##### Table of Contents



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

For the Fiscal Year Ended December 31, 2000



|      |                                                                                                                                                  
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------
|[   ] | Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to __________.

Commission File Number 1-12542

UTI ENERGY CORP.(Exact name of registrant as specified in its charter)

|                                                      |  |                                     
|----------------------------------------------------- |  | ------------------------------------
|Delaware                                              |  | 23-2037823                          
|(State or other jurisdiction of incorporation)        |  | (I.R.S. Employer Identification No.)
|                                                     
|Suite 225N
16800 Greenspoint Park DriveHouston, Texas |  | 77060-2390                          
|(Address of principal executive offices)              |  | (Zip Code)                          

(281) 873-4111(Registrants telephone number, including area code)

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

|                              |  |                                            
|----------------------------- |  | -------------------------------------------
|Common Stock, Par Value $.001 |  | American Stock Exchange                    
|(Title of each class)         |  | (Name of each exchange on which registered)

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. [  ]

Aggregate market value of the voting stock held by non-affiliates of the
registrant.

$1,172,993,184 at February 9, 2001

Number of shares outstanding of each class of registrants Common Stock, as of
the latest practicable date.

37,572,030 shares of Common Stock at February 9, 2001

Documents incorporated by reference.

Proxy statement to be filed pursuant to Regulation 14A
which involves the election of directors (Page III)





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TABLE OF CONTENTS



|                                                           |                                                                                               |  |  |  |  |  |  | 
|---------------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                                           | PART I                                                                                       
|                                                           | Item 1. BUSINESS                                                                             
|                                                           | Item 2. PROPERTIES                                                                           
|                                                           | Item 3. LEGAL PROCEEDINGS                                                                    
|                                                           | Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                                                           | PART II                                                                                      
|                                                           | Item 5. MARKET FOR UTIS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                       
|                                                           | Item 6. SELECTED FINANCIAL DATA                                                              
|                                                           | Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                           | Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|                                                           | Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|                                                           | Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|                                                           | PART III                                                                                     
|                                                           | PART IV                                                                                      
|                                                           | Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                     
|Report of Independent Auditors                            
|CONSOLIDATED BALANCE SHEETS                               
|CONSOLIDATED STATEMENTS OF OPERATIONS                     
|CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
|CONSOLIDATED STATEMENTS OF CASH FLOWS                     
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)    
|SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS             
|                                                           | EXHIBIT INDEX                                                                                
|Agreement and Plan of Merger dated 2/4/2001               
|Amendment to Rights Agreement dated 2/9/2001              
|List of Subsidiaries                                      
|Consent of Ernst & Young LLP                              



---






PART I




Item 1. BUSINESS

Introduction

UTI Energy Corp. is a leading provider of onshore contract drilling
services to companies that explore for and produce oil and natural gas. UTI
operates one of the largest fleets of drilling rigs used to drill oil and
natural gas wells on land in North America. As of February 9, 2001, UTI had a fleet of 150 land drilling rigs.
A drilling rig includes the structure, power source and machinery necessary to allow a drill bit to
penetrate rock to a depth desired by the customer. UTIs drilling rigs
operate in the oil and natural gas producing basins of:



| |  |  | Louisiana                                                  
| | - |  | -----------------------------------------------------------
| |  |  | New Mexico                                                 
| |  |  | Oklahoma                                                   
| |  |  | Texas                                                      
| |  |  | Western Canada (Alberta, British Columbia and Saskatchewan)

UTI
also provides pressure pumping services in the Appalachian Basin. Pressure
pumping services consist primarily of well stimulation and cementing for the
completion of new wells and remedial work on existing wells. Well stimulation
involves processes inside a well designed to enhance the flow of oil, natural
gas or other desired substances from the well. Cementing is the process of
inserting material between the hole and the pipe to center and stabilize the
pipe in the hole.

UTI operates principally in two business segments: drilling oil or
natural gas wells on land and pressure pumping. Financial information and
other disclosures relating to these business segments are provided in the Notes
to Consolidated Financial Statements.

On February 5, 2001, UTI announced that its Board of Directors along with
the Board of Directors of Patterson Energy Inc. approved a merger of the two
companies. According to the terms of the merger agreement between UTI and
Patterson, shareholders of UTI will receive one share of Patterson common stock
for each share of UTI common stock and Patterson will assume UTIs outstanding
options and warrants. The board of directors of the new company will consist
of eleven directors, six of which will be selected by Patterson and five of
which would be selected by UTI. Although the merger agreement does not specify
who will be the officers of the new company, management of UTI understands that
Mark S. Siegel, UTIs Chairman of the Board, would be the Chairman of the Board
and Cloyce A. Talbott, Pattersons Chairman of the Board and Chief Executive Officer, would be Chief
Executive Officer. The combined company will be the second largest United
States land-based drilling service contractor with 302 drilling rigs and will
be called Patterson-UTI Energy, Inc.

2



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##### Table of Contents



Under the terms of the merger agreement, both UTI and Patterson have
agreed not to solicit competing offers, but the boards of directors of each
company are free to consider and accept an unsolicited offer if, based on
advice of counsel, it believes it must do so in the exercise of its fiduciary
duty. In the event a party accepts an unsolicited offer, or its board of
directors withdraws its recommendation in light of an unsolicited offer, or the
shareholders do not vote to approve the merger because of an unsolicited offer,
the other party would be entitled to receive a breakup fee of $32.5 million
plus reimbursement of expenses of up to $2.5 million. In the event the
shareholders of one party do not vote to approve the merger and the other party
is not in default and is ready, willing and able to perform its agreement, the
party whose shareholders vote against the merger will be required to pay to the
other party $2.5 million, plus up to an additional $2.5 million in expenses.

The merger is subject to customary conditions to closing, including
approval by the shareholders of both companies, as well as any necessary
regulatory filings and approvals, such as the anti-trust provisions of the
Hart-Scott-Rodino Act. There can be no assurance that the merger will be
consummated in accordance with the terms of the merger agreement, if at all.

Land Drilling

UTIs rigs can drill to depths ranging from 8,000 to 30,000 feet. UTI
continues to increase its number of active rigs as illustrated by the following table:

|                      |  |                       |  |                       
|--------------------- |  | --------------------- |  | ----------------------
|                      |  | As ofFebruary 9, 2001 |  | As ofDecember 31, 1999
|                      |  |                       |  |                       
|Number of Active Rigs |  | 111                   |  | 70                    

An active rig is a rig that is currently generating revenue.  An inactive
rig is a rig that is not generating revenue as of the date of the rig count.  UTI had 39 inactive rigs as of February 9, 2001.
Generally, UTI intends to place the inactive rigs into service in an orderly manner as regional market conditions merit and trained
crews are retained. Some of UTIs inactive rigs cannot be activated without incurring refurbishing expenditures which are
estimated to range from less than $100,000 to $3 million. In limited situations,  UTI may use inactive rigs for parts.

UTIs rig utilization rate, which is calculated by dividing the
operating days by total days rigs are available, was
62% for the year ended December 31, 2000. UTIs rig utilization during the
fourth quarter of 2000 was 70%.

UTIs land drilling services are performed through regional drilling
units:



| |  |  | East Texas (UTI Drilling Company)            
| | - |  | ---------------------------------------------
| |  |  | Mid-Continent (UTI Drilling Company Triad)  
| |  |  | New Mexico/West Texas (UTI Drilling Company) 
| |  |  | South Texas (UTI Drilling Company Southland)
| |  |  | Western Canada (Phelps Drilling Co.)         

3



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##### Table of Contents



UTIs regional offices for contract drilling are located in:



| |  |  | Calgary, Alberta       
| | - |  | -----------------------
| |  |  | Midland, Texas         
| |  |  | Oklahoma City, Oklahoma
| |  |  | Tyler, Texas           
| |  |  | Victoria, Texas        

UTI deploys rigs and equipment among the various drilling units based on
regional need and profitability. UTIs land drilling customers include major
oil companies and various sized independent producers.

Drilling Rigs

A land drilling rig consists of various components, including:



| |  |  | engines           
| | - |  | ------------------
| |  |  | drawworks or hoist
| |  |  | derrick or mast   
| |  |  | substructure      
| |  |  | pumps             
| |  |  | blowout preventers

Over the life of a typical drilling rig, many of these components are
replaced or rebuilt on a periodic basis. Other components, including the
derrick/mast and substructure, can be utilized for extended periods of time
with proper maintenance. UTI follows a policy of keeping its drilling rigs
technologically competitive and well maintained.

The following table shows the current distribution of rigs among UTIs
regional units as of
February 9, 2001:

|                      |  |        |     |          |  |               |    |          |  |  |     |  |  |  |            |  |  |  |  | 
|--------------------- |  | ------ | --- | -------- |  | ------------- | -- | -------- |  |  | --- |  |  |  | ---------- |  |  |  |  | 
|                      |  |        |     |          |  | Average Rated
|                      |  | Active |     | Inactive |  | Total         |    | Drilling
|Region                |  | Rigs   |     | Rigs     |  | Rigs          |    | Depths  
|                      |  |        |     |          |  |               |    |         
|East Texas            |  |        | 15  |          |  |               | 4  |          |  |  | 19  |  |  |  | 16,000 ft. | 
|                     
|                     
|                     
|                     
|Mid Continent         |  |        | 19  |          |  |               | 16 |          |  |  | 35  |  |  |  | 13,000 ft. | 
|                     
|                     
|                     
|                     
|New Mexico/West Texas |  |        | 47  |          |  |               | 14 |          |  |  | 61  |  |  |  | 13,500 ft. | 
|                     
|                     
|                     
|                     
|South Texas           |  |        | 16  |          |  |               | 3  |          |  |  | 19  |  |  |  | 16,500 ft. | 
|                     
|                     
|                     
|                     
|Western Canada        |  |        | 14  |          |  |               | 2  |          |  |  | 16  |  |  |  | 9,000 ft.  | 
|                      |  |        |     |          |  |               |    |          |  |  |     | 
|Total                 |  |        | 111 |          |  |               | 39 |          |  |  | 150 | 
|                      |  |        |     |          |  |               |    |          |  |  |     | 

4



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##### Table of Contents



The following table sets forth certain data concerning UTIs drilling
operations:

|                                                                                 |  |                          |  |  |  |      |         |      |  |      |         |   |  |   |         |  
|-------------------------------------------------------------------------------- |  | ------------------------ |  |  |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                                 |  | Years Ended December 31,
|                                                                                 |  |                          |  |  |  |      |         |      |  |     
|                                                                                 |  |                          |  |  |  | 2000 |         | 1999 |  | 1998
|                                                                                 |  |                          |  |  |  |      |         |      |  |     
|                                                                                 |  | (dollars in thousands)  
|                                                                                
|Revenues                                                                         |  |                          |  |  |  | $    | 253,887 |      |  | $    | 134,870 |   |  | $ | 162,600 |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Direct operating costs
(excluding depreciation and amortization)                 |  |                          |  |  |  | $    | 195,360 |      |  | $    | 110,958 |   |  | $ | 124,779 |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Selling, general and administrative                                              |  |                          |  |  |  | $    | 3,943   |      |  | $    | 2,818   |   |  | $ | 3,767   |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Depreciation and amortization                                                    |  |                          |  |  |  | $    | 26,369  |      |  | $    | 22,490  |   |  | $ | 18,350  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Operating days(1)                                                                |  |                          |  |  |  |      | 30,998  |      |  |      | 17,823  |   |  |   | 20,308  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average revenue per day                                                          |  |                          |  |  |  | $    | 8.19    |      |  | $    | 7.57    |   |  | $ | 8.01    |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average direct operating costs
(excluding depreciation and amortization) per day |  |                          |  |  |  | $    | 6.30    |      |  | $    | 6.23    |   |  | $ | 6.14    |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average margin per day(2)                                                        |  |                          |  |  |  | $    | 1.89    |      |  | $    | 1.34    |   |  | $ | 1.87    |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Number of owned rigs at end of year                                              |  |                          |  |  |  |      | 144     |      |  |      | 125     |   |  |   | 109     |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average number of rigs owned during year                                         |  |                          |  |  |  |      | 136     |      |  |      | 112     |   |  |   | 100     |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average rigs operating                                                           |  |                          |  |  |  |      | 85      |      |  |      | 49      |   |  |   | 56      |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Rig utilization percentage(3)                                                    |  |                          |  |  |  |      | 62      | %    |  |      | 43      | % |  |   | 55      | %
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Capital expenditures                                                             |  |                          |  |  |  | $    | 34,186  |      |  | $    | 7,116   |   |  | $ | 32,912  |  



---

|(1) |  | An operating day is defined as a day during which a rig is being
operated, mobilized, assembled or dismantled while under contract.                                                                                                         
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Average margin per day represents average revenue per day minus average
direct operating costs per day and excludes provisions for bad debts,
other charges, depreciation and amortization and selling, general and
administrative expenses.
|   
|   
|   
|   
|(3) |  | Utilization rates are calculated by dividing the operating days by the
total available days. Available days are
calculated by multiplying rigs owned by the days in the period under
review.                                                

Drilling Contracts

UTIs land drilling rigs are employed under individual contracts. The
drilling contract may be for a single well or a number of wells. Drilling
contracts are generally obtained through competitive bidding.
Contracts generally are subject to termination by the customer on short notice.
Drilling contracts may provide for compensation on a dayrate, footage or
turnkey basis, which are described below:

1) Dayrate Contract

A dayrate contract provides for a basic rate per day when drilling. A
dayrate contract provides for lower rates when the rig is moving or when
drilling operations are interrupted or restricted by:



| |  |  | equipment breakdowns                      
| | - |  | ------------------------------------------
| |  |  | adverse weather conditions                
| |  |  | other conditions beyond the control of UTI

5



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##### Table of Contents



In addition, dayrate 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       
| | - |  | ----------------------------------------
| |  |  | nature of the operations to be performed
| |  |  | duration of the work                    
| |  |  | equipment and services to be provided   
| |  |  | geographic area involved                
| |  |  | other variables                         

2) Footage and Turnkey Contracts

In a footage contract, UTI undertakes to drill a well to a specified depth
at a fixed price per foot of hole. In a turnkey contract, UTI undertakes to
drill a well to a specified depth for a fixed price. UTI enters into footage
and turnkey contracts in situations in which UTI possesses experience and
expertise in the geological and operational aspect of the project.

Footage and turnkey contracts have the following characteristics that are
not normally found under contracts where UTI is paid on a daily rental basis:



| |  |  | UTI must bear the cost of performing the drilling services until the target depth is reached
| | - |  | --------------------------------------------------------------------------------------------
| |  |  | UTI must make significant cash commitments                                                  
| |  |  | UTI generally furnishes other services including testing, coring and casing the hole        
| |  |  | UTI earns compensation upon completion of the well to the specified depth                   
| |  |  | UTI bears the cost of unanticipated downhole problems and other cost overruns               

For the year ended December 31, 2000, UTI completed wells under all three
types of contracts as the following table shows:

|        |  |                               |    |  
|------- |  | ----------------------------- | -- | -
|        |  | Percentage of Completed Wells
|        |  |                              
|Dayrate |  |                               | 59 | %
|       
|       
|       
|       
|Footage |  |                               | 27 | %
|       
|       
|       
|       
|Turnkey |  |                               | 14 | %

UTI also provides horizontal boring services which uses vertical drilling
technology to bore horizontal holes. These services are used for the placement
of pipelines and cables, including fiber optic cables, under obstacles such as
highways and railroads. These services are currently marketed in the eastern
half of the United States.

Pressure Pumping

UTI, through its subsidiary Universal Well Services, Inc., is a leading
provider of pressure pumping services in the northern Appalachian Basin.
Pressure pumping services consist primarily of:



| |  |  | well stimulation and cementing for the completion of new wells
| | - |  | --------------------------------------------------------------
| |  |  | remedial work on existing wells                               

6



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##### Table of Contents



Generally, all completed Appalachian Basin wells require cementing
services before production commences. Cementing is the process of inserting
material between the hole wall and the pipe to center and stabilize the pipe in
the hole. In addition, most completed wells drilled in the Appalachian Basin
require some form of fracturing or other stimulation to enhance the flow of oil
and natural gas to the well bore.

UTI continuously maintains its pressure pumping equipment. Virtually all
of the pressure pumping equipment is in use on a regular basis. As of February
9, 2001, UTI operated the following pressure pumping equipment:

|                         |  |          |     | 
|------------------------ |  | -------- | --- | 
|                         |  | Number  
|Equipment Type           |  | of Units
|                         |  |         
|Cement pumper trucks     |  |          | 14  | 
|                        
|                        
|                        
|                        
|Fracturing pumper trucks |  |          | 21  | 
|                        
|                        
|                        
|                        
|Nitrogen pumper trucks   |  |          | 15  | 
|                        
|                        
|                        
|                        
|Blender trucks           |  |          | 11  | 
|                        
|                        
|                        
|                        
|Bulk acid trucks         |  |          | 7   | 
|                        
|                        
|                        
|                        
|Bulk cement trucks       |  |          | 16  | 
|                        
|                        
|                        
|                        
|Bulk nitrogen trucks     |  |          | 6   | 
|                        
|                        
|                        
|                        
|Bulk sand trucks         |  |          | 18  | 
|                        
|                        
|                        
|                        
|Connection trucks        |  |          | 5   | 
|                        
|                        
|                        
|                        
|Other trucks             |  |          | 6   | 
|                         |  |          |     | 
|Total                    |  |          | 119 | 
|                         |  |          |     | 

The following table shows certain data concerning UTIs pressure pumping operations:

|                                                                                 |  |                          |  |      |  |      |        |  |  |   |        |  |  |   |        | 
|-------------------------------------------------------------------------------- |  | ------------------------ |  | ---- |  | ---- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                                                                 |  | Years Ended December 31,
|                                                                                 |  |                         
|                                                                                 |  | 2000                     |  | 1999 |  | 1998
|                                                                                 |  |                          |  |      |  |     
|                                                                                 |  | (dollars in thousands)  
|                                                                                
|Revenues                                                                         |  |                          |  |      |  | $    | 21,465 |  |  | $ | 20,721 |  |  | $ | 23,365 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Direct operating costs
(excluding depreciation and amortization)                 |  |                          |  |      |  | $    | 13,403 |  |  | $ | 12,219 |  |  | $ | 14,041 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Selling, general and administrative                                              |  |                          |  |      |  | $    | 3,197  |  |  | $ | 3,457  |  |  | $ | 3,216  | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Depreciation and amortization                                                    |  |                          |  |      |  | $    | 1,584  |  |  | $ | 1,391  |  |  | $ | 1,043  | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Total jobs                                                                       |  |                          |  |      |  |      | 3,329  |  |  |   | 2,892  |  |  |   | 3,292  | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average revenue per job                                                          |  |                          |  |      |  | $    | 6.45   |  |  | $ | 7.16   |  |  | $ | 7.10   | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average direct operating costs
(excluding depreciation and amortization) per job |  |                          |  |      |  | $    | 4.03   |  |  | $ | 4.22   |  |  | $ | 4.27   | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average margin per job(1)                                                        |  |                          |  |      |  | $    | 2.42   |  |  | $ | 2.94   |  |  | $ | 2.83   | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Capital expenditures                                                             |  |                          |  |      |  | $    | 4,426  |  |  | $ | 2,307  |  |  | $ | 3,895  | 



---

|(1) |  | Average margin per job represents average revenue per job minus average
direct operating costs per job and excludes provisions for bad debts,
other charges, depreciation and amortization and selling, general and
administrative expenses.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7



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##### Table of Contents



Other Operations

In addition to its operating activities, UTI has invested in oil and
natural gas wells. These investments are principally in the Appalachian and
Permian Basins. The net book value of such investments was $169,000 at
December 31, 2000 and $318,000 at December 31, 1999.

Industry Conditions

Demand and prices for UTIs services depend upon the level of activity in
the onshore oil and natural gas exploration and production industry in the
United States and Canada. Because this industry is volatile, levels of oil and
natural gas exploration activities in UTIs markets and demand for UTIs
services may change significantly. Further, any material changes in the demand
for or supply of oil or natural gas could materially impact the demand for
UTIs services.

The level of drilling activity in the onshore oil and natural gas
exploration and production industry in the United States and Canada is
influenced by numerous factors over which UTI has no control, including the
following:



| |  |  | the level of oil and natural gas prices                                 
| | - |  | ------------------------------------------------------------------------
| |  |  | expectations about future oil and natural gas prices                    
| |  |  | the cost of exploring for, producing and delivering oil and natural gas 
| |  |  | the level and price of foreign imports of oil and natural gas           
| |  |  | the discovery rate of new oil and natural gas reserves                  
| |  |  | available pipeline and other oil and natural gas transportation capacity
| |  |  | local weather conditions                                                
| |  |  | international, political, military, regulatory and economic conditions  
| |  |  | the ability of oil and natural gas companies to raise capital           

Prices for oil and natural gas are expected to continue to be volatile and
to affect the demand for and pricing of UTIs services.

As prices for oil and natural gas have increased, exploration and
production companies have increased spending budgets. These increased spending
budgets have increased the demand for drilling services. Increased demand for
drilling services increased the contract rates that UTI received for contract
drilling services performed in 2000 compared to 1999.

