<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-K
(Mark One)


[x]      Annual report pursuant to section 13 or 15(d) of the Securities
         Exchange Act of 1934 [Fee Required] for the fiscal year ended December
         31, 1996 or


[ ]      Transition report pursuant to section 13 or 15(d) of the Securities
         Exchange Act of 1934 [No Fee Required] for the transition period from
         _______________ to _______________.

COMMISSION FILE NUMBER 1-12542

                                UTI ENERGY CORP.
                            ------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
   <S>                                                             <C>
                      Delaware                                                  23-2037823
---------------------------------------------------         ---------------------------------------------------
   (State or other jurisdiction of incorporation)                  (I.R.S. Employer Identification No.)

                     Suite 112
               485 Devon Park Drive
                Wayne, Pennsylvania                                                19087
---------------------------------------------------         ---------------------------------------------------
      (Address of principal executive offices)                                  (Zip Code)
</TABLE>

(Registrant's telephone number, including area code)             (610) 971-9600
                                                            -------------------

Securities registered pursuant to section 12(b) of the Act:

     Title of each class            Name of each exchange on which registered

 Common Stock, Par value $.001               American Stock Exchange
 -----------------------------               -----------------------

Securities registered pursuant to section 12(g) of the Act:  None

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 registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
                      Yes  /X/           No  / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.

State the aggregate market value of the voting stock held by non-affiliates of
the registrant.
                         $51,078,000 at March 21, 1997
                         -----------------------------

(APPLICABLE ONLY TO CORPORATE REGISTRANTS) Indicate the number of shares
outstanding of each class of registrant's common stock, as of the latest
practicable date.  3,858,511 shares of Common Stock at March 21, 1997.
                   ---------------------------------------------------

DOCUMENTS INCORPORATED BY REFERENCE.

Proxy Statement for the 1997 Annual Meeting of Shareholders. (Part III)

Exhibit Index Begins on Page 24.



<PAGE>   2

PART I.

ITEM 1.  BUSINESS

INTRODUCTION

         The Company is a leading provider of contract drilling services in the
United States.  Drilling operations currently are concentrated in the prolific
oil and natural gas producing basins of Oklahoma and Texas.  The Company's rig
fleet consists of 74 land drilling rigs with effective depth capabilities
ranging from 5,000 to 25,000 feet.  The Company also provides drilling and
pressure pumping services in the Appalachian Basin.

         Beginning in 1995, the Company made a strategic decision to focus its
efforts on the expansion of its land drilling operations to take advantage of
improving market conditions and the benefits arising from a consolidation in
the land drilling industry.  To effect this strategy, the Company disposed of
its oil field distribution business in September 1995 and immediately embarked
on a directed acquisition program aimed at expanding the Company's presence in
the oil and gas producing regions in the United States.

         The Company's acquisition strategy is focused both on existing
drilling contractors with established reputations and on underutilized assets
that can be assimilated into the Company's existing operations.  The Company
has sought acquisitions that would provide it with access to new markets,
established regional bases of operation, operational leverage through
additional capacity, and a well-trained work force.  Since commencing its
growth strategy, the Company has more than doubled the size of its rig fleet
and has expanded both its drilling depth capabilities and the geographic scope
of its operations.   The Company considers that its operating leverage, its
large inventory of low cost drill pipe and spare equipment and its diversified
and decentralized regional drilling operations are significant competitive
advantages.

BUSINESS AND ACQUISITION STRATEGY

         The Company's business strategy is to continue to take advantage of
the consolidation in the industry and to grow through selective acquisitions of
drilling rigs and drilling contractors and to expand its operations by
redeploying excess and underutilized equipment into desirable markets.  Key
aspects of the Company's acquisition and operational strategy include:

                 o Acquisition of High Quality Operations and Assets.  The
         Company seeks acquisitions of companies with existing drilling
         operations and established reputations for quality service and high
         quality assets that can easily be assimilated into the Company's
         operations.

                 o Diversified Operations.  The Company seeks to achieve a
         diversified mix in its drilling operations through the maintenance of
         regional bases of operations and a rig fleet designed to meet regional
         demands and the ability to drill wells of all depths and types.  The
         Company believes this diversity minimizes the impact of changes in
         regional drilling strategies by its customers and fluctuations in
         prices in oil and natural gas that affect drilling decisions.





                                     - 2 -
<PAGE>   3
                 o Customer Satisfaction and Regional Management and Expertise.
         Management stresses customer satisfaction and local expertise and
         knowledge.  Drilling operations are managed on a regional basis by
         local managers who are responsible for the day to day drilling
         operations and customer relations in their area.

                 o Disciplined Bid Approach.  The Company maintains a
         disciplined approach to bidding.  Contracts are bid to maximize
         profitability rather than maximize rig utilization.  Turnkey and
         footage contracts are bid only when the Company has experience and
         expertise in the geological and operational aspects of the project and
         the anticipated benefits of the contract merit the risk.

                 o Operational Leverage and Allocation of Equipment.  The
         Company seeks operational leverage through the ownership of excess
         equipment that can be utilized when needed with little additional
         capital cost.  Rigs, drill pipe and other equipment are allocated
         among regional drilling units based on the needs and profitability of
         the units.

ACQUISITIONS

         Since November 1995, the Company has acquired 51 rigs, approximately
one million feet of drill pipe and other equipment through its acquisition of
FWA Drilling Company, Inc. ("FWA") and Viersen and Cochran Drilling Company
("Viersen") and its acquisition of the rigs and other assets used in the
contract drilling business of Quarles Drilling Corporation ("Quarles").  These
acquisitions were effected at a total cost to the Company of $43.6 million in
cash, notes, Common Stock and warrants to purchase Common Stock.  The Company
also has entered into an agreement with Southland Drilling Company, Ltd. (the
"Southland Agreement") pursuant to which the Company has agreed to purchase
eight rigs and the contract drilling business of Southland Drilling Company,
Ltd. ("Southland") for $28 million and warrants to purchase 100,000 shares of
Common Stock at $48 per share.

         FWA Drilling.  The FWA acquisition was completed in November 1995 at a
cost of $12.9 million, net of cash, and added 29 rigs to the Company's fleet.
The FWA acquisition also substantially expanded the Company's operations into
markets in Texas where it had previously not been operating.  Revenues
attributable to FWA during the year ended December 31, 1996, were $51.2
million.

         Viersen & Cochran.  The Viersen acquisition was completed in August
1996 at a cost of $14.5 million comprised of cash, a note and warrants to
purchase Common Stock.  This acquisition provided the Company with 13 high
quality rigs, two of which are deep electric drilling rigs, over 600,000 feet
of drill pipe (approximately 40% of which had never been used) and over 800
drill collars.  Since the Viersen acquisition, the Company has redeployed six
of the acquired rigs into its operations in Texas and Oklahoma and is utilizing
the acquired drill pipe and drill collars throughout its operations as needed.
The Company currently estimates that the drill pipe acquired in the Viersen
acquisition should satisfy the drill pipe needs of the Company's current fleet
for four to five years.  The Company believes that the availability of this
drill pipe should provide the Company with a competitive advantage over other
drilling companies who may not be able to fully secure their drill pipe needs
and whose cost for drill pipe will be substantially in excess of that paid by
the Company in the Viersen acquisition.

         Quarles Drilling.  The Quarles acquisition was completed in January
1997 at a cost of $16.2 million in cash and Common Stock and provided the
Company with nine high-quality drilling rigs, including two deep electric
drilling rigs.  All of the Quarles rigs currently are operating.  The Quarles
acquisition also expanded the Company's operations in Oklahoma, East Texas and
the Texas Gulf Coast and added experienced rig crews to the Company's work
force.





                                     - 3 -
<PAGE>   4

         Southland.  The Southland acquisition is intended to expand the
Company's operations in the South Texas and the Gulf Coast markets.  The
acquisition will provide the Company with an established base of operation in
this market with eight fully equipped and manned rigs having an average
efficient drilling depth capacity of 12,000 to 18,000 feet.  The Southland rigs
operated at an average utilization rate during 1996 of approximately 90% at an
average dayrate of approximately $5,700.  The rigs are currently operating at a
utilization rate in excess of 90% at an average dayrate of approximately
$6,500.

         The Company's acquisition of Southland is subject to financing.  The
Company has paid a non-refundable deposit of $500,000 towards the purchase of
the rigs and will be required to pay an additional $500,000 as liquidated
damages in the event the transaction does not close due to the Company's
inability to obtain financing.  Southland may terminate the agreement if the
Company does not obtain the required financing by April 15, 1997.  The Company
currently expects to finance the acquisition of the Southland rigs through a
combination of an institutional private placement of debt and bank borrowings,
which is expected to include the issuance of warrants to purchase common stock.
The Company also has the right to finance $13 million of the purchase price
through a $13 million subordinated note payable to Southland.  The Company,
however, can reduce the purchase price by $750,000 if it elects to pay cash in
lieu of such note.  Accordingly, the Company is currently pursuing financing
for the entire purchase price to take advantage of this discount.  The
Southland acquisition is also subject to various customary conditions to
closing.  Although the Company currently anticipates obtaining financing for
the Southland acquisition, there can be no assurance that the transaction will
close.

         The Company is continuing to review potential acquisitions of rigs and
rig contractors.  These potential acquisitions are currently focused on
operating drilling companies that have between five and fifteen rigs of various
depth capabilities and operations in locations in which the Company does not
currently have any significant presence.  Although there can be no assurance
that such acquisitions will be completed or as to the terms thereof, such
acquisitions would further expand the Company's rig fleet and operations.

CONTRACT DRILLING

         General

         The Company's contract drilling fleet currently consists of 74 land
drilling rigs having effective depth capacities ranging from 5,000 to 25,000
feet.  As of March 7, 1997, the Company had a total of 63 rigs available for
contract up from 43 rigs available for contract at December 31, 1995.  The
Company also has 11 stacked rigs that could be returned to operation at an
average estimated cost of approximately $200,000 per rig.  The Company's rig
utilization rate was 54% for the year ended December 31, 1996.  The Company
believes that its excess capacity provides substantial capacity for growth.

         The Company's contract drilling services are performed through various
regional drilling units and markets under the names Triad, FWA, and IPSCO.  The
Company's drilling operations currently are concentrated in the prolific oil
and natural gas producing regions of Texas and Oklahoma.  The Company also
markets six smaller rigs in the Appalachian Basin in Ohio, Pennsylvania and New
York.  Drilling operations are managed through regional offices located in
Oklahoma City, Oklahoma; Midland, Tyler and Houston, Texas; and Sheffield,
Pennsylvania.  Rigs and equipment are deployed and allocated among the various
drilling units based on regional need and profitability.  The Company's
contract drilling customers include major oil companies and independent
producers, both large and small.





                                     - 4 -
<PAGE>   5

         Day-to-day drilling operations are managed at the Company's regional
offices by unit managers who are responsible for designated rigs and locations
and clients at those locations.  Drilling contracts are bid on the basis of
profitability and local market conditions and not to maximize rig utilization
at the expense of profitability.  Rigs, drill pipe and other equipment are
allocated on a Company-wide basis among the Company's regional drilling units
based on the needs and profitability of the units.

         The Company maintains an incentive compensation plan for its
managerial and key employees based on operating and budgeted results.  The
Company believes that this plan provides the Company with the ability to
attract and retain qualified managers and key operating employees.  The Company
also provides incentive compensation to its rig workers based on operating
results and safety records.

         Drilling Rigs and Other Contract Drilling Properties

         A land drilling rig consists of various components including engines,
drawworks or hoist, derrick or mast, pumps, blowout preventers and drill pipe.
Rig size and configuration vary with depth, terrain and operator requirements.
An active maintenance program during the life of a drilling rig permits the
maintenance, replacement and upgrading of its components on an individual
basis.  Over the life of a typical drilling rig, major components, such as
engines, pumps, drawworks and drill pipe are replaced or rebuilt on a periodic
basis as required while other components, such as the mast and substructure,
can be utilized for extended periods of time with proper maintenance.

         Drilling rigs and related equipment deteriorate over time unless they
are operated and maintained properly.  The Company follows a policy of keeping
its drilling rigs well maintained and technologically competitive.

         As of March 7, 1997, the Company had an inventory of 74 rigs, 54 of
which were active.  The Company's rig fleet is configured to suit the Company's
various operating regions with drilling depths abilities ranging to 25,000
feet.  The Company allocates its rigs among its operating regions based upon
market conditions and in accordance with the needs of its customers and the
capabilities of its rigs.





                                     - 5 -
<PAGE>   6

         The following table sets forth certain information with respect to the
Company's rig fleet and the current distribution of rigs among the Company's
regional operating regions as of March 7, 1997.

<TABLE>
<CAPTION>
                                                                                          Maximum
                                    Active         Idle        Stacked      Total         Drilling
              Region               Rigs (1)      Rigs (1)     Rigs (1)      Rigs        Depth Range
         -----------------        ----------    ----------   ----------    -------   -----------------
         <S>                           <C>           <C>          <C>         <C>     <C>
         Arklatex . . . . . . . .      11            -             -          11      10,000 - 22,000

         Permian  . . . . . . . .      19            7             -          26       8,500 - 22,000

         Gulf Coast . . . . . . .       3            -             -           3          22,000

         Mid Continent  . . . . .      16            -            11          27       6,500 - 25,000

         Northeast  . . . . . . .       4            2             -           6       5,000 - 12,000

         Other (2)  . . . . . . .       1            -             -           1          25,000
                                   ------      -------       -------      ------
                                       54            9            11          74
</TABLE>
__________________________________
(1)      A rig is considered active when under contract.  An idle rig is one
         that is not under contract but is available and being marketed.  A
         stacked rig is not currently being marketed but can be made available
         after refurbishment.  Excludes rigs to be acquired pursuant to the
         Southland Agreement.
(2)      Represents a rig acquired from Quarles in January 1997, which
         currently is operating in Utah.

         The following table sets forth for the periods indicated certain data
concerning the utilization of the Company's drilling rigs:

<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                                               -----------------------------------------
                                                                  1996            1995           1994
                                                               ----------      ----------     ----------
         <S>                                                     <C>              <C>            <C>
         Number of owned rigs
          at end of period (1)  . . . . . . . . . . . . . .          65              55             27

         Average number of owned
          rigs during period  . . . . . . . . . . . . . . .          59              31             27

         Operating days . . . . . . . . . . . . . . . . . .      11,872           4,405          3,931

         Rig utilization rate (2) . . . . . . . . . . . . .         54%             39%            40%
</TABLE>
__________________________________
(1)      Excludes nine rigs acquired in January 1997 and eight rigs subject to
         the Southland Agreement.
(2)      Utilization rates are computed by dividing operating days by the
         product of average owned rigs and the number of days in the period.
         An operating day is defined as a day during which a rig is being
         operated, mobilized, demobilized, assembled, or dismantled while under
         contract.

         The Company currently owns yards in Woodward, Oklahoma; Midland,
Texas; Tyler, Texas; and Sheffield, Pennsylvania, and leases a yard in Oklahoma
City, Oklahoma, on which it has exercised an option to buy.  The Company also
maintains a fleet of trucks that are utilized in certain regions to mobilize and
demobilize its drilling rigs.





                                     - 6 -
<PAGE>   7
         As a result of the Company's acquisition of Viersen, the Company
currently has an inventory of more than 425,000 feet of spare drill pipe
available for its operations.  The price of drill pipe recently has increased
substantially and many contractors are subject to allocations and back orders.
The Company estimates that its inventory of drill pipe should satisfy the drill
pipe needs of its current fleet for the next four to five years.  The Company
believes that the availability of this large inventory of drill pipe provides
it with a competitive advantage over many of its competitors who may have
difficulty in securing drill pipe and whose cost of drill pipe is substantially
in excess of the amounts paid by the Company for the pipe acquired by it in the
Viersen acquisition.

