##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from  to
 Commission file number 000-51471
 
 Bronco Drilling Company, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    20-2902156
(I.R.S. Employer
Identification No.)16217 North May Avenue, Edmond, OK
(Address of Registrants Principal Executive Offices)
    
    73013
(Zip Code)
 (405) 242-4444
(Registrants telephone number, including area code)
 Securities Registered Pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock $0.01 Par Value per Share
    
    The Nasdaq Stock Market LLC
 Securities Registered Pursuant to Section 12(g) of the Act:
None
 
 Yes o No þ
 Yes o No þ
 þ o
 o o
 þ
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company o
 o þ
   Documents Incorporated By Reference




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##### 



BRONCO DRILLING COMPANY, INC.
INDEX
 Form10-KItem
    
    
    
    
    ReportNo.
    
    
    
    
    PageCautionary Note Regarding Forward-Looking Statements
    
    
    3PART I1.
    
    Business
    
    
    31A.
    
    Risk Factors
    
    
    131B.
    
    Unresolved Staff Comments
    
    
    222.
    
    Properties
    
    
    223.
    
    Legal Proceedings
    
    
    224.
    
    Reserved
    
    
    22PART II5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    236.
    
    Selected Financial Data
    
    
    247.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    267A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    418.
    
    Financial Statements and Supplementary Data
    
    
    419.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    419A.
    
    Controls and Procedures
    
    
    419B.
    
    Other Information
    
    
    43PART III10.
    
    Directors and Executive Officers and Corporate Governance
    
    
    4411.
    
    Executive Compensation
    
    
    4412.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    4413.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    4414.
    
    Principal Accounting Fees and Services
    
    
    44PART IV15.
    
    Exhibits and Financial Statement Schedules
    
    
    45Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



Cautionary Note Regarding Forward-Looking Statements
    
 PART I
 
 Item 1.
    
    Business
 Unless otherwise indicated or the context otherwise requires, all references in this report to
Bronco, the Company, us, our, or we, are to Bronco Drilling Company, Inc., a Delaware
corporation, and its consolidated subsidiaries.
 Our Company
     3




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##### Table of Contents



Contract Land Drilling
 Our Acquisitions
  Purchase
    
    
    Number of Land DrillingDate
    
    Acquisition
    
    Price
    
    
    /Workover RigsJune 2001
    
    Ram Petroleum
    
    $
    1,250,000
    
    
    
    1May 2002
    
    Bison Drilling and Four Aces Drilling
    
    $
    12,500,000
    
    
    
    7August 2003
    
    Elk Hill Drilling and U.S. Rig & Equipment
    
    $
    49,000,000
    
    
    
    22July 2005
    
    Strata Drilling and Strata Property
    
    $
    20,000,000
    
    
    
    3October 2005
    
    Eagle Drilling
    
    $
    50,000,000
    
    
    
    12October 2005
    
    Thomas Drilling
    
    $
    68,000,000
    
    
    
    13January 2006
    
    Big A Drilling
    
    $
    18,150,000
    
    
    
    6January 2007
    
    Eagle Well Service
    
    $
    32,085,000
    
    
    
    31
  4




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Our Equity Investments
  ApproximateDrillingRig
    
    Design
    
    
    Depth (ft)
    
    
    Type
    
    
    Horsepower3
    
    Cabot 900
    
    
    10,000
    
    
    Mechanical
    
    
    95018
    
    Gardner Denver 1500E
    
    
    25,000
    
    
    Electric
    
    
    2,00019
    
    Mid Continent U-1220 EB
    
    
    25,000
    
    
    Electric
    
    
    2,00038
    
    National 1320
    
    
    25,000
    
    
    Electric
    
    
    2,00093
    
    National T-32
    
    
    8,000
    
    
    Mechanical
    
    
    50096
    
    Ideco H-35
    
    
    8,000
    
    
    Mechanical
    
    
    400
  5




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##### Table of Contents



ApproximateDrilling DepthRig
    
    Design
    
    
    (ft)
    
    
    Type
    
    
    Horsepower91
    
    Ideco H-35
    
    
    8,000
    
    
    Mechanical
    
    
    45095
    
    Emsco GB800
    
    
    12,000
    
    
    Mechanical
    
    
    1,000
 Investments-Equity Method and Joint Venture,
  ApproximateDrilling DepthRig
    
    Design
    
    
    (ft)
    
    
    Type
    
    
    Horsepower43
    
    Gardner Denver 800
    
    
    15,000
    
    
    Mechanical
    
    
    1,0004
    
    Skytop Brewster N46
    
    
    14,000
    
    
    Mechanical
    
    
    95053
    
    Skytop Brewster N42
    
    
    12,000
    
    
    Mechanical
    
    
    85055
    
    Oilwell 660
    
    
    12,000
    
    
    Mechanical
    
    
    1,00058
    
    National N55
    
    
    12,000
    
    
    Mechanical
    
    
    80060
    
    Skytop Brewster N46
    
    
    14,000
    
    
    Mechanical
    
    
    85072
    
    Skytop Brewster N42
    
    
    10,000
    
    
    Mechanical
    
    
    75076
    
    National N55
    
    
    12,000
    
    
    Mechanical
    
    
    70078
    
    Seaco 1200
    
    
    12,000
    
    
    Mechanical
    
    
    1,200
    6




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Overview of Our Operating Segment
 Contract Land Drilling
        Year Ended December 31,2010
    
    
    2009
    
    
    2008Average number of operating drilling rigs
    
    
    33
    
    
    
    44
    
    
    
    44Revenue days
    
    
    7,450
    
    
    
    5,699
    
    
    
    12,712Utilization Rates
    
    
    62
    %
    
    
    36
    %
    
    
    79
    %
   7




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Years Ended December 31,2010
    
    
    2009
    
    
    2008Daywork Contracts
    
    
    163
    
    
    
    152
    
    
    
    378Footage Contracts
    
    
    
    
    
    
    
    
    
    
    Turnkey Contracts
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    163
    
    
    
    152
    
    
    
    378
 Daywork Contracts
 Footage Contracts
 Turnkey Contracts
  8




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Customers and Marketing
  Total RevenueCustomer
    
    Percentage2010Petro-Hunt LLC
    
    
    11
    %EOG Resources Inc
    
    
    10
    %Whiting Petroleum
    
    
    9
    %Antero Resources
    
    
    8
    %Anschutz Exploration
    
    
    7
    %Zenergy Inc
    
    
    7
    %Beusa Energy Inc
    
    
    7
    %Comstock Oil and Gas
    
    
    6
    %Hunt Oil Company
    
    
    5
    %2009Comstock Oil and Gas
    
    
    12
    %Whiting Petroleum
    
    
    9
    %Pemex Exploracion
    
    
    8
    %Laredo Petroleum
    
    
    6
    %Antero Resources
    
    
    6
    %Hunt Oil Company
    
    
    5
    %JMA Energy Company, LLC
    
    
    5
    %2008Antero Resources
    
    
    11
    %XTO Energy
    
    
    7
    %JMA Energy Company, LLC
    
    
    5
    %Pablo Energy II, LLC
    
    
    5
    %
  Competition
 Contract Land Drilling
   9




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
    
    the type and condition of each of the competing drilling rigs;
 
    
    the mobility and efficiency of the rigs;
 
    
    the quality of service and experience of the rig crews;
 
    
    the offering of ancillary services; and
 
    
    the ability to provide drilling equipment adaptable to, and personnel
familiar with, new technologies and drilling techniques.
    
    
    better withstand industry downturns;
 
    
    compete more effectively on the basis of price and technology;
 
    
    better retain skilled rig personnel; and
 
    
    build new rigs or acquire and refurbish existing rigs so as to be able to
place rigs into service more quickly than us in periods of high drilling demand.
 Raw Materials
   Operating Risks and Insurance
  
    
    blowouts;
    
    fires and explosions;
 
    
    loss of well control;
 
    
    collapse of the borehole;
 
    
    lost or stuck drill strings; and
 
    
    damage or loss from natural disasters.
  
    
    suspension of drilling operations;
 
    
    damage to, or destruction of, our property and equipment and that of others;
 
    
    personal injury and loss of life;
 
    
    damage to producing or potentially productive oil and natural gas formations
through which we drill; and
 
    
    environmental damage.
  10




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Employees
   Governmental Regulation
    11




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Available Information
 www.broncodrill.com
  12




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Item 1A.
    
    Risk Factors
  Risks Relating to the Oil and Natural Gas Industry
 We derive all our revenues from companies in the oil and natural gas exploration and production
industry, a historically cyclical industry with levels of activity that are significantly affected
by the levels and volatility of oil and natural gas prices.
  
    
    the cost of exploring for, producing and delivering oil and natural gas;
 
    
    the discovery rate of new oil and natural gas reserves;
 
    
    the rate of decline of existing and new oil and natural gas reserves;
 
    
    available pipeline and other oil and natural gas transportation capacity;
 
    
    the ability of oil and natural gas companies to raise capital;
 
    
    actions by OPEC, the Organization of Petroleum Exporting Countries;
 
    
    political instability in the Middle East and other major oil and natural gas
producing regions;
 
    
    economic conditions in the United States and elsewhere;
 
    
    governmental regulations, both domestic and foreign;
 
    
    domestic and foreign tax policy;
 
    
    weather conditions in the United States and elsewhere;
 
    
    the pace adopted by foreign governments for the exploration, development and
production of their national reserves;
 
    
    the price of foreign imports of oil and natural gas; and
 
    
    the overall supply and demand for oil and natural gas.
  
    
    our revenues, cash flows and profitability;
 
    
    our ability to maintain or increase our borrowing capacity;
 
    
    our ability to obtain additional capital to finance our business and make
acquisitions, and the cost of that capital;
 
    
    our ability to retain skilled rig personnel whom we would need in the event
of an upturn in the demand for our services; and
 
    
    the fair market value of our rig fleet.
   13




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Risks Relating to Our Business
 Global economic conditions may adversely affect our operating results.
  Natural Gas Priceper Mcf
    
