<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q



[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                For the quarterly period ended September 30, 2000

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

              For the transition period from ________ to ________

                         Commission file number 1-13086


                         WEATHERFORD INTERNATIONAL, INC.
                         -------------------------------
             (Exact name of Registrant as specified in its Charter)

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

515 Post Oak Blvd., Suite 600, Houston, Texas                  77027-3415
---------------------------------------------                  ----------
(Address of principal executive offices)                       (Zip Code)

                                 (713) 693-4000
               --------------------------------------------------
               (Registrant's telephone number, include area code)


--------------------------------------------------------------------------------
     (Former name, former address and former fiscal year, if changed since
                                  last report)


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

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

       Title of Class                           Outstanding at October 27, 2000
       --------------                           -------------------------------
Common Stock, par value $1.00                             109,889,830


<PAGE>   2

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                   (IN THOUSANDS, EXCEPT SHARES AND PAR VALUE)

<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,     DECEMBER 31,
                                                                                    2000              1999
                                                                                ------------      ------------
                                                                                (UNAUDITED)
<S>                                                                             <C>               <C>
                                     ASSETS
CURRENT ASSETS:
   Cash and Cash Equivalents ..............................................     $     97,739      $     44,361
   Accounts Receivable, Net of Allowance for Uncollectible
     Accounts of $23,222 and $19,882, Respectively ........................          446,516           352,139
   Inventories ............................................................          431,509           364,607
   Other Current Assets ...................................................          125,801           108,042
                                                                                ------------      ------------
                                                                                   1,101,565           869,149
                                                                                ------------      ------------
PROPERTY, PLANT AND EQUIPMENT, AT COST,
   NET OF ACCUMULATED DEPRECIATION ........................................          927,950           898,996

GOODWILL, NET .............................................................        1,071,077           991,679
NET ASSETS OF DISCONTINUED OPERATIONS .....................................               --           553,861
DEFERRED TAX ASSET ........................................................           72,962            66,077
OTHER ASSETS ..............................................................          231,674           134,027
                                                                                ------------      ------------
                                                                                $  3,405,228      $  3,513,789
                                                                                ============      ============
                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Short-Term Borrowings and Current Portion of Long-Term Debt ............     $     39,502      $    322,767
   Accounts Payable .......................................................          152,671           117,530
   Other Current Liabilities ..............................................          258,289           216,302
                                                                                ------------      ------------
                                                                                     450,462           656,599
                                                                                ------------      ------------
LONG-TERM DEBT ............................................................          226,321           226,603
ZERO COUPON CONVERTIBLE SENIOR DEBENTURES .................................          505,409                --
MINORITY INTEREST .........................................................          199,308           198,597
DEFERRED INCOME TAXES AND OTHER ...........................................          205,894           186,611
5% CONVERTIBLE SUBORDINATED PREFERRED
   EQUIVALENT DEBENTURES ..................................................          402,500           402,500

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Series A Preferred Stock, $1 Par Value, Authorized One
     Share, Issued One and Zero Shares, Respectively .....................               --                --
   Common Stock, $1 Par Value, Authorized 250,000,000 Shares,
     Issued 121,335,034 and 120,200,449 Shares, Respectively ..............          121,335           120,200
   Capital in Excess of Par Value .........................................        1,590,166         1,526,648
   Treasury Stock, at Cost ................................................         (304,253)         (300,482)
   Retained Earnings ......................................................          137,011           586,310
   Accumulated Other Comprehensive Loss ...................................         (128,925)          (89,797)
                                                                                ------------      ------------
                                                                                   1,415,334         1,842,879
                                                                                ------------      ------------
                                                                                $  3,405,228      $  3,513,789
                                                                                ============      ============
</TABLE>

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


                                       1
<PAGE>   3

                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                   (UNAUDITED)
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                   THREE MONTHS                       NINE MONTHS
                                                                ENDED SEPTEMBER 30,                ENDED SEPTEMBER 30,
                                                            ----------------------------      ----------------------------
                                                                2000            1999             2000             1999
                                                            -----------      -----------      -----------      -----------
<S>                                                         <C>              <C>              <C>              <C>
REVENUES:
     Products .........................................     $   207,983      $   162,564      $   569,727      $   387,446
     Services and Rentals .............................         254,187          161,068          709,673          480,115
                                                            -----------      -----------      -----------      -----------
                                                                462,170          323,632        1,279,400          867,561
COSTS AND EXPENSES:
     Cost of Products .................................         133,556          122,711          383,261          274,553
     Cost of Services and Rentals .....................         188,839          113,690          514,596          346,556
     Selling, General and Administrative Attributable
       to Segments ....................................          85,869           64,705          249,053          186,535
     Corporate General and Administrative .............           9,574            5,585           27,383           18,150
     Equity in Earnings of Unconsolidated Affiliates ..            (677)            (688)          (2,460)          (1,578)
                                                            -----------      -----------      -----------      -----------
OPERATING INCOME ......................................          45,009           17,629          107,567           43,345

OTHER INCOME (EXPENSE):
     Interest Income ..................................           5,269              427            8,781            2,528
     Interest Expense .................................         (15,818)         (11,019)         (45,360)         (31,917)
     Other, Net .......................................            (368)            (672)             193            1,485
                                                            -----------      -----------      -----------      -----------
INCOME BEFORE INCOME TAXES
     AND MINORITY INTEREST ............................          34,092            6,365           71,181           15,441
PROVISION FOR INCOME TAXES ............................         (12,442)          (1,848)         (25,626)          (3,903)
                                                            -----------      -----------      -----------      -----------
INCOME BEFORE MINORITY INTEREST .......................          21,650            4,517           45,555           11,538
MINORITY INTEREST EXPENSE, NET OF TAX .................            (127)          (1,495)            (835)          (2,821)
                                                            -----------      -----------      -----------      -----------
INCOME FROM CONTINUING
     OPERATIONS .......................................          21,523            3,022           44,720            8,717
LOSS FROM DISCONTINUED
     OPERATIONS, NET OF TAX ...........................              --          (14,115)          (3,458)         (19,292)
                                                            -----------      -----------      -----------      -----------
NET INCOME (LOSS) .....................................     $    21,523      $   (11,093)     $    41,262      $   (10,575)
                                                            ===========      ===========      ===========      ===========
BASIC EARNINGS (LOSS) PER SHARE:
     Income From Continuing Operations ................     $      0.20      $      0.03      $      0.41      $      0.09
     Loss From Discontinued Operations ................              --            (0.14)           (0.03)           (0.20)
                                                            -----------      -----------      -----------      -----------
     Net Income (Loss) Per Share ......................     $      0.20      $     (0.11)     $      0.38      $     (0.11)
                                                            ===========      ===========      ===========      ===========
DILUTED EARNINGS (LOSS) PER SHARE:
     Income From Continuing Operations ................     $      0.19      $      0.03      $      0.40      $      0.09
     Loss From Discontinued Operations ................              --            (0.14)           (0.03)           (0.19)
                                                            -----------      -----------      -----------      -----------
     Net Income (Loss) Per Share ......................     $      0.19      $     (0.11)     $      0.37      $     (0.10)
                                                            ===========      ===========      ===========      ===========
WEIGHTED AVERAGE SHARES OUTSTANDING:
     Basic ............................................         109,792          101,408          109,147           98,770
     Diluted ..........................................         114,500          103,481          112,908          100,306
</TABLE>

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


                                       2
<PAGE>   4

                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                         NINE MONTHS
                                                                                     ENDED SEPTEMBER 30,
                                                                                ------------------------------
                                                                                    2000              1999
                                                                                ------------      ------------
<S>                                                                             <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income (Loss) .......................................................     $     41,262      $    (10,575)
  Adjustments to Reconcile Net Income (Loss) to Net Cash
     Provided  by Operating Activities:
     Depreciation and Amortization ........................................          146,339           119,968
     Loss from Discontinued Operations ....................................            3,458            19,292
     Minority Interest Expense, Net of Tax ................................              835             2,821
     Deferred Income Tax Provision (Benefit) ..............................          (13,647)            3,903
     Provision for Uncollectible Accounts Receivable ......................            3,251             3,556
     Gain on Sales of Property, Plant and Equipment .......................           (8,483)           (7,157)
     Other, Net ...........................................................            1,998                --
     Change in Operating Assets and Liabilities, Net of  Effects
       of Businesses Acquired .............................................         (154,992)         (107,322)
                                                                                ------------      ------------
       Net Cash Provided by Continuing Operations .........................           20,021            24,486
       Net Cash Provided (Used) by Discontinued Operations ................          (12,225)           55,176
                                                                                ------------      ------------
       Net Cash Provided by Operating Activities ..........................            7,796            79,662
                                                                                ------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of Businesses, Net of Cash Acquired .........................          (86,366)          (78,286)
  Capital Expenditures for Property, Plant and Equipment ..................         (164,062)         (134,719)
  Acquisitions and Capital Expenditures of Discontinued Operations ........           (5,056)          (50,340)
  Proceeds from Sale of Businesses ........................................           14,084                --
  Proceeds from Sale of Property, Plant and Equipment .....................           25,666            21,763
  Proceeds from Sale and Leaseback of Equipment ...........................           55,068           139,815
                                                                                ------------      ------------
       Net Cash Used by Investing Activities ..............................         (160,666)         (101,767)
                                                                                ------------      ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings (Repayments) of Short-Term Debt, Net .........................         (280,095)          145,339
  Repayments of Long-Term Debt, Net .......................................           (9,468)          (17,598)
  Repayments of Debt by Discontinued Operations ...........................               --           (52,316)
  Issuance of Zero Coupon Convertible Senior Debentures, Net ..............          491,868                --
  Distribution to Minority Interest Holder ................................               --           (65,350)
  Proceeds from Exercise of Stock Options .................................            6,226             1,329
  Acquisition of Treasury Stock ...........................................           (2,607)           (2,762)
  Other, Net ..............................................................              324               501
                                                                                ------------      ------------
       Net Cash Provided by Financing Activities ..........................          206,248             9,143
                                                                                ------------      ------------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS ........................................................           53,378           (12,962)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ..........................           44,361            34,131
                                                                                ------------      ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................     $     97,739      $     21,169
                                                                                ============      ============

SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest Paid ...........................................................     $     40,204      $     32,802
  Income Taxes Paid, Net of Refunds .......................................           12,916            14,322
</TABLE>


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


                                       3
<PAGE>   5

                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    THREE MONTHS                       NINE MONTHS
                                                                ENDED SEPTEMBER 30,                ENDED SEPTEMBER 30,
                                                            ----------------------------      ----------------------------
                                                                2000             1999            2000             1999
                                                            -----------      -----------      -----------      -----------
<S>                                                         <C>              <C>              <C>              <C>
Net Income (Loss) .....................................     $    21,523      $   (11,093)     $    41,262      $   (10,575)
Other Comprehensive Loss:
     Foreign Currency Translation Adjustment ..........         (31,176)          (5,103)         (53,593)         (10,414)
                                                            -----------      -----------      -----------      -----------
Comprehensive Loss ....................................     $    (9,653)     $   (16,196)     $   (12,331)     $   (20,989)
                                                            ===========      ===========      ===========      ===========
</TABLE>


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


                                       4
<PAGE>   6

                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1.   GENERAL

     The unaudited consolidated condensed financial statements included herein
have been prepared by Weatherford International, Inc. pursuant to the rules and
regulations of the Securities and Exchange Commission. These financial
statements include the accounts of Weatherford International, Inc. and all
majority-owned subsidiaries (the "Company") and reflect all adjustments which
the Company considers necessary for the fair presentation of such financial
statements for the interim periods presented. Although the Company believes that
the disclosures in these financial statements are adequate to make the interim
information presented not misleading, certain information relating to the
Company's organization and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
has been condensed or omitted in this Form 10-Q pursuant to such rules and
regulations. These financial statements should be read in conjunction with the
audited consolidated financial statements for the year ended December 31, 1999
and notes thereto included in the Company's Annual Report on Form 10-K. The
results of operations for the three and nine month periods ended September 30,
2000 are not necessarily indicative of the results expected for the full year.

     In October 1999, the Board of Directors of the Company approved a plan to
distribute all of the outstanding shares of common stock of its wholly owned
subsidiary, Grant Prideco, Inc. (the "Spin-off"), to holders of the Company's
common stock, $1.00 par value ("Common Stock"). These shares were distributed at
the close of business on April 14, 2000 to stockholders of record as of March
23, 2000. In connection with and prior to the Spin-off, the Company transferred
its drilling products businesses to Grant Prideco, Inc. ("Grant Prideco"). As a
result, the accompanying financial statements reflect the operations of Grant
Prideco as discontinued operations (See Note 4).

     Certain reclassifications of prior year balances have been made to conform
such amounts to corresponding 2000 classifications.

2.   INVENTORIES

     Inventories by category are as follows:

<TABLE>
<CAPTION>
                                                  SEPTEMBER 30,    DECEMBER 31,
                                                      2000             1999
                                                  ------------     ------------
                                                         (in thousands)
<S>                                               <C>              <C>
Raw materials, components and supplies ......     $    158,641     $    159,380
Work in process .............................           48,666           34,089
Finished goods ..............................          224,202          171,138
                                                  ------------     ------------
                                                  $    431,509     $    364,607
                                                  ============     ============
</TABLE>

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

3.   BUSINESS COMBINATIONS AND DISPOSITIONS

     On August 10, 2000 the Company acquired Alpine Oil Services Corporation
("Alpine") for approximately $54.4 million of Common Stock and one share of the
Company's preferred stock (See Note 8). Alpine, headquartered in Calgary,
Alberta, Canada, is being integrated into the Company's Drilling and
Intervention Services and Completion Systems Divisions. The acquisition extends
the Company's underbalanced drilling capabilities worldwide, adds new completion
technology and further expands the Company's offerings of products and services
in Canada.


                                       5
<PAGE>   7

                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)

     On June 30, 2000, the Company acquired the underbalanced drilling product
line of Oiltools International Limited ("Oiltools") for approximately $20.0
million cash. The acquired business provides underbalanced drilling services in
the international markets, in particular, Asia Pacific and the Middle East. The
assets add to the capabilities of the Company's underbalanced drilling
operations and are being integrated into its Drilling and Intervention Services
Division. On April 20, 2000, the Company also acquired the sand screen product
lines of Oiltools for approximately $18.5 million. The principal sand screen
product lines include Stratapac(R), a highly engineered, patented screen used in
offshore, deviated and horizontal wells; Stratacoil(TM), a small diameter
premium screen used for thru tubing completions; and AccuWrap(TM), a premium
wire wrap screen. These product lines were acquired to enhance and complement
the Company's Completion Systems Division's existing Houston Well Screen(TM) and
Expandable Sand Screen(TM) product lines.

     The Company's Compression Services Division acquired Singapore-based Gas
Services International Limited ("GSI") on January 12, 2000 for a total of
approximately $20.2 million. The acquisition is intended to expand this
division's platform of full service capabilities in the Asia Pacific and Middle
Eastern markets. GSI's main business units include compressor package rental,
maintenance and service, and floating production storage and offloading
platforms. In addition to Singapore, GSI has service locations in Indonesia and
the United Arab Emirates.

     The Company also effected various other smaller acquisitions during the
nine months ended September 30, 2000 for total consideration of approximately
$40.7 million, of which $35.9 million was paid in cash and assumed debt and $4.8
million was paid in the form of shares of Common Stock.