         Drilling Contracts

         The Company's drilling rigs are employed under individual contracts
which extend either over a stated period of time or the time required to drill
a well or a number of wells. Drilling contracts are generally obtained through
competitive bidding though some may be obtained by negotiation.  Contracts
generally are subject to termination by the customer on short notice, but can
be firm for a number of wells or years. Drilling contracts may provide for
compensation on a daywork, footage or turnkey basis.

         The Company maintains a disciplined approach to bidding.  Contracts
are bid on the basis of profitability and not to maximize rig utilization.
Turnkey and footage contracts are bid only when the Company has experience and
expertise in the geological and operational aspects of the project and the
anticipated benefits of the contract merit the risk.

         A day-work contract provides for a basic rate per day when drilling
(the "Dayrate") and for lower rates when the rig is moving, or when drilling
operations are interrupted or restricted by equipment breakdowns, actions of
the customer or adverse weather conditions or other conditions beyond the
control of the Company.  In addition, day-work contracts typically provide for
a lump sum fee for the mobilization and demobilization of the drilling rig. The
Dayrate depends on market and competitive conditions, the nature of the
operations to be performed, the duration of the work, the equipment and
services to be provided, the geographic area involved and other variables.

         The Company also is a party to turnkey and footage contracts in
certain areas of the United States.  In a turnkey contract, the Company
undertakes to drill a well to a specified depth for a fixed price.  In a
footage contract, the Company undertakes to drill a well to a specified depth
at a fixed price per foot of hole. In both turnkey and footage contracts, the
Company must bear the cost of performing the drilling services until the well
has been drilled, and accordingly, such contracts require significant cash
commitments by the Company.  In both the turnkey and footage contracts, the
Company generally agrees to furnish services such as testing, coring and casing
the hole and other services which are not normally provided by a drilling
contractor working under a daywork contract.  In both situations, compensation
is earned upon completion of the well to the specified depth.  If the well is
not completed to the specified depth, the Company may not receive the fixed
turnkey or footage price.  For those reasons, footage and turnkey contracts
generally involve a higher degree of risk to the Company than daywork contracts
because the Company bears the cost of unanticipated downhole problems.

PRESSURE PUMPING SERVICES AND OTHER OPERATIONS

         Pressure Pumping

         The Company, through its Universal Well Servicing unit, is a leading
provider of pressure pumping services in the northern Appalachian Basin.
Pressure pumping services consist primarily of well





                                     - 7 -
<PAGE>   8

stimulation and cementing for the completion of new wells and remedial work on
existing wells. Generally, all completed Appalachian Basin wells require
cementing services before production commences.  In addition, substantially all
completed wells drilled in the Appalachian Basin require some form of
fracturing or other stimulation to enhance the flow of gas and oil to the well
bore.  With the purchase of proprietary technology and equipment in 1995,
Universal has added the capability to fracture wells using liquid carbon
dioxide and sand.

         Universal maintains four base camps in the Appalachian Basin:  one
each in Punxsutawney, Bradford, and Meadville, Pennsylvania; and Wooster, Ohio.
These camps typically consist of an office area, an equipment maintenance
facility, a bulk storage facility and a storage yard for vehicles and other
materials.  Universal also maintains a portable, temporary facility which is
available for special projects.

         The Company's pressure pumping equipment consists of cement,
fracturing and nitrogen pumpers, blenders, and cement, sand, acid, connection
and nitrogen transport trucks.  The Company maintains its pressure pumping
equipment in good condition.  Virtually all of the Company's pressure pumping
equipment is in use on a regular basis.  At March 7, 1997, the Company operated
the following equipment:

<TABLE>
<CAPTION>
                                                                                              Number
         Equipment Type                                                                      of Units
         -------------------------------------------------------------------------------     --------
         <S>                                                                                    <C>
         Pumper Trucks  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        37
         Blender Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         9
         Bulk Cement Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        14
         Sand Trucks  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        17
         Acid Trucks  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        11
         Connection Trucks  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         7
         Miscellaneous  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        13
                                                                                          ---------
                 Total  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       108
</TABLE>

         The following table sets forth for the periods indicated certain data
concerning the operations of the Company's pressure pumping business:

<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                                               -----------------------------------------
                                                                  1996            1995           1994
                                                               ----------      ----------     ----------
         <S>                                                      <C>             <C>            <C>
         Pressure Pumping Jobs:
                 Cementing jobs . . . . . . . . . . . . . .       2,094           1,840          2,021
                 Conventional stimulation jobs (1)  . . . .         900             688            706
                 CO2 fracturing jobs  . . . . . . . . . . .           5              16              -
</TABLE>

(1)      Conventional well stimulation includes hydraulic fracturing,
         acidizing, and nitrogen injection jobs.

         Other Operations

         The Company also operates a horizontal hard rock boring division
("Boring").  Using a patented process and equipment, Boring applies vertical
drilling technology to bore horizontal holes for the placement of pipelines and
cables, including fiber optic cables, under obstacles such as highways and
railroads when hard rock conditions are encountered.  Boring currently markets
its services in the eastern





                                     - 8 -
<PAGE>   9

half of the United States.

         In addition to its operating activities, the Company has invested in
working interests in gas and oil wells from time to time, principally in the
Appalachian and Permian Basins.  The net book value of such investments at
December 31, 1996 and December 31, 1995, was $310,000 and $162,000,
respectively.

INDUSTRY CONDITIONS, COMPETITION, AND SEASONALITY

         The Company's revenues and earnings are affected directly by the
demand for contract drilling and related oilfield services in the United
States.  Demand is a function of the level of oil and gas exploration and
development activity.  The level of such activity is impacted by many factors
over which the Company has no control, including among others, the market
prices of oil and gas, the stability or volatility of such prices, levels of
production, activities of OPEC and other oil and gas producers, governmental
regulations, the level of worldwide economic activity, the development of
alternate energy sources, and the short and long-term effect of worldwide
energy conservation measures.  Substantial uncertainty exists as to the future
level of oil and gas exploration and production drilling activity in the United
States.

         The contract drilling, workover and well servicing industry is a
highly-fragmented, intensely competitive and cyclical business.  Since 1982,
the contract drilling business has been severely affected by the decline and
continued instability in the prices of oil and natural gas. Though these
depressed economic conditions have resulted in a consolidation of the number of
competitors and the reduction of the number of rigs available, the supply of
available rigs, particularly in the U.S. land markets, still exceeds the demand
for those rigs.  Competition for services in a particular market is based on
price, location, type and condition of available equipment and quality of
service.  A number of large and small contractors provide competition for
drilling contracts in all areas of the Company's business.  Certain competitors
are present in more than one of those areas and drilling rigs are mobile and
can be moved from one region to another in response to increased demand.
Within the last several months, prices for land drilling rigs have started to
increase, particularly with respect to electric rigs and mechanical rigs that
are capable of drilling in excess of 12,000 feet.  Seasonality is not a
significant factor with respect to the overall operations of the Company,
although the Company's pressure pumping and contract drilling services in
Appalachia are subject to slow periods of activity during spring months.

OPERATING RISKS AND INSURANCE

         The Company's operations are subject to many hazards inherent in the
drilling, workover and well servicing industries including blowouts, cratering,
explosions and fires, any of which could result in personal injury or death,
damage to or destruction of equipment and facilities, suspension of operations,
environmental damage to surrounding areas and damage to the property of others.
To the extent that such risks are not transferred to customers by contract or
indemnification agreements, the Company seeks protection through insurance
which the Company's management considers to be adequate. However, there is no
assurance that such insurance or indemnification agreements will be adequate to
protect the Company against liability from all of the consequences of the
hazards described above. The occurrence of an event not fully insured or
indemnified against, or the failure of a customer to meet its indemnification
obligations could result in substantial losses to the Company. In addition,
there can be no assurance that insurance will be available to the Company in
the future, or, even if available, that it will be adequate or that insurance
premiums or other costs will not rise significantly.





                                     - 9 -
<PAGE>   10

ENVIRONMENTAL REGULATION

         The Company's activities are subject to existing federal, state and
local laws and regulations governing environmental quality and pollution
control.  It is not anticipated that compliance with existing laws and
regulations regulating the release of materials into the environment or
otherwise relating to the protection of the environment will have a material
adverse effect upon the operations, capital requirements or earnings of the
Company in the foreseeable future, absent the occurrence of an extraordinary
event.  The Company cannot predict what effect additional regulation or
legislation, enforcement policies thereunder and claims for damages to
property, employees, other persons, and the environment could have on its
activities.

         The Company's operations routinely involve the handling of various
materials, some of which are classified as hazardous materials.  The Company's
operations and facilities are subject to numerous state and federal
environmental laws, rules and regulations, including, but not limited to, laws
concerning the containment and disposal of hazardous materials, oil field
waste, other waste materials and acids, and the use of underground storage
tanks. Laws protecting the environment have generally become more restrictive
in recent years.  In addition, environmental laws and regulations may impose
strict liability whereby the Company could be liable for clean-up costs, even
if the situation resulted from previous conduct of the Company that was lawful
at the time conducted or from improper conduct of, or conditions caused by,
previous property owners or other persons not associated with the Company.
From time to time, claims may be made and litigation might be brought against
the Company under these laws.  Such clean-up costs or costs associated with
changes in environmental laws and regulations could be substantial and could
have a material adverse effect on the Company's financial condition.  However,
the cost of environmental compliance has not had any material adverse effect on
the Company's financial condition in the past.  The Company is unable to
predict the effect of new regulations and amendments to existing regulations
governing its operations, and therefore is unable to determine the ultimate
costs of complying with environmental laws and regulations.

         The Oil Pollution Act of 1990 ("OPA") amends certain provisions of the
federal Water Pollution Control Act of 1972, commonly referred to as the Clean
Water Act ("CWA") and other statutes as they pertain to the prevention of and
response to oil spills into navigable waters.  The OPA subjects owners of
facilities to strict, joint and several liability for all containment and
cleanup costs and certain other damages arising from a spill, including, but
not limited to, the costs of responding to a release of oil to surface waters.
The CWA provides penalties for any discharges of petroleum products in
reportable quantities and imposes substantial liability for the costs of
removing a spill.  State laws for the control of water pollution also provide
varying civil and criminal penalties and liabilities in the case of releases of
petroleum or its derivatives into surface waters or into the ground.  The
Environmental Protection Agency ("EPA") is also authorized to seek preliminary
and permanent injunctive relief and, in certain cases, criminal penalties and
fines.  In the event that a discharge occurs at a well site at which the
Company is conducting drilling or pressure pumping operations, the Company may
be exposed to claims that it is liable under the CWA.

         Certain of the Company's facilities are also subject to regulations of
the EPA, including regulations that require the preparation and implementation
of spill prevention control and countermeasure plans relating to the possible
discharge of oil into navigable waters.

         The Comprehensive Environmental Response, Compensation and Liability
Act, as amended, ("CERCLA"), also known as the "Superfund" Law, imposes
liability, without regard to fault or the legality of the original conduct, on
certain classes of persons with respect to the release of a "hazardous





                                     - 10 -
<PAGE>   11

substance" into the environment.  These persons include the owner and operator
of a site and persons that disposed of or arranged for the disposal of the
hazardous substances found at the site.  CERCLA currently exempts crude oil,
and the Resource Conservation and Recovery Act, as amended, currently exempts
certain drilling materials, such as drilling fluids and production waters, from
the definitions of hazardous substances.  There can be no assurance that such
exemptions will be preserved in future amendments of such acts, if any, or that
more stringent laws and regulations protecting the environment will not be
adopted.  In addition, the Company's operations may involve the use or handling
of acids currently classified as hazardous substances and other materials that
may in the future be classified as environmentally hazardous substances.

         The operations of the Company are subject to local, state and federal
regulations for the control of emissions and air pollution.  Legal and
regulatory requirements in this area are increasing, and there can be no
assurance that significant costs and liabilities will not be incurred in the
future as a result of new regulatory developments.  In particular, regulations
promulgated under the Clean Air Act Amendments of 1990 may impose additional
compliance requirements that could affect the Company's operations.  The
Company may in the future be subject to civil or administrative enforcement
actions for failure to comply strictly with air regulations and permits.  These
enforcement actions are generally resolved by payment of monetary fines and
correction of any identified deficiencies.  Alternatively, regulatory agencies
could require the Company to forego construction or operation of certain air
emission sources.

         Management believes that the Company is in substantial compliance with
environmental laws and regulations.

EMPLOYEES

         At March 7, 1997, the Company had approximately 1,248 full-time
employees, 1,180 of which were rig personnel, and 68 of whom were employed in
support and administrative capacities.

         Increases in domestic drilling demand since mid-1995 and recent
increases in contract drilling activity have resulted in a shortage of
qualified rig personnel in the industry.  To date, the Company has not
experienced material labor shortages due to these changing market conditions.
The Company believes that its compensation and organizational structure allows
it to compete favorably with its larger and smaller competitors.  However,
there can be no assurance that the Company will continue to be able to retain
and attract qualified rig personnel, and any failure to do so could have a
material adverse effect on the Company's results of operations and financial
condition.

         In addition to the services of its employees, the Company employs the
services of consultants as required.  None of the Company's employees are
represented by labor unions.  There have been no work stoppages or strikes
during the last three years which have resulted in the loss of production or
production delays.  The Company believes its relations with its employees are
good.


ITEM 2.          PROPERTIES

         See Item 1 for information with respect to properties.


ITEM 3.          LEGAL PROCEEDINGS





                                     - 11 -
<PAGE>   12

         The Company and its operating subsidiaries are sometimes named as a
defendant in litigation usually relating to personal injuries alleged to result
from negligence.  The Company maintains insurance coverage against such claims
to the extent deemed prudent by management.  The Company believes that there
are no existing adverse claims for which it is uninsured or has not already
provided.  Except as described above, there are no material pending, or, to the
Company's knowledge, threatened lawsuits against the Company or any of its
subsidiaries.

         There can be no assurance that the Company will be able to maintain
adequate insurance in the future at rates it considers reasonable, and further,
there can be no assurance that insurance will continue to be available on terms
as favorable as those for its existing arrangements.  The occurrence of an
adverse claim in excess of the coverage limits maintained by the Company could
have a material adverse effect on the Company's financial condition and results
of operations.

         The Company knows of no legal proceedings pending or threatened, or
judgments entered against, any director or officer of the Company in his
capacity as such.


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

         No matters were submitted to a vote of security holders during the
quarter ended December 31, 1996.


PART II

ITEM 5.          MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
                 MATTERS

         The Company's Common Stock, constituting the only class of common
equity of the Company currently outstanding, is traded on the American Stock
Exchange under the symbol "UTI".  The table below provides price information
for the Common Stock for 1996 and 1995.

<TABLE>
<CAPTION>
                                                        1996                           1995
                                              ------------------------       -------------------------
            Quarter Ended                        High          Low              High           Low
         --------------------                 ----------    ----------       -----------    ----------
         <S>                                   <C>           <C>              <C>            <C>
         March 31 . . . . . . . . . . . . .    $ 7 1/8       $ 5 1/4          $ 4 13/16      $ 3 1/2

         June 30  . . . . . . . . . . . . .    $13 3/4       $ 6 7/8          $ 5 1/4        $ 4 3/8

         September 30 . . . . . . . . . . .    $16           $11 1/2          $ 5 1/8        $ 4 1/2

         December 31  . . . . . . . . . . .    $38 5/8       $15 3/4          $ 5 7/8        $ 4
</TABLE>

         At March 7, 1997, the closing price for the Company's Common Stock was
$23 3/4.  At March 7, 1997, the Company's Common Stock was held of record by
approximately 45 persons, and, in management's estimation, beneficially owned
by approximately 600 persons.

