UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

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

For the Transition Period From                      to                     

SUPERIOR ENERGY SERVICES, INC.

Delaware		75-2379388
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1105 Peters Road
Harvey, Louisiana		70058
(Address of principal executive offices)		(Zip Code)

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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer þ       Accelerated filer o       Non-accelerated o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares of the registrant’s common stock outstanding on August 1, 2006 was 79,817,521.

 

 

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q for
the Quarterly Period Ended June 30, 2006

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements			3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures about Market Risk			35
Item 4. Controls and Procedures			36
PART II            OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders			37
Item 6. Exhibits			37
Officer's Certification Pursuant to Section 302
Officer's Certification Pursuant to Section 302
Officer's Certification Pursuant to Section 906
Officer's Certification Pursuant to Section 906

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 2006 and December 31, 2005
(in thousands, except share data)

		6/30/06				12/31/05
		(Unaudited)				(Audited)
ASSETS
Current assets:
Cash and cash equivalents		$	115,846			$	54,457
Accounts receivable — net			233,496				196,365
Current portion of notes receivable			4,712				2,364
Prepaid insurance and other			58,493				51,116
Total current assets			412,547				304,302
Property, plant and equipment — net			608,548				534,962
Goodwill — net			224,346				220,064
Notes receivable			26,085				29,483
Equity-method investments			32,541				953
Other assets — net			12,416				7,486
Total assets		$	1,316,483			$	1,097,250
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	45,846			$	42,035
Accrued expenses			76,323				69,926
Income taxes payable			50,740				11,353
Fair value of commodity derivative instruments			5,658				10,792
Current portion of decommissioning liabilities			14,081				14,268
Current maturities of long-term debt			810				810
Total current liabilities			193,458				149,184
Deferred income taxes			95,321				97,987
Decommissioning liabilities			106,482				107,641
Long-term debt			311,694				216,596
Other long-term liabilities			3,330				1,468
Stockholders’ equity:
Preferred stock of $.01 par value. Authorized, 5,000,000 shares; none issued			—				—
Common stock of $.001 par value. Authorized, 125,000,000 shares; issued and outstanding, 79,815,021 shares at June 30, 2006, and 79,499,927 shares at December 31, 2005			80				79
Additional paid in capital			433,415				428,507
Accumulated other comprehensive income (loss), net			1,104				(4,916	)
Retained earnings			171,599				100,704
Total stockholders’ equity			606,198				524,374
Total liabilities and stockholders’ equity		$	1,316,483			$	1,097,250

See accompanying notes to consolidated financial statements.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 2006 and 2005
(in thousands, except per share data)
(unaudited)

		Three Months								Six Months
		2006				2005				2006				2005
Oilfield service and rental revenues		$	228,134			$	160,522			$	435,132			$	307,814
Oil and gas revenues			33,625				29,478				49,096				55,433
Total revenues			261,759				190,000				484,228				363,247
Cost of oilfield services and rentals			101,286				79,561				194,541				153,174
Cost of oil and gas sales			18,702				11,091				32,907				23,896
Total cost of services, rentals and sales			119,988				90,652				227,448				177,070
Depreciation, depletion, amortization and accretion			25,727				23,580				48,642				45,977
General and administrative expenses			40,088				33,166				77,739				65,550
Gain on sale of liftboats			—				3,269				—				3,269
Income from operations			75,956				45,871				130,399				77,919
Other income (expense):
Interest expense, net			(5,556	)			(5,518	)			(10,400	)			(11,093	)
Interest income			1,559				407				2,222				731
Loss on early extinguishment of debt			(12,596	)			—				(12,596	)			—
Earnings in equity-method investments, net			1,148				259				1,148				778
Reduction in value of equity-method investment			—				(1,250	)			—				(1,250	)
Income before income taxes			60,511				39,769				110,773				67,085
Income taxes			21,784				14,715				39,878				24,822
Net income		$	38,727			$	25,054			$	70,895			$	42,263
Basic earnings per share		$	0.49			$	0.32			$	0.89			$	0.55
Diluted earnings per share		$	0.48			$	0.32			$	0.87			$	0.53
Weighted average common shares used in computing earnings per share:
Basic			79,798				77,704				79,719				77,544
Incremental common shares from stock options			1,490				1,407				1,422				1,493
Incremental common shares from restricted stock units			36				20				36				20
Diluted			81,324				79,131				81,177				79,057

See accompanying notes to consolidated financial statements.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 2006 and 2005
(in thousands)
(unaudited)

		2006				2005
Cash flows from operating activities:
Net income		$	70,895			$	42,263
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion			48,642				45,977
Deferred income taxes			(4,714	)			(98	)
Stock-based compensation expense			1,316				—
Earnings from equity-method investments			(1,148	)			(778	)
Reduction in value of equity-method investment			—				1,250
Write-off of debt acquisition costs			2,817				—
Amortization of debt acquisition costs and note discount			510				448
Gain on sale of liftboats			—				(3,269	)
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Receivables			(40,222	)			(6,542	)
Other — net			(4,140	)			(9,186	)
Accounts payable			4,408				(1,360	)
Accrued expenses			6,115				2,363
Decommissioning liabilities			(2,255	)			(8,199	)
Income taxes			40,461				16,789
Net cash provided by operating activities			122,685				79,658
Cash flows from investing activities:
Payments for capital expenditures			(82,048	)			(60,112	)
Acquisitions of oil and gas properties, net of cash acquired			(46,631	)			—
Acquisitions of businesses, net of cash acquired			(9,822	)			(5,273	)
Cash contributed to equity-method investment			(30,441	)			—
Cash proceeds from sale of subsidary, net of cash sold			18,343				—
Cash proceeds from the sale of liftboats, net			—				19,313
Other			(2,412	)			(1,208	)
Net cash used in investing activities			(153,011	)			(47,280	)
Cash flows from financing activities:
Proceeds from long-term debt			295,467				—
Principal payments on long-term debt			(200,405	)			(5,905	)
Payment of debt acquisition costs			(6,203	)			—
Proceeds from exercise of stock options			2,393				6,427
Net cash provided by financing activities			91,252				522
Effect of exchange rate changes on cash			463				(304	)
Net increase in cash			61,389				32,596
Cash and cash equivalents at beginning of period			54,457				15,281
Cash and cash equivalents at end of period		$	115,846			$	47,877

See accompanying notes to consolidated financial statements.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Six Months Ended June 30, 2006 and 2005

(1) Basis of Presentation

Certain information and footnote disclosures normally in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission; however, management believes the disclosures which are made are adequate to make the information presented not misleading. These financial statements and footnotes should be read in conjunction with the consolidated financial statements and notes thereto and the Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2005 included in Superior Energy Services, Inc.’s Current Report on Form 8-K filed on May 11, 2006 and in the Annual Report on Form 10-K.