Competition

The land drilling and well servicing businesses are intensely competitive
due to the fact that the supply of available rigs, particularly in the United
States land markets, exceeds the demand for those rigs. This excess capacity
has resulted in substantial competition for drilling contracts. The fact that
drilling rigs are mobile and can be moved from one market to another in
response to market conditions heightens the competition in the industry.

8



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##### Table of Contents



UTI believes that price competition for drilling contracts will continue
for the foreseeable future due to the existence of idle rigs, which are
rigs that are not under contract but are available to be marketed or could be
prepared for marketing in a short period of time. In addition, some of UTIs
competitors have greater financial resources than UTI, which may enable them
to:



| |  |  | better withstand industry downturns           
| | - |  | ----------------------------------------------
| |  |  | compete more effectively on the basis of price
| |  |  | acquire existing rigs or build new rigs       

Seasonality

Seasonality does not significantly affect the overall operations of UTI.
However, UTIs pressure pumping services in Appalachia and UTIs drilling operations in Canada are subject to slow
periods of activity during the spring thaw. In addition, UTIs drilling operations in Canada are subject to slow periods of
activity during the fall.

Raw Materials and Subcontractors

UTI uses many suppliers of raw materials and services. These materials
and services have been and continue to be available. Where appropriate, UTI
maximizes price discounts through volume purchases. UTI also utilizes numerous
independent subcontractors from various trades.

Operating Risks and Insurance

UTIs drilling operations and fleet are subject to the many hazards of the
onshore drilling industry. Among other things, these hazards include:



| |  |  | blowouts  
| | - |  | ----------
| |  |  | explosions
| |  |  | sour gas  
| |  |  | well fires
| |  |  | spills    

These hazards can result in:



| |  |  | personal injury                                          
| | - |  | ---------------------------------------------------------
| |  |  | loss of life                                             
| |  |  | severe damage to or destruction of property and equipment
| |  |  | environmental damage                                     
| |  |  | suspension of operations                                 

Although UTI maintains insurance protection as management deems
appropriate, such insurance coverage may not provide sufficient funds in all
situations to protect UTI from all liabilities that could result from its
operations. Also, claims will be subject to various retentions and
deductibles.

9



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##### Table of Contents



While UTI generally seeks to obtain some degree of contractual
indemnification from its customers in most of its dayrate contracts, no such
indemnification is typically available for footage and turnkey contracts.
These indemnity agreements require the customers to hold UTI harmless in the
event of loss of production or reservoir damage. This contractual
indemnification may not be supported by adequate insurance maintained by the
customer.

UTIs operations and financial condition could be damaged by the
occurrence of a significant event not fully insured or indemnified against or
the failure of a customer to meet its indemnification. Moreover, UTI may not
always be able to secure insurance in the future at reasonable rates.

Environmental Regulation

UTIs operations and facilities are subject to numerous state and federal
environmental laws, rules and regulations, including but not limited to, laws
concerning:



| |  |  | containment and disposal of hazardous materials, oilfield
waste, other waste materials and acids
| | - |  | ------------------------------------------------------------------------------------------------
| |  |  | use of underground storage tanks                                                                
| |  |  | emissions and air pollution                                                                     

UTI does not anticipate that compliance with existing environmental laws
and regulations will have a material adverse effect upon its operations,
capital expenditures or earnings in the foreseeable future. UTI cannot predict
what effect the following could have on its activities:



| |  |  | additional regulation or legislation              
| | - |  | --------------------------------------------------
| |  |  | changes in enforcement policies or practices      
| |  |  | claims for damages to property and the environment

Environmental laws have generally become more restrictive in recent years.
In addition, environmental laws and regulations may impose strict liability.
If UTI is determined to be strictly liable, UTI could be liable for clean up
costs, even if the situation resulted from:



| |  |  | previous conduct of UTI that was lawful at the time conducted                                                
| | - |  | -------------------------------------------------------------------------------------------------------------
| |  |  | improper conduct of or conditions caused by previous property
owners or other persons not associated with UTI

From time to time, parties may make claims and bring litigation against
UTI under these laws. These claims and related costs could be substantial and
could have a material adverse effect on UTIs financial condition. However,
this has not happened in the past.

10



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##### Table of Contents



UTI is subject to The Oil Pollution Act of 1990, which amends provisions
of the federal Water Pollution Control Act of 1972, commonly known as the Clean
Water Act, and other statutes that address the prevention of and response to
oil spills into navigable waters. The Oil Pollution Act subjects owners of
facilities to:



| |  |  | strict, joint and several liability for all containment and
cleanup costs                                                      
| | - |  | -------------------------------------------------------------------------------------------------------------------------------
| |  |  | other damages arising from a spill, including but not limited
to, the costs of responding to a release of oil to surface waters

The Clean Water Act provides penalties for any discharge 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 is also authorized to seek
preliminary and permanent injunctive relief and in certain cases, criminal
penalties and fines. UTI may be exposed to claims that it is liable under the
Clean Water Act if a discharge occurs at a well site where UTI is conducting
drilling or pressure pumping operations.

UTI is also subject to The Comprehensive Environmental Response
Compensation and Liability Act, which is commonly known as CERCLA or the
Superfund Law. CERCLA imposes liability, without regard to fault or the
legality of the original conduct, on certain classes of persons which release a
hazardous 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. The definition of
hazardous substance does not currently include crude oil and certain drilling
materials, such as drilling fluids and produced waters, although they may be
included in the future. In addition, UTI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.

As mentioned above, UTIs operations 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. UTI cannot assure 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 UTIs operations. UTI 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 paying monetary fines or correcting any identified
deficiencies. Alternatively, regulatory agencies could prevent UTI from
constructing or operating certain air emission sources.

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

11



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##### Table of Contents



Employees

As of February 9, 2001, UTI employed approximately 2,772 full-time
employees. 2,633 of these employees were field personnel and 139 of them were
employed in selling and administrative capacities.

None of UTIs employees are represented by labor unions. There have been
no work stoppages or strikes during the last three years that have resulted in
the loss of production or production delays. Management believes that employee
relations are good. In addition to the services of its employees, UTI uses
consultants periodically.

UTI maintains an incentive compensation plan for its managerial and key
employees. The incentive compensation plan is based on operating results and
return on invested capital. UTI believes that this plan allows it to attract
and retain qualified managers and key operating employees. UTI also provides
incentive compensation to its rig workers based on operating results and safety
records.




Item 2. PROPERTIES

The following table summarizes UTI's significant real estate:

|                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                          |  |                                                                                                                 |  |                                                                                                                                                                                                                                                                                            
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Location                                                                                                                                                                                                                                                                                                       |  | Business Segment                                                                                                                                                                                                                                         |  | Owned/Leased                                                                                                    |  | Activity                                                                                                                                                                                                                                                                                   
|                                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                                                                                          |  |                                                                                                                 |  |                                                                                                                                                                                                                                                                                            
|Calgary, Alberta
Nisku, Alberta
Hobbs, New Mexico
Oklahoma City, Oklahoma
Woodward, Oklahoma
Levelland, Texas
Lubbock, Texas
Midland, Texas
Midland, Texas
Tyler, Texas
Victoria, Texas
Allen, Kentucky
Wooster, Ohio
Bradford, Pennsylvania
Meadville, Pennsylvania
Punxsutawney, Pennsylvania
Houston, Texas |  | Land Drilling
Land Drilling
Land Drilling
Land Drilling
Land Drilling
Land Drilling
Land Drilling
Land Drilling
Land Drilling
Land Drilling
Land Drilling
Pressure Pumping
Pressure Pumping
Pressure Pumping
Pressure Pumping
Pressure Pumping
Corporate |  | Leased
Leased
Leased
Owned
Owned
Owned
Leased
Owned
Leased
Leased
Owned
Leased
Leased
Leased
Owned
Owned
Leased |  | Field Office
Field Office/Rig Yard
Field Office
Field Office/Rig Yard
Field Office/Rig Yard
Field Office/Rig Yard
Field Office
Field Office/Rig Yard
Field Office
Field Office/Rig Yard
Field Office/Rig Yard
Base Camp
Base Camp
Base Camp
Base Camp
Base Camp
Principal Executive Offices

UTI does not believe that its executive offices or its other leased
facilities are material to its operations. Management believes that UTIs
properties are suitable and adequate for its operations.

12



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##### Table of Contents






Item 3. LEGAL PROCEEDINGS

UTI 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 or will not have a material adverse effect on UTIs financial
position.

Sometimes individuals bring personal injury claims against UTI and its
operating subsidiaries. Management believes that it maintains a reasonable
amount of insurance coverage against such claims.




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

UTI did not submit any matters to a vote of security holders during the
quarter that ended December 31, 2000.




PART II




Item 5. MARKET FOR UTIS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

UTIs common stock is the only class of equity of UTI currently
outstanding. UTIs common stock is traded on the American Stock Exchange under
the symbol UTI. The following table provides price information for UTIs
common stock for 2000 and 1999, adjusted for UTIs two-for-one stock split
effected on October 3, 2000.

|              |  |      |       |      |  |      |       |     |  |   |       |  |  |   |      | 
|------------- |  | ---- | ----- | ---- |  | ---- | ----- | --- |  | - | ----- |  |  | - | ---- | 
|              |  | 2000 |       | 1999
|              |  |      |       |     
|Quarter Ended |  | High |       | Low  |  | High |       | Low
|              |  |      |       |      |  |      |       |    
|March 31      |  | $    | 19.69 |      |  | $    | 11.00 |     |  | $ | 5.44  |  |  | $ | 2.56 | 
|             
|             
|             
|             
|June 30       |  | $    | 22.63 |      |  | $    | 14.00 |     |  | $ | 8.56  |  |  | $ | 4.31 | 
|             
|             
|             
|             
|September 30  |  | $    | 23.88 |      |  | $    | 14.72 |     |  | $ | 11.44 |  |  | $ | 7.34 | 
|             
|             
|             
|             
|December 31   |  | $    | 32.88 |      |  | $    | 18.25 |     |  | $ | 11.69 |  |  | $ | 7.38 | 

As of February 9, 2001, the closing price for UTIs common stock was
$36.13. As of February 9, 2001, UTIs common stock was held by approximately
250 stockholders of record. Management estimates that more than 6,300 persons
beneficially owned the stock.

UTI has not paid a cash dividend on its common stock during the two most
recent fiscal years and management does not anticipate that any cash dividend
will be paid on the common stock for the foreseeable future.

13



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##### Table of Contents






Item 6. SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial data of UTI
for each of the periods indicated. The selected financial data is derived from
UTI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 to the consolidated financial statements.

|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |        |  
|---------------------------------------------------------------- |  | ------------------------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------ | -
|                                                                 |  | Years Ended December 31,             
|                                                                 |  |                                      
|                                                                 |  | 2000                                  |         | 1999 |  | 1998 |         | 1997 |  | 1996
|                                                                 |  |                                       |         |      |  |      |         |      |  |     
|                                                                 |  | (in thousands, except per share data)
|                                                                
|Statement of Operations Data(1)
Revenues                         |  | $                                     | 275,543 |      |  | $    | 155,775 |      |  | $    | 186,157 |   |  | $ | 182,437 |   |  | $ | 97,301 |  
|                                                                
|                                                                
|                                                                
|                                                                
|Direct operating costs
(excluding depreciation and amortization) |  |                                       | 208,825 |      |  |      | 123,240 |      |  |      | 138,935 |   |  |   | 137,499 |   |  |   | 78,718 |  
|                                                                
|                                                                
|                                                                
|                                                                
|Selling, general and administrative expenses                     |  |                                       | 11,959  |      |  |      | 10,170  |      |  |      | 10,781  |   |  |   | 10,011  |   |  |   | 7,166  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Provisions for bad debts                                         |  |                                       | (456    | )    |  |      | 548     |      |  |      | 1,143   |   |  |   | 623     |   |  |   | 141    |  
|                                                                
|                                                                
|                                                                
|                                                                
|Other charges (income)(2)                                        |  |                                       | (483    | )    |  |      | (2,861  | )    |  |      | 206     |   |  |   | (774    | ) |  |   | (517   | )
|                                                                
|                                                                
|                                                                
|                                                                
|Depreciation and amortization                                    |  |                                       | 28,331  |      |  |      | 24,122  |      |  |      | 19,529  |   |  |   | 11,075  |   |  |   | 4,292  |  
|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |        |  
|Operating income                                                 |  |                                       | 27,367  |      |  |      | 556     |      |  |      | 15,563  |   |  |   | 24,003  |   |  |   | 7,501  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Other income                                                     |  |                                       | 548     |      |  |      | 585     |      |  |      | 1,355   |   |  |   | 461     |   |  |   | 824    |  
|                                                                
|                                                                
|                                                                
|                                                                
|Interest expense                                                 |  |                                       | (5,111  | )    |  |      | (4,168  | )    |  |      | (3,815  | ) |  |   | (4,330  | ) |  |   | (1,148 | )
|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |        |  
|Income (loss) before income taxes                                |  |                                       | 22,804  |      |  |      | (3,027  | )    |  |      | 13,103  |   |  |   | 20,134  |   |  |   | 7,177  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Income taxes                                                     |  |                                       | 8,634   |      |  |      | (425    | )    |  |      | 5,235   |   |  |   | 7,609   |   |  |   | 2,324  |  
|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |        |  
|Income (loss) before extraordinary item                          |  |                                       | 14,170  |      |  |      | (2,602  | )    |  |      | 7,868   |   |  |   | 12,525  |   |  |   | 4,853  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Extraordinary item, net of tax                                   |  |                                       | (329    | )    |  |      |        |      |  |      |        |   |  |   |        |   |  |   |       |  
|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |        |  
|Net income (loss)                                                |  | $                                     | 13,841  |      |  | $    | (2,602  | )    |  | $    | 7,868   |   |  | $ | 12,525  |   |  | $ | 4,853  |  
|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |        |  
|Net income (loss) per common share
Basic                         |  | $                                     | 0.38    |      |  | $    | (0.08   | )    |  | $    | 0.24    |   |  | $ | 0.48    |   |  | $ | 0.23   |  
|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |        |  
|Diluted                                                          |  | $                                     | 0.36    |      |  | $    | (0.08   | )    |  | $    | 0.23    |   |  | $ | 0.42    |   |  | $ | 0.21   |  
|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |        |  
|Average common shares outstanding
Basic                          |  |                                       | 36,860  |      |  |      | 33,984  |      |  |      | 32,139  |   |  |   | 26,165  |   |  |   | 20,896 |  
|                                                                
|                                                                
|                                                                
|                                                                
|Diluted                                                          |  |                                       | 38,817  |      |  |      | 33,984  |      |  |      | 33,590  |   |  |   | 30,139  |   |  |   | 22,878 |  
|                                                                
|                                                                 |  | As of December 31,                   
|                                                                 |  |                                      
|                                                                 |  | 2000                                  |         | 1999 |  | 1998 |         | 1997 |  | 1996
|                                                                 |  |                                       |         |      |  |      |         |      |  |     
|                                                                 |  | (in thousands)                       
|Balance Sheet Data                                              
|                                                                
|                                                                
|                                                                
|                                                                
|Working capital(3)                                               |  | $                                     | 18,589  |      |  | $    | 20,895  |      |  | $    | 22,592  |   |  | $ | 70,452  |   |  | $ | 5,761  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Total assets(1)                                                  |  |                                       | 329,807 |      |  |      | 260,582 |      |  |      | 234,021 |   |  |   | 208,987 |   |  |   | 61,870 |  
|                                                                
|                                                                
|                                                                
|                                                                
|Long-term debt, including Redeemable Stock                       |  |                                       | 55,000  |      |  |      | 32,196  |      |  |      | 31,721  |   |  |   | 30,159  |   |  |   | 14,658 |  
|                                                                
|                                                                
|                                                                
|                                                                
|Shareholders equity(3)                                          |  |                                       | 178,988 |      |  |      | 157,032 |      |  |      | 144,146 |   |  |   | 137,620 |   |  |   | 22,696 |  



---

|(1) |  | Over the five years presented, UTIs rig fleet has increased by 89 land
drilling rigs. This increase in land drilling rigs is the primary cause
for the increase in revenue, gross profit, selling, general and
administrative expenses, depreciation and amortization and total assets.
The net change in land drilling rigs owned was 19 during 2000, 16 during
1999, 20 during 1998, 24 during 1997 and 10 during 1996.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | UTI recognized a $2.8 million gain from the sale of land drilling assets
in the first quarter of 1999.                                                                                                                                                                                                                                                                                                                    
|   
|   
|   
|   
|(3) |  | In October of 1997, UTI sold approximately 3.6 million shares of its
common stock in a public offering. Approximately another 3.4 million
shares of UTI common stock were sold by various shareholders of UTI
through the exercise of options and warrants. Both of these events
resulted in net proceeds to UTI of approximately $80.0 million.                                                                          

14



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##### Table of Contents






Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Beginning in 1995, UTI decided to expand its land drilling operations.
Management of UTI made this decision to take advantage of:



| |  |  | improving market conditions                                        
| | - |  | -------------------------------------------------------------------
| |  |  | benefits arising from a consolidation in the land drilling industry

To affect this strategy, UTI disposed of its oilfield distribution
business in September 1995 and embarked on an acquisition program aimed at
expanding UTIs presence in the oil and natural gas producing regions in the
United States. Under this strategy, UTI has acquired 132 rigs since 1995.
During this same time period, UTI disposed of nine rigs primarily in the
Appalachian Basin. Five of the nine rigs disposed of were sold in 1999.
Recent acquisitions are as follows:

On April 9, 1998, UTI acquired Peterson Drilling Company for a total
purchase price of $20.4 million in cash. Petersons assets included eight land
drilling rigs, drilling equipment and approximately $4.5 million in net working
capital. The acquisition allowed UTI to enter the New Mexico market.

On June 24, 1998, UTI acquired the land drilling assets of LaMunyon
Drilling Corporation for $12.2 million in cash. The acquired assets consisted
of five land drilling rigs and other assets used in LaMunyons land drilling
business. The acquisition expanded UTIs presence in the mid-continent region.

On July 31, 1998, UTI acquired Suits Enterprises, Inc. for approximately
$11.1 million. This $11.1 million was comprised of $2.9 million in cash, $7.8
million in 7% four-year notes and five-year warrants to purchase 200,000 shares of  UTI common
stock. Warrants to purchase 150,000 shares were exercisable at $13.25 per
share and the remaining 50,000 warrants were exercisable at $17.50 per share.
Suits assets included seven land drilling rigs, drilling equipment and rolling
stock. The acquisition expanded UTIs presence in the mid-continent region.

On July 27, 1999, UTI acquired Norton Drilling Services, Inc., for
approximately 2.6 million shares of UTIs common stock. The stock was valued
at $13.3 million or $5.12 per share based on the average price of UTIs common
stock shortly before and after the acquisition was announced. UTI also repaid
approximately $8.0 million of Nortons existing debt upon the acquisition.
Nortons assets included sixteen land drilling rigs, drilling equipment and
rolling stock. The acquisition increased UTIs presence in the West Texas/New
Mexico market.

On December 14, 1999, UTI acquired the land drilling assets of Schneider
Drilling Corporation for $7.5 million in cash. Schneiders assets included
three land drilling rigs, major components for two additional land drilling
rigs and drilling equipment. The acquisition increased UTIs presence in the
East Texas market.

On May 5, 2000, UTI acquired the land drilling operations of Phelps
Drilling International Ltd. for $29.6 million in cash. Phelps assets are
located in the Canadian provinces of Alberta, British Columbia and Saskatchewan.
The acquired assets consisted of fourteen land drilling rigs and other assets used in Phelps' land drilling business. The
acquisition allowed UTI to enter the Canadian market.

15



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##### Table of Contents



UTI acquired five land drilling rigs during 2000 through three separate
transactions for an aggregate purchase price of $7.65 million in cash and $.9
million in a nonmonetary exchange of similar productive assets. The
acquisitions provided UTI with additional capacity.

In January of 2001, UTI acquired six land drilling rigs located in the
United States through three separate transactions for $13.2 million in cash,
increasing UTIs capacity.

On February 5, 2001, UTI announced that its Board of Directors along with
the Board of Directors of Patterson Energy Inc. approved a merger of the two
companies. According to the terms of the merger agreement between UTI and
Patterson, shareholders of UTI will receive one share of Patterson common stock
for each share of UTI common stock and Patterson will assume UTIs outstanding
options and warrants. The board of directors of the new company will consist
of eleven directors, six of which will be selected by Patterson and five of
which would be selected by UTI. Although the merger agreement does not specify
who will be the officers of the new company, management of UTI understands that
Mark S. Siegel, UTIs Chairman of the Board, would be the Chairman of the Board
and Cloyce A. Talbott, Pattersons Chairman of the Board and Chief Executive Officer, would be Chief
Executive Officer. The combined company will be the second largest United
States land-based drilling service contractor with 302 drilling rigs and will
be called Patterson-UTI Energy, Inc.