    
    Oil Price per BblQuarter
    
    High
    
    
    Low
    
    
    High
    
    
    Low2010:Fourth
    
    $
    4.61
    
    
    $
    3.29
    
    
    $
    91.51
    
    
    $
    79.49Third
    
    $
    4.92
    
    
    $
    3.65
    
    
    $
    82.55
    
    
    $
    71.63Second
    
    $
    5.19
    
    
    $
    3.91
    
    
    $
    86.79
    
    
    $
    68.01First
    
    $
    6.01
    
    
    $
    3.84
    
    
    $
    83.76
    
    
    $
    71.192009:Fourth
    
    $
    5.99
    
    
    $
    4.25
    
    
    $
    81.37
    
    
    $
    69.57Third
    
    $
    4.88
    
    
    $
    2.51
    
    
    $
    74.37
    
    
    $
    59.52Second
    
    $
    4.45
    
    
    $
    3.25
    
    
    $
    72.68
    
    
    $
    45.88First
    
    $
    6.07
    
    
    $
    3.63
    
    
    $
    54.34
    
    
    $
    33.982008:Fourth
    
    $
    7.73
    
    
    $
    5.29
    
    
    $
    98.53
    
    
    $
    33.87Third
    
    $
    13.58
    
    
    $
    7.22
    
    
    $
    145.29
    
    
    $
    95.71Second
    
    $
    13.35
    
    
    $
    9.32
    
    
    $
    140.21
    
    
    $
    100.98First
    
    $
    10.23
    
    
    $
    7.62
    
    
    $
    110.33
    
    
    $
    86.99
 Our acquisition strategy exposes us to various risks, including those relating to difficulties in
identifying suitable acquisition opportunities and integrating businesses, assets and personnel, as
well as difficulties in obtaining financing for targeted acquisitions and the potential for
increased leverage or debt service requirements.
  
    
    unanticipated costs and assumption of liabilities and exposure to unforeseen
liabilities of acquired companies, including but not limited to environmental
liabilities;
 
    
    difficulty in integrating the operations and assets of the acquired business
and the acquired personnel and distinct cultures;
 
    
    our ability to properly access and maintain an effective internal control
environment over an acquired company, in order to comply with public reporting
requirements;
 
    
    potential loss of key employees and customers of the acquired companies;
 
    
    risk of entering markets in which we have limited prior experience; and
    
    an increase in our expenses and working capital requirements.
   14




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Increases in the supply of rigs could decrease revenue rates and utilization rates.
  Our indebtedness could restrict our operations and make us more vulnerable to adverse economic
conditions.
   
    
    impairing our ability to make investments and obtain additional financing
for working capital, capital expenditures, acquisitions or other general corporate
purposes;
 
    
    limiting our ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these funds to make
principal and interest payments on our indebtedness;
 
    
    making us more vulnerable to a downturn in our business, our industry or
the economy in general as a substantial portion of our operating cash flow could be
required to make principal and interest payments on our indebtedness, making it more
difficult to react to changes in our business and in industry and market conditions;
 
    
    limiting our ability to obtain additional financing that may be necessary
to operate or expand our business;
 
    
    putting us at a competitive disadvantage to competitors that have less
debt; and
 
    
    increasing our vulnerability to rising interest rates.
  
    
    refinancing or restructuring our debt;
 
    
    selling assets;
 
    
    reducing or delaying acquisitions or capital investments, such as
refurbishments of our rigs and related equipment; or
 
    
    seeking to raise additional capital.
   15




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Our revolving credit facility imposes restrictions on us that may affect our ability to
successfully operate our business.
  
    
    limitations on the incurrence of additional indebtedness;
 
    
    restrictions on investments, mergers or consolidations, asset
dispositions, acquisitions, transactions with affiliates and other transactions
without the lenders consent; and
 
    
    limitation on dividends and distributions.
  Carlos Slim Helú, members of his family and affiliated entities may exercise significant influence
in our affairs and their interests may differ from the interests of our other stockholders.
    Our investments in Challenger and Bronco MX are illiquid and may never generate cash.
   16




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Our minority equity investment in Challenger and Bronco MX limits our control of those companies.
  
    
    preemptive rights;
 
    
    transfer rights;
 
    
    tag-along rights;
 
    
    drag-along rights; and
 
    
    certain voting rights.
  International operations are subject to uncertain political, economic and other risks which could
affect our financial results.
  
    
    terrorist acts, war and civil disturbances;
 
    
    expropriation or nationalization of assets;
 
    
    renegotiation or nullification of existing contracts;
 
    
    foreign taxation, including changes in law or interpretation of existing
law;
 
    
    assaults on property or personnel;
 
    
    changing political conditions;
 
    
    foreign and domestic monetary policies; and
 
    
    travel limitations or operational problems
caused by public health
threats.
      17




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We operate in a highly competitive, fragmented industry in which price competition could reduce our
profitability.
   
    
    the type and condition of each of the competing drilling rigs;
 
    
    the mobility and efficiency of the rigs;
 
    
    the quality of service and experience of the rig crews;
 
    
    the offering of ancillary services; and
 
    
    the ability to provide drilling equipment adaptable to, and personnel
familiar with, new technologies and drilling techniques.
   We face competition from competitors with greater resources that may make it more difficult for us
to compete, which can reduce our revenue rates and utilization rates.
  
    
    better withstand industry downturns;
 
    
    compete more effectively on the basis of price and technology;
 
    
    retain skilled rig personnel; and
 
    
    build new rigs or acquire and refurbish existing rigs so as to be able to
place rigs into service more quickly than us in periods of high drilling demand.
 In the event we enter into footage or turnkey contracts, we could be subject to unexpected cost
overruns, which could negatively impact our profitability.
   18




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Our operations involve operating hazards, which if not insured or indemnified against, could
adversely affect our results of operations and financial condition.
  
    
    blowouts;
 
    
    fires and explosions;
 
    
    loss of well control;
 
    
    collapse of the borehole;
 
    
    lost or stuck drill strings; and
 
    
    damage or loss from natural disasters.
  
    
    suspension of operations;
 
    
    damage to, or destruction of, our property and equipment and that of others;
 
    
    personal injury and loss of life;
 
    
    damage to producing or potentially productive oil and natural gas formations
through which we drill; and
 
    
    environmental damage.
  We face increased exposure to operating difficulties because we have historically focused on
drilling in unconventional resource plays.
  Our operations are subject to various laws and governmental regulations that could restrict our
future operations and increase our operating costs.
  
    
    environmental quality;
 
    
    pollution control;
 
    
    remediation of contamination;
    
    preservation of natural resources; and
 
    
    worker safety.
   19




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We rely on a few key employees whose absence or loss could disrupt our operations resulting in a
loss of revenues.
  We may be unable to attract and retain qualified, skilled employees necessary to operate our
business.
   20




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Shortages in equipment and supplies could limit our operations and jeopardize our relations
with customers.
  If the price of our common stock fluctuates significantly, your investment could lose value.
  
    
    our quarterly operating results;
 
    
    changes in our earnings estimates;
 
    
    additions or departures of key personnel;
 
    
    changes in the business, earnings estimates or market perceptions of our
competitors;
 
    
    changes in general market or economic conditions; and
 
    
    announcements of legislative or regulatory change.
  The market price of our common stock could decline following sales of substantial amounts of our
common stock in the public markets.
  We may issue preferred stock whose terms could adversely affect the voting power or value of our
common stock.
   21




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Provisions in our organizational documents could delay or prevent a change in control of our
company, even if that change would be beneficial to our stockholders.
  
    
    provisions regulating the ability of our stockholders to nominate directors
for election or to bring matters for action at annual meetings of our stockholders;
 
    
    limitations on the ability of our stockholders to call a special meeting and
act by written consent;
 
    
    the authorization given to our board of directors to issue and set the terms
of preferred stock; and
 
    
    limitations on the ability of our stockholders from removing our directors
without cause.
 We do not intend to pay cash dividends on our common stock in the foreseeable future, and
therefore only appreciation of the price of our common stock, which may not occur, will provide a
return to our stockholders.
  
 Item 1B.
    
    Unresolved Staff Comments
  
 Item 2.
    
    Property
    
 Item 3.
    
    Legal Proceedings
  
 Item 4.
    
    Reserved
  22




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PART II
 
 Item 5.
    
    Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities.
 Market Information
  High
    
    
    LowYear Ending December 31, 2009:First Quarter
    
    $
    6.68
    
    
    $
    3.65Second Quarter
    
    $
    6.68
    
    
    $
    4.09Third Quarter
    
    $
    7.54
    
    
    $
    3.34Fourth Quarter
    
    $
    8.64
    
    
    $
    4.60Year ending December 31, 2010:First Quarter
    
    $
    6.50
    
    
    $
    4.60Second Quarter
    
    $
    5.07
    
    
    $
    3.34Third Quarter
    
    $
    4.22
    
    
    $
    3.40Fourth Quarter
    
    $
    8.07
    
    
    $
    3.95Year ending December 31, 2011:First Quarter (through February 28)
    
    $
    8.95
    
    
    $
    6.34
  Dividend Policy
  Equity Compensation Plan Information
  Number of securitiesremaining available forNumber of securities to be
    
    
    Weighted-average
    
    
    future issuance under equityissued upon exercise of
    
    
    exercise price per share
    
    
    compensation plansoutstanding options,
    
    
    of outstanding options,
    
    
    (excluding securitiesPlan category
    
    warrants and rights
    
    
    warrants and rights
    
    
    reflected in column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation plans approved
by security holders
    
    
    
    
    
    $
    
    
    
    
    2,549,878Equity compensation plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    $
    
    
    
    
    2,549,878
 (1)
    
    As of December 31, 2010, we had no options to purchase shares of our common stock
outstanding. As of December 31, 2010, we had issued 2,470,746 shares of our restricted stock under
our 2006 Stock Incentive Plan. The securities remaining available for future issuance reflect securities that may be issued under the 2006
Plan, as no more shares remain available for the grant of awards under our 2005 Stock Incentive
Plan.  23




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Item 6.
    
