SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K/A
Amendment to Application or Report
Amendment No. 2

(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, 1999                                                                                                         
|     
|     
|     
|     
|     
|[   ] |  | Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____________ to ___________.



Commission File Number 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 Drive
Houston, Texas |  | 77060                               
|                                                       |  |                                     
|(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.

$478,859,388 at March 20, 2000

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

18,482,397 shares of Common Stock at March 20, 2000

Documents incorporated by reference.

None.





---



TABLE OF CONTENTS




|                                                           |                                                                                               |  |  |  |  |  |  | 
|---------------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                                           | PART I                                                                                       
|                                                           | Item 2. PROPERTIES                                                                           
|                                                           | Item 3. LEGAL PROCEEDINGS                                                                    
|                                                           | Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                                                           | PART II                                                                                      
|                                                           | 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                                                                                     
|                                                           | Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                  
|                                                           | Item 11. EXECUTIVE COMPENSATION                                                              
|                                                           | Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                      
|                                                           | Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                      
|                                                           | PART IV                                                                                      
|                                                           | Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K                     
|CONSOLIDATED BALANCE SHEETS                               
|CONSOLIDATED STATEMENTS OF OPERATIONS                     
|CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
|SIGNATURES                                                
|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 the United States. 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:



| |  |  | Colorado  
| | - |  | ----------
|
| |  |  | Texas     
|
| |  |  | Louisiana 
|
| |  |  | Oklahoma  
|
| |  |  | New Mexico
|
| |  |  | Utah      
|
| |  |  | Wyoming   

UTI has a fleet of 125 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.

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.

Land Drilling

UTIs rigs can drill to depths ranging from 8,000 to 30,000 feet. In
1999, UTI continued to increase its number of rigs available for contract. The
following table shows the increase:

|                                      |  |                |     |                   |  |  |    | 
|------------------------------------- |  | -------------- | --- | ----------------- |  |  | -- | 
|                                      |  | As of          |     | As of            
|                                      |  | March 20, 2000 |     | December 31, 1998
|                                      |  |                |     |                  
|Number of Rigs
Available for Contract |  |                | 108 |                   |  |  | 90 | 

-2-



---



UTI also has 17 stacked rigs. A stacked rig is a rig that is not
currently being marketed and cannot be made available without incurring
refurbishing expenditures. UTI could return the stacked rigs to operation at
an average estimated cost of approximately $650,000 per rig. UTI intends to
either use the stacked rigs for parts or to place them into service in an
orderly manner as regional market conditions merit and trained crews are
retained. UTIs rig utilization rate, which is calculated by dividing the
operating days by total days rigs are available, including stacked rigs, was
43% for the year ended December 31, 1999. UTIs rig utilization during the
fourth quarter of 1999 was 57%.

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



| |  |  | East Texas (FWA Drilling Company)                                                
| | - |  | ---------------------------------------------------------------------------------
|
| |  |  | Mid-Continent (Triad Drilling Company)                                           
|
| |  |  | New Mexico/West Texas (FWA/Peterson Drilling Company and
Norton Drilling Company)
|
| |  |  | Rockies (Norton Drilling Company)                                                
|
| |  |  | South Texas (Southland Drilling Company)                                         



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



| |  |  | Oklahoma City, Oklahoma
| | - |  | -----------------------
|
| |  |  | Lubbock, Texas         
|
| |  |  | Midland, Texas         
|
| |  |  | 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
|
| |  |  | drill pipe        

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.

-3-



---



The following table shows the current distribution of rigs among UTIs
regional units as of March 20, 2000:

|                      |  |          |    |          |  |          |    |       |  |          |    |  |  |  |     |  |  |               |            |  |  |  |  | 
|--------------------- |  | -------- | -- | -------- |  | -------- | -- | ----- |  | -------- | -- |  |  |  | --- |  |  | ------------- | ---------- |  |  |  |  | 
|                      |  |          |    |          |  |          |    |       |  |          |    |  |  |  |     |  |  | Average Rated
|                      |  | Active   |    | Idle     |  | Stacked  |    | Total |  | Drilling
|Region                |  | Rigs (1) |    | Rigs (1) |  | Rigs (1) |    | Rigs  |  | Depths  
|                      |  |          |    |          |  |          |    |       |  |         
|East Texas            |  |          | 13 |          |  |          | 1  |       |  |          | 2  |  |  |  | 16  |  |  |               | 15,500 ft. | 
|                     
|                     
|                     
|                     
|Mid Continent         |  |          | 12 |          |  |          | 12 |       |  |          | 9  |  |  |  | 33  |  |  |               | 13,500 ft. | 
|                     
|                     
|                     
|                     
|New Mexico/West Texas |  |          | 35 |          |  |          | 15 |       |  |          | 6  |  |  |  | 56  |  |  |               | 13,500 ft. | 
|                     
|                     
|                     
|                     
|Rockies               |  |          | 1  |          |  |          | 3  |       |  |          |   |  |  |  | 4   |  |  |               | 18,000 ft. | 
|                     
|                     
|                     
|                     
|South Texas           |  |          | 11 |          |  |          | 5  |       |  |          |   |  |  |  | 16  |  |  |               | 16,000 ft. | 
|                      |  |          |    |          |  |          |    |       |  |          |    |  |  |  |     | 
|Total                 |  |          | 72 |          |  |          | 36 |       |  |          | 17 |  |  |  | 125 | 
|                      |  |          |    |          |  |          |    |       |  |          |    |  |  |  |     | 



---

|(1) |  | A rig is considered active when under contract. An idle rig is one that
is not under contract but is available and being marketed. A stacked rig
is not currently being marketed and cannot be made available without
incurring refurbishing expenditures.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth certain data concerning UTIs utilization
of drilling rigs. This utilization data is based on UTIs total fleet,
including stacked and idle rigs:

|                                                                                 |  |                                                    |         |      |  |      |         |   |  |   |         |  
|-------------------------------------------------------------------------------- |  | -------------------------------------------------- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                                 |  | Years Ended December 31,                          
|                                                                                 |  |                                                   
|                                                                                 |  | 1999                                               |         | 1998 |  | 1997
|                                                                                 |  |                                                    |         |      |  |     
|                                                                                 |  | (in thousands, except operating days and rig data)
|Revenues                                                                         |  | $                                                  | 134,870 |      |  | $    | 162,600 |   |  | $ | 161,265 |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Direct operating costs (excluding
depreciation and amortization)                 |  | $                                                  | 110,958 |      |  | $    | 124,779 |   |  | $ | 124,780 |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Selling, general and administrative                                              |  | $                                                  | 2,818   |      |  | $    | 3,767   |   |  | $ | 4,206   |  
|Depreciation and amortization                                                    |  | $                                                  | 22,490  |      |  | $    | 18,350  |   |  | $ | 10,252  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Operating days(1)                                                                |  |                                                    | 17,823  |      |  |      | 20,308  |   |  |   | 21,576  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average revenue per day                                                          |  | $                                                  | 7.57    |      |  | $    | 8.01    |   |  | $ | 7.47    |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average direct operating costs (excluding
depreciation and amortization) per day |  | $                                                  | 6.23    |      |  | $    | 6.14    |   |  | $ | 5.78    |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average margin per day(2)                                                        |  | $                                                  | 1.34    |      |  | $    | 1.87    |   |  | $ | 1.69    |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Number of owned rigs at end of period                                            |  |                                                    | 125     |      |  |      | 109     |   |  |   | 89      |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average number of rigs owned during period                                       |  |                                                    | 112     |      |  |      | 100     |   |  |   | 82      |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average rigs operating                                                           |  |                                                    | 49      |      |  |      | 56      |   |  |   | 59      |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Rig utilization percentage(3)                                                    |  |                                                    | 43      | %    |  |      | 55      | % |  |   | 72      | %
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Capital expenditures                                                             |  | $                                                  | 7,116   |      |  | $    | 32,912  |   |  | $ | 16,282  |  
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Capital expenditures per operating day                                           |  | $                                                  | 0.40    |      |  | $    | 1.62    |   |  | $ | 0.75    |  



---

|(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, including stacked rigs. Available days are
calculated by multiplying rigs owned by the days in the period under
review. For the year ended December 31, 1999, the utilization rate of
UTIs rigs, excluding stacked rigs, was 50%.

-4-



---



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. UTI bids
contracts on the basis of profitability and not to maximize rig utilization.
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

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 more services including testing,
coring and casing the hole and other services
|
| |  |  | UTI earns compensation upon completion of the well to the specified depth                             
|
| |  |  | UTI bears the cost of unanticipated downhole problems and other cost overruns                         

-5-



---



For the year ended December 31, 1999, UTI completed wells under all three
types of contracts as the following table shows:

|        |  |                               |    |  
|------- |  | ----------------------------- | -- | -
|        |  | Percentage of Completed Wells
|        |  |                              
|Dayrate |  |                               | 50 | %
|       
|       
|       
|       
|Footage |  |                               | 31 | %
|       
|       
|       
|       
|Turnkey |  |                               | 19 | %

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                               

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
natural gas and oil 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 March
20, 2000, UTI operated the following pressure pumping equipment:

|                         |  |          |     | 
|------------------------ |  | -------- | --- | 
|                         |  | Number  
|Equipment Type           |  | of Units
|                         |  |         
|Cement pumper trucks     |  |          | 13  | 
|                        
|                        
|                        
|                        
|Fracturing pumper trucks |  |          | 22  | 
|                        
|                        
|                        
|                        
|Nitrogen pumper trucks   |  |          | 6   | 
|                        
|                        
|                        
|                        
|Blender trucks           |  |          | 10  | 
|                        
|                        
|                        
|                        
|Bulk acid trucks         |  |          | 8   | 
|                        
|                        
|                        
|                        
|Bulk cement trucks       |  |          | 17  | 
|                        
|                        
|                        
|                        
|Bulk nitrogen trucks     |  |          | 4   | 
|                        
|                        
|                        
|                        
|Bulk sand trucks         |  |          | 18  | 
|                        
|                        
|                        
|                        
|Connection trucks        |  |          | 7   | 
|                        
|                        
|                        
|                        
|Other trucks             |  |          | 3   | 
|                         |  |          |     | 
|Total                    |  |          | 108 | 
|                         |  |          |     | 

-6-



---



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

|                                                                                 |  |                                   |        |      |  |      |        |  |  |   |        | 
|-------------------------------------------------------------------------------- |  | --------------------------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                                                                 |  | Years Ended December 31,         
|                                                                                 |  |                                  
|                                                                                 |  | 1999                              |        | 1998 |  | 1997
|                                                                                 |  |                                   |        |      |  |     
|                                                                                 |  | (in thousands, except total jobs)
|Revenues                                                                         |  | $                                 | 20,721 |      |  | $    | 23,365 |  |  | $ | 20,923 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Direct operating costs (excluding
depreciation and amortization)                 |  | $                                 | 12,219 |      |  | $    | 14,041 |  |  | $ | 12,615 | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Selling, general and administrative                                              |  | $                                 | 3,457  |      |  | $    | 3,216  |  |  | $ | 2,945  | 
|Depreciation and amortization                                                    |  | $                                 | 1,391  |      |  | $    | 1,043  |  |  | $ | 728    | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Total jobs                                                                       |  |                                   | 2,892  |      |  |      | 3,292  |  |  |   | 3,196  | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average revenue per job                                                          |  | $                                 | 7.17   |      |  | $    | 7.10   |  |  | $ | 6.55   | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average direct operating costs (excluding
depreciation and amortization) per job |  | $                                 | 4.23   |      |  | $    | 4.27   |  |  | $ | 3.95   | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Average margin per job(1)                                                        |  | $                                 | 2.94   |      |  | $    | 2.83   |  |  | $ | 2.60   | 
|                                                                                
|                                                                                
|                                                                                
|                                                                                
|Capital expenditures                                                             |  | $                                 | 2,307  |      |  | $    | 3,895  |  |  | $ | 1,676  | 



---

|(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.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Operations

In addition to its operating activities, UTI has invested in working
interests in natural gas and oil wells. These investments are principally in
the Appalachian and Permian Basins. The net book value of such investments at
December 31, 1999 was $318,000. The net book value at December 31, 1998 was
$404,000.

Industry Conditions

The level of activity in the United States onshore oil and natural gas
exploration and production industry influences the demand and prices for UTIs
services. The level of activity depends upon numerous factors over which UTI
has no control. These factors include:



| |  |  | the level of oil and natural gas prices                                     
| | - |  | ----------------------------------------------------------------------------
|
| |  |  | the expectations about future oil and natural gas prices                    
|
| |  |  | the ability of OPEC to set and maintain production levels and 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                      
|
| |  |  | the available pipeline and other oil and natural gas transportation capacity
|
| |  |  | the worldwide weather conditions                                            
|
| |  |  | the international, political, military, regulatory and economic conditions  
|
| |  |  | the ability of oil and natural gas companies to raise capital               

The level of drilling activity in the onshore oil and natural gas
exploration and production industry in the United States has been volatile.
UTI cannot give assurance that recent levels of oil and natural gas exploration
activities in UTIs markets will continue. UTI cannot give assurance that
demand for UTIs services will correspond to the level of activity in the
industry. Further, any changes in the demand for or supply of oil and natural
gas materially impacts the demand for and pricing of UTIs services.

-7-



---



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 is expected to increase the contract rates for UTIs contract
drilling services.

All of UTIs operating regions have been affected by the above-mentioned
factors. However, some of UTIs operating regions, like the Permian Basin,
have been more significantly affected than other regions due to greater
sensitivity to changes in oil prices.

Major Customers

Providing contract drilling services for Anadarko Petroleum Corp. on a
daily rate basis accounted for approximately 10% of UTIs consolidated revenue
in 1999. These contractual arrangements may be terminated by Anadarko at any
time without penalty. Through August 31, 2000, the revenues related
to the contracts with Anadarko represented less than 6% of UTI's
total revenues for fiscal 2000 and UTI expects this percentage to
decline further as the result of the addition of revenues from
acquired business and relative revenue increases from other areas.
Accordingly, UTI does not believe that the contracts create any
rights or obligations on which UTI's business is substantially
dependent. Although the loss of Anadarko Petroleum Corp. as a
customer could have a material adverse effect on UTIs revenues, UTI believes
that it could substantially set off the lost revenue by deploying those rigs
for other customers.

Competition

The land drilling and well servicing industry is:



| |  |  | highly-fragmented    
| | - |  | ---------------------
|
| |  |  | intensely competitive
|
| |  |  | cyclical             

Since 1982, the decline and continued instability in oil and natural gas
prices has severely impacted the land drilling business. These depressed
economic conditions have reduced the number of competitors and reduced the
number of rigs available. However, the supply of available rigs, particularly
in the United States land markets, still exceeds the demand for those rigs.
This excess capacity has resulted in substantial competition. Competition for
services in a particular market is based on:



| |  |  | price of service                
| | - |  | --------------------------------
|
| |  |  | location of available equipment 
|
| |  |  | type of available equipment     
|
| |  |  | condition of available equipment
|
| |  |  | quality of service              

In addition, drilling rigs are mobile and can be moved from one market to
another in response to market conditions.

Seasonality

Seasonality does not significantly affect the overall operations of UTI.
However, UTIs pressure pumping services in Appalachia are subject to slow
periods of activity during the spring thaw. In addition, UTIs drilling
operations in the Rockies are affected by governmental land restrictions during
the first quarter.

-8-



---



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                                 

UTI maintains insurance protection as management deems appropriate. Such
insurance coverage, however, 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.

While UTI has generally been able 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.

-9-



---



Environmental Regulation

UTIs activities are subject to existing environmental laws and
regulations at the federal, state and local level. 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

UTIs operations routinely involve the handling of various materials,
including hazardous materials. 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                                                                

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.

UTI is unable to predict the effect of new regulations and amendments to
existing regulations governing its operations. Therefore, UTI is unable to
determine the ultimate costs of complying with environmental laws and
regulations.

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

-10-



---



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.

Employees

As of March 20, 2000, UTI employed approximately 1,929 full-time
employees. 1,828 of these employees were field personnel and 101 of them were
employed in selling and administrative capacities.

In addition to the services of its employees, UTI uses consultants
periodically. 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.

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.

-11-



---






Item 2. PROPERTIES

Contract drilling operations are conducted from facilities UTI currently owns in:



| |  |  | Levelland, Texas       
| | - |  | -----------------------
|
| |  |  | Midland, Texas         
|
| |  |  | Oklahoma City, Oklahoma
|
| |  |  | Rock Springs, Wyoming  
|
| |  |  | Tyler, Texas           
|
| |  |  | Victoria, Texas        
|
| |  |  | Woodward, Oklahoma     

Pressure pumping operations are conducted from five base camps in the Appalachian Basin:



| |  |  | Allen, Kentucky           
| | - |  | --------------------------
|
| |  |  | Bradford, Pennsylvania    
|
| |  |  | Meadville, Pennsylvania   
|
| |  |  | Punxsutawney, Pennsylvania
|
| |  |  | Wooster, Ohio             

The Punxsutawney and Meadville camps are owned by UTI. The other camps
are leased under leases not exceeding five years.

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.




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. UTI 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, 1999.

