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SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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Form 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

|ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended March 31, 2002

or

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
 to
.

Commission file nos.:

001-15843333-48279


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Universal Compression Holdings, Inc.
Universal Compression, Inc.(Exact name of Registrants as Specified in Their Charters)

|Delaware
Texas                                                   |  | 13-3989167
74-1282680                
|---------------------------------------------------------------- |  | -------------------------------------
|(States or Other Jurisdictions of
Incorporation or Organization) |  | (I.R.S. Employer
Identification Nos.)
|4440 Brittmoore Road
Houston, Texas                              |  | 77041-8004                           
|(Address of Principal Executive Offices)                         |  | (Zip Code)                           

(713) 335-7000(Registrants' telephone number, including area code)

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Securities
of Universal Compression Holdings, Inc. Registered Pursuant to Section 12(b) of the Act:

|Title of Each Class                                                                                 |  | Name of Each Exchange on Which Registered
|--------------------------------------------------------------------------------------------------- |  | -----------------------------------------
|Common Stock, $.01 par value                                                                        |  | New York Stock Exchange, Inc             
|Securities of Universal Compression Holdings, Inc. Registered Pursuant to Section 12(g) of the Act:
|
|None                                                                                                |  |                                          
|Securities of Universal Compression, Inc. Registered Pursuant to Section 12(b) of the Act:         
|
|None                                                                                                |  | N/A                                      
|Securities of Universal Compression, Inc. Registered Pursuant to Section 12(g) of the Act:         
|
|None                                                                                                |  |                                          

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UNIVERSAL COMPRESSION, INC. MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS
FORM 10-K WITH THE REDUCED DISCLOSURE FORMAT.

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

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 each of
the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. o

The
aggregate market value of the Common Stock of Universal Compression Holdings, Inc. held by non-affiliates as of June 14, 2002: $334,291,144. For purposes of the above
statements only, all directors, executive officers and 10% stockholders are assumed to be affiliates. This calculation does not reflect a determination that such persons are affiliates for any other
purpose.

The
number of shares of the Common Stock of Universal Compression Holdings, Inc. outstanding as of June 14, 2002: 30,634,135 shares. All 4,910 outstanding shares of common
stock of Universal Compression, Inc., par value $10.00 per share, are owned by Universal Compression Holdings, Inc.

Documents Incorporated by Reference

Portions of Universal Compression Holdings, Inc.'s Proxy Statement for the Annual Meeting of Stockholders to be held on August 15, 2002 are
incorporated by reference into Part III, as indicated herein.

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The Index to Exhibits is on page 43.

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PART I

The terms "our," "Company," "we," and "us" when used in this report refer to Universal Compression Holdings, Inc. and its subsidiaries, including Universal
Compression, Inc. ("Universal"), as a combined entity, except where it is made clear that such term means only the parent company, and includes its predecessors.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This report contains "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform
Act of 1995. All statements other than statements of historical fact contained in this report are forward-looking statements, including, without limitation, statements regarding future financial
position, business strategy, proposed acquisitions, budgets, litigation, projected costs and plans and objectives of management for future operations. You can identify many of these statements by
looking for words such as "believes," "expects," "will," "intends," "projects," "anticipates," "estimates," "continues" or similar words or the negative thereof.

Such
forward-looking statements in this report include, without limitation:



Such
forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report.
The risks related to our business described under "Risk Factors" and elsewhere in this report could cause our actual results to differ from those described in, or otherwise projected or implied by,
the forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, no assurance can be given that these
expectations will prove to be correct. Important factors that could cause our actual results to differ materially from the expectations reflected in these forward-looking statements include, among
other things:



1

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All
subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements
contained or referred to in this section as well as "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The forward-looking statements included
herein are only as of the date of this report and we undertake no obligation to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise.

ITEM 1.Business

This report refers to the term "contract compression", which during the second quarter of fiscal 2002 we changed the name of our "rental
and maintenance" business to "contract compression". In addition, during the fourth quarter of fiscal 2002, we changed the name of our "parts sales and service" business to "aftermarket
services".

We
are the second largest natural gas compression services company in the world in terms of compressor fleet horsepower, with a fleet as of March 31, 2002 of approximately 7,400
compressor units comprising approximately 2.2 million horsepower. We provide a full range of contract compression services, sales, operations, maintenance and fabrication services and products
to the natural gas industry, both domestically and internationally. These services and products are essential to the natural gas industry as gas must be compressed to be delivered from the wellhead to
end-users.

We
operate in four primary business segments: domestic contract compression, international contract compression, fabrication and aftermarket services. Our core business, contract
compression, involves the leasing of compression equipment to customers. In most cases, maintenance is provided under the terms of the lease. By outsourcing their compression needs, we believe our
contract compression customers generally are able to increase their revenues by producing a higher volume of natural gas through decreased compressor downtime. In addition, outsourcing allows our
customers to reduce their
operating and maintenance costs and capital investments and more efficiently meet their changing compression needs.

In
addition to contract compression, we provide a broad range of compression services and products to customers who own their compression equipment or lease their equipment from our
competitors. Our equipment fabrication business involves the design, engineering and assembly of natural gas and air compressors for sale to third parties in addition to those that we use in our
contract compression fleet. Our ability to fabricate compressors ranging in size from under 100 horsepower to over 5,000 horsepower enables us to provide compressors that are used in all facets of
natural gas production, transmission and distribution. Our aftermarket services business sells parts and components, and provides maintenance to customers who own their compression equipment or lease
their equipment from our competitors. Our ability to provide a full range of compression services and products broadens our customer relationships and helps us identify potential new customers as well
as cross-selling opportunities for existing customers. As the compression needs of our customers increase due to the growing demand for natural gas throughout the world, we believe our geographic
scope and broad range of compression services and products will enable us to participate in that growth.

Since
our initial public offering in May 2000, we completed seven acquisitions, which have contributed significantly to our growth. Our most significant acquisition was that of
Weatherford Global Compression Services, L.P. and certain related entities ("Weatherford Global"), a former subsidiary of Weatherford International, Inc. ("Weatherford"), in
February 2001, which added approximately 950,000 horsepower, more than doubling our size at that time. In addition to the increase in horsepower, this

2

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acquisition provided us with numerous strategic and operational benefits, including increased geographic scope, expanded international operations, an established aftermarket services business, cost
savings and synergies and increased financial strength. Our acquisition of Gas Compression Services, Inc. ("GCSI") in September 2000 added approximately 138,000 horsepower to our fleet
and provided us with an increased customer base, additional market segments and additional fabrication capabilities. ISS Compression ("IEW") was acquired in February 2001 and added
approximately 26,000 horsepower to our fleet, as well as important offshore Gulf of Mexico service capabilities. Compressor System International, Inc. ("CSII"), which was acquired in
April 2001, added approximately 34,000 horsepower in the aggregate to our fleet in Mexico and Argentina. In July 2001, we acquired KCI, Inc. ("KCI"), which added approximately
125,000 horsepower to our domestic fleet as well as significant fabrication expertise and capabilities, a 100,000 square foot fabrication facility in Tulsa, Oklahoma and expertise in the natural gas
pipeline compression and related markets. With our acquisition of Louisiana Compressor Maintenance ("LCM") in July 2001, we enhanced our position as a supplier of maintenance, repair, overhaul
and upgrade services to natural gas pipeline and related markets. Our acquisition of Technical Compression Service, Inc. ("TCSI") in October 2001 added to our aftermarket services
business for the natural gas producing industry as well as the refinery and petrochemical industries. These acquisitions have allowed us to enter new geographic areas with growing demand for our
products and services, such as California, Canada and the Gulf of Mexico.

The
following table illustrates our growth and utilization during the last fiscal year:

Year Ended March 31,2001

2002(Dollars in thousands)Domestic horsepower (end of period)


1,631,138


1,886,592International horsepower (end of period)


254,450


345,093Total horsepower (end of period)


1,885,588


2,231,685Average horsepower utilization rate(a)


87.6
%

88.8
%Revenues

$
232,466

$
679,989Percentage of revenues from:Contract compression


64.2
%

48.2
%Fabrication


26.6
%

31.1
%Aftermarket services


9.2
%

20.7
%EBITDA, as adjusted(b)

$
88,610

$
207,584


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The
contract compression industry has grown rapidly, driven by the steady increase in demand for natural gas, the aging of producing natural gas fields and the attractiveness of
outsourcing compression needs. Demand for compression services is principally tied to consumption of natural gas rather than
exploration or drilling activities. As a result, we have historically been less affected by oil and gas price volatility than companies operating in other sectors of the energy industry. We operate
our standardized compressor fleet in the primary onshore and offshore natural gas producing regions of the United States. In addition, we operate in select international markets, with current
operations in Argentina, Canada, Mexico, Colombia, Thailand, Australia, Venezuela, Peru and Brazil. For the year ended March 31, 2002, approximately 23% of our revenues were attributable to
international operations.

3

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Our
financial performance is generally less affected by the short-term market cycles and oil and gas price volatility than the financial performance of companies operating in
other sectors of the energy industry because:



Adding
to this stability is the fact that, while compressors often must be specifically engineered or reconfigured to meet the unique demands of our customers, the fundamental technology
of compression equipment has not experienced significant technological change.

Competitive Strengths

We believe that we have the following key competitive strengths:



4

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Business Strategy

Our business strategy is to meet the evolving needs of our customers by providing consistent and dependable services and products, and to take advantage of our
size and broad geographic scope to expand our customer base. The key elements of our business strategy are described below:



5

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Industry

Natural Gas Compression Overview

Natural gas compression is a mechanical process whereby a volume of gas at an existing pressure is compressed to a desired higher pressure. We offer both slow and
high speed reciprocating compressors driven either by internal combustion engines or electric motors. We also offer screw compressors for applications involving low pressure natural gas. Most natural
gas compression applications involve compressing gas for its delivery from one point to another. Low pressure or aging natural gas wells require compression for delivery of produced gas into higher
pressured gas gathering or pipeline systems. Compression at the wellhead is required because, over the life of an oil or gas well, natural reservoir pressure typically declines as reserves are
produced. As the natural reservoir pressure of the well declines below the line pressure of the gas gathering or pipeline system used to transport the gas to market, gas no longer naturally flows into
the pipeline. It is at this time that compression equipment is applied in both field and gathering systems to boost the well's pressure levels and allow gas to be brought to market. Compression is
also used to reinject natural gas down producing oil wells to help lift liquids to the surface, known as gas lift operations. In secondary oil recovery operations, compression is used to inject
natural gas into wells to maintain reservoir pressure. Compression is also used in gas storage projects to inject gas into underground reservoirs during off-peak seasons for withdrawal
later during periods of high demand. Compressors may also be used in combination with oil and gas production equipment to process and refine oil and gas into more marketable energy sources. In
addition, compression services are used for compressing feedstocks in refineries and petrochemical plants, and for refrigeration applications in natural gas processing plants.

Typically,
compression is required several times during the natural gas production cycle: at the wellhead, at the gathering lines, into and out of gas processing facilities, into and out
of storage facilities and through the pipeline. Natural gas compression that is used to transport produced gas from the wellhead through the gathering system is considered "field compression." Natural
gas compression
that is used during the transportation of gas from the gathering systems to storage or the end-user is considered "pipeline compression." During the production phase, compression is used
to boost the pressure of natural gas from the wellhead so that natural gas can flow into the gathering system or pipeline for transmission to end-users. Typically, these applications
require portable, low to mid-range horsepower compression equipment located at or near the wellhead. The continually dropping pressure levels in natural gas fields require constant
modification and variation of on-site compression equipment.

Compression
equipment is also used to increase the efficiency of a low capacity gas field by providing a central compression point from which the gas can be produced and injected into a
pipeline for transmission to facilities for further processing. In an effort to reduce costs for wellhead operators, operators of gathering systems tend to keep the pressure of the gathering systems
low. As a result, more pressure is often needed to force the gas from the low pressure gathering systems into the higher pressure pipelines. Similarly, as gas is transported through a pipeline,
compressor units are applied all along the pipeline to allow the natural gas to continue to flow through the pipeline to its destination. These applications generally require larger horsepower
compression equipment (600 horsepower and higher).

6

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Gas
producers, transporters and processors have historically owned and maintained most of the compression equipment used in their operations. However, in recent years, there has been a
growing trend toward outsourcing compression equipment. Changing well and pipeline pressures and conditions over the life of a well often require producers to reconfigure their compressor units to
optimize the well production or pipeline efficiency.

Outsourcing
contract compression equipment offers customers:



Customers
that elect to outsource compression equipment may also choose full maintenance or contract compression for such equipment. Full maintenance calls for the contract compression
service provider to be responsible for the scheduled preventative maintenance, repair and general up-keep of the equipment, while the customer usually remains responsible for installing
and handling the day-to-day operation of the equipment. Contract compression requires the contract compression service provider to maintain and operate and, in many cases, to
install the equipment. Often, the contract compression service provider will inspect the equipment daily, provide consumables such as oil and antifreeze and, if necessary, be present at the site for
several hours each day.

Natural Gas Industry Conditions

A significant factor in the growth of the gas compression services market is the increasing demand and consumption of natural gas, both domestically and
internationally, rather than the more cyclical oil and gas exploration and drilling activities.

In
the United States, natural gas is the second leading fuel in terms of total consumption. In recent years, natural gas has increased its market share of total domestic energy
consumption. Domestic consumption of natural gas increased significantly from 1990 to 2000, before declining in 2001 due to an economic slowdown. Industry sources forecast increased consumption of
natural gas in the United States in 2002 and for the remainder of the decade.

Domestic
field compression horsepower is estimated to be 17 million, up from 10 million in 1993, and the percent outsourced is estimated to have increased to 34% from 20%
over the same time period. We believe the domestic gas compression market will continue to grow due to the following factors:



The
international gas compression services market currently is substantially smaller than the domestic market. However, we estimate significant growth opportunities in international
demand for compression services and products due to the following factors:



7

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In
contrast to the domestic compression market, the international compression market is comprised primarily of large horsepower compressors that are maintained and operated by
compression service providers. A significant portion of this market involves comprehensive installation projects, which include the design, fabrication, delivery, installation, operation and
maintenance of compressors and related gas treatment equipment by the contract compression service provider. In these projects, the customer's only responsibility is to provide fuel gas within
specifications. As a result of the full service nature of these projects and that these compressors generally remain on-site for three to seven years, we are able to achieve higher
revenues and margins on these projects.

Operations

Contract Compressor Fleet

We have standardized our contract compressor fleet around three primary gas compressor platforms based on smaller horsepower applications (less than
150 horsepower), mid-range applications (150-600 horsepower) and larger horsepower applications (over 600 horsepower). These three compressor platforms represent
over 90% of our horsepower. In recent years there has been substantial growth in customer demand in the over 600 horsepower category and as a result we have increased the average horsepower of
our fleet and have increased our fabrication of upper range units (generally over 600 horsepower). Since our initial public offering in May 2000, the total horsepower of our fleet has increased
by 218%. For the year ended March 31, 2002, the average horsepower utilization rate for our fleet was approximately 88.8%, which reflects average horsepower utilization based upon our total
average fleet horsepower. For the quarter ended March 31, 2002, this average rate was approximately 86.8%.

As
of March 31, 2002, our fleet consisted of 7,393 compressors ranging in size up to 3,400 horsepower, as reflected in the following table:

Total Horsepower as of
March 31,

% of Horsepower as
of March 31,

Number of Units as of
March 31,Horsepower Range2001

2002

2001

2002

2001

20020 - 99

203,123

196,024

10.8

8.8

3,083

2,652100 - 299

444,836

462,751

23.6

20.7

2,625

2,688300 - 599

328,378

349,250

17.4

15.6

864

917600 - 999

327,788

380,251

17.4

17.0

452

5171,000 and over

581,463

847,752

30.8

37.9

440

619Total

1,885,588

2,236,028

100
%
100
%
7,464

7,393


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Our
standardized fleet:



Domestic Operations

As of March 31, 2002, we operated one of the largest domestic fleets of natural gas compressors with approximately 6,800 units comprising
approximately 1.9 million horsepower. We operate sales and service locations in the primary onshore and offshore natural gas producing regions of the United States. For the year ended
March 31, 2002, approximately 81.6% of our contract compression revenue and 39.3% of our total revenue was generated from domestic contract compression operations.

We
believe that our fabrication and aftermarket services business provide us with opportunities to cross-sell our contract compression services.

We
have standard contracts for rates and terms on the compressors in our fleet. We also enter into master service agreements whereby we generally provide full maintenance. Through
negotiations, these rates and contracts may be modified. Optional items such as oil, antifreeze, freight, insurance and other items may be either itemized or included in the basic monthly contract
compression rate. Initial contract compression terms are usually six months, with some projects committed for as long as five years. At the end of the initial term, contract compression services can
continue at the option of the lessee on a month-to-month basis or the compressor may be returned or replaced with a different compressor.

International Operations

We operate internationally in Argentina, Canada, Mexico, Colombia, Thailand, Australia, Venezuela, Peru and Brazil in large part as a result of our acquisitions.
As of March 31, 2002, we had approximately 500 units comprising approximately 345,000 horsepower, in the aggregate, in these markets. We intend to continue to expand our presence in these
markets and pursue opportunities in other strategic international areas. For the year ended March 31, 2002, 23% of our total revenue was generated from international operations, of which
approximately 8.9% represents contract compression revenue.

International
compression service projects usually generate higher margins than domestic projects. Our international operations are focused on large horsepower compressor markets and
frequently involve longer-term and more comprehensive service projects than our domestic projects. International projects generally require us to provide complete engineering and design.
International service agreements differ significantly from domestic service agreements as individual contracts are negotiated for each project. We believe our extensive engineering and design
capabilities and reputation for high quality fabrication give us a competitive advantage in these markets.

Contract Compression

We provide comprehensive contract compression services, which includes rental, operation and maintenance services for our domestic and international fleet. When
providing full contract compression service, we work closely with a customer's field service personnel so that the compressor can be adjusted to efficiently match changing characteristics of the gas
produced. We provide maintenance services on substantially all of our fleet units. Maintenance services include the scheduled

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preventive maintenance, repair and general up-keep of compressor equipment. As a complement to our maintenance business, we offer supplies and services such as antifreeze, lubricants, and
prepaid freight to the job site. We also may offer installation services, which for our typical lower, mid-range and smaller horsepower units involves significantly less engineering and
cost than the comprehensive service concept prevalent in the international markets. We also routinely repackage or reconfigure some of our existing fleet to adapt to our customers' needs.

We
generally operate the large horsepower compressors and include the operations fee as part of its contract compression rate. Large horsepower units are more complex and, by operating
the equipment ourselves, we reduce maintenance and overhaul expenses. Generally, we train our customers' personnel in fundamental compressor operations of smaller horsepower units so that they may
operate them.

We
currently maintain overhaul and repackaging facilities in Edmonton, Alberta, Canada and in Houma, Louisiana, Yukon, Oklahoma and Schulenberg, Texas, in addition to our fabrication and
repackaging facilities in Calgary, Alberta, Canada and Houston, Texas. Following our Weatherford Global acquisition, we closed a number of facilities, including our fabrication, overhaul and
repackaging facility in Corpus Christi, Texas, and have combined some of our operating activities.

Our
field compression equipment is maintained in accordance with daily, weekly, monthly and annual maintenance schedules. These maintenance procedures are updated as technology changes
and as our operations group develops new techniques and procedures. In addition, because our field technicians provide maintenance on substantially all of our contract compression equipment, they are
familiar with the condition of our equipment and can readily identify potential problems. In our experience, these procedures maximize equipment life and unit availability and minimize avoidable
downtime. Generally, each of our units undergoes a major overhaul once every six to eight years. A major overhaul involves the rebuilding of the unit in order to materially extend its useful life or
to enhance the unit's ability to fulfill broader or different contract compression applications.

Fabrication

As a complement to our contract compression service operations, we design, engineer, fabricate and sell natural gas and air compressors for engineering and
construction firms, as well as for exploration
and production companies, both domestically and internationally. We also fabricate compressors for our own fleet. Our primary fabrication facilities are located in Houston and Schulenberg, Texas,
Tulsa, Oklahoma, and Calgary, Alberta, Canada.

Generally,
compressors to be sold to third parties are assembled according to each customer's specifications and sold on a turnkey basis, although we also sell prepacked compressors. We
purchase components for these compressor units from third party suppliers. We also act as a distributor for Ariel gas compressors and as an original equipment manufacturer for Atlas Copco air
compressors. Some of the compressors manufactured by these entities are used by us in our fabrication services. For the year ended March 31, 2002, approximately 31.1% or $211.3 million
of our total revenues were generated from fabrication operations.

We
do not incur material research and development expenditures, as research and development activities are not a significant aspect of our business. All research and development costs
are expensed as incurred.

Aftermarket Services

Our aftermarket services business sells parts and components, and provides maintenance to customers who own their compression equipment or lease their equipment
from our competitors. For

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the year ended March 31, 2002, we generated $141 million in revenues, or 20.7% of our total revenues, from this segment of our business.

