<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             _____________________

                                   FORM 10-K

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 
         For the fiscal year ended December 31, 1995
                                       OR
[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 
         Commission file number 0-7265

                             ENERGY VENTURES, INC.
             (Exact name of registrant as specified in its charter)

                    Delaware                           04-2515019
     (State or other jurisdiction of                (I.R.S. Employer
     incorporation or organization)                 Identification No.)

    5 Post Oak Park, Suite 1760, Houston, Texas                   77027-3415
      (Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, include area code: (713) 297-8400

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

<TABLE>
<CAPTION>
         Title of each class           Name of each exchange in which registered
         -------------------           -----------------------------------------
<S>                                    <C>
      Common Stock, $1.00 Par Value              New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None
</TABLE>

     Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes   X      No
                                                ---        ---

    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.  [X]

    The aggregate market value of the voting stock held by  nonaffiliates of
the registrant as of March 1, 1996, was $335,864,880, based upon the closing
price on the New York Stock Exchange as of such date.

    Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:

<TABLE>
<CAPTION>
          Title of Class                           Outstanding at March 1, 1996
          --------------                           ----------------------------
<S>                                                       <C>
Common Stock, $1.00 Par Value                             18,428,582
</TABLE>

                      DOCUMENTS INCORPORATED BY REFERENCE

    The information called for by Part III, Items 10, 11, 12 and 13, will be
included in the registrant's definitive proxy statement to be filed pursuant to
Regulation 14A and is incorporated herein by reference.
<PAGE>   2
                                     PART I

ITEM 1.  BUSINESS

GENERAL

      Energy Ventures, Inc., a Delaware corporation (together with its
subsidiaries, the "Company"), is an international manufacturer and supplier of
oilfield equipment and contract drilling services.  The Company operates
through two business segments: oilfield equipment and contract drilling.  The
oilfield equipment segment manufactures high performance tubulars and a
complete line of artificial lift equipment as well as completion tools.  The
Company's contract drilling segment consists primarily of barge rigs used by
major and large independent oil and gas companies for the exploration and
development of natural gas primarily in the U.S. Gulf Coast area.  The
Company's tubular products and contract drilling operating divisions provide
products and services used primarily for natural gas exploration and
production.  The artificial lift and completion tool product lines are related
to the maturation of oil producing formations.

      Tubular products are provided through the Company's Grant Prideco tubular
products division ("Grant Prideco").  Tubular products are manufactured at nine
locations throughout the world, and distribution is effected through a
worldwide sales and service support system.  This division's products consist
of proprietary drill pipe (H-Series(TM)), heavyweight drill pipe, casing and
premium tubulars (Atlas Bradford(TM)).  As part of its premium tubular
business, Grant Prideco also designs, manufactures and markets Atlas Bradford
proprietary premium threaded connections for tubing and casing used in oil and
gas wells.  Grant Prideco's products are designed and engineered for high
performance applications.  Drill pipe serves as the principal mechanical
drilling tool needed to drill an oil or natural gas well.  Drill pipe  is
designed and manufactured to provide a reliable connection from the drilling
rig to the drill bit thousands of feet below the surface.  Grant Prideco is the
largest manufacturer and supplier of drill pipe in the world and is one of the
two largest manufacturers of premium tubulars in North America.  Grant Prideco
is also one of the two largest manufacturers of drill collars and heavyweight
drill pipe in the Americas.

      The Company's EVI Oil Tools division manufactures artificial lift
equipment and completion tools used for the production of crude oil.  EVI Oil
Tools was created in early 1996 through the consolidation of the operations of
the Company's Highland and Production Oil Tools divisions.  The consolidation
was implemented to provide marketing advantages and manufacturing economies.
In conjunction with the consolidation, the Company sold Highland's United
States retail distribution network to Continental Emsco Company ("Continental
Emsco").  This disposition has allowed the Company to reduce its workforce by
over 170 employees and focus the operations of this division on manufacturing.

      EVI Oil Tools provides a wide variety of proprietary and patented
products, including the RotaFlex(R) pumping unit, the Corod(R) continuous
sucker rod (through the Company's Corod unit ("Corod")), progressive cavity
pumps, Fluid Packed(TM) pumps, EL(R) sucker rods, Production Oil Tools packers,
Engemaq completion tools and Vitex flow control equipment.  EVI Oil Tools is
one of the two largest manufacturers of rod lift equipment in the world and
provides the only integrated product line in this class of lift from the above
ground equipment to the tools submersed in the producing reservoir.

      The Company's contract drilling operations are conducted through its
Mallard drilling and workover services division ("Mallard").  Mallard's
domestic operations are concentrated in the area of barge drilling and workover
in the shallow coastal and inland waters of the U.S. Gulf Coast where
conventional jack-up rigs cannot operate.  The Company is the second largest
operator of barge rigs in this market.  The Company's domestic barge rig fleet
consists of 16 drilling rigs and 19 workover rigs.  The Company also has a
fleet of  six platform rigs in the Gulf of Mexico.  Internationally, Mallard
operates one barge rig in Nigeria, two platform rigs in Peru and four land rigs
in Argentina.  The Company also owns a 49% interest in a joint venture that
owns two land rigs in Peru.

      The Company made various acquisitions in 1995 designed to strengthen its
existing product lines and operations in each of its core businesses.  The most
significant of the Company's acquisitions was the acquisition of Prideco, Inc.
("Prideco").  The Prideco acquisition enhanced the Company's tubular product
line by adding drill collars, heavyweight drill pipe and premium casing to its
already extensive line of tubular products.  Prideco was the second largest
manufacturer of drill pipe in the U.S. and one of the two largest manufacturers
of drill collars and heavyweight drill pipe in the Americas.  The Company is
currently seeking to expand internationally the market for Grant Prideco's
drill collars and heavyweight drill pipe.  The Company has also begun to market
Grant Prideco's premium casing with the Company's previously introduced
TC-II(TM) line of premium casing connectors.  The





                                       1
<PAGE>   3
Company intends to substantially increase production of this product during
1996.

      The Company's acquisition of Prideco has further strengthened the
Company's position as the leader in the worldwide drill pipe market.  The
acquisition is also expected to increase the profitability of the Company's
tubular business by providing it with greater manufacturing and marketing
efficiencies through a consolidation of overhead and a rationalization of
manufacturing operations.  The Company is currently in the process of
consolidating the manufacturing of drill pipe and other tubular products to the
most efficient manufacturing locations for those products and is actively
marketing the acquired Prideco product lines internationally through the
Company's existing international sales force and distribution system.

      In July 1995, the Company acquired Engemaq S.A., ("Engemaq") a
manufacturer of completion tools.  Engemaq manufactures and markets packers in
South America.  The business of Engemaq has been incorporated into EVI Oil
Tools.

      From the Company's inception in 1972 through early 1986, the Company was
primarily an oil and gas exploration and production company.  In January 1986,
the Company disposed of substantially all of its oil and gas properties other
than a minority interest in a joint venture ("COLEVE") with Columbia Gas
Development Corporation ("Columbia").  In 1990, the Company dissolved COLEVE
and in 1992, the Company sold its remaining oil and gas properties (other than
an overriding royalty interest and certain related rights with respect to the
properties received on dissolution of COLEVE) and discontinued its exploration
and production segment.

      In 1993, the Company disposed of its Eastman Cherrington environmental
services group.  The results of Eastman Cherrington are reflected in the
Company's Consolidated Statements of Income as a discontinued operation.  See
discussion in Note 5 to Consolidated Financial Statements for further
information.  Financial information with respect to revenues, operating profit
and identifiable assets for each segment is contained in Note 14 to
Consolidated Financial Statements.

      The Company was incorporated in 1972 as a Massachusetts Corporation and
was reincorporated in Delaware in 1980.  The Company's  corporate office is
located at 5 Post Oak Park, Suite 1760, Houston, Texas 77027-3415, and its
telephone number is 713/297-8400.

OILFIELD EQUIPMENT

      The Company's oilfield equipment segment manufactures and markets tubular
products and services through Grant Prideco and manufactures and markets
artificial lift and completion tool equipment and services through EVI Oil
Tools.

    TUBULAR PRODUCTS

      Grant Prideco manufactures and markets two tubular product lines: (i)
drill pipe and related products and (ii) the Atlas Bradford and Prideco lines
of premium tubulars and premium connections.  Grant Prideco operates through
nine manufacturing facilities of which seven are located in the U.S., one in
India and one in Mexico.  Grant Prideco also has over 90 worldwide licensed
manufacturing and repair locations.  Grant Prideco markets its product lines
through ten technical support sales offices and a worldwide network of agents
and suppliers.  Grant Prideco tubular products are either used for drilling and
completion of oil and gas wells or for production of oil and natural gas.
Grant Prideco's drilling products include drill pipe, drill collars,
heavyweight drill pipe and kellys.  These products constitute all components of
the drill stem used to drill a well from the rig to the drill bit.  Grant
Prideco's production tubulars are primarily premium tubing, casing and
connections.

      In January 1996, the Company entered into a long-term manufacturing and
sales agreement with Oil Country Tubular, Ltd. ("OCTL"), an India-based
manufacturer of drill pipe and premium tubulars.  The OCTL facility was built
in 1990 under the direction of personnel who are currently employed by Grant
Prideco and is the most modern tubular fabricating facility in the world.  The
facility will be used by the Company to pursue a strategic expansion of its
sales and operations in the Eastern Hemisphere.  The Company believes that the
combination of Grant Prideco's product line coupled with OCTL's low
manufacturing costs and proximity to major Eastern Hemisphere markets will
accomplish this objective.  This expansion is intended to substantially
increase the Company's sales into the growing Eastern Hemisphere markets, which
over the last few years have represented less than 5% of the Company's total
revenues.  Manufacturing operations on behalf of the Company are expected to
commence during the second quarter of 1996.





                                       2
<PAGE>   4
      Under the terms of the OCTL agreement, the Company has a right to
terminate the agreement on an annual basis.  The agreement is for an initial
five-year term renewable for successive five-year terms.  The agreement may be
terminated by OCTL only under certain limited circumstances, including,
beginning December 31, 2000, if certain minimum orders have not been placed
through OCTL and minimum payments have not been made by the Company.  Under the
terms of the agreement with OCTL, the Company made a one-time payment of $8
million for the exclusive right to have Grant Prideco's products manufactured
at the facility.  The Company is also required to pay all direct operating
expenses relating to the facility, including the cost of inventory and raw
materials used for the manufacture of the Company's products.

      Drill Pipe

      Drill pipe is manufactured within specific metallurgical and engineering
guidelines to meet stringent requirements necessary for its use in the drilling
of oil and natural gas wells.  Oil and gas companies consider drill pipe to be
a material portion of their overall drilling costs.  Accordingly, purchasing
decisions are sensitive to price, quality, operational needs and fluctuations
in oil and gas prices.

      Grant Prideco's drill pipe product line consists primarily of specialty
pipe that is marketed under the H-Series trade name.  The H-Series product line
combines the proprietary and patented technology of the Hughes Tool Joint drill
pipe fabrication system (acquired from Baker Hughes, Incorporated ("Baker
Hughes") in 1990) with the Company's original drill pipe manufacturing
capabilities.  Grant Prideco owns a number of patents on tool joint design and
drill pipe manufacturing processes and has licensed a number of foreign drill
pipe manufacturers for the use of Grant Prideco's H-Series patents,
technologies and hardware.

      Drill Collars and Heavyweights

      Drill collars are the component of the drill stem generally located
directly above the drill bit in a vertical well.  A drill collar is machined
from a solid steel bar and is used to provide weight on the drill bit.  Grant
Prideco's heavyweight drill pipe is a seamless tubular product that is less
rigid than a drill collar and provides a transitional zone between the drill
collar in a vertical well and the more flexible drill pipe.  Heavyweight drill
pipe also serves to apply weight to the drill bit in a directional well.  The
Company's drill collar and heavyweight drill pipe product lines were acquired
through the acquisition of Prideco.

      Premium Tubulars and Connections

      Grant Prideco's premium tubular product line consists of premium tubing,
casing and premium connections.  The product line is marketed under the trade
name Atlas Bradford and utilizes a number of proprietary and patented processes
for threading and manufacturing premium tubulars.  Atlas Bradford was a pioneer
in the development of high performance connections for premium tubulars.
Premium tubulars, like the lower performance variety known as API tubulars, are
made up of casing and tubing, products that respectively line the walls of a
wellbore and serve as a conduit for hydrocarbons up the wellbore.  Grant
Prideco's casing products consist of larger outside diameter, thinner walled,
seamless tubular products previously manufactured by Prideco.  Casing is used
to line and maintain the integrity of a wellbore.  The term "premium" refers to
high alloy, seamless tubulars with specific molecular structure and highly
engineered connections.  Such tubulars, whether casing or tubing, are designed
and engineered to withstand deep, high pressure, high temperature and highly
corrosive well environments.  Premium tubulars are generally used in deep
natural gas and offshore wells.

      In 1994, the Company introduced a new line of premium connections by
Atlas Bradford known as the TC-II line.  The TC-II line is a  highly engineered
and technologically advanced line of premium connections.  The product line is
the result of two and a half years of product development and testing.  The
TC-II product line was developed to provide the worldwide oil and gas industry
with the premium performance and design incorporating economical threading
using high alloy materials.  The significance in developing and introducing the
TC-II line was to enhance Grant Prideco's ability to better compete in
international markets, which currently represents three times the volume of the
domestic market.  Before the introduction of the TC-II line, Grant Prideco's
primary market for its premium tubulars was in the U.S. and Canada.  Although
TC-II testing will continue through 1996, this product line is now being
marketed for selected commercial applications.  The Company intends to market
its TC-II line in conjunction with Grant Prideco's casing product line in order
to provide its customers with a uniform casing product.





                                       3
<PAGE>   5
      Sales and Backlog

      Total sales of drill pipe and tubular products for years ended December
31, 1995, 1994 and 1993 were $157.8 million, $97.2 million and $74.6 million,
respectively, representing approximately 45%, 39% and 30% of the Company's
total sales.  The sales backlog for drill pipe and other tubular products at
December 31, 1995, totaled approximately $78.4 million, compared to
approximately $35.2 million at December 31, 1994.  The increase in the 1995
backlog was primarily due to a large increase in demand for drill pipe during
1995 and the effects of the Prideco acquisition.  The Company anticipates that
all of the backlog existing at December 31, 1995, will be shipped during 1996.
The Company is currently taking action to reduce its backlog of drill pipe by
increasing its current production rates at its facilities.  Production at the
OCTL facility is also expected to reduce the backlog.

      Competition

      Grant Prideco is the largest manufacturer and supplier of drill pipe in
the world and the second largest manufacturer of premium tubulars in North
America.  Grant Prideco is one of the two largest manufacturers of drill
collars and heavyweight drill pipe in the Western Hemisphere.

      Grant Prideco operates in a highly competitive industry that has
experienced depressed demand, overcapacity and excess supplies for the past
several years.  Competition is based on price, quality and service.  The market
for the Company's drill pipe is essentially worldwide and the Company competes
with four large international and domestic manufacturers, some of whom are
licensees of the Company, as well as manufacturing operations in China and the
Commonwealth of Independent States ("CIS").  Other large domestic and
international manufacturers not currently in the market also have the ability
of competing with the Company.  Market conditions for drill pipe in recent
years have been highly competitive.  During 1995, prices for drill pipe began
to improve with the decline in excess inventories of used pipe and the
associated increase in demand for new drill pipe.

      In the United States, the Company competes with approximately four
manufacturers of premium tubular products.  Competitors include large domestic
and foreign corporations and small specialty manufacturers.  Internationally,
the Company competes with five manufacturers of premium tubing.  Many of the
Company's competitors have greater financial resources than the Company.  The
Company continues to expand its market for premium tubulars outside the U.S.
through the opening of new sales and service centers.

      The market for casing is limited to some extent by transportation costs.
As a result, the Company's current market for these products is primarily in
North and South America.  The Company competes with over four other
manufacturers of these products in these locations.  Casing is currently
manufactured by over five large manufacturing companies.

      Raw Materials

      The Company uses plain end "green" steel tubing stock as raw material in
the manufacture of drill pipe, casing and premium tubing.  The primary raw
material for drill collars is solid steel bars.  Heavyweight drill pipe is
manufactured from heavy wall tubular products.  The Company's suppliers are
major domestic and international steel mills.  The Company has established
relations with several domestic and foreign mill sources that provide a
competitive availability of "green" tubing stock supplies.  Prices for "green"
tubing have recently increased.  The Company, however, has been able, to date,
to pass through these increased costs to its customers.

      Facilities

      The Company's drill pipe and premium tubulars are manufactured
domestically at seven locations in Texas, one location in Mexico and one
location in India.  The Company continues to focus on product development and
manufacturing efficiencies.  The Company also has sales offices in Houston and
Dallas, Texas; New Orleans, Louisiana;  Abu Dhabi, United Arab Emirates;
Aberdeen, Scotland; Moscow, Russia; Caracas, Venezuela; The Hague, The
Netherlands; Kuala Lumpur, Malaysia and Shanghai, China.

      Customers and Markets

      The customers for the Company's tubular products include both domestic
and international oil and gas companies and distributors of oilfield supplies.
Because the Company's tubular products are designed primarily for drilling and
production in deep wells and harsh environments, they are generally used in
connection with the





                                       4
<PAGE>   6
exploration and production of natural gas and international exploration.
Accordingly, sales of these products are sensitive to fluctuations in the price
outlook for natural gas and related levels of exploration activity.

    ARTIFICIAL LIFT AND COMPLETION TOOL EQUIPMENT

      Artificial lift products and completion systems are manufactured by EVI
Oil Tools.  EVI Oil Tools represents a combination of the Company's  Highland
and Production Oil Tools divisions.  EVI Oil Tools' products are used in the
production segment of the oil and gas industry, with an emphasis on the
production of oil.  Products manufactured by the EVI Oil Tools division include
a complete line of artificial lift equipment and parts and a line of high
performance packers and related downhole tools for use by service companies.

      The Company's artificial lift equipment emphasizes rod lift products and
utilizes various proprietary and patented technology.  Rod lift is one of four
artificial lift technologies currently used for recovering oil from maturing
fields, which lack sufficient pressure to flow under their own power.  These
methods and related equipment are designed to sustain the flow of oil
production from such fields.  Artificial lift technologies include electrical
submersible lift, gas lift and hydraulic lift.  Rod lift is a form of
artificial lift technology in which oil is recovered through a suction process
utilizing an above ground drive system connected by sucker rods to a downhole
pump placed in the reservoir.  Rod lift is particularly suited for older oil
wells with depths of up to 10,000 feet and with production rates of up to 1,000
barrels per day.  The Company estimates that rod lift represents approximately
50% of the total artificial lift market in the world, with electrical
submersible lift having the next largest share at approximately 40%.

      EVI Oil Tools' packers and downhole tools include cement retainers,
remedial service tools, production packers and flow control equipment.
Downhole packers are used in the completion and production of oil and gas
wells.  Packers maintain the separation between productive zones and seal off
the space between the tubing and casing.

      EVI Oil Tools distinguishes itself from its competitors in that it has a
fully integrated product line and utilizes new technologies for the production
of oil using artificial lift.  EVI Oil Tools' integrated product line offers
all artificial lift equipment from the wellhead to the reservoir.  To the
Company's knowledge, none of its competitors has as broad a product line.  EVI
Oil Tools' principal products include: (i) RotaFlex pumping units, (ii) Corod
continuous sucker rods and EL sucker rods, (iii) progressive cavity pump
systems, (iv) Fluid Packed pumps, (v) Production Oil Tools packers, (vi)
Engemaq completion tools and (vii) Vitex flow control equipment.

      EVI Oil Tools' products have traditionally been principally marketed in
the oil producing regions of North America through its own extensive U.S. store
system.  Recently, the Company made a strategic decision to dispose of that
system to Continental Emsco, and in connection with that disposition, entered
into a supply agreement under which the Company's products will be sold through
the more extensive Continental Emsco distribution network in the U.S.  The
Company believes that this arrangement, together with arrangements that the
Company has with other major distributors, will permit a broader distribution
of the Company's products while saving the Company the overhead cost of
maintaining its own retail distribution network.  The Company has retained its
Canadian distribution system that is used to service and support its Corod and
other product lines.  With the opening of the world oil markets in China, the
CIS and South America, EVI Oil Tools has been taking steps to introduce its
products into these markets where modern artificial lift equipment and
completion tools are both needed and actively sought.  The Company believes
that these markets should provide significant opportunities for the Company.

      EVI Oil Tools' products are focused on the production side of the oil and
gas industry, which the Company believes is less volatile than the exploration
segment of the industry.  The Company further believes that the crude oil
production side of the industry is a growing market for artificial lift
products in that there is an increasing need for artificial lift to aid
production as oil fields mature worldwide.  Thus, although domestic exploration
for crude oil has declined in recent years, this decline is not expected to
materially affect the demand for EVI Oil Tools' products.  However, declines in
prices of oil may reduce demand for EVI Oil Tools' products due to reduced
capital expenditures by customers and decisions by customers not to pursue
additional work on marginal wells.

      RotaFlex "Pumping Unit"

      RotaFlex is a 100% mechanical, long-stroke surface drive pump unit used
to artificially lift oil from deep or high-volume wells as opposed to
low-volume stripper wells.  The unique patented design is greater than 20% more





                                       5
<PAGE>   7
efficient than the conventional pump drive unit that has been in use for over
50 years.  The Company has actively marketed the RotaFlex system for
approximately three years with increasing market acceptance.  The Company also
markets the RotaFlex system in the Canadian, South American and Chinese
markets.

      The Company's RotaFlex line is marketed in the United States on an
exclusive basis through Continental Emsco.  International sales are made
through the Company's own sales force and third party distributors.

      Progressive Cavity Pumps and Fluid Packed Pumps

      Downhole pumps in rod lift come in one of two forms: progressive cavity
pumps and rod pumps.  Progressive cavity pumps lift by using a rotating motion
and elastomer lined cavities.  Rod pumps lift by using a vertical motion and a
set of mechanical valves.  Both are connected to the prime mover above ground
by either traditional coupled rods or Corod continuous rods.  The Company
produces and distributes a complete line of progressive cavity pump systems
using proprietary hydraulic gear boxes and patented vertical electric drives.
The Company's progressive cavity pump is particularly suited for shallow to
medium depth wells with high volumes of produced water, low gravity crude or
sandy conditions.  The Company believes that the progressive cavity pump
provides a desirable alternative to the traditional rod pump and electric
submersible pumps in these applications.  The rotor and stator components of
the Company's progressive cavity pump are currently manufactured for the
Company by Robbins & Myers, Inc. ("Robbins & Myers").  As a result of the
Company's disposition of its U.S. store distribution network to Continental
Emsco, the Company and Robbins & Myers are in the process of negotiating a new
supply arrangement under which Robbins & Myers would provide the Company with
rotors and stators.

      In 1994, the Company added the Fluid Packed line of rod pumps, parts and
accessories and the EL sucker rod business, previously owned by
National-Oilwell, to EVI Oil Tools' product line.  As part of this addition,
the Company acquired leased and owned manufacturing facilities in Woodward,
Oklahoma and Santa Teresa, New Mexico, respectively.  The Fluid Packed line
offers a wide variety of API pumps, specialty rod pumps and unique accessories.
The Fluid Packed line of  specialty rod pumps is designed for pumping
applications to meet special well conditions.  The sucker rod business includes
both API grades and the premium Electra(R) Series EL line.

      Corod "Continuous Sucker Rods"

      The Company manufactures the only continuous sucker rod available in the
industry through its Corod unit located in Canada.  A sucker rod is an integral
part of any sucker rod pumping system and is used to connect the surface drive
unit of an oil well, such as the RotaFlex system or a traditional drive system,
to a subsurface pump.  The typical sucker rod requires a coupling every
twenty-five to thirty feet.  Corod's semi-elliptical smooth and continuous
sucker rod does not have such couplings, which reduces wear and torque and
produces a more efficient and economical form of artificial lift.  The
manufacturing process of Corod is proprietary and the servicing process is
patented.  The Company continues to market Corod's products in foreign markets
such as Venezuela and China.