-12-



---






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 1999 and 1998.

|              |  |      |       |      |  |      |       |     |  |   |       |  |  |   |       | 
|------------- |  | ---- | ----- | ---- |  | ---- | ----- | --- |  | - | ----- |  |  | - | ----- | 
|              |  | 1999 |       | 1998
|              |  |      |       |     
|Quarter Ended |  | High |       | Low  |  | High |       | Low
|              |  |      |       |      |  |      |       |    
|March 31      |  | $    | 10.88 |      |  | $    | 5.13  |     |  | $ | 26.44 |  |  | $ | 12.00 | 
|             
|             
|             
|             
|June 30       |  | $    | 17.13 |      |  | $    | 8.63  |     |  | $ | 20.50 |  |  | $ | 12.50 | 
|             
|             
|             
|             
|September 30  |  | $    | 22.88 |      |  | $    | 14.69 |     |  | $ | 13.38 |  |  | $ | 6.50  | 
|             
|             
|             
|             
|December 31   |  | $    | 23.63 |      |  | $    | 14.75 |     |  | $ | 12.00 |  |  | $ | 5.75  | 

As of March 20, 2000, the closing price for UTIs common stock was $32.50.
As of March 20, 2000, UTIs common stock was held by approximately 180
stockholders of record. Management estimates that more than 8,000 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.

UTI has recently sold unregistered common stock to Canpartners Investments
IV, LLC and parties related to Southland Drilling Company, Ltd. These two
transactions are described in the following paragraphs.

On March 2, 2000, UTI sold 298,138 shares of common stock to Canpartners
Investments IV, LLC. Canpartners Investments IV, LLC exchanged warrants
covering 480,000 shares of common stock of UTI that it acquired on September
26, 1997 for the 298,138 shares of common stock of UTI, and no other
consideration was given. The fair value of the common stock as agreed by the
parties was $28.58. This sale was exempt from registration under Section
3(a)(9) of the Securities Act of 1933. Under Section 3(a)(9), if an existing
security holder exchanges securities of the issuer for other securities of the
issuer and no other consideration is paid, then the transaction is exempt from
registration.

-13-



---



On March 3, 2000, UTI sold 91,500 shares of common stock to parties
related to Southland Drilling Company, Ltd. Like Canpartners Investments IV,
LLC, the Southland parties exchanged warrants covering 183,000 shares of common
stock of UTI that it acquired on April 11, 1997 for the 91,500 shares of common
stock of UTI, and no other consideration was given. The fair value of the
common stock as agreed by the parties was $32.00. This sale was also exempt
from registration under Section 3(a)(9) of the Securities Act of 1933. The
following table shows the Southland parties and the number of shares of common
stock covered by warrants that were exchanged for shares of common stock.

|      |                            |                    |                  |             |                  |  |  |        | 
|----- | -------------------------- | ------------------ | ---------------- | ----------- | ---------------- |  |  | ------ | 
|      |                            |                    | Number of Shares |             | Number of Shares
|      |                            |                    | of Common Stock  |             | of Common Stock 
|Party |                            | Covered by Warrant |                  | Sold by UTI
|      |                            |                    |                  |            
|      | Neil E. Hanson             |                    |                  | 63,240      |                  |  |  | 31,620 | 
|     
|     
|     
|     
|      | Christopher N. Hanson      |                    |                  | 42,000      |                  |  |  | 21,000 | 
|     
|     
|     
|     
|      | John J. Surko              |                    |                  | 2,880       |                  |  |  | 1,440  | 
|     
|     
|     
|     
|      | Ben A. McCarthy            |                    |                  | 72,000      |                  |  |  | 36,000 | 
|     
|     
|     
|     
|      | Southland Minerals Company |                    |                  | 2,880       |                  |  |  | 1,440  | 

-14-



---






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,             
|                                                                 |  |                                      
|                                                                 |  | 1999                                  |         | 1998 |  | 1997 |         | 1996 |  | 1995
|                                                                 |  |                                       |         |      |  |      |         |      |  |     
|                                                                 |  | (in thousands, except per share data)
|Statement of Operations Data(1)                                 
|                                                                
|                                                                
|                                                                
|                                                                
|Revenues                                                         |  | $                                     | 155,775 |      |  | $    | 186,157 |      |  | $    | 182,437 |   |  | $ | 97,301 |   |  | $ | 40,124 |  
|                                                                
|                                                                
|                                                                
|                                                                
|Direct operating costs (excluding
depreciation and amortization) |  |                                       | 123,240 |      |  |      | 138,935 |      |  |      | 137,499 |   |  |   | 78,718 |   |  |   | 32,720 |  
|                                                                
|                                                                
|                                                                
|                                                                
|Selling, general and administrative expenses                     |  |                                       | 10,170  |      |  |      | 10,781  |      |  |      | 10,011  |   |  |   | 7,166  |   |  |   | 5,057  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Provisions for bad debts                                         |  |                                       | 548     |      |  |      | 1,143   |      |  |      | 623     |   |  |   | 141    |   |  |   | (10    | )
|                                                                
|                                                                
|                                                                
|                                                                
|Other charges (income)(2)                                        |  |                                       | (2,861  | )    |  |      | 206     |      |  |      | (774    | ) |  |   | (517   | ) |  |   | (63    | )
|                                                                
|                                                                
|                                                                
|                                                                
|Depreciation and amortization                                    |  |                                       | 24,122  |      |  |      | 19,529  |      |  |      | 11,075  |   |  |   | 4,292  |   |  |   | 2,552  |  
|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |        |   |  |   |        |  
|Operating income (loss)                                          |  |                                       | 556     |      |  |      | 15,563  |      |  |      | 24,003  |   |  |   | 7,501  |   |  |   | (132   | )
|                                                                
|                                                                
|                                                                
|                                                                
|Other income                                                     |  |                                       | 585     |      |  |      | 1,355   |      |  |      | 461     |   |  |   | 824    |   |  |   | 230    |  
|                                                                
|                                                                
|                                                                
|                                                                
|Interest expense                                                 |  |                                       | (4,168  | )    |  |      | (3,815  | )    |  |      | (4,330  | ) |  |   | (1,148 | ) |  |   | (265   | )
|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |        |   |  |   |        |  
|Income (loss) from continuing operations
before income taxes     |  |                                       | (3,027  | )    |  |      | 13,103  |      |  |      | 20,134  |   |  |   | 7,177  |   |  |   | (167   | )
|                                                                
|                                                                
|                                                                
|                                                                
|Income taxes                                                     |  |                                       | (425    | )    |  |      | 5,235   |      |  |      | 7,609   |   |  |   | 2,324  |   |  |   | (592   | )
|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |        |   |  |   |        |  
|Income (loss) from continuing operations                         |  | $                                     | (2,602  | )    |  | $    | 7,868   |      |  | $    | 12,525  |   |  | $ | 4,853  |   |  | $ | 425    |  
|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |        |   |  |   |        |  
|Income (loss) from continuing operations
per common share
Basic  |  | $                                     | (0.15   | )    |  | $    | 0.49    |      |  | $    | 0.96    |   |  | $ | 0.46   |   |  | $ | 0.04   |  
|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |        |   |  |   |        |  
|Diluted                                                          |  | $                                     | (0.15   | )    |  | $    | 0.47    |      |  | $    | 0.83    |   |  | $ | 0.42   |   |  | $ | 0.04   |  
|                                                                 |  |                                       |         |      |  |      |         |      |  |      |         |   |  |   |        |   |  |   |        |  
|Average common shares outstanding                               
|                                                                
|                                                                
|                                                                
|                                                                
|Basic                                                            |  |                                       | 16,992  |      |  |      | 16,070  |      |  |      | 13,083  |   |  |   | 10,448 |   |  |   | 9,899  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Diluted                                                          |  |                                       | 16,992  |      |  |      | 16,795  |      |  |      | 15,069  |   |  |   | 11,439 |   |  |   | 9,899  |  

|                                           |  |                    |         |      |  |      |         |      |  |      |         |  |  |   |        |  |  |   |        | 
|------------------------------------------ |  | ------------------ | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------ |  |  | - | ------ | 
|                                           |  | As of December 31,
|                                           |  |                   
|                                           |  | 1999               |         | 1998 |  | 1997 |         | 1996 |  | 1995
|                                           |  |                    |         |      |  |      |         |      |  |     
|                                           |  | (in thousands)    
|Balance Sheet Data                        
|                                          
|                                          
|                                          
|                                          
|Working capital(3)                         |  | $                  | 20,895  |      |  | $    | 22,592  |      |  | $    | 70,452  |  |  | $ | 5,761  |  |  | $ | 5,427  | 
|                                          
|                                          
|                                          
|                                          
|Total assets(1)                            |  |                    | 260,582 |      |  |      | 234,021 |      |  |      | 208,987 |  |  |   | 61,870 |  |  |   | 33,990 | 
|                                          
|                                          
|                                          
|                                          
|Long-term debt, including Redeemable Stock |  |                    | 32,196  |      |  |      | 31,721  |      |  |      | 30,159  |  |  |   | 14,658 |  |  |   | 8,701  | 
|                                          
|                                          
|                                          
|                                          
|Shareholders equity(3)                    |  |                    | 157,032 |      |  |      | 144,146 |      |  |      | 137,620 |  |  |   | 22,696 |  |  |   | 14,990 | 



---

|(1) |  | Over the five years presented, UTIs rig fleet has increased by 98 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 16 during 1999, 20 during
1998, 24 during 1997, 10 during 1996 and 28 during 1995.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|   
|(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 1.8 million shares of its
common stock in a public offering. Approximately another 1.7 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 million.                                                                            

-15-



---






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 effect 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 107 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.

UTIs revenues grew substantially during 1997 and 1998 as a result of:



| |  |  | acquisitions                                                                
| | - |  | ----------------------------------------------------------------------------
|
| |  |  | increased rig utilization and dayrates caused by favorable market conditions

On January 27, 1997, UTI acquired the land drilling assets of Quarles
Drilling Corporation for $16.2 million. This $16.2 million consisted of $8.1
million in cash and approximately .7 million shares of UTIs common stock. The
acquired assets consisted of nine land drilling rigs and other equipment used
in Quarles land drilling business. The acquisition increased UTIs presence
in its existing markets and provided experienced field workers.

On April 11, 1997, UTI acquired the land drilling operations of Southland
Drilling Company Ltd. for approximately $27.1 million in cash and a five-year
warrant to purchase .3 million shares of UTIs common stock at an exercise
price of $16.00 per share. The acquired assets consisted of nine land drilling
rigs and other equipment used in Southlands land drilling business. The
acquisition established a base for UTIs operations in the natural gas
producing regions of the South Texas/Gulf Coast areas.

On September 11, 1997, UTI acquired all of the capital stock of J.S.M. &
Associates, Inc. for approximately .6 million shares of UTIs common stock and
$2.6 million in cash. JSMs assets included seven land drilling rigs, drilling
equipment and approximately $1.0 million in net working capital. The
acquisition increased UTIs presence in the West Texas market.

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.

-16-



---



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 100,000 five-year warrants of UTIs common
stock. 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 1.3 million shares of UTIs common stock. The stock was valued
at $13.3 million or $10.23 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.

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 72% in 1997 to 55% in 1998 and 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:



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

These actions included:



| |  |  | streamlining of certain contract drilling operations                                                                                                                          
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | personnel changes                                                                                                                                                             
|
| |  |  | changes to the accounting and administrative functions, including the
relocation of certain accounting functions from Oklahoma City to UTIs
corporate headquarters in Houston

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

-17-



---



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.

UTI currently expects market conditions in the land drilling industry to
improve in response to the recent improvement in commodity prices for oil and
natural gas. In this regard, UTI expects its average utilization during the
first quarter of 2000 to be more than the 43% average utilization experienced
during 1999. The dayrate component of drilling contracts also have increased
during the first quarter of 2000. As conditions in the land drilling industry
improve, UTI believes that its strong liquidity position and balance sheet
provide it with the financial ability to react quickly to opportunities in the
land drilling industry.

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,
|                                           |  |                         
|                                           |  | 1999                     |         | 1998 | 1997
|                                           |  |                          |         |      |     
|Operating Data:                           
|                                          
|                                          
|                                          
|                                          
|Average U.S. active land rig count         |  |                          | 504     |      |      |   | 671     |   |  |   | 801     |  
|                                          
|                                          
|                                          
|                                          
|Number of rigs owned by UTI at end of year |  |                          | 125     |      |      |   | 109     |   |  |   | 89      |  
|                                          
|                                          
|                                          
|                                          
|Average number of rigs owned during year   |  |                          | 112     |      |      |   | 100     |   |  |   | 82      |  
|                                          
|                                          
|                                          
|                                          
|Average rigs operating                     |  |                          | 49      |      |      |   | 56      |   |  |   | 59      |  
|                                          
|                                          
|                                          
|                                          
|                                          
|Land Drilling:                            
|                                          
|                                          
|                                          
|                                          
|Operating days(2)                          |  |                          | 17,823  |      |      |   | 20,308  |   |  |   | 21,576  |  
|                                          
|                                          
|                                          
|                                          
|Utilization rate(3)                        |  |                          | 43      | %    |      |   | 55      | % |  |   | 72      | %
|                                          
|                                          
|                                          
|                                          
|                                          
|Pressure Pumping:                         
|                                          
|                                          
|                                          
|                                          
|Cementing jobs                             |  |                          | 2,108   |      |      |   | 2,296   |   |  |   | 2,245   |  
|                                          
|                                          
|                                          
|                                          
|Stimulation jobs                           |  |                          | 784     |      |      |   | 996     |   |  |   | 951     |  
|                                          
|                                          
|                                          
|                                          
|                                          
|Financial Data (in thousands):            
|                                          
|                                          
|                                          
|                                          
|Revenues                                   |  | $                        | 155,775 |      |      | $ | 186,157 |   |  | $ | 182,437 |  
|                                           |  |                          |         |      |      |   |         |   |  |   |         |  
|Operating income                           |  | $                        | 556     |      |      | $ | 15,563  |   |  | $ | 24,003  |  
|                                           |  |                          |         |      |      |   |         |   |  |   |         |  

-18-



---





---

|(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, including stacked rigs. Available days are
calculated by multiplying rigs owned by the days in the period under
review. For the year ended December 31, 1999, the utilization rate of
UTIs rigs, excluding stacked rigs, was 50%.

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 | )
|                                                                  |  |                    |         |          |  |            |         | 

-19-



---



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 operating units from nine, which included eight
regional operating units and one unit that focused on deep drilling in various
U.S. markets, to seven regional operating units.

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 1998 and 1999.

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               

-20-



---



Comparison of Years Ended 1998 and 1997

Revenues by business segment for the years ended December 31, 1998 and
1997 are as follows:

|                 |  |                    |         |          |  |            |         |  |  |  |       |  
|---------------- |  | ------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | ----- | -
|                 |  | Years             
|                 |  | Ended December 31, |         | %       
|                 |  |                    |         | Increase
|                 |  | 1998               |         | 1997     |  | (Decrease)
|                 |  |                    |         |          |  |           
|                 |  | (in thousands)    
|Revenues:       
|                
|                
|                
|                
|Land Drilling    |  | $                  | 162,600 |          |  | $          | 161,265 |  |  |  | 0.8   |  
|                
|                
|                
|                
|Pressure Pumping |  |                    | 23,365  |          |  |            | 20,923  |  |  |  | 11.7  |  
|                
|                
|                
|                
|Other            |  |                    | 192     |          |  |            | 249     |  |  |  | (22.9 | )
|                 |  |                    |         |          |  |            |         | 
|                 |  | $                  | 186,157 |          |  | $          | 182,437 |  |  |  | 2.0   |  
|                 |  |                    |         |          |  |            |         | 

Land drilling revenues remained flat as a result of depressed market
conditions despite revenue generated from recent acquisitions. These depressed
market conditions resulted in:



| |  |  | lower utilization rates                                            
| | - |  | -------------------------------------------------------------------
|
| |  |  | lower dayrates and prices received on footage and turnkey contracts

However, these factors were offset by additional revenues from rigs
acquired during 1997 and 1998. Acquisitions completed during the year ended
December 31, 1998 and 1997 generated an additional $19.7 million of revenue in
the year ended December 31, 1998 compared to the year ended December 31, 1997.
The increase in pressure pumping revenue resulted from an increase in pressure
pumping jobs and related rates. UTIs pressure pumping operations were not as
adversely affected by declining oil and natural gas prices as UTIs land
drilling operations.

Direct operating costs, excluding depreciation and amortization, by
business segment for the years ended December 31, 1998 and 1997 are as follows:

|                                                                  |  |                    |         |          |  |            |         |  |  |  |      |  
|----------------------------------------------------------------- |  | ------------------ | ------- | -------- |  | ---------- | ------- |  |  |  | ---- | -
|                                                                  |  | Years             
|                                                                  |  | Ended December 31, |         | %       
|                                                                  |  |                    |         | Increase
|                                                                  |  | 1998               |         | 1997     |  | (Decrease)
|                                                                  |  |                    |         |          |  |           
|                                                                  |  | (in thousands)    
|Direct Operating Costs (excluding
depreciation and amortization):
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Land Drilling                                                     |  | $                  | 124,779 |          |  | $          | 124,780 |  |  |  | (0.0 | )
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Pressure Pumping                                                  |  |                    | 14,041  |          |  |            | 12,615  |  |  |  | 11.3 |  
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Other                                                             |  |                    | 115     |          |  |            | 104     |  |  |  | 10.6 |  
|                                                                  |  |                    |         |          |  |            |         | 
|                                                                  |  | $                  | 138,935 |          |  | $          | 137,499 |  |  |  | 1.0  |  
|                                                                  |  |                    |         |          |  |            |         | 

The percentage increase in direct operating costs (excluding
depreciation and amortization) in the land drilling and
pressure pumping business segments corresponds with the percentage increase in
revenues from the respective business segment.

Selling, general and administrative expenses increased $.8 million during
the year ended December 31, 1998 compared to the year ended December 31, 1997.
This was primarily due to acquisitions consummated during the second and third
quarters of 1997 and during 1998.

