... 826 8 4,200 -- 4,208
Exercise of stock options........ 20 0 62 -- 62
Net loss.......................... -- -- -- (7,005) (7,005)
------------ ---------- -------------- -------------- --------------
Balance, June 30, 1999............ 32,517 $ 325 $ 116,806 $ 36,986 $ 154,117
============ ========== ============== ============== ==============

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

7
8

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

Six Months Ended June 30,
--------------------------
1998 1999
-------- --------
(in thousands)

Cash flows from operating activities:
Net income (loss) .............................................. $ 6,254 $ (7,005)
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation, depletion and amortization ....................... 12,599 14,126
Impairment of oil and natural gas properties ................... 790 --
Net (gain) loss on sale of assets .............................. (372) 81
Deferred income tax expense (benefit) .......................... 2,035 (320)
Decrease in deferred compensation liabilities .................. (568) (13)
Change in operating assets and liabilities:
Decrease in trade accounts receivable ..................... 5,522 4,988
Increase in oil and natural gas sales receivables ......... (98) (130)
Decrease in accrued Federal income taxes receivable ....... -- 2,563
(Increase) decrease in inventory held for resale .......... (1,181) 373
Increase in undeveloped oil and natural gas
properties held for resale ............................ (1,736) (1,051)
Increase in other current assets .......................... (2,755) (459)
Increase (decrease) in trade accounts payable ............. 3,560 (352)
Increase (decrease) in revenue distribution payable ....... (1,335) 701
Increase (decrease) in accrued expenses ................... (783) 553
Decrease in state and Federal income taxes payable ........ (5,023) --
Increase (decrease) in other current payables ............. (597) 51
-------- --------
Net cash provided by operating activities ............. 16,312 14,106
-------- --------
Cash flows from investing activities:
Net sales of investment securities ............................. 566 --
Acquisitions ................................................... (41,879) --
Purchases of property and equipment ............................ (18,641) (4,297)
Sale of property and equipment ................................. 372 371
Change in other assets ......................................... 459 (60)
-------- --------
Net cash used in investing activities ................. (59,123) (3,986)
-------- --------

Cash flows from financing activities:
Proceeds from notes payable .................................... 40,150 --
Payments of notes payable ...................................... (3,400) (4,286)
Issuance of common stock ....................................... -- --
Proceeds from exercise of stock options ........................ 299 62
-------- --------
Net cash provided by (used in) financing activities .. 37,049 (4,224)
-------- --------
Net increase (decrease) in cash and cash equivalents .. (5,762) 5,896
Cash and cash equivalents at beginning of period .................... 23,338 8,986
-------- --------
Cash and cash equivalents at end of period .......................... $ 17,576 $ 14,882
======== ========

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ....................................................... $ 2,165 $ 2,026
Income taxes ................................................... 8,000 --

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

8
9

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

Supplemental disclosure of cash flow information - continued:

On January 27, 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 Notes 2 and 4).

On June 1, 1999, the Company issued 25,776 shares of its common stock
to purchase certain drilling equipment for an estimated purchase price of
$208,000 (See Note 4).

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

9
10

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 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 and six months ended June 30,
1998, the dilutive securities, consisting of certain stock options and warrants,
were approximately 320,000 and 270,000, respectively. For the three and six
months ended June 30, 1999, dilutive securities of approximately 1.4 million
were excluded from the calculation 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,
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. The Company has the option to buy
back 300,000 shares at $5.50 per share on February 1, 2000. 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.

(continued)
10
11

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 June 30, 1999 (in
thousands):

Goodwill................................ $ 47,491
Covenants not to compete................ 1,673
Other................................... 979
--------
50,143
Less accumulated amortization........... (6,051)
--------
$ 44,092
========

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. During June 1999, the Company issued 25,776
shares of its common stock as consideration for its purchase of certain drilling
equipment. The common stock was recorded at $8.0625 per share, its fair market
value on the date of purchase.

(continued)
11
12

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

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.

THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------------- -----------------------------
1998 1999 1998 1999
------------- -------------- -------------- -----------

Revenues:
Contract drilling............... $ 45,913 $ 26,718 $ 100,210 $ 49,175
Oil and natural gas............. 1,717 2,020 3,903 3,368
Drilling fluids................. 3,520 1,806 7,789 4,739
------------- -------------- -------------- -----------
Total operating revenues.............. $ 51,150 $ 30,544 $ 111,902 $ 57,282
============= ============== ============== ===========
Income (loss) from operations:
Contract drilling .............. $ 3,797 $ (3,554) $ 10,974 $ (7,842)
Oil and natural gas ............ (362) 413 (345) 281
Drilling fluids ................ 164 (545) 857 (979)
------------- -------------- -------------- -----------
3,599 (3,686) 11,486 (8,540)
Net gain (loss) on sale of assets .... 213 (139) 372 (81)
Interest income ...................... 282 116 446 216
Interest expense ..................... (1,266) (973) (2,165) (2,026)
------------- -------------- -------------- -----------
Income (loss) before income taxes .... $ 2,828 $ (4,682) $ 10,139 $ (10,431)
============= ============== ============== ===========

6. RECENTLY ISSUED ACCOUNTING STANDARD

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," 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. 137, 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 to the Company.

12
13

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

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 1999, the Company had working capital of approximately
$29.2 million and cash and cash equivalents of approximately $14.9 million as
compared to working capital of approximately $30.5 million and cash and cash
equivalents of approximately $9.0 million as of December 31, 1998. For the six
months ended June 30, 1999, the Company generated net cash from operations of
approximately $14.1 million, sold property and equipment for proceeds of
approximately $371,000 and received approximately $62,000 from the exercise of
employee stock options. The net cash generated from operations was largely
attributable to a $4.9 million net reduction in the Company's accounts
receivables and a $5.7 million refund of previously paid Federal income taxes.
These funds were used primarily to acquire and refurbish drilling and other
related equipment of approximately $3.8 million, to fund leasehold acquisition,
exploration and development of approximately $530,000 and to reduce certain
notes payable by approximately $4.3 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. The Company has the option to buy back 300,000 shares at $5.50 per share
on February 1, 2000.

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 SIX MONTHS ENDED JUNE 30, 1999 AND 1998

For the six months ended June 30, 1999, contract drilling revenues were
approximately $49.2 million as compared to $100.2 million for the same period in
1998, a decrease of 51%. Average rig utilization was 34% for the six months
ended June 30, 1999, as compared to 67% for the same period in 1998. Direct
contract drilling expenses for the six months ended June 30, 1999 were
approximately $43.1 million, or 88% of related contract drilling revenues, as
compared to approximately $74.4 million, or 74% of contract drilling revenues,
for the same period in 1998. The decrease in contract drilling revenues and
direct contract drilling expenses was largely attributable to the 33% decrease
in rig utilization as stated above. General and administrative expense for the

13
14

contract drilling segment was approximately $1.8 million for the six months
ended June 30, 1999 as compared to $4.1 million for the same period in 1998. The
decrease in general and administrative expense was largely attributable to the
Company's decision to close its administrative offices in Dallas, Abilene and
Wichita Falls, Texas. The Dallas office was acquired during February 1998 in the
Company's acquisition of Robertson Onshore Drilling Company and the Abilene
office was acquired during June 1997 in the Company's acquisition of Wes-Tex
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 in response to the significantly weakened economic conditions of
the industry. Depreciation and amortization expense for the contract drilling
segment was approximately $12.1 million for the six months ended June 30, 1999,
as compared to approximately $10.7 million for the same six-month period in
1998. For the six months ended June 30, 1999, the contract drilling segment
generated an operating loss of approximately $7.8 million as compared to
operating income of approximately $11.0 million for the same six-month period in
1998. The decline in the contract drilling segment's operating results for the
first six months in 1999 was reflective of the significantly weakened commodity
prices, particularly for crude oil throughout fiscal year 1998 and the initial
months of 1999, and the resulting 33% decrease in the Company's utilization
rate. Notwithstanding the improvement in oil and natural gas prices over the
past few months, the demand for contract drilling services, although improving,
remains relatively weak. There can be no assurance that the demand for contract
drilling services will increase proportionally with the current higher prices or
of the duration of the higher commodity prices.