      Production Oil Tools and Engemaq Completion Equipment and Vitex Flow
Control Equipment

      The Company manufactures downhole packers and completion equipment
through its Production Oil Tools and Engemaq product lines.  Downhole packers
and flow control equipment are used in the completion and production process of
oil and gas wells.  Packers maintain the separation between productive zones in
oil and gas wells and seal off the space between the tubing and casing to
protect the casing from reservoir pressures and corrosive formation fluids.

      The Production Oil Tools and Engemaq downhole packers are compatible with
the packers manufactured by Baker Hughes which is the largest manufacturer of
packers in the industry.  The Company believes that Production Oil Tools and
Engemaq packers are the only ones in the industry that have such compatibility
characteristics.  The Company considers this compatibility as an important
competitive attribute in that much of the packer business is in the repair or
replacement of existing installations and over half of the existing packers are
believed to be Baker Hughes products.  The Company believes that its packers
provide its customers with a viable cost effective alternative to those
manufactured by Baker Hughes.

      The Company manufactures packers at its facilities in Powell, Wyoming;
Arlington, Texas and Caxias do Sul, Brazil.  Distribution is effected through
sales directly to the customer and through third party distributors.  The
Company is currently reviewing  opportunities to expand this product line
internationally.





                                       6
<PAGE>   8
      Other Products and Repair Services

      Through its Leamco(TM) division, EVI Oil Tools also manufactures and
installs pumping unit replacement parts, primarily bearings and gearboxes, for
both EVI Oil Tools' products and products sold by competitors.  Among the
products provided by Leamco is a proprietary line of self-lubricating Teflon(R)
bearings.  The Leamco unit repairs, installs and services oilfield pumping
units at 15 locations in Texas, Oklahoma and New Mexico.  The market for repair
of pumping units is very fragmented in North America.  The Company, however,
believes Leamco is the largest domestic provider of these services.  EVI Oil
Tools produces a full line of motor and control units used in connection with
oilfield pumping units.  These units include the Sargent(TM) line of ultra
high-slip electric motors and controls that maximize the lift capacity of beam
pumping units while reducing unit load.

      Product Sales

      Total sales for the Company's subsurface pump group for the years ended
December 31, 1995, 1994 and 1993 were $83 million, $59 million and $56 million,
respectively, representing 24%, 24% and 23% of the Company's total sales during
such periods.

      Competition

      The market for artificial lift and completion tool equipment, equipment
parts and repair is very competitive.  Competition is based on product design
and quality, ability to meet delivery requirements and pricing.  The RotaFlex
system competes with conventional pumping units, which are manufactured by
Lufkin Industries.  Corod's continuous sucker rods compete with conventional
sucker rods, which are manufactured and sold by both EVI Oil Tools and three
major competitors.  The Company's progressive cavity pumps compete with five
major competitors.  EVI Oil Tools has identified in the industry six large
competitors that individually have significant shares of the entire artificial
lift equipment market (inclusive of all other forms of lift).  The Company
believes that it currently has the second or third largest market share in the
world, although its market share varies depending on the type of product.

      Customers and Markets

      EVI Oil Tools' products and services are designed primarily for oil
production from maturing fields.  Demand is, therefore, not significantly
affected by short-term changes in exploration and drilling activity.  As the
average age of oil wells worldwide increases, the market for the Company's
artificial lift equipment is expected to increase.  Currently, most of the
Company's artificial lift equipment is sold in the United States and Canada.
However, the Company believes that significant opportunities exist for its
products in other areas with maturing fields such as South America, the CIS and
China.  In recognition of this opportunity, the Company has taken extensive
efforts to expand EVI Oil Tools' products internationally.  Approximately 8% of
the Company's revenues from the sale of artificial lift equipment for 1995,
1994 and 1993 were derived from sales of equipment provided outside the United
States and Canada.

      Facilities

      EVI Oil Tools' products are manufactured at seven locations in the United
States, one location in Canada and one in Brazil.

      Backlog

      Backlog of artificial lift equipment is generally not considered to be a
meaningful indication of future sales or results due to the nature of the
business.

CONTRACT DRILLING

      The Company's contract drilling  segment in the United States is
primarily concentrated in the area of barge drilling and workover in the
shallow coastal and inland waters of the U.S. Gulf Coast where conventional
jack-up rigs cannot operate.  Mallard is the second largest operator of barge
rigs in this market.  Mallard's domestic barge rig fleet consists of 16
drilling rigs and 19 workover rigs.  Mallard also has a fleet of six platform
rigs in the Gulf of Mexico.





                                       7
<PAGE>   9
      The domestic barge rig market has for more than a decade been
characterized by overcapacity and a heavy dependence on natural gas drilling.
These market conditions, combined with depressed and volatile natural gas
prices, created an operating environment that was characterized by low day
rates and rig utilization, and precipitated a consolidation in the industry.
Since the early 1980's, the number of rigs in existence has declined from over
200 to less than 100, and the number of contractors has declined from over 20
to less than five.  As one of the two major surviving contractors, Mallard has
begun to benefit from these conditions through increased revenues and rig
utilization.  These market improvements have occurred notwithstanding continued
low natural gas prices and a low domestic rig count.  The Company expects
domestic results to continue to benefit from these conditions as well as from
increased demand in the U.S. Gulf Coast.  These changes in demand stem from an
increase in three-dimensional seismic survey activity, resulting in the
identification of attractive deep natural gas prospects in the inland and
coastal water of Louisiana, and increased lease activity in these areas
following the 1994 settlement of a production royalty dispute between the State
of Louisiana and Texaco, Inc. ("Texaco"), Mallard's largest barge rig customer.

      Internationally, Mallard operates three rigs in the coastal and offshore
waters of Nigeria and Peru and four land rigs in Argentina.  International
drilling contracts are generally for longer periods than domestic contracts and
at more favorable rates.  International drilling operations represented
approximately 31% and 25% of the revenue and operating income, respectively,
for this segment during 1995.

      Mallard owns all of its rigs and has a 49% interest in a joint venture
that owns two land rigs in Peru.  From its inception in 1987, Mallard has
devoted substantial efforts toward establishing itself as a leader in quality
by upgrading and refurbishing its rigs.

    The Company's fleet of barge and other rigs was acquired through a number
of acquisitions affected during the last ten years.  These acquisitions were
concentrated on barge rigs that could be easily integrated into Mallard's
fleet.  Because most of the purchases were made at a time during which there
existed substantial overcapacity and low demand in the barge drilling market
and from companies desiring to leave the market, the rigs were acquired at what
the Company believes to be favorable prices substantially below replacement
cost.

    FLEET

      As of December 31, 1995, Mallard's fleet consisted of the following
general types of rigs located in the following regions:
<TABLE>
<CAPTION>
                                                                                                  TOTAL
                                                                                                  FLEET
                                                                                                  -----
      <S>                                                                                           <C>
      Inland Barge:
                 Gulf Coast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         35
                 Nigeria  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          1
      Platform:
                 Gulf of Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          6
                 Peru . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          2
      Land:
                 Argentina  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          4
                 Peru*  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          2
                                                                                                    --
                     Total  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         50
                                                                                                    ==
</TABLE>

      *The Company has a 49% interest in two land rigs in Peru.





                                       8
<PAGE>   10
    More detailed information with respect to Mallard's fleet of drilling rigs,
as of December 31, 1995, is set forth in the following table:

<TABLE>
<CAPTION>
                                                                                  YEAR BUILT      MAXIMUM
                                                                                   OR LAST        DRILLING
                                                                    HORSEPOWER   REFURBISHED    DEPTH (FEET)
                                                                   ----------    -----------    ------------
<S>                                                                    <C>          <C>          <C>
Inland Barge:
   Deep Drilling
    Rig No. 50  . . . . . . . . . . . . . . . . . . . . . . . .        2,000        1993          25,000 
    Rig No. 51  . . . . . . . . . . . . . . . . . . . . . . . .        2,000        1993          25,000 
    Rig No. 52  . . . . . . . . . . . . . . . . . . . . . . . .        2,000        1993          25,000 
    Rig No. 53  . . . . . . . . . . . . . . . . . . . . . . . .        2,000        1995          20,000 
    Rig No. 54  . . . . . . . . . . . . . . . . . . . . . . . .        2,000        1995          30,000 
    Rig No. 55  . . . . . . . . . . . . . . . . . . . . . . . .        2,000        1993          30,000 
    Rig No. 56  . . . . . . . . . . . . . . . . . . . . . . . .        2,000        1992          30,000 
    Rig No. 57  . . . . . . . . . . . . . . . . . . . . . . . .        3,000        1980          30,000 
    Rig No. 58  . . . . . . . . . . . . . . . . . . . . . . . .        3,000        1982          30,000 
    Rig No. 59  . . . . . . . . . . . . . . . . . . . . . . . .        3,000        1972          30,000 
    Rig No. 60  . . . . . . . . . . . . . . . . . . . . . . . .        3,000        1981          30,000 
    Rig No. 71(a)   . . . . . . . . . . . . . . . . . . . . . .        3,000        1994          30,000 
                                                                                                         
   Intermediate Drilling                                                                                 
    Rig No. 8   . . . . . . . . . . . . . . . . . . . . . . . .        1,700        1995          15,000 
    Rig No. 11  . . . . . . . . . . . . . . . . . . . . . . . .        1,700        1994          15,000 
    Rig No. 12  . . . . . . . . . . . . . . . . . . . . . . . .        1,200        1990          14,000 
    Rig No. 17  . . . . . . . . . . . . . . . . . . . . . . . .        1,200        1993          13,000 
    Rig No. 21  . . . . . . . . . . . . . . . . . . . . . . . .        1,200        1995          14,000 
                                                                                                         
   Heavy Workover and Shallow Drilling                                                                   
    Rig No. 15  . . . . . . . . . . . . . . . . . . . . . . . .          800        1991          11,500 
    Rig No. 16  . . . . . . . . . . . . . . . . . . . . . . . .          800        1994          11,500 
    Rig No. 18  . . . . . . . . . . . . . . . . . . . . . . . .          800        1993          11,500 
    Rig No. 19  . . . . . . . . . . . . . . . . . . . . . . . .          800        1993          11,500 
    Rig No. 20  . . . . . . . . . . . . . . . . . . . . . . . .          800        1995          11,500 
    Rig No. 23  . . . . . . . . . . . . . . . . . . . . . . . .        1,000        1993          13,000 
    Rig No. 24  . . . . . . . . . . . . . . . . . . . . . . . .        1,000        1992          13,000 
    Rig No. 25  . . . . . . . . . . . . . . . . . . . . . . . .        1,000        1993          13,000 
    Rig No. 26  . . . . . . . . . . . . . . . . . . . . . . . .        1,000        1981          13,000 
                                                                                                         
   Workover and Other                                                                                    
    Rig No. 1   . . . . . . . . . . . . . . . . . . . . . . . .        1,100        1980              -- 
    Rig No. 3   . . . . . . . . . . . . . . . . . . . . . . . .        1,000        1980              -- 
    Rig No. 4   . . . . . . . . . . . . . . . . . . . . . . . .        1,000        1990              -- 
    Rig No. 5   . . . . . . . . . . . . . . . . . . . . . . . .          800        1991              -- 
    Rig No. 6   . . . . . . . . . . . . . . . . . . . . . . . .          800        1995              -- 
    Rig No. 7   . . . . . . . . . . . . . . . . . . . . . . . .          800        1995              -- 
    Rig No. 9   . . . . . . . . . . . . . . . . . . . . . . . .          800        1992              -- 
    Rig No. 10  . . . . . . . . . . . . . . . . . . . . . . . .          800        1978              -- 
    Rig No. 27  . . . . . . . . . . . . . . . . . . . . . . . .          800        1987          11,500 
    Rig No. 28  . . . . . . . . . . . . . . . . . . . . . . . .          800        1987          11,500 
</TABLE>



                                       9
<PAGE>   11
<TABLE>
<CAPTION>
                                                                                  YEAR BUILT    MAXIMUM
                                                                                    OR LAST     DRILLING
                                                                     HORSEPOWER   REFURBISHED  DEPTH (FEET)
                                                                     ----------   -----------  ------------
<S>                                                                    <C>          <C>          <C>
Platform:
    Rig No. 36  . . . . . . . . . . . . . . . . . . . . . . . .          500        1977              --
    Rig No. 41  . . . . . . . . . . . . . . . . . . . . . . . .          950        1993          11,000
    Rig No. 42  . . . . . . . . . . . . . . . . . . . . . . . .          950        1993          11,000
    Rig No. 43  . . . . . . . . . . . . . . . . . . . . . . . .          650        1994              --
    Rig No. 46  . . . . . . . . . . . . . . . . . . . . . . . .          650        1988              --
    Rig No. 47  . . . . . . . . . . . . . . . . . . . . . . . .          750        1993              --
    Rig No. 40(b)   . . . . . . . . . . . . . . . . . . . . . .          950        1992          11,000
    Rig No. 48(b)   . . . . . . . . . . . . . . . . . . . . . .          950        1992          11,000
                                                                                                        
Land:                                                                                                   
    Rig No. 301(c)  . . . . . . . . . . . . . . . . . . . . . .          800        1995          10,000
    Rig No. 302(c)  . . . . . . . . . . . . . . . . . . . . . .          800        1995          10,000
    Rig No. 303(c)  . . . . . . . . . . . . . . . . . . . . . .        1,300        1995          11,500
    Rig No. 305(c)  . . . . . . . . . . . . . . . . . . . . . .        1,300        1995          11,500
    Rig No. 8(d)  . . . . . . . . . . . . . . . . . . . . . . .          750        1983          12,000
    Rig No. 9(d)  . . . . . . . . . . . . . . . . . . . . . . .          750        1983          12,000

   Total Rigs   . . . . . . . . . . . . . . . . . . . . . .  50
---------------------                                        ==

</TABLE>
  (a) Located in Nigeria.

  (b) Located in Peru.

  (c) Located in Argentina.

  (d) Located in Peru.  The Company has a 49% interest in a joint venture that
      owns these rigs.

      Mallard's domestic operations are primarily conducted in the coastal
(bays, swamps and canals) and offshore waters of Louisiana, Texas and Alabama.
Mallard's business is directly dependent upon the level of oil and gas
exploration, development and workover activity in these geographic markets.
Because most of the current exploration and development activity in the Gulf
Coast area is concentrated on the exploration for and production of natural
gas, Mallard's operations are materially affected by market conditions for
natural gas.

      The U.S. natural gas market has in recent periods been extremely
volatile.  In 1994 and through the first half of 1995, natural gas prices
declined significantly.  However, beginning in the middle of 1995, prices
showed a marked increase.  These increases have resulted in increased
exploration and workover activity in the Gulf of Mexico, which in turn has
resulted in increased demand for barge drilling and workover services.
Increased demand, combined with an overall shrinkage in fleets and a
consolidation in the industry, has improved day rates and margins.  Prices for
oil and natural gas continue to be extremely volatile and any material decline
in the prevailing price of natural gas could result in reduced exploration and
development activity and related day rates.

    Mallard's domestic rigs are primarily barge rigs that are capable of
performing medium and deep drilling operations.  Barge rigs are mobile drilling
platforms that are submersible and are built to work in eight to 20 feet of
water.  These rigs are towed by tug boats to the drill site with the derrick
laid down.  The lower hull is then submerged by flooding until it rests on the
sea floor.  The derrick is then raised and drilling and workover operations are
conducted with the barge in this position.  There are two basic forms of barge
rigs: "posted" and "conventional".  A posted barge is identical to a
conventional barge except that the hull and super structure are separated by 12
to 14 foot columns, which increases the water depth capabilities of the rig.

      Internationally, Mallard currently operates one 3,000 HP barge drilling
rig with a Varco TDS-3S Top Drive in the inland waters of Nigeria and two
platform drilling rigs in the offshore waters of Peru.  Mallard's rig in
Nigeria is currently under contract to Chevron Nigeria Limited.  This contract
was recently renewed through August 1996.





                                       10
<PAGE>   12
      Mallard's platform rigs in Peru are currently under a one-year contract
expiring in January 1997.  These rigs were placed on standby status in July
1995 by the Company's customer to reduce costs.  Since such time, one rig has
returned to operation.  See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations".  The Company's
operations in Peru are conducted through a partnership.  Under the terms of the
agreements relating to this partnership, Mallard is entitled to approximately
two-thirds of the income from the partnership's operations.

    LAND DRILLING AND WORKOVER RIGS

      Mallard currently owns four land rigs.  These rigs are under a two-year
drilling contract with Yacimientos Petroliferos Fiscales Sociedad Anonima
("YPF") in Argentina.  Drilling operations commenced in June 1995 and are
expected to benefit future results.

      In 1994, Mallard acquired a 49% interest in a joint venture that owns two
land rigs in Peru.  This venture is actively pursuing land drilling
opportunities in Peru.

    COMPETITION AND CUSTOMERS

      Drilling in the U.S. Gulf Coast area serviced by Mallard ranges from
shallow wells (up to 12,000 feet) to deep wells (up to 30,000 feet).  The
shallow wells generally take up to 20 days to drill and complete.  Deeper wells
generally take disproportionately longer to drill than shallow wells due
primarily to more varied and difficult subsurface conditions and the frequent
need to run protective casing.

      The Company's drilling rigs are generally operated under individual day
rate contracts between the Company and its customers.  Drilling contracts
generally cover either the drilling of a specified well or wells or a stated
term.  Historically, most domestic contracts have been on a well-to-well basis
while contracts in the international markets typically are offered on a term
basis.  The Company, from time to time, operates under turnkey contracts.  The
Company maintains redrill insurance to insure against certain costs in the
event the Company was required to redrill under a turnkey contract.

      The Company obtains most of its contracts through competitive bidding
against other contractors in response to solicitations of bids by oil and gas
companies.  Under the Company's day rate drilling contracts, it receives a
fixed amount per day for providing the rig, certain related equipment and the
rig operating crew, which works under the direction of a representative of the
customer who is in charge of drilling operations.  The customer pays all other
costs of drilling the well.  Under most such contracts, the customer also pays,
at a reduced day rate, for periods of travel or when operations are interrupted
or restricted by equipment breakdowns, adverse weather or water conditions or
other conditions beyond the control of the Company.  The Company also makes
available the services of its fleet of approximately 55 crew boats as an extra
cost option.  Mallard primarily competes with one other barge competitor in the
Gulf of Mexico, Falcon Drilling Company, Inc., although there exists a number
of smaller companies.  Mallard also competes with other types of rigs.  The
Company estimates that its share of the barge drilling and workover market in
coastal and inland waters in the Gulf Coast area is approximately 40%.

      Mallard's customer base consists of independent and major oil companies.
For 1995, Texaco, Petro-Tech Peruana S.A. and Chevron U.S.A., Inc. accounted
for 25%, 13% and 11%, respectively, of Mallard's revenues.  For 1994, Texaco
and Oryx Energy Company accounted for 15% and 11%, respectively, of Mallard's
revenues.  For 1993, Texaco accounted for 19% of Mallard's revenues.

    GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS

      The U.S. Gulf Coast market, and particularly the shallow-water areas
where the Company's contract drilling service operations are concentrated, are
ecologically sensitive.  As a result, environmental issues have led to higher
drilling costs, a more difficult and lengthy well permitting process and, in
general, have adversely affected decisions of the oil companies to drill in
these areas.  U.S. laws and regulations applicable to the Company's operations
include those controlling the discharge of materials into the environment,
requiring removal and cleanup of materials that may harm the environment, or
otherwise relating to the protection of the environment.  The Company, as an
operator of drilling rigs in navigable U.S. waters and certain offshore areas,
may be liable for damages and costs incurred in connection with oil spills for
which it is held responsible, subject to certain limitations.  An oil spill in
a wetland or inland waterway could produce substantial damage to the
environment, including wildlife and ground water.  Laws and regulations
protecting the environment have become more stringent in recent years, and





                                       11
<PAGE>   13
may, in certain circumstances, impose "strict liability", rendering a person
liable for environmental damage without regard to negligence or fault on the
part of such person.  Such laws and regulations may expose the Company to
liability for the conduct of or conditions caused by others, or for acts of the
Company which were in compliance with all applicable laws at the time such acts
were performed.  The application of these requirements or the adoption of the
new requirements could have a material adverse effect on the Company.

      The drilling of oil and gas wells is subject to various federal, state,
local and foreign laws, rules and regulations.  The Company, as an owner or
operator of domestic offshore facilities, may be liable for the costs of
removal and damages arising out of a pollution incident to the extent set forth
in the Federal Water Pollution Control Act, as amended by the Oil Pollution Act
of 1990 ("OPA") and the Outer Continental Shelf Lands Act.  In addition, the
Company may also be subject to applicable state law and other civil claims
arising out of any such incident.  Certain of the Company's facilities are also
subject to regulations of the Environmental Protection Agency ("EPA") that
require the preparation and implementation of spill prevention, control and
countermeasure plans relating to possible discharge of oil into navigable
waters.  Other regulations of the EPA may require certain precautions in
storing, handling and transporting hazardous wastes.  State statutory
provisions relating to oil and natural gas generally include requirements as to
well spacing, waste prevention, production limitations, pollution prevention
and cleanup, obtaining drilling and dredging permits and similar matters.  The
Company believes that it is in compliance in all material respects with such
laws, rules and regulations.

      The OPA and regulations promulgated pursuant thereto impose a variety of
regulations on "responsible parties" related to the prevention of oil spills
and liability for damages resulting from such spills.  A "responsible party"
includes the owner or operator of a facility or vessel, or the lessee or
permittee of the area in which an offshore facility is located.  The OPA
assigns liability to each responsible party of oil removal costs and a variety
of public and private damages.  While liability limits apply in some
circumstances, a responsible party for an Outer Continental Shelf facility must
pay all spill removal costs incurred by a federal, state or local government.
The OPA establishes liability limits (subject to indexing) for offshore
drilling rigs.  If functioning as an offshore facility, the offshore drilling
rigs are considered "tank vessels" for spills of oil on or above the water
surface, with liability limits of $1,200 per gross ton or $10 million.  To the
extent damages and removal costs exceed this amount, the offshore drilling rigs
will be treated as an offshore facility and the offshore lessee will be
responsible up to higher liability limits for all removal costs plus $75
million.  A party cannot take advantage of liability limits if the spill was
caused by gross negligence or willful misconduct or resulted from violation of
a federal safety, construction or operating regulation.  If the party fails to
report a spill or to cooperate fully in the cleanup, liability limits likewise
do not apply.  Few defenses exist to the liability imposed by the OPA.  The OPA
also imposes ongoing requirements on a responsible party.  These include proof
of financial responsibility (to cover at least some costs in a potential spill)
and preparation of an oil spill contingency plan.  A failure to comply with
ongoing requirements or inadequate cooperation in a spill may even subject a
responsible party to civil or criminal enforcement actions.

      In addition, the Outer Continental Shelf Lands Act authorized regulations
relating to safety and environmental protection applicable to lessees and
permittees operating on the Outer Continental Shelf.  Specific design and
operational standards may apply to Outer Continental Shelf vessels, rigs,
platforms, vehicles and structures.  Violations of environmental-related lease
conditions or regulations issued pursuant to the Outer Continental Shelf Lands
Act can result in substantial civil and criminal penalties as well as potential
court injunctions curtailing operations and the cancellation of leases.  Such
enforcement liabilities can result from either governmental or citizen
prosecution.

      The drilling industry is dependent on the demand for services from the
oil and gas exploration and development industry and, accordingly, is affected
by changing tax laws, price controls and other laws relating to the energy
business. The Company's business is affected generally by political
developments and by federal, state, local and foreign laws and regulations that
may relate directly to the oil and gas industry.  The adoption of laws and
regulations, both domestic and foreign, that curtail exploration and
development drilling for oil and gas for economic, environmental and other
policy reasons may adversely affect the Company's operations by limiting
available drilling opportunities.

      The Company believes it is in material compliance with applicable
federal, state, local and foreign legislation and regulations relating to
environmental controls.  In this regard, all of Mallard's operating domestic
drilling rigs have zero discharge capabilities as required by law.  In
addition, in recognition of environmental concerns regarding dredging of inland
waters and permitting requirements, Mallard conducts minimal dredging
operations and approximately two-thirds of Mallard's drilling contracts involve
directional drilling, which minimizes the need for dredging.  However, the
existence of such laws and regulations has had and will continue to have a
restrictive effect


                                       12
<PAGE>   14
on the Company and its customers.

