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

                                    FORM 10-K

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

                    FOR THE FISCAL YEAR ENDED MARCH 31, 1997

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

        FOR THE TRANSITION PERIOD FROM _____________ TO ______________.

                           COMMISSION FILE NO. 0-27732

                             -----------------------

                        DAWSON PRODUCTION SERVICES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                 TEXAS                                 74-2231546
    (STATE OR OTHER JURISDICTION OF                  I.R.S. EMPLOYER
     INCORPORATION OR ORGANIZATION)                IDENTIFICATION NO.)

    112 E. PECAN STREET, SUITE 1000                       78205
         SAN ANTONIO, TEXAS                             (ZIP CODE)
 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (210) 476-0420

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

(TITLE OF EACH CLASS)                  NAME OF EACH EXCHANGE ON WHICH REGISTERED
--------------------------------------------------------------------------------
COMMON STOCK, PAR VALUE $0.01 PER SHARE               THE NASDAQ NATIONAL MARKET

                             -----------------------

        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
1034 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] OR  NO [ ]

        INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENTS TO THIS FORM 10-K. [ ]

THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AT JUNE 26, 1997, BASED ON THE CLOSING PRICE ON THE NASDAQ NATIONAL
MARKET SYSTEM ON SUCH DATE, WAS $147,423,276.

        THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK OUTSTANDING ON
JUNE 26, 1997 WAS 11,126,285.

        DOCUMENTS INCORPORATED BY REFERENCE: PORTIONS OF THE COMPANY'S
DEFINITIVE PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
SEPTEMBER 11, 1997 ARE INCORPORATED BY REFERENCE INTO PART III OF THIS REPORT.
<PAGE>
                       DOCUMENTS INCORPORATED BY REFERENCE

        THE INFORMATION REQUIRED BY PART III OF THIS ANNUAL REPORT ON FORM 10-K
IS INCORPORATED BY REFERENCE FROM THE REGISTRANT'S DEFINITIVE PROXY STATEMENT
FOR THE REGISTRANT'S 1997 ANNUAL MEETING OF SHAREHOLDERS.


Item 10    Directors and Executive      Incorporated by reference from "Nominees
           Officers of the Registrant   for Election of Directors" of the       
                                        Company's definitive proxy statement to 
                                        be filed pursuant to Regulation 14A of  
                                        the Securities Exchange act of 1934, as 
                                        amended (the "Exchange Act"), for the   
                                        Company's 1997 annual meeting of        
                                        shareholders.                           
                                        
Item 11    Executive Compensation       Incorporated by reference from
                                        "Executive Compensation" of the
                                        Company's definitive proxy statement to
                                        be filed pursuant to Regulation 14A of
                                        the Exchange Act for the Company's 1997
                                        annual meeting of shareholders.

Item 12                                 Security Ownership of Incorporated by
                                        reference from "Security Ownership of
                                        Certain Beneficial Owners Certain
                                        Beneficial Owners and Management" of the
                                        and Management Company's definitive
                                        proxy statement to be filed pursuant to
                                        Regulation 14A of the Exchange Act for
                                        the Company's 1997 annual meeting of
                                        shareholders. Incorporated by Reference 
                                        from "Certain Relationships

Item 13                                 Certain Relationships and and Related
                                        Transactions" of the Company's
                                        definitive Related Transactions proxy
                                        statement to be filed pursuant to
                                        Regulation 14A of the Exchange Act for
                                        the Company's 1997 annual meeting of
                                        shareholders.

                                       i
<PAGE>
                        DAWSON PRODUCTION SERVICES, INC.
                            YEAR ENDED MARCH 31, 1997
                               INDEX TO FORM 10-K
<TABLE>
<CAPTION>
ITEM                                                                                         PAGE
 NO.                                                                                          NO.
----                                                                                         ----
<S>                                                                                           <C>
RISK FACTORS ..............................................................................   01

PART I ....................................................................................   07
        ITEM 1. BUSINESS ..................................................................   07
        ITEM 2. PROPERTIES ................................................................   21
        ITEM 3. LEGAL PROCEEDINGS .........................................................   21
        ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .......................   21

PART II ...................................................................................   22
        ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS .....   22
        ITEM 6. SELECTED FINANCIAL DATA ...................................................   23
        ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS  OF
                OPERATIONS ................................................................   25
        ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ...............................   32
        ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                FINANCIAL DISCLOSURE ......................................................   54

PART III ..................................................................................   54
        ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .......................   54
        ITEM 11. EXECUTIVE COMPENSATION ...................................................   54
        ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ...........   54
        ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...........................   54

PART IV ...................................................................................   55
        ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K ..........   55

SIGNATURES ................................................................................   60
</TABLE>
                                       ii
<PAGE>
                                  RISK FACTORS

  THE STATEMENTS INCLUDED IN THIS REPORT REGARDING FUTURE FINANCIAL PERFORMANCE
AND RESULTS AND THE OTHER STATEMENTS THAT ARE NOT HISTORICAL FACTS ARE
FORWARD-LOOKING STATEMENTS. THE WORDS "EXPECT," "PROJECT," "ESTIMATE," "PREDICT"
AND SIMILAR EXPRESSIONS ALSO ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. SUCH STATEMENTS INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS,
INCLUDING BUT NOT LIMITED TO, INDUSTRY CONDITIONS, PRICES OF CRUDE OIL AND
NATURAL GAS, AND OTHER FACTORS DISCUSSED IN THIS REPORT (INCLUDING THOSE
SPECIFICALLY DISCUSSED BELOW) AND IN THE COMPANY'S OTHER FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION. SHOULD ONE OR MORE OF THESE RISKS OR
UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT,
ACTUAL OUTCOMES MAY VARY MATERIALLY FROM THOSE INDICATED.

  CAPITALIZED TERMS USED IN RISK FACTORS ARE DEFINED LATER IN THIS REPORT.

INCURRENCE OF SUBSTANTIAL INDEBTEDNESS

  At March 31, 1997, the Company had approximately $144.0 million in total
indebtedness. The Company historically has operated at substantially lower
levels of debt. The Company's level of indebtedness has several important
effects on its future operations, including, without limitation, (i) a
substantial portion of the Company's cash flow from operations must be dedicated
to the payment of interest and principal on its indebtedness, (ii) the Company's
leveraged position substantially increases its vulnerability to adverse changes
in general economic and industry conditions, as well as to competitive pressure,
and (iii) the Company's ability to obtain additional financing for working
capital, capital expenditures, acquisitions, general corporate and other
purposes may be limited. The Company's ability to meet its debt service
obligations and to reduce its total indebtedness will be dependent upon the
Company's future performance, which will be subject to general economic
conditions, industry cycles and financial, business and other factors affecting
the operations of the Company, many of which are beyond its control. There can
be no assurance that the Company's business will continue to generate cash flow
at or above current levels. If the Company is unable to generate sufficient cash
flow from operations in the future to service its debt, it may be required,
among other things, to seek additional financing in the debt or equity markets,
to refinance or restructure all or a portion of its indebtedness, including the
Senior Notes, or to sell selected assets or reduce or delay planned capital
expenditures. There can be no assurance that any such measures would be
sufficient to enable the Company to service its debt or that any such financing,
refinancing or sale of assets would be available on economically favorable
terms. See "Business - Senior Notes; Subsidiary Guarantees."

                                        1
<PAGE>
DEPENDENCE ON VOLATILE OIL AND GAS INDUSTRY

  Demand for the Company's services depends substantially upon the level of
activity in the oil and gas industry, which in turn depends in part on oil and
gas prices, expectations about future prices, the cost of exploring for,
producing and delivering oil and gas, the discovery rate of new oil and gas
reserves in land areas, the level of drilling and workover activity, domestic
and international political, military, regulatory and economic conditions and
the ability of oil and gas companies to raise capital. Prices for oil and gas
historically have been extremely volatile and have reacted to changes in the
supply of and demand for oil and natural gas, domestic and worldwide economic
conditions and political instability in oil producing countries. No assurance
can be given that current levels of oil and gas activities will be maintained or
that demand for the Company's services will reflect the level of such
activities. Prices for oil and natural gas are expected to continue to be
volatile and affect the demand for and pricing of the Company's services. A
material decline in oil or natural gas prices or activities could materially
adversely affect the demand for the Company's services and the Company's results
of operations. Industry conditions will continue to be influenced by numerous
factors over which the Company has no control. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business -
Customers."

  The volatility of the oil and gas industry and the consequent impact thereof
on exploration activity could adversely impact certain of the Company's
customers. The Company, therefore, could be subject to special credit risks as
to certain of its customers. While the Company endeavors not to take unjustified
credit risks, it is necessary from time to time to extend trade credit to
long-term customers and others where some risks of nonpayment or late payment
could exist.

ACQUISITION RISKS

  The Company completed the Pride Acquisition in February 1997 and the Taylor
Acquisition in July 1996. Pursuant to the Pride Acquisition the Company acquired
407 workover rigs, which is more than four times the number of workover rigs it
previously operated. No assurance can be given that the Company will be
successful in managing and incorporating the businesses and assets acquired in
the Pride Acquisition or the Taylor Acquisition into its existing operations or
that such activities will not require a disproportionate amount of management's
attention. The Company's failure to incorporate the acquired businesses and
assets into its existing operations successfully, or the occurrence of
unexpected costs or liabilities in the acquired businesses, could have a
material adverse effect on the Company. See "Business - General; -- Business
Strategy."

                                       2
<PAGE>
LIQUIDITY NEEDS; ABILITY TO REPAY NOTES

  The Company may from time to time fund a portion of its working capital needs
and capital expenditure requirements from external financing. In addition, the
Company expects that in order to repay the principal amount of the Senior Notes
at maturity or upon acceleration, or to purchase the Senior Notes upon a Change
of Control, it will likely be required to seek additional financing or engage in
asset sales or similar transactions. There can be no assurance that sufficient
funds for any of the foregoing purposes would be available to the Company at the
time they are required on favorable terms. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" and "Business - Senior Notes; Subsidiary Guarantees."

RISKS RELATING TO INJECTION WELLS

  The Company's injection operations pose certain risks of environmental
liability to the Company. Although the Company monitors the injection process,
any leakage from the subsurface portions of the wells could cause degradation of
fresh groundwater resources, potentially resulting in cancellation of operation
of the well, fines and penalties from governmental agencies, expenditures for
redemption of the affected resource, and liability to third parties for property
damages and personal injuries. In addition, the sale by the Company of residual
crude oil collected as part of the saltwater injection process could impose
liability on the Company in the event the entity to which the oil was
transferred fails to manage the material in accordance with applicable
environmental health and safety laws.

SUBSTANTIAL COMPETITION

  The workover rig and production services industry is highly competitive and
fragmented and includes several large companies and a number of small companies
capable of competing effectively on a local basis. See "Business - Competition."

OPERATING RISKS AND INSURANCE

  The Company's operations are subject to hazards inherent in the oil and gas
industry, such as blowouts, explosions, craterings, fires and oil spills, that
can cause personal injury or loss of life, damage to or destruction of property,
equipment, the environment and marine life and suspension of operations. In
addition, claims for loss of oil and gas production and damage to formations can
occur in the workover business. Litigation arising from a catastrophic
occurrence at a location where the Company's equipment and services are used may
in the future result in the Company being named as a defendant in lawsuits
asserting potentially large claims.

                                       3
<PAGE>
  The Company maintains insurance coverage that it believes to be customary in
the industry against these hazards. However, there can be no assurance that the
Company will be able to maintain adequate insurance in the future at rates it
considers reasonable or that insurance will continue to be available on terms as
favorable as the Company's existing arrangements. The occurrence of a
significant event or adverse claim in excess of the insurance coverage limits
maintained by the Company could have a materially adverse effect on the
Company's financial condition and results of operations. See "Business -
Operating Risks and Insurance."

RISK OF ENVIRONMENTAL COSTS AND LIABILITIES

  The Company's operations are subject to governmental laws and regulations
governing the management and disposal of waste materials or otherwise relating
to the protection of the environment or of public health and safety. Many of the
Company's operations take place in or near ecologically sensitive areas, such as
the Texas Gulf Coast and Louisiana inland waters. Numerous local, state and
federal environmental laws impose liability for causing pollution in inland and
coastal waters. State and federal legislation also provide special protection to
water quality and animal and marine life that could be affected by some of the
Company's activities. The Company's operations also take place in states that
stringently regulate environmental matters, such as California. In general, the
regulations applicable to the Company's operations include certain regulations
controlling the discharge of hazardous or toxic materials into the environment,
requiring removal or remediation of pollutants and imposing civil and criminal
penalties for violations. Some of the statutory and regulatory programs that
apply to the Company's operations also authorize private suits, the recovery of
nature resource damages by the government, injunctive relief and cease and
desist orders.

  Some environmental statutes impose strict liability, rendering a person or
entity liable for environmental damage without regard to negligence or fault on
the part of such person or entity. As a result, the Company could be liable,
under certain circumstances, for environmental damage caused by others or for
acts of the Company that were in compliance with all applicable laws at the time
such acts were performed.

  The clear trend in environmental regulation has been to impose more
restrictions and limitations on activities that may impact the environment,
including the generation and disposal of wastes and the use and handling of
chemical substances. These restrictions and limitations have increased operating
costs for both the Company and its customers. Any regulatory changes that impose
additional environmental regulations or requirements on the Company and its
customers could adversely affect the Company through increased operating costs
and potential decreased demand for the Company's services.

                                       4
<PAGE>
  In this regard, the Resource Conservation and Recovery Act ("RCRA"), the
principal federal statute governing the disposal of solid and hazardous wastes,
includes a statutory exemption that allows oil and gas exploration and
production wastes to be classified as non-hazardous waste. A similar exemption
is contained in many of the state counterparts to RCRA, including the state
statutes in Texas, New Mexico, and Louisiana however, there is no such exemption
in the California statutes. If oil and gas exploration and production wastes
were required to be managed and disposed of as hazardous waste, either as a
result of changes in RCRA or the imposition of more stringent state regulations,
domestic oil and gas producers, including many of the Company's customers, could
be required to incur substantial obligations with respect to such waste. Because
of the potential impact on the Company's customers, any regulatory changes that
impose additional restrictions or requirements on the disposal of oil and gas
wastes could adversely affect demand for the Company's services. See "Business
Environmental Regulation."

DEPENDENCE ON KEY PERSONNEL

  The Company believes that its success will depend to a significant extent upon
the continued services of certain key individuals, particularly Michael E.
Little, Chairman of the Board, President and Chief Executive Officer, and James
J. Byerlotzer, Vice President of Operations and Chief Operating Officer. The
loss of the services of either of these individuals could have a material
adverse effect on the Company.

DEPENDENCE ON MAJOR CUSTOMERS

  During the fiscal year ended March 31, 1997, the Company derived approximately
20.00% of its revenues from its largest customer. The loss of this customer
could have a material adverse effect on the Company's financial condition and
results of operations. See "Business Customers."

DIVIDEND POLICY

  The Company has never paid cash dividends on the Common Stock and does not
anticipate that cash dividends will be paid in the foreseeable future. The
Company currently intends to retain any future earnings to finance the expansion
and continuing development of the Company's business. The declaration and
payment in the future of any cash dividends will be at the election of the
Company's Board of Directors and will depend upon the earnings, capital
requirements and financial position of the Company, future loan covenants,
general economic conditions and other pertinent factors. Furthermore, certain
provisions of the Credit Facility and the Indenture will restrict the Company's
ability to pay cash dividends on the Common Stock. See "Management's Discussions
and Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."

                                       5
<PAGE>
SUBSTANTIAL AMOUNT OF SECURITIES SUBJECT TO REGISTRATION RIGHTS

  Pursuant to a registration rights agreement (the "Registration Rights
Agreement"), shareholders (the "Rights Holders") that beneficially own
approximately 2.4 million shares of Common Stock, or approximately 22% of the
currently issued and outstanding shares of Common Stock, are entitled to
registration of such shares under the Securities Act of 1933, as amended (the
"Securities Act"), subject to certain exceptions and limitations. Under the
Registration Rights Agreement, the Company is obligated to file a registration
statement (the "Shelf Registration Statement"), beginning July 20, 1997 for the
Registrable Securities. The holders of a majority of the Registrable Securities
can require that the Shelf Registration Statement be in the form of an
underwritten offering. Additionally, if the Company proposes to register any of
its securities under the Securities Act for its own account or for the account
of the other security holders, the Rights Holders are entitled to notice of such
registration and are entitled to include all or a portion of the Registrable
Securities in such registration, subject to certain exceptions and limitations,
including the right of the underwriters (if any) of any such offering to exclude
for marketing reasons some or all of the Registrable Securities from such
registration. The Company generally is required to pay all of the expenses
relating to the registration of the Registrable Securities, except for the
Rights Holders' share of any underwriting discounts and commissions. The
Registration Rights Agreement prohibits the Company from granting any new
registration rights under the Securities Act that would adversely impact the
rights of the Rights Holders. Sales of substantial amounts of the Common Stock
in the public market could adversely affect prevailing market prices and the
ability of the Company to raise equity capital in the future.

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS

  The Company's Articles of Incorporation and Bylaws include certain provisions
that may have the effect of discouraging potential unsolicited offers or other
efforts to obtain control of the Company that are not approved by the Board.
Upon a change of control of the Company, holders of the Senior Notes will have
the right to require the Company to purchase such Senior Notes at a price equal
to 101% of the aggregate principal amount thereof, together with accrued and
unpaid interest to the date of purchase. Such provisions may adversely affect
the market price of the Common Stock and may also deprive the shareholders of
opportunities to sell shares of Common Stock at prices higher than prevailing
market prices. Such provisions include the requirement that all shareholder
action must be taken at a duly called annual or special meeting of shareholders
unless a majority of the entire Board provides its prior approval for
shareholder action to be taken by written consent of shareholders. The Board has
the authority, without further action by the shareholders, to issue up to
560,600 shares of the Company's preferred stock in one or more series and to fix
the rights, preferences, privileges and restrictions thereof, and to issue over
9,000,000 additional shares of Common Stock. The issuance of the Company's

                                       6
<PAGE>
preferred stock or additional shares of Common Stock could adversely affect the
voting power of the purchasers of Common Stock in the Equity Offering and could
have the effect of delaying, deferring or preventing a change in control of the
Company.