         During the two most recent fiscal years, the Company has not paid a
cash dividend on its Common Stock, and it is not anticipated that any cash
dividend will be paid on the Common Stock for





                                     - 12 -
<PAGE>   13
the foreseeable future.





                                     - 13 -
<PAGE>   14
ITEM 6.          SELECTED FINANCIAL DATA

         The following table sets forth selected consolidated financial data of
the Company as of and for each of the periods indicated.  The selected
financial data for each of the five years in the period ended December 31,
1996, are derived from the Company's audited consolidated financial statements.
The information presented below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto
included elsewhere herein.

<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                      -----------------------------------------------------------------------
                                                          1996            1995           1994           1993          1992
                                                      ------------    ------------   ------------   ------------   ----------
                                                                          (in thousands, except share data)
<S>                                                   <C>             <C>            <C>            <C>             <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
         Oil field service  . . . . . . . . . . . . . $    96,628     $    39,844    $    35,831    $    33,434     $    29,662
         Other  . . . . . . . . . . . . . . . . . . .         673             280            444            786             927
                                                      -----------     -----------    -----------    -----------     -----------
                 Total revenues . . . . . . . . . . .      97,301          40,124         36,275         34,220          30,589

Gross profit:
         Oil field service  . . . . . . . . . . . . .      18,737           7,337          8,121          7,211           5,936

         Other  . . . . . . . . . . . . . . . . . . .         307             102            297            668             669
                                                      -----------     -----------    -----------    -----------     -----------
                 Total gross profit . . . . . . . . .      19,044           7,439          8,418          7,879           6,605
                                                      -----------     -----------    -----------    -----------     -----------


Depreciation and amortization . . . . . . . . . . . .       4,292           2,552          2,302          2,611           3,170

Selling, general, and administrative  . . . . . . . .       7,768           5,082          4,958          4,718           4,419
                                                      -----------     -----------    -----------    -----------     -----------

Operating income (loss) . . . . . . . . . . . . . . .       6,984            (195)         1,158            550            (984)

Other income  . . . . . . . . . . . . . . . . . . . .       1,341             293            461            318             188
Interest expense  . . . . . . . . . . . . . . . . . .      (1,148)           (265)          (260)           (72)           (154)
                                                      -----------     -----------    -----------    -----------     -----------

Income (loss) from continuing operations
  before income taxes . . . . . . . . . . . . . . . .       7,177            (167)         1,359            796            (950)

Income taxes  . . . . . . . . . . . . . . . . . . . .       2,324            (592)           293            155            (171)
                                                      -----------     -----------    -----------    -----------     -----------

Income (loss) from continuing operations  . . . . . .       4,853             425          1,066            641            (779)

Preferred stock dividend  . . . . . . . . . . . . . .           -               -              -          2,330           2,461
                                                      -----------     -----------    -----------    -----------     -----------
Income (loss) from continuing operations
  applicable to common shareholders . . . . . . . . . $     4,853     $       425    $      1,066   $    (1,689)    $    (3,240)
                                                      ===========     ===========    ============   ===========     ===========

Income (loss) from continuing operations per common share
         Primary  . . . . . . . . . . . . . . . . . . $      1.27     $      0.13    $      0.33    $     (2.37)    $     (2.81)
                                                      ===========     ===========    ===========    ===========     ===========


         Fully Diluted  . . . . . . . . . . . . . . . $      1.26     $      0.13    $      0.33    $     (2.37)    $     (2.81)
                                                      ===========     ===========    ===========    ============    ===========
Average common shares outstanding
         Primary  . . . . . . . . . . . . . . . . . .   3,813,062       3,299,556      3,244,000        711,704       1,153,000
         Fully Diluted  . . . . . . . . . . . . . . .   3,853,164       3,299,556      3,244,000        711,704       1,153,000

BALANCE SHEET DATA:
Working capital . . . . . . . . . . . . . . . . . . . $     5,761     $     5,427    $     8,179    $     7,210     $     7,747
Total assets  . . . . . . . . . . . . . . . . . . . .      61,870          33,990         22,474         22,957          25,311
Long-term debt  . . . . . . . . . . . . . . . . . . .      14,658           8,701          2,211          3,342             484
Redeemable preferred stock  . . . . . . . . . . . . .           -               -              -              -          24,437
Common shareholders' equity (deficiency)  . . . . . .      22,696          14,990         13,745         12,588          (7,380)
</TABLE>





                                     - 14 -
<PAGE>   15
Item 7.          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                 AND RESULTS OF OPERATIONS

OVERVIEW

         UTI is a leading provider of contract drilling services in the United
States.  The Company's drilling operations are currently concentrated in the
prolific oil and natural gas producing basins of Oklahoma and Texas.  The
Company's rig fleet consists of 74 land drilling rigs with effective depth
capabilities ranging from 5,000 to 25,000 feet.  The Company also provides
drilling and pressure pumping services in the Appalachian Basin.

         Beginning in 1995, the Company made a strategic decision to focus its
efforts on the expansion of its land drilling operations to take advantage of
improving market conditions and the benefits arising from a consolidation in
the land drilling industry.  To effect this strategy, the Company disposed of
its oil field distribution business in September 1995 and immediately embarked
on a directed acquisition program aimed at expanding the Company's presence in
the oil and gas producing regions in the United States.

         Since November 1995, the Company has acquired 51 rigs in three
transactions.  FWA was acquired in November 1995 for $12.9 million net cash,
Viersen in August 1996 for approximately $14.5 million (consisting of $6
million cash, a two-year $8.0 million note and warrants to purchase Common
Stock at $15 per share) and the contract drilling business of Quarles in
January 1997 for $16.2 million (consisting of $8.1 million cash and shares of
Common Stock having a value of $8.1 million).

         The Company's results for the year ended December 31, 1996, also
reflect an improvement in market conditions in the United States land drilling
markets resulting from an increase in demand for drilling services.  During
1996, the Company was able to increase the rates charged to its customers.
Fleet utilization increased to 54% from 39% in 1995.  The Company has continued
to focus on streamlining operations and reducing its cost structure, which has
further increased operating margins and profitability.

         The Company currently expects that its land drilling operations will
continue to benefit from improved market conditions and the effects of its
prior acquisitions.  The Company intends to continue its strategy of growth
through acquisitions of rigs and equipment that can be easily integrated into
its fleet and operations and through acquisitions of other drilling contractors
that may provide opportunities for expansion of the Company's markets and
services.  Although there can be no assurance as to the success of the
Company's future acquisitions, such acquisitions, if effected, could be
expected to result in further increases in revenues and earnings.

RECENT DEVELOPMENT--SOUTHLAND ACQUISITION

         The Company recently entered into the Southland Agreement pursuant to
which it is proposing to acquire the contract drilling business of Southland
for $28 million cash and warrants to purchase 100,000 shares of Common Stock at
$48 per share.  The Southland acquisition is intended to expand the Company's
operations in South Texas and the Gulf Coast.  The acquisition will provide the
Company with an established base of operation in this market with eight fully
equipped and manned rigs having an average efficient drilling depth capacity of
12,000 to 18,000 feet.  The Southland rigs operated at an average utilization
rate during 1996 of approximately 90% and at an average dayrate of
approximately $5,700.  The rigs are currently operating at a utilization rate
in excess of 90% and at an average dayrate





                                     - 15 -
<PAGE>   16

of approximately $6,500.

         The Company's acquisition of Southland is subject to financing.  The
Company has paid a non-refundable deposit of $500,000 towards the purchase of
the rigs and will be required to pay an additional $500,000 as liquidated
damages in the event the transaction does not close due to the Company's
inability to obtain financing.  Southland may terminate the agreement if the
Company does not obtain the required financing by April 15, 1997.  The Company
currently expects to finance the acquisition of the Southland rigs through a
combination of an institutional private placement of debt and bank borrowings,
which is expected to include the issuance of warrants to purchase common stock.
The Company also has the right to finance $13 million of the purchase price
through a $13 million subordinated note payable to Southland.  The Company,
however, can reduce the purchase price by $750,000 if it elects to pay cash in
lieu of such note.  Accordingly, the Company is currently pursuing financing
for the entire purchase price to take advantage of this discount.  The
Southland acquisition is also subject to various customary conditions to
closing.  Although the Company currently anticipates obtaining financing for
the Southland acquisition, there can be no assurance that the transaction will
close.  If the Company is unable to obtain financing for the acquisition,
earnings will be affected by the loss of the deposit and liquidated damages.

RESULTS OF OPERATIONS

         The Company views the number of rigs actively drilling in the United
States as a barometer of the overall strength of the domestic oil field service
industry.  Without giving effect to acquisitions, variations in revenues and
gross margins of the Company's core business generally follow the rig count
trend.

         The following table presents certain results of operations data for
the Company and the average United States rig count as reported by Baker Hughes
Inc. (1) for the periods indicated:

<TABLE>
<CAPTION>
                                                                       Years Ended December 31,
                                                             -----------------------------------------
                                                                1996            1995           1994
                                                             ----------      ----------     ----------
                                                                        (dollars in thousands)
         <S>                                                 <C>             <C>            <C>
         Operating Data:
         Average U.S. land rig count  . . . . . . . . . . .        673             601            637
         Contract drilling:
           Operating days . . . . . . . . . . . . . . . . .     11,872           4,405          3,931
           Average utilization  . . . . . . . . . . . . . .        54%             39%            40%
         Pressure pumping:
           Cement jobs  . . . . . . . . . . . . . . . . . .      2,094           1,840          2,021
           Stimulation jobs . . . . . . . . . . . . . . . .        905             704            706

         Financial data:
         Net sales  . . . . . . . . . . . . . . . . . . . .  $  97,301       $  40,124      $  36,275
                                                             =========       =========      =========
         Gross profit . . . . . . . . . . . . . . . . . . .  $  19,044       $   7,439      $   8,418
                                                             =========       =========      =========
         As a percentage of sales . . . . . . . . . . . . .      19.6%           18.5%          23.2%
                                                             =========       =========      =========
         Operating income (loss)  . . . . . . . . . . . . .  $   6,984       $    (195)     $   1,158
                                                             =========       =========      =========
</TABLE>
__________________________________
(1)      Baker Hughes, Inc. is an international oilfield service and equipment
         company which for more than twenty years has conducted and published a
         weekly census of active drilling rigs.  Its active rig count is
         generally regarded as an industry standard for measuring industry
         activity levels.





                                     - 16 -
<PAGE>   17

COMPARISON OF YEARS ENDED 1996 AND 1995

         During the year ended December 31, 1996, the Company experienced
significant growth in its income, revenues and operating margins.  This growth
reflected the successful implementation of the Company's growth strategy as
well as improvements in market conditions in the industry and a continued
emphasis on increasing operating efficiencies.

         The Company's revenues for the year ended December 31, 1996, increased
by $57.2 million, or 143%, to a record $97.3 million compared to $40.1 million
for the year ended December 31, 1995.  This substantial increase in revenues
reflected a $52.8 million increase in contract drilling revenue and a $3.8
million increase in pressure pumping revenue.  Of the $52.8 million increase in
contract drilling revenue, $45.8 million is attributable to the FWA
acquisition, with the remainder attributable to higher day rates and rig
utilization.  The Company's rig fleet was employed for 11,872 days during the
year ended December 31, 1996, compared to 4,405 days for the year ended
December 31, 1995.  The Company completed 2,999 pressure pumping jobs during
the year ended December 31, 1996, up from 2,544 jobs during the year ended
December 31, 1995.

         The Company's gross profit for the year ended December increased 156%
to $19.0 million for the year ended December 31, 1996, from $7.4 million for
the year ended December 31, 1995.  Contract drilling gross margin as a
percentage of sales was 16.5% for the year ended 1996, up from 13.4% for the
same period in 1995.  This increase in gross margin percentage was attributable
to higher day rates and rig utilization.  Pressure pumping gross margin as a
percentage of revenue was 33% for the year ended 1996, up from 30% for the same
period in 1995.

         The Company's depreciation and amortization expense for the year ended
December 31, 1996, increased $1.7 million from the year ended December 31,
1995, due to the FWA acquisition and, to a lesser extent, the acquisition of
Viersen.  Depreciation and amortization expense will increase in future periods
as a result of the Company's acquisitions of Viersen and Quarles and the
possible acquisition of Southland.

         Selling, general and administrative expenses for the year ended
December 31, 1996, increased $2.7 million from the year ended December 31,
1995.  This increase was as a result of the FWA acquisition and higher
performance based bonus accruals.  Selling, general and administrative expense
as a percentage of revenues, however, decreased from 12.7% to 8.0% as a result
of increased utilization and revenues.

         Other income for the year ended December 31, 1996, increased $1.0
million.  This increase was primarily due to a favorable resolution of a
dispute with the United States government over mineral rights owned by the
Company in Southeast New Mexico.

         Interest expense for the year ended December 31, 1996, increased
$883,000 from the year ended December 31, 1995.  The increase in interest
expense was due to interest on the debt associated with the Company's
acquisitions of FWA and Viersen.  The interest costs associated with the debt
incurred for the Quarles acquisition will also result in an increase in
interest expense during the first quarter of 1997.  Future acquisitions may
result in additional debt financing where desirable.  In addition, the increase
in the Company's activity level requires a greater level of working capital,
which will be funded from time to time in part with borrowings under the
Company's working capital line of credit.

         Income from continuing operations was $4.8 million for the year ended
December 31, 1996, compared to $425,000 for the same period in 1995.  This
increase reflects the improved revenues and





                                     - 17 -
<PAGE>   18

gross profit resulting from the Company's growth and improved market conditions.

COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994

         Revenues increased 10.6% to $40.1 million in 1995 from $36.3 million
in 1994 as the revenues from the acquisition of FWA offset a 4.2% decline in
the revenues of the Company's other operations.  The U.S. average land rig
count declined 5.7% from 637 to 601, primarily in response to soft natural gas
prices that prevailed during the first three quarters of 1995.  Contract
drilling operating days increased 12.1% reflecting the acquisition of FWA.
Total pressure pumping jobs decreased 6.7%.

         Gross profit declined 11.6% from $8.4 million in 1994 to $7.4 million
in 1995.  The decline in gross margin resulted from $750,000 in losses suffered
on a footage and a turn-key well during the fourth quarter of 1995, competitive
pricing pressure in the Appalachian Basin, and lower productivity in
Appalachian drilling operations.

         Depreciation and amortization expense increased $250,000 due to the
acquisition of FWA.

         Selling, general and administrative expense increased $124,000
primarily as a result of the FWA acquisition.

         Other income decreased $168,000 primarily because 1994 included a
one-time benefit of $200,000 from an antitrust settlement.

         Interest expense was essentially flat period to period as the interest
on the debt financing associated with the purchase of FWA in 1995 was offset by
the decline in interest on short term debt.  The Company had no short term debt
outstanding at any point in 1995.

         Income tax declined from an expense of $293,000 in 1994 to a benefit
of $592,000 in 1995.  The 1995 income tax benefit resulted from the reduction
of a valuation allowance against the Company's deferred tax asset.  The
valuation was reduced based on the Company's expectation that the deferred tax
asset will more likely than not be realized from future taxable income.

         Income from continuing operations was $425,000 in 1995, a $641,000
decline from 1994.

LIQUIDITY AND CAPITAL RESOURCES

         Working Capital

         The Company's primary cash needs are to fund working capital
requirements and to make capital expenditures to replace and expand its
drilling rig fleet and for acquisitions.  The Company's ongoing  operations are
funded with available cash and cash provided from operations and borrowings
under its working capital line of credit.  To date, acquisitions have been
funded with available cash, borrowings and issuances of Common Stock and
warrants to purchase Common Stock.