-21-



---



Provisions for bad debts increased $.5 million for the year ended December
31, 1998 compared to the year ended December 31, 1997. This was primarily due
to existing industry conditions during that time period.

Included in the other charges (income) for the year ended December 31,
1998 was $.8 million as a result of the streamlining of certain contract
drilling operations and changes to the accounting and administrative functions.
The other charges (income) also includes gains on the sale of long-lived
assets.

Depreciation and amortization expense increased $8.5 million during the
year ended December 31, 1998 compared to the year ended December 31, 1997.
This was primarily due to depreciation and amortization on assets acquired
during the second and third quarters of 1997 and during 1998.

Interest expense decreased $.5 million during the year ended December 31,
1998 compared to the year ended December 31, 1997. This decrease was primarily
due to a reduction in outstanding debt for the year ended December 31, 1998
compared to the same period of 1997. The following table shows other
significant data regarding UTIs debt:

|                         |  |                   |  |                  
|------------------------ |  | ----------------- |  | -----------------
|                         |  | Year Ended        |  | Year Ended       
|                         |  | December 31, 1998 |  | December 31, 1997
|                         |  |                   |  |                  
|Average Debt Outstanding |  | $26.7 million     |  | $35.7 million    
|                        
|                        
|                        
|                        
|Effective Interest Rate  |  | 14.3%             |  | 12.1%            

Income taxes decreased $2.4 million during the year ended December 31,
1998 compared to the year ended December 31, 1997, primarily due to lower
taxable income in 1998. UTIs effective tax rate for the year ended December
31, 1998 was 40.0%. UTIs effective tax rate for the year ended December 31,
1997 was 37.8%. This increase from 37.8% to 40.0% was primarily attributable
to goodwill amortization associated with acquisitions that is nondeductible for
tax purposes.

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                   

-22-



---



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 $14.4 million in 1999 and $31.6 million in
1998. UTI used these funds along with available cash balances on hand to fund
acquisitions and capital expenditures. Capital expenditures, excluding
acquisitions, was $9.4 million for the year ended December 31, 1999. Capital
expenditures, excluding acquisitions, was $37.4 million for the year ended
December 31, 1998.

UTI had $7.5 million in cash and cash equivalents and no borrowings under
the working capital line as of December 31, 1999. This is compared to $10.3
million in cash and cash equivalents and no borrowings under the working
capital line as of December 31, 1998.

Long Term Debt Facilities

As of December 31, 1999, UTI had outstanding debt, net of unamortized
discounts, of $32.2 million. This indebtedness included $25.0 million
associated with a 1997 private placement of debt securities in connection with
an acquisition and refinancing of existing indebtedness and $7.8 million of
notes associated with an acquisition completed in 1998.

Revolving Credit Facility.On November 22, 1999, UTI entered into a
four-year revolving credit facility. This revolving credit facility provides
for maximum borrowings of up to $65.0 million. Under the revolving credit
facility, UTI may use up to $10.0 million for letters of credit. The revolving
credit facility calls for periodic interest payments at a floating rate ranging
from LIBOR plus 1.75% to LIBOR plus 2.75%. The actual rate charged above LIBOR
is based on UTIs trailing twelve-month EBITDA. UTIs assets secure the new
facility. As of December 31, 1999, UTI had no outstanding borrowings under
this facility.

Subordinated Notes.On April 11, 1997, UTI issued $25.0 million principal
amount of 12.0% subordinated notes. These subordinated notes come due 2001.
The subordinated notes were issued at a 2.0% discount along with seven-year
warrants to purchase 1.2 million shares of UTIs common stock at an exercise
price of $10.83 per share. The subordinated notes contain various affirmative
and negative covenants customary in such private placements, including
restrictions on additional indebtedness, restrictions on dividends,
distributions and other restricted payments.

Promissory Notes.On July 31, 1998, UTI issued $7.8 million principal
amount of unsecured promissory notes. In the event the average trading value
of UTIs common stock for thirty consecutive days exceeds $30.00 per share,
then $3.5 million of the principal amount becomes payable within 90 days
following the event. The triggering event occurred on March 9, 2000. The
notes bear interest at 7.0% and mature on July 31, 2002. The notes were issued
in connection with an acquisition.

-23-



---



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                           

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

Inflation

Inflation has not had a significant impact on UTIs comparative results of
operations.

Year 2000

In late 1999, UTI completed remediating and testing its Year 2000
readiness systems. UTI did not experience any significant disruptions in
mission critical information technology and non-information technology systems.
UTI believes those systems successfully responded to the Year 2000 date
change.

UTI is not aware of any material problems resulting from Year 2000 issues,
either with:



| |  |  | UTIs products and services           
| | - |  | --------------------------------------
|
| |  |  | UTIs internal systems                
|
| |  |  | products and services of third parties

UTI will continue to monitor the mission critical computer applications of
the following parties throughout the Year 2000:



| |  |  | UTI            
| | - |  | ---------------
|
| |  |  | UTIs suppliers
|
| |  |  | UTIs vendors  

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(SFAS 137) which is effective for fiscal years beginning after June 15,
2000, requires all derivatives to be recognized at fair value on the balance
sheet. UTI plans to adopt SFAS 133 no later than January 1, 2001. The change
is not expected to have a significant effect on UTIs financial statements.

-24-



---



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 or uncertainties 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.

-25-



---



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 world-wide 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                                                                                            




Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The tables below present expected cash flows and related weighted-average
interest rates expected by maturity dates. UTI is not subject to interest rate
risk due to its indebtedness having fixed rates of interest. The fair value of
fixed rate debt is based on the estimated yield to maturity for each debt issue
as of December 31, 1999 and 1998.

|                                |  |                                                 |      |       |  |      |      |      |  |       |     |          |  |   |   |  |  |   |      |   |  |   |      | 
|------------------------------- |  | ----------------------------------------------- | ---- | ----- |  | ---- | ---- | ---- |  | ----- | --- | -------- |  | - | - |  |  | - | ---- | - |  | - | ---- | 
|                                |  | Expected Maturity Date                          |      | Fair 
|                                |  |                                                 |      | Value
|                                |  | 2000                                            |      | 2001  |  | 2002 |      | 2003 |  | Total |     | 12/31/99
|                                |  |                                                 |      |       |  |      |      |      |  |       |     |         
|                                |  | (in millions, except interest rate percentages)
|Long Term Debt                 
|                               
|                               
|                               
|                               
|Debt service(a)                 |  | $                                               | 3.5  |       |  | $    | 27.0 |      |  | $     | 8.1 |          |  | $ |  |  |  | $ | 38.6 |   |  | $ | 33.2 | 
|                               
|                               
|                               
|                               
|Average effective
interest rate |  |                                                 | 12.3 | %     |  |      | 10.4 | %    |  |       | 7.0 | %        |  |   |  |  |  |   | 11.3 | %

|                                |  |                                                 |      |       |  |      |      |      |  |       |      |          |  |   |     |   |  |   |      |   |  |   |      | 
|------------------------------- |  | ----------------------------------------------- | ---- | ----- |  | ---- | ---- | ---- |  | ----- | ---- | -------- |  | - | --- | - |  | - | ---- | - |  | - | ---- | 
|                                |  | Expected Maturity Date                          |      | Fair 
|                                |  |                                                 |      | Value
|                                |  | 1999                                            |      | 2000  |  | 2001 |      | 2002 |  | Total |      | 12/31/98
|                                |  |                                                 |      |       |  |      |      |      |  |       |      |         
|                                |  | (in millions, except interest rate percentages)
|Long Term Debt                 
|                               
|                               
|                               
|                               
|Debt service(a)                 |  | $                                               | 3.5  |       |  | $    | 3.5  |      |  | $     | 27.0 |          |  | $ | 8.1 |   |  | $ | 42.1 |   |  | $ | 33.0 | 
|                               
|                               
|                               
|                               
|Average effective
interest rate |  |                                                 | 12.3 | %     |  |      | 12.3 | %    |  |       | 10.4 | %        |  |   | 7.0 | % |  |   | 11.7 | %



---

|(a) |  | Assumes scheduled maturities are funded with available resources.
|--- |  | -----------------------------------------------------------------

-26-



---






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.




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

None.

-27-



---






PART III




Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is the name, age and position as of April 1, 2000 for each
of the directors and executive officers of UTI. Pursuant to UTIs bylaws,
directors are elected to serve for three-year terms until their successors are
elected or their earlier resignation or removal. Class I directors terms
expire in 2001, Class II directors terms expire in 2002 and Class III
directors terms expire in 2000.

|                    |  |     |    |          |  |                                                                                
|------------------- |  | --- | -- | -------- |  | -------------------------------------------------------------------------------
|Name                |  | Age |    | Position
|                    |  |     |    |         
|Mark S. Siegel      |  |     | 49 |          |  | Chairman of the Board and Class II Director
(director since 1995)              
|                   
|                   
|                   
|                   
|Vaughn E. Drum      |  |     | 54 |          |  | President, Chief Executive Officer and
Class III Director (director since 1986)
|                   
|                   
|                   
|                   
|Kenneth N. Berns    |  |     | 40 |          |  | Class II Director (director since 1995)                                        
|                   
|                   
|                   
|                   
|Curtis W. Huff      |  |     | 42 |          |  | Class I Director (director since 1997)                                         
|                   
|                   
|                   
|                   
|Terry H. Hunt       |  |     | 51 |          |  | Class I Director (director since 1994)                                         
|                   
|                   
|                   
|                   
|Nadine C. Smith     |  |     | 42 |          |  | Class I Director (director since 1995)                                         
|                   
|                   
|                   
|                   
|Robert B. Spears    |  |     | 73 |          |  | Class III Director (director since 1994)                                       
|                   
|                   
|                   
|                   
|John E. Vollmer III |  |     | 44 |          |  | Senior Vice President, Secretary, Treasurer and
Chief Financial Officer        
|                   
|                   
|                   
|                   
|Bruce Sauers        |  |     | 36 |          |  | Vice President and Corporate Controller                                        

_______________________

Mark S. Siegel- Mr. Siegel has served as Chairman of the Board and a
director of UTI since March 14, 1995. Mr. Siegel has been President of Remy
Investors & Consultants, Incorporated (Remy Investors) since 1993. From 1992
to 1993, Mr. Siegel was President, Music Division, Blockbuster Entertainment
Corp. From 1988 through 1992, Mr. Siegel was an Executive Vice President of
Shamrock Holdings, Inc. and Managing Director of Shamrock Capital Advisors,
Incorporated. Mr. Siegel is also Chairman of the Board and a director of
Variflex Inc. Mr. Siegel holds a B.A. from Colgate University and a J.D. from
Boalt Hall School of Law.

-28-



---



Vaughn E. Drum- Mr. Drum has served as President, Chief Executive Officer
and a director of UTI since December 1986. From 1980 through November 1986,
Mr. Drum served in various capacities for UGI Development Company, a subsidiary
of UGI Corporation. Mr. Drum holds a B.S. in Petroleum Engineering from
Marietta College.

Kenneth N. Berns- Mr. Berns has served as a director of UTI since May 24,
1995. Mr. Berns has been an executive employee of Remy Investors since 1994.
From 1990 through 1994, Mr. Berns was employed by affiliated real estate
development and management companies, including Ridge Properties, Ltd., Ridge
Development, Ltd. and Spound Company. Prior to 1990, Mr. Berns was a senior
manager of Spicer & Oppenheim and a Vice President of Cantor Fitzgerald
Financial Corporation. Mr. Berns is the sole stockholder of RD Management,
Inc., which was the General Partner of Ridge Properties, Ltd. Mr. Berns is a
Certified Public Accountant and holds a Bachelors Degree in Business
Administration from San Diego State University and a Masters Degree in Taxation
from Golden Gate University.

Curtis W. Huff- Mr. Huff has been Executive Vice President, Chief
Financial Officer and General Counsel of Weatherford International, Inc. since
January 2000. He served as Senior Vice President and General Counsel of
Weatherford from May 1998 to January 2000. Prior to that time, Mr. Huff was a
partner with the law firm of Fulbright & Jaworski L.L.P., our counsel, and held
that position for more than five years.

Terry H. Hunt- Mr. Hunt served as Senior Vice President  Strategic
Planning of PPL Corporation, an international electricity and natural gas
supplier, from October 1998 to March 2000 following the merger of Penn Fuel
Gas, Inc. into PPL. Mr. Hunt served as the President and Chief Executive
Officer of Penn Fuel Gas, Inc. a natural gas and propane distribution company
from 1992 to April 1999. From 1989 to 1992, Mr. Hunt was President and
Chairman of Carnegie Natural Gas Company, a natural gas distribution and
transportation company and of Apollo Gas Company, a natural gas distributor.
From 1984 through 1988, he served as Vice President of Delhi Gas Pipeline
Corporation, an intrastate pipeline company. Mr. Hunt holds a Bachelor of
Engineering degree from the University of Saskatchewan, Canada and a M.B.A.
from Southern Methodist University.

Nadine C. Smith- Prior to April 2000, Ms. Smith was President and Chief
Executive Officer of Enidan Capital Corp., an investment company that makes
equity investments in public and privately held companies. Previously, Ms.
Smith was an investment banker and principal with NC Smith & Co. and The First
Boston Corporation and a management consultant with McKinsey & Co. Ms. Smith
is a director of American Retirement Corporation, Aegis Asset Management and
American Southwest Holdings.
Ms. Smith earned a bachelors degree in economics from Smith College and a
masters degree in business from Yale University.

Robert B. Spears- Since 1989, Mr. Spears has served as the Chairman and
Vice President, Business Development of Spears & Associates, Inc., a firm which
he founded in 1965. Spears & Associates is a leading research-based consulting
firm to the oil and natural gas industry worldwide.

John E. Vollmer III- Mr. Vollmer joined UTI in July 1998 and serves as
Senior Vice President and Chief Financial Officer. Mr. Vollmer was a financial
consultant from October 1997 until joining UTI in 1998. From 1992 until
October 1997, Mr. Vollmer served in a variety of capacities at Blockbuster
Entertainment, including Senior Vice President-Finance and Chief Financial
Officer of Blockbuster Entertainments Music Division. Mr. Vollmer is a
Certified Public Accountant and holds a B. A. in Accounting from Michigan State
University.

-29-



---



Bruce Sauers- Mr. Sauers has served as Vice President of UTI since August
1998 and as Corporate Controller since December 1996. Prior to joining UTI in
1996, Mr. Sauers was a manager in a regional public accounting firm. Mr.
Sauers is a Certified Public Accountant and holds a B. S. in Business
Administration from Shippensburg University of Pennsylvania.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires UTIs
officers and directors, and persons who beneficially own more than ten percent
of a registered class of UTIs equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten percent stockholders are required by
the regulations promulgated under Section 16(a) to furnish UTI with copies of
all Section 16(a) forms they file.

Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Form 5s were
required for those persons, UTI believes that, during 1999, all filing
requirements applicable to officers, directors, and greater than ten percent
stockholders were complied with, except that UTIs reporting persons filed Form
5s one day late.

-30-



---






Item 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information concerning compensation for
1999, 1998 and 1997 earned by or paid to (collectively, the Named Executive
Officers):



| |  |  | UTIs Chief Executive Officer                                                                                                                                      
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | UTIs other executive officers whose total annual salary and
bonus exceeded $100,000 in 1999                                                                       
|
| |  |  | each employee for whom disclosure would be required except for
the fact that such individual was not serving as an executive officer
of UTI as of December 31, 1999

SUMMARY COMPENSATION TABLE

|                            |  |      |      |          |  |                     |         |                               |  |          |         |         |  |              |       |            |  |            |              |           |  |            |         |     |  |  |       | 
|--------------------------- |  | ---- | ---- | -------- |  | ------------------- | ------- | ----------------------------- |  | -------- | ------- | ------- |  | ------------ | ----- | ---------- |  | ---------- | ------------ | --------- |  | ---------- | ------- | --- |  |  | ----- | 
|                            |  |      |      |          |  | Annual Compensation |         | Long Term Compensation Awards
|                            |  |      |      |          |  |                     |         |                              
|                            |  |      |      |          |  |                     |         |                               |  |          |         |         |  |              |       |            |  |            |              |           |  | Securities
|                            |  |      |      |          |  |                     |         |                               |  |          |         |         |  | Other Annual |       | Restricted |  | Underlying |              | All Other
|                            |  |      |      |          |  |                     |         |                               |  |          |         |         |  | Compensation |       | Stock      |  | Options    | Compensation
|Name and Principal Position |  | Year |      | Salary $ |  | Bonus $             |         | (1)$                          |  | Award(s) |         | SARs(#) |  | (3)$        
|                            |  |      |      |          |  |                     |         |                               |  |          |         |         |  |             
|Vaughn E. Drum              |  |      | 1999 |          |  |                     | 170,040 |                               |  |          | 25,000  |         |  |              |      |            |  |            |             |           |  |            | 90,000  |     |  |  | 3,270 | 
|                           
|                           
|                           
|                           
|President and Chief         |  |      | 1998 |          |  |                     | 170,040 |                               |  |          | 200,000 |         |  |              |      |            |  |            |             |           |  |            | 12,500  | (4) |  |  | 3,229 | 
|                           
|                           
|                           
|                           
|Executive Officer           |  |      | 1997 |          |  |                     | 156,350 |                               |  |          | 115,681 |         |  |              |      |            |  |            |             |           |  |            | 42,500  |     |  |  | 5,959 | 
|                           
|                           
|                           
|                           
|Mark S. Siegel              |  |      | 1999 |          |  |                     | 100,000 |                               |  |          |        |         |  |              |      |            |  |            |             |           |  |            | 85,000  |     |  |  |      | 
|                           
|                           
|                           
|                           
|Chairman of the Board       |  |      | 1998 |          |  |                     | 100,000 |                               |  |          |        |         |  |              |      |            |  |            |             |           |  |            | 385,000 | (4) |  |  |      | 
|                           
|                           
|                           
|                           
|                            |  |      | 1997 |          |  |                     |        |                               |  |          |        |         |  |              |      |            |  |            |             |           |  |            | 550,000 |     |  |  |      | 
|                           
|                           
|                           
|                           
|John E. Vollmer III(5)     
|                           
|                           
|                           
|                           
|Senior Vice President,      |  |      | 1999 |          |  |                     | 150,000 |                               |  |          | 25,000  |         |  |              |      |            |  |            |             |           |  |            | 100,000 |     |  |  | 2,140 | 
|                           
|                           
|                           
|                           
|Treasurer and Chief         |  |      | 1998 |          |  |                     | 63,462  |                               |  |          | 26,250  |         |  |              | 8,615 | (2)        |  |            |             |           |  |            | 125,000 |     |  |  |      | 
|                           
|                           
|                           
|                           
|Financial Officer           |  |      | 1997 |          |  |                     |        |                               |  |          |        |         |  |              |      |            |  |            |             |           |  |            |        |     |  |  |      | 