                                       7
<PAGE>
                                     PART I
ITEM I.   BUSINESS

GENERAL

  Dawson Production Services, Inc. (the "Company" or "Dawson") is a leading
provider of a broad range of workover, liquid and production services used in
the production of oil and gas. The Company's services are utilized by major oil
and gas companies as well as independent producers to optimize performance of
oil and gas wells. The Company recently acquired the U.S. land-based well
servicing operations of Pride Petroleum Services, Inc. ("Pride") in a
transaction (the "Pride Acquisition") that has positioned Dawson as the second
largest provider of workover rigs in the United States.

  The Company commenced operations in 1951. In 1982, the current management team
joined the Company and initiated a strategy to expand and diversify the
Company's workover rig services. At that time, the Company owned four workover
rigs that were operated out of a single yard. In November 1994, the Company
broadened the array of services that it provides by acquiring the liquid
services and production services businesses of Well Solutions, Inc. (the "Well
Solutions Acquisition") and expanded such business in July 1996 with the
acquisition of Taylor Companies, Inc. (the "Taylor Acquisition"). Subsequent to
the Pride Acquisition that closed effective February 20, 1997, the Company owns
and operates 498 workover rigs. The Company believes that it generally has been
successful in acquiring businesses and assets and subsequently reducing
overhead, enhancing internal controls, improving marketing and related
operations through management incentives and improving the utilization of its
assets by redeploying equipment.

  As a result of its acquisitions and certain corporate restructuring, the
Company currently has several direct and indirect subsidiaries through which it
conducts a significant portion of its operations. All of the assets acquired
from Pride are held in Dawson Production Partners, L.P., a Delaware limited
partnership (the "Partnership"), and the Company is in the process of
transferring substantially all of its remaining operating assets to the
Partnership. All of the general and limited partnership interests in the
Partnership are owned by two wholly owned corporate subsidiaries of Dawson;
Dawson Production Management, Inc., a Delaware corporation, owns a 1% general
partnership interest in the Partnership, and Dawson Production Acquisition
Corp., a Delaware corporation, owns the remaining 99% limited partnership
interest in the Partnership. Dawson has the following additional wholly owned
subsidiaries: Dawson Production Services de Mexico, S.A. de C.V., and Ubicadora
de Tecnicos S.A. de C.V., both of which are companies organized under the laws
of Mexico, Taylor Companies, Inc., a Texas corporation; and Mobley Vehicle
Acquisition Corp., a Texas corporation.

                                       8
<PAGE>
BUSINESS STRATEGY

  The Company's strategy emphasizes diversification and expansion through
acquisitions and internal growth. In recent years, there has been significant
industry consolidation activity in the Company's principal businesses. The
Company has been an active participant in this industry consolidation and plans
to continue to pursue strategic acquisitions of businesses and assets which
enhance or expand its market presence or complement its existing businesses. As
a result of the Pride Acquisition, the Company has expanded the range of
services offered at its locations and continues to increase its presence,
through redeployment of underutilized assets, within the geographic regions in
which the Company operates. The Company believes that its ability to offer a
wide range of services over a large operating base will provide it with a
competitive advantage by allowing its customers to consolidate their procurement
of workover, liquid and production services by utilizing fewer vendors. The
Company believes that this consolidation may allow customers to lower their
costs by streamlining production decisions and increasing operational
efficiencies. The Company also believes that its strategy will allow it to take
advantage of cross-marketing opportunities for its services and to appeal to a
broader customer base by enhancing its position as a one-stop source for
workover, liquid and production services.

  Consistent with its business strategy, on February 20, 1997 the Company closed
a transaction in which it acquired substantially all of Pride's U.S. land-based
well servicing operations for approximately $135.4 million in cash. The Pride
Acquisition has significantly increased the size and geographic scope of the
Company's workover rig service business. This U.S. land-based fleet consists of
407 workover rigs and related operations in 28 locations in the Texas and
Louisiana Gulf Coasts, the Permian Basin areas of West Texas and New Mexico, and
California. The Company is currently the largest provider of workover rigs in
Texas and the second largest provider in the United States. The Company will
seek to generate improved profit margins for the acquired assets through
increased operating efficiencies and cost savings resulting from overhead
reductions and the consolidation of certain overlapping yard locations. In
addition, the Company will seek to expand its liquid and production services
businesses into new markets through certain of the acquired yard locations and
also to redeploy certain of the acquired workover rigs to areas with greater rig
demand.

  The Company believes that the high quality of its equipment, employees and
services combined with its favorable safety record enables it to maintain its
position as a leader in its principal markets. In that regard, the Company has
committed substantial capital to an ongoing workover rig refurbishment program
to maintain the Company's equipment in good working condition. The Company has
invested, and plans to continue to invest, in quality management and safety
programs. The Company believes that many smaller competitors have not undertaken
comparable maintenance or training programs and do not have the financial
resources to enable them to do so. The Company believes that a number of its
customers place significant importance on their contractors' safety records and
quality management systems in their screening and selection processes, and that
such factors will gain further importance in the future.

                                       9
<PAGE>
OVERVIEW OF SERVICES

WORKOVER RIG SERVICES

  The Company provides workover rig services to oil and gas exploration and
production companies through the use of mobile well servicing workover rigs
together with crews of three to four workers. Additional equipment such as
pumps, tanks, blowout preventers and power swivels are provided by the Company
as may be required for a particular job. The Company also provides trucking
services for moving large equipment to and from the job sites of its customers.
The Company charges its customers an hourly rate for its workover rig services,
which varies based on a number of considerations including market conditions in
each region, the type of rig, the amount of ancillary equipment required and the
necessary personnel. The Company gives its yard managers considerable
flexibility to negotiate with customers and, through compensation arrangements,
seeks to provide incentives to its managers to maximize both revenues and
profitability. For the fiscal year ended March 31, 1997, workover rig services
contributed approximately 49% of the Company's revenues.

  The Company operates 496 land workover rigs, two barge-mounted workover rigs
and ancillary equipment from yards in Texas, Louisiana, California and New
Mexico. The Company's land workover rigs are mobile units that generally operate
within a radius of approximately 75 to 100 miles from their respective bases.
Swab rigs are used for swabbing or cleaning wells at depths of up to
approximately 16,000 feet. Pole rigs are used for swabbing and rod and tubing
workovers and repairs on wells at depths of up to approximately 4,000 feet. Rigs
having between 150 and 250 horsepower are used for services on wells to maximum
depths of between 4,000 and 6,000 feet and work primarily on rod and tubing
workovers and repairs. Rigs having between 251 and 350 horsepower are used for
services on wells to maximum depths of between 10,000 and 12,000 feet and also
work primarily on rod and tubing workovers and repairs. Rigs having between 351
and 550 horsepower are used for deeper workovers and more complicated procedures
such as deepening of existing well bores, recompletions and complicated fishing
operations. These rigs operate at maximum depths of between 16,000 and 18,000
feet. Rigs having between 551 and 750 horsepower are used in wells with maximum
depths of approximately 20,000 feet. Rigs having between 751 and 900 horsepower
are generally used for horizontal drilling or recompletion jobs and deep
workovers at depths of up to approximately 25,000 feet. These rigs are almost
always operated for continuous 24-hour periods as contrasted to the Company's
other rigs that typically operate during daylight hours only.

  The Company operates two barge-mounted workover rigs in the Louisiana inland
waters. These rigs typically are outfitted by moving a land workover rig onto
the barge, with operating crews housed on the barge, and have the capability to
operate for continuous 24-hour periods. In addition to hourly charges for the
workover rigs, when market conditions permit, the Company charges its customers
for auxiliary equipment, travel time, mobilization and other related items.

                                       10
<PAGE>
  Set forth below is certain information pertaining to the Company's land-based
workover rigs including those acquired in the Pride Acquisition.

                                                             PRIDE
DESCRIPTION                                  DAWSON      ACQUISITION       TOTAL
-----------                                  ------      -----------       -----
Swab ..............................              2             17             19
Pole ..............................            --               1              1
150-250 hp ........................            --              71             71
251-350 hp ........................             71            214            285
351-550 hp ........................             13             95            108
551-750 hp ........................              1              6              7
751-900 hp ........................              2              3              5
                                               ---            ---            ---
                                                89            407            496

  The Company operated approximately 82 of 89 rigs during the 1996 calendar
year. The Company acquired 407 additional rigs from Pride in February 1997. In
the Pride Purchase Agreement, Pride represented that it had operated 318 of the
approximately 407 rigs within the 12 months ended December 23, 1996. The Company
believes that market demand may justify the incremental cost of refurbishing a
majority of the remaining 89 rigs acquired from Pride and anticipates that a
minority of the 89 rigs may not be restored to operating condition. Therefore,
the Company's stacked rigs will be refurbished, used for spare parts or
liquidated.

  Workover rig services are categorized by the type of job performed:
completion, maintenance, workover, and plugging and abandonment.

  COMPLETION SERVICES. Completion services prepare a newly drilled well for
production. The completion process may involve selectively perforating the well
casing to access producing zones, stimulating and testing these zones and
installing downhole equipment. The Company provides a workover rig to assist in
this completion process. Newly drilled wells are frequently completed by well
servicing rigs to minimize the use of higher cost drilling rigs. The completion
process typically requires a few days to several weeks, depending on the nature
and type of the completion, and generally requires additional auxiliary
equipment.

  The demand for well completion services is directly related to drilling
activity levels, which are sensitive to expectations relating to and changes in
oil and gas prices. During periods of weak drilling demand, drilling contractors
frequently price well completion work competitively compared to a workover rig
so that the drilling rig stays on the job. Thus, excess drilling capacity will
serve to reduce the amount of completion work available to the well servicing
industry.

                                       11
<PAGE>
  MAINTENANCE SERVICES. Maintenance services are required on producing oil and
gas wells to ensure efficient and continuous operation. These services consist
of routine mechanical repairs necessary to maintain production from the well,
such as repairing parted sucker rods or defective downhole pumps in an oil well
or replacing defective tubing in a gas well. The Company provides the workover
rigs, equipment and crews for these maintenance services. Many of these workover
rigs also have pumps and tanks that can be used for circulating fluids into and
out of the well. Maintenance jobs are often performed on a series of wells in
proximity to each other and typically take less than 48 hours per well.

  Maintenance services are generally required throughout the life of a well. The
need for these services does not depend on the level of drilling activity and is
generally independent of short-term fluctuations in oil and gas prices.
Accordingly, maintenance services are generally the most stable type of workover
rig services activity. The general level of maintenance, however, is affected by
changes in the total number of producing oil and gas wells in the Company's
geographic service area.

  WORKOVER SERVICES. In addition to periodic maintenance, producing oil and gas
wells occasionally require major repairs or modifications called "workovers."
Workover services include extensions of existing wells to drain new formations
either through deepening well bores or through drilling of horizontal laterals.
In less extensive workovers, the Company's rigs are used to drill out plugs and
packers in existing well bores to access previously bypassed productive zones.
The Company's workover rigs are also used to convert producing wells to
injection wells during enhanced recovery operations. Workover services also
include major subsurface repairs such as casing repair or replacement, recovery
of tubing and removal of foreign objects in the well bore. These extensive
workover operations are normally performed by a workover rig with additional
specialized auxiliary equipment, which may include rotary drilling equipment,
mud pumps, mud tanks and blowout preventers, depending upon the particular type
of workover operation. Most of the Company's workover rigs are designed and
equipped to perform complex workover operations. A workover may last from a few
days to several weeks.

  The demand for workover services is more sensitive to expectations relating to
and changes in oil and gas prices than the demand for maintenance services, but
not as sensitive as the demand for completion services. When oil and gas prices
are low, there is little incentive to perform workovers on wells to increase
production and well operators tend to defer workover services. As oil and gas
prices increase, the level of workover activity tends to increase as operators
seek to increase production by enhancing the efficiency of their wells.

  PLUGGING AND ABANDONMENT SERVICES. Workover rigs are also used in the plugging
and abandonment of oil and gas wells no longer capable of producing in economic
quantities. The demand for well plugging services is not impacted significantly
by levels of demand for oil and gas.

                                       12
<PAGE>
LIQUID SERVICES

  The Company provides liquid services, which are comprised of vacuum truck
services, frac tank rentals and salt water injection services. The Company uses
its vacuum trucks, frac tanks and salt water injection wells to provide an
integrated mix of liquid services to well site customers. For the fiscal year
ended March 31, 1997, liquid services contributed approximately 36% of the
Company's revenues.

  VACUUM TRUCK SERVICES. The Company previously owned and operated 175 vacuum
trucks and it acquired an additional 10 vacuum trucks in connection with the
Pride Acquisition. A vacuum truck is a tractor trailer with a fluid hauling
capacity of 130 barrels. A large vacuum pump mounted on each truck extracts
fluids from pits, tanks and other storage facilities. The vacuum trucks also are
used for the following purposes: to transport water to fill frac tanks on well
locations, including frac tanks provided by the Company and by others; to
transport produced salt water to injection wells, including injection wells
owned and operated by the Company; and to transport brine and other drilling
fluids to and from well locations. In conjunction with the rental of its frac
tanks, the Company generally uses its vacuum trucks to transport water for use
in fracturing operations. Following completion of fracturing operations, the
Company's vacuum trucks are used to transport salt water produced as a result of
the fracturing operations from the well site to injection wells. Vacuum truck
services are generally provided to oilfield operators within a 30-mile radius of
the Company's nearest yard.

  FRAC TANK RENTALS. The Company owns 696 frac tanks located primarily at the
Company's yards in Bryan, Giddings and Kilgore, Texas. Each frac tank can store
up to 500 barrels of fluid and is used by oilfield operators to store various
fluids at the well site, including water, drilling mud, acid and brine. The
Company transports frac tanks on its trucks to well locations which are usually
within a 30-mile radius of the Company's nearest yard. Frac tanks are used
during all phases of the life of a producing well. The Company generally rents
frac tanks at daily rates for a minimum of four days. A typical fracturing
operation, absent complications, can be completed within four days using 20 to
100 frac tanks.

  INJECTION WELL SERVICES. The Company owns or leases 22 injection wells that
are authorized to dispose of salt water and incidental non-hazardous oil and gas
wastes, each with an injection capacity of 2,000 to 21,000 barrels per day. The
Company's injection wells are strategically located in close proximity to its
customers' producing wells. These wells are utilized primarily to dispose of
salt water produced from oil and gas wells. Most oil and gas wells ultimately
produce varying amounts of salt water and, particularly in vertically fractured
formations such as those common in the Austin Chalk trend, produce salt water at
increasing rates throughout their productive lives. In addition, these wells are
utilized for the disposal of incidental, non-hazardous oil and gas wastes. In
Texas and Arkansas, oil and gas wastes and salt water produced from oil and gas
wells are required by law to be disposed of in authorized facilities, including
permitted injection wells. Injection wells are licensed by state authorities and
are completed in permeable formations below the fresh water table.

                                       13
<PAGE>
  The Company utilizes its injection wells primarily for the disposal of salt
water and incidental, non-hazardous oil and gas waste transported from the well
site by vacuum trucks owned and operated by the Company. Although the Company is
authorized to inject salt water and non-hazardous oil and gas wastes transported
by other licensed vacuum truck operators, the Company does not currently permit
such uses by third parties. The Company also maintains separators at each of its
injection wells permitting it to salvage residual crude oil, which is later sold
for the account of the Company.

  The Company's injection operations pose certain risks of environmental
liability to the Company. Although the Company monitors the injection process,
any leakage from the subsurface portions of the wells could cause degradation of
fresh groundwater resources, potentially resulting in cancellation of operation
of the well, fines and penalties from governmental agencies, expenditures for
remediation of the affected resource, and liability to third parties for
property damages and personal injuries. In addition, the sale by the Company of
residual crude oil collected as part of the saltwater injection process could
impose liability on the Company in the event the entity to which the oil was
transferred fails to manage the material in accordance with applicable
environmental health and safety laws.

PRODUCTION SERVICES

  The Company provides production services, which are comprised of production
testing services, slickline wireline services, fishing and rental tool services
and pipe testing. For the fiscal year ended March 31, 1997, production services
contributed approximately 15% of the Company's revenues.

  PRODUCTION TESTING SERVICES. The Company owns 21 gas production testing units
that are used to provide services to oil and gas wells located onshore and in
inland waters. The Company performs production testing services for oil and gas
producers primarily along the Texas Gulf Coast and to a limited extent in
Mexico. In addition, the Company is bidding on a multi-year contract for
services in northern Mexico.

  The Company's equipment includes several trailer-mounted manifolds,
separators, heater treaters, sand separators, light generators and slickline
wireline units. Manifolds are used to reduce the flowing pressure of the well
stream to a rate which will easily flow through the production testing
equipment. After the appropriate well stream rate is achieved, a separator is
used to divide the well stream into its respective components -- oil, gas and
water. For gas wells, a heater is used to prevent the gas from freezing during
flowbacks. Slickline wireline equipment generally is used to lower measurement
equipment into a well for several days to retrieve data to determine the
characteristics of the reservoir.