         At December 31, 1996, and December 31, 1995, the Company had cash of
$570,000 and $2.3 million, respectively, and $5.4 million and $8.0 million in
available borrowings under its working capital facility.  The Company's working
capital at December 31, 1996, was $5.8 million, compared to $5.4 million at
December 31, 1995, and $8.2 million at December 31, 1994.  The decline in
working capital from December 31, 1994, reflected the elimination of working
capital related to the Company's





                                     - 18 -
<PAGE>   19

oil field distribution operations that were discontinued in September 1995, and
an increase in the current portion of the Company's long-term debt associated
with its acquisition of Viersen.

         Net cash provided by continuing operations was $6.3 million, $600,000
and $3.2 million for 1996, 1995 and 1994, respectively.  Such funds were
utilized to fund capital expenditures.  Capital expenditures, excluding
acquisitions, for the years ended December 31, 1996, 1995 and 1994, were $4.3
million, $1.9 million and $1.3 million, respectively.

         Debt Facilities

         At December 31, 1996, the Company had outstanding $19.4 million in
debt and capital lease obligations.  Such indebtedness included $2.6 million
outstanding under a revolving line of credit provided by Mellon Bank, N.A. (the
"Mellon Line of Credit") and $15.1 million associated with the Company's
acquisitions of FWA and Viersen described below.  In January 1997, the Company
incurred an additional $8.1 million in indebtedness in connection with the
acquisition of Quarles' contract drilling business, which indebtedness
consisted of advances of $4.1 million under the Mellon Line of Credit and $4.0
million pursuant to a new term loan with Mellon (the "Mellon Term Loan").

         In addition to the Company's indebtedness relating to the FWA and
Viersen acquisitions and the Mellon Line of Credit, at December 31, 1996, the
Company had outstanding $1.5 million under a promissory note issued in
conjunction with a prior preferred stock redemption by the Company.  This note
requires annual principal payments of $500,000 per year plus accrued and unpaid
interest, and additional annual mandatory principal prepayments of an amount
equal to the Company's excess cash flow as defined, but not to exceed $500,000
per year.  A scheduled $500,000 payment of principal was made on this note in
the fourth quarter of 1996, and a $500,000 prepayment will be made on April 1,
1997.

         Mellon Bank, N.A.  The Mellon Line of Credit provides for borrowings
up to $8.4 million, subject to collateral requirements.  The facility is
secured by a pledge of the Company's accounts receivable and inventory and
includes financial covenants covering tangible net worth, interest coverage,
and debt service coverage.  Advances under the line are limited by levels of
accounts receivable and inventory.  Interest under the facility is calculated
at the lower of the prime rate or such other rate options available at the time
of borrowing, depending upon the Company's financial performance.  The facility
expires on June 30, 1998.  At December 31, 1996, the Company had $5.4 million
available for borrowings under this facility, $4.1 million of which was
utilized in January 1997 to fund a portion of the consideration paid by the
Company to acquire Quarles' contract drilling business.

         FWA Financing.  In November 1995, the Company acquired FWA for $12.9
million, net of cash.  The acquisition was financed with $9.0 million in
promissory notes issued to an institutional lender and secured by the Company's
drilling rigs, a portion of the $4.3 million in net proceeds from the Company's
sale of its oil field supply business, and $1.0 million realized from the
private placement of 222,222 shares of Common Stock.  The promissory notes
require equal principal payments of $150,000 per month plus interest, based on
30 day LIBOR, and are due in November 2000.  The notes contain financial
covenants covering tangible net worth, debt service coverage, and leverage
ratios.  The Company had outstanding $7.1 million and $8.9 million under these
promissory notes at December 31, 1996 and 1995, respectively.  The Company
currently intends to repay this facility in connection with its acquisition of
Southland and consolidation of its credit facilities.  Such repayment would
result in an estimated charge of $198,000 for the early retirement of this
debt.





                                     - 19 -
<PAGE>   20

         Viersen Financing.  On August 14, 1996, the Company acquired Viersen.
The consideration paid for Viersen consisted of (i) $6.0 million cash (a
portion of which the Company borrowed under its revolving credit facility),
(ii) a two-year $8 million promissory note (the "Viersen Note") and (iii)
two-year warrants to purchase 200,000 shares of Common Stock at $15 per share.
The Viersen Note bears interest at the rate of 6% per annum and is payable in
full on or before August 14, 1998.  The terms of the Viersen Note require the
Company to make a principal payment of $1,500,000 on or before August 14, 1997
and an additional principal payment of $1,500,000 on or before February 14,
1998.  The Company has the option to prepay the Viersen Note by paying
$7,655,000 plus accrued interest on or before April 14, 1997.  The Company's
obligations under the Promissory Note are guaranteed by Viersen and are secured
by a pledge of the assets of Viersen pursuant to a security agreement.  The
Company intends to prepay the Viersen Note prior to April 14, 1997, and thereby
realize the discount.

         Quarles Financing.  In January 1997, the Company purchased the
contract drilling business of Quarles for $16.2 million, consisting of $8.1
million and 256,175 shares of Common Stock having a value at the time the
agreement was negotiated of $8.1 million, subject to adjustment as described
below.  The cash portion of the purchase price was funded with advances under
the Mellon Line of Credit of $4.1 million and a $4.0 million advance pursuant
to a new Mellon Term Loan that bear interest at the bank's prime rate and are
secured by a pledge of certain of the Company's accounts receivable and
inventory.

         Under the terms of the agreement relating to the Company's acquisition
of the Quarles Assets, Quarles also is entitled to receive additional shares of
Common Stock in the event the market price of the Common Stock is less than
$31.69 per share on the date a registration statement covering the resale of
the Common Stock issued to Quarles is declared effective.  The number of
additional shares will be equal to a number of shares sufficient to provide
Quarles with $8.1 million of Common Stock based on the market price of the
Common Stock on such date.  In the event the market price of the Common Stock
is greater than $31.69 per share on such date, Quarles is required to return a
number of shares of Common Stock having a value (at such market price) equal to
one-half of the amount by which the market price of the shares (at such market
price) initially issued is greater than $8.1 million.

         Southland Financing and Refinancing of Existing Indebtedness.  The
Company is currently negotiating with an institutional lender a new $25 million
four-year senior subordinated note that would be used to finance the Southland
acquisition.  The Company is also negotiating a new $25 million three-year term
facility with a financial institution that would be used to consolidate into one
facility the Company's other outstanding indebtedness.  It is expected that
these facilities would be negotiated and completed by April 15, 1997.  It is
anticipated that the new institutional facility would be unsecured and
subordinated to the term facility and that the term facility will be secured by
various assets of the Company's subsidiaries, including its receivables and
certain rigs. Although the Company believes that it will be successful in
consummating its new credit arrangements, there can be no assurance that such
arrangements will in fact be consummated.  If the Company is unable to
consummate these new arrangements, or obtain alternative financing for the
Southland acquisition by April 15, 1997, the Company will be subject to a
forfeiture of its $500,000 deposit with Southland as well as an additional
$500,000 payment for liquidated damages if Southland elects to terminate the
Southland Agreement.

         Following the Southland Acquisition, it is expected that the Company
will have outstanding approximately $52 million of indebtedness and $6 million
available under the Mellon Line of Credit.  Although the Company believes that
its internally generated cash will be sufficient to satisfy its working capital
and capital expenditure obligations, as well as its debt service requirements,
the ability of the Company to continue to grow through acquisitions will be
dependent upon the Company's ability to





                                     - 20 -
<PAGE>   21

secure additional financing in the form of debt or equity for those
acquisitions.  There can be no assurance that such financing will be available.

         Other.  The Company is continuing to review potential acquisitions of
rigs and rig contractors.  These potential acquisitions are currently focused
on operating drilling companies that have between five and 15 rigs of various
depth capabilities and operations in locations in which the Company does not
currently have any significant presence.  Although there can be no assurance
that such acquisitions will be completed or as to the terms thereof, such
acquisitions would further expand the Company's rig fleet and operations.

         Management believes its internally generated cash and existing credit
facility will be sufficient to meet its working capital, capital expenditure,
and debt service requirements.  Acquisitions are expected to be funded with
available cash and borrowings.  In addition, the Company may, if desirable,
issue stock and rights to acquire stock.

INFLATION

         Inflation has not had a significant impact on the Company's
comparative results of operations.

RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS

         From time to time, the Company may make certain statements that
contain "forward-looking" information (as defined in the Private Securities
Litigation Reform Act of 1995).  Words such as "anticipate", "believe",
"expect", "estimate", "project" and similar expressions are intended to
identify such forward-looking statements.  Forward-looking statements may be
made by management orally or in writing, including, but not limited to, in
press releases, as part of this "Management's Discussion and Analysis of
Financial Condition Results of Operation" and "Business and Properties"
contained in this Report, and in the Company's other filings with the
Securities and Exchange Commission under the Securities Act of 1933 and the
Securities Exchange Act of 1934.

         Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct.  Such forward-looking statements
are subject to certain risks, uncertainties and assumptions, including without
limitation those identified below.  Should one or more of these risks or
uncertainties materialize, or should any of the underlying assumptions prove
incorrect, actual results of current and future operations may vary materially
from those anticipated, estimated, or projected.  Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as
of their dates.

         Among the factors that will have a direct bearing on the Company's
results of operations and the contract drilling service industry in which it
operates are changes in the price of oil and natural gas and the volatility of
the contract drilling service industry in general; any difficulties associated
with the Company's ability to successfully integrate recent acquisitions;
contractual risk associated with turn-key and footage contracts; the presence
of competitors with greater financial resources; difficulties in arranging
financing for the Southland Acquisition; operating risks inherent in the
contract drilling service industry, such as blowouts, explosions, cratering,
well fires and spills; labor shortages; domestic and world-wide political
stability and economic growth; and other risks associated with the Company's
successful execution of internal operating plans as well as regulatory
uncertainties and legal proceedings.





                                     - 21 -
<PAGE>   22

ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Financial Statements of the Company meeting the requirements of
Regulation S-X (except Section 210.3-05 and Article 11 thereof) are included
herein on pages F-1 through F-19 hereof.

         Other financial statements and schedules required under Regulation
S-X, if any, are filed pursuant to Item 14, Exhibits, Financial Statement
Schedules, and Reports on Form 8-K, of this Annual Report on Form 10-K.





                                     - 22 -
<PAGE>   23

         The Company is not required to include herein the supplementary
financial information specified in Item 302 of Regulation S-K, and has not
included such information.


ITEM 9.          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                 AND FINANCIAL DISCLOSURE

         None.

PART III

         The information required by Part III, Items 10 through 13, inclusive,
of Form 10-K is hereby incorporated by reference from the Company's Definitive
Proxy Statement for the 1996 Annual Meeting of Shareholders, which shall be
filed with the Securities and Exchange Commission not later than 120 days after
the end of the fiscal year to which this Annual Report on Form 10-K relates.


PART IV

ITEM 14.         EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K

         (a)     The following Financial Statements are filed as part of this
Annual Report on Form 10-K:

<TABLE>
<CAPTION>
                                                                                                          Page
                                                                                                        ---------
<S>                                                                                                        <C>
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        F-1

Report of Ernst & Young LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        F-2

Consolidated Balance Sheets at December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . .        F-3

Consolidated Statements of Income for the Years Ended
  December 31, 1996, 1995, and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        F-4

Consolidated Statements of Changes in Shareholders' Equity for the
  Years Ended December 31, 1996, 1995, and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . .        F-5

Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1996, 1995, and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        F-6

Notes to Consolidated Financial Statements  . . . . . . . . . . . . . . . . . . . . . . . . . . . .        F-7

Schedule II--Valuation and Qualifying Accounts  . . . . . . . . . . . . . . . . . . . . . . . . . .        S-1
</TABLE>

         All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have
been omitted.





                                     - 23 -
<PAGE>   24
         (b)     The following Exhibits are filed as part of this Annual Report
on Form 10-K.

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                            TITLE OR DESCRIPTION
------------------------------------------------------------------------------------------------------------------------
        <S>        <C>  <C>
         3.1       -    Restated Certificate of Incorporation of the Company (incorporated by reference to Amendment No.
                        1 to the Company's Registration Statement on Form S-1 (No. 33-69726).

         3.2       -    Amendment to Restated Certificate of Incorporation (incorporated by reference to Amendment No. 1
                        to the Company's Registration Statement on Form S-1 (Nol 33-69726).

         3.3       -    Amendment to Restated Certificate of Incorporation (incorporated by reference to the Company's
                        Annual Report on Form 10-K for the year ended December 31, 1994).

         3.4       -    By-laws of the Company, as amended (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1993).

         4.1       -    See Exhibit Nos. 3.1 and 3.2 for provisions of the Restated Certificate of Incorporation and
                        amended By-laws of the Company defining the rights of the holders of Common Stock.

         4.2       -    Form of Common Stock Certificate (incorporated by reference to Amendment No. 1 to the Company's
                        Registration Statement on Form S-1 (No. 33-69726)).

         4.4       -    Stock Purchase Warrant dated August 14, 1996, between the Sam K. Viersen, Jr. Trust dated
                        September 9, 1986, as Amended and Restated on May 11, 1994, and UTI Energy Corp. (incorporated
                        by reference to the Company's Current Report on Form 8-K dated August 28, 1996).

         4.5       -    Warrant to purchase 162,000 shares of Common Stock (incorporated by reference to Amendment No. 4
                        to the Company's Registration Statement on Form S-1 (No. 33-69726)).

        10.1       -    Amended and Restated Loan and Security Agreement dated December 7, 1995 (the "Mellon Line of
                        Credit"), by and among UTI Energy Corp., UTICO, Inc., FWA Drilling Company, Triad Drilling
                        Company, Universal Well Services, Inc., and USC, Incorporated, and Mellon Bank, N.A.
                        (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
                        December 31, 1995).

        10.2       -    First Amendment and Modification to the Mellon Line of Credit effective March 14, 1996
                        (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
                        December 31, 1995).
</TABLE>





                                     - 24 -
<PAGE>   25
<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                            TITLE OR DESCRIPTION
-----------------------------------------------------------------------------------------------------------------------
       <S>         <C>  <C>
        10.3       -    Second Amendment and Modification to the Mellon Line of Credit effective August 14, 1996
                        (incorporated by reference to the Company's Current Report on Form 8-K dated January 27, 1997).

        10.4       -    Third Amendment and Modification to the mellon Line of Credit effective January 25, 1997
                        (incorporated by reference to the Company's Current Report on Form 8-K dated January 27, 1997).

        10.5       -    Loan and Security Agreement dated as of January 23, 1997, by and among FWA Drilling Company,
                        Inc., International Petroleum Service Company, Triad Drilling Company, Universal Well Services,
                        Inc., USC Incorporated, the Company, UTICO, Inc., Viersen & Cochran Drilling Company and Mellon
                        Bank, N.A. (incorporated by reference to the Company's Current Report on Form 8-K dated
                        January 27, 1997).

        10.6       -    Noted dated January 23, 1997, in the principal amount of $4.0 million, from FWA Drilling
                        Company, Inc., International Petroleum Service Company, Triad Drilling Company, Universal Well
                        Services, Inc., USC Incorporated, the Company UTICO, Inc., Viersen & Cochran Drilling Company in
                        favor of Mellon Bank, N.A. (incorporated by reference to the Company's Current Report on 8-K
                        dated January 27, 1997).

        10.7       -    Promissory Note of UTI Energy Corp. dated August 14, 1996, in the principal amount of $8.0
                        million in favor of the Sam K. Viersen, Jr. Trust dated September 9, 1986, as Amended and
                        Restated on May 11, 1994 (incorporated by reference to the Company's Current Report on Form 8-K
                        dated August 28, 1996).