    Selected Financial Data.
   24




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Years Ended December 31,(in thousands, except per share amounts)2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Consolidated Statements of Operations
Information:Contract drilling revenues
    
    $
    124,399
    
    
    $
    102,896
    
    
    $
    233,922
    
    
    $
    257,409
    
    
    $
    270,322Costs and expenses:Contract drilling
    
    
    90,290
    
    
    
    70,721
    
    
    
    140,935
    
    
    
    139,693
    
    
    
    128,287Depreciation and amortization
    
    
    28,445
    
    
    
    36,180
    
    
    
    39,194
    
    
    
    34,989
    
    
    
    27,192General and administrative
    
    
    17,108
    
    
    
    15,782
    
    
    
    29,821
    
    
    
    19,604
    
    
    
    17,027Gain on Challenger transactions
    
    
    
    
    
    
    
    
    
    
    (2,252
    )
    
    
    
    
    
    
    Loss on Bronco MX transaction
    
    
    1,487
    
    
    
    23,705
    
    
    
    
    
    
    
    
    
    
    
    Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    21,115
    
    
    
    
    
    
    
    Impairment of drilling rigs and related equipment
    
    
    7,900
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss on sale of drilling rigs and related equipment
    
    
    23,732
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating costs and expenses
    
    
    168,962
    
    
    
    146,388
    
    
    
    228,813
    
    
    
    194,286
    
    
    
    172,506Income (loss) from continuing operations
    
    
    (44,563
    )
    
    
    (43,492
    )
    
    
    5,109
    
    
    
    63,123
    
    
    
    97,816Other income (expense):Interest expense
    
    
    (4,671
    )
    
    
    (6,933
    )
    
    
    (4,048
    )
    
    
    (5,030
    )
    
    
    (1,499
    )Loss from early extinguishment of debt
    
    
    
    
    
    
    (2,859
    )
    
    
    (155
    )
    
    
    
    
    
    
    (1,000
    )Interest income
    
    
    201
    
    
    
    273
    
    
    
    1,039
    
    
    
    1,237
    
    
    
    164Loss on partial sale of investment in Bronco MX
    
    
    (1,271
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity in income (loss) of Challenger
    
    
    (984
    )
    
    
    (1,914
    )
    
    
    2,186
    
    
    
    
    
    
    
    Equity in income (loss) of Bronco MX
    
    
    22
    
    
    
    (588
    )
    
    
    
    
    
    
    
    
    
    
    Impairment of investment in Challenger
    
    
    
    
    
    
    (21,247
    )
    
    
    (14,442
    )
    
    
    
    
    
    
    Other income (expense)
    
    
    204
    
    
    
    (383
    )
    
    
    (343
    )
    
    
    285
    
    
    
    408Change in fair value of warrant
    
    
    (1,578
    )
    
    
    1,850
    
    
    
    
    
    
    
    
    
    
    
    Total other income (expense)
    
    
    (8,077
    )
    
    
    (31,801
    )
    
    
    (15,763
    )
    
    
    (3,508
    )
    
    
    (1,927
    )Income (loss) from continuing operations before tax
    
    
    (52,640
    )
    
    
    (75,293
    )
    
    
    (10,654
    )
    
    
    59,615
    
    
    
    95,889Income tax expense (benefit)
    
    
    (18,135
    )
    
    
    (27,151
    )
    
    
    (5,339
    )
    
    
    22,690
    
    
    
    37,194Income (loss) from continuing operations
    
    
    (34,505
    )
    
    
    (48,142
    )
    
    
    (5,315
    )
    
    
    36,925
    
    
    
    58,695Income (loss) from discontinued operations
    
    
    (16,172
    )
    
    
    (9,437
    )
    
    
    (2,928
    )
    
    
    667
    
    
    
    1,138Net income (loss)
    
    $
    (50,677
    )
    
    $
    (57,579
    )
    
    $
    (8,243
    )
    
    $
    37,592
    
    
    $
    59,833Income (loss) per common share-BasicContinuing Operations
    
    $
    (1.27
    )
    
    $
    (1.81
    )
    
    $
    (0.20
    )
    
    $
    1.42
    
    
    $
    2.39Discontinued Operations
    
    $
    (0.60
    )
    
    $
    (0.35
    )
    
    $
    (0.11
    )
    
    $
    0.03
    
    
    $
    0.04Income (loss) per common share-Basic
    
    $
    (1.87
    )
    
    $
    (2.16
    )
    
    $
    (0.31
    )
    
    $
    1.45
    
    
    $
    2.43Income (loss) per common share-DilutedContinuing Operations
    
    $
    (1.27
    )
    
    $
    (1.81
    )
    
    $
    (0.20
    )
    
    $
    1.41
    
    
    $
    2.38Discontinued Operations
    
    $
    (0.60
    )
    
    $
    (0.35
    )
    
    $
    (0.11
    )
    
    $
    0.03
    
    
    $
    0.05Income (loss) per common share-Diluted
    
    $
    (1.87
    )
    
    $
    (2.16
    )
    
    $
    (0.31
    )
    
    $
    1.44
    
    
    $
    2.43Weighted average number of shares outstanding-Basic
    
    
    27,091
    
    
    
    26,651
    
    
    
    26,293
    
    
    
    25,996
    
    
    
    24,585Weighted average number of shares
outstanding-Diluted
    
    
    27,091
    
    
    
    26,651
    
    
    
    26,293
    
    
    
    26,101
    
    
    
    24,623Other Financial Data (Unaudited):Calculation of Adjusted EBITDA (1):Net income (loss)
    
    $
    (50,677
    )
    
    $
    (57,579
    )
    
    $
    (8,243
    )
    
    $
    37,592
    
    
    $
    59,833Interest expense
    
    
    4,671
    
    
    
    6,933
    
    
    
    4,048
    
    
    
    5,030
    
    
    
    1,499Income tax expense (benefit)
    
    
    (18,135
    )
    
    
    (27,151
    )
    
    
    (5,339
    )
    
    
    22,690
    
    
    
    37,194Depreciation and amortization
    
    
    28,445
    
    
    
    36,180
    
    
    
    39,194
    
    
    
    34,989
    
    
    
    27,192Other adjustments related to discontinued operations
    
    
    14,498
    
    
    
    3,641
    
    
    
    13,465
    
    
    
    9,398
    
    
    
    4,242Other and non-recurring expense
    
    
    40,204
    
    
    
    48,905
    
    
    
    35,557
    
    
    
    
    
    
    
    Adjusted EBITDA (1)
    
    
    19,006
    
    
    
    10,929
    
    
    
    78,682
    
    
    
    109,699
    
    
    
    129,960
 As of December 31,2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Consolidated Balance Sheet
Information:Total current assets
    
    $
    51,547
    
    
    $
    43,077
    
    
    $
    107,821
    
    
    $
    72,019
    
    
    $
    73,372Total assets
    
    
    342,030
    
    
    
    445,583
    
    
    
    612,354
    
    
    
    568,605
    
    
    
    482,488Total debt
    
    
    6,825
    
    
    
    51,903
    
    
    
    117,547
    
    
    
    68,118
    
    
    
    64,727Total liabilities
    
    
    48,688
    
    
    
    105,312
    
    
    
    218,343
    
    
    
    172,176
    
    
    
    142,503Total stockholders/members equity
    
    
    293,342
    
    
    
    340,271
    
    
    
    394,011
    
    
    
    396,429
    
    
    
    339,985
  25




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##### Table of Contents



(1)
    
    Adjusted EBITDA is a non-GAAP financial measure equal to net income (loss), the most
directly comparable Generally Accepted Accounting Principles, or GAAP, financial measure, plus
interest expense, income tax expense, depreciation, amortization, impairment, book loss on certain
asset sales and other non-cash charges. We have presented Adjusted EBITDA because we use Adjusted
EBITDA as an integral part of our internal reporting to measure our performance and to evaluate the
performance of our senior management. We consider Adjusted EBITDA to be an important indicator of
the operational strength of our business. Adjusted EBITDA eliminates the uneven effect of
considerable amounts of non-cash depreciation and amortization. Limitations of this measure,
however, are that it does not reflect the periodic costs of certain capitalized tangible and
intangible assets used in generating revenues in our business or changes in our working capital
needs or the significant interest expense and cash requirements necessary to service our debt.
Management evaluates the costs of tangible and intangible assets through other financial measures,
such as capital expenditures, investment spending and return on capital. Therefore, we believe that
Adjusted EBITDA provides useful information to our investors regarding our performance and overall
results of operations. Adjusted EBITDA is not intended to be a performance measure that should be
regarded as an alternative to, or more meaningful than, either net income as an indicator of
operating performance or to cash flows from operating activities as a measure of liquidity. In
addition, Adjusted EBITDA is not intended to represent funds available for dividends, reinvestment
or other discretionary uses, and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP. The Adjusted EBITDA measure presented in
this Form 10-K may not be comparable to similarly titled measures presented by other companies, and
may not be identical to corresponding measures used in our various agreements. 
 Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operation.
 The following discussion and analysis should be read in conjunction with the Selected
Historical Financial Data and the consolidated financial statements and related notes included
elsewhere in this Form 10-K . This discussion contains forward-looking statements reflecting our
current expectations and estimates and assumptions concerning events and financial trends that may
affect our future operating results or financial position. Actual results and the timing of events
may differ materially from those contained in these forward-looking statements due to a number of
factors, including those discussed in the sections entitled Risk Factors and Cautionary Note
Regarding Forward-Looking Statements appearing elsewhere in this Form 10-K .
 Overview
   Operating Segments
     26




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##### Table of Contents



Three Months EndedDecember 31,
    
    
    Years Ended December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2008Average number of
operating rigs
    
    
    24
    
    
    
    37
    
    
    
    33
    
    
    
    44
    
    
    
    44Revenue days
    
    
    2,152
    
    
    
    1,049
    
    
    
    7,450
    
    
    
    5,699
    
    
    
    12,712Utilization Rates
    
    
    96
    %
    
    
    31
    %
    
    
    62
    %
    
    
    36
    %
    
    
    79
    %
   27




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##### Table of Contents



Market Conditions in Our Industry
     At December 31,2010
    
    
    2009
    
    
    2008Crude oil (Bbl)
    
    $
    91.38
    
    
    $
    79.36
    
    
    $
    44.60Natural gas (Mmbtu)
    
    $
    4.41
    
    
    $
    5.57
    
    
    $
    5.62U.S. Land Rig Count
    
    
    1,670
    
    
    
    1,150
    
    
    
    1,653
   Critical Accounting Policies and Estimates
  Revenue and Cost Recognition
  28




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Accounts Receivable
   29




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##### Table of Contents



Asset Impairment and Depreciation Accounting for the Impairment or Disposal of Long-Lived Assets
 Goodwill and Other Intangible Assets.
        30




---



##### Table of Contents



Investments-Equity Method and Joint Venture,
    Stock
Based Compensation Stock Compensation,
 Deferred Income Taxes
 Equity Method Investments
 Other Accounting Estimates
  31