                                       14
<PAGE>
  The Company uses its production testing units to perform deliverability tests
required upon the initial completion of a well and periodically during the
productive life of a gas well to determine the maximum production allowable
under certain rules of the Texas Railroad Commission, the state oil and gas
regulatory agency. In addition, these units are used to clean and test
stimulated wells and to measure the pressure, volume and quality of gas and
liquids produced by the well. These units also are used to determine the most
efficient production flow rate, to run pressure build-up tests that measure the
rate of increase of shut-in gas pressure to determine reservoir characteristics
and to determine whether a producing formation has been damaged.

  SLICKLINE WIRELINE SERVICES. The Company owns seven slickline wireline units
and will acquire three additional units upon the closing of the Pride
Acquisition. The mechanical downhole wireline or "slickline" services are used
to simplify completion operations and in connection with regular maintenance on
producing wells. In some cases, slickline wireline services may be used instead
of workover rigs to provide workover services. By using slickline wireline
services, workover services can be performed under 15,000 psi of pressure
without shutting-in the well. The Company also provides slickline wireline
consulting services where unusual conditions exist.

  FISHING AND RENTAL TOOLS. The Company provides a complete line of cased hole
fishing and rental tools to oilfield operators and well service companies from
two yards in the Texas Panhandle. The Company's rental tool inventory includes
both air compressor equipment, which is used in drilling and workover
activities, and fishing tools, which are used to mill or retrieve loose or
broken equipment or other material in the well bore or to free stuck pipe and
other tools, such as slips, elevators and casing cutters. The Company rents the
equipment to its customers at daily rates and, in the case of air compressors
and fishing tools, generally conducts or supervises the operations.

  PIPE TESTING. The Company operates nine pipe testing units along the Texas
Gulf Coast. The Company's testing equipment is used during completion and
recompletion operations for leak detection in the internal pipe systems of oil
and gas wells.

                                       15
<PAGE>
COMPETITION

  The workover rig and production services industry is highly competitive and
fragmented and includes several large companies and a number of small companies
capable of competing effectively on a local basis. As a result of the Pride
Acquisition, the Company is the second largest provider of workover rigs in the
United States behind Pool Energy Services Co. ("Pool"). Pool and Key Energy
Group, Inc. ("Key") are the largest companies that currently compete with the
Company in providing workover rig and liquid services in the domestic well
servicing markets. Pool and Key operate in multiple geographic regions and Pool
has significantly more domestic workover rigs than the Company. In addition to
these large companies, the Company has numerous regional competitors for each of
the services it provides. The Company believes that it is competitive in terms
of pricing, performance, equipment, safety, availability of equipment to meet
customer needs and availability of experienced, skilled personnel in those areas
in which it operates.

  Excess capacity in the well servicing industry has resulted in severe price
competition throughout much of the past decade. In the well servicing market, an
important competitive factor in establishing and maintaining long-term customer
relationships is having an experienced and skilled work force. In recent years,
many of the Company's larger customers have placed an emphasis not only on
pricing, but also on safety records and quality management systems of
contractors. The Company believes that such factors will gain further importance
in the future. The Company has directed substantial resources toward employee
safety and quality management training programs as well as its employee review
process. While the Company's efforts in these areas are not unique, many
competitors, particularly small contractors, have not undertaken similar
training programs for their employees. The Company expects competition and
pricing pressures to continue in the foreseeable future.

CUSTOMERS

  The Company has approximately 3,700 active customers. The Company's largest
customer, Union Pacific Resources Company ("UPRC"), accounted for approximately
20.00% of the Company's revenues for the fiscal year ended March 31, 1997. The
Company has a contract with UPRC to provide liquid and workover rig services,
which expires in February 1999 (with respect to liquid services) and August 1997
(with respect to workover rig services). The Company is required to maintain
established levels of insurance and to indemnify UPRC against all losses arising
in whole or in part from the Company's negligence, whether or not UPRC and its
agents were contributorily negligent. While the Company believes that its
relationship with UPRC is good, the loss of UPRC, or a significant reduction in
business done with the Company by UPRC, if not offset by sales to new or
existing customers, could have a material adverse effect on the Company's
business, results of operations and prospects. No other customer accounted for
more than 10% of the Company's revenues during the fiscal year ended March 31,
1997.

                                       16
<PAGE>
EMPLOYEES

  As of June 20, 1997, the Company employed approximately 3,051 people, of whom
approximately 2,527 were employed on an hourly basis. The Company's future
success will depend partially on its ability to attract, retain and motivate
qualified personnel. The Company is not a party to any collective bargaining
agreements and has not experienced any strikes or work stoppages. The Company
considers its relations with employees to be generally satisfactory.

OPERATING RISKS AND INSURANCE

  The Company's operations are subject to hazards inherent in the oil and gas
industry, such as blowouts, explosions, craterings, fires and oil spills, that
can cause personal injury or loss of life, damage to or destruction of property,
equipment, the environment and marine life, and suspension of operations. In
addition, claims for loss of oil and gas production and damage to formations can
occur in the workover business. If a serious accident was to occur at a location
where the Company's equipment and services are used, it could result in the
Company being named as a defendant in lawsuits asserting potentially large
claims.

  Because the Company's vacuum truck and frac tank rentals involve the
transportation of heavy equipment and materials, the Company may experience
traffic accidents which may result in spills, property damage and personal
injury. Despite the Company's efforts to maintain high safety standards, the
Company from time to time has suffered losses in the past and anticipates that
it could experience further losses in the future. Moreover, the frequency and
severity of such incidents affect the Company's operating costs and
insurability, and its relationship with customers, employees and regulators. Any
significant increase in the frequency or severity of such incidents, or the
general level of compensation awards with respect thereto, could adversely
affect the cost of, or ability of the Company to obtain, workers' compensation
and other forms of insurance, and could have other material adverse effects on
the Company's financial condition and results of operations.

  As a protection against operating hazards, the Company maintains broad
insurance coverage, including physical damage, employer's liability,
comprehensive commercial general liability and workers' compensation insurance.
The Company believes that it is adequately insured for public liability and
property damage to others with respect to its operations, and that its insurance
coverage is comparable to that which is customary in the industry against such
hazards. However, such insurance may not be sufficient to protect the Company
against liability for all consequences of well disasters, extensive fire damage,
damage to personal property, injuries to or deaths of persons or damage to the
environment. In addition, certain insurance policies exclude coverage for
damages resulting from environmental contamination. The Company also carries
insurance to

                                       17
<PAGE>
cover physical damage to or loss of certain of its workover rigs. No assurance
can be given that the Company will be able to maintain the type and amount of
coverage that it considers adequate at rates that it considers reasonable or
that insurance will continue to be available on terms as favorable as the
Company's existing arrangements.

  In addition to insurance, the Company conducts training programs designed to
promote the safe operation of all equipment and to minimize accidents occurring
on job sites. The Company gives its managers incentives, through compensation
arrangements, to take all reasonable steps possible to promote safety. The
Company monitors safety closely and has carefully designed safety programs to
reduce costs associated with accidents. However, there can be no assurance that
the Company's insurance or safety programs will be adequate to protect against
liability for accidents occurring on the job site or affecting the Company's
equipment.

ENVIRONMENTAL REGULATION

  Many of the Company's operations take place in or near ecologically sensitive
areas, such as the Texas Gulf Coast and the Louisiana inland waters, as well as
in states that stringently regulate environmental matters, such as California.
In addition, the Company's operations routinely involve the handling of
significant amounts of waste materials, some of which are classified as
hazardous substances. The Company's operations and facilities are thus subject
to numerous local, state and federal environmental and public health and safety
laws, rules and regulations, including laws concerning the containment and
disposal of hazardous materials, oilfield waste and other waste materials, the
use of underground storage tanks and the use of underground injection wells. The
regulations applicable to the Company's operations include certain regulations
controlling the discharge of hazardous or toxic materials into the environment,
requiring removal or remediation of pollutants, requiring permits or licenses
issued by regulatory agencies and imposing civil and criminal penalties for
violations. Some of the statutory and regulatory programs that apply to the
Company's operations also authorize private suits, the recovery of natural
resource damages by the government, injunctive relief and cease and desist
orders. Moreover, environmental laws typically expose the Company to "strict
liability" rendering a person or entity liable for environmental damage without
regard to negligence or fault on the part of such person or entity. As a result,
the Company could be liable for cleanup costs, even if the situation resulted
from previous acts by the Company that were lawful at the time or from the
improper conduct of, or conditions caused by, previous property owners, lessees
or other persons not associated with the Company. Environmental laws have become
more stringent in recent years and are expected to become even more so in the
future.

  Cleanup costs associated with environmental claims or capital expenditures or
increased operating costs associated with changes in environmental laws and
regulations could be substantial and could have a material adverse effect on the
Company's financial condition and

                                       18
<PAGE>
results of operations. However, the cost of environmental compliance has not had
any material adverse effect on the Company's operations, financial condition or
competitive position in the past, and management is not currently aware of any
situation or condition that it believes is likely to have any such material
adverse effect or require any material capital expenditure in the foreseeable
future. In addition to management personnel who are responsible for monitoring
environmental compliance and arranging for remedial actions as required from,
the Company also employs from time to time outside experts to advise and assist
the Company's environmental compliance efforts.

  In addition to having a direct effect on the Company, local, state and federal
environmental regulations also may negatively impact oil and gas exploration and
production companies which in turn could have a material adverse effect on the
Company. To the extent laws are enacted or other governmental action is taken
that prohibits or restricts drilling or imposes environmental protection
requirements that result in increased costs to the oil and gas industry in
general and the drilling industry in particular, the financial condition and
results of operations of the Company could be adversely affected.

  In this regard, RCRA, the principal federal statute governing the disposal of
solid and hazardous wastes, includes a statutory exemption that allows oil and
gas exploration and production wastes to be classified as nonhazardous waste. A
similar exemption is contained in many of the state counterparts to RCRA,
including the state statutes in Texas, New Mexico and Louisiana however, there
is no such exemption in the California statutes. If oil and gas exploration and
production wastes were required to be managed and disposed of as hazardous
waste, either as a result of changes in RCRA or the imposition of more stringent
state regulations, the Company could be required to make significant
unanticipated capital and operating expenditures or to cease or curtail certain
operations. Further, if such wastes were required to be managed and disposed of
as hazardous waste, domestic oil and gas producers, including many of the
Company's customers, could be required to incur substantial obligations with
respect to such waste. Because of the potential impact on the Company's
customers, any regulatory changes that impose additional restrictions or
requirements on the disposal of oil and gas wastes could adversely affect demand
for the Company's services.

SENIOR NOTES; SUBSIDIARY GUARANTEES

  Terms used in this subheading as defined terms have the same meanings as set
forth in the Indenture between the Company and its Subsidiary Guarantors, dated
as of February 20, 1997, with U.S. Trust Company of Texas, N.A. as trustee,
relating to the Company's 9 3/8% Senior Notes due 2007. Each of the Company's
Significant Subsidiaries on the Issue Date, including those acquired in the
Pride Acquisition, and each other Restricted Subsidiary that provides a
guarantee under the Credit Facility (defined in the Indenture to include the
Working Line which is in effect, and the Acquisition Line, which is not) became
a Subsidiary Guarantor under

                                       19
<PAGE>
the Indenture. Each Subsidiary Guarantor has unconditionally guaranteed on a
senior basis, jointly and severally, the full and prompt performance of the
Company's obligations under the Indenture and the Notes, including the payment
of principal and interest on the Notes. The obligations of each Subsidiary
Guarantor under its Subsidiary Guarantee is limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Subsidiary Guarantor and after giving effect to any collections from or payments
made by or on behalf of any other Subsidiary Guarantor in respect of the
obligations of such other Subsidiary Guarantor under its Subsidiary Guarantee or
pursuant to its contribution obligations under the Indenture, result in the
obligations of such Subsidiary Guarantor under the Subsidiary Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. The terms of the Subsidiary Guarantees provide that, for purposes of
such limitations and the applicable fraudulent conveyance laws, any indebtedness
of a Subsidiary Guarantor incurred from time to time pursuant to the Credit
Facility and secured by a perfected Lien on the assets of such Subsidiary
Guarantor (assuming, for purposes of such determination, that the incurrence of
any such indebtedness and the granting of any such security interest did not
violate any such fraudulent conveyance laws) shall be deemed, to the extent of
the value of the assets subject to such Lien, to have been incurred prior to the
incurrence by such Subsidiary Guarantor of liability under its Subsidiary
Guarantee.

  The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person) another Person (other than the Company or another Subsidiary Guarantor),
whether or not affiliated with such Subsidiary Guarantor, unless (i) subject to
the provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Subsidiary Guarantor) shall
execute a Subsidiary Guarantee and deliver an opinion of counsel in accordance
with the terms of the Indenture; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; (iii) such Subsidiary
Guarantor, or any Person formed by or surviving any such consolidation or
merger, would have Consolidated Net Worth (immediately after giving effect to
such transaction), equal to or greater than the Consolidated Net Worth of such
Subsidiary Guarantor immediately preceding the transaction; (iv) the Company
would be permitted by virtue of the Company's pro forma Fixed Charge Coverage
Ratio, immediately after giving effect to such transaction, to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the Indenture; and (v) such transaction does not violate
certain other covenants described in the Indenture.

  The Indenture provides that in the event of (i) the designation of any
Subsidiary Guarantor as an Unrestricted Subsidiary or (ii) a sale or other
disposition of all or substantially all of the property or assets of any
Subsidiary Guarantor to a third party or an Unrestricted Subsidiary, by way of
merger, consolidation or otherwise, or a sale or other disposition of all of the
capital stock of any Subsidiary Guarantor, in either case, in a transaction or
manner that does not violate any of the covenants in the Indenture, then such
Subsidiary Guarantor (in the event of such a designation

                                       20
<PAGE>
or a sale or other disposition, by way of such a merger, consolidation or
otherwise, of all of the capital stock of such Subsidiary Guarantor) or the
Person acquiring the property (in the event of a sale or other disposition of
all or substantially all of the properties or assets of such Subsidiary
Guarantor) will be released from and relieved of any obligations under its
Subsidiary Guarantee, PROVIDED that any Net Proceeds of such sale or other
disposition are applied in accordance with certain covenants set forth in the
Indenture, and PROVIDED, FURTHER, HOWEVER, that any such termination shall occur
only to the extent that all obligations of such Subsidiary Guarantor under all
of its guarantees of, and under all of its pledges of assets or other security
interests that secure, any other Indebtedness of the Company or its Restricted
Subsidiaries shall also terminate upon such release, sale or disposition.

  The Indenture provides that (i) if the Company or any of its Restricted
Subsidiaries shall, after the Issue Date, (a) transfer or cause to be
transferred, any assets, businesses, divisions, real property or equipment
having an aggregate fair market or book value in excess of $1.0 million to any
Restricted Subsidiary that is not a Subsidiary Guarantor or (b) make any
Investment having an aggregate fair market or book value in excess of $1.0
million in any Restricted Subsidiary that is not a Subsidiary Guarantor or (ii)
if, after the Issue Date, any Restricted Subsidiary that is not a Subsidiary
Guarantor shall own any assets or properties having an aggregate fair market or
book value in excess of $1.0 million, then the Company shall cause such
Restricted Subsidiary to execute a Subsidiary Guarantee and deliver an opinion
of counsel, in accordance with the terms of the Indenture. In addition, the
Company shall not permit any of its Restricted Subsidiaries, other than a
Subsidiary Guarantor, directly or indirectly, to (i) incur, guarantee or secure
through the granting of Liens the payment of any Indebtedness of the Company or
(ii) pledge any intercompany notes representing obligations of any of its
Restricted Subsidiaries to secure the payment of any Indebtedness of the
Company, in each case, unless the Company shall cause such Restricted Subsidiary
to execute a Subsidiary Guarantee and deliver an opinion of counsel in advance
in accordance with the terms of the Indenture.

  The Notes are effectively subordinated in right of payment to all existing and
future senior Indebtedness of the Company, which includes any draws made under
the Credit Facility. As of March 31, 1997, the Company's Credit Facility
consisted of a $50.0 million working capital line of credit which, if borrowed,
would be included as senior Indebtedness. The Indenture also permits the Company
to have an acquisition line of credit of up to $10.0 million. See "Management's
Discussion and Analysis - Liquidity and Capital Resources." Thus, the Notes and
the Subsidiary Guarantees are effectively subordinated to claims of the lenders
under the Credit Facility to the extent of such pledged collateral. At March 31,
1997, the Notes and the Subsidiary Guarantees were not subordinated to any
secured Indebtedness (excluding letters of credit) of the Company or the
Subsidiary Guarantors.

                                       21
<PAGE>
  Certain summary financial information concerning Dawson Production Services,
Inc., on an unconsolidated basis, is set forth in the notes to the financial
statements appearing elsewhere in this report. As noted above, the Company is in
the process of completing the transfer of substantially all of its assets to the
Partnership, which is expected to occur during July, 1997. Accordingly, at such
time, substantially all of Company's revenue producing assets (other than
interests in the Partnership itself) will be owned by the Partnership, which is
a Subsidiary Guarantor. The Company's subsidiaries making such transfers are
also Subsidiary Guarantors and the transfers are thus permissible under the
terms of the Indenture.

ITEM 2. PROPERTIES

PROPERTIES

  The principal office of the Company is located in approximately 16,400 square
feet of leased office space in San Antonio, Texas. The Company now operates
approximately 39 yards, 15 of which it owns and 24 of which it leases. Of the
Company's approximately 39 yards, 32 yards are located in Texas, 2 yards are
located in Louisiana, 2 yards are located in New Mexico, and 3 yards are located
in California. The Company has an option to purchase 9 of its leased yards
pursuant to the terms of the Pride Purchase Agreement. The Company also operates
21 injection wells in Texas and 1 in Arkansas, 6 of which it owns and 15 of
which it leases. The Company believes that its leased and owned properties, none
of which individually is material to the Company, are adequate for its current
needs.

