UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended September 30, 2008
 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.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    20-2535684(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 1380 Rt. 286 East, Suite #121
Indiana, Pennsylvania 15701  (Address of principal executive offices)
(Zip Code)
 (724) 465-8904  (Registrants telephone number, including area code)
 þ o
  Large accelerated filer
o
    
    Accelerated filer þ
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller Reporting Company o
 o þ




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##### 



SUPERIOR WELL SERVICES, INC. QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
2008
TABLE OF CONTENTS
 PAGEPART I FINANCIAL INFORMATIONItem 1. Financial Statements- Unaudited Consolidated Balance Sheets
    
    
    1- Unaudited Consolidated Statements of Income
    
    
    2- Unaudited Consolidated Statements of Changes in Stockholders Equity
    
    
    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
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    33PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    34Item 1A. Risk Factors
    
    
    34Item 6. Exhibits
    
    
    35
  i




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##### 



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 December 31,
    
    
    September2007
    
    
    30, 2008(in thousands, except per share data)Current Assets:Cash and cash equivalents
    
    $
    5,510
    
    
    $
    6,429Trade accounts receivable, net of
allowance of $1,629 and $2,350,
respectively
    
    
    54,002
    
    
    
    88,682Inventories
    
    
    9,933
    
    
    
    13,703Prepaid expenses and other current assets
    
    
    1,027
    
    
    
    1,370Income taxes receivable
    
    
    3,722
    
    
    
    385Deferred income taxes
    
    
    1,827
    
    
    
    2,239Total current assets
    
    
    76,021
    
    
    
    112,808Property, Plant and Equipment:Land
    
    
    420
    
    
    
    420Building and improvements
    
    
    4,776
    
    
    
    8,963Equipment and vehicles
    
    
    266,444
    
    
    
    342,406Construction in progress
    
    
    29,814
    
    
    
    21,692301,454
    
    
    
    373,481Accumulated depreciation
    
    
    (60,591
    )
    
    
    (87,335
    )Total property, plant and equipment, net
    
    
    240,863
    
    
    
    286,146Goodwill
    
    
    5,850
    
    
    
    9,432Intangible assets, net of accumulated
amortization of $1,815 and $2,582,
respectively
    
    
    3,242
    
    
    
    3,434Deferred income taxes
    
    
    366
    
    
    
    450Other assets
    
    
    745
    
    
    
    1,640Total assets
    
    $
    327,087
    
    
    $
    413,910Current Liabilities:Accounts payable-trade
    
    $
    31,497
    
    
    $
    30,379Current portion of long-term debt
    
    
    390
    
    
    
    157401(k) plan contribution and withholding.
    
    
    1,615
    
    
    
    1,687Advance payments on servicing contracts
    
    
    70
    
    
    
    Accrued wages and health benefits
    
    
    2,126
    
    
    
    5,645Other accrued liabilities
    
    
    1,931
    
    
    
    2,980Total current liabilities
    
    
    37,629
    
    
    
    40,848Long-term debt
    
    
    9,165
    
    
    
    51,470Deferred income taxes
    
    
    26,694
    
    
    
    39,307Stockholders Equity:Common stock, voting, par $.01 per
share, 70,000,000 shares authorized,
23,474,552 and 23,587,218 shares issued
at December 31, 2007 and September 30,
2008, respectively
    
    
    234
    
    
    
    236Additional paid-in capital
    
    
    184,432
    
    
    
    186,215Retained earnings
    
    
    68,933
    
    
    
    95,834Total stockholders equity
    
    
    253,599
    
    
    
    282,285Total liabilities and stockholders equity
    
    $
    327,087
    
    
    $
    413,910
  1




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##### 



SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008(in thousands, except per share data)Revenue
    
    $
    94,317
    
    
    $
    146,008
    
    
    $
    255,832
    
    
    $
    359,183Cost of revenue
    
    
    66,112
    
    
    
    109,686
    
    
    