Our
inventory of parts is available either on an over-the-counter basis through our 17 service locations in the United States and four in Canada, on a bid basis
for larger orders, or as part of our compressor maintenance service. Our maintenance services are available on an individual call basis, on a contract basis (which may cover a particular unit, an
entire compression project or all of the customer's compression projects) or as part of our comprehensive operation and maintenance service. We also provide offshore maintenance and service. In
addition, we provide overhaul and reconfiguration services for customer-owned compression equipment, either on-site or in our overhaul shops.

Customers

Our current customer base consists of over 1,000 domestic and international companies engaged in all aspects of the oil and gas industry, including major
integrated oil and gas companies, international state-owned oil and gas companies, large and small independent producers, natural gas processors, gatherers and pipelines. We have entered into
strategic alliances with some of our customers. These
alliances are essentially preferred vendor arrangements and give us preferential consideration for the compression needs of these customers. In exchange, we provide these customers with enhanced
product availability, product support and favorable pricing.

In
the fiscal year ended March 31, 2002, no single customer accounted for as much as 10% of our total revenues. Our top 20 customers accounted for approximately 29% of our
contract compression revenues in fiscal year 2002.

Suppliers

Our principal suppliers include Caterpillar and Waukesha for engines, Air Xchangers for coolers, and Ariel and Gemini for compressors. We also purchase a
significant number of Cooper compressors in Canada for sale to customers. Although we rely primarily on these suppliers, we believe alternative sources are generally available. We have not experienced
any material supply problems to date, and we believe our relations with our suppliers are good.

In
addition, in December 1999, Weatherford Global sold the assets and properties of its Gemini compressor business in Corpus Christi, Texas to GE Packaged Power LP. Under the
terms of that sale, Weatherford Global agreed to purchase from GE Packaged Power $38.0 million of compressor components over five years and $3.0 million of parts over three years, and GE
Packaged Power agreed to provide compressors to Weatherford Global during that time period at negotiated prices. We assumed this obligation in connection with the Weatherford Global acquisition in
February 2001. As of March 31, 2002, $22.2 million of components and $9.1 million of parts had been purchased.

Backlog

As of March 31, 2002, we had a compressor unit fabrication backlog for sale to third parties of approximately $80.0 million, compared to
$34.2 million as of March 31, 2001. As of June 14, 2002, our backlog increased to approximately $103 million. A majority of the backlog is expected to be completed within a
180-day period.

Insurance

We believe that our insurance coverage is customary for the industry and adequate for our business. As is customary in the natural gas service operations
industry, we review our safety equipment and procedures and carry insurance against some, but not all, risks of our business. Losses and

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liabilities not covered by insurance would reduce our revenues and increase our costs. The natural gas service operations business can be hazardous, involving unforeseen circumstances such as
uncontrollable flows of gas or well fluids, fires and explosions or environmental damage. To address the hazards inherent in our business, we maintain insurance coverage that includes physical damage
coverage, third party general liability insurance, employer's liability, including well control, environmental and pollution and other coverage, although coverage for environmental and
pollution-related losses is subject to significant limitations. In addition, many of our service contracts shift certain risks to our customers.

Competition

The natural gas contract compression, fabrication and aftermarket services businesses are highly competitive. We face competition from large national and
multinational companies with greater financial resources and, on a regional basis, from numerous smaller companies.

Our
main competitors in the contract compression business, based on horsepower, are Hanover Compressor Company, Compressor Systems, Inc. and J-W Operating Company. In
addition, Weatherford and its subsidiaries may continue to compete with us as they are not contractually restricted from doing so. In our fabrication activities, we currently compete primarily with
Hanover Compressor Company, Compressor Systems, Inc. and Enerflex Systems, Ltd. Our aftermarket services business faces competition from manufacturers including Cooper Cameron,
Dresser-Rand and Hanover Compressor Company, from distributors of Caterpillar and Waukesha engines, from a number of smaller companies and, in Canada, from Enerflex.

We
believe that we compete effectively on the basis of customer service, including the availability of our personnel in remote locations, price, technical expertise, parts service
system, flexibility in meeting customer needs and quality and reliability of our compressors and related services.

Environmental and Other Regulations

We are subject to stringent and complex federal, state and local laws and regulations regarding the environment, emission controls and other environmental
protection as well as employee health and safety concerns. Compliance with these laws and regulations may affect the costs of our operations. Moreover, failure to comply with these environmental laws
and regulations may result in the imposition of administrative, civil, and criminal penalties. Not all of our properties may be in full compliance with all applicable environmental requirements.
However, as part of the regular evaluation of our operations, we update the environmental condition of our existing and acquired properties as necessary. Overall, we believe that we are in substantial
compliance with applicable environmental laws and regulations and that the phasing in of more stringent emission controls and other known regulatory
requirements at the rate currently contemplated by such laws and regulations will not have a material adverse effect on our business, financial condition or results of operations.

Under
the Comprehensive Environmental Response, Compensation, and Liability Act, referred to as "CERCLA," and comparable state laws and regulations, strict and, under certain
circumstances, joint and several liability can be imposed without regard to fault or the legality of the original conduct on certain classes of persons that contributed to the release of a hazardous
substance into the environment. These persons include the owner and operator of a contaminated site where a hazardous substance release occurred and any company that transported, disposed of, or
arranged for the transport or disposal of hazardous substances released at the site. Under CERCLA, such persons may be liable for the costs of remediating the hazardous substances that have been
released into the environment and for damages to natural resources. In addition, where contamination may be present it is not uncommon for the neighboring land owners and other third parties to file
claims for personal injury, property damage and recovery of response costs.

12

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As
part of our operations, we generate wastes, including hazardous wastes such as used paints and solvents. The management and disposal of hazardous wastes are subject to the Resource
Conservation and Recovery Act, referred to as "RCRA," and comparable state laws. These laws and the regulations implemented thereunder govern the generation, storage, treatment, transfer and disposal
of hazardous and nonhazardous wastes. The United States Environmental Protection Agency and various state agencies have limited the approved methods of disposal for certain hazardous and nonhazardous
wastes.

We
currently own or lease, and have in the past owned or leased, a number of properties that have been used, some for many years, by third parties over whom we have no control, in
support of natural gas compression services or other industrial operations. As with any owner or operator of property, we may be subject to remediation costs and liability under CERCLA, RCRA or other
environmental laws for hazardous waste, asbestos or any other toxic or hazardous substance that may exist on or under any of our properties, including waste disposed or groundwater contaminated by
prior owners or operators. We have performed in the past, are currently performing and may perform in the future, certain remediation activities governed by environmental laws. The cost of this
remediation has not been material to date and we currently do not expect it to be. We are currently undertaking groundwater monitoring at certain of our facilities, which may further define remedial
obligations. Certain of our acquired properties may also warrant groundwater monitoring and other remedial activities. We believe that former owners and operators of many of these properties may be
responsible under environmental laws and contractual agreements to pay for or perform remediation, or to indemnify us for our remedial costs. These other entities may fail to fulfill their legal or
contractual obligations, which could result in material costs to us.

Our
standard contract typically provides that the customer will assume all environmental compliance and permitting obligations and environmental risks related to compressor operations,
even in cases where we operate and maintain the compressors on their behalf. Under most of our contract
compression service agreements, our customers must indemnify us for certain losses or liabilities we may suffer as a result of the failure to comply with applicable environmental laws, including
requirements pertaining to necessary permits such as air permits.

Air
pollutant emissions from natural gas compressor engines are an environmental concern for the natural gas transportation industry. Proposed federal regulations, if promulgated in
their current form, are expected to impose or increase obligations of operators to reduce air emissions of nitrogen oxides and other pollutants from internal combustion engines in transmission
service. In most cases, these obligations would be allocated to our customers under the above-mentioned contracts.

Stricter
standards in environmental legislation or regulations that may affect us may be imposed in the future, such as proposals to make hazardous wastes subject to more stringent and
costly handling, disposal and remediation requirements. Accordingly, new environmental laws or regulations or amendments to existing environmental laws or regulations (including, but not limited to,
regulations concerning ambient air quality standards, waste water and storm water discharge, and global climate change) could require us to undertake significant capital expenditures and could
otherwise have a material adverse effect on our business, results of operations and financial condition.

Our
international operations are potentially subject to similar governmental controls and restrictions relating to the environment. We believe that we are in substantial compliance with
any such foreign requirements pertaining to the environment.

Since
1992, there have been various proposals to impose taxes with respect to the energy industry, none of which have been enacted and all of which have received significant scrutiny
from various industry lobbyists. At the present time, given the uncertainties regarding the proposed taxes, including the uncertainties regarding the terms which the proposed taxes might ultimately
contain and the

13

---

industries and persons who may ultimately be the subject of such taxes, it is not possible to determine whether any such tax will have a material adverse effect on us.

Employees and Labor Relations

As of March 31, 2002, we had approximately 1,700 employees in the United States and 570 employees located outside of the United States. We believe our
relationship with our employees is good. Approximately 100 of our employees in Canada are covered by a collective bargaining agreement, which expires in June 2002. We are currently in
negotiations to renew this agreement.

ITEM 2.Properties

The following table describes our material facilities owned or leased as of May 31, 2002, none of which are pledged as collateral:

|Location                 |  | Square
Feet |  | Acreage |  | Status |  | Uses                                                                              
|------------------------ |  | ----------- |  | ------- |  | ------ |  | ----------------------------------------------------------------------------------
|Houston, Texas           |  | 164,000     |  | 30.0    |  | Owned  |  | Corporate headquarters, fabrication, contract compression and aftermarket services
|Calgary, Alberta, Canada |  | 105,760     |  | 9.22    |  | Owned  |  | Fabrication, contract compression and aftermarket services                        
|Tulsa, Oklahoma          |  | 100,000     |  | 10.1    |  | Owned  |  | Fabrication, contract compression and aftermarket services                        
|Yukon, Oklahoma          |  | 72,000      |  | 14.7    |  | Owned  |  | Contract compression and aftermarket services                                     
|Houma, Louisiana         |  | 60,000      |  | 91.0    |  | Owned  |  | Aftermarket services                                                              
|Schulenberg, Texas       |  | 23,000      |  | 13.3    |  | Owned  |  | Fabrication, contract compression and aftermarket services                        
|Broussard, Louisiana     |  | 24,700      |  | 10.0    |  | Leased |  | Contract compression and aftermarket services                                     

ITEM 3.Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We do not believe we are
party to any legal proceedings which, if determined adversely to us, individually or in the aggregate, would have a material adverse effect on our results of operations or financial position.

ITEM 4.Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of fiscal 2002.

14

---



PART II

ITEM 5.Market for Registrants' Common Equity and Related Stockholder Matters

Universal Compression Holdings, Inc.'s common stock is traded on the New York Stock Exchange under the symbol "UCO." The following table sets forth the
range of high and low sale prices for our common stock for the periods indicated, beginning on May 24, 2000, the first day of trading for our common stock:

Price RangeHigh

LowQuarter Ended:June 30, 2000

$
35.50

$
20.63September 30, 2000


34.13


22.13December 31, 2000


39.50


25.50March 31, 2001


40.50


31.88June 30, 2001

$
37.95

$
25.75September 30, 2001


31.15


22.23December 31, 2001


30.15


18.80March 31, 2002


29.37


16.75Through June 18th


27.00


19.50


On
June 18, 2002, the closing price of our common stock was $20.66 per share. As of June 1, 2002, there were approximately 600 holders of record of our common stock.

We
have never declared or paid any cash dividends to our stockholders and do not plan to pay any cash dividends in the foreseeable future. We currently intend to retain our earnings for
use in the operation and expansion of our business. Furthermore, our revolving credit facility, operating lease facilities, senior discount notes indenture and other financing arrangements restrict
the payment of dividends. Any future determination as to the declaration and payment of dividends will be at the discretion of our board of directors and will depend on then existing conditions,
including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors that our board of directors considers relevant.

15

---

ITEM 6.Selected Financial Data

SELECTED HISTORICAL FINANCIAL DATA        UNIVERSAL COMPRESSION HOLDINGS, INC.

The following selected historical consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements and related notes included elsewhere in this report. The selected
historical financial and operating data for Tidewater Compression, our predecessor, for the period from April 1, 1997 through February 20, 1998 (acquisition date) and the selected
historical financial data as of and for the 39-day period ended March 31, 1998 and each of the four years in the period ended March 31, 2002 have been derived from the
respective audited financial statements. The consolidated financial statements and report thereon, for the year ended March 31, 2002 are included elsewhere in this report.

|                                             |                      | Tidewater Compression
(Predecessor Company)
April 1, 1997
through
February 20,
1998 |        | Company |  
|-------------------------------------------- | -------------------- | ----------------------------------------------------------------------------------- | ------ | ------- | -
|
|
|
|Statement of Operations Data:                |                      |                                                                                     |        |         |  
|Revenues                                     |                      | $                                                                                   | 95,686 |         | $
|Gross margin(1)                              |                      |                                                                                     | 47,752 |         |  
|Selling, general and administrative expenses |                      |                                                                                     | 8,669  |         |  
|Depreciation and amortization                |                      |                                                                                     | 23,310 |         |  
|Operating income(2)                          |                      |                                                                                     | 15,773 |         |  
|Interest expense, net                        |                      |                                                                                     |       |         |  
|Operating lease expense                      |                      |                                                                                     |       |         |  
|Income tax expense (benefit)                 |                      |                                                                                     | 6,271  |         |  
|Income (loss) before extraordinary items     |                      |                                                                                     | 10,759 |         |  
|Net income (loss)                            |                      |                                                                                     | 10,759 |         |  
|Earnings (loss) per share                    |                      |                                                                                     |        |         |  
|                                             | Basic                |                                                                                     |        |        |  
|                                             | Diluted              |                                                                                     |        |        |  
|Weighted Average common stock outstanding    |                      |                                                                                     |        |         |  
|                                             | Basic                |                                                                                     |        |        |  
|                                             | Diluted              |                                                                                     |        |        |  
|Other Financial Data:                        |                      |                                                                                     |        |         |  
|EBITDA, as adjusted(3)                       |                      | $                                                                                   | 40,340 |         | $
|Capital expenditures:                        |                      |                                                                                     |        |         |  
|                                             | Expansion            |                                                                                     |        | (11,902 | )
|                                             | Overhauls            |                                                                                     |        | (5,698  | )
|                                             | Other                |                                                                                     |        | 3,803   |  
|Cash flows provided by (used in):            |                      |                                                                                     |        |         |  
|                                             | Operating activities |                                                                                     |        | 33,491  |  
|                                             | Investing activities |                                                                                     |        | (13,797 | )
|                                             | Financing activities |                                                                                     |        | (17,870 | )

16

---

|                     |  | As of March 31, |        
|-------------------- |  | --------------- | -------
|
|
|Balance Sheet Data:  |  |                 |        
|Working capital(5)   |  | $               | 13,882 
|Total assets         |  |                 | 380,226
|Total debt(6)        |  |                 | 286,862
|Stockholders' equity |  |                 | 81,680 

---



Tidewater Compression
(Predecessor Company)
April 1, 1997
through
February 20,
1998

CompanyYear Ended March 31,December 12,
1997 through
March 31, 19981999

2000

2001

2002(In thousands)EBITDA, as adjusted

$
40,340

$
5,930

$
48,435

$
55,557

$
88,610

$
207,584Depreciation and amortization


(23,310
)

(1,560
)

(19,314
)

(26,006
)

(33,491
)

(48,600
)Operating lease expense














(14,443
)

(55,401
)Interest expense, net





(3,203
)

(29,313
)

(34,327
)

(23,220
)

(23,017
)Management fee





(328
)

(3,200
)

(3,200
)




Other, including non-recurring














(8,699
)

(227
)Income tax (expense) benefit


(6,271
)

(409
)

1,031


1,994


(3,645
)

(30,931
)Extraordinary loss, net














(9,503
)

Net income (loss)

$
10,759

$
430

$
(2,361
)
$
(5,982
)
$
(4,391
)
$
49,408


17

---

SELECTED HISTORICAL FINANCIAL DATA        UNIVERSAL COMPRESSION, INC.

The following selected historical consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated audited financial statements and related notes included elsewhere in this report. The selected historical financial and operating data for Tidewater
Compression, our predecessor, for the period from April 1, 1997 through February 20, 1998 (acquisition date) and the selected historical financial data as of and for the
39-day period ended March 31, 1998 and for each of the four years in the period ended March 31, 2002 have been derived from the respective audited financial statements. The
consolidated audited financial statements and report thereon, for the year ended March 31, 2002 are included elsewhere in this report.

|                                             |                      | Tidewater Compression
(Predecessor Company)
April 1, 1997
through
February 20,
1998 |        | Company |  
|-------------------------------------------- | -------------------- | ----------------------------------------------------------------------------------- | ------ | ------- | -
|
|
|
|Statement of Operations Data:                |                      |                                                                                     |        |         |  
|Revenues                                     |                      | $                                                                                   | 95,686 |         | $
|Gross margin(1)                              |                      |                                                                                     | 47,752 |         |  
|Selling, general and administrative expenses |                      |                                                                                     | 8,669  |         |  
|Depreciation and amortization                |                      |                                                                                     | 23,310 |         |  
|Operating income(2)                          |                      |                                                                                     | 15,773 |         |  
|Interest expense, net                        |                      |                                                                                     |       |         |  
|Operating lease expense                      |                      |                                                                                     |       |         |  
|Income tax expense (benefit)                 |                      |                                                                                     | 6,271  |         |  
|Income (loss) before extraordinary items     |                      |                                                                                     | 10,759 |         |  
|Net income (loss)                            |                      |                                                                                     | 10,759 |         |  
|Other Financial Data:                        |                      |                                                                                     |        |         |  
|EBITDA, as adjusted(3)                       |                      | $                                                                                   | 40,340 |         | $
|Capital expenditures:                        |                      |                                                                                     |        |         |  
|                                             | Expansion            |                                                                                     |        | (11,902 | )
|                                             | Overhauls            |                                                                                     |        | (5,698  | )
|                                             | Other                |                                                                                     |        | 3,803   |  
|Cash flows provided by (used in):            |                      |                                                                                     |        |         |  
|                                             | Operating activities |                                                                                     |        | 33,491  |  
|                                             | Investing activities |                                                                                     |        | (13,797 | )
|                                             | Financing activities |                                                                                     |        | (17,870 | )

18

---

|                     |  | As of March 31, |        
|-------------------- |  | --------------- | -------
|
|
|Balance Sheet Data:  |  |                 |        
|Working capital(5)   |  | $               | 13,882 
|Total assets         |  |                 | 379,108
|Total debt(6)        |  |                 | 261,508
|Stockholder's equity |  |                 | 105,797

---

The
following table reconciles our EBITDA, as adjusted, to net income or (loss):

Tidewater Compression
(Predecessor Company)
April 1, 1997
through
February 20,
1998

CompanyDecember 12,
1997 through
March 31,
1998

Year Ended March 31,1999

2000

2001

2002(In thousands)EBITDA, as adjusted

$
40,340

$
5,930

$
48,435

$
55,557

$
88,610

$
207,584Depreciation and amortization


(23,310
)

(1,560
)

(19,308
)

(26,006
)

(33,485
)

(48,600
)Operating lease expense














(14,443
)

(55,401
)Interest expense, net





(2,896
)

(26,251
)

(30,916
)

(22,622
)

(23,017
)Management fee





(328
)

(3,200
)

(3,200
)




Other, including non-recurring














(8,699
)

(227
)Income tax (expense) benefit


(6,271
)

(529
)

(166
)

696


(3,871
)

(30,931
)Extraordinary loss, net














(6,632
)

Net income (loss)

$
10,759

$
617

$
(489
)
$
(3,863
)
$
(1,142
)
$
49,408


19

---



ITEM 7.Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS        UNIVERSAL COMPRESSION HOLDINGS, INC.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our financial
statements, and the notes thereto, and the other financial information appearing elsewhere in this report. The following discussion includes forward-looking statements that involve certain risks and
uncertainties. See "Part I. Disclosure Regarding Forward-Looking Statements" and "Risk Factors."

General

We are the second largest provider of natural gas contract compression, sales, operations, maintenance and fabrication services to the natural gas industry in
terms of compression fleet horsepower, with one of the largest natural gas compressor fleets in the United States and a strong presence in key international markets.

We
were formed in December 1997 to acquire all of the outstanding stock of Tidewater Compression Service, Inc. Upon completion of the acquisition in February 1998,
Tidewater Compression became our wholly-owned operating subsidiary and changed its name to Universal Compression, Inc. Through this subsidiary, our gas compression service operations date back
to 1954.

During
the quarter ended June 30, 2000, we completed an initial public offering of 7,275,000 shares of our common stock, par value $0.01 per share, at a price of $22.00 per share,
which provided us with net proceeds (after deducting underwriting discounts and commissions) of approximately $149.2 million.
Concurrently with our initial public offering, we implemented a recapitalization pursuant to which all then existing classes of our stock were converted into common stock. We used the proceeds of the
offering and the $62.6 million in initial proceeds from an operating lease facility to repay $192.7 million of indebtedness, and the remaining proceeds for working capital and to pay
expenses associated with the offering and concurrent financing transactions.