---

|(1) |  | The aggregate amounts of perquisites and other personal benefits,
securities or property is less than 10% of each executive officers
combined annual salary and bonus during the applicable year.                                                                                                                                                                                                                                                                       
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|   
|(2) |  | Relates to consultant services provided prior to employment.                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|   
|   
|   
|   
|(3) |  | Amounts set forth for 1999, 1998 and 1997 reflect UTIs contributions or
other allocations to defined contribution plans.                                                                                                                                                                                                                                                                                                                                                
|   
|   
|   
|   
|   
|(4) |  | In August 1998, the Board of Directors of UTI approved the repricing of
options to purchase an aggregate of 743,375 shares granted to employees
of UTI during 1998 and 1997. Pursuant to such action, Messrs. Drum and
Siegel had options to purchase 12,500 and 385,000 shares of common stock,
respectively, which were repriced and are included in this table as new
grants during 1998 although new options were not actually granted as a
result of such repricing.
|   
|   
|   
|   
|   
|(5) |  | Mr. Vollmer became an officer of UTI in July 1998.                                                                                                                                                                                                                                                                                                                                                                                                                       

-31-



---



Compensation Pursuant to Employee Benefit Plans

UTI maintains several plans intended to provide incentives to its key
employees. These plans are described below:

Incentive Compensation Plan.UTI maintains an Incentive Compensation Plan
established in 1987 (the ICP). Under the ICP, specified management employees
of UTI and its subsidiaries with at least 90 days of service may be eligible to
receive a cash bonus following each plan year based on a comparison of
financial performance against targets established for each plan year.

Norton 1997 Stock Option Plan.In July of 1999, UTI acquired Norton
Drilling Services, Inc. Norton Drilling Services, Inc. had a stock option plan
which UTI assumed. The options vest over three years. No further shares of
common stock are available for grant under the plan.

1996 Employee Stock Option Plan.In August 1996, UTIs stockholders
approved UTIs 1996 Employee Stock Option Plan (the 1996 Plan). Under the
1996 Plan, UTI can award options on up to 900,000 shares of common stock to
certain employees of UTI and its subsidiaries at a price equal to the fair
market value of the stock at the date the option is granted. In August of 1998
certain of the options were repriced to the fair market value on the date of
repricing. During 1998 and 1999, net of cancellations, UTI did not award any
options to purchase shares of common stock under the 1996 Plan. The 1996 Plan
currently is administered by UTIs Compensation Committee. There are currently
only 92,300 shares of common stock available for grant under the 1996 Plan.

1997 Long-Term Incentive Plan.In August 1997, UTIs stockholders
approved UTIs 1997 Long-Term Incentive Plan (the 1997 Plan). Under the 1997
Plan, UTI may grant stock options, stock appreciation rights issued independent
or in tandem with such options (SAR), restricted stock awards and performance
awards to certain employees of UTI and its subsidiaries. In August of 1998,
certain of the options were repriced to the fair market value on the date of
repricing. In June 1999, UTIs stockholders increased the number of shares of
common stock authorized for issuance under the 1997 Plan from 600,000 to
1,500,000. Options are to be granted at a price not less than the fair market
value of the common stock on the date the option is granted. During 1998 and
1999, UTI awarded options, net of cancellations, to purchase 687,375 shares of
common stock pursuant to the 1997 Plan. The options that have been granted
under the 1997 Plan vest over zero to five years. The 1997 Plan currently is
administered by UTIs Compensation Committee. There are currently 370,250
shares of common stock available for grant under the 1997 Plan.

-32-



---



The following table sets forth information regarding grants of stock
options to the Named Executive Officers during 1999.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

|                    |  |              |         |              |  |             |       |            |  |        |        |         |  |                  |         |  |  |                      |         |  |  |  |           | 
|------------------- |  | ------------ | ------- | ------------ |  | ----------- | ----- | ---------- |  | ------ | ------ | ------- |  | ---------------- | ------- |  |  | -------------------- | ------- |  |  |  | --------- | 
|                    |  |              |         |              |  |             |       |            |  |        |        |         |  |                  |         |  |  | Potential Realizable
|                    |  |              |         |              |  |             |       |            |  |        |        |         |  |                  |         |  |  | Value at Assumed    
|                    |  |              |         |              |  |             |       |            |  |        |        |         |  |                  |         |  |  | Annual Rates of     
|                    |  |              |         |              |  |             |       |            |  |        |        |         |  |                  |         |  |  | Stock Price         
|                    |  | Number of    |         | % of Total   |  |             |       |            |  |        |        |         |  | Appreciation for
|                    |  | Securities   |         | Options/SARs |  |             |       |            |  |        |        |         |  | Option Term     
|                    |  | Underlying   |         | Granted to   |  | Exercise or |       |            |  |        |        |        
|                    |  | Options/SARs |         | Employees in |  | Base Price  |       | Expiration
|Name                |  | Granted      |         | Fiscal Year  |  | ($/Sh)      |       | Date       |  | 5% ($) |        | 10% ($)
|                    |  |              |         |              |  |             |       |            |  |        |        |        
|Vaughn E. Drum      |  |              | 85,000  |              |  |             | 13.71 | %          |  |        | 9.8125 |         |  |                  | 4/25/09 |  |  |                      | 524,357 |  |  |  | 1,329,281 | 
|                   
|                   
|                   
|                   
|Mark S. Siegel      |  |              | 90,000  |              |  |             | 14.52 | %          |  |        | 9.8125 |         |  |                  | 4/25/09 |  |  |                      | 555,393 |  |  |  | 1,407,474 | 
|                   
|                   
|                   
|                   
|John E. Vollmer III |  |              | 100,000 |              |  |             | 16.13 | %          |  |        | 9.8125 |         |  |                  | 4/25/09 |  |  |                      | 617,103 |  |  |  | 1,563,860 | 

The following table sets forth information concerning stock options
exercised in 1999 and stock options unexercised at December 31, 1999 for the
Named Executive Officers:

AGGREGATED OPTION/SAR EXERCISES IN 1999
AND VALUE TABLE AT DECEMBER 31, 1999

|                    |  |          |         |          |  |                           |         |                           |  |                      |                 |  |  |   |                      | 
|------------------- |  | -------- | ------- | -------- |  | ------------------------- | ------- | ------------------------- |  | -------------------- | --------------- |  |  | - | -------------------- | 
|                    |  | Shares   |         |          |  |                           |         | Number of Unexercised     |  | Value of Unexercised
|                    |  | Acquired |         | Value    |  | Options/SARs at           |         | In-the-money Options/SARs
|                    |  | on       |         | Realized |  | December 31, 1999         |         | at December 31, 1999     
|Name                |  | Exercise |         | ($)      |  | Exercisable/Unexercisable |         | Exercisable/Unexercisable
|                    |  |          |         |          |  |                           |         |                          
|Vaughn E. Drum      |  |          | 100,000 |          |  |                           | 347,613 |                           |  |                      | 184,460/85,000  |  |  | $ | 3,543,188/$1,099,688 | 
|                   
|                   
|                   
|                   
|Mark S. Siegel      |  |          |        |          |  |                           |        |                           |  |                      | 416,667/223,333 |  |  | $ | 5,639,308/$2,881,042 | 
|                   
|                   
|                   
|                   
|John E. Vollmer III |  |          |        |          |  |                           |        |                           |  |                      | 33,333/191,667  |  |  | $ | 429,167/$2,473,958   | 

Employment Contracts

UTI has an employment agreement with Mr. Drum. The annual salary
currently payable under such agreement is $225,000, which may be increased by
UTIs Board of Directors or the Compensation Committee. The agreement has an
initial term of five years continuing through December 2000, and automatically
extends for an additional year upon the completion of the five-year term unless
either party provides notice to the other of the intention to terminate such
contract 120 days prior to the termination date. In addition, the employment
agreement entitles Mr. Drum to receive four weeks paid vacation per year and to
participate fully in all employee plans and fringe benefit programs established
by UTI after the date of the contract in which other senior executives of UTI
are eligible to participate.

-33-



---



In the event of a termination due to Mr. Drums death or disability, his
estate is entitled to receive:



| |  |  | unused vacation pay                                                                                                                                                                                                     
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | a pro-rated portion of the bonus (the Pro-rated Bonus)
which would have been payable to Mr. Drum under the ICP Plan had he
been employed at the end of the year in which the termination
occurred (the Annual Bonus)
|
| |  |  | separation payment not more than fifty percent of Mr. Drums
compensation in the most recent calendar year (the Separation
Payment)                                                                                   
|
| |  |  | vesting of all of Mr. Drums interests, if any, under UTI
stock option plans and any other employee plans of UTI (Plan
Vesting)                                                                                       

In the event Mr. Drum retires in accordance with UTIs retirement
policies, he is entitled to receive:



| |  |  | unused vacation pay                                                                                  
| | - |  | -----------------------------------------------------------------------------------------------------
|
| |  |  | Pro-rated Bonus                                                                                      
|
| |  |  | Separation Payment                                                                                   
|
| |  |  | Plan Vesting (but only to the extent provided in UTIs
employee benefit plans for retiring employees)

If Mr. Drum is terminated by UTI without cause, he is entitled to receive:



| |  |  | termination pay of one years salary                                                                                       
| | - |  | ---------------------------------------------------------------------------------------------------------------------------
|
| |  |  | unused vacation pay                                                                                                        
|
| |  |  | Separation Payment                                                                                                         
|
| |  |  | Annual Bonus                                                                                                               
|
| |  |  | Plan Vesting                                                                                                               
|
| |  |  | continuation of all employee benefits, without any increase
in cost to him, for a period of 18 months following termination

In connection with UTIs relocation of its corporate headquarters from
Wayne, Pennsylvania to Houston, Texas, UTI agreed to provide relocation
assistance if and when Mr. Drums employment with UTI is terminated.

In 1997, the Compensation Committee approved employment arrangements with
Messrs. Siegel and Berns providing for annual salaries of $100,000 and $50,000
for a period of five years. Effective February 20, 2000, the annual salaries
of Messrs. Siegel and Berns increased to $125,000 and $90,000, respectively.
In the event of a change in control of UTI, UTIs obligation to pay such
salaries would end and Messrs. Siegel and Berns would each be entitled to
payment of one years salary and vesting of all options granted in connection
with such employment arrangements. Both Messrs. Siegel and Berns are entitled
to receive bonuses for extraordinary services solely within the discretion of
the Board of Directors and Compensation Committee.

-34-



---



COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to November 1997, grants of stock options to UTIs executive
officers and Messrs. Siegel and Berns as well as salary levels of UTIs
executive officers were approved by the full Board of Directors. In November
1997, the Board of Directors delegated these responsibilities to the
Compensation Committee, which is comprised of Messrs. Hunt and Spears.
Although the full Board of Directors authorized the repricing of options during
1998 (with Messrs. Siegel, Drum and Berns abstaining), it is intended that the
Compensation Committee will determine compensation awarded to UTIs executive
officers, as well as Messrs. Siegel and Berns, in the future. Item 13 sets
forth certain transactions between members of the Board of Directors and UTI.




Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 31, 2000, the stock ownership
of UTIs Named Executive Officers and directors individually, all directors and
executive officers as a group and each person known by UTI to be the beneficial
owner of more than 5% of UTIs common stock.

|                                                              |                                                                               |                      |           |           |     |  |      |      |  
|------------------------------------------------------------- | ----------------------------------------------------------------------------- | -------------------- | --------- | --------- | --- |  | ---- | ---- | -
|Name of                                                       |                                                                               | Amount and Nature of |           | Percent  
|Beneficial Owner                                              |                                                                               | Beneficial Ownership |           | of Class 
|                                                              |                                                                               |                      |           |          
|Other Beneficial Owners:                                     
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | REMY Capital Partners III, L.P.                                              
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | 1801 Century Park East, Suite 1111                                           
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Los Angeles, CA 90067                                                         |                      |           | 3,514,762 | (1) |  |      | 19.0 | %
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | REMY Investors & Consultants,
Incorporated
1801 Century Park East, Suite 1111
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Los Angeles, CA 90067                                                         |                      |           | 3,580,762 | (1) |  |      | 19.3 | %
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|Directors and Named Executive Officers:                      
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Mark S. Siegel                                                                |                      |           | 4,037,762 | (1) |  |      | 21.2 | %
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Vaughn E. Drum                                                                |                      |           | 287,316   | (2) |  |      | 1.5  | %
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Kenneth N. Berns                                                              |                      |           | 95,333    | (3) |  |      | *    |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Curtis W. Huff                                                                |                      |           | 11,250    | (4) |  |      | *    |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Terry H. Hunt                                                                 |                      |           | 14,250    | (4) |  |      | *    |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Nadine C. Smith                                                               |                      |           | 13,250    | (4) |  |      | *    |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | Robert B. Spears                                                              |                      |           | 13,350    | (4) |  |      | *    |  
|                                                             
|                                                             
|                                                             
|                                                             
|                                                              | John E. Vollmer III                                                           |                      |           | 65,416    | (2) |  |      | *    |  
|                                                             
|                                                             
|                                                             
|                                                             
|(All directors and executive officers as
a group  9 persons) |                                                                               |                      | 4,541,177 | (5)       |     |  | 23.6 | %   

* indicates less than 1.0%

-35-



---





---

|(1) |  | The common stock beneficially owned by Remy Investors, which is the
General Partner of Remy, includes the 3,514,762 shares of common stock
owned by Remy as well as presently exercisable options held by Remy
Investors to purchase 66,000 shares of common stock. The common stock
beneficially owned by Mr. Siegel, who is the President and sole
stockholder of Remy Investors, includes the 3,580,762 shares of common
stock and warrants beneficially owned by Remy Investors as well as
presently exercisable options held by Mr. Siegel to purchase 457,000
shares of common stock, but does not include 183,000 shares underlying
stock options held by Mr. Siegel, which options are not presently
exercisable within sixty days.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Includes shares underlying presently exercisable stock options held by
Mr. Drum to purchase 60,916 shares and presently exercisable stock options
held by Mr. Vollmer to purchase 65,416 shares. Does not include shares
underlying stock options held by Mr. Drum to purchase 66,584 shares and
stock options held by Mr. Vollmer to purchase 159,584 shares that are not
presently exercisable and will not become exercisable within sixty days.                                                                                                                                                                                                                                                                                        
|   
|   
|   
|   
|(3) |  | Represents presently exercisable warrants and options owned by Mr. Berns
to purchase 95,333 shares. Does not include 61,667 shares underlying
options that are not presently exercisable within 60 days and does not
include shares of common stock or warrants beneficially owned by Remy
Investors by whom Mr. Berns is employed. Mr. Berns disclaims beneficial
ownership of such shares and warrants beneficially owned by Remy
Investors.                                                                                                                                                                                                                                                                                             
|   
|   
|   
|   
|(4) |  | Includes presently exercisable options owned by Messrs. Huff, Hunt and
Spears and Ms. Smith to purchase 11,250 shares. Does not include 3,750
shares underlying stock options held by Messrs. Huff, Hunt and Spears and
Ms. Smith that are not presently exercisable and will not become
exercisable within sixty days.                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|   
|   
|   
|(5) |  | Includes presently exercisable options to purchase 792,915 shares of
common stock. Does not include options to purchase 497,585 shares owned
by such individuals that are not exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



| |                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Except as stated herein, UTI is not aware of any arrangements which may
result in a change in control of UTI and each stockholder has sole voting
and investment power with respect to UTIs common stock included in the
above table.

-36-



---






Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In connection with Remy Capital Partners III, L.P.s (Remy) acquisition
of its ownership interest in UTI in March 1995, Remy succeeded to a
registration rights agreement with UTI which provides Remy with the right to
require UTI to use its best efforts to register shares held by Remy under the
Securities Act. In the event that such rights are exercised in connection with
a primary offering proposed by UTI (or a secondary offering with which UTI
agrees to participate), Remy would bear its pro rata share of the costs of the
offering, other than legal, accounting and printing costs which UTI shall bear.
In the event that Remy elected to exercise such rights other than in
connection with an offering proposed by UTI, Remy will bear all costs of the
offering. These rights continue so long as Remy continues to own the common
stock that it acquired. The right to a demand registration may be exercised
three times.

Mr. Mark S. Siegel, Chairman of UTI, is President and sole stockholder of
Remy Investors, which is the General Partner of Remy. Kenneth N. Berns, a
director and employee of UTI, is an executive employee of Remy Investors.