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##### Table of Contents



Year in Review Highlights
  Asset Sales and Held for Sale
        Well Servicing Segment
   32




---



##### Table of Contents



Bronco MX Joint Venture
      33




---



##### Table of Contents



Global Financial Markets
  Natural Gas Priceper Mcf
    
    
    Oil Price per BblQuarter
    
    High
    
    
    Low
    
    
    High
    
    
    Low2010:Fourth
    
    $
    4.61
    
    
    $
    3.29
    
    
    $
    91.51
    
    
    $
    79.49Third
    
    $
    4.92
    
    
    $
    3.65
    
    
    $
    82.55
    
    
    $
    71.63Second
    
    $
    5.19
    
    
    $
    3.91
    
    
    $
    86.79
    
    
    $
    68.01First
    
    $
    6.01
    
    
    $
    3.84
    
    
    $
    83.76
    
    
    $
    71.192009:Fourth
    
    $
    5.99
    
    
    $
    4.25
    
    
    $
    81.37
    
    
    $
    69.57Third
    
    $
    4.88
    
    
    $
    2.51
    
    
    $
    74.37
    
    
    $
    59.52Second
    
    $
    4.45
    
    
    $
    3.25
    
    
    $
    72.68
    
    
    $
    45.88First
    
    $
    6.07
    
    
    $
    3.63
    
    
    $
    54.34
    
    
    $
    33.982008:Fourth
    
    $
    7.73
    
    
    $
    5.29
    
    
    $
    98.53
    
    
    $
    33.87Third
    
    $
    13.58
    
    
    $
    7.22
    
    
    $
    145.29
    
    
    $
    95.71Second
    
    $
    13.35
    
    
    $
    9.32
    
    
    $
    140.21
    
    
    $
    100.98First
    
    $
    10.23
    
    
    $
    7.62
    
    
    $
    110.33
    
    
    $
    86.99
   
    
    In December 2008, we incurred goodwill impairment of our contract land
drilling and well servicing segments of $24.3 million due to the fair value of the
segments being less than their carrying value;
 
    
    In June 2009, we temporarily suspended operations in our well servicing
segment;
 
    
    In September 2009, we incurred an impairment charge to our investment in
Challenger of $21.2 million due to the fair value of the investment being less than
its carrying value;
 
    
    In June 2010, management made a decision to sell the assets in the well
servicing segment. We recorded a $23.4 million impairment charge ($14.3 million after
tax).
 
    
    In July 2010, subsequent to the end of our second quarter, we completed
the sale of the property and equipment of our trucking assets for $11.3 million in
cash, net of selling expenses in the amount of $403,000. Proceeds from this sale were
used to repay existing indebtedness under our revolving credit facility with Banco
Inbursa.
 
    
    In September 2010, we sold at auction in separate lots to multiple bidders
substantially all of the assets of our discontinued well servicing segment, two
complete drilling rigs and components comprising four other drilling rigs (rigs 2, 9,
52, 70, 75 and 94), and ancillary equipment. We recorded losses of $8.9 million and
$19.9 million from the sale of the assets of our well servicing segment and drilling
rigs and related equipment, respectively.
 
    
    In September 2010, we sold two drilling rigs (rigs 41 and 42) in a private
sale to Windsor Permian LLC, an unaffiliated third party, for estimated proceeds of
$7.2 million. We recorded a loss of $1.7 million on the sale of these assets.
  
    
    In September 2010, management made a decision to sell five drilling rigs
(rigs 5, 6, 7, 51 and 54). We recorded a $8 million impairment charge on these rigs.
 
    
    In November 2010, we sold at auction in separate lots to multiple bidders
two complete drilling rigs (rigs 51 and 54) and ancillary equipment. We recorded a
loss of $2.2 million on the sale of these assets.
 
    
    In November 2010, we sold two drilling rigs (rigs 5 and 7) and entered
into a contract to sale one drilling rig (rig 6) in a private sale to Atlas Drilling,
LLC, an unaffiliated third party, for estimated net proceeds of $4.5 million. The
Company recorded a $14,000 gain on the sale of rigs 5 and 7.
 
    
    In February 2011, we sold two drilling rigs (rigs 56 and 62) in a private
sale to Windsor Permian LLC, an unaffiliated third party, for estimated proceeds of
$11.5 million.
  34




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##### Table of Contents



Results of Operations
 Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
 Contract
Drilling Revenue.
 Equity in Income
(Loss) of Challenger. Investments-Equity Method and Joint Venture,
 Equity in Income (Loss) of Bronco MX.
 Contract Drilling Expense.
 Depreciation and Amortization Expense.
 General and Administrative Expense.
 Interest Expense.
 Income Tax Expense
  35




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##### Table of Contents



Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 Contract Drilling Revenue.
 Equity in
Income (Loss) of Challenger. Investments-Equity Method and Joint Venture,
 Equity in Income (Loss) of Bronco MX.
 Contract Drilling Expense.
 Depreciation and Amortization Expense.
 General and Administrative Expense.
 Interest Expense.
 Income Tax Expense
  36




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##### Table of Contents



Liquidity and Capital Resources
 Operating Activities .
 Investing Activities .
 Financing Activities .
 Sources of Liquidity .
 Debt Financing
     37




---



##### Table of Contents



Issuances of Equity.
  Capital Expenditures.
   38




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##### Table of Contents



Working Capital.
  December 31,2010
    
    
    2009
    
    
    ChangeCash and cash equivalents
    
    $
    11,854
    
    
    $
    9,497
    
    
    $
    2,357Restricted cash
    
    
    2,700
    
    
    
    
    
    
    
    2,700Trade and other receivables
    
    
    24,656
    
    
    
    15,306
    
    
    
    9,350Affiliate receivables
    
    
    1,508
    
    
    
    9,620
    
    
    
    (8,112
    )Unbilled receivables
    
    
    428
    
    
    
    828
    
    
    
    (400
    )Income tax receivable
    
    
    5,700
    
    
    
    3,800
    
    
    
    1,900Current deferred income taxes
    
    
    2,765
    
    
    
    1,360
    
    
    
    1,405Current maturities of note receivable
    
    
    1,607
    
    
    
    2,000
    
    
    
    (393
    )Prepaid expenses
    
    
    329
    
    
    
    666
    
    
    
    (337
    )Current assets
    
    
    51,547
    
    
    
    43,077
    
    
    
    8,470Current debt
    
    
    95
    
    
    
    89
    
    
    
    6Accounts Payable
    
    
    7,945
    
    
    
    9,756
    
    
    
    (1,811
    )Accrued liabilities and deferred
revenues
    
    
    7,847
    
    
    
    7,952
    
    
    
    (105
    )Current liabilities
    
    
    15,887
    
    
    
    17,797
    
    
    
    (1,910
    )Working capital
    
    $
    35,660
    
    
    $
    25,280
    
    
    $
    10,380
     39




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##### Table of Contents



Contractual and Commercial Commitments
  Payments Due by PeriodLess than 1
    
    
    
    
    
    
    
    
    
    
    More than 5Contractual Obligations
    
    Total
    
    
    year
    
    
    1-3 years
    
    
    4-5 years
    
    
    yearsShort and long-term debt
    
    $
    10,373
    
    
    $
    95
    
    
    $
    9,423
    
    
    $
    855
    
    
    $
    Interest on long-term debt
    
    
    2,478
    
    
    
    625
    
    
    
    1,685
    
    
    
    89
    
    
    
    79Operating lease
obligations
    
    
    2,032
    
    
    
    770
    
    
    
    1,185
    
    
    
    77
    
    
    
    Total
    
    $
    14,883
    
    
    $
    1,490
    
    
    $
    12,293
    
    
    $
    1,021
    
    
    $
    79
 Off Balance Sheet Arrangements
  Recent Accounting Pronouncements
  Fair Value Measurements
    40




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##### Table of Contents



Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 8.
    
    Financial Statements and Supplementary Data.
  
 Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
  
 Item 9A.
    
    Controls and Procedures.
 Evaluation of Disclosure Control and Procedures
   Managements Report on Internal Control over Financial Reporting.
  (i)
    
    pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of our company;
 (ii)
    
    provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP, and that receipts
and expenditures are being made only in accordance with authorizations of management
and our Board of Directors; and
 (iii)
    
    provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a material
effect on the financial statements.
  Internal ControlIntegrated Framework
  41




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##### Table of Contents



Changes in Internal Controls over Financial Reporting.
  Report of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated
Framework Managements Report on Internal
Control over Financial Reporting.
    Internal Control -
Integrated Framework
   
  42




---



##### Table of Contents



Item 9B.
    
    Other Information
   43




---



##### Table of Contents



PART III
 
 Item 10.
    
    Directors and Executive Officers and Corporate Governance.
  
 Item 11.
    
    Executive Compensation.
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  
 Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence.
  
 Item 14.
    
    Principal Accounting Fees and Services
   44




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##### Table of Contents



PART IV
 
 Item 15.
    
    Exhibits, Financial Statement Schedules.
  1.
    
    Financial StatementsSee Index to Consolidated Financial Statements on page 47 of this Form 10-K.2.
    
    Financial Statement SchedulesSchedule II3.
    
    Exhibits:
  Exhibit No.