     In September 2000, the Company sold its one-third interest in Total
Logistic Control, LLC to C2, Inc. for $8.5 million. A director of the Company is
also a primary stockholder and director of C2, Inc.

     On August 31, 1999, the Company completed the acquisition of Dailey
International Inc. ("Dailey") pursuant to a pre-negotiated plan of
reorganization in bankruptcy. Under the terms of the acquisition, the Company
issued a total of approximately 4.3 million shares of Common Stock to the Dailey
noteholders and stockholders. Because the Company held Senior Notes of Dailey,
which the Company acquired prior to the bankruptcy at a discount, the total
purchase price for Dailey, excluding assumed liabilities of Dailey that were not
impaired in the bankruptcy, was approximately $185.0 million.

     The acquisitions discussed above were accounted for using the purchase
method of accounting. Results of operations for acquisitions accounted for as
purchases are included in the accompanying consolidated condensed financial
statements since the date of acquisition. The purchase price was allocated to
the net assets acquired based upon their estimated fair market values at the
date of acquisition. The balances included in the Consolidated Condensed Balance
Sheets related to the acquisitions effected subsequent to September 30, 1999 are
based upon preliminary information and are subject to change when final asset
and liability valuations are obtained. Material changes in the preliminary
allocations are not anticipated by management.

     The following presents the consolidated financial information for the
Company on a pro forma basis assuming the Dailey acquisition had occurred on
January 1, 1999. All other 1999 and 2000 acquisitions are not material
individually nor in the aggregate with same year acquisitions, therefore, pro
forma information is not presented. The pro forma information set forth below is
not necessarily indicative of the results that actually would have been achieved
had such transactions been consummated as of January 1, 1999, or that may be
achieved in the future.


                                       6
<PAGE>   8

                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)


<TABLE>
<CAPTION>
                                                     THREE MONTHS             NINE MONTHS
                                                  ENDED SEPTEMBER 30,     ENDED SEPTEMBER 30,
                                                  -------------------     -------------------
                                                          1999                   1999
                                                  -------------------     -------------------
                                                   (in thousands, except per share amounts)
<S>                                               <C>                     <C>
    Revenues ................................        $    340,199            $    934,804
    Loss from continuing operations .........                (931)                (14,619)
    Net loss ................................             (15,046)                (33,911)
    Basic loss per share:
         Loss from continuing operations ....               (0.01)                  (0.14)
         Net loss ...........................               (0.14)                  (0.33)
    Diluted loss per share:
         Loss from continuing operations ....               (0.01)                  (0.14)
         Net loss ...........................               (0.14)                  (0.33)
</TABLE>

4.   DISCONTINUED OPERATIONS

     In October 1999, the Board of Directors of the Company approved a plan to
spinoff Grant Prideco through a distribution by the Company to its stockholders
of one share of stock of Grant Prideco for each share of Common Stock held by
the Company's stockholders. The distribution was completed as of the close of
business on April 14, 2000 (the "Spin-off Date"). The distribution of the net
assets of discontinued operations and the related accumulated other
comprehensive loss is reflected in the accompanying Consolidated Condensed
Balance Sheets as an adjustment to Retained Earnings.

     The results of operations for Grant Prideco are reflected in the
accompanying Consolidated Condensed Statements of Income as Loss from
Discontinued Operations, Net of Tax. Condensed results of Grant Prideco were as
follows:

<TABLE>
<CAPTION>
                                                THREE MONTHS               NINE MONTHS
                                             ENDED SEPTEMBER 30,        ENDED SEPTEMBER 30,
                                             -------------------    --------------------------
                                                     1999              2000            1999
                                             -------------------    ----------      ----------
                                                                  (IN THOUSANDS)
<S>                                               <C>               <C>             <C>
Revenues ................................         $   57,987        $  124,813      $  210,987
                                                  ----------        ----------      ----------

Loss before interest
     allocation and income taxes ........            (12,862)             (831)        (15,673)
Interest allocation .....................             (1,813)           (2,500)         (5,438)
Benefit for income taxes ................              4,130               888           5,389
                                                  ----------        ----------      ----------
Net loss before accrued costs ...........            (10,545)           (2,443)        (15,722)
Spin-off related costs, net of taxes ....             (3,570)           (1,015)         (3,570)
                                                  ----------        ----------      ----------
Net loss from discontinued operations,
     as reported ........................         $  (14,115)       $   (3,458)     $  (19,292)
                                                  ==========        ==========      ==========
</TABLE>


                                       7
<PAGE>   9

                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)

       In connection with the Spin-off, Grant Prideco issued an unsecured
subordinated note to the Company in the amount of $100.0 million. The $100.0
million obligation, classified as Other Assets in the accompanying Consolidated
Condensed Balance Sheet, bears interest at an annual rate equal to 10.0%.
Interest payments are due quarterly, and principal and all unpaid interest is
due no later than March 31, 2002. Under the terms of the note, Grant Prideco is
required to repay this note with the proceeds of any debt or equity financing,
excluding financing under a credit facility or any equity issued in connection
with a business combination. The indebtedness of Grant Prideco to the Company is
subordinated to the working capital obligations of Grant Prideco to its banks.

     The Drilling and Intervention Services Division and Artificial Lift Systems
Division of the Company purchase drill pipe and other related products from
Grant Prideco. The purchases made prior to the Spin-off Date have been
eliminated in the accompanying consolidated condensed financial statements. The
purchases eliminated during the nine months ended September 30, 2000 were $6.8
million, and for the three and nine months ended September 30, 1999 were $15.1
million and $22.7 million, respectively. These purchases represent Grant
Prideco's cost.

     The results from discontinued operations include a management fee charged
to Grant Prideco of $0.5 million for the nine months ended September 30, 2000,
and $0.5 million and $1.0 million for the three and nine months ended September
30, 1999, respectively. The fee is based on the time devoted to Grant Prideco
for accounting, tax, treasury and risk management services.

     Grant Prideco was charged $1.4 million and $4.3 million of costs related to
the Company's information systems function in the three and nine months ended
September 30, 1999, respectively. There were no charges for the comparable
periods of 2000. Information systems charges were based on direct support
provided, equipment usage and number of system users.

     Agreements Between the Company and Grant Prideco

     In connection with the Spin-off, Grant Prideco and the Company entered into
a tax allocation agreement (the "Tax Allocation Agreement"). Under the terms of
the Tax Allocation Agreement, Grant Prideco is responsible for all taxes and
associated liabilities relating to the historical businesses of Grant Prideco.
The Tax Allocation Agreement also requires that any tax liabilities associated
with the Spin-off will be paid by Grant Prideco subject to certain exceptions
relating to changes in control of the Company. The Tax Allocation Agreement
further provides that in the event there is a tax liability associated with the
historical operations of Grant Prideco that is offset by a tax benefit of the
Company, the Company will apply the tax benefit against such tax liability and
will be reimbursed for the value of the tax benefit when and as the Company
would have been able to otherwise utilize that tax benefit for its own
businesses.

     The Company entered into a transition services agreement with Grant Prideco
for a period of one year from the Spin-off Date. Under the agreement, the
Company has agreed to provide certain services requested by Grant Prideco. The
fee for these services is based on a cost-plus 10% basis. Under this agreement,
transition services include accounting services, tax services, finance services,
employee benefit services, information systems services, risk management
services and may include any other similar services. Since the Spin-off Date,
the Company has charged Grant Prideco $1.6 million related to such services.

     The Company has also entered into a preferred customer agreement with Grant
Prideco pursuant to which the Company agreed, for a three-year period, to
purchase at least 70% of its requirements of drill stem products from Grant
Prideco. The price for those products will be at a price not greater than that
which Grant Prideco sells to its best similarly situated customers.


                                       8

<PAGE>   10

                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)

5.   SHORT-TERM DEBT

     The Company's unsecured credit agreement provides for borrowings of up to
an aggregate of $250.0 million, consisting of a $200.0 million U.S. credit
facility and a $50.0 million Canadian credit facility. As of September 30, 2000,
the Company had $239.9 million available under this agreement. Amounts
outstanding under the facility accrue interest at the U.S. prime rate or a
variable rate based on LIBOR. A commitment fee ranging from 0.09% to 0.20% per
annum, depending on the senior unsecured credit ratings assigned by Standard and
Poor's and Moody's Investor Service to the Company, is payable quarterly on the
unused portion of the facility. The facility contains customary affirmative and
negative covenants, including a maximum debt to capitalization ratio, a minimum
interest coverage ratio, a limitation on liens and a limitation on asset
dispositions.

     The Company also engages in unsecured short-term borrowings with various
institutions pursuant to uncommitted facilities and bid note arrangements. At
September 30, 2000, the Company had $8.8 million in unsecured short-term
borrowings outstanding under these arrangements.

     In July 2000, the Company's Compression Services Division, put in place a
$25.0 million uncommitted line of credit. Interest rates are at LIBOR plus 1.75%
or the "Quoted Rate", defined as any rate of interest mutually agreed upon by
the two parties. As of September 30, 2000, $12.0 million was available under
this line of credit.

6.   ZERO COUPON CONVERTIBLE SENIOR DEBENTURES

     On June 30, 2000 the Company completed a private placement of $910.0
million face amount of its Zero Coupon Convertible Senior Debentures, due 2020
(the "Zero Coupon Debentures"). The Zero Coupon Debentures were issued at a
discount with an imputed 3% per annum interest rate. The Company received
proceeds of $491.9 million, net of debt issuance costs of $9.7 million. The
proceeds were used to pay down current debt of $424.0 million. Subsequent to
September 30, 2000, $10.0 million has been paid.

     Holders may convert the Zero Coupon Debentures into shares of Common Stock
at any time before maturity at a conversion rate of 9.9970 shares per $1,000
principal amount at maturity or initially at a price of $55.1425 per share of
Common Stock. The effective conversion price will increase as the accreted value
of the Zero Coupon Debentures increases. The Company may redeem any of the Zero
Coupon Debentures on or after June 30, 2005 at the accreted discounted amount at
the time of redemption. Holders may require the Company to repurchase the Zero
Coupon Debentures on June 30, 2005, June 30, 2010, and June 30, 2015 at the
accreted discounted amount at the time of redemption.

7.   SALE AND LEASEBACK OF EQUIPMENT

     The Compression Services Division has entered into various sale and
leaseback arrangements under which it has sold $294.9 million of compression
units and has a right to sell up to another $55.1 million of compression units.
Under these arrangements, legal title to the compression units is sold to third
parties and leased back to the division under a five-year operating lease with a
market-based purchase option.

     As of December 31, 1999, the Compression Services Division had sold
compressors under these arrangements having appraised values equal to the cash
received of $239.8 million. These sales resulted in a pretax deferred gain of
$77.3 million, classified as Deferred Income Taxes and Other on the accompanying
Consolidated Condensed Balance Sheets, which may be deferred until the end of
the lease. During the nine months ended September 30, 2000, the Compression
Services Division sold additional compressors having an appraised value equal to
the cash received of $55.1 million. The sales resulted in an additional pretax
deferred gain of approximately $15.5 million.


                                       9
<PAGE>   11

                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)

     The Company has guaranteed certain of the obligations of the Compression
Services Division joint venture with respect to the sale of $200.0 million of
the compression units. The remaining sales by the Compression Services Division
joint venture were done on a non-recourse basis to the Company and recourse is
limited solely to the assets of the Compression Services Division joint venture.

     The following table provides future minimum lease payments (in thousands)
under the aforementioned lease as of September 30, 2000:

<TABLE>
<S>                                                                                   <C>
     Remainder of 2000...........................................................     $ 6,018
     2001........................................................................      24,072
     2002........................................................................      24,072
     2003........................................................................      23,273
     2004........................................................................       9,596
     2005........................................................................       1,493
                                                                                      -------
                                                                                      $88,524
                                                                                      =======
</TABLE>

8.   PREFERRED STOCK

     The Company has authorized and issued one share of $1.00 par value Series A
Preferred Stock. In connection with the acquisition of Alpine, the one share of
Series A Preferred Stock was issued to a trustee, and will be held for the
benefit of the former Alpine shareholders. The former Alpine shareholders were
issued an exchangeable security in one of the Company's Canadian subsidiaries
that is exchangeable for Common Stock on a one-for-one basis. The one share of
Series A Preferred Stock entitles the trustee to vote, essentially as a proxy
for the former Alpine shareholders who have not yet exchanged their exchangeable
securities into shares of Common Stock, the same number of votes as could be
voted if the former Alpine shareholders had exchanged the exchangeable
securities for Common Stock. As the exchangeable securities are exchanged, the
number of votes to which the Series A Preferred Stock is entitled decreases and
the voting rights of the Series A Preferred Stock will be eliminated entirely
when there are no more outstanding exchangeable securities. The Series A
Preferred Stock has a $1.00 liquidation preference, has no class voting rights
and votes together with the Common Stock.

9.   EARNINGS PER SHARE

     Basic earnings per share is computed by dividing net income by the weighted
average number of shares of Common Stock outstanding during the period. Diluted
earnings per share is computed by dividing net income by the weighted average
number of shares of Common Stock outstanding during the period adjusted for the
dilutive effect of the incremental shares that would have been outstanding under
the Company's stock option and restricted stock plans. The effect of the
Company's 5% Convertible Subordinated Preferred Equivalent Debentures due 2027
and the Zero Coupon Debentures on diluted earnings per share is anti-dilutive
and thus is not included in the calculation.

     The following reconciles basic and diluted weighted average shares
outstanding:

<TABLE>
<CAPTION>
                                                                                THREE MONTHS                  NINE MONTHS
                                                                             ENDED SEPTEMBER 30,          ENDED SEPTEMBER 30,
                                                                         -------------------------     -------------------------
                                                                            2000           1999           2000           1999
                                                                         ----------     ----------     ----------     ----------
                                                                                              (in thousands)
<S>                                                                      <C>            <C>            <C>             <C>
     Basic weighted average shares outstanding .....................        109,792        101,408        109,147         98,770
     Dilutive effect of stock option and restricted stock plans.....          4,708          2,073          3,761          1,536
                                                                         ----------     ----------     ----------     ----------
     Dilutive weighted average shares outstanding ..................        114,500        103,481        112,908        100,306
                                                                         ==========     ==========     ==========     ==========
</TABLE>

The number of shares under all option plans, as well as their exercise prices,
were adjusted so that the options immediately after the Spin-off had equivalent
economic terms to the options immediately before the Spin-off.


                                       10
<PAGE>   12

                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)

10.  SUPPLEMENTAL CASH FLOW INFORMATION

     The following summarizes investing activities relating to acquisitions
integrated into the Company's continuing operations for the periods shown:

<TABLE>
<CAPTION>
                                                                   NINE MONTHS
                                                               ENDED SEPTEMBER 30,
                                                         ------------------------------
                                                             2000              1999
                                                         ------------      ------------
                                                                (in thousands)
<S>                                                      <C>               <C>
Fair value of assets, net of cash acquired .........     $     87,173      $    494,331
Goodwill ...........................................          129,256           327,813
Total liabilities, including minority interest .....          (70,812)         (380,280)
Value of Common Stock issued .......................          (59,251)         (363,578)
                                                         ------------      ------------
Cash consideration, net of cash acquired ...........     $     86,366      $     78,286
                                                         ============      ============
</TABLE>

11.  SEGMENT INFORMATION

     The Company is a diversified international energy service and manufacturing
company that provides a variety of services and equipment to the exploration,
production and transmission sectors of the oil and gas industry. The Company
operates in virtually every oil and gas exploration and production region in the
world. The Company currently divides its business into four separate segments:
drilling and intervention services, completion systems, artificial lift systems
and compression services.