Mr. Curtis W. Huff, a director of UTI, is Executive Vice President, Chief
Financial Officer, General Counsel and Secretary of Weatherford International,
Inc., one of UTIs vendors. UTI purchased $2.2 million of supplies, materials
and drill pipe from Weatherford during 1999, and owed $1.2 million to
Weatherford or wholly-owned subsidiaries of Weatherford as of December 31,
1999. UTI believes that the terms of these transactions were at least as
favorable to UTI as those that could have been obtained from unrelated third
parties through arms-length negotiations.

-37-



---






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, 1999 and 1998                                                       |  |      | F-3 | 
|                                             
|                                             
|                                             
|                                             
|                                              | Consolidated Statements of Operations for the Years Ended
December 31, 1999, 1998 and 1997                      |  |      | F-4 | 
|                                             
|                                             
|                                             
|                                             
|                                              | Consolidated Statements of Changes in Shareholders Equity for the
Years Ended December 31, 1999, 1998 and 1997 |  |      | F-5 | 
|                                             
|                                             
|                                             
|                                             
|                                              | Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997                      |  |      | 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.

-38-



---



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

|        |  |                      |  |                                                                                                                                                                                                                                                                                                              
|------- |  | -------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |  | Title or Description
|        |  |                      |  |                                                                                                                                                                                                                                                                                                              
|3.1     |  | -                    |  | Restated Certificate of Incorporation of UTI (incorporated by reference
to Amendment No. 1 to UTIs Registration Statement on Form S-1 (No.
33-69726)).                                                                                                                                                      
|       
|       
|       
|       
|3.2     |  | -                    |  | Amendment to Restated Certificate of Incorporation (incorporated by
reference to Amendment No. 1 to UTIs Registration Statement on Form S-1
(No. 33-69726)).                                                                                                                                                
|       
|       
|       
|       
|3.3     |  | -                    |  | Amendment to Restated Certificate of Incorporation (incorporated by
reference to UTIs Annual Report on Form 10-K for the year ended December
31, 1994).                                                                                                                                                     
|       
|       
|       
|       
|3.4     |  | -                    |  | Amendment to Restated Certificate of Incorporation, dated August 28, 1997
(incorporated by reference to Exhibit 3.4 to UTIs Registration Statement
on Form S-3 (No. 333-35109)).                                                                                                                            
|       
|       
|       
|       
|3.5     |  | -                    |  | By-laws of UTI, 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).                                                                                                                                                              
|       
|       
|       
|       
|3.6     |  | -                    |  | 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).
|       
|       
|       
|       
|3.7     |  | -                    |  | 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).                 
|       
|       
|       
|       
|3.8     |  | -                    |  | 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 through 3.8 for provisions of the Restated
Certificate of Incorporation and amended By-laws of UTI 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).                                                      
|       
|       
|       
|       
|4.4     |  | -                    |  | Stock Option Agreement, dated December 19, 1995, between UTI and Remy
Consultants Incorporated (incorporated by reference to Exhibit 2 to UTIs
Amendment No. 1 to Schedule 13D dated August 8, 1996).                                                                                                       

-39-



---



|        |  |                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | -------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |  | Title or Description
|        |  |                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4.5(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).                                                                                                                                                                                                                                                                                                
|       
|       
|       
|       
|4.6     |  | -                    |  | Note Purchase Agreement, dated April 11, 1997, by and among
FWA Drilling Company, Inc., International Petroleum Service Company,
Triad Drilling Company, Universal Well Services, Inc., USC,
Incorporated, Panther Drilling, Inc. and Canpartners Investments IV,
LLC (incorporated by reference to Schedule 13D relating to UTI filed
on April 22, 1997 by Canpartners Investments IV, LLC, Canpartners
Incorporated, Mitchell R. Julis, Joshua S. Friedman and R. Christian
B. Evensen).
|       
|       
|       
|       
|4.7     |  | -                    |  | Note, dated April 11, 1997, payable by FWA Drilling Company,
Inc., International Petroleum Service Company, Triad Drilling
Company, Universal Well Services, Inc., USC, Incorporated and
Panther Drilling, Inc. to Canpartners Investments IV, LLC
(incorporated by reference to Exhibit 10.5 to UTIs Current Report
on Form 8-K dated April 11, 1997).                                                                                                                                  
|       
|       
|       
|       
|4.8     |  | -                    |  | Warrant Agreement, dated April 11, 1997, by and between UTI
Energy Corp. and Southland Drilling Company, Ltd. (incorporated by
reference to Exhibit 10.1 to UTIs Current Report on Form 8-K dated
April 11, 1997).                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|4.9(1)  |  | -                    |  | 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).                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|4.10(1) |  | -                    |  | Amended and Restated 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).                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|4.11(1) |  | -                    |  | Amendment No. 1 to the Amended and Restated 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).                                                                                                                                                                                                                                       
|       
|       
|       
|       
|4.12    |  | -                    |  | Form of Warrant to purchase an aggregate of 75,000 shares of
Common Stock at $26.50 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).                                                                                                
|       
|       
|       
|       
|4.13    |  | -                    |  | Form of Warrant to purchase an aggregate of 25,000 shares of
Common Stock at $35.00 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).                                                                                                

-40-



---



|        |  |                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- |  | -------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |  | Title or Description
|        |  |                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.14    |  | -                    |  | 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).                                                                                                                                                                                                                                                     
|       
|       
|       
|       
|4.15    |  | -                    |  | 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).
|       
|       
|       
|       
|10.1    |  | -                    |  | For additional material contracts see Exhibits 4.3 through
4.15.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       
|       
|       
|       
|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).                                                                                                                                                                                                                                                                                                                                                                                                                  
|       
|       
|       
|       
|10.3    |  | -                    |  | 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).                                                                                                                                                                                                                                                                                                                                                                                      
|       
|       
|       
|       
|21.1    |  | -                    |  | List of
subsidiaries of UTI (incorporated by reference to Exhibit 21.1 to
UTIs Annual Report on Form 10-K for the year ended December 31, 1999).                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|23.1(2) |  | -                    |  | Consent of Ernst & Young LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|27.1    |  | -                    |  | Financial Data Schedule (incorporated by reference to
Exhibit 4.15 to UTIs Annual Report on Form 10-K for the year ended
December 31, 1999).                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



---

|(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.                                                      

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

UTI did not submit a Form 8-K during the quarter that ended December 31,
1999

-41-



---



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



---



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, 1999 and 1998 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, 1999. 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, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, 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 11, 2000

F-2



---



UTI ENERGY CORP.




|                                                                                                                                                                  |  |   |         |              |  |      |         |   |  | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | ------- | ------------ |  | ---- | ------- | - |  | 
|                                                                                                                                                                  |  |   |         | December 31,
|                                                                                                                                                                  |  |   |         |             
|                                                                                                                                                                  |  |   |         | 1999         |  | 1998
|                                                                                                                                                                  |  |   |         |              |  |     
|ASSETS                                                                                                                                                           
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|CURRENT ASSETS                                                                                                                                                   
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Cash and cash equivalents                                                                                                                                         |  | $ | 7,547   |              |  | $    | 10,337  |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Accounts receivable, net of allowance for doubtful
accounts of $3,143 in 1999 and $1,919 in 1998                                                                  |  |   | 33,522  |              |  |      | 25,485  |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Federal income tax receivables                                                                                                                                    |  |   | 5,043   |              |  |      | 3,200   |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Materials and supplies                                                                                                                                            |  |   | 748     |              |  |      | 887     |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Deferred income taxes                                                                                                                                             |  |   | 1,762   |              |  |      | 1,954   |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Prepaid expenses                                                                                                                                                  |  |   | 1,487   |              |  |      | 4,648   |  
|                                                                                                                                                                  |  |   |         |              |  |      |         |  
|                                                                                                                                                                  |  |   | 50,109  |              |  |      | 46,511  |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|PROPERTY AND EQUIPMENT                                                                                                                                           
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Land                                                                                                                                                              |  |   | 1,224   |              |  |      | 1,224   |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Buildings and improvements                                                                                                                                        |  |   | 3,538   |              |  |      | 3,324   |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Machinery and equipment                                                                                                                                           |  |   | 244,657 |              |  |      | 202,698 |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Oil and natural gas working interests                                                                                                                             |  |   | 1,856   |              |  |      | 1,943   |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Construction in process                                                                                                                                           |  |   | 376     |              |  |      | 2,729   |  
|                                                                                                                                                                  |  |   |         |              |  |      |         |  
|                                                                                                                                                                  |  |   | 251,651 |              |  |      | 211,918 |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Less accumulated depreciation and amortization                                                                                                                    |  |   | 62,807  |              |  |      | 47,070  |  
|                                                                                                                                                                  |  |   |         |              |  |      |         |  
|                                                                                                                                                                  |  |   | 188,844 |              |  |      | 164,848 |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|GOODWILL, less accumulated amortization of $3,616 in 1999
and $2,086 in 1998                                                                                      |  |   | 19,261  |              |  |      | 20,791  |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|OTHER ASSETS                                                                                                                                                      |  |   | 2,368   |              |  |      | 1,871   |  
|                                                                                                                                                                  |  |   |         |              |  |      |         |  
|                                                                                                                                                                  |  | $ | 260,582 |              |  | $    | 234,021 |  
|                                                                                                                                                                  |  |   |         |              |  |      |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                             
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|CURRENT LIABILITIES                                                                                                                                              
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Accounts payable                                                                                                                                                  |  | $ | 19,672  |              |  | $    | 17,649  |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Accrued payroll and related costs                                                                                                                                 |  |   | 4,536   |              |  |      | 2,387   |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Accrued health insurance                                                                                                                                          |  |   | 1,058   |              |  |      | 1,284   |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Other accrued expenses                                                                                                                                            |  |   | 3,948   |              |  |      | 2,599   |  
|                                                                                                                                                                  |  |   |         |              |  |      |         |  
|                                                                                                                                                                  |  |   | 29,214  |              |  |      | 23,919  |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|LONG-TERM DEBT                                                                                                                                                    |  |   | 32,196  |              |  |      | 31,721  |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|DEFERRED INCOME TAXES                                                                                                                                             |  |   | 41,668  |              |  |      | 33,579  |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|OTHER LIABILITIES                                                                                                                                                 |  |   | 472     |              |  |      | 656     |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|COMMITMENTS AND CONTINGENCIES                                                                                                                                    
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|SHAREHOLDERS EQUITY                                                                                                                                             
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Preferred Stock, $.01 par value, 5,000 shares authorized,
0 shares issued or outstanding in 1999 and 1998                                                         |  |   |        |              |  |      |        |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Common Stock, $.001 par value, 50,000 shares authorized,
18,432 shares issued and 17,829 outstanding in 1999,
16,612 shares issued and 16,009 outstanding in 1998 |  |   | 18      |              |  |      | 17      |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Additional capital                                                                                                                                                |  |   | 144,312 |              |  |      | 128,825 |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Retained earnings                                                                                                                                                 |  |   | 22,707  |              |  |      | 25,309  |  
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|                                                                                                                                                                 
|Treasury Stock, 603 shares in 1999 and 1998, at cost                                                                                                              |  |   | (10,005 | )            |  |      | (10,005 | )
|                                                                                                                                                                  |  |   |         |              |  |      |         |  
|                                                                                                                                                                  |  |   | 157,032 |              |  |      | 144,146 |  
|                                                                                                                                                                  |  |   |         |              |  |      |         |  
|                                                                                                                                                                  |  | $ | 260,582 |              |  | $    | 234,021 |  
|                                                                                                                                                                  |  |   |         |              |  |      |         |  

See accompanying notes.

F-3



---



UTI ENERGY CORP.




|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|---------------------------------------------------------------- |  | ------------------------ | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                 |  | Years Ended December 31,
|                                                                 |  |                         
|                                                                 |  | 1999                     |         | 1998 |  | 1997
|                                                                 |  |                          |         |      |  |     
|REVENUES                                                         |  | $                        | 155,775 |      |  | $    | 186,157 |   |  | $ | 182,437 |  
|                                                                
|                                                                
|                                                                
|                                                                
|COSTS AND EXPENSES                                              
|                                                                
|                                                                
|                                                                
|                                                                
|Direct operating costs (excluding depreciation and amortization) |  |                          | 123,240 |      |  |      | 138,935 |   |  |   | 137,499 |  
|                                                                
|                                                                
|                                                                
|                                                                
|Selling, general and administrative                              |  |                          | 10,170  |      |  |      | 10,781  |   |  |   | 10,011  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Provisions for bad debts                                         |  |                          | 548     |      |  |      | 1,143   |   |  |   | 623     |  
|                                                                
|                                                                
|                                                                
|                                                                
|Other charges (income)                                           |  |                          | (2,861  | )    |  |      | 206     |   |  |   | (774    | )
|                                                                
|                                                                
|                                                                
|                                                                
|Depreciation and amortization                                    |  |                          | 24,122  |      |  |      | 19,529  |   |  |   | 11,075  |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|                                                                 |  |                          | 155,219 |      |  |      | 170,594 |   |  |   | 158,434 |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|OPERATING INCOME                                                 |  |                          | 556     |      |  |      | 15,563  |   |  |   | 24,003  |  
|                                                                
|                                                                
|                                                                
|                                                                
|OTHER INCOME (EXPENSE)                                           |  |                          |         |      |  |      |         |   |  |   |         |  
|                                                                
|                                                                
|                                                                
|                                                                
|Interest expense                                                 |  |                          | (4,168  | )    |  |      | (3,815  | ) |  |   | (4,330  | )
|                                                                
|                                                                
|                                                                
|                                                                
|Interest income                                                  |  |                          | 602     |      |  |      | 1,084   |   |  |   | 689     |  
|                                                                
|                                                                
|                                                                
|                                                                
|Other, net                                                       |  |                          | (17     | )    |  |      | 271     |   |  |   | (228    | )
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|                                                                 |  |                          | (3,583  | )    |  |      | (2,460  | ) |  |   | (3,869  | )
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|INCOME (LOSS) BEFORE INCOME TAXES                                |  |                          | (3,027  | )    |  |      | 13,103  |   |  |   | 20,134  |  
|                                                                
|                                                                
|                                                                
|                                                                
|INCOME TAXES                                                     |  |                          | (425    | )    |  |      | 5,235   |   |  |   | 7,609   |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|NET INCOME (LOSS)                                                |  | $                        | (2,602  | )    |  | $    | 7,868   |   |  | $ | 12,525  |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|BASIC EARNINGS (LOSS) PER COMMON SHARE                           |  | $                        | (0.15   | )    |  | $    | 0.49    |   |  | $ | 0.96    |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|DILUTED EARNINGS (LOSS) PER COMMON SHARE                         |  | $                        | (0.15   | )    |  | $    | 0.47    |   |  | $ | 0.83    |  
|                                                                 |  |                          |         |      |  |      |         |   |  |   |         |  
|AVERAGE COMMON SHARES OUTSTANDING                               
|                                                                
|                                                                
|                                                                
|                                                                
|Basic                                                            |  |                          | 16,992  |      |  |      | 16,070  |   |  |   | 13,083  |  
|                                                                
|                                                                
|                                                                
|                                                                
|Diluted                                                          |  |                          | 16,992  |      |  |      | 16,795  |   |  |   | 15,069  |  

See accompanying notes.