    179,578
    
    
    
    280,899Gross profit
    
    
    28,205
    
    
    
    36,322
    
    
    
    76,254
    
    
    
    78,284Selling, general and administrative
expenses
    
    
    9,330
    
    
    
    11,388
    
    
    
    26,622
    
    
    
    31,614Operating income
    
    
    18,875
    
    
    
    24,934
    
    
    
    49,632
    
    
    
    46,670Interest expense
    
    
    71
    
    
    
    466
    
    
    
    177
    
    
    
    876Other income (expense), net
    
    
    33
    
    
    
    246
    
    
    
    800
    
    
    
    (137
    )Income before income taxes
    
    
    18,837
    
    
    
    24,714
    
    
    
    50,255
    
    
    
    45,657Income taxesCurrent
    
    
    4,647
    
    
    
    3,466
    
    
    
    13,583
    
    
    
    6,639Deferred
    
    
    2,560
    
    
    
    6,340
    
    
    
    5,874
    
    
    
    12,1177,207
    
    
    
    9,806
    
    
    
    19,457
    
    
    
    18,756Net income
    
    $
    11,630
    
    
    $
    14,908
    
    
    $
    30,798
    
    
    $
    26,901Earnings per common share:Basic
    
    $
    0.50
    
    
    $
    0.64
    
    
    $
    1.33
    
    
    $
    1.16Fully diluted
    
    $
    0.50
    
    
    $
    0.64
    
    
    $
    1.33
    
    
    $
    1.15Weighted average shares outstanding  basic
    
    
    23,102,291
    
    
    
    23,153,687
    
    
    
    23,098,945
    
    
    
    23,149,220Weighted average shares outstanding  diluted
    
    
    23,142,350
    
    
    
    23,321,011
    
    
    
    23,194,945
    
    
    
    23,306,924
  2




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##### 



SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (Unaudited)
 AdditionalCommon
    
    
    Paid-in
    
    
    RetainedStock
    
    
    Capital
    
    
    Earnings
    
    
    Total(in thousands)BALANCE, DECEMBER 31, 2006
    
    $
    234
    
    
    $
    182,492
    
    
    $
    31,178
    
    
    $
    213,904Net income
    
    
    
    
    
    
    
    
    
    
    30,798
    
    
    
    30,798Issuance of restricted stock awards
    
    
    1
    
    
    
    133
    
    
    
    
    
    
    
    134Restricted
stock retired
    
    
    
    
    
    
    (157
    )
    
    
    
    
    
    
    (157
    )Share-based compensation
    
    
    
    
    
    
    1,450
    
    
    
    
    
    
    
    1,450BALANCE, SEPTEMBER 30, 2007
    
    $
    235
    
    
    $
    183,918
    
    
    $
    61,976
    
    
    $
    246,129BALANCE, DECEMBER 31, 2007
    
    $
    234
    
    
    $
    184,432
    
    
    $
    68,933
    
    
    $
    253,599Net income
    
    
    
    
    
    
    
    
    
    
    26,901
    
    
    
    26,901Issuance of restricted stock awards
    
    
    2
    
    
    
    141
    
    
    
    
    
    
    
    143Restricted stock retired
    
    
    
    
    
    
    (231
    )
    
    
    
    
    
    
    (231
    )Share-based compensation
    
    
    
    
    
    
    1,873
    
    
    
    
    
    
    
    1,873BALANCE, SEPTEMBER 30, 2008
    
    $
    236
    
    
    $
    186,215
    
    
    $
    95,834
    
    
    $
    282,285
  3




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##### 



SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Nine Months EndedSeptember 302007
    
    
    2008(in thousands)Cash flows from operations:Net income
    
    $
    30,798
    
    
    $
    26,901Adjustments to reconcile net income to net
cash provided by operations:Deferred income taxes
    
    
    5,874
    
    
    
    12,117Depreciation and amortization
    
    
    17,628
    
    
    