ITEM 3. LEGAL PROCEEDINGS

  From time to time, the Company is a party to litigation or other legal
proceedings that the Company considers to be a part of the ordinary course of
its business. The Company currently is not involved in any legal proceedings
that could reasonably be expected to have a material adverse effect on the
Company's financial condition or results of operations. See "Business Operating
Risks and Insurance."

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

  No matters were submitted, during the fourth quarter of the Company's fiscal
year ended March 31, 1997, to a vote of its shareholders.

                                       22
<PAGE>
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

  The Company's Common Stock commenced trading on the Nasdaq National Market on
March 20, 1996 under the symbol "DPSI." The following table sets forth the high
and low sale prices per share of the Common Stock as reported by the Nasdaq
National Market for the periods indicated. 

                                                          HIGH            LOW
Fiscal 1996                                              ------         --------
       Fourth Quarter (March 20, 1996 - March 31, 1996)  $11 7/8        $10

Fiscal 1997
       First Quarter (April 1 - June 30, 1996)           $14 1/2        $10 3/4
       Second Quarter (July 1 - September 30, 1996)      $14            $ 9 3/4
       Third Quarter (October 1 - December 31, 1996      $16 1/4        $11 1/2
       Fourth Quarter (January 1 - March 31, 1997)       $16 1/2        $11 3/16

  On March 31, 1997, the last reported sale price of the Common Stock on the
Nasdaq National Market was $12 1/4 per share. At June 24, 1997, the Company had
112 shareholders of record of the Common Stock. The Company believes that there
are in excess of 400 beneficial owners of the Common Stock.

  The Company has never paid cash dividends on the Common Stock and does not
anticipate that cash dividends will be paid in the foreseeable future.
Furthermore, certain provisions of the Credit Facility and the Indenture
restrict the Company's ability to pay cash dividends on the Common Stock. Prior
to the conversion of the Company's Series A Preferred Stock into Common Stock in
March 1996, dividends were paid on the Series A Preferred Stock at the rate of
$1.25 per share per annum, in accordance with the requirements of the Company's
Articles of Incorporation. Such dividends were payable, at the option of the
Company, either in cash or in shares of Common Stock, at the rate of one share
of Common Stock for each $3.49 of dividends due. The Company paid dividends on
the Series A Preferred Stock both in cash and in shares of Common Stock. The
Company's loan agreement in effect at the time with its bank prohibited the
payment of dividends; however, the bank waived this provision with respect to
the payment of Series A Preferred Stock dividends. No Series A Preferred Stock
is currently outstanding.

  The Company currently intends to retain any future earnings to finance the
expansion and continuing development of the Company's business. The declaration
and payment in the future of any cash dividends will be at the election of the
Company's Board of Directors and will depend upon the earnings, capital
requirements and financial position of the Company, future loan covenants,
general economic conditions and other pertinent factors. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

                                       23
<PAGE>
  During the period covered by this report, the Company sold the following
unregistered securities. On or about April 1, 1996, the Company granted options
to acquire 34,400 shares of its Common Stock at an exercise price of $10.75 per
share to eight non-employee directors. These options will expire on April 1,
2006. On or about July 3, 1996, the Company granted options to acquire 290,650
shares of its Common Stock at an exercise price of $11.375 per share to 33
employees and a consultant. These options expire on July 3, 2006. On or about
November 20, 1996, the Company granted options to acquire 4,300 shares of its
Common Stock at an exercise price of $12.25 per share to one director. These
options expire on November 20, 2006. All of the above grants of options were
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

  In addition, the Company issued the following restricted shares of its Common
Stock in connection with the exercise of options. On or about April 5, 1996, the
Company issued 4,300 shares to a director for $7.44 per share. On or about May
30, 1996, the Company issued 4,300 shares to a director for $7.44 per share. On
or about January 14, 1997, the Company issued 4,300 shares for $7.44 per share
and 4,300 shares for $10.75 per share to a former directors, transferee. On or
about January 23, 1997, the Company issued 4,300 shares to a former employee or
director for $4.65 per share. All such issuances were made in connection with
the exercise of options and were exempt from registration pursuant to Section
4(2) of the Securities Act of 1933.

                      SELECTED CONSOLIDATED FINANCIAL DATA

ITEM 6. SELECTED FINANCIAL DATA

  The following table sets forth selected consolidated financial data for the
Company for the periods indicated. The selected consolidated financial data for
all fiscal years presented have been derived from the audited consolidated
financial statements of the Company. The selected financial data should be read
in conjunction with, and is qualified in its entirety by, the consolidated
financial statements of the Company and related notes and other financial
information included elsewhere in this Annual Report on Form 10-K and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

                                       24
<PAGE>
<TABLE>
<CAPTION>
                                                                                   AT OR FOR YEARS
                                                                                         ENDED
                                                                                        MARCH 31,
                                                      -----------------------------------------------------------------------------
                                                         1993            1994             1995            1996             1997
                                                      ----------     -----------      -----------      -----------      -----------
                                                                   (in thousands, except share and per share amounts)
<S>                                                   <C>            <C>              <C>              <C>              <C>        
INCOME STATEMENT DATA:
Revenues ........................................     $   20,822     $    27,942      $    36,005      $    52,391      $    92,628
Costs and expenses:
  Operating .....................................         14,772          19,937           24,241           34,320           59,958
  General and administrative ....................          3,040           3,854            5,574            8,937           14,790
  Depreciation and amortization .................          1,374           1,707            2,608            4,396            7,844
                                                      ----------     -----------      -----------      -----------      -----------
Operating income ................................          1,636           2,444            3,582            4,738           10,036
Interest expense ................................            301             282              789            1,848            2,313
Other (income) expense ..........................             84             (61)             (41)            (129)            (697)
Minority interest ...............................            358             902            1,092              937             --
                                                      ----------     -----------      -----------      -----------      -----------

Income before income taxes and
     extraordinary item .........................            893           1,321            1,742            2,082            8,420

Provision for income taxes ......................            320             525              681              709            3,343
                                                      ----------     -----------      -----------      -----------      -----------
Income before extraordinary item ................            573             796            1,061            1,373            5,077
Extraordinary item(1) ...........................           --               (92)            --               (514)            --
                                                      ----------     -----------      -----------      -----------      -----------
Net income ......................................            573             704            1,061              859            5,077
Preferred stock dividends .......................            101             101              101               88             --
                                                      ----------     -----------      -----------      -----------      -----------
Net income applicable to common .................     $      472     $       603      $       960      $       771      $     5,077
                                                      ==========     ===========      ===========      ===========      ===========

    Primary earnings per share ..................     $      .23     $       .29      $       .45      $       .27      $       .71
    Fully diluted earnings per share ............     $      .23     $       .29      $       .42      $       .27      $       .71
    Average number of shares outstanding
    -primary ....................................      2,020,664       2,052,168        2,155,380        2,931,234        7,189,638
    Average number of shares outstanding
    -fully diluted ..............................      2,020,664       2,450,791        2,648,740        3,207,622        7,189,638

BALANCE SHEET DATA:
Cash and cash equivalents .......................     $    1,139     $     2,172      $     2,797      $    13,863      $    42,330
Net property and equipment ......................          8,625           8,978           25,321           29,115          145,641
Total assets ....................................         15,828          16,714           40,525           56,368          273,736
Long-term debt and other obligations,
    net of current portion ......................          1,722           1,623           15,989            3,695          143,306
Total shareholders' equity ......................          6,009           6,720           10,098           45,694          106,219
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(2) ...........           3.6x            5.0x             3.1x             2.1x             4.4x
EBITDA(3) .......................................     $    3,010     $     4,151      $     6,190      $     9,134      $    17,880
Ratio of EBITDA to interest expense .............          10.0x           14.7x             7.9x             4.9x             7.7x
</TABLE>
-----------
(1)  Includes a $92,000 charge in fiscal 1994 to reflect the cumulative effect
     of change in accounting principle.

(2)  For purposes of computing the ratio of earnings to fixed charges, earnings
     are computed as income before income taxes, extraordinary item and
     cumulative effect of a change in accounting principle, plus fixed charges.
     Fixed charges consist of interest, whether expensed or capitalized,
     amortization of debt issuance costs and an estimated portion of rentals
     representing interest costs.
                                 
                                       25
<PAGE>
  (3) EBITDA is defined as earnings before interest expense, taxes, depreciation
and amortization, minority interest and other (income) expense and is presented
because it is a widely accepted financial indication of a company's ability to
incur and service debt. EBITDA should not be considered as an alternative to
earnings as an indicator of the Company's operating performance or to cash flows
as a measure of liquidity.

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

  The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward looking statements which involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward looking statements. In addition, the
Management's Discussion and Analysis should be read in conjunction with, and is
qualified in its entirety by reference to, the financial statements of the
Company and the notes thereto included elsewhere in this Annual Report. This
discussion and analysis of operations compares the three fiscal years ended
March 31, 1995, 1996 and 1997.

GENERAL

  The Company's operations have been significantly impacted by the Pride
Acquisition. As a result of the Pride Acquisition, the Company increased its
workover rig fleet to over five times its previous size to become the second
largest provider of workover rigs in the United States. In addition, the Company
has acquired significant operations in California, a market in which it did not
previously operate. The Company also will seek to expand its liquid and
production services into land-based well servicing areas acquired through the
Pride Acquisition. The Company does not have any current understanding,
arrangement or agreement to acquire other businesses or assets. There can be no
assurance that attractive acquisitions will be available to the Company at
prices it believes to be reasonable or that any acquisition achieved will
ultimately prove to be a successful undertaking by the Company. Consistent with
its strategy, the Company intends to continue to pursue acquisitions of
businesses and assets as attractive opportunities become available.

  The Company has experienced revenue growth as a result of the Pride
Acquisition and, to a lesser extent, the Taylor Acquisition. The Company derives
its revenues from workover rig services, liquid services and production
services. Workover rig services are billed at hourly rates that are generally
determined by the type of equipment required, market conditions in the region in
which the rig operates, the ancillary equipment provided on the rig and the
necessary personnel. The Company charges its customers for liquid services
either on an hourly basis or on a per barrel basis depending on the services
offered, while production services are primarily billed on an hourly basis. The
base rates for the Company's services have generally been stable over the past
three years.

                                       26
<PAGE>
  In February 1997, the Company sold 4,722,259 shares of its common stock at
$12.50 per share in a public offering which yielded net proceeds of
approximately $55.3 million. Concurrent with the stock offering, the Company
sold $140 million of senior unsecured notes at par value. The senior unsecured
notes carry a coupon rate of interest of 9 3/8%, the proceeds of which netted
the Company approximately $135.3 million. The total proceeds from the stock and
senior unsecured note offerings (the "Offerings") yielded the Company combined
proceeds of approximately $190.6 million of which $135.4 million was used to pay
the consideration attributable to the Pride Acquisition. Approximately $12.3
million was used to repay existing indebtedness and the remainder is being used
for working capital and general corporate purposes.

  The Company's operating costs are comprised primarily of labor and maintenance
costs. Labor costs generally are variable and are incurred only while a workover
rig is operating or liquid services or production services are being provided;
however, the Company employs rig personnel to perform maintenance and other
services who are paid even when rigs are not operating. The Company's
administrative staff at the yard level and in the corporate office are accounted
for as general and administrative expense. Insurance costs generally are fixed
costs and relate to the number of active rigs, trucks and other equipment in the
Company's fleet. The Company's workers' compensation insurance costs have
declined over the past two years due to its favorable safety record.

RESULTS OF OPERATIONS

YEAR ENDED MARCH 31, 1997 COMPARED TO THE YEAR ENDED MARCH 31, 1996

  REVENUES. Revenues for the year ended March 31, 1997 were $92.6 million, an
increase of 77% from $52.4 million for the year ended March 31, 1996. This
increase in revenues is primarily attributable to the various acquisitions made
during the fiscal year ended March 31, 1997. The Pride Acquisition added 407
workover rigs, the Taylor Acquisition added 66 vacuum trucks to the Company's
fleet, and the acquisition of Mobley Company, Inc. ("the Mobley Acquisition")
added 33 vacuum trucks. Various other acquisitions added 11 vacuum trucks, a
Louisiana production testing company and six workover rigs.

  OPERATING COSTS. Operating costs for the year ended March 31, 1997 were $60.0
million, an increase of 75% from $34.3 million for the year ended March 31,
1996. This increase was due primarily to the Pride and Taylor Acquisitions.
Operating costs as a percentage of revenues remained constant at 65% for the
years ended March 31, 1997 and 1996.

                                       27
<PAGE>
  GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for
the year ended March 31, 1997 were $14.8 million, an increase of 65% from $8.9
million for the year ended March 31, 1996. This increase was due primarily to
the higher general and administrative expenses associated with the Pride and
Taylor Acquisitions, which significantly increased the Company's fixed cost base
with the addition of 29 new yard locations. As a percentage of revenues, general
and administrative expenses decreased to 16% for the year ended March 31, 1997,
compared to 17% for the prior year.

  DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense for the
year ended March 31, 1997 was $7.8 million, an increase of 78% from $4.4 million
for the year ended March 31, 1996. This increase was due to a substantial
increase in the Company's asset base resulting from the Pride and Taylor
Acquisitions.

  INTEREST EXPENSE. Interest expense for the year ended March 31, 1997 was $2.3
million compared to $1.9 million for the year ended March 31, 1996. The increase
of $.4 million is attributable to two factors. First, interest expense declined
for the first nine months of the year ended March 31, 1997 due to the retirement
of debt from funds generated from the Company's initial public offering
completed in March 1996. Secondly, interest expense in the fourth quarter of
fiscal 1997 increased substantially due to the $140.0 million senior notes
incurred in the Debt Offering in February 1997.

  MINORITY INTEREST. Minority interest for the year ended March 31, 1997 was
$nil, compared to $0.9 million for the year ended March 31, 1996. This decrease
was a result of the Company's acquisition of the Minority interest in Dawson
Welltech L.C. in November of 1996. 

YEAR ENDED MARCH 31, 1996 COMPARED TO THE YEAR ENDED MARCH 31, 1995

  REVENUES. Revenues for the year ended March 31, 1996 were $52.4 million, an
increase of 46% from $36.0 million for the year ended March 31, 1995. This
increase was due primarily to the Well Solutions Acquisition in November 1995.
Revenues from workover rig services were slightly higher for the year ended
March 31, 1996 compared to the prior year due to increased demand for horizontal
recompletion services and the introduction of a second barge-mounted workover
rig in August 1995.

  OPERATING COSTS. Operating costs for the year ended March 31, 1996 were $34.3
million, an increase of 42% from $24.2 million for the year ended March 31,
1995. This increase was due primarily to the Well Solutions Acquisition.
Operating costs as a percentage of revenues decreased to 65% for the year ended
March 31, 1996 compared to 67% for the prior year, which reflects the higher
margin characteristics of the liquid services and production services businesses
acquired in the Well Solutions Acquisition compared to the Company's workover
rig services business.

                                       28
<PAGE>
  GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for
the year ended March 31, 1996 were $8.9 million, an increase of 60% from $5.6
million for the year ended March 31, 1995. This increase was due primarily to
the higher general and administrative expenses associated with the Well
Solutions Acquisition, which significantly increased the Company's fixed cost
base with the addition of seven new yard locations. As a percentage of revenues,
general and administrative expenses increased to 17% for the year ended March
31, 1996, compared to 15% for the prior year. In fiscal year 1996, the Company
granted bonuses of $336,000 in connection with exercises of non-statutory stock
options by certain of the Company's current and former officers, directors and
employees with regard to federal tax liability they incurred related to such
exercises. The Company does not anticipate granting bonuses for such purposes in
the future.

  DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense for the
year ended March 31, 1996 was $4.4 million, an increase of 69% from $2.6 million
for the year ended March 31, 1995. This increase was due to a substantial
increase in the Company's asset base resulting from the Well Solutions
Acquisition.

  INTEREST EXPENSE. Interest expense for the year ended March 31, 1996 was $1.9
million compared to $0.8 million for the year ended March 31, 1995, due to the
incurrence, in connection with the Well Solutions Acquisition, of $13.0 million
of debt with a 10.81% interest rate. The approximately $11.4 million of debt
remaining in March 1996 relating to the Well Solutions Acquisition was prepaid
with a portion of the proceeds from the IPO.

  MINORITY INTEREST. Minority interest for the year ended March 31, 1996 was
$0.9 million, a decrease of 12% from $1.1 million for the year ended March 31,
1995. This decrease was a result of the acquisition in November 1995 of the
Minority interest in Dawson Welltech, L.C.

  EXTRAORDINARY ITEM. As a result of the prepayment of approximately $11.4
million of debt related to the Well Solutions Acquisition, the Company recorded
an extraordinary expense for the year ended March 31, 1996 amounting to
approximately $0.5 million (net of taxes). This amount represents prepayment
penalties, reimbursement to the lender for its costs and expenses resulting from
the prepayment and the write-off of fees incurred at loan origination (net of
taxes).

LIQUIDITY AND CAPITAL RESOURCES

  The Company had cash and cash equivalents of approximately $42.3 million at
March 31, 1997 compared to approximately $13.9 million at March 31, 1996.
Working capital was approximately $56.0 million and approximately $16.8 million
at March 31, 1997 and March 31, 1996, respectively. The Company used a net
amount of approximately $163.8 million for investing activities during the
fiscal year ended March 31, 1997, primarily for the Pride and Taylor Acquisition
and for other capital expenditures of approximately $63 million. Acquisitions of
additional assets

                                       29
<PAGE>
and businesses are expected to continue to be an important part of the Company's
strategy. Under certain circumstances, the Company would need to obtain
additional financing to fund such acquisitions.

