##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  FORM 10-Q
  (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    March 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file
    number: 001-31346
  W-H
    Energy Services, Inc.
 (Exact name of registrant as
    specified in its charter)
  Texas

76-0281502(State or other jurisdiction
    of
    incorporation or organization)

(IRS Employer
    Identification No.)   2000 West Sam Houston Parkway South,
    Suite 500
    Houston, Texas 77042 (Address of principal
    executive offices and zip code)
  (713) 974-9071
 (Registrants telephone
    number, including area code)
  þ o
  Rule 12b-2
  Large
    accelerated filer þ
    Accelerated
    filer o
    Non-accelerated
    filer o  Rule 12b-2 o þ




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##### 



W-H
    ENERGY SERVICES, INC.
  INDEX
  PagePART I
    FINANCIAL INFORMATIONItem 1.

Financial
    Statements


1Consolidated Balance Sheets
    (unaudited)  March 31, 2007 and
    December 31, 2006
    (as adjusted)


1Consolidated Statements of
    Operations and Comprehensive Income (unaudited) 
    Three months ended March 31, 2007 and 2006 (as
    adjusted)


2Consolidated Statements of Cash
    Flows (unaudited)  Three months ended March 31,
    2007 and 2006 (as adjusted)


3Notes to Consolidated Financial
    Statements (unaudited)


4Item 2.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


10Item 3.

Quantitative and
    Qualitative Disclosures About Market Risk


15Item 4.

Controls and
    Procedures


15PART II
    OTHER INFORMATIONItem 2.

Unregistered Sales
    of Equity Securities and Use of Proceeds


17Item 6.

Exhibits


17Signatures


18Second Amendment to the Employment Agreement - Kenneth T. White, Jr.First Amendment to the Employment Agreement of William J. Thomas IIIFirst Amendment to the Employment Agreement of Glen J. RitterFirst Amendment to the Employment Agreement of Jeffery L. TeperaFirst Amendment to the Employment Agreement of Ernesto Bautista, IIIFirst Amendment to the Employment Agreement of Stuart J. FordCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906   i




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PART I



FINANCIAL
    INFORMATION  Item 1.
    Financial
    Statements  W-H
    ENERGY SERVICES, INC.
 CONSOLIDATED
    BALANCE SHEETS
    (In thousands, except per share amounts)
    (Unaudited)  March 31,


December 31,2007


2006(as adjusted)Current Assets:Cash and cash equivalents

$
23,805


$
36,329Accounts receivable, net of
    allowance of $6,254 and $5,596, respectively


227,466



204,755Inventories


82,970



78,127Deferred income taxes


8,568



7,870Prepaid expenses and other


12,113



14,906Total current assets


354,922



341,987Property and equipment, net


369,064



343,496Goodwill, net


134,696



119,550Other assets, net


20,313



19,248Total assets

$
878,995


$
824,281Current Liabilities:Accrued liabilities

$
75,406


$
64,757Accounts payable


53,856



56,668Total current liabilities


129,262



121,425Long-term debt


150,000



150,000Deferred income taxes


51,168



56,637Other long-term obligations


15,939



993Commitments and ContingenciesShareholders Equity:Preferred stock, $0.01 par
    value, 10,000 shares authorized, none issued and outstanding






Common stock, $0.0001 par
    value, 100,000 shares authorized 30,340 and
    30,158 shares issued and outstanding, respectively


3



3Additional paid-in capital


278,036



272,010Other comprehensive income


9,364



9,759Retained earnings


245,223



213,454Total shareholders equity


532,626



495,226Total liabilities and
    shareholders equity

$
878,995


$
824,281    1




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W-H
    ENERGY SERVICES, INC.
 CONSOLIDATED
    STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
    (In thousands, except per share amounts)
    (Unaudited)  For the Three MonthsEnded March 31,2007


2006(as adjusted)Revenues

$
272,887


$
201,809Costs and expenses:Cost of revenues


147,419



108,215Selling, general and administrative


43,280



34,480Research and development


4,716



3,844Depreciation and amortization


17,552



15,044Total costs and expenses


212,967



161,583Operating income


59,920



40,226Other expense:Interest expense, net


1,993



2,175Other expense, net


29



19Income before income taxes


57,898



38,032Provision for income taxes


22,074



14,705Net income

$
35,824


$
23,327Comprehensive income:Net income

$
35,824


$
23,327Interest rate swap valuations


(573
)


1,397Foreign currency translation
    adjustment


177



(484
)Comprehensive income

$
35,428


$
24,240Earnings per share:Basic

$
1.19


$
0.80Diluted

$
1.16


$
0.77Number of shares used in
    calculation of earnings per share:Basic


30,076



29,125Diluted


30,868



30,162    2




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W-H
    ENERGY SERVICES, INC.
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS
    (In thousands)
    (Unaudited)  For the Three MonthsEnded March 31,2007