The financial information of Superior Energy Services, Inc. and subsidiaries (the Company) for the six months ended June 30, 2006 and 2005 has not been audited. However, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the results of operations for the periods presented have been included therein. The results of operations for the first six months of the year are not necessarily indicative of the results of operations that might be expected for the entire year. Certain previously reported amounts have been reclassified to conform to the 2006 presentation.

(2) Stock-Based and Long-Term Compensation

The Company maintains various stock incentive plans, including the 2005 Stock Incentive Plan (2005 Incentive Plan), the 2002 Stock Incentive Plan (2002 Incentive Plan), the 1999 Stock Incentive Plan (1999 Incentive Plan) and the 1995 Stock Incentive Plan (1995 Incentive Plan), as amended. These plans provide long-term incentives to the Company’s key employees, including officers and directors, consultants and advisers (Eligible Participants). Under the 2005 Incentive Plan, the 2002 Incentive Plan, the 1999 Incentive Plan and the 1995 Incentive Plan, the Company may grant incentive stock options, non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights, other stock-based awards or any combination thereof to Eligible Participants for up to 4,000,000 shares, 1,400,000 shares, 5,929,327 shares and 1,900,000 shares, respectively, of the Company’s common stock. The Compensation Committee of the Company’s Board of Directors establishes the term and the exercise price of any stock options granted under the 2005 Incentive Plan and the 2002 Incentive Plan, provided the exercise price may not be less than the fair value of the common share on the date of grant. All of the options which have been granted under the 1999 Incentive Plan and the 1995 Incentive Plan were fully-vested by June 30, 2006.

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123(R) (FAS No. 123R), “Share-Based Payment (as amended)” which requires that compensation costs relating to share-based payment transactions be recognized in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award). The Company is using the modified prospective application method and, accordingly, financial statement amounts for prior periods presented in this Form 10-Q have not been restated to reflect the fair value method of recognizing compensation costs relating to non-qualified stock options. Prior to January 1, 2006, the Company followed the disclosure-only provisions of Statement of Financial Accounting Standards No. 123 (FAS No. 123), “Accounting for Stock-Based Compensation” using the measurement principles prescribed in Accounting Principles Board’s Opinion No. 25, “Accounting for Stock Issued to Employees.” No stock-based compensation costs were recognized for stock options in net income prior to January 1, 2006, as all options granted had an exercise price equal to the market value of the underlying common stock on the date of the grant. Stock compensation costs from the grant of restricted stock, restricted stock units, and performance stock units were expensed as incurred.

Stock Options

The Company has granted non-qualified stock options under its various stock incentive plans. The options generally vest in equal installments on the anniversary of the respective grant for three consecutive years and expire on the tenth anniversary of the respective date of grant. Non-vested options are generally subject to forfeiture in the event of termination of employment. On February 23, 2006, the Company granted 212,600 non-qualified stock options from its 2005 Incentive Plan under these same terms.

Beginning January 1, 2006, the Company began recognizing compensation expense for stock option grants based on the fair value at the date of grant using the Black-Scholes-Merton option pricing model. With the adoption of FAS No. 123R, the Company has contracted a third party to assist in the valuation of option grants. The Company uses historical data, among other factors, to estimate the expected price volatility, the expected option life and the expected forfeiture rate. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected life of the option. The following table presents the fair value of grants made during the three and six months ended June 30, 2006 and 2005 and the related assumptions used to calculate the fair value:

		Three Months Ended						Six Months Ended
		June 30, 2006		June 30, 2005				June 30, 2006				June 30, 2005
		Actual		Pro Forma				Actual				Pro Forma
Weighted-average fair value of grants		*		$	7.47			$	11.58			$	7.47
Black-Scholes-Merton Assumptions:
Risk free interest rate		*			3.85	%			4.57	%			3.85	%
Expected life (years)		*			5.7				5.1				5.7
Volatility		*			38.91	%			45.42	%			38.91	%
Dividend yield		*			—				—				—

(* There were no stock option grants during the three months ended June 30, 2006.)

The Company’s compensation expense related to stock options for the six months ended June 30, 2006 was approximately $404,000, which is reflected in general and administrative expenses. This compensation expense reduced net income, on an after tax basis, by approximately $258,000 for the six months ended June 30, 2006, respectively. No compensation expense related to options was recorded during the six months ended June 30, 2005.

The pro forma data presented below show the effects of stock option costs had they been expensed in prior periods (amounts are in thousands, except per share amounts):

		Three Months				Six Months
		Ended June 30,				Ended June 30,
		2005				2005
Net income, as reported		$	25,054			$	42,263
Stock-based employee compensation expense, net of tax			(218	)			(306	)
Pro forma net income		$	24,836			$	41,957
Basic earnings per share:
Earnings, as reported		$	0.32			$	0.55
Stock-based employee compensation expense, net of tax			(0.01	)			(0.01	)
Pro forma earnings per share		$	0.31			$	0.54
Diluted earnings per share:
Earnings, as reported		$	0.32			$	0.53
Stock-based employee compensation expense, net of tax			(0.01	)			(0.01	)
Pro forma earnings per share		$	0.31			$	0.52

The following table summarizes stock option activity for the six months ended June 30, 2006:

										Weighted
						Weighted				Average				Aggregate
						Average				Remaining				Intrinsic
		Number of				Option				Contractual				Value (in
		Options				Price				Term (in years)				thousands)
Outstanding at December 31, 2005			3,893,633			$	11.44
Granted			212,600			$	24.99
Exercised			(212,651	)		$	11.25
Forfeited			(10,917	)		$	16.43
Outstanding at June 30, 2006			3,882,665			$	12.17				7.4			$	84,356
Exercisable at June 30, 2006			3,661,732			$	11.43				7.2			$	82,261

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between our closing stock price on June 30, 2006 and the option price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2006. The Company expects all of its remaining non-vested options to vest as they are primarily held by its officers and senior managers.