    28,554Loss on disposal of equipment
    
    
    264
    
    
    
    179Share-based compensation
    
    
    1,450
    
    
    
    1,873Changes in assets and liabilities:Trade accounts receivable
    
    
    (14,057
    )
    
    
    (34,680
    )Inventory
    
    
    (2,110
    )
    
    
    (3,770
    )Prepaid expenses and other assets
    
    
    (208
    )
    
    
    (343
    )Income taxes receivable
    
    
    
    
    
    
    3,337Accounts payable-trade
    
    
    (647
    )
    
    
    1,052Income taxes payable
    
    
    (52
    )
    
    
    401 (k) plan contribution and
withholding
    
    
    (787
    )
    
    
    72Advance payments on servicing
contracts
    
    
    (610
    )
    
    
    (70
    )Accrued wages and health benefits
    
    
    2,092
    
    
    
    3,519Other accrued liabilities
    
    
    628
    
    
    
    1,049Net cash provided by operations
    
    
    40,263
    
    
    
    39,790Cash flows from investing:Expenditure for property, plant and
equipment, net of construction payables
    
    
    (87,262
    )
    
    
    (75,519
    )Acquisition of businesses, net of cash
acquired
    
    
    (7,921
    )
    
    
    (6,006
    )Purchase of short-term investments, net
    
    
    (18,967
    )
    
    
    Proceeds from sales of short-term
investments
    
    
    18,967
    
    
    
    Expenditures for other assets
    
    
    (396
    )
    
    
    405Proceeds from sale of property, plant and
equipment
    
    
    24
    
    
    
    1,568Net cash used in investing
    
    
    (95,555
    )
    
    
    (79,552
    )Cash flows from financing:Principal payments on long-term debt
    
    
    (32,459
    )
    
    
    (175,503
    )Proceeds from long-term borrowings
    
    
    32,115
    
    
    
    216,272Issuance/retirement of restricted stock, net
    
    
    (23
    )
    
    
    (88
    )Net cash
(used in) provided by financing
    
    
    (367
    )
    
    
    40,681Net
(decrease) increase in cash and cash
equivalents
    
    
    (55,659
    )
    
    
    919Cash and cash equivalents, beginning of period
    
    
    56,752
    
    
    
    5,510Cash and cash equivalents, end of period
    
    $
    1,093
    
    
    $
    6,429Supplemental disclosure of cash flow data:Interest paid
    
    $
    193
    
    
    $
    905Income taxes paid
    
    
    13,635
    
    
    
    3,302
  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
  Cash, Cash Equivalents and Short-term Investments
  5




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




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##### 



SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Income Taxes
 Accounting for Income Taxes .
 Accounting for Uncertainty in Income Taxes, an interpretation of FASB
Statement No. 109 Definition of Settlement in FASB Interpretation No. 48
  Fair Value of Financial Instruments
   Acquisitions
  7




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SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
   Goodwill and Intangible Assets
 Goodwill and Other Intangible Assets
 Concentration of Credit Risk
  Share Based Compensation
 Share-Based Payment
 8




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##### 



SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Weighted average shares outstanding
   Accounting Standards Not Yet Adopted
 Noncontrolling Interests in Consolidated
Financial Statements, an Amendment of ARB No. 51
 Business Combinations,
 Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including
Partial Cash Settlement )
 Determination of the Useful Life of
Intangible Assets
 9




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SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities
 3. Debt
    10




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SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Long-term debt at December 31, 2007 and September 30, 2008 consisted of the following (amounts
in thousands):
 December 31,
    
    
    September 30,2007
    
    
    2008Syndicated credit facility with
interest rates at either LIBOR plus a
spread of 1.5-2.5% or the prime
lending rate plus a spread of 0-0.25%
due March 2013, collateralized by
cash, investment property, accounts
receivable, inventory, intangibles
and equipment
    
    $
    
    
    