    SEASONALITY

      The Contract drilling business is subject to seasonal variation.
Historically, the first two quarters of the calendar year are less active,
while the last two quarters usually have a higher level of activity.

    FACILITIES

      Mallard is headquartered in New Iberia, Louisiana where it operates a
yard and docking facility at the Port of Iberia.  Mallard owns the facility and
leases the land on which it is located under a long-term lease, subject to
extensions, that will expire in 2018.

    BACKLOG

      Other than Mallard's foreign contracts, which are long-term in nature,
drilling and workover servicing contracts have typically been for short-terms,
usually the time required to drill one well.

RAW MATERIALS

      The Company purchases a variety of raw materials for its manufacturing
operations, including plain end "green" tubing stock, steel bars and a variety
of parts and components fabricated by other manufacturers and suppliers.  With
the exception of Robbins & Myers, which acts as the exclusive manufacturer of
two material components of EVI Oil Tools' progressive cavity pumps, the
Company is not dependent on any single source of supply for any of its raw
materials and components.  The Company is currently engaged in discussions with
Robbins & Myers regarding the terms under which the products manufactured by it
for the Company will be provided.  A loss of one or more of  the Company's
suppliers could disrupt production.

PATENTS

    The Company's oilfield equipment segment utilizes various patents and
proprietary technology in the manufacture of its products.  Certain components
used in the progressive cavity pump utilize technology owned and licensed by
Robbins & Myers.  Although the Company considers its patents important to the
operation of its business and a loss of one or more patents could adversely
affect a particular product, because of the proprietary processes that the
Company has developed in using its patents, and the nature of the business
conducted with the patents, it does not believe that any significant portion of
its business is materially dependent upon any single patent or group of patents
or generally upon patent protection.

INSURANCE COSTS

      The Company has purchased Operators Extra Expense insurance to insure
itself against exposure to certain hazards unique to drilling and workover
operations and maintains redrill insurance with respect to its exposure
relating to turnkey contracts.  There can be no assurance, however, that such
insurance will be sufficient to cover any future losses, or that such insurance
will continue to be available on commercially reasonable terms.  The Company's
drilling and workover business is also subject to the usual hazards of oil and
gas drilling operations (including blowouts, fires, cratering, pollution and
environmental damages), plus the additional dangers incident to marine
operations in coastal and offshore waters (including capsizing, collision,
grounding and adverse weather).  The Company maintains insurance coverage that
it believes to be customary in the industry against these hazards and whenever
possible obtains agreements from customers providing for indemnification
against liability to others.  The Company also maintains political risk
insurance to insure against certain risks of doing business in foreign
countries.  However, neither insurance nor indemnity agreements can provide
complete protection against casualty losses.  In addition, the Company is
partially self-insured for marine workers' compensation claims.

      The Company is required to carry workers' compensation insurance to
comply with state laws and customer requirements.  Grant Prideco has elected to
opt out of the mandatory workers' compensation pools and secures its workers'
compensation through outside insurance.  Although it has been able to reduce
insurance costs through this election, certain benefits provided under  the
workers' compensation statutes may not be available to the Company.  The cost
of insurance is subject to substantial fluctuation due to a variety of factors,
some of which are beyond the Company's control.  Although the Company has
generally been able to obtain insurance on terms it considers to be





                                       13
<PAGE>   15
reasonable, there can be no assurance that such insurance will continue to be
available on terms as favorable as those for its existing arrangements.  The
Company is partially self-insured for employee health insurance claims and
certain workers' compensation claims.

      Although the Company maintains product liability insurance with respect
to its products, such insurance is limited in coverage.  The occurrence of an
adverse claim in excess of the coverage limits maintained by the Company with
respect to its products could have a material adverse effect on the Company.

REGULATION

      The Company's business is affected by changes in public policy and by
federal, state and local laws and regulations relating to the energy industry.
The adoption of laws and regulations curtailing exploration and development
drilling for oil and gas for economic, environmental and other policy reasons
may adversely affect the Company's operations by limiting available drilling
and other opportunities in the energy service industry.  The Company is also
subject to various health and safety regulation as established by the
Occupational Safety and Health Administration.  For information concerning
regulation of the contract drilling services provided by Mallard, see 
"-- Contract Drilling -- Government Regulation and Environmental Matters".

FOREIGN OPERATIONS

      The Company's equipment and services are used in approximately 50
countries by U.S. customers operating abroad and by foreign customers.  Sales
of equipment and services outside the U.S. accounted for approximately 38%, 36%
and 40% of total revenues for 1995, 1994 and 1993, respectively, based upon the
ultimate destination in which equipment or services were sold, shipped or
provided to the customer by the Company.  The distribution of the Company's
revenues by geographic region is shown below:

<TABLE>
<CAPTION>
                                         WESTERN HEMISPHERE      EASTERN HEMISPHERE
                                       ---------------------    --------------------
                                       UNITED STATES   OTHER    MIDDLE EAST    OTHER   ELIMINATIONS    TOTAL
                                       -------------   -----    -----------    -----   ------------    -----
                                                                    (IN THOUSANDS)
<S>                                     <C>          <C>         <C>         <C>      <C>           <C>
1995
----
    Operating revenues from
      unaffiliated customers  . . .     $  220,937   $  61,293   $     --    $  9,921  $   (3,567)  $ 288,584
      Export sales to unaffiliated
      customers                             63,003          --         --          --          --      63,003
                                        ----------   ---------   --------    --------  ----------   ---------
    Total revenues  . . . . . . . .        283,940      61,293         --       9,921      (3,567)    351,587
1994
----
    Operating revenues from                          
      unaffiliated customers  . . . .   $  162,344   $  34,643   $  5,801    $  5,329  $   (3,304)  $ 204,813
    Export sales to unaffiliated
      customers   . . . . . . . . . .       43,724          --         --          --          --      43,724
                                        ----------   ---------   --------    --------  ----------   ---------
    Total revenues  . . . . . . . . .      206,068      34,643      5,801       5,329      (3,304)    248,537
1993
----
    Operating revenues from
      unaffiliated customers  . . . .   $  150,729   $  31,722   $  7,967    $  4,675  $   (1,983)  $ 193,110
    Export sales to unaffiliated
      customers   . . . . . . . . . .       52,847          --         --          --          60      52,907
                                        ----------   ---------   --------    --------  ----------   ---------
    Total revenues  . . . . . . . . .      203,576      31,722      7,967       4,675      (1,923)    246,017
</TABLE>

      See Note 15 to the Consolidated Financial Statements of the Company for
additional financial information related to the Company's revenues by
geographic region.

      Operations and sales in foreign markets are subject to substantial
competition from large multi-national corporations and government-owned
entities and to a variety of local laws and regulations requiring
qualifications, use of local labor, the provision of financial assurances or
other restrictions and conditions on operations.  Foreign operations are also
subject to risks associated with doing business outside the U.S., including
risk of war, civil disturbances and governmental activities that may limit or
disrupt markets, restrict the movement of funds or result in the deprivation of
contract rights or the taking of property without fair compensation.  Foreign
operations may also subject the Company to risks relating to fluctuations in
currency exchange rates.  However, to date, currency fluctuations have not had
a material adverse impact on the Company.





                                       14
<PAGE>   16
      The Company currently has material manufacturing operations in Canada,
Mexico, Brazil and India (through OCTL) and is operating rigs in Nigeria, Peru
and Argentina.  The Company's operations in each of these countries are subject
to various political and economic conditions existing in them which could
disrupt operations.  In this regard, there is currently pending before the U.S.
Congress various legislation that, if enacted, would restrict trade and
investment in Nigeria.  To date, no legislation has been enacted.  However, if
legislation were to be adopted that either restricted trade or investment in
Nigeria, the Company's Nigerian operations could be materially affected.  The
Company generally seeks to obtain, where economical, insurance against certain
political risks and attempts to structure its contracts and arrangements in the
foreign countries in which it operates in a manner that would minimize the
exposure of its assets to losses in those countries.  Such efforts include
structuring substantially all of its sales and service contracts to be in U.S.
dollars and utilizing lease arrangements and joint ventures for manufacturing
facilities so as not to require substantial investment of funds in fixed assets
in foreign countries.  Although the Company believes that its exposure to
foreign risks is not materially greater than that of its competitors, there can
be no assurance that disruptions will not occur in the Company's foreign
operations or that any losses that do occur will be covered by insurance.

ENVIRONMENTAL REGULATION

      The Company's operations are subject to federal, state and local laws and
regulations controlling the discharge of materials into or otherwise relating
to the protection of the environment.  In recent years, laws and regulations
protecting the environment have generally become more stringent and have sought
to impose greater liability on a larger number of potentially responsible
parties.  However, the Company is not currently aware of any situation or
condition that it believes is likely to have a material adverse effect on its
results of operations or financial condition.  For information concerning
environmental matters with respect to the contract drilling services provided
by Mallard, see "-- Contract Drilling -- Governmental Regulation and
Environmental Matters".

      The Company's expenditures in 1995 in order to comply with applicable
environmental laws and regulations were not material, and the Company expects
that the costs of compliance with such laws and regulations for 1996 will be
minimal.  The Company maintains insurance coverage with respect to
environmental liabilities relating to its marine drilling operations.  Although
the Company believes that such coverage is adequate for the risks involved,
there can be no assurance that the coverage limits would not be exceeded or
such insurance would apply to all such liabilities.  The Company does not
believe that its costs for compliance with applicable environmental laws and
regulations is, on a relative basis, greater than that of its competitors.

EMPLOYEES

      As of  March 1, 1996, the Company employed approximately 3,800 employees.
The Company considers its relations with its employees to be generally
satisfactory.

ITEM 2.  PROPERTIES

      The Principal offices of the Company and facilities used by the Company
in its oilfield equipment and contract drilling segments are set forth in the
table below:

<TABLE>
<CAPTION>
                                       FACILITY SIZE    PROPERTY
           LOCATION                      (SQ. FT.)    SIZE (ACRES)  TENURE        UTILIZATION
           --------                      ---------    ------------  ------        -----------
<S>                                        <C>          <C>         <C>       <C>
OILFIELD EQUIPMENT:
   Navasota, Texas  . . . . . . . . .      251,600      182.80      Owned     Manufacture drill pipe, premium threaded
                                                                              casing, liners and tubing
   Vera Cruz, Mexico  . . . . . . . .      214,000       42.00      Leased    Manufacture drill pipe
   Bastrop, Texas   . . . . . . . . .      108,300       21.00      Owned     Manufacture tool joints
   Bryan, Texas   . . . . . . . . . .      160,000       55.27      Owned     Manufacture premium tubing
   Houston, Texas   . . . . . . . . .       12,400          --      Leased    Principal offices of Grant Prideco
                                            68,500       13.50      Owned     Manufacture drill pipe, drill collars,
                                                                              heavyweights and kellys
                                            21,900       11.00      Owned     Manufacture drill pipe, drill collars,
                                                                              heavyweights and kellys
                                            31,500       10.00      Owned     Manufacture drill pipe, drill collars,
                                                                              heavyweights and kellys
   Channelview, Texas   . . . . . . .       60,600       20.00      Owned     Threading of premium casing


</TABLE>



                                       15
<PAGE>   17
<TABLE>
<CAPTION>
                                        FACILITY SIZE   PROPERTY
             LOCATION                     (SQ. FT.)   SIZE (ACRES)   TENURE           UTILIZATION
             --------                     ---------   ------------   ------           -----------
<S>                                        <C>           <C>         <C>       <C>                                           
   Longview, Texas  . . . . . . . . .       40,000       22.10       Owned     Manufacture pump barrels and plungers         
   Odessa, Texas  . . . . . . . . . .       97,000        7.20       Owned     Manufacture of RotaFlex pumping units         
                                            58,000        6.70       Owned     Manufacture couplings, tubing anchors and     
                                                                               gears                                         
   Oklahoma City, Oklahoma  . . . . .        9,500        1.20       Leased    Manufacture and repair pumping unit parts     
   Morgan City, Louisiana   . . . . .       19,300        2.40       Leased    Repair drill pipe, drill collars,             
                                                                               heavyweights and kellys                       
   Arlington, Texas   . . . . . . . .       60,000        2.50       Leased    Manufacture of downhole packers and           
                                                                               completion systems                            
   Powell, Wyoming  . . . . . . . . .       16,000        1.80       Leased    Manufacture of downhole packers and           
                                                                               completion systems                            
   Midland, Texas   . . . . . . . . .       30,000        5.60       Owned     Manufacture and repair pumping unit parts     
   Woodward, Oklahoma   . . . . . . .      148,800       53.02       Leased    Manufacture sucker rod pump parts             
   Santa Teresa, New Mexico   . . . .       43,000        7.50       Owned     Manufacture sucker rods                       
   Nisku, Alberta, Canada   . . . . .       15,900        8.30       Owned     Manufacture continuous rods                   
   Caxias do Sul, Brazil  . . . . . .       62,400          --       Leased    Manufacture downhole packers and completion   
                                                                               systems                                       
   Macae, Brazil  . . . . . . . . . .       10,200          --       Owned     Repair facility                               
   Natal, Brazil  . . . . . . . . . .        2,600          --       Leased    Repair facility                               
                                                                                                                             
CONTRACT DRILLING:                                                                                                           
                                                                                                                             
   Buenos Aires, Argentina  . . . . .        2,500          --       Leased    Principal offices of Argentina operations   
   Caleta Olivia, Argentina   . . . .        7,500        5.00       Leased    Operating base for Southern Argentina       
   Rincon de las Sauces, Argentina  .        2,500        2.50       Leased    Operating base for Western Argentina        
   Warri, Delta State, Nigeria  . . .        5,750        0.50       Leased    Equipment storage facility                  
   New Iberia, Louisiana  . . . . . .       54,600          --       Owned     Principal offices of Mallard, warehouse and 
                                                                               repair shop                                 
                                                --       14.00       Leased    Docking facility                            
CORPORATE:                                                                                                                   
   Houston, Texas   . . . . . . . . .       14,500          --       Leased    Principal offices of the Company            
</TABLE>

      In addition to the above facilities, the Company has an agreement with
OCTL pursuant to which OCTL's manufacturing facility in Narketpally, India is
to be dedicated by OCTL to the production of drill pipe and other tubular
products exclusively for the Company.  This facility is owned by OCTL and
consists of 262,000 sq. ft. located on 60 acres.

ITEM 3.   LEGAL PROCEEDINGS

      In August of 1994, the Company received a letter from the United States
Internal Revenue Service ("IRS"), proposing to increase the gain recognized by
the Company upon the dissolution in October 1990 of COLEVE with Columbia.  In
general, the IRS' proposal seeks payment of a tax liability of approximately
$14.1 million plus accrued interest thereon, and includes $3.4 million of taxes
relating to the proposed disallowance of certain interest deductions taken by
the Company with respect to COLEVE that was the subject of  a similar letter
received by the Company in the fourth quarter of 1993.  The tax liability with
respect to these matters has been previously provided for as a deferred tax
liability in the Company's financial statements.  The Company disagrees with
the IRS' position and is currently pursuing its rights of administrative review
and appeal and intends to vigorously contest this matter.





                                       16
<PAGE>   18
Although the resolution of these remaining issues could affect the timing of
the payment of previously accrued tax liabilities, the Company does not believe
that the results of the audit or the ultimate resolution of the IRS' proposed
adjustments will have a material impact on its results of operations or
financial position.

      The Company is aware of various other disputes and potential claims and
is a party in various litigation involving claims against the Company, some of
which are covered by insurance.  Based on facts currently known to the Company,
it believes that the ultimate liability, if any, which may result from these
disputes, claims and litigation would not have a material adverse affect on the
Company's consolidated financial position or its results of operations.  See
Note 10 to Consolidated Financial Statements.

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

          No matters were submitted during the fourth quarter of the year ended
December 31, 1995, to a vote of shareholders of the Company.

                                    PART II

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

      The Common Stock is traded on the New York Stock Exchange ("NYSE") under
the symbol "EVI".  The following table sets forth, for the periods indicated,
the high and low sale prices per share for the Common Stock as reported on the
NYSE from June 1994 and on the NASDAQ-National Market System for the period
from January through May 1994.

<TABLE>
<CAPTION>
                                                                        PRICE
                                                                 ------------------
                                                                  HIGH        LOW
                                                                 ------     -------
                 <S>                                            <C>         <C>
                 Year ending December 31, 1995
                     First Quarter  . . . . . . . . . . . . .   $14 5/8     $11 7/8
                     Second Quarter   . . . . . . . . . . . .    20 5/8      13 1/4
                     Third Quarter  . . . . . . . . . . . . .    24          17 3/8
                     Fourth Quarter . . . . . . . . . . . . .    25 1/4      18 3/8

                 Year ending December 31, 1994
                     First Quarter  . . . . . . . . . . . . .   $16 1/4     $12
                     Second Quarter . . . . . . . . . . . . .    14 3/4      11 1/4
                     Third Quarter  . . . . . . . . . . . . .    15 1/4      12 5/8
                     Fourth Quarter . . . . . . . . . . . . .    14 3/4      11 1/4
</TABLE>

      The Company has not paid any dividends on the Common Stock since 1984 and
currently anticipates that, for the foreseeable future, any earnings will be
retained for the development of the Company's business.  Accordingly, no
dividends are expected to be declared or paid on the Common Stock for the
foreseeable future.  The declaration of all dividends is at the discretion of
the Company's Board of Directors.  The Company's dividend policy will be
reviewed by the Board of Directors at such future time as may be appropriate in
light of relevant factors at the time; however, the Company and the Company's
principal operating subsidiaries are subject to certain prohibitions on the
declaration and payment of dividends under the terms of their existing credit
facilities.  In addition, under the terms of the Company's 10 1/4% Senior Notes
due 2004 ("Senior Notes"), the Company is limited in the amount of funds it may
distribute as dividends or distributions to stockholders to an amount generally
equal to: (a) the sum of (i) its earnings subsequent to December 31, 1993, (ii)
the net consideration received from certain stock issuances since March 1994,
(iii) the value of certain investments in unrestricted subsidiaries
redesignated as restricted subsidiaries and (iv) $5 million, less (b) the
amount of dividends, distributions and other restricted payments made by the
Company since March 1994.  As of December 31, 1995, the Company was limited in
the amount of dividends, distributions and other restricted payments that could
be made by it to approximately $137 million.

      As of February 29, 1996, there were 1,072 stockholders of record.  The
Common Stock is traded on the NYSE under the symbol EVI.

ITEM 6.   SELECTED FINANCIAL DATA

          The following table sets forth certain selected historical
consolidated financial data of the Company and





                                       17
<PAGE>   19
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Consolidated Financial
Statements and Notes thereto included elsewhere herein. The following
information may not be deemed indicative of future operating results of the
Company.

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                ---------------------------------------------------------------
                                                  1995         1994         1993           1992         1991
                                                --------     ---------    ---------      --------     ---------
                                                           (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                             <C>           <C>         <C>           <C>          <C>
Revenues    . . . . . . . . . . . . . . . .     $351,587      $248,537    $ 246,017     $ 190,458    $177,794
Operating Income  . . . . . . . . . . . . .       32,440        19,469       18,555         4,612       9,832
Income from Continuing Operations . . . . .       11,311         4,642        7,947           281       5,829
Earnings Per Share from Continuing
    Operations  . . . . . . . . . . . . . .          .77           .37          .66           .02         .51
Total Assets  . . . . . . . . . . . . . . .      491,060       344,234      277,231       230,596     185,022
Long-term Debt  . . . . . . . . . . . . . .      126,849       125,690       38,982        37,304       5,878
Stockholders' Investment  . . . . . . . . .      228,066       110,913      107,736       101,156     101,123
Cash Dividends Per Share  . . . . . . . . .           --            --           --            --          --
</TABLE>

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

GENERAL

      The Company manufactures and markets drill pipe and premium tubular
products, artificial lift and completion systems through its oilfield equipment
segment and provides contract drilling and workover services through its
contract drilling segment for use in the exploration and production of oil and
natural gas.  The level of exploration and production activity is influenced by
worldwide economic conditions, supply and demand and the political stability of
oil producing countries.  However, natural gas and oil prices historically have
been the prevalent factor in determining the level of worldwide exploration and
production.

      Income from continuing operations was $11,311,000, or $.77 per share, on
revenues of $351,587,000 for 1995 compared to income from continuing operations
of $4,642,000, or $.37 per share, on revenues of $248,537,000 for 1994.
Operating income for 1995 was $32,440,000 compared to $19,469,000 for 1994 which
represents a 67% increase for 1995 as compared to 1994.  The increase in
operating income for 1995 primarily reflects improvements in the Company's
tubular products division coupled with the contribution of operating income
attributable to the acquisition of Prideco on June 30, 1995.  Demand for the
Company's tubular products benefited during 1995 from a continuing reduction in
the worldwide inventory of used drill pipe. These trends have resulted in
increased drill pipe demand. The improved results for 1995 also reflected
generally improved industry conditions,the acquisition of the Fluid Packed pump
and sucker rod businesses from National-Oilwell in August 1994, higher
international revenues and the Company's internal cost saving efforts.

      Early in the fourth quarter of 1995, the Company completed a public
offering of 3,450,000 shares of its Common Stock ("Public Offering").  The net
proceeds of this offering were approximately $72.6 million. The funds from the
offering were used to reduce the Company's outstanding debt under its revolving
lines of credit, to finance the expansion of the Company's domestic and
international tubular operations and for general and corporate purposes.  The
offering resulted in a reduction in the Company's debt to total capitalization
ratio at December 31, 1995 to approximately 38%.

      In December 1995, the Company made a strategic decision to dispose of its
Highland store distribution system in the United States which has been a part
of the artificial lift and completion tool equipment division.  This decision
reflected the Company's desire to focus its efforts on manufacturing and to
eliminate the substantial cost associated with serving as a distributor in the
United States market. Early in 1996, the Company completed the sale of these
operations to Continental Emsco for approximately $3 million in cash, a $4
million vendor credit with Continental Emsco for future equipment needs of the
Company and a $0.5 million note receivable. The consideration received in the
sale approximated the net book value of the assets sold, resulting in no
material gain or loss.

      The disposition by the Company of its U.S. store system provided the
Company with the ability to reduce its work force by over 170 employees,
eliminate the overhead cost of maintaining its own store distribution network
and reduce inventory costs in the U.S.  In connection with the disposition,
Continental Emsco was appointed as a non-exclusive distributor in the U.S. for
most of  the Company's artificial lift division U.S. manufactured products





                                       18
<PAGE>   20
as well as an exclusive distributor of the Company's RotaFlex products in the
U.S.  The Company believes that this distribution arrangement, together with
arrangements that the Company has with other major distributors, will permit a
broader distribution of the Company's products on a more cost effective basis.
The Company has retained its Canadian distribution system that is used to
service and support its Corod and other product lines.

      The Company is currently focusing its efforts on assimilating its
acquisition of Prideco and improving its manufacturing efficiencies and
capabilities.  The Company is also continuing to seek opportunities for
expansion of sales and manufacturing outside the U.S.  The Company currently
expects that 1996 results will benefit from continuing strong tubular sales and
cost reductions at its oil tools division.  Results, however, will be dependent
on market conditions, in particular the level of drilling activity in the U.S.
Gulf Coast and demand for drill pipe and other tubular products.

RESULTS OF OPERATIONS

     COMPARISON OF FISCAL YEAR 1995 WITH FISCAL YEAR 1994

      Oilfield Equipment Segment

      Revenues and operating income for the oilfield equipment segment were
$271.7 million and $23.1 million, respectively, for the year ended December 31,
1995 as compared to $185.3 million and $8.2 million, respectively, for the year
ended December 31, 1994.  The increases in revenues and operating income were
primarily attributable to the contributions from increased drill pipe sales and
higher prices and margins.  In addition, the Company's Canadian pump sales were
higher in 1995 as compared to 1994.

      The increase in sales of tubulars products in 1995 was $60.6 million
compared to $22.6 million in 1994.  The increase in sales for 1995 resulted
from the acquisition of Prideco on June 30, 1995,  as well as an overall
increase in demand for drill pipe.  Evidence of the improved demand for drill
pipe is the Company's tubular backlog at December 31, 1995, being $78.4 million
compared to $35.2 million at December 31, 1994.  The Company anticipates that
all of the backlog existing at December 31, 1995 will be shipped during the
next twelve months.  In addition, the Company implemented price increases in
the second half of 1995 which the Company will benefit from in 1996 as the
existing backlog turns.