The total intrinsic value of options exercised during the six months ended June 30, 2006 (the difference between the stock price upon exercise and the option price) was approximately $3.3 million. The Company received approximately $2.4 million during the six months ended June 30, 2006 from employee stock option exercises. The Company expects to reduce its future tax payments by approximately $1.2 million as the result of the intrinsic value of options exercised during the six months ended June 30, 2006. Due to the I.R.S. administrative relief provisions related to Hurricanes Katrina and Rita, the Company has not been required to make income tax payments since June 15, 2005. The next income tax payment is scheduled on August 28, 2006. In accordance with Statement 123(R), the Company is now required to report the excess tax benefits from the exercise of stock options as financing cash flows. The Company expects to recognize this

estimated benefit when the related tax payments are made during the third quarter of 2006.

The following table summarizes non-vested stock option activity for the six months ended June 30, 2006:

						Weighted
						Average Grant-
		Number of Options				Date Fair Value
Non-vested at December 31, 2005			133,912			$	3.63
Granted			212,600			$	11.58
Vested			(124,912	)		$	3.62
Forfeited			(667	)		$	3.62
Non-vested at June 30, 2006			220,933			$	11.29

As of June 30, 2006, there was approximately $2.2 million of unrecognized compensation expense related to non-vested stock options outstanding. The Company expects to recognize approximately $0.5 million, $0.8 million, $0.8 million and $0.1 million during the remainder of 2006, the years 2007, 2008 and 2009, respectively, for these non-vested stock options outstanding.

Restricted Stock

During the six months ended June 30, 2006, the Company granted 104,643 shares of restricted stock to its employees under its 2005 Incentive Plan. These shares of restricted stock vest in equal annual installments on the anniversary of the respective grant for three consecutive years, and unvested shares are subject to forfeiture in the event of termination of employment. Holders of the shares of restricted stock are entitled to all rights of a shareholder of the Company with respect to the restricted stock, including the right to vote the shares and receive all dividends and other distributions declared thereon. Compensation expense associated with shares of restricted stock is measured based on the grant-date fair value of our common stock and is recognized on a straight-line basis over the vesting period. The Company’s compensation expense related to shares of restricted stock outstanding for the six months ended June 30, 2006 was approximately $410,000, which is reflected in general and administrative expenses.

A summary of the status of the shares of restricted stock for the six months ended June 30, 2006 is presented in the table below:

						Weighted
		Number of				Average Grant
		Shares				Date Fair Value
Non-vested at December 31, 2005			24,000			$	22.24
Granted			104,643			$	25.02
Vested			(9,000	)		$	22.55
Forfeited			(2,200	)		$	24.99
Non-vested at June 30, 2006			117,443			$	24.65

As of June 30, 2006, there was approximately $2.5 million of unrecognized compensation expense related to non-vested restricted stock shares. The Company expects to recognize approximately $0.5 million, $1.0 million, $0.9 million and $0.1 million during the remainder of 2006, the years 2007, 2008 and 2009, respectively, for these shares of non-vested restricted stock.

Restricted Stock Units

In May 2006, the Company’s stockholders approved the Amended and Restated 2004 Directors Restricted Stock Units Plan. The amended plan provides that each non-employee director is granted a number of restricted stock units having an aggregate value of $100,000, with the exact number of units determined by dividing $100,000 by the fair market value of the Company’s common stock on the day of the annual stockholders’ meeting. In addition, upon the initial election or appointment of any non-employee director, other than at an annual stockholders’ meeting, such person will receive a number of restricted stock units based on the number of full calendar months between the date of grant and the first anniversary of the previous annual stockholders’ meeting. A restricted stock unit represents the right to receive from the Company, within 30 days of the date the participant ceases to serve on the Board, one share of the Company’s common stock. As a result of this plan, 36,137 restricted stock units are outstanding at June 30, 2006. The Company’s expense related to restricted stock units for the six months ended June 30, 2006 and 2005 was approximately $0.6 million and $0.1 million, respectively, which is reflected in general and administrative expenses.

A summary of the activity of restricted stock units for the six months ended June 30, 2006 is presented in the table below:

		Number of				Weighted
		Restricted				Average Grant
		Stock Units				Date Fair Value
Outstanding at December 31, 2005			19,998			$	12.38
Granted			16,139			$	30.98
Outstanding at June 30, 2006			36,137			$	20.69

Performance Share Units

The Company awards performance share units (“PSUs”) to its employees as part of the Company’s long-term incentive program. There is a 3-year performance period associated with each PSU grant date. The two performance measures applicable to all participants are the Company’s return on invested capital and total shareholder return relative to those of the Company’s pre-defined “peer group.” Participants can earn from $0 to $200 per PSU, as determined by the Company’s achievement of the performance measures. The PSUs provide for settlement in cash or up to 50% in equivalent value in Company common stock, if the participant has met specified continued service requirements. At June 30, 2006 there were 64,901 PSUs outstanding (31,464 and 33,437 related to the 3-year performance periods ending December 31, 2007 and 2008, respectively). The Company’s compensation expense related to all outstanding PSUs for the six months ended June 30, 2006 was approximately $1.1 million, which is reflected in general and administrative expenses. The Company’s compensation expense related to all outstanding PSUs for the six months ended June 30, 2005 was immaterial. At June 30, 2006, the company has recorded a liability of approximately $2.1 million for all outstanding PSU’s which is reflected in accrued expenses.

(3) Earnings per Share

Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed in the same manner as basic earnings per share except that the denominator is increased to include the number of additional common shares that could have been outstanding assuming the exercise of stock options that would have a dilutive effect on earnings per share and the conversion of restricted stock units into common stock using the treasury stock method.