    $
    50,386Revolving credit facility with
interest rates at LIBOR plus a spread
of 1-1.25% due October 2009,
collateralized by accounts
receivable, inventory and equipment
    
    
    7,957
    
    
    
    Mortgage notes payable to a bank with
interest at the banks prime lending
rate minus 1%, payable in monthly
installments of $8,622 plus interest
through January 2021, collateralized
by real property
    
    
    1,221
    
    
    
    1,138Note payable to sellers with an
interest rate of 7% due through
September 2008, collateralized by
equipment
    
    
    233
    
    
    
    Notes payable to sellers with nominal
interest rates due through December
2010, collateralized by specific
buildings and equipment
    
    
    144
    
    
    
    1039,555
    
    
    
    51,627Less  Payments due within one year
    
    
    390
    
    
    
    157Total
    
    $
    9,165
    
    
    $
    51,470
  4. Income taxes
   Period ended September 30, 2007
    
    
    Period ended September 30, 2008Three Months
    
    
    Nine Months
    
    
    Three Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedCurrent:State and local
    
    $
    571
    
    
    $
    2,115
    
    
    $
    791
    
    
    $
    1,437U.S. federal
    
    
    4,076
    
    
    
    11,468
    
    
    
    2,675
    
    
    
    5,202Total current
    
    
    4,647
    
    
    
    13,583
    
    
    
    3,466
    
    
    
    6,639Deferred:State and local
    
    
    453
    
    
    
    1,040
    
    
    
    688
    
    
    
    1,710U.S. federal
    
    
    2,107
    
    
    
    4,834
    
    
    
    5,652
    
    
    
    10,407Total deferred
    
    
    2,560
    
    
    
    5,874
    
    
    
    6,340
    
    
    
    12,117Provision for income tax expense
    
    $
    7,207
    
    
    $
    19,457
    
    
    $
    9,806
    
    
    $
    18,756
 11




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SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  December 31,
    
    
    September 30,2007
    
    
    2008(amounts in thousands)Deferred tax assets:Restricted stock
    
    $
    1,014
    
    
    $
    951Accrued expenses and other
    
    
    544
    
    
    
    897Allowance for doubtful accounts receivable
    
    
    635
    
    
    
    841Total deferred tax assets
    
    
    2,193
    
    
    
    2,689Deferred tax liabilities:Depreciation differences on property, plant and equipment
    
    
    (26,694
    )
    
    
    (39,307
    )Total deferred tax liabilities
    
    
    (26,694
    )
    
    
    (39,307
    )Net deferred taxes
    
    $
    (24,501
    )
    
    $
    (36,618
    )
  Period ended September 30, 2007
    
    Period ended September 30, 2008Three months
    
    Nine months
    
    Three months
    
    Nine monthsended
    
    ended
    
    ended
    
    endedFederal statutory tax rate
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %
    
    
    35
    %Impact of vesting of restricted stock
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    1State income taxes
    
    
    3
    
    
    
    4
    
    
    
    4
    
    
    
    4Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Effective income tax rate
    
    
    38
    %
    
    
    39
    %
    
    
    40
    %
    
    
    41
    %
 5. 401(k) Plan
  6. Related-Party Transactions
   12




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##### 



SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  7. Commitments and Contingencies
      8. Stock Incentive Plan
  Accounting for Stock Based
Compensation
  13




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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
    %
  WeightedAverage GrantNumber of
    
    
    Date Fair Valueshares
    
    
    Per ShareNonvested at December 31, 2006
    
    
    285,900
    
    
    $
    28.47Granted
    
    
    135,200
    
    
    
    23.05Vested
    
    
    (36,770
    )
    
    
    28.22Forfeited
    
    
    (5,450
    )
    
    
    25.54Retired
    
    
    (7,465
    )
    
    
    28.29Nonvested at December 31, 2007
    
    
    371,415
    
    
    
    26.57Granted
    
    
    142,900
    
    
    
    20.96Vested
    
    
    (50,245
    )
    