Under the terms of the merger agreement, both UTI and Patterson have
agreed not to solicit competing offers, but the boards of directors of each
company are free to consider and accept an unsolicited offer if, based on
advice of counsel, it believes it must do so in the exercise of its fiduciary
duty. In the event a party accepts an unsolicited offer, or its board of
directors withdraws its recommendation in light of an unsolicited offer, or the
shareholders do not vote to approve the merger because of an unsolicited offer,
the other party would be entitled to receive a breakup fee of $32.5 million
plus reimbursement of expenses of up to $2.5 million. In the event the
shareholders of one party do not vote to approve the merger and the other party
is not in default and is ready, willing and able to perform its agreement, the
party whose shareholders vote against the merger will be required to pay to the
other party $2.5 million, plus up to an additional $2.5 million in expenses.

The merger is subject to customary conditions to closing, including
approval by the shareholders of both companies, as well as any necessary
regulatory filings and approvals, such as the anti-trust provisions of the
Hart-Scott-Rodino Act. There can be no assurance that the merger will be
consummated in accordance with the terms of the merger agreement, if at all.

Beginning in 1998 and continuing into 1999, UTI and the United States land
drilling industry experienced significant declines in demand and pricing for
their services. The depressed market conditions caused UTIs rig fleet
utilization to decrease from 55% in 1998 to 43% in 1999.

In response to these depressed industry conditions, UTI undertook a series
of actions during the third quarter of 1998 and the first quarter of 1999
designed to make UTI more competitive in the marketplace.

These actions reduced UTIs regional drilling units in the United States
from seven to four. It also reduced UTIs administrative staff by forty-six
persons. As a result of these actions, UTI recorded other charges of $.3
million during 1999 and $.8 million during 1998. The charges consisted
primarily of employee-related expenses.

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##### Table of Contents



In addition, UTI sold certain non-strategic assets of its Appalachian
Basin contract drilling division for $5.6 million. As a result, UTI recorded a
gain of approximately $2.8 million during the first quarter of 1999.

During 2000, market conditions improved in the land drilling industry in
response to the improvement in commodity prices for oil and natural gas. In
this regard, UTIs average utilization during 2000 increased to 62%. The
dayrate component of drilling contracts also has increased during 2000. UTI
currently expects market conditions in the land drilling industry to remain
favorable in 2001.

Results of Operations

UTI believes the number of land rigs actively drilling in the United
States indicates the overall strength of the United States oilfield service
industry. Without giving effect to acquisitions, variations in UTIs revenues
and gross margins generally follow trends in the United States rig count.

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

|                                           |  |                          |         |      |  |      |         |   |  |   |         |  
|------------------------------------------ |  | ------------------------ | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                           |  | Years Ended December 31,
|                                           |  |                         
|                                           |  | 2000                     |         | 1999 |  | 1998
|                                           |  |                          |         |      |  |     
|Operating Data:                           
|                                          
|                                          
|                                          
|                                          
|Average U.S. active land rig count         |  |                          | 770     |      |  |      | 504     |   |  |   | 671     |  
|                                          
|                                          
|                                          
|                                          
|Number of rigs owned by UTI at end of year |  |                          | 144     |      |  |      | 125     |   |  |   | 109     |  
|                                          
|                                          
|                                          
|                                          
|Average number of rigs owned during year   |  |                          | 136     |      |  |      | 112     |   |  |   | 100     |  
|                                          
|                                          
|                                          
|                                          
|Average rigs operating                     |  |                          | 85      |      |  |      | 49      |   |  |   | 56      |  
|                                           | 
|
|Land Drilling:                            
|                                          
|                                          
|                                          
|                                          
|Operating days(2)                          |  |                          | 30,998  |      |  |      | 17,823  |   |  |   | 20,308  |  
|                                          
|                                          
|                                          
|                                          
|Utilization rate(3)                        |  |                          | 62      | %    |  |      | 43      | % |  |   | 55      | %
|                                           | 
|
|Pressure Pumping:                         
|                                          
|                                          
|                                          
|                                          
|Cementing jobs                             |  |                          | 2,337   |      |  |      | 2,108   |   |  |   | 2,296   |  
|                                          
|                                          
|                                          
|                                          
|Stimulation jobs                           |  |                          | 992     |      |  |      | 784     |   |  |   | 996     |  
|                                           | 
|
|Financial Data (in thousands):            
|                                          
|                                          
|                                          
|                                          
|Revenues                                   |  | $                        | 275,543 |      |  | $    | 155,775 |   |  | $ | 186,157 |  
|                                           |  |                          |         |      |  |      |         |   |  |   |         |  
|Operating income                           |  | $                        | 27,367  |      |  | $    | 556     |   |  | $ | 15,563  |  
|                                           |  |                          |         |      |  |      |         |   |  |   |         |  



---

|(1) |  | Baker Hughes, Inc. is an international oilfield service and equipment
company. For more than twenty years, it 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.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | An operating day is defined as a day during which a rig is being
operated, mobilized, assembled or dismantled while under contract.                                                                                                                                                          
|   
|   
|   
|   
|(3) |  | Utilization rates are calculated by dividing the operating days by the
total available days. Available days are calculated by multiplying rigs owned by the days in the period under
review.                                                                                                 

17



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##### Table of Contents



Comparison of Years Ended 2000 and 1999

Revenues by business segment for the years ended December 31, 2000 and
1999 are as follows:

|                 |  |                    |         |          |  |            |         |  |  |  |      | 
|---------------- |  | ------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | ---- | 
|                 |  | Years             
|                 |  | Ended December 31, |         | %       
|                 |  |                    |         | Increase
|                 |  | 2000               |         | 1999     |  | (Decrease)
|                 |  |                    |         |          |  |           
|                 |  | (in thousands)    
|Revenues:       
|                
|                
|                
|                
|Land Drilling    |  | $                  | 253,887 |          |  | $          | 134,870 |  |  |  | 88.2 | 
|                
|                
|                
|                
|Pressure Pumping |  |                    | 21,465  |          |  |            | 20,721  |  |  |  | 3.6  | 
|                
|                
|                
|                
|Other            |  |                    | 191     |          |  |            | 184     |  |  |  | 3.8  | 
|                 |  |                    |         |          |  |            |         | 
|                 |  | $                  | 275,543 |          |  | $          | 155,775 |  |  |  | 76.9 | 
|                 |  |                    |         |          |  |            |         | 

Land drilling revenue increased due to improved market conditions and due
to revenue generated from recent acquisitions. Acquisitions completed during
the years ended December 31, 2000 and 1999 generated an additional $45.6
million of revenue in the year ended December 31, 2000 compared to the year
ended December 31, 1999. Pressure pumping revenue remained stable as the
pressure pumping market in Appalachia did not recover as quickly as the land
drilling market. These improved market conditions resulted in:



| |  |  | higher utilization rates, 62% for the year ended December 31,
2000 compared to 43% for the year ended December 31, 1999                                  
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | higher rates for services, average revenue per day of $8,200
for the year ended December 31, 2000 compared to $7,600 for the year
ended December 31, 1999

Direct operating costs, excluding depreciation and amortization, by
business segment for the years ended December 31, 2000 and 1999 are as follows:

|                                                                 |  |                    |         |          |  |            |         |  |  |  |      |  
|---------------------------------------------------------------- |  | ------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | ---- | -
|                                                                 |  | Years             
|                                                                 |  | Ended December 31, |         | %       
|                                                                 |  |                    |         | Increase
|                                                                 |  | 2000               |         | 1999     |  | (Decrease)
|                                                                 |  |                    |         |          |  |           
|                                                                 |  | (in thousands)    
|Direct Operating Costs(excluding depreciation and amortization):
|                                                                
|                                                                
|                                                                
|                                                                
|Land Drilling                                                    |  | $                  | 195,360 |          |  | $          | 110,958 |  |  |  | 76.1 |  
|                                                                
|                                                                
|                                                                
|                                                                
|Pressure Pumping                                                 |  |                    | 13,403  |          |  |            | 12,219  |  |  |  | 9.7  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Other                                                            |  |                    | 62      |          |  |            | 63      |  |  |  | (1.6 | )
|                                                                 |  |                    |         |          |  |            |         | 
|                                                                 |  | $                  | 208,825 |          |  | $          | 123,240 |  |  |  | 69.4 |  
|                                                                 |  |                    |         |          |  |            |         | 

The increase in direct operating costs (excluding depreciation and
amortization) in the land drilling business segment correlates with the
increase in revenue. The percentage increase in direct operating costs
(excluding depreciation and amortization) in the pressure pumping business
segment outpaced the increase in revenue due to the mix of jobs performed.
While there were 437 more pressure pumping jobs performed in the year ended
December 31, 2000 compared to 1999, they had lower margins.

18



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##### Table of Contents



Selling, general and administrative expenses increased $1.8 million during
the year ended December 31, 2000 compared to the year ended December 31, 1999.
The increase was primarily due to acquisitions consummated in 2000 and 1999.

Provisions for bad debts decreased $1.0 million for the year ended
December 31, 2000 compared to the year ended December 31, 1999. This was
primarily due to improved market conditions. Accounts receivable that were
previously reserved as a bad debt became collectible.

Included in the December 31, 1999 other charges (income) is a $2.8 million
gain realized as a result of the sale of land drilling assets. The assets sold
consisted of UTIs drilling presence in the Appalachian Basin.

Depreciation and amortization expense increased $4.2 million during the
year ended December 31, 2000 compared to the year ended December 31, 1999.
This was primarily due to depreciation and amortization on assets acquired
during 2000 and 1999.

Interest expense increased $.9 million during the year ended December 31,
2000 compared to the year ended December 31, 1999. In addition, $.4 million of
interest was capitalized in the year ended December 31, 2000 in conjunction
with capital expenditure projects. No interest was capitalized in the year
ended December 31, 1999. The increase in incurred interest was primarily due to an increase in
average outstanding debt for the year ended December 31, 2000 compared to the
same period of 1999. The effective interest rate decreased between years
primarily as a result of the early payoff of UTIs subordinated notes. The
following table shows other significant data regarding UTIs debt:

|                         |  |                   |  |                  
|------------------------ |  | ----------------- |  | -----------------
|                         |  | Year Ended        |  | Year Ended       
|                         |  | December 31, 2000 |  | December 31, 1999
|                         |  |                   |  |                  
|Average Debt Outstanding |  | $46.0 million     |  | $32.0 million    
|                        
|                        
|                        
|                        
|Effective Interest Rate  |  | 11.9%             |  | 13.0%            

Income taxes, including the tax benefit on the extraordinary item,
increased $8.9 million during the year ended December 31,
2000 compared to the year ended December 31, 1999. This was primarily due to a
profit in 2000 compared to taxable loss in 1999. UTIs effective tax rate for
the year ended December 31, 2000 was 37.9%. UTIs effective tax rate for the
year ended December 31, 1999 was 14.0%. The effective tax rate in each year
varies from the statutory rate primarily for two reasons:



| |  |  | goodwill amortization associated with acquisitions that is nondeductible for tax purposes
| | - |  | -----------------------------------------------------------------------------------------
| |  |  | state income taxes payable                                                               

The extraordinary loss incurred during the year ended December 31, 2000
related to the early retirement of the $25.0 million subordinated notes. The
early retirement was financed from the proceeds of the revolving credit
facility. The loss consisted primarily of the write-off of the discount,
deferred interest and financing fees.

19



---



##### Table of Contents



Comparison of Years Ended 1999 and 1998

Revenues by business segment for the years ended December 31, 1999 and
1998 are as follows:

|                 |  |                    |         |          |  |            |         |  |  |  |       |  
|---------------- |  | ------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | ----- | -
|                 |  | Years             
|                 |  | Ended December 31, |         | %       
|                 |  |                    |         | Increase
|                 |  | 1999               |         | 1998     |  | (Decrease)
|                 |  |                    |         |          |  |           
|                 |  | (in thousands)    
|Revenues:       
|                
|                
|                
|                
|Land Drilling    |  | $                  | 134,870 |          |  | $          | 162,600 |  |  |  | (17.1 | )
|                
|                
|                
|                
|Pressure Pumping |  |                    | 20,721  |          |  |            | 23,365  |  |  |  | (11.3 | )
|                
|                
|                
|                
|Other            |  |                    | 184     |          |  |            | 192     |  |  |  | (4.2  | )
|                 |  |                    |         |          |  |            |         | 
|                 |  | $                  | 155,775 |          |  | $          | 186,157 |  |  |  | (16.3 | )
|                 |  |                    |         |          |  |            |         | 

Land drilling revenue decreased despite revenue generated from recent
acquisitions. Acquisitions completed during the years ended December 31, 1999
and 1998 generated an additional $14.0 million of revenue in the year ended
December 31, 1999 compared to the year ended December 31, 1998. The decrease
was attributable to depressed market conditions. Pressure pumping revenue also
decreased as a result of depressed market conditions. These depressed market
conditions resulted in:



| |  |  | lower utilization rates 
| | - |  | ------------------------
| |  |  | lower rates for services

Direct operating costs, excluding depreciation and amortization, by
business segment for the years ended December 31, 1999 and 1998 are as follows:

|                                                                 |  |                    |         |          |  |            |         |  |  |  |       |  
|---------------------------------------------------------------- |  | ------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | ----- | -
|                                                                 |  | Years             
|                                                                 |  | Ended December 31, |         | %       
|                                                                 |  |                    |         | Increase
|                                                                 |  | 1999               |         | 1998     |  | (Decrease)
|                                                                 |  |                    |         |          |  |           
|                                                                 |  | (in thousands)    
|Direct Operating Costs(excluding depreciation and amortization):
|                                                                
|                                                                
|                                                                
|                                                                
|Land Drilling                                                    |  | $                  | 110,958 |          |  | $          | 124,779 |  |  |  | (11.1 | )
|                                                                
|                                                                
|                                                                
|                                                                
|Pressure Pumping                                                 |  |                    | 12,219  |          |  |            | 14,041  |  |  |  | (13.0 | )
|                                                                
|                                                                
|                                                                
|                                                                
|Other                                                            |  |                    | 63      |          |  |            | 115     |  |  |  | (45.2 | )
|                                                                 |  |                    |         |          |  |            |         | 
|                                                                 |  | $                  | 123,240 |          |  | $          | 138,935 |  |  |  | (11.3 | )
|                                                                 |  |                    |         |          |  |            |         | 

The decrease in direct operating costs (excluding depreciation and
amortization) in the land drilling and pressure pumping business segments
correlates with the decrease in revenue in the respective business segment.

Selling, general and administrative expenses decreased $.6 million during
the year ended December 31, 1999 compared to the year ended December 31, 1998.
This was primarily due to actions taken to streamline operations during the
third quarter of 1998 and the first quarter of 1999. These actions included
the relocation of certain accounting functions from Oklahoma City to the
Companys corporate headquarters in Houston and personnel changes. The Company
also reduced its number of regional operating units.

20



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##### Table of Contents



Provisions for bad debts decreased $.6 million for the year ended December
31, 1999 compared to the year ended December 31, 1998. This was primarily due
to improved collection efforts.

The other charges (income) for the years ended December 31, 1999 and 1998
include charges as a result of the streamlining of certain contract drilling
operations and changes to the accounting and administrative functions as well
as gains from the sale of long-lived assets. Included in the December 31, 1999
other charges (income) is a $2.8 million gain realized as a result of the sale
of land drilling assets in 1999. The assets sold consisted of UTIs drilling
presence in the Appalachian Basin.

Depreciation and amortization expense increased $4.6 million during the
year ended December 31, 1999 compared to the year ended December 31, 1998.
This was primarily due to depreciation and amortization on assets acquired
during 1999 and 1998.

Interest expense increased $.4 million during the year ended December 31,
1999 compared to the year ended December 31, 1998. This increase was primarily
due to an increase in average outstanding debt for the year ended December 31,
1999 compared to the same period of 1998. The following table shows other
significant data regarding UTIs debt:

|                         |  |                   |               |                   |  |  |               | 
|------------------------ |  | ----------------- | ------------- | ----------------- |  |  | ------------- | 
|                         |  | Year Ended        |               | Year Ended       
|                         |  | December 31, 1999 |               | December 31, 1998
|                         |  |                   |               |                  
|Average Debt Outstanding |  |                   | $32.0 million |                   |  |  | $26.7 million | 
|                        
|                        
|                        
|                        
|Effective Interest Rate  |  |                   | 13.0%         |                   |  |  | 14.3%         | 

Income taxes decreased $5.7 million during the year ended December 31,
1999 compared to the year ended December 31, 1998. This was primarily due to a
taxable loss in 1999 compared to taxable income in 1998. UTIs effective tax
rate for the year ended December 31, 1999 was 14.0%. UTIs effective tax rate
for the year ended December 31, 1998 was 40.0%. The effective tax rate in each
year varies from the statutory rate primarily for two reasons:



| |  |  | goodwill amortization associated with acquisitions that is nondeductible for tax purposes
| | - |  | -----------------------------------------------------------------------------------------
| |  |  | state income taxes payable in states where a taxable loss was not incurred               

Liquidity and Capital Resources

Working Capital

Historically, UTI has needed cash:



| |  |  | to fund working capital requirements                                     
| | - |  | -------------------------------------------------------------------------
| |  |  | to make capital expenditures to replace and expand its drilling rig fleet
| |  |  | for acquisitions                                                         

UTI has funded ongoing operations through:



| |  |  | available cash               
| | - |  | -----------------------------
| |  |  | cash provided from operations
| |  |  | borrowings                   

21



---



##### Table of Contents



To date, UTI has funded acquisitions with:



| |  |  | available cash                                                 
| | - |  | ---------------------------------------------------------------
| |  |  | borrowings                                                     
| |  |  | issuances of common stock and warrants to purchase common stock

Operations provided net cash of $49.2 million in 2000 and $14.4 million in
1999. In 2000, UTI used these funds along with borrowings to fund acquisitions
and capital expenditures. Capital expenditures, excluding acquisitions, was
$38.7 million for the year ended December 31, 2000. Capital expenditures,
excluding acquisitions, was $9.4 million for the year ended December 31, 1999.

UTIs working capital at December 31, 2000 was $18.6 million compared to
$20.9 million at December 31, 1999. The decrease is attributable to UTIs
investment of cash into long-term assets, primarily drilling rigs.

At December 31, 2000, UTI had available borrowings of $39.3 million under
its revolving credit facility compared to $65.0 million of available borrowings
at December 31, 1999. The maximum borrowing amount under the revolving credit
facility was $90.0 million at December 31, 2000 compared to $65.0 million at
December 31, 1999. During 2000, UTI borrowed $25.0 million under the revolving
credit facility to repay 12% subordinated notes that were due in April of 2001.
Additional borrowings were made against the facility for acquisitions.

Long Term Debt Facilities

As of December 31, 2000, UTI had outstanding debt of $55.0 million. This
indebtedness included $50.7 million under the revolving credit facility and
$4.3 million of notes associated with an acquisition completed in 1998.

Revolving Credit Facility.On November 22, 1999, UTI entered into a $65.0
million revolving credit facility. The initial term of the facility is for
four years with automatic annual renewals thereafter unless terminated by
either party. An early termination fee applies if UTI terminates before the
four-year anniversary date. The maximum borrowings under this revolving credit
facility were increased to $75.0 million in May of 2000 and were further
increased to $90.0 million in October of 2000. UTI incurs a fee of .375% per
annum on the unused facility amount. Under the revolving credit facility, UTI
may use up to $10.0 million for letters of credit. The amount used for letters
of credit decreases the borrowing base of the facility. At December 31, 2000,
UTI had a $2.6 million standby letter of credit issued under the facility. The
revolving credit facility calls for periodic interest payments at a floating
rate ranging from LIBOR plus 1.75% to LIBOR plus 2.75% or prime. The actual
rate charged above LIBOR (1.75% at December 31, 2000) is based on UTIs
trailing twelve-month EBITDA. UTIs assets secure the facility.

Among the various covenants that UTI must satisfy under the revolving
credit facility are the following two covenants which shall apply whenever
UTIs availability under the facility falls below $20.0 million:



| |  |  | minimum tangible net worth (as defined in the facility) at
the end of each month of $120.0 million
| | - |  | --------------------------------------------------------------------------------------------------
| |  |  | minimum trailing twelve month EBITDA (as defined in the
facility) of $15.0 million                

22



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##### Table of Contents



The facility also contains provisions regarding UTIs ability to, among
other things:



| |  |  | engage in new lines of business unrelated to UTIs current activities
| | - |  | ---------------------------------------------------------------------
| |  |  | enter into mergers, consolidations, asset sales or purchases         
| |  |  | incur liens or debts or make advances, investments or loans          
| |  |  | pay dividends or redeem stock                                        
| |  |  | incur additional indebtedness                                        

Events of default under the facility include:



| |  |  | non-payment of amounts due                                                                                     
| | - |  | ---------------------------------------------------------------------------------------------------------------
| |  |  | misrepresentations and breach of loan covenants                                                                
| |  |  | a change in control (meaning that some person or group has
acquired beneficial ownership of 30% or more of UTI)
| |  |  | certain other events of default                                                                                

Promissory Notes.On July 31, 1998, UTI issued $7.8 million principal
amount of unsecured promissory notes. An early principal payment of $3.5
million became payable because the average trading value of UTIs common stock
for thirty consecutive days exceeded $15.00 per share on March 9, 2000. The
repayments were funded by long-term borrowings under the revolving credit
facility. The notes bear interest at 7.0% and, except for the $3.5 million
discussed above, mature on July 31, 2002. The notes were issued in connection
with an acquisition.