On
February 9, 2001, we completed our acquisition of Weatherford Global for 13,750,000 shares of our common stock (approximately 45% of our current total outstanding shares) and
the restructuring of approximately $323 million in debt and operating lease obligations.

On
July 3, 2001, we completed the public offering of 1,333,333 shares of our common stock, together with 2,666,667 shares of our common stock sold by certain selling stockholders,
including Castle Harlan Partners III, L.P. and its affiliates. The shares were sold in the offering at a price of $28.50 per share, and the offering provided us with net proceeds (after deducting
underwriting discounts and commissions) of approximately $36.1 million. We used the proceeds to fund the cash portion of the purchase price for our acquisition of KCI, to repay a portion of
KCI's indebtedness concurrently with the acquisition and to partially fund the purchase price of our acquisition of LCM. In addition, we issued 694,927 shares of our common stock in the acquisition of
KCI.

Consummation
of the July 2001 offering, and Castle Harlan's reduced ownership of our common stock following that offering, gave the holders of Universal's 97/8%
senior discount notes the right to require us to repurchase those notes at a price equal to 101% of the accreted value, plus accrued and unpaid interest to date. As a result, we repurchased
approximately $5.8 million face value of the 97/8% senior discount notes in August 2001 using borrowings under our revolving credit facility.

Since
our initial public offering, we have completed seven acquisitions. Our completed acquisitions include GCSI in September 2000, Weatherford Global and IEW in
February 2001, CSII in April 2001, KCI and LCM in July 2001, and TCSI in October 2001. Weatherford Global was the second largest

20

---

natural gas compression services company in the world in terms of horsepower. This acquisition added over 950,000 horsepower to our fleet and provided us with a number of important strategic and
operational benefits, including expanded international operations, increased aftermarket services business and cost savings and synergies.

Critical Accounting Policies

The following policies are important to gain an understanding of our operating results and financial condition and should be considered as an integral part of the
financial review.

Estimates
and Assumptions

In
preparing our financial information, we use some estimates and assumptions that may affect reported amounts and disclosures. More specifically, in accounting for allowances and
reserves, depreciation of fixed assets, operating leases, income taxes, revenues, warranty obligations, and contingencies and litigation, we must periodically evaluate and adjust, if necessary, our
estimates and assumptions as new facts or information becomes available, such as accounting rule changes. Actual results may differ from these estimates under different assumptions or conditions.

Operating
Leases

A
significant portion of our compression equipment fleet is financed through operating leases, which are not recorded as liabilities and the equipment is not recorded as assets on our
balance sheet. This treatment is in accordance with generally accepted accounting principles. If the operating leases and related equipment were recorded on the consolidated balance sheet as of
March 31, 2002, total liabilities and total assets would have been increased by approximately $594.2 million. In addition, if the leased equipment had been recorded as assets on our
balance sheet, we would have recorded additional depreciation expense of approximately $32 million and interest expense of approximately $55 million related to this equipment, offset by
a reduction of operating lease expense of approximately $55 million on our consolidated statement of operations for the year ended March 31, 2002.

Allowances
and Reserves

Our
customers that purchase products and services are evaluated for credit worthiness prior to the extension of credit. We maintain an allowance for bad debts based on specific customer
collection issues and historical experience. On an ongoing basis, we conduct an evaluation of the financial strength of our customers based on payment history and make adjustments to the allowance as
necessary. Since most of our customers are in the energy industry, their ability to pay balances due could be affected by dramatic changes in the price and demand for their products.

Depreciation
on properties and equipment is computed on the straight-line method based on estimated useful lives of 15 years for compression equipment and
2-25 years for properties and other equipment. Salvage values of 20% are used for compression equipment. Overhauls and major components related to compression equipment are
depreciated over periods of 5-10 years. Overhauls and major improvements that increase the value or extend the life of contract compressor equipment are capitalized and depreciated
over the estimated period of 6.5 years.

We
record a reserve against our inventory balance for estimated obsolescence. This reserve is based on specific identification and historical experience.

Revenue
Recognition

We
recognize revenue for all our business segments using the following criteria: (a) persuasive evidence of an exchange arrangement exists, (b) delivery has occurred or
services have been rendered, (c) the buyer's price is fixed or determinable and (d) collectibility is reasonably assured. Revenue from contract compression is recorded when earned over
the period of the contract, which generally ranges

21

---

from one month to several years. Fabrication revenue is recognized using the completed contract method, specifically when all terms of the contract have been completed and title to the product has
been transferred. Aftermarket services revenue is recorded as products are delivered and services are rendered.

Financial Results of Operations

Fiscal Year Ended March 31, 2002 Compared to Fiscal Year Ended March 31, 2001

The following table summarizes revenues, gross margins, expenses and the respective percentages for each of our business segments:

Year Ended March 31,2001

2002(dollars in thousands)Revenues:Domestic contract compression

$
126,686

$
267,550% of revenue


54.5
%

39.3
%International contract compression

$
22,549

$
60,185% of revenue


9.7
%

8.9
%Fabrication

$
61,779

$
211,265% of revenue


26.6
%

31.1
%Aftermarket services

$
21,452

$
140,989% of revenue


9.2
%

20.7
%Gross Margin:Domestic contract compression

$
80,465

$
169,892International contract compression


16,425


43,411Fabrication


9,041


24,347Aftermarket services


3,476


30,696Expenses:Depreciation and amortization


(33,491
)

(48,600
)Selling, general and administrative


(21,092
)

(60,890
)Operating lease expense


(14,443
)

(55,401
)Interest expense, net


(23,220
)

(23,017
)Income taxes


(3,645
)

(30,931
)Net income before extraordinary items


5,112


49,408


Revenues.Our total revenues for the fiscal year ended March 31, 2002 increased $447.5 million, or 192.5%, to
$680 million, compared to $232.5 million for the fiscal year ended March 31, 2001. Our contract compression revenues increased by $178.5 million, or 119.6%, to
$327.7 million during the fiscal year ended March 31, 2002 from $149.2 million during the fiscal year ended March 31, 2001. Domestic contract compression revenues increased
by $140.9 million, or 111.2%, to $267.6 million during the fiscal year ended March 31, 2002 from $126.7 million during the fiscal year ended March 31, 2001. Our
international contract compression revenues increased by $37.7 million, or 167.5%, to $60.2 million during the fiscal year ended March 31, 2002 from $22.5 million during
the fiscal year ended March 31, 2001. The increase in domestic contract compression revenues primarily resulted from expansion of our contract compression fleet through the impact of a full
year of operations from the Weatherford Global acquisition, the KCI acquisition and internal growth. The increase in international contract compression revenue resulted from expansion of our
international contract compression fleet primarily through the CSII acquisition and the impact of a full year of operations from the Weatherford Global acquisition.

22

---

Domestic
average rented horsepower for the fiscal year ended March 31, 2002 increased by 107% to approximately 1,603,000 horsepower from approximately 776,000 horsepower for the
fiscal year ended March 31, 2001, primarily due to the KCI acquisition and a full year of operations from the Weatherford Global and GCSI acquisitions. In addition, international average rented
horsepower for the fiscal year ended March 31, 2002 increased by 240% to approximately 303,000 horsepower from approximately 89,000 horsepower for the fiscal year ended March 31, 2001,
primarily through our acquisitions and expansion of our international contract compression fleet and high utilization rates. Our combined average horsepower utilization rate for the fiscal year ended
March 31, 2002 was approximately 88.8%, up from 87.6% in the fiscal year ended March 31, 2001. As of March 31, 2002, we had approximately 2.2 million available horsepower
with an average horsepower utilization rate for the quarter then ended of 86.8% and for the same period one year earlier of 88.8%.

Our
revenue from fabrication increased to $211.3 million from $61.8 million, an increase of 242%. The increase in fabrication revenue, consisting mostly of equipment
fabrication, was due primarily to our acquisition of KCI and the impact of a full year of operations from the Weatherford Global acquisition combined with internal growth. Revenues from fabrication
vary quarter to quarter due to the
recognition of revenues only at the time of shipment. Our backlog of fabrication projects at the fiscal year ended March 31, 2002 was approximately $80.0 million, compared with a backlog
of $34.2 million at March 31, 2001. From December 31, 2001 to March 31, 2002, our backlog decreased $21.0 million.

Our
revenues from aftermarket services increased to $141.0 million during the fiscal year ended March 31, 2002 from $21.5 million during the fiscal year ended
March 31, 2001, an increase of 556%. The increase was due primarily to the impact of a full year of operations from the Weatherford Global acquisition, and resulted in the aftermarket services
segment becoming a more significant part of our business. In addition, the LCM and TCSI acquisitions increased revenues approximately $23 million in the aggregate.

Gross Margin.Our gross margin (defined as total revenue less rental expense, cost of sales (exclusive of depreciation and
amortization), gain on asset sales and interest income) for the fiscal year ended March 31, 2002 increased $158.9 million, or 145.3%, to $268.3 million from gross margin of
$109.4 million for the fiscal year ended March 31, 2001. Our contract compression gross margin for the fiscal year ended March 31, 2002 increased $116.4 million, or 120%,
to $213.3 million compared to gross margin of $96.9 million for the fiscal year ended March 31, 2001. Contract compression gross margin increased primarily as the result of our
contract compression revenue growth and operating cost improvements realized by the integration of our contract compression business. Our fabrication gross margin for the fiscal year ended
March 31, 2002 increased $15.3 million, or 169%, to $24.3 million compared to a gross margin of $9.0 million for the fiscal year ended March 31, 2001. Fabrication
gross margins increased primarily due to the impact of a full year of operations from Weatherford Global, a partial year of operations from KCI and synergies from the integration of these operations.
Our aftermarket services gross margin for the fiscal year ended March 31, 2002 increased $27.2 million or 783%, to $30.7 million compared to a gross margin of $3.5 million
for the fiscal year ended March 31, 2001. Aftermarket services gross margin increased primarily due to the impact of a full year of operations from Weatherford Global and the acquisitions of
TCSI and LCM.

Selling, General and Administrative Expenses.Our selling, general and administrative expenses increased by
$39.8 million to $60.9 million for the fiscal year ended March 31, 2002, compared to $21.1 million for the fiscal year ended March 31, 2001. Selling, general and
administrative expenses represented 9.0% of revenue for the fiscal year ended March 31, 2002 compared to 9.1% of revenue for the fiscal year ended March 31, 2001.

EBITDA,
as adjusted, for the fiscal year ended March 31, 2002 increased 134.3% to $207.6 million from $88.6 million for the fiscal year ended March 31, 2001,
primarily due to increases in total fleet

23

---

horsepower and utilization of the compression contract compression fleet, gross margin contribution from fabrication and sales, and operating cost improvements realized by contract compression
operations. EBITDA, as adjusted, is defined as net income plus income taxes, interest expense, leasing expense, management fees, depreciation and amortization, excluding non-recurring
items and extraordinary gains or losses. EBITDA, as adjusted, is not a measure of financial performance under generally accepted accounting principles and should not be considered an alternative to
operating income or net income as an indicator of our operating performance or to net cash provided by
operating activities as a measure of its liquidity. Additionally, the EBITDA, as adjusted, computation used herein may not be comparable to other similarly titled measures of other companies. EBITDA,
as adjusted, represents a measure upon which management assesses financial performance, and financial covenants in our current borrowing arrangements are tied to similar measures. We believe that
EBITDA, as adjusted, is a standard measure of financial performance used for valuing companies in the compression industry. EBITDA, as adjusted, is a useful common yardstick as it measures the
capacity of companies to generate cash without reference to how they are capitalized, how they account for significant non-cash charges for depreciation and amortization associated with
assets used in the business (the majority of which are long-lived assets in the compression industry), or what their tax attributes may be.

Non-recurring Charges.During the fiscal year ended March 31, 2001, we incurred non-recurring
charges of $8.7 million related to the early termination of a management agreement and a consulting agreement and other related fees in connection with our initial public offering and
concurrent financing transactions as well as costs related to facilities and workforce reductions associated with our Weatherford Global acquisition.

Depreciation and Amortization.Depreciation and amortization increased by $15.1 million to $48.6 million during
the fiscal year ended March 31, 2002, compared to $33.5 million during the fiscal year ended March 31, 2001. The increase was primarily due to capital additions of
$188 million, which primarily resulted from expansion of our contract compression fleet, through our fabrication operations and the purchase of approximately $60 million and
$13 million of contract compression equipment from the acquisitions of KCI and CSII, respectively. The increase in depreciation and amortization was partially offset by the net sales and
leasebacks of compressor equipment, with a book value of approximately $142.1 million, between April and October 2001 under our operating lease facilities.

Operating Lease.Operating lease expense increased to $55.4 million during the fiscal year ended March 31, 2002
resulting from the increase in compression equipment leased under our operating lease facilities. The outstanding balance under the operating lease facilities at March 31, 2002 was
$708.5 million.

Interest Expense, Net.Interest expense, net, remained fairly constant at $23.0 million for the fiscal year ended
March 31, 2002 from $23.2 million for the fiscal year ended March 31, 2001, primarily as a result of the repayment of the $1.2 million revenue bonds, offset partially by
increased accretion of Universal's 97/8% senior discount notes.

Extraordinary Loss.During the fiscal year ended March 31, 2001, we incurred extraordinary losses of
$15.2 million ($9.5 million net of income tax) related to debt restructurings that occurred concurrently with our initial public offering and the Weatherford Global acquisition.

Net Income (Loss).We had a net income of $49.4 million for the fiscal year ended March 31, 2002 compared to a
net loss of $4.4 million (including extraordinary loss of $9.5 million net of income taxes)
for the fiscal year ended March 31, 2001, primarily as a result of the $158.9 million increase in our gross margins and interest expense, net, remaining constant at approximately
$23.0 million, offset partially by increased depreciation and amortization of $48.6 million related to the continued expansion of our assets, increased leasing expense of
$55.4 million resulting from the increase in compression

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equipment leased under our operating lease facilities, an increase in the income tax provision to $30.9 million and a decrease in net income of $2.4 million related to the Argentina
political and economic situation.

Fiscal Year Ended March 31, 2001 Compared to Fiscal Year Ended March 31, 2000

The following table summarizes revenues, cost of sales, gross margins and the respective percentages for each of our business segments:

Year Ended March 31,2000

2001(dollars in thousands)Revenues:Domestic contract compression

$
83,577

$
126,686% of revenue


61.3
%

54.5
%International contract compression

$
14,718

$
22,549% of revenue


10.8
%

9.7
%Fabrication

$
25,258

$
61,779% of Revenue


18.5
%

26.6
%Aftermarket services

$
12,742

$
21,452% of Revenue


9.4
%

9.2
%Gross Margin:Domestic contract compression

$
52,411

$
80,465International contract compression


10,532


16,425Fabrication


3,358


9,041Aftermarket services


2,699


3,476Expenses:Depreciation and amortization


(26,006
)

(33,491
)Selling, general and administrative


(16,797
)

(21,092
)Operating lease expense





(14,443
)Interest expense, net


(34,327
)

(23,220
)Income taxes


(1,944
)

(3,645
)Net income (loss)


(5,982
)

5,112


Revenues.Our total revenues for the fiscal year ended March 31, 2001 increased $96.2 million, or 70.7%, to
$232.5 million, compared to $136.3 million for the fiscal year ended March 31, 2000. Our contract compression revenues increased by $50.9 million, or 51.8%, to
$149.2 million during the fiscal year ended March 31, 2001 from $98.3 million during the fiscal year ended March 31, 2000. Domestic contract compression revenues increased
by $43.1 million, or 51.6%, to $126.7 million during the fiscal year ended March 31, 2001 from $83.6 million during the fiscal year ended March 31, 2000. Our
international contract compression revenues increased by $7.8 million, or 53.1%, to $22.5 million during the fiscal year ended March 31, 2001 from $14.7 million during the
fiscal year ended March 31, 2000. The increase in domestic contract compression revenues primarily resulted from expansion of our contract compression fleet through the acquisition of GCSI,
Weatherford Global and internal growth. The increase in international contract compression revenues resulted from expansion of our international contract compression fleet primarily through the
addition of horsepower from our acquisitions, high utilization rates and the impact of our Weatherford Global acquisition. During the quarter ended December 31, 2000, we started our first
contract compression project in Mexico consisting of 10,000 horsepower. This project contributed approximately $4.7 million in one-time turnkey installation revenues.

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Domestic
average rented horsepower for the fiscal year ended March 31, 2001 increased by 61.0% to approximately 776,000 horsepower from approximately 482,000 horsepower for the
fiscal year ended March 31, 2000. In addition, international average rented horsepower for the fiscal year ended March 31, 2001 increased by 81.6% to approximately 89,000 horsepower from
approximately 49,000 horsepower for the fiscal year ended March 31, 2000, primarily through expansion of our international contract compression fleet, high utilization rates and additional
service in Latin America. Our average horsepower utilization rate for the fiscal year ended March 31, 2001 was approximately 87.6%, up from 80.7% in the fiscal year ended March 31, 2000.
As of March 31, 2000, we had approximately 1.9 million available horsepower with an additional 69,000 horsepower operated and maintained for customers. Our average horsepower utilization
rate for the quarter ended March 31, 2001 was 88.8% and at March 31, 2001 was approximately 88.4%. These horsepower and utilization amounts include GCSI for the full fourth quarter and
Weatherford Global for the 50 days from the date of the merger.

Our
revenue from fabrication increased to $61.8 million from $25.3 million, an increase of 144.3%. The increase in fabrication revenue, consisting mostly of equipment
fabrication, was due primarily to our acquisitions of GCSI and Weatherford Global. Revenues from fabrication vary quarter to quarter due to the recognition of revenues only at the time of shipment.
Our backlog of fabrication projects at March 31, 2001 was approximately $34.2 million, compared with a backlog of $11.1 million at the same time a year earlier. From
December 31, 2000 to March 31, 2001, our backlog increased $3.7 million.

Our
revenues from aftermarket services increased to $21.5 million during the fiscal year ended March 31, 2001 from $12.7 million during the fiscal year ended
March 31, 2000, an increase of 69.3%. The increase was due primarily to our acquisitions of GCSI and Weatherford Global.

Gross Margin.Our gross margin for the fiscal year ended March 31, 2001 increased $40.4 million, or 58.8%, to
$109.4 million from gross margin of $69.0 million for the fiscal year ended March 31, 2000. Our contract compression gross margin for the fiscal year ended March 31, 2001
increased $34.0 million, or 54.1%, to $96.9 million compared to gross margin of $62.9 million for the fiscal year ended March 31, 2000. Contract compression gross margin
increased primarily as the result of our contract compression revenue growth discussed above and operating cost improvements realized by contract compression operations. Our fabrication gross margin
for the fiscal year ended March 31, 2001 increased $5.6 million, or 164.7%, to $9.0 million compared to a gross margin of $3.4 million for the fiscal year ended
March 31, 2000. Fabrication gross margin increased primarily due to strong customer demand, cost reductions and their resulting gross margin effects.

Our
aftermarket services gross margin for the fiscal year ended March 31, 2001 increased $0.8 million or 29.6%, to $3.5 million compared to a gross margin of
$2.7 million for the fiscal year ended March 31, 2000. Aftermarket services revenue increased primarily due to our acquisition of Weatherford Global.

Selling, General and Administrative Expenses.Our selling, general and administrative expenses for the fiscal year ended
March 31, 2001 increased $4.3 million compared to the fiscal year ended March 31, 2000. Selling, general and administrative expenses represented 9.1% of revenue for the fiscal
year ended March 31, 2001 compared to 12.3% of revenue for the fiscal year ended March 31, 2000. The percentage decrease was primarily due to the approximately $4.7 million in
one-time turnkey installation revenues associated with a large contract compression project in Mexico, the elimination of management fees in connection with our initial public offering in
May 2000 and synergies achieved in our acquisitions of GCSI and Weatherford Global. These reductions have been offset partially by increases in certain expenses related to our operating as a
publicly traded company.

EBITDA,
as adjusted, for the fiscal year ended March 31, 2001 increased 59.4% to $88.6 million from $55.6 million for the fiscal year ended March 31, 2000,
primarily due to increases in horsepower and utilization of the compression contract compression fleet, gross margin contribution from

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fabrication and sales, operating cost improvements realized by contract compression operations, and a decreased percentage of selling, general and administrative expenses, as discussed above.

Non-recurring Charges.During the fiscal year ended March 31, 2001, we incurred non-recurring
charges of $8.7 million related to the early termination of a management agreement and a consulting agreement and other related fees in connection with our initial public offering and
concurrent financing transactions as well as costs related to facilities and workforce reductions associated with our Weatherford Global acquisition.

Depreciation and Amortization.Depreciation and amortization increased by $7.5 million to $33.5 million during
the fiscal year ended March 31, 2001, compared to $26 million during the fiscal year ended March 31, 2000. The increase resulted primarily from the expansion of our contract
compression fleet, offset partially by the compressor equipment sold and leased back under our previous operating lease facility.

Operating Lease.We incurred leasing expense of $14.4 million during the fiscal year ended March 31, 2001
resulting from our operating lease facilities. The outstanding balance under the operating lease facilities at March 31, 2001 was $527.5 million.