      Results in the oilfield equipment segment include a $0.75 million royalty
payment in the fourth quarter of 1995, which benefited operating income for
1995. The oilfield equipment segment also benefited from lower average
manufacturing costs for its tubulars associated with increased sales and higher
gross margins at the Company's Mexican facility, which has a lower cost base
than the United States facilities.  The Company expects that as production at
the OCTL facility becomes fully operational, average manufacturing costs for
tubulars should decline further as a result of the lower labor costs at that
facility. However, the Company expects some initial production inefficiencies
associated with the OCTL facility.

      In the third quarter of 1995, the Company experienced increases in its
cost of "green" tubing, the primary material used by it in the production of
its tubular goods.  To date, the Company has generally been able to pass
through the additional costs of this raw material to its customers.  However,
there can be no assurances that it will continue to be able to do so.

      The Company's recent acquisition of Prideco is expected to further
benefit results in this segment through higher revenues and improved margins
from reductions in per unit costs for tubular goods.  Although there can be no
assurance as to the ultimate savings that may be realized as a result of the
acquisition, the Company currently expects to realize annual savings in
overhead and distribution costs in excess of $6 million once the operations of
Prideco are fully integrated into those of the Company.  The Company expects
this integration to be completed by the middle of 1996.

      Revenues and operating income associated with the Company's artificial
lift division were $106.5 million and $8.0 million, respectively, for 1995
compared to $85.1 million and $5.3 million, respectively, for 1994.  The
increases in revenues and operating income for 1995 were primarily attributable
to the Company's increases in Canadian progressive cavity pump and Corod sales.
The Company is currently in the process of effecting cost reductions at this
division and eliminating redundant administrative costs.  The Company
anticipates that once this process is completed, operating results at this
division should improve.  The disposition of the Company's United States
distribution system also provides the Company with the opportunity to focus on
its manufacturing and





                                       19
<PAGE>   21
product design.

      Contract Drilling Segment

      Revenues and operating income for the contract drilling segment were
$79.9 million and $14.5 million, respectively, for 1995, compared to $63.3
million and $15.8 million respectively, for 1994.  The increase in revenues for
1995 reflects the increase in international operations in Nigeria, Peru and
Argentina as new contracts in Nigeria and Peru did not take effect until late
in the third quarter of 1994.  In July  1995, the Company's two Peru rigs were
placed on standby.  Recently, one of such rigs was placed back into operation,
with the other rig remaining on standby.  In June 1995, the Company's
operations commenced in Argentina covering four drilling rigs.  The operations
in Nigeria, Peru and Argentina contributed $24.6 million in revenues for 1995.

      Operating income for the international operations was $3.6 million in
1995 as compared to $5.2 million in 1994.  Operating income in 1994 included
the insurance settlement with respect to the National Iranian Oil Company
("NIOC") contract which increased operating income by $4.8 million and was
reduced by operating losses of $2.6 million relating to the Iranian operations
for 1994.  The Argentina operations produced an operating loss of $0.5 million
in 1995 attributable to certain initial start-up costs incurred.  The Company
expects 1996 to benefit from the start-up operating costs incurred during 1995
and expects the operation in Argentina to have a favorable impact on 1996
operating results.

      Operations in Nigeria are currently subject to various political risk.
In that regard, there is currently pending before the U.S. Congress various
legislation that, if enacted, would restrict trade and investment in Nigeria.
To date, no legislation has been enacted.  However, if legislation were to be
adopted that either restricted trade or investment in Nigeria, the Company's
Nigerian operations could be materially affected.

      Domestic revenues increased 5% in 1995 as compared to 1994 due to an
increase in domestic barge rig volume.  Operating income in 1995 was $10.8
million as compared to $10.6 million in 1994.  Mallard's 1995 operating income
was reduced by  a fourth quarter increase in reserves for workers' compensation
claims on cases settled as well as unsettled claims.  Such expenses were
partially offset by a gain on the sale of a rig.   The net effect of these
reduced 1995 operating results by approximately $0.8 million.

      On September 30, 1994, the Company settled all of its claims with its
insurance carriers with respect to the termination of its workover drilling
contract with NIOC.  Under the terms of the settlement with the Company's
insurance carriers, the Company received a net cash payment of $23 million and
retained all rights to any funds collected or recovered by the Company from
NIOC and to the rigs and equipment deployed in Iran.  The Company has since
sold or redeployed to Argentina the rigs and equipment that were in Iran.
Although the Company has been receiving payments on the retained obligations
under a four year extended payment arrangement reached with the Central Bank of
Iran and other local banks, the timing and ultimate recovery is subject to
various risks relating to Iran, including the impact of the recently imposed
United States sanctions and restrictions on trade with an investment in Iran.
The net carrying value after reserves of these obligations as of December 31,
1995, was approximately $3.6 million.

      Demand for the Company's domestic contract drilling and workover services
will continue to be materially dependent on levels of exploration and
development in the Gulf of Mexico and coastal and inland waters.  The price of
natural gas will also be a material factor effecting that demand.

      General

      Selling, general and administrative expenses increased approximately 19%
to $56.9 million in 1995 from $47.9 million in 1994.  The increase in 1995 was
attributable to the Prideco acquisition and to increased sales and
international expansion.

      Interest expense increased during 1995 to $16.7 million from $13.7
million for 1994.  The increase in interest expense is attributable to higher
levels of indebtedness during 1995 under the Company's working capital lines of
credit due to increases in the level of the Company's business.  The Company's
interest expense declined in the fourth quarter of 1995 as a result of the
reduction in debt following the Public Offering.

      The Company's effective tax rate for 1995 was approximately 31% compared
to 28% in 1994.  The increase in such rate reflects the impact of certain tax
benefits occurring in 1994 associated with net operating loss





                                       20
<PAGE>   22
carryforwards which was partially offset by foreign losses with no
corresponding tax benefit.

      Substantially all of the Company's customers are engaged in the energy
industry.  This concentration of customers may impact the Company's overall
exposure to credit risk, either positively or negatively, in that customers may
be similarly affected by changes in economic and industry conditions.  The
Company performs ongoing credit evaluations of its customers and does not
generally require collateral in support of its trade receivables.  The Company
maintains reserves for potential credit losses, and actual losses have
historically been within the Company's expectations.

    COMPARISON OF FISCAL YEAR 1994 WITH FISCAL YEAR 1993

      For the year ended December 31, 1994, the Company reported net income and
income from continuing operations of $858,000, or $0.07 per share, and $4.6
million, or $0.37 per share, respectively, on revenues of $248.5 million,
compared with net income and income from continuing operations of $5.9 million,
or $0.49 per share, and $7.9 million, or $0.66 per share, respectively, on
revenues of $246.0 million for fiscal year 1993.  In 1994, the Company
refinanced its outstanding indebtedness with the proceeds of a $120 million in
Senior Notes due 2004.  As part of the transaction, the Company incurred a
first quarter extraordinary charge of approximately $3.8 million, net of taxes
of approximately $1.9 million, or $0.30 per share.  The extraordinary charge
represented the difference between the reacquisition price and the net carrying
value of the Company's $34 million senior notes, including unamortized debt
issuance costs.

      For the year ended December 31, 1994, the Company's  operating income was
$19.5 million compared with $18.6 million for fiscal year 1993.  For 1994,
operating income for the Company's oilfield equipment and contract drilling
segments was $8.2 million and $15.8 million, respectively.  For 1993, operating
income for these segments was $10.8 million and $11.8 million, respectively.

      On September 30, 1994, the Company settled all of its claims with its
insurance carriers with respect to the termination of its workover contract
with the NIOC.  The insurance settlement which increased operating income by
$4.8 million was reduced by operating losses of $2.6 million relating to the
Iranian operations for 1994.  This benefit was more than offset by the
reduction in operating income in Nigeria and Peru.

      Oilfield Equipment Segment

      Revenues for the oilfield equipment segment increased by 8% to $185.3
million in 1994 compared to $171.6 million in 1993.  The increase was due
primarily to increased sales of tubular products partially offset by reduced
procurement revenues from the operations of International Tool and Supply
Company ("ITS"), which was acquired on June 30, 1993, and sold on December 30,
1993.  The increase in tubular products revenues was primarily due to a change
in the sales mix to larger diameter drill pipe.

      Operating income for the oilfield equipment segment was $8.2 million in
1994, as compared to $10.8 million in 1993.  The reduction in operating income
resulted from costs incurred by the Company in the consolidation of certain
plants and product lines resulting from the acquisition of the Fluid Packed
lines of sucker rod pumps and sucker rods from National-Oilwell.  In addition
the Company experienced reduced margins on tubular products and artificial lift
equipment due to lower oil prices, the steep decline in natural gas prices in
the second half of 1994 and sluggish domestic and international development
activity.  The Company, however, benefited from increased utilization of
certain facilities due to increased revenues.

      Contract Drilling Segment

      Revenues in the contract drilling segment decreased by approximately 15%
to $63.3 million for 1994 compared to $74.4 million for 1993.  Domestic
revenues were slightly lower due to reduced drilling activity and international
revenues decreased primarily due to the termination of the land drilling
contract with NIOC in Iran.  In addition, international revenues related to the
Company's operations in Peru and Nigeria were lower in 1994 as compared to 1993
as a result of the Company's rigs in Nigeria and Peru going off contract in the
middle of 1993.  The Company's rigs in Peru and Nigeria began new contracts in
the second half of 1994.

      The contract drilling segment's  operating income was $15.8 million in
1994, as compared to $11.8 million in 1993.  Domestic operating income
increased by 36% in 1994 as compared to 1993, while international  operating
income increased by 31% in 1994 as compared to 1993.  The increase in 1994 was
principally due to higher





                                       21
<PAGE>   23
domestic day rates and the February 1994 acquisition of AWI Drilling &
Workover, Inc. ("AWI") and its 12 rigs.  The AWI acquisition improved gross
profit in 1994 because prior to the acquisition, eight of the 12 rigs had been
under charter by the Company.  The increase was partially offset by the lower
rig utilization during 1994 of 48% from 52% in 1993 due to reduced activity in
the U.S. Gulf Coast area.

      The insurance settlement with respect to the NIOC contract increased
operating income by $4.8 million and was reduced by operating losses of $2.6
million relating to the Iranian operations for 1994.  This benefit was more
than offset by the reduction in operating income in Nigeria and Peru.

      In March 1995, the Company entered into a two-year land drilling contract
with YPF in Argentina.  The contract covers four drilling rigs.

      General

      Selling, general and administrative expenses increased approximately 5%
to $47.9 million in 1994 from $45.7 million in 1993.  The increase in 1994 was
primarily attributable to a full year of operations at the Company's Mexico,
Hungary and China facilities as well as a full year of operations from the
Production Oil Tools acquisition.  These increases were partially offset by the
selling, general and administrative costs associated with ITS which was sold
December 30, 1993.

      Interest expense increased from $7.6 million for the year ended December
31, 1993 to $13.7 million for 1994, reflecting the increased cost associated
with the Company's $120 million Senior Notes due 2004 issued in March 1994,
substantially all of which were subsequently exchanged for a new series of
Senior Notes due 2004 that were essentially identical to the old series.  The
net proceeds from the $120 million Senior Notes were used to repay
substantially all of the Company's outstanding indebtedness and for working
capital purposes.  The prepayment of the Company's prior indebtedness resulted
in an extraordinary charge, net of taxes, of $3,784,000, or $0.30 per share,
during the first quarter of 1994.

      The Company's effective tax rate on income from continuing operations
decreased to 28% in 1994 from 38% in 1993.  The favorable impact on the 1994
effective tax rate was obtained through the utilization of net operating loss
carryforwards and was partially offset by foreign losses with no corresponding
tax benefit.

LIQUIDITY AND CAPITAL RESOURCES

      Early in the fourth quarter of 1995, the Company completed a public
offering of 3,450,000 shares of its Common Stock.  The net proceeds of this
offering were approximately $72.6 million. The funds from the offering were
used to reduce the Company's outstanding debt under its revolving lines of
credit, to finance the expansion of the Company's domestic and international
tubular operations and for general and corporate purposes.  The offering
resulted in a reduction in the Company's debt to total capitalization ratio at
December 31, 1995 to approximately 38%.

      At December 31, 1995, the Company had cash and cash equivalents of
approximately $4.5 million compared to approximately $3.1 million at December
31, 1994.  At December 31, 1995, the Company's working capital was
approximately $152 million compared to approximately $94 million at December
31, 1994.  The increase in working capital was primarily the result of the
recent Public Offering.

      At December 31, 1995 and December 31, 1994, the Company had in place
various working capital lines of credit secured by the inventory and
receivables of the Company's subsidiaries, providing for borrowings up to $65.5
million, subject to availability requirements.  Borrowings under the Company's
lines of credit are generally based on the lender's determination of the
collateral value of the current assets securing the lines of credit.  The lines
of credit bear interest at floating rates ranging from prime to prime plus 1
1/4% and are secured by substantially all of the borrowing subsidiary's
accounts receivable and inventory.  The Company and its subsidiaries are
required to comply with various affirmative and negative covenants relating to
working capital, earnings and net worth.  The facilities also impose certain
limitations on the use of funds by the Company and its subsidiaries for
acquisitions and capital expenditures, the incurrence of additional
indebtedness and other operational matters and certain expenditures, and
certain prohibitions on the declaration or payment of dividends by the Company.
At December 31, 1995 and December 31, 1994, $4.8 million and $17.3 million,
respectively, had been borrowed under the revolving lines of credit and $5.1
million and $1 million, respectively, had been used to support outstanding
letters of credit.  At December 31, 1995 and December 31, 1994, $55.6 million
and $35.6 million, respectively, was





                                       22
<PAGE>   24
available for additional borrowing under these credit facilities.  The average
interest rate under these facilities was 8.8% for 1994 and 10.2% for 1995.

      The Company currently has outstanding $120 million of Senior Notes with
semi-annual interest payments in March and September.  The Senior Notes were
issued pursuant to the terms of an Indenture dated as of March 15, 1994.
Certain subsidiaries of the Company have unconditionally guaranteed the
Company's obligations under the Senior Notes.  The Indenture relating to the
Senior Notes contains various customary affirmative and negative covenants
that, among other things, limit the ability of the Company and certain of its
subsidiaries to: (i) incur certain additional indebtedness unless the Company's
Consolidated Fixed Charge Coverage Ratio (as defined in the Indenture) is at
least 2.0 to 1.0, (ii) make dividends, distributions and certain other
restricted payments, (iii) create certain liens, (iv) engage in certain
transitions with its affiliates, (v) engage in sale and leaseback transactions,
(vi) make certain asset dispositions and (vii) merge or consolidate with, or
transfer all or substantially all of its assets to another person.  The
Indenture also limits the ability of the Company and certain of its
subsidiaries to issue preferred stock and creates restrictions on the ability
of certain of its subsidiaries to pay dividends and make other distributions.

      In August 1994, the Company received a letter from the IRS proposing to
increase the gain recognized by the Company upon the dissolution in October
1990 of COLEVE with Columbia.  In general, the IRS' proposal seeks payment of a
tax liability of approximately $14.1 million plus accrued interest thereon, and
includes $3.4 million of taxes relating to the proposed disallowance of certain
interest deductions taken by the Company with respect to COLEVE that was the
subject of a similar letter received by the Company in the fourth quarter of
1993.  The tax liability with respect to these matters has been previously
provided for as a deferred tax liability in the Company's financial statements.
The Company disagrees with the IRS' position and is currently pursuing its
rights of administrative review and appeal and intends to vigorously contest
this matter.  Although the resolution of these remaining issues could affect
the timing of the payment of previously accrued tax liabilities and require the
use of a portion of its available capital, the Company does not believe that
the results of the audit or the ultimate resolution of the IRS' proposed
adjustments will have a material impact on its results of operations or
financial position.

      The demand for the Company's tubular products and contract drilling
services are particularly effected by the price of natural gas and the level of
oil and gas exploration activity while the demand for the Company's artificial
lift and completion tool equipment is directly dependent on oil production
activity.  Although the Company's international contract drilling services are
effected by the level of exploration activity in the countries in which it
provides those services, its domestic drilling operations are materially
dependent on the level of exploration activity in the U.S. Gulf Coast and
domestic natural gas prices.

      The Company's current sources of capital are cash generated from
operations and borrowings under its working capital lines of credit.  The
Company believes that current reserves of cash and short-term investments,
access to existing credit lines and internally generated cash from operations
are sufficient to finance the projected cash requirements of its current and
future operations.

      The Company is continually evaluating new acquisitions with a focus on
proprietary technology and under-utilized assets to enhance operations.  Future
acquisitions may be funded through cash flow from operations, borrowings under
lines of credit and other facilities, and equity issuances if desirable.

CAPITAL EXPENDITURES, ACQUISITIONS AND DISPOSITIONS

      On June 30, 1995, the Company acquired Prideco in a transaction which
involved the issuance of approximately 2.25 million shares of Common Stock.
The acquisition is expected to provide the Company with greater manufacturing
and marketing efficiencies by allowing for a consolidation of overhead, reduced
distribution and marketing costs and a rationalization of manufacturing
operations.  Revenues and operating income of Prideco for its fiscal year ended
June 30, 1995, were $55.2 million and $4.2 million, respectively.

      In July 1995, the Company acquired Engemaq S.A., a Brazilian completion
tool business, for $4 million.

      The allocations of the purchase price to the fair market values of the
net assets acquired in the 1995 acquisitions are based on preliminary estimates
of the fair market value and may be revised when additional information
concerning asset and liability valuations is obtained.

      In January 1996, the Company entered into a long-term manufacturing and
sales agreement with OCTL, an





                                       23
<PAGE>   25
India-based manufacturer of drill pipe and premium tubulars.  The OCTL facility
was built in 1990 under the direction of personnel who are currently employed
by Grant Prideco and is the most modern tubular fabricating facility in the
world.  The facility will be used by the Company to pursue a strategic
expansion of its sales and operations in the Eastern Hemisphere.  The Company
believes that the combination of Grant Prideco's product line coupled with
OCTL's low manufacturing costs and proximity to major Eastern Hemisphere
markets will accomplish this objective.  This expansion is intended to
substantially increase the Company's sales into the growing Eastern Hemisphere
markets, which over the last few years have represented less than 5% of the
Company's total revenues.  Manufacturing operations on behalf of the Company
are expected to commence during the second quarter of 1996.

      Under the terms of the OCTL agreement, the Company has a right to
terminate the agreement on an annual basis.  The agreement is for an initial
five-year term renewable for successive five-year terms.  The agreement may be
terminated by OCTL only under certain limited circumstances, including,
beginning December 31, 2000, if certain minimum orders have not been placed
through OCTL and payments have not been made by the Company.  Under the terms
of the agreement with OCTL, the Company made a one-time payment of $8 million
for the exclusive right to have Grant Prideco's products manufactured at the
facility.  The Company is also required to pay all direct operating expenses
relating to the facility, including the cost of inventory and raw materials
used in the manufacture of the Company's products.

      The Company expects the OCTL facility to require a first-year investment
of between $20 million and $25 million, which includes the $8 million deposit
made in January 1996 and working capital requirements.  Funds relating to the
OCTL facility are expected to be financed with existing cash and borrowings
under lines of credit and other facilities.

      Early in 1996, the Company completed the sale of its store distribution
system in the United States for approximately $7.5 million.  The Company
received $3 million in cash, a $4 million vendor credit with Continental Emsco
for future equipment needs of the Company and a $0.5 million note receivable.
The consideration received in the sale approximated the net book value of the
assets sold, resulting in no material gain or loss.

      In addition to funds used to finance acquisitions, capital expenditures
by the Company during 1995 totaled approximately $32.7 million.  During 1995,
capital expenditures included approximately $16 million relating to the
acquisition of a land rig deployed to Argentina, equipment additions to the
three existing land rigs in Argentina and three deep drilling barge rigs.

      Ongoing routine capital expenditures for the next twelve months are
budgeted at approximately $21.9 million.  Capital expenditures are expected to
be funded with available cash, cash flow from operations and borrowings under
lines of credit and other facilities.

ITEM  8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

<TABLE>
<CAPTION>
                                                                                           PAGE
                                                                                           ----
      <S>                                                                                   <C>
      Report of Independent Public Accountants  . . . . . . . . . . . . . . . . . . .       25
      Consolidated Balance Sheets - December 31, 1995 and 1994  . . . . . . . . . . .       26
      Consolidated Statements of Income, for each of the three years in the
         period ended December 31, 1995   . . . . . . . . . . . . . . . . . . . . . .       27
      Consolidated Statements of Stockholders' Investment, for each of the three
         years in the period ended December 31, 1995  . . . . . . . . . . . . . . . .       28
      Consolidated Statements of Cash Flows, for each of the three years in
         the period ended December 31, 1995   . . . . . . . . . . . . . . . . . . . .       29
      Notes to Consolidated Financial Statements  . . . . . . . . . . . . . . . . . .       30
      Financial Statement Schedule:
         II. - Valuation and Qualifying Accounts and Allowances   . . . . . . . . . .       56

</TABLE>
      All other schedules are omitted because they are not required or because
the required information is included in the financial statements or notes
thereto.





                                       24
<PAGE>   26

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Energy Ventures, Inc.

      We have audited the accompanying consolidated balance sheets of Energy
Ventures, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of income, stockholders'
investment and cash flows for each of the three years in the period ended
December 31, 1995.  These consolidated financial statements and the schedule
referred to below are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.

      We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated 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 Energy Ventures, Inc. and subsidiaries as of December 31, 1995 and 1994, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.

      Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole.  The Financial Statement
Schedule listed in Part II - Item 8 is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements.  The Financial Statement Schedule has been
subjected to the auditing procedures applied in our audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.