(4) Acquisitions and Dispositions

In February 2006, the Company sold its subsidiary Environmental Treatment Team, L.L.C., (ETT) for approximately $18.7 million in cash (exclusive of $0.4 million of cash sold). The Company reduced the net asset

value of ETT by $3.8 million in 2005 to its approximate sales price. For the six months ended June 30, 2006 and 2005, revenue from ETT was approximately $4.6 million and $13.9 million, respectively, and operating income was approximately $386,000 and $312,000, respectively.

In the second quarter of 2006, the Company acquired two businesses for an aggregate purchase price of approximately $9.8 million in cash consideration in order to expand the housing units offered by its rental tools segment into Wyoming and expand the snubbing services offered by its well intervention segment in Australia. These acquisitions have been accounted for as purchases, and the acquired assets and liabilities have been valued at their estimated fair value. The purchase price preliminarily allocated to net assets was approximately $4.0 million, and the excess purchase price over the fair value of net assets of approximately $5.8 million goodwill was recorded. The results of operations have been included from the acquisition date.

In April 2006, the Company’s subsidiary, SPN Resources, LLC (“SPN Resources”), acquired additional oil and gas properties through the acquisition of five offshore Gulf of Mexico leases. Under the terms of the transaction, the Company acquired the properties and assumed the related decommissioning liabilities. The Company paid cash in the amount of $46.6 million and preliminarily recorded decommissioning liabilities of approximately $3.7 million and oil and gas producing assets of approximately $50.3 million.

In 2005, the Company acquired a business for a purchase price of approximately $1.3 million in cash consideration in order to geographically expand the snubbing services offered by its well intervention segment. The purchase price allocated to net assets was approximately $1.3 million, and no goodwill was recorded. The results of operations have been included from the acquisition date.

Also in 2005, SPN Resources acquired additional oil and gas properties through the acquisition of three offshore Gulf of Mexico leases. Under the terms of the transaction, the Company acquired the properties and assumed the related decommissioning liabilities. The Company received $3.7 million in cash and will invoice the sellers at agreed upon prices as the decommissioning activities (abandonment and structure removal) are completed. The Company recorded notes receivable of approximately $2.4 million, decommissioning liabilities of $11.5 million and oil and gas producing assets were recorded at their estimated fair value of $5.4 million.

The following unaudited pro forma information for the three and six months ended June 30, 2006 and 2005 presents a summary of the consolidated results of operations as if the business acquisitions and dispositions described above had occurred on January 1, 2005, with pro forma adjustments to give effect to depreciation and certain other adjustments, together with related income tax effects (in thousands, except per share amounts):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2006				2005				2006				2005
Revenues		$	262,987			$	188,052			$	485,055			$	359,381
Net income		$	38,969			$	25,933			$	71,741			$	44,303
Basic earnings per share		$	0.49			$	0.33			$	0.90			$	0.57
Diluted earnings per share		$	0.48			$	0.33			$	0.88			$	0.56

The above pro forma information is not necessarily indicative of the results of operations that would have been achieved had the acquisitions been effected on January 1, 2005.

Most of the Company’s business acquisitions have involved additional contingent consideration based upon a multiple of the acquired companies’ respective average earnings before interest, income taxes, depreciation and amortization (EBITDA) over a three-year period from the respective date of acquisition. As of June 30, 2006, the maximum additional consideration payable for the Company’s prior acquisitions was approximately $2.4 million, and will be determined and payable through 2008. These amounts are not classified as liabilities under generally accepted accounting principles and are not reflected in the Company’s financial statements until the amounts are fixed and determinable. The Company does not have any other financing arrangements that are not required under

generally accepted accounting principles to be reflected in its financial statements. When the amounts are determined, they are capitalized as part of the purchase price of the related acquisition.

(5) Segment Information

Business Segments

Effective as of January 1, 2006, the Company modified its segment disclosure by combining its other oilfield services segment into the well intervention segment. In February 2006, the Company sold its environmental subsidiary, which comprised a large part of the other oilfield services segment. The remaining businesses, which include platform and field management services, environmental cleaning services and the sale of drilling instrumentation equipment, are impacted by similar factors that affect the well intervention segment. The combination of the well intervention and other oilfield services segments better reflects the way management evaluates the Company’s results. The prior year segment presentation has been restated to conform to the current segment classification.

The Company’s reportable segments are now as follows: well intervention, rental tools, marine, and oil and gas. The first three segments offer products and services within the oilfield services industry. The well intervention segment provides plug and abandonment services, coiled tubing services, well pumping and stimulation services, data acquisition services, gas lift services, electric wireline services, hydraulic drilling and workover services, well control services, drilling instrumentation equipment, contract operations and maintenance services, transportation and logistics services, offshore oil and gas cleaning services, engineering support, technical analysis and mechanical wireline services that perform a variety of ongoing maintenance and repairs to producing wells, as well as modifications to enhance the production capacity and life span of the well. The rental tools segment rents and sells stabilizers, drill pipe, tubulars and specialized equipment for use with onshore and offshore oil and gas well drilling, completion, production and workover activities. It also provides onsite accommodations and bolting and machining services. The marine segment operates liftboats for production service activities, as well as oil and gas production facility maintenance, construction operations and platform removals. The oil and gas segment acquires mature oil and gas properties and produces and sells any remaining economic oil and gas reserves prior to the Company’s other segments providing decommissioning services. Oil and gas eliminations represent products and services provided to the oil and gas segment by the Company’s three other segments.