2006(as adjusted)Cash Flows from Operating
    Activities:Net income

$
35,824


$
23,327Adjustments to reconcile net
    income to cash provided by operating activities Depreciation and amortization


17,552



15,044Provision for doubtful accounts


856



479Gain on sales of equipment


(7,013
)


(2,742
)Deferred tax provision


(2,121
)


(625
)Share-based compensation


1,498



1,179Amortization of deferred financing
    costs


142



113Excess tax benefit from
    share-based compensation


(339
)


(5,806
)Changes in operating assets and
    liabilities, excluding effects of acquisitions Accounts receivable, net


(18,601
)


(17,032
)Inventories


(4,530
)


(6,563
)Prepaid expenses and other


2,698



1,708Other assets, net


567



(153
)Accounts payable, accrued
    liabilities and other


6,146



21,485Net cash provided by operating
    activities


32,679



30,414Cash Flows from Investing
    Activities:Additions to property and equipment


(47,237
)


(32,485
)Acquisition of businesses, net of
    cash acquired


(12,583
)


Proceeds from sales of equipment


13,378



3,908Net cash used in investing
    activities


(46,442
)


(28,577
)Cash Flows from Financing
    Activities:Proceeds from the issuance of debt


24,407



5,352Payments on debt


(24,407
)


(20,352
)Proceeds from the exercise of
    stock options


689



8,819Excess tax benefit from
    share-based compensation


339



5,806Net cash provided by (used in)
    financing activities


1,028



(375
)Effect of exchange rate changes on
    cash


211



(501
)Net increase (decrease) in cash
    and cash equivalents


(12,524
)


961Cash and cash equivalents,
    beginning of period


36,329



9,914Cash and cash equivalents, end of
    period

$
23,805


$
10,875    3




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W-H
    ENERGY SERVICES, INC.



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)  1.
    Business
    Organization  Description
    of Company
    Basis
    of Presentation
  Form 10-Q Regulation S-X. Form 10-K
  Reclassifications
    Accounting
    Policies and Procedures
  Accounting for Uncertainty in Income Taxes Accounting for Income
    Taxes
  accrue-in-advance
 4




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Form 10-K
  Fair Value Measurements
  The
    Fair Value Option for Financial Assets and Financial Liabilities
    (as amended)
  2.
    Acquisitions    3.
    Earnings
    per Share      Three MonthsEnded March 31,2007


2006Basic weighted average shares
    outstanding


30,076



29,125Dilutive effect of stock options
    and restricted shares


792



1,037Diluted weighted average shares
    outstanding


30,868



30,162   4.
    Inventories    March 31, 2007


December 31, 2006Finished goods

$
68,468


$
66,069Work-in-process


8,638



7,626Raw materials and supplies


18,082



16,594Inventory reserve


(12,218
)


(12,162
)Inventories

$
82,970


$
78,127  5




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5.
    Credit
    Facility        W-Hs W-Hs W-H W-H W-H W-H
  6.
    Litigation    7.
    Income
    Taxes  non-U.S. income
   6




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8.
    Shareholders
    Equity  Stock
    options
    Weighted AverageNumber of


Weighted Average


Remaining


AggregateOptions


Price per Share


Contractual Term


Intrinsic Value(Years)


(Amounts in thousands)Outstanding at December 31,
    2006


1,951,904


$
16.94Granted






Exercised


(38,050
)


17.64






$
1,004Expired/canceled


(4,375
)


19.27Outstanding at March 31, 2007


1,909,479



16.92



5.6



32,312Exercisable at March 31, 2007


1,234,229



21.07



4.5



18,086   Restricted
    Stock
      WeightedAverageNumber of


Fair ValueShares


Per ShareNonvested balance at
    December 31, 2006


142,000


$
49.51Granted


52,000



44.74Vested






Forfeited






Nonvested balance at
    March 31, 2007


194,000


$
48.23   9.
    Operating
    Segments   7




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##### Table of Contents



Form 10-K
  Drilling
    Related Products and Services
    Completion
    and Workover Related Products and Services
    Summary
    Information
      Drilling


Completion


Corporate


TotalRevenues

$
179,261


$
93,626


$



$
272,887Operating income


38,982



25,852



(4,914
)


59,920Depreciation and amortization


10,573



6,933



46



17,552Total assets


544,330



303,968



30,697



878,995Capital expenditures


25,912



21,098



227



47,237     Drilling


Completion


Corporate


TotalRevenues

$
129,050


$
72,759


$



$
201,809Operating income


24,797



19,351



(3,922
)