Future Acquisitions and Capital Needs

Management believes UTI will be able to meet its working capital, capital
expenditure and debt service requirements for the next twelve months by using:



| |  |  | internally generated cash                       
| | - |  | ------------------------------------------------
| |  |  | availability under the revolving credit facility
| |  |  | cash balances on hand                           

UTI believes that its strong liquidity position will allow it to react
quickly to opportunities in the land drilling industry. These opportunities
include making strategic acquisitions.

New Accounting Pronouncement

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities(SFAS 133). SFAS 133, as amended by Statement of
Financial Accounting Standards No. 137, Accounting for Derivative Instruments
and Hedging Activities- Deferral of the Effective Date of FASB Statement No.
133which is effective for fiscal years beginning after June 15, 2000, requires
all derivatives to be recognized at fair value on the balance sheet. UTI
adopted SFAS 133 on January 1, 2001. The change is not expected to have a
significant effect on UTIs financial statements.

23



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##### Table of Contents



Risks Associated with Forward-Looking Statements

From time to time, UTI may make certain statements that contain
forward-looking information. Forward-looking statements speak to the future.
The following words and similar expressions are intended to identify such
forward-looking statements:



| |  |  | anticipate
| | - |  | ----------
| |  |  | believe   
| |  |  | could     
| |  |  | estimate  
| |  |  | expect    
| |  |  | intend    
| |  |  | may       
| |  |  | plan      
| |  |  | predict   
| |  |  | project   
| |  |  | will      

Forward-looking statements may be made by management both orally or in
writing. Written forward-looking statements may appear:



| |  |  | in press releases                                                                                                                                            
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | as part of the Business, Properties and Managements
Discussion and Analysis of Financial Conditions and Results of
Operations contained in this report
| |  |  | in UTIs other filings with the Securities and Exchange
Commission                                                                                           

UTI believes that the expectations reflected in these forward-looking
statements are reasonable. However, UTI cannot give any assurance that such
expectations will materialize. These forward-looking statements are subject
to:



| |  |  | risks        
| | - |  | -------------
| |  |  | uncertainties
| |  |  | assumptions  

If any of these risks, uncertainties or assumptions materialize, actual
results of current and future operations may not be as expected. Therefore,
readers should not place undue certainty on these forward-looking statements.
These forward-looking statements speak only as of their dates.

24



---



##### Table of Contents



Among the factors that will directly affect UTIs results of operations
and the contract drilling service industry are:



| |  |  | changes in the price of oil and natural gas                                                                                      
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------
| |  |  | the volatility of the contract drilling service industry                                                                         
| |  |  | UTIs ability to successfully integrate recent acquisitions                                                                      
| |  |  | presence of competitors with greater financial resources                                                                         
| |  |  | labor shortages                                                                                                                  
| |  |  | contractual risk associated with turnkey and footage contracts                                                                   
| |  |  | operating risks inherent in the contract drilling service
industry, such as blowouts, explosions, sour gas, well fires and
spills
| |  |  | domestic and worldwide political stability and economic growth                                                                   
| |  |  | risks associated with UTIs successful execution of internal operating plans                                                     
| |  |  | regulatory uncertainties                                                                                                         
| |  |  | legal proceedings                                                                                                                
| |  |  | drill pipe shortages                                                                                                             
| |  |  | exposure to environmental liabilities                                                                                            
| |  |  | currency risk factors                                                                                                            

See also, the factors affecting the level of drilling activity discussed
in Item 1. Business-Industry Conditions on page 8 of this Annual Report on
Form 10-K.




Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

UTI has exposure to market risk associated with the floating rate portion
of the interest charged on the $50.7 million outstanding under its revolving
credit facility. The revolving credit facility, which matures on November 22,
2003, bears interest at LIBOR plus 1.75% or prime. UTIs exposure to interest
rate risk due to changes in LIBOR or prime is not expected to be material and
at December 31, 2000, the fair value of the obligation approximates its related
carrying value because the obligation bears interest at the current market
rate.

UTIs fair value of fixed rate debt as of December 31, 2000 is $4.2
million and the carrying value is $4.3 million. The fair value of the fixed
rate debt is based on the estimated yield to maturity.

With the Phelps Drilling acquisition UTI now conducts some business in
Canadian dollars. The exchange rate between Canadian dollars and U.S. dollars
has fluctuated over the last ten years. If the value of the Canadian dollar
against the U.S. dollar weakens, revenues and earnings of UTI's Canadian
operations will be reduced when they are translated to U.S. dollars. Also, the
value of UTI's Canadian net assets in U.S. dollars may decline.




Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements of UTI meeting the requirements of Regulation S-X
(except
Section 210.3-05 and Article 11 thereof) are included on pages F-1 through F-28
hereof.

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

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---



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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, of Form 10-K is
incorporated by reference from UTIs proxy statement filed pursuant to Regulation 14A which involves the election of
directors. This proxy statement shall be filed with the Securities and Exchange Commission not later than 120 days after
December 31, 2000, which is the end of the fiscal year.




PART IV




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



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

|                                              |                                                                                                                 |  |  |      |  | 
|--------------------------------------------- | --------------------------------------------------------------------------------------------------------------- |  |  | ---- |  | 
|                                              |                                                                                                                 |  |  | Page
|                                              |                                                                                                                 |  |  |     
|(1) Financial Statements of UTI Energy Corp.:
|                                             
|                                              | Contents                                                                                                        |  |  | F-1  | 
|                                             
|                                              | Report of Independent Auditors                                                                                  |  |  | F-2  | 
|                                             
|                                              | Consolidated Balance Sheets at December 31, 2000 and 1999                                                       |  |  | F-3  | 
|                                             
|                                              | Consolidated Statements of Operations for the Years Ended
December 31, 2000, 1999 and 1998                      |  |  | F-4  | 
|                                             
|                                              | Consolidated Statements of Changes in Shareholders Equity for the
Years Ended December 31, 2000, 1999 and 1998 |  |  | F-5  | 
|                                             
|                                              | Consolidated Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998                      |  |  | F-6  | 
|                                             
|                                              | Notes to Consolidated Financial Statements                                                                      |  |  | F-7  | 
|                                             
|(2) Financial Statement Schedule:            
|                                             
|                                              | Schedule II Valuation and Qualifying Accounts                                                                  |  |  | S-1  | 

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 do not apply and therefore
have been omitted.

26



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##### Table of Contents



(3) The following Exhibits are filed as part of this Annual Report on Form 10-K.

|        |     |     |  |                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | --- | --- |  | -------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |     |     |  | Title or Description
|        |     |     |  |                     
|        | 2.1 |     |  | -                    |  | Agreement and Plan of Merger, dated April 26, 1999, by and
between UTI Energy Corp. and Norton Drilling Services,
Inc. (incorporated by reference to Exhibit 2.1 to UTIs
Current Report on Form 8-K dated July 26, 1999).                                                                                                                                                                                                                                                                                                                                                                                                                              
|       
|        | 2.2 | (2) |  | -                    |  | Agreement and Plan of Merger, dated February 4, 2001, by
and between UTI Energy Corp. and Patterson Energy, Inc.
Pursuant to Item 601(b)(2) of Regulation S-K, schedules
and similar attachments to the Agreement and Plan of
Merger have not been filed with this exhibit. The
Patterson Energy, Inc. Disclosure Schedule and the UTI
Energy Corp. Disclosure Schedule contain information
relating to the representations and warranties contained
in Article II and Article III, respectively, of the
Agreement and Plan of Merger. UTI agrees to furnish
supplementally any omitted schedule to the Securities and
Exchange Commission upon request.
|       
|        | 3.1 |     |  | -                    |  | Restated Certificate of Incorporation of UTI Energy Corp.
dated July 25, 2000 (incorporated by reference to Exhibit
3.1 to UTIs Registration Statement on Form S-3 (No.
333-42576)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 3.2 |     |  | -                    |  | By-laws of UTI Energy Corp., as amended (incorporated by
reference to Exhibit 3.3 to UTIs Annual Report on Form
10-K for the year ended December 31, 1993).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       
|        | 3.3 |     |  | -                    |  | Rights Agreement, dated February 26, 1999, between UTI
Energy Corp. and ChaseMellon Shareholder Services, L.L.C.
as Rights Agent (incorporated by reference to Exhibit 4.1
to UTIs Current Report on Form 8-K, dated February 26,
1999, filed with the Securities and Exchange Commission on
March 4, 1999).                                                                                                                                                                                                                                                                                                                                           
|       
|        | 3.4 | (2) |  | -                    |  | Amendment to Rights Agreement, dated February 9, 2001,
between UTI Energy Corp. and Mellon Investor Services LLC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|        | 3.5 |     |  | -                    |  | Certificate of Designation, Powers, Preferences and Rights
of Series I Preferred Stock dated February 26, 1999
(incorporated by reference to Exhibit 4.2 to UTIs Current
Report on Form 8-K, dated February 26, 1999, filed with
the Securities and Exchange Commission on March 4, 1999).                                                                                                                                                                                                                                                                                                                                                             
|       
|        | 3.6 |     |  | -                    |  | Form of Right Certificate (incorporated by reference to
Exhibit 4.3 to UTIs Current Report on Form 8-K, dated
February 26, 1999, filed with the Securities and Exchange
Commission on March 4, 1999).                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | 4.1 |     |  | -                    |  | See Exhibit No. 3.1 and 3.2 for provisions of the Restated
Certificate of Incorporation and amended By-laws of UTI
Energy Corp. defining the rights of the holders of common
stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 4.2 |     |  | -                    |  | Form of Common Stock Certificate (incorporated by
reference to Amendment No. 1 to UTIs Registration
Statement on Form S-1 (No. 33-69726)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|        | 4.3 |     |  | -                    |  | 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 Exhibit
10.17 to UTIs Annual Report on Form 10-K for the year
ended December 31, 1993).                                                                                                                                                                                                                                                                                                                                                                                                 

27



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##### Table of Contents



|        |      |     |  |                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | ---- | --- |  | -------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |      |     |  | Title or Description
|        |      |     |  |                     
|        | 4.4  | (1) |  | -                    |  | Amended and Restated UTI Energy Corp. 1996 Employee Stock
Option Plan (incorporated by reference to Exhibit 4.6 to
UTIs Annual Report on Form 10-K for the year ended
December 31, 1997).                                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 4.5  |     |  | -                    |  | Amended and Restated UTI Energy Corp. Non-Employee
Director Stock Option Plan (incorporated by reference to
Exhibit 4.18 to UTIs Annual Report on Form 10-K for the
year ended December 31, 1997).                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|        | 4.6  | (1) |  | -                    |  | Amended and Restated UTI Energy Corp. 1997 Long-Term
Incentive Plan (incorporated by reference to Exhibit 4.2
to UTIs Annual Report on Form 10-K for the year ended
December 31, 1997).                                                                                                                                                                                                                                                                                                                                                                                                                        
|       
|        | 4.7  | (1) |  | -                    |  | Amendment No. 1 to the Amended and Restated UTI Energy
Corp. 1997 Long-Term Incentive Plan adopted by the Board
of Directors on April 26, 1999 (incorporated by reference
to Exhibit 4.11 to UTIs Annual Report on Form 10-K for
the year ended December 31, 1999).                                                                                                                                                                                                                                                                                                                                            
|       
|        | 4.8  | (1) |  | -                    |  | Amendment No. 2 to the Amended and Restated UTI Energy
Corp. 1997 Long-Term Incentive Plan adopted by the Board
of Directors on April 27, 2000 (incorporated by reference
to Exhibit 4.3 to UTIs Registration Statement on Form S-8 (No. 333-52916)).                                                                                                                                                                                                                                                                                                                                                          
|       
|        | 4.9  |     |  | -                    |  | Form of Warrant to purchase an aggregate of 150,000
shares of common stock at $13.25 per share, which was
issued to the former shareholders of Suits Enterprises,
Inc. listed on such exhibit in the amounts set forth
opposite such former shareholders name on such exhibit
(incorporated by reference from UTIs Quarterly Report on
Form 10-Q for the six months ended June 30, 1998).                                                                                                                                                                                                                     
|       
|        | 4.10 |     |  | -                    |  | Form of Warrant to purchase an aggregate of 50,000 shares
of common stock at $17.50 per share, which was issued to
the former shareholders of Suits Enterprises, Inc. listed
on such exhibit in the amounts set forth opposite such
former shareholders name on such exhibit (incorporated
by reference from UTIs Quarterly Report on Form 10-Q for
the six months ended June 30, 1998).                                                                                                                                                                                                                      
|       
|        | 4.11 |     |  | -                    |  | Form of Note Payable, in the aggregate amount of $7.79
million, which was issued to the former shareholders of
Suits Enterprises, Inc. listed on such exhibit in the
amounts set forth opposite such former shareholders name
on such exhibit (incorporated by reference from UTIs
Quarterly Report on Form 10-Q for the six months ended
June 30, 1998).                                                                                                                                                                                                                                                     
|       
|        | 4.12 |     |  | -                    |  | Loan and Security Agreement, dated November 22, 1999, by
and among The CIT Group/Business Credit, Inc., GMAC
Business Credit, LLC and Foothill Capital Corporation as
Lenders, UTI Energy Corp., UTICO, Inc., UTICO Hard Rock
Boring, Inc., International Petroleum Service Company and
Norton Drilling Services, Inc. as Guarantors and UTI
Drilling, L.P., Norton Drilling Company, Universal Well
Services, Inc., UTI Management Services, L.P. and Suits
Drilling Company as Borrowers (incorporated by reference
to Exhibit 4.15 to UTIs Annual Report on Form 10-K for
the year ended December 31, 1999).

28



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##### Table of Contents



|        |      |     |  |                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | ---- | --- |  | -------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |      |     |  | Title or Description
|        |      |     |  |                     
|        | 4.13 |     |  | -                    |  | First Amendment dated as of May 2, 2000 to the Loan and
Security Agreement, dated as of November 22, 1999, by and among The
CIT Group/Business Credit, Inc., GMAC Business Credit, LLC and
Foothill Capital Corporation as Lenders, UTI Energy Corp., UTICO,
Inc., UTICO Hard Rock Boring, Inc., International Petroleum Service
Company and Norton Drilling Services, Inc. as Guarantors and UTI
Drilling, L.P., Norton Drilling LP, a successor in interest by
conversion to Norton Drilling Company, Universal Well Services,
Inc., UTI Management Services, L.P. and Suits Drilling Company as
Borrowers (incorporated by reference to Exhibit 4.16 to UTIs
Registration Statement on Form S-3 (No. 333-42576)).                                                                                              
|       
|        | 4.14 |     |  | -                    |  | Second Amendment dated as of May 18, 2000 to the Loan and
Security Agreement, dated as of November 22, 1999, by and among The
CIT Group/Business Credit, Inc., GMAC Business Credit, LLC and
Foothill Capital Corporation as Lenders, UTI Energy Corp., UTICO,
Inc., UTICO Hard Rock Boring, Inc., International Petroleum Service
Company and Norton Drilling Services, Inc. as Guarantors and UTI
Drilling, L.P., Norton Drilling LP, a successor in interest by
conversion to Norton Drilling Company, Universal Well Services,
Inc., UTI Management Services, L.P. and Suits Drilling Company as
Borrowers (incorporated by reference to Exhibit 4.17 to UTIs
Registration Statement on Form S-3 (No. 333-42576)).                                                                                            
|       
|        | 4.15 |     |  | -                    |  | Third Amendment dated as of October 18, 2000 to the Loan
and Security Agreement, dated as of November 22, 1999, by and among
The CIT Group/Business Credit, Inc., Foothill Capital Corporation,
GMAC Business Credit, LLC and The CIT Group/Equipment Financing,
Inc. as Lenders, UTI Energy Corp., UTICO, Inc., UTICO Hard Rock
Boring, Inc., International Petroleum Service Company, Norton
Drilling Services, Inc. and Norton Drilling Company Mexico, Inc. as
Guarantors and UTI Drilling, L.P., Norton Drilling LP, a successor
in interest by conversion to Norton Drilling Company, Universal Well
Services, Inc., UTI Management Services, L.P. and Suits Drilling
Company as Borrowers (incorporated by reference from UTI's Quarterly
Report on Form 10-Q for the nine months ended September 30, 2000).
|       
|        | 10.1 |     |  | -                    |  | For additional material contracts see Exhibits 4.3 through
4.14.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 10.2 | (1) |  | -                    |  | Amended and Restated Employment Agreement with Vaughn E. Drum
dated December 19, 1996 (incorporated by reference to Exhibit 10.4
to UTIs Current Report on Form 8-K dated January 27, 1997).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 21.1 | (2) |  | -                    |  | List of subsidiaries of UTI.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|        | 23.1 | (2) |  | -                    |  | Consent of Ernst & Young LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      



---

|(1) |  | Management contract or compensatory plan, identified as required by Item
14(a)(3) of Form 10-K.
|--- |  | -----------------------------------------------------------------------------------------------
|   
|(2) |  | Filed herewith as part of this Form 10-K.                                                      

29



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##### Table of Contents



As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, UTI has not filed
with this Form 10-K certain instruments defining the right of holders of
long-term debt of UTI and its subsidiaries. This is because the total amount
of securities authorized under any of such instruments does not exceed 10% of
the total assets of UTI and its subsidiaries on a consolidated basis. UTI
agrees to furnish a copy of any of these agreements to the Securities and
Exchange Commission upon request.

(b) Reports on Form 8-K



| |  |  | To report an Underwriting Agreement, pursuant to Item 5 of Form 8-K, UTI
filed a Form 8-K with the Securities and Exchange Commission dated
December 19, 2000.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | To report an Underwriting Agreement, pursuant to Item 5 of Form 8-K, UTI
filed a Form 8-K with the Securities and Exchange Commission dated
December 12, 2000.

30



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##### Table of Contents



UTI ENERGY CORP.
CONSOLIDATED FINANCIAL STATEMENTS

Contents

|                                          |                                                            |  |  |     | 
|----------------------------------------- | ---------------------------------------------------------- |  |  | --- | 
|AUDITED CONSOLIDATED FINANCIAL STATEMENTS
|                                         
|                                          | Report of Independent Auditors                             |  |  | F-2 | 
|                                         
|                                          | Consolidated Balance Sheets                                |  |  | F-3 | 
|                                         
|                                          | Consolidated Statements of Operations                      |  |  | 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 | 

F1



---



##### Table of Contents






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, 2000 and 1999 and the related consolidated statements
of operations, changes in shareholders equity and cash flows for each of the
three years in the period ended December 31, 2000. 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 auditing standards generally
accepted in the United States. 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 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, 2000 and 1999, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States. 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
|                                
|                                
|                                
|                                
|Houston, Texas
February 16, 2001 |                      

F2



---



##### Table of Contents



UTI ENERGY CORP.