  On January 20, 1997, the Company completed the Mobley Acquisition. The Company
paid approximately $5.0 million of the acquisition price from its existing cash.
The remainder of the purchase price consisted of a $0.5 million five year
subordinated note.

  In February 1997, the Company sold 4,722,259 shares of its common stock at
$12.50 per share in a public offering which yielded net proceeds of
approximately $55.3 million. Concurrent with the stock offering, the Company
sold $140.0 million of senior unsecured notes at par value. The senior unsecured
notes carry a coupon rate of interest of 9 3/8%, the proceeds of which netted
the Company approximately $135.3 million. The total net proceeds from the
Offerings yielded the Company combined proceeds of approximately $190.6 million
of which $135.4 million was used to pay the consideration attributable to the
Pride Acquisition. Approximately $12.3 million was used to repay existing
indebtedness and the remainder is being used for working capital and general
corporate purposes.

  The Company has $3.75 million of subordinated debt outstanding at March 31,
1997. Approximately $1.5 million of the subordinated debt is represented by a
debenture held by Well Solutions, bears interest at 8%, matures on November 30,
1999, is prepayable without penalty at any time, and may be converted at any
time, at the option of the holder, into 37,634 shares of Company Common Stock,
subject to adjustment to prevent dilution. The Company does not currently intend
to prepay the debenture by may decide to do so in the future if interest rates
decline. Approximately $1.75 million of subordinated debt is represented by a
subordinated, non-negotiable promissory note held by PSD Investments, Ltd.,
which bears interest at 8%, matures on July 26, 2001 and is prepayable without
penalty at any time. In addition, approximately $.5 million of subordinated debt
is represented by a promissory note held by The Mobley Company, Inc., which
bears interest at 8.5%, matures on January 20, 2002 and is prepayable without
penalty at any time.

     All of the subordinated debt of the Company was incurred in conjunction
with certain acquisitions made by the Company and have offset provisions in
conjunction with unforeseen liabilities that might arise from these
acquisitions. The Company has received a request for acceleration of payment and
has been served with a lawsuit relating to the $1.75 million of subordinated
debt held by PSD Investments, Ltd. debt due to an alleged event of default.
However, the Company believes it is in compliance with the applicable loan
covenants and an event of default does not exist. Accordingly, the subordinated
debt has not been reflected as a current obligation in the consolidated
financial statements.

  The Company generated cash from operating activities of approximately $13.5
million during the year ended March 31, 1997. The Company's principal uses of
cash during the year ended March 31, 1997 were to prepay the indebtedness from
the Taylor Acquisition and to fund approximately $6.3 million of capital
expenditures for upgrading and purchasing equipment.

                                       30
<PAGE>
  The Company believes that the combination of internally generated cash flow,
the net proceeds from the Offerings and availability under the Credit Facility
should provide the Company with sufficient financing to fund the Company's
operations for at least the next 12 months. There can be no assurance, however,
that the Company will not need additional financing or that such financing will
be available on economically acceptable terms.

DESCRIPTION OF CREDIT FACILITY

  Concurrent with the closing of the Offerings and the Pride Acquisition, the
Company put into place a working capital line of credit (the "Working Line")
with a bank. The maximum availability under the Working Line is the lesser of
(i) $50.0 million or (ii) 80% of eligible accounts receivable that have been
outstanding less than 90 days. The Working Line is secured by a first lien
security interest on all the Company's accounts receivable. Borrowings under the
Working Line mature on February 20, 1999 and bear interest, at a rate the
Company may select from time-to-time, equal to: (i) the Bank's prime rate of
interest or (ii) the applicable margin plus the Wall Street Journal LIBOR rate
of interest; the applicable margin is determined by a ratio of total funded debt
to consolidated EBITDA, but shall never be less than 1.75% nor higher than
2.75%. Under the terms of the agreement relating to the Working Line, the
Company must maintain minimum working capital, tangible net worth, current
ratios and debt to capital ratios. The foregoing description does not purport to
be a complete description of all terms of the Working Line or the Credit
Facility. The Company had not drawn against the Working Line as of March 31,
1997 but has used the line to secure five letters of credit totaling $568,000
related to its worker's compensation insurance program.

INFLATION AND SEASONALITY

  Inflation has not had a significant impact on the Company's operations to date
and the Company's operating revenues have not historically been subject to
significant seasonal changes.

NEW ACCOUNTING PRONOUNCEMENTS -- ACCOUNTING FOR ASSET IMPAIRMENT; ACCOUNTING FOR
STOCK-BASED COMPENSATION; ACCOUNTING FOR EARNINGS PER SHARE

  During March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("FAS") No. 121, "Accounting for the
Impairment of LongLived Assets and for Long-Lived Assets to Be Disposed Of "
("FAS 121"). The Company adopted FAS 121 effective April 1, 1996. FAS 121
requires that long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Adoption of this pronouncement had no material effect on the
financial statements.

  In October 1995, the FASB issued FAS No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"). FAS 123 defines a fair value based method of
accounting for employee stock options or similar equity instruments and
encourages all entities to adopt that

                                       31
<PAGE>
method of accounting for all of their employee stock compensation plans. Under
the fair value based method, compensation cost is measured at the grant date
based on the value of the award and is recognized over the service period of the
award, which is usually the vesting period. However, FAS 123 also allows
entities to continue to measure compensation costs for employee stock
compensation plans using the intrinsic value method of accounting prescribed by
APB Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25").
Entities electing to remain with the accounting prescribed by APB 25 must make
pro forma disclosures of net income and earnings per share as if the fair value
based method recommended by FAS 123 had been applied. The accounting
requirements of FAS 123 are effective for transactions entered into in years
that begin after December 15, 1995, though they may be adopted on issuance. The
disclosure requirements of FAS 123 are effective for financial statements for
years beginning after December 15, 1995. The Company intends to continue
measuring compensation costs using APB 25 and has provided pro forma disclosures
of net income and earnings per share as if the fair value based method of
accounting under FAS 123 had been applied beginning with its financial
statements for the year ending March 31, 1997.

  In February 1997, the FASB issued FAS No. 128, "Earnings Per Share," which
establishes standards for computing and presenting earnings per share. This
Standard, effective for financial statements issued for periods ending after
December 15, 1997, replaces the presentation of primary earnings per share with
a presentation of basic earnings per share. In addition, this Standard requires
dual presentation of basic and diluted earnings per share on the face of the
statement of operations. The impact of the adoption of FAS No. 128 on earnings
per share for 1996 and 1997 will not be material.

                                       32
<PAGE>
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                                                                       PAGE
                                                                                                       ----
<S>                                                                                                    <C>
Independent Auditors' Report........................................................................    33
Consolidated Financial Statements:
  Consolidated Balance Sheets at March 31, 1996 and 1997............................................    34
  Consolidated Statements of Income for the years ended March 31, 1995, 1996 and 1997...............    35
  Consolidated Statements of Shareholders' Equity for the years ended March 31, 1995, 1996 and 1997     36
  Consolidated Statements of Cash Flows for the years ended March 31, 1995, 1996 and 1997...........    37
  Notes to the Consolidated Financial Statements....................................................    38
</TABLE>
                                       33
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Dawson Production Services, Inc.:

  We have audited the accompanying consolidated balance sheets of Dawson
Production Services, Inc. and subsidiaries as of March 31, 1996 and 1997, and
the related consolidated statements of income, shareholders' equity, and cash
flows for each of the years in the three-year period ended March 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

  In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Dawson
Production Services, Inc. and subsidiaries as of March 31, 1996 and 1997, and
the results of their operations and their cash flows for each of the years in
the three-year period ended March 31, 1997, in conformity with generally
accepted accounting principles.

                                                    KPMG Peat Marwick LLP
San Antonio, Texas
June 23, 1997

                                       34
<PAGE>
                        DAWSON PRODUCTION SERVICES, INC.

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                            March 31,
                                                                                                    1996                   1997
                                                                                                ------------          -------------
<S>                                                                                             <C>                   <C>          
                               ASSETS
Current assets:
  Cash and cash equivalents ...........................................................         $ 13,863,108          $  42,329,987
  Trade receivables, substantially all pledged (net of allowance for
       doubtful accounts of $290,839 and $561,182, respectively) ......................            8,773,156             30,914,440
  Other receivables ...................................................................               95,202                673,905
  Income taxes receivable .............................................................              740,768                574,155
  Prepaid expenses and other ..........................................................              215,497                444,415
                                                                                                ------------          -------------
          Total current assets ........................................................           23,687,731             74,936,902
Net property and equipment (note 6) ...................................................           29,114,671            145,640,596
Goodwill and other assets .............................................................            3,565,555             53,158,691
                                                                                                ------------          -------------
          Total assets ................................................................         $ 56,367,957          $ 273,736,189
                                                                                                ============          =============
                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable ....................................................................         $  2,909,390          $   9,605,696
  Accrued liabilities .................................................................            2,825,926              8,621,675
  Current portion of long-term debt (note 4) ..........................................               20,055                623,333
  Current portion of obligations under capital
     leases (note 6) ..................................................................            1,167,384                 39,207
                                                                                                ------------          -------------
          Total current liabilities ...................................................            6,922,755             18,889,911
                                                                                                ------------          -------------
Long-term debt, net of current portion (note 4) .......................................            1,530,903              3,166,667
Obligations under capital leases, net of current portion (note 6) .....................            2,163,610                139,678
Senior notes (note 5) .................................................................                 --              140,000,000
Deferred income taxes (note 9) ........................................................               56,310              5,320,951
Shareholders' equity (notes 7 and 8):
  Preferred stock, no par value 560,600 shares
     authorized, none issued and outstanding ..........................................                 --                     --
  Common stock, $.01 par value, 20,560,600 shares
     authorized, 6,382,526 and 11,126,285 issued and
     outstanding, respectively ........................................................               63,826                111,264
  Paid-in capital .....................................................................           41,458,254             96,858,449
  Retained earnings ...................................................................            4,314,177              9,391,147
  Notes receivable from officers ......................................................             (141,878)              (141,878)
                                                                                                ------------          -------------
          Total shareholders' equity ..................................................           45,694,379            106,218,982
Commitments and contingencies (note 12)
          Total liabilities and shareholders'
            equity ....................................................................         $ 56,367,957          $ 273,736,189
                                                                                                ============          =============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       35
<PAGE>
                        DAWSON PRODUCTION SERVICES, INC.

                        CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                                                                YEARS ENDED
                                                                                                  MARCH 31,
                                                                         ----------------------------------------------------------
                                                                             1995                   1996                  1997
                                                                         ------------           ------------           ------------
<S>                                                                      <C>                    <C>                    <C>         
Revenues ......................................................          $ 36,004,700           $ 52,391,307           $ 92,627,701
                                                                         ------------           ------------           ------------
Costs and expenses:
  Operating ...................................................            24,240,773             34,319,579             59,957,770
  General and administrative ..................................             5,573,978              8,937,502             14,789,471
  Depreciation and amortization ...............................             2,607,837              4,396,574              7,844,336
                                                                         ------------           ------------           ------------
          Total costs and expenses ............................            32,422,588             47,653,655             82,591,577
                                                                         ------------           ------------           ------------
          Operating income ....................................             3,582,112              4,737,652             10,036,124
                                                                         ------------           ------------           ------------
Other income and expense:
  Interest expense ............................................               789,276              1,847,678              2,312,850
  Other income, net ...........................................               (40,939)              (129,494)              (696,696)
                                                                         ------------           ------------           ------------
          Total other income and
            expense ...........................................               748,337              1,718,184              1,616,154
                                                                         ------------           ------------           ------------
          Income before minority
            interest, income taxes and
            extraordinary item ................................             2,833,775              3,019,468              8,419,970
Minority interest in consolidated
  subsidiary ..................................................             1,091,717                937,164                   --
                                                                         ------------           ------------           ------------
Income before income taxes and
 extraordinary item ...........................................             1,742,058              2,082,304              8,419,970
Provision for income taxes (note 9) ...........................               680,822                709,306              3,343,000
                                                                         ------------           ------------           ------------
Income before extraordinary item ..............................             1,061,236              1,372,998              5,076,970
Extraordinary item ............................................                  --                 (513,819)                  --
                                                                         ------------           ------------           ------------
Net income ....................................................             1,061,236                859,179           $  5,076,970
                                                                         ------------           ------------           ------------
Preferred stock dividends .....................................               101,007                 88,273                   --
                                                                         ------------           ------------           ------------
Net income applicable to common
  stock .......................................................          $    960,229           $    770,906           $  5,076,970
                                                                         ============           ============           ============
Earnings per common share:
  Primary:
     Income before extraordinary item .........................          $       0.45           $       0.44           $       0.71
     Extraordinary item .......................................                  --                    (0.17)                  --
                                                                         ------------           ------------           ------------
        Net income ............................................          $       0.45           $       0.27           $       0.71
                                                                         ============           ============           ============
     Average number of shares outstanding .....................             2,155,380              2,931,234              7,189,638
                                                                         ============           ============           ============
  Fully diluted:
     Income before extraordinary item .........................          $       0.42           $       0.43           $       0.71
     Extraordinary item .......................................                  --                    (0.16)                  --
                                                                         ------------           ------------           ------------
       Net income .............................................          $       0.42           $       0.27           $       0.71
                                                                         ============           ============           ============
     Average number of shares outstanding .....................             2,648,740              3,207,622              7,189,638
                                                                         ============           ============           ============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       36

<PAGE>
                        DAWSON PRODUCTION SERVICES, INC.

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                       COMMON STOCK                                                                 NOTES      
                                  -----------------------                     TREASURY STOCK                      RECEIVABLE   
                                     ISSUED                   PAID-IN      ---------------------    RETAINED        FROM       
                                     SHARES      AMOUNTS      CAPITAL      SHARES      AMOUNTS      EARNINGS       OFFICERS    
                                  -----------   ---------   ------------   -------   -----------   -----------   ------------  
<S>                                 <C>         <C>         <C>             <C>      <C>           <C>                  <C>    
Balances at March 31, 1994 .....    1,326,348   $  13,263   $  4,200,880    48,732   $   (76,994)  $ 2,583,042          $--    
  Purchase of treasury stock ...         --          --             --      16,172       (72,264)         --             --    
  Sale of common stock .........      282,536       2,826      2,248,576   (63,687)      143,598          --             --    
  Dividends on preferred stock,
    paid in cash ...............         --          --             --        --            --        (101,007)          --    
  Exercise of common stock
    warrants ...................       57,818         578         86,300      --            --            --          (66,878) 
  Conversion of subordinated
    convertible note into common
    stock ......................       16,125         161         74,839      --            --            --             --    
    Net income .................         --          --             --        --            --       1,061,236           --    
                                  -----------   ---------   ------------   -------   -----------   -----------   ------------  
BALANCES AT MARCH 31, 1995 .....    1,682,827      16,828      6,610,595     1,217        (5,660)    3,543,271        (66,878) 
  Dividends on preferred stock,
    paid in cash ...............         --          --             --        --            --         (88,273)          --    
  Common stock issued--
    Initial public offering
      (note 7) .................    2,616,202      26,163     23,495,829      --            --            --             --    
    Conversion of subordinated
      convertible note .........      371,232       3,712      2,546,288      --            --            --             --    
    Issuance of common stock for
      minority interest ........    1,329,495      13,295      7,686,705      --            --            --             --    
    Conversion of preferred
      stock to common stock ....      347,440       3,474      1,006,526      --            --            --             --    
  Exercise of stock options ....       36,547         366         75,633      --            --            --          (75,000) 
  Tax benefit realized from
    stock options ..............         --          --           42,326      --            --            --             --    
  Retirement of treasury
    stock ......................       (1,217)        (12)        (5,648)   (1,217)        5,660          --             --    
 Net income ....................         --          --             --        --            --         859,179           --    
                                  -----------   ---------   ------------   -------   -----------   -----------   ------------  
BALANCES AT MARCH 31, 1996 .....    6,382,526      63,826     41,458,254      --            --       4,314,177       (141,878)
Common stock issued -
    Secondary public
      offering (note 7) ........    4,722,259      47,223     55,238,214      --            --            --             --    
Exercise of stock options ......       21,500         215        161,981      --            --            --             --    
Net income .....................         --          --             --        --            --       5,076,970           --    
                                                ---------   ------------   -------   -----------   -----------   ------------  

BALANCES AT MARCH 31, 1997 .....   11,126,285   $ 111,264   $ 96,858,449      --            --     $ 9,391,147   $   (141,878) 
                                  ===========   =========   ============   =======   ===========   ===========   ============  
</TABLE>
                                 
                                       TOTAL
                                       SHARE-
                                       HOLDERS'
                                       EQUITY
                                   -------------
Balances at March 31, 1994 .....   $   6,720,191
  Purchase of treasury stock ...         (72,264)
  Sale of common stock .........       2,395,000
  Dividends on preferred stock,
    paid in cash ...............        (101,007)
  Exercise of common stock
    warrants ...................          20,000
  Conversion of subordinated
    convertible note into common
    stock ......................          75,000
    Net income .................       1,061,236
                                   -------------
BALANCES AT MARCH 31, 1995 .....      10,098,156
  Dividends on preferred stock,
    paid in cash ...............         (88,273)
  Common stock issued--
    Initial public offering
      (note 7) .................      23,521,992
    Conversion of subordinated
      convertible note .........       2,550,000
    Issuance of common stock for
      minority interest ........       7,700,000
    Conversion of preferred
      stock to common stock ....       1,010,000
  Exercise of stock options ....             999
  Tax benefit realized from
    stock options ..............          42,326
  Retirement of treasury
    stock ......................            --
 Net income ....................         859,179
                                   -------------
BALANCES AT MARCH 31, 1996 .....      45,694,379
Common stock issued -
    Secondary public
      offering (note 7) ........      55,285,437
Exercise of stock options ......         162,196
Net income .....................       5,076,970
                                   -------------

BALANCES AT MARCH 31, 1997 .....   $ 106,218,982
                                   =============

See accompanying notes to consolidated financial statements.

