##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 000-51435
 SUPERIOR WELL SERVICES, INC.
  Delaware
(State or other jurisdiction 
of incorporation or organization)
    
    20-2535684
(I.R.S. Employer
Identification No.)
 1380 Rt. 286 East, Suite #121
Indiana, Pennsylvania 15701
 (724) 465-8904
 þ o
  o o þ
 o þ




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##### 



SUPERIOR WELL SERVICES, INC. QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2006
 TABLE OF CONTENTS
 PAGEPART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Unaudited Financial Statements- Unaudited Consolidated Balance Sheets
    
    
    1- Unaudited Consolidated Statements of Income
    
    
    2- Unaudited Consolidated Statement of Changes in Stockholders Equity
    
    
    3- Unaudited Consolidated Statement of Changes in Capital
    
    
    3- Unaudited Consolidated Statements of Cash Flows
    
    
    4- Notes to Unaudited Consolidated Financial Statements
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    29Item 4.
    
    Controls and Procedures
    
    
    29PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    30Item 1.A
    
    Risk Factors
    
    
    30Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    30Item 6.
    
    Exhibits
    
    
    30Signatures
    
    
    31Index to Exhibits
    
    
    32EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 December 31,
    
    
    September 30,2005
    
    
    2006(in thousands, except per share data)Current Assets:Cash and cash equivalents
    
    $
    10,765
    
    
    $
    107Trade accounts receivable, net of allowance of $134
and $697, respectively
    
    
    23,381
    
    
    
    41,223Inventories
    
    
    3,761
    
    
    
    4,996Prepaid expenses
    
    
    1,157
    
    
    
    1,129Deferred income taxes
    
    
    303
    
    
    
    608Total current assets
    
    
    39,367
    
    
    
    48,063Property, Plant and Equipment:Land
    
    
    420
    
    
    
    420Building and improvements
    
    
    1,842
    
    
    
    2,619Equipment and vehicles
    
    
    84,184
    
    
    
    130,460Construction in progress
    
    
    8,760
    
    
    
    15,78595,206
    
    
    
    149,284Accumulated depreciation
    
    
    (22,515
    )
    
    
    (32,193
    )Total property, plant and equipment, net
    
    
    72,691
    
    
    
    117,091Intangible assets, net of accumulated amortization of
$665 and $897, respectively
    
    
    760
    
    
    
    719Deferred income taxes
    
    
    
    
    
    
    439Other assets
    
    
    273
    
    
    
    395Total assets
    
    $
    113,091
    
    
    $
    166,707Current Liabilities:Accounts and construction payable
    
    $
    7,737
    
    
    $
    21,370Income taxes payable
    
    
    
    
    
    
    208Current portion of long-term debt
    
    
    179
    
    
    
    374401(k) plan contribution and withholding
    
    
    911
    
    
    
    1,221Advance payments on servicing contracts
    
    
    479
    
    
    
    1,360Accrued wages and health benefits
    
    
    841
    
    
    
    3,241Accrued insurance payable
    
    
    
    
    
    
    592Other accrued liabilities
    
    
    706
    
    
    
    1,236Total current liabilities
    
    
    10,853
    
    
    
    29,602Long-term debt
    
    
    1,258
    
    
    
    9,631Deferred income taxes
    
    
    9,587
    
    
    
    12,338Stockholders Equity:Common stock, voting, par $.01 per share, 70,000,000
shares authorized, 19,376,667 and 19,662,567
shares issued at December 31, 2005 and
September 30, 2006, respectively
    
    
    194
    
    
    
    197Additional paid-in capital
    
    
    91,944
    
    
    
    93,535Retained (deficit) earnings
    
    
    (745
    )
    
    
    21,404Total stockholders equity
    
    
    91,393
    
    
    
    115,136Total liabilities and stockholders equity
    
    $
    113,091
    
    
    $
    166,707
  1




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##### Table of Contents



SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2006
    
    
    2005
    
    
    2006(in thousands, except per share data)Revenue
    
    $
    34,934
    
    
    $
    67,205
    
    
    $
    90,544
    
    
    $
    169,481Cost of revenue
    
    
    24,051
    
    
    
    45,152
    
    
    
    62,835
    
    
    
    114,592Gross profit
    
    
    10,883
    
    
    
    22,053
    
    
    
    27,709
    
    
    
    54,889Selling, general and administrative
expenses
    
    
    4,743
    
    
    
    6,813
    
    
    
    11,609
    
    
    
    18,492Operating income
    
    
    6,140
    
    
    