    
    Description2.1
    
    
    Merger Agreement, dated as of August 11, 2005, by and among Bronco
Drilling Holdings, L.L.C, Bronco Drilling Company, L.L.C. and Bronco Drilling
Company, Inc. (incorporated by reference to Exhibit 2.1 to the Registration
Statement on Form S-1, File No. 333-128861, filed by the Company with the SEC on
October 6, 2005).2.2
    
    
    Agreement and Plan of Merger by and among the Company, BDC Acquisition
Company, Eagle Well Service, Inc. (Eagle), and the stockholders of Eagle dated as
of January 9, 2007 (incorporated by reference to Exhibit 2.1 to the Companys
Current Report on Form 8-K, File No. 000-51571, filed by the Company with the SEC on
January 16, 2007).2.3
    
    
    Agreement and Plan of Merger, dated as of January 23, 2008, by and among
Allis-Chalmers Energy, Inc., Bronco Drilling Company, Inc. and Elway Merger Sub,
Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K,
File No. 000-51471, filed by the Company with the SEC on January 24, 2008).2.4
    
    
    First Amendment, dated as of June 1, 2008, to Agreement and Plan of
Merger by and among Allis-Chalmers Energy, Inc., Bronco Drilling Company, Inc. and
Elway Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to the Current
Report on Form 8-K, File No. 000-51471, filed by the Company with the SEC on June 2,
2008).2.5
    
    
    Membership Interest Purchase Agreement, dated September 18, 2009, by and
among Bronco Drilling Company, Inc., Saddleback Properties LLC and Carso
Infraestructura y Construccion, S.A.B. de C.V. (incorporated by reference to Exhibit
2.1 to the Current Report on Form 8-K, File No. 000-51471, filed by the Company with
the SEC on September 23, 2009).3.1
    
    
    Amended and Restated Certificate of Incorporation of the Company, dated
August 11, 2005 (incorporated by reference to Exhibit 2.1 to the Registration
Statement on Form S-1, File No. 333-128861, filed by the Company with the SEC on
October 6, 2005).3.2
    
    
    Bylaws of the Company (incorporated by reference to Exhibit 3.2 to
Amendment No. 1 to the Registration Statement on Form S-1, File No. 333-125405,
filed by the Company with the SEC on July 14, 2005).4.1
    
    
    Form of Common Stock certificate (incorporated by reference to Exhibit
4.1 to Amendment No. 2 to the Registration Statement on Form S-1, File No.
333-125405, filed by the Company with the SEC on August 2, 2005).10.1
    
    
    Credit Agreement, dated September 18, 2009, by and among Bronco Drilling
Company, Inc., certain subsidiaries of Bronco Drilling Company, Inc., as guarantors,
and Banco Inbursa S.A., Institución de Banca Múltiple, Grupo Financiero Inbursa, as
lender and as the issuing bank (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K, File No. 000-51471, filed by the Company with the SEC on
September 23, 2009).
  45




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##### Table of Contents



Exhibit No.

    
    Description10.2
    
    
    Warrant Agreement, dated September 18, 2009, by and among Bronco Drilling
Company, Inc. and Banco Inbursa S.A., Institución de Banca Múltiple, Grupo
Financiero Inbursa (incorporated by reference to Exhibit 10.2 to the Current Report
on Form 8-K, File No. 000-51471, filed by the Company with the SEC on September 23,
2009).10.3
    
    
    Warrant No. W-1, dated September 18, 2009, by and among Bronco Drilling
Company, Inc. and Banco Inbursa S.A., Institución de Banca Múltiple, Grupo
Financiero Inbursa (incorporated by reference to Exhibit 10.3 to the Current Report
on Form 8-K, File No. 000-51471, filed by the Company with the SEC on September 23,
2009).10.4
    
    
    Registration Rights Agreement, dated September 18, 2009, by and among
Bronco Drilling Company, Inc., Banco Inbursa S.A., Institución de Banca Múltiple,
Grupo Financiero Inbursa (incorporated by reference to Exhibit 10.4 to the Current
Report on Form 8-K, File No. 000-51471, filed by the Company with the SEC on
September 23, 2009).10.5
    
    
    Warrant No. W-2,
dated September 18, 2009, by and among Bronco Drilling
Company, Inc. and Carso Infraestructura y Construcción, S.A.B.
de C.V. (incorporated by reference to Exhibit 10.6 to the Annual
Report on Form 10-K, File No. 000-51471, filed by the Company with
the SEC on March 15, 2010).10.6
    
    
    Waiver Letter, dated February 9, 2010, by and between Bronco Drilling
Company, Inc. and Banco Inbursa S.A., Institución de Banca Múltiple, Grupo
Financiero Inbursa (incorporated by reference to Exhibit 10.1 to the Current Report
on Form 8-K, File No. 000-51471, filed by the Company with the SEC on February 16,
2010).10.7
    
    
    First Amendment to Credit Agreement, dated February 9, 2011, by and
among Bronco Drilling Company, Inc., certain subsidiaries thereof, and Banco
Inbursa S.A., Institución de Banca Múltiple, Grupo Financiero Inbursa (incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K, File No. 000-51471,
filed by the Company with the SEC on February 11, 2011).+10.8
    
    
    Bronco Drilling Company, Inc. 2006 Stock Incentive Plan
(incorporated by reference to Appendix B to the Companys Proxy
Statement, filed by the Company with the SEC on April 28, 2008).+10.9
    
    
    Form of Restricted Stock Award Agreement (incorporated by reference
to Exhibit 10.2 to the Companys Current Report on Form 8-K, File
No. 000-51471, filed by the Company with the SEC on June 15, 2008).+10.10
    
    
    Form of Stock Option Agreement (incorporated by reference to
Exhibit 10.3 to the Companys Current Report on Form 8-K, File No.
000-51471, filed by the Company with the SEC on June 15, 2008).+10.11
    
    
    Bronco Drilling Company, Inc. 2006 Stock Incentive Plan, as amended
(incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K, File No. 000-51471, filed by the Company with the SEC on
December 15, 2010).*21.1
    
    
    List of the Companys Subsidiaries.*23.1
    
    
    Consent of Grant Thornton LLP*24.1
    
    
    Power of Attorney (included on signature page).*31.1
    
    
    Certification of Chief Executive Officer of Bronco Drilling
Company, Inc. pursuant to Rule 13a-14(a) promulgated under the
Securities Exchange Act of 1934, as amended.*31.2
    
    
    Certification of Chief Financial Officer of Bronco Drilling
Company, Inc. pursuant to Rule 13a-14(a) promulgated under the
Securities Exchange Act of 1934, as amended*32.1
    
    
    Certification of Chief Executive Officer of Bronco Drilling
Company, Inc. pursuant to Rule 13a-14(b) promulgated under the
Securities Exchange Act of 1934, as amended, and Section 1350 of
Chapter 63 of Title 18 of the United States Code.*32.2
    
    
    Certification of Chief Financial Officer of Bronco Drilling
Company, Inc. pursuant to Rule 13a-14(b) promulgated under the
Securities Exchange Act of 1934, as amended, and Section 1350 of
Chapter 63 of Title 18 of the United States Code.
 
 +
    
    Management contract, compensatory plan or arrangement*
    
    Filed herewith.  46




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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
BRONCO DRILLING COMPANY, INC. AND SUBSIDIARIES
 PageBronco Drilling Company, Inc. and SubsidiariesReport of Independent Registered Public Accounting Firm
    
    
    48Consolidated Balance Sheets as of December 31, 2010 and 2009
    
    
    49Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008
    
    
    50Consolidated Statements
of Stockholders Equity and Comprehensive Income (loss) for the years ended December 31, 2010, 2009 and 2008
    
    
    51Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008
    
    
    52Notes to Consolidated Financial Statements
    
    
    53
  47




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Internal Control  Integrated Framework
  
  48




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##### Table of Contents



Bronco Drilling Company, Inc. and Subsidiaries
 
   December 31,2010
    
    
    2009ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    11,854
    
    
    $
    9,497Restricted cash
    
    
    2,700
    
    
    
    ReceivablesTrade and other, net of allowance for doubtful accounts of
$891 and $3,576 in 2010 and 2009, respectively
    
    
    24,656
    
    
    
    15,306Affiliate receivables, net of allowance of $800 in 2010
    
    
    1,508
    
    
    
    9,620Unbilled receivables
    
    
    428
    
    
    
    828Income tax receivable
    
    
    5,700
    
    
    
    3,800Current deferred income taxes
    
    
    2,765
    
    
    
    1,360Current maturities of note receivable from affiliate
    
    
    1,607
    
    
    
    2,000Prepaid expenses
    
    
    329
    
    
    
    666Total current assets
    
    
    51,547
    
    
    
    43,077PROPERTY AND EQUIPMENT  AT COSTDrilling rigs and related equipment
    
    
    315,085
    
    
    
    386,514Transportation, office and other equipment
    
    
    16,236
    
    
    
    18,602331,321
    
    
    
    405,116Less accumulated depreciation
    
    
    105,242
    
    
    
    116,455226,079
    
    
    
    288,661OTHER ASSETSNote receivable from affiliate, less current maturities
    
    
    
    
    
    
    517Investment in Challenger
    
    
    38,730
    
    
    
    39,714Investment in Bronco MX
    
    
    20,632
    
    
    
    21,407Debt issue costs and other
    
    
    3,362
    
    
    
    3,672Non-current assets held for sale and discontinued operations
    
    
    1,680
    
    
    
    48,53564,404
    
    
    
    113,845$
    342,030
    
    
    $
    445,583LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    7,945
    
    
    $
    9,756Accrued liabilities
    
    
    7,847
    
    
    
    7,952Current maturities of long-term debt
    
    
    95
    
    
    
    89Total current liabilities
    
    
    15,887
    
    
    
    17,797LONG-TERM DEBT, less current maturities and discount
    
    
    6,730
    
    
    
    51,814WARRANT
    
    
    4,407
    
    
    
    2,829DEFERRED INCOME TAXES
    
    
    21,664
    
    
    
    32,872COMMITMENTS AND CONTINGENCIES (Note 8)STOCKHOLDERS EQUITYCommon stock, $.01 par value, 100,000
shares authorized; 27,236 and 26,713 shares
issued and outstanding at December 31, 2010 and 2009
    
    
    277
    
    
    
    270Additional paid-in capital
    
    
    310,580
    
    
    
    307,313Accumulated other comprehensive income
    
    
    1,012
    
    
    
    538Retained earnings (Accumulated deficit)
    
    
    (18,527
    )
    
    
    32,150Total stockholders equity
    
    
    293,342
    
    
    
    340,271$
    342,030
    
    
    $
    445,583
   49




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##### Table of Contents



Bronco Drilling Company, Inc. and Subsidiaries
 
   Years Ended December 31,2010
    
    
    2009
    
    
    2008REVENUESContract drilling revenues, including 0%, 0%, and 2%
from related parties
    
    $
    124,399
    
    
    $
    102,896
    
    
    $
    233,922EXPENSESContract drilling
    
    
    90,290
    
    
    
    70,721
    
    
    
    140,935Depreciation and amortization
    
    
    28,445
    
    
    
    36,180
    
    
    
    39,194General and administrative
    
    
    17,108
    
    
    
    15,782
    
    
    
    29,821Gain on Challenger transactions
    
    
    
    
    
    
    
    
    
    
    (2,252
    )Loss on Bronco MX transaction
    
    
    1,487
    
    
    