    
    26.24Forfeited
    
    
    (18,920
    )
    
    
    24.72Retired
    
    
    (11,314
    )
    
    
    26.26Nonvested at September 30, 2008
    
    
    433,836
    
    
    $
    24.85
  14




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##### 



SUPERIOR WELL SERVICES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 9. Subsequent events
   15




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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 consolidated
financial statements and notes thereto included elsewhere in this report. This discussion contains
forward-looking statements that reflect managements current views with respect to future events
and financial performance. Our actual results may differ materially form those anticipated in
these forward-looking statements or as a result of certain factors such as those set forth below
under Cautionary Statement Regarding Forward-Looking Statements.
 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;
    
    overcapacity and competition in our industry;
    
    unanticipated costs, delays and other difficulties in executing our growth strategy;
    
    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 (SEC) filings.
  Overview
  16




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##### 



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Technical pumping services
    
    $
    81,368
    
    
    
    86.3
    %
    
    $
    131,325
    
    
    
    89.9
    %
    
    $
    220,222
    
    
    
    86.1
    %
    
    $
    320,941
    
    
    
    89.4
    %Down-hole surveying services
    
    
    12,949
    
    
    
    13.7
    
    
    
    14,683
    
    
    
    10.1
    
    
    
    35,610
    
    
    
    13.9
    
    
    
    38,242
    
    
    
    10.6Total revenue
    
    $
    94,317
    
    
    
    100.0
    %
    
    $
    146,008
    
    
    
    100.0
    %
    
    $
    255,832
    
    
    
    100.0
    %
    
    $
    359,183
    
    
    
    100.0
    %
  Technical Pumping Services
  Down-Hole Surveying Services
  17




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##### 



How We Generate Our Revenue
   How We Evaluate Our Operations
  Operating Income per Operating Region.
   Material and Labor Expenses as a Percentage of Revenue.
   18




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##### 



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.
  19




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##### 



Equipment Maintenance Performance.
  Customer Satisfaction.
  Safety Performance.
  Our Industry
   20




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##### 



Our Growth Strategy
    Business Environment
   21




---



##### 



22




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##### 



Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2008
    
    % Change
    
    2007
    
    2008
    
    % ChangeAverage rig count 1Crude Oil
    
    
    298
    
    
    
    398
    
    
    
    33.6
    %
    
    
    285
    
    
    
    367
    
    
    
    28.8
    %Natural gas
    
    
    1,490
    
    
    
    1,580
    
    
    
    6.0
    
    
    
    1,475
    
    
    
    1,504
    
    
    
    2.0Total U.S. land rigs
    
    
    1,788
    
    
    
    1,978
    
    
    
    10.6
    %
    
    
    1,760
    
    
    
    1,871
    
    
    
    6.3
    %Commodity prices (avg.):Crude Oil (West Texas Intermediate)
    
    $
    75.38
    
    
    $
    117.98
    
    
    
    56.5
    %
    
    $
    66.23
    
    
    $
    113.29
    
    
    
    71.1
    %Natural gas (Henry Hub)
    
    
    6.16
    
    
    
    9.05
    
    
    
    46.9
    %
    
    
    6.95
    
    
    
    9.67
    
    
    
    39.1
    %
  Our Results of Operations
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Statement of Operations Data:Revenues:Technical pumping services
    
    $
    81,368
    
    
    
    86.3
    %
    
    $
    131,325
    
    
    
    89.9
    %
    
    $
    220,222
    
    
    
    86.1
    %
    
    $
    320,941
    
    
    
    89.4
    %Down-hole surveying services
    
    
    12,949
    
    
    
    13.7
    
    
    
    14,683
    
    
    
    10.1
    
    
    
    35,610
    
    
    
    13.9
    
    
    
    38,242
    
    
    
    10.6Total revenue
    
    
    94,317
    
    
    
    100.0
    
    
    
    146,008
    
    
    
    100.0
    
    
    
    255,832
    
    
    