                              ARTHUR ANDERSEN LLP

Houston, Texas
February 26, 1996





                                       25
<PAGE>   27
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                                ----------------------
                                                                                 1995        1994
                                                                                ---------   ----------
ASSETS                                                                              (IN THOUSANDS)
<S>                                                                             <C>         <C>
CURRENT ASSETS:
    Cash and Cash Equivalents   . . . . . . . . . . . . . . . . . . . . .       $   4,517   $    3,144
    Accounts Receivable, Net of Allowance for Uncollectible Accounts of
       $615,000 in 1995 and $564,000 in 1994  . . . . . . . . . . . . . .         102,763       72,790
    Inventories   . . . . . . . . . . . . . . . . . . . . . . . . . . . .         117,936       74,938
    Materials and Supplies  . . . . . . . . . . . . . . . . . . . . . . .          10,042        7,687
    Prepaid Expenses  . . . . . . . . . . . . . . . . . . . . . . . . . .           3,907        3,751
    Other Current Assets  . . . . . . . . . . . . . . . . . . . . . . . .          10,409        2,493
                                                                                ---------   ----------
                                                                                  249,574      164,803
                                                                                ---------   ----------

PROPERTY, PLANT AND EQUIPMENT, AT COST:
    Land, Buildings and Other Property  . . . . . . . . . . . . . . . . .          33,271       27,278
    Rigs, Machinery and Equipment   . . . . . . . . . . . . . . . . . . .         201,945      152,096
    Furniture and Vehicles  . . . . . . . . . . . . . . . . . . . . . . .          15,880       17,071
                                                                                ---------   ----------
                                                                                  251,096      196,445
    Less:  Accumulated Depreciation   . . . . . . . . . . . . . . . . . .          58,394       45,550
                                                                                ---------   ----------
                                                                                  192,702      150,895
                                                                                ---------   ----------
EXCESS OF COST OVER FAIR VALUE OF NET TANGIBLE ASSETS
    OF BUSINESSES ACQUIRED, NET   . . . . . . . . . . . . . . . . . . . .          37,398       15,606
OTHER ASSETS    . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          11,386       12,930
                                                                                ---------   ----------
                                                                                $ 491,060   $  344,234
                                                                                =========   ==========

LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
    Short-Term Borrowings, Primarily Under Revolving Lines of Credit  . .       $   4,826   $   17,265
    Current Maturities of Long-Term Debt  . . . . . . . . . . . . . . . .           5,894        3,189
    Accounts Payable  . . . . . . . . . . . . . . . . . . . . . . . . . .          53,703       30,741
    Accrued Salaries and Benefits   . . . . . . . . . . . . . . . . . . .           5,963        3,908
    Other Accrued Liabilities   . . . . . . . . . . . . . . . . . . . . .          26,730       15,362
                                                                                ---------   ----------
                                                                                   97,116       70,465
                                                                                ---------   ----------

LONG-TERM DEBT  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         126,849      125,690
DEFERRED INCOME TAXES, NET  . . . . . . . . . . . . . . . . . . . . . . .          32,926       30,785
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .           6,103        6,381

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' INVESTMENT:
    Common Stock, $1 Par Value, Authorized 20,000,000 Shares, Issued
       18,522,183 Shares in 1995 and 12,754,249 Shares in 1994  . . . . .          18,522       12,754
    Capital in Excess of Par Value  . . . . . . . . . . . . . . . . . . .         157,953       55,142
    Retained Earnings   . . . . . . . . . . . . . . . . . . . . . . . . .          60,167       48,856
    Cumulative Foreign Currency Translation Adjustment  . . . . . . . . .          (6,915)      (4,536)
    Treasury Stock, at Cost   . . . . . . . . . . . . . . . . . . . . . .          (1,661)      (1,303)
                                                                                ---------   ----------
                                                                                  228,066      110,913
                                                                                ---------   ----------
                                                                                $ 491,060   $  344,234
                                                                                =========   ==========


</TABLE>

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





                                       26
<PAGE>   28
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME


<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31, 
                                                                -----------------------------------------------
                                                                     1995            1994               1993
                                                                -------------    ------------       -----------
                                                                       (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                             <C>              <C>                <C>
REVENUES    . . . . . . . . . . . . . . . . . . . . . . . .     $     351,587    $    248,537       $   246,017
                                                                -------------    ------------       -----------

COSTS AND EXPENSES:
    Cost of Sales   . . . . . . . . . . . . . . . . . . . .           262,293         181,137           181,742
    Selling, General and Administrative Attributable to
          Segments  . . . . . . . . . . . . . . . . . . . .            51,731          43,183            41,690
    Corporate General and Administrative  . . . . . . . . .             5,123           4,748             4,030
                                                                -------------    ------------       -----------
                                                                      319,147         229,068           227,462
                                                                -------------    ------------       -----------
OPERATING INCOME  . . . . . . . . . . . . . . . . . . . . .            32,440          19,469            18,555
                                                                -------------    ------------       -----------

OTHER INCOME (EXPENSE):
    Interest Income   . . . . . . . . . . . . . . . . . . .               118             210               366
    Interest Expense, Net   . . . . . . . . . . . . . . . .           (16,723)        (13,715)           (7,575)
    Other, Net  . . . . . . . . . . . . . . . . . . . . . .               556             484             1,465
                                                                -------------    ------------       -----------
                                                                      (16,049)        (13,021)           (5,744)
                                                                -------------    ------------       -----------
INCOME BEFORE INCOME TAXES  . . . . . . . . . . . . . . . .            16,391           6,448            12,811

PROVISION FOR INCOME TAXES  . . . . . . . . . . . . . . . .             5,080           1,806             4,864
                                                                -------------    ------------       -----------

INCOME FROM CONTINUING OPERATIONS . . . . . . . . . . . . .            11,311           4,642             7,947

DISCONTINUED OPERATION, NET OF TAXES  . . . . . . . . . . .                --              --            (2,057)
                                                                -------------    ------------       -----------

INCOME BEFORE EXTRAORDINARY CHARGE  . . . . . . . . . . . .            11,311           4,642             5,890

EXTRAORDINARY CHARGE, NET OF TAXES  . . . . . . . . . . . .                --          (3,784)               --
                                                                -------------    ------------       -----------

NET INCOME      . . . . . . . . . . . . . . . . . . . . . .     $      11,311    $        858       $     5,890
                                                                =============    ============       ===========

EARNINGS PER COMMON SHARE:
    Continuing Operations   . . . . . . . . . . . . . . . .     $         .77    $        .37       $       .66
    Discontinued Operation, Net of Taxes  . . . . . . . . .                --              --              (.17)
    Extraordinary Charge, Net of Taxes  . . . . . . . . . .                --            (.30)               --
                                                                -------------    ------------       -----------
    Net Income  . . . . . . . . . . . . . . . . . . . . . .     $         .77    $        .07       $       .49
                                                                =============    ============       ===========

    Weighted Average Common Shares Outstanding  . . . . . .            14,724          12,629            12,067
                                                                =============    ============       ===========


</TABLE>



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





                                       27
<PAGE>   29
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT

<TABLE>
<CAPTION>
                                                                                           
                                                                                 CUMULATIVE 
                                                            CAPITAL                FOREIGN                                     
                                       COMMON STOCK           IN                  CURRENCY     TREASURY STOCK       TOTAL       
                                    ---------------------   EXCESS    RETAINED  TRANSLATION -----------------   STOCKHOLDERS'  
                                       SHARES     $1 PAR    OF PAR    EARNINGS  ADJUSTMENT   SHARES    AMOUNT    INVESTMENT 
                                    ----------   --------   --------  --------   ----------  -------   -------   ------------
                                                       (IN THOUSANDS EXCEPT NUMBER OF SHARES)
<S>                                 <C>          <C>        <C>       <C>        <C>         <C>       <C>       <C>
Balance at
   December 31, 1992  . . .         12,067,670   $ 12,068   $ 48,421  $ 42,108   $ (1,152)   (23,891)  $  (289)  $ 101,156
   Net Income . . . . . . .                 --         --         --     5,890         --         --        --       5,890
   Shares Issued in
      Connection with
      Acquisition . . . . .            206,849        207      1,826        --         --         --        --       2,033
  Options Exercised . . . .             41,237         41        195        --         --         --        --         236
  Purchase of Treasury
      Stock, at Cost, for
      Executive Deferred
      Compensation Plan . .                 --         --         --        --         --    (41,084)     (620)       (620)
  Foreign Currency
      Translation       
      Adjustment  . . . . .                 --         --         --        --       (959)        --        --        (959)
                                    ----------   --------   --------  --------   --------    -------   -------   ---------
Balance at
   December 31, 1993  . . .         12,315,756     12,316     50,442    47,998     (2,111)   (64,975)     (909)    107,736
Net Income  . . . . . . . .                 --         --         --       858         --         --        --         858
Shares Issued in
  Connection with
  Acquisition . . . . . . .            433,333        433      4,692        --          --        --        --       5,125
Options Exercised . . . . .              5,160          5          8        --          --        --        --          13
Purchase of Treasury
  Stock, at Cost, for
  Executive Deferred
  Compensation Plan . . . .                 --         --         --        --          --   (29,234)     (394)       (394)
Foreign Currency
  Translation
  Adjustment  . . . . . . .                 --         --         --        --     (2,425)        --        --      (2,425)
                                    ----------   --------   --------  --------   --------    -------   -------   ---------
Balance at
December 31,1994  . . . . .         12,754,249     12,754     55,142    48,856     (4,536)   (94,209)   (1,303)    110,913
Net Income  . . . . . . . .                 --         --         --    11,311          --        --        --      11,311
Shares Issued
  Connection with
  Acquisition . . . . . . .          2,255,198      2,255     33,020        --          --        --        --      35,275
Options Exercised . . . . .             62,736         63        593        --          --        --        --         656
Issuance of Common
  Stock . . . . . . . . . .          3,450,000      3,450     69,198        --          --        --        --      72,648
Purchase of Treasury
  Stock, at Cost, for
  Executive Deferred
  Compensation Plan . . . .                 --         --         --        --          --   (19,392)     (358)       (358)
Foreign Currency
  Translation
  Adjustment  . . . . . . .                 --         --         --        --     (2,379)        --        --      (2,379)
                                    ----------   --------   --------  --------   --------    -------   -------   ---------
Balance at
  December 31, 1995 . . . .         18,522,183  $  18,522   $157,953  $ 60,167   $ (6,915)  (113,601)  $(1,661)  $ 228,066
                                    ==========   ========   ========  ========   ========    =======   =======   =========
</TABLE>

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





                                       28
<PAGE>   30
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31,
                                                                           --------------------------------
                                                                             1995         1994        1993  
                                                                           --------     --------    -------
                                                                                    (IN THOUSANDS)
<S>                                                                        <C>          <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                                                               
    Net Income  . . . . . . . . . . . . . . . . . . . . . . . . . .        $ 11,311     $    858    $ 5,890
    Adjustments to Reconcile Net Income to Net Cash Provided
      (Used) by Operations:
      Depreciation and Amortization   . . . . . . . . . . . . . . .          20,824       14,268     12,281
      Deferred Income Tax Provision (Benefit) from Continuing
         Operations   . . . . . . . . . . . . . . . . . . . . . . .           1,980       (1,052)        96
      Extraordinary Charge on Prepayment of Debt, Net   . . . . . .              --        3,784         --
      Insurance Settlement, Net   . . . . . . . . . . . . . . . . .              --       23,000         --
      Gain on Sale of Business and Disposal of Assets   . . . . . .          (1,424)        (100)    (1,962)
      Provision for Uncollectible Accounts Receivable   . . . . . .             492          158        204
      Decrease to Carrying Value of Accounts Receivable   . . . . .              --           --        369
      Change in Assets and Liabilities, Net of Effects of Businesses
         Acquired:
         Accounts Receivable  . . . . . . . . . . . . . . . . . . .         (21,068)     (19,718)    (1,608)
         Inventories  . . . . . . . . . . . . . . . . . . . . . . .         (34,271)      (6,686)   (24,283)
         Prepaid Expenses and Other . . . . . . . . . . . . . . . .         (10,832)      (1,126)       149
         Accounts Payable . . . . . . . . . . . . . . . . . . . . .          18,018       (9,178)     9,926
         Accrued Salaries and Benefits and Other  . . . . . . . . .          (6,899)      (5,234)       156
         Other Assets . . . . . . . . . . . . . . . . . . . . . . .            (561)      (6,013)    (8,432)
         Other Liabilities, Net . . . . . . . . . . . . . . . . . .             558        2,281      1,637
                                                                           --------     --------    -------
            Net Cash Used by Operations . . . . . . . . . . . . . .         (21,872)      (4,758)    (5,577)
                                                                           --------     --------    -------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from Sale of Business  . . . . . . . . . . . . . . . .              --           --      3,500
    Proceeds from Sale of Assets  . . . . . . . . . . . . . . . . .           3,369        3,131        754
    Acquisition of Businesses, Net of Cash Acquired   . . . . . . .          (8,105)     (17,076)      (933)
    Capital Expenditures for Property, Plant and Equipment  . . . .         (32,690)     (19,607)   (14,885)
                                                                           --------     --------    -------
       Net Cash Used by Investing Activities  . . . . . . . . . . .         (37,426)     (33,552)   (11,564)
                                                                           --------     --------    -------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Issuance of Common Stock, Net   . . . . . . . . . . . . . . . .          72,648           --         --
    Proceeds from Issuance of Long-Term Debt  . . . . . . . . . . .              --      120,000         --
    Penalty on Early Retirement of Debt   . . . . . . . . . . . . .              --       (4,872)        --
    Debt Issuance Costs   . . . . . . . . . . . . . . . . . . . . .              --       (4,155)        --
    Borrowings (Repayments) Under Revolving Lines of Credit, Net  .         (12,439)     (28,940)    21,590
    Borrowings of Term Debt   . . . . . . . . . . . . . . . . . . .           4,536        2,284      3,571
    Repayments on Term Debt   . . . . . . . . . . . . . . . . . . .          (4,453)     (46,981)    (6,409)
    Stock Options Exercised, Purchase of Treasury Stock and
      Other, Net  . . . . . . . . . . . . . . . . . . . . . . . . .             298         (381)      (384)
                                                                           --------     --------    -------
      Net Cash Provided by Financing Activities   . . . . . . . . .          60,590       36,955     18,368
                                                                           --------     --------    -------

EFFECT OF TRANSLATION ADJUSTMENT ON CASH  . . . . . . . . . . . . .              81         (300)      (468)
                                                                           --------     --------    -------
NET INCREASE (DECREASE) IN CASH AND CASH
    EQUIVALENTS   . . . . . . . . . . . . . . . . . . . . . . . . .           1,373       (1,655)       759
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR  . . . . . . . . . .           3,144        4,799      4,040
                                                                           --------     --------    -------
CASH AND CASH EQUIVALENTS AT END OF YEAR  . . . . . . . . . . . . .        $  4,517     $  3,144    $ 4,799
                                                                           ========     ========    =======
</TABLE>

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





                                       29
<PAGE>   31

                     ENERGY VENTURES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    PRINCIPLES OF CONSOLIDATION

      The consolidated financial statements include the accounts of Energy
Ventures, Inc. and all majority-owned subsidiaries and partnerships (the
"Company").  All material intercompany accounts and transactions have been
eliminated in consolidation.

    NATURE OF OPERATIONS

      The Company is an international manufacturer and supplier of oilfield
equipment and contract drilling services.  The Company operates through two
business segments: oilfield equipment and contract drilling.  The oilfield
equipment segment manufactures high performance tubulars and a complete line of
artificial lift equipment as well as completion tools.  The Company's contract
drilling rig fleet consists primarily of barge rigs used by major and large
independent oil and gas companies for the exploration and development of
natural gas primarily in the U.S. Gulf Coast area.  The Company's tubular
products and contract drilling operating divisions provide products and
services used primarily for natural gas exploration and production.  The
artificial lift and completion tool product lines are tied to the maturation of
oil producing formations.

    INVENTORIES

      Inventories are valued using the first-in, first-out (FIFO) method and
are stated at the lower of cost or market.

    PROPERTY, PLANT AND EQUIPMENT

      Property, plant and equipment is carried at cost.  Depreciation of
domestic property, plant and equipment is provided using the straight-line
method over the estimated useful lives for the respective categories.  The
useful lives of the major classes of property, plant and equipment are as
follows:

<TABLE>
<CAPTION>
                                                                             LIFE
                                                                         ------------
             <S>                                                        <C>
             Buildings  . . . . . . . . . . . . . . . . . . . . . . .   15 - 40 years
             Rigs, machinery and equipment  . . . . . . . . . . . . .    5 - 20 years
             Furniture and vehicles . . . . . . . . . . . . . . . .      3 -  7 years
</TABLE>

      Due to differences between the international and U.S. rig contracting
markets, depreciation on international drilling rigs and related equipment is
provided using the units-of-production method.  Under the units-of-production
method, depreciation is based on the utilization of the drilling rigs with a
minimum provision when the rigs are idle.

      Interest costs related to major capital projects are capitalized as a
component of construction costs.  Interest costs capitalized were $266,000,
$247,000 and $574,000 in 1995, 1994 and 1993, respectively.  Maintenance and
repairs are expensed as incurred.  The costs of renewals, replacements and
betterments are capitalized.

    INTANGIBLE ASSETS AND AMORTIZATION

      The excess of cost over the fair value of net tangible assets of
businesses acquired is being amortized on a straight-line basis over the lesser
of expected useful lives or 40 years.  Other intangible assets, included in
other assets, are amortized over the years expected to be benefited.
Amortization expense for goodwill and other intangible assets was $2,781,000,
$996,000 and $1,578,000 for 1995, 1994 and 1993, respectively.  Accumulated
amortization of goodwill at December 31, 1995 and 1994 was $1,979,000 and
$1,553,000, respectively.

    FOREIGN CURRENCY TRANSLATION

      Results of operations for foreign subsidiaries with functional currencies
other than the U.S. dollar are translated using average exchange rates during
the period.  Assets and liabilities of these foreign subsidiaries are
translated using the exchange rates in effect at the balance sheet date and the
resulting translation adjustments are





                                       30
<PAGE>   32
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-(CONTINUED)

included as a separate component of Stockholders' Investment.  Currency
transaction gains and losses are reflected in income for the period.  The
Company's Nigerian operations are in a "highly inflationary" economy and use
the U.S. dollar as the functional currency.  Accordingly, the gains or losses
resulting from balance sheet translation are reflected in income for the
period.

    INCOME TAXES

      Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 109 ("SFAS No.  109").  The adoption of SFAS No. 109
did not have a material effect on the Company's consolidated financial position
or results of operations.  Under the asset and liability method of SFAS No.
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.

    WEIGHTED AVERAGE SHARES

      Earnings per share has been computed based on the weighted average number
of common shares outstanding during the respective periods.  Stock options
outstanding are excluded from the weighted average number of shares since the
dilutive effect is not material.

    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 reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.  Actual results could differ from those
estimates.

    PLANNED ACCOUNTING CHANGES

      As of January 1, 1996, SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" will be
effective for the Company.  The statement sets forth guidelines regarding when
to recognize an impairment of long-lived assets and how to measure such
impairment.  Management believes that the adoption of SFAS No. 121 will not
have a significant effect on the Company's consolidated financial position or
results of operations.

      As of January 1, 1996, SFAS No. 123, "Accounting for Stock-Based
Compensation", will be effective for the Company.  SFAS No. 123 permits, but
does not require, a fair value based method of accounting for employee stock
option plans which results in compensation expense recognition when stock
options are granted.  The Company plans to continue the use of its current
intrinsic value based method of accounting for such plans.

    RECLASSIFICATIONS

      Certain reclassifications of prior year balances have been made to
conform such amounts to corresponding 1995 classifications.

2.  SUPPLEMENTAL CASH FLOW INFORMATION

      For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid investments with original maturities of three
months or less to be cash equivalents.





                                       31
<PAGE>   33
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

2.  SUPPLEMENTAL CASH FLOW INFORMATION-(CONTINUED)

      Cash paid during the years ended December 31, 1995, 1994, and 1993 for
interest (net of amounts capitalized) and income taxes (net of refunds) was as
follows:

<TABLE>
<CAPTION>
                                                                        1995       1994        1993     
                                                                      --------    --------    -------
                                                                              (IN THOUSANDS)
             <S>                                                      <C>          <C>         <C>
             Interest paid, net of amounts capitalized  . . . . .     $ 15,851     $13,487     $ 7,144
             Income taxes paid, net of refunds  . . . . . . . . .     $  3,088     $ 1,903     $(1,818)
                                                                                                      
</TABLE>

      Refer to Note 4 for additional information concerning noncash investing
and financing activities.

3.  INVENTORIES

      Inventories by category are as follows:

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,                                      
                                                                     ---------------------- 
                                                                       1995          1994   
                                                                     ---------    ---------
                                                                          (IN THOUSANDS)

             <S>                                                     <C>           <C>
             Raw materials and components . . . . . . . . . . . .    $  61,578     $ 34,759
             Work in process  . . . . . . . . . . . . . . . . . .       17,167       12,861
             Finished goods . . . . . . . . . . . . . . . . . . .       39,191       27,318
                                                                        ------       ------
                                                                     $ 117,936     $ 74,938
                                                                     =========     ========
</TABLE>

         Work in process and finished goods inventories include the cost of
materials, labor and plant overhead.

4.  ACQUISITIONS AND DISPOSITIONS

      In December 1995, the Company made a strategic decision to dispose of its
Highland store distribution system in the United States which has been a part
of the artificial lift and completion tool equipment division.  This decision
reflected the Company's desire to focus its efforts on manufacturing and to
eliminate the substantial cost associated with serving as a distributor in the
United States market. Early in 1996, the Company completed the sale of its
store distribution system in the United States to Continental Emsco Company for
approximately $7.5 million. The Company received $3 million in cash, a $4
million vendor credit with Continental Emsco Company for future equipment needs
by the Company and a $0.5 million note receivable.  The consideration received
in the sale approximated the net book value of the assets sold, resulting in no
material gain or loss.

      In July 1995, the Company acquired Engemaq S.A., a Brazilian completion
tool business, for $4 million.

      On June 30, 1995, the Company acquired Prideco, Inc. ("Prideco") in a
transaction which involved the issuance of approximately 2.25 million shares of
Common Stock.  The acquisition is expected to provide the Company with greater
manufacturing and marketing efficiencies by allowing for a consolidation of
overhead, reduced distribution and marketing costs and a rationalization of
manufacturing operations.

      The allocations of the purchase price to the fair market values of the
net assets acquired in the 1995 acquisitions are based on preliminary estimate
of fair market value and may be revised when additional information concerning
asset and liability valuations is obtained.

      On September 1, 1994, the Company completed the acquisition of the Fluid
Packed(TM) pumps line of rod pumps, parts and accessories, and the sucker rod
line from National-Oilwell for $13.5 million in cash.  The acquired assets have
been integrated into the Company's  artificial lift and completion tool
equipment division.  Included in the acquisition are manufacturing facilities
and equipment in Woodward, Oklahoma and Santa Teresa, New Mexico and product
inventory.





                                       32
<PAGE>   34
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

4.  ACQUISITIONS AND DISPOSITIONS-(CONTINUED)

      On July 29, 1994, the Company acquired a tubular finishing facility
located in Bryan, Texas ("Bryan facility").  The Company exchanged Eastman
Cherrington Environmental, Inc. ("Eastman Cherrington") including a cash
payment of approximately $2 million for the Bryan facility.  The acquired
tubular finishing mill is a 160,000 square foot industrial facility located on
55 acres.  The facility is being operated as part of the Company's Grant
Prideco drill pipe and tubular products division.  The recorded net book value
of Eastman Cherrington, including operations to the date of disposition,
approximated the appraised value of the Bryan facility.  As a result, there was
no material gain or loss realized on the exchange.  See Note 5 for additional
information on Eastman Cherrington.

      On February 9, 1994, the Company  purchased all of the outstanding stock
of AWI Drilling & Workover, Inc. ("AWI"), for a purchase price of $1.5 million
cash, $5.0 million in notes payable and 433,333 shares of the Company's Common
Stock, $1.00 par value.  The assets of AWI consist primarily of 12 barge
drilling rigs, eight of which were under charter to the Company at the time of
acquisition.  Charter fees incurred by the Company were approximately $2.5
million in 1993.

      In November 1993, the Company acquired Production Oil Tools, a
manufacturer of downhole packers and completion systems, for approximately $2.2
million, comprised of cash and shares of the Company's Common Stock.

      On June 30, 1993, the Company acquired from Energy Service Company its
International Tool & Supply procurement division ("Procurement Division") and
tubular services division ("Tubular Services") for approximately $4.8 million
consisting of cash, notes payable and other obligations.  Tubular Services has
a threading facility for oil country tubulars, specializing in premium tubulars
with large diameters.  Tubular Services was integrated into Grant Prideco.  On
December 30, 1993, the Company sold the Procurement Division, together with
certain other assets of the Company.  Proceeds from the sale were used to repay
the remaining principal balance of notes payable incurred to finance the
acquisitions.

      The acquisitions discussed above were accounted for using the purchase
method of accounting, and their results of operations are included in the
Consolidated Statements of Income from the respective dates of acquisition.
The results of operations related to the acquisition of National-Oilwell's
Fluid Packed pump product lines and the Bryan facility are not material,
therefore, pro forma information is not presented.

      The following table presents selected unaudited consolidated financial
information for the Company on a pro forma basis assuming  the Prideco
acquisition and the sale of the 3,450,000 shares of Common Stock had occurred
on January 1, 1994.  The pro forma information set forth below is not
necessarily indicative of the results that actually would have been achieved
had such transactions been consummated as of  January 1, 1994, or that may be
achieved in the future.

<TABLE>
<CAPTION>
                                                               YEAR ENDED                 YEAR ENDED
                                                         DECEMBER 31, 1995          DECEMBER 31, 1994
                                                         -----------------          -----------------
                                                           (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
    <S>                                                     <C>                        <C>
    Revenues  . . . . . . . . . . . . . . . . . . .         $381,135                   $ 299,191
    Income before extraordinary charge  . . . . . .           15,064                       7,766
    Net income  . . . . . . . . . . . . . . . . . .           15,064                       3,982
    Earnings per share from continuing operations               0.82                        0.42
    Net income per share  . . . . . . . . . . . . .             0.82                        0.22
</TABLE>





                                       33
<PAGE>   35
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

5.  DISCONTINUED OPERATIONS

      On July 29, 1994, the Company disposed of Eastman Cherrington, including
a cash payment of approximately $2 million, in exchange for a tubular finishing
facility located in Bryan, Texas.  Revenues from the discontinued operation of
Eastman Cherrington for 1994 and 1993 were $1.4 million and $3.3 million,
respectively.  The discontinued operation of Eastman Cherrington reflected a
net loss of $797,000 and $2.1 million for 1994 and 1993, respectively.  The
recorded net book value of Eastman Cherrington, including operations to the
date of disposition, approximated the appraised value of the Bryan facility.
As a result, there was no material gain or loss realized on the exchange.