     The Company's Drilling and Intervention Services segment provides a wide
range of oilfield products and services, including fishing and rental services,
well installation services, cementing products and underbalanced drilling and
specialty pipeline services.

     The Company's Completion Systems segment provides completion products and
systems including packers, sand control, flow control, liner hangers, inflatable
packers and intelligent well technology.

     The Company's Artificial Lift Systems segment designs, manufactures, sells
and services a complete line of artificial lift equipment, including progressing
cavity pumps, reciprocating rod lift, gas lift, electrical submersible pumps and
hydraulic lift. This segment also offers well optimization and remote monitoring
and control services.

     The Company's Compression Services segment packages, rents and sells parts
and services for gas compressor units over a broad horsepower range.


                                       11
<PAGE>   13
                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)

     Financial information by industry segment for each of the three and nine
months ended September 30, 2000 and September 30, 1999 is summarized below. The
accounting policies of the segments are the same as those of the Company.

<TABLE>
<CAPTION>
                                                        THREE MONTHS                     NINE MONTHS
                                                     ENDED SEPTEMBER 30,             ENDED SEPTEMBER 30,
                                                ----------------------------    ---------------------------
                                                    2000            1999            2000            1999
                                                ------------    ------------    ------------    ------------
                                                                      (in thousands)
<S>                                             <C>             <C>             <C>             <C>
Revenues from unaffiliated customers
     Drilling and Intervention Services ....    $   225,038     $   142,794     $   619,315     $   422,158
     Completion Systems ....................         57,338          34,167         151,503          80,501
     Artificial Lift Systems ...............        110,840          78,740         315,292         198,438
     Compression Services ..................         68,954          67,931         193,290         166,464
                                                -----------     -----------     -----------     -----------
                                                $   462,170     $   323,632     $ 1,279,400     $   867,561
                                                ===========     ===========     ===========     ===========
EBITDA (a)
     Drilling and Intervention Services ....    $    67,961     $    37,798     $   188,607     $   122,845
     Completion Systems ....................          7,554          (1,166)         10,641          (7,356)
     Artificial Lift Systems ...............         17,430          10,979          46,717          22,476
     Compression Services ..................         11,194          15,581          32,877          41,987
     Corporate .............................         (8,848)         (4,946)        (24,936)        (16,639)
                                                -----------     -----------     -----------     -----------
                                                $    95,291     $    58,246     $   253,906     $   163,313
                                                ===========     ===========     ===========     ===========
Depreciation and amortization
     Drilling and Intervention Services ....    $    26,205     $    22,900     $    77,197     $    70,265
     Completion Systems ....................          6,743           3,595          19,340           8,305
     Artificial Lift Systems ...............          6,438           5,024          18,478          14,694
     Compression Services ..................         10,057           8,459          28,907          25,193
     Corporate .............................            839             639           2,417           1,511
                                                -----------     -----------     -----------     -----------
                                                $    50,282     $    40,617     $   146,339     $   119,968
                                                ===========     ===========     ===========     ===========
Operating income (loss)
     Drilling and Intervention Services ....    $    41,756     $    14,898     $   111,410     $    52,580
     Completion Systems ....................            811          (4,761)         (8,699)        (15,661)
     Artificial Lift Systems ...............         10,992           5,955          28,239           7,782
     Compression Services ..................          1,137           7,122           3,970          16,794
     Corporate .............................         (9,687)         (5,585)        (27,353)        (18,150)
                                                -----------     -----------     -----------     -----------
                                                $    45,009     $    17,629     $   107,567     $    43,345
                                                ===========     ===========     ===========     ===========
</TABLE>

(a)  The Company evaluates performance and allocates resources based on EBITDA,
     which is calculated as operating income adding back depreciation and
     amortization. Calculations of EBITDA should not be viewed as a substitute
     to calculations under GAAP, in particular cash flows from operations,
     operating income, income from continuing operations and net income. In
     addition, EBITDA calculations by one company may not be comparable to
     another company.

     As of September 30, 2000, total assets were $1,202.2 million for Drilling
and Intervention Services, $504.6 million for Completion Systems, $678.1 million
for Artificial Lift Systems, $701.8 million for Compression Services and $318.5
million for Corporate.


                                       12
<PAGE>   14
                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)

     As of December 31, 1999, total assets, excluding net assets of discontinued
operations, were $1,117.9 million for Drilling and Intervention Services, $424.5
million for Completion Systems, $615.9 million for Artificial Lift Systems,
$662.7 million for Compression Services and $138.9 million for Corporate.

12.  RECENT ACCOUNTING PRONOUNCEMENTS

     In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB No. 101"), Revenue Recognition in
Financial Statements, to provide guidance on the recognition, presentation and
disclosure of revenue in financial statements. In March 2000, the SEC issued SAB
101A, which delayed the implementation date of SAB 101 until the second quarter
after December 15, 1999 for companies with fiscal years beginning between
December 16, 1999 and March 15, 2000. The SEC staff issuance of SAB 101B on June
26, 2000 further extends the compliance requirement until the fourth quarter of
fiscal years beginning after December 15, 1999, with an effective date of
January 1, 2000. The Company has reviewed its revenue recognition policies and
believes that they are in compliance with GAAP and the related interpretive
guidance set forth in SAB 101 with the exception of its classification in the
Consolidated Condensed Statements of Income of certain pass-through costs. The
anticipated restatements caused by the application of this bulletin is not
expected to have a material impact on its financial position or results of
operations.

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. In June 1999, the FASB issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of SFAS No. 133, amending the effective date of SFAS No. 133 to
years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities,
amending accounting and reporting standards of SFAS No. 133 for certain
derivative instruments and certain hedging activities. The Company is evaluating
the impact of SFAS No. 133 on its consolidated financial statements and does not
anticipate that application of this statement will have a material impact on its
financial position or results of operation.

13.  SUBSEQUENT EVENTS

     On October 24, 2000, the Company announced the proposed acquisition of
13.75 million shares of common stock (48% interest) of Universal Compression
Holdings, Inc. ("Universal") in exchange for the contribution of substantially
all of the Company's Compression Services Division into a subsidiary of
Universal. The Company will retain approximately $40 million of the assets of
the Compression Services Division, including Singapore-based GSI and its Asia
Pacific compressor rental operations, other than those in Thailand and
Australia. The Company will, however, continue to operate compressor rentals in
those regions either alone or in conjunction with Universal. The value of the
transaction will be based on the stock price of Universal as of the closing date
of the transaction. A floor price of $25 per share of Universal common stock has
been established as a condition to closing.

     In connection with this investment the Company has entered into an
agreement to purchase GE Capital's 36% interest in the joint venture in which
its Compression Division is operated for $206.5 million, subject to the
concurrent closing of our investment in Universal. The transactions are subject
to various conditions, including governmental approvals, approval of Universal's
stockholders, and the refinancing of its joint venture's and Universal's debt
and compressor sale leaseback arrangements. Although there can be no assurance
the merger and purchase will close, the Company anticipates that the
transactions will be consummated by the end of the year, or early in the first
quarter of 2001.


                                       13
<PAGE>   15
                WEATHERFORD INTERNATIONAL, INC. AND SUBSIDIARIES
       NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)

     The Company expects to recognize a pre-tax charge for this transaction of
approximately $20 million relating to transaction costs and severance expenses.
The Company may also have a non-cash charge to the extent the market price of
the Universal common stock at time of closing is less than their approximate
$490 million book value as well as a non-cash charge for the establishment of
deferred taxes on their joint venture interest due to the Company no longer
consolidating the operations. The amount of these charges will be a function of
the market price of the Universal stock at the time of closing. At a Universal
common stock price of $30, the after tax non-cash charge would be around $100
million and would relate primarily to the establishment of deferred taxes due to
the deconsolidation of The Company's investment.


                                       14
<PAGE>   16

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS

GENERAL

     Our business is conducted through four business segments: (1) Drilling and
Intervention Services, (2) Completion Systems, (3) Artificial Lift Systems and
(4) Compression Services. On October 24, 2000, we announced the proposed
acquisition by us of 13.75 million shares of common stock (48% of the total
outstanding common stock after the transaction) of Universal Compression
Holdings, Inc. in exchange for the contribution of substantially all of our
Compression Services Division into a subsidiary of Universal Compression
Holdings, Inc. In connection with this investment we have entered into an
agreement to purchase the 36% interest held by our partner, GE Capital
Corporation, in the joint venture in which our Compression Division is operated
for $206.5 million subject to the concurrent closing of our transaction with
Universal. The transactions are subject to various conditions, including
governmental approvals, approval of Universal's stockholders and the refinancing
of our joint venture's and Universal's debt and compressor sale and leaseback
arrangements. Although there can be no assurance the merger and purchase will
close, we anticipate that the transactions will be consummated by the end of the
year, or early in the first quarter of 2001.

     We also have historically operated a Drilling Products Division that
manufactured and sold drill pipe and other drill stem products and premium
tubulars and connections. On April 14, 2000, we distributed to our stockholders
all of the outstanding shares of Grant Prideco, Inc., which at the time of the
distribution held substantially all of the operating assets used in our Drilling
Products Division. As a result of this distribution, our Drilling Products
Division is presented as a discontinued operation in the accompanying financial
statements.

     The following is a discussion of our results of operations for the three
and nine months ended September 30, 2000 and 1999. This discussion should be
read in conjunction with our financial statements that are included with this
report and our financial statements and related Management's Discussion and
Analysis of Financial Condition and Results of Operations for the year ended
December 31, 1999 included in our Annual Report on Form 10-K.

     The discussion of our results and financial condition includes various
forward-looking statements about our markets, the demand for our products and
services and our future results. These statements are based on certain
assumptions that we consider reasonable. However, there can be no assurances
that these assumptions will be met or that our actual future results will not
vary from our current expectation. For information about these assumptions, you
should refer to the section of this discussion entitled "Forward Looking
Information and Regulation FD Considerations."

MARKET TRENDS AND OUTLOOK

     Our businesses serve the oil and gas industry. All of our businesses are
affected by changes in the worldwide demand and price of oil and natural
gas. Certain of our products and services, such as our fishing and rental
services, well installation services and well completion services, are dependent
on the level of exploration and development activity and particularly the
completion phase of a well. Other products and services, such as our artificial
lift systems and compression services, are dependent on oil and gas production
activity. We currently estimate that around 50% of our continuing operations are
primarily reliant on drilling activity, with the remainder focused on production
and reservoir enhancement activity. The percentage of our business that is
dependent on drilling will increase following the closing of our proposed
compression transaction.

     In 1999, the price of oil hit a low of $11.07 per barrel and the North
American and international rig counts reached historical lows of 534 and 556,
respectively. During the second half of 1999, the price of oil increased due to
demand and supply imbalances and members of the Organization of Petroleum
Exporting Countries reducing production in compliance with production quotas.
These conditions resulted in world oil prices increasing and trading in the $25
to $35 a barrel range during the first nine months of 2000.


                                       15
<PAGE>   17


     The following chart sets forth certain historical statistics that are
reflective of the market conditions in which we have been operating over the
last year:

<TABLE>
<CAPTION>
                                                                HENRY HUB     NORTH AMERICAN     INTERNATIONAL
                                             WTI OIL (1)         GAS (2)       RIG COUNT (3)     RIG COUNT (3)
                                             -----------         -------       -------------     -------------
<S>                                         <C>              <C>                 <C>              <C>
     September 30, 2000..................     $   30.84        $    5.186          1,327              710
     December 31, 1999...................         25.60             2.329          1,177              575
     September 30, 1999..................         24.51             2.560            966              557
</TABLE>

(1)  Price per barrel of West Texas Intermediate crude oil as of September 30
     and December 31 - Source: Applied Reasoning, Inc.

(2)  Price per MM/BTU as of September 30 and December 31 - Source: Oil World

(3)  Average rig count for the applicable month - Source: Baker Hughes Rig Count

     The timing of the impact of these market trends varies region to region and
division to division, with our Compression Services Division less affected by
market activity. The North American rig count fluctuations impact our divisions
generally within one quarter. Our international activity in turn generally lags
North American activity by six to nine months. Our Artificial Lift Systems
Division, which tracks very closely the United States and Canadian rig counts
and the Canadian workover rig count, was the first to benefit from the oil price
improvements experienced in 1999 as many production projects were reinstated in
light of the higher prices of oil, in particular heavy oil in Canada. The
increase in natural gas activity in Canada also positively impacted this
division. Our Drilling and Intervention Services and our Completion Systems
Divisions were the next to benefit from the improved activity in North America,
in particular in our fishing and rental and cementation businesses.

     Increased North American activity has benefited all of our divisions this
year through increasing volumes, and most recently, the ability to begin to
improve pricing for many of our products and services. Outside North America,
our strongest growth has been in Europe where the rig count has increased from
77 last year to 95 on September 30, 2000. We have also seen improvement in Latin
America where activity is beginning to increase and in some regions in Africa.
Volumes are still materially down from historical peak periods and pricing
remains competitive and below peak levels. The Middle East and Asia Pacific have
been slower to recover and are still quite depressed in many of our markets.

     Throughout 2000, we have experienced steady improvements in the demand for
our products and services. As we enter next year, we expect these improvements
to be even stronger due to an anticipated market recovery outside North America.
In general, we expect the recovery to affect our businesses as follows:

     DRILLING AND INTERVENTION SERVICES. This division is expected to see
quarter on quarter improvements in the fourth quarter and into 2001 in both
revenue and profitability. We believe this division should continue to see a
strong contribution from the North American market where we currently expect an
increase in revenues over the next two quarters in an amount of 15% to 20% with
sales in Canada rising around 25% to 30% over the third quarter of 2000.
Although somewhat more difficult to predict, we currently expect that the
markets in the North Sea and Latin America will experience sales improvements in
an amount of around 15% over the next two quarters. Sales in the Middle East,
Africa and Asia Pacific are expected to increase between 5% and 10% over the
next six months. Results for the fourth quarter and 2001 will be heavily
dependent on the continued recovery in the North American markets and the timing
and strength of the recovery outside North America.


                                       16
<PAGE>   18


     COMPLETION SYSTEMS. Our Completion Systems Division realized its first
operating profit in the third quarter since the division was created last year.
This division is expected to continue to experience revenue growth throughout
the remainder of this year and next year as it increases its sales and service
infrastructure and manufacturing capacity. We are completing an increase in
manufacturing capacity of around 50% over our available capacity this year. We
currently expect this division to improve profitability over the next year. The
profitability of this division will be dependent on increased drilling activity,
particularly in the international markets, its ability to meet market demand
through increased manufacturing output, and the division's ability to
successfully market its new products such as its patented expandable sand
screen, its Stratapac(R) premium screen and its premium liner hangers and
packers. In addition, we expect results will be impacted in the fourth quarter
from relatively high selling, general and administrative expenses as a
percentage of revenues while the division seeks to increase its revenue base and
positions itself for growth in 2001 and beyond by expanding its sales, service
and engineering operations worldwide.