    15,240
    
    
    
    16,100
    
    
    
    36,397Interest expense
    
    
    169
    
    
    
    77
    
    
    
    552
    
    
    
    164Other income
    
    
    246
    
    
    
    1
    
    
    
    285
    
    
    
    192Income before income taxes
    
    
    6,217
    
    
    
    15,164
    
    
    
    15,833
    
    
    
    36,425Income taxesCurrent
    
    
    2,226
    
    
    
    4,683
    
    
    
    2,226
    
    
    
    12,268Deferred
    
    
    8,634
    
    
    
    1,119
    
    
    
    8,634
    
    
    
    2,00810,860
    
    
    
    5,802
    
    
    
    10,860
    
    
    
    14,276Net income (loss)
    
    $
    (4,643
    )
    
    $
    9,362
    
    
    $
    4,973
    
    
    $
    22,149Earnings per common share:Basic and fully diluted
    
    $
    (0.24
    )
    
    $
    0.48
    
    
    $
    0.26
    
    
    $
    1.14
  2




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##### Table of Contents



SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
 (Unaudited)
 Superior Well Services, Inc.Additional
    
    
    RetainedCommon
    
    
    Paid-in
    
    
    EarningsStock
    
    
    Capital
    
    
    (Deficit)
    
    
    Total(in thousands)BALANCE, DECEMBER 31, 2005
    
    $
    194
    
    
    $
    91,944
    
    
    $
    (745
    )
    
    $
    91,393Net income
    
    
    
    
    
    
    
    
    
    
    22,149
    
    
    
    22,149Restricted stock awards (Note 8)
    
    
    3
    
    
    
    286
    
    
    
    
    
    
    
    289Stock-based compensation (Note 8)
    
    
    
    
    
    
    1,305
    
    
    
    
    
    
    
    1,305BALANCE, SEPTEMBER 30, 2006
    
    $
    197
    
    
    $
    93,535
    
    
    $
    21,404
    
    
    $
    115,136
  SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL
 (Unaudited)
 Partnerships
    
    
    
    
    
    
    Superior Well Services, Inc.Accumulated
    
    
    
    
    
    
    
    
    
    
    AdditionalPartners
    
    
    Comprehensive
    
    
    Comprehensive
    
    
    Less: Notes
    
    
    Common
    
    
    Paid-in
    
    
    RetainedCapital
    
    
    Income
    
    
    Income (Loss)
    
    
    Receivable
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    Total(in thousands)BALANCE, DECEMBER 31, 2004
    
    $
    33,885
    
    
    $
    
    
    
    $
    2
    
    
    $
    (68
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    33,819Net income prior to reorganization
(unaudited)
    
    
    10,212
    
    
    
    10,212
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,212Unrealized losses on interest rate
swaps (unaudited)
    
    
    
    
    
    
    (2
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2
    )Total comprehensive income
    
    
    
    
    
    $
    10,210Distributions to partners (unaudited)
    
    
    (13,719
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,719
    )Collection of notes receivable
(unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    68Reorganization effected through
contribution of partnership
interests to Superior Well Services,
Inc. (unaudited)
    
    
    (30,378
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141
    
    
    
    30,237
    
    
    
    
    
    
    
    Issuance of common stock in
connection with initial public
offering (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53
    
    
    
    61,520
    
    
    
    
    
    
    
    61,573Net (loss) after reorganization
(unaudited)
    
    
    
    
    
    $
    (5,239
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,239
    )
    
    
    (5,239
    )BALANCE, SEPTEMBER 30, 2005
(unaudited)
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    194
    
    
    $
    91,757
    
    
    $
    (5,239
    )
    
    $
    86,712
 3




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##### Table of Contents



SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Nine Months EndedSeptember 302005
    
    
    2006(in thousands)Cash flows from operations:Net income
    
    $
    4,973
    
    
    $
    22,149Adjustments to reconcile net income to net
cash provided by operations:Deferred income taxes
    
    
    8,634
    
    
    
    2,007Depreciation and amortization
    
    
    6,162
    
    
    
    9,922Stock-based compensation
    
    
    
    
    
    
    1,305Loss on disposal of equipment
    
    
    
    
    
    
    30Changes in assets and liabilities:Trade accounts receivable
    
    
    (13,877
    )
    
    
    (17,842
    )Inventory
    
    
    (1,057
    )
    
    
    (1,235
    )Prepaid expenses and other assets
    
    
    (205
    )
    
    
    (285
    )Accounts payable
    
    
    2,607
    
    
    