CONSOLIDATED BALANCE SHEETS

(All share amounts reflect the 2:1 stock split effective October 3, 2000)
(in thousands)

|                                                                                                          |                                                                                                                                                                    |                                      |         |    |              |   |         |    |  |  | 
|--------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------ | ------- | -- | ------------ | - | ------- | -- |  |  | 
|                                                                                                          |                                                                                                                                                                    |                                      |         |    | December 31,
|                                                                                                          |                                                                                                                                                                    |                                      |         |    |             
|                                                                                                          |                                                                                                                                                                    |                                      |         |    | 2000         |   | 1999   
|                                                                                                          |                                                                                                                                                                    |                                      |         |    |              |   |        
|                                                                                                          |                                                                                                                                                                    |                                      | ASSETS 
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|CURRENT ASSETS                                                                                           
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Cash and cash equivalents                                                                                 |                                                                                                                                                                    | $                                    | 7,561   |    |              | $ | 7,547   |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Accounts receivable, net of allowance for doubtful
accounts of $1,959 in 2000 and $3,143 in 1999          |                                                                                                                                                                    |                                      | 59,482  |    |              |   | 33,522  |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Federal income tax receivables                                                                            |                                                                                                                                                                    |                                      |        |    |              |   | 5,043   |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Materials and supplies                                                                                    |                                                                                                                                                                    |                                      | 767     |    |              |   | 748     |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Deferred income taxes                                                                                     |                                                                                                                                                                    |                                      | 1,957   |    |              |   | 1,762   |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Prepaid expenses                                                                                          |                                                                                                                                                                    |                                      | 2,387   |    |              |   | 1,487   |   
|                                                                                                          |                                                                                                                                                                    |                                      |         |    |              |   |         |   
|                                                                                                          |                                                                                                                                                                    |                                      | 72,154  |    |              |   | 50,109  |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|PROPERTY AND EQUIPMENT                                                                                   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Land                                                                                                      |                                                                                                                                                                    |                                      | 1,150   |    |              |   | 1,224   |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Buildings and improvements                                                                                |                                                                                                                                                                    |                                      | 3,539   |    |              |   | 3,538   |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Machinery and equipment                                                                                   |                                                                                                                                                                    |                                      | 316,288 |    |              |   | 245,033 |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Oil and natural gas working interests                                                                     |                                                                                                                                                                    |                                      | 1,359   |    |              |   | 1,856   |   
|                                                                                                          |                                                                                                                                                                    |                                      |         |    |              |   |         |   
|                                                                                                          |                                                                                                                                                                    |                                      | 322,336 |    |              |   | 251,651 |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Less accumulated depreciation and amortization                                                            |                                                                                                                                                                    |                                      | 84,049  |    |              |   | 62,807  |   
|                                                                                                          |                                                                                                                                                                    |                                      |         |    |              |   |         |   
|                                                                                                          |                                                                                                                                                                    |                                      | 238,287 |    |              |   | 188,844 |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|GOODWILL, less accumulated amortization of $5,144 in
2000 and $3,616 in 1999                              |                                                                                                                                                                    |                                      | 17,733  |    |              |   | 19,261  |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|OTHER ASSETS                                                                                              |                                                                                                                                                                    |                                      | 1,633   |    |              |   | 2,368   |   
|                                                                                                          |                                                                                                                                                                    |                                      |         |    |              |   |         |   
|                                                                                                          |                                                                                                                                                                    | $                                    | 329,807 |    |              | $ | 260,582 |   
|                                                                                                          |                                                                                                                                                                    |                                      |         |    |              |   |         |   
|                                                                                                          |                                                                                                                                                                    | LIABILITIES AND SHAREHOLDERS EQUITY
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|CURRENT LIABILITIES                                                                                      
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Accounts payable                                                                                          |                                                                                                                                                                    | $                                    | 37,449  |    |              | $ | 19,672  |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Accrued payroll and related costs                                                                         |                                                                                                                                                                    |                                      | 7,056   |    |              |   | 4,536   |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Accrued workers compensation                                                                              |                                                                                                                                                                    |                                      | 3,999   |    |              |   | 871     |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Other accrued expenses                                                                                    |                                                                                                                                                                    |                                      | 5,061   |    |              |   | 4,135   |   
|                                                                                                          |                                                                                                                                                                    |                                      |         |    |              |   |         |   
|                                                                                                          |                                                                                                                                                                    |                                      | 53,565  |    |              |   | 29,214  |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|LONG-TERM DEBT                                                                                            |                                                                                                                                                                    |                                      | 55,000  |    |              |   | 32,196  |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|DEFERRED INCOME TAXES                                                                                     |                                                                                                                                                                    |                                      | 41,816  |    |              |   | 41,668  |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|OTHER LIABILITIES                                                                                         |                                                                                                                                                                    |                                      | 438     |    |              |   | 472     |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|COMMITMENTS AND CONTINGENCIES                                                                            
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|SHAREHOLDERS EQUITY                                                                                     
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Preferred Stock, $.01 par value, 5,000 shares authorized,
0 shares issued or outstanding in 2000 and 1999 |                                                                                                                                                                    |                                      |        |    |              |   |        |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                          | Common Stock, $.001 par value, 100,000 shares
authorized, 38,772 shares issued and 37,566 outstanding in 2000, 36,865 shares
issued and 35,659 outstanding in 1999 |                                      |         | 38 |              |   |         | 37 | 
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Additional capital                                                                                        |                                                                                                                                                                    |                                      | 152,377 |    |              |   | 144,293 |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Retained earnings                                                                                         |                                                                                                                                                                    |                                      | 36,548  |    |              |   | 22,707  |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Accumulated other comprehensive income                                                                    |                                                                                                                                                                    |                                      | 30      |    |              |   |        |   
|                                                                                                         
|                                                                                                         
|                                                                                                         
|                                                                                                         
|Treasury Stock, 1,206 shares in 2000 and 1999, at cost                                                    |                                                                                                                                                                    |                                      | (10,005 | )  |              |   | (10,005 | ) 
|                                                                                                          |                                                                                                                                                                    |                                      |         |    |              |   |         |   
|                                                                                                          |                                                                                                                                                                    |                                      | 178,988 |    |              |   | 157,032 |   
|                                                                                                          |                                                                                                                                                                    |                                      |         |    |              |   |         |   
|                                                                                                          |                                                                                                                                                                    | $                                    | 329,807 |    |              | $ | 260,582 |   
|                                                                                                          |                                                                                                                                                                    |                                      |         |    |              |   |         |   

See accompanying notes.

F3



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##### Table of Contents



UTI ENERGY CORP.




CONSOLIDATED STATEMENTS OF OPERATIONS

(All per share and share amounts reflect the 2:1 stock split effective October 3, 2000)
(in thousands, except per share amounts)

|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|---------------------------------------------------------------- |  | ------------------------ | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                 |  | Years Ended December 31,
|                                                                 |  |                         
|                                                                 |  | 2000                     |         | 1999 |  | 1998
|                                                                 |  |                          |         |      |  |     
|REVENUES                                                         |  | $                        | 275,543 |      |  | $    | 155,775 |   |  | $ | 186,157 |  
|                                                                
|                                                                
|                                                                
|                                                                
|COSTS AND EXPENSES                                              
|                                                                
|                                                                
|                                                                
|                                                                
|Direct operating costs (excluding depreciation and amortization) |  |                          | 208,825 |      |  |      | 123,240 |   |  |   | 138,935 |  
|                                                                
|                                                                
|                                                                
|                                                                
|Selling, general and administrative                              |  |                          | 11,959  |      |  |      | 10,170  |   |  |   | 10,781  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Provisions for bad debts                                         |  |                          | (456    | )    |  |      | 548     |   |  |   | 1,143   |  
|                                                                
|                                                                
|                                                                
|                                                                
|Other charges (income)                                           |  |                          | (483    | )    |  |      | (2,861  | ) |  |   | 206     |  
|                                                                
|                                                                
|                                                                
|                                                                
|Depreciation and amortization                                    |  |                          | 28,331  |      |  |      | 24,122  |   |  |   | 19,529  |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|                                                                 |  |                          | 248,176 |      |  |      | 155,219 |   |  |   | 170,594 |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|OPERATING INCOME                                                 |  |                          | 27,367  |      |  |      | 556     |   |  |   | 15,563  |  
|                                                                
|                                                                
|                                                                
|                                                                
|OTHER INCOME (EXPENSE)
Interest expense                          |  |                          | (5,111  | )    |  |      | (4,168  | ) |  |   | (3,815  | )
|                                                                
|                                                                
|                                                                
|                                                                
|Interest income                                                  |  |                          | 378     |      |  |      | 602     |   |  |   | 1,084   |  
|                                                                
|                                                                
|                                                                
|                                                                
|Other, net                                                       |  |                          | 170     |      |  |      | (17     | ) |  |   | 271     |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|                                                                 |  |                          | (4,563  | )    |  |      | (3,583  | ) |  |   | (2,460  | )
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|INCOME (LOSS) BEFORE INCOME TAXES                                |  |                          | 22,804  |      |  |      | (3,027  | ) |  |   | 13,103  |  
|                                                                
|                                                                
|                                                                
|                                                                
|INCOME TAXES                                                     |  |                          | 8,634   |      |  |      | (425    | ) |  |   | 5,235   |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                          |  |                          | 14,170  |      |  |      | (2,602  | ) |  |   | 7,868   |  
|                                                                
|                                                                
|                                                                
|                                                                
|EXTRAORDINARY ITEM, net of tax of $197                           |  |                          | (329    | )    |  |      |        |   |  |   |        |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|NET INCOME (LOSS)                                                |  | $                        | 13,841  |      |  | $    | (2,602  | ) |  | $ | 7,868   |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|BASIC EARNINGS (LOSS) PER COMMON SHARE                           |  | $                        | 0.38    |      |  | $    | (0.08   | ) |  | $ | 0.24    |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|DILUTED EARNINGS (LOSS) PER COMMON SHARE                         |  | $                        | 0.36    |      |  | $    | (0.08   | ) |  | $ | 0.23    |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|AVERAGE COMMON SHARES OUTSTANDING                               
|                                                                
|                                                                
|                                                                
|                                                                
|Basic                                                            |  |                          | 36,860  |      |  |      | 33,984  |   |  |   | 32,139  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Diluted                                                          |  |                          | 38,817  |      |  |      | 33,984  |   |  |   | 33,590  |  

See accompanying notes.

F4



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##### Table of Contents



UTI ENERGY CORP.




CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

(All share amounts reflect the 2:1 stock split effective October 3, 2000)
(in thousands)

|                                 |  |              |        |       |  |            |    |          |  |            |         |               |  |          |        |             |  |   |     |   |  |   |    |  |  |   |         |   |  |   |         |  
|-------------------------------- |  | ------------ | ------ | ----- |  | ---------- | -- | -------- |  | ---------- | ------- | ------------- |  | -------- | ------ | ----------- |  | - | --- | - |  | - | -- |  |  | - | ------- | - |  | - | ------- | -
|                                 |  | Common Stock |        |       |  |            |    |          |  |            |         |               |  |          |        | Accumulated
|                                 |  |              |        |       |  |            |    |          |  |            |         |               |  |          |        | Other      
|                                 |  | Number       |        | Par   |  | Additional |    | Retained |  | Restricted |         | Comprehensive |  | Treasury
|                                 |  | of Shares    |        | $.001 |  | Capital    |    | Earnings |  | Stock      |         | Income        |  | Stock    |        | Total      
|                                 |  |              |        |       |  |            |    |          |  |            |         |               |  |          |        |            
|Balance at December 31, 1997     |  |              | 32,294 |       |  | $          | 32 |          |  | $          | 120,192 |               |  | $        | 17,441 |             |  | $ | (45 | ) |  | $ |   |  |  | $ |        |   |  | $ | 137,620 |  
|                                
|                                
|                                
|                                
|Net income                       |  |              |       |       |  |            |   |          |  |            |        |               |  |          | 7,868  |             |  |   |    |   |  |   |   |  |  |   |        |   |  |   | 7,868   |  
|                                
|                                
|                                
|                                
|Redemption of Redeemable Stock   |  |              |       |       |  |            | 1  |          |  |            | 6,701   |               |  |          |       |             |  |   |    |   |  |   |   |  |  |   | (6,702  | ) |  |   |        |  
|                                
|                                
|                                
|                                
|Warrants issued                  |  |              |       |       |  |            |   |          |  |            | 411     |               |  |          |       |             |  |   |    |   |  |   |   |  |  |   |        |   |  |   | 411     |  
|                                
|                                
|                                
|                                
|Exercise of options              |  |              | 313    |       |  |            |   |          |  |            | 1,505   |               |  |          |       |             |  |   |    |   |  |   |   |  |  |   |        |   |  |   | 1,505   |  
|                                
|                                
|                                
|                                
|Purchase of Treasury Stock       |  |              | (588   | )     |  |            |   |          |  |            |        |               |  |          |       |             |  |   |    |   |  |   |   |  |  |   | (3,303  | ) |  |   | (3,303  | )
|                                
|                                
|                                
|                                
|Vesting of restricted stock plan |  |              |       |       |  |            |   |          |  |            |        |               |  |          |       |             |  |   | 45  |   |  |   |   |  |  |   |        |   |  |   | 45      |  
|                                 |  |              |        |       |  |            |    |          |  |            |         |               |  |          |        |             |  |   |     |   |  |   |    |  |  |   |         |   |  |   |         |  
|Balance at December 31, 1998     |  |              | 32,019 |       |  |            | 33 |          |  |            | 128,809 |               |  |          | 25,309 |             |  |   |    |   |  |   |   |  |  |   | (10,005 | ) |  |   | 144,146 |  
|                                
|                                
|                                
|                                
|Net loss                         |  |              |       |       |  |            |   |          |  |            |        |               |  |          | (2,602 | )           |  |   |    |   |  |   |   |  |  |   |        |   |  |   | (2,602  | )
|                                
|                                
|                                
|                                
|Issuance of Common Stock         |  |              | 2,596  |       |  |            | 3  |          |  |            | 13,262  |               |  |          |       |             |  |   |    |   |  |   |   |  |  |   |        |   |  |   | 13,265  |  
|                                
|                                
|                                
|                                
|Exercise of options              |  |              | 1,044  |       |  |            | 1  |          |  |            | 2,222   |               |  |          |       |             |  |   |    |   |  |   |   |  |  |   |        |   |  |   | 2,223   |  
|                                 |  |              |        |       |  |            |    |          |  |            |         |               |  |          |        |             |  |   |     |   |  |   |    |  |  |   |         |   |  |   |         |  
|Balance at December 31, 1999     |  |              | 35,659 |       |  |            | 37 |          |  |            | 144,293 |               |  |          | 22,707 |             |  |   |    |   |  |   |   |  |  |   | (10,005 | ) |  |   | 157,032 |  
|                                
|                                
|                                
|                                
|Net income                       |  |              |       |       |  |            |   |          |  |            |        |               |  |          | 13,841 |             |  |   |    |   |  |   |   |  |  |   |        |   |  |   | 13,841  |  
|                                
|                                
|                                
|                                
|Foreign currency translation     |  |              |       |       |  |            |   |          |  |            |        |               |  |          |       |             |  |   |    |   |  |   | 30 |  |  |   |        |   |  |   | 30      |  
|                                
|                                
|                                
|                                
|Exercise of warrants             |  |              | 1,054  |       |  |            |   |          |  |            | 694     |               |  |          |       |             |  |   |    |   |  |   |   |  |  |   |        |   |  |   | 694     |  
|                                
|                                
|                                
|                                
|Exercise of options              |  |              | 853    |       |  |            | 1  |          |  |            | 7,390   |               |  |          |       |             |  |   |    |   |  |   |   |  |  |   |        |   |  |   | 7,391   |  
|                                 |  |              |        |       |  |            |    |          |  |            |         |               |  |          |        |             |  |   |     |   |  |   |    |  |  |   |         |   |  |   |         |  
|Balance at December 31, 2000     |  |              | 37,566 |       |  | $          | 38 |          |  | $          | 152,377 |               |  | $        | 36,548 |             |  | $ |    |   |  | $ | 30 |  |  | $ | (10,005 | ) |  | $ | 178,988 |  
|                                 |  |              |        |       |  |            |    |          |  |            |         |               |  |          |        |             |  |   |     |   |  |   |    |  |  |   |         |   |  |   |         |  

See accompanying notes.

F5



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##### Table of Contents



UTI ENERGY CORP.




CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

|                                                                       |                                                                                  |                               |                                                  |        |                          |         |        |        |        |         |         |        |        |         |  
|---------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ----------------------------- | ------------------------------------------------ | ------ | ------------------------ | ------- | ------ | ------ | ------ | ------- | ------- | ------ | ------ | ------- | -
|                                                                       |                                                                                  |                               |                                                  |        | Years Ended December 31,
|                                                                       |                                                                                  |                               |                                                  |        |                         
|                                                                       |                                                                                  |                               |                                                  |        | 2000                     |         | 1999   |        | 1998  
|                                                                       |                                                                                  |                               |                                                  |        |                          |         |        |        |       
|CASH FLOWS FROM OPERATING ACTIVITIES                                  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Net income (loss)                                                      |                                                                                  | $                             | 13,841                                           |        |                          | $       | (2,602 | )      |        | $       | 7,868   |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Adjustments to reconcile net income to net cash
provided by operations
|                                                                       | Depreciation                                                                     |                               |                                                  | 26,136 |                          |         |        | 21,924 |        |         |         | 17,630 |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Amortization                                                                     |                               |                                                  | 2,195  |                          |         |        | 2,198  |        |         |         | 1,899  |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Deferred income taxes                                                            |                               |                                                  | 6      |                          |         |        | 2,208  |        |         |         | 2,549  |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Amortization of debt discount                                                    |                               |                                                  | 594    |                          |         |        | 475    |        |         |         | 475    |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Stock compensation expense                                                       |                               |                                                  |       |                          |         |        |       |        |         |         | 45     |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Tax benefit on exercised stock options                                           |                               |                                                  | 4,353  |                          |         |        | 699    |        |         |         | 828    |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Provisions for bad debts                                                         |                               |                                                  |       |                          |         |        | 282    |        |         |         | 1,104  |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Gain on disposal of fixed assets                                                 |                               |                                                  | (483   | )                        |         |        | (3,121 | )      |         |         | (579   | )     
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Change in operating assets and liabilities, net of
effect of businesses acquired
|                                                                       |                                                                                  | Receivables and prepaids      |                                                  |        | (21,816                  | )       |        |        | (4,079 | )       |         |        | 5,445  |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                  | Materials and supplies        |                                                  |        | (19                      | )       |        |        | (109   | )       |         |        | 477    |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                  | Accounts payable and accruals |                                                  |        | 24,350                   |         |        |        | (2,255 | )       |         |        | (3,450 | )      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                  | Other                         |                                                  |        | 35                       |         |        |        | (1,220 | )       |         |        | (2,723 | )      
|                                                                       |                                                                                  |                               |                                                  |        |                          |         |        |        |        |         |         |       
|                                                                       |                                                                                  |                               | Net cash provided by operating activities        |        |                          | 49,192  |        |        |        | 14,400  |         |        |        | 31,568  |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|CASH FLOWS FROM INVESTING ACTIVITIES                                  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Acquisitions of property and equipment                                 |                                                                                  |                               | (38,669                                          | )      |                          |         | (9,444 | )      |        |         | (37,429 | )     
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Acquisitions, net of cash                                              |                                                                                  |                               | (38,820                                          | )      |                          |         | (7,540 | )      |        |         | (34,300 | )     
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Net proceeds from disposition                                          |                                                                                  |                               |                                                 |        |                          |         | 4,935  |        |        |         |        |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Proceeds from sale of property and equipment                           |                                                                                  |                               | 2,404                                            |        |                          |         | 1,286  |        |        |         | 1,530   |       
|                                                                       |                                                                                  |                               |                                                  |        |                          |         |        |        |        |         |         |       
|                                                                       |                                                                                  |                               | Net cash used by investing activities            |        |                          | (75,085 | )      |        |        | (10,763 | )       |        |        | (70,199 | )
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|CASH FLOWS FROM FINANCING ACTIVITIES                                  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Proceeds from issuance of long-term debt                               |                                                                                  |                               | 61,976                                           |        |                          |         |       |        |        |         |        |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Repayments of long-term debt                                           |                                                                                  |                               | (39,766                                          | )      |                          |         | (7,951 | )      |        |         | (52     | )     
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Repurchased stock                                                      |                                                                                  |                               |                                                 |        |                          |         |       |        |        |         | (10,005 | )     
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Proceeds from issuance of Common Stock                                 |                                                                                  |                               | 3,731                                            |        |                          |         | 1,524  |        |        |         | 678     |       
|                                                                       |                                                                                  |                               |                                                  |        |                          |         |        |        |        |         |         |       
|                                                                       |                                                                                  |                               | Net cash provided (used) by financing activities |        |                          | 25,941  |        |        |        | (6,427  | )       |        |        | (9,379  | )
|                                                                       |                                                                                  |                               |                                                  |        |                          |         |        |        |        |         |         |       
|NET INCREASE (DECREASE) IN CASH AND CASH                              
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|EQUIVALENTS                                                            |                                                                                  |                               | 48                                               |        |                          |         | (2,790 | )      |        |         | (48,010 | )     
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|EFFECT OF EXCHANGE RATE CHANGES ON CASH AND                           
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|CASH EQUIVALENTS                                                       |                                                                                  |                               | (34                                              | )      |                          |         |       |        |        |         |        |       
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                         |                                                                                  |                               | 7,547                                            |        |                          |         | 10,337 |        |        |         | 58,347  |       
|                                                                       |                                                                                  |                               |                                                  |        |                          |         |        |        |        |         |         |       
|CASH AND CASH EQUIVALENTS AT END OF YEAR                               |                                                                                  | $                             | 7,561                                            |        |                          | $       | 7,547  |        |        | $       | 10,337  |       
|                                                                       |                                                                                  |                               |                                                  |        |                          |         |        |        |        |         |         |       

See accompanying notes.

F6



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##### Table of Contents



UTI ENERGY CORP.




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All share amounts reflect the 2:1 stock split effective October 3, 2000)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

UTI Energy Corp. is a leading provider of onshore contract drilling
services to companies that explore for and produce oil and natural gas.
UTI was incorporated in Delaware and commenced its current business on
December 31, 1986. UTI operates one of the largest fleets of drilling
rigs used to drill oil and natural gas wells on land in North America. A
drilling rig includes the structure, power source and machinery necessary
to allow a drill bit to penetrate rock to a depth desired by the
customer. UTIs drilling rigs operate in the oil and natural gas
producing basins of Texas, Oklahoma, New Mexico and Western Canada. As
of December 31, 2000, UTIs fleet consisted of 144 land drilling rigs.

UTI also provides pressure pumping services in the Appalachian Basin.
Pressure pumping services consist primarily of well stimulation and
cementing for the completion of new wells and remedial work on existing
wells. Well stimulation involves processes inside a well designed to
enhance the flow of oil, natural gas or other desired substances from the
well. Cementing is the process of inserting material between the hole
and the pipe to center and stabilize the pipe in the hole.

Principles of Consolidation

The consolidated financial statements include the accounts of UTI and its
subsidiaries. All of UTIs subsidiaries 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 and Cash Equivalents

UTI considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.