      The results of operations for Eastman Cherrington are reflected in the
accompanying Consolidated Statements of Income as "Discontinued Operations, Net
of Taxes".

6.  SHORT-TERM BORROWINGS AND LINES OF CREDIT

      The Company's short-term borrowings at December 31, 1995 and 1994
consisted of the following:

<TABLE>
<CAPTION>
                                                                                  1995            1994  
                                                                               -----------      ----------
                                                                            (IN THOUSANDS, EXCEPT PERCENTAGES)
    <S>                                                                         <C>               <C>
    Payable to banks under lines of credit, interest at prime to prime plus
      1 1/4% at December 31, 1995 and December 31, 1994; principal
      and interest payable on demand  . . . . . . . . . . . . . . . . . .       $  4,826          $17,265
    Weighted average interest rate on notes outstanding during
      the year  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           10.2%             8.8%
    Average borrowings during the year  . . . . . . . . . . . . . . . . .       $ 24,382          $22,026
    Maximum outstanding during the year   . . . . . . . . . . . . . . . .       $ 43,189          $48,310
</TABLE>

      At December 31, 1995, the Company had in place various working capital
lines of credit secured by the inventory and receivables of the Company's
subsidiaries providing for borrowings up to $65.5 million subject to
availability requirements.  Borrowings under the Company's lines of credit are
generally based on the lender's determination of the collateral value of the
current assets securing the lines of credit. The Company and its subsidiaries
are required to maintain various affirmative and negative  covenants relating
to working capital, earnings and net worth.  The facilities also impose certain
limitations on the use of funds by the Company and its subsidiaries for
acquisitions and capital expenditures, the incurrence of additional
indebtedness and other operational matters and certain prohibitions on the
declaration or payment of dividends by the Company.

      At December 31, 1995, approximately $4.8 million had been borrowed under
the revolving lines of credit and approximately $5.1 million had been used to
support outstanding letters of credit.  Additional borrowings of approximately
$55.6 million were available based on collateral values at December 31, 1995.

7.  LONG-TERM DEBT

      The Company's long-term debt at December 31, 1995 and 1994 consisted of
the following:

<TABLE>
<CAPTION>
                                                                                  1995            1994      
                                                                               ---------        --------- 
                                                                                     (IN THOUSANDS)
    <S>                                                                        <C>              <C>
    Senior Notes due in 2004, interest at 10.25%  . . . . . . . . . . .        $ 120,000        $ 120,000
    Capitalized lease obligations under various leases with various
      installment amounts   . . . . . . . . . . . . . . . . . . . . . .            5,073            4,530
    Other notes payable at various rates  . . . . . . . . . . . . . . .            7,670            4,349
                                                                               ---------        --------- 
                                                                                 132,743          128,879
    Less:  current maturities of long-term debt   . . . . . . . . . . .            5,894            3,189
                                                                               ---------        --------- 
                                                                               $ 126,849        $ 125,690
                                                                               =========        ========= 
</TABLE>


                                       34
<PAGE>   36
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

7.  LONG-TERM DEBT-(CONTINUED)

      The following is a summary of scheduled debt maturities by year (in
thousands):

<TABLE>
            <S>                                                                <C>
            1996  . . . . . . . . . . . . . . . . . . . . . . . . . . .        $   5,894
            1997  . . . . . . . . . . . . . . . . . . . . . . . . . . .            5,094
            1998  . . . . . . . . . . . . . . . . . . . . . . . . . . .            1,464
            1999  . . . . . . . . . . . . . . . . . . . . . . . . . . .              291
            2000  . . . . . . . . . . . . . . . . . . . . . . . . . . .               --
            Thereafter  . . . . . . . . . . . . . . . . . . . . . . . .          120,000
                                                                               ---------
                                                                               $ 132,743
                                                                               =========
</TABLE>

      On March 24, 1994, the Company sold pursuant to a private placement $120
million of 10.25% Senior Notes due 2004.  In July 1994, substantially all of
these notes were exchanged for a substantially identical series of 10.25%
Senior Notes due 2004 with semi-annual interest payments in March and
September.  Both issues of Senior Notes were issued pursuant to the terms of an
Indenture dated as of March 15, 1994.  Certain subsidiaries of the Company have
unconditionally guaranteed the Company's obligations under the Senior Notes.
See Note 17. The Indenture relating to the Senior Notes contains various
customary affirmative and negative covenants that, among other things, limit
the ability of the Company and certain of its subsidiaries to: (i) incur
certain additional indebtedness unless the Company's Consolidated Fixed Charge
Coverage Ratio (as defined in the Indenture) is at least 2.0 to 1.0, (ii) make
dividends, distributions and certain other restricted payments, (iii) create
certain liens, (iv) engage in certain transactions with its affiliates, (v)
engage in sale and leaseback transactions, (vi) make certain asset dispositions
and (vii) merge or consolidate with, or transfer all or substantially all of
its assets to another person.  The Indenture also limits the ability of the
Company and certain of its subsidiaries to issue preferred stock and creates
restrictions on the ability of certain of its subsidiaries to pay dividends and
make other distributions.  As of December 31, 1995, the Company was limited in
the amount of dividends, distributions and other restricted payments that could
be made by it to approximately $137 million.

      The carrying value of the $120 million Senior Notes approximates fair
value as of December 31, 1994.  At December 31, 1995, the fair value of the
$120 million Senior Notes, using a rate currently available to the Company for
similar debt, approximates $125 million.

      The placement of the $120 million Senior Notes provided the Company with
$116 million in net proceeds that were used to prepay the $34 million 12.25%
senior notes due 1997 and to repay substantially all of the Company's
outstanding indebtedness other than the Senior Notes.  The remaining funds were
used for working capital and other general purposes.  In connection with the
early retirement, the Company incurred a first quarter extraordinary charge of
approximately $3.8 million, net of taxes of approximately $1.9 million, or
$0.30 per share.  The extraordinary charge represented the difference between
the reacquisition price and the net carrying value of the $34 million senior
notes, including unamortized debt issuance costs.

      Accrued interest payable, which is included in Other Accrued Liabilities
in the consolidated financial statements, was approximately $3.8 million and
$3.7 million at December 31,  1995 and 1994, respectively.

8.  STOCKHOLDERS' INVESTMENT

    PUBLIC STOCK OFFERING

      Early in the fourth quarter 1995, the Company completed a public offering
of 3,450,000 shares of its Common Stock ("Public Offering").  The net proceeds
of this offering were approximately $72.6 million.





                                       35
<PAGE>   37
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)


8.    STOCKHOLDERS' INVESTMENT-(CONTINUED)

    STOCK OPTION PLANS

      In May 1981, the Company's stockholders approved the Company's Employee
Stock Option Plan ("Option Plan"), a non- qualified stock option plan. The plan
expired in May 1991. Under the Option Plan, options were provided to officers
and key employees of the Company (including directors who are also key
employees) and its subsidiaries to purchase up to an aggregate of 1,000,000
shares of Common Stock of the Company.

      In May 1991, the Company's stockholders approved the Company's
Non-Employee Director Stock Option Plan ("Director Plan"), a non-qualified
stock option plan.  Under the Director Plan, options to purchase up to an
aggregate of 500,000 shares of Common Stock of the Company may be granted to
non-employee directors of the Company.  Options to purchase 15,000 shares of
Common Stock are automatically granted to each non-employee director on the
date of their initial election.   At December 31, 1995, 365,000 shares were
available for the granting of options.

      In May 1992, the Company's stockholders approved the Company's 1992
Employee Stock Option Plan ("ESO Plan").  Under the ESO Plan, options to
purchase up to an aggregate of 600,000 shares of Common Stock of the Company
may be granted to officers and key employees of the Company (including
directors who are also key employees) and its subsidiaries.  At December 31,
1995, 136,000 shares were available for granting of such options.

      Transactions under the above option plans are summarized as follows:

<TABLE>
<CAPTION>
                                                                          NUMBER              OPTION
                                                                            OF              PRICE/RANGE
                                                                          SHARES             PER SHARE
                                                                         --------        ------------------
    <S>                                                                  <C>             <C>     
    Options outstanding, December 31, 1992  . . . . . . . . . . . .       653,300        $  2.69  -  $23.88
      Granted   . . . . . . . . . . . . . . . . . . . . . . . . . .        95,000          11.75  -   16.13
      Exercised   . . . . . . . . . . . . . . . . . . . . . . . . .       (41,237)          2.69  -   11.50
      Canceled  . . . . . . . . . . . . . . . . . . . . . . . . . .       (40,000)         16.50  -   18.25
                                                                         --------        
    Options outstanding, December 31, 1993  . . . . . . . . . . . .       667,063           2.69  -   23.88
      Granted   . . . . . . . . . . . . . . . . . . . . . . . . . .        52,000          13.75
      Exercised   . . . . . . . . . . . . . . . . . . . . . . . . .        (5,160)          2.69
      Canceled  . . . . . . . . . . . . . . . . . . . . . . . . . .       (74,167)         11.50  -   18.25
                                                                         --------        
    Options outstanding, December 31, 1994  . . . . . . . . . . . .       639,736           2.69  -   23.88
      Granted   . . . . . . . . . . . . . . . . . . . . . . . . . .       127,000          13.75  -   18.00
      Exercised   . . . . . . . . . . . . . . . . . . . . . . . . .       (62,736)          2.69  -   16.50
                                                                         --------        
    Options outstanding, December 31, 1995  . . . . . . . . . . . .       704,000           9.38  -   23.88
                                                                         ========        
    Options exercisable as of December 31, 1995   . . . . . . . . .       537,333           9.38  -   23.88
                                                                         ========        

</TABLE>
    PROFIT SHARING PLANS

      The Company and certain of its subsidiaries have adopted retirement plans
which qualify under Section 401(k) of the Internal Revenue Code.  The plans
generally provide for 20% matching contributions by the Company, up to a
maximum liability of 1.2% of each participating employee's annual compensation.
The Company, under each plan, also has the right to make additional
discretionary matching contributions.  Total contributions by the Company under
these plans were $306,000, $193,000 and $383,000 during 1995, 1994 and 1993,
respectively.





                                       36
<PAGE>   38
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

8.    STOCKHOLDERS' INVESTMENT-(CONTINUED)

    EXECUTIVE DEFERRED COMPENSATION PLAN

      In May 1992, the Company's stockholders approved the Executive Deferred
Compensation Stock Ownership Plan (the "EDC Plan").  Under the EDC Plan, a
portion of the compensation for certain key employees of the Company and its
subsidiaries, including officers and employee directors, can be deferred for
payment after retirement or termination of employment.

      The Company has established a grantor trust to fund the benefits under
the EDC Plan.  The funds provided to such trust are invested by a trustee
independent of the Company primarily in Common Stock of the Company which is
purchased by the trustee on the open market.  The assets of the trust are
available to satisfy the claims of all general creditors of the Company in the
event of bankruptcy or insolvency.  Accordingly, the Common Stock held by the
trust has been consolidated for accounting purposes and is included in the
accompanying Consolidated Statements of Stockholders' Investment as "Treasury
Stock, at Cost" and reflected as such on the Consolidated Balance Sheets.  The
compensation expense related to this plan was not significant for any of  the
three years in the period ended December 31, 1995.

9.  INCOME TAXES

      The domestic and foreign components of Income before Income Taxes from
Continuing Operations consisted of the following:

<TABLE>
<CAPTION>
                                                                          1995        1994        1993 
                                                                        --------    --------    --------
                                                                                 (IN THOUSANDS)
    <S>                                                                 <C>         <C>         <C>
    Domestic  . . . . . . . . . . . . . . . . . . . . . . . . . .       $  7,865    $  1,162    $  6,155
    Foreign   . . . . . . . . . . . . . . . . . . . . . . . . . .          8,526       5,286       6,656
                                                                        --------    --------    --------
                                                                        $ 16,391    $  6,448    $ 12,811
                                                                        ========    ========    ========
</TABLE>

     Total income tax provision  (benefit) was recorded as follows:

<TABLE>
<CAPTION>
                                                                          1995        1994        1993    
                                                                        --------    --------    --------
                                                                                  (IN THOUSANDS)
    <S>                                                                 <C>         <C>         <C>
    Income from Continuing Operations   . . . . . . . . . . . . .       $  5,080    $  1,806    $  4,864
    Discontinued Operations   . . . . . . . . . . . . . . . . . .             --          --      (1,185)
    Extraordinary Charge  . . . . . . . . . . . . . . . . . . . .             --      (1,949)         --
                                                                        --------    --------    --------
                                                                        $  5,080    $   (143)   $  3,679
                                                                        ========    ========    ========
</TABLE>

      The Company's provision for income taxes of continuing operations for the
three years ended December 31, 1995, consisted of:
<TABLE>
<CAPTION>
                                                                          1995        1994        1993   
                                                                        --------    --------    --------
                                                                                 (IN THOUSANDS)
    <S>                                                                 <C>         <C>         <C>
    Current
      U.S. Federal  . . . . . . . . . . . . . . . . . . . . . . .       $    250    $    648    $  1,654
      Foreign   . . . . . . . . . . . . . . . . . . . . . . . . .          2,090       1,985       3,017
      State   . . . . . . . . . . . . . . . . . . . . . . . . . .            760         225          97
                                                                        --------    --------    --------
                                                                           3,100       2,858       4,768
                                                                        --------    --------    --------
    Deferred
      U.S. Federal  . . . . . . . . . . . . . . . . . . . . . . .           (184)     (1,229)       (454)
      Foreign   . . . . . . . . . . . . . . . . . . . . . . . . .          2,126         177         202
      State   . . . . . . . . . . . . . . . . . . . . . . . . . .             38          --         348
                                                                        --------    --------    --------
                                                                           1,980      (1,052)         96
                                                                        --------    --------    --------
                                                                        $  5,080    $  1,806    $  4,864
                                                                        ========    ========    ========
</TABLE>


                                       37
<PAGE>   39

                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

9.  INCOME TAXES-(CONTINUED)

      The difference between the tax provision at the statutory federal income
tax rate and the tax provision attributable to income from continuing
operations before income taxes for the three years ended December 31, 1995, in
the accompanying Consolidated Statements of Income is analyzed below:

<TABLE>
<CAPTION>
                                                                           1995      1994         1993
                                                                           ----      -----        ----
    <S>                                                                    <C>       <C>          <C>
    Statutory federal income tax rate   . . . . . . . . . . . . .          35.0%      34.0%       34.0%
    Effect of state income tax, net   . . . . . . . . . . . . . .           3.4        2.3         2.3
    Effect of non-deductible expenses   . . . . . . . . . . . . .           2.2        3.7          .9
    Utilization of net operating loss carryforward  . . . . . . .          (5.4)     (15.5)         --
    Effect of foreign income tax, net   . . . . . . . . . . . . .            .3        (.1)        2.6
    Non-benefitable foreign losses  . . . . . . . . . . . . . . .            .9        6.2          --
    Realization of tax assets   . . . . . . . . . . . . . . . . .          (6.3)        --          --
    Other   . . . . . . . . . . . . . . . . . . . . . . . . . . .            .9       (2.6)       (1.8)
                                                                           ----      -----        ----
                                                                           31.0%      28.0%       38.0%
                                                                           ====      =====        ====
</TABLE>

    The deferred income tax provisions for income before income taxes for the
three years ended December 31, 1995, primarily consisted of:

<TABLE>
<CAPTION>
                                                                         1995         1994         1993
                                                                       --------     -------      ------
                                                                                 (IN THOUSANDS)
    <S>                                                                <C>          <C>          <C>
    Excess of tax over (under) financial deduction related
      to depreciation   . . . . . . . . . . . . . . . . . . . . .      $   (541)    $ 1,262      $1,082
    Excess of tax over (under) financial deductions for reserves          1,623       1,379        (155)
    Benefit provided on losses of subsidiaries not included in
      consolidated return   . . . . . . . . . . . . . . . . . . .            --          --        (477)
    Alternative minimum tax   . . . . . . . . . . . . . . . . . .           257        (660)       (461)
    Book accruals (reversals) not currently deductible  . . . . .         1,042        (775)       (368)
    State and foreign income taxes  . . . . . . . . . . . . . . .         2,164         177         549
    Utilization of net operating loss carryforward  . . . . . . .          (890)       (997)         --
    Foreign tax credits, net  . . . . . . . . . . . . . . . . . .          (414)     (1,281)         --
    Realization of tax assets   . . . . . . . . . . . . . . . . .        (1,025)         --          --
    Other, net  . . . . . . . . . . . . . . . . . . . . . . . . .          (236)       (157)        (74)
                                                                       --------     -------      ------
                                                                       $  1,980     $(1,052)     $   96
                                                                       ========     =======      ======
</TABLE>

      The components of the net deferred tax liability  at December 31, 1995
and December 31, 1994, were as follows:
<TABLE>
<CAPTION>
                                                                               DECEMBER 31,       DECEMBER 31,
                                                                                  1995                1994 
                                                                                ---------          ---------
                                                                                       (IN THOUSANDS) 
    <S>                                                                         <C>                <C>
    Deferred tax assets:
      Net operating loss carryforwards  . . . . . . . . . . . . . . . .         $   5,839          $   5,433
      Alternative minimum tax credit carryforward   . . . . . . . . . .               864              1,121
      Book accruals/other   . . . . . . . . . . . . . . . . . . . . . .             8,458              2,927
      Foreign tax credit carryforwards  . . . . . . . . . . . . . . . .             5,973              3,074
      Valuation allowance   . . . . . . . . . . . . . . . . . . . . . .            (4,186)            (6,101)
                                                                                ---------          ---------
             Total deferred tax asset . . . . . . . . . . . . . . . . .            16,948              6,454
                                                                                ---------          ---------
    Deferred tax liabilities:
      COLEVE production payment   . . . . . . . . . . . . . . . . . . .           (14,907)           (14,224)
      Depreciation  . . . . . . . . . . . . . . . . . . . . . . . . . .           (25,533)           (20,105)
      Other   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (9,434)            (2,910)
                                                                                ---------          ---------
             Total deferred tax liability . . . . . . . . . . . . . . .           (49,874)           (37,239)
                                                                                ---------          ---------
    Net deferred tax liability  . . . . . . . . . . . . . . . . . . . .         $ (32,926)         $ (30,785)
                                                                                =========          =========


</TABLE>



                                       38
<PAGE>   40
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

9.  INCOME TAXES-(CONTINUED)

      The amount of federal operating loss carryforwards for tax purposes
generated by certain subsidiaries prior to their acquisition is $17,060,000,
which includes $4,710,000 of federal operating loss carryforwards previously
benefited for book purposes, and if not utilized will expire between 2001 and
2007.  The use of pre-acquisition operating losses is subject to limitations
imposed by the Internal Revenue Code. At December 31, 1995, the Company had
$860,000 of alternative minimum tax credit carryforwards, which may be used
indefinitely to reduce regular Federal income taxes.  Additionally, at December
31, 1995, the Company, for U.S. Federal income tax purposes, had $760,000 of
foreign tax credit carryforwards, expiring principally between 1996 and 1999.
The realization of a portion of the deferred tax asset is dependent on
generating sufficient taxable income prior to expiration of the carryforward
amounts.  Although realization is not assured, management believes it is more
likely than not that the net deferred tax asset will be realized.  The amount
of the deferred tax asset considered realizable, however, could be reduced in
the near term if estimates of future taxable income during the carryforward
period are reduced.

      The Company has a valuation allowance to reflect the estimated amount of
deferred tax assets for which realization is uncertain.  The net change in the
valuation allowance for the year ended December 31, 1995 was a decrease of
$1,915,000.  The net change principally relates to a reduction in the valuation
allowance required for certain deferred tax assets which realization became
certain during 1995.

  COLEVE TAX MATTER

    In August of 1994, the Company received a letter from the United States
Internal Revenue Service ("IRS") proposing to increase the gain recognized by
the Company upon the dissolution in October 1990 of a joint venture ("COLEVE")
with Columbia Gas Development Corporation.  In general, the IRS' proposal seeks
payment of a tax liability of approximately $14.1 million plus accrued interest
thereon, and includes $3.4 million of taxes relating to the proposed
disallowance of certain interest deductions taken by the Company with respect
to COLEVE that was the subject of a similar letter received by the Company in
the fourth quarter of 1993.  The tax liability with respect to these matters
has been previously provided for as a deferred tax liability in the Company's
consolidated financial statements.  The Company disagrees with the IRS'
position and is currently pursuing its rights of administrative review and
appeal and intends to vigorously contest this matter.  Although the resolution
of these remaining issues could affect the timing of the payment of previously
accrued tax liabilities and require the use of a portion of its available
capital, the Company does not believe that the results of the audit or the
ultimate resolution of the IRS' proposed adjustments will have a material
impact on its consolidated results of operations or financial position.

10. DISPUTES, LITIGATION AND CONTINGENCIES

    LITIGATION AND OTHER DISPUTES

      The Company is aware of various disputes and potential claims and is a
party in various litigation involving claims against the Company, some of which
are covered by insurance.  Based on facts currently known, the Company believes
that the ultimate liability, if any, which may result from known claims,
disputes and pending litigation would not have a material adverse effect on the
Company's consolidated financial position or its results of operations.

    INSURANCE

      The Company is partially self-insured for employee health insurance
claims and for workers' compensation for certain of its employees.  Although
the Company believes that adequate reserves have been provided for expected
liabilities arising from its self-insured obligations, it is reasonably
possible that management's estimates of these liabilities will change over the
near term as circumstances develop.





                                       39
<PAGE>   41
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

11. INSURANCE SETTLEMENT

      On September 30, 1994, the Company settled all of its claims with its
insurance carriers with respect to the termination of its workover drilling
contract with the National Iranian Oil Company ("NIOC").  Under the terms of
the settlement with the Company's insurance carriers, the Company received a
net cash payment of $23 million for reimbursement of certain operating costs
incurred and amounts to be received in accordance with the terms of the
workover drilling contract.  The Company also retained all rights to any funds
collected or recovered by the Company from NIOC and to the rigs and equipment
deployed in Iran. The rigs and the related equipment were moved out of Iran by
December 31, 1994.

    In 1994, the Company adjusted the carrying value of the receivables, rigs
and equipment, and established reserves for demobilization, refurbishment and
contract settlement costs, all of which totaled approximately $18 million. The
insurance settlement which increased operating income by $4.8 million was
reduced by operating losses of $2.6 million relating to the Iranian operations
for 1994.

12. COMMITMENTS

    The Company is committed under various noncancelable operating leases which
primarily relate to office space and equipment.  Total lease expense incurred
under noncancelable operating leases was approximately $5,124,000, $4,626,000
and $3,055,000 for the years ended December 31, 1995, 1994, and 1993,
respectively.

    Future minimum rental commitments under these operating leases are as
follows (in thousands):

<TABLE>
              <S>                                                        <C>
              1996  . . . . . . . . . . . . . . . . . . . . . . . .      $   4,367
              1997  . . . . . . . . . . . . . . . . . . . . . . . .          3,620
              1998  . . . . . . . . . . . . . . . . . . . . . . . .          3,161
              1999  . . . . . . . . . . . . . . . . . . . . . . . .          1,055
              2000  . . . . . . . . . . . . . . . . . . . . . . . .            542
              Thereafter  . . . . . . . . . . . . . . . . . . . . .          5,521
                                                                         ---------
                                                                         $  18,266
                                                                         =========
</TABLE>

13. RELATED PARTY TRANSACTIONS

      The Company incurred legal fees of $594,000, $748,000, and $582,000
during 1995, 1994 and 1993, respectively, with a law firm in which  a director
of the Company is a partner.

      The Company paid approximately $4,037,000 in 1995 and $3,300,000 in 1994
in underwriting fees associated with the Public Offering and the private
placement of the $120 million of 10.25% Senior Notes, respectively.  The
underwriting group for each of these transactions included Lehman Brothers, an
affiliate of Lehman Brothers Holdings Inc., a major stockholder of the Company,
as well as several other unrelated underwriters.  The fee arrangements
associated with these offerings were on terms standard in the underwriting
industry.