Oil and natural gas sales revenues were approximately $2.5 million for
the six months ended June 30, 1999, as compared to approximately $3.1 million in
1998. The volume of oil and natural gas sold by the Company decreased by
approximately 16% for the first six months in 1999, as compared to the same
six-month period in 1998. The average price per Bbl of crude oil received by the
Company was $14.13 in 1999, as compared to $13.51 in 1998, and the average price
per Mcf of natural gas was $1.78 in 1999, as compared to $2.16 per Mcf in 1998.
General and administrative expense for the oil and natural gas segment was
approximately $564,000 and $616,000 for the six months ended June 30, 1999 and
1998, respectively. Exploration costs were approximately $308,000 and $336,000
for the six months ended June 30, 1999 and 1998, respectively. Depreciation and
depletion expense was approximately $1.5 million in 1999 and approximately $2.3
million in 1998. The Company incurred $790,000 of impairment costs during the
first six months of 1998 associated with its oil and natural gas properties.
Other revenues generated by the oil and natural gas segment, consisting
primarily of well operation fees, were approximately $824,000 and $783,000 for
the six-months ended June 30, 1999 and 1998, respectively. For the six months
ended June 30, 1999, the oil and natural gas segment generated income from
operations of approximately $281,000 as compared to a loss of approximately
$345,000 for the same six-month period in 1998. The increase in the segment's
operating results was largely attributable to the 5% increase in the price
received for crude oil and reduced production costs on an equivalent unit basis
resulting from the Company's decision to cease production efforts on marginally
productive wells. Additionally, the Company incurred $790,000 of impairment
costs to its oil and natural gas properties during the six months ended
June 30, 1998.

Operating revenues from the Company's drilling fluid services were
approximately $4.7 million and approximately $7.8 million for the six months
ended June 30, 1999 and 1998, respectively. Operating costs incurred by the
drilling fluids segment were approximately $4.2 million for the first six months
June 30, 1999 as compared to costs of approximately $5.7 million in 1998. The
decrease in operating margin was principally attributable to the negative impact
of the significantly weakened commodity prices on the oil and natural gas
industry. For the six months ended June 30, 1999, depreciation and amortization
expense was $529,000 as compared to $408,000 in 1998. General and administrative
expense for the drilling fluids segment was approximately $1.1 million and
$788,000 for the six months ended June 30, 1999 and 1998, respectively. This
increase was partially 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 six months ended June 30, 1999, the
drilling fluids segment generated a net loss from operations of approximately
$979,000 as compared to net operating income of approximately $857,000 for the
comparative six-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 economic conditions.

For the six months ended June 30, 1999, interest expense was
approximately $2.0 million as compared to $2.2 million for the same period in
1998. Interest income for the first six months of 1999 was approximately
$216,000 as compared to approximately $446,000 in 1998. The Company incurred a
net loss on the sale of

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certain assets of approximately $81,000 during the six months ended June 30,
1999 versus a net gain of approximately $372,000 in 1998.

COMPARISON OF THE FISCAL QUARTERS ENDED JUNE 30, 1999 AND 1998

For the fiscal quarter ended June 30, 1999, contract drilling revenues
were approximately $26.7 million as compared to $45.9 million for the same
fiscal quarter in 1998, a decrease of 42%. Average rig utilization was 36% for
the fiscal quarter ended June 30, 1999, as compared to 64% for the same fiscal
quarter in 1998. Direct contract drilling costs for the fiscal quarter ended
June 30, 1999 were approximately $23.2 million, or 87% of contract drilling
revenues, as compared to approximately $34.3 million, or 75% of contract
drilling revenues, for the same fiscal quarter in 1998. As previously discussed,
the decrease in contract drilling revenues and direct contract drilling costs
was due largely to the 28% decrease in rig utilization. General and
administrative expense for the contract drilling segment was approximately
$983,000 for the fiscal quarter ended June 30, 1999 as compared to approximately
$2.2 million for the same fiscal quarter in 1998. The decrease in general and
administration costs was due to the Company's decision to close certain of its
administrative offices and impose a company-wide salary reduction (as discussed
previously). Depreciation and amortization expense was approximately $6.0
million for the fiscal quarter ended June 30, 1999 as compared to $5.6 million
for the same fiscal quarter in 1998. For the fiscal quarter ended June 30, 1999,
the operating loss from the contract drilling segment was approximately $3.6
million as compared to operating income of approximately $3.8 million for the
same fiscal quarter in 1998. The decrease in net operating profits from the
contract drilling segment was reflective of the significantly weakened economic
conditions prevalent in the industry throughout fiscal year 1998 and the first
six months of 1999. Notwithstanding the improvement in oil and natural gas
prices over the past few months, the demand for contract drilling services,
although improving, remains relatively weak. There can be no assurance that the
demand for contract drilling services will increase proportionally with the
current higher prices or of the duration of the higher commodity prices.