Interest Expense, Net.Interest expense, net, decreased $11.1 million to $23.2 million for the fiscal year
ended March 31, 2001 from $34.3 million for the fiscal year ended March 31, 2000, primarily from the reduction of debt resulting from our initial public offering and financing
restructurings. The decrease in interest expense was offset partially by increased accretion of Universal's 97/8% senior discount notes and the assumption and refinancing of debt
related to our GCSI acquisition.

Extraordinary Loss.During the fiscal year ended March 31, 2001, we incurred extraordinary losses of
$15.2 million ($9.5 million net of income tax) related to debt restructurings that occurred concurrently with our initial public offering and the Weatherford Global acquisition.

Net Income (Loss).We had a net loss of $4.4 million for the fiscal year ended March 31, 2001 compared to a net
loss of $6 million for the fiscal year ended March 31, 2000, primarily as a result of an increase in our gross margins and interest expense decreasing from $34.4 million to
$24.2 million, offset partially by increased depreciation and amortization related to the continued expansion of our assets, leasing expense of $14.4 million resulting from our operating
lease facilities, non-recurring charges, an increase of the income tax provision to $3.6 million from an income tax benefit of $2 million, and an extraordinary loss of
$9.5 million.

Effects of Inflation

In recent years, inflation has been modest and has not had a material impact upon the results of our operations.

Liquidity and Capital Resources

Our cash and cash equivalents balance at March 31, 2002 was $6.2 million, compared to $12.3 million at March 31, 2001.

During
the twelve months ended March 31, 2002, cash flows from operations provided $133.0 million, primarily from net income of $49.4 million, depreciation of
$48.6 million, and accretion of Universal's 97/8% senior discount notes of $20.1 million.

During
the twelve months ended March 31, 2002, we used $160.3 million of cash for investing activities, which primarily consisted of $188.0 million for fixed asset
additions, $160.0 million for acquisitions, largely funded by $187.8 million from proceeds from sales of compression equipment to our operating lease facilities.

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During the twelve months ended March 31, 2002, $21.1 million of cash was provided by financing activities, which primarily consisted of $36.3 million from the
issuance of common stock, partially offset by repayments of debt of $7.4 million, issuance costs related to the operating lease facilities of $4.1 million and payments on capital lease
agreements of $2.9 million.

On
July 3, 2001, we completed the offering of 1,333,333 shares of our common stock together with 2,666,667, shares of our common stock sold by certain selling stockholders,
including Castle Harlan. The shares were sold at a price of $28.50 per share, and the offering provided us with net proceeds (after deducting underwriting discounts and commissions) of approximately
$36.1 million. We used the proceeds to fund the $25.8 million cash portion of the purchase price in our acquisition of KCI, to repay a portion of KCI's indebtedness concurrently with the
acquisition and to partially fund the purchase price of our acquisition of LCM.

Pursuant
to the indenture governing Universal's 97/8% senior discount notes, the holders of the notes had the right to require Universal to repurchase the notes through
August 23, 2001 as a result of the consummation of the July 2001 equity offering as Castle Harlan's change in ownership to less than 20% of our common stock constituted a change of
control under the indenture. We repurchased approximately $5.8 million face value of these notes in August 2001 with borrowings under our revolving credit facility. As of May 31,
2002, Universal had approximately $219.3 million aggregate principal amount outstanding under the 97/8% senior discount notes.

On
October 3, 2001, we completed our acquisition of TCSI for approximately $22.5 million in cash by using funds available under our revolving credit facility.

On
October 23, 2001, we sold an additional $122 million of compression equipment to BRL Universal Equipment 2001 A, L.P. and leased the equipment back under our existing
high yield operating lease facility. We used the net proceeds from the sale of the compression equipment to repay all of the outstanding indebtedness under our revolving credit facility, to repay a
portion of our obligations under our ABS operating lease facility, for the payment of other indebtedness and for general corporate purposes. Most of the funds used to pay for the compression equipment
under the high yield operating lease facility came from the issuance and sale by the issuers, BRL Universal Equipment 2001 A, L.P. and BRL Universal Equipment Corp., in October 2001 of
$100.0 million aggregate principal amount of additional 87/8% senior secured notes due 2008 issued under an indenture dated February 9, 2001. The October 2001 notes
increased the notes outstanding under the indenture to an aggregate principal amount of $450.0 million.

In
accordance with generally accepted accounting principles, our operating leases' aggregate balance of $708.5 million as of March 31, 2002, was not recorded as a liability
in our consolidated balance sheet as of that date except to the extent of approximately $114.3 million of deferred gain. Likewise, the leased equipment under the operating leases, representing
approximately 1.3 million horsepower and having a gross and net book value of approximately $609.9 million and $594.2 million, respectively, was not recorded as an asset in our
March 31, 2002 consolidated balance sheet, and we did not record depreciation of that leased equipment as an expense in our consolidated statements of operations for periods ended on or prior
to March 31, 2002. If the operating leases were recorded in our consolidated balance sheet as of March 31, 2002, total liabilities would have been increased by approximately
$594.2 million, and if the leased equipment under our operating leases (having a gross and net book value, at the date they were sold to the lessors, of $609.9 million and
$594.2 million, respectively) had been recorded as assets on our consolidated balance sheet, total assets would have increased by approximately $594.2 million (less depreciation). In
addition, if the leased equipment had been recorded as assets on our balance sheet, we would have recorded additional depreciation expense of approximately $32 million (using our current
depreciation life policy) and interest expense of approximately $55 million related to this equipment, offset by a reduction of operating lease expense of approximately $55 million on
our consolidated statement of operations for the year ended March 31,

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2002. Under our current policy, depreciation of owned contract compression equipment is generally calculated using the straight line method over a period of 15 years with residual value of
20%.

As
of March 31, 2002, our debt to capitalization ratio, including the operating leases, was 57% and our book debt to capitalization ratio, excluding operating leases, was 24.5%.

Working
capital for the year ended March 31, 2002 increased compared to March 31, 2001 due to non-cash adjustments within the purchase accounting liability
balances and changes to the current deferred tax balances.

As
of June 15, 2002, subject to covenant and other restrictions, we had unused credit availability of approximately $165.5 million (approximately $40.5 million under
our asset-backed securitization facility and $125 million under our revolving credit facility).

Capital
expenditures, excluding acquisitions, are expected to be approximately $140 to $170 million for fiscal 2003, with approximately $65 million for domestic expansion,
approximately $35 million for international expenditures, approximately $30 million for maintenance capital expenditures and approximately $10 million for general corporate
expenditures.

As
a result of the political and economic situation in Argentina, which began to deteriorate in January 2002, we continue to negotiate with our customers in Argentina as to contract
amounts to be paid, subject to restrictions by the Argentine government. The majority of our existing contracts were written
to ensure that we received United States dollars rather than Argentine pesos, which were designed to reduce our exposure to fluctuations in the Argentine peso's value. For the three and twelve month
periods ended March 31, 2002, the impact from the Argentina situation reduced EBITDA, as adjusted, by approximately $4.0 million. Also, we have recorded a non-cash adjustment
to stockholders' equity at March 31, 2002 of approximately $53 million pertaining to the currency translation of the Argentina balance sheet. Under GAAP this adjustment is not recorded
as an expense in the current statement of operations. A significant portion of this adjustment is related to compression assets.

We
believe that funds generated from our operations, together with our existing cash and the additional capacity available under our revolving credit facility and ABS operating lease
facility, will be sufficient to finance our current operations, planned capital expenditures and internal growth for the remainder of fiscal year 2003. If we were to make significant additional
acquisitions for cash, we may need to obtain additional debt, equity or operating lease financing.

Recent Accounting Pronouncements

In August 2001, the Financial Acounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for
the Impairment or Disposal of Long-Lived Assets". SFAS 144 provides new guidance on the recognition of impairment losses on long-lived assets to be held and used or to
be disposed of and also broadens the definition of what constitutes a discontinued operation and how the results of a discontinued operation are to be measured and presented. SFAS 144
supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and Accounting Principle Board Opinion
No. 30, while retaining many of the requirements of these two statements. Under SFAS 144, assets held for sale that are a component of an entity will be included in discontinued
operations if the operations and cash flows will be or have been eliminated from the ongoing operations of the entity and the entity will not have any significant continuing involvement in the
operations prospectively. SFAS 144 is effective for fiscal years beginning after December 15, 2001. SFAS 144 does not materially change the methods used by the Company to measure
impairment losses on long-lived assets, but may result in additional future dispositions being reported as discontinued operations. The Company adopted SFAS 144 on April 1,
2002. Based on the Company's review of SFAS 144, no impairment existed as of March 31, 2002.

Seasonal Fluctuations

Our results of operations have not historically reflected any material seasonal tendencies.

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RISK FACTORS

As described in "Part I. Disclosure Regarding Forward-Looking Statements," this report contains forward-looking statements
regarding us, our business and our industry. The risk factors described below, among others, could cause our actual results to differ materially from the expectations reflected in the forward-looking
statements. If any of the following risks actually occur, our business, financial condition and operating results could be materially adversely affected. Additional risks not presently known to us or
which we currently consider immaterial may also adversely affect the Company and Universal.

Risks Inherent in Our Industry

We depend on strong demand for natural gas, and a prolonged, substantial reduction in this demand could adversely affect the demand for our services and products.

Gas contract compression operations are significantly dependent upon the demand for natural gas. Demand may be affected by, among other factors, natural gas
prices, weather, demand for energy and availability of alternative energy sources. Any prolonged, substantial reduction in the demand for natural gas would, in all likelihood, depress the level of
production, exploration and development activity and result in a decline in the demand for our contract compression services and products. Similarly, a decrease in capital spending by our customers
could result in reduced demand for our fabrication or aftermarket services businesses. These events could materially adversely affect our business, results of operations and financial condition.

Future terrorist attacks or responses thereto could adversely affect our company.

The impact that future events, arising as a result of the terrorist attacks on the United States on September 11, 2001, or any terrorist attacks that may
occur in the future, including military or police activities in the United States or foreign countries, future terrorist activities or threats of such activities, political unrest and instability,
riots and protests, could have on the United States economy, the global economy, global financial markets and our business cannot currently be determined with any accuracy.

We intend to continue to make substantial capital investments to implement our business strategy, which may reduce funds available for other operations.

We anticipate that we will continue to make substantial capital investments to expand our contract compression fleet. For the year ended March 31, 2002,
net of asset sales (other than under our operating leases), we invested approximately $188 million in capital investments, excluding acquisitions. We expect to spend between $140 and
$170 million on capital expenditures during fiscal year 2003, excluding acquisitions. Historically, we have financed these investments through internally generated funds, debt and equity
offerings and our revolving credit facility and our operating lease facilities. These significant capital investments require cash that we could otherwise apply to other business needs. However, if we
do not incur these expenditures while our competitors make substantial fleet investments, our market share may decline and our business may be adversely affected. In addition, if we are unable to
generate sufficient cash internally or obtain alternative sources of capital, it could materially adversely affect our results of operations, financial condition and growth.

We may not be successful in implementing our business strategy, which may adversely affect our ability to finance our future growth.

Our ability to implement our business strategy successfully depends upon a number of factors including competition, availability of working capital and general
economic conditions. Significant elements of our business strategy include growth of our market share and broader participation in the international market for contract compression services. We cannot
assure you that we will succeed in

30

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implementing our strategy or be able to obtain financing for this strategy on acceptable terms. The indenture governing Universal's 97/8% senior discount notes and our revolving credit
facility and operating lease facilities substantially limit our ability to incur additional debt to finance our growth strategy. See "BusinessGrowth Strategy."

Most of our domestic compressor leases haves short initial terms, and we may not recoup the costs of our investment if we were unable to subsequently re-lease the
compressors.

In most cases, the initial terms of our contract compression leases with customers are short, with the most common initial term being six months and continuing on
a month-to-month basis thereafter. The initial terms of our leases are generally too short to enable us to recoup the average cost of acquiring or fabricating compressors for
contract compression customers, to the extent applicable. As a result, we assume substantial risk of not recovering our entire investment in the equipment we acquire or fabricate for contract
compression customers. Although we historically have been successful in subsequently leasing our compressors, we may not be able to continue to do so and a substantial number of our contract
compression customers could terminate their leases at approximately the same time. If such an event were to occur, even if we are successful in re-leasing our compressors as we have been
in the past, we may not be able to obtain favorable contract compression rates. This would have an adverse effect on our revenues.

We do not insure against all potential losses and could be seriously harmed by unexpected liabilities.

Natural gas service operations are subject to inherent risks such as equipment defects, malfunction and failures, and natural disasters that can result in
uncontrollable flows of gas or well fluids, fires and explosions. These risks could expose us to substantial liability for personal injury, death, property damage, pollution and other environmental
damages. Although we have obtained insurance against many of these risks, there can be no assurance that our insurance will be adequate to cover our liabilities. Further, insurance covering the risks
we face or in the amounts we desire may not be available in the future or, if available, the premiums may not be commercially justifiable. If we were to incur substantial liability and such damages
were not covered by insurance or were in excess of policy limits, or if we were to incur liability at a time when we are not able to obtain liability insurance, our business, results of operations and
financial condition could be materially adversely affected.

We are subject to substantial environmental regulation, and changes in these regulations could increase our costs or liabilities.

We are subject to stringent and complex foreign, federal, state and local laws and regulatory standards, including laws and regulations regarding the discharge of
materials into the environment, emission controls and other environmental protection and occupational health and safety concerns. See "BusinessEnvironmental and Other Regulations."
Environmental laws and regulations may, in certain circumstances, impose strict liability for environmental contamination, rendering us liable for remediation costs, natural resource damages and other
damages as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior owners or operators or other third parties. In addition, where
contamination may be present, it is not uncommon for neighboring land owners and other third parties to file claims for personal injury, property damage and recovery of response costs. Remediation
costs and other damages arising as a result of environmental laws and regulations, and costs associated with new information, changes in existing environmental laws and regulations or the adoption of
new environmental laws and regulations could be substantial and could have a material adverse effect on our business, financial condition or results of operations. Moreover, failure to comply with
these environmental laws and regulations may result in the imposition of administrative, civil and criminal penalties.

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We
currently are engaged in remediation and monitoring activities with respect to some of our properties. The cost of these activities has not been, and we currently do not expect it to
be, material to us. We believe that former owners and operators of some of these properties may be responsible under environmental laws and contractual agreements to pay for or perform some of these
activities, or to indemnify us for some of our remediation costs. There can be no assurance that these other entities will fulfill their legal or contractual obligations, and their failure to do so
could result in material costs to us. In addition, we have entered into a settlement agreement with the prior owner of Tidewater Compression whereby the prior owner's indemnification obligations
related to environmental matters
have been terminated. As such, any environmental obligations related to our acquisition of Tidewater Compression will not be indemnified by the prior owner.

We
routinely deal with natural gas, oil and other petroleum products. As a result of our engineered products and overhaul and field operations, we generate, manage and dispose of or
recycle hazardous wastes and substances such as solvents, thinner, waste paint, waste oil, washdown wastes and sandblast material. Although it is our policy to use generally accepted operating and
disposal practices in accordance with applicable environmental laws and regulations, hydrocarbons or other hazardous substances or wastes may have been disposed or released on, under or from
properties owned, leased or operated by us or on or under other locations where such substances or wastes have been taken for disposal. These properties may be subject to investigatory, remediation
and monitoring requirements under foreign, federal, state and local environmental laws and regulations.

We
believe that our operations are in substantial compliance with applicable environmental laws and regulations. Nevertheless, the modification or interpretation of existing
environmental laws or regulations, the more vigorous enforcement of existing environmental laws or regulations, or the adoption of new environmental laws or regulations may also negatively impact oil
and natural gas exploration and production companies, which in turn could have a material adverse effect on us and other similarly situated service companies.

We face significant competition that may cause us to lose market share and harm our financial performance.

The contract compression, fabrication, and aftermarket services businesses are highly competitive. Many of our competitors also offer a wide range of compressors
for sale or lease, and there are low barriers to entry for individual projects. In addition, we compete with several large national and multinational companies that provide contract compression
services to third parties, most of which have greater financial and other resources than we do. If our competitors substantially increase the resources they devote to the development and marketing of
competitive products and services, we may not be able to compete effectively. In addition, in our Weatherford Global acquisition, we acquired most, but not all, of the compression operations of
Weatherford. Weatherford retained certain foreign compression equipment and is not contractually restricted from competing with us.

Risks Specific to Our Company

We may not be able to successfully integrate the businesses that we acquire, which could cause us not to realize all of the expected benefits of our acquisitions.

We have completed seven acquisitions since our initial public offering in May 2000. Integrating acquired businesses into ours is an ongoing process
involving a number of potential challenges and costs, including combining, reducing and relocating workforces, facilities and offices and combining systems, processes, administrative functions and
corporate cultures. The integration process could cause operational difficulties, divert the attention of our management away from managing our business to the assimilation of the operations and
personnel and have adverse effects on our operating results. Furthermore, if our integration of our acquisitions is not successful, we may lose personnel, not be able

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to retain our customer base to the extent expected and experience increased costs and reduced revenues.

We are highly leveraged, a significant portion of our cash flow must be used to service our obligations and in addition we are vulnerable to interest rate increases.

As of June 15, 2002, we had approximately $938 million in outstanding obligations, including capital leases and operating lease facilities. Of this
amount, approximately $99 million bears interest at floating rates. As of that date, we also had unused availability of approximately $165.5 million ($125 million under our
revolving credit facility and approximately $40.5 million under our ABS operating lease facility). Both the interest payments under our revolving credit facility and a portion of the lease
payments under our operating lease facilities bear interest at a floating rate (based on a base rate or LIBOR, at our option, in the case of the revolving credit facility, and based on LIBOR in the
case of the operating lease facilities), plus a variable amount depending on our operating results. Changes in economic conditions could result in higher interest and lease payment rates, thereby
increasing our interest expense and lease payments and reducing our funds available for capital investment, operations or other purposes. If, during the term of the operating lease facilities, the
realizable value of the equipment under the facilities is insufficient to satisfy the obligations under the facilities, we may be required to record a loss due to our residual value guarantees and may
have insufficient funds to provide for repayment of our obligations. Our significant leverage increases our vulnerability to general adverse economic and industry conditions. In addition, a
substantial portion of our cash flow must be used to service our debt and lease obligations, which may affect our ability to make acquisitions or capital expenditures.

Our financing arrangements contain restrictions that may limit our ability to finance future operations or engage in attractive business transactions.

A significant portion of our gas compressors are pledged as collateral under operating lease facilities, each of which contains covenants that restrict our
operations. The indenture governing Universal's 97/8% senior discount notes also contains restrictive covenants. These covenants place limitations on, among other things, our ability to
enter into acquisitions, asset sales and operating lease transactions, and to
incur additional indebtedness and create liens. These covenants could hinder our flexibility and restrict our ability to take advantage of market opportunities or respond to changing market
conditions.

Our international operations subject us to risks that are difficult to predict.

For the year ended March 31, 2002, we derived approximately 23% of our revenues from international operations. We intend to continue to expand our business
in Latin America and Asia Pacific.

Our
international operations are affected by global political and economic conditions, and we may encounter difficulties managing our international operations. Changes in political or
economic conditions and in legal or regulatory requirements in any of the countries in which we operate could result in exchange rate movement, new currency or exchange controls, expropriation or
other trade restrictions, including tariffs, being imposed on our operations. Many of these factors are outside of our control. In addition, the financial condition of foreign customers may not be as
strong as that of our current domestic customers. As a result of the political and economic situation in Argentina, we are involved in negotiations with our customers in Argentina as to the currency
in which contract amounts are to be paid, as mandated by the Argentine government. The impact from the Argentina political and economic situation reduced EBITDA, as adjusted, by approximately
$4.0 million in the three and twelve month periods ended March 31, 2002.

33

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Weatherford's voting power may give it the ability to control the outcome of matters submitted to a vote of our stockholders, and thus limit the rights of our other
stockholders to influence our affairs.

Currently, an affiliate of Weatherford beneficially owns approximately 45% of our outstanding common stock. In addition to its voting power, Weatherford and its
affiliates are entitled to designate three persons to serve on our board of directors for so long as they own at least 20% of our outstanding common stock. If Weatherford's ownership falls below 20%,
Weatherford may designate only two directors. If Weatherford's ownership falls below 10%, it will no longer have the right to designate directors to our board. Currently, Bernard J. Duroc-Danner, Lisa
W. Rodriguez and Uriel E. Dutton are serving as Weatherford's designees to our board.

This
significant stock ownership and board representation gives Weatherford the ability to exercise substantial influence over our ownership, policies, management and affairs and
significant control over actions requiring approval of our stockholders. Weatherford's interests could conflict with our other stockholders. See "Item 13. Certain Relationships and Related
Transactions" for further information regarding our relationship with Weatherford.

The market price of our common stock is volatile.

Historically, the market price of common stock of companies engaged in the natural gas industry has been highly volatile. Similarly, the market price of our
common stock has varied significantly since our initial public offering in May 2000. In particular, changes in natural gas prices or in the demand for natural gas could affect the price of our
common stock.