14. SUBSEQUENT EVENT

      In January 1996, the Company entered into a long-term manufacturing and
sales agreement with Oil Country Tubular, Ltd. ("OCTL"), an India-based
manufacturer of drill pipe and premium tubulars.  Manufacturing operations on
behalf of the Company are expected to commence during the second quarter of
1996.  In January 1996, under the terms of the agreement with OCTL, the Company
made a one-time payment of $8 million for the exclusive right to have Grant
Prideco's product manufactured at the facility.





                                       40
<PAGE>   42
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

15. SEGMENT INFORMATION

    BUSINESS SEGMENTS

      The Company operates through two business segments: oilfield equipment
and contract drilling.  The oilfield equipment segment manufactures high
performance tubulars and a complete line of artificial lift and completion tool
equipment. The Company's tubular products are used primarily for natural gas
exploration and production.  The Company's contract drilling segment consists
primarily of a fleet of barge rigs used by major and large independent oil and
gas companies primarily for the exploration and development of natural gas in
the U.S. Gulf Coast area.  Internationally, the contract drilling segment is
currently operating one barge rig in Nigeria, two platform rigs in Peru and
four land rigs in Argentina.

      Financial information by industry segment for each of the three years
ended December 31, 1995, is summarized below (in thousands).  Identifiable
assets included in the Corporate and Other column includes the elimination of
intercompany transactions.
<TABLE>
<CAPTION>
                                                                                    CORPORATE
                                                    OILFIELD        CONTRACT           AND
                                                   EQUIPMENT        DRILLING          OTHER          TOTAL
                                                   ----------       --------        ---------       ---------
    <S>                                            <C>              <C>             <C>             <C>
    1995                                                            
      Sales to unaffiliated customers   . . .      $  271,675       $ 79,912        $      --       $351,587
      Operating income (loss)   . . . . . . .          23,091         14,475           (5,126)        32,440
      Identifiable assets   . . . . . . . . .         350,697        151,538          (11,175)       491,060
      Depreciation and amortization   . . . .          12,357          8,378               89         20,824
      Capital expenditures and acquisitions            33,217         22,898               18         56,133
    1994
      Sales to unaffiliated customers   . . .      $  185,285       $ 63,252        $      --       $248,537
      Operating income (loss)   . . . . . . .           8,226         15,831           (4,588)        19,469
      Identifiable assets   . . . . . . . . .         230,592        125,927          (12,285)       344,234
      Depreciation and amortization   . . . .           9,302          4,870               96         14,268
      Capital expenditures and acquisitions            32,533         33,938               91         66,562
    1993
      Sales to unaffiliated customers   . . .      $  171,638       $ 74,379        $      --       $246,017
      Operating income (loss)   . . . . . . .          10,788         11,797           (4,030)        18,555
      Identifiable assets   . . . . . . . . .         180,862         86,385            9,984        277,231
      Depreciation and amortization   . . . .           7,826          4,381               74         12,281
      Capital expenditures and acquisitions            13,119          4,468            2,091         19,678

</TABLE>
   MAJOR CUSTOMERS AND CREDIT RISK

    Substantially all of the Company's customers are engaged in the energy
industry.  This concentration of customers may impact the Company's overall
exposure to credit risk, either positively or negatively, in that customers may
be similarly affected by changes in economic and industry conditions.  The
Company performs ongoing credit evaluations of its customers and does not
generally require collateral in support of its trade receivables.  The Company
maintains reserves for potential credit losses, and actual losses have
historically been within the Company's expectations.  Foreign sales also
present various risks, including risks of war, civil disturbances and
governmental activities that may limit or disrupt markets, restrict the
movement of funds or result in the deprivation of contract rights or the taking
of property without fair consideration.  Most of the Company's foreign sales,
however, are to large international companies or are secured by letter of
credit or similar arrangements.

    In 1995, 1994 and 1993, there was no individual customer who accounted for
10% of consolidated revenues.  With the exception of the contract drilling
segment, whose foreign rigs typically operate under long-term contracts, the
Company does not believe itself to be dependent to any material degree on any
single customer.





                                       41
<PAGE>   43
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

15. SEGMENT INFORMATION-(CONTINUED)

  FOREIGN OPERATIONS AND EXPORT SALES

    The Company's equipment and services are used in approximately 50 countries
by U.S. customers operating abroad and by foreign customers.  Sales of
equipment and services outside the United States accounted for 38%, 36%, and
40% of total revenues in 1995, 1994 and 1993, respectively, based upon the
ultimate destination in which equipment or services were sold, shipped or
provided to the customer by the Company.

    Summarized financial information for the three years ended December 31,
1995, by geographic area is as follows:
<TABLE>
<CAPTION>
                                     WESTERN HEMISPHERE                                  EASTERN HEMISPHERE
                                 ----------------------                             -----------------------
                                 UNITED STATES     OTHER MIDDLE EAST          OTHER    ELIMINATIONS     TOTAL
                                 ----------     -------     --------       --------    ------------   ---------
                                                           (IN THOUSANDS)
<S>                              <C>            <C>         <C>            <C>         <C>            <C>
1995
  Operating revenues from
    unaffiliated customers       $  220,937     $61,293     $     --       $  9,921    $   (3,567)    $288,584
  Export sales to
    unaffiliated customers           63,003          --           --             --            --       63,003
                                 ----------     -------     --------       --------    ----------     --------
  Total revenues  . . . . .         283,940      61,293           --         9,921         (3,567)     351,587
  Operating income (loss)            17,518      13,733         (262)        2,148           (697)      32,440
  Identifiable assets   . .         359,696      88,772        4,295        38,297             --      491,060
1994
  Operating revenues from
    unaffiliated customers       $  162,344     $34,643     $  5,801       $ 5,329     $   (3,304)    $204,813
  Export sales to
    unaffiliated customers           43,724          --           --            --             --       43,724
                                 ----------     -------     --------       --------    ----------     --------
  Total revenues  . . . . .         206,068      34,643        5,801         5,329         (3,304)     248,537
  Operating income (loss)             9,511       7,194        3,219          (170)          (285)      19,469
  Identifiable assets   . .         263,192      41,413       12,866        26,763             --      344,234
1993                                                                                                       
  Operating revenues from
    unaffiliated customers       $  150,729     $31,722     $  7,967       $ 4,675     $   (1,983)    $193,110
  Export sales to                    
    unaffiliated customers           52,847          --           --            --             60       52,907
                                 ----------     -------     --------       --------    ----------     --------
  Total revenues  . . . . .         203,576      31,722        7,967         4,675         (1,923)     246,017
  Operating income  . . . .           9,744       7,372          802           599             38       18,555
  Identifiable assets   . .         200,771      32,281       28,316        15,863             --      277,231
</TABLE>

16. QUARTERLY FINANCIAL DATA (UNAUDITED)

    The following tabulation sets forth unaudited quarterly financial data for
1995 and 1994.

<TABLE>
<CAPTION>
                                                       1ST QTR.    2ND QTR.     3RD QTR.  4TH QTR.     TOTAL    
                                                      ---------   --------     --------   ---------   ---------
                                                               (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                   <C>         <C>          <C>        <C>         <C>
1995
  Revenues  . . . . . . . . . . . . . . . . . .       $  72,660   $ 79,747     $ 93,797   $ 105,383   $ 351,587
  Gross Profit  . . . . . . . . . . . . . . . .          19,504     20,096       24,256      25,438      89,294
  Income before Income Taxes  . . . . . . . . .           2,630      2,743        4,685       6,333      16,391
  Net Income  . . . . . . . . . . . . . . . . .           1,631      1,753        3,556       4,371      11,311
  Net Income Per Common Share   . . . . . . . .             .13        .14          .24         .24         .77 (1)
                                                                                                             --

</TABLE>




                                       42
<PAGE>   44
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

16. QUARTERLY FINANCIAL DATA (UNAUDITED)-(CONTINUED)

<TABLE>
<CAPTION>
                                                      1ST QTR.     2ND QTR.     3RD QTR.     4TH QTR.    TOTAL  
                                                      ---------   --------     --------   ---------   ---------
                                                                 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                   <C>         <C>          <C>        <C>         <C>
1994
  Revenues  . . . . . . . . . . . . . . . . . .       $  55,118   $ 50,566     $ 68,079   $  74,774   $ 248,537
  Gross Profit  . . . . . . . . . . . . . . . .          14,927     14,874       18,689      18,910      67,400
  Income before Income Taxes  . . . . . . . . .           1,336        195        2,698       2,219       6,448
  Income from Continuing Operations   . . . . .             855        127        1,679       1,981       4,642
  Extraordinary Charge, Net of Taxes  . . . . .          (3,784)        --           --          --      (3,784)
  Net Income (Loss)   . . . . . . . . . . . . .          (2,929)       127        1,679       1,981         858
  Net Income (Loss) Per Common Share:
    Continuing Operations   . . . . . . . . . .       $     .07   $    .01     $    .13   $     .16   $     .37
    Extraordinary Charge, Net of Taxes  . . . .           ( .30)        --           --          --        (.30)
                                                      ---------   --------     --------   ---------   ---------
    Net Income (Loss)   . . . . . . . . . . . .       $   ( .23)  $    .01     $    .13   $     .16   $     .07
                                                      =========   ========     ========   =========   =========
</TABLE>

(1) Net Income Per Common Share for the year ended December 31, 1995, differs
    from the summation of the individual quarters within that year due to the
    impact of the Public Offering of Common Stock and shares issued in 
    connection with the Prideco acquisition.

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

    The $120 million Senior Notes which are described in Note 7 are
unconditionally guaranteed on a joint and several basis, by certain
subsidiaries of the Company.  Accordingly, the following condensed
consolidating balance sheets as of December 31, 1995 and 1994, and the related
condensed consolidating statements of income and cash flows for each of the
three years in the period ended December 31, 1995, have been provided.  The
condensed consolidating financial statements herein are followed by notes which
are an integral part of these statements.





                                       43
<PAGE>   45
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS-(CONTINUED)

                     CONDENSED CONSOLIDATING BALANCE SHEET
                               DECEMBER 31, 1995
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                        NON-
                                              PARENT   GUARANTORS      GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                           --------    ----------     ----------   -----------     ------------
<S>                                        <C>         <C>            <C>          <C>             <C>
ASSETS

CURRENT ASSETS:
  Cash and Cash Equivalents   . . . .      $    532    $    2,985     $   1,000    $        --     $   4,517
  Other Current Assets  . . . . . . .         1,564       208,342        35,151             --       245,057
                                           --------    ----------     ---------    -----------     ---------
                                              2,096       211,327        36,151             --       249,574
                                           --------    ----------     ---------    -----------     ---------
PROPERTY, PLANT AND EQUIPMENT,
  AT COST, NET OF ACCUMULATED
  DEPRECIATION  . . . . . . . . . . .           159       177,945        14,598             --       192,702

INTERCOMPANY AND INVESTMENT
  IN SUBSIDIARIES, NET  . . . . . . .       342,844     (169,154)        18,417       (192,107)           --

OTHER ASSETS  . . . . . . . . . . . .         4,969        47,079        (3,264)            --        48,784
                                           --------    ----------     ---------    -----------     ---------
                                           $350,068    $  267,197     $  65,902    $  (192,107)    $ 491,060
                                           ========    ==========     =========    ===========     =========


LIABILITIES AND STOCKHOLDERS'
  INVESTMENT

CURRENT LIABILITIES:
  Short-Term Borrowings   . . . . . .      $     --    $      795     $   4,031    $        --     $   4,826
  Current Maturities of Long-Term
     Debt   . . . . . . . . . . . . .            --         5,484           410             --         5,894
  Accounts Payable and Other Accrued
     Liabilities  . . . . . . . . . .         4,055        72,451         9,890             --        86,396
                                           --------    ----------     ---------    -----------     ---------
                                              4,055        78,730        14,331             --        97,116
                                           --------    ----------     ---------    -----------     ---------

LONG-TERM DEBT  . . . . . . . . . . .       120,000         6,262           587             --       126,849

OTHER LIABILITIES . . . . . . . . . .       (2,053)        22,394        18,688             --        39,029
                                           --------    ----------     ---------    -----------     ---------

STOCKHOLDERS' INVESTMENT  . . . . . .       228,066       159,811        32,296      (192,107)       228,066
                                           --------    ----------     ---------    -----------     ---------
                                           $350,068    $  267,197     $  65,902    $ (192,107)     $ 491,060
                                           ========    ==========     =========    ===========     =========

</TABLE>




                                       44
<PAGE>   46
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - (CONTINUED)


                     CONDENSED CONSOLIDATING BALANCE SHEET
                               DECEMBER 31, 1994
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                         NON-
                                             PARENT    GUARANTORS     GUARANTORS     ELIMINATIONS   CONSOLIDATED
                                           ---------   ----------     ----------     ------------   ------------
<S>                                        <C>         <C>            <C>            <C>            <C>
ASSETS

CURRENT ASSETS:
  Cash and Cash Equivalents   . . .        $     166   $    1,593     $    1,385     $       --     $  3,144
  Other Current Assets  . . . . . .            1,549      135,170         24,940             --      161,659
                                           ---------   ----------     ----------     ----------     --------
                                               1,715      136,763         26,325             --      164,803
                                           ---------   ----------     ----------     ----------     --------

PROPERTY, PLANT AND EQUIPMENT,
  AT COST, NET OF ACCUMULATED
  DEPRECIATION  . . . . . . . . . .              230      140,024         10,641             --      150,895

INTERCOMPANY AND INVESTMENT
  IN SUBSIDIARIES, NET  . . . . . .          229,873     (134,749)        18,058       (113,182)          --

OTHER ASSETS  . . . . . . . . . . .            4,124       23,496            916             --       28,536
                                           ---------   ----------     ----------     ----------     --------
                                           $ 235,942   $  165,534     $   55,940     $ (113,182)    $344,234
                                           =========   ==========     ==========     ==========     ========


LIABILITIES AND STOCKHOLDERS'
  INVESTMENT

CURRENT LIABILITIES:
  Short-Term Borrowings   . . . . .        $      --   $   13,627     $    3,638     $       --     $ 17,265
  Current Maturities of Long-Term
    Debt  . . . . . . . . . . . . .               --        1,480          1,709             --        3,189
  Accounts Payable and Other Accrued
    Liabilities   . . . . . . . . .            5,291       37,748          6,972             --       50,011
                                           ---------   ----------     ----------     ----------     --------
                                               5,291       52,855         12,319             --       70,465
                                           ---------   ----------     ----------     ----------     --------

LONG-TERM DEBT  . . . . . . . . . .          120,062        4,605          1,023             --      125,690

OTHER  LIABILITIES  . . . . . . . .             (324)      21,829         15,661             --       37,166
                                           ---------   ----------     ----------     ----------     --------

STOCKHOLDERS' INVESTMENT  . . . . .          110,913       86,245         26,937       (113,182)     110,913
                                           ---------   ----------     ----------     ----------     --------
                                           $ 235,942   $  165,534     $   55,940     $ (113,182)    $344,234
                                           =========   ==========     ==========     ==========     ========


</TABLE>



                                       45
<PAGE>   47
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - (CONTINUED)




                  CONDENSED CONSOLIDATING STATEMENT OF INCOME
                          YEAR ENDED DECEMBER 31, 1995
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                         NON-
                                            PARENT     GUARANTORS     GUARANTORS     ELIMINATIONS   CONSOLIDATED
                                           --------    ----------     ----------     ------------   ------------
<S>                                        <C>         <C>            <C>            <C>            <C>
REVENUES  . . . . . . . . . . . . . .      $     --    $  289,246     $   62,341     $       --     $ 351,587

COSTS AND EXPENSES  . . . . . . . . .         5,123       264,111         49,913             --       319,147
                                           --------    ----------     ----------     ----------     ---------

OPERATING INCOME (LOSS) . . . . . . .        (5,123)       25,135         12,428             --        32,440
                                           --------    ----------     ----------     ----------     ---------

OTHER INCOME (EXPENSE)
   Interest Income (Expense), Net   .         2,539       (17,174)        (1,970)            --       (16,605)
   Equity in Subsidiaries, Net of
     Taxes  . . . . . . . . . . . . .        11,179            --             --        (11,179)           --
   Other, Net   . . . . . . . . . . .           360         1,317         (1,121)            --           556
                                           --------    ----------     ----------     ----------     ---------

INCOME BEFORE INCOME TAXES  . . . . .         8,955         9,278          9,337        (11,179)       16,391

PROVISION (BENEFIT) FOR INCOME TAXES         (2,356)        4,046          3,390             --         5,080
                                           --------    ----------     ----------     ----------     ---------

NET INCOME  . . . . . . . . . . . . .      $ 11,311    $    5,232     $    5,947     $  (11,179)    $  11,311
                                           ========    ==========     ==========     ==========     =========

</TABLE>



                  CONDENSED CONSOLIDATING STATEMENT OF INCOME
                          YEAR ENDED DECEMBER 31, 1994
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                          NON-
                                            PARENT      GUARANTORS    GUARANTORS     ELIMINATIONS  CONSOLIDATED
                                           --------    ----------     ----------     ------------  ------------
<S>                                        <C>         <C>            <C>            <C>           <C>
REVENUES  . . . . . . . . . . . . . .      $     --    $  211,052     $   37,485     $       --    $ 248,537

COSTS AND EXPENSES  . . . . . . . . .         4,775       190,924         33,369             --      229,068
                                           --------    ----------     ----------     ----------    ---------
OPERATING INCOME (LOSS)  . . . . . .         (4,775)       20,128          4,116             --       19,469
                                           --------    ----------     ----------     ----------    ---------

OTHER INCOME (EXPENSE)
    Interest Income (Expense), Net  .        (6,828)       (6,187)          (490)            --      (13,505)
    Equity in Subsidiaries, Net of
      Taxes   . . . . . . . . . . . .        11,343            --             --        (11,343)          --
    Other, Net  . . . . . . . . . . .            35           459            (10)            --          484
                                           --------    ----------     ----------     ----------    ---------

INCOME (LOSS) BEFORE INCOME TAXES . .          (225)       14,400          3,616        (11,343)       6,448

PROVISION (BENEFIT) FOR INCOME TAXES         (4,867)        4,558          2,115             --        1,806
                                           --------    ----------     ----------     ----------    ---------

INCOME FROM CONTINUING OPERATIONS . .         4,642         9,842          1,501        (11,343)       4,642

EXTRAORDINARY CHARGE, NET
  OF TAXES  . . . . . . . . . . . . .        (3,784)           --             --             --       (3,784)
                                           --------    ----------     ----------     ----------    ---------

NET INCOME  . . . . . . . . . . . . .      $    858    $    9,842     $    1,501     $  (11,343)   $     858
                                           ========    ==========     ==========     ==========    =========

</TABLE>




                                       46
<PAGE>   48

                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - (CONTINUED)


                  CONDENSED CONSOLIDATING STATEMENT OF INCOME
                          YEAR ENDED DECEMBER 31, 1993
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                          NON-
                                            PARENT      GUARANTORS     GUARANTORS     ELIMINATIONS   CONSOLIDATED
                                           --------    ----------      ----------     ------------   ------------
<S>                                        <C>         <C>             <C>            <C>            <C>
REVENUES  . . . . . . . . . . . . . .      $     --    $  205,278      $  40,739      $      --      $ 246,017

COSTS AND EXPENSES  . . . . . . . . .         4,226       186,863         36,373             --        227,462
                                           --------    ----------      ---------      ---------      ---------

OPERATING INCOME (LOSS) . . . . . . .        (4,226)       18,415          4,366             --         18,555
                                           --------    ----------      ---------      ---------      ---------

OTHER INCOME (EXPENSE)
  Interest Income (Expense), Net  . .        (2,334)       (4,980)           105             --         (7,209)
                                                                                                            
  Equity in Subsidiaries, Net  of
    Taxes   . . . . . . . . . . . . .        11,565            --             --        (11,565)            --
  Other, Net  . . . . . . . . . . . .         1,076           201            188             --          1,465
                                           --------    ----------      ---------      ---------      ---------

INCOME (LOSS) BEFORE INCOME TAXES . .         6,081        13,636          4,659        (11,565)        12,811
                                                                                                            

PROVISION (BENEFIT) FOR INCOME TAXES         (1,866)        5,213          1,517             --          4,864
                                           --------    ----------      ---------      ---------      ---------

INCOME FROM CONTINUING OPERATIONS . .         7,947         8,423          3,142        (11,565)         7,947

DISCONTINUED OPERATIONS, NET
  OF TAXES  . . . . . . . . . . . . .        (2,057)           --             --             --         (2,057)
                                           --------    ----------      ---------      ---------      ---------

NET INCOME  . . . . . . . . . . . . .      $  5,890    $    8,423      $   3,142      $ (11,565)     $   5,890
                                           ========    ==========      =========      =========      =========


</TABLE>



                                       47
<PAGE>   49
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - (CONTINUED)


                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 1995
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             NON-                                 
                                                PARENT     GUARANTORS     GUARANTORS     ELIMINATIONS   CONSOLIDATED
                                               --------    ----------     ----------     ------------   ------------
<S>                                            <C>         <C>            <C>            <C>            <C>         
CASH FLOWS FROM OPERATING                                                                                           
ACTIVITIES:                                                                                                         
 Net Income . . . . . . . . . . . . . .        $ 11,311    $   5,232      $  5,947       $(11,179)       $ 11,311    
                                                                                                                    
    Equity in Earnings of                                                                                           
      Subsidiaries  . . . . . . . . . .         (11,179)          --            --         11,179              --    
    Other Adjustments and Charges   . .          (3,808)     (39,633)       10,258             --         (33,183)    
                                               --------    ---------      --------       ---------       --------
    Net Cash Provided (Used) by                                                                                     
      Operations  . . . . . . . . . . .          (3,676)     (34,401)       16,205             --         (21,872)    
                                               --------    ---------      --------       ---------       --------
                                                                                                                    
CASH FLOWS FROM INVESTING                                                                                           
 ACTIVITIES:                                                                                                     
  Proceeds from Sale of Business and                                                                                
    Assets  . . . . . . . . . . . . . .              --        2,880           489             --           3,369    
  Acquisition of Businesses   . . . . .              --       (4,007)       (4,098)            --          (8,105)    
  Capital Expenditures for Property, Plant                                                                          
    and Equipment   . . . . . . . . . .             (19)     (28,689)       (3,982)            --         (32,690)    
                                               --------    ---------      --------       ---------       --------
    Net Cash Used by Investing                                                                                      
      Activities  . . . . . . . . . . .             (19)     (29,816)       (7,591)            --         (37,426)    
                                               --------    ---------      --------       ---------       --------
                                                                                                                    
CASH FLOWS FROM FINANCING                                                                                           
 ACTIVITIES:                                                                                                         
  Issuance of Common Stock  . . . . . .          73,304           --          (656)            --          72,648    
  Borrowings (Repayments) Under Revolving                                                                           
    Lines of Credit, Net  . . . . . . .              --      (12,832)          393             --         (12,439)    
  Borrowings Under Term Debt  . . . . .              --        3,848           688             --           4,536    
  Repayment on Term Debt  . . . . . . .              --       (3,412)       (1,041)            --          (4,453)    
  (Increase) Decrease in amounts Due to                                                                              
    and from Subsidiaries, Net  . . . .         (68,885)      78,005        (9,120)            --              --    
  Other, Net  . . . . . . . . . . . . .            (358)          --           656             --             298    
                                               --------    ---------      --------       ---------       --------
      Net Cash Provided (Used) by Financing                                                                         
      Activities  . . . . . . . . . . .           4,061       65,609        (9,080)            --          60,590    
                                               --------    ---------      --------       ---------       --------
                                                                                                                    
Effect of Translation Adjustment on Cash             --           --            81             --              81
                                               --------    ---------      --------       ---------       --------
                                                                                                                    
Net Increase (Decrease) in Cash and Cash                                                                            
  Equivalents   . . . . . . . . . . . .             366        1,392          (385)            --           1,373    
                                                                                                                    
Cash and Cash Equivalents at Beginning                                                                              
  of Year   . . . . . . . . . . . . . .             166        1,593         1,385             --           3,144    
                                               --------    ---------      --------       ---------       --------
                                                                                                                    
Cash and Cash Equivalents at End                                                                                    
  of Year   . . . . . . . . . . . . . .        $    532    $   2,985      $  1,000       $     --      $    4,517    
                                               ========    =========      ========       =========       ========