F-4



---



UTI ENERGY CORP.




|                                 |  |              |        |       |  |            |    |          |  |              |         |            |  |       |        |   |  |   |      |   |  |   |         |   |  |   |         |  
|-------------------------------- |  | ------------ | ------ | ----- |  | ---------- | -- | -------- |  | ------------ | ------- | ---------- |  | ----- | ------ | - |  | - | ---- | - |  | - | ------- | - |  | - | ------- | -
|                                 |  | Common Stock |        |       |  |            |    |          |  |              |         | Restricted
|                                 |  |              |        |       |  |            |    |          |  |              |         | Stock Plan
|                                 |  | Number       |        | Par   |  | Additional |    | Retained |  | Unearned     |         | Treasury  
|                                 |  | of Shares    |        | $.001 |  | Capital    |    | Earnings |  | Compensation |         | Stock      |  | Total
|                                 |  |              |        |       |  |            |    |          |  |              |         |            |  |      
|Balance at December 31, 1996     |  |              | 10,807 |       |  | $          | 11 |          |  | $            | 17,870  |            |  | $     | 4,916  |   |  | $ | (101 | ) |  | $ |        |   |  | $ | 22,696  |  
|                                
|                                
|                                
|                                
|Net income                       |  |              |       |       |  |            |   |          |  |              |        |            |  |       | 12,525 |   |  |   |     |   |  |   |        |   |  |   | 12,525  |  
|                                
|                                
|                                
|                                
|Issuance of Common Stock         |  |              | 2,836  |       |  |            | 3  |          |  |              | 84,528  |            |  |       |       |   |  |   |     |   |  |   |        |   |  |   | 84,531  |  
|                                
|                                
|                                
|                                
|Warrants issued                  |  |              |       |       |  |            |   |          |  |              | 1,410   |            |  |       |       |   |  |   |     |   |  |   |        |   |  |   | 1,410   |  
|                                
|                                
|                                
|                                
|Exercise of warrants             |  |              | 1,911  |       |  |            | 2  |          |  |              | 13,773  |            |  |       |       |   |  |   |     |   |  |   |        |   |  |   | 13,775  |  
|                                
|                                
|                                
|                                
|Exercise of options              |  |              | 593    |       |  |            |   |          |  |              | 2,627   |            |  |       |       |   |  |   |     |   |  |   |        |   |  |   | 2,627   |  
|                                
|                                
|                                
|                                
|Vesting of restricted stock plan |  |              |       |       |  |            |   |          |  |              |        |            |  |       |       |   |  |   | 56   |   |  |   |        |   |  |   | 56      |  
|                                 |  |              |        |       |  |            |    |          |  |              |         |            |  |       |        |   |  |   |      |   |  |   |         |   |  |   |         |  
|Balance at December 31, 1997     |  |              | 16,147 |       |  |            | 16 |          |  |              | 120,208 |            |  |       | 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              |  |              | 156    |       |  |            |   |          |  |              | 1,505   |            |  |       |       |   |  |   |     |   |  |   |        |   |  |   | 1,505   |  
|                                
|                                
|                                
|                                
|Purchase of Treasury Stock       |  |              | (294   | )     |  |            |   |          |  |              |        |            |  |       |       |   |  |   |     |   |  |   | (3,303  | ) |  |   | (3,303  | )
|                                
|                                
|                                
|                                
|Vesting of restricted stock plan |  |              |       |       |  |            |   |          |  |              |        |            |  |       |       |   |  |   | 45   |   |  |   |        |   |  |   | 45      |  
|                                 |  |              |        |       |  |            |    |          |  |              |         |            |  |       |        |   |  |   |      |   |  |   |         |   |  |   |         |  
|Balance at December 31, 1998     |  |              | 16,009 |       |  |            | 17 |          |  |              | 128,825 |            |  |       | 25,309 |   |  |   |     |   |  |   | (10,005 | ) |  |   | 144,146 |  
|                                
|                                
|                                
|                                
|Net loss                         |  |              |       |       |  |            |   |          |  |              |        |            |  |       | (2,602 | ) |  |   |     |   |  |   |        |   |  |   | (2,602  | )
|                                
|                                
|                                
|                                
|Issuance of Common Stock         |  |              | 1,298  |       |  |            | 1  |          |  |              | 13,264  |            |  |       |       |   |  |   |     |   |  |   |        |   |  |   | 13,265  |  
|                                
|                                
|                                
|                                
|Exercise of options              |  |              | 522    |       |  |            |   |          |  |              | 2,223   |            |  |       |       |   |  |   |     |   |  |   |        |   |  |   | 2,223   |  
|                                 |  |              |        |       |  |            |    |          |  |              |         |            |  |       |        |   |  |   |      |   |  |   |         |   |  |   |         |  
|Balance at December 31, 1999     |  |              | 17,829 |       |  | $          | 18 |          |  | $            | 144,312 |            |  | $     | 22,707 |   |  | $ |     |   |  | $ | (10,005 | ) |  | $ | 157,032 |  
|                                 |  |              |        |       |  |            |    |          |  |              |         |            |  |       |        |   |  |   |      |   |  |   |         |   |  |   |         |  

See accompanying notes.

F-5



---



UTI ENERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|                                                                       |                                                                                  |                                                  |        |                          |         |      |         |         |         |   |         |         |         |  
|---------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ------------------------------------------------ | ------ | ------------------------ | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                                                                       |                                                                                  |                                                  |        | Years Ended December 31,
|                                                                       |                                                                                  |                                                  |        |                         
|                                                                       |                                                                                  |                                                  |        | 1999                     |         | 1998 |         | 1997   
|                                                                       |                                                                                  |                                                  |        |                          |         |      |         |        
|CASH FLOWS FROM OPERATING ACTIVITIES                                  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Net income (loss)                                                      |                                                                                  | $                                                | (2,602 | )                        |         | $    | 7,868   |         |         | $ | 12,525  |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Adjustments to reconcile net income to net cash
provided by operations |                                                                                  |                                                  |        |                          |         |      |         |         |         |   |         |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Depreciation                                                                     |                                                  | 21,924 |                          |         |      | 17,630  |         |         |   | 10,410  |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Amortization                                                                     |                                                  |        | 2,198                    |         |      |         | 1,899   |         |   |         | 665     |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Deferred income taxes                                                            |                                                  |        | 2,208                    |         |      |         | 2,549   |         |   |         | 1,012   |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Amortization of debt discount                                                    |                                                  |        | 475                      |         |      |         | 475     |         |   |         | 402     |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Stock compensation expense                                                       |                                                  |        |                         |         |      |         | 45      |         |   |         | 56      |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Provisions for bad debts                                                         |                                                  |        | 282                      |         |      |         | 1,104   |         |   |         | 510     |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Gain on disposal of fixed assets                                                 |                                                  |        | (3,121                   | )       |      |         | (579    | )       |   |         | (774    | )      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | Change in operating assets and liabilities, net of
effect of businesses acquired |                                                  |        |                          |         |      |         |         |         |   |         |         |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                  | Receivables and prepaids                         |        | (4,079                   | )       |      |         | 5,445   |         |   |         | (16,670 | )      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                  | Materials and supplies                           |        |                          | (109    | )    |         |         | 477     |   |         |         | (489    | )
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                  | Accounts payable and accruals                    |        |                          | (1,556  | )    |         |         | (2,622  | ) |         |         | 16,357  |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       |                                                                                  | Other                                            |        |                          | (1,220  | )    |         |         | (2,723  | ) |         |         | 217     |  
|                                                                       |                                                                                  |                                                  |        |                          |         |      |         |         |         |   |         |        
|                                                                       |                                                                                  | Net cash provided by operating activities        |        |                          | 14,400  |      |         |         | 31,568  |   |         |         | 24,221  |  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|CASH FLOWS FROM INVESTING ACTIVITIES                                  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Acquisitions of property and equipment                                 |                                                                                  |                                                  | (9,444 | )                        |         |      | (37,429 | )       |         |   | (18,356 | )      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Acquisitions, net of cash                                              |                                                                                  |                                                  | (7,540 | )                        |         |      | (34,300 | )       |         |   | (36,847 | )      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Net proceeds from disposition                                          |                                                                                  |                                                  | 4,935  |                          |         |      |        |         |         |   |        |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Proceeds from sale of property and equipment                           |                                                                                  |                                                  | 1,286  |                          |         |      | 1,530   |         |         |   | 1,373   |        
|                                                                       |                                                                                  |                                                  |        |                          |         |      |         |         |         |   |         |        
|                                                                       |                                                                                  | Net cash used by investing activities            |        |                          | (10,763 | )    |         |         | (70,199 | ) |         |         | (53,830 | )
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|CASH FLOWS FROM FINANCING ACTIVITIES                                  
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Proceeds from issuance of long-term debt                               |                                                                                  |                                                  |       |                          |         |      |        |         |         |   | 58,900  |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Repayments of long-term debt                                           |                                                                                  |                                                  | (7,951 | )                        |         |      | (52     | )       |         |   | (52,559 | )      
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Repurchased stock                                                      |                                                                                  |                                                  |       |                          |         |      | (10,005 | )       |         |   |        |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Proceeds from issuance of Common Stock                                 |                                                                                  |                                                  | 1,524  |                          |         |      | 678     |         |         |   | 81,045  |        
|                                                                       |                                                                                  |                                                  |        |                          |         |      |         |         |         |   |         |        
|                                                                       |                                                                                  | Net cash provided (used) by financing activities |        |                          | (6,427  | )    |         |         | (9,379  | ) |         |         | 87,386  |  
|                                                                       |                                                                                  |                                                  |        |                          |         |      |         |         |         |   |         |        
|NET INCREASE (DECREASE) IN CASH AND                                   
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | CASH EQUIVALENTS                                                                 |                                                  |        | (2,790                   | )       |      |         | (48,010 | )       |   |         | 57,777  |        
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|CASH AND CASH EQUIVALENTS AT BEGINNING                                
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|                                                                       | OF YEAR                                                                          |                                                  |        | 10,337                   |         |      |         | 58,347  |         |   |         | 570     |        
|                                                                       |                                                                                  |                                                  |        |                          |         |      |         |         |         |   |         |        
|CASH AND CASH EQUIVALENTS AT END OF YEAR                               |                                                                                  | $                                                | 7,547  |                          |         | $    | 10,337  |         |         | $ | 58,347  |        
|                                                                       |                                                                                  |                                                  |        |                          |         |      |         |         |         |   |         |        

See accompanying notes.

F-6



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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 the United
States. 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 Wyoming.
As of December 31, 1999, UTIs fleet consisted of 125 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



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | 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 developments 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



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



| |  |  | 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(SFAS 137), 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 plans to adopt SFAS
133 no later than 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



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

2. ACQUISITIONS



| |  |  | (a) Quarles Drilling Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | On January 27, 1997, UTI acquired the land drilling assets of Quarles
Drilling Corporation for $16.2 million. This $16.2 million consisted of
$8.1 million in cash and approximately .7 million shares of UTIs common
stock. The stock was valued at $8.1 million or $11.04 per share based on
the average price of UTIs common stock shortly before and after the
acquisition was announced. The acquisition was accounted for using the
purchase method. Quarles operating results since January 27, 1997 have
been consolidated with the operating results of UTI. The acquired assets
consisted of nine land drilling rigs, drilling equipment, rig components
and other equipment used in Quarles land drilling business. The fair
market value of the assets acquired were estimated and the purchase price
was allocated as follows (in thousands):

|                       |  |   |        |  
|---------------------- |  | - | ------ | -
|Property and Equipment |  | $ | 16,651 |  
|                      
|                      
|                      
|                      
|Goodwill               |  |   |       |  
|                      
|                      
|                      
|                      
|Liabilities Assumed    |  |   | (451   | )
|                       |  |   |        |  
|Purchase Price         |  | $ | 16,200 |  
|                       |  |   |        |  



| |  |  | (b) Southland Drilling Company                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | On April 11, 1997, UTI acquired the land drilling operations of Southland
Drilling Company Ltd. for approximately $27.1 million in cash and a
five-year warrant to purchase 300,000 shares of UTIs common stock at an
exercise price of $16.00 per share. Warrants to purchase 105,000 shares
of UTIs common stock were exercised in 1997. The remaining warrants
were unexercised at December 31, 1999. The acquisition was accounted for
using the purchase method. Southlands operating results since April
11, 1997 have been consolidated with the operating results of UTI. The
acquired assets consisted of nine land drilling rigs, drilling equipment,
rig components and other equipment used in Southlands land drilling
business. The fair market value of the assets acquired were estimated
and the purchase price was allocated as follows (in thousands):

|                       |  |   |        |  
|---------------------- |  | - | ------ | -
|Property and Equipment |  | $ | 17,219 |  
|                      
|                      
|                      
|                      
|Goodwill               |  |   | 10,139 |  
|                      
|                      
|                      
|                      
|Liabilities Assumed    |  |   | (201   | )
|                       |  |   |        |  
|Purchase Price         |  | $ | 27,157 |  
|                       |  |   |        |  

F-10



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

2. ACQUISITIONS (Continued)



| |  |  | (c) J.S.M. & Associates, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | On September 11, 1997, UTI acquired all of the capital stock of J.S.M. &
Associates, Inc. for approximately .6 million shares of UTIs common
stock and $2.6 million in cash. The stock was valued at $16.1 million or
$26.00 per share based on the average price of UTIs common stock shortly
before and after the acquisition was announced. Approximately .3 million
shares of the .6 million shares were redeemable and were redeemed on
January 6, 1998. The acquisition was accounted for using the purchase
method of accounting. JSMs operating results since September 11, 1997
have been consolidated with the operating results of UTI. JSMs assets
included seven land drilling rigs, drilling equipment and approximately
$1.0 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    |  | $ | 14,314 |  
|                         
|                         
|                         
|                         
|Goodwill                  |  |   | 9,131  |  
|                         
|                         
|                         
|                         
|Other Assets Assumed, net |  |   | 324    |  
|                         
|                         
|                         
|                         
|Deferred Taxes            |  |   | (5,183 | )
|                          |  |   |        |  
|Purchase Price            |  | $ | 18,586 |  
|                          |  |   |        |  



| |  |  | (d) 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 |  
|                          |  |   |        |  

F-11



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

2. ACQUISITIONS (Continued)



| |  |  | (e) 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) 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 100,000 five-year warrants of UTIs common
stock. Warrants to purchase 75,000 shares of UTIs common stock are
exercisable at $26.50 per share and warrants to purchase 25,000 shares of UTIs
common stock are exercisable at $35.00 per share. Using the Black-Scholes
valuation model, the warrants were valued at $4.27 and $3.62 per respective
warrant. As of December 31, 1999, none of the warrants were exercised. 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 |  
|                               |  |   |        |  

F-12



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

2. ACQUISITIONS (Continued)



| |  |  | (g) Norton Drilling Services, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | On July 27, 1999, UTI acquired Norton Drilling Services, Inc., for
approximately 1.3 million shares of UTIs common stock. The stock was
valued at $13.3 million or $10.23 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 |  
|                               |  |   |        |  



| |  |  | (h) 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-13



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

3. LONG-TERM DEBT



| |  |  | UTIs long-term debt at December 31, 1999 and 1998 consisted of the
following:
| |  |  | ------------------------------------------------------------------------------

|                           |  |                |        |      |  |   |        | 
|-------------------------- |  | -------------- | ------ | ---- |  | - | ------ | 
|                           |  | December 31,  
|                           |  |               
|                           |  | 1999           |        | 1998
|                           |  |                |        |     
|                           |  | (in thousands)
|Subordinated notes         |  | $              | 25,000 |      |  | $ | 25,000 | 
|                          
|                          
|                          
|                          
|Promissory notes           |  |                | 7,790  |      |  |   | 7,790  | 
|                           |  |                |        |      |  |   |        | 
|                           |  |                | 32,790 |      |  |   | 32,790 | 
|                          
|                          
|                          
|                          
|Less: unamortized discount |  |                | 594    |      |  |   | 1,069  | 
|                           |  |                |        |      |  |   |        | 
|                           |  | $              | 32,196 |      |  | $ | 31,721 | 
|                           |  |                |        |      |  |   |        | 



| |  |  | Subordinated Notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | On April 11, 1997, UTI issued $25.0 million principal amount of 12.0%
subordinated notes due 2001. The proceeds of the note were $24.5 million
after discount. The subordinated notes were issued along with seven-year
warrants to purchase 1.2 million shares of UTIs common stock at an
exercise price of $10.83 per share. UTI assigned a value of $1.4 million
to the warrants issued. UTI is amortizing the cost of the warrants to
interest expense over the life of the borrowing. The subordinated notes
contain various affirmative and negative covenants customary in such
private placements, including restrictions on:
|
| |  |  |      additional indebtedness                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  |  |      dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  |      distributions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  |  |      other restricted payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | In addition to the subordinated note borrowing, UTI also borrowed $34.4
million from a financial institution during 1997 primarily to finance
acquisitions which was subsequently repaid in 1997 with proceeds from the
issuance of common stock.                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | Promissory Notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | On July 31, 1998, UTI issued approximately $7.8 million principal amount
of unsecured promissory notes. In the event the average trading value of
UTIs common stock for thirty consecutive trading days exceeds $30.00 per
share, then $3.5 million of the principal amount becomes payable within
ninety days following the event. The triggering event occurred on March
9, 2000. The notes bear interest at 7.0% and mature on July 31, 2002.
The notes were issued in connection with the acquisition of Suits.                                                                                                                  

F-14



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

3. LONG-TERM DEBT (Continued)



| |  |  | Working Capital Line                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | UTI entered into a $65.0 million four-year revolving credit agreement
with certain financial institutions on November 22, 1999. The credit
facility calls for periodic interest at a floating rate ranging from
LIBOR plus 1.75% to LIBOR plus 2.75%. 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 $15.0 million then covenants related to net worth
and earnings before income taxes and depreciation apply. UTIs assets
secure the facility. There were no borrowings under this facility in
1999. UTI incurs a fee of .375% on the unused facility amount. A $2.6
million standby letter of credit is issued under this agreement.
|
| |  |  | 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 1998 or 1999. A $1.6 million
standby letter of credit was issued under this agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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, 1999 (in
thousands):
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                             |  |   |     | 
|---------------------------- |  | - | --- | 
|2000                         |  | $ | 421 | 
|                            
|                            
|                            
|                            
|2001                         |  |   | 307 | 
|                            
|                            
|                            
|                            
|2002                         |  |   | 203 | 
|                            
|                            
|                            
|                            
|2003                         |  |   | 38  | 
|                             |  |   |     | 
|Total minimum lease payments |  | $ | 969 | 
|                             |  |   |     | 



| |  |  | The following table shows the approximate rental expense for all
operating leases for the last three years:
| |  |  | -----------------------------------------------------------------------------------------------------------

|         |  |      |         |      |  |   |         | 
|-------- |  | ---- | ------- | ---- |  | - | ------- | 
|1999     |  | 1998 |         | 1997
|         |  |      |         |     
|$469,000 |  | $    | 511,000 |      |  | $ | 472,000 | 

F-15



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

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. UTIs management believes 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. UTI
was self-insured for workers compensation for certain years prior to
1999. UTI incurs a maximum of $100,000 per employee under medical claims
and 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-16



---



6. 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, 1999 or December
31, 1998 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-17