We are dependent on particular suppliers and are vulnerable to product shortages and price increases.

As a consequence of having a highly standardized contract compression fleet, some of the components used in our products are obtained from a single source or a
limited group of suppliers. Our reliance on these suppliers involves several risks, including price increases, inferior component quality and a potential inability to obtain an adequate supply of
required components in a timely manner. The partial or complete loss of certain of these sources could have at least a temporary material adverse effect on our results of operations and could damage
our customer relationships. Further, a significant increase in the price of one or more of these components could have a material adverse effect on our results of operations.

Our operations may be adversely affected by significant fluctuations in the value of foreign currencies relative to the United States dollar.

Our revenues from international operations and, as a result, our exposure to currency exchange rate fluctuations, have increased as a result of our acquisitions.
Although we attempt to match costs and revenues in local currencies, we anticipate that as we continue our expansion on a global basis, there may be many instances in which costs and revenues will not
be matched with respect to currency denomination. As a result, we expect that increasing portions of our revenues, costs, assets and liabilities will be subject to fluctuations in foreign currency
valuations. Although we may use foreign currency forward contracts or other currency hedging mechanisms from time to time to minimize our exposure to currency exchange rate fluctuations, we may not
elect or have the ability to implement hedges or, if we do implement them, that they will achieve the desired effect. We may experience economic loss and a negative impact on earnings or net assets
solely as a result of foreign currency exchange rate fluctuations. Further, the markets in which we operate could restrict the removal or conversion of the local or foreign currency, resulting in our
inability to hedge against these risks.

34

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Our ability to manage our business effectively will be weakened if we lose key personnel.

We depend on the continuing efforts of our executive officers and senior management. The departure of any of our key personnel could have a material adverse
effect on our business, operating results and financial condition. We do not maintain key man life insurance coverage with respect to our executive officers or key management personnel. We are not
aware of the upcoming retirement of any of our executive officers or senior management personnel. In addition, we believe that our success depends on our ability to attract and retain additional
qualified employees. If we fail to recruit other skilled personnel, we could be unable to compete effectively.

We are a holding company and rely on our subsidiaries for operating income.

We are a holding company and, as such, derive all of our operating income from our operating subsidiary, Universal, and its subsidiaries. We do not have any
significant assets other than the stock of our operating subsidiary. Consequently, we are dependent on the earnings and cash flow of our subsidiaries to meet our obligations. Our subsidiaries are
separate legal entities that are not legally obligated to make funds available to us, and in some cases may be contractually restricted from doing so. We cannot assure you that our subsidiaries will
be able to, or be permitted to, pay to us amounts necessary to meet our obligations.

A third party could be prevented from acquiring control of us because of the anti-takeover provisions in our charter and bylaws.

There are provisions in our restated certificate of incorporation and bylaws that may make it more difficult for a third party to acquire control of us, even if a
change in control would result in the purchase of your shares at a premium to the market price or would otherwise be beneficial to you. For example, our restated certificate of incorporation
authorizes our board of directors to issue preferred stock without stockholder approval. If our board of directors elects to issue preferred stock, it could be more difficult for a third party to
acquire us. In addition, provisions of our restated certificate of incorporation, such as a staggered board of directors and limitations on the removal of directors, no stockholder action by written
consent and limitations on stockholder proposals at meetings of stockholders, could make it more difficult for a third party to acquire control of us. Delaware corporation law may also discourage
takeover attempts that have not been approved by our board of directors.

We do not expect to pay dividends.

We have never paid cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. In addition, our ability to
pay dividends is restricted by our
revolving credit facility, our operating lease facilities, the indenture governing Universal's 97/8% senior discount notes and other financing arrangements.

You should not place undue reliance on forward-looking statements, as our actual results may differ materially from those anticipated in our forward-looking statements.

This report contains forward-looking statements about our operations, economic performance and financial condition. These statements are based on a number of
assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond our control, and reflect future business decisions, which are subject
to change. Some of these assumptions inevitably will not materialize, and unanticipated events will occur which will affect our results of operations. See "Part I. Disclosure Regarding
Forward-Looking Statements".

35

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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS        UNIVERSAL COMPRESSION, INC.

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our financial
statements, and the notes thereto, and the other financial information appearing elsewhere in this report. The following discussion includes forward-looking statements that involve certain risks and
uncertainties. See "Part I. Disclosure Regarding Forward-Looking Statements" and "Risk Factors."

Financial Results of Operations.

Fiscal Year Ended March 31, 2002 Compared to Fiscal Year Ended March 31, 2001

The following table summarizes revenues, gross margins, expenses and the respective percentages for each of Universal's business segments:

Year Ended March 31,2001

2002(dollars in thousands)Revenues:Domestic contract compression

$
126,686

$
267,550% of revenue


54.5
%

39.3
%International contract compression

$
22,549

$
60,185% of revenue


9.7
%

8.9
%Fabrication

$
61,779

$
211,265% of revenue


26.6
%

31.1
%Aftermarket services

$
21,452

$
140,989% of revenue


9.2
%

20.7
%Gross Margin:Domestic contract compression

$
80,465

$
169,892International contract compression


16,425


43,411Fabrication


9,041


24,347Aftermarket services


3,476


30,696Expenses:Depreciation and amortization


(33,485
)

(48,600
)Selling, general and administrative


(21,092
)

(60,890
)Operating lease expense


(14,443
)

(55,401
)Interest expense, net


(22,622
)

(23,017
)Income taxes


(3,871
)

(30,931
)Net income before extraordinary items


5,490


49,408


Revenues.Universal's total revenue for the fiscal year ended March 31, 2002 increased $447.5 million, or
192.5%, to $680 million, compared to $232.5 million for the fiscal year ended March 31, 2001. Contract compression revenue increased by $178.5 million, or 119.6%, to
$327.7 million during the fiscal year ended March 31, 2002 from $149.2 million during the fiscal year ended March 31, 2001. Domestic contract compression revenues increased
by $140.9 million, or 111.2%, to $267.6 million during the fiscal year ended March 31, 2002 from $126.7 million during the fiscal year ended March 31, 2001.
International contract compression revenues increased by $37.7 million, or 167.5%, to $60.2 million during the fiscal year ended March 31, 2002 from $22.5 million during
the fiscal year ended March 31, 2001. The increase in domestic contract

36

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compression revenue primarily resulted from expansion of the contract compression fleet through the impact of a full year of operations from the Weatherford Global acquisition, the KCI acquisition
and internal growth. The increase in international contract compression revenue resulted from expansion of Universal's international contract compression fleet primarily through the CSII acquisition
and the impact of a full year of operations from the Weatherford Global acquisition.

Domestic
average rented horsepower for the fiscal year ended March 31, 2002 increased by 107% to approximately 1,603,000 horsepower from approximately 776,000 horsepower for the
fiscal year ended March 31, 2001 primarily due to the KCI acquisition and a full year of operations from the Weatherford Global and GCSI acquisitions. In addition, international average rented
horsepower for the fiscal year ended March 31, 2002 increased by 240% to approximately 303,000 horsepower from approximately 89,000 horsepower for the fiscal year ended March 31, 2001,
primarily through acquisitions and expansion of the international contract compression fleet and high utilization rates. Combined average horsepower utilization rate for the fiscal year ended
March 31, 2002 was approximately 88.8%, up from 87.6% in the fiscal year ended March 31,2001. As of March 31, 2002, Universal had approximately 2.2 million available
horsepower with an average horsepower utilization rate for the quarter then ended of 86.8% and for the same period one year earlier of approximately 88.8%.

Revenue
from fabrication increased to $211.3 million from $61.8 million, an increase of 242%. The increase in fabrication revenue, consisting mostly of equipment
fabrication, was due primarily to the acquisition of KCI and the impact of a full year of operations from the Weatherford Global acquisition combined with internal growth. Revenues from fabrication
vary quarter to quarter due to the
recognition of revenue only at the time of shipment. Universal's backlog of fabrication projects at the fiscal year ended March 31, 2002 was approximately $80.0 million, compared with a
backlog of $34.2 million at March 31, 2001. From December 31, 2000 to March 31, 2001, backlog decreased $21.0 million.

Revenues
from aftermarket services increased to $141.0 million during the fiscal year ended March 31, 2002 from $21.5 million during the fiscal year ended
March 31, 2001, an increase of 556%. The increase was due primarily to the impact of full year of operations from the Weatherford Global acquisition and resulted in the aftermarket services
segment becoming a more significant part of Universal's business. In addition, the LCM and TCSI acquisitions increased revenues approximately $23 million in the aggregate.

Gross Margin.Universal's gross margin for the fiscal year ended March 31, 2002 increased $158.9 million, or
145.3%, to $268.3 million from gross margin of $109.4 million for the fiscal year ended March 31, 2001. Contract compression gross margin for the fiscal year ended
March 31, 2002 increased $116.4 million, or 120%, to $213.3 million compared to gross margin of $96.9 million for the fiscal year ended March 31, 2001. Contract
compression gross margin increased primarily as the result of Universal's contract compression revenue growth and operating cost improvements realized by the integration of the contract compression
businesses. Fabrication gross margin for the fiscal year ended March 31, 2002 increased $15.3 million, or 169%, to $24.3 million compared to a gross margin of $9.0 million
for the fiscal year ended March 31, 2001. Fabrication gross margins increased primarily due to the impact of a full year of operations from Weatherford Global, a partial year of operations from
KCI and synergies from the integration of these operations. Aftermarket services gross margin for the fiscal year ended March 31, 2002 increased $27.2 million or 783%, to
$30.7 million compared to a gross margin of $3.5 million for the fiscal year ended March 31, 2001. Aftermarket services gross margin increased primarily due to the impact of a
full year of operations from Weatherford Global and the acquisitions of TCSI and LCM.

Selling, General and Administrative Expenses.Universal's selling, general and administrative expenses increased by
$39.8 million to $60.9 million for the fiscal year ended March 31, 2002 compared

37

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to $21.1 million for the fiscal year ended March 31, 2001. Selling, general and administrative expenses represented 9.0% of revenue for the fiscal year ended March 31, 2002
compared to 9.1% of revenue for the fiscal year ended March 31, 2001.

EBITDA,
as adjusted, for the fiscal year ended March 31, 2002 increased 134.3% to $207.6 million from $88.6 million for the fiscal year ended March 31, 2001,
primarily due to increases in total fleet horsepower and utilization of the compression contract compression fleet, gross margin contribution from fabrication and sales, and operating cost
improvements realized by contract compression operations.

Non-recurring Charges.During the fiscal year ended March 31, 2001, Universal incurred non-recurring charges of
$8.7 million related to the early termination of a management agreement and a consulting agreement and other related fees in connection with Universal Compression Holdings' initial public
offering and concurrent financing transactions as well as costs related to facilities and workforce reductions associated with the Weatherford Global acquisition.

Depreciation and Amortization.Depreciation and amortization increased by $15.1 million to $48.6 million during
the fiscal year ended March 31, 2002, compared to $33.5 million during the fiscal year ended March 31, 2001. The increase was primarily due to capital additions of
$188 million, which primarily resulted from expansion of the contract compression fleet, through our fabrication operations and the purchase of approximately $60 million and
$13 million of contract compression equipment from the acquisitions of KCI and CSII, respectively. The increase in depreciation and amortization was partially offset by the net sales and
leasebacks of compressor equipment, with a book value of approximately $142.1 million, between April and October 2001 under our operating lease facilities.

Operating Lease.Operating lease expense increased to $55.4 million during the fiscal year ended March 31, 2002
resulting from the increase in compression equipment leased under the operating lease facilities. The outstanding balance under the operating lease facilities at March 31, 2002 was
$708.5 million.

Interest Expense, Net.Interest expense, net, remained fairly constant at $23.0 million for the fiscal year ended
March 31, 2002 from $22.6 million for the fiscal year ended March 31, 2001, primarily as a result of the repayment of the $1.2 million revenue bonds, offset partially by
increased accretion of our 97/8% senior discount notes.

Extraordinary Loss.During the fiscal year ended March 31, 2001, Universal incurred extraordinary losses of
$10.6 million ($6.6 million net of income tax) related to debt restructurings that occurred concurrently with Universal Compression Holdings' initial public offering and the Weatherford
Global acquisition.

Net Income (Loss).Universal had a net income of $49.4 million for the fiscal year ended March 31, 2002
compared to a net loss of $1.1 million for the fiscal year ended March 31, 2001, primarily as a result of the $158.9 million increase in gross margins and interest expense, net,
remaining constant at approximately $23.0 million, offset partially by increased depreciation and amortization of $48.6 million related to the continued expansion of assets, increased
leasing expense of $55.4 million resulting from the increase in compression equipment leased under the operating lease facilities, an increase in the income tax provision to
$30.9 million and a decrease in net income of $2.4 million related to the Argentina political and economic situation.

Fiscal Year Ended March 31, 2001 Compared to Fiscal Year Ended March 31, 2000

Revenues.Universal's total revenue for the fiscal year ended March 31, 2001 increased $96.2 million, or 70.8%,
to $232.5 million, compared to $136.3 million for the fiscal year ended March 31, 2000. Contract compression revenues increased by $50.9 million, or 51.8%, to
$149.2 million

38

---

during the fiscal year ended March 31, 2001 from $98.3 million during the fiscal year ended March 31, 2000. Domestic contract compression revenues increased by
$43.1 million, or 51.6%, to $126.7 million during the fiscal year ended March 31, 2001 from $83.6 million during the fiscal year ended March 31, 2000. International
contract compression revenues increased by $7.8 million, or 53.1%, to $22.5 million during the fiscal year ended March 31, 2001 from $14.7 million during the fiscal year
ended March 31, 2000. The increase in domestic contract compression revenue primarily resulted from expansion of the contract compression fleet through the acquisition of GCSI, Weatherford
Global and core growth. The increase in international contract compression revenue resulted from expansion of the international contract compression fleet primarily through the addition of horsepower
from Universal's acquisitions, continued high utilization rates and the impact of our Weatherford Global acquisition. During the quarter ended December 31, 2000, Universal we started their
first contract compression project in Mexico consisting of 10,000 horsepower. This project contributed approximately $4.7 million in one-time turnkey installation revenue.

Domestic
average rented horsepower for the fiscal year ended March 31, 2001 increased by 61.0% to approximately 776,000 horsepower from approximately 482,000 horsepower for the
fiscal year ended March 31, 2000. In addition, international average rented horsepower for the fiscal year ended March 31, 2001 increased by 81.6% to approximately 89,000 horsepower from
approximately 49,000 horsepower for the fiscal year ended March 31, 2000, primarily through expansion of the international contract compression fleet, continued high utilization rates and
additional service in South America. Average horsepower utilization rate for the fiscal year ended March 31, 2001 was approximately 87.6%, up from 80.7% in the fiscal year ended 2000. At the
end of the quarter, Universal had approximately 1.9 million available horsepower with an additional 69,000 horsepower operated and maintained for customers. Average horsepower utilization rate
for the quarter ended March 31, 2001 was 88.8% and at March 31, 2001 was approximately 88.4%. These horsepower and utilization amounts include GCSI for the full fourth quarter and
Weatherford Global for the 50 days from the date of the merger.

Revenue
from fabrication increased to $61.8 million from $25.3 million, an increase of 144.3%. The increase in fabrication revenue, consisting mostly of equipment
fabrication, for the last half of the fiscal year was due primarily to the acquisitions of GCSI and Weatherford Global. Revenues from fabrication vary quarter to quarter due to the recognition of
revenue only at the time of shipment. Universal's backlog of fabrication projects at the end of the fiscal year ended March 31, 2001 was approximately $34.2 million, compared with a
backlog of $11.1 million at the same time a year earlier. From December 31, 2000 to March 31, 2001, backlog increased $3.7 million.

Revenues
from aftermarket services increased to $21.5 million during the fiscal year ended March 31, 2001 from $12.7 million during the fiscal year ended
March 31, 2000, an increase of 69.3%. The increase for the last half of the fiscal year was due primarily to the acquisitions of GCSI and Weatherford Global.

Gross Margin.Universal's gross margin for the fiscal year ended March 31, 2001 increased $40.4 million, or
58.8%, to $109.4 million from gross margin of $69.0 million for the fiscal year ended March 31, 2000. Contract compression gross margin for the fiscal year ended March 31,
2001 increased $34.0 million, or 54.1%, to $96.9 million compared to gross margin of $62.9 million for the fiscal year ended March 31, 2000. Contract compression gross
margin increased primarily as the result of Universal's contract compression revenue growth discussed above and operating cost improvements realized by contract compression operations. Fabrication
gross margin for the fiscal year ended March 31, 2001 increased $5.6 million, or 164.7%, to $9.0 million compared to a gross margin of $3.4 million for the fiscal year
ended March 31, 2000. Fabrication gross margin increased primarily due to strong customer demand, cost reductions and their resulting gross margin effects.

Aftermarket
services gross margin for the fiscal year ended March 31, 2001 increased $0.8 million or 29.6%, to $3.5 million compared to a gross margin of
$2.7 million for the fiscal year ended

39

---

March 31, 2000. Aftermarket services revenue increased primarily due to the acquisition of Weatherford Global.

Selling, General and Administrative Expenses.Universal's selling, general and administrative expenses for the fiscal year
ended March 31, 2001 increased $4.3 million compared to the fiscal year ended March 31, 2000. Selling, general and administrative expenses represented 9.1% of revenue for the
fiscal year ended March 31, 2001 compared to 12.3% of revenue for the fiscal year ended March 31, 2000. The percentage decrease was primarily due to the approximately $4.7 million
in one-time turnkey installation revenues associated with a large contract compression project in Mexico and the elimination of management fees in connection with Holdings' our initial public offering
in May 2000, in addition to synergies achieved in the acquisitions of GCSI and Weatherford Global. These reductions have been offset partially by increases in certain expenses related to
operating as a publicly traded company.

EBITDA,
as adjusted, for the fiscal year ended March 31, 2001 increased 59.4% to $88.6 million from $55.6 million for the fiscal year ended March 31, 2001,
primarily due to increases in horsepower and utilization of the compression contract compression fleet, gross margin contribution from fabrication and sales, operating cost improvements realized by
contract compression operations, and a decreased percentage of selling, general and administrative expenses, as discussed above.

Non-recurring Charges.During the fiscal year ended March 31, 2001, Universal incurred non-recurring charges of
$8.7 million related to the early termination of a management agreement and a consulting agreement and other related fees in connection with Holdings' initial public offering and concurrent
financing transactions as well as costs related to facilities and headcount reduction associated with the Weatherford Global acquisition.

Depreciation and Amortization.Depreciation and amortization increased by $7.5 million to $33.5 million during
the fiscal year ended March 31, 2001, compared to $26 million during the fiscal year ended March 31, 2001. The increase resulted primarily from expansion of the contract
compression fleet offset partially by the compressor equipment sold and leased back under the previous operating lease facility.

Operating Lease.Universal incurred leasing expense of $14.4 million during the fiscal year ended March 31,
2001 resulting from the operating lease facilities. The outstanding balance under the operating lease facilities at March 31, 2001 was $527.5 million, consisting of $427.0 million
under the new operating lease facility and $100.5 million under the asset-backed securitization operating lease facility.

Interest Expense, Net.Interest expense, net decreased $7.3 million to $22.6 million for the fiscal year ended
March 31, 2001 from $30.9 million for the fiscal year ended March 31, 2000, primarily as a result of the reduction of debt resulting from UCH's initial public offering and
financing restructurings. The decrease in interest expense was offset partially by increased accretion of our 97/8% senior discount notes and the assumption and refinancing of debt
related to the GCSI acquisition.

Extraordinary Loss.During the fiscal year ended March 31, 2001, we incurred extraordinary losses of
$10.6 million ($6.6 million net of income tax) related to debt restructurings that occurred concurrently with our initial public offering and the Weatherford Global acquisition.

Net Loss.Universal had a net loss of $1.1 million for the fiscal year ended March 31, 2001 compared to a net
loss of $3.9 million for the fiscal year ended March 31, 2000, primarily as a result of an increase in gross margins and interest expense decreasing from $30.9 million to
$22.6 million, offset partially by increased depreciation and amortization related to the continued expansion of Universal's assets, leasing expense of $14.4 million resulting from the
operating lease facilities, non-recurring

40

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charges, an increase of the income tax provision to $3.9 million from an income tax benefit of $0.7 million, and an extraordinary loss of $6.6 million.

ITEM 7A.Quantitative and Qualitative Disclosures About Market Risk

We are exposed to some market risk due to the floating or variable interest rates under our financing arrangements. A portion of the interest and lease payments
under our financing arrangements are based on a floating rate (a base rate or LIBOR, at our option, in the case of our revolving credit facility, and LIBOR in the case of our operating lease
facilities) plus a variable amount based on our
operating results. The one-month LIBOR rate at March 31, 2002 was 1.875%. A 1.0% increase in interest rates would result in a $1.0 million annual increase in interest and operating lease
expense. As of March 31, 2002, approximately $99 million of our indebtedness and other obligations outstanding bear interest at floating rates.