    100.0
    
    
    
    359,183
    
    
    
    100.0Expenses:Cost of revenue
    
    
    66,112
    
    
    
    70.1
    
    
    
    109,686
    
    
    
    75.1
    
    
    
    179,578
    
    
    
    70.2
    
    
    
    280,899
    
    
    
    78.2Selling, general,
and
administrative
    
    
    9,330
    
    
    
    9.9
    
    
    
    11,388
    
    
    
    7.8
    
    
    
    26,622
    
    
    
    10.4
    
    
    
    31,614
    
    
    
    8.8Total expense
    
    
    75,442
    
    
    
    80.0
    
    
    
    121,074
    
    
    
    82.9
    
    
    
    206,200
    
    
    
    80.6
    
    
    
    312,513
    
    
    
    87.0Operating income
    
    $
    18,875
    
    
    
    20.0
    %
    
    $
    24,934
    
    
    
    17.1
    %
    
    $
    49,632
    
    
    
    19.4
    %
    
    $
    46,670
    
    
    
    13.0
    %
  
 1
    
    Estimate of activity as measured by average active U.S.
land drilling rigs based on Baker Hughes Inc. rig count information 23




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##### 



Revenue
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,$
    
    
    %
    
    
    
    
    
    
    
    
    
    
    $
    
    
    %2007
    
    
    2008
    
    
    change
    
    
    change
    
    
    2007
    
    
    2008
    
    
    change
    
    
    changeRevenues by service type:Stimulation
    
    $
    49,736
    
    
    $
    94,514
    
    
    $
    44,778
    
    
    
    90.0
    %
    
    $
    140,880
    
    
    $
    226,211
    
    
    $
    85,331
    
    
    
    60.6
    %Cementing
    
    
    18,899
    
    
    
    25,717
    
    
    
    6,818
    
    
    
    36.1
    
    
    
    52,603
    
    
    
    69,396
    
    
    
    16,793
    
    
    
    31.9Nitrogen
    
    
    12,733
    
    
    
    11,094
    
    
    
    (1,639
    )
    
    
    (10.1
    )
    
    
    26,739
    
    
    
    25,332
    
    
    
    (1,407
    )
    
    
    (5.3
    )Technical pumping revenues
    
    
    81,368
    
    
    
    131,325
    
    
    
    49,957
    
    
    
    61.4
    
    
    
    220,222
    
    
    
    320,941
    
    
    
    100,718
    
    
    
    45.7Down-hole surveying services
    
    
    12,949
    
    
    
    14,683
    
    
    
    1,734
    
    
    
    13.4
    
    
    
    35,610
    
    
    
    38,242
    
    
    
    2,632
    
    
    
    7.4Total revenue
    
    $
    94,317
    
    
    $
    146,008
    
    
    $
    51,691
    
    
    
    54.8
    %
    
    $
    255,832
    
    
    $
    359,183
    
    
    $
    103,351
    
    
    
    40.4
    %
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,$
    
    
    %
    
    
    
    
    
    
    
    
    
    
    
    $
    
    
    %2007
    
    
    2008
    
    
    change
    
    
    change
    
    
    2007
    
    
    2008
    
    
    change
    
    
    changeRegion:Appalachian
    
    $
    45,507
    
    
    $
    53,682
    
    
    $
    8,179
    
    
    
    18.0
    %
    
    $
    113,261
    
    
    $
    135,385
    
    
    $
    22,124
    
    
    
    19.6
    %Southeast
    
    
    19,345
    
    
    
    23,418
    
    
    
    4,074
    
    
    
    21.1
    
    
    
    49,211
    
    
    
    62,978
    
    
    
    13,767
    
    
    
    28.0Southwest
    
    
    9,241
    
    
    
    21,190
    
    
    
    11,949
    
    
    
    129.3
    
    
    
    27,187
    
    
    
    50,118
    
    
    
    22,931
    
    
    