                                       37
<PAGE>
                        DAWSON PRODUCTION SERVICES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                                 YEARS ENDED MARCH 31,
                                                                              ------------------------------------------------------
                                                                                  1995                  1996               1997
                                                                              ------------         ------------        ------------
<S>                                                                           <C>                  <C>                 <C>         
Cash flows from operating activities:
  Net income .........................................................        $  1,061,236         $    859,179        $  5,076,970
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Minority interest in net income of
        subsidiary company ...........................................           1,091,717              937,164                --
      Depreciation and amortization ..................................           2,607,837            4,396,574           7,844,336
      Allowance for doubtful accounts ................................             157,921              (57,213)            200,343
      Common stock issued in lieu of interest
        payments .....................................................                                                     
      Loss (gain) on sale of assets ..................................             (22,113)              95,351            (124,609)
      Increase in deferred income taxes ..............................              88,740              636,665           2,573,091
      Decrease (increase) in receivables .............................          (4,338,722)            (813,746)        (19,134,658)
      Decrease (increase) in prepaid expenses
        and other ....................................................             (11,802)             (71,512)             36,055
      Decrease (increase) in other assets ............................            (129,336)             170,390            (321,106)
      Increase (decrease) in accounts payable ........................           1,823,552              (19,796)          5,862,700
      Increase (decrease) in income tax payable ......................            (288,671)                --                 --
      Increase in accrued expenses ...................................           1,000,374              510,305          11,450,404
                                                                              ------------         ------------        ------------
        Net cash provided by operating activities ....................           3,040,733            6,643,361          13,463,526
                                                                              ------------         ------------        ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisitions .......................................................         (16,597,550)            (125,000)       (157,540,516)
  Additions to property and equipment ................................          (2,567,230)          (4,522,765)          6,793,784
  Proceeds from sales of property and equipment ......................              65,644              281,841              91,754
                                                                              ------------         ------------        ------------
        Net cash used in investing activities ........................         (19,099,136)          (4,365,924)       (164,242,546)
                                                                              ------------         ------------        ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Long-term borrowings ...............................................          16,156,053            1,042,677           9,511,330
  Payments on short-term borrowings ..................................                --                   --                  --   
  Payments on long-term debt .........................................          (2,027,649)         (14,058,284)        (11,800,526)
  Capital lease payments .............................................            (593,838)          (1,348,564)         (4,576,248)
  Sale of common stock ...............................................           2,395,000           23,521,992          55,285,437
  Net proceeds from senior notes issuance ............................                --                   --           135,332,000
  Deferred debt issuance costs .......................................                --                   --            (4,668,290)
  Exercise of common stock options and warrants ......................              20,000                  999             162,196
  Tax benefit realized from stock options ............................                --                 42,326                --
  Cost of treasury stock purchased ...................................             (72,264)                --                  --
  Cash dividends on preferred stock ..................................            (101,007)             (88,273)               --
  Investment in subsidiary by minority owner .........................           1,404,000                 --                  --
  Subsidiary distributions to minority owner .........................            (497,026)            (323,742)               --
                                                                              ------------         ------------        ------------
        Net cash used in financing activities ........................          16,683,269            8,789,131         179,245,899
                                                                              ------------         ------------        ------------
        Net increase in cash .........................................             624,866           11,066,568          28,466,879
  Cash and cash equivalents at the beginning of
    the period .......................................................           2,171,674            2,796,540          13,863,108
                                                                              ------------         ------------        ------------
  Cash and cash equivalents at the end of the
    period ...........................................................        $  2,796,540         $ 13,863,108        $ 42,329,987
                                                                              ============         ============        ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid for:
    Interest .........................................................        $    708,234         $  1,928,993        $    859,935
    Income taxes .....................................................             967,208              912,628             817,163
SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONS:
  Assets acquired under capital leases ...............................             645,972            3,823,282           1,302,008
  Conversion of preferred stock to common stock ......................                --              1,010,000                --
  Conversion of long-term debt to common stock .......................              75,000            2,550,000                --
  Issuance of common stock for acquisition of
    minority interest ................................................                --              7,700,000                --
  Issuance of notes payable for acquisition of
    business .........................................................           1,500,000                 --             2,250,000
  Issuance of notes receivable for exercise of
    stock options ....................................................              66,878               75,000                --
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       38
<PAGE>
                        DAWSON PRODUCTION SERVICES, INC.

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(1) THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Dawson Production Services, Inc. (the "Company" or "Dawson") is a leading
provider of a broad range of workover, liquid and production services used in
the production of oil and gas in the Texas and Louisiana Gulf Coasts, the
Permian Basin areas of West Texas and New Mexico, and California. The Company's
services are utilized by major oil and gas companies as well as independent
producers to optimize performance of oil and gas wells. The Company recently
acquired the U.S. land-based well servicing operations of Pride Petroleum
Services, Inc.
("Pride").

  As a result of its acquisitions and certain corporate restructuring, the
Company currently has several direct and indirect subsidiaries through which it
conducts a significant portion of its operations. All of the assets acquired
from Pride are held in Dawson Production Partners, L.P., a Delaware limited
partnership (the "Partnership"), and the Company is in the process of
transferring substantially all of its remaining operating assets to the
Partnership. All of the general and limited partnership interests in the
Partnership are owned by two wholly-owned corporate subsidiaries of Dawson;
Dawson Production Management, Inc., a Delaware corporation, owns a 1% general
partnership interest in the Partnership, and Dawson Production Acquisition
Corp., a Delaware corporation owns the remaining 99% limited partnership
interest in the Partnership. Dawson has the following additional wholly owned
subsidiaries: Dawson Production Services de Mexico, S.A. de C.V., and Ubicadora
de Tecnicos, S.A. de C.V., both of which are companies organized under the laws
of Mexico; Taylor Companies, Inc., a Texas corporation; and Mobley Vehicle
Acquisition Corp., a Texas corporation.

PRINCIPLES OF CONSOLIDATION

  The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany accounts and transactions have
been eliminated (see note 2).

MANAGEMENT ESTIMATES

  The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of

                                       39
<PAGE>
the financial statements and the reported amounts of revenues and expenses
during the reporting period. While it is believed that such estimates are
reasonable, actual results could differ from those estimates.

CASH EQUIVALENTS

  For purposes of the statements of cash flows, cash and short-term investments
with an original maturity of three months or less from the date of purchase are
considered to be cash equivalents.

REVENUE RECOGNITION

  The Company generally recognizes revenue when services are rendered.

PROPERTY AND EQUIPMENT

  Property and equipment are stated at cost. Major renewals and improvements are
capitalized and depreciated over the respective asset's useful life.
Expenditures for repairs and maintenance are charged to expense as incurred.
Property and equipment are reviewed for impairment whenever events or
circumstances provide evidence that suggests that the carrying amounts of the
property and equipment may not be recoverable.

  Property and equipment are depreciated over their estimated useful lives on
the straight-line method. Commencing with the acquisition of substantially all
of Pride Petroleum Services, Inc.'s U.S. land-based well servicing operations in
February 1997, the Company has utilized a "component parts" approach to
depreciating fixed assets. Estimated useful lives are as follows:

                                                           ESTIMATED
                                                          LIFE (YEARS)
                                                          ------------
Buildings..............................................        20
Well servicing equipment...............................      3-20
Vehicles...............................................       3-5
Office furniture and other equipment...................      5-12

INCOME TAXES

The Company uses the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

                                       40
<PAGE>
INTANGIBLE AND OTHER ASSETS

  Goodwill represents the excess purchase price over fair value of net assets
acquired and is amortized on a straight-line basis over twenty to twenty-five
year periods from the dates of acquisition. Other assets consist principally of
loan costs and are amortized on a straight-line basis over the terms of the
loans.

  Intangible assets are reviewed for impairment whenever events or circumstances
provide evidence that suggests that the carrying amount of the intangible asset
may not be recoverable. The Company assesses the recoverability of the
intangible asset by determining whether the carrying amount of the intangible
asset can be recovered through projected undiscounted future cash flows over the
remaining amortization period.

FAIR VALUES OF FINANCIAL INSTRUMENTS

  The Company's financial instruments consist primarily of short-term, variable
rate items or recently issued debt instruments for which management believes
fair value approximates carrying value. The carrying value of the $140 million
Senior Notes due February 1, 2007 (see note 5) approximates fair value as of
March 31, 1997.

EARNINGS PER SHARE

  Primary earnings per share is computed by deducting preferred dividends from
net income in order to determine net income attributable to common shareholders.
This amount is then divided by the weighted average number of common shares
outstanding and common stock equivalents.

  Earnings per share assuming full dilution is determined by dividing net income
plus tax effected convertible debt interest by the weighted average number of
common shares outstanding during the year after giving effect for common stock
equivalents arising from stock options and for convertible debt or preferred
stock assumed converted to common stock.

  Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, stock and stock options issued during the twelve months immediately
preceding the Company's initial public offering filing date including those
issued in connection with the minority interest acquisition (see note 2) have
been included in the calculation of common and common equivalent shares using
the treasury stock method and the anticipated public offering price as if they
were outstanding for all periods. Common stock equivalents resulting from the
conversion or exercise of convertible debt or preferred shares and other stock
options are excluded when their result is anti-dilutive.

                                       41
<PAGE>
RECLASSIFICATION

  Certain amounts, as previously presented, have been reclassified to conform
with the current year financial statement presentation.

NEW ACCOUNTING PRONOUNCEMENTS

ACCOUNTING FOR STOCK-BASED COMPENSATION

  In October 1995, the Financial Accounting Standards Board (FASB) issued SFAS
No. 123, "Accounting for Stock-Based Compensation," which sets forth alternative
accounting and disclosure requirements for stock-based compensation
arrangements. SFAS 123 does not rescind the existing accounting for employee
stock-based compensation under APB Opinion No. 25. Companies may continue to
follow the current accounting to measure and recognize employee stock-based
compensation; however, SFAS 123 requires disclosure of pro forma net income and
earnings per share that would have been reported under the "fair value" based
recognition provisions of SFAS 123. The Company has elected to continue to
follow the provisions of APB Opinion No. 25 for employee stock-based
compensation and has disclosed the pro forma information required under SFAS 123
(see note 8).

EARNINGS PER SHARE

  In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which
establishes standards for computing and presenting earnings per share. This
Standard, effective for financial statements issued for periods ending after
December 15, 1997, replaces the presentation of primary earnings per share with
a presentation of basic earnings per share. In addition, this Standard requires
dual presentation of basic and diluted earnings per share on the face of the
statement of operations. The impact of the adoption of SFAS No. 128 on earnings
per share for 1996 and 1997 will not be material.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of temporary cash investments and trade
receivables. The Company places its temporary cash investments in U.S.
Government securities and in other high quality financial instruments. By policy
the Company limits the amount of credit exposure to any one financial
institution or issuer. The Company's customer base consists primarily of
independent oil and natural gas producers. During the years ended March 31,
1995, 1996 and 1997, the provisions charged to operations to increase the
reserve for doubtful trade accounts receivable were $223,475, $21,714 and
$270,343, respectively. During the years ended March 31, 1995, 1996 and 1997,
sales to the Company's largest customer accounted for approximately 16%, 24% and
20.0%, respectively, of total operating revenues.

                                       42
<PAGE>
(2) ACQUISITIONS

PRIDE

Effective February 20, 1997, the Company acquired Pride for approximately $135.4
million in cash and acquisition costs of $1.9 million. The acquisition has been
accounted for as a purchase and, accordingly, the operating results of Pride
have been included in the Company's consolidated statements of income since the
effective date of acquisition. The excess of the aggregate purchase price over
the fair market value of the net assets acquired was recognized as goodwill and
is being amortized over 25 years. The fair value of assets acquired, including
goodwill of $30.2 million, was $138.0 million and liabilities assumed totaled
$1.8 million. The funds used to acquire Pride were provided by proceeds of sales
of common stock and senior notes through public offerings in February 1997.

TAYLOR COMPANIES, INC.

  Effective July 29, 1996, the Company acquired all of the issued and
outstanding stock of Taylor Companies, Inc. for an aggregate purchase price of
$12,750,000, consisting of $11,000,000 in cash and a $1,750,000 subordinated
promissory note payable to the selling shareholder. Goodwill recognized on this
transaction amounted to approximately $7,350,621, which is being amortized over
a twenty-year period. The final purchase price allocations for the Pride and
Taylor Acquisitions may be adjusted based on the resolution of certain
pre-acquisition issues.

     Assuming the purchases of Pride and Taylor Companies, Inc. had been
consummated as of the beginning of the fiscal year 1996, unaudited pro forma
operating results of the Company would be as follows:

                                                           MARCH 31,
                                              ---------------------------------
                                                    1996               1997
                                              ---------------    --------------
Revenues ..................................   $   182,219,000       205,382,000
Net income (loss) .........................   $    (4,003,000)        2,169,000 
Primary earnings (loss) per share .........   $         (0.56)             0.21
Fully diluted earnings (loss) per share ...   $         (0.56)             0.21

  The pro forma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the purchase been made
at the beginning of the respective periods.

                                       43
<PAGE>
WELL SOLUTIONS, INC.

  On November 30, 1994, the Company acquired substantially all of the property
and equipment of Well Solutions, Inc. (Well Solutions), a company engaged in
providing oilfield services, for an aggregate purchase price of $18,097,550,
consisting of $15,895,733 in cash, a convertible note payable of $1,500,000 and
closing costs of $701,817. The acquisition has been accounted for as a purchase
and, accordingly, the operating results of Well Solutions have been included in
the Company's consolidated statements of income since the date of acquisition.
The excess of the aggregate purchase price over the fair market value of the net
assets acquired was recognized as goodwill and is being amortized over 20 years.
The fair value of assets acquired, including goodwill of $2,451,818, was
$18,534,355 and liabilities assumed totaled $436,805. The funds used to acquire
Well Solutions were provided by long-term borrowings, proceeds of sales of
common stock and subordinated debt and cash from operations.

OTHER ACQUISITIONS:

  Effective November 1, 1995, the Company acquired the 39% minority interest in
the Company's subsidiary, Dawson WellTech, L.C., from WellTech, Inc. in exchange
for the issuance to WellTech, Inc. of 1,329,495 shares of common stock for a
total purchase price of $7,700,000 based on an independent appraisal of the
common stock. Goodwill recognized on this transaction amounted to $385,000 and
is being amortized over 20 years.

  Effective March 1, 1996, the Company acquired a portion of the assets of a
small company in Giddings, Texas for an aggregate purchase price of
approximately $1,248,000, consisting of $125,000 in cash and $1,123,000 in
capital leases and a note payable. Goodwill recognized on this transaction
amounted to $97,000 and is being amortized over 20 years.

  In April 1996, the Company acquired the assets of two small production testing
companies in Louisiana. The aggregate purchase price was approximately $673,000.
Goodwill and a non-compete agreement were recognized on these transactions which
amounted to approximately $111,000. These items are being amortized over 20 and
five year periods, respectively.

  In May 1996, the Company acquired the Texas-based well servicing division of a
non-affiliated company. The aggregate purchase price was $779,000.

  In July 1996, the Company acquired the assets of a trucking company in
Louisiana. The aggregate purchase price was approximately $400,000. Goodwill
recognized on the transaction amounted to $50,000, which is being amortized over
a 20-year period.

  On January 20, 1997, the Company acquired the liquid services assets of Mobley
Company, Inc. for approximately $5.0 million in cash and a $500,000 five year
subordinated note. Goodwill recognized on this transaction amounted to
$1,566,000 and is being amortized over 20 years.

                                       44
<PAGE>
  The other acquisitions have been accounted for as purchases and, accordingly,
the operating results have been included in the Company's consolidated
statements of income since the dates of acquisition. The effect on results of
operations would not have been material if such other acquisitions had occurred
at the beginning of the year.

(3) MANDATORILY REDEEMABLE PREFERRED STOCK

  In October 1990, the Company issued 80,800 shares of 10% cumulative
convertible preferred stock for a total price of $1,010,000. Each preferred
shareholder was entitled to receive, in preference to common shareholders,
annual dividends in the amount of $1.25 per share, payable quarterly. At the
discretion of the Company, the dividends could have been declared in either cash
or common stock valued at $3.49 a share. Dividends were cumulative and accrued
from the date of the stock issuance. The Company declared dividends on the
preferred stock in the amount of $101,007 in the years ended March 31, 1994 and
1995 and $88,273 in the year ended March 31, 1996.

  Holders of the preferred stock elected to convert 20,200 shares of such stock
into 86,860 shares of common stock, effective October 18, 1995. Pursuant to a
November 1, 1995 Agreement for the Conversion of Securities (the "Conversion
Agreement"), the remaining 60,600 shares of preferred stock converted into
260,580 shares of common stock effective February 19, 1996.