Summarized financial information concerning the Company’s segments for the three and six months ended June 30, 2006 and 2005 is shown in the following tables (in thousands):

Three Months Ended June 30, 2006

																		Oil & Gas
		Well				Rental												Eliminations				Consolidated
		Intervention				Tools				Marine				Oil & Gas				& Unallocated				Total
Revenues		$	111,675			$	86,593			$	33,951			$	33,625			$	(4,085	)		$	261,759
Cost of services, rentals and sales			63,355				28,223				13,793				18,702				(4,085	)			119,988
Depreciation, depletion, amortization and accretion			4,329				12,482				2,133				6,783				—				25,727
General and administrative expense			18,270				16,483				2,687				2,648				—				40,088
Income from operations			25,721				29,405				15,338				5,492				—				75,956
Interest expense, net			—				—				—				—				(5,556	)			(5,556	)
Interest income			—				—				—				302				1,257				1,559
Loss on early extinguishment of debt			—				—				—				—				(12,596	)			(12,596	)
Earnings in equity method investments			—				—				—				1,148				—				1,148
Income before income taxes		$	25,721			$	29,405			$	15,338			$	6,942			$	(16,895	)		$	60,511

Three Months Ended June 30, 2005

																		Oil & Gas
		Well				Rental												Eliminations				Consolidated
		Intervention				Tools				Marine				Oil & Gas				& Unallocated				Total
Revenues		$	85,019			$	61,122			$	18,285			$	29,478			$	(3,904	)		$	190,000
Cost of services, rentals and sales			52,122				18,877				12,466				11,091				(3,904	)			90,652
Depreciation, depletion, amortization and accretion			4,525				10,460				2,017				6,578				—				23,580
General and administrative expense			16,448				13,027				2,107				1,584				—				33,166
Gain on sale of liftboats			—				—				3,269				—				—				3,269
Income from operations			11,924				18,758				4,964				10,225				—				45,871
Interest expense, net			—				—				—				—				(5,518	)			(5,518	)
Interest income			—				—				—				263				144				407
Earnings in equity method investments, net			—				259				—				—				—				259
Reduction in value of investment			—				(1,250	)							—				—				(1,250	)
Income before income taxes		$	11,924			$	17,767			$	4,964			$	10,488			$	(5,374	)		$	39,769

Six Months Ended June 30, 2006

																		Oil & Gas
		Well				Rental												Eliminations				Consolidated
		Intervention				Tools				Marine				Oil & Gas				& Unallocated				Total
Revenues		$	213,748			$	164,367			$	64,158			$	49,096			$	(7,141	)		$	484,228
Cost of services, rentals and sales			123,355				52,521				25,806				32,907				(7,141	)			227,448
Depreciation, depletion, amortization and accretion			8,864				24,195				4,285				11,298				—				48,642
General and administrative expense			36,138				31,749				5,585				4,267				—				77,739
Income from operations			45,391				55,902				28,482				624				—				130,399
Interest expense, net			—				—				—				—				(10,400	)			(10,400	)
Interest income			—				—				—				602				1,620				2,222
Loss on early extinguishment of debt			—				—				—				—				(12,596	)			(12,596	)
Earnings in equity method investments			—				—				—				1,148				—				1,148
Income before income taxes		$	45,391			$	55,902			$	28,482			$	2,374			$	(21,376	)		$	110,773

Six Months Ended June 30, 2005

																		Oil & Gas
		Well				Rental												Eliminations				Consolidated
		Intervention				Tools				Marine				Oil & Gas				& Unallocated				Total
Revenues		$	165,135			$	113,749			$	38,083			$	55,433			$	(9,153	)		$	363,247
Cost of services, rentals and sales			101,520				36,411				24,396				23,896				(9,153	)			177,070
Depreciation, depletion, amortization and accretion			9,104				20,370				4,120				12,383				—				45,977
General and administrative expense			32,651				25,621				4,215				3,063				—				65,550
Gain on sale of liftboats			—				—				3,269				—				—				3,269
Income from operations			21,860				31,347				8,621				16,091				—				77,919
Interest expense, net			—				—				—				—				(11,093	)			(11,093	)
Interest income			—				—				—				555				176				731
Earnings in equity method investments, net			—				778				—				—				—				778
Reduction in value of investment			—				(1,250	)			—				—				—				(1,250	)
Income before income taxes		$	21,860			$	30,875			$	8,621			$	16,646			$	(10,917	)		$	67,085

Identifiable Assets

		Well				Rental																Consolidated
		Intervention				Tools				Marine				Oil & Gas				Unallocated				Total
June 30, 2006		$	363,456			$	468,685			$	195,951			$	275,724			$	12,667			$	1,316,483
December 31, 2005		$	332,996			$	405,527			$	203,718			$	147,667			$	7,342			$	1,097,250

Geographic Segments

The Company attributes revenue to countries based on the location where services are performed or the destination of the sale of products. Long-lived assets consist primarily of property, plant and equipment and are attributed to the United States or other countries based on the physical location of the asset at the end of a period. The Company’s information by geographic area is as follows (amounts in thousands):

Revenues:

		Three Months Ended June 30,								Six Months Ended June 30,
		2006				2005				2006				2005
United States		$	225,527			$	168,087			$	414,532			$	319,631
Other Countries			36,232				21,913				69,696				43,616
Total		$	261,759			$	190,000			$	484,228			$	363,247

Long-Lived Assets:

		June 30,				December 31,
		2006				2005
United States		$	562,339			$	492,602
Other Countries			46,209				42,360
Total		$	608,548			$	534,962

(6) Equity-Method Investments

Investments in entities that are not controlled by the Company but where we have the ability to exercise influence over the operations are accounted for using the equity method. Our share of the income or losses of these entities is reflected as Earnings in equity-method investments on the Consolidated Statements of Operations.

In May 2006, the Company’s subsidiary, SPN Resources, acquired a 40% interest in Coldren Resources LP (“Coldren Resources”) which entered into a purchase and sale agreement with Noble Energy, Inc. to purchase all of Noble’s offshore Gulf of Mexico shelf assets. SPN Resources has made total cash contributions of approximately $30.4 million as of June 30, 2006.

The Company has one additional equity investment of approximately $900,000 and the investment income from both investments was approximately $1.1 million through June 30, 2006.

Subsequent Event

On July 14, 2006, Coldren Resources completed the acquisition from Noble. After downward adjustments to the purchase price, including those for title defects and properties excluded from the sale as a result of the exercise of preferential rights to purchase, the aggregate purchase price for the Noble assets was approximately $475 million. SPN made an additional contribution of approximately $27.4 million at closing.