    10,654Income taxes payable
    
    
    2,226
    
    
    
    208401(k) plan contribution and withholding
    
    
    (110
    )
    
    
    310Advance payments on servicing
contracts
    
    
    446
    
    
    
    881Accrued wages and health benefits
    
    
    773
    
    
    
    2,400Accrued insurance payable
    
    
    
    
    
    
    592Other accrued liabilities
    
    
    (45
    )
    
    
    530Net cash provided by operations
    
    
    10,527
    
    
    
    31,626Cash flows from investing:Expenditure for property, plant and
equipment, net of construction payables
    
    
    (26,628
    )
    
    
    (51,141
    )Expenditures for other assets
    
    
    (88
    )
    
    
    Notes receivable repayments
    
    
    68
    
    
    
    Net cash used in investing
    
    
    (26,648
    )
    
    
    (51,141
    )Cash flows from financing:Principal payments on long-term debt
    
    
    (12,180
    )
    
    
    (4,648
    )Proceeds from long-term borrowings
    
    
    720
    
    
    
    13,216Proceeds from notes payable
    
    
    10,511
    
    
    
    Payments on notes payable
    
    
    (14,466
    )
    
    
    Net proceeds from initial public offering
    
    
    61,631
    
    
    
    Issuance of restricted stock awards (Note 8)
    
    
    
    
    
    
    289Distributions to partners
    
    
    (13,719
    )
    
    
    Net cash provided by financing
    
    
    32,497
    
    
    
    8,857Net increase (decrease) in cash and cash equivalents
    
    
    16,376
    
    
    
    (10,658
    )Cash and cash equivalents, beginning of period
    
    
    1,544
    
    
    
    10,765Cash and cash equivalents, end of period
    
    $
    17,920
    
    
    $
    107Supplemental disclosure of cash flow data:Interest paid
    
    $
    552
    
    
    $
    132Income taxes paid
    
    
    
    
    
    
    11,575Non-cash transactions:Equipment acquired through seller financed debt
    
    
    
    
    
    
    450
  4




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SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 1. Organization
     2. Summary of Significant Accounting Policies
 Basis of Presentation
   Estimates and Assumptions
  5




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SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 Cash and Cash Equivalents
  Trade Accounts Receivable
  Property, Plant and Equipment
    Revenue Recognition
  Inventories
  6




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SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 Insurance Expense
  Income Taxes
 Accounting for Income Taxes.
 Interest Rate Risk Management
  Fair Value of Financial Instruments
    Intangible Assets
  7




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SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 Concentration of Credit Risk
  Stock Based Compensation
  Weighted average shares outstanding
   Reclassification
  Recently Issued Guidance
  8




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SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
   3. Debt
     9




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##### Table of Contents



SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
  2005
    
    
    2006Working Capital Facility due October 2008
with interest at LIBOR plus 1%,
collateralized by accounts receivable,
inventory and equipment
    
    $
    
    
    
    $
    8,253Notes payable to sellers with nominal
interest rates due through December 2010,
collateralized by specific buildings and
equipment
    
    
    292
    
    
    
    221Mortgage notes payable to a bank with
interest at the banks prime lending rate
minus 1%, payable in monthly installments
of $7,111 plus interest through January
2019, collateralized by real property
    
    
    1,145
    
    
    
    1,081Note payable to sellers with nominal
interest rates due through September 2008,
collateralized by equipment
    
    
    
    
    
    
    4501,437
    
    
    
    10,005Less  Payments due within one year
    
    
    179
    
    
    
    374Total
    
    $
    1,258
    
    
    $
    9,631
 4. Income taxes
    September 30, 2006Three Months
    
    
    Nine MonthsEnded
    
    
    EndedCurrent:State and local
    
    $
    576
    
    
    $
    1,958U.S. federal
    
    
    4,107
    
    
    
    10,310Total current
    
    
    4,683
    
    
    
    12,268Deferred:State and local
    
    
    199
    
    
    
    356U.S. federal
    
    
    920
    
    
    
    1,652Total deferred
    
    
    1,119
    
    
    
    2,008Provision for income tax expense
    
    $
    5,802
    
    
    $
    14,276
 10




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SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
  December 31,
    
    
    September 30,2005
    
    
    2006Deferred tax assets:Restricted stock
    
    $
    
    
    
    $
    516Accrued expenses and other
    
    
    252
    
    
    
    264Allowance for doubtful accounts receivable
    
    
    51
    
    
    
    267Total deferred tax assets
    
    
    303
    
    
    