(4) NOTES PAYABLE AND LONG-TERM DEBT

Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                                    MARCH 31,
                                                              ----------------------
                                                                 1996       1997
                                                              ----------  ----------
<S>                                                           <C>         <C>       
Convertible debenture bearing interest at 8%. Interest is
  due quarterly; principal is due November 30, 1999 ........  $1,500,000  $1,500,000
Subordinated promissory note payable to a former Taylor
  shareholder bearing interest at 8.0% per annum ...........
  Interest is due quarterly; principal is due in
  quarterly installments of $83,333 ........................        --     1,750,000
Subordinated note bearing interest at 8.5%.  Interest is due
  quarterly; principal is due January 20, 2002 .............        --       500,000
Other note payable bearing at interest at 10% ..............      50,958      40,000
                                                              ----------  ----------
Total long-term debt .......................................   1,550,958   3,790,000
Less current portion .......................................      20,055     623,333
                                                              ----------  ----------
Long-term debt, net of current portion .....................  $1,530,903  $3,166,667
                                                              ==========  ==========
</TABLE>
                                       45
<PAGE>
  On February 20, 1997, concurrent with the closing of the Senior Note and
Common Stock offerings and the acquisition of Pride, the Company entered into a
working capital line of credit (the "Working Line") with a bank. The maximum
availability under the Working Line would be the lesser of (i) $50 million or
(ii) 80% of eligible accounts receivable that have been outstanding less than 90
days. The Working Line is secured by a first lien security interest on all the
Company's accounts receivable. Borrowings under the Working Line mature two
years from the date of any such borrowings and bear interest at the lesser of
(i) the Bank's prime rate of interest or (ii) a varying percentage rate ranging
from 1.75% to 2.75%, based on the total funded debt to cash flow ratio, over the
Company's choice of the 30, 90 or 180-day LIBOR rate of interest. The Company
had not drawn against the line as of March 31, 1997, but has used the line to
secure five letters of credit totaling $568,000 related to its worker's
compensation insurance program. Under the terms of the loan agreement, the
Company must maintain minimum working capital, tangible net worth, current
ratios and debt to capital ratios. The foregoing description does not purport to
be a complete description of all terms of the Credit Facility.

  The Company has $3.75 million of subordinated debt outstanding at March 31,
1997. Approximately $1.5 million of the subordinated debt is represented by a
debenture held by Well Solutions, bears interest at 8%, matures on November 30,
1999, is prepayable without penalty at any time, and may be converted at any
time, at the option of the holder, into 37,634 shares of Company Common Stock,
subject to adjustment to prevent dilution. Approximately $1.75 million of
subordinated debt is represented by a subordinated, non-negotiable promissory
note held by PSD Investments, Ltd., which bears interest at 8%, matures on July
26, 2001 and is prepayable without penalty at any time. In addition, $.5 million
of subordinated debt is represented by a promissory note held by Mobley Company,
Inc., which bears interest at 8.5%, matures on January 20, 2002 and is
prepayable without penalty at any time.

  All of the subordinated debt of the Company was incurred in conjunction with
certain acquisitions made by the Company and have offset provisions in
conjunction with unforeseen liabilities that might arise from these
acquisitions. The Company has received a demand for acceleration of payment and
has been served with a lawsuit relating to the $1.75 million of subordinated
debt held by PSD Investments, Ltd. due to an alleged event of default. However,
the Company believes it is in compliance with the applicable loan covenants and
that an event of default does not exist. Accordingly, the subordinated debt has
not been reflected as a current obligation in the consolidated financial
statements.

  In March 1996, the Company elected to prepay a $13,000,000 note payable to a
bank. An extraordinary charge of $513,819 (net of income tax benefit of
$264,495) was incurred as a result of the early extinguishment of the note
payable.

  During fiscal 1995, $75,000 in principal amount of subordinated notes were
converted into 16,125 shares of common stock. During fiscal 1996, $150,000 in
principal amount of subordinated notes were converted into 27,232 shares of
common stock.

                                       46
<PAGE>
  Also, pursuant to the Conversion Agreement, $2.4 million of the Company's
subordinated debt converted into common stock at the rate of one share of common
stock for each $6.98 in principal amount of subordinated debt effective February
19, 1996.

  Scheduled maturities of principal for long-term debt based on balances
outstanding at March 31, 1997 are summarized as follows:

YEARS ENDING
  MARCH 31,                               TOTAL
------------                          ------------
   1998   ........................    $    623,333
   1999  .. ......................         333,333
   2000   ........................       1,833,333
   2001  .........................         333,334
   2002  .........................         666,667
   Thereafter  (*) ...............     140,000,000
                                      ------------
                                      $143,790,000
                                      ============

(*)  See note 5 for discussion of Senior Notes due 2007.

(5) SENIOR NOTES
                                                      MARCH 31,
                                              ---------------------------
                                                1996            1997
                                              --------       ------------
       9 3/8% Senior Notes due 2007..........  $ --          $140,000,000
                                              ========       ============


  The Senior Notes due February 1, 2007 (Notes) were issued by the Company in
February 1997. The Notes bear interest at 9 3/8%, payable semi-annually on
February 1 and August 1 of each year, commencing August 1, 1997. The proceeds
from the issuance of the Notes were utilized primarily to acquire Pride (see
note 2) and prepay existing debt. The Notes are redeemable at the option of the
Company, in whole or in part, at any time on or after February 1, 2002, at the
redemption prices included in the indenture agreement, together with accrued and
unpaid interest to the date of redemption. The Notes are unconditionally
guaranteed on a senior unsecured basis by each of the Company's principal
operating subsidiaries. The terms of the indenture related to the Notes contain
covenants limiting, among other things, the incurrence of additional
indebtedness of the Company; dividend payments on or issuance and sales of
capital stock of restricted subsidiaries; payments with respect to certain
subordinated obligations and the making of certain investments; sales of assets;
certain transactions with affiliates; and sale/leaseback transactions.

                                       47
<PAGE>
(6) LEASES AND LEASE COMMITMENTS

  The Company leases vehicles and office equipment under capital leases. Total
assets recorded under capital leases at March 31, 1996 and 1997 are $5,197,835
and $6,386,608, respectively. Amortization expense related to assets held under
capital lease for the years ended March 31, 1995, 1996 and 1997 was $357,363,
$243,558 and $999,372, respectively.

  The Company leases certain of its facilities under operating leases. Lease
terms generally range from one to five years. Rent expense for the years ended
March 31, 1995, 1996 and 1997 was approximately $174,175, $251,556 and $367,240,
respectively.

Future minimum lease payments as of March 31, 1997 are as follows:

YEAR ENDING                                            CAPITAL     OPERATING
  MARCH 31,                                             LEASES      LEASES
-----------                                           ---------    --------
1998...........................................       $  56,423    $394,710
1999...........................................          56,423     278,296
2000...........................................          56,423     203,251
2001...........................................          56,423      93,890
2002...........................................           9,401      25,761
                                                      ---------    ---------
Total minimum lease payments...................       $ 235,093    $995,908
Less amounts representing interest.............        (56,208)    =========
                                                      ---------  
Present value of minimum lease payments........       $ 178,885
                                                      =========  

 (7) SHAREHOLDERS' EQUITY

     (a) EQUITY OFFERINGS

      In March 1996, the Company completed an initial public offering (the
"IPO") of 2,616,202 shares (net of 48 fractional shares paid in cash in
connection with the Recapitalization and Stock Split referred to below) of its
common stock for the purpose of raising funds to acquire additional businesses
and to retire debt. Net proceeds to the Company from the IPO, after deduction of
associated expenses, were approximately $23,522,000.

      In February 1997, the Company completed a secondary public offering of
4,722,259 shares (including 689,773 shares issued in connection with an
over-allotment option) of its common stock for the purpose of raising funds to
acquire Pride and retire debt (see notes 2 and 4). Net proceeds to the Company,
after deduction of associated expenses, were approximately $55,285,000.

                                       48
<PAGE>
     (b) RECAPITALIZATION AND STOCK SPLIT

Effective January 17, 1996, the shareholders approved an amendment to the
Articles of Incorporation which, among other actions, increased the authorized
shares of all classes of capital stock to 20,560,600 and changed the par value
of the common stock to $.01 per share. Share and per share amounts for all
periods presented have been adjusted to reflect these changes. The Board of
Directors approved a 4.3-for-one stock split of the common stock which occurred
on March 1, 1996. Share and per share amounts for all periods presented have
been adjusted to reflect this stock split.

     (c) TREASURY STOCK

  During fiscal 1996, the Company retired all of the common shares held in
treasury. The cost of acquired shares in excess of par value was charged to
additional paid-in capital.

(8) STOCK WARRANTS AND OPTIONS

  In fiscal 1995, 118,250 common stock warrants were issued by the Company to
several officers and directors of the Company. The warrants have an exercise
price of $4.65 per share. During fiscal 1995 and 1996, employees and officers of
the Company exercised their warrants to purchase 40,618 and 36,546 shares,
respectively, of common stock in exchange for notes payable to the Company of
$66,878 and $75,000. The notes are secured by the shares of common stock issued
and the personal guarantees of the officers receiving the stock.

  In October 1995, the Company adopted the 1995 Incentive Plan (the "1995
Plan"). Under the 1995 Plan, incentive options, non-statutory options,
restricted stock awards, and/or stock appreciation rights may be granted to key
employees, non-employee directors and consultants to purchase the Company's
common stock at prices not less than the fair market value at the time of grant,
which become exercisable as described in the respective Award Agreement.
Pursuant to the 1995 Plan, an aggregate of 537,500 shares of the Company's
common stock is available for issuance upon the exercise of such options, awards
and rights, which may be granted over a ten-year period. On October 6, 1995,
options to purchase 133,300 shares of common stock at $7.44 per share were
granted under the 1995 Plan. During fiscal 1997, options to purchase 329,350
shares of common stock at amounts ranging from $10.75 to $12.25 per share were
granted under the 1995 Plan. Also in fiscal 1997, 21,500 and 5,300 options were
exercised and canceled, respectively, under the 1995 Plan.

                                       49
<PAGE>
  The following table summarizes the activity of stock options and warrants
granted by the Company:
                                                                    PRICE
                                                  SHARES          PER SHARE
                                                 -------       -----------------
Outstanding, March 31, 1995 ..............       154,796           $.23 to $4.65
  Granted ................................       133,300                   $7.44
  Exercised ..............................       (36,546)          $.23 to $2.33
  Canceled ...............................       (10,750)                  $4.55
                                                 -------
Outstanding, March 31, 1996 ..............       240,800          $4.65 to $7.44
                                                 -------
  Granted ................................       329,350        $10.75 to $12.25

  Exercised ..............................       (21,500)        $4.65 to $10.75

  Canceled ...............................        (5,300)      $10.75 to $11.375
                                                 -------
Outstanding, March 31, 1997 ..............       543,350        $4.65 to $11.375
                                                 =======
Exercisable at end of year ...............       159,179
                                                 =======

  The weighted average fair value of stock options granted during 1996 and 1997
was $7.44 and $11.375 per share, respectively. The fair value of each option
grant is estimated on the date of grant using the Black-Scholes options-pricing
model. The model assumed expected volatility of 0% and 47.6%, weighted average
risk-free interest rates of 6.66% and 6.75%, for grants in 1996 and 1997,
respectively, and an expected life of 4 years. As the Company has not declared
dividends since it became a public entity, no dividend yield was used. Actual
value realized, if any, is dependent on the future performance of the Company's
common stock and overall stock market conditions. There is no assurance the
value realized by an optionee will be at or near the value estimated by the
Black-Scholes model.

  As discussed in note 1, no compensation expense has been recorded in 1995,
1996 or 1997 for the Company's stock options. Had compensation cost for the
Company's stock option plans been determined based on the fair-value at the
grant dates for awards made after March 31, 1995 under that plan, the Company's
net income and earnings per common share would have been reduced to the pro
forma amounts indicated below:

                                                       YEARS ENDED MARCH 31,
                                                 -------------------------------
                                                     1996               1997
                                                 -------------     -------------
Net income:
       As reported .......................       $     770,906     $   5,076,970
       Pro forma .........................       $     685,641     $   4,928,107
Earnings per common share:
       As reported .......................       $        0.27     $        0.71
       Pro forma .........................       $        0.23     $        0.69

                                       50
<PAGE>
(9) INCOME TAXES

  The components of income tax expense applicable to continuing operations are
as follows:

                                               YEARS ENDED MARCH 31,
                                    --------------------------------------------
                                      1995              1996              1997
                                    --------        ----------        ----------
Current ....................        $592,082        $     --          $  769,909
Deferred ...................          88,740           709,306         2,573,091
                                    --------        ----------        ----------
                                    $680,822        $  709,306        $3,343,000
                                    ========        ==========        ==========

  Income taxes for financial reporting purposes differs from the amount computed
by applying the statutory federal income tax rate of 34% to income before income
taxes as follows:

                                                     YEARS ENDED MARCH 31,
                                                --------------------------------
                                                  1995       1996        1997
                                                --------  ---------   ----------
Expected tax expense at U.S. statutory rate ..  $592,300  $ 707,984   $2,862,790
Expenses not deductible ......................    11,220     35,501       70,375
State income taxes, net of federal effect ....    47,190    (37,116)     310,428
Other ........................................    30,112      2,937       99,407
                                                --------  ---------   ----------
Provision for income taxes ...................  $680,822  $ 709,306   $3,343,000
                                                ========  =========   ==========

  The extraordinary loss of $513,819 in 1996 is net of deferred tax benefits of
$264,495.

  The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at March 31,
1996 and 1997 are presented below:

                                                            1996         1997
                                                         ----------   ----------
Deferred tax assets:
  Allowance for uncollectible accounts receivable ....   $  109,065   $  210,443
  Reserve for worker's compensation ..................      347,966      621,498
  Accrued bonuses ....................................      195,110      248,546
  Net operating loss carryforwards ...................    1,119,522      641,059
  Alternative minimum tax credit carryforwards .......      435,455      868,527
  Foreign tax credit carryforwards ...................         --        123,783
  Other ..............................................       12,456       39,595
                                                         ----------   ----------
          Total gross deferred tax assets ............    2,219,574    2,753,451
                                                         ----------   ----------
Deferred tax liabilities:
  Property and equipment .............................    2,275,884    8,074,402
                                                         ----------   ----------
          Net deferred tax liability .................   $   56,310   $5,320,951
                                                         ==========   ==========

  The Company anticipates the reversal of existing taxable temporary differences
will provide sufficient taxable income to realize the benefits of its deferred
tax assets.

  For the year ended March 31, 1996, a decrease in deferred income tax expense
resulted primarily from the purchase of the remaining 39% interest in the
Company's majority owned subsidiary, Dawson WellTech, L.C. (note 2), a reduction
in deferred tax liabilities occurred of approximately $1,400,000 as a result of
the differences in basis of assets for financial reporting and income tax
purposes.

  As discussed in note 2, the Company acquired all of the issued and outstanding
stock of Taylor Companies, Inc. The transaction was accounted for as a purchase
and resulted in an increase in deferred tax liabilities of approximately $2.5
million due to differences in basis of assets for financial reporting and income
tax purposes.

                                       51
<PAGE>
  At March 31, 1997, the Company had $869,000 of alternative minimum tax credit
carryforwards available to reduce regular Federal income taxes which have no
expiration date. The Company also has a tax net operating loss carryforward of
approximately $1,885,000 and foreign tax credits of approximately $124,000 for
federal income tax purposes which expire in 2011 and 2002, respectively.

(10) RELATED PARTY TRANSACTIONS

  The Company previously retained a company owned by a member of the Board of
Directors to provide consulting services and makes payments to that company upon
completion of various financing and acquisition transactions. Payments for fees
and expenses for the years ended March 31, 1995, 1996 and 1997 were $147,916,
$47,475 and $18,614, respectively. The payment for the year ended March 31, 1995
includes $122,500 paid as a finder's fee by an investment banking firm from the
fee it received from the Company in connection with an acquisition.

(11) EMPLOYEE BENEFIT PLANS

  The Company has a welfare benefit plan (the "Plan") to provide medical
benefits for eligible employees and their dependents. Contributions to the Plan
are made by the Company and covered employees. The Plan may be terminated at the
discretion of the Company. Contributions to the Plan in the amounts of $571,387,
$686,949 and $1,054,965 were made in fiscal 1995, 1996 and 1997, respectively.

  In addition, the Company made contributions to the Taylor Interests, Inc.
welfare benefit plan to provide medical benefits for those employees hired by
Dawson. Contributions were $187,239 from July 29, 1996 through January 1, 1997,
the date the employees transferred to the Company.

  In fiscal 1993, the Company established a 401(k) savings plan. Eligible
employees can make contributions to the plan. The Company may, at its option,
match a portion of the contributions made by the employees. The Company matched
50% of employee contributions up to a limit of $500 per employee in fiscal 1994,
resulting in total payments of $50,140, which amounts were paid in fiscal 1995.
The Company did not match employee contributions made in fiscal 1995, 1996 or
fiscal 1997.

  As of January 1, 1997, the Company transferred all former Taylor Interests,
Inc. employees hired by Dawson from the Taylor Interests 401(k) savings plan to
the Dawson 401(k) savings plan. Dawson did not match employee contributions made
to either plan by these employees from July 29, 1997 through March 31, 1997.

                                       52
<PAGE>
(12) COMMITMENTS AND CONTINGENCIES

  Under the Company's worker's compensation insurance program, the Company pays
the first $300,000 of all claims with no aggregate limit in any one year.
Provision for claims under the program has been made in the financial statements
which represent the expected future payments based on the estimated ultimate
costs for incidents incurred through the end of each period. The insurance
carrier required the Company to make a deposit of $95,000. The deposit has been
included in other assets in the accompanying balance sheet. In addition, the
Company has established a letter of credit in favor of its respective insurance
carriers (note 4) and has entered into an agreement with an insurance carrier
for the guarantee of deductible reimbursement. The amount of the guarantee for
the year ended March 31, 1997 was $500,000.

  The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations.