</TABLE>




                                       48
<PAGE>   50
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - (CONTINUED)


                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 1994
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             NON-
                                               PARENT      GUARANTORS    GUARANTORS     ELIMINATIONS   CONSOLIDATED
                                              --------    -----------    ----------     ------------   ------------
<S>                                           <C>         <C>            <C>            <C>            <C>
CASH FLOWS FROM OPERATING
   ACTIVITIES:
     Net Income   . . . . . . . . . . .       $    858    $    9,842     $    1,501     $  (11,343)    $      858
   Insurance Settlement, Net  . . . . .             --        23,000             --             --         23,000
   Equity in Earnings of Subsidiaries          (11,343)           --             --         11,343             --
   Other Adjustments and Changes  . . .         11,329       (37,044)        (2,901)            --        (28,616)
                                              --------    ----------     ----------     ----------     ----------
    Net Cash Provided (Used) by             
     Operations   . . . . . . . . . . .            844        (4,202)        (1,400)            --         (4,758)
                                              --------    ----------     ----------     ----------     ----------

CASH FLOWS FROM INVESTING
   ACTIVITIES:
   Proceeds from Sale of Business and Assets        --         3,103             28             --          3,131
   Acquisition of Businesses  . . . . .             --       (17,076)            --             --        (17,076)
   Capital Expenditures for Property, Plant
    and Equipment   . . . . . . . . . .            (91)      (16,441)        (3,075)            --        (19,607)
                                              --------    ----------     ----------     ----------     ----------
    Net Cash Used by Investing Activities          (91)      (30,414)        (3,047)            --        (33,552)
                                              --------    ----------     ----------     ----------     ----------

CASH FLOWS FROM FINANCING
   ACTIVITIES:
   Proceeds from Issuance of Long-Term Debt    120,000            --             --             --        120,000
   Short-Term Borrowings, Net   . . . .             --       (27,894)        (1,046)            --        (28,940)
   Repayments on Term Debt, Net   . . .        (34,442)       (8,188)        (2,067)            --        (44,697)
   (Increase) Decrease in amounts Due to and
    from Subsidiaries, Net  . . . . . .        (78,181)       70,091          8,090             --             --
   Other, Net   . . . . . . . . . . . .         (9,408)           --             --             --         (9,408)
                                              --------    ----------     ----------     ----------     ----------
    Net Cash Provided (Used) by Financing
    Activities  . . . . . . . . . . . .         (2,031)       34,009          4,977             --         36,955
                                              --------    ----------     ----------     ----------     ----------

Effect of Translation Adjustment on
  Cash  . . . . . . . . . . . . . . .               --            --           (300)            --           (300)
                                              --------    ----------     ----------     ----------     ----------

Net Increase (Decrease) in Cash and Cash
  Equivalents   . . . . . . . . . . . .         (1,278)         (607)           230             --         (1,655)

Cash and Cash Equivalents at Beginning
  of Year   . . . . . . . . . . . . .            1,444         2,200          1,155             --          4,799
                                              --------    ----------     ----------     ----------     ----------

Cash and Cash Equivalents at End of
  Year  . . . . . . . . . . . . . . .         $    166    $    1,593     $    1,385     $       --     $    3,144
                                              ========    ==========     ==========     ==========     ==========

</TABLE>




                                       49
<PAGE>   51





                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - (CONTINUED)


                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 1993
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                         NON-
                                            PARENT     GUARANTORS     GUARANTORS     ELIMINATIONS   CONSOLIDATED
                                           --------    ----------     ----------     ------------   ------------
<S>                                        <C>         <C>            <C>            <C>            <C>        
CASH FLOWS FROM OPERATING
 ACTIVITIES:
    Net Income  . . . . . . . . . . .      $  5,890    $    8,423     $   3,142      $ (11,565)     $    5,890
    Equity in Earnings of
      Subsidiaries  . . . . . . . . .       (11,565)           --            --         11,565              --
    Other Adjustments and Changes   .        (1,780)       (1,037)      (12,202)         3,552         (11,467)
                                           --------    ----------     ---------      ---------      ----------
      Net Cash Provided (Used) by
        Operations  . . . . . . . . .        (7,455)        7,386        (9,060)         3,552          (5,577)
                                           --------    ----------     ---------      ---------      ----------

CASH FLOWS FROM INVESTING
 ACTIVITIES:
  Proceeds from Sale of Business and
    Assets  . . . . . . . . . . . . .         3,500           447           307             --           4,254
  Acquisition of Businesses   . . . .          (633)           51          (351)            --            (933)
  Capital Expenditures for Property,
    Plant and Equipment   . . . . . .            --        (9,615)       (5,270)            --         (14,885)
                                           --------    ----------     ---------      ---------      ----------
    Net Cash Provided (Used) by
      Investing Activities  . . . . .         2,867        (9,117)       (5,314)            --         (11,564)
                                           --------    ----------     ---------      ---------      ----------

CASH FLOWS FROM FINANCING
    ACTIVITIES:
  Short-Term Borrowings, Net  . . . .            --        17,283         4,307             --          21,590
  (Repayments)/Borrowings of Term Debt       (3,801)       (1,795)        2,758             --          (2,838)
  (Increase) Decrease in Amounts Due
    to and from Subsidiaries, Net   .         9,434       (14,344)        8,462         (3,552)             --
  Other, Net  . . . . . . . . . . . .          (384)           --            --             --            (384)
                                           --------    ----------     ---------      ---------      ----------
    Net Cash Provided by Financing
      Activities  . . . . . . . . . .         5,249         1,144        15,527         (3,552)         18,368
                                           --------    ----------     ---------      ---------      ----------

Effect of Translation Adjustment on
  Cash  . . . . . . . . . . . . . . .            --            --          (468)            --            (468)
                                           --------    ----------     ---------      ---------      ----------

Net Increase (Decrease) in Cash and Cash
  Equivalents   . . . . . . . . . . .           661          (587)          685             --             759

Cash and Cash Equivalents at Beginning
  of Year   . . . . . . . . . . . . .           783         2,787           470             --           4,040
                                           --------    ----------     ---------      ---------      ----------

Cash and Cash Equivalents at End
  of Year   . . . . . . . . . . . . .      $  1,444    $    2,200     $   1,155     $       --   $       4,799
                                           ========    ==========     =========      =========      ==========

</TABLE>




                                       50
<PAGE>   52
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

17. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - (CONTINUED)

A.  SIGNIFICANT ACCOUNTING POLICIES

  Reclassifications

    Certain reclassifications of prior year balances have been made to conform
such amounts to corresponding 1995 classifications.

  Elimination Entries

    Revenues and related Cost of Sales by individual category have been
presented net of intercompany transactions.

B.  LONG-TERM DEBT

    The Company's summary of scheduled debt maturities by year, description of
debt and other information is disclosed in Note 7.

C.  COLEVE TAX MATTER

    The Company received a letter from the IRS seeking payment of a tax
liability of approximately $14.1 million plus accrued interest thereon with
respect to COLEVE.  See Note 9 for additional information regarding this tax
matter.

D.  INSURANCE SETTLEMENT

    On September 30, 1994, the Company received net proceeds of $23 million
from its insurance carriers as settlement for the termination of its workover
drilling contract with NIOC.  See Note 11 for additional information regarding
this settlement.

E.  OTHER

    Notes 1 through 16 should be read in conjunction with the Condensed
Consolidating Financial Statements.

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

  None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  Pursuant to General Instruction G(3), information on directors and executive
officers of the Registrant is incorporated by reference from the Registrant's
Definitive Proxy Statement to be filed pursuant to Regulation 14A.

ITEM 11.  EXECUTIVE COMPENSATION

  Pursuant to General Instruction G(3), information on executive compensation
is incorporated by reference from the Registrant's Definitive Proxy Statement
to be filed pursuant to Regulation 14A.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  Pursuant to General Instruction G(3), information on security ownership of
certain beneficial owners and management is incorporated by reference from the
Registrant's Definitive Proxy Statement to be filed pursuant to





                                       51
<PAGE>   53
Regulation 14A.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Pursuant to General Instruction G(3), information on certain relationships
and related transactions is incorporated by reference from the Registrant's
Definitive Proxy Statement to be filed pursuant to Regulation 14A.

                                    PART IV

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

   The following documents are filed as a part of this report or incorporated
herein by reference:

CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

   The consolidated financial statements and financial statement schedule of
the Company are listed on the index on page 24.

REPORTS ON FORM 8-K

   The Company filed no reports on Form 8-K during the fourth quarter of 1995.

EXHIBITS

     3.1    -     Certificate of Incorporation of the Company, as amended
                  through May 22, 1991 (incorporated by reference to Exhibit
                  No. 4.1 to the Registration Statement on Form S-3;
                  Registration No. 33-40833).
     3.2    -     By-laws as amended (incorporated by reference to Exhibit No.
                  3.2 to Form 10-K, File 0-7265, filed March 1, 1994).
     4.1    -     Certificate of Incorporation of the Company, as amended
                  through May 22, 1991 (incorporated by reference to Exhibit
                  No. 4.1 to the Registration Statement on Form S-3;
                  Registration No. 33-40833).
     4.2    -     By-laws as amended (incorporated by reference to Exhibit No.
                  3.2 to Form 10-K, File 0-7265, filed March 1, 1994).
     4.3    -     Indenture dated March 15, 1994, among Energy Ventures, Inc.,
                  as Issuer, the Subsidiary Guarantors party thereto, as
                  Guarantors, and Chemical Bank, as Trustee (incorporated by
                  reference to Form 8-K, File 0-7265, filed April 5, 1994).
     4.4    -     Specimen 10 1/4% Senior Note due 2004 of Energy Ventures,
                  Inc. (incorporated by reference to Form 8-K, File 0-7265,
                  filed April 5, 1994).
     4.5    -     First Supplemental Indenture by and among Energy Ventures,
                  Inc., Prideco and Chemical Bank, as trustee, dated June 30,
                  1995 (incorporated by reference to Exhibit No. 4.4 to the
                  Registration Statement on Form S-3; Registration No.
                  33-61933).
    10.1    -     Letter Agreement dated September 24, 1990, among ENGY, Inc.,
                  Columbia Gas Transmission Corporation, and COLEVE, a joint
                  venture (incorporated by reference to Exhibit No. 10.32 to
                  the Registration Statement on Form S-2; Registration No.
                  33-36653).
    10.2    -     Letter Agreement dated September 24, 1990, between ENGY, Inc.
                  and Columbia Gas Transmission Corporation (incorporated by
                  reference to Exhibit No. 10.33 to the Registration Statement
                  on Form S-2; Registration No. 33-36653).
    10.3    -     Purchase and Sale Agreement between ENGY, Inc. and Columbia
                  Gas Development Corporation dated October 22, 1990 and
                  Exhibit A(1) thereto (incorporated by reference to Form 8-K,
                  File 0-7265, filed November 6, 1990).
    10.4    -     COLEVE Termination Agreement between Columbia Gas Development
                  Corporation, ENGY, Inc. and Energy Ventures, Inc. dated
                  October 22, 1990 (incorporated by reference to Form 8-K, File
                  0-7265, filed November 6, 1990).
    10.5    -     Dismissal Agreement between Columbia Gas Development
                  Corporation, ENGY, Inc. and COLEVE dated October 22, 1990
                  (incorporated by reference to Form 8-K, File 0-7265, filed
                  November 6, 1990).
    10.6    -     Amended and Restated Loan and Security Agreement among
                  EVI-Highland Pump Company, Grant TFW Inc., and Mallard
                  Drilling, Inc. as Borrowers, Energy Ventures, Inc., as
                  Guarantor, and Transamerica Business Credit Corporation, as
                  Lender, dated October 13, 1992 (incorporated by reference to
                  Form 10-Q, File 0-7265, filed November 16, 1992).





                                       52
<PAGE>   54
     10.7   -     First Amendatory Agreement dated May 5, 1993 to Amended and
                  Restated Loan and Security Agreement dated October 13, 1992
                  by and among EVI-Highland Pump Company, Grant TFW Inc., and
                  Mallard Drilling, Inc., as Borrowers, Energy Ventures, Inc.,
                  as Guarantor, and Transamerica Business Credit Corporation,
                  as Lender (incorporated by reference to Form 10-K, File
                  0-7265, filed March 1, 1994).
     10.8   -     Second Amendatory Agreement dated August 12, 1993 to Amended
                  and Restated Loan and Security Agreement dated October 13,
                  1992 by and among EVI-Highland Pump Company, Grant TFW Inc.,
                  and Mallard Drilling, Inc., as Borrowers, Energy Ventures,
                  Inc., as Guarantor, and Transamerica Business Credit
                  Corporation, as Lender (incorporated by reference to Form
                  10-Q, File 0-7265, filed November 3, 1993).
     10.9   -     Third Amendatory Agreement dated October 12, 1993 to Amended
                  and Restated Loan and Security Agreement dated October 13,
                  1992 by and among EVI-Highland Pump Company, Grant TFW Inc.,
                  and Mallard Drilling, Inc., as Borrowers, Energy Ventures,
                  Inc., as Guarantor, and Transamerica Business Credit
                  Corporation, as Lender (incorporated by reference to Form
                  10-Q, File 0-7265, filed November 3, 1993).
     10.10  -     Fourth Amendatory Agreement dated February 21, 1994 to
                  Amended and Restated Loan and Security Agreement dated
                  October 13, 1992 by and among EVI-Highland Pump Company,
                  Grant TFW Inc., and Mallard Drilling, Inc., as Borrowers,
                  Energy Ventures, Inc., as Guarantor, and Transamerica
                  Business Credit Corporation, as Lender (incorporated by
                  reference to Form 10-Q, File 0-7265, filed May 11, 1994).
     10.11  -     Fifth Amendatory Agreement dated March 22, 1994 to Amended
                  and Restated Loan and Security Agreement dated October 13,
                  1992 by and among EVI-Highland Pump Company, Grant TFW Inc.,
                  and Mallard Drilling, Inc., as Borrowers, Energy Ventures,
                  Inc., as Guarantor, and Transamerica Business Credit
                  Corporation, as Lender (incorporated by reference to Form
                  10-Q, File 0-7265, filed May 11, 1994).
     10.12  -     Letter Agreement dated May 5, 1994 to Amended and Restated
                  Loan and Security Agreement dated October 13, 1992 by and
                  among EVI-Highland Pump Company, Grant TFW Inc., and Mallard
                  Drilling, Inc., as Borrowers, Energy Ventures, Inc., as
                  Guarantor, and Transamerica Business Credit Corporation, as
                  Lender (incorporated by reference to Form 10-Q, File 0-7265,
                  filed May 11, 1994).
   **10.13  -     Sixth Amendatory Agreement dated June 30, 1994, to Amended
                  and Restated Loan and Security Agreement dated October 13,
                  1992 by and among EVI-Highland Pump Company, Grant TFW Inc.
                  and Mallard Bay Drilling, Inc., as Borrowers, Energy
                  Ventures, Inc., as Guarantor, and Transamerica Business
                  Credit Corporation, as Lender.
   **10.14  -     Seventh Amendatory Agreement dated May 18, 1995, to Amended
                  and Restated Loan and Security Agreement dated October 13,
                  1992 by and among EVI-Highland Pump Company, Grant TFW Inc.
                  and Mallard Bay Drilling, Inc., as Borrowers, Energy
                  Ventures, Inc., as Guarantor, and Transamerica Business
                  Credit Corporation, as Lender.
   **10.15  -     Eighth Amendatory Agreement dated September 13, 1995, to
                  Amended and Restated Loan and Security Agreement dated
                  October 13, 1992 by and among EVI-Highland Pump Company,
                  Grant Prideco, Inc. and Mallard Bay Drilling, Inc., as
                  Borrowers, Energy Ventures, Inc., as Guarantor, and
                  Transamerica Business Credit Corporation, as Lender.
    *10.16  -     Executive Deferred Compensation Stock Ownership Plan and
                  related Trust Agreement (incorporated by reference to Form
                  10-Q, File 0-7265, filed November 16, 1992).
     10.17  -     First Amendment to Energy Ventures, Inc. Executive Deferred
                  Compensation Stock Ownership Plan dated June 28, 1993
                  (incorporated by reference to Exhibit No. 4.3 to the
                  Registration Statement on Form S-8; Registration No.
                  33-65790).
    *10.18  -     Non-Employee Director Deferred Compensation Plan
                  (incorporated by reference to Form 10-Q, File 0-7265, Filed
                  November 16, 1992).
    *10.19  -     1991 Non-Employee Director Stock Option Plan and Form of
                  Agreement (incorporated by reference to Form 10-Q, File
                  0-7265, filed August 8, 1991).
     10.20  -     1992 Employee Stock Option Plan and Form Agreement
                  (incorporated by reference to Exhibit No. 4.3 to the
                  Registration Statement on Form S-8; Registration No.
                  33-31662).
    *10.21  -     Energy Ventures, Inc. Employees Stock Option Plan
                  (incorporated by reference to Exhibit No. 4.1 to the
                  Registration Statement on Form S-8; Registration No.
                  33-31662).
    *10.22  -     Form of Stock Option Agreement under the Company's Employees'
                  Stock Option Plan (incorporated by reference to Exhibit No.
                  4.2 to the Registration Statement on Form S-8; Registration
                  No. 33-31662).
    *10.23  -     Amended and Restated Non-Employee Director Stock Option Plan
                  (incorporated by reference to Form 10-Q, File 0-7265, filed
                  August 12, 1995).





                                       53
<PAGE>   55
   10.24    -     Amended and Restated Promissory Note Agreement dated
                  September 29, 1993 between Energy Ventures, Inc., as Maker,
                  and ENSCO Tool and Supply Company, as Payee (incorporated by
                  reference to Form 10-Q, filed November 3, 1993).
   10.25    -     Term Loan Agreement dated December 17, 1992 between Energy
                  Ventures Mid East, Inc., as Borrower, and Emirates Bank
                  International, Limited, as Lender (incorporated by reference
                  to Form 10-Q, File 0-7265, filed November 3, 1993).
   10.26    -     Amendment to Term Loan Agreement dated December 17, 1992
                  between Energy Ventures Mid East, Inc., as Borrower, and
                  Emirates Bank International, Limited, as Lender, dated
                  September 2, 1993 (incorporated by reference to Form 10-Q,
                  File 0-7265, filed November 3, 1993).
   10.27    -     Agreement and Plan of Merger dated November 10, 1993, by and
                  among Production Oil Tools, Energy Ventures, Inc., and
                  Production Oil Tools Acquisition Co., (incorporated by
                  reference to Form 10-K, File 0-7265, filed March 1, 1994).
   10.28    -     Lease Agreement dated September 30, 1993, among T.F. de
                  Mexico, S.A. de C.V. as Lessor, Grant T.F. de Mexico, S.A. de
                  C.V., as Lessee, Energy Ventures, Inc. as Guarantor, and
                  Revemex, S.A. de C.V. as Owner of subleased assets
                  (incorporated by reference to Form 10-K, File 0-7265, filed
                  March 1, 1994).
   10.29    -     Stock Purchase Agreement dated February 9, 1994, between
                  Energy Ventures, Inc. and Shareholders of AWI Drilling &
                  Workover, Inc. (incorporated by reference to Form 8-K, File
                  0-7265, filed February 23, 1994).
   10.30    -     Registration Rights Agreement dated March 24, 1994, among
                  Energy Ventures, Inc., the Subsidiary Guarantors party
                  thereto, Lehman Brothers, Inc. and Kidder, Peabody & Co.
                  Incorporated (incorporated by reference to Form 8-K, File
                  0-7265, filed April 5, 1994).
   10.31    -     Registration Rights Agreement dated March 24, 1994, between
                  Energy Ventures, Inc. and Lehman Brothers Inc. (incorporated
                  by reference to Form 8-K, File 0-7265, filed April 5, 1994).
   10.32    -     The Woodward, Oklahoma Lease agreements as amended
                  (incorporated by reference to Form 10-K, File 0-7265, filed
                  March 23, 1995).
   10.33    -     Agreement and Plan of Merger dated as of May 22, 1995, as
                  amended by Amendment No. 1 dated as of June 30, 1995, by and
                  among Prideco, Inc., Christiana Companies, Inc., William
                  Chunn, Donald Morris, Sandra Hamilton, Energy Ventures, Inc.
                  and Grant Acquisition Company (incorporated by reference to
                  Exhibit No.  2.1 to Form 8-K, File 0-7265, filed July 12,
                  1995).
 **10.34    -     Manufacturing and Sales Agreement dated as of January 1,
                  1996, by and between Grant Prideco, S.A. and Oil Country
                  Tubular Limited.
 **21.1     -     Subsidiaries of Energy Ventures, Inc.
 **23.1     -     Consent of Arthur Andersen LLP.

 *Management Compensation or Incentive Plan
**Filed herewith

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





                                       54
<PAGE>   56
                                   SIGNATURES

    PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

                                                 ENERGY VENTURES, INC.


                                           BY:  /s/ BERNARD J. DUROC-DANNER
                                              ----------------------------------
                                                  BERNARD J. DUROC-DANNER
                                           PRESIDENT AND CHIEF EXECUTIVE OFFICER
                                               (PRINCIPAL EXECUTIVE OFFICER)
                                                      AND DIRECTOR

Date:  March 19, 1996

    PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
                     Name                                   Title                                  Date
                     ----                                   -----                                  ----
<S>                                         <C>                                               <C>
BY: /s/   BERNARD J. DUROC-DANNER            President and Chief Executive Officer            March 19, 1996
----------------------------------               (Principal Executive Officer)    
          BERNARD J. DUROC-DANNER                         and Director            

BY: /s/       JAMES G. KILEY                  Vice President, Finance and Treasurer          March 19, 1996
   -----------------------------------            (Principal Financial Officer)      
             JAMES G. KILEY                                                          

BY: /s/      FRANCES R. POWELL             Vice President, Accounting and Controller         March 19, 1996
   -----------------------------------            (Principal Accounting Officer)  
             FRANCES R. POWELL                                                    

BY: /s/       DAVID J. BUTTERS                              Director                         March 19, 1996
   -----------------------------------               and Chairman of the Board 
              DAVID J. BUTTERS                                                 


BY: /s/        URIEL E. DUTTON                              Director                         March 19, 1996
   -----------------------------------
               URIEL E. DUTTON
      

BY: /s/       ELIOT M. FRIED                                Director                         March, 19, 1996
   -----------------------------------
              ELIOT M. FRIED


BY: /s/       SHELDON S. GORDON                             Director                         March  19, 1996
   -----------------------------------
              SHELDON S. GORDON


BY: /s/       SHELDON B. LUBAR                              Director                         March 19, 1996
   -----------------------------------
              SHELDON B. LUBAR


BY: /s/      ROBERT B. MILLARD                              Director                         March 19, 1996
   -----------------------------------
             ROBERT B. MILLARD

BY: /s/      ROBERT A. RAYNE                                Director                         March 19, 1996
   -----------------------------------
             ROBERT A. RAYNE


</TABLE>



                                       55
<PAGE>   57
                                  SCHEDULE II
                     ENERGY VENTURES, INC. AND SUBSIDIARIES
                VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
                  FOR THE THREE YEARS ENDED DECEMBER 31, 1995



<TABLE>
<CAPTION>
===============================================================================================================
                                                                      ADDITIONS
                                                                -----------------------
                                                   BALANCE      CHARGED TO     CHARGED                  BALANCE
                                                  BEGINNING     COSTS AND      TO OTHER                  END OF
                   DESCRIPTION                    OF PERIOD      EXPENSES      ACCOUNTS    DEDUCTIONS    PERIOD
---------------------------------------------------------------------------------------------------------------
                                                                        (in thousands)
<S>                                                <C>           <C>           <C>          <C>         <C>
YEAR ENDED DECEMBER 31, 1995:
    Allowance for uncollectible accounts
      receivable  . . . . . . . . . . . . . .      $  564        $   492       $   92       $ (533)     $  615
YEAR ENDED DECEMBER 31, 1994:
    Allowance for uncollectible accounts
      receivable  . . . . . . . . . . . . . .      $  669        $   158       $   31       $  (294)    $  564
YEAR ENDED DECEMBER 31, 1993:
    Allowance for uncollectible accounts
      receivable  . . . . . . . . . . . . . .      $  559        $   204       $   37       $  (131)    $  669

</TABLE>




                                       56