    23,705
    
    
    
    Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    21,115Impairment of drilling rigs and related equipment
    
    
    7,900
    
    
    
    
    
    
    
    Loss on sale of drilling rigs and related equipment
    
    
    23,732
    
    
    
    
    
    
    
    168,962
    
    
    
    146,388
    
    
    
    228,813Income (loss) from continuing operations
    
    
    (44,563
    )
    
    
    (43,492
    )
    
    
    5,109OTHER INCOME (EXPENSE)Interest expense
    
    
    (4,671
    )
    
    
    (6,933
    )
    
    
    (4,048
    )Loss from early extinguishment of debt
    
    
    
    
    
    
    (2,859
    )
    
    
    (155
    )Interest income
    
    
    201
    
    
    
    273
    
    
    
    1,039Loss on partial sale of investment in Bronco MX
    
    
    (1,271
    )
    
    
    
    
    
    
    Equity in income (loss) of Challenger
    
    
    (984
    )
    
    
    (1,914
    )
    
    
    2,186Equity in income (loss) of Bronco MX
    
    
    22
    
    
    
    (588
    )
    
    
    Impairment of investment in Challenger
    
    
    
    
    
    
    (21,247
    )
    
    
    (14,442
    )Other
    
    
    204
    
    
    
    (383
    )
    
    
    (343
    )Change in fair value of warrant
    
    
    (1,578
    )
    
    
    1,850
    
    
    
    (8,077
    )
    
    
    (31,801
    )
    
    
    (15,763
    )Loss from continuing operations before
income tax
    
    
    (52,640
    )
    
    
    (75,293
    )
    
    
    (10,654
    )Income tax benefit
    
    
    (18,135
    )
    
    
    (27,151
    )
    
    
    (5,339
    )Loss from continuing operations
    
    
    (34,505
    )
    
    
    (48,142
    )
    
    
    (5,315
    )Loss from discontinued operations, net of tax
    
    
    (16,172
    )
    
    
    (9,437
    )
    
    
    (2,928
    )NET LOSS
    
    $
    (50,677
    )
    
    $
    (57,579
    )
    
    $
    (8,243
    )Loss per common share-BasicContinuing operations
    
    
    (1.27
    )
    
    
    (1.81
    )
    
    
    (0.20
    )Discontinued operations
    
    
    (0.60
    )
    
    
    (0.35
    )
    
    
    (0.11
    )Loss per common share-Basic
    
    $
    (1.87
    )
    
    $
    (2.16
    )
    
    $
    (0.31
    )Loss per common share-DilutedContinuing operations
    
    
    (1.27
    )
    
    
    (1.81
    )
    
    
    (0.20
    )Discontinued operations
    
    
    (0.60
    )
    
    
    (0.35
    )
    
    
    (0.11
    )Loss per common share-Diluted
    
    $
    (1.87
    )
    
    $
    (2.16
    )
    
    $
    (0.31
    )Weighted average number of shares outstanding-Basic
    
    
    27,091
    
    
    
    26,651
    
    
    
    26,293Weighted average number of shares outstanding-Diluted
    
    
    27,091
    
    
    
    26,651
    
    
    
    26,293
   50




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##### Table of Contents



Bronco Drilling Company, Inc. and Subsidiaries
 
   AccumulatedAdditional
    
    
    Other
    
    
    
    
    
    
    TotalCommon
    
    
    Common
    
    
    Paid In
    
    
    Comprehensive
    
    
    Retained
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Income
    
    
    Earnings
    
    
    EquityBalance as of December 31, 2007
    
    
    26,031
    
    
    $
    262
    
    
    $
    298,195
    
    
    $
    
    
    
    $
    97,972
    
    
    $
    396,429Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,243
    )
    
    
    (8,243
    )Stock compensation
    
    
    315
    
    
    
    5
    
    
    
    5,820
    
    
    
    
    
    
    
    
    
    
    
    5,825Balance as of December 31, 2008
    
    
    26,346
    
    
    
    267
    
    
    
    304,015
    
    
    
    
    
    
    
    89,729
    
    
    
    394,011Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,579
    )
    
    
    (57,579
    )Other Comprehensive Income:Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    538
    
    
    
    
    
    
    
    538Total Comprehensive Income (Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,041
    )Stock compensation
    
    
    367
    
    
    
    3
    
    
    
    3,298
    
    
    
    
    
    
    
    
    
    
    
    3,301Balance as of December 31, 2009
    
    
    26,713
    
    
    
    270
    
    
    
    307,313
    
    
    
    538
    
    
    
    32,150
    
    
    
    340,271Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,677
    )
    
    
    (50,677
    )Other Comprehensive Income:Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    474
    
    
    
    
    
    
    
    474Total Comprehensive Income (Loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,203
    )Stock compensation
    
    
    523
    
    
    
    7
    
    
    
    3,267
    
    
    
    
    
    
    
    
    
    
    
    3,274Balance as of December 31, 2010
    
    
    27,236
    
    
    $
    277
    
    
    $
    310,580
    
    
    $
    1,012
    
    
    $
    (18,527
    )
    
    $
    293,342
   51




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##### Table of Contents



Bronco Drilling Company, Inc. and Subsidiaries
 
   Years Ended December 31,2010
    
    
    2009
    
    
    2008(Unaudited)Cash flows from operating activities from continuing operations:Net loss
    
    $
    (50,677
    )
    
    $
    (57,579
    )
    
    $
    (8,243
    )Adjustments to reconcile net loss to net cash
provided by operating activities from continuing operations:Loss from discontinued operations, net of tax
    
    
    16,172
    
    
    
    9,437
    
    
    
    2,928Depreciation and amortization
    
    
    29,241
    
    
    
    36,942
    
    
    
    39,455Bad debt expense
    
    
    2,282
    
    
    
    240
    
    
    
    3,582Loss (gain) on sale of assets
    
    
    (272
    )
    
    
    466
    
    
    
    941Write off of debt issue costs
    
    
    
    
    
    
    2,859
    
    
    
    155Gain on Challenger transactions
    
    
    
    
    
    
    
    
    
    
    (3,138
    )Impairment of investment in Challenger
    
    
    
    
    
    
    21,247
    
    
    
    14,442Impairment of goodwill
    
    
    
    
    
    
    
    
    
    
    21,534Loss on sale of drilling rigs and related equipment
    
    
    23,732
    
    
    
    
    
    
    
    Impairment of drilling rigs and related equipment
    
    
    7,900
    
    
    
    
    
    
    
    Loss on partial sale of investment in Bronco MX
    
    
    1,271
    
    
    
    
    
    
    
    Equity in (income) loss of Challenger
    
    
    984
    
    
    
    1,914
    
    
    
    (2,186
    )Equity in (income) loss of Bronco MX
    
    
    (22
    )
    
    
    588
    
    
    
    Change in fair value of warrant
    
    
    1,578
    
    
    
    (1,850
    )
    
    
    Loss on Bronco MX transaction
    
    
    1,487
    
    
    
    23,705
    
    
    
    Imputed interest expense
    
    
    907
    
    
    
    224
    
    
    
    Stock compensation
    
    
    3,274
    
    
    
    3,301
    
    
    
    5,825Deferred income taxes
    
    
    (5,392
    )
    
    
    (25,760
    )
    
    
    (6,332
    )Changes in current assets and liabilities:Receivables
    
    
    (11,993
    )
    
    
    40,490
    
    
    
    (1,643
    )Affiliate receivables
    
    
    8,112
    
    
    
    (6,233
    )
    
    
    Unbilled receivables
    
    
    400
    
    
    
    1,990
    
    
    
    (937
    )Prepaid expenses
    
    
    190
    
    
    
    (64
    )
    
    
    (152
    )Other assets
    
    
    (790
    )
    
    
    244
    
    
    
    717Accounts payable
    
    
    8,627
    
    
    
    (21,465
    )
    
    
    (13,973
    )Accrued expenses
    
    
    181
    
    
    
    (6,762
    )
    
    
    (4,552
    )Income taxes receivable
    
    
    1,086
    
    
    
    (1,730
    )
    
    
    Net cash provided by operating activities from continuing operations
    
    
    38,278
    
    
    
    22,204
    
    
    
    48,423Cash flows from investing activities from continuing operations:Restricted cash account
    
    
    (2,700
    )
    
    
    
    
    
    
    2,899Business acquisition, net of cash acquired
    
    
    
    
    
    
    
    
    
    
    (5,063
    )Principal payments on note receivable
    
    
    911
    
    
    
    3,065
    
    
    
    Proceeds from sale of assets
    
    
    23,982
    
    
    
    32,375
    
    
    
    3,965Purchase of property and equipment
    
    
    (19,177
    )
    
    
    (16,462
    )
    
    
    (76,793
    )Net cash provided by (used in) investing activities from continuing operations
    
    
    3,016
    
    
    
    18,978
    
    
    
    (74,992
    )Cash flows from financing activities from continuing operations:Proceeds from borrowings
    
    
    5,000
    
    
    
    55,000
    
    
    
    51,100Payments of debt
    
    
    (50,986
    )
    
    
    (111,184
    )
    
    
    (79
    )Debt issue costs
    
    
    
    
    
    
    (2,232
    )
    
    
    (3,501
    )Net provided by (used in) financing activities from continuing operations
    
    
    (45,986
    )
    
    
    (58,416
    )
    
    
    47,520Net increase (decrease) in cash and cash equivalents from continuing operations
    
    
    (4,692
    )
    
    
    (17,234
    )
    
    
    20,951Cash flows from discontinued operations:Operating cash flows
    
    
    (16,611
    )
    
    
    5,844
    
    
    
    10,677Investing cash flows
    
    
    23,660
    
    
    
    (784
    )
    
    
    (7,803
    )Financing cash flows
    
    
    
    
    
    
    (5,005
    )
    
    
    (2,870
    )Net increase (decrease) in cash and cash equivalents from discontinued operations
    
    
    7,049
    
    
    
    55
    
    
    
    4Increase (decrease) in cash and cash equivalents
    
    
    2,357
    
    
    
    (17,179
    )
    
    
    20,955Beginning cash and cash equivalents
    
    
    9,497
    
    
    
    26,676
    
    
    
    5,721Ending cash and cash equivalents
    
    $
    11,854
    
    
    $
    9,497
    
    
    $
    26,676Supplementary disclosure of cash flow information:Interest paid, net of amount capitalized
    