    84.3Rocky Mountain
    
    
    6,737
    
    
    
    19,549
    
    
    
    12,805
    
    
    
    189.9
    
    
    
    24,517
    
    
    
    42,771
    
    
    
    18,254
    
    
    
    74.5Mid-Continent
    
    
    13,487
    
    
    
    28,169
    
    
    
    14,684
    
    
    
    108.9
    
    
    
    41,656
    
    
    
    67,931
    
    
    
    26,275
    
    
    
    63.1Total
    
    $
    94,317
    
    
    $
    146,008
    
    
    $
    51,691
    
    
    
    54.8
    %
    
    $
    255,832
    
    
    $
    359,183
    
    
    $
    103,351
    
    
    
    40.4
    %
 Results for the three months ended September 30, 2007 and 2008
  24




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##### 



Results for the nine months ended September 30, 2007 and 2008
  Cost of Revenue.
 Results for the three months ended September 30, 2007 and 2008
  Results for the nine months ended September 30, 2007 and 2008
  25




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##### 



Selling, General and Administrative Expenses (SG&A).
 Results for the three months ended September 30, 2007 and 2008
  Results for the nine months ended September 30, 2007 and 2008
  Operating Income
 Results for the three months ended September 30, 2007 and 2008
  Results for the nine months ended September 30, 2007 and 2008
  26




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##### 



Liquidity and Capital Resources
   Financial Condition and Cash Flows
 Financial Condition.
   Cash flows from operations.
  Cash flows used in investing activities.
 27




---



##### 



Cash flows from financing activities.
  Capital Requirements
  
    
    expansion capital expenditures, such as those to acquire additional equipment and
other assets or upgrade existing equipment to grow our business; and
    
    maintenance capital expenditures, which are capital expenditures made to extend the
useful life of partially or fully depreciated assets or to maintain the operational
capabilities of existing assets.
    Off-Balance Sheet Arrangements
  Description of Our Indebtedness
  28




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##### 



Accounting standards not yet adopted
 Noncontrolling Interests in Consolidated
Financial Statements, an Amendment of ARB No. 51
 Business Combinations
 Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including
Partial Cash Settlement)
 Determination of the Useful Life of
Intangible Assets
 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities
 29




---



##### 



Critical Accounting Policies
   Revenue Recognition
   Property, Plant and Equipment
  Impairment of Long-Lived Assets
 Accounting for the Impairment or Disposal of Long-Lived
Assets
 30




---



##### 




    
    changes in general economic conditions in regions in which our services are
located;
    
    the price of natural gas and crude oil;
    
    our ability to negotiate favorable sales arrangements; and
    
    our competition from other service providers.
  Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets
 Contingent Liabilities
  Insurance Expenses
  31




---



##### 



Share Based Compensation
 Share-Based Payment
 Impact of Inflation
  Non-GAAP Accounting Measures
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Reconciliation of EBITDA to Net Income:Net income
    
    $
    11,630
    
    
    $
    14,908
    
    
    $
    30,798
    
    
    $
    26,901Income tax expense
    
    
    7,207
    
    
    
    9,806
    
    
    
    19,457
    
    
    
    18,756Interest expense
    
    
    71
    
    
    
    466
    
    
    
    177
    
    
    
    876Depreciation and amortization
    
    
    6,690
    
    
    
    10,444
    
    
    
    17,628
    
    
    
    28,554EBITDA
    
    $
    25,598
    
    
    $
    35,624
    
    
    $
    68,060
    
    
    $
    75,087
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
  Interest Rate Risk
 Concentration of Credit Risk
 Commodity Price Risk
 32




---



##### 



Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
 33




---



##### 



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
 Many of our customers activity levels and spending for our products and services may be impacted
by a sustained decline of oil and natural gas prices and current deterioration in the credit and
capital markets.
    Our ability to obtain funding for our capital projects may be limited due to the deterioration of
the credit and capital markets.
   34