        10.8       -    Hypothecation/Security Agreement dated August 14, 1996, by Viersen & Cochran Drilling Company in
                        favor of the Sam K. Viersen, Jr. Trust dated September 9, 1996, as Amended and Restated on
                        May 11, 1994 (incorporated by reference to the Company's Current Report on Form 8-K dated
                        August 28, 1996).

        10.9       -    Promissory Note dated December 14, 1993, from the Company in favor of UGID Holding Corporation
                        (incorporated by reference to Amendment No. 4 to the Company's registration statement on Form S-
                        1 (No. 33-69726)).

       10.10       -    Loan and Security Agreement dated November 20, 1995, by and among Triad Drilling Company,
                        International Petroleum Service Company, FWA Drilling Company, Inc., and The CIT Group/Equipment
                        Financing, Inc. (incorporated by reference to the Company's Annual Report on Form 10-K for the
                        year ended December 31, 1995).
</TABLE>





                                     - 25 -
<PAGE>   26
<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                                             TITLE OR DESCRIPTION
----------------------------------------------------------------------------------------------------------------------
       <S>         <C>  <C>
       10.11       -    Rider A to Loan and Security Agreement dated November 20, 1995, by and among Triad Drilling
                        Company, International Petroleum Service Company, FWA Drilling Company, Inc., and The CIT
                        Group/Equipment Financing, Inc. (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1995).

       10.12       -    Form of Promissory Note dated November 20, 1995, between each of FWA Drilling Company, Inc.,
                        Triad Drilling Company, International Petroleum Service Company, and The CIT Group/Equipment
                        Financing, Inc. (incorporated by reference to the Company's Annual Report on Form 10-K for the
                        year ended December 31, 1995).

       10.13       -    Guaranty Agreement dated December 20, 1995, by FWA Drilling Company, Inc. in favor of The CIT
                        Group/Equipment Financing, Inc. (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1995).

       10.14       -    Guaranty Agreement dated December 20, 1995, by Triad Drilling Company in favor of The CIT
                        Group/Equipment Financing, Inc. (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1995).

       10.15       -    Guaranty Agreement dated December 20, 1995, by International Petroleum Service Company in favor
                        of The CIT Group/Equipment Financing, Inc. (incorporated by reference to the Company's Annual
                        Report on Form 10-K for the year ended December 31, 1995).

       10.16       -    Guaranty Agreement dated December 20, 1995, by UTICO, Inc. in favor of The CIT Group/Equipment
                        Financing, Inc. (incorporated by reference to the Company's Annual Report on Form 10-K for the
                        year ended December 31, 1995).

       10.17       -    Guaranty Agreement dated December 20, 1995, by Universal Well Services, Inc. in favor of The CIT
                        Group/Equipment Financing, Inc. (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1995).

       10.18       -    Guaranty Agreement dated December 20, 1995, by UTI Energy Corp. in favor o The CIT
                        Group/Equipment Financing, Inc. (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1995).

       10.19       -    Subscription Agreement dated September 19, 1995, by and between Shamrock Holdings of California,
                        Inc. and UTI Energy Corp. (incorporated by reference to the Company's Annual Report on Form 10-K
                        for the year ended December 31, 1995).
</TABLE>





                                     - 26 -
<PAGE>   27
<TABLE>
<CAPTION>
   EXHIBIT
    NUMBER                                               TITLE OR DESCRIPTION
-------------------------------------------------------------------------------------------------------------------------
       <S>         <C>  <C>
       10.20       -    Purchase and Sale Agreement dated September 29, 1995, between UTI Energy Corp. and Union Supply
                        Company as Sellers and Continental EMSCO as Buyer (incorporated by reference to the Company's
                        Current Report on Form 8-K dated October 13, 1995).

       10.21       -    Agreement for Purchase and Sale of Common Stock of FWA Drilling Company, Inc. dated November 17,
                        1995, between UTI Energy Corp. and USX Corporation (incorporated by reference to the Company's
                        Current Report on Form 8-K dated December 1, 1995).

       10.22       -    1993 Restricted Stock Plan (incorporated by reference to Amendment No. 1 to the Company's
                        Registration Statement on Form S-1 (No. 33-69726)).

       10.23       -    UTI Energy Corp. 1996 Employee Stock Option Plan (incorporated by reference to the Company's
                        Registration Statement on Form S-8 dated October 2, 1996).

       10.24       -    UTI Energy Corp. Non-Employee Director Stock Option Plan (incorporated by reference to the
                        Company's Registration Statement on Form S-8 dated October 2, 1996).

       10.25       -    1993 Non-Qualified Incentive Stock Option Plan (incorporated by reference to Amendment No. 3 to
                        the Company's Registration Statement on Form S-1 (No. 33-69726)).

       10.26       -    Warrant Agreement dated as of December 19, 1996, between the Company and Remy Consultants
                        Incorporated [incorporated by reference to proxy].

       10.27       -    Option Agreement dated as of August 31, 1996, between the Company and Eddie L. Nowell
                        (incorporated by reference to the Company's Registration Statement on Form S-8 dated October 2,
                        1996).

       10.28       -    Amended and Restated Employment Agreement with Vaughn E. Drum dated December 19, 1996
                        (incorporated by reference to the Company's Current Report ton Form 8-K dated January 27, 1997).

       10.29       -    Amended and Restated Employment Agreement with Gerald J. Guz dated December 19, 1996
                        (incorporated by reference to the Company's Current Report on Form 8-K dated January 27, 1997).

       10.30       -    Amended and Restated Employment Agreement with Vincent J. Donahue dated December 19, 1996
                        (incorporated by reference to the Company's Current Report on Form 8-K dated January 27, 1997).
</TABLE>





                                     - 27 -
<PAGE>   28
<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                                            TITLE OR DESCRIPTION
--------------------------------------------------------------------------------------------------------------------------
      <S>          <C>  <C>
       10.31       -    Amended and Restated Employment Agreement Terry L. Pope dated December 19, 1996 (incorporated by
                        reference to the Company's Current Report on Form 8-K dated January 27, 1997).

       10.32       -    Asset Purchase Agreement dated December 21, 1996, between the Company and Quarles Drilling
                        Corporation (incorporated by reference to the Company's Current Report on Form 8-K dated
                        January 27, 1997).

      *10.33       -    Asset Purchase Agreement dated March 5, 1997, by and between the Company and Southland Drilling
                        Company, Ltd.

       10.34       -    Registration Rights Agreement with Bear Stearns & Co. Inc. dated March 25, 1994, as assigned to
                        Remy Capital Partners III, L.P. (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1994).

       *21.1       -    List of subsidiaries of the Company.

       *23.1       -    Consent of Ernst & Young LLP.

       *27.1       -    Financial Data Schedule.
</TABLE>

*Filed herewith.

         As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Company
has not filed with this Registration Statement certain instruments defining the
rights of holders of long-term debt of the Company and its subsidiaries because
the total amount of securities authorized under any of such instruments does
not exceed 10% of the total assets of the Company and its subsidiaries on a
consolidated basis.  The Company agrees to furnish a copy of any such agreement
to the Commission upon request.





                                     - 28 -
<PAGE>   29
                                UTI ENERGY CORP.

                       CONSOLIDATED FINANCIAL STATEMENTS





                                    CONTENTS


<TABLE>
<S>                                                                                                             <C>
REPORT OF INDEPENDENT AUDITORS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

   Consolidated Balance Sheets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3

   Consolidated Statements of Income  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

   Consolidated Statements of Changes in Shareholders' Equity   . . . . . . . . . . . . . . . . . . . . . . . . F-5

   Consolidated Statements of Cash Flows  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6

   Notes to Consolidated Financial Statements   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
</TABLE>





                                      F-1
<PAGE>   30




                         REPORT OF INDEPENDENT AUDITORS




To the Board of Directors
UTI Energy Corp.


We have audited the accompanying consolidated balance sheets of UTI Energy
Corp. as of December 31, 1996 and 1995, and the related consolidated statements
of income, changes in shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996.  Our audits also included
the financial statement schedule listed in the index at item 14(a).  These
financial statements and schedule are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of UTI
Energy Corp. at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.


                                        /s/ Ernst & Young, LLP

Philadelphia, Pennsylvania
February 28, 1997, except for Note 13, as to
  which the date is March 24, 1997





                                      F-2
<PAGE>   31
                                UTI ENERGY CORP.

                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                                   DECEMBER 31,
                                                                                        ------------------------------
                                                                                             1996            1995
                                                                                        --------------   -------------
                                                                                                  (IN THOUSANDS)
<S>                                                                                     <C>              <C>
                                                          ASSETS
CURRENT ASSETS
   Cash     . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $         570    $   2,273
   Accounts receivable, net of allowance for doubtful
     accounts of $305 in 1996 and $193 in 1995  . . . . . . . . . . . . . . . . . . . .        17,831        9,370
   Other receivables  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           598          669
   Materials and supplies   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           874          803
   Prepaid expenses   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         1,749        2,261
                                                                                        -------------    ---------
                                                                                               21,622       15,376
PROPERTY AND EQUIPMENT
   Land   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           749          775
   Buildings and improvements   . . . . . . . . . . . . . . . . . . . . . . . . . . . .         1,760        1,792
   Machinery and equipment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        58,421       33,504
   Oil and gas working interests  . . . . . . . . . . . . . . . . . . . . . . . . . . .         1,732        1,690
   Construction in process  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           338          292
                                                                                        -------------    ---------
                                                                                               63,000       38,053
   Less accumulated depreciation and amortization   . . . . . . . . . . . . . . . . . .        23,149       20,269
                                                                                        -------------    ---------
                                                                                               39,851       17,784

DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .             -          551
OTHER ASSETS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           397          279
                                                                                        -------------    ---------

                                                                                        $      61,870    $  33,990
                                                                                        =============    =========

                                           LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
   Current portion of long-term debt  . . . . . . . . . . . . . . . . . . . . . . . . . $       4,507    $   2,542
   Accounts payable   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         7,945        4,244
   Accrued payroll costs  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         2,445        1,399
   Other accrued expenses   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           964        1,764
                                                                                        -------------    ---------
                                                                                               15,861        9,949

LONG-TERM DEBT, less current portion  . . . . . . . . . . . . . . . . . . . . . . . . .        14,658        8,701
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         8,305            -
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           350          350

COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
   Common stock, $.001 par value, 10,000,000
     shares authorized, 3,602,336 shares issued
     and outstanding in 1996, 3,466,222 shares
     issued and outstanding in 1995   . . . . . . . . . . . . . . . . . . . . . . . . .             4            3
   Additional capital   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        17,877       15,095
   Retained earnings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         4,916           63
   Restricted stock plan unearned compensation  . . . . . . . . . . . . . . . . . . . .          (101)        (171)
                                                                                        -------------    ---------
                                                                                               22,696       14,990
                                                                                        -------------    ---------

                                                                                        $      61,870    $  33,990
                                                                                        =============    =========
</TABLE>

See accompanying notes.





                                      F-3
<PAGE>   32
                                UTI ENERGY CORP.

                       CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                                                       YEARS ENDED DECEMBER 31,
                                                                           -------------------------------------------
                                                                                1996             1995           1994
                                                                           -------------    -------------    ---------
                                                                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                                        <C>              <C>              <C>
REVENUES
   Oilfield service   . . . . . . . . . . . . . . . . . . . . . . . . . .  $     96,628     $     39,844     $    35,831
   Other  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           673              280             444
                                                                           ------------     ------------     -----------
                                                                                 97,301           40,124          36,275
COSTS AND EXPENSES
   Cost of sales
       Oilfield service . . . . . . . . . . . . . . . . . . . . . . . . .        77,891           32,507          27,710
       Other  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           366              178             147
   Selling, general and administrative  . . . . . . . . . . . . . . . . .         7,768            5,082           4,958
   Depreciation and amortization  . . . . . . . . . . . . . . . . . . . .         4,292            2,552           2,302
                                                                           ------------     ------------     -----------
                                                                                 90,317           40,319          35,117
                                                                           ------------     ------------     -----------

OPERATING INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . . .         6,984             (195)          1,158

OTHER INCOME (EXPENSE)
   Interest expense   . . . . . . . . . . . . . . . . . . . . . . . . . .        (1,148)            (265)           (260)
   Other, net   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         1,341              293             461
                                                                           ------------     ------------     -----------
                                                                                    193               28             201
                                                                           ------------     ------------     -----------

INCOME (LOSS) FROM CONTINUING OPERATIONS
  BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . .         7,177             (167)          1,359

INCOME TAXES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         2,324             (592)            293
                                                                           ------------     ------------     -----------

INCOME FROM CONTINUING OPERATIONS . . . . . . . . . . . . . . . . . . . .         4,853              425           1,066

INCOME FROM DISCONTINUED OPERATIONS . . . . . . . . . . . . . . . . . . .             -               38              26

LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS . . . . . . . . . . . . . . .             -             (361)              -
                                                                           ------------     ------------     -----------

NET INCOME  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $      4,853     $        102     $     1,092
                                                                           ============     ============     ===========

PRIMARY EARNINGS PER COMMON SHARE:
   Continuing operations  . . . . . . . . . . . . . . . . . . . . . . . .  $       1.27     $       0.13     $      0.33
   Discontinued operations  . . . . . . . . . . . . . . . . . . . . . . .             -             0.01            0.01
   Loss on disposal of discontinued operations  . . . . . . . . . . . . .             -            (0.11)              -
                                                                           ------------     ------------     -----------

                                                                           $       1.27     $       0.03     $      0.34
                                                                           ============     ============     ===========

FULLY DILUTED EARNINGS PER COMMON SHARE:
   Continuing operations  . . . . . . . . . . . . . . . . . . . . . . . .  $       1.26     $       0.13     $      0.33
   Discontinued operations  . . . . . . . . . . . . . . . . . . . . . . .             -             0.01            0.01
   Loss on disposal of discontinued operations  . . . . . . . . . . . . .             -            (0.11)              -
                                                                           ------------     ------------     -----------

                                                                           $       1.26     $       0.03     $      0.34
                                                                           ============     ============     ===========

AVERAGE COMMON SHARES OUTSTANDING
   Primary  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3,813,062        3,299,556       3,244,000
   Fully Diluted  . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3,853,164        3,299,556       3,244,000
</TABLE>

See accompanying notes.





                                      F-4
<PAGE>   33
                                UTI ENERGY CORP.

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>

                                              COMMON STOCK                                        RESTRICTED
                                       --------------------------                  RETAINED       STOCK PLAN
                                          NUMBER                    ADDITIONAL     EARNINGS        UNEARNED
                                         OF SHARES     PAR $.001     CAPITAL      (DEFICIT)      COMPENSATION      Total
                                       ------------  ------------   ----------   -----------    --------------  ----------
                                                             (IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<S>                                      <C>          <C>           <C>           <C>            <C>            <C>
Balance at December 31, 1993  . . . .     3,244,000   $        3    $  14,116     $  (1,131)     $    (400)     $ 12,588
   Net income   . . . . . . . . . . .                          -            -         1,092              -         1,092
   Vesting of restricted
     stock plan   . . . . . . . . . .                          -          (15)            -             80            65
                                        -----------   ----------    ---------     ---------      ---------      --------

Balance at December 31, 1994  . . . .    3,244,000             3       14,101           (39)          (320)       13,745
   Net income   . . . . . . . . . . .                          -            -           102              -           102
   Issuance of common stock   . . . .      222,222             -          994             -              -           994
   Vesting of restricted
     stock plan   . . . . . . . . . .                          -            -             -            149           149
                                       ------------   ----------    ---------     ---------      ---------      --------

Balance at December 31, 1995  . . . .     3,466,222            3       15,095            63           (171)       14,990
   Net income   . . . . . . . . . . .                          -            -         4,853              -         4,853
   Warrants issued  . . . . . . . . .                          -          710             -              -           710
   Exercise of options  . . . . . . .       136,114            1        1,838             -              -         1,839
   Vesting of restricted
     stock plan   . . . . . . . . . .                          -          234             -             70           304
                                       -----------    ----------    ---------     ---------      ---------      --------

Balance at December 31, 1996  . . . .    3,602,336    $        4    $  17,877     $   4,916      $    (101)     $ 22,696
                                       ===========    ==========    =========     =========      =========      ========
</TABLE>

See accompanying notes.