40,226Depreciation and amortization


9,443



5,521



80



15,044Total assets


394,420



243,626



26,691



664,737Capital expenditures


17,039



15,422



24



32,485  8




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##### Table of Contents



Revenues
  Three MonthsEnded March 31,2007


2006United States

$
237,287


$
181,583North Sea


15,800



7,307Other


19,800



12,919Total

$
272,887


$
201,809   Operating
    Income
  Three MonthsEnded March 31,2007


2006(as adjusted)United States

$
53,731


$
37,306North Sea


1,752



532Other


4,437



2,388Total

$
59,920


$
40,226     March 31,


December 31,2007


2006United States

$
330,991


$
306,357North Sea


11,956



13,986Other


26,117



23,153Total

$
369,064


$
343,496  9




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Forward-Looking
    Statements
  Form 10-K
  Overview
    of Our Products and Services
         10




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Drilling
    Related Products and Services
        ® 3-Dimensional 1 4 ® 1 2 ® ® 3-Dimensional
  tm o tm tm tm HDS-1 tm tm tm tm tm 3 4 tm tm 3 4
  Completion
    and Workover Related Products and Services
     11




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Geographic
    Expansion
    Results
    of Operations
  Form 10-Q.
  Three
    Months Ended March 31, 2007 Compared to the Three Months
    Ended March 31, 2006
  Revenues.
    
    a 14% increase in the average number of rotary rigs operating in
    the United States, resulting in an increase in demand for our
    directional drilling services and technologically advanced
    services and tools, rental tools and drilling fluids products;
    our larger asset base resulting from our capital expenditure
    investments;
    increased international activity in the North Sea, the Middle
    East and North Africa;
    an increase in our Gulf of Mexico market share, resulting from
    higher utilization of our existing logging-while-drilling tools
    and commercialization of certain of our new technologies
    discussed earlier;
    onshore geographic expansion; and
    improved pricing.    
    higher demand for our coiled tubing and cased-hole wireline
    services as a result of an overall increase in activity levels;
    an increase in our coiled tubing and cased-hole wireline fleets
    and other capital expenditure investments;
    onshore geographic expansion;
    increased activity offshore; and
    improved pricing.  Cost of Revenues.
  Selling, General and Administrative
    Expenses.
 12




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Research and Development Expenses. ® 3-Dimensional
  Depreciation and Amortization.
  Interest and Other Expense.
  Provision for Income Taxes.
  Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes Accounting for Income
    Taxes
  accrue-in-advance
  Fair Value Measurements
 13




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The
    Fair Value Option for Financial Assets and Financial Liabilities
    (as amended)
  Liquidity
    and Capital Resources
    Cash
    flow
          Capital
    resources
  Credit
    Agreement
    Future
    capital requirements
   14




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Off
    balance sheet arrangements
    Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk    Interest Rate Risk.
  Foreign Currency Exchange Risk.
  Stock Price Volatility.
  Item 4.
    Controls
    and Procedures  Disclosure Controls and Procedures.
 15




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Internal Control over Financial
    Reporting.
  and/or
 16




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PART II



OTHER
    INFORMATION  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds    Item 6.
    Exhibits    Form 10-Q,
 17




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SIGNATURES    W-H Energy Services, Inc.
   By:
    /s/  Kenneth
    T. White, Jr.   Chairman of the Board, President and Chief
    Executive Officer (Principal Executive Officer)
   By:
    /s/  Ernesto
    Bautista, III   Vice President and Chief Financial Officer
    (Principal Financial and Accounting Officer)
 18




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EXHIBIT INDEX
  10
.1



Second Amendment to the Employment
    Agreement of Kenneth T. White, Jr., dated March 30,
    2007*10
.2



First Amendment to the Employment
    Agreement of William J. Thomas III, dated March 30,
    2007*10
.3



First Amendment to the Employment
    Agreement of Glen J. Ritter, dated March 30, 2007*10
.4



First Amendment to the Employment
    Agreement of Jeffery L. Tepera, dated March 30, 2007*10
.5



First Amendment to the Employment
    Agreement of Ernesto Bautista, III, dated March 30,
    2007*10
.6



First Amendment to the Employment
    Agreement of Stuart J. Ford, dated March 30, 2007*31
.1



Certification of Chief Executive
    Officer of W-H Energy Services, Inc. pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002*31
.2



Certification of Chief Financial
    Officer of W-H Energy Services, Inc. pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002*32
.1



Certification of Chief Executive
    Officer of W-H Energy Services, Inc. pursuant 18 U.S.C.
    Section 1350*32
.2



Certification of Chief Financial
    Officer of W-H Energy Services, Inc. pursuant 18 U.S.C.
    Section 1350*     *
    
    Filed herewith