    $
    4,026
    
    
    $
    11,549
    
    
    $
    2,704Income taxes (refunded) paid
    
    
    (13,829
    )
    
    
    339
    
    
    
    198Supplementary disclosure of non-cash investing and financing:Purchase of property and equipment in accounts payable
    
    
    2,034
    
    
    
    4,425
    
    
    
    11,430Reduction of receivable for property and equipment
    
    
    
    
    
    
    5,040
    
    
    
    Reduction of debt for warrants issued
    
    
    
    
    
    
    4,679
    
    
    
    Assets contributed to Bronco MX
    
    
    
    
    
    
    77,194
    
    
    
    Note issued for acquisition of property and equipment
    
    
    
    
    
    
    
    
    
    
    1,277Assets exchanged/sold for equity interest and note receivable
    
    
    
    
    
    
    
    
    
    
    72,503Common stock received for payment of receivable
    
    
    
    
    
    
    
    
    
    
    1,900
   52




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##### Table of Contents



Bronco Drilling Company, Inc. and Subsidiaries
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 ($ Amounts in thousands, except per share amounts)
 1. Organization and Summary of Significant Accounting Policies
 Business and Principles of Consolidation
    Cash and Cash Equivalents
   Restricted Cash
  Foreign Currency
  Revenue Recognition
     53




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##### Table of Contents



Accounts Receivable
  Prepaid Expenses
  Property and Equipment
   Accounting for the Impairment or Disposal of Long-Lived Assets Asset Sales and Held for Sale Discontinued Operations,
 Debt issue costs and other
 Intangibles  Goodwill and Other
  54




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##### Table of Contents



Income Taxes
 Income Taxes,
   Comprehensive Income (Loss)
  Years ended December 31,2010
    
    
    2009
    
    
    2008Net income (loss)
    
    $
    (50,677
    )
    
    $
    (57,579
    )
    
    $
    (8,243
    )Other comprehensive income  translation adjustment
    
    
    474
    
    
    
    538
    
    
    
    Comprehensive income (loss)
    
    $
    (50,203
    )
    
    $
    (57,041
    )
    
    $
    (8,243
    )
 Net income (Loss) Per Common Share
 Earnings per Share.
 Stock-based Compensation
 Stock Compensation
  55




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##### Table of Contents



Equity Method Investments
  Recent Accounting Pronouncements
  Fair Value Measurements
     56




---



##### Table of Contents



Reclassifications
  2. Equity Method Investments
     Investments-Equity Method and Joint Venture
    57




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##### Table of Contents



December 31,2010
    
    
    2009Condensed statement of operations:Revenues
    
    $
    49,267
    
    
    $
    56,509Gross margin
    
    $
    12,616
    
    
    $
    21,076Net Income (loss)
    
    $
    (2,931
    )
    
    $
    (3,552
    )Condensed balance sheet:Current assets
    
    $
    61,147
    
    
    $
    59,971Noncurrent assets
    
    
    124,494
    
    
    
    130,667Total assets
    
    $
    185,641
    
    
    $
    190,638Current liabilities
    
    $
    28,788
    
    
    $
    25,511Noncurrent liabilities
    
    
    15,189
    
    
    
    20,531Equity
    
    
    141,664
    
    
    
    144,596Total liabilities and equity
    
    $
    185,641
    
    
    $
    190,638
  ApproximateDrilling DepthRig
    
    Design
    
    (ft)
    
    Type
    
    Horsepower43
    
    Gardner Denver 800
    
    15,000
    
    Mechanical
    
    1,0004
    
    Skytop Brewster N46
    
    14,000
    
    Mechanical
    
    95053
    
    Skytop Brewster N42
    
    12,000
    
    Mechanical
    
    85055
    
    Oilwell 660
    
    12,000
    
    Mechanical
    
    1,00058
    
    National N55
    
    12,000
    
    Mechanical
    
    80060
    
    Skytop Brewster N46
    
    14,000
    
    Mechanical
    
    85072
    
    Skytop Brewster N42
    
    10,000
    
    Mechanical
    
    75076
    
    National N55
    
    12,000
    
    Mechanical
    
    70078
    
    Seaco 1200
    
    12,000
    
    Mechanical
    
    1,200
 Consolidation,
  58




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##### Table of Contents



December 31,2010
    
    
    2009Condensed statement of operations:Revenues
    
    $
    34,128
    
    
    $
    7,171Gross margin
    
    $
    765
    
    
    $
    (2,582
    )Net Income (loss)
    
    $
    826
    
    
    $
    (1,472
    )Condensed balance sheet:Current assets
    
    $
    25,497
    
    
    $
    8,931Noncurrent assets
    
    
    100,687
    
    
    
    57,746Total assets
    
    $
    126,184
    
    
    $
    66,677Current liabilities
    
    $
    23,031
    
    
    $
    13,162Noncurrent liabilities
    
    
    
    
    
    
    Equity
    
    
    103,153
    
    
    
    53,515Total liabilities and equity
    
    $
    126,184
    
    
    $
    66,677
 3. Accrued liabilities
  2010
    
    
    2009Salaries, wages, payroll taxes and benefits
    
    $
    1,252
    
    
    $
    623Workers compensation liability
    
    
    3,695
    
    
    
    2,458Sales, use and other taxes
    
    
    829
    
    
    
    2,211Health insurance
    
    
    735
    
    
    
    784Deferred revenue
    
    
    755
    
    
    
    1,251General liability insurance
    
    
    500
    
    
    
    500Accrued interest
    
    
    81
    
    
    
    125$
    7,847
    
    
    $
    7,952
  59




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##### Table of Contents



4. Long-term Debt and Warrant
  December 31,
    
    
    December 31,2010
    
    
    2009Revolving credit facility with Banco Inbursa S.A., collateralized by the Companys assets,
and matures on September 17, 2014. Loans under the revolving credit facility
bear interest at variable rates as defined in the credit agreement. Presented net of discount of $3,548 and $4,455 at December 31, 2010 and 2009, respectively. (1)
    
    
    5,555
    
    
    
    50,545Note payable to Ameritas Life Insurance Corp., collateralized by a building, payable in
principal and interest installments of $14, interest on the note is 6.0%, maturity date
of January 1, 2021. (2)
    
    
    1,270
    
    
    
    1,3586,825
    
    
    
    51,903Less current installments
    
    
    95
    
    
    
    896,730
    
    
    
    51,814
 (1)
    
    On September 18, 2009, the Company entered into a new senior secured revolving credit
facility with Banco Inbursa S.A., or Banco Inbursa, as lender and as the issuing bank. The
Company utilized (i) borrowings under the credit facility, (ii) proceeds from the sale of the
membership interests of Bronco MX and (iii) cash-on-hand to repay all amounts outstanding
under the Companys prior revolving credit agreement with Fortis Bank SA/NV, New York Branch,
which was replaced by this credit facility.
      60




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##### Table of Contents



(2)
    
    On January 2, 2007, the Company assumed a term loan agreement with Ameritas Life Insurance
Corp. related to the acquisition of a building. The loan provides for term installments in an
aggregate not to exceed $1,590.
  2011
    
    $
    952012
    
    
    1002013
    
    
    1072014
    
    
    9,2162015
    
    
    1202016 and thereafter
    
    
    735$
    10,373
 5. Income Taxes
   61




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##### Table of Contents



Years Ended December 31,2010
    
    
    2009
    
    
    2008Current:State
    
    $
    212
    
    
    $
    28
    
    
    $
    (165
    )Federal
    
    
    874
    
    
    
    (1,419
    )
    
    
    (874
    )Deferred:State
    
    
    (3,133
    )
    
    
    (1,660
    )
    
    
    (432
    )Federal
    
    
    (16,088
    )
    
    
    (24,100
    )
    
    
    (3,868
    )Income tax expense (benefit)
    
    $
    (18,135
    )
    
    $
    (27,151
    )
    
    $
    (5,339
    )
  Years Ended December 31,2010
    
    
    2009Deferred tax assets:Stock option expense
    
    $
    2,369
    
    
    $
    2,607Alternative minimum tax credit carryforward
    
    
    
    
    
    
    2,225Net operating loss carryforwards
    
    
    27,903
    
    
    
    37,905Accounts receivable allowance
    
    
    341
    
    
    
    1,383Tax credits
    
    
    
    
    
    
    Employee benefits and insurance accruals
    
    
    277
    
    
    
    303Other
    
    
    2,987
    
    
    
    1,093Total deferred tax assets
    
    
    33,877
    
    
    
    45,516Deferred tax liabilities:Property and equipment, principally due
to differences in depreciation and
impairments
    
    
    52,712
    
    
    
    76,964Other
    
    
    64
    
    
    
    64Total deferred tax liabilities
    
    
    52,776
    
    
    
    77,028Net deferred tax liabilities
    
    $
    18,899
    
    
    $
    31,512
   62




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Years Ended December 31,2010
    
    
    2009
    
    
    2008Expected tax expense (benefit)
    
    $
    (17,473
    )
    
    $
    (25,783
    )
    
    $
    (4,870
    )State income taxes (benefit)
    
    
    (2,977
    )
    
    
    (2,201
    )
    
    
    (345
    )Nondeductible officer compensation
    
    
    155
    
    
    
    121
    
    
    
    330Nondeductible meals and entertainment
    
    
    26
    
    
    
    19
    
    
    
    68Stock compensation adjustment
    
    
    447
    
    
    
    783
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    1,125Foreign tax expense/(credit)
    
    
    1,019
    
    
    
    (660
    )
    
    
    (832
    )Prior year estimate adjustment
    
    
    630
    
    
    
    356
    
    
    
    (295
    )Other
    
    
    38
    
    
    
    214
    
    
    
    (520
    )$
    (18,135
    )
    
    $
    (27,151
    )
    
    $
    (5,339
    )
 6. Workers Compensation and Health Insurance
   7. Transactions with Affiliates
   Equity
Method Investments.
 8. Commitments and Contingencies
   2011
    
    $
    7702012
    
    
    5542013
    
    
    4012014
    
    
    2302015
    
    
    77$
    2,032
  63




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9. Asset Sales and Held for Sale
       10. Discontinued Operations
 Well Servicing
    64




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##### Table of Contents



Year Ended December 31,2010
    
    
    2009
    
    
    2008Revenue
    
    $
    
    
    