     ARTIFICIAL LIFT SYSTEMS. We expect that our Artificial Lift Systems
Division will continue to see improvements on a year on year basis in North
American revenues, as well as improvements in margins as a result of cost
containment, pricing and higher throughput in our plants. United States oil
markets have been slower to recover due to an emphasis on gas exploration and
development in light of high natural gas prices. The oil rig count in the United
States was 207 at September 30, 2000, compared to a natural gas rig count of
806. The oil rig count at December 31, 1999, was 165 and the natural gas rig
count was 606. The current emphasis on natural gas exploration and development
has made oil drilling (in particular on land) a later cycle phenomena. Results
for the last quarter of the year will be heavily dependent on the United States
and Canadian rig counts, oil workover activity and heavy oil production in
Canada.

     COMPRESSION SERVICES. Our Compression Services Division, which is less
affected by day-to-day market factors, experienced a decline in profitability
during 2000 as we implemented a reorganization of its operations and incurred
some start-up costs with the expansion of its operations outside of North
America, in particular in Asia and the Middle East. With this division's
reorganization substantially complete, we believe it is now positioned for
renewed growth in the fourth quarter and into next year. We saw some benefits
from this reorganization and the division's international operations during the
third quarter. We currently expect that the results will continue to improve in
this division for the remainder of the year and that our compression business
will be well positioned for growth next year, as its operations are consolidated
with those of Universal.

     Overall, the level of market improvements for our businesses for the
remainder of 2000 will continue to be heavily dependent on the North American
rig count and on whether recent commodity price increases will result in higher
customer spending. Although we believe that the activity levels in our industry,
in particular in the international markets, are in the early stages of recovery,
the extent of the recovery is difficult to predict in light of the volatile
nature of our business. In particular, the recovery to date has not been linear
and has varied from region to region and month to month as new projects are
added and rigs deployed. We expect this trend to continue through next year. In
addition, the strength of the recovery will be dependent on many external
factors such as compliance with OPEC quotas, world economic conditions and
weather conditions. The extreme volatility of our markets makes predictions
regarding future results difficult.

RESULTS OF CONTINUING OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1999

     On a consolidated basis, we experienced sequential quarterly and year over
year improvements in revenues, operating income and net income from continuing
operations. Revenues for the third quarter were up 9.6% from the second quarter
of 2000 and 42.8% from the third quarter of last year. Operating income was up
29.0% from the second quarter of 2000 and 155.3% from the comparable period of
1999. Net income from continuing operations was up 63.0% from last quarter and
612.2% from the third quarter of 1999.

     North America was the principal contributor in the third quarter of 2000,
with around 66.0% of total outside sales; 45.6% were in the U.S. and 20.4% were
in Canada. North America also represented around 52.7% of our


                                       17
<PAGE>   19

operating profit compared to 50.5% in the second quarter of 2000. Outside North
America, our strongest gains were in Europe and Latin America where total
revenues increased 10.5% and 18.9%, respectively, over the second quarter of
2000. Operating income and EBITDA (operating income adding back depreciation and
amortization) in Europe increased 157.1% and 30.3%, respectively, over the
second quarter of 2000. Operating income and EBITDA in Latin America increased
14.7% and 18.9%, respectively, over the second quarter of this year.

     The following charts contain selected financial data comparing our results
for the three months ended September 30, 2000 and September 30, 1999:


     COMPARATIVE FINANCIAL DATA


<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED
                                                                        SEPTEMBER 30,
                                                                 --------------------------
                                                                    2000            1999
                                                                 ----------      ----------
                                                                       (in thousands,
                                                                   except percentages and
                                                                       per share data)
<S>                                                              <C>             <C>
Revenues ...................................................     $  462,170      $  323,632
Gross Profit ...............................................        139,775          87,231
Gross Profit % .............................................           30.2%           27.0%
Selling, General and Administrative
  Attributable to Segments .................................     $   85,869      $   64,705
Corporate General and Administrative .......................          9,574           5,585
Operating Income ...........................................         45,009          17,629
Income from Continuing Operations ..........................         21,523           3,022
Income from Continuing Operations Excluding
  Goodwill Amortization, Net of Taxes ......................         29,658           7,895
EBITDA (a) .................................................         95,291          58,246
EBITDAR (b) ................................................        101,020          61,734
Income per Diluted Share from Continuing Operations ........           0.19            0.03
Income per Diluted Share from Continuing Operations
  Excluding Goodwill Amortization, Net of Taxes ............           0.26            0.08
</TABLE>


(a)    EBITDA is calculated by taking operating income and adding back
       depreciation and amortization. We have included an EBITDA calculation
       here because when we look at the performance of our businesses, we give
       consideration to their EBITDA. Calculations of EBITDA should not be
       viewed as a substitute for calculations under generally accepted
       accounting principals (GAAP), in particular cash flows from operations,
       operating income, income from continuing operations and net income. In
       addition, EBITDA calculations by one company may not be comparable to
       those of another company.

(b)    EBITDAR is calculated by adding our Compression Services Division's lease
       expenses from the compressor leases, that are subject to its sale
       leaseback arrangements to our EBITDA. We have included the EBITDAR for
       informational purposes because this is a financial measure under which
       the investment community analyzes other public compression companies.
       Calculations of EBITDAR should not be viewed as a substitute to
       calculations under GAAP. In addition, EBITDAR calculations by one company
       may not be comparable to those of another company.


                                       18
<PAGE>   20


     The following table provides certain sales and operating income data by
region for the three months ended September 30, 2000 and 1999:

     SALES BY GEOGRAPHIC REGION


<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED
                                                   SEPTEMBER 30,
                                             -----------------------
                                              2000             1999
                                             ------           ------
<S>                                         <C>              <C>
REGION (1):
U.S. ..............................              46%              48%
Canada ............................              20               19
Europe ............................               9               11
Latin America .....................              10                9
Africa ............................               5                6
Middle East .......................               3                3
Asia ..............................               7                4
                                             ------           ------
    Total .........................             100%             100%
                                             ======           ======
</TABLE>


(1)  Represents sales by point of sale. Export sales are included in the sales
     of the exporting region.

     Our results for the three months ended September 30, 2000 reflected the
improved market conditions in which we were operating. These conditions had the
following effects on our results:

o    Third quarter 2000 consolidated revenues improved 42.8% over the third
     quarter 1999 as a result of improved revenues in all regions and the impact
     of our late 1999 acquisitions. Our third quarter 2000 revenues in North
     America were $86.5 million higher than they were in the third quarter of
     1999.

o    Our gross profit percentage increased to 30.2% (or up 11.9%) from the third
     quarter of 1999 to the third quarter of 2000. Improved margins reflect the
     higher revenue base, higher pricing and improved manufacturing
     efficiencies.

o    Selling, general and administrative expenses decreased as a percentage of
     revenues from 21.7% in the third quarter of 1999 to 20.7% in the third
     quarter of 2000. The decrease primarily reflects a higher revenue base,
     offset by a $4.7 million increase in goodwill and intangibles amortization
     primarily associated with acquisitions in late 1999.

o    Our operating income increased 155.3% from the third quarter of 1999 due to
     improved market conditions and our efforts to reduce costs and improve
     efficiencies during the industry downturn. The acquisitions made by us late
     in the third quarter 1999 also contributed to the increase in operating
     income.

o    Our effective tax rate for the third quarter of 2000 was 36.5%, as compared
     to 29.0% for the third quarter 1999, due to the mix between foreign and
     U.S. tax attributes for 2000.

o    Our operating income as a percentage of revenues was 9.7% compared to 5.4%
     in the third quarter of 1999.

o    Our EBITDA as a percentage of revenues was 20.6% in the third quarter of
     2000 compared to 18.0% in the third quarter of 1999.



                                       19
<PAGE>   21


   SEGMENT RESULTS

     DRILLING AND INTERVENTION SERVICES

     Our Drilling and Intervention Services Division experienced improvements in
revenue and operating income as the increase in the North American rig count
positively impacted the demand for its products and services, particularly in
the United States. The continued recovery for the international markets also
contributed to the growth in the third quarter for this division. Our Drilling
and Intervention Services Division's revenue and operating income were
positively impacted by its 1999 and 2000 acquisitions, including Dailey
International and Williams Tool.

     Within our Drilling and Intervention Services Division, all of the product
lines reported gains in revenues. Our fishing and rental and cementation lines
showed the greatest improvements, due to stronger demand in North America. The
growth of the underbalanced drilling product line was also a major contributor
to the increase in revenues. Our underbalanced drilling revenues are currently
running at an annualized rate of around $100 million.

     We recently acquired certain proprietary and innovative multilateral
completion technology for this division. This technology will be used by this
division to penetrate the growing number of multilateral well completions, in
particular in Latin America and offshore. The contributions from this technology
are expected to be minimal in 2001, with the greatest contribution in 2002 and
beyond.

     The following chart sets forth data regarding the results of our Drilling
and Intervention Services Division for the third quarters of 2000 and 1999:

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED
                                                           SEPTEMBER 30,
                                                  ------------------------------
                                                      2000              1999
                                                  ------------      ------------
                                                          (in thousands,
                                                       except percentages)
<S>                                               <C>               <C>
     Revenues:
       Cementing ..............................   $     27,774      $     18,854
       Fishing and Rental .....................        128,535            83,221
       Well Installation ......................         46,455            40,719
       Underbalanced Drilling (1) .............         22,274                --
                                                  ------------      ------------
          Total Revenues ......................   $    225,038      $    142,794

     Gross Profit .............................   $     73,246      $     37,699
     Gross Profit % ...........................           32.5%             26.4%
     Selling, General and Administrative ......   $     32,276      $     23,349
     Operating Income .........................         41,756            14,898
     EBITDA ...................................         67,961            37,798
</TABLE>


(1)  We began tracking the revenues of this product line in the fourth quarter
     of 1999 following our acquisition of Dailey International and Williams
     Tool.

     Material items affecting the results of our Drilling and Intervention
Services Division for the third quarter of 2000 compared to the third quarter of
1999 were:

o    Our North American revenues for the third quarter of 2000 improved $60.0
     million, or 85.3%, over the comparable period of 1999. Acquisitions
     completed in the latter half of 1999 and an increase in the North American
     rig count contributed to these improvements.

o    Our international revenues, excluding Canada, increased by 30.7% from the
     third quarter of 1999 reflecting the international rig count improvement.
     The most significant revenue increase occurred in Europe and Latin America.
     Revenues in Europe increased $6.8 million, or 30.6%, from third quarter
     1999 due to improving rig count in Europe. Revenues in Latin America
     increased $6.5 million, or 48.9%, from the same period last year due to
     increasing activities in Brazil and Argentina.


                                       20
<PAGE>   22

o    Selling, general and administrative expenses decreased as a percentage of
     revenues from 16.4% in the third quarter of 1999 to 14.3% in the third
     quarter of 2000. The decrease primarily reflects a higher revenue base
     partially offset by higher employee costs and an increase of $2.3 million
     in goodwill and intangible amortization expense.

o    Operating income increased $26.9 million in the third quarter of 2000 as
     compared to the third quarter of 1999 primarily due to improved market
     conditions in North America and the impact of 1999 acquisitions. This
     division's margin improvements were partially offset by increased expenses
     associated with approximately 400 new employees hired during the third
     quarter of 2000 and increased amortization expense.

o    United States activity was the biggest contributor to the earnings of our
     Drilling and Intervention Services Division for the quarter, having
     contributed around 49.7% of the division's revenues and 46.8% of its
     operating profits. Europe contributed around 12.9% of the division's
     revenues and 15.6% of its operating profits.

     COMPLETION SYSTEMS

     Our Completion Systems Division has shown steady improvements since the
first quarter of 1999. We significantly changed the composition of this division
in 1999 through our acquisitions of Petroline Wellsystems Limited and Cardium
Tool Services. These acquisitions, together with a major expansion of our Nodeco
liner hanger product line into the United States in 1999 and our acquisition of
the Stratapac(R) and Stratacoil(TM) screen lines earlier this year, have
expanded our businesses into the higher margin premium completion markets
worldwide and have added sand control and flow control to our completion product
and service offerings.

     Our Completion Systems Division had a strong increase in volumes due to
improvements in manufacturing. This division's revenues improved $10.8 million,
or 23.2%, from the second quarter of 2000. This division saw improved revenues
in almost all regions, most notably in the United States and Latin America. In
the third quarter, this division reported operating profits for the first time
since its inception in 1999.

     Sales of our expandable sand screens were $4.5 million for the quarter, up
36.8% from the second quarter of 2000. This improvement represents the first
stages in top line growth in this product line from our recently added
manufacturing capacity. We expect sales to continue to grow as we fulfill
commitments from the new capacity. We are reviewing the possibility of adding
additional expandable sand screen manufacturing capacity in Brazil and
Singapore, with the objective that the capacity comes online sometime later next
year.

     The following chart sets forth data regarding the results of our Completion
Systems Division for the third quarters of 2000 and 1999:

<TABLE>
<CAPTION>
                                                                                       THREE MONTHS ENDED
                                                                                          SEPTEMBER 30,
                                                                                  ------------------------------
                                                                                      2000             1999
                                                                                  -------------    -------------
                                                                                         (in thousands,
                                                                                       except percentages)
<S>                                                                                <C>             <C>
     Revenues..............................................................        $     57,338    $      34,167
     Gross Profit..........................................................              14,602            5,418
     Gross Profit %........................................................                25.5%            15.9%
     Selling, General and Administrative...................................        $     13,795    $      10,179
     Operating Income (Loss)...............................................                 811           (4,761)
     EBITDA................................................................               7,554           (1,166)
</TABLE>

     Other material items affecting the results of our Completion Systems
Division for the third quarter of 2000 compared to third quarter of 1999 were:

o    Revenues increased 67.8% in the third quarter of 2000 as compared to the
     third quarter of 1999. This improvement was mostly seen in the well screen,
     packer and liner hangers product lines as well as from sales of


                                       21
<PAGE>   23

     expandable completion products and flow control products added through our
     acquisition of Petroline Well Systems in September 1999.

o    Sales of our sand screen product line improved by more than 60% in the
     third quarter of 2000 compared to the second quarter of 2000 due to
     improved market conditions and our recent addition of the Stratapac(R) and
     Stratacoil(TM) lines to our offering of sand control products.

o    Gross profit as a percentage of revenues increased 60.4% from the third
     quarter of 1999 primarily due to higher gross margin percentages from our
     1999 acquisitions and improved manufacturing efficiencies. Our expandable
     completion products continue to have improved margins on a quarter over
     quarter basis.

o    Our expandable product lines continue to perform well and we recently
     completed the longest horizontal section (4000 feet) of an expandable sand
     screen completion system ever. We also used our own proprietary positive
     displacement expansion device on this job.

o    We are currently working on solid expandable technology using our positive
     displacement expansion device, which we will be seeking to introduce
     commercially sometime next year or early in 2002.

o    We added approximately 120 employees to this division late in the third
     quarter through our acquisition of Alpine Services and the addition of new
     personnel to allow us to serve the increasing market demand.

o    Selling, general and administrative expenses as a percentage of revenues
     decreased from 29.8% in the third quarter of 1999 to 24.1% in the same
     period in 2000. The decrease is primarily due to the higher revenue base,
     partially offset by an increase of $1.7 million in goodwill and intangible
     amortization.

o    Our research and development expenses for our Completion Systems Division
     were approximately $2.9 million, or 5.0% of sales during the three months
     ended September 30, 2000. Goodwill and intangible amortization for the
     quarter was $3.1 million or 5.4% of revenues. These two items of expense
     are expected to be relatively flat for the remainder of the year and
     decline as a percentage of revenues as revenues increase. This division,
     however, is expected to invest heavily in research and development over the
     next two years.