(7) Debt

The Company has a bank credit facility consisting of a $150 million revolving credit facility, with an option to increase it to $250 million. Any balance outstanding on the revolving credit facility is due on October 31, 2008. At June 30, 2006, the Company had no amounts outstanding under this bank credit facility, but it had approximately $19.5 million of letters of credit outstanding, which reduce the borrowing availability under this credit facility. The credit facility bears interest at a LIBOR rate plus margins that depend on the Company’s leverage ratio. Indebtedness under the credit facility is secured by substantially all of the Company’s assets, including the pledge of the stock of the Company’s principal subsidiaries. The credit facility contains customary events of default and requires that the Company satisfy various financial covenants. It also limits the Company’s capital expenditures, its ability to pay dividends or make other distributions, make acquisitions, create liens, incur additional indebtedness or assume additional decommissioning liabilities. At June 30, 2006, the Company was in compliance with all such covenants.

The Company has $17.0 million outstanding at June 30, 2006, in U. S. Government guaranteed long-term financing under Title XI of the Merchant Marine Act of 1936, which is administered by the Maritime Administration (MARAD), for two 245-foot class liftboats. The debt bears interest at 6.45% per annum and is payable in equal semi-annual installments of $405,000, on every June 3rd and December 3rd through June 3, 2027. The Company’s obligations are secured by mortgages on the two liftboats. In accordance with this agreement, the Company is required to comply with certain covenants and restrictions, including the maintenance of minimum net worth and debt-to-equity requirements. At June 30, 2006, the Company was in compliance with all such covenants. This long-term financing ranks equally with the bank credit facility.

In the second quarter of 2006, the Company completed a tender offer for approximately 97.6% of its $200 million outstanding of 8 7/8% unsecured senior notes due 2011. The cash consideration for the tender offer was $1,045.63 per $1,000 in aggregate principal amount of senior notes tendered. In conjunction with the tender offer, the Company also received consents to amend the indenture pursuant to which the senior notes were issued to eliminate from the indenture substantially all of the restrictive covenants and certain events of default. After the tender offer was completed, the Company redeemed the remaining outstanding senior notes in accordance with the indenture at the redemption price of $1,044.38 per $1,000 of the principal amount redeemed. The Company recognized a loss on the early extinguishment of debt of approximately $12.6 million, which included the tender premiums, redemption premiums, fees and expenses and the write-off of the remaining unamortized debt acquisition costs associated with these notes.

In May 2006, the Company issued $300 million new unsecured senior notes, which were offered at 98.489% of par and bear interest at the rate of 6 7/8% per annum. The Company used the net proceeds to refinance the $200 million senior notes, including the payment of tender premiums, redemption premiums, fees and expenses, and to fund the equity investment in Coldren Resources. The indenture governing the notes requires semi-annual interest payments, on every June 1^st and December 1^st through the maturity date of June 1, 2014. The indenture contains certain covenants that, among other things, prevent the Company from incurring, assuming or guaranteeing additional debt, repurchasing capital stock, paying dividends or making other distributions, unless its ratio of cash flow to interest expense is at least 2.0 to 1, except that the Company may incur additional debt in addition to the senior notes in an amount equal to the greater of $250 million or 30% of its net tangible assets as defined, which was approximately $248 million at June 30, 2006. The indenture also contains covenants that restrict the Company’s ability to create certain liens, sell assets or enter into certain mergers or acquisitions. At June 30, 2006, the Company was in compliance with all such covenants.

(8) Hedging Activities

The Company has entered into hedging transactions with major financial institutions to secure a commodity price for a portion of its future oil production and to reduce its exposure to oil price fluctuations. The Company does not enter into derivative transactions for trading purposes. Crude oil hedges are settled based on the average of the reported settlement prices for West Texas Intermediate crude on the New York Mercantile Exchange (NYMEX) for each month. The Company has used financially-settled crude oil swaps and zero-cost collars that provide floor and ceiling prices with varying upside price participation. The Company’s swaps and zero-cost collars are designated and accounted for as cash flow hedges. The Company has not hedged any of its natural gas production.

With a financially-settled swap, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is below the hedged price for the transaction, and the Company is required to make a payment to the counterparty if the settlement price for any settlement period is above the hedged price for the transaction. With a zero-cost collar, the counterparty is required to make a payment to the Company if the settlement price for any settlement period is below the floor price of the collar, and the Company is required to make a payment to the counterparty if the settlement price for any settlement period is above the cap price for the collar. The Company recognizes the fair value of all derivative instruments as assets or liabilities on the balance sheet. Changes in the fair value of cash flow hedges are recognized, to the extent the hedge is effective, in other comprehensive income until the hedged item is settled and recorded in revenue. For the six months ended June 30, 2006, hedging settlement payments reduced oil revenues by approximately $8.7 million, and no gains or losses were recognized due to hedge ineffectiveness.

The Company had the following hedging contracts as of June 30, 2006:

Crude Oil Positions
		Instrument		Strike		Volume (Bbls)
Remaining Contract Term		Type		Price (Bbl)		Daily		Total (Bbls)
7/06 — 8/06		Swap		$39.45		1,000		92,000
7/06 — 8/06		Collar		$35.00/$45.60		1,000		92,000

Based on the futures prices quoted at June 30, 2006, the Company expects to reclassify net losses of approximately $3.6 million, net of taxes, into earnings related to the derivative contracts through August 2006 during the remaining term of the contracts; however, actual gains or losses recognized may differ materially depending on the movement of commodity pricing over the next twelve months.

(9) Decommissioning Liabilities

The Company records estimated future decommissioning liabilities related to its oil and gas producing properties pursuant to the provisions of Statement of Financial Accounting Standards No. 143 (FAS No. 143), “Accounting for Asset Retirement Obligations.” FAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation (decommissioning liabilities) in the period in which it is incurred with a corresponding increase in the carrying amount of the related long-lived asset. Subsequent to initial measurement, the

decommissioning liability is required to be accreted each period to present value. The Company’s decommissioning liabilities consist of costs related to the plugging of wells, the removal of facilities and equipment, including pipeline, and site restoration on oil and gas properties.