    1,047Deferred tax liabilities:Depreciation differences on property, plant and equipment
    
    
    (9,587
    )
    
    
    (12,338
    )Total deferred
    
    
    (9,587
    )
    
    
    (12,338
    )Net deferred taxes
    
    $
    (9,284
    )
    
    $
    (11,291
    )
  September 30, 2006Three months
    
    
    Nine monthsended
    
    
    endedIncome before income taxes
    
    $
    15,164
    
    
    $
    36,425Statutory U.S. income tax rate
    
    
    35
    %
    
    
    35
    %Tax expense using statutory U.S. income tax rate
    
    
    5,307
    
    
    
    12,749State income taxes
    
    
    504
    
    
    
    1,504Other
    
    
    (9
    )
    
    
    23Income tax expense
    
    $
    5,802
    
    
    $
    14,276Effective income tax rate
    
    
    38
    %
    
    
    39
    %
 5. 401(k) Plan
  6. Related-Party Transactions
  11




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##### Table of Contents



SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
     7. Commitments and Contingencies
     8. Stock Incentive Plan
  12




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SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
  Percentage of Total NumberOf Restricted Shares as to WhichNumber of Full Years
    
    Forfeiture Restrictions LapseLess than 1 year
    
    
    0
    %1 year
    
    
    15
    %2 years
    
    
    30
    %3 years
    
    
    45
    %4 years
    
    
    60
    %5 years or more
    
    
    100
    %
     9. Subsequent Event
  13




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 The following discussion and analysis should be read in conjunction with the unaudited
consolidated financial statements and notes thereto included elsewhere in this report. The terms
Superior Well Services, Superior, we, us and our refer to Superior Well Services, Inc.,
together with its two operating partnerships, Superior Well Services, Ltd. and Bradford Resources,
Ltd., and their general partner, Superior GP, L.L.C., each of which became wholly owned
subsidiaries of Superior Well Services, Inc. in connection with its initial public offering.
 Overview
   Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2005
    
    
    2006
    
    
    2005
    
    
    2006Technical pumping services
    
    $
    31,560
    
    
    
    90.3
    %
    
    $
    60,436
    
    
    
    89.9
    %
    
    $
    81,820
    
    
    
    90.3
    %
    
    $
    152,463
    
    
    
    90.0
    %Down-hole surveying services
    
    
    3,374
    
    
    
    9.7
    
    
    
    6,769
    
    
    
    10.1
    
    
    
    8,724
    
    
    
    9.7
    
    
    
    17,018
    
    
    
    10.0Total revenue
    
    $
    34,934
    
    
    
    100.0
    %
    
    $
    67,205
    
    
    
    100.0
    %
    
    $
    90,544
    
    
    
    100.0
    %
    
    $
    169,481
    
    
    
    100.0
    %
  Technical Pumping Services
  Down-Hole Surveying Services
  14




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##### Table of Contents



How We Generate Our Revenue
   How We Evaluate Our Operations
  Operating Income per Operating Region.
   Material and Labor Expenses as a Percentage of Revenue.
   15




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##### Table of Contents



Selling, General and Administrative Expenses as a Percentage of Revenue.
  EBITDA.
  
    
    as a measure of operating performance because it assists us in comparing our performance
on a consistent basis, since it removes the impact of our capital structure and asset base
from our operating results;
    
    as a measure for planning and forecasting overall expectations and for evaluating actual
results against such expectations;
    
    to assess compliance with financial ratios and covenants included in credit facilities;
    
    in communications with lenders concerning our financial performance; and
    
    to evaluate the viability of potential acquisitions and overall rates of return.
 How We Manage Our Operations
  Service Crew Performance.
  Equipment Maintenance Performance.
  16




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##### Table of Contents



Inventory Turnover Rates.
  Customer Satisfaction.
  Safety Performance.
  Our Growth Strategy
   Three Months Ended September 30,
    
    
    Nine Months Ended September 30,Region
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006Appalachian
    
    $
    19,297
    
    
    
    55.2
    %
    
    $
    31,620
    
    
    
    47.0
    %
    
    $
    50,762
    
    
    
    56.1
    %
    
    $
    84,167
    
    
    
    49.7
    %Southeast
    
    
    8,954
    
    
    
    25.6
    
    
    
    16,530
    
    
    
    24.6
    
    
    
    24,338
    
    
    
    26.9
    
    
    
    42,745
    
    
    
    25.2Rocky Mountain
    
    
    1,238
    
    
    
    3.6
    
    
    