Oil and natural gas sales revenues were approximately $1.6 million for
the three months ended June 30, 1999, as compared to approximately $1.3 million
in 1998. The volume of oil and natural gas sold by the Company increased by
approximately 4% for the second quarter 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 $16.50 in 1999, as compared to $13.12 in 1998, and the average
price per Mcf of natural gas was $1.85 in 1999, as compared to $1.97 per Mcf in
1998. General and administrative expense for the oil and natural gas segment was
approximately $306,000 for the three months ended June 30, 1999 and 1998,
respectively. Exploration costs were approximately $153,000 and $168,000 for the
quarters ended June 30, 1999 and 1998. Depreciation and depletion expense was
approximately $753,000 in 1999, as compared to approximately $1.1 million in
1998. Other revenues generated by the oil and natural gas segment, consisting
primarily of fees generated from lease operating activities, were approximately
$412,000 and $393,000 for the three-months ended June 30, 1999 and 1998,
respectively. For the three months ended June 30, 1999, the oil and natural gas
segment generated income from operations of approximately $413,000 as compared
to a loss from operations of approximately $362,000 for the same three-month
period in 1998. The increase in the segment's operating results was primarily
attributable to the 26% increase in the price received for crude oil, as
discussed above. Additionally, the Company incurred $489,000 of impairment
costs to its oil and natural gas properties during the fiscal quarter ended
June 30, 1998.

Operating revenues from the Company's drilling fluid services were
approximately $1.8 million and approximately $3.5 million for the quarters ended
June 30, 1999 and 1998, respectively. Operating costs incurred by the drilling
fluids segment were approximately $1.6 million for the second quarter of 1999 as
compared to costs of approximately $2.8 million in 1998. The decrease in
operating margin was principally attributable to the negative impact the
significantly weakened commodity prices had on the oil and natural gas industry.
For the three months ended June 30, 1999 depreciation and amortization expense
was $240,000 as compared to $204,000 in 1998. General and administrative expense
for the drilling fluids segment was approximately $501,000 and $386,000 for the
three months ended June 30, 1999 and 1998, respectively. 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 June 30, 1999, the drilling
fluids segment generated a net loss from operations of approximately $545,000 as
compared to net operating income of approximately $164,000 for the comparative
three-month period in 1998. The net loss from operations was

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consistent with the decline in the segment's operating margin as discussed above
and reflective of the deterioration in the industry's economic conditions.

For the three months ended June 30, 1999, interest expense was
approximately $1.0 million as compared to $1.3 million for the same period in
1998. Interest income for the second quarter of 1999 was approximately $116,000
as compared to approximately $282,000 in 1998. The Company incurred a net loss
on the sale of certain assets of approximately $139,000 during the three months
ended June 30, 1999 versus a net gain of approximately $213,000 for the same
three month period 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 has adversely impacted the Company's operations. Should oil
prices remain at current levels or continue to decline or natural gas prices
begin to decline, the Company's operations could be further 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.

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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 June 30,
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 June 30, 1999, the fair value of
the obligation approximates its related carrying value because the obligation
bears interest at the current market rate.

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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.

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PART II - OTHER INFORMATION

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)

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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

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21.1 Subsidiaries of the registrant. (18)

27.1 Financial Data Schedule as of June 30, 1999 and for the three and six
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.

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(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.

The following reports on Form 8-K were filed with the Securities and
Exchange Commission during the fiscal quarter ended June 30, 1999.

(1) Report dated May 24, 1999 announcing the resignation of the Company's
Chief Financial Officer; filed June 15, 1999.

(2) Report dated April 30, 1999 announcing the Company's results from
operations for the period ended March 31, 1999; filed May 3, 1999.

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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/ Jody Nelson
-----------------------------------
Jody Nelson
Vice President-Finance

DATED: August 16, 1999

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EXHIBIT INDEX

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

15.1 Awareness Letter of Independent Accountants,
PricewaterhouseCoopers LLP

27.1 Financial Data Schedule as of June 30, 1998 and for the three and
six months ended June 30, 1998.