---



##### 



Item 6. Exhibits.
  35




---



##### 



SIGNATURES
  SUPERIOR WELL SERVICES, INC.RegistrantDated: November 4, 2008
    
    By:
    
    /s/ Thomas W. StoelkThomas W. StoelkVice President and Chief Financial Officer(Duly Authorized Officer and Principal Financial Officer)
 36




---



##### 



INDEX TO EXHIBITS
OF
SUPERIOR WELL SERVICES, INC.
 (a) Exhibits
  2.1
    
    Asset purchase agreement by and among Superior and Diamondback,
dated September 12, 2008 (incorporated by reference to Exhibit 2.1
to Form 8-K filed on September 18, 2008).3.1
    
    Amended and Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 to Form 8-K filed on August 3, 2005).3.2
    
    Amended and Restated Bylaws (incorporated by reference to
Exhibit 3.2 to Form 8-K filed on August 3, 2005).4.1
    
    Specimen Stock Certificate representing our common stock
(incorporated by reference to Exhibit 4.1 to Registration Statement
on Form S-1/A (Registration No. 333-124674) filed on June 24,
2005).4.2
    
    Registration Rights Agreement dated as of July 28, 2005 by and
among the Company and the stockholders signatory thereto
(incorporated by reference to Exhibit 10.1 to Form 8-K filed on
August 3, 2005).4.3
    
    Form of Restricted Stock Agreement for Employees without Employment
Agreements (filed as Exhibit 4.1 to the Companys Registration
Statement on Form S-8(Registration No. 333-130615) filed on
December 22, 2005).4.4
    
    Form of Restricted Stock Agreement for Executives with Employment
Agreements (filed as Exhibit 4.2 to the Companys Registration
Statement on Form S-8(Registration No. 333-130615) filed on
December 22, 2005).4.5
    
    Form of Restricted Stock Agreement for Non-Employee Directors
(filed as Exhibit 4.3 to the Companys Registration Statement on
Form S-8(Registration No. 333-130615) filed on December 22, 2005).4.6
    
    2005 stock Incentive Plan (incorporated by reference to
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q filed
on August 31, 2005).10.1*
    
    Sand Purchase Agreement between Superior Well Services, Inc. and
Preferred Rocks USS, Inc., dated October 10, 2008.10.2
    
    Credit Agreement by and among Superior Well Services, Inc., the
Lenders party thereto, Citizens Bank of Pennsylvania, as
Administrative Agent, and RBS Securities Corporation d/b/a/RBS
Greenwich Capital, as Sole Lead Arranger and Sole Bookrunner
(incorporated by reference to Exhibit 10.1 to Form 8-K filed on
October 3, 2008).10.3
    
    Employment Agreement effective September 15, 2008 between Superior
Well Services, Inc and David E. Wallace (incorporated by reference
to Exhibit 10.1 to Form 8-K filed on September 18, 2008).10.4
    
    Employment Agreement effective September 15, 2008 between Superior
Well Services, Inc and Jacob B. Linaberger (incorporated by
reference to Exhibit 10.2 to Form 8-K filed on September 18, 2008).10.5
    
    Employment Agreement effective September 15, 2008 between Superior
Well Services, Inc and Rhys R. Reese (incorporated by reference to
Exhibit 10.3 to Form 8-K filed on September 18, 2008).10.6
    
    Employment Agreement effective September 15, 2008 between Superior
Well Services, Inc and Thomas W. Stoelk (incorporated by reference
to Exhibit 10.4 to Form 8-K filed on September 18, 2008).31.1*
    
    Sarbanes-Oxley Section 302 certification of David E. Wallace for
Superior Well Services, Inc. for the September 30, 2008 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, 2008 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, 2008 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, 2008 Quarterly
Report on Form 10-Q.
 
 
    
    Management contract or compensatory plan or arrangement
    
    Certain commercial terms of this exhibit have been omitted pursuant
to a request for confidential treatment from the Securities and
Exchange Commission.