     ARTIFICIAL LIFT SYSTEMS

     Our Artificial Lift Systems Division continued to show strong growth in the
third quarter of 2000. This division benefited from higher activity in Canada as
well as increased activity in Latin America. Canadian revenues for the third
quarter were up from both the first and second quarters of this year, despite a
lower than expected rig count.

     Operating income in Canada was $9.3 million for the quarter and represented
an improvement of $2.5 million over the first quarter of this year and $1.9
million over second quarter of this year, on $2.3 million and $3.9 million in
revenue improvements. These improvements reflected strong demand and better
pricing. Canadian margins were affected by lower margin field supply sales made
through our BMW progressing cavity pump operations in Canada.

     Latin America revenues were up 13.5% over the second quarter of 2000, with
operating income and EBITDA up 32.1% and 25.6%, respectively, over the second
quarter of this year. These improvements were primarily driven by higher
progressing cavity pumps sales and margins.

     Looking forward to the fourth quarter and into 2001, we expect that
revenues in our Artificial Lift Systems Division will continue to benefit from
the recovery in North America and the impact of price increases initiated
earlier this year. Growth for the division will be heavily dependent on the
extent and timing of increases in oil drilling and work-over activity in North
America, as well as the growth in South America. We have raised prices in our
Artificial Lift Systems Division and are seeking to add another 1% to our
average realized pricing in the fourth quarter. Additional price increases are
planned in November with the objective of a 3% increase to impact the first half
of next year.



                                       22
<PAGE>   24


     The following chart sets forth data regarding the results of our Artificial
Lift Systems Division for the third quarters of 2000 and 1999:


<TABLE>
<CAPTION>
                                                                                     THREE MONTHS ENDED
                                                                                        SEPTEMBER 30,
                                                                                ------------------------------
                                                                                    2000             1999
                                                                                -------------    -------------
                                                                                       (in thousands,
                                                                                     except percentages)
<S>                                                                             <C>              <C>
    Revenues.............................................................       $   110,840      $    78,740
    Gross Profit.........................................................            39,859           26,660
    Gross Profit %.......................................................              36.0%            33.9%
    Selling, General and Administrative..................................       $    28,867      $    20,845
    Operating Income ....................................................            10,992            5,955
    EBITDA...............................................................            17,430           10,979
</TABLE>


     Other material items affecting the results of our Artificial Lift Systems
Division as reflected above for the third quarter of 2000 compared to the third
quarter of 1999 were:

o    Revenues increased 40.8% in the third quarter of 2000, compared to the
     third quarter of 1999 primarily as a result of recent improvements in North
     American markets. The most significant improvements were in Canada, where
     revenues were up 46.6% and Latin America, where revenues were up 73.1% from
     third quarter 1999 levels. These increases were primarily due to increased
     sales of progressing cavity and reciprocating pumps, where each were up by
     more than 55% from the same period last year.

o    Gross profit as a percentage of revenues increased from the comparable
     period in 1999 primarily due to product mix differences, higher pricing and
     improved manufacturing efficiencies.

o    We are in the process of switching our manufacturing of downhole
     components, rotors and stators, for our progressing cavity lift systems
     group to Canada with the objective to moving most of the production
     in-house within the next two years. This shift is designed to add
     approximately 1% to the overall margins in this division by sometime in
     2002.

o    Selling, general and administrative expenses, as a percentage of sales,
     remained relatively flat due to the incremental selling costs associated
     with higher revenues.

o    Operating income as a percentage of revenues improved to 9.9% for the third
     quarter of 2000 as compared to 7.6% for the third quarter of 1999 due to
     improved pricing and product mix differences. The largest contributor to
     operating income in the third quarter of 2000 was Canada, which contributed
     84.6% of total operating income.

o    EBITDA as a percentage of revenues increased to 15.7% in the third quarter
     of 2000 from 14.5% in the second quarter of 2000 and 13.9% in the third
     quarter of 1999. The improvement reflected the impact of higher revenues
     and lower overhead costs.

     COMPRESSION SERVICES

     The Compression Services Division reported revenues of $69.0 million for
the quarter compared to $67.9 million for the third quarter of 1999. EBITDAR,
however, declined to $16.9 million from $19.1 million in the third quarter of
1999 due to lower margin sales and higher international costs associated with
this division's international expansion. During the third quarter, this division
experienced improved revenue and operating income compared to the second quarter
of this year. The improvements in the quarter reflected the beginning of the
recovery in this division following the reorganization that began earlier this
year. Costs during the quarter, however, were higher than originally expected as
costs were incurred in positioning our rental fleet for increased activity in
the fourth quarter and into 2001. The increased activity and our efforts to
refurbish and bring back in the market older compressors resulted in repair and
maintenance expense of $13.6 million in the third quarter of 2000 compared to
$10.6 million in the third quarter of 1999.

                                       23
<PAGE>   25

     The following chart sets forth data regarding the results of our
Compression Services Division for the third quarters of 2000 and 1999:

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED
                                                         SEPTEMBER 30,
                                                  ---------------------------
                                                     2000             1999
                                                  ----------       ----------
                                                        (in thousands,
                                                     except percentages)
<S>                                               <C>              <C>
    Revenues:
     Rentals ................................     $   33,670       $   31,651
     Equipment Sales ........................         19,460           24,044
     Parts and Services .....................         15,824           12,236
                                                  ----------       ----------
      Total Revenues ........................     $   68,954       $   67,931

    Gross Profit:
     Rentals ................................     $    6,936       $   12,245
     Equipment Sales ........................          1,715            1,726
     Parts and Services .....................          3,417            3,483
                                                  ----------       ----------
      Total Gross Profit ....................     $   12,068       $   17,454

    Gross Profit % ..........................           17.5%            25.7%
    Selling, General and Administrative .....     $   10,931       $   10,332
    Operating Income ........................          1,137            7,122
    EBITDA ..................................         11,194           15,581
    Lease Expense ...........................          5,729            3,488
    EBITDAR .................................         16,923           19,069
    Minority Interest, Net of Tax ...........           (154)          (1,671)
</TABLE>


     Other material items affecting the results of our Compression Services
Division for the third quarter of 2000 as compared to the comparable period in
1999 were:

o    Revenues were slightly up from the third quarter of 1999. Despite the
     minimal increase in total revenue, there were substantial improvements in
     this division's Canadian and international revenues. The largest increase
     was in Asia, due to our January 2000 acquisition of Gas Services
     International (GSI).

o    Gross profit as a percentage of revenues decreased 31.9% from the
     comparable period of 1999. A contributing factor to the decrease was the
     impact of contracts bid at lower margins prior to our changes in
     manufacturing and pricing requirements. Another contributing factor to
     lower gross margins was higher lease expenses due to an increased number of
     compressors having been sold and subject to the sales leaseback
     arrangements described below. At September 30, 2000, the Compression
     Services Division had $294.9 million in compressors subject to these
     arrangements compared to $239.8 million at September 30, 1999. Quarterly
     lease payments for the compressors was $5.7 million for the third quarter
     of 2000 compared to $3.5 million for the third quarter of 1999.

o    Selling, general and administrative costs as a percentage of revenue
     remained relatively flat in the third quarter of 2000 compared to the third
     quarter of 1999, despite costs associated with international expansion and
     additional goodwill amortization.

o    Gross margins, excluding depreciation and compressor lease expenses, for
     our U.S. rental fleet was 57.8% compared to 56.4% in the second quarter of
     2000 and 65.6% in the third quarter of 1999.

o    Horsepower utilization was 80.0% in the third quarter of 2000 compared to
     78.8% in the third quarter of 1999. The average size of compressors in our
     fleet during the third quarter of 2000 was 241 horsepower, with an average
     rate of $14.10 per horsepower, compared to average size of 229 horsepower
     and $14.05 per horsepower in the third quarter of 1999.

o    Parts and service margins were 21.6% for the third quarter of 2000 compared
     to 28.5% in the third quarter of 1999. The decrease reflected a higher
     volume of sales of lower margin parts during the quarter.



                                       24
<PAGE>   26

o    This division closed its purchase of Cooper Cameron's parts and services
     business in Canada during the third quarter. This acquisition expands our
     parts and services business and compliments our existing packaging
     operations in Canada. We saw improvements in Canada attributable to this
     acquisition.

NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1999

     The following charts contain selected financial data comparing our results
for the nine months ended September 30, 2000 and September 30, 1999:


     COMPARATIVE FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                         NINE MONTHS ENDED
                                                                           SEPTEMBER 30,
                                                                 ------------------------------
                                                                     2000              1999
                                                                 ------------      ------------
                                                                         (in thousands,
                                                                     except percentages and
                                                                         per share data)
<S>                                                              <C>               <C>
Revenues ...................................................     $  1,279,400      $    867,561
Gross Profit ...............................................          381,543           246,452
Gross Profit % .............................................             29.8%             28.4%
Selling, General and Administrative
  Attributable to Segments .................................     $    249,053      $    186,535
Corporate General and Administrative .......................           27,383            18,150
Operating Income ...........................................          107,567            43,345
Income from Continuing Operations ..........................           44,720             8,717
Income from Continuing Operations Excluding
  Goodwill Amortization, Net of Taxes ......................           69,308            22,153
EBITDA .....................................................          253,906           163,313
EBITDAR ....................................................          269,263           170,517
Income per Diluted Share from Continuing Operations ........             0.40              0.09
Income per Diluted Share from Continuing Operations
  Excluding Goodwill Amortization, Net of Taxes ............             0.61              0.22
</TABLE>


      SALES BY GEOGRAPHIC REGION


<TABLE>
<CAPTION>
                                 NINE MONTHS ENDED
                                   SEPTEMBER 30,
                              ----------------------
                                2000          1999
                              --------      --------
REGION:
<S>                           <C>           <C>
U.S. ....................           46%           46%
Canada ..................           21            17
Europe ..................            9            12
Latin America ...........            9             9
Africa ..................            5             7
Middle East .............            3             4
Asia ....................            7             5
                              --------      --------
    Total ...............          100%          100%
                              ========      ========
</TABLE>

     Our results for the nine months ended September 30, 2000 reflected the
improved market conditions in which we were operating and the effects of our
acquisitions and investments over the last two years. These factors contributed
to the following consolidated results:



                                       25
<PAGE>   27

o    Consolidated revenues for the first nine months of 2000 improved 47.5% over
     the same period of 1999 as a result of improved rig count and the impact of
     our late 1999 acquisitions. For this period of 2000, revenues in North
     America were $298.9 million, or 54.1%, higher than they were in the
     comparable period of 1999. International revenues increased $112.9 million,
     or 35.9%, from 1999 levels for these periods.

o    Selling, general and administrative expenses decreased as a percentage of
     revenues from 23.6% in the first nine months of 1999 to 21.6% for the same
     period of 2000. The decrease primarily reflects a higher revenue base,
     offset by the initial costs relating to new product lines and businesses,
     and a $15.8 million increase in goodwill and intangible amortization.

o    Operating income increased 148.2% from the first nine months of 1999 due to
     improved market conditions and our efforts to reduce costs and improve
     efficiencies during the recent industry downturn. The acquisitions made by
     us late in the third quarter 1999 also contributed to the increase in
     operating income.

o    Our effective tax rate for the nine months ended September 30, 2000 was
     36.0%, as compared to 25.3% for the same period of 1999, due to the change
     in the mix between foreign and U.S. tax attributes.

   SEGMENT RESULTS

     DRILLING AND INTERVENTION SERVICES

     Our Drilling and Intervention Services Division experienced improvements in
revenue and operating income as the increase in the North American rig count
positively impacted the demand for its products and services. Demand in
international markets was at historical lows during 1999. The decline in demand
carried into the first part of 2000, resulting in continued pricing pressures
and reduced volumes. The international markets are now in the beginning stages
of a recovery, evidenced by quarter over quarter improvements in international
revenues. Our Drilling and Intervention Services Division's revenue and
operating income were positively impacted by its 1999 acquisitions, including
Dailey International and Williams Tool.

     The following chart sets forth data regarding the results of our Drilling
and Intervention Services Division for the nine months ended September 30, 2000
and 1999:

<TABLE>
<CAPTION>
                                                              NINE MONTHS ENDED
                                                                SEPTEMBER 30,
                                                       ------------------------------
                                                           2000              1999
                                                       ------------      ------------
                                                              (in thousands,
                                                            except percentages)
<S>                                                    <C>               <C>
     Revenues:
       Cementing ...................................     $     80,313      $     57,808
       Fishing and Rentals .........................          355,463           235,359
       Well Installation Services ..................          129,226           128,991
       Underbalanced Drilling (1) ..................           54,313                --
                                                         ------------      ------------
          Total Revenues ...........................     $    619,315      $    422,158

     Gross Profit ..................................     $    201,504      $    120,454
     Gross Profit % ................................             32.5%             28.5%
     Selling, General and Administrative ...........     $     92,520      $     69,312
     Operating Income ..............................          111,410            52,580
     EBITDA ........................................          188,607           122,845
</TABLE>


(1)  We began tracking the revenues of this product line in the fourth quarter
     of 1999 following our acquisition of Dailey International and Williams
     Tool.

     Other material items affecting the results of our Drilling and Intervention
Services Division for the nine months ended September 30, 2000 compared to the
nine months ended September 30, 1999 were:




                                       26
<PAGE>   28

o    Our North American revenues for the first nine months of 2000 improved by
     93.4% over the comparable period of 1999. Acquisitions completed in the
     latter half of 1999 and a 52.7% increase in the North American rig count
     contributed to these improvements. Our international revenues, excluding
     Canada, increased $23.1 million, or 9.8%, compared to the same period of
     1999.

o    Gross profit increased 67.3% from the first nine months of 2000. Fishing
     and rental sales were the largest contributor to this improvement, more
     than doubling in gross margin from last year. Gross margin as a percentage
     of revenue increased by 14.0% due to the product line mix shifting to
     higher margin sales.

o    Selling, general and administrative expenses decreased as a percentage of
     revenues from 16.4% in the first nine months of 1999 to 14.9% in the first
     nine months of 2000. The decrease primarily reflects a higher revenue base,
     partially offset by an increase of $6.8 million in goodwill and intangible
     amortization expense.

o    Operating income increased $58.8 million in the nine months ended September
     30, 2000 as compared to the same period of 1999 primarily due to improved
     market conditions in North America and the impact of the late 1999
     acquisitions.

o    The improvement in the North American markets was most strongly felt by
     this division as 58.2% of its revenues and 57.8% of its operating profits
     are attributable to this region.