Materials and Supplies

Materials and supplies are composed of replacement parts and supplies
held for use in the operations of UTI. Material and supplies are stated
at the lower of cost or market. Cost is determined by the first in,
first out method.

F7



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property and Equipment

Property and equipment are stated at cost. Improvements are capitalized
and depreciated over the period of benefit. UTI periodically reviews its
long-lived assets for impairment. Provisions for impairment are charged
to income when indicators of impairment are present and when it is
considered probable that the carrying values of producing asset groups
may not be recovered over their remaining service lives based on
estimates of future net cash flows on an undiscounted basis.

Upon retirement or other disposal of fixed assets, the cost and related
accumulated depreciation are removed from the respective accounts. Any
gains or losses are included in results of operations. Depreciation is
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

UTI capitalizes interest on borrowings during the active construction
period of major capital projects. Capitalized interest is added to the
cost of the underlying assets and is amortized over the useful lives of
the assets. For the year ended December 31, 2000, UTI capitalized
approximately $.4 million of interest in connection with various capital
projects. Prior to 2000, capitalized interest was not significant.

Oil and Natural Gas Working Interests

UTI accounts for its oil and natural gas operations under the successful
efforts method of accounting. Under the successful efforts method of
accounting, costs which result directly in the discovery of oil and
natural gas reserves and all development costs are capitalized.
Exploration costs which do not result directly in discovering oil and
natural gas reserves are charged to expense as incurred. The capitalized
costs are depreciated, depleted and amortized on the units-of-production
method, based on estimates of recoverable proved developed oil and
natural gas reserves of each respective field.

Goodwill

The excess of the purchase price over the estimated fair value of net
assets acquired is accounted for as goodwill and is amortized on a
straight-line basis over 15 years. UTIs management periodically
assesses recorded goodwill, net of accumulated amortization, for
impairment based on the undiscounted cash flows associated with the
assets acquired compared to the carrying amount of those assets.
Management believes that there have been no events or circumstances which
affect the recoverability of its recorded goodwill.

F8



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreign Currency Translation

The U.S. dollar is the functional currency for all of UTIs operations
except for UTIs Canadian operations which uses the Canadian dollar as
the functional currency. The effects of exchange rate changes are
reflected as a separate component of shareholders equity.

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. Any losses are provided
for in the period in which the loss is determinable.

Stock-Based Compensation

UTI 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 123). In accordance with APB No. 25, UTI has not
recognized compensation expense for stock options. This is because the
exercise price of the options equal the market price of the underlying
stock on the date of grant, which is the measurement date.

New Accounting Pronouncement

In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities(SFAS 133). SFAS 133, as amended by
Statement of Financial Accounting Standards No. 137, Accounting for
Derivative Instruments and Hedging Activities- Deferral of the Effective
Date of FASB Statement No. 133, which is effective for fiscal years
beginning after June 15, 2001, and requires all derivatives to be
recognized at fair value on the balance sheet. UTI adopted SFAS 133 on
January 1, 2001. The change is not expected to have a significant effect
on UTI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9



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

2. ACQUISITIONS

(a) Peterson Drilling Company

On April 9, 1998, UTI acquired Peterson Drilling Company for a total
purchase price of $20.4 million in cash. The acquisition has been
accounted for under the purchase method of accounting. Petersons
operating results since April 9, 1998 have been consolidated with the
operating results of UTI. Petersons assets included eight land drilling
rigs, drilling equipment and approximately $4.5 million in net working
capital. The fair market value of the assets acquired were estimated and
the purchase price was allocated as follows (in thousands):

|                          |  |   |        |  
|------------------------- |  | - | ------ | -
|Property and Equipment    |  | $ | 20,318 |  
|                         
|                         
|                         
|                         
|Goodwill                  |  |   | 3,607  |  
|                         
|                         
|                         
|                         
|Other Assets Assumed, net |  |   | 3,835  |  
|                         
|                         
|                         
|                         
|Deferred Taxes            |  |   | (7,360 | )
|                          |  |   |        |  
|Purchase Price            |  | $ | 20,400 |  
|                          |  |   |        |  

(b) LaMunyon Drilling Corporation

On June 24, 1998, UTI acquired the land drilling assets of LaMunyon
Drilling Corporation for $12.2 million in cash. The acquisition has been
accounted for using the purchase method of accounting. LaMunyons
operating results since June 24, 1998 have been consolidated with the
operating results of UTI. The acquired assets consisted of five land
drilling rigs, drilling equipment, rolling stock and other assets used in
LaMunyons land drilling business. The fair market value of the drilling
rigs and related equipment was estimated and the purchase price was
allocated as follows (in thousands):

|                       |  |   |        |  
|---------------------- |  | - | ------ | -
|Property and Equipment |  | $ | 12,560 |  
|                      
|                      
|                      
|                      
|Goodwill               |  |   |       |  
|                      
|                      
|                      
|                      
|Liabilities Assumed    |  |   | (360   | )
|                       |  |   |        |  
|Purchase Price         |  | $ | 12,200 |  
|                       |  |   |        |  

F10



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

2. ACQUISITIONS (Continued)

(c) Suits Enterprises, Inc.

On July 31, 1998, UTI acquired Suits Enterprises, Inc. for approximately
$11.1 million. This $11.1 million was comprised of $2.9 million in cash,
$7.8 million in 7% four-year notes and five-year warrants to purchase 200,000 shares of
UTI common stock. Warrants to purchase 150,000 shares of UTIs common
stock are exercisable at $13.25 per share and warrants to purchase 50,000
shares of UTIs common stock are exercisable at $17.50 per share. Using
the Black-Scholes valuation model, the warrants were valued at $2.14 and
$1.81 per respective warrant. Warrants to purchase 78,750 shares of
UTIs common stock have been exercised through December 31, 2000. The
acquisition has been accounted for using the purchase method of
accounting. Suits operating results since July 31, 1998 have been
consolidated with the operating results of UTI. Suits assets included
seven land drilling rigs, drilling equipment and rolling stock. The fair
market value of the drilling rigs and related equipment was estimated and
the purchase price was allocated as follows (in thousands):

|                               |  |   |        |  
|------------------------------ |  | - | ------ | -
|Property and Equipment         |  | $ | 17,856 |  
|                              
|                              
|                              
|                              
|Goodwill                       |  |   |       |  
|                              
|                              
|                              
|                              
|Deferred Taxes                 |  |   | (6,460 | )
|                              
|                              
|                              
|                              
|Other Liabilities Assumed, net |  |   | (306   | )
|                               |  |   |        |  
|Purchase Price                 |  | $ | 11,090 |  
|                               |  |   |        |  

(d) Norton Drilling Services, Inc.

On July 27, 1999, UTI acquired Norton Drilling Services, Inc., for
approximately 2.6 million shares of UTIs common stock. The stock was
valued at $13.3 million or $5.12 per share based on the average price of
UTIs common stock shortly before and after the acquisition was
announced. UTI also repaid approximately $8.0 million of Nortons
existing debt upon the acquisition. The acquisition has been accounted
for under the purchase method of accounting. Nortons operating results
since July 27, 1999 have been consolidated with the operating results of
UTI. Nortons assets included sixteen land drilling rigs, drilling
equipment and rolling stock. The fair market value of the drilling rigs
and related equipment was estimated and the purchase price was allocated
as follows (in thousands):

|                               |  |   |        |  
|------------------------------ |  | - | ------ | -
|Property and Equipment         |  | $ | 31,381 |  
|                              
|                              
|                              
|                              
|Goodwill                       |  |   |       |  
|                              
|                              
|                              
|                              
|Deferred Taxes                 |  |   | (6,073 | )
|                              
|                              
|                              
|                              
|Long-Term Debt Assumed         |  |   | (7,951 | )
|                              
|                              
|                              
|                              
|Other Liabilities Assumed, net |  |   | (4,073 | )
|                               |  |   |        |  
|Purchase Price                 |  | $ | 13,284 |  
|                               |  |   |        |  

F11



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

2. ACQUISITIONS (Continued)

(e) Schneider Drilling Corporation

On December 14, 1999, UTI acquired the land drilling assets of Schneider
Drilling Corporation for $7.5 million in cash. The acquisition has been
accounted for under the purchase method of accounting. Schneiders
operating results since December 14, 1999 have been consolidated with the
operating results of UTI. Schneiders assets included three land
drilling rigs, major components for two additional land drilling rigs and
drilling equipment. The fair market value of the drilling rigs and
related equipment was allocated as follows (in thousands):

|                          |  |   |       |  
|------------------------- |  | - | ----- | -
|Property and Equipment    |  | $ | 7,712 |  
|                         
|                         
|                         
|                         
|Goodwill                  |  |   |      |  
|                         
|                         
|                         
|                         
|Other Liabilities Assumed |  |   | (212  | )
|                          |  |   |       |  
|Purchase Price            |  | $ | 7,500 |  
|                          |  |   |       |  

(f) Phelps Drilling International Ltd.

On May 5, 2000, UTI acquired the land drilling operations of Phelps
Drilling International Ltd. for $29.6 million in cash. Phelps assets
and operations are located in the Canadian provinces of Alberta,
British Columbia and Saskatchewan. The acquisition has been accounted
for under the purchase method of accounting. Phelps operating results
since May 5, 2000 have been consolidated with the operating results of
UTI. The acquired assets consisted of fourteen land drilling rigs,
drilling equipment and other equipment used in Phelps land drilling
business. The fair market value of the drilling rigs and related
equipment was estimated and the purchase price was allocated as follows
(in thousands):

|                               |  |   |        |  
|------------------------------ |  | - | ------ | -
|Property and Equipment         |  | $ | 31,170 |  
|                              
|                              
|                              
|                              
|Goodwill                       |  |   |       |  
|                              
|                              
|                              
|                              
|Other Liabilities Assumed, net |  |   | (1,559 | )
|                               |  |   |        |  
|Purchase Price                 |  | $ | 29,611 |  
|                               |  |   |        |  

(g) Asset Swap

On May 15, 2000, UTI, in a nonmonetary exchange of similar productive
assets, acquired a drilling rig in exchange for certain drilling rig
components and drill pipe with a net book value of approximately
$970,000. No gain or loss was recognized on this transaction.

F12



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

2. ACQUISITIONS (Continued)

(h) Asset Acquisitions

On September 1, 2000, UTI acquired one drilling rig for $1.25 million in
cash which was placed in service in October of 2000.

On September 5, 2000, UTI acquired three drilling rigs for $6.4 million
in cash.

3. LONG-TERM DEBT

UTIs long-term debt at December 31, 2000 and 1999 consisted of the
following:

|                           |  |                |        |      |  |   |        | 
|-------------------------- |  | -------------- | ------ | ---- |  | - | ------ | 
|                           |  | December 31,  
|                           |  |               
|                           |  | 2000           |        | 1999
|                           |  |                |        |     
|                           |  | (in thousands)
|                          
|Revolving credit facility  |  | $              | 50,710 |      |  | $ |       | 
|                          
|                          
|                          
|                          
|Subordinated notes         |  |                |       |      |  |   | 25,000 | 
|                          
|                          
|                          
|                          
|Promissory notes           |  |                | 4,290  |      |  |   | 7,790  | 
|                           |  |                |        |      |  |   |        | 
|                           |  |                | 55,000 |      |  |   | 32,790 | 
|                          
|                          
|                          
|                          
|Less: unamortized discount |  |                |       |      |  |   | 594    | 
|                           |  |                |        |      |  |   |        | 
|                           |  | $              | 55,000 |      |  | $ | 32,196 | 
|                           |  |                |        |      |  |   |        | 

Revolving Credit Facility

On November 22, 1999, UTI entered into a $65.0 million revolving credit
facility. The initial term of the facility is for four years with
automatic annual renewals thereafter unless terminated by either party.
An early termination fee applies if UTI terminates before the four-year
anniversary date. The maximum borrowings under this revolving credit
facility were increased to $75.0 million in May of 2000 and were
increased to $90.0 million in October of 2000. UTI incurs a fee of .375%
per annum on the unused facility amount. Under the revolving credit
facility, UTI may use up to $10.0 million for letters of credit. The
amount used for letters of credit decreases the borrowing base of the
facility. At December 31, 2000, UTI had a $2.6 million standby letter of
credit issued under the facility. The revolving credit facility calls
for periodic interest payments at a floating rate ranging from LIBOR plus
1.75% to LIBOR plus 2.75% or prime. The actual rate charged above LIBOR
(1.75% at December 31, 2000) is based on UTIs trailing twelve-month
EBITDA. UTIs assets secure the facility. The facility has restrictions
customary in financial instruments of this type including restrictions on
certain investments, acquisitions and loans. If availability under the
facility is less than $20.0 million then covenants related to net worth
and earnings before income taxes and depreciation apply.

F13



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

3. LONG-TERM DEBT (Continued)

Prior to entering into the $65.0 million revolving credit agreement, UTI
maintained a $30.0 million revolving credit agreement with a bank. There
were no borrowings under this facility in 1999. A $1.6 million
standby letter of credit was issued under this agreement.

Subordinated Notes

On April 11, 1997, UTI issued $25.0 million principal amount of 12.0%
subordinated notes due 2001. The proceeds of the notes were $24.5 million
after discount. The subordinated notes were issued along with seven-year
warrants to purchase 2.4 million shares of UTIs common stock at an
exercise price of $5.42 per share. UTI assigned a value of $1.4 million
to the warrants issued. UTI was amortizing the cost of the warrants to
interest expense over the life of the borrowing. The notes were repaid
in 2000 from the proceeds of borrowings under the revolving credit
facility.

Promissory Notes

On July 31, 1998, UTI issued $7.8 million principal amount of unsecured
promissory notes. An early principal payment of $3.5 million became
payable because the average trading value of UTIs common stock for
thirty consecutive days exceeded $15.00 per share on March 9, 2000. The
repayments were funded by long-term borrowings under the revolving credit
facility. The notes bear interest at 7% and, except for the $3.5 million
discussed above, mature on July 31, 2002. The notes were issued in
connection with the acquisition of Suits.

4. LEASES

Future minimum payments, for each year and in the aggregate, under
noncancellable operating leases with initial or remaining terms of one
year or more consist of the following at December 31, 2000 (in
thousands):

|                             |  |   |       | 
|---------------------------- |  | - | ----- | 
|2001                         |  | $ | 610   | 
|                            
|                            
|                            
|                            
|2002                         |  |   | 417   | 
|                            
|                            
|                            
|                            
|2003                         |  |   | 144   | 
|                            
|                            
|                            
|                            
|2004                         |  |   | 70    | 
|                            
|                            
|                            
|                            
|2005                         |  |   | 23    | 
|                             |  |   |       | 
|Total minimum lease payments |  | $ | 1,264 | 
|                             |  |   |       | 

The following table shows the approximate rental expense, consisting
primarily of daily rental charges for the use of drilling equipment, for
the last three years (in thousands):

|       |  |        |  |        |  |  |  | 
|------ |  | ------ |  | ------ |  |  |  | 
|2000   |  | 1999   |  | 1998  
|       |  |        |  |       
|$6,822 |  | $3,059 |  | $2,459

F14



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

5. CONTINGENCIES

UTI is involved in several claims arising in the ordinary course of
business. UTIs management believes that all of these claims are covered
by insurance or that these matters will not have a material adverse
effect on UTIs financial statements.

UTI is partially self-insured for employee health insurance claims and
incurs a maximum of $100,000 per employee under medical claims. UTI was
self-insured for workers compensation for certain years prior to 2000 and
incurs a maximum of $250,000 per event for workers compensation claims.
Although UTI believes that adequate reserves have been provided for
expected liabilities arising from its self-insured obligations,
managements estimates of these liabilities may change in the future as
circumstances develop.

UTIs operations are subject to the many hazards inherent in the onshore
drilling industry, such as blowouts, explosions, sour gas, well fires and
spills. These hazards can result in personal injury and loss of life, severe
damage to or destruction of property and equipment, pollution or environmental
damage and suspension of operations. Although UTI maintains insurance
protection as management deems appropriate, such insurance coverage may not
provide sufficient funds to protect UTI from all liabilities that could result
from its operations. Also, claims will be subject to various retentions and
deductibles. While UTI has generally been able to obtain some degree of
contractual indemnification from its customers in most of its dayrate drilling
contracts, no such indemnification is typically available for footage or
dayrate contracts. The indemnity agreements require the customers to hold UTI
harmless in the event of loss of production or reservoir damage. This
contractual indemnification may not be supported by
adequate insurance maintained by the customer.

UTIs operations routinely involve the handling of various materials, including
hazardous materials. UTI may be exposed to liability under numerous state and
federal environmental laws, rules and regulations, including dealing with
hazardous materials. In addition, environmental laws and regulations including
The Comprehensive Environmental Response, Compensation and Liability Act (also
known as the Superfund Law), may impose strict liability whereby UTI could be
liable for clean-up costs, even if the situation resulted from previous conduct
of UTI 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 UTI. UTI maintains insurance coverage against some environmental
liabilities, including pollution caused by sudden and accidental oil spills.

Management believes it has adequately reserved for these contingencies.
Management is of the opinion that the outcome of known and potential claims
will not have a material adverse effect on UTIs operations.

F15



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

6. SHAREHOLDERS EQUITY

At UTIs Annual Meeting held on July 26, 2000, the stockholders approved an
amendment to UTIs Restated Certificate of Incorporation that increased the
number of authorized shares of common stock from 50 million to 100 million. In
addition, at the Annual Meeting, the stockholders approved an amendment to the
Restated Certificate of Incorporation to eliminate Class A common stock.

At UTIs Board of Directors Meeting held on July 26, 2000, the board approved a
resolution to eliminate Class A Preferred Stock and to restate the Certificate
of Incorporation.

On September 14, 2000, UTIs Board of Directors authorized a two for one stock
split in the form of a stock dividend. The stock dividend was paid on October
3, 2000 to stockholders of record on September 25, 2000. As a result of the
stock split, all share and per share data contained herein have been restated
to reflect the effect of the two for one stock split.

7. EXTRAORDINARY ITEM

UTI recorded an extraordinary loss of $329,000 after taxes ($.01 per share) as
a result of the early retirement of its $25.0 million subordinated notes. The
redemption of 12.0% debt was financed with proceeds from the revolving credit
facility with interest rates between LIBOR plus 1.75% to prime. At December
31, 2000, prime interest rate was 9.5%. The loss consisted primarily of the
write-off of the discount, deferred interest and financing fees.

8. OTHER CHARGES (INCOME)

During 1999 and 1998, UTI incurred charges related to a series of actions taken
to:



| |  |  | improve efficiency                          
| | - |  | --------------------------------------------
| |  |  | increase productivity                       
| |  |  | make UTI more competitive in the marketplace

The actions included the reduction of regional operating offices and
reductions of UTIs administrative staff. These charges were $.3 million
and $.8 million for the years ended December 31, 1999 and 1998,
respectively. There were no accruals at December 31, 2000 or December
31, 1999 related to these charges.

In March 1999, UTI sold certain land drilling assets of International
Petroleum Service Company, its wholly owned subsidiary, to an unrelated
party for $5.6 million. A pre-tax gain of $2.8 million was realized as a
result of the sale. Included in the sale were:



| |  |  | five land drilling rigs  
| | - |  | -------------------------
| |  |  | related support equipment
| |  |  | rolling stock            
| |  |  | spare parts and supplies 

F16



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

9. INCOME TAXES

Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts for income tax purposes. Significant
components of UTIs deferred tax assets and liabilities are as follows:

|                                |                          |   |                |       |      |   |         |       | 
|------------------------------- | ------------------------ | - | -------------- | ----- | ---- | - | ------- | ----- | 
|                                |                          |   | December 31,  
|                                |                          |   |               
|                                |                          |   | 2000           |       | 1999
|                                |                          |   |                |       |     
|                                |                          |   | (in thousands)
|Deferred tax assets:           
|                               
|                               
|                               
|                               
|Alternative minimum tax credits |                          | $ | 2,754          |       |      | $ | 614     |      
|                               
|                               
|                               
|                               
|Investment tax credits          |                          |   |               |       |      |   | 21      |      
|                               
|                               
|                               
|                               
|Accrued expenses                |                          |   | 4,158          |       |      |   | 1,988   |      
|                                |                          |   |                |       |      |   |         |      
|                                | Total deferred tax asset |   |                | 6,912 |      |   |         | 2,623 | 
|                               
|Deferred tax liabilities:      
|                               
|                               
|                               
|                               
|Depreciation                    |                          |   | (46,771        | )     |      |   | (42,529 | )    
|                                |                          |   |                |       |      |   |         |      
|Net deferred tax liability      |                          | $ | (39,859        | )     |      | $ | (39,906 | )    
|                                |                          |   |                |       |      |   |         |      

UTIs investment tax credit carryforwards expired in 2000. UTIs
alternative minimum tax credit carryforwards may be carried forward
indefinitely. UTIs valuation allowance related to these tax credit
carryforwards is zero since management believes that these credits will
be utilized to offset future tax. UTIs management adjusts the valuation
allowance as circumstances change affecting the expected realization of
the deferred tax assets.