                                      F-5
<PAGE>   34
                                UTI ENERGY CORP.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                       YEARS ENDED DECEMBER 31,
                                                                           ---------------------------------------------
                                                                                1996             1995            1994
                                                                           -------------    -------------    -----------
                                                                                             (IN THOUSANDS)
<S>                                                                        <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Income from continuing operations  . . . . . . . . . . . . . . . . . .  $      4,853     $        425     $     1,066
   Adjustments to reconcile income from continuing operations
     to net cash provided by continuing operations:
       Depreciation and amortization  . . . . . . . . . . . . . . . . . .         4,292            2,552           2,302
       Deferred income taxes  . . . . . . . . . . . . . . . . . . . . . .           799             (650)          (187)
       Amortization of debt discount  . . . . . . . . . . . . . . . . . .            68                -              -
       Stock compensation expense . . . . . . . . . . . . . . . . . . . .           304              149             65
       Provision (recovery) for bad debts . . . . . . . . . . . . . . . .           112              (10)            70
       Gain on disposal of fixed assets . . . . . . . . . . . . . . . . .          (517)             (63)          (142)
       Change in operating assets and liabilities, net of
         effect of business acquired:
          Accounts receivable and prepaids  . . . . . . . . . . . . . . .        (7,990)          (2,316)           956
          Materials and supplies  . . . . . . . . . . . . . . . . . . . .           (71)              35            (82)
          Accounts payable, accrued expenses and accrued
            payroll costs   . . . . . . . . . . . . . . . . . . . . . . .         4,647              564           (824)
          Other   . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (174)             (86)           (38)
                                                                           ------------     ------------     ----------
   Net cash provided by continuing operations   . . . . . . . . . . . . .         6,323              600          3,186
   Net cash provided (used) by discontinued operations  . . . . . . . . .             -           (1,108)         1,991
                                                                           ------------     ------------     ----------
              Net cash provided (used) by operating activities  . . . . .         6,323             (508)         5,177

CASH FLOWS FROM INVESTING ACTIVITIES
   Capital expenditures   . . . . . . . . . . . . . . . . . . . . . . . .        (4,311)          (1,910)        (1,343)
   Acquisitions of businesses   . . . . . . . . . . . . . . . . . . . . .        (6,000)         (12,946)             -
   Proceeds from sale of discontinued operations  . . . . . . . . . . . .             -            4,870              -
   Proceeds from sale of property and equipment   . . . . . . . . . . . .         1,113              304            350
                                                                           ------------     ------------     ----------
              Net cash used by investing activities . . . . . . . . . . .        (9,198)          (9,682)          (993)

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from issuance of long-term debt   . . . . . . . . . . . . . .         2,600            9,264            264
   Repayments of long-term debt   . . . . . . . . . . . . . . . . . . . .        (2,467)          (1,580)          (892)
   Proceeds from issuance of common stock   . . . . . . . . . . . . . . .         1,039              994              -
                                                                           ------------     ------------     ----------
              Net cash provided (used) by financing activities  . . . . .         1,172            8,678           (628)
                                                                           ------------     ------------     ----------

NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . .        (1,703)          (1,512)         3,556

CASH AND CASH EQUIVALENTS AT BEGINNING
  OF YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         2,273            3,785            229
                                                                           ------------     ------------     ----------

CASH AND CASH EQUIVALENTS AT END OF YEAR  . . . . . . . . . . . . . . . .  $        570     $      2,273     $    3,785
                                                                           ============     ============     ==========
</TABLE>

See accompanying notes.





                                      F-6
<PAGE>   35
                                UTI ENERGY CORP.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Nature of Business

         UTI Energy Corp. (the "Company") is engaged in the businesses of
         contract drilling, providing oil and gas well stimulation, and
         cementing and completion services.  The primary market for the
         Company's services is the onshore oil and gas industry, and the
         customers consist primarily of major oil companies, and independent
         oil and gas producers.

         Principles of Consolidation

         The consolidated financial statements include the accounts of the
         Company and its subsidiaries, all of which are wholly owned.
         Intercompany accounts and transactions have been eliminated in
         consolidation.

         Use of Estimates

         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the amounts reported in the financial
         statements and accompanying notes.  Actual results could differ from
         those estimates.

         Cash Equivalents

         The Company considers all highly liquid investments with a maturity of
         three months or less when purchased to be cash equivalents.

         Inventories

         Materials and supplies are stated at the lower of cost (first-in,
         first-out method) or market.

         Property and Equipment

         Property and equipment are stated on the basis of cost.  Improvements
         are capitalized and depreciated over the period of benefit.
         Amortization of assets acquired under capital leases are included in
         depreciation expense.  The provision for depreciation was determined
         by the straight-line method over the estimated useful lives of the
         related assets which are as follows:  buildings--30 years, building
         improvements--7-10 years, machinery and equipment--2-15 years.





                                      F-7
<PAGE>   36
                                UTI ENERGY CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




         Working Interests in Oil and Gas Wells

         The Company accounts for its oil and gas operations under the
         successful efforts method of accounting.

         The Company recognizes oil and gas revenue from its working interests
         based upon the sales method.  Working interests in wells are included
         in property and equipment and are stated at cost less accumulated
         amortization.  Amortization is based on the units of production method
         utilizing estimated reserves and sales of oil and gas from the wells.

         Revenue Recognition

         Revenues are recognized when services have been performed.  Revenues
         from footage and turnkey drilling contracts are recognized using the
         percentage of completion method of accounting.  Losses, if any, are
         provided for in the period in which the loss is determined.

         Earnings Per Share

         Earnings (loss) per common share is calculated by dividing net income
         by the aggregate of the weighted average shares outstanding during the
         period and the dilutive effect, if any, of common stock equivalents
         that are outstanding.

         Stock-Based Compensation

         The Company follows the method of accounting for employee stock
         compensation plans prescribed by APB No. 25, which is permitted by
         Statement of Financial Accounting Standards No. 123, Accounting for
         Stock-Based Compensation ("SFAS No. 123").  In accordance with APB No.
         25, the Company has not recognized compensation expense for stock
         options because the exercise price of the options equals the market
         price of the underlying stock on the date of grant, which is the
         measurement date.

         Changes in Accounting Principles

         Effective January 1, 1996, the Company adopted the provisions of
         Statement of Financial Accounting Standards No. 121, Accounting for
         the Impairment of Long-Lived Assets and for Long-Lived Assets to be
         Disposed Of.  This statement requires companies to write down to
         estimated fair value long-lived assets that are impaired.  This change
         did not have a significant effect on the Company's financial
         statements.

         Reclassifications

         Certain items in the prior years' financial statements have been
         reclassified to conform with the presentation in the current year.





                                      F-8
<PAGE>   37
                                UTI ENERGY CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




2.       ACQUISITIONS

         Effective November 1, 1995, the Company purchased all of the capital
         stock of FWA Drilling Company, Inc. (FWA) for $14,000,000 in cash.
         FWA is engaged in contract drilling in Texas.  The acquisition was
         accounted for using the purchase method, and FWA's operating results
         since November 1, 1995, have been consolidated with the operating
         results of the Company.  The estimated fair market value of the assets
         acquired exceeded the purchase price by $4.9 million, which reduced
         long-term assets acquired.

         On August 14, 1996, the Company purchased all of the capital stock of
         the Viersen & Cochran Drilling Company ("Viersen").  Viersen was
         engaged in contract drilling in Oklahoma but had suspended its
         operations prior to the closing date.  The consideration paid for
         Viersen consisted of (i) $6,000,000 in cash paid on August 14, 1996;
         (ii) a two-year $8,000,000 promissory note executed by the Company in
         favor of the Seller; and (iii) stock warrants with a two-year term to
         purchase 200,000 shares of the Company's common stock, $.001 par value
         at $15 per share.  The acquisition was accounted for using the
         purchase method, and Viersen's operating results since August 14,
         1996, have been consolidated with the operating results of the
         Company.

         The following pro forma operating results reflect the inclusion of FWA
         for 1994 and 1995, and the inclusion of Viersen for 1995 and 1996:
<TABLE>
<CAPTION>
                                                                                  Years Ended December 31,
                                                                 --------------------------------------------------------
                                                                       1996                  1995                1994
                                                                 -----------------      --------------       ------------
                                                                                       (in thousands)
         <S>                                                      <C>                   <C>                  <C>
         Revenue  . . . . . . . . . . . . . . . . . . . . . . . . $      99,027         $      77,405        $     72,715
                                                                  =============         =============        ============
         Income from continuing
           operations . . . . . . . . . . . . . . . . . . . . . . $       3,935         $         151        $      2,343
                                                                  =============         =============        ============

         Earnings per share from
           continuing operations  . . . . . . . . . . . . . . . . $        1.02         $        0.05        $        .68
                                                                  =============         =============        =============
</TABLE>
3.       DISCONTINUED OPERATIONS

         On September 29, 1995, the Company sold its oil field supply business
         for cash of $4,870,000.  The net results of the oil field supply
         business for all periods presented are reported separately in the
         Consolidated Statement of Income as "Income from discontinued
         operations."  Prior period financial statements have been restated to
         report the oil field supply business as a discontinued operation.





                                      F-9
<PAGE>   38
                                UTI ENERGY CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




         The following is a summary of the results of operations of the
Company's oil field supply business:

<TABLE>
<CAPTION>
                                                           Years Ended December 31,
                                                      ----------------------------------
                                                           1995                 1994
                                                      --------------       -------------
                                                                (in thousands)
         <S>                                          <C>                  <C>
         Revenue . . . . . . . . . . . . . . . . . .  $      13,407        $     18,617
                                                      =============        ============
         Income from operations (net of income
           taxes of $14, and $13)  . . . . . . . . .  $          38        $         26
         Loss on disposal (net of income tax
           benefit of $129)  . . . . . . . . . . . .           (361)                  -
                                                      -------------        ------------

         Income (loss) from discontinued
           operations  . . . . . . . . . . . . . . .  $        (323)       $         26
                                                      =============        ============
</TABLE>
4.       INCOME TAXES

         Deferred income taxes reflect the net tax effects of temporary
         differences between the carrying amounts of assets and liabilities for
         financial reporting purposes and the amounts used for income tax
         purposes.  Significant components of the Company's deferred tax
         liabilities and assets as of December 31, 1996 and 1995, are as
         follows:
<TABLE>
<CAPTION>
                                                                    1996                 1995
                                                               --------------       -------------
                                                                         (in thousands)
                  <S>                                          <C>                  <C>
                  Deferred tax assets:
                     Alternative minimum tax credits  . . . .  $         675        $      1,056
                     Investment tax credits . . . . . . . . .            232                 531
                     Fuel tax credit  . . . . . . . . . . . .              -                  73
                     Accrued liabilities  . . . . . . . . . .            780                 646
                     Valuation allowance  . . . . . . . . . .           (232)               (636)
                                                               -------------        ------------
                        Total deferred tax asset  . . . . . .          1,455               1,670

                  Deferred tax liabilities:
                     Depreciation . . . . . . . . . . . . . .         (9,760)             (1,119)
                                                               --------------       ------------

                  Net deferred tax asset (liability)  . . . .  $      (8,305)       $        551
                                                               =============        ============
</TABLE>

         SFAS No. 109 requires that deferred tax assets be reduced by a
         valuation allowance if it is more likely than not that some or all of
         the deferred tax asset will not be realized.  During 1996 and 1995,
         the Company decreased its valuation allowance since management
         believes that it is more likely than not that the deferred tax asset
         will be realized primarily from future taxable income over the next
         several years.  Management assesses the realizability of the Company's
         deferred tax asset on a continuous basis and adjusts the valuation
         allowance in the event that circumstances affecting the realization of
         the deferred tax asset change.





                                      F-10
<PAGE>   39
                                UTI ENERGY CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




         At December 31, 1996, the Company has available approximately $232,000
         of investment tax credit carryforwards for which a valuation allowance
         has been provided in as much as it is the Company's opinion that these
         credits will not be available to reduce future tax payments.  The
         credits expire between 1998 and 2001.  The Company utilizes the
         flow-through method for recognizing investment tax credits.

         The components of the provision for income taxes from continuing
operations are as follows:

<TABLE>
<CAPTION>
                                                                  Years Ended December 31,
                                                   ------------------------------------------------------
                                                       1996                 1995                1994
                                                   -------------       --------------      --------------
                                                                       (in thousands)
        <S>                                        <C>                 <C>                 <C>
        Income taxes:
        Current:
           Federal   . . . . . . . . . . . . . .   $      1,372        $         57        $         442
           State   . . . . . . . . . . . . . . .            153                   1                   38
                                                   ------------        ------------        -------------
                                                          1,525                  58                  480
        Deferred:
           Federal   . . . . . . . . . . . . . .            740                (622)                 (95)
           State   . . . . . . . . . . . . . . .             59                 (28)                 (92)
                                                   ------------        -------------       -------------
                                                            799                (650)                (187)
                                                   ------------        ------------        -------------

                                                   $      2,324        $       (592)       $         293
                                                   ============        ============        =============
</TABLE>
         The difference between tax expense on continuing operations computed
         at the federal income tax rate of 34% and actual tax expense is as
         follows:

<TABLE>
<CAPTION>
                                                                  Years Ended December 31,
                                                   ------------------------------------------------------
                                                       1996                 1995                1994
                                                   -------------       --------------      --------------
                                                                       (in thousands)
        <S>                                        <C>                 <C>                 <C>       <C>
        Taxes at 34% applied to pre-tax
         income (loss) . . . . . . . . . . . . .   $      2,440        $         (57)      $         462
        State income tax . . . . . . . . . . . .            141                  (17)                (36)
        Permanent differences, principally
         nondeductible expenses  . . . . . . . .            123                   81                 125
        Change in valuation allowance and
         realization of tax credit carryforwards           (404)                (577)               (217)
        Other    . . . . . . . . . . . . . . . .             24                  (22)                (41)
                                                   ------------        -------------       -------------
                                                   $      2,324        $        (592)      $         293
                                                   ============        =============       =============
</TABLE>





                                      F-11
<PAGE>   40
                                UTI ENERGY CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




5.       WARRANTS

         As part of the consideration for redemption of its Series A Preferred
         Stock in December 1993, the Company issued warrants to purchase up to
         162,000 shares of Common Stock at an exercise price of $8.00 per
         share.  The warrants are exercisable in whole or in part for three
         years beginning December 14, 1995.

         As part of the consideration paid to acquire Viersen & Cochran
         Drilling Company, the Company issued warrants to purchase up to
         200,000 shares of Common Stock at an exercise price of $15 per share.
         The warrants are exercisable in whole or part for two years beginning
         August 14, 1996.

6.       LEASES

         Future minimum payments, for each year and in the aggregate, under
         capital leases and noncancelable operating leases with initial or
         remaining terms of one year or more consist of the following at
         December 31, 1996:

<TABLE>
<CAPTION>
                                                            Capital            Operating
                                                            Leases               Leases
                                                        --------------       -------------
                                                                  (in thousands)
           <S>                                          <C>       <C>        <C>     <C>
           1997  . . . . . . . . . . . . . . . . . . .  $         225        $        297
           1998  . . . . . . . . . . . . . . . . . . .             54                 236
           1999  . . . . . . . . . . . . . . . . . . .              2                 116
           2000  . . . . . . . . . . . . . . . . . . .              -                  90
           2001 and thereafter . . . . . . . . . . . .              -                  83
                                                        -------------        ------------
           Total minimum lease payments  . . . . . . .            281        $        822
           Amounts representing interest . . . . . . .             22        ============
                                                        -------------
           Present value of net minimum lease
             payments  . . . . . . . . . . . . . . . .  $         259
                                                        =============
</TABLE>

         Rental expense for all operating leases was approximately $448,000,
         $181,000 and $221,000 for the years ended December 31, 1996, 1995 and
         1994, respectively.