The Company estimates the cost that would be incurred if it contracted an unaffiliated third party to plug and abandon wells, abandon the pipelines, decommission and remove the platforms and pipelines and restore the sites of its oil and gas properties, and uses that estimate to record its proportionate share of the decommissioning liability. In estimating the decommissioning liability, the Company performs detailed estimating procedures, analysis and engineering studies. Whenever practical, the Company utilizes its own equipment and labor services to perform well abandonment and decommissioning work. When the Company performs these services, all recorded intercompany revenues are eliminated in the consolidated financial statements. The recorded decommissioning liability associated with a specific property is fully extinguished when the property is abandoned. The recorded liability is first reduced by all cash expenses incurred to abandon and decommission the property. If the recorded liability exceeds (or is less than) the Company’s total costs, then the difference is reported as income (or loss) within revenue during the period in which the work is performed. The Company reviews the adequacy of its decommissioning liabilities whenever indicators suggest that the estimated cash flows needed to satisfy the liability have changed materially. The timing and amounts of these expenditures are estimates, and changes to these estimates may result in additional (or decreased) liabilities recorded, which in turn would increase (or decrease) the carrying values of the related oil and gas properties. The Company revised its estimates for the timing of these expenditures during the six months ended June 30, 2006, which caused a reduction in the decommissioning liability of approximately $5.1 million. The following table summarizes the activity for the Company’s decommissioning liabilities for the six months ended June 30, 2006 and 2005 (amounts in thousands):

		Six Months Ended
		June 30,
		2006				2005
Total decommissioning liabilities at December 31, 2005 and 2004, respectively		$	121,909			$	114,018
Liabilities acquired and incurred			3,554				—
Liabilities settled			(2,255	)			(8,200	)
Accretion			2,419				2,125
Revision in estimated liabilities			(5,064	)			(2,956	)
Total decommissioning liabilities at June 30, 2006 and 2005, respectively			120,563				104,987
Current portion of decommissioning liabilities at June 30, 2006 and 2005, respectively			14,081				11,083
Long-term portion of decommissioning liabilities at June 30, 2006 and 2005, respectively		$	106,482			$	93,904

(10) Notes Receivable

Notes receivable consist primarily of contractual obligations of sellers of oil and gas properties to reimburse the Company a specified amount following the abandonment of acquired properties. The Company invoices the seller specified amounts following the performance of decommissioning operations (abandonment and structure removal) in accordance with the applicable agreements with the seller. These receivables are recorded at present value, and the related discounts are amortized to interest income, based on the expected timing of the decommissioning.

(11) Prepaid Insurance and Other

Prepaid insurance and other includes approximately $26.2 million and $23.9 million in insurance receivables at June 30, 2006 and December 31, 2005, respectively. The balances are primarily due to property and casualty insurance claims caused by the impact of Hurricanes Katrina and Rita on our oil and gas properties, as well as our buildings

and equipment. The insurance deductibles on Hurricanes Katrina and Rita of approximately $1 million were expensed during 2005. All amounts not expected to be reimbursed by insurance are expensed as incurred.

(12) Other Comprehensive Income

The following tables reconcile the change in accumulated other comprehensive income (loss) for the three and six months ended June 30, 2006 and 2005 (amounts in thousands):

		Three Months Ended
		June 30,
		2006				2005
Accumulated other comprehensive loss, March 31, 2006 and 2005, respectively		$	(3,353	)		$	(5,897	)
Other comprehensive income (loss):
Other comprehensive income (loss), net of tax
Hedging activities:
Adjustment for settled contracts, net of tax of $1,736 in 2006 and $789 in 2005			2,956				1,343
Changes in fair value of outstanding hedging positions, net of tax of ($455) in 2006 and ($650) in 2005			(776	)			(1,105	)
Foreign currency translation adjustment			2,277				(1,206	)
Total other comprehensive income (loss)			4,457				(968	)
Accumulated other comprehensive income (loss), June 30, 2006 and 2005, respectively		$	1,104			$	(6,865	)

		Six Months Ended
		June 30,
		2006				2005
Accumulated other comprehensive income (loss), December 31, 2005 and 2004, respectively		$	(4,916	)		$	2,884
Other comprehensive income (loss):
Other comprehensive income (loss), net of tax
Hedging activities:
Adjustment for settled contracts, net of tax of $3,059 in 2006 and $1,103 in 2005			5,209				1,877
Changes in fair value of outstanding hedging positions, net of tax of ($1,160) in 2006 and ($5,697) in 2005			(1,975	)			(9,699	)
Foreign currency translation adjustment			2,786				(1,927	)
Total other comprehensive income (loss)			6,020				(9,749	)
Accumulated other comprehensive income (loss), June 30, 2006 and 2005, respectively		$	1,104			$	(6,865	)

(13) Commitments and Contingencies

From time to time, the Company is involved in litigation and other disputes arising out of operations in the normal course of business. In management’s opinion, the Company is not involved in any litigation or disputes, the outcome of which would have a material effect on the financial position, results of operations or liquidity of the Company.

(14) Accounting Pronouncements

In February 2006, the Financial Accounting Standards Board issued its Statement of Financial Accounting Standards No. 155 (FAS No. 155), “Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140.” FAS No. 155 simplifies accounting for certain hybrid financial instruments by permitting fair value remeasurement for any hybrid instrument that contains an embedded derivative that otherwise would require bifurcation and eliminates a restriction on the passive derivative instruments that a qualifying special-purpose entity may hold. FAS No. 155 is effective for all financial instruments acquired, issued or subject to a remeasurement (new basis) event occurring after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The Company does not expect the adoption of FAS No. 155 to have any impact on its results of operations or financial position.

In March 2006, the Financial Accounting Standards Board issued its Statement of Financial Accounting Standards No. 156 (FAS No. 156), “Accounting for Servicing of Financial Assets — an amendment of FASB Statement No. 140.” FAS No. 156 establishes, among other things, the accounting for all separately recognized servicing assets and servicing liabilities by requiring that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. FAS No. 156 is effective as of the beginning of an entity’s first fiscal year that begins after September 15, 2006. The adoption of FAS No. 156 will have no impact on the Company’s results of operations or financial position.

In July 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48 (FIN No. 48), “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.” FIN No. 48 provides guidance on measurement and recognition in accounting for income tax uncertainties and also requires expanded financial statement disclosure. This interpretation is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the impact, if any, that FIN No. 48 will have on its results of operations and financial position.