In
order to minimize any significant foreign currency credit risk, we generally contractually require that payment by our customers be made in United States dollars. If payment is not
made in United States dollars, we generally utilize the exchange rate into United States dollars on the payment date or balance payments in local currency against local expenses. As a result of the
political and economic situation in Argentina, we are involved in negotiations with our customers in Argentina as to the currency in which contract amounts are to be paid, as mandated by the Argentine
government. The impact from the Argentina political and economic situation reduced EBITDA, as adjusted, by approximately $4.0 million in the three and twelve month periods ended
March 31, 2002.

ITEM 8.Financial Statements and Supplementary Data

The consolidated statements of the Company and Universal included in this Report beginning on page F-1 are incorporated herein by reference.

ITEM 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

41

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PART III

ITEM 10.Directors and Executive Officers of the Company

The information to be included in the Company's definitive proxy statement for its 2002 Annual Meeting of Stockholders under the captions "Election of Directors"
is incorporated by reference herein.

ITEM 11.Executive Compensation

The information included or to be included under the captions "Executive Compensation" in the Company's definitive proxy statement for its 2002 Annual Meeting of
Stockholders is incorporated by reference herein.

ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information included or to be included under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan
Information" in the Company's definitive proxy statement for its 2002 Annual Meeting of Stockholders is incorporated by reference herein.

ITEM 13.Certain Relationships and Related Transactions

The information included or to be included under the caption "Certain Relationships and Related Transactions" in the Company's definitive proxy statement for its
2002 Annual Meeting of Stockholders is incorporated by reference herein.

PART IV

ITEM 14.Exhibits, Financial Statement Schedules and Reports On Form 8-K

(a)  The
following documents are filed as part of this Report:



(b)  Reports
on Form 8-K

Four
reports were filed on Form 8-K during the fourth quarter of fiscal 2002.



42

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(c)  Exhibits

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1         |  | Agreement and Plan of Merger dated as of October 23, 2000, by and among Universal Compression Holdings, Inc., Universal Compression, Inc., Weatherford International, Inc., WEUS Holding, Inc. and Enterra Compression
Company (incorporated by reference to Exhibit 10.1 to Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 28, 2000).                                                    
|3.1         |  | Restated Certificate of Incorporation of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 3.1 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30,
 2000).                                                                                                                                                                                                                                    
|3.2         |  | Restated Bylaws of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 3.2 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).                                                                                                                                                                                                                                                           
|4.1         |  | Indenture, dated as of February 20, 1998, between Universal Compression, Inc. and the United States Trust Company of New York, as Trustee, with respect to the 97/8% Senior Discount Notes
(incorporated by reference to Exhibit 4.3 to Universal Compression, Inc.'s Registration Statement on Form S-4 dated March 19, 1998 (File No. 333-48279)).                                                                                                                      
|4.2         |  | First Supplemental Indenture, dated May 9, 2000, between Universal Compression, Inc. and United States Trust Company of New York, as Trustee, with respect to the 97/8% Senior Discount Notes
(incorporated by reference to Exhibit 4.7 of Amendment No. 2 dated May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).                                                                                        
|4.3         |  | Second Supplemental Indenture, dated as of May 30, 2000, by and among Universal Compression, Inc., Universal Compression Holdings, Inc. and United States Trust Company of New York, as Trustee, with respect to the
97/8% Senior Discount Notes (incorporated by reference to Exhibit 4.3 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).                                                             
|4.4         |  | Third Supplemental Indenture, dated as of October 15, 2000, by and among Universal Compression, Inc., Gas Compression Finance Corporation, G.C.S. Distributing L.L.C., Gas Compression Realty L.L.C. and United States Trust
Company of New York, as Trustee, with respect to the 97/8% Senior Discount Notes (incorporated by reference to Exhibit 4.4 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000).

43

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|4.5   |  | Specimen of Universal Compression, Inc.'s 97/8% Senior Discount Notes due 2008 (incorporated by reference to Exhibit 4.2 to Universal Compression, Inc.'s Registration Statement on Form S-4 dated
March 19, 1998 (File No. 333-48279)).                                                                                                                                                                                                    
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.6   |  | Specimen common stock certificate of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 4.1 to Amendment No. 2 dated May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement
on Form S-1 (File No. 333-34090)).                                                                                                                                                                              
|4.7   |  | Indenture, dated as of February 9, 2001, among BRL Universal Equipment 2001 A, L.P. and BRL Universal Equipment Corp., as Issuers, and The Bank of New York, as Indenture Trustee, with respect to the
87/8% Senior Secured Notes due 2008 (incorporated by reference to Exhibit 10.4 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).                                     
|4.8   |  | First Supplemental Indenture, dated as of September 11, 2001, among BRL Universal Equipment 2001 A, L.P. and BRL Universal Equipment Corp., as Issuers, and The Bank of New York, as Trustee, with respect to the
87/8% Senior Secured Notes due 2008 (incorporated by reference to Exhibit 4.1 to Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 24,
2001).
|4.9   |  | Indenture, dated as of February 9, 2001, between BRL Universal Compression Funding I, L.P., issuer, and Wells Fargo Bank Minnesota, National Association, Indenture Trustee, with respect to the ABS operating lease facility
(incorporated by reference to Exhibit 4.10 to Registration Statement on Form S-4 dated March 20, 2001 (File No. 333-57302)).                                                                                  
|4.10  |  | Series 2001-1 Supplement, dated as of February 9, 2001, to Indenture dated as of February 9, 2001, between BRL Universal Compression Funding I, L.P., issuer, and Wells Fargo Bank Minnesota, National Association,
Indenture Trustee, with respect to the ABS operating lease facility (incorporated by reference to Exhibit 4.11 to Registration Statement on Form S-4 dated March 20, 2001 (File No. 333-57302)).                        
|4.11  |  | Amendment No. 1 to Indenture, dated as of October 1, 2001, between BRL Universal Compression Funding I, L.P., as Issuer, and Wells Fargo Bank Minnesota, N.A., as Indenture Trustee (incorporated by reference to Exhibit 4.2
of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001).                                                                                             
|4.12* |  | Amendment No. 2 to Indenture, dated as of February 8, 2002, between BRL Universal Compression Funding I, L.P., as Issuer, and Wells Fargo Bank Minnesota, N.A., as Indenture Trustee.                                                                                                                                                                                                                                                       
|4.13* |  | Amendment No. 3 to Indenture, dated as of March 29, 2002, between BRL Universal Compression Funding I, L.P., as Issuer, and Wells Fargo Bank Minnesota, N.A., as Indenture Trustee.                                                                                                                                                                                                                                                         
|4.14* |  | Amendment No. 4 to Indenture, dated as of May 31, 2002, between BRL Universal Compression Funding I, L.P., as Issuer, and Wells Fargo Bank Minnesota, N.A., as Indenture Trustee.                                                                                                                                                                                                                                                           
|9.1   |  | Termination of Voting Trust Agreement, dated October 1, 2001, among Universal Compression Holdings, Inc., John K. Castle, as voting trustee, and the stockholders party thereto (incorporated by reference to Exhibit 9.1 to
Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 7, 2001).                                                                      

44

---

|9.2  |  | Termination of Voting Trust Agreement, dated November 12, 2001, among Universal Compression Holdings, Inc., John K. Castle, as voting trustee, and the stockholders party thereto (incorporated by reference to Exhibit 9.2
to Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 7, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1 |  | Equipment Lease Agreement with respect to the senior secured notes operating lease facility, dated as of February 9, 2001, between BRL Universal Equipment 2001 A, L.P., as Lessor, and Universal Compression, Inc., as
Lessee (incorporated by reference to Exhibit 10.2 to Registration Statement on Form S-4 dated March 20, 2001 (File No. 333-57302)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|10.2 |  | First Amendment to Equipment Lease Agreement with respect to the senior secured notes operating lease facility, dated as of October 15, 2001, between BRL Universal Equipment 2001 A, L.P., as Lessor, and Universal
Compression, Inc., as Lessee (incorporated by reference to Exhibit 10.1 to Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 24, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.3 |  | First Amended and Restated Participation Agreement, dated as of October 15, 2001, among Universal Compression, Inc., as Lessee, Universal Compression Holdings, Inc., as Guarantor, BRL Universal Compression Equipment 2001
A, L.P., as Lessor, the financial institutions listed on the signature pages as Tranche B Lenders, The Bank of New York, not in its individual capacity but as Indenture Trustee, Paying Agent, Transfer Agent and Registrar for the Tranche A Noteholders,
 BRL Universal Equipment Management, Inc., as Lessor General Partner, Bankers Trust Company, as Administrative Agent and Collateral Agent for the Tranche B Lenders and Indenture Trustee on behalf of the Tranche A Noteholders, Deutsche Banc Alex.
Brown Inc., as Arranger, The Bank of Nova Scotia, as Syndicate Agent for Tranche B Lenders, Bank One, N.A., as Documentation Agent for Tranche B Lenders, and First Union National Bank, as Managing Agent (incorporated by reference to Exhibit 10.2 to
Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 24, 2001).
|10.4 |  | Participation Agreement Supplement No. 1, dated as of October 23, 2001, among Universal Compression, Inc., as Lessee, Universal Compression Holdings, Inc., as Guarantor, BRL Universal Equipment 2001 A, L.P., as Lessor,
and The Bank of New York, not in its individual capacity but as Indenture Trustee for the Tranche A Noteholders (incorporated by reference to Exhibit 10.3 to Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities
and Exchange Commission on October 24, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.5 |  | Tranche B Loan Agreement, dated as of February 9, 2001, among BRL Universal Equipment 2001 A, L.P., as Borrower, Bankers Trust Company, as Administrative Agent and Collateral Agent, and the Tranche B Lenders (incorporated
by reference to Exhibit 10.4 to Registration Statement on Form S-4 dated March 20, 2001 (File No. 333-57302)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.6 |  | First Amendment to Tranche B Loan Agreement, dated as of October 15, 2001, among BRL Universal Equipment 2001 A, L.P. and Bankers Trust Company, as Administrative Agent for Tranche B Lenders and as Collateral Agent
(incorporated by reference to Exhibit 10.4 to Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 24, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

45

---

|10.7   |  | Master Equipment Lease Agreement, with respect to the ABS operating lease facility, dated as of February 9, 2001, between BRL Universal Compression Funding I, L.P., as Head Lessor, and UCO Compression LLC, as Head Lessee
(incorporated by reference to Exhibit 10.5 to Registration Statement on Form S-4 dated March 20, 2001 (File No. 333-57302)).                                                                                                                                                            
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.8   |  | Amendment No. 1 to the Master Equipment Lease Agreement, dated February 8, 2002, between BRL Universal Compression Funding I, L.P. and UCO Compression LLC (incorporated by reference to Exhibit 10.11 of Universal
Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001).                                                                                                                                                                                             
|10.9*  |  | Amendment No. 2 to the Master Equipment Lease Agreement, dated as of March 29, 2002, between BRL Universal Compression Funding I, L.P. and UCO Compression LLC.                                                                                                                                                                                                                                                                                                                                                      
|10.10* |  | Amendment No. 3 to the Master Equipment Lease Agreement, dated as of April 1, 2002, between BRL Universal Compression Funding I, L.P. and UCO Compression LLC.                                                                                                                                                                                                                                                                                                                                                       
|10.11* |  | Amendment No. 4 to the Master Equipment Lease Agreement, dated as of May 31, 2002, between BRL Universal Compression Funding I, L.P. and UCO Compression LLC.                                                                                                                                                                                                                                                                                                                                                        
|10.12  |  | Senior Secured Revolving Credit Agreement, dated as of February 9, 2001, among Universal Compression, Inc., as Borrower, First Union National Bank, as Administrative Agent, Bank One, N.A., as Syndication Agent, and the
lenders signatory thereto (incorporated by reference to Exhibit 10.6 to Registration Statement on Form S-4 dated March 20, 2001 (File No. 333-57302)).                                                                                                                                    
|10.13* |  | First Amendment and Supplement to Senior Secured Revolving Credit Agreement, dated as of October 15, 2001, among Universal Compression, Inc., as Borrower, First Union National Bank, as Administrative Agent, Bank One, N.A.,
 as Syndication Agent, and the lenders signatory thereto.                                                                                                                                                                                                                             
|10.14  |  | Guaranty and Collateral Agreement made by Universal Compression Holdings, Inc. and Universal Compression, Inc. and in favor of First Union National Bank, as Administrative Agent, dated as of February 9, 2001 (incorporated
by reference to Exhibit 10.8 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).                                                                                                                                         
|10.15  |  | Security Agreement (Pledge and Assignment), dated as of February 9, 2001, between Universal Compression International, Inc. and First Union National Bank, as Administrative Agent (incorporated by reference to Exhibit 10.9
to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).                                                                                                                                                                      
|10.16  |  | Engagement and Indemnity Letter, dated February 9, 2001 among Universal Compression, Inc., Universal Compression Holdings, Inc., Deutsche Banc Alex. Brown Inc., First Union Securities, Inc., Goldman Sachs & Co., Banc
One Capital Markets, Inc., Scotia Capital (USA), Inc., BRL Universal Equipment 2001 A, L.P., and BRL Universal Equipment Corp. (incorporated by reference to Exhibit 10.12 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended December 31, 2000).
|10.17  |  | Guaranty made by Universal Compression Holdings, Inc. for the benefit of UCO Compression LLC, BRL Universal Compression Funding I, L.P. and Wells Fargo Bank National Association, dated as of February 9, 2001 (incorporated
by reference to Exhibit 10.11 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 filed with the Securities and Exchange Commission on March 20, 2001 (File No. 333-57302)).                                                                                  

46

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|10.18  |  | Management Agreement dated February 9, 2001, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P. (incorporated by reference to Exhibit 10.10 of Universal Compression
Holdings, Inc.'s Registration Statement on Form S-4 filed with the Securities and Exchange Commission on March 20, 2001 (File No. 333-57302)).                              
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.19  |  | Amendment No. 1 to Management Agreement dated as of April 30, 2001, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P. (incorporated by reference to Exhibit 10.13 of
Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 filed with the Securities and Exchange Commission on May 11, 2001 (File No. 333-57302)).         
|10.20  |  | Amendment No. 2 to Management Agreement dated as of July 16, 2001, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P. (incorporated by reference to Exhibit 10.15 of
Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 filed with the Securities and Exchange Commission on November 30, 2001 (File No. 333-74342)).     
|10.21  |  | Amendment No. 3 to Management Agreement dated as of September 14, 2001, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P. (incorporated by reference to Exhibit 10.16 of
Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 filed with the Securities and Exchange Commission on November 30, 2001 (File No. 333-74342)).
|10.22  |  | Amendment No. 4 to Management Agreement, dated as of November 8, 2001, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P. (incorporated by reference to Exhibit 10.8 of
Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001).                                                           
|10.23  |  | Amendment No. 5 to the Management Agreement, dated as of February 8, 2002, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P. (incorporated by reference to Exhibit 10.9 of
Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001).                                                       
|10.24* |  | Amendment No. 6 to the Management Agreement, dated as of March 29, 2002, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P.                                                                                                                                                                                                                      
|10.25* |  | Amendment No. 7 to the Management Agreement, dated as of May 31, 2002, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P.                                                                                                                                                                                                                        
|10.26  |  | Back-up Management Agreement, dated as of February 1, 2002, among Caterpillar Inc., UCO Compression LLC, BRL Universal Compression Funding I, L.P. and Universal Compression, Inc. (incorporated by reference to Exhibit
10.10 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001).                                                   
|10.27 |  | Universal Compression Holdings, Inc. Restricted Stock Plan for Executive Officers (incorporated by reference to Exhibit 4.2 to Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 dated August 17,
2001 (File No. 333-67784)).                                                                                                                                              

47

---

|10.28  |  | Universal Compression Holdings, Inc. Form of Restricted Stock Agreement with respect to the Restricted Stock Plan for Executive Officers (incorporated by reference to Exhibit 10.8 to Universal Compression Holdings, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2001).                                                                                                                                    
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.29  |  | Universal Compression Holdings, Inc. Directors' Stock Plan (incorporated by reference to Exhibit 4.3 to Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 dated August 17, 2001 (File No.
333-67784)).                                                                                                                                                                                                            
|10.30* |  | Form of Stock Option Agreements under Directors' Stock Plan between Universal Compression Holdings, Inc. and each of Thomas C. Case, Lisa W. Rodriguez, Edmund P. Segner, III, Bernard J.
Duroc-Danner, William M. Pruellage, Samuel Urcis, Uriel E. Dutton, and Curtis W. Huff.                                                                                                                                                          
|10.31   |  | Registration Rights Agreement dated February 20, 1998 by and among Universal Compression, Inc., Castle Harlan Partners III, L.P. and each other party listed as signatory thereto (incorporated by reference to Exhibit 10.14
to Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 dated March 19, 1998 (File No. 333-48283)).                                                                                    
|10.32   |  | Registration Rights Agreement, dated July 11, 2001, among Universal Compression Holdings, Inc. and the former shareholders of KCI, Inc. (incorporated by reference to Exhibit 10.1 to Universal Compression Holdings, Inc.'s
Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2001).                                                                                                              
|10.33   |  | Registration Rights Agreement, dated July 11, 2001, among Universal Compression Holdings, Inc., MCNIC Compression GP, Inc. and MCNIC Compression LP, Inc. (incorporated by reference to Exhibit 10.2 to Universal Compression
Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2001).                                                                                            
|10.34   |  | Form of Instruments of Accession to Registration Rights Agreement for each of Richard W. FitzGerald and Valerie L. Banner (incorporated by reference to Exhibit 4.10 to Universal Compression Holdings, Inc.'s Registration
Statement on Form S-1 (File No. 333-34090)).                                                                                                                                                                  
|10.35   |  | Instrument of Accession to Registration Rights Agreement, dated April 28, 2000, for Energy Spectrum Partners LP (incorporated by reference to Exhibit 10.19 to Amendment No. 2 dated May 22, 2000, to Universal Compression
Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).                                                                                                                                    
|10.36   |  | Registration Agreement, dated September 15, 2000, by and among Universal Compression Holdings, Inc., the Reuben James Helton Trust dated January 24, 2000, and Michael Pahl (incorporated by reference to Exhibit 4.1 to
Universal Compression Holdings, Inc.'s Current Report on Form 8-K dated September 29, 2000).                                                                                                                     
|10.37   |  | Escrow Agreement, dated as of September 15, 2000, by and among Universal Compression Holdings, Inc., the Reuben James Helton Trust dated January 24, 2000, Garlin Rymes, as representative of the Trust, Michael Pahl and
State Street Bank and Trust Company (incorporated by reference to Exhibit 10.1 to Universal Compression Holdings, Inc.'s and Universal Compression, Inc.'s Current Report on Form 8-K dated September 29, 2000).
|10.38  |  | Universal Compression Holdings, Inc. Incentive Stock Option Plan (incorporated by reference to Exhibit 10 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the period ended September 30,
1998).                                                                                                                                                                                                               

48

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|10.39 |  | Amendment Number One to Incentive Stock Option Plan, dated April 20, 2000 (incorporated by reference to Exhibit 10.3 to Amendment No. 2 dated May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement
on Form S-1 (File No. 333-34090)).                                                                
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.40 |  | Amendment Number Two to Incentive Stock Option Plan, dated May 15, 2000 (incorporated by reference to Exhibit 10.4 to Amendment No. 2 dated May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on
Form S-1 (File No. 333-34090)).                                                                  
|10.41 |  | Amendment Number Three to Incentive Stock Option Plan, dated November 27, 2000 (incorporated by reference to Exhibit 4.7 to Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed on February 9,
2001).                                                                                              
|10.42 |  | Stock Option Agreements between Universal Compression Holdings, Inc., and each of Ernie Danner, Stephen Snider, Samuel Urcis and Newton Schnoor (incorporated by reference to Exhibit 10.18 to Universal Compression Holdings,
 Inc.'s Registration Statement on Form S-4 dated March 19, 1998 (File No. 333-48283)).          
|10.43 |  | Stock Option Agreement, dated April 12, 1999, between Universal Compression Holdings, Inc. and Richard W. FitzGerald (incorporated by reference to Exhibit 10.2 to Universal Compression Holdings, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended December 31, 1999).                                              
|10.44 |  | Form of Stock Option Agreements between Universal Compression Holdings, Inc. and each of Jack B. Hilburn, H. Patrick Jones and Kirk E. Townsend (incorporated by reference to Exhibit 10.24 to
Amendment No. 1 May 3, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).
|10.45 |  | Stock Option Agreement, effective as of October 18, 2000, by and between Universal Compression Holdings, Inc. and Mark L. Carlton (incorporated by reference to Exhibit 10.6 to Universal Compression Holdings, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).                                
|10.46 |  | Form of Stock Option Agreements of Universal Compression Holdings, Inc., effective as of April 20, 2000 (incorporated by reference to Exhibit 10.30 to Amendment No. 2 dated May 22, 2000, to Universal Compression
Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).                                 
|10.47  |  | Agreement, dated October 27, 1999, among Universal Compression, Inc., Universal Compression Holdings, Inc., and Jack B. Hilburn (incorporated by reference to Exhibit 10.23 to Universal Compression Holdings, Inc.'s
Registration Statement on Form S-1 (File No. 333-34090)).                                                
|10.48 |  | Agreement, dated October 27, 1999, among Universal Compression, Inc., Universal Compression Holdings, Inc. and Kirk E. Townsend (incorporated by reference to Exhibit 10.24 to Universal Compression Holdings, Inc.'s
Registration Statement on Form S-1 (File No. 333-34090)).                                                
|10.49 |  | Form of Agreement for Mark L. Carlton (incorporated by reference to Exhibit 10.9 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K dated March 22, 2001).                                                                                                                                                   