                                      F-12
<PAGE>   41
                                UTI ENERGY CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




7.       SUPPLEMENTAL CASH FLOW INFORMATION

         On August 14, 1996, the Company purchased all of the capital stock of
         the Viersen & Cochran Drilling Company.  In connection with the
         acquisition, the Company incurred deferred tax liabilities, assumed
         certain other liabilities and issued debt and stock warrants to the
         seller as follows (in thousands):

<TABLE>
         <S>                                                               <C>
         Cash paid for the capital stock . . . . . . . . . . . . . . . .   $      6,000
         Long-term debt issued . . . . . . . . . . . . . . . . . . . . .          8,000
           Less: discount  . . . . . . . . . . . . . . . . . . . . . . .           (312)
         Deferred tax liabilities  . . . . . . . . . . . . . . . . . . .          8,057
         Other directly related liabilities  . . . . . . . . . . . . . .            100
         Stock warrants issued . . . . . . . . . . . . . . . . . . . . .            710
                                                                           ------------
         Fair Value of Assets Acquired . . . . . . . . . . . . . . . . .   $     22,555
                                                                           ============
</TABLE>

         Other non-cash investing and financing activities for 1996 are as
follows (in thousands):

<TABLE>
                 <S>                                                               <C>     <C>
                 Tax benefit of exercised options reflected as
                   additional capital  . . . . . . . . . . . . . . . . . . . . .   $        800
                 Long-term debt issued for equipment acquisitions  . . . . . . .             34
</TABLE>

         Interest paid amounted to approximately $893,000, $427,000 and
         $388,000 for the years ended December 31, 1996, 1995 and 1994,
         respectively.

         Income taxes of approximately $1,389,000, $339,000 and $329,000 were
         paid in the years ended December 31, 1996, 1995 and 1994,
         respectively.





                                      F-13
<PAGE>   42
                                UTI ENERGY CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




8.       LONG-TERM DEBT

         The Company's long-term debt at December 31, 1996 and 1995, consisted
of the following:

<TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                        ---------------------------------
                                                                                             1996                 1995
                                                                                        --------------       ------------
                                                                                                  (in thousands)
         <S>                                                                            <C>                  <C>
         Promissory note, other, dated August 14, 1996, fixed
           rate (6.0%), due in two installments of $1,500,000
           due August 1997 and February 1998, with the final
           installment of $5,000,000 due August 1998  . . . . . . . . . . . . . . . . . $       8,000        $          -

         Promissory notes, financial institution, dated November 20,
           1995, variable rate (7.975% at December 31, 1996) due
           in $150,000 monthly installments through 2000  . . . . . . . . . . . . . . .         7,050               8,850

         Revolving credit agreement,bank, effective December 7, 1995,
           up to $8,400,000 through June 30, 1998, at the lower of
           the prime rate or other rate options available at the time
           of borrowing (8.25% at December 31, 1996). . . . . . . . . . . . . . . . . .         2,600                   -

         Promissory note, other, dated December 15, 1993,
           fixed rate (5.75%), due in minimum annual
           installments of $500,000 through 1999  . . . . . . . . . . . . . . . . . . .         1,500               2,000

         Capital lease obligations, interest at fixed
           (ranging from 5.5% to 9.5%) and variable (8.25%
           at December 31, 1996) rates, due in varying
           amounts through February 1999  . . . . . . . . . . . . . . . . . . . . . . .           259                 393
                                                                                        -------------        ------------
                                                                                               19,409              11,243
         Less unamortized discount  . . . . . . . . . . . . . . . . . . . . . . . . . .           244                   -
         Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         4,507               2,542
                                                                                        -------------        ------------

                                                                                        $      14,658        $      8,701
                                                                                        =============        =============
</TABLE>





                                      F-14
<PAGE>   43
                                UTI ENERGY CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




         Maturities of long-term debt, excluding unamortized discount, for the
         succeeding five years as of December 31, 1996, are as follows:

<TABLE>
<CAPTION>
                                                                     Long-Term              Capital
                                                                       Debt                 Leases             Total
                                                                 -----------------      --------------       ---------
                                                                                       (in thousands)
         <S>                                                      <C>                   <C>       <C>        <C>
         1997 . . . . . . . . . . . . . . . . . . . . . . . . . . $       4,300         $         207        $   4,507
         1998 . . . . . . . . . . . . . . . . . . . . . . . . . .        11,400                    50           11,450
         1999 . . . . . . . . . . . . . . . . . . . . . . . . . .         1,800                     2            1,802
         2000 . . . . . . . . . . . . . . . . . . . . . . . . . .         1,650                     -            1,650
</TABLE>

         The promissory note dated August 14, 1996, is guaranteed by a
         subsidiary Company and is secured by certain assets of that
         subsidiary.

         The promissory notes dated November 20, 1995, are secured by certain
         drilling equipment owned by subsidiaries of the Company and the
         Company is a guarantor of these notes.  The notes also include certain
         financial covenants covering tangible net worth, debt service coverage
         and leverage ratios.

         The revolving credit agreement, which is to be used for working
         capital and general corporate purposes, is secured by the pledge of
         Company accounts receivable and inventory.  Maximum borrowings under
         this facility in 1996 were $6,000,000, with average borrowings during
         the year of $1,116,308 and a weighted average interest rate on
         borrowings during the year of 8.32%.  A standby letter of credit of
         $400,000 is issued under this agreement.  The agreement also includes
         certain financial covenants covering tangible net worth, debt service
         coverage and leverage ratios.  The entire outstanding balance at
         December 31, 1996 has been treated as long- term, as it is the
         Company's intention not to pay this amount down until June 1998.

         The promissory note dated December 15, 1993, requires annual mandatory
         prepayments not exceeding $500,000 per year of principal, commencing
         on April 1, 1995, until the note is fully repaid in an amount equal to
         the Company's excess cash flow as defined.  Excess cash flow is
         generally net income adjusted for noncash expenditures, less the
         Company's $500,000 required annual redemption and the lesser of
         $1,750,000 or actual capital expenditures.  The Company will make a
         mandatory prepayment of $500,000 on April 1, 1997.


9.       STOCK PLANS

         In December 1993, the Company established a Restricted Stock Plan and
         a Non-Qualified Stock Option Plan.

         Under the Restricted Plan, 50,000 shares of Common Stock were awarded
         to certain full-time employees of the Company.  Common Stock awarded
         under the Restricted Stock Plan vests in five equal annual
         installments contingent upon the beneficiaries' continued employment
         by the Company.  As of December 31, 1996, 12,670 shares were unvested.





                                      F-15
<PAGE>   44
                                UTI ENERGY CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




         Under the Non-Qualified Stock Option Plan, the Company awarded options
         to senior management to purchase 486,600 shares of Common Stock with
         an exercise price of $8 per share.  The options vest in five equal
         annual installments contingent upon continued employment by the
         Company.  On December 15, 1995, the options were repriced from $8 to
         prices ranging from $5 5/16 (the fair market value on December 15,
         1995) to $6 3/8, depending upon the individual as well as the vesting
         date of the option.  In addition, the term of each option was reduced
         from ten years from the original date of grant to five years from date
         of repricing.  As of December 31, 1996, options to purchase 180,174
         shares were exercisable and options to purchase 116,786 shares were
         unvested.

         In July 1996, the Company's shareholders approved the award of options
         to purchase 120,000 shares of the Company's common stock at a price
         equal to the fair market value of the stock at the date of grant to
         REMY Investors and Consultants, Inc., general partner of REMY Capital
         Partners III, L.P. an owner of 48.2% of the Company's common stock.
         These options expire five years from the date of grant. The options
         were awarded in December of 1995 as a result of the services REMY
         Investors and Consultants, Inc. rendered in connection with the
         acquisition and related financing of FWA Drilling Company, Inc. and
         the Company's sale of the assets of Union Supply Company.

         In July 1996, the Company's shareholders approved the Non-Employee
         Director Stock Option Plan (Director Plan), a non qualified stock
         option plan.  Under the Director Plan, options to purchase up to an
         aggregate of 100,000 shares of Common Stock of the Company may be
         granted to non-employee directors of the Company.  The Director Plan
         provides for the grant of an option to purchase 2,500 shares of Common
         Stock to each non-employee director as of December 19, 1995 and to
         each future non-employee director as of the date he is first elected.
         Options granted pursuant to the Director Plan stipulate that the
         purchase price per share be equal to the fair market value of the
         Common Stock as of the date of grant.  Commencing on December 31,
         1996, each non-employee director who has served for a period of at
         least one year will automatically be granted on December 31 an option
         to purchase 1,250 shares of Common Stock at a purchase price equal to
         the fair market value of the Common Stock as of the date of grant.  At
         December 31, 1996, 88,750 shares were available for granting of such
         options.  No options under this plan will be granted after December
         18, 2005.  All options issued expire five years from the date of
         grant.

         In July 1996, the Company's shareholders approved the UTI Energy Corp.
         1996 Employee Stock Option Plan.  Under the plan, the Company can
         award options on up to 300,000 shares of Common Stock to certain
         full-time employees at a price equal to the fair market value of the
         stock at the date the option is granted.  During 1996, the Company
         awarded options to purchase 95,000 shares of Common Stock at an
         exercise price of $13.75 per share.  The options vest over one to five
         years, with no options being exercisable at December 31, 1996.

         FASB Statement 123 requires that pro forma information regarding net
         income and earnings per share be determined as if the Company had
         accounted for its employee stock options under the fair value method
         as defined in that Statement for options granted or modified after
         December 31, 1994.  The fair value for applicable options was
         estimated at the date of grant using a Black-Scholes option pricing
         model with the following weighted-average assumptions for 1995 and
         1996, respectively: risk-free interest rates of 5.38% and 6.70%;
         dividend yield of 0%; volatility factors of the expected market price
         of the Company's common stock of .307 and .438 and a weighted average
         expected life of the option of 2.64 and 3.52 years.





                                      F-16
<PAGE>   45
                                UTI ENERGY CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




         The Black-Scholes option valuation model was developed for use in
         estimating the fair value of traded options which have no vesting
         restrictions and are fully transferable.  In addition, option
         valuation models require the input of highly subjective assumptions
         including the expected stock price volatility.  Because the Company's
         employee stock options have characteristics significantly different
         from those of traded options, and because changes in the subjective
         input assumptions can materially affect the fair value estimate, in
         management's opinion, the existing models do not necessarily provide a
         reliable single measure of the fair value of its employee stock
         options.

         For purposes of pro forma disclosures, the estimated fair value of the
         options is amortized to expense over the options' vesting period.  The
         Company's pro forma information follows (in thousands except for
         earnings per share information):
<TABLE>
<CAPTION>
                                                           1996                 1995
                                                      --------------       -------------
         <S>                                          <C>                  <C>
         Proforma net income (loss)  . . . . . . . .  $       4,739        $       (107)

         Pro forma earnings (loss)
          per share:
            Primary  . . . . . . . . . . . . . . . .  $        1.24        $       (.03)
            Fully diluted  . . . . . . . . . . . . .  $        1.23        $       (.03)
</TABLE>

         A summary of the Company's stock option activity and related
         information for the years ended December 31 follows:
<TABLE>
<CAPTION>
                                                                                              Weighted-
                                                                           Shares              Average
                                                                            Under              Exercise
                                                                           Option               Price
                                                                       --------------       -------------
         <S>                                                                <C>             <C>
         Outstanding, December 31,
          1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . .        486,600        $        8.00
              Granted . . . . . . . . . . . . . . . . . . . . . . . .        434,460        $        5.55
              Cancelled . . . . . . . . . . . . . . . . . . . . . . .       (306,960)       $        8.00
                                                                       -------------

         Outstanding, December 31, 1995 . . . . . . . . . . . . . . .        614,100        $        6.27
              Granted . . . . . . . . . . . . . . . . . . . . . . . .         98,750        $       14.57
              Exercised . . . . . . . . . . . . . . . . . . . . . . .       (136,114)       $        7.63
              Cancelled . . . . . . . . . . . . . . . . . . . . . . .        (53,526)       $        8.00
                                                                       -------------

         Outstanding, December 31, 1996 . . . . . . . . . . . . . . .        523,210        $        7.30
                                                                       =============

         Exercisable, December 31,
              1994  . . . . . . . . . . . . . . . . . . . . . . . . .         97,320        $        8.00
              1995  . . . . . . . . . . . . . . . . . . . . . . . . .        377,900        $        6.37
              1996  . . . . . . . . . . . . . . . . . . . . . . . . .        307,680        $        5.64
</TABLE>

         Weighted-average fair value of options granted during 1996 and 1995
         were $5.59 per share and $1.32 per share, respectively.

         Exercise price for options outstanding as of December 31, 1996, ranged
         from $5.69 per share to $35.38 per share.  The weighted-average
         remaining contractual life of those options is 4.25 years.





                                      F-17
<PAGE>   46
                                UTI ENERGY CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




10.      DEFINED CONTRIBUTION PLANS

         The Company maintains two defined contribution plans.  Employees who
         have completed one year of service (1,000 active work hours) and are
         age 21 or older are eligible to participate.  Company matching
         provisions and vesting schedules vary by plan.  For the years ended
         December 31, 1996, 1995 and 1994, the Company made matching
         contributions totaling approximately $406,000, $156,000 and $189,000
         respectively.  Effective January 1, 1997, the two plans were combined.

11.      CONTINGENCIES

         The Company is involved in several claims arising in the ordinary
         course of business.  In the opinion of management, all of these claims
         are covered by insurance and these matters will not have a material
         adverse effect on the Company's financial position.

         The Company is partially self-insured for employee health insurance
         claims and for workers' compensation.  The Company incurs a maximum of
         $75,000 per employee under medical claims and a maximum of $250,000
         per event for workers' compensation claims.  Although the Company
         believes that adequate reserves have been provided for expected
         liabilities arising from its self-insured obligations, it is
         reasonably possible that management's estimates of these liabilities
         will change over the near term as circumstances develop.

12.      FINANCIAL INSTRUMENTS

         Concentrations of credit risk

         Financial instruments that potentially subject the Company to
         significant concentrations of credit risk consist principally of cash
         balances and trade accounts receivable.

         In 1996, one customer accounted for approximately 25% of the revenue
         and approximately 20% of accounts receivable at December 31, 1996.

         The Company performs ongoing credit evaluations of its customers and
         generally does not require material collateral.  The Company provides
         allowances for potential credit losses when necessary.

         The Company maintains cash balances with various financial
         institutions.  These financial institutions are located throughout the
         country and Company policy is designed to limit exposure to any one
         institution.  However, at December 31, 1996, the Company had cash in
         one institution in excess of insured limits.  The Company performs
         periodic evaluations of the relative credit standing of those
         financial institutions that are considered in the Company's investment
         strategy to ensure high credit quality.

         Cash and cash equivalents, accounts receivable and accounts payable:
         The carrying amounts reported in the balance sheets approximate fair
         value.

         Long and short-term debt:  The carrying amounts of the Company's
         borrowings under its short-term revolving credit arrangements and all
         promissory notes approximate their fair value.  The fair value of debt
         was estimated by management based upon current interest rates
         available to the Company at the respective balance sheet dates for
         similar issues.