(13) SUPPLEMENTARY INFORMATION
<TABLE>
<CAPTION>
                                                                                       MARCH 31,
                                                                           -----------------------------
                                                                               1996            1997
                                                                           -------------   -------------
<S>                                                                        <C>             <C>          
Receivables:
  Trade receivables .....................................................  $   9,063,995   $  31,475,622
  Less allowance for doubtful accounts ..................................       (290,839)       (561,182)
                                                                           -------------   -------------
          Net trade receivables .........................................  $   8,773,156   $  30,914,440
                                                                           =============   =============
Prepaid expenses and other:
  Prepaid expenses ......................................................  $     108,957   $      68,507
  Other current assets ..................................................        106,540         375,908
                                                                           -------------   -------------
          Total prepaids and other assets ...............................  $     215,497   $     444,415
                                                                           =============   =============
Property and equipment:
  Land ..................................................................  $     143,228   $      98,210
  Buildings .............................................................      1,087,308         753,585
  Well servicing equipment ..............................................     31,946,106     150,981,201
  Automobiles, trucks and other vehicles ................................      8,519,707      12,951,176
  Office furniture and other equipment ..................................        354,077         691,345
                                                                           -------------   -------------
                                                                           $  42,050,426     165,475,517
  Less accumulated depreciation and depletion ...........................    (12,935,755)    (19,834,921)
                                                                           -------------   -------------
          Net property and equipment ....................................  $  29,114,671     145,640,596
                                                                           =============   =============
Goodwill and other assets:
  Goodwill (net of accumulated amortization of $216,716 and $600,016) ...  $   2,059,696   $  38,654,974
  Other assets (net of accumulated amortization of $248,392 and $530,341)      1,107,224      14,152,590
  Deposits and notes receivable .........................................        398,635         351,127
                                                                           -------------   -------------
                                                                           $   3,565,555   $  53,158,691
                                                                           =============   =============
Accrued liabilities:
  Accrued payroll .......................................................  $     839,446   $   2,195,827
  Accrued insurance .....................................................        927,911       1,657,329
  Other accrued expenses ................................................      1,058,569       4,768,519
                                                                           -------------   -------------
                                                                           $   2,825,926   $   8,621,675
                                                                           =============   =============
</TABLE>
                                       53
<PAGE>
Summarized parent company only information for Dawson Production Services, Inc.
as of and for the year ended March 31, 1997 is as follows:

                                                                      March 31,
                                                                        1997
                                                                    ------------
Assets:
  Current assets .................................................  $ 65,766,438
                                                                    ------------
          Total assets ...........................................  $261,811,356
                                                                    ============
Liabilities and shareholders' equity:
  Current liabilities ............................................  $ 10,507,754
                                                                    ------------
          Total liabilities ......................................   155,592,374
Shareholders' equity .............................................   106,218,982
                                                                    ------------
          Total liabilities and shareholders' equity .............  $261,811,356
                                                                    ============

Revenues .........................................................  $ 79,589,594
Income before income taxes and equity in earnings of subsidiaries   $  7,051,874
Net income .......................................................  $  5,076,970

(14) QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Summarized quarterly financial data for 1996 are as follows:
<TABLE>
<CAPTION>
                                   FIRST         SECOND          THIRD          FOURTH
                                  QUARTER        QUARTER        QUARTER        QUARTER(a)
                                  -------        -------        -------        ----------
<S>                             <C>            <C>            <C>            <C>         
Revenues ...................    $12,647,883    $13,240,504    $13,058,459    $ 13,444,461
Operating income ...........      1,338,895      1,419,899        921,093       1,057,765
Net income (loss) ..........        326,146        321,982        211,756            (705)(a)
Earnings per share-- primary           0.12           0.12           0.06           (0.01)(a)
Earnings per share-- fully                                                   
  diluted ..................           0.12           0.12           0.06           (0.01)(a)
</TABLE>
------------
(a) See discussion at note 4 regarding extraordinary item.

Summarized quarterly financial data for 1997 are as follows:
<TABLE>
<CAPTION>
                                  FIRST          SECOND          THIRD         FOURTH
                                 QUARTER         QUARTER        QUARTER        QUARTER
                                -----------    -----------    -----------    -----------
<S>                             <C>            <C>            <C>            <C>        
Revenues ...................    $14,677,591    $19,133,840    $22,455,685    $36,360,585
Operating income ...........      1,549,775      2,153,804      2,769,377      3,563,168
Net income .................      1,015,650      1,159,397      1,549,955      1,351,968
Earnings per share-- primary           0.16           0.18           0.24           0.15
Earnings per share-- fully                                                  
  diluted ..................           0.16           0.18           0.23           0.15
</TABLE>
                                                                          
                                       54
<PAGE>
                                    PART III

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

  Not applicable.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  Information concerning Directors and Executive Officers of the Company is
incorporated by reference from the Company's definitive Proxy Statement and
related materials in connection with the annual meeting of shareholders to be
held September 11, 1997. The incorporated portions consist of all of the
disclosures that appear in that Proxy Statement under the headings "Nominees for
Election as Directors" and "Executive Officers."

ITEM 11. EXECUTIVE COMPENSATION

  Information concerning Executive Compensation is incorporated by reference
from the Company's definitive Proxy Statement and related materials in
connection with the annual meeting of shareholders to be held on September 11,
1997. The incorporated portions consist of all of the disclosures that appear in
that Proxy Statement under the heading "Executive Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  Information concerning the Security Ownership of Certain Beneficial Owners and
Management is incorporated by reference from the Company's definitive Proxy
Statement and related materials in connection with the annual meeting of
shareholders to be held on September 11, 1997. The incorporated portions consist
of all of the disclosures that appear in that Proxy Statement under the heading
"Security Ownership of Certain Beneficial Owners and Management."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  Information concerning Certain Relationships and Related Transactions is
incorporated by reference from the Company's definitive Proxy Statement and
related materials in connection with the annual meeting of shareholders to be
held on September 11, 1997. The incorporated portions consist of all of the
disclosures that appear in that Proxy Statement under the heading "Certain
Relationships and Related Transactions."

                                       55
<PAGE>
                                    PART IV

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

(a) (1) The following consolidated financial statements of Dawson Production
Services, Inc. and subsidiaries are included in Item 8:

        Independent Auditors' Report

        Consolidated Balance Sheets as of March 31, 1996 and March 31, 1997

        Consolidated Statements of Income for each of the years in the
        three-year period ended March 31, 1997

        Consolidated Statements of Shareholders' Equity for each of the years in
        the three-year period ended March 31, 1997

        Consolidated Statements of Cash Flows for each of the years in the
        three-year period ended March 31, 1997

        Notes to the Consolidated Financial Statements

                                       56

<PAGE>
    (2) The following Financial Statement Schedules are included herein:

        None.

        All schedules for which provision is made in the applicable accounting
        regulations of the Securities and Exchange Commission are not required
        under the related instructions or are inapplicable, and therefore, have
        been omitted.

    (3) Listing of Exhibits (included herein)

(b) Reports on Form 8-K.

    On March 7, 1997, the Company filed a Report on Form 8-K reporting the
    acquisition of the domestic land-based well serviciing operations of Pride
    Petroleum Services, Inc. No financial statements were filed with such report
    because they had been previously filed by the Company in the Company's
    Registration Statement on Form S-1 (File No. 333-19413).

                                       57
<PAGE>
ITEM 16. EXHIBITS AD FINANCIAL STATEMENT SCHEDULES.

(a)  Exhibits:

EXHIBIT
NUMBER
-------

3.1     -Amended and Restated Articles of Incorporation of the Company, as
        amended by Articles of Amendment to the Amended and Restated Articles of
        Incorporation (incorporated by reference as Exhibit 3.1 of the
        Registrant's Registration Statement on Form S-1 (No. 333-00452 dated
        March 14, 1996)).

3.2     -Bylaws of the Company, as amended (incorporated by reference as Exhibit
        3.2 of the Registrant's Registration Statement on Form S-1 (No.
        333-00452 dated March 14, 1996)).

4.1     -Specimen stock certificate evidencing the Common Stock (incorporated by
        reference as Exhibit 4.1 of the Registrant's Registration Statement on
        Forms S-1 (No. 333-00452 dated March 14, 1996)).


4.2     -See Exhibits 3.1 and 3.2 for provisions of the Articles of
        Incorporation and Bylaws of the Company defining the rights of the
        holders of Common Stock.

4.3     -Indenture between the Company and U.S. Trust Company of Texas, N.A.
        related to the offering of the 9 3/8% Senior Notes due 2007.

10.1    -Dawson Production Services, Inc. 1995 Incentive Plan (incorporated by
        reference as Exhibit 10.1 of the Registrant's Registration Statement on
        Forms S-1 (No. 333-00452 dated March 14, 1996)).

10.2    -Employment Agreement between the Company and Michael E. Little dated as
        of April 1, 1996 (incorporated by reference as Exhibit 10.2 of the
        Registrant's Registration Statement on Forms S-1 (No. 333-00452 dated
        March 14, 1996)).

10.3    -Service contract between the Company and Union Pacific Resources
        Company dated December 8, 1992 and Purchase Order dated April 27, 1995
        (incorporated by reference as Exhibit 10.4 of the Registrant's
        Registration Statement on Forms S-1 (No. 333-00452 dated March 14,
        1996)).

10.4    -Credit Agreement between the Company and The Frost National Bank, dated
        February 20, 1997, relating to a $50.0 million Working Capital Revolving
        Facility.

10.5    -Security Agreement between the Company and The Frost National Bank,
        dated as of February 20, 1997 relating to the Working Capital Revolving
        Facility. Pursuant to Item 601, Instructions of Reg. S-K, identical
        copies of the Security Agreement are not included for the following
        debtors: Dawson Production Acquisition Corp. Dawson Production
        Management, Inc. Taylor Companies, Inc. Dawson Production Partners, L.P.

10.6    -Non-Negotiable Convertible Debenture dated December 1, 1994 executed by
        Dawson WellTech, L.C., as maker, and payable to Well Solutions, Inc.,
        and Amendment and Modification of Non-Negotiable Convertible Debenture
        (incorporated by reference as Exhibit 10.11 of the Registrant's
        Registration Statement on Forms S-1 (No. 333-00452 dated March 14,
        1996)).

10.7    -Agreement for the Acquisition of Minority Interest in Dawson WellTech,
        L.C. between the Company and WellTech, Inc. dated as of November 1, 1995
        (incorporated by reference as Exhibit 10.12 of the Registrant's
        Registration Statement on Forms S-1 (No. 333-00452 dated March 14,
        1996)).

10.8    -Agreement for the Conversion of Securities of Dawson Well Servicing,
        Inc. among the Company, RIMCO Partners, L.P., RIMCO Partners, L.P. II,
        RIMCO Partners, L.P. III, Triad Ventures Limited II and Nueces Ventures,
        Inc., dated as of November 1, 1995, and Joinder Agreement executed by
        NationsBanc Campital Corporation (incorporated by reference as Exhibit
        10.13 of the Registrant's Registration Statement on Forms S-1 (No.
        333-00452 dated March 14, 1996)).

10.9    -Registration Rights Agreement among the Company, WellTech, Inc., RIMCO
        Partners, L.P., RIMCO Partners, L.P. II, RIMCO Partners, L.P. III, RIMCO
        Partners, L.P. IV, Triad Ventures Limited II, NationsBanc Capital
        Corporation and Nueces Ventures, Inc., dated as of November 1, 1995
        (incorporated by reference as Exhibit 10.14 of the Registrant's
        Registration on Forms S-1 (No. 333-00452 dated March 14, 1996)).

10.10   -Letter agreements between the Company and Nueces Ventures, Inc.
        Relating to consulting services dated August 14, 1992, with amendment
        dated January 10, 1995 and termination dated October 13, 1995
        (incorporated by reference as Exhibit 10.15 of the Registrant's
        Registration Statement on Forms S-1 (No. 333-00452 dated March 14,
        1996)).

10.11   -Form of Indemnification Agreement between the Company and each of its
        directors and executive officers (incorporated by reference as Exhibit
        10.16 of the Registrant's Registration Statement on Forms S-1 (No.
        333-00452 dated March 14, 1996)).

                                       58
<PAGE>
10.12   -Employment Agreement between the Company and P. Mark Stark dated as of
        April 1, 1996 (incorporated by reference as Exhibit 10.17 of the
        Registrant's Registration Statement on Forms S-1 (No. 333-00452 dated
        March 14, 1996)).

10.13   -Employment Agreement between the Company and Joseph Eustace dated as of
        April 1, 1996 (incorporated by reference as Exhibit 10.18 of the
        Registrant's Registration Statement on Forms S-1 (No. 333-00452 dated
        March 14, 1996)).

10.14   -Promissory Notes dated November 1, 1994 and February 1, 1996 payable to
        the Company by Michael E. Little (incorporated by reference as Exhibit
        10.19 of the Registrant's Registration Statement on Forms S-1 (No.
        333-00452 dated March 14, 1996)).

10.15   -Voting Agreement among RIMCO Partners, L.P., RIMCO Partners, L.P. II,
        RIMCO Partners, L.P. III, RIMCO Partners, L.P. IV, Triad Ventures
        Limited II, the Company and Michael E. Little dated November 28, 1994
        and letter dated January 16, 1995 relating thereto (Incorporated by
        Reference to Exhibit 10.9 to the Registration Statement on Form S-1
        effective March 20, 1996 (File No. 333-00452)).

10.16   -Purchase Agreement between the Company and Pride Petroleum Services,
        Inc., a Louisiana Corporation, dated as of December 23, 1996. 
        (Incorporated by reference from Exhibit 10.16 of the Company's
        Registration Statement on Form S-1 (File No. 333-19413))

10.17   -First Amendment to Purchase Agreement dated February 20, 1997 between
        the Company and Pride Petroleum Services, Inc., a Louisiana Corporation.
        (Incorporated by reference from Exhibit 10.24 of the Company's Report on
        Form 8-K filed March 7, 1997 (File No. 0-27732)).

10.18   -Stock Purchase Agreement dated July 8, 1996 among Dawson Production
        Services, Inc., a Texas Corporation (the "Buyer"), PSD Investments,
        Ltd., a Texas limited partnership (the "Seller"), John Randall Taylor,
        an individual residing in Panola County, Texas, in his individual
        capacity, and as general partner and sole managing partner of the Seller
        and his spouse, Kathy Dianne Taylor, who is also an individual residing
        in Panola County, Texas, in her individual capacity and as a general
        partner of the Seller (incorporated by reference as Exhibit 10.23 of the
        Registrant's Current Report on Form 8-K (No. 0-27732 dated July 29,
        1996)).

10.19   -First Amendment dated July 29, 1996 to Stock Purchase Agreement dated
        July 8, 1996 by and among Dawson Production Services, Inc., a Texas
        corporation (the "Buyer"), PSD Investments, Ltd., a Texas limited
        partnership (the "Seller"), John Randall Taylor, an individual residing
        in Panola County, Texas, in his individual capacity, and as general
        partner and sole managing partner of the Seller and his spouse, Kathy
        Diane Taylor, who is also an individual residing in Panola County,
        Texas, in her individual capacity and as a general partner of the Seller
        (incorporated by reference as Exhibit 10.24 of the Registrant's Current
        Report on Form 8-K (No. 0-27732 dated July 29, 1996)).

10.20   -Omitted.

10.21   -Omitted.

11.1    -Statement Regarding Computation of Per Share Earnings.

12.1    -Statement of Ratio of Earnings to Fixed Charges for each of the last
        three fiscal years.

21.1    -Subsidiaries of the Registrant.

24.1    -Power of Attorney for Dawson Production Services, Inc. (contained on 
         the signature page of this report).

                                       59
<PAGE>
  As permitted by Item 601 (b) (4) (iii) (A) of Regulation S-K, the Registrant
has not filed with this Registration Statement certain instruments defining the
rights of holders of long-term debt of the Registrant and its subsidiaries
because the total amount of securities authorized under any such instruments
does not exceed 10% of the total assets of the Registrant and its subsidiaries
on a consolidated basis. The Registrant agrees to furnish a copy of any such
agreement to the Commission upon request.

                                       60
<PAGE>
  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Antonio, State of Texas, on June 27, 1997.

                                       DAWSON PRODUCTION SERVICES, INC.
               
                                       BY: /s/ MICHAEL E. LITTLE 
                                               Michael E. Little 
                                               Chairman of the Board, President
                                               and Chief Executive Officer 
                                               Power of Attorney

  Each person whose signature appears below hereby constitutes and appoints
Michael E. Little and P. Mark Stark, and each of them, each with full power to
act without the other, his true and lawful attorneys-in-fact and agents, each
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign any or all amendments to
this Report, and to file the same with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto each of said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person hereby ratifying and confirming that each of said attorneys-in-fact
and agents or his substitutes may lawfully do or cause to be done by virtue
hereof.

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
          SIGNATURE                    CAPACITY                                            DATE
          ---------                    --------                                            ----
<S>                                    <C>                                              <C> 
 /s/ MICHAEL E. LITTLE                 Chairman of the Board, President,                June 27, 1997
------------------------------         Chief Executive Officer and
     Michael E. Little                 Director (Principal Executive
                                       Officer)

 /s/ P. MARK STARK                     Chief Financial Officer (Principal               June 27, 1997
------------------------------         Accounting and Financial Officer)
     P. Mark Stark

______________________________         Director                                         June 27, 1997
     Wm. Ward Greenwood


______________________________         Director                                         June 27, 1997
      J. Michael Bell


______________________________         Director                                         June 27, 1997
      Douglas D. Lewis

                                                      61
<PAGE>


/s/ PAUL E. MCCOLLAM                   Director                                         June 27, 1997
------------------------------
     Paul E. McCollam


/s/ RUSSELL BANKS                      Director                                         June 27, 1997
------------------------------
     Russell Banks


/s/ STEPHEN F. OAKES                   Director                                         June 27, 1997
------------------------------
     Stephen F. Oakes

/S/ LAWRENCE C. PETRUCCI               Director                                         June 27, 1997
------------------------------
     Lawrence C. Petrucci
</TABLE>
                                       62