    $
    3,799
    
    
    $
    33,284Impairment of assets held for sale
    
    $
    23,694
    
    
    $
    
    
    
    $
    Loss from discontinued operations
before income tax
    
    $
    (36,383
    )
    
    $
    (10,094
    )
    
    $
    (3,555
    )Income tax
benefit
    
    $
    (14,079
    )
    
    $
    (3,906
    )
    
    $
    (131
    )Loss on sale
of well servicing assets
    
    $
    (8,915
    )
    
    $
    
    
    
    $
    
 Fair Value Measurements
 Trucking Assets
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Revenue
    
    $
    1,133
    
    
    $
    3,842
    
    
    $
    13,907Income (loss) from discontinued
operations before income tax
    
    $
    10,005
    
    
    $
    (5,301
    )
    
    $
    805Income tax
expense (benefit)
    
    $
    3,873
    
    
    $
    (2,052
    )
    
    $
    311Gain on sale of trucking assets
    
    $
    10,962
    
    
    $
    
    
    
    $
    
  65




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##### Table of Contents



11. Net Income (Loss) Per Common Share
  Year Ended December 31,2010
    
    
    2009
    
    
    2008Basic:Continuing operations
    
    
    (34,505
    )
    
    
    (48,142
    )
    
    
    (5,315
    )Discontinued operations
    
    
    (16,172
    )
    
    
    (9,437
    )
    
    
    (2,928
    )Net loss
    
    $
    (50,677
    )
    
    $
    (57,579
    )
    
    $
    (8,243
    )Weighted average shares (thousands)
    
    
    27,091
    
    
    
    26,651
    
    
    
    26,293Continuing operations per share
    
    
    (1.27
    )
    
    
    (1.81
    )
    
    
    (0.20
    )Discontinued operations per share
    
    
    (0.60
    )
    
    
    (0.35
    )
    
    
    (0.11
    )Net loss per share
    
    $
    (1.87
    )
    
    $
    (2.16
    )
    
    $
    (0.31
    )Diluted:Continuing operations
    
    
    (34,505
    )
    
    
    (48,142
    )
    
    
    (5,315
    )Discontinued operations
    
    
    (16,172
    )
    
    
    (9,437
    )
    
    
    (2,928
    )Net Loss
    
    $
    (50,677
    )
    
    $
    (57,579
    )
    
    $
    (8,243
    )Weighted average shares:Outstanding (thousands)
    
    
    27,091
    
    
    
    26,651
    
    
    
    26,293Restricted Stock and Options (thousands)
    
    
    
    
    
    
    
    
    
    
    27,091
    
    
    
    26,651
    
    
    
    26,293Continuing operations per share
    
    
    (1.27
    )
    
    
    (1.81
    )
    
    
    (0.20
    )Discontinued operations per share
    
    
    (0.60
    )
    
    
    (0.35
    )
    
    
    (0.11
    )Income (loss) per share
    
    $
    (1.87
    )
    
    $
    (2.16
    )
    
    $
    (0.31
    )
  12. Fair Value Measurements
 Fair Value Measurements
  Level 1 :
 Level 2 :
 Level 3 :
  66




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Fair Value on Recurring Basis
  Fair Value on Non-Recurring Basis
     13. Restricted Stock
    67




---



##### Table of Contents



Weighted AverageGrant DateShares
    
    
    Fair ValueOutstanding at December 31, 2007
    
    
    553,445
    
    
    $
    16.64Granted
    
    
    232,874
    
    
    
    13.98Vested
    
    
    (321,889
    )
    
    
    16.36Forfeited/expired
    
    
    (750
    )
    
    
    16.69Outstanding at December 31, 2008
    
    
    463,680
    
    
    $
    15.22Granted
    
    
    415,955
    
    
    
    5.28Vested
    
    
    (375,037
    )
    
    
    13.86Outstanding at December 31, 2009
    
    
    504,598
    
    
    $
    7.67Granted
    
    
    1,247,000
    
    
    
    4.74Vested
    
    
    (529,102
    )
    
    
    7.35Forfeited/expired
    
    
    
    
    
    
    Outstanding at December 31, 2010
    
    
    1,222,496
    
    
    $
    4.82
  14. Fair Value of Financial Instruments
 Cash and cash equivalents, trade receivables and payables and short-term debt:
  Long-term debt
  15. Employee Benefit Plans
   68




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16. Quarterly Results of Operations (unaudited)
  Bronco Drilling Company Inc.
 First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter (1)
    
    
    Quarter (2)2010Revenues
    
    $
    22,295
    
    
    $
    29,938
    
    
    $
    34,837
    
    
    $
    37,329Loss from continuing operations before
income tax
    
    
    (8,626
    )
    
    
    (8,907
    )
    
    
    (31,796
    )
    
    
    (3,311
    )Income tax benefit
    
    
    (2,621
    )
    
    
    (2,341
    )
    
    
    (12,126
    )
    
    
    (1,047
    )Loss from continuing operations
    
    
    (6,005
    )
    
    
    (6,566
    )
    
    
    (19,670
    )
    
    
    (2,264
    )Income (loss) from discontinued operations
    
    
    (1,414
    )
    
    
    (15,371
    )
    
    
    846
    
    
    
    (233
    )Net loss
    
    
    (7,419
    )
    
    
    (21,937
    )
    
    
    (18,824
    )
    
    
    (2,497
    )Income (loss) per common share-BasicContinuing operations
    
    $
    (0.23
    )
    
    $
    (0.24
    )
    
    $
    (0.72
    )
    
    $
    (0.08
    )Discontinued operations
    
    
    (0.05
    )
    
    
    (0.57
    )
    
    
    0.03
    
    
    
    (0.01
    )Loss per common share-Basic
    
    $
    (0.28
    )
    
    $
    (0.81
    )
    
    $
    (0.69
    )
    
    $
    (0.09
    )Income (loss) per common share-DilutedContinuing operations
    
    $
    (0.23
    )
    
    $
    (0.24
    )
    
    $
    (0.72
    )
    
    $
    (0.08
    )Discontinued operations
    
    
    (0.05
    )
    
    
    (0.57
    )
    
    
    0.03
    
    
    
    (0.01
    )Loss per common share-Diluted
    
    $
    (0.28
    )
    
    $
    (0.81
    )
    
    $
    (0.69
    )
    
    $
    (0.09
    )
 First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter (3)
    
    
    Quarter2009Revenues
    
    $
    45,282
    
    
    $
    25,894
    
    
    $
    15,826
    
    
    $
    15,894Income (loss) from continuing
operations before income tax
    
    
    1,558
    
    
    
    (6,753
    )
    
    
    (64,152
    )
    
    
    (5,946
    )Income tax expense (benefit)
    
    
    1,251
    
    
    
    (2,361
    )
    
    
    (23,716
    )
    
    
    (2,325
    )Income (loss) from continuing operations
    
    
    307
    
    
    
    (4,392
    )
    
    
    (40,436
    )
    
    
    (3,621
    )Loss from discontinued operations
    
    
    (2,016
    )
    
    
    (2,766
    )
    
    
    (2,218
    )
    
    
    (2,437
    )Net loss
    
    
    (1,709
    )
    
    
    (7,158
    )
    
    
    (42,654
    )
    
    
    (6,058
    )Income (loss) per common share-BasicContinuing operations
    
    $
    0.01
    
    
    $
    (0.17
    )
    
    $
    (1.52
    )
    
    $
    (0.13
    )Discontinued operations
    
    
    (0.07
    )
    
    
    (0.10
    )
    
    
    (0.08
    )
    
    
    (0.10
    )Loss per common share-Basic
    
    $
    (0.06
    )
    
    $
    (0.27
    )
    
    $
    (1.60
    )
    
    $
    (0.23
    )Income (loss) per common share-DilutedContinuing operations
    
    $
    0.01
    
    
    $
    (0.17
    )
    
    $
    (1.52
    )
    
    $
    (0.13
    )Discontinued operations
    
    
    (0.07
    )
    
    
    (0.10
    )
    
    
    (0.08
    )
    
    
    (0.10
    )Loss per common share-Diluted
    
    $
    (0.06
    )
    
    $
    (0.27
    )
    
    $
    (1.60
    )
    
    $
    (0.23
    )
 (1)
    
    Includes $7,761 of impairment of drilling rigs and related equipment and $20,809 of loss on
sale of drilling rigs and related equipment.(2)
    
    Includes $2,923 of loss on sale of drilling rigs and related equipment.(3)
    
    Includes $21,247 of impairment to our Challenger Investment and $23,964 loss on Bronco MX
transaction.
 17. Valuation and Qualifying Accounts
  Valuation and Qualifying AccountsBalance
    
    
    Chargedat
    
    
    to Costs
    
    
    Deductions
    
    
    BalanceBeginning
    
    
    and
    
    
    from
    
    
    atof Year
    
    
    Expenses
    
    
    Accounts
    
    
    Year EndYear ended December
31, 2008Allowance for
doubtful
receivables
    
    $
    1,834
    
    
    $
    3,745
    
    
    $
    (1,749
    )
    
    $
    3,830Year ended December
31, 2009Allowance for
doubtful
receivables
    
    $
    3,830
    
    
    $
    2,134
    
    
    $
    (2,388
    )
    
    $
    3,576Year ended December
31, 2010Allowance for
doubtful
receivables
    
    $
    3,576
    
    
    $
    2,692
    
    
    $
    (4,577
    )
    
    $
    1,691
  69




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18. Subsequent Events
    70




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SIGNATURES
  Bronco Drilling Company, Inc.Date: March 15, 2011
    By:
    /S/    D. Frank HarrisonD. Frank HarrisonChief Executive Officer Power of Attorney
   Name
    
    Title
    
    Date/S/ D. Frank Harrison

D. Frank Harrison
    
    Chief Executive, President and Director
(Principal Executive Officer)
    
    March 15, 2011/S/ Matthew S. Porter

Matthew S. Porter
    
    Chief Financial Officer
(Principal Accounting and Financial Officer)
    
    March 15, 2011/S/ David House

David House
    
    Director
    
    March 15, 2011/S/ Richard B. Hefner

Richard B. Hefner
    
    Director
    
    March 15, 2011/S/ Gary Hill

Gary Hill
    
    Director
    
    March 15, 2011/S/ William R. Snipes

William R. Snipes
    
    Director
    
    March 15, 2011
  71