                                      F-18
<PAGE>   47
                                UTI ENERGY CORP.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




13.      SUBSEQUENT EVENTS

         On January 27, 1997, the Company acquired the contract drilling
         division of Quarles Drilling, Inc. (Quarles) for $16.2 million,
         consisting of $8.1 million and 256,175 shares of Common Stock having a
         value at the time the agreement was negotiated of $8.1 million.  The
         cash portion of the purchase price was funded with advances under the
         line of credit of $4.1 million and a $4.0 million advance pursuant to
         a new bank term loan.  The term loan bears interest at the bank's
         prime rate and is secured by a pledge of certain of the Company's
         accounts receivable and inventory.  Under the terms of the acquisition
         agreement, Quarles is entitled to receive additional shares of Common
         Stock in the event the market price of the Common Stock on the
         effective date of resale is less than $31.69 per share.  The number of
         additional shares will be equal to the number of shares sufficient to
         provide Quarles with $8.1 million of Common Stock based on the market
         price of the Common Stock on such date.  In the event the market price
         of the Common Stock is greater than $31.69 per share on such date,
         Quarles is required to return a number of shares of Common Stock
         having a value (at such market price) equal to one-half of the amount
         by which the market price of the shares (at such market price)
         initially issued is greater than $8.1 million.

         On February 13, 1997, the Company exercised its option to purchase a
         leased facility for $485,000.

         On March 5, 1997, the Company entered into an agreement to purchase
         eight rigs and the contract drilling business of Southland Drilling
         Company, Ltd. ("Southland") for $28 million and warrants to purchase
         100,000 shares of Common Stock.  The Company's acquisition of
         Southland is subject to financing.  The Company has paid a
         non-refundable deposit of $500,000 towards the purchase of the rigs
         and will be required to pay an additional $500,000 as liquidated
         damages in the event the transaction does not close due to the
         Company's inability to obtain financing.  Southland may terminate the
         agreement if the Company does not obtain the required financing by
         April 15, 1997.  The Company currently expects to finance the
         acquisition of the Southland rigs through a combination of an
         institutional private placement of debt and bank borrowings, which is
         expected to include the issuance of warrants to purchase common stock.
         The Company also has the right to finance $13 million of the purchase
         price through a $13 million subordinated note payable to Southland.
         The Company, however, can reduce the purchase price by $750,000 if it
         elects to pay cash in lieu of such note.  Accordingly, the Company is
         currently pursuing financing for the entire purchase price to take
         advantage of this discount.  The Southland acquisition is also subject
         to various customary conditions to closing.  Although the Company
         currently anticipates obtaining financing for the Southland
         acquisition, there can be no assurance that the transaction will
         close.  If the Company is unable to obtain financing for the
         acquisition, earnings will be affected by the loss of the deposit and
         liquidated damages.





                                      F-19
<PAGE>   48
                                UTI ENERGY CORP.

                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>
                                                Balance at     Charged to       Charges-                     Balance
                                                Beginning      Costs and          Other                      at End
Description                                     of Period      Expenses (1)     Accounts      Deductions     of Period
-----------                                     -------------  ------------    ----------     ----------     ---------
                                                                              (in thousands)
<S>                                             <C>            <C>            <C>             <C>             <C>
Year Ended December 31, 1996
   Deducted from asset accounts:
       Allowance for doubtful
         accounts . . . . . . . . . . . . . .   $     193      $     141      $       -       $      29 (2)   $    305
       Reserve for inventory  . . . . . . . .           1              7              -               7 (3)          1
                                                ---------      ---------      ---------       ---------       --------

          Totals  . . . . . . . . . . . . . .   $     194      $     148      $       -       $      36       $    306
                                                =========      =========      =========       =========       ========

Year Ended December 31, 1995
   Deducted from asset accounts:
       Allowance for doubtful
         accounts . . . . . . . . . . . . . .   $     203      $     (10)     $       -       $       -       $    193
       Reserve for inventory  . . . . . . . .           2             (1)             -               -              1
                                                ---------      ---------      ---------       ---------       --------

          Totals  . . . . . . . . . . . . . .   $     205      $     (11)     $       -       $       -       $    194
                                                =========      =========      =========       =========       ========

Year Ended December 31, 1994
   Deducted from asset accounts:
       Allowance for doubtful
         accounts . . . . . . . . . . . . . .   $     136      $      70      $       -       $       3 (2)   $    203
       Reserve for inventory  . . . . . . . .          10             (8)             -               -              2
                                                ---------      ---------      ---------       ---------       --------

          Totals  . . . . . . . . . . . . . .   $     146      $      62      $       -       $       -       $    205
                                                =========      =========      =========       =========       ========
</TABLE>

(1)  Net of recoveries.
(2)  Uncollectible accounts written off.
(3)  Inventory Adjustment.





                                      S-1
<PAGE>   49
                                   SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

UTI ENERGY CORP.

By:      /s/ Vaughn E. Drum
         ------------------------------------
         Vaughn E. Drum, President,
         Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.


<TABLE>
<CAPTION>
                     SIGNATURE                                            TITLE                            DATE
---------------------------------------------------   ---------------------------------------------   --------------
<S>                                                   <C>                                             <C>
               /s/ Vaughn E. Drum                     President, Chief Executive Officer              March 25, 1997
---------------------------------------------------     and Director
                   Vaughn E. Drum

               /s/ Mark S. Siegel                     Chairman and Director                           March 25, 1997
---------------------------------------------------
                   Mark S. Siegel

              /s/ Kenneth N. Berns                    Director                                        March 25, 1997
---------------------------------------------------
                  Kenneth N. Berns

                /s/ Terry H. Hunt                     Director                                        March 25, 1997
---------------------------------------------------
                    Terry H. Hunt

               /s/ P. Blake Dupuis                    Vice President, Treasurer and                   March 25, 1997
---------------------------------------------------     Chief Financial Officer
                   P. Blake Dupuis

               /s/ Nadine C. Smith                    Director                                        March 25, 1997
---------------------------------------------------
                   Nadine C. Smith

               /s/ Robert B. Spears                   Director                                        March 25, 1997
---------------------------------------------------
                   Robert B. Spears
</TABLE>


<PAGE>   50
                               INDEX TO EXHIBITS
<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                                                DESCRIPTION
------------------------------------------------------------------------------------------------------------------------
        <S>        <C>  <C>
         3.1       -    Restated Certificate of Incorporation of the Company (incorporated by reference to Amendment No.
                        1 to the Company's Registration Statement on Form S-1 (No. 33-69726).

         3.2       -    Amendment to Restated Certificate of Incorporation (incorporated by reference to Amendment No. 1
                        to the Company's Registration Statement on Form S-1 (No. 33-69726).

         3.3       -    Amendment to Restated Certificate of Incorporation (incorporated by reference to the Company's
                        Annual Report on Form 10-K for the year ended December 31, 1994).

         3.4       -    By-laws of the Company, as amended (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1993).

         4.1       -    See Exhibit Nos. 3.1 and 3.2 for provisions of the Restated Certificate of Incorporation and
                        amended By-laws of the Company defining the rights of the holders of Common Stock.

         4.2       -    Form of Common Stock Certificate (incorporated by reference to Amendment No. 1 to the Company's
                        Registration Statement on Form S-1 (No. 33-69726)).

         4.4       -    Stock Purchase Warrant dated August 14, 1996, between the Sam K. Viersen, Jr. Trust dated
                        September 9, 1986, as Amended and Restated on May 11, 1994, and UTI Energy Corp. (incorporated
                        by reference to the Company's Current Report on Form 8-K dated August 28, 1996).

         4.5       -    Warrant to purchase 162,000 shares of Common Stock (incorporated by reference to Amendment No. 4
                        to the Company's Registration Statement on Form S-1 (No. 33-69726)).

        10.1       -    Amended and Restated Loan and Security Agreement dated December 7, 1995 (the "Mellon Line of
                        Credit"), by and among UTI Energy Corp., UTICO, Inc., FWA Drilling Company, Triad Drilling
                        Company, Universal Well Services, Inc., and USC, Incorporated, and Mellon Bank, N.A.
                        (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
                        December 31, 1995).

        10.2       -    First Amendment and Modification to the Mellon Line of Credit effective March 14, 1996
                        (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended
                        December 31, 1995).

        10.3       -    Second Amendment and Modification to the Mellon Line of Credit effective August 14, 1996
                        (incorporated by reference to the Company's Current Report on Form 8-K dated January 27, 1997).

        10.4       -    Third Amendment and Modification to the mellon Line of Credit effective January 25, 1997
                        (incorporated by reference to the Company's Current Report on Form 8-K dated January 27, 1997).

        10.5       -    Loan and Security Agreement dated as of January 23, 1997, by and among FWA Drilling Company,
                        Inc., International Petroleum Service Company, Triad Drilling Company, Universal Well Services,
                        Inc., USC Incorporated, the Company, UTICO, Inc., Viersen & Cochran Drilling Company and Mellon
                        Bank, N.A. (incorporated by reference to the Company's Current Report on Form 8-K dated
                        January 27, 1997).

        10.6       -    Noted dated January 23, 1997, in the principal amount of $4.0 million, from FWA Drilling
                        Company, Inc., International Petroleum Service Company, Triad Drilling Company, Universal Well
                        Services, Inc., USC Incorporated, the Company UTICO, Inc., Viersen & Cochran Drilling Company in
                        favor of Mellon Bank, N.A. (incorporated by reference to the Company's Current Report on Form 8-K
                        dated January 27, 1997).

        10.7       -    Promissory Note of UTI Energy Corp. dated August 14, 1996, in the principal amount of $8.0
                        million in favor of the Sam K. Viersen, Jr. Trust dated September 9, 1986, as Amended and
                        Restated on May 11, 1994 (incorporated by reference to the Company's Current Report on Form 8-K
                        dated August 28, 1996).

        10.8       -    Hypothecation/Security Agreement dated August 14, 1996, by Viersen & Cochran Drilling Company in
                        favor of the Sam K. Viersen, Jr. Trust dated September 9, 1996, as Amended and Restated on
                        May 11, 1994 (incorporated by reference to the Company's Current Report on Form 8-K dated
                        August 28, 1996).

        10.9       -    Promissory Note dated December 14, 1993, from the Company in favor of UGID Holding Corporation
                        (incorporated by reference to Amendment No. 4 to the Company's registration statement on Form S-
                        1 (No. 33-69726)).

       10.10       -    Loan and Security Agreement dated November 20, 1995, by and among Triad Drilling Company,
                        International Petroleum Service Company, FWA Drilling Company, Inc., and The CIT Group/Equipment
                        Financing, Inc. (incorporated by reference to the Company's Annual Report on Form 10-K for the
                        year ended December 31, 1995).

       10.11       -    Rider A to Loan and Security Agreement dated November 20, 1995, by and among Triad Drilling
                        Company, International Petroleum Service Company, FWA Drilling Company, Inc., and The CIT
                        Group/Equipment Financing, Inc. (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1995).

       10.12       -    Form of Promissory Note dated November 20, 1995, between each of FWA Drilling Company, Inc.,
                        Triad Drilling Company, International Petroleum Service Company, and The CIT Group/Equipment
                        Financing, Inc. (incorporated by reference to the Company's Annual Report on Form 10-K for the
                        year ended December 31, 1995).

       10.13       -    Guaranty Agreement dated December 20, 1995, by FWA Drilling Company, Inc. in favor of The CIT
                        Group/Equipment Financing, Inc. (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1995).

       10.14       -    Guaranty Agreement dated December 20, 1995, by Triad Drilling Company in favor of The CIT
                        Group/Equipment Financing, Inc. (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1995).

       10.15       -    Guaranty Agreement dated December 20, 1995, by International Petroleum Service Company in favor
                        of The CIT Group/Equipment Financing, Inc. (incorporated by reference to the Company's Annual
                        Report on Form 10-K for the year ended December 31, 1995).

       10.16       -    Guaranty Agreement dated December 20, 1995, by UTICO, Inc. in favor of The CIT Group/Equipment
                        Financing, Inc. (incorporated by reference to the Company's Annual Report on Form 10-K for the
                        year ended December 31, 1995).

       10.17       -    Guaranty Agreement dated December 20, 1995, by Universal Well Services, Inc. in favor of The CIT
                        Group/Equipment Financing, Inc. (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1995).

       10.18       -    Guaranty Agreement dated December 20, 1995, by UTI Energy Corp. in favor o The CIT
                        Group/Equipment Financing, Inc. (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1995).

       10.19       -    Subscription Agreement dated September 19, 1995, by and between Shamrock Holdings of California,
                        Inc. and UTI Energy Corp. (incorporated by reference to the Company's Annual Report on Form 10-K
                        for the year ended December 31, 1995).

       10.20       -    Purchase and Sale Agreement dated September 29, 1995, between UTI Energy Corp. and Union Supply
                        Company as Sellers and Continental EMSCO as Buyer (incorporated by reference to the Company's
                        Current Report on Form 8-K dated October 13, 1995).

       10.21       -    Agreement for Purchase and Sale of Common Stock of FWA Drilling Company, Inc. dated November 17,
                        1995, between UTI Energy Corp. and USX Corporation (incorporated by reference to the Company's
                        Current Report on Form 8-K dated December 1, 1995).

       10.22       -    1993 Restricted Stock Plan (incorporated by reference to Amendment No. 1 to the Company's
                        Registration Statement on Form S-1 (No. 33-69726)).

       10.23       -    UTI Energy Corp. 1996 Employee Stock Option Plan (incorporated by reference to the Company's
                        Registration Statement on Form S-8 dated October 2, 1996).

       10.24       -    UTI Energy Corp. Non-Employee Director Stock Option Plan (incorporated by reference to the
                        Company's Registration Statement on Form S-8 dated October 2, 1996).

       10.25       -    1993 Non-Qualified Incentive Stock Option Plan (incorporated by reference to Amendment No. 3 to
                        the Company's Registration Statement on Form S-1 (No. 33-69726)).

       10.26       -    Warrant Agreement dated as of December 19, 1996, between the Company and Remy Consultants
                        Incorporated [incorporated by reference to proxy].

       10.27       -    Option Agreement dated as of August 31, 1996, between the Company and Eddie L. Nowell
                        (incorporated by reference to the Company's Registration Statement on Form S-8 dated October 2,
                        1996).

       10.28       -    Amended and Restated Employment Agreement with Vaughn E. Drum dated December 19, 1996
                        (incorporated by reference to the Company's Current Report ton Form 8-K dated January 27, 1997).

       10.29       -    Amended and Restated Employment Agreement with Gerald J. Guz dated December 19, 1996
                        (incorporated by reference to the Company's Current Report on Form 8-K dated January 27, 1997).

       10.30       -    Amended and Restated Employment Agreement with Vincent J. Donahue dated December 19, 1996
                        (incorporated by reference to the Company's Current Report on Form 8-K dated January 27, 1997).

       10.31       -    Amended and Restated Employment Agreement Terry L. Pope dated December 19, 1996 (incorporated by
                        reference to the Company's Current Report on Form 8-K dated January 27, 1997).

       10.32       -    Asset Purchase Agreement dated December 21, 1996, between the Company and Quarles Drilling
                        Corporation (incorporated by reference to the Company's Current Report on Form 8-K dated
                        January 27, 1997).

      *10.33       -    Asset Purchase Agreement dated March 5, 1997, by and between the Company and Southland Drilling
                        Company, Ltd.

       10.34       -    Registration Rights Agreement with Bear Stearns & Co. Inc. dated March 25, 1994, as assigned to
                        Remy Capital Partners III, L.P. (incorporated by reference to the Company's Annual Report on
                        Form 10-K for the year ended December 31, 1994).

       *21.1       -    List of subsidiaries of the Company.

       *23.1       -    Consent of Ernst & Young LLP.

       *27.1       -    Financial Data Schedule.
</TABLE>

*Filed herewith.