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

|          |  |                          |       |      |  |      |        |   |  |   |       | 
|--------- |  | ------------------------ | ----- | ---- |  | ---- | ------ | - |  | - | ----- | 
|          |  | Years Ended December 31,
|          |  |                         
|          |  | 2000                     |       | 1999 |  | 1998
|          |  |                          |       |      |  |     
|          |  | (in thousands)          
|Current: 
|         
|         
|         
|         
|Federal   |  | $                        | 8,466 |      |  | $    | (3,031 | ) |  | $ | 2,372 | 
|         
|         
|         
|         
|State     |  |                          | (35   | )    |  |      | 398    |   |  |   | 314   | 
|          |  |                          |       |      |  |      |        |   |  |   |       | 
|          |  |                          | 8,431 |      |  |      | (2,633 | ) |  |   | 2,686 | 
|         
|         
|         
|         
|Deferred:
|         
|         
|         
|         
|Federal   |  |                          | (791  | )    |  |      | 2,281  |   |  |   | 2,540 | 
|         
|         
|         
|         
|Foreign   |  |                          | 470   |      |  |      |       |   |  |   |      | 
|         
|         
|         
|         
|State     |  |                          | 327   |      |  |      | (73    | ) |  |   | 9     | 
|          |  |                          |       |      |  |      |        |   |  |   |       | 
|          |  |                          | 6     |      |  |      | 2,208  |   |  |   | 2,549 | 
|          |  |                          |       |      |  |      |        |   |  |   |       | 
|          |  | $                        | 8,437 |      |  | $    | (425   | ) |  | $ | 5,235 | 
|          |  |                          |       |      |  |      |        |   |  |   |       | 

F17



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

9. INCOME TAXES (Continued)

The difference between tax expense computed at the federal income tax
rate of 35% for 2000, 1999 and 1998 and actual tax expense is as follows:

|                                                          |  |                          |       |      |  |      |        |   |  |   |       |  
|--------------------------------------------------------- |  | ------------------------ | ----- | ---- |  | ---- | ------ | - |  | - | ----- | -
|                                                          |  | Years Ended December 31,
|                                                          |  |                         
|                                                          |  | 2000                     |       | 1999 |  | 1998
|                                                          |  |                          |       |      |  |     
|                                                          |  | (in thousands)          
|                                                         
|Taxes applied to pre-tax income                           |  | $                        | 7,797 |      |  | $    | (1,059 | ) |  | $ | 4,586 |  
|                                                         
|                                                         
|                                                         
|                                                         
|State income tax, net of federal benefit                  |  |                          | 190   |      |  |      | 211    |   |  |   | 204   |  
|                                                         
|                                                         
|                                                         
|                                                         
|Foreign taxes                                             |  |                          | 119   |      |  |      |       |   |  |   |      |  
|                                                         
|                                                         
|                                                         
|                                                         
|Permanent differences, principally
nondeductible expenses |  |                          | 557   |      |  |      | 423    |   |  |   | 588   |  
|                                                         
|                                                         
|                                                         
|                                                         
|Other                                                     |  |                          | (226  | )    |  |      |       |   |  |   | (143  | )
|                                                          |  |                          |       |      |  |      |        |   |  |   |       |  
|                                                          |  | $                        | 8,437 |      |  | $    | (425   | ) |  | $ | 5,235 |  
|                                                          |  |                          |       |      |  |      |        |   |  |   |       |  

10. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted
earnings per share:

|                                                                                                     |                                  |   |                                          |       |      |   |        |   |  |   |        |       | 
|---------------------------------------------------------------------------------------------------- | -------------------------------- | - | ---------------------------------------- | ----- | ---- | - | ------ | - |  | - | ------ | ----- | 
|                                                                                                     |                                  |   | Years Ended December 31,                
|                                                                                                     |                                  |   |                                         
|                                                                                                     |                                  |   | 2000                                     |       | 1999 |   | 1998  
|                                                                                                     |                                  |   |                                          |       |      |   |       
|                                                                                                     |                                  |   | (in thousands, except per share amounts)
|Numerator:                                                                                          
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Net income (loss)                                                                                    |                                  | $ | 13,841                                   |       |      | $ | (2,602 | ) |  | $ | 7,868  |      
|                                                                                                     |                                  |   |                                          |       |      |   |        |   |  |   |        |      
|Denominator:                                                                                        
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Denominator for basic earnings per
share weighted-average shares                                    |                                  |   | 36,860                                   |       |      |   | 33,984 |   |  |   | 32,139 |      
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|Effect of dilutive securities:                                                                      
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Stock options                    |   |                                          | 1,726 |      |   |        |  |  |   |        | 1,298 | 
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                    
|                                                                                                     | Warrants                         |   |                                          | 231   |      |   |        |  |  |   |        | 153   | 
|                                                                                                     |                                  |   |                                          |       |      |   |        |   |  |   |        |      
|                                                                                                     | Dilutive potential common shares |   |                                          | 1,957 |      |   |        |  |  |   |        | 1,451 | 
|                                                                                                     |                                  |   |                                          |       |      |   |        |   |  |   |        |      
|Denominator for diluted earnings per
share adjusted weighted-average
shares and assumed conversions |                                  |   | 38,817                                   |       |      |   | 33,984 |   |  |   | 33,590 |      
|                                                                                                     |                                  |   |                                          |       |      |   |        |   |  |   |        |      
|Basic earnings (loss) per share                                                                      |                                  | $ | 0.38                                     |       |      | $ | (0.08  | ) |  | $ | 0.24   |      
|                                                                                                     |                                  |   |                                          |       |      |   |        |   |  |   |        |      
|Diluted earnings (loss) per share                                                                    |                                  | $ | 0.36                                     |       |      | $ | (0.08  | ) |  | $ | 0.23   |      
|                                                                                                     |                                  |   |                                          |       |      |   |        |   |  |   |        |      

Options to purchase 1,060,000 shares of UTIs common stock and warrants
to purchase 294,000 shares of UTIs common stock were not included in
the computation of diluted earnings per share for 1999 as the effect
would have been antidilutive due to the net loss for the year.

F18



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

11. RELATED-PARTY TRANSACTIONS

A director of UTI is an officer of a group of related companies that are
both vendors and customers of UTI. UTI purchased $5.7 million of
supplies, materials and drill pipe from that vendor during 2000. UTI
owed that vendor $2.7 million at December 31, 2000. UTI provided
services worth $.8 million during 2000 to that customer. At December 31,
2000, that customer owed UTI $.5 million.

UTI has employment contracts with certain of its executive officers.

12. SUPPLEMENTAL CASH FLOW INFORMATION

|                                                      |  |   |                          |  |      |   |        |  |  |   |       |  | 
|----------------------------------------------------- |  | - | ------------------------ |  | ---- | - | ------ |  |  | - | ----- |  | 
|                                                      |  |   | Years Ended December 31,
|                                                      |  |   |                         
|                                                      |  |   | 2000                     |  | 1999 |   | 1998  
|                                                      |  |   |                          |  |      |   |       
|                                                      |  |   | (in thousands)          
|Noncash Investing and FinancingActivities:           
|Norton acquisition with UTI common stock              |  | $ |                         |  |      | $ | 13,284 |  |  | $ |      | 
|                                                     
|                                                     
|                                                     
|                                                     
|Norton acquisition, deferred tax liability recorded   |  |   |                         |  |      |   | 6,073  |  |  |   |      | 
|                                                     
|                                                     
|                                                     
|                                                     
|Peterson acquisition, deferred tax liability recorded |  |   |                         |  |      |   |       |  |  |   | 7,360 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Suits acquisition with long-term debt issued          |  |   |                         |  |      |   |       |  |  |   | 7,790 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Suits acquisition with warrants granted               |  |   |                         |  |      |   |       |  |  |   | 411   | 
|                                                     
|                                                     
|                                                     
|                                                     
|Suits acquisition, deferred tax liability recorded    |  |   |                         |  |      |   |       |  |  |   | 6,460 | 
|                                                     
|Cash Paid During the Period for:                     
|Interest                                              |  | $ | 4,980                    |  |      | $ | 3,561  |  |  | $ | 3,239 | 
|                                                     
|                                                     
|                                                     
|                                                     
|Income taxes                                          |  |   | 119                      |  |      |   | 964    |  |  |   | 7,996 | 

13. WARRANTS

At December 31, 2000, warrants to purchase 121,250 shares of UTIs common
stock were outstanding. The exercise price ranges from $13.25 to $17.50
and the warrants expire on July 31, 2003.

14. STOCK PLANS

At December 31, 2000, UTI has authorized options to purchase UTI common
stock under the following stock plans:

|                                        |  |            |           |               |  |         |           | 
|--------------------------------------- |  | ---------- | --------- | ------------- |  | ------- | --------- | 
|                                        |  |            |           |               |  | Options
|                                        |  | Authorized |           | Available for
|Plan Name                               |  | Options    |           | Future Grants
|                                        |  |            |           |              
|Non-Employee Director Stock Option Plan |  |            | 600,000   |               |  |         | 405,000   | 
|                                       
|                                       
|                                       
|                                       
|1996 Employee Stock Option Plan         |  |            | 1,800,000 |               |  |         | 12,600    | 
|                                       
|                                       
|                                       
|                                       
|1997 Long-Term Incentive Plan           |  |            | 3,800,000 |               |  |         | 1,217,500 | 
|                                       
|                                       
|                                       
|                                       
|Norton 1997 Stock Option Plan           |  |            | 213,650   |               |  |         | 0         | 

F19



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

14. STOCK PLANS (Continued)

Other pertinent data related to the stock option plans are as follows:

|                                        |  |         |             |      |  |  |              | 
|--------------------------------------- |  | ------- | ----------- | ---- |  |  | ------------ | 
|Plan Name                               |  | Vesting |             | Term
|                                        |  |         |             |     
|Non-Employee Director Stock Option Plan |  |         | 1 year      |      |  |  | 5 years      | 
|                                       
|                                       
|                                       
|                                       
|1996 Employee Stock Option Plan         |  |         | 1 - 5 years |      |  |  | 5 - 10 years | 
|                                       
|                                       
|                                       
|                                       
|1997 Long-Term Incentive Plan           |  |         | 1 - 5 years |      |  |  | 5 - 10 years | 
|                                       
|                                       
|                                       
|                                       
|Norton 1997 Stock Option Plan           |  |         | 3 years     |      |  |  | 10 years     | 

On August 12, 1998, certain of the options under the 1996 Employee Stock
Option Plan and the 1997 Long-Term Incentive Plan were repriced. The
original exercise prices of $5.69, $6.97, $8.13, $10.00 and $15.81 were
repriced to $4.94 (the fair market value on the date of repricing). The
repricing did not have an effect on UTIs results of operations or future
accounting for the plan.

SFAS 123 requires that pro forma information regarding net income and
earnings per share be presented as if UTI 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:

|                            |  |      |           |      |  |      |           |   |  |  |            |  
|--------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  |  | ---------- | -
|                            |  | 2000 |           | 1999 |  | 1998
|                            |  |      |           |      |  |     
|Risk-free interest rates    |  |      | 6.33      | %    |  |      | 4.53      | % |  |  | 4.91       | %
|                           
|                           
|                           
|                           
|Dividend yield              |  |      | 0.00      | %    |  |      | 0.00      | % |  |  | 0.00       | %
|                           
|                           
|                           
|                           
|Volatility factors          |  |      | 1.1385    |      |  |      | 1.219     |   |  |  | 0.669      |  
|                           
|                           
|                           
|                           
|Expected life of the option |  |      | 4.0 years |      |  |      | 2.0 years |   |  |  | 3.20 years |  

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restriction and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. UTIs management believes that the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options because:



| |  |  | UTIs employee stock options have characteristics
significantly different from those of trade options
| | - |  | -----------------------------------------------------------------------------------------------------
| |  |  | changes in the subjective input assumptions can materially
affect the fair value estimate            

F20



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

14. STOCK PLANS (Continued)

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting period. UTIs
pro forma information follows:

|                                                         |  |                                          |        |      |  |      |        |   |  |   |       | 
|-------------------------------------------------------- |  | ---------------------------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ----- | 
|                                                         |  | Years Ended December 31,                
|                                                         |  |                                         
|                                                         |  | 2000                                     |        | 1999 |  | 1998
|                                                         |  |                                          |        |      |  |     
|                                                         |  | (in thousands, except per share amounts)
|                                                        
|Pro forma net income (loss)                              |  | $                                        | 11,220 |      |  | $    | (4,381 | ) |  | $ | 5,105 | 
|                                                         |  |                                          |        |      |  |      |        |   |  |   |       | 
|Pro forma earnings (loss) per share:                    
|                                                        
|                                                        
|                                                        
|                                                        
|Basic                                                    |  | $                                        | 0.30   |      |  | $    | (0.13  | ) |  | $ | 0.16  | 
|                                                         |  |                                          |        |      |  |      |        |   |  |   |       | 
|Diluted                                                  |  | $                                        | 0.29   |      |  | $    | (0.13  | ) |  | $ | 0.15  | 
|                                                         |  |                                          |        |      |  |      |        |   |  |   |       | 
|Weighted-average fair value of options
granted per share |  | $                                        | 14.00  |      |  | $    | 3.42   |   |  | $ | 2.56  | 

A summary of UTIs stock option activity and related information for the
years ended December 31 follows:

|                               |      |  |            |           |          |   |           |      | 
|------------------------------ | ---- |  | ---------- | --------- | -------- | - | --------- | ---- | 
|                               |      |  |            |           |          |   | Weighted-
|                               |      |  | Shares     |           | Average 
|                               |      |  | Under      |           | Exercise
|                               |      |  | Option     |           | Price   
|                               |      |  |            |           |         
|Outstanding, December 31, 1997 |      |  | 3,948,950  |           |          | $ | 6.00      |     
|                              
|                              
|                              
|                              
|Granted                        |      |  | 2,012,750  |           |          |   | 5.26      |     
|                              
|                              
|                              
|                              
|Exercised                      |      |  | (312,960   | )         |          |   | 2.16      |     
|                              
|                              
|                              
|                              
|Canceled                       |      |  | (1,814,250 | )         |          |   | 11.09     |     
|                               |      |  |            |          
|Outstanding, December 31, 1998 |      |  | 3,834,490  |           |          |   | 3.53      |     
|                              
|                              
|                              
|                              
|Granted                        |      |  | 1,485,754  |           |          |   | 5.57      |     
|                              
|                              
|                              
|                              
|Exercised                      |      |  | (1,043,110 | )         |          |   | 1.46      |     
|                              
|                              
|                              
|                              
|Canceled                       |      |  | (68,062    | )         |          |   | 5.39      |     
|                               |      |  |            |          
|Outstanding, December 31, 1999 |      |  | 4,209,072  |           |          |   | 4.73      |     
|                              
|                              
|                              
|                              
|Granted                        |      |  | 531,000    |           |          |   | 18.05     |     
|                              
|                              
|                              
|                              
|Exercised                      |      |  | (1,014,747 | )         |          |   | 3.23      |     
|                              
|                              
|                              
|                              
|Canceled                       |      |  | (9,879     | )         |          |   | 16.09     |     
|                               |      |  |            |          
|Outstanding, December 31, 2000 |      |  | 3,715,446  |           |          | $ | 7.01      |     
|                               |      |  |            |          
|Exercisable, December 31,     
|                              
|                              
|                              
|                              
|                               | 1997 |  |            | 2,246,344 |          |   | $         | 3.93 | 
|                              
|                              
|                              
|                              
|                               | 1998 |  |            | 2,605,240 |          |   |           | 2.73 | 
|                              
|                              
|                              
|                              
|                               | 1999 |  |            | 2,091,348 |          |   |           | 4.08 | 
|                              
|                              
|                              
|                              
|                               | 2000 |  |            | 1,875,751 |          |   |           | 5.24 | 

F21



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

14. STOCK PLANS (Continued)

Exercise price for options outstanding as of December 31, 2000 ranged
from $3.66 per share to $32.88 per share. The weighted-average remaining
contractual life of those options is 6.96 years.

In February 1999, UTI adopted a Rights Plan which provided for the
distribution by UTI of one preferred stock purchase right for each
outstanding share of common stock to holders of record of common stock at
the close of business on March 10, 1999. The Rights Plan provided that
UTI shall issue one Right with each share of common stock prior to the
earliest of the following:



| |  |  | the date the rights first become exercisable, known as the distribution date of the rights
| | - |  | ------------------------------------------------------------------------------------------
| |  |  | the date of redemption of the rights                                                      
| |  |  | February 26, 2009, which is the expiration date of the rights                             

Until such time that the rights become exercisable, the rights will be
evidenced by the certificates representing the shares of common stock and
may only be traded with such shares. Each right, once exercisable, will
entitle the registered holder to purchase from UTI one one-thousandth of
a share of UTIs Series I Preferred Stock, par value $.01 per share, at a
price of $21.25 per one one-thousandth of a share, subject to
adjustments.

The rights become exercisable only if, without the prior consent of UTI,
the following occurs:



| |  |  | a person or group of associated or related persons acquire,
or obtain the right to acquire, 15% or more of the voting power of
all outstanding common stock of UTI, or                                             
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | any person or group of related persons makes a tender offer
or exchange offer which could result in such person or group owning
beneficially 15% or more of the voting power of all outstanding
common stock of UTI

15. DEFINED CONTRIBUTION PLANS

UTI maintains defined contribution plans for the benefit of its
employees. Prior to January 1, 2000, employees were eligible to
participate upon reaching 21 years of age and completion of one year of
service with 1,000 or more active work hours. Effective January 1, 2000,
employees are eligible to participate after one hour of service without
regard to their age. UTI currently matches $.50 for each dollar
contributed by the employee up to 4% of the employees total annual
compensation. The following table shows the matching that UTI made for
the last three years:

|         |  |          |  |          |  |  |  | 
|-------- |  | -------- |  | -------- |  |  |  | 
|2000     |  | 1999     |  | 1998    
|         |  |          |  |         
|$634,000 |  | $289,000 |  | $298,000

F22



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

16. COMPREHENSIVE INCOME

|                             |  |                          |        |      |  |      |        |   |  |   |       | 
|---------------------------- |  | ------------------------ | ------ | ---- |  | ---- | ------ | - |  | - | ----- | 
|                             |  | Years Ended December 31,
|                             |  |                         
|                             |  | 2000                     |        | 1999 |  | 1998
|                             |  |                          |        |      |  |     
|                             |  | (in thousands)          
|                            
|Net income (loss)            |  | $                        | 13,841 |      |  | $    | (2,602 | ) |  | $ | 7,868 | 
|                            
|                            
|                            
|                            
|Other comprehensive income: 
|                            
|                            
|                            
|                            
|Foreign currency translation |  |                          | 30     |      |  |      |       |   |  |   |      | 
|                             |  |                          |        |      |  |      |        |   |  |   |       | 
|Comprehensive income (loss)  |  | $                        | 13,871 |      |  | $    | (2,602 | ) |  | $ | 7,868 | 
|                             |  |                          |        |      |  |      |        |   |  |   |       | 

17. FINANCIAL INSTRUMENTS

Cash, cash equivalents and trade accounts receivable are the financial
instruments that potentially subject UTI to significant concentrations of
credit risk. UTI performs ongoing credit evaluations of its customers
and generally does not require material collateral. UTI provides
allowances for potential credit losses when necessary.

UTI maintains cash balances with various financial institutions. These
financial institutions are located throughout North America. UTIs
policy is designed to limit exposure to any one institution. However, at
December 31, 2000, UTI had 68% of its cash and cash equivalents in one
institution. UTI performs periodic evaluations of the relative credit
standing of those financial institutions 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-term debt:The carrying amounts included in the balance sheets of
UTIs borrowings under its revolving credit facility and promissory notes
approximate fair value. The fair value was estimated by management based
upon estimates of current interest rates available at the balance sheet
date for similar issues.

18. INDUSTRY SEGMENT INFORMATION

UTI has two reportable segments: land drilling and pressure pumping.
Reportable segments are business units that offer different services.

UTI evaluates performance and allocates resources based on profit or loss
from operations before other income or expense and income taxes. The
accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies.