    5,700
    
    
    
    8.5
    
    
    
    1,594
    
    
    
    1.7
    
    
    
    9,647
    
    
    
    5.7Mid-Continent
    
    
    5,445
    
    
    
    15.6
    
    
    
    11,747
    
    
    
    17.5
    
    
    
    13,850
    
    
    
    15.3
    
    
    
    31,314
    
    
    
    18.5Southwest
    
    
    
    
    
    
    
    
    
    
    1,608
    
    
    
    2.4
    
    
    
    
    
    
    
    
    
    
    
    1,608
    
    
    
    0.9Total
    
    $
    34,934
    
    
    
    100.0
    %
    
    $
    67,205
    
    
    
    100.0
    %
    
    $
    90,544
    
    
    
    100.0
    %
    
    $
    169,481
    
    
    
    100.0
    %
 17




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##### Table of Contents



Cautionary Statement Regarding Forward-Looking Statements
  
    
    a decrease in domestic spending by the oil and natural gas exploration and production industry;
    
    a decline in or substantial volatility of crude oil and natural gas commodity prices;
    
    the loss of one or more significant customers;
    
    the loss of or interruption in operations of one or more key suppliers;
    
    the incurrence of significant costs and liabilities in the future resulting from our
failure to comply with new or existing environmental regulations or an accidental release
of hazardous substances into the environment; and
    
    other financial, operational and legal risks and uncertainties detailed from time to
time in our Securities and Exchange Commission filings.
  18




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##### Table of Contents



Our
Results of Operations
   Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2005
    
    
    2006
    
    
    2005
    
    
    2006Statement of Operations Data:Revenues:Technical pumping services
    
    $
    31,560
    
    
    $
    60,436
    
    
    $
    81,820
    
    
    $
    152,463Down-hole surveying services
    
    
    3,374
    
    
    
    6,769
    
    
    
    8,724
    
    
    
    17,018Total revenues
    
    
    34,934
    
    
    
    67,205
    
    
    
    90,544
    
    
    
    169,481Expenses:Cost of revenue
    
    
    24,051
    
    
    
    45,152
    
    
    
    62,835
    
    
    
    114,592Selling, general and administrative
    
    
    4,743
    
    
    
    6,813
    
    
    
    11,609
    
    
    
    18,492Total expense
    
    
    28,794
    
    
    
    51,965
    
    
    
    74,444
    
    
    
    133,084Operating income
    
    $
    6,140
    
    
    $
    15,240
    
    
    $
    16,100
    
    
    $
    36,397
 Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005
 Revenue.
    Cost of Revenue.
  19




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Selling, General and Administrative Expenses (SG&A).
  Operating Income.
  20




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##### Table of Contents



Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005
 Revenue.
    Cost of Revenue.
  Selling, General and Administrative Expenses.
  21




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##### Table of Contents



Operating Income.
  Items Impacting Comparability of Our Financial Results
  Changes in Our Legal Structure.
   22




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##### Table of Contents



Public Company Expenses.
  Non-cash compensation expense.
  Liquidity and Capital Resources
  Financial Condition and Cash Flows
 Financial Condition.
  Cash flows from operations.
   23




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##### Table of Contents



Cash flows used in investing activities.
  Cash flows from financing activities.
  Capital Requirements
  
    
    expansion capital expenditures, such as those to acquire additional equipment and other
assets to grow our business; and
    
    maintenance or upgrade capital expenditures, which extend the useful life or upgrade the
operational capabilities of existing assets.
   Off-Balance Sheet Arrangements
  Description of Our Indebtedness
  24




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##### Table of Contents



Recent Accounting Pronouncements
    Critical Accounting Policies
  25




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##### Table of Contents



Revenue Recognition
   Property, Plant and Equipment
  Impairment of Long-Lived Assets
 Accounting for the Impairment or Disposal of Long-Lived
Assets,
 26




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##### Table of Contents




    
    changes in general economic conditions in regions in which our services are located;
    
    the price of crude oil and natural gas;
    
    our ability to negotiate favorable sales arrangements; and
    
    our competition from other service providers.
  Intangible Assets
  Contingent Liabilities
  Insurance Expenses
   27




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##### Table of Contents



Stock Based Compensation
  Non-GAAP Accounting Measures
  
    
    as a measure of operating performance because it assists us in comparing our performance
on a consistent basis as it removes the impact of our capital structure and asset base from
our operating results;
    
    as a measure for planning and forecasting overall expectations and for evaluating actual
results against such expectations;
    
    to assess compliance with financial ratios and covenants included in credit facilities;
    
    in communications with lenders concerning our financial performance; and
    
    to evaluate the viability of potential acquisitions and overall rates of return.
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2005
    