(15) Financial Information Related to Guarantor Subsidiaries

In May 2006, SESI, L.L.C. (“Issuer”), a wholly-owned subsidiary of Superior Energy Services, Inc. (“Parent”), issued $300 million of 6 7/8% Senior Notes at 98.489%. The Parent, along with substantially all of its direct and indirect subsidiaries, fully and unconditionally guaranteed the Senior Notes and such guarantees are joint and several. All of the guarantor subsidiaries are wholly-owned, direct or indirect subsidiaries of the Issuer. Income taxes are paid by the Parent through a consolidated tax return and are accounted for by the Parent. The following tables present the condensed consolidating financial statements as of June 30, 2006 and December 31, 2005 and for the three and six months ended June 30, 2006 and 2005.

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Balance Sheets
June 30, 2006
(in thousands)
(unaudited)

														Non-
										Guarantor				Guarantor
		Parent				Issuer				Subsidiaries				Subsidiaries				Eliminations				Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	83,971			$	19,260			$	12,615			$	—			$	115,846
Accounts receivable — net			—				2,503				212,692				30,095				(11,794	)			233,496
Current portion of notes receivable			—				—				4,712				—				—				4,712
Prepaid insurance and other			37				4,679				51,006				2,771				—				58,493
Total current assets			37				91,153				287,670				45,481				(11,794	)			412,547
Property, plant and equipment — net			—				—				553,264				55,284				—				608,548
Goodwill — net			—				—				199,567				24,779				—				224,346
Notes receivable			—				—				26,085				—				—				26,085
Investments in affiliates			124,271				190,742				31,573				968				(315,013	)			32,541
Other assets — net			—				11,699				104				613				—				12,416
Total assets		$	124,308			$	293,594			$	1,098,263			$	127,125			$	(326,807	)		$	1,316,483
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	—			$	1,416			$	39,227			$	16,997			$	(11,794	)		$	45,846
Accrued expenses			372				16,746				51,186				8,019				—				76,323
Income taxes payable			48,728				—				—				2,012				—				50,740
Fair value of commodity derivative instruments			—				—				5,658				—				—				5,658
Current portion of decommissioning liabilities			—				—				14,081				—				—				14,081
Current maturities of long-term debt			—				—				—				810				—				810
Total current liabilities			49,100				18,162				110,152				27,838				(11,794	)			193,458
Deferred income taxes			92,519				—				—				2,802				—				95,321
Decommissioning liabilities			—				—				106,482				—				—				106,482
Long-term debt			—				295,503				—				16,191				—				311,694
Intercompany payables/(receivables)			(337,065	)			28,541				465,039				26,874				(183,389	)			—
Other long-term liabilities			—				3,294				36				—				—				3,330
Stockholders’ equity:
Preferred stock of $.01 par value.			—				—				—				—				—				—
Common stock of $.001 par value.			80				—				—				101				(101	)			80
Additional paid in capital			433,415				127,173				—				4,350				(131,523	)			433,415
Accumulated other comprehensive loss, net			—				—				(3,565	)			4,669				—				1,104
Retained earnings (deficit)			(113,741	)			(179,079	)			420,119				44,300				—				171,599
Total stockholders’ equity			319,754				(51,906	)			416,554				53,420				(131,624	)			606,198
Total liabilities and stockholders’ equity		$	124,308			$	293,594			$	1,098,263			$	127,125			$	(326,807	)		$	1,316,483

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidating Balance Sheets
December 31, 2005
(in thousands)
(unaudited except as noted)

														Non-
										Guarantor				Guarantor								Consolidated
		Parent				Issuer				Subsidiaries				Subsidiaries				Eliminations				(Audited)
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	21,414			$	19,421			$	13,622			$	—			$	54,457
Accounts receivable — net			—				3,748				180,670				23,332				(11,385	)			196,365
Current portion of notes receivable			—				—				2,364				—				—				2,364
Prepaid insurance and other			—				3,039				46,237				1,840				—				51,116
Total current assets			—				28,201				248,692				38,794				(11,385	)			304,302
Property, plant and equipment — net			—				—				481,265				53,697				—				534,962
Goodwill — net			—				—				196,696				23,368				—				220,064
Notes receivable			—				—				29,483				—				—				29,483
Investments in subsidiaries and affiliates			124,271				203,083				—				953				(327,354	)			953
Other assets — net			—				6,390				553				543				—				7,486
Total assets		$	124,271			$	237,674			$	956,689			$	117,355			$	(338,739	)		$	1,097,250
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	—			$	821			$	34,790			$	17,809			$	(11,385	)		$	42,035
Accrued expenses			269				17,300				46,025				6,332				—				69,926
Income taxes payable			9,917				—				—				1,436				—				11,353
Fair value of commodity derivative instruments			—				—				10,792				—				—				10,792
Current portion of decommissioning liabilities			—				—				14,268				—				—				14,268
Current maturities of long-term debt			—				—				—				810				—				810
Total current liabilities			10,186				18,121				105,875				26,387				(11,385	)			149,184
Deferred income taxes			95,196				—				—				2,791				—				97,987
Decommissioning liabilities			—				—				107,641				—				—				107,641
Long-term debt			—				200,000				—				16,596				—				216,596
Intercompany payables/(receivables)			(332,937	)			31,751				467,362				29,554				(195,730	)			—
Other long-term liabilities			—				1,458				10				—				—				1,468
Stockholders’ equity:
Preferred stock of $.01 par value.			—				—				—				—				—				—
Common stock of $.001 par value.			79				—				—				101				(101	)			79
Additional paid in capital			428,507				127,173				—				4,350				(131,523	)			428,507
Accumulated other comprehensive income (loss), net			—				—				(6,799	)			1,883				—				(4,916	)
Retained earnings (deficit)			(76,760	)			(140,829	)			282,600				35,693				—				100,704
Total stockholders’ equity			351,826				(13,656	)			275,801				42,027				(131,624	)			524,374
Total liabilities and stockholders’ equity		$	124,271			$	237,674			$	956,689			$	117,355			$	(338,739	)		$	1,097,250