F23



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

18. INDUSTRY SEGMENT INFORMATION (Continued)

The other category in the segment breakdown is attributable to
investments in oil and natural gas properties. This segment has not met
the quantitative thresholds for determining reportable segments. There
are no intersegment sales and transfers.

|                                     |  |                |         |      |  |      |         |   |  |   |         |  
|------------------------------------ |  | -------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                     |  | Years Ended   
|                                     |  | December 31,  
|                                     |  |               
|                                     |  | 2000           |         | 1999 |  | 1998
|                                     |  |                |         |      |  |     
|                                     |  | (in thousands)
|Revenues:                           
|                                    
|                                    
|                                    
|                                    
|Land Drilling                        |  | $              | 253,887 |      |  | $    | 134,870 |   |  | $ | 162,600 |  
|                                    
|                                    
|                                    
|                                    
|Pressure Pumping                     |  |                | 21,465  |      |  |      | 20,721  |   |  |   | 23,365  |  
|                                    
|                                    
|                                    
|                                    
|Other                                |  |                | 191     |      |  |      | 184     |   |  |   | 192     |  
|                                     |  |                |         |      |  |      |         |   |  |   |         |  
|                                     |  | $              | 275,543 |      |  | $    | 155,775 |   |  | $ | 186,157 |  
|                                     |  |                |         |      |  |      |         |   |  |   |         |  
|Selling, General and Administrative:
|                                    
|                                    
|                                    
|                                    
|Land Drilling                        |  | $              | 3,943   |      |  | $    | 2,818   |   |  | $ | 3,767   |  
|                                    
|                                    
|                                    
|                                    
|Pressure Pumping                     |  |                | 3,197   |      |  |      | 3,457   |   |  |   | 3,216   |  
|                                    
|                                    
|                                    
|                                    
|Other                                |  |                |        |      |  |      |        |   |  |   |        |  
|                                     |  |                |         |      |  |      |         |   |  |   |         |  
|                                     |  |                | 7,140   |      |  |      | 6,275   |   |  |   | 6,983   |  
|                                    
|                                    
|                                    
|                                    
|Corporate                            |  |                | 4,819   |      |  |      | 3,895   |   |  |   | 3,798   |  
|                                     |  |                |         |      |  |      |         |   |  |   |         |  
|                                     |  | $              | 11,959  |      |  | $    | 10,170  |   |  | $ | 10,781  |  
|                                     |  |                |         |      |  |      |         |   |  |   |         |  
|Operating Income:                   
|                                    
|                                    
|                                    
|                                    
|Land Drilling(1)                     |  | $              | 28,670  |      |  | $    | (1,953  | ) |  | $ | 13,915  |  
|                                    
|                                    
|                                    
|                                    
|Pressure Pumping(1)                  |  |                | 3,282   |      |  |      | 3,662   |   |  |   | 5,098   |  
|                                    
|                                    
|                                    
|                                    
|Other(1)                             |  |                | 56      |      |  |      | 39      |   |  |   | 19      |  
|                                     |  |                |         |      |  |      |         |   |  |   |         |  
|                                     |  |                | 32,008  |      |  |      | 1,748   |   |  |   | 19,032  |  
|                                    
|                                    
|                                    
|                                    
|Corporate                            |  |                | (5,124  | )    |  |      | (4,053  | ) |  |   | (3,263  | )
|                                    
|                                    
|                                    
|                                    
|Other Charges (Income)               |  |                | 483     |      |  |      | 2,861   |   |  |   | (206    | )
|                                     |  |                |         |      |  |      |         |   |  |   |         |  
|                                     |  | $              | 27,367  |      |  | $    | 556     |   |  | $ | 15,563  |  
|                                     |  |                |         |      |  |      |         |   |  |   |         |  
|Depreciation and Amortization:      
|                                    
|                                    
|                                    
|                                    
|Land Drilling                        |  | $              | 26,369  |      |  | $    | 22,490  |   |  | $ | 18,350  |  
|                                    
|                                    
|                                    
|                                    
|Pressure Pumping                     |  |                | 1,584   |      |  |      | 1,391   |   |  |   | 1,043   |  
|                                    
|                                    
|                                    
|                                    
|Other                                |  |                | 73      |      |  |      | 82      |   |  |   | 58      |  
|                                     |  |                |         |      |  |      |         |   |  |   |         |  
|                                     |  |                | 28,026  |      |  |      | 23,963  |   |  |   | 19,451  |  
|                                    
|                                    
|                                    
|                                    
|Corporate                            |  |                | 305     |      |  |      | 159     |   |  |   | 78      |  
|                                     |  |                |         |      |  |      |         |   |  |   |         |  
|                                     |  | $              | 28,331  |      |  | $    | 24,122  |   |  | $ | 19,529  |  
|                                     |  |                |         |      |  |      |         |   |  |   |         |  

F24



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

18. INDUSTRY SEGMENT INFORMATION (Continued)

|                                        |  |                |        |      |  |      |       |  |  |   |        | 
|--------------------------------------- |  | -------------- | ------ | ---- |  | ---- | ----- |  |  | - | ------ | 
|                                        |  | Years Ended   
|                                        |  | December 31,  
|                                        |  |               
|                                        |  | 2000           |        | 1999 |  | 1998
|                                        |  |                |        |      |  |     
|                                        |  | (in thousands)
|                                       
|Acquisitions of Property and Equipment:
|                                       
|                                       
|                                       
|                                       
|Land Drilling                           |  | $              | 34,186 |      |  | $    | 7,116 |  |  | $ | 32,912 | 
|                                       
|                                       
|                                       
|                                       
|Pressure Pumping                        |  |                | 4,426  |      |  |      | 2,307 |  |  |   | 3,895  | 
|                                       
|                                       
|                                       
|                                       
|Other                                   |  |                | 12     |      |  |      |      |  |  |   | 50     | 
|                                        |  |                |        |      |  |      |       |  |  |   |        | 
|                                        |  |                | 38,624 |      |  |      | 9,423 |  |  |   | 36,857 | 
|                                       
|                                       
|                                       
|                                       
|Corporate                               |  |                | 45     |      |  |      | 21    |  |  |   | 572    | 
|                                        |  |                |        |      |  |      |       |  |  |   |        | 
|                                        |  | $              | 38,669 |      |  | $    | 9,444 |  |  | $ | 37,429 | 
|                                        |  |                |        |      |  |      |       |  |  |   |        | 

|                 |  |                |         |              |  |   |         | 
|---------------- |  | -------------- | ------- | ------------ |  | - | ------- | 
|                 |  | December 31,   |         | December 31,
|                 |  | 2000           |         | 1999        
|                 |  |                |         |             
|                 |  | (in thousands)
|                
|Segment Assets: 
|                
|                
|                
|                
|Land Drilling    |  | $              | 306,246 |              |  | $ | 233,341 | 
|                
|                
|                
|                
|Pressure Pumping |  |                | 16,114  |              |  |   | 16,399  | 
|                
|                
|                
|                
|Other            |  |                | 169     |              |  |   | 318     | 
|                 |  |                |         |              |  |   |         | 
|                 |  |                | 322,529 |              |  |   | 250,058 | 
|                
|                
|                
|                
|Corporate        |  |                | 7,278   |              |  |   | 10,524  | 
|                 |  |                |         |              |  |   |         | 
|                 |  | $              | 329,807 |              |  | $ | 260,582 | 
|                 |  |                |         |              |  |   |         | 



---

|(1) |  | Operating income is total operating revenues less operating expenses,
depreciation and amortization and does not include general corporate
expenses, other charge, interest or income taxes.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

One customer of UTIs land drilling segment, Anadarko Petroleum Corp.,
represented approximately 10% of consolidated revenue in 1999 and 11% of
consolidated revenue in 1998.

F25



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

18. INDUSTRY SEGMENT INFORMATION (Continued)

The following tables set forth financial information with respect to
UTIs operations by geographic area:

|              |  |                |         |      |  |      |         |  |  |   |         | 
|------------- |  | -------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|              |  | Years Ended   
|              |  | December 31,  
|              |  |               
|              |  | 2000           |         | 1999 |  | 1998
|              |  |                |         |      |  |     
|              |  | (in thousands)
|Revenues:    
|             
|             
|             
|             
|United States |  | $              | 261,753 |      |  | $    | 155,775 |  |  | $ | 186,157 | 
|             
|             
|             
|             
|Canada        |  |                | 13,790  |      |  |      |        |  |  |   |        | 
|              |  |                |         |      |  |      |         |  |  |   |         | 
|              |  | $              | 275,543 |      |  | $    | 155,775 |  |  | $ | 186,157 | 
|              |  |                |         |      |  |      |         |  |  |   |         | 

|                  |  |                |         |              |  |   |         | 
|----------------- |  | -------------- | ------- | ------------ |  | - | ------- | 
|                  |  | December 31,   |         | December 31,
|                  |  | 2000           |         | 1999        
|                  |  |                |         |             
|                  |  | (in thousands)
|Long Term Assets:
|                 
|                 
|                 
|                 
|United States     |  | $              | 225,195 |              |  | $ | 210,473 | 
|                 
|                 
|                 
|                 
|Canada            |  |                | 32,458  |              |  |   |        | 
|                  |  |                |         |              |  |   |         | 
|                  |  | $              | 257,653 |              |  | $ | 210,473 | 
|                  |  |                |         |              |  |   |         | 
|Goodwill:        
|                 
|                 
|                 
|                 
|United States     |  | $              | 17,733  |              |  | $ | 19,261  | 
|                 
|                 
|                 
|                 
|Canada            |  |                |        |              |  |   |        | 
|                  |  |                |         |              |  |   |         | 
|                  |  | $              | 17,733  |              |  | $ | 19,261  | 
|                  |  |                |         |              |  |   |         | 

F26



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

19. SELECTED QUARTERLY FINANCIAL RESULTS (Unaudited)

Quarterly financial information for the years ended December 31, 2000,
1999 and 1998 is as follows:

|                                      |  |                                          |        |         |  |         |        |         |  |       |        |   |  |   |        |   |  |   |         |  
|------------------------------------- |  | ---------------------------------------- | ------ | ------- |  | ------- | ------ | ------- |  | ----- | ------ | - |  | - | ------ | - |  | - | ------- | -
|                                      |  | 1st Qtr                                  |        | 2nd Qtr |  | 3rd Qtr |        | 4th Qtr |  | Total
|                                      |  |                                          |        |         |  |         |        |         |  |      
|                                      |  | (in thousands, except per share amounts)
|                                     
|2000                                 
|                                     
|Revenues                              |  | $                                        | 54,273 |         |  | $       | 55,585 |         |  | $     | 72,331 |   |  | $ | 93,354 |   |  | $ | 275,543 |  
|                                     
|                                     
|                                     
|                                     
|Gross Profit(1)                       |  |                                          | 4,203  |         |  |         | 5,092  |         |  |       | 10,870 |   |  |   | 18,222 |   |  |   | 38,387  |  
|                                     
|                                     
|                                     
|                                     
|Extraordinary Item, net of tax        |  |                                          |       |         |  |         |       |         |  |       | (329   | ) |  |   |       |   |  |   | (329    | )
|                                     
|                                     
|                                     
|                                     
|Net Income                            |  |                                          | 304    |         |  |         | 745    |         |  |       | 3,898  |   |  |   | 8,894  |   |  |   | 13,841  |  
|                                     
|Earnings Per Share(2)
Basic           |  |                                          | 0.01   |         |  |         | 0.02   |         |  |       | 0.11   |   |  |   | 0.24   |   |  |   | 0.38    |  
|                                     
|                                     
|                                     
|                                     
|Diluted                               |  |                                          | 0.01   |         |  |         | 0.02   |         |  |       | 0.10   |   |  |   | 0.23   |   |  |   | 0.36    |  
|                                     
|1999                                 
|                                     
|Revenues                              |  | $                                        | 32,536 |         |  | $       | 28,884 |         |  | $     | 42,396 |   |  | $ | 51,959 |   |  | $ | 155,775 |  
|                                     
|                                     
|                                     
|                                     
|Gross Profit(1)                       |  |                                          | 795    |         |  |         | 95     |         |  |       | 3,040  |   |  |   | 4,483  |   |  |   | 8,413   |  
|                                     
|                                     
|                                     
|                                     
|Net Income (Loss)                     |  |                                          | (256   | )       |  |         | (2,928 | )       |  |       | (355   | ) |  |   | 937    |   |  |   | (2,602  | )
|                                     
|Earnings (Deficit) Per Share(2)
Basic |  |                                          | (0.01  | )       |  |         | (0.09  | )       |  |       | (0.01  | ) |  |   | 0.05   |   |  |   | (0.08   | )
|                                     
|                                     
|                                     
|                                     
|Diluted                               |  |                                          | (0.01  | )       |  |         | (0.09  | )       |  |       | (0.01  | ) |  |   | 0.05   |   |  |   | (0.08   | )
|                                     
|1998                                 
|                                     
|Revenues                              |  | $                                        | 48,317 |         |  | $       | 48,403 |         |  | $     | 48,690 |   |  | $ | 40,747 |   |  | $ | 186,157 |  
|                                     
|                                     
|                                     
|                                     
|Gross Profit(1)                       |  |                                          | 9,126  |         |  |         | 8,535  |         |  |       | 7,371  |   |  |   | 2,661  |   |  |   | 27,693  |  
|                                     
|                                     
|                                     
|                                     
|Net Income (Loss)                     |  |                                          | 3,547  |         |  |         | 3,102  |         |  |       | 1,624  |   |  |   | (405   | ) |  |   | 7,868   |  
|                                     
|Earnings (Deficit) Per Share(2)
Basic |  |                                          | 0.11   |         |  |         | 0.10   |         |  |       | 0.05   |   |  |   | (0.01  | ) |  |   | 0.24    |  
|                                     
|                                     
|                                     
|                                     
|Diluted                               |  |                                          | 0.10   |         |  |         | 0.09   |         |  |       | 0.05   |   |  |   | (0.01  | ) |  |   | 0.23    |  



---

|(1) |  | Gross profit represents revenues minus direct operating costs and
depreciation and amortization and excludes provisions for bad debts, other
charges (income), and selling, general and administrative expenses.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Earnings (deficit) per share are computed independently for each of the
quarters presented. Therefore, the sum of the quarterly earnings per
share may not equal the total computed for the year.               

F27



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##### Table of Contents



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)(All share amounts reflect the 2:1 stock split effective October 3, 2000)

20. SUBSEQUENT EVENTS

In January of 2001, UTI acquired six land drilling rigs located in the
United States through three separate transactions for $13.2 million in
cash, increasing UTIs capacity.

On February 5, 2001, UTI announced that its Board of Directors along with
the Board of Directors of Patterson Energy Inc. approved a merger of the
two companies. According to the terms of the merger agreement between UTI
and Patterson, shareholders of UTI will receive one share of Patterson
common stock for each share of UTI common stock and Patterson will assume
UTIs outstanding options and warrants. The board of directors of the new
company will consist of eleven directors, six of which will be selected by
Patterson and five of which would be selected by UTI. Although the merger
agreement does not specify who will be the officers of the new company,
management of UTI understands that Mark S. Siegel, UTIs Chairman of the
Board, would be the Chairman of the Board and Cloyce A. Talbott,
Pattersons Chairman of the Board and Chief Executive Officer, would be Chief Executive Officer. The
combined company will be the second largest United States land-based
drilling service contractor with 302 drilling rigs and will be called
Patterson-UTI Energy, Inc.

Under the terms of the merger agreement, both UTI and Patterson have
agreed not to solicit competing offers, but the boards of directors of
each company are free to consider and accept an unsolicited offer if,
based on advice of counsel, it believes it must do so in the exercise of
its fiduciary duty. In the event a party accepts an unsolicited offer, or
its board of directors withdraws its recommendation in light of an
unsolicited offer, or the shareholders do not vote to approve the merger
because of an unsolicited offer, the other party would be entitled to
receive a breakup fee of $32.5 million plus reimbursement of expenses of
up to $2.5 million. In the event the shareholders of one party do not
vote to approve the merger and the other party is not in default and is
ready, willing and able to perform its agreement, the party whose
shareholders vote against the merger will be required to pay to the other
party $2.5 million, plus up to an additional $2.5 million in expenses.

The merger is subject to customary conditions to closing, including
approval by the shareholders of both companies, as well as any necessary
regulatory filings and approvals, such as the anti-trust provisions of the
Hart-Scott-Rodino Act. There can be no assurance that the merger will be
consummated in accordance with the terms of the merger agreement, if at
all.

F28



---



##### Table of Contents



UTI ENERGY CORP.




SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

|                             |                               |                                 |  |                |       |            |  |               |       |        |  |   |      |           |  |   |     |  |  |   |       | 
|---------------------------- | ----------------------------- | ------------------------------- |  | -------------- | ----- | ---------- |  | ------------- | ----- | ------ |  | - | ---- | --------- |  | - | --- |  |  | - | ----- | 
|                             |                               |                                 |  |                |       |            |  | Additions(1) 
|                             |                               |                                 |  |                |       |            |  |              
|                             |                               |                                 |  | Balance at     |       | Charged to |  | Charged to    |       |        |  |   |      | Balance  
|                             |                               |                                 |  | Beginning      |       | Costs and  |  | Acquisition   |       |        |  |   |      | at End of
|Description                  |                               | of Period                       |  | Expenses       |       | Costs      |  | Deductions(2) |       | Period
|                             |                               |                                 |  |                |       |            |  |               |       |       
|                             |                               |                                 |  | (in thousands)
|Year Ended December 31, 2000
|                            
|                            
|                            
|                            
|                             | Deducted from asset accounts:
|                            
|                            
|                            
|                            
|                             |                               | Allowance for doubtful
accounts |  | $              | 3,143 |            |  | $             | (456  | )      |  | $ | (101 | )         |  | $ | 627 |  |  | $ | 1,959 | 
|                             |                               |                                 |  |                |       |            |  |               |       |        |  |   |      |           |  |   |     |  |  |  
|Year Ended December 31, 1999
|                            
|                            
|                            
|                            
|                             | Deducted from asset accounts:
|                            
|                            
|                            
|                            
|                             |                               | Allowance for doubtful
accounts |  | $              | 1,919 |            |  | $             | 548   |        |  | $ | 942  |           |  | $ | 266 |  |  | $ | 3,143 | 
|                             |                               |                                 |  |                |       |            |  |               |       |        |  |   |      |           |  |   |     |  |  |  
|Year Ended December 31, 1998
|                            
|                            
|                            
|                            
|                             | Deducted from asset accounts:
|                            
|                            
|                            
|                            
|                             |                               | Allowance for doubtful
accounts |  | $              | 815   |            |  | $             | 1,143 |        |  | $ |     |           |  | $ | 39  |  |  | $ | 1,919 | 
|                             |                               |                                 |  |                |       |            |  |               |       |        |  |   |      |           |  |   |     |  |  |  



---

|(1) |  | Net of recoveries.                 
|--- |  | -----------------------------------
|   
|   
|   
|   
|(2) |  | Uncollectible accounts written off.

S1



---



##### Table of Contents



SIGNATURES

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

|                        |  |                                                                             |  |                  
|----------------------- |  | --------------------------------------------------------------------------- |  | -----------------
|Signature               |  | Title                                                                       |  | Date             
|                        |  |                                                                             |  |                  
|                       
|/s/ MARK S. SIEGEL      |  | Chairman and Director                                                       |  | February 22, 2001
|                        |  |                                                                             |  |                  
|Mark S. Siegel         
|                       
|                       
|                       
|                       
|                       
|/s/ VAUGHN E. DRUM      |  | President, Chief Executive Officer
    and Director                         |  | February 22, 2001
|                        |  |                                                                             |  |                  
|Vaughn E. Drum         
|                       
|                       
|                       
|                       
|                       
|/s/ JOHN E. VOLLMER III |  | Senior Vice President, Secretary, Treasurer
    and Chief Financial Officer |  | February 22, 2001
|                        |  |                                                                             |  |                  
|John E. Vollmer III    
|                       
|                       
|                       
|                       
|                       
|/s/ BRUCE SAUERS        |  | Vice President and Chief
    Accounting Officer                             |  | February 22, 2001
|                        |  |                                                                             |  |                  
|Bruce Sauers           
|                       
|/s/ KENNETH N. BERNS    |  | Director                                                                    |  | February 22, 2001
|                        |  |                                                                             |  |                  
|Kenneth N. Berns       
|                       
|/s/ CURTIS W. HUFF      |  | Director                                                                    |  | February 22, 2001
|                        |  |                                                                             |  |                  
|Curtis W. Huff         
|                       
|/s/ TERRY H. HUNT       |  | Director                                                                    |  | February 22, 2001
|                        |  |                                                                             |  |                  
|Terry H. Hunt          
|                       
|/s/ NADINE C. SMITH     |  | Director                                                                    |  | February 22, 2001
|                        |  |                                                                             |  |                  
|Nadine C. Smith        
|                       
|/s/ ROBERT B. SPEARS    |  | Director                                                                    |  | February 22, 2001
|                        |  |                                                                             |  |                  
|Robert B. Spears       



---



##### Table of Contents






EXHIBIT INDEX

|        |      |  |  |                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | ---- |  |  | -------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |      |  |  | Title or Description
|        |      |  |  |                     
|       
|        | 2.2  |  |  | -                    |  | Agreement and Plan of Merger, dated February 4, 2001, by
and between UTI Energy Corp. and Patterson Energy, Inc.
Pursuant to Item 601(b)(2) of Regulation S-K, schedules
and similar attachments to the Agreement and Plan of
Merger have not been filed with this exhibit. The
Patterson Energy, Inc. Disclosure Schedule and the UTI
Energy Corp. Disclosure Schedule contain information
relating to the representations and warranties contained
in Article II and Article III, respectively, of the
Agreement and Plan of Merger. UTI agrees to furnish
supplementally any omitted schedule to the Securities and
Exchange Commission upon request.
|       
|        | 3.4  |  |  | -                    |  | Amendment to Rights Agreement, dated February 9, 2001,
between UTI Energy Corp. and Mellon Investor Services LLC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|        | 21.1 |  |  | -                    |  | List of subsidiaries of UTI.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       
|        | 23.1 |  |  | -                    |  | Consent of Ernst & Young LLP.