     COMPLETION SYSTEMS

     Our Completion Systems Division has shown steady improvements since the
first quarter of 1999. The following chart sets forth data regarding the results
of our Completion Systems Division for the nine months ended September 30, 2000
and 1999:


<TABLE>
<CAPTION>
                                                                                        NINE MONTHS ENDED
                                                                                          SEPTEMBER 30,
                                                                                  ------------------------------
                                                                                      2000             1999
                                                                                  -------------    -------------
                                                                                     (in thousands, except
                                                                                          percentages)
<S>                                                                                <C>             <C>
     Revenues..............................................................        $  151,503      $    80,501
     Gross Profit..........................................................            32,551           10,688
     Gross Profit %........................................................              21.5%            13.3%
     Selling, General and Administrative...................................        $   41,254      $    26,349
     Operating Loss........................................................            (8,699)         (15,661)
     EBITDA................................................................            10,641           (7,356)
</TABLE>

     Other material items affecting the results of our Completion Systems
Division for the nine months ended September 30, 2000 compared to nine months
ended September 30, 1999 were:

o    Revenues almost doubled in the first nine months of 2000 as compared to the
     first nine months of 1999. The increase is due to the expansion of the
     distribution of our core products and the new product offerings generated
     by our late 1999 acquisitions.

o    Gross profit as a percentage of revenues increased 61.7% primarily due to
     higher gross margin percentages from our late 1999 acquisitions and higher
     throughput in our manufacturing facilities.

o    Selling, general and administrative expenses as a percentage of revenues
     decreased from 32.7% in the first nine months of 1999 to 27.2% in the same
     period in 2000. The decrease is primarily due to the higher revenue base,
     partially offset by an increase of $7.0 million in goodwill and intangible
     amortization associated with acquisitions.



                                       27
<PAGE>   29




     ARTIFICIAL LIFT SYSTEMS

     Operating results from our Artificial Lift Systems Division are heavily
dependent on oil production activity. Revenues for this division increased
approximately 58.9% for the nine months ended September 30, 2000, from 1999
levels, primarily in response to improved activity levels in North American
markets, in particular Canada. This division has also seen increased sales in
the Latin American markets from 1999 levels as its artificial lift products have
begun to penetrate those markets utilizing our worldwide infrastructure.

     The following chart sets forth data regarding the results of our Artificial
Lift Systems Division for the nine months ended September 30, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                                      NINE MONTHS ENDED
                                                                                        SEPTEMBER 30,
                                                                                ------------------------------
                                                                                    2000             1999
                                                                                -------------    -------------
                                                                                    (in thousands, except
                                                                                         percentages)
<S>                                                                             <C>              <C>
    Revenues.............................................................       $   315,292      $   198,438
    Gross Profit.........................................................           110,716           71,812
    Gross Profit %.......................................................              35.1%            36.2%
    Selling, General and Administrative..................................       $    82,477      $    64,170
    Operating Income ....................................................            28,239            7,782
    EBITDA...............................................................            46,717           22,476
</TABLE>

     Other material items affecting the results of our Artificial Lift Systems
Division as reflected above for the nine months ended September 30, 2000
compared to the nine months ended September 30, 1999 were:

o    The first nine months of 2000 experienced an increase in revenues of 58.9%
     compared to the first nine months of 1999 primarily as a result of recent
     improvements in North American markets. The most significant improvement
     was in Canada where revenues almost doubled 1999 levels reflecting higher
     Canadian rig count.

o    Gross profit as a percentage of revenues decreased 3.0% from the comparable
     period 1999 primarily due to increased sales of lower margin ancillary
     products associated with progressing cavity pumps in Canada.

o    Selling, general and administrative expenses decreased as a percentage of
     revenues from 32.3% in the nine months ended September 30, 1999 to 26.2% in
     the same period of 2000 due to cost reductions previously implemented and a
     higher revenue base.

o    Operating income increased by $20.5 million compared to the first nine
     months of 1999. This improvement is primarily due to increased demand, both
     domestically and internationally, as well as the impact of cost reduction
     programs implemented during 1999.

     COMPRESSION SERVICES

     The Compression Services Division reported revenues of $193.3 million for
the first nine months of 2000 compared to $166.5 million for the same period of
1999. Operating income declined to $4.0 million in the first nine months of 2000
from $16.8 million in the same period of 1999. The decline in operating income
for the period was primarily attributable to lower margins on rentals, higher
costs related to the reorganization of the division during the first nine months
of 2000, higher selling, general and administrative expenses and start-up costs
associated with international expansion, including GSI.



                                       28
<PAGE>   30


     The following chart sets forth data regarding the results of our
Compression Services Division for the nine months ended September 30, 2000 and
1999:

<TABLE>
<CAPTION>
                                                          NINE MONTHS ENDED
                                                            SEPTEMBER 30,
                                                  -------------------------------
                                                      2000               1999
                                                  ------------       ------------
                                                         (in thousands,
                                                       except percentages)
<S>                                               <C>                <C>
    Revenues:
      Rentals ...............................     $     98,591       $     87,116
      Equipment Sales .......................           52,544             45,274
      Parts and Services ....................           42,155             34,074
                                                  ------------       ------------
         Total Revenues .....................     $    193,290       $    166,464

    Gross Profit:
      Rental ................................     $     22,421       $     31,109
      Equipment Sales .......................            3,431              2,295
      Parts and Services ....................           10,920             10,094
                                                  ------------       ------------
         Total Gross Profit .................     $     36,772       $     43,498

    Gross Profit % ..........................             19.0%              26.1%
    Selling, General and Administrative .....     $     32,802       $     26,704
    Operating Income ........................            3,970             16,794
    EBITDA ..................................           32,877             41,987
    Lease Expense ...........................           15,357              7,204
    EBITDAR .................................           48,234             49,191
    Minority Interest, Net of Tax ...........             (848)            (3,557)
</TABLE>


     Other material items affecting the results of our Compression Services
Division for the nine months ended September 30, 2000 as compared to the nine
months ended September 30, 1999 were:

o    The increase in revenues reflects $10.5 million in revenues from our rental
     contracts with YPF contract and $24.7 million of incremental revenues from
     the January 2000 acquisition of GSI. All product lines for this division
     saw improvements in revenues.

o    Gross profit as a percentage of revenues decreased 27.2% due to:

     o    Lower margins on rental contracts due to pricing pressures primarily
          in the United States.

     o    Higher lease expenses due to an increased number of compressors having
          been sold and subject to the sales leaseback arrangements described in
          our Liquidity and Capital Resources Section.

     o    Lower parts and services margins due in part to product mix and higher
          overall parts and service sales as a percentage of total sales.

o    Gross margins, excluding depreciation and compressor lease expenses, for
     our U.S. rental fleet was 56.5%, for the nine months ended September 30,
     2000, compared to 61.6% in the same period of 1999.

o    Horsepower utilization was 80.2% in the nine months ended September 30,
     2000 compared to 79.6% in the same period of 1999. The average size of
     compressors in our fleet during the first nine months of 2000 was 237
     horsepower, with an average rate of $14.06 per horsepower, compared to 210
     horsepower and $14.19 per horsepower in the comparable period of 1999.

o    Parts and service margins were 25.9% for the nine months ended September
     30, 2000 compared to 29.6% in the same period of 1999.

o    The increase in selling, general and administrative expenses reflects costs
     associated with increased market activity, costs related to the
     reorganization of this division that commenced in the first quarter of
     2000, $1.2 million in additional goodwill amortization and costs associated
     with new foreign operations, including Latin America and Asia.



                                       29
<PAGE>   31

o    During the first quarter of 2000, we acquired GSI and began start-up
     operations for the Middle East. The selling, general and administrative
     costs associated with GSI for the first nine months of 2000 were
     approximately $3.5 million, with little profit attributable to that unit
     due to the start-up nature of operations. GSI, however, commenced
     operations in Oman in the second quarter and has a large construction
     contract that recently began.

UNIVERSAL COMPRESSION

     On October 24, 2000, we announced the proposed acquisition by us of 13.75
million shares of common stock (48% interest) of Universal in exchange for the
contribution of substantially all of our Compression Services Division into a
subsidiary of Universal. We will retain approximately $40 million of the assets
of the Compression Services Division, including Singapore-based GSI and our Asia
Pacific compressor rental operations other than those in Thailand and Australia.
We will, however, continue to operate compressor rentals in those regions either
alone or in conjunction with Universal. The value of the transaction will be
based on the stock price of Universal as of the closing date of the transaction.
A floor price of $25 per share of Universal common stock has been established as
a condition to closing.

     In connection with this investment we have entered into an agreement to
purchase GE Capital's 36% interest in the joint venture in which our Compression
Division is operated for $206.5 million subject to the concurrent closing of our
investment in Universal. The transactions are subject to various conditions,
including governmental approvals, approval of Universal's stockholders, and the
refinancing of our joint venture's and Universal's debt and compressor sale
leaseback arrangements. Although there can be no assurance the merger and
purchase will close, we anticipate the transactions will be consummated by the
end of the year, or early in the first quarter of 2001.

     We expect to recognize a pre-tax charge for this transaction of
approximately $20 million relating to transaction costs and severance expenses.
We may also have a non-cash charge to the extent the market price of the
Universal common stock at time of closing is less than our approximate $490
million book value as well as a non-cash charge for the establishment of
deferred taxes on our joint venture interest due to us no longer consolidating
the operations. The amount of these charges will be a function of the market
price of the Universal stock at the time of closing. At a Universal common stock
price of $30, the after tax non-cash charge would be around $100 million and
would relate primarily to the establishment of deferred taxes due to the
deconsolidation of our investment.

DISCONTINUED OPERATIONS

     Our discontinued operations consist of our Drilling Products Division that
was distributed to our shareholders on April 14, 2000 through the distribution
of all of our holdings in Grant Prideco. Results from discontinued operations
were as follows:

o    We had a loss from discontinued operations, net of tax, for the nine months
     ended September 30, 2000, of $3.5 million and a loss from discontinued
     operations, net of tax, for the three and nine months ended September 30,
     1999 of $14.1 million and $19.3 million, respectively.

o    Included in the loss from discontinued operations for the nine months ended
     September 30, 2000 are $1.0 million, net of tax, of transaction costs.

LIQUIDITY AND CAPITAL RESOURCES

     Our current sources of capital are reserves of cash, cash generated from
operations and borrowings under bank lines of credit. In June 2000 we completed
the private placement of $910 million face amount of our Zero Coupon Convertible
Senior Debentures due 2020 (the "Zero Coupon Debentures"). The net proceeds of
approximately $491.9 million from the placement were primarily used to repay our
short-term indebtedness.

     As of September 30, 2000, we had repaid approximately $424.0 million in
short term and other debt that we had outstanding in the second quarter with the
proceeds of the placement of our Zero Coupon Debentures. Subsequent to
September 30, 2000, we repaid an additional $10.0 million in short-term debt.
Our total funded debt is currently around $1.1 billion. Pending the redeployment
in our business, we are investing our excess cash in short-term government and
investment grade securities. We elected to issue the Zero Coupon Debentures
because of the attractiveness of the rate compared to the


                                       30
<PAGE>   32

prevailing rate on our short-term debt, our desire to convert our short-term
borrowings into longer term debt and the significant premium to market provided
to us on the conversion rate. We believe the placement of the Zero Coupon
Debentures has substantially strengthened our financial position to take
advantage of future opportunities as they may arise. Our annual interest expense
on our current debt is around $53.8 million pre-tax. The current annual after
tax cash cost of our outstanding debt is around $25.0 million.

     We believe that the current reserves of cash and short-term investments,
access to our existing credit lines and internally generated cash from
operations are sufficient to finance the projected cash requirements of our
current and future operations, and our proposed purchase of GE Capital's
minority interest in our Compression Services Division joint venture. We are
continually reviewing acquisitions in our markets. Depending upon the size,
nature and timing of an acquisition, we may require additional capital in the
form of either debt, equity or a combination of both.

     The following chart contains information regarding our capital resources
and borrowings as of September 30, 2000 and December 31, 1999:

<TABLE>
<CAPTION>
                                                       SEPTEMBER 30,    DECEMBER 31,
                                                           2000             1999
                                                       ------------     ------------
                                                             (in thousands)
<S>                                                    <C>              <C>
Cash and Cash Equivalents ........................     $     97,739     $     44,361
Short-Term Borrowings and Current Portion of
  Long-Term Debt .................................           39,502          322,767
Long-Term Debt ...................................          226,321          226,603
Zero Coupon Convertible Senior Debentures ........          505,409               --
5% Convertible Subordinated Preferred
  Equivalent Debentures ..........................          402,500          402,500
Letters of Credit Outstanding ....................           38,407           27,791
</TABLE>

     The net increase in our cash and cash equivalents since December 31, 1999,
was primarily attributable to the following:

o    Proceeds from issuance of Zero Coupon Debentures of $491.9 million, net of
     expenses.

o    Repayments, net, on long-term debt and short-term facilities of $289.6
     million.

o    Proceeds from the sale and leaseback of compression units of $55.1 million.

o    Capital expenditures of property, plant and equipment from continuing
     operations of $164.1 million, including $61.4 million for our Compression
     Services Division funded by sale and leaseback arrangements.

o    Acquisition of new businesses for continuing operations of approximately
     $86.4 million in cash, net of cash acquired, including acquisitions for our
     Compression Services Division of $33.4 million that were partially funded
     with the proceeds of the sale and leaseback arrangements noted above.

o    Cash inflows from operating activities associated with our continuing
     operations of $20.0 million.

o    Capital expenditures of property, plant and equipment from discontinued
     operations of $5.1 million and cash outflow from operating activities of
     discontinued operations of $12.2 million.



                                       31
<PAGE>   33


     BANKING FACILITIES

     In May 1998, we put in place a five-year unsecured revolving credit
facility that allows us to borrow up to $250.0 million at any time. The facility
consists of a $200.0 million U.S. credit facility and a $50.0 million Canadian
credit facility. As of September 30, 2000, $239.9 million was available under
the credit facility. Borrowings under this facility bear interest at the U.S.
prime rate or a variable rate based on the LIBOR. Our credit facility contains
customary affirmative and negative covenants, including a maximum debt to
capitalization ratio, a minimum interest coverage ratio, a limitation on liens
and a limitation on asset dispositions.

     We have unsecured short-term borrowings with various institutions pursuant
to uncommitted lines of credit facilities and bid note arrangements. At
September 30, 2000, we had $8.8 million in unsecured short-term borrowings
outstanding under these arrangements, which have been repaid.

     In July 2000, the Company's Compression Services Division put in place a
$25.0 million uncommitted line of credit. Interest rates are at LIBOR plus 1.75%
or the "Quoted Rate", defined as any rate of interest mutually agreed upon by
the two parties. As of September 30, 2000, $12.0 million was available under
this line of credit.

     ZERO COUPON CONVERTIBLE SENIOR DEBENTURES

     As noted above, on June 30, 2000 we completed the private placement of
$910.0 million face amount of our Zero Coupon Debentures. These debentures were
issued at $501.6 million providing the holders with an annual 3% yield to
maturity. We received proceeds of $491.9 million, net of debt issuance costs of
$9.7 million.

     Holders may convert the Zero Coupon Debentures into shares of our Common
Stock at any time before maturity at a conversion rate of 9.9970 shares per
$1,000 principal amount at maturity or an initial conversion price of $55.1425
per share of Common Stock. The effective conversion price will increase as the
accreted value of the Zero Coupon Debentures increases. We may redeem the Zero
Coupon Debentures on or after June 30, 2005 at the accreted discounted amount at
the time of redemption as provided for in the indenture agreement. The holders
also may require us to repurchase the Zero Coupon Debentures on June 30, 2005,
June 30, 2010, and June 30, 2015 at the accreted discounted amount at the time
of redemption.

     CONVERTIBLE SUBORDINATED DEBENTURES

     In November 1997, we sold $402.5 million principal amount of our 5%
Convertible Subordinated Preferred Equivalent Debentures (the "Debentures") due
2027. The Debentures bear interest at an annual rate of 5% and are convertible
into Common Stock. The original conversion was at a price of $80 per share;
however, under the terms of the Debentures, the conversion rate for the
Debentures was adjusted to $53.34 per share following our spin-off of Grant
Prideco. The adjustment factor for the conversion rate was based on the average
market price of our common stock on a pre-spin basis and the fair market value
of the Grant Prideco common stock distributed.