49

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|10.50  |  | Form of Indemnification Agreements for each of Samuel Urcis, Stephen A. Snider, John K. Castle, William M. Pruellage, Newt Schnoor, C. Kent May, Thomas C. Case, Jack B. Hilburn, Ernie L. Danner, Kirk E. Townsend, Hanford
P. Jones, Richard W. FitzGerald, Edmund P. Segner III, Mark L. Carlton, Curtis W. Huff and Uriel E. Dutton (incorporated by reference to Exhibit 10.27 to Amendment No. 1 dated May 3, 2000, to Universal Compression Holdings, Inc.'s Registration
Statement on Form S-1 (File No. 333-34090)).
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.51  |  | Form of Indemnification Agreement for Bernard J. Duroc-Danner (incorporated by reference to Exhibit 10.8 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K dated March 22, 2001).                                                                                                                                                                                                                                                                                                                         
|10.52  |  | Universal Compression, Inc. Employees' Supplemental Savings Plan (incorporated by reference to Exhibit 10.42 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the year ended March 31,
2001).                                                                                                                                                                                                                                                                                                        
|10.53* |  | Amendment Number 1 to the Universal Compression, Inc. Employees' Supplemental Savings Plan dated as of January 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                      
|10.54  |  | Letter dated March 15, 2001, with respect to certain retirement benefits to be provided to Stephen A. Snider (incorporated by reference to Exhibit 10.43 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K
for the year ended March 31, 2001).                                                                                                                                                                                                                                                            
|10.55  |  | Universal Compression Holdings, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.1 to Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 dated August 17, 2001 (File No.
333-67784)).                                                                                                                                                                                                                                                                                        
|10.56* |  | Amendment Number 1 to the Universal Compression Holdings, Inc. Employee Stock Purchase Plan dated as of December 20, 2001.                                                                                                                                                                                                                                                                                                                                                                                                   
|21.1*   |  | List of Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

---

50

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                      |                                                 | Page
|----------------------------------------------------- | ----------------------------------------------- | ----
|Universal Compression Holdings, Inc.                  |                                                 |     
|Independent Auditors' Report of Deloitte & Touche LLP |                                                 | F-2 
|Consolidated Financial Statements:                    |                                                 |     
|                                                      | Consolidated Balance Sheets                     |     
|                                                      | Consolidated Statements of Operations           |     
|                                                      | Consolidated Statements of Stockholders' Equity |     
|                                                      | Consolidated Statements of Cash Flows           |     
|                                                      | Notes to Consolidated Financial Statements      |     
|Universal Compression, Inc.                           |                                                 |     
|Independent Auditors' Report of Deloitte & Touche LLP |                                                 | F-29
|Consolidated Financial Statements:                    |                                                 |     
|                                                      | Consolidated Balance Sheets                     |     
|                                                      | Consolidated Statements of Operations           |     
|                                                      | Consolidated Statements of Stockholder's Equity |     
|                                                      | Consolidated Statements of Cash Flows           |     
|                                                      | Notes to Consolidated Financial Statements      |     
|Schedule IIValuation and Qualifying Accounts         |                                                 |     
|                                                      | Allowance for Doubtful Accounts                 |     
|                                                      | Reserve for Inventory Obsolescence              |     

F-1

---

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
Universal Compression Holdings, Inc.

We
have audited the accompanying consolidated balance sheets of Universal Compression Holdings, Inc. and subsidiaries (the "Company") as of March 31, 2001 and 2002, and the
related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended March 31, 2002. Our audits also included the financial
statement schedule listed in the Index at E-1, which represents Schedule II to the consolidated financial statements of the Company. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2001 and 2002, and the
results of its operations and its cash flows for each of the three years in the period ended March 31, 2002, in conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

As
discussed in Note 1 to the consolidated financial statements, in the year ended March 31, 2002 the Company changed its method of accounting and reporting for goodwill to
conform to the Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."

/s/
DELOITTE & TOUCHE LLP

Houston,
Texas
June 14, 2002

F-2

---



UNIVERSAL COMPRESSION HOLDINGS, INC.        CONSOLIDATED BALANCE SHEETS        (In thousands)

|                                                                                                                           |                                                                                                                                                                                        | March 31, 2001                             |         | March 31, 2002 |          
|-------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | -------------- | ---------
|ASSETS                                                                                                                     |                                                                                                                                                                                       
|Current assets:                                                                                                            |                                                                                                                                                                                        |                                            |         |                |          
|                                                                                                                           | Cash and cash equivalents                                                                                                                                                              |                                            | $       | 12,279         |          
|                                                                                                                           | Accounts receivable, net of allowance for bad debts of $2,771 and $7,470 as of March 31, 2001 and 2002, respectively                                                                   |                                            |         | 87,088         |          
|                                                                                                                           | Current portion of notes receivable                                                                                                                                                    |                                            |         | 3,928          |          
|                                                                                                                           | Inventories, net of reserve for obsolescence of $17,607 and $10,537 as of March 31, 2001 and 2002, respectively                                                                        |                                            |         | 120,939        |          
|                                                                                                                           | Current deferred tax asset                                                                                                                                                             |                                            |         |               |          
|                                                                                                                           | Other                                                                                                                                                                                  |                                            |         | 20,284         |          
|                                                                                                                           |                                                                                                                                                                                        |                                            |         |                |          
|                                                                                                                           |                                                                                                                                                                                        | Total current assets                       |         |                | 244,518  
|Property, plant and equipment                                                                                              |                                                                                                                                                                                        |                                            | 592,449 |                |          
|Other property                                                                                                             |                                                                                                                                                                                        |                                            | 52,810  |                |          
|Accumulated depreciation                                                                                                   |                                                                                                                                                                                        |                                            | (55,634 | )              |          
|                                                                                                                           |                                                                                                                                                                                        |                                            |         |                |          
|                                                                                                                           |                                                                                                                                                                                        | Net property, plant and equipment          |         |                | 589,625  
|Goodwill, net of accumulated amortization of $8,773 as of March 31, 2001 and 2002                                          |                                                                                                                                                                                        |                                            | 294,358 |                |          
|Notes receivable                                                                                                           |                                                                                                                                                                                        |                                            | 4,803   |                |          
|Other non-current assets, net of accumulated amortization of $1,777 and $5,031 as of March 31, 2001 and 2002, respectively |                                                                                                                                                                                        |                                            | 30,819  |                |          
|Non-current deferred tax asset                                                                                             |                                                                                                                                                                                        |                                            | 12,133  |                |          
|                                                                                                                           |                                                                                                                                                                                        |                                            |         |                |          
|                                                                                                                           |                                                                                                                                                                                        | Total assets                               |         | $              | 1,176,256
|                                                                                                                           |                                                                                                                                                                                        |                                            |         |                |          
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                       |                                                                                                                                                                                       
|Current liabilities:                                                                                                       |                                                                                                                                                                                        |                                            |         |                |          
|                                                                                                                           | Accounts payable, trade                                                                                                                                                                |                                            | $       | 67,450         |          
|                                                                                                                           | Accrued liabilities                                                                                                                                                                    |                                            |         | 61,915         |          
|                                                                                                                           | Current deferred tax liability                                                                                                                                                         |                                            |         | 13,938         |          
|                                                                                                                           | Current portion of long-term debt and capital lease obligation                                                                                                                         |                                            |         | 3,452          |          
|                                                                                                                           |                                                                                                                                                                                        |                                            |         |                |          
|                                                                                                                           |                                                                                                                                                                                        | Total current liabilities                  |         |                | 146,755  
|Capital lease obligations                                                                                                  |                                                                                                                                                                                        |                                            | 6,086   |                |          
|Long-term debt                                                                                                             |                                                                                                                                                                                        |                                            | 205,569 |                |          
|Non-current deferred tax liability                                                                                         |                                                                                                                                                                                        |                                            | 90,126  |                |          
|Deferred gain                                                                                                              |                                                                                                                                                                                        |                                            | 75,146  |                |          
|Other liabilities                                                                                                          |                                                                                                                                                                                        |                                            |        |                |          
|                                                                                                                           |                                                                                                                                                                                        |                                            |         |                |          
|                                                                                                                           |                                                                                                                                                                                        | Total liabilities                          |         |                | 523,682  
|Commitments and contingencies (see note 10)                                                                                |                                                                                                                                                                                        |                                            |         |                |          
|Stockholders' equity:                                                                                                      |                                                                                                                                                                                        |                                            |         |                |          
|                                                                                                                           | Common stock, $.01 par value, 200,000 and 200,000 shares authorized, 28,488 and 30,644 shares issued, 28,475 and 30,602 shares outstanding as of March 31, 2001 and 2002, respectively |                                            |         | 285            |          
|                                                                                                                           | Treasury stock, 13 and 42 shares at cost outstanding as of March 31, 2001 and 2002, respectively                                                                                       |                                            |         | (134           | )        
|                                                                                                                           | Additional paid-in capital                                                                                                                                                             |                                            |         | 663,882        |          
|                                                                                                                           | Deferred compensation                                                                                                                                                                  |                                            |         |               |          
|                                                                                                                           | Other comprehensive income (loss)                                                                                                                                                      |                                            |         | 845            |          
|                                                                                                                           | Retained earnings (deficit)                                                                                                                                                            |                                            |         | (12,304        | )        
|                                                                                                                           |                                                                                                                                                                                        |                                            |         |                |          
|                                                                                                                           |                                                                                                                                                                                        | Total stockholders' equity                 |         |                | 652,574  
|                                                                                                                           |                                                                                                                                                                                        |                                            |         |                |          
|                                                                                                                           |                                                                                                                                                                                        | Total liabilities and stockholders' equity |         | $              | 1,176,256
|                                                                                                                           |                                                                                                                                                                                        |                                            |         |                |          

See accompanying notes to consolidated financial statements.

F-3

---

UNIVERSAL COMPRESSION HOLDINGS, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (In thousands, except per share amounts)

|                                                                  |                                                      | For the Year Ended March 31,
|----------------------------------------------------------------- | ---------------------------------------------------- | ----------------------------
|
|Revenues:                                                         |                                                      |                             
|                                                                  | Contract compression                                 |                             
|                                                                  | Fabrication and aftermarket services                 |                             
|                                                                  |                                                      |                             
|                                                                  |                                                      | Total revenues              
|Costs and expenses:                                               |                                                      |                             
|                                                                  | Contract compressiondirect costs                    |                             
|                                                                  | Fabrication and aftermarket servicesdirect costs    |                             
|                                                                  | Depreciation and amortization                        |                             
|                                                                  | Selling, general and administrative                  |                             
|                                                                  | Operating lease                                      |                             
|                                                                  | Interest expense, net                                |                             
|                                                                  | Other (income) / expense, net                        |                             
|                                                                  | Non-recurring charges                                |                             
|                                                                  |                                                      |                             
|                                                                  |                                                      | Total costs and expenses    
|                                                                  |                                                      |                             
|Income (loss) before income taxes and extraordinary items         |                                                      |                             
|Income tax expense (benefit)                                      |                                                      |                             
|                                                                  |                                                      |                             
|                                                                  | Income (loss) before extraordinary items             |                             
|                                                                  |                                                      |                             
|                                                                  | Extraordinary loss, net of $5,701 income tax benefit |                             
|                                                                  |                                                      |                             
|                                                                  | Net income (loss)                                    |                             
|                                                                  |                                                      |                             
|Weighted average common and common equivalent shares outstanding: |                                                      |                             
|                                                                  | Basic                                                |                             
|                                                                  | Diluted                                              |                             
|Earnings per sharebasic:                                         |                                                      |                             
|                                                                  | Income (loss) before extraordinary items             |                             
|                                                                  | Extraordinary loss                                   |                             
|                                                                  | Net income (loss)                                    |                             
|                                                                  |                                                      |                             
|Earnings per sharediluted:                                       |                                                      |                             
|                                                                  | Income (loss) before extraordinary items             |                             
|                                                                  | Extraordinary loss                                   |                             
|                                                                  |                                                      |                             
|                                                                  | Net income (loss)                                    |                             
|                                                                  |                                                      |                             

See
accompanying notes to consolidated financial statements.

F-4

---



UNIVERSAL COMPRESSION HOLDINGS, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        For the Years Ended March 31, 2000, 2001 and 2002        (In thousands, except
for share data)

|                                                              |  | Common Stock |   | Preferred Stock |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  
|------------------------------------------------------------- |  | ------------ | - | --------------- | --- |  | ---------- | - | - | --- | - | ------ | - | - | ------- | - | - | ------- | -
|
|
|Balance, March 31, 1999                                       |  | 2,450,518    |   | $               | 3   |  | 1,320,144  |   | $ | 13  |   | 3,950  |   | $ | 82,698  |   | $ | (1,931  | )
|Common stock cancellation                                     |  | (30          | ) |                 |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  
|Series A preferred stock cancellation                         |  |              |   |                 |     |  | (16        | ) |   |     |   |        |   |   | (1      | ) |   |         |  
|Treasury stock purchase 5,630 shares at $50 per share         |  | (3,178       | ) |                 |     |  | (1,712     | ) |   |     |   | (740   | ) |   |         |   |   |         |  
|Sale of treasury stock 1,371 shares at $50 per share          |  | 891          |   |                 |     |  | 480        |   |   |     |   |        |   |   |         |   |   |         |  
|Net loss                                                      |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   | (5,982  | )
|Balance, March 31, 2000                                       |  | 2,448,201    |   | $               | 3   |  | 1,318,896  |   | $ | 13  |   | 3,210  |   | $ | 82,697  |   | $ | (7,913  | )
|                                                              |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  
|Stock issued for acquisitions                                 |  | 15,279,869   |   |                 | 152 |  | 160,010    |   |   | 1   |   |        |   |   | 429,508 |   |   |         |  
|Option exercises                                              |  | 65,649       |   |                 | 1   |  |            |   |   |     |   |        |   |   | 917     |   |   |         |  
|Shares issued in connection with initial public offering      |  | 7,431,752    |   |                 | 74  |  |            |   |   |     |   |        |   |   | 150,801 |   |   |         |  
|Conversion of preferred and Class A non voting stock          |  | 3,249,695    |   |                 | 55  |  | (1,478,869 | ) |   | (14 | ) | (2,026 | ) |   | (41     | ) |   |         |  
|Purchases of treasury stock                                   |  | (30          | ) |                 |     |  | (37        | ) |   |     |   | (1,184 | ) |   |        |   |   |         |  
|Net loss                                                      |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   | (4,391  | )
|Foreign currency translation adjustment                       |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  
|                                                              |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  
|Comprehensive loss                                            |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  
|Balance, March 31, 2001                                       |  | 28,475,136   |   | $               | 285 |  |           |   |   |    |   |       |   | $ | 663,882 |   | $ | (12,304 | )
|                                                              |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  
|Common stock issuance                                         |  | 1,333,333    |   |                 | 13  |  |            |   |   |     |   |        |   |   | 36,118  |   |   |         |  
|Stock issued for acquisition                                  |  | 694,927      |   |                 | 7   |  |            |   |   |     |   |        |   |   | 19,993  |   |   |         |  
|Treasury stock redeem, at $27 per share                       |  | (28,379      | ) |                 |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  
|Option exercises                                              |  | 109,419      |   |                 | 1   |  |            |   |   |     |   |        |   |   | 1,099   |   |   |         |  
|Shares issued in 401(k) plan and employee stock purchase plan |  | 17,606       |   |                 |     |  |            |   |   |     |   |        |   |   | 1,006   |   |   |         |  
|Share issuances costs                                         |  |              |   |                 |     |  |            |   |   |     |   |        |   |   | (1,122  | ) |   |         |  
|Deferred compensation                                         |  |              |   |                 |     |  |            |   |   |     |   |        |   |   | 2,855   |   |   |         |  
|Amortization of deferred compensation                         |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  
|Net income                                                    |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   | 49,408  |  
|Foreign currency translation adjustment                       |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  
|                                                              |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  
|Comprehensive loss                                            |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  
|                                                              |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  
|Balance, March 31, 2002                                       |  | 30,602,042   |   | $               | 306 |  |           |   |   |    |   |       |   | $ | 723,831 |   | $ | 37,104  |  
|                                                              |  |              |   |                 |     |  |            |   |   |     |   |        |   |   |         |   |   |         |  

See accompanying notes to consolidated financial statements.

F-5

---

UNIVERSAL COMPRESSION HOLDINGS, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        (In thousands)

|                                                                      |                                                                                                                     | For the Year Ended March 31,               |                                                    
|--------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------------------------------------------------
|
|Cash flows from operating activities:                                 |                                                                                                                     |                                            |                                                    
|                                                                      | Net income (loss)                                                                                                   |                                            | $                                                  
|                                                                      | Adjustments to reconcile net income (loss) to cash provided by operating activities, net of effect of acquisitions: |                                            |                                                    
|Depreciation and amortization                                         |                                                                                                                     |                                            | 26,006                                             
|                                                                      | (Gain) loss on asset sales                                                                                          |                                            |                                                    
|                                                                      | Amortization of debt issuance costs                                                                                 |                                            |                                                    
|                                                                      | Amortization of deferred compensation                                                                               |                                            |                                                    
|                                                                      | Accretion of discount notes                                                                                         |                                            |                                                    
|                                                                      |                                                                                                                     | Increase (decrease) in deferred taxes      |                                                    
|                                                                      |                                                                                                                     | (Increase) decrease in other assets        |                                                    
|                                                                      |                                                                                                                     | (Increase) decrease in receivables         |                                                    
|                                                                      |                                                                                                                     | (Increase) decrease in inventories         |                                                    
|                                                                      |                                                                                                                     | Increase (decrease) in accounts payable    |                                                    
|                                                                      |                                                                                                                     | Increase (decrease) in accrued liabilities |                                                    
|                                                                      |                                                                                                                     | Other                                      |                                                    
|                                                                      |                                                                                                                     |                                            |                                                    
|                                                                      |                                                                                                                     |                                            | Net cash provided by operating activities          
|                                                                      |                                                                                                                     |                                            |                                                    
|Cash flows from investing activities:                                 |                                                                                                                     |                                            |                                                    
|                                                                      | Additions to property, plant and equipment                                                                          |                                            |                                                    
|                                                                      | Acquisition of Weatherford Global                                                                                   |                                            |                                                    
|                                                                      | Other acquisitions, net of cash received of $900                                                                    |                                            |                                                    
|                                                                      | Proceeds from sale of property, plant and equipment                                                                 |                                            |                                                    
|                                                                      |                                                                                                                     |                                            |                                                    
|                                                                      |                                                                                                                     |                                            | Net cash used in investing activities              
|                                                                      |                                                                                                                     |                                            |                                                    
|Cash flows provided by (used in) financing activities:                |                                                                                                                     |                                            |                                                    
|                                                                      | Principal repayments of long-term debt                                                                              |                                            |                                                    
|                                                                      | Net repayment under revolving line of credit                                                                        |                                            |                                                    
|                                                                      | Net proceeds (repayment) on sale-leaseback of vehicles                                                              |                                            |                                                    
|                                                                      | Net proceeds (repayment) of financing lease                                                                         |                                            |                                                    
|                                                                      | Common stock issuance                                                                                               |                                            |                                                    
|                                                                      | Preferred stock cancellation                                                                                        |                                            |                                                    
|                                                                      | Purchase of treasury stock                                                                                          |                                            |                                                    
|                                                                      | Sale of treasury stock                                                                                              |                                            |                                                    
|                                                                      | Debt issuance costs                                                                                                 |                                            |                                                    
|                                                                      |                                                                                                                     |                                            |                                                    
|                                                                      |                                                                                                                     |                                            | Net cash provided by (used in) financing activities
|                                                                      |                                                                                                                     |                                            |                                                    
|Net increase (decrease) in cash and cash equivalents                  |                                                                                                                     |                                            | (1,524                                             
|Cash and cash equivalents at beginning of period                      |                                                                                                                     |                                            | 2,927                                              
|                                                                      |                                                                                                                     |                                            |                                                    
|Cash and cash equivalents at end of period                            |                                                                                                                     | $                                          | 1,403                                              
|                                                                      |                                                                                                                     |                                            |                                                    
|Supplemental disclosure of cash flow information:                     |                                                                                                                     |                                            |                                                    
|                                                                      | Cash paid for interest                                                                                              |                                            | $                                                  
|                                                                      |                                                                                                                     |                                            |                                                    
|                                                                      | Cash paid for operating leases                                                                                      |                                            | $                                                  
|                                                                      |                                                                                                                     |                                            |                                                    
|                                                                      | Cash paid for income taxes                                                                                          |                                            | $                                                  
|                                                                      |                                                                                                                     |                                            |                                                    
|Supplemental schedule of non-cash investing and financing activities: |                                                                                                                     |                                            |                                                    
|                                                                      | Stock issued for acquisition                                                                                        |                                            | $                                                  
|                                                                      |                                                                                                                     |                                            |                                                    
|                                                                      |                                                                                                                     | $                                          |                                                   
|                                                                      |                                                                                                                     |                                            |                                                    

See
accompanying notes to consolidated financial statements.