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

7. 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 as of December
31, 1999 and 1998, are as follows:
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                |                          |   |                |       |      |   |         |       | 
|------------------------------- | ------------------------ | - | -------------- | ----- | ---- | - | ------- | ----- | 
|                                |                          |   | December 31,  
|                                |                          |   |               
|                                |                          |   | 1999           |       | 1998
|                                |                          |   |                |       |     
|                                |                          |   | (in thousands)
|Deferred tax assets:           
|                               
|                               
|                               
|                               
|Alternative minimum tax credits |                          | $ | 614            |       |      | $ | 36      |      
|                               
|                               
|                               
|                               
|Investment tax credits          |                          |   | 21             |       |      |   | 184     |      
|                               
|                               
|                               
|                               
|Accrued expenses                |                          |   | 1,988          |       |      |   | 1,845   |      
|                                |                          |   |                |       |      |   |         |      
|                                | Total deferred tax asset |   |                | 2,623 |      |   |         | 2,065 | 
|                               
|                               
|                               
|                               
|Deferred tax liabilities:      
|                               
|                               
|                               
|                               
|Depreciation                    |                          |   | (42,529        | )     |      |   | (33,690 | )    
|                                |                          |   |                |       |      |   |         |      
|Net deferred tax liability      |                          | $ | (39,906        | )     |      | $ | (31,625 | )    
|                                |                          |   |                |       |      |   |         |      



| |  |  | UTIs investment tax credit carryforwards will expire in 2000 if not
utilized. UTI uses the flow-through method for recognizing investment
tax credits. 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,
|          |  |                         
|          |  | 1999                     |        | 1998 |  | 1997
|          |  |                          |        |      |  |     
|          |  | (in thousands)          
|Current: 
|         
|         
|         
|         
|Federal   |  | $                        | (3,031 | )    |  | $    | 2,372 |  |  | $ | 5,681 | 
|         
|         
|         
|         
|State     |  |                          | 398    |      |  |      | 314   |  |  |   | 916   | 
|          |  |                          |        |      |  |      |       |  |  |   |       | 
|          |  |                          | (2,633 | )    |  |      | 2,686 |  |  |   | 6,597 | 
|         
|         
|         
|         
|Deferred:
|         
|         
|         
|         
|Federal   |  |                          | 2,281  |      |  |      | 2,540 |  |  |   | 1,005 | 
|         
|         
|         
|         
|State     |  |                          | (73    | )    |  |      | 9     |  |  |   | 7     | 
|          |  |                          |        |      |  |      |       |  |  |   |       | 
|          |  |                          | 2,208  |      |  |      | 2,549 |  |  |   | 1,012 | 
|          |  |                          |        |      |  |      |       |  |  |   |       | 
|          |  | $                        | (425   | )    |  | $    | 5,235 |  |  | $ | 7,609 | 
|          |  |                          |        |      |  |      |       |  |  |   |       | 

F-18



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

7. INCOME TAXES (Continued)



| |  |  | The difference between tax expense computed at the federal income tax
rate of 35% for 1999, 1998 and 1997 and actual tax expense is as follows:
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------

|                                                          |  |                          |                |      |  |      |       |   |  |   |       |  
|--------------------------------------------------------- |  | ------------------------ | -------------- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                                          |  | Years Ended December 31,
|                                                          |  |                         
|                                                          |  | 1999                     |                | 1998 |  | 1997
|                                                          |  |                          |                |      |  |     
|                                                          |  |                          | (in thousands)
|Taxes applied to pre-tax income                           |  | $                        | (1,059         | )    |  | $    | 4,586 |   |  | $ | 7,047 |  
|                                                         
|                                                         
|                                                         
|                                                         
|State income tax                                          |  |                          | 211            |      |  |      | 204   |   |  |   | 595   |  
|                                                         
|                                                         
|                                                         
|                                                         
|Change in statutory tax rate                              |  |                          |               |      |  |      |      |   |  |   | 435   |  
|                                                         
|                                                         
|                                                         
|                                                         
|Permanent differences, principally
nondeductible expenses |  |                          | 423            |      |  |      | 588   |   |  |   | 38    |  
|                                                         
|                                                         
|                                                         
|                                                         
|Change in valuation allowance                             |  |                          |               |      |  |      |      |   |  |   | (232  | )
|                                                         
|                                                         
|                                                         
|                                                         
|Other                                                     |  |                          |               |      |  |      | (143  | ) |  |   | (274  | )
|                                                          |  |                          |                |      |  |      |       |   |  |   |       |  
|                                                          |  | $                        | (425           | )    |  | $    | 5,235 |   |  | $ | 7,609 |  
|                                                          |  |                          |                |      |  |      |       |   |  |   |       |  

8. EARNINGS PER SHARE



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

|                                                                   |                                                                                                       |   |                                          |        |      |   |        |        |  |   |        |        | 
|------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------- | - | ---------------------------------------- | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                                                   |                                                                                                       |   | Years Ended December 31,                
|                                                                   |                                                                                                       |   |                                         
|                                                                   |                                                                                                       |   | 1999                                     |        | 1998 |   | 1997  
|                                                                   |                                                                                                       |   |                                          |        |      |   |       
|                                                                   |                                                                                                       |   | (in thousands, except per share amounts)
|Numerator:                                                        
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Net income (loss)                                                  |                                                                                                       | $ | (2,602                                   | )      |      | $ | 7,868  |        |  | $ | 12,525 |       
|                                                                   |                                                                                                       |   |                                          |        |      |   |        |        |  |   |        |       
|Denominator:                                                      
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Denominator for basic earnings per
share  weighted-average shares |                                                                                                       |   | 16,992                                   |        |      |   | 16,070 |        |  |   | 13,083 |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Effect of dilutive securities:                                    
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Stock options                                                                                         |   |                                          |       |      |   |        | 649    |  |   |        | 1,286  | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Warrants                                                                                              |   |                                          |       |      |   |        | 76     |  |   |        | 676    | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Other                                                                                                 |   |                                          |       |      |   |        |       |  |   |        | 24     | 
|                                                                   |                                                                                                       |   |                                          |        |      |   |        |        |  |   |        |       
|                                                                   | Dilutive potential common shares                                                                      |   |                                          |       |      |   |        | 725    |  |   |        | 1,986  | 
|                                                                   |                                                                                                       |   |                                          |        |      |   |        |        |  |   |        |       
|                                                                   | Denominator for diluted earnings per
share  adjusted weighted-average
shares and assumed conversions |   |                                          | 16,992 |      |   |        | 16,795 |  |   |        | 15,069 | 
|                                                                   |                                                                                                       |   |                                          |        |      |   |        |        |  |   |        |       
|Basic earnings (loss) per share                                    |                                                                                                       | $ | (0.15                                    | )      |      | $ | 0.49   |        |  | $ | 0.96   |       
|                                                                   |                                                                                                       |   |                                          |        |      |   |        |        |  |   |        |       
|Diluted earnings (loss) per share                                  |                                                                                                       | $ | (0.15                                    | )      |      | $ | 0.47   |        |  | $ | 0.83   |       
|                                                                   |                                                                                                       |   |                                          |        |      |   |        |        |  |   |        |       

F-19



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

8. EARNINGS PER SHARE (Continued)



| |  |  | Options to purchase 530,000 shares of UTIs common stock and warrants to
purchase 147,000 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.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9. RELATED-PARTY TRANSACTIONS



| |  |  | A director of UTI is an officer of one of UTIs vendors. UTI purchased
$2.2 million of supplies, materials and drill pipe from that vendor
during 1999. UTI owed that vendor $1.2 million at December 31, 1999.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | UTI has employment contracts with certain of its executive officers.                                                                                                                                           

10. SUPPLEMENTAL CASH FLOW INFORMATION

|                                                                       |  |                          |        |      |  |   |       | 
|---------------------------------------------------------------------- |  | ------------------------ | ------ | ---- |  | - | ----- | 
|                                                                       |  | Years Ended December 31,
|                                                                       |  |                         
|                                                                       |  | 1999                     |        | 1998
|                                                                       |  |                          |        |     
|                                                                       |  | (in thousands)          
|Noncash Investing and Financing Activities:                           
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Tax benefit of exercised stock options reflected in
additional capital |  | $                        | 699    |      |  | $ | 828   | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|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 | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Norton acquisition with UTI common stock                               |  |                          | 13,284 |      |  |   |      | 
|                                                                      
|                                                                      
|                                                                      
|                                                                      
|Norton acquisition, deferred tax liability recorded                    |  |                          | 6,073  |      |  |   |      | 

|                                 |  |                          |       |      |  |      |       |  |  |   |       | 
|-------------------------------- |  | ------------------------ | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                 |  | Years Ended December 31,
|                                 |  |                         
|                                 |  | 1999                     |       | 1998 |  | 1997
|                                 |  |                          |       |      |  |     
|                                 |  | (in thousands)          
|Cash Paid During the Period for:
|                                
|                                
|                                
|                                
|Interest                         |  | $                        | 3,561 |      |  | $    | 3,239 |  |  | $ | 3,523 | 
|                                
|                                
|                                
|                                
|Income taxes                     |  |                          | 964   |      |  |      | 7,996 |  |  |   | 1,624 | 

F-20



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

11. WARRANTS



| |  |  | The following warrants to purchase UTI common stock were outstanding at
December 31, 1999:
| |  |  | ------------------------------------------------------------------------------------------

|                      |  |           |         |          |  |            |             |  |  |  |                       | 
|--------------------- |  | --------- | ------- | -------- |  | ---------- | ----------- |  |  |  | --------------------- | 
|Related               |  | Number of |         | Exercise |  | Expiration
|Event                 |  | Shares    |         | Price    |  | Date      
|                      |  |           |         |          |  |           
|Subordinated Notes    |  |           | 480,000 |          |  | $          | 10.83       |  |  |  | April 11, 2004        | 
|                     
|                     
|                     
|                     
|Southland Acquisition |  |           | 195,000 |          |  |            | 16.00       |  |  |  | April 11, 2002        | 
|                     
|                     
|                     
|                     
|Suits Acquisition     |  |           | 100,000 |          |  |            | 26.50-35.00 |  |  |  | July 31, 2003         | 
|                     
|                     
|                     
|                     
|Norton Acquisition    |  |           | 36,264  |          |  |            | 9.50-14.82  |  |  |  | February 24, 2004 and | 
|                     
|                     
|                     
|                     
|                      |  |           |         |          |  |            |             |  |  |  | April 1, 2002         | 

12. STOCK PLANS



| |  |  | UTI has authorized options to purchase UTI common stock under the
following stock plans:
| |  |  | ----------------------------------------------------------------------------------------

|                                        |  |                    |           |               |  |               |         | 
|--------------------------------------- |  | ------------------ | --------- | ------------- |  | ------------- | ------- | 
|                                        |  |                    |           |               |  | Options      
|                                        |  |                    |           |               |  | Available for
|Plan Name                               |  | Authorized Options |           | Future Grants
|                                        |  |                    |           |              
|1993 Non-Qualified Stock Option Plan    |  |                    | 1,459,800 |               |  |               | 0       | 
|                                       
|                                       
|                                       
|                                       
|Remy Investors Stock Option Agreement   |  |                    | 360,000   |               |  |               | 0       | 
|                                       
|                                       
|                                       
|                                       
|Non-Employee Director Stock Option Plan |  |                    | 300,000   |               |  |               | 217,500 | 
|                                       
|                                       
|                                       
|                                       
|1996 Employee Stock Option Plan         |  |                    | 900,000   |               |  |               | 92,300  | 
|                                       
|                                       
|                                       
|                                       
|1997 Long-Term Incentive Plan           |  |                    | 1,500,000 |               |  |               | 370,250 | 
|                                       
|                                       
|                                       
|                                       
|Norton 1997 Stock Option Plan           |  |                    | 106,825   |               |  |               | 0       | 



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

|                                        |  |         |             |      |  |  |              | 
|--------------------------------------- |  | ------- | ----------- | ---- |  |  | ------------ | 
|Plan Name                               |  | Vesting |             | Term
|                                        |  |         |             |     
|1993 Non-Qualified Stock Option Plan    |  |         | 5 years     |      |  |  | 5 years      | 
|                                       
|                                       
|                                       
|                                       
|Remy Investors Stock Option Agreement   |  |         | Immediate   |      |  |  | 5 years      | 
|                                       
|                                       
|                                       
|                                       
|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     | 

F-21



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

12. STOCK PLANS (Continued)



| |  |  | 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 $11.38, $13.94, $16.25, $20.00 and $31.63
were repriced to $9.88 (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:

|                             |  |      |           |      |  |      |            |   |  |  |            |  
|---------------------------- |  | ---- | --------- | ---- |  | ---- | ---------- | - |  |  | ---------- | -
|                             |  | 1999 |           | 1998 |  | 1997
|                             |  |      |           |      |  |     
|Risk-free interest rates:    |  |      | 4.53      | %    |  |      | 4.91       | % |  |  | 5.11       | %
|                            
|                            
|                            
|                            
|Dividend yield:              |  |      | 0.00      | %    |  |      | 0.00       | % |  |  | 0.00       | %
|                            
|                            
|                            
|                            
|Volatility factors:          |  |      | 1.219     |      |  |      | .669       |   |  |  | .529       |  
|                            
|                            
|                            
|                            
|Expected life of the
option: |  |      | 2.0 years |      |  |      | 3.20 years |   |  |  | 2.60 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-22



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

12. 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,                
|                                                         |  |                                         
|                                                         |  | 1999                                     |        | 1998 |  | 1997
|                                                         |  |                                          |        |      |  |     
|                                                         |  | (in thousands, except per share amounts)
|Pro forma net income (loss)                              |  | $                                        | (4,381 | )    |  | $    | 5,105 |  |  | $ | 10,359 | 
|                                                         |  |                                          |        |      |  |      |       |  |  |   |        | 
|Pro forma earnings (loss) per
share:                    
|                                                        
|                                                        
|                                                        
|                                                        
|Basic                                                    |  | $                                        | (0.26  | )    |  | $    | 0.32  |  |  | $ | 0.79   | 
|                                                         |  |                                          |        |      |  |      |       |  |  |   |        | 
|Diluted                                                  |  | $                                        | (0.26  | )    |  | $    | 0.30  |  |  | $ | 0.69   | 
|                                                         |  |                                          |        |      |  |      |       |  |  |   |        | 
|Weighted-average fair value of options
granted per share |  | $                                        | 6.84   |      |  | $    | 5.12  |  |  | $ | 8.72   | 



| |  |  | 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, 1996 |      |  | 1,569,630 |           |          | $ | 2.43      |     
|                              
|                              
|                              
|                              
|Granted                        |      |  | 997,825   |           |          |   | 21.22     |     
|                              
|                              
|                              
|                              
|Exercised                      |      |  | (592,980  | )         |          |   | 2.02      |     
|                               |      |  |           |          
|Outstanding, December 31, 1997 |      |  | 1,974,475 |           |          |   | 12.05     |     
|                              
|                              
|                              
|                              
|Granted                        |      |  | 1,006,375 |           |          |   | 10.51     |     
|                              
|                              
|                              
|                              
|Exercised                      |      |  | (156,480  | )         |          |   | 4.33      |     
|                              
|                              
|                              
|                              
|Canceled                       |      |  | (907,125  | )         |          |   | 22.17     |     
|                               |      |  |           |          
|Outstanding, December 31, 1998 |      |  | 1,917,245 |           |          |   | 7.05      |     
|                              
|                              
|                              
|                              
|Granted                        |      |  | 742,877   |           |          |   | 11.14     |     
|                              
|                              
|                              
|                              
|Exercised                      |      |  | (521,555  | )         |          |   | 2.92      |     
|                              
|                              
|                              
|                              
|Canceled                       |      |  | (34,031   | )         |          |   | 10.78     |     
|                               |      |  |           |          
|Outstanding, December 31, 1999 |      |  | 2,104,536 |           |          | $ | 9.47      |     
|                               |      |  |           |          
|Exercisable, December 31,     
|                              
|                              
|                              
|                              
|                               | 1996 |  |           | 923,040   |          |   | $         | 1.88 | 
|                              
|                              
|                              
|                              
|                               | 1997 |  |           | 1,123,172 |          |   |           | 7.85 | 
|                              
|                              
|                              
|                              
|                               | 1998 |  |           | 1,302,620 |          |   |           | 5.45 | 
|                              
|                              
|                              
|                              
|                               | 1999 |  |           | 1,045,674 |          |   |           | 8.16 | 

F-23



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

12. STOCK PLANS (Continued)



| |  |  | Exercise price for options outstanding as of December 31, 1999, ranged
from $1.79 per share to $28.50 per share. The weighted-average remaining
contractual life of those options is 7.06 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 $42.50 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                                                                                                                                                                                                                             

13. 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 matches $.50 for each dollar contributed by the
employee up to 4% of the employees total annual compensation. UTI may
make an additional discretionary contribution. The following table
shows the matching that UTI made for the last three years:
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|         |  |      |         |      |  |   |         | 
|-------- |  | ---- | ------- | ---- |  | - | ------- | 
|1999     |  | 1998 |         | 1997
|         |  |      |         |     
|$289,000 |  | $    | 298,000 |      |  | $ | 396,000 | 

F-24



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

14. 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 the country. UTIs policy
is designed to limit exposure to any one institution. However, at
December 31, 1999, UTI had 75% 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 subordinated notes and promissory notes
approximate fair value. The fair value of the subordinated notes and the
promissory notes are estimated to be $33.2 million versus its carrying
value of $32.2 million. The fair value was estimated by management based
upon estimates of current interest rates available at the balance sheet
date for similar issues.