     We have the right to redeem the Debentures at any time on or after November
4, 2000, at redemption prices provided for in the indenture agreement. The
Debentures are subordinated in right of payment of principal and interest to the
prior payment in full of certain existing and future senior indebtedness. We
also have the right to defer payments of interest on the Debentures by extending
the quarterly interest payment period on the Debentures for up to 20 consecutive
quarters at any time when we are not in default in the payment of interest.

     7 1/4% SENIOR NOTES DUE 2006

     We have outstanding $200.0 million of publicly traded 7 1/4% Senior Notes
due May 15, 2006. Interest on the 7 1/4% Senior Notes is payable semi-annually
on May 15 and November 15. These Senior Notes may not be redeemed prior to
maturity.



                                       32
<PAGE>   34


     COMPRESSION FINANCING

     Our Compression Services Division has entered into various sale and
leaseback arrangements where it has sold $294.9 million of compression units at
September 30, 2000, and has a right to sell up to another $55.1 million of
compression units. Under these arrangements, legal title to the compression
units are sold to third parties and leased back to the division under a
five-year operating lease with a market-based purchase option. These obligations
and leases are expected to be refinanced as part of our investment in Universal.

     As of December 31, 1999, our Compression Services Division had sold
compressors under these arrangements having appraised values and received cash
of $239.8 million. These sales resulted in a pretax deferred gain of $77.3
million, which may be deferred until the end of the lease. During the nine
months ended September 30, 2000, our Compression Services Division sold
additional compressors for which it received cash equal to the appraised value
of $55.1 million. The sales resulted in an additional pretax deferred gain of
approximately $15.5 million.

     GRANT PRIDECO NOTE

     In connection with our spin-off of Grant Prideco, we received from Grant
Prideco an unsecured subordinated note to us in the amount of $100.0 million.
The $100.0 million obligation to us bears interest at an annual rate equal to
10.0%. Interest payments are payable to us quarterly, and principal and all
unpaid interest is due no later than March 31, 2002. Under the terms of the
note, Grant Prideco is required to repay this note with the proceeds of any debt
or equity financing, excluding financing under a credit facility or any equity
issued in connection with a business combination. The indebtedness of Grant
Prideco to us is subordinated to the working capital obligations of Grant
Prideco to its banks. Grant Prideco's ability to repay this indebtedness and the
timing thereof is subject to its discretion and will be dependent upon market
conditions.

     CAPITAL EXPENDITURES

     Our capital expenditures for property, plant and equipment for our
continuing operations during the nine months ended September 30, 2000 were
$164.1 million and primarily related to rental equipment, fishing tools and
tubular service equipment and compressors and related assets. Included within
these capital expenditures for the nine months ended September 30, 2000 was
$61.4 million for our Compression Services Division that primarily related to
our U.S. operations. Capital expenditures for the full year of 2000 are expected
to be between $135.0 and $150.0 million, excluding capital expenditures for our
compression operations that are financed by sale and leaseback arrangements. Our
depreciation expense during the first nine months of 2000 was $113.4 million. We
currently expect depreciation for the year to be approximately $155 to $160
million.

     ACQUISITIONS

     On August 10, 2000 we acquired Alpine Oil Services Corporation for shares
of our common stock having a value of approximately $54.4 million. Alpine,
headquartered in Calgary, Alberta, Canada, is being integrated into our Drilling
and Intervention Services and Completion Systems Divisions. The acquisition
extends our underbalanced drilling capabilities worldwide, adds new completion
technology and further expands our offerings of products and services in Canada.

     On June 30, 2000, we acquired the underbalanced drilling product line of
Oiltools International Limited for approximately $20.0 million. The acquired
business provides underbalanced drilling services in the international markets,
in particular Asia Pacific and the Middle East. The assets added to the
capabilities of our underbalanced drilling operations.

     On April 20, 2000, we acquired the sand screen product lines of Oiltools
for approximately $18.5 million. The principal product lines include
Stratapac(R), a highly engineered, patented screen used in offshore, deviated
and horizontal wells; Stratacoil(TM), a small diameter premium screen used for
thru tubing completions; and AccuWrap(TM), a premium wire wrap screen. These
product lines were acquired to enhance and complement our existing Houston Well
Screen(TM) and Expandable Sand Screen(TM) product lines.



                                       33
<PAGE>   35

     On January 12, 2000, our Compression joint venture acquired Singapore-based
GSI for a total of approximately $20.2 million. The acquisition expanded
capabilities in the Asia-Pacific and Middle Eastern markets. GSI's main business
units include compressor packaging, rental, maintenance and service, and
floating production storage and offloading platforms. In addition to Singapore,
GSI has service locations in Indonesia and the United Arab Emirates. These
businesses will be retained by us in our transaction with Universal.

     During the nine months ended September 30, 2000, we also completed two
acquisitions for our Artificial Lift Systems Division for $7.6 million and seven
small acquisitions for our Compression Services Division for total consideration
of $18.3 million. We also acquired a minority-held interest in one of our
subsidiaries of our Completion Systems Division for shares of our common stock
valued at $4.8 million, and completed five acquisitions for our Drilling and
Intervention Services Division for total consideration of $10.0 million.

     Some of our acquisitions have resulted in substantial goodwill associated
with their operations, including the addition of approximately $129.3 million of
goodwill during the nine months ended September 30, 2000. The amortization
expense for goodwill and other intangibles during the nine months ended
September 30, 2000 was $32.9 million.

     Our acquisitions during 1999 and 2000 were accounted for using the purchase
method of accounting. Results of operations for acquisitions accounted for as
purchases are included in our consolidated condensed financial statements since
the dates of acquisition. The purchase price is allocated to the net assets
acquired based upon their estimated fair market values at the date of
acquisition. The balances included in our Consolidated Condensed Balance Sheets
related to our acquisitions during the past twelve months are based upon
preliminary information and are subject to change when final asset and liability
valuations are obtained.

NEW ACCOUNTING PRONOUNCEMENTS

      In December 1999 the Securities and Exchange Commission ("SEC") released
Staff Accounting Bulletin No. 101 ("SAB No. 101"), Revenue Recognition in
Financial Statements, to provide guidance on the recognition, presentation and
disclosure of revenue in financial statements. In March 2000, the SEC issued SAB
101A, which delayed the implementation date of SAB 101 until the second quarter
after December 15, 1999 for companies with fiscal years beginning between
December 16, 1999 and March 15, 2000. The SEC staff issuance of SAB 101B on June
26, 2000 further extends the compliance requirement until the fourth quarter of
fiscal years beginning after December 15, 1999, with an effective date of
January 1, 2000. We have reviewed our revenue recognition policies and believe
that they are in compliance with GAAP and the related interpretive guidance set
forth in SAB 101 with the expectation of our classification in the Consolidated
Condensed Statements of Income of certain pass-through costs. The anticipated
restatements caused by the application of this bulletin is not expected to have
a material impact on our financial position or results of operations.

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. In June 1999, the FASB issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of SFAS No. 133, amending the effective date of SFAS No. 133 to
years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities,
amending accounting and reporting standards of SFAS No. 133 for certain
derivative instruments and certain hedging activities. We are evaluating the
impact of SFAS No. 133 on our consolidated financial statements and do not
anticipate that application of this statement will have a material impact on our
financial position or results of operations.



                                       34
<PAGE>   36


EXPOSURES

     INDUSTRY EXPOSURE

     Substantially all of our customers are engaged in the energy industry. This
concentration of customers may impact our overall exposure to credit risk,
either positively or negatively, in that our customers may be similarly affected
by changes in economic and industry conditions. We perform ongoing credit
evaluations of our customers and do not generally require collateral in support
of our trade receivables extensions of credit. We maintain reserves for
potential credit losses, and generally, actual losses have historically been
within our expectations.

     LITIGATION AND ENVIRONMENTAL EXPOSURE

     In the ordinary course of business, we become the subject of various claims
and litigation. We maintain insurance to cover many of our potential losses and
we are subject to various self-retentions and deductibles with respect to our
insurance. Although we are subject to various ongoing items of litigation, we do
not believe that any of the items of litigation that we are currently subject to
will result in any material uninsured losses to us. It is, however, possible
that an unexpected judgment could be rendered against us in cases in which we
could be uninsured and beyond the amounts that we currently have reserved or
anticipate incurring for that matter.

     We are also subject to various federal, state and local laws and
regulations relating to the energy industry in general and the environment in
particular. Environmental laws have in recent years become more stringent and
have generally sought to impose greater liability on a larger number of
potentially responsible parties. While we are not currently aware of any
situation involving an environmental claim which would be likely to have a
material adverse effect on our business, it is always possible that an
environmental claim with respect to one or more of our current businesses or a
business or property that one of our predecessors owned or used could arise that
could involve the expenditure of a material amount of funds.

     INTERNATIONAL EXPOSURE

     Like most multinational oilfield service companies, we have operations in
certain international areas, including parts of the Middle East, North and West
Africa, Latin America, the Asia-Pacific region and the Commonwealth of
Independent States, that are inherently subject to risks of war, political
disruption, civil disturbance and policies that may:

     o    disrupt oil and gas exploration and production activities;

     o    restrict the movement of funds;

     o    lead to U.S. government or international sanctions; and

     o    limit access to markets for periods of time.

     Historically, the economic impact of such disruptions has been temporary,
and oil and gas exploration and production activities have resumed eventually
and became subject to more normal market forces. Certain areas, including the
CIS, Algeria, Nigeria, parts of the Middle East, the Asia-Pacific region and
Latin America, have been subjected to political disruption that has negatively
impacted results of operations following such events.

     CURRENCY EXPOSURE

     A single European currency ("the Euro") was introduced on January 1, 1999,
at which time the conversion rates between legacy currencies and the Euro were
set for 11 participating member countries. However, the legacy currencies in
those countries will continue to be used as legal tender through January 1,
2002. Thereafter, the legacy currencies will be canceled, and Euro bills and
coins will be used in the 11 participating countries. We are currently
evaluating the effect of the Euro on our consolidated financial statements and
our business operations; however, we do not foresee that the transition to the
Euro will have a significant impact.


                                       35
<PAGE>   37

     Approximately 42.7% of our net assets attributable to continuing operations
are located outside the United States and are carried on our books in local
currencies. Changes in those currencies in relation to the U.S. dollar result in
translation adjustments which are reflected as accumulated other comprehensive
loss in the stockholders' equity section on our balance sheet. We recorded a
$53.6 million adjustment to our equity account for the nine months ended
September 30, 2000 primarily to reflect the net impact of the decline in
European currencies against the U.S. dollar. We recognize remeasurement and
transactional gains and losses on currencies in our Consolidated Condensed
Statements of Income. During the three and nine months ended September 30, 2000
we recognized net losses on currencies in our Consolidated Condensed Statements
of Income of $1.3 million and $1.2 million, respectively. We recognized a net
loss on currencies in the three months ended September 30, 1999 of $0.3 million
and a gain on currencies in the nine months ended September 30, 1999 of $0.4
million. We were also impacted by lower sales and profits for our international
sales that are denominated in the local currencies such as the Pound Sterling
and Euro and have U.S. dollar based costs or local currency pricing under term
contracts.

FORWARD LOOKING INFORMATION AND REGULATION FD CONSIDERATIONS

     REGULATION FD

     In light of the SEC's new Regulation FD, we have elected to provide in this
report various forward-looking statements and operational data that are in more
detail than we have previously provided. We have done so to assure full market
disclosure of information that we traditionally made available to our investors
and securities analysts. We expect to provide updates to this information on a
regular basis in our periodic and current reports filed with the SEC. We have
also made our investor conference calls open to all investors and encourage all
investors to listen in on these calls. We anticipate that we will publicly
announce the call-in numbers before the calls.

     In addition to providing ongoing market information and operational data,
we are beginning with this report to provide a brief discussion of our earnings
expectations for the coming quarters. We are doing so to assist our stockholders
in better understanding our business. These expectations reflect only our
current view on these matters and are subject to change based on changes of
facts and circumstances. There can be no assurance that these expectations will
be met and our actual results will likely vary (up or down) from those currently
projected. We make no undertaking to update this information, and in any event
we do not intend to update our analysis in our quarterly reports or in a current
report any more than once each quarter. The absence of an update should not be
considered as an affirmation of our current expectations or that facts have not
changed during the quarter that would impact our expectations.

     EXPECTATIONS FOR FOURTH QUARTER 2000 AND 2001

     Based on the existing market trends described above, we currently expect
that our fourth quarter earnings, excluding non-recurring charges, should be in
a range of between $0.25 to $0.31 per share, with actual results being dependent
on (1) continued strong volumes in the United States, (2) increasing volumes and
prices in Canada as the winter drilling season picks up, (3) our ability to have
meaningful bottom line realization of our recent pricing increases in the United
States by our Drilling and Intervention Services Division, (4) our Completion
Systems Division's continuing to increase its revenues and margins and (5) the
level of growth in volume in the international markets during the quarter.

     Looking forward to 2001, we note that the analysts who follow our company
have projected earnings for us, excluding one time charges, of between $1.30 and
$1.70 per share. Although it is difficult to predict our results for next year
due to the volatile nature of our business, our dependence on drilling activity
and our ability and the industry's ability to raise prices and meet market
demand, as of the date of filing this report we believe that this range is
reasonable. We also believe that the $1.55 per share average consensus estimate
is reasonable based on the information we have as of the date of this filing.
Investors, however, should be cautioned that our actual earnings for 2001 will
be highly dependent on the pace of growth in the international markets, our
ability to implement and maintain pricing increases, and general world economic
trends. Any material change in the markets or changes that affect the
assumptions used by us in modeling next year's results will affect our actual
results.

                                       36
<PAGE>   38

     In modeling our earnings for next year, we have made the following
assumptions regarding our operations. Although we believe, as of the date this
report is filed, that these assumptions are reasonable, there can be no
assurance that they will be correct in the future.

o    Total revenues from our operations for 2001, excluding our compression
     business, which, as previously announced, we are proposing to combine with
     Universal, will be between $1.8 - $2.0 billion. We expect those revenues to
     be broken out as follows:

     o    $1.1 - $1.2 billion from Drilling and Intervention Services

     o    $275 - $325 million from Completion Systems

     o    $450 - $500 million from Artificial Lift Systems

     Our revenues for these divisions could materially vary, up or down, from
     these levels based on market conditions. Accordingly, these projected
     levels reflect only our expectations, as of the date this report is filed,
     which will likely change as the year progresses.

o    We will be able to realize price increases between 5% and 10% for our
     products and services and be able to retain qualified personnel without
     excess cost burden. Our profit from our operations will be dependent on our
     ability to implement and maintain these targeted pricing increases, our
     ability to attract and retain personnel in an ever tightening labor market,
     the impact of cost increases and our ability to pass on these increases to
     our customers and the general level of activity in our industry. Many of
     our international operations involve fixed-term contracts with fixed
     pricing, which restricts our ability to make across the board price
     increases.

o    We currently expect that our EBITDA margins (EBITDA as a percentage of
     revenues) will be between 32-36% for the year in our Drilling and
     Intervention Services Division, 15-20% for our Completion Systems Division
     and 18 - 22% for our Artificial Lift Systems Division for the year.

o    The before-tax contribution to us from our investment in Universal is
     currently expected to be $19 to $23 million for 2001. The actual
     contribution will be dependent upon the timing of the closing of the
     transaction and how quickly consolidation savings and synergies are
     realized by Universal. We currently expect at least $20 million in cost
     savings and other synergies in 2001.

o    Our total debt should be in the range of $1.2 - $1.3 billion, excluding any
     acquisition funded debt. The annual interest expense associated with this
     debt is expected to be around $53 - $60 million.

o    Our corporate selling, general and administrative expense is expected to be
     between $9.5 to $10 million in each quarter of 2001.