F-6

---



UNIVERSAL COMPRESSION HOLDINGS, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Organization

Universal Compression Holdings, Inc. (the "Company") was formed on December 12, 1997 for the purpose of acquiring Tidewater Compression
Service, Inc. ("TCS") from Tidewater Inc. ("Tidewater"). Upon completion of the acquisition on February 20, 1998 (the "Tidewater Acquisition"), TCS became the Company's
wholly-owned subsidiary and changed its name to Universal Compression, Inc. ("Universal"). Through this subsidiary, the Company's gas compression service operations date back to 1954. The
Company is a holding company, which conducts its operations through its wholly-owned subsidiary, Universal. Accordingly, the Company is dependent upon the distribution of earnings from Universal,
whether in the form of dividends, advances or payments on account of intercompany obligations, to service its debt obligations.

During
the quarter ended June 30, 2000, we completed an initial public offering of 7,275,000 shares of our common stock, par value $0.01 per share, which provided us with net
proceeds (after deducting underwriting discounts and commissions) of approximately $149.2 million. Concurrently with our initial public offering, we implemented a recapitalization pursuant to
which all then existing classes of our stock were converted into common stock.

On
February 9, 2001, we completed our acquisition of Weatherford Global Compression Services, L.P. and certain related entities ("Weatherford Global"), a supplier of natural gas
compression equipment and services and a division of Weatherford International, Inc. Under the terms of the agreement, a
subsidiary of Weatherford International, Inc. was merged into Universal in exchange for 13,750,000 shares of our common stock.

Since
our initial public offering, we have completed seven acquisitions. Our completed acquisitions include Gas Compression Services, Inc. ("GCSI") in September 2000,
Weatherford Global and ISS Compression ("IEW") in February 2001, Compressor System International, Inc. ("CSII") in April 2001, KCI, Inc. ("KCI") and Louisiana Compressor
Maintenance ("LCM") in July 2001, and Technical Compression Service, Inc. ("TCSI") in October 2001. GCSI added approximately 138,000 horsepower to our fleet and provided us with
an increased customer base, additional market segments and additional fabrication capabilities. Weatherford Global added approximately 950,000 horsepower, which expanded both our domestic and
international presence and more than doubled our size at the time. IEW added approximately 26,000 horsepower to our fleet, as well as important offshore Gulf of Mexico service capabilities. CSII added
approximately 34,000 horsepower in the aggregate to our fleet in Mexico and Argentina. KCI added approximately 125,000 horsepower to our domestic fleet as well as significant fabrication expertise and
capabilities, a 100,000 square foot fabrication facility in Tulsa, Oklahoma and expertise in the pipeline compression and related natural gas markets. LCM added to our ability to be a supplier of
maintenance, repair, overhaul and upgrade services to natural gas pipeline and related markets. TCSI added to our compression parts and service capabilities for the natural gas producing industry as
well as the refinery and petrochemical industries.

Nature of Operations

The Company is the second largest natural gas compression services company in the world in terms of contract compression fleet horsepower. The Company provides a
full range of contract compression services, which include sales, operations, maintenance and fabrication services and products to the natural gas industry, both domestically and internationally. The
compressors are used by oil and gas producers and processors and pipeline companies primarily to boost the pressure of

F-7

---

natural gas from the wellhead into gas gathering systems, gas processing plants or into and through high pressure pipelines to be delivered to the end-users. The Company also designs and
fabricates compressors for its own fleet as well as for sale to customers, and sells parts as well as services compressor units for its customers.

Principles of Consolidation

The accompanying consolidated financial statements include the Company and its wholly owned subsidiary, Universal. All significant intercompany accounts and
transactions have been eliminated in consolidation.

Reclassifications

Certain reclassifications have been made to the prior year amounts to conform to the current year presentation.

Use of Estimates

In preparing the Company's financial statements, management makes estimates and assumptions that affect the amounts reported in the financial statements and
related disclosures. Actual results may differ from these estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash flows are computed
using the indirect method.

Revenue Recognition

Revenue is recognized by the Company's four reportable business segments using the following criteria: (a) persuasive evidence of an exchange arrangement
exists, (b) delivery has occurred or services have been rendered, (c) the buyer's price is fixed or determinable and (d) collectibility is reasonably assured.

Revenue
from contract compression services is recorded when earned over the period of service and maintenance contracts which generally range from one month to several years. Aftermarket
services revenue is recorded as products are delivered or services are performed for the customer.

Fabrication
revenue is recognized using the completed-contract method which recognizes revenue upon completion of the contract. This method is used because the typical contract is
completed within two to three months and financial position and results of operations do not vary significantly from those which would result from use of the
percentage-of-completion method.

Concentration of Credit Risk

Trade accounts receivable are due from companies of varying size engaged principally in oil and gas activities in the United States and in certain international
locations such as South America, Southeast Asia, Europe and Canada. The Company reviews the financial condition of customers prior to extending credit and periodically updates customer credit
information. Payment terms are on a

F-8

---

short-term basis and in accordance with industry standards. No single customer accounts for 10% or more of the Company's revenues. For the years ended March 31, 2000, 2001 and
2002, the Company wrote off bad debts, net of recoveries totaling $116,000, $77,000 and $94,000, respectively.

Inventories

Inventories are recorded at the lower of average cost (first in first out FIFO method) or market (net realizable value). Some items of compression equipment are
acquired and placed in inventories for subsequent sale or compression services to others. Acquisitions of these assets are considered operating activities in the statement of cash flows.

Properties and Equipment

Properties and equipment are carried at cost. Depreciation for financial reporting purposes is computed on the straight-line basis beginning with the
first compression service, with salvage values of 20% for compression equipment, using estimated useful lives of:

Compression equipment

15 yearsOther properties and equipment

2-25 years


Maintenance
and repairs are charged to expenses as incurred. Overhauls and major improvements that increase the value or extend the life of contract compressor units are capitalized and
depreciated over
the estimated period of 6.5 years. Depreciation expense for the years ended March 31, 2000, 2001 and 2002 was $23.4 million, $29.9 million and $48.3 million,
respectively.

Properties
and equipment are reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable based upon undiscounted cash
flows. Any impairment losses are measured based upon the excess of the carrying value over the fair value. The Company has not recognized any impairment losses for any of the periods presented.

Goodwill

Goodwill represents the purchase price of an acquired entity in excess of the fair market value assigned to its assets and liabilities. Through March 31,
2001 goodwill was amortized on a straight-line basis over 40 years. Effective April 1, 2002 we discontinued amortization of goodwill with our adoption of Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 addresses accounting and reporting for intangible assets acquired
individually or with a group of other assets (but not those acquired in a business combination) at acquisition. It also addresses financial accounting and reporting for goodwill and other intangible
assets subsequent to their acquisition. At March 31, 2002 we performed an impairment analysis on our goodwill in accordance with SFAS No. 142 and determined that no impairment had
occurred.

F-9

---

The
following table sets forth adjusted net income and basic and diluted earnings per share as if SFAS No. 142 had been effective and the Company adopted it on April 1,
1999 (in thousands):

For the Year Ended March 31,2000

2001

2002Reported net income (loss)

$
(5,982
)
$
(4,391
)
$
49,408Add back: Goodwill amortization


2,046


2,085


Adjusted net income

$
(3,936
)
$
(2,306
)
$
49,408Reported earnings per share-basic

$
(2.44
)
$
(.30
)
$
1.65Add back: Goodwill amortization


.84


.14


Adjusted earnings per share-basic

$
(1.60
)
$
(.16
)
$
1.65Reported earnings per share-diluted

$
(2.44
)
$
(.29
)
$
1.63Add back: Goodwill amortization


.84


.14


Adjusted earnings per share-diluted

$
(1.60
)
$
(.15
)
$
1.63


Other Non-Current Assets

Included in other non-current assets are debt issuance costs, net of accumulated amortization, totaling approximately $18.5 million and
$19.6 million at March 31, 2001 and 2002, respectively. Such costs are amortized over the period of the respective debt agreements on a straight-line method which
approximates the effective interest method.

Stock-Based Compensation

Under SFAS No. 123, "Accounting for Stock-Based Compensation," the Company elected to measure compensation cost using the intrinsic value-based method as
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." As such, the Company is required to make pro forma disclosures of net income and earnings
per share as if the fair value based method of accounting defined by SFAS No. 123 had been applied. See Note 7.

Income Taxes

The Company accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, all expected future events are considered other
than enactments of changes in the tax law or rates.

Foreign Currency Translation

The majority of the Company's foreign subsidiaries have designated the local currency as their functional currency and, as such, gains and losses resulting from
financial statement translation of foreign operations are included as a separate component of other comprehensive income (loss) within stockholders' equity. For those foreign subsidiaries that have
designated the United States Dollar as the

F-10

---

functional currency, transaction gains and losses resulting from financial statement translation of foreign operations are included in the consolidated statements of operations as incurred.

Fair Value of Financial Instruments

The Company's financial instruments consist of trade receivables and payables (which have carrying values that approximate fair value) and long-term
debt. The fair value of the Company's revolving credit facility (see Note 4) is representative of its carrying value based upon variable rate terms. The fair value of the senior discount notes
was approximately $252.1 million and $253.7 million, as compared to a carrying amount of $200.8 million and $215.9 million at March 31, 2001 and 2002, respectively.
The estimated fair value amounts have been determined by the Company using appropriate valuation methodologies and information available to management as of March 31, 2002 based on the quoted
market price from brokers of these notes.

Environmental Liabilities

The costs to remediate and monitor environmental matters are accrued when such liabilities are considered probable and a reasonable estimate of such costs is
determinable.

Net Income Per Share

Basic and diluted net income loss per share are calculated in accordance with Statement of Financial Accounting Standards No. 128 ("SFAS 128"), Earnings
per Share.

F-11

---

The
following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share amounts):

|                                                            |                                               | For the Year Ended March 31,
|----------------------------------------------------------- | --------------------------------------------- | ----------------------------
|
|Basic earnings per share                                    |                                               |                             
|Income (loss) before extraordinary items                    |                                               | $                           
|Extraordinary loss, net of income tax benefit               |                                               |                             
|                                                            |                                               |                             
|Net income (loss)                                           |                                               | $                           
|                                                            |                                               |                             
|Weighted average common stock outstanding                   |                                               |                             
|Basic net income (loss) per share:                          |                                               |                             
|                                                            | Before extraordinary loss                     |                             
|                                                            | Extraordinary loss, net of income tax benefit |                             
|                                                            |                                               |                             
|Basic net income (loss) per share                           |                                               | $                           
|                                                            |                                               |                             
|Diluted earnings per share                                  |                                               |                             
|Income (loss) before extraordinary items                    |                                               | $                           
|Extraordinary loss, net of income tax benefit               |                                               |                             
|                                                            |                                               |                             
|Net income (loss)                                           |                                               | $                           
|                                                            |                                               |                             
|Weighted average common stock outstanding                   |                                               |                             
|Dilutive effect of stock options outstanding                |                                               |                             
|                                                            |                                               |                             
|Weighted average diluted shares of common stock outstanding |                                               |                             
|                                                            |                                               |                             
|Net income (loss) per sharediluted:                        |                                               |                             
|                                                            | Before extraordinary loss                     |                             
|                                                            | Extraordinary loss, net of income tax benefit |                             
|                                                            |                                               |                             
|Net income (loss) per sharediluted                         |                                               | $                           
|                                                            |                                               |                             

New Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Accounting Financial Standards ("SFAS") No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides new guidance on the recognition of impairment losses on long-lived assets to be held
and used or to be disposed of and also broadens the definition of what constitutes a discontinued operation and how the results of a discontinued operation are to be measured and presented.
SFAS No. 144 supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and Accounting
Principle Board Opinion No. 30, while retaining many of the requirements of these two statements. Under SFAS No. 144, assets held for sale that are a component of an entity will
be included in discontinued operations if the operations and cash flows will be or have been eliminated from the ongoing operations of the entity and the entity will not have any significant
continuing involvement in the operations prospectively. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 does not
materially change the methods used by the Company to measure impairment

F-12

---

losses on long-lived assets, but may result in additional future dispositions being reported as discontinued operations. The Company adopted SFAS No. 144 on April 1,
2002. Based on the Company's review of SFAS No. 144, no impairment existed as of March 31, 2002.

2. Mergers & Acquisitions

On April 23, 2001, the Company acquired the international operations of CSII based in Midland, Texas for approximately $30 million in cash. The
acquisition resulted in goodwill of $13.3 million, which is not subject to amortization.

On
July 11, 2001, the Company acquired KCI, a Tulsa, Oklahoma based fabricator of large horsepower compressors for approximately $25.8 million in cash and 694,927 shares of
the Company's common stock. In addition, the Company incurred costs and assumed other liabilities related to the transaction of approximately $6 million. Concurrently with the acquisition, the
Company repaid substantially all of KCI's approximately $51 million of indebtedness. In order to fund the acquisition, the Company used approximately $50 million of the availability
under its revolving credit facility and $27.3 million of the funds received from the offering in July 2001. The acquisition resulted in goodwill of $40.3 million.

On
July 13, 2001, the Company acquired LCM, a Houma, Louisiana based supplier of maintenance, repair, overhaul and upgrade services to the natural gas pipeline and related markets
for approximately $26.0 million in cash. In order to fund the acquisition, the Company used approximately $25 million of the availability under its revolving credit facility and
$1.3 million of the funds received from the Offering. The acquisition resulted in goodwill of $14.1 million.

On
October 3, 2001, the Company acquired TCSI, located in Belle Chase, Louisiana. TCSI provides compression parts and services to the natural gas producing industry as well as to
the refinery and petrochemical industries. Under the terms of the purchase agreement, the Company acquired TCSI for approximately $22.5 million in cash. In order to fund the acquisition, the
Company used approximately $19 million under its ABS Operating Lease Facility and approximately $3.5 million under its revolving credit facility. The acquisition resulted in goodwill of
$17.2 million.

On
September 15, 2000, the Company completed the merger of GCSI, a supplier of natural gas compression equipment and services with fabrication and overhaul facilities in Michigan
and Texas. In connection with the merger, the Company entered into an escrow agreement with the selling shareholders of GCSI pursuant to which certain of the shares issued to the shareholders are
being held in escrow to indemnify the Company against certain losses it may incur. On October 17, 2001, 28,379 of these escrow shares of the Company's common stock were released to the Company
to satisfy certain indemnified matters. Goodwill related to the GCSI acquisition amounted to $30.5 million at March 31, 2002.

The
Company's acquisitions were accounted for as purchases and accordingly, the results of operations of the acquired businesses are included in the accompanying financial statements
from the dates of acquisition. In addition, the Company is permitted to make, and has occasionally made, changes to their purchase price allocation during the first year after completing each
acquisition. Goodwill in the amounts listed below has been recognized for the amount of the excess of the purchase

F-13

---

price paid over the fair market value of the net assets acquired and is accounted for in accordance with SFAS 142.

For the Year Ended March 31,2001

2002Weatherford Global Compression Services

$
164,492

$
168,075Tidewater Compression Service


104,452


104,452KCI, Inc.





40,343Gas Compressors Services Inc.


32,668


30,534Technical Compression Services, Inc.





17,232Louisiana Compression Maintenance





14,133Compressor System International, Inc.





13,312ISS Compression


1,519


1,251Total


303,131


389,332Less accumulated amortization


(8,773
)

(8,773
)Goodwill, net

$
294,358

$
380,559


The
changes in the carrying amount of goodwill for the year ended March 31, 2002, are as follows (in thousands):

|                                  |  | Domestic Contract Compression |         | International Contract Compression |   | Aftermarket Services |  | Fabrication |        | Total
|--------------------------------- |  | ----------------------------- | ------- | ---------------------------------- | - | -------------------- |  | ----------- | ------ | -----
|Balance as of March 31, 2001      |  | $                             | 242,934 |                                    | $ | 26,970               |  | $           | 13,813 |      
|Goodwill acquired during the year |  |                               | 22,189  |                                    |   | 13,312               |  |             | 31,365 |      
|Purchase accounting adjustments   |  |                               | 975     |                                    |   | 108                  |  |             | 55     |      
|Balance as of March 31, 2002      |  | $                             | 266,097 |                                    | $ | 40,390               |  | $           | 45,234 |      

3. Inventories, Net

Inventories, net consisted of the following (in thousands):

For the Year Ended March 31,2001

2002Raw materials

$
59,790

$
67,912Work-in-progress


35,012


25,114Finished goods


26,137


9,722Total

$
120,939

$
102,748


Inventory
for Fabrication operations included in the above balances amounted to $46.1 million and $41.5 million for March 31, 2001 and 2002, respectively.

F-14

---

4. Long-Term Debt

The Company's debt at March 31 consisted of the following (in thousands):

As of March 31,2001

2002Senior discount notes, bearing interest of 97/8% per annum, due 2008, net of discount of $39,700 and $18,835 at March 31, 2001 and 2002, respectively, unsecured

$
200,800

$
215,915Various term loans due between August 2005 and April 2014. The March 31, 2001and 2002 average rates were 7.85% and 6.44%, respectively. In addition, the weighted average rates for fiscal 2001 and 2002 was 8.975% and
6.73%, respectively.


4,091


3,735Limited revenue obligation bonds, bearing interest of 4.5%.


1,200


Other





38Total debt


206,091


219,688Less current maturities


522


361Total long-term debt

$
205,569

$
219,327


On
February 20, 1998, the Company issued $242.5 million of its 97/8% senior discount notes due February 15, 2008 in a private placement. The
97/8% senior discount notes were offered at a substantial discount from their principal amount. The Company subsequently exchanged the notes for publicly tradable notes pursuant to a
registered exchange offer under the Securities Act. As of March 31, 2002, approximately $215.9 million aggregate principal amount of 97/8% senior discount notes was
outstanding.

The
Company's senior secured credit agreement ("Credit Agreement") provides for up to $125 million under the revolving credit facility, which includes a sub-limit for
letters of credit. The revolver bears interest at the Company's option of a base rate or LIBOR plus, in each case, a variable amount depending on its operating results.

The
available capacity on the revolving credit facility at March 31, 2001 and 2002 was approximately $110 million and $125 million, respectively, after giving effect
to outstanding letters of credit. The interest rates on the prior revolving credit facility at March 31, 2001 and 2002 were 7.58% and 6.0%, respectively. Under the revolving credit facility, a
commitment fee of 0.50% per annum on the average available commitment is payable quarterly.

The
Credit Agreement contains certain financial covenants and limitations on, among other things, acquisitions, sales, indebtedness and liens. The Credit Agreement also limits the
payment of cash dividends related to Universal paying up to $1 million to the Company in any given fiscal year. In addition, the Company has substantial dividend payment restrictions under the
indenture related to the senior discount notes. The Company was in compliance with all such covenants and limitations at March 31, 2001 and 2002. As defined by the Credit Agreement, any "change
of control" would result in an "Event of Default" and all amounts outstanding under the Credit Agreement would become due and payable. All principal amounts and accrued interest would become due
without further notice.

F-15

---

The
Company is not, and has not been, a lender to, affiliate of or investor in any manner with any of its lessors.

Maturities
of long-term debt as of March 31, 2002 are as follows (in thousands):

2003

$
3612004


3592005


3892006


4222007


456Thereafter


217,701Total

$
219,688


5. Capital Leases

On June 17, 1999, Universal signed a master lease agreement with GE Capital Fleet Services completing a sale and leaseback of the majority of its service
vehicle fleet. Under the agreement, the vehicles were sold and leased back by Universal at lease terms ranging from 20 months to 56 months and will continue to be deployed by Universal
under its normal operating procedures.

In
connection with the GCSI and Weatherford Global acquisitions, we have additional capital leases with GE Capital and Ford Motor Credit.

Properties
and equipment at March 31, 2002 include the following amounts for capitalized leases (in thousands):

For the Year Ended March 31,2001

2002Compression equipment

$
4,290


Service vehicles


9,771


11,809Less accumulated depreciation


(3,915
)

(1,844
)Net assets under capital leases

$
10,146

$
9,965


Future
minimum lease payments under non-cancelable capital leases as of March 31, 2002 are as follows (in thousands):

2003

$
3,4402004


1,9362005


1,1832006


2722007


98Thereafter


145Total

$
7,074


F-16

---

6. Income Taxes

For the years ended March 31, 2000 and 2001, substantially all of the Company's income and losses before income taxes were derived from its United States
operations. During 2002, the Company made acquisitions and experienced internal growth, which resulted in an increase in its international operations and a deferred foreign tax benefit.

Income
tax expense (benefit) for the years ended March 31, 2000, 2001 and 2002 consisted of the following (in thousands):

2000

2001

2002Current:Foreign

$
889

$
1,771