F-25



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

15. 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.
|
| |  |  | 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,
|                                     |  |                         
|                                     |  | 1999                     |         | 1998 |  | 1997
|                                     |  |                          |         |      |  |     
|                                     |  | (in thousands)          
|Revenues:                           
|                                    
|                                    
|                                    
|                                    
|Land Drilling                        |  | $                        | 134,870 |      |  | $    | 162,600 |   |  | $ | 161,265 |  
|                                    
|                                    
|                                    
|                                    
|Pressure Pumping                     |  |                          | 20,721  |      |  |      | 23,365  |   |  |   | 20,923  |  
|                                    
|                                    
|                                    
|                                    
|Other                                |  |                          | 184     |      |  |      | 192     |   |  |   | 249     |  
|                                     |  |                          |         |      |  |      |         |   |  |   |         |  
|                                     |  | $                        | 155,775 |      |  | $    | 186,157 |   |  | $ | 182,437 |  
|                                     |  |                          |         |      |  |      |         |   |  |   |         |  
|Selling, General and
Administrative:
|                                    
|                                    
|                                    
|                                    
|Land Drilling                        |  | $                        | 2,818   |      |  | $    | 3,767   |   |  | $ | 4,206   |  
|                                    
|                                    
|                                    
|                                    
|Pressure Pumping                     |  |                          | 3,457   |      |  |      | 3,216   |   |  |   | 2,945   |  
|                                    
|                                    
|                                    
|                                    
|Other                                |  |                          |        |      |  |      |        |   |  |   |        |  
|                                     |  |                          |         |      |  |      |         |   |  |   |         |  
|                                     |  |                          | 6,275   |      |  |      | 6,983   |   |  |   | 7,151   |  
|                                    
|                                    
|                                    
|                                    
|Corporate                            |  |                          | 3,895   |      |  |      | 3,798   |   |  |   | 2,860   |  
|                                     |  |                          |         |      |  |      |         |   |  |   |         |  
|                                     |  | $                        | 10,170  |      |  | $    | 10,781  |   |  | $ | 10,011  |  
|                                     |  |                          |         |      |  |      |         |   |  |   |         |  
|Operating Income:                   
|                                    
|                                    
|                                    
|                                    
|Land Drilling(1)                     |  | $                        | (1,953  | )    |  | $    | 13,915  |   |  | $ | 21,499  |  
|                                    
|                                    
|                                    
|                                    
|Pressure Pumping(1)                  |  |                          | 3,662   |      |  |      | 5,098   |   |  |   | 4,540   |  
|                                    
|                                    
|                                    
|                                    
|Other(1)                             |  |                          | 39      |      |  |      | 19      |   |  |   | 91      |  
|                                     |  |                          |         |      |  |      |         |   |  |   |         |  
|                                     |  |                          | 1,748   |      |  |      | 19,032  |   |  |   | 26,130  |  
|                                    
|                                    
|                                    
|                                    
|Corporate                            |  |                          | (4,053  | )    |  |      | (3,263  | ) |  |   | (2,901  | )
|                                    
|                                    
|                                    
|                                    
|Other Charges (Income)               |  |                          | 2,861   |      |  |      | (206    | ) |  |   | 774     |  
|                                     |  |                          |         |      |  |      |         |   |  |   |         |  
|                                     |  | $                        | 556     |      |  | $    | 15,563  |   |  | $ | 24,003  |  
|                                     |  |                          |         |      |  |      |         |   |  |   |         |  
|Depreciation and
Amortization:      
|                                    
|                                    
|                                    
|                                    
|Land Drilling                        |  | $                        | 22,490  |      |  | $    | 18,350  |   |  | $ | 10,252  |  
|                                    
|                                    
|                                    
|                                    
|Pressure Pumping                     |  |                          | 1,391   |      |  |      | 1,043   |   |  |   | 728     |  
|                                    
|                                    
|                                    
|                                    
|Other                                |  |                          | 82      |      |  |      | 58      |   |  |   | 54      |  
|                                     |  |                          |         |      |  |      |         |   |  |   |         |  
|                                     |  |                          | 23,963  |      |  |      | 19,451  |   |  |   | 11,034  |  
|                                    
|                                    
|                                    
|                                    
|Corporate                            |  |                          | 159     |      |  |      | 78      |   |  |   | 41      |  
|                                     |  |                          |         |      |  |      |         |   |  |   |         |  
|                                     |  | $                        | 24,122  |      |  | $    | 19,529  |   |  | $ | 11,075  |  
|                                     |  |                          |         |      |  |      |         |   |  |   |         |  

F-26



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

15. INDUSTRY SEGMENT INFORMATION (Continued)

|                      |  |                          |       |      |                |      |        |  |  |   |        | 
|--------------------- |  | ------------------------ | ----- | ---- | -------------- | ---- | ------ |  |  | - | ------ | 
|                      |  | Years Ended December 31,
|                      |  |                         
|                      |  | 1999                     |       | 1998 |                | 1997
|                      |  |                          |       |      |                |     
|                      |  |                          |       |      | (in thousands) |      |        | 
|Capital Expenditures:
|                     
|                     
|                     
|                     
|Land Drilling         |  | $                        | 7,116 |      |                | $    | 32,912 |  |  | $ | 16,282 | 
|                     
|                     
|                     
|                     
|Pressure Pumping      |  |                          | 2,307 |      |                |      | 3,895  |  |  |   | 1,676  | 
|                     
|                     
|                     
|                     
|Other                 |  |                          |      |      |                |      | 50     |  |  |   | 136    | 
|                      |  |                          |       |      |                |      |        |  |  |   |        | 
|                      |  |                          | 9,423 |      |                |      | 36,857 |  |  |   | 18,094 | 
|                     
|                     
|                     
|                     
|Corporate             |  |                          | 21    |      |                |      | 572    |  |  |   | 262    | 
|                      |  |                          |       |      |                |      |        |  |  |   |        | 
|                      |  | $                        | 9,444 |      |                | $    | 37,429 |  |  | $ | 18,356 | 
|                      |  |                          |       |      |                |      |        |  |  |   |        | 

|                 |  |                |         |              |  |   |         | 
|---------------- |  | -------------- | ------- | ------------ |  | - | ------- | 
|                 |  | December 31,   |         | December 31,
|                 |  | 1999           |         | 1998        
|                 |  |                |         |             
|                 |  | (in thousands)
|Segment Assets: 
|                
|                
|                
|                
|Land Drilling    |  | $              | 233,341 |              |  | $ | 204,283 | 
|                
|                
|                
|                
|Pressure Pumping |  |                | 16,399  |              |  |   | 14,799  | 
|                
|                
|                
|                
|Other            |  |                | 318     |              |  |   | 404     | 
|                 |  |                |         |              |  |   |         | 
|                 |  |                | 250,058 |              |  |   | 219,486 | 
|                
|                
|                
|                
|Corporate        |  |                | 10,524  |              |  |   | 14,535  | 
|                 |  |                |         |              |  |   |         | 
|                 |  | $              | 260,582 |              |  | $ | 234,021 | 
|                 |  |                |         |              |  |   |         | 



---

|(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. Furthermore, Anadarko represented
approximately 10% of total accounts receivable at December 31, 1998.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-27



---



UTI ENERGY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

16. SELECTED QUARTERLY FINANCIAL RESULTS (Unaudited)



| |  |  | Quarterly financial information for the years ended December 31, 1999,
1998 and 1997 is as follows:
| |  |  | ---------------------------------------------------------------------------------------------------

|                                |  |                                          |        |         |  |         |        |         |  |       |        |   |  |   |        |   |  |   |         |  
|------------------------------- |  | ---------------------------------------- | ------ | ------- |  | ------- | ------ | ------- |  | ----- | ------ | - |  | - | ------ | - |  | - | ------- | -
|                                |  | 1st Qtr                                  |        | 2nd Qtr |  | 3rd Qtr |        | 4th Qtr |  | Total
|                                |  |                                          |        |         |  |         |        |         |  |      
|                                |  | (in thousands, except per share amounts)
|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                           |  |                                          | (0.02  | )       |  |         | (0.18  | )       |  |       | (0.02  | ) |  |   | 0.05   |   |  |   | (0.15   | )
|                               
|                               
|                               
|                               
|Diluted                         |  |                                          | (0.02  | )       |  |         | (0.18  | )       |  |       | (0.02  | ) |  |   | 0.05   |   |  |   | (0.15   | )
|                               
|                               
|                               
|                               
|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                           |  |                                          | 0.22   |         |  |         | 0.19   |         |  |       | 0.10   |   |  |   | (0.03  | ) |  |   | 0.49    |  
|                               
|                               
|                               
|                               
|Diluted                         |  |                                          | 0.21   |         |  |         | 0.18   |         |  |       | 0.10   |   |  |   | (0.03  | ) |  |   | 0.47    |  
|                               
|                               
|                               
|                               
|1997                           
|                               
|                               
|                               
|                               
|Revenues                        |  | $                                        | 34,368 |         |  | $       | 42,440 |         |  | $     | 50,310 |   |  | $ | 55,319 |   |  | $ | 182,437 |  
|                               
|                               
|                               
|                               
|Gross Profit(1)                 |  |                                          | 5,205  |         |  |         | 6,709  |         |  |       | 9,978  |   |  |   | 11,971 |   |  |   | 33,863  |  
|                               
|                               
|                               
|                               
|Net Income                      |  |                                          | 1,844  |         |  |         | 1,777  |         |  |       | 3,894  |   |  |   | 5,010  |   |  |   | 12,525  |  
|                               
|                               
|                               
|                               
|Earnings Per Share(2)          
|                               
|                               
|                               
|                               
|Basic                           |  |                                          | 0.16   |         |  |         | 0.15   |         |  |       | 0.31   |   |  |   | 0.30   |   |  |   | 0.96    |  
|                               
|                               
|                               
|                               
|Diluted                         |  |                                          | 0.14   |         |  |         | 0.13   |         |  |       | 0.26   |   |  |   | 0.28   |   |  |   | 0.83    |  



---

|(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-28



---



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 |              | Period
|                             |                               |                               |                                 |          |                |       |            |            |              |       
|                             |                               |                               |                                 |          | (in thousands)
|Year Ended December 31, 1999
|                            
|                            
|                            
|                            
|                             |                               | Deducted from asset accounts:
|                            
|                            
|                            
|                            
|                             |                               |                               | Allowance for doubtful
accounts |          | $              | 1,919 |            |            | $            | 548    |  |  | $ | 942 |           |  | $ | 266 | (2) |  | $ | 3,143 | 
|                             |                               |                               |                                 |          |                |       |            |            |              |        |  |  |   |     |           |  |   |     |     | 
|Year Ended December 31, 1998
|                            
|                            
|                            
|                            
|                             |                               | Deducted from asset accounts:
|                            
|                            
|                            
|                            
|                             |                               |                               | Allowance for doubtful
accounts |          | $              | 815   |            |            | $            | 1,143  |  |  | $ |    |           |  | $ | 39  | (2) |  | $ | 1,919 | 
|                             |                               |                               |                                 |          |                |       |            |            |              |        |  |  |   |     |           |  |   |     |     | 
|Year Ended December 31, 1997
|                            
|                            
|                            
|                            
|                             | Deducted from asset accounts:
|                            
|                            
|                            
|                            
|                             |                               |                               | Allowance for doubtful
accounts |          | $              | 305   |            |            | $            | 623    |  |  | $ |    |           |  | $ | 113 | (2) |  | $ | 815   | 
|                             |                               |                               |                                 |          |                |       |            |            |              |        |  |  |   |     |           |  |   |     |     | 



---

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

F-29



---






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
Mark S. Siegel                               |  | Chairman and Director                                        |  | October 10, 2000
|                                                                
|                                                                
|                                                                
|                                                                
|/s/ Vaughn E. Drum
Vaughn E. Drum                                |  | President, Chief Executive Officer
and Director              |  | October 10, 2000
|                                                                
|                                                                
|                                                                
|                                                                
|/s/ John E. Vollmer III
John E. Vollmer III                      |  | Senior Vice President, Treasurer and
Chief Financial Officer |  | October 10, 2000
|                                                                
|                                                                
|                                                                
|                                                                
|/s/ Bruce Sauers
Bruce Sauers                                    |  | Vice President and Chief
Accounting Officer                  |  | October 10, 2000
|                                                                
|                                                                
|                                                                
|                                                                
|*/s/ Kenneth N. Berns
Kenneth N. Berns                           |  | Director                                                     |  | October 10, 2000
|                                                                
|                                                                
|                                                                
|                                                                
|*/s/ Curtis W. Huff
Curtis W. Huff                               |  | Director                                                     |  | October 10, 2000
|                                                                
|                                                                
|                                                                
|                                                                
|/s/ Terry H. Hunt
Terry H. Hunt                                  |  | Director                                                     |  | October 10, 2000
|                                                                
|                                                                
|                                                                
|                                                                
|Nadine C. Smith                                                  |  | Director                                                    
|                                                                
|                                                                
|                                                                
|                                                                
|*/s/ Robert B. Spears
Robert B. Spears                           |  | Director                                                     |  | October 10, 2000
|                                                                
|                                                                
|                                                                
|                                                                
|*By /s/ John E. Vollmer III
John E. Vollmer III
Attorney-in-Fact

F-30



---



INDEX TO EXHIBITS

|        |  |                      |  |                                                                                                                                                                                                                                                                                                              
|------- |  | -------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |  | Title or Description
|        |  |                      |  |                                                                                                                                                                                                                                                                                                              
|3.1     |  | -                    |  | Restated Certificate of Incorporation of UTI (incorporated by reference
to Amendment No. 1 to UTIs Registration Statement on Form S-1 (No.
33-69726)).                                                                                                                                                      
|       
|       
|       
|       
|3.2     |  | -                    |  | Amendment to Restated Certificate of Incorporation (incorporated by
reference to Amendment No. 1 to UTIs Registration Statement on Form S-1
(No. 33-69726)).                                                                                                                                                
|       
|       
|       
|       
|3.3     |  | -                    |  | Amendment to Restated Certificate of Incorporation (incorporated by
reference to UTIs Annual Report on Form 10-K for the year ended December
31, 1994).                                                                                                                                                     
|       
|       
|       
|       
|3.4     |  | -                    |  | Amendment to Restated Certificate of Incorporation, dated August 28, 1997
(incorporated by reference to Exhibit 3.4 to UTIs Registration Statement
on Form S-3 (No. 333-35109)).                                                                                                                            
|       
|       
|       
|       
|3.5     |  | -                    |  | By-laws of UTI, 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).                                                                                                                                                              
|       
|       
|       
|       
|3.6     |  | -                    |  | 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).
|       
|       
|       
|       
|3.7     |  | -                    |  | 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).                 
|       
|       
|       
|       
|3.8     |  | -                    |  | 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 through 3.8 for provisions of the Restated
Certificate of Incorporation and amended By-laws of UTI 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).                                                      
|       
|       
|       
|       
|4.4     |  | -                    |  | Stock Option Agreement, dated December 19, 1995, between UTI and Remy
Consultants Incorporated (incorporated by reference to Exhibit 2 to UTIs
Amendment No. 1 to Schedule 13D dated August 8, 1996).                                                                                                       



---



|        |  |                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | -------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |  | Title or Description
|        |  |                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|4.5(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).                                                                                                                                                                                                                                                                                                
|       
|       
|       
|       
|4.6     |  | -                    |  | Note Purchase Agreement, dated April 11, 1997, by and among
FWA Drilling Company, Inc., International Petroleum Service Company,
Triad Drilling Company, Universal Well Services, Inc., USC,
Incorporated, Panther Drilling, Inc. and Canpartners Investments IV,
LLC (incorporated by reference to Schedule 13D relating to UTI filed
on April 22, 1997 by Canpartners Investments IV, LLC, Canpartners
Incorporated, Mitchell R. Julis, Joshua S. Friedman and R. Christian
B. Evensen).
|       
|       
|       
|       
|4.7     |  | -                    |  | Note, dated April 11, 1997, payable by FWA Drilling Company,
Inc., International Petroleum Service Company, Triad Drilling
Company, Universal Well Services, Inc., USC, Incorporated and
Panther Drilling, Inc. to Canpartners Investments IV, LLC
(incorporated by reference to Exhibit 10.5 to UTIs Current Report
on Form 8-K dated April 11, 1997).                                                                                                                                  
|       
|       
|       
|       
|4.8     |  | -                    |  | Warrant Agreement, dated April 11, 1997, by and between UTI
Energy Corp. and Southland Drilling Company, Ltd. (incorporated by
reference to Exhibit 10.1 to UTIs Current Report on Form 8-K dated
April 11, 1997).                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|4.9(1)  |  | -                    |  | 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).                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|4.10(1) |  | -                    |  | Amended and Restated 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).                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|4.11(1) |  | -                    |  | Amendment No. 1 to the Amended and Restated 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).                                                                                                                                                                                                                                       
|       
|       
|       
|       
|4.12    |  | -                    |  | Form of Warrant to purchase an aggregate of 75,000 shares of
Common Stock at $26.50 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).                                                                                                
|       
|       
|       
|       
|4.13    |  | -                    |  | Form of Warrant to purchase an aggregate of 25,000 shares of
Common Stock at $35.00 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).                                                                                                



---



|        |  |                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------- |  | -------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |  | Title or Description
|        |  |                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4.14    |  | -                    |  | 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).                                                                                                                                                                                                                                                     
|       
|       
|       
|       
|4.15    |  | -                    |  | 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).
|       
|       
|       
|       
|10.1    |  | -                    |  | For additional material contracts see Exhibits 4.3 through
4.15.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       
|       
|       
|       
|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).                                                                                                                                                                                                                                                                                                                                                                                                                  
|       
|       
|       
|       
|10.3    |  | -                    |  | 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).                                                                                                                                                                                                                                                                                                                                                                                      
|       
|       
|       
|       
|21.1    |  | -                    |  | List of subsidiaries of UTI.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|       
|       
|       
|23.1(2) |  | -                    |  | Consent of Ernst & Young LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|27.1    |  | -                    |  | Financial Data Schedule (incorporated by reference to
Exhibit 4.15 to UTIs Annual Report on Form 10-K for the year ended
December 31, 1999).                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



---

|(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.