Our projections for 2001 are also based on the following assumptions regarding
our business and the industry we serve, which are subject to modification from
time to time as more fully described below under "Forward Looking Statements".
If any of these assumptions is not borne out, our results could vary materially
from those currently projected.

o    North American drilling activity will continue to be strong, with pricing
     increases realized.

o    Canadian drilling activity will be at near record levels for 2001 and the
     seasonal downturn in the warmer months in Canada will not be unusually long
     or disruptive.

o    International rig activity and volumes will continue to pick up, with
     pricing improvements beginning to be realized in the second quarter.

o    Underbalanced drilling demand will continue to grow over our current $100
     million per year run rate, with margins improving as more and more work is
     completed internationally.

o    Our expandable sand screens will continue to gain market share and
     contribute between $40 to $60 million in revenue.

o    Our multi-lateral product line will be successfully introduced during the
     year.

o    Our historical fishing and rental, cementation, well installation services
     and artificial lift product and service lines will maintain their current
     market positions and continue to grow.

o    We will benefit from enhancements of many of our products and services
     through our new technologies.

o    We will not experience any material unusual losses, expenses or charges
     associated with litigation, warranty claims, environmental matters or
     property losses.

o    Our manufacturing operations will not experience any material disruptions
     in supply or efficiencies and we will be able to add capacity as needed.



                                       37
<PAGE>   39

o    The U.S. and world economies will remain strong and not move into
     recession.

o    There will be no material geo-political events that disrupt energy markets.

o    We will not incur any material currency remeasurement or transactional
     losses.

o    There will not be any material acquisitions or divestments during the year.
     Although we have made this assumption for modeling purposes, we do expect
     that some acquisitions and divestments will be made during the year that
     will affect our projections.

o    Capital expenditures for 2001 will approximate $150 million and will relate
     primarily to the addition of revenue producing assets.

     FORWARD-LOOKING STATEMENTS

     This report and our other filings with the SEC and our public releases
contain statements relating to our future results, including our projections and
business trends. We believe these statements constitute "Forward-Looking
Statements" as defined in the Private Securities Litigation Reform Act of 1995.

     Certain risks and uncertainties may cause actual results to be materially
different from projected results contained in forward-looking statements in this
report and in our other disclosures. These risks and uncertainties include, but
are not limited to, the following:

          A Downturn in Market Conditions Could Affect Projected Results. Any
     unexpected material changes in drilling activity or oil and gas prices or
     other market trends would likely affect the forward-looking information
     provided by us. Any unexpected material changes in oil and gas prices or
     other market trends that would impact drilling activity would likely affect
     the forward-looking information contained in this report and our filings.
     The oil and gas industry is extremely volatile and subject to change based
     on political and economic factors outside our control.

          Our estimates as to future results and industry trends are based on
     assumptions regarding the future prices of oil and gas, the North American
     and international rig counts and their effect on the demand and pricing of
     our products and services. These assumptions are based on various
     macroeconomic factors, and actual market conditions could vary materially
     from those assumed.

          In analyzing the market and its impact on us for the remainder of 2000
     and for 2001, we have made the following assumptions regarding oil prices,
     demand and pricing:

     o    Oil prices will average over $25 per barrel for West Texas
          Intermediate crude.

     o    Average natural gas prices will exceed $4.00 per mcf.

     o    World demand for oil will be up only slightly.

     o    There will not be any material decline in world demand for oil or
          North American demand for natural gas.

     o    Pricing will continue to be subject to market conditions and
          competitive pricing pressures in certain markets and with respect to
          certain product lines.

     o    We will be able to improve our margins through price increases and
          such price increases will more than offset wage and other cost
          increases.

          A Future Reduction in the Rig Count Could Adversely Affect the Demand
     for Our Products and Services. Our operations were materially affected by
     the decline in the rig counts during 1998 and 1999. Although the North
     American rig count has improved significantly this year from the low levels
     in 1999, another decline in the North American and international rig counts
     would adversely affect our results. Our forward-looking statements
     regarding our drilling products assume that the rig count in 2001 will
     continue to improve domestically and that the international rig count will
     increase steadily during 2001.

          Projected Cost Savings Could Be Insufficient. During the last two
     years we implemented a number of programs intended to reduce costs and
     align our cost structure with the current market environment. Our
     forward-looking statements regarding cost savings and their impact on our
     business assume these measures will generate the savings expected.



                                       38
<PAGE>   40
         Manufacturing Improvements. We have recently taken steps to increase
     our manufacturing capacity and reduce manufacturing costs in our European
     completion operations through the consolidation of facilities and additions
     of equipment. These activities are still ongoing. We were adversely
     affected by the relocation of manufacturing operations in this division in
     the second quarter of 2000. Our forward-looking statements assume that the
     manufacturing expansion and consolidation are completed without any further
     material disruptions. If there are any additional disruptions or excess
     costs associated with the manufacturing changes, the results of our
     Completion Systems Division could be adversely affected.

         Capacity Constraints. Our forward-looking information assumes that we
     will have sufficient manufacturing capacity and personnel to address the
     demand increases that we expect, as noted above. To the extent there are
     limitations on capacity or personnel in areas in which the markets are
     improving, our growth could be limited or our costs increased due to the
     need to meet demand through outside sources.

         Integration of Acquisitions. During 1999 and 2000, we consummated, or
     agreed to consummate, various acquisitions of product lines and businesses.
     The success of these acquisitions will be dependent on our ability to
     integrate these product lines and businesses with our existing businesses
     and to eliminate duplicative costs. We have, or will have, incurred various
     duplicative costs with respect to the operations of companies and
     businesses acquired by us during 1999 and 2000 pending the integration of
     the acquired businesses with our businesses. Our forward-looking statements
     assume the successful integration of the acquired businesses and their
     contribution to our income during 2001. We have also assumed that our
     compression business will be successfully consolidated with Universal's and
     the estimated $20 million in cost savings and other synergies will be
     realized in 2001. Integration of acquisitions is something that cannot
     occur in the short term and is something that requires constant effort at
     the local level to be successful. Accordingly, there can be no assurance as
     to the ultimate success of these integration efforts.

         Technological Advances. Our ability to succeed with our long-term
     growth strategy is dependent in part on the technological competitiveness
     of our products and services. A central aspect of our growth strategy is to
     enhance the technology of our products and services, to expand the markets
     for many of our products through the leverage of our worldwide
     infrastructure and to enter new markets and expand in existing markets with
     technologically advanced value-added products. These technological advances
     include our underbalanced drilling technology, our expandable sand screen
     technology and our recently added multilateral technology. Our
     forward-looking statements have assumed above average growth from these new
     products and services in 2001.

         An Economic Downturn Could Adversely Affect Demand for Products and
     Services. The economic downturn that began in Asia in 1997 affected the
     economies of other regions of the world, including South America and the
     former Soviet Union, and contributed to the decline in the price of oil and
     the level of drilling activity worldwide. Although the economy in the
     United States has experienced one of its longest periods of growth in
     recent history, the continued strength of the United States economy cannot
     be assured. If the United States or European economies were to begin to
     decline or if the economies of South America or Asia were to decline again,
     the demand for and prices of oil and gas and our products and services
     could again adversely affect our revenues and income. We have assumed that
     a worldwide recession, or significant recession in any major region of the
     world, or a material downturn in the United States economy will not occur.

         Currency Fluctuations Could Have a Material Adverse Financial Impact. A
     material decline in foreign currency, values (compared to the United States
     dollar) in our foreign markets could affect our future results as well as
     affect the carrying values of our assets. World currencies have been
     subject to much volatility in recent years. The United States dollar has
     been strong against most currencies over the past year. In particular, the
     British Pound and the Euro have declined significantly against the United
     States dollar since the beginning of the year. Our forward-looking
     statements assume no material impact from future changes in currency
     values.

         Changes in Global Trade Policies Could Adversely Impact Operations.
     Changes in global trade policies in our markets could impact our operations
     in affected markets. We have assumed that there will be no material changes
     in global trading policies.


                                       39
<PAGE>   41

         Unexpected Litigation and Legal Disputes Could Have a Material Adverse
      Financial Impact. If we experience unexpected litigation or unexpected
      results in our existing litigation having a material effect on results,
      the accuracy of our forward-looking statements would be affected. Our
      forward-looking statements assume that there will be no such unexpected
      litigation or results.

     Finally, our future results will depend upon various other risks and
uncertainties, including, but not limited to, those detailed in our other
filings with the SEC. For additional information regarding risks and
uncertainties, see our other current year filings with the SEC under the
Securities Exchange Act of 1934, as amended, and the Securities Act of 1933, as
amended. We intend generally to update our assumptions in our required SEC
filings as circumstances require.



                                       40
<PAGE>   42



PART II. OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

     In connection with the acquisition of Alpine Oil Services Corporation on
August 10, 2000, we issued one share of our Series A Preferred Stock, par value
$1.00 per share, a new series of Preferred Stock. The one share of Series A
Preferred Stock was issued to Montreal Trust Company of Canada, as trustee, and
will be held for the benefit of the former Alpine shareholders. The former
Alpine shareholders were issued an exchangeable security in one of our Canadian
subsidiaries that is exchangeable for our common stock on a one-for-one basis.
The one share of Series A Preferred Stock entitles the trustee to vote,
essentially as a proxy for the former Alpine shareholders who have not yet
exchanged their exchangeable securities into shares of our common stock, the
same number of votes as could be voted if the former Alpine shareholders had
exchanged the exchangeable securities for our common stock. As the exchangeable
securities are exchanged for our common stock, the number of votes to which the
Series A Preferred Stock is entitled decreases and the voting rights of the
Series A Preferred Stock will be eliminated entirely when there are no more
outstanding exchangeable securities. The Series A Preferred Stock has a $1.00
liquidation preference, has no class voting rights and votes together with the
common stock. Except for the specific voting rights and the $1.00 liquidation
preference, the Series A Preferred Stock has no other rights or preferences. The
Series A Preferred Stock was issued in reliance on the exemption from
registration contained in Section 4(2) of the Securities Act of 1933.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

  (a)   Exhibits:

        10.1    Form of Stock Option Agreement for Non-Employee Directors dated
                July 5, 2000 (incorporated by reference to Exhibit 4.16 to
                Registration Statement on Form S-8 (Reg. No. 333-48322)).

        10.2    Form of Warrant Agreement with Robert K. Moses, Jr. dated July
                5, 2000 (incorporated by reference to Exhibit 4.17 to
                Registration Statement on Form S-8 (Reg. No. 333-48322)).

        10.3    Weatherford International, Inc. 1998 Employee Stock Option Plan
                as amended, including form of agreement for officers
                (incorporated by reference to Exhibit 4.16 to Registration
                Statement on Form S-8 (Reg. No. 333-48320)).

        10.4    Agreement and Plan of Merger dated October 23, 2000 by and among
                Weatherford International, Inc., WEUS Holding, Inc., Enterra
                Compression Company, Universal Compression Holdings, Inc. and
                Universal Compression, Inc. (incorporated by reference to
                Exhibit 10.1 to the Current Report on Form 8-K of Universal
                Compression Holdings, Inc. (File No. 001-15843) and Universal
                Compression, Inc. (File No. 333-48279) filed on October 26,
                2000).

        10.5    Stockholders' Agreement, dated as of October 23, 2000, by and
                among WEUS Holding, Inc., Universal Compression Holdings, Inc.,
                Castle Harlan Partners III, Castle Harlan Offshore Partners III,
                L.P., Castle Harlan Affiliates III, L.P. and John K. Castle
                (incorporated by reference to Exhibit B to the Schedule 13D,
                with respect to the common stock of Universal Compression
                Holdings, Inc., filed by Weatherford International, Inc. and
                WEUS Holding, Inc. on November 2, 2000).

        10.6    Form of Registration Rights Agreement between WEUS Holding, Inc.
                and Universal Compression Holdings, Inc. (incorporated by
                reference to Exhibit C to the Schedule 13D, with respect to the
                common stock of Universal Compression Holdings, Inc., filed by
                Weatherford International, Inc. and WEUS Holding, Inc. on
                November 2, 2000).

        10.7    Form of Voting Agreement by and among Weatherford International,
                Inc., WEUS Holding, Inc. and Universal Compression Holdings,
                Inc. (incorporated by reference to Exhibit D to the Schedule
                13D, with respect to the common stock of Universal Compression
                Holdings, Inc., filed by Weatherford International, Inc. and
                WEUS Holding, Inc. on November 2, 2000).

        10.8    Form of Transitional Services Agreement between Weatherford
                International, Inc. and Weatherford Global Compression Services,
                L.P. (incorporated by reference to Exhibit E to the Schedule
                13D, with respect to the common stock of Universal Compression
                Holdings, Inc., filed by Weatherford International, Inc. and
                WEUS Holding, Inc. on November 2, 2000).

        10.9    Purchase Agreement, dated as of October 23, 2000, by and among
                Weatherford International, Inc., WEUS Holding, Inc., Enterra
                Compression Company, Global Compression Services, Inc. and


                                       41
<PAGE>   43


                General Electric Capital Corporation (incorporated by reference
                to Exhibit F to the Schedule 13D, with respect to the common
                stock of Universal Compression Holdings, Inc., filed by
                Weatherford International, Inc. and WEUS Holding, Inc. on
                November 2, 2000).

        *12.1   Statement of Computation of Ratios

        *27.1   Financial Data Schedule

        *27.2   Restated Financial Data Schedule

        *       Filed herewith

   (b)  Reports on Form 8-K:

        1)      Current Report on Form 8-K dated July 27, 2000, announcing the
                Company's earnings for the quarter ended June 30, 2000.

        2)      Current Report on Form 8-K dated June 19, 2000, announcing (i)
                the Company's agreement to acquire Alpine Oil Services
                Corporation, (ii) the Company's issuance in a private placement
                of 20-year Zero Coupon Convertible Senior Debentures due 2020
                and (iii) containing certain pro forma financial information for
                the Company and Dailey International Inc.





                                       42
<PAGE>   44




                                   SIGNATURES

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

                                    Weatherford International, Inc.



                                By: /s/ Curtis W. Huff
                                    --------------------------------------------
                                    Curtis W. Huff
                                    Executive Vice President and Chief Financial
                                    Officer
                                    (Principal Financial Officer)


                                    /s/ Lisa W. Rodriguez
                                    --------------------------------------------
                                    Lisa W. Rodriguez
                                    Vice President Accounting and Controller
                                    (Principal Accounting Officer)

Date:  November 8, 2000


                                       43
<PAGE>   45



                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER         DESCRIPTION
     ------         -----------
<S>                 <C>

     12.1           Statement of Computation of Ratios

     27.1           Financial Data Schedule

     27.2           Restated Financial Data Schedule
</TABLE>