    
    2006
    
    
    2005
    
    
    2006Reconciliation of EBITDA to Net Income:Net income (loss)
    
    $
    (4,643
    )
    
    $
    9,362
    
    
    $
    4,973
    
    
    $
    22,149Income tax expense
    
    
    10,860
    
    
    
    5,802
    
    
    
    10,860
    
    
    
    14,276Interest expense
    
    
    169
    
    
    
    77
    
    
    
    552
    
    
    
    164Depreciation and amortization
    
    
    2,005
    
    
    
    3,733
    
    
    
    6,162
    
    
    
    9,922EBITDA
    
    $
    8,391
    
    
    $
    18,974
    
    
    $
    22,547
    
    
    $
    46,511
 28




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk.
  Interest Rate Risk.
 Concentration of Credit Risk.
 Commodity Price Risk.
 
 Item 4. Controls and Procedures.
   29




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##### Table of Contents



PART
II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors
  
 Item 4. Submission of Matters to a Vote of Security Holders
  Number ofAffirmative
    
    
    
    
    
    NumberNames
    
    Votes
    
    Against
    
    WithheldMark A. Snyder
    
    
    16,239,238
    
    
    
    
    
    
    
    1,289,562Anthony J. Mendicino
    
    
    16,139,879
    
    
    
    
    
    
    
    1,388,921
   Number ofAffirmative
    
    
    
    
    
    NumberVotes
    
    Against
    
    WithheldRatification of appointment of
Schneider Downs & Co., Inc.
    
    
    15,517,377
    
    
    
    2,010,778
    
    
    
    645
 
 Item 6. Exhibits.
  30




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##### Table of Contents



SIGNATURES
  SUPERIOR WELL SERVICES, INC.
RegistrantDated: November 7, 2006
    By:
    /s/ David E. WallaceDavid E. WallaceChief Executive Officer and
Chairman of the Board of DirectorsDated: November 7, 2006
    By:
    /s/ Thomas W. StoelkThomas W. StoelkVice President and Chief Financial Officer 31




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##### Table of Contents



INDEX TO EXHIBITS
 OF
 SUPERIOR WELL SERVICES, INC.
 (a) Exhibits
 3.1
    
    Amended and Restated Certificate of Incorporation
(incorporated herein by reference to Exhibit 3.1 to Superior
Well Services, Inc.s Current Report on Form 8-K filed August 3,
2005).3.2
    
    Amended and Restated Bylaws (incorporated herein by
reference to Exhibit 3.2 to Superior Well Services, Inc.s
Current Report on Form 8-K filed August 3, 2005).4.1
    
    Specimen Stock Certificate representing common stock
(incorporated herein by reference to Exhibit 4.1 to Superior
Well Services, Inc.s Registration Statement on Form S-1/ A
filed June 24, 2005).4.3
    
    Form of Restricted Stock Agreement for Employees without
Employment Agreements (incorporated herein by reference to
Exhibit 4.1 to Superior Well Services, Inc.s Registration
Statement on Form S-8 filed December 22, 2005).4.4
    
    Form of Restricted Stock Agreement for Executives with
Employment Agreements (incorporated herein by reference to
Exhibit 4.2 to Superior Well Services, Inc.s Registration
Statement on Form S-8 filed December 22, 2005).4.5
    
    Form of Restricted Stock Agreement for Non-Employee
Directors (incorporated herein by reference to Exhibit 4.3 to
Superior Well Services, Inc.s Registration Statement on Form
S-8 filed December 22, 2005).31.1*
    
    Sarbanes-Oxley Section 302 certification of David E.
Wallace for Superior Well Services, Inc. for the September 30,
2006 Quarterly Report on Form 10-Q.31.2*
    
    Sarbanes-Oxley Section 302 certification of Thomas W.
Stoelk for Superior Well Services, Inc. for the September 30,
2006 Quarterly Report on Form 10-Q.32.1*
    
    Sarbanes-Oxley Section 906 certification of David E.
Wallace for Superior Well Services, Inc. for the September 30,
2006 Quarterly Report on Form 10-Q.32.2*
    
    Sarbanes-Oxley Section 906 certification of Thomas W.
Stoelk for Superior Well Services, Inc. for the September 30,
2006 Quarterly Report on Form 10-Q.
 
 *
    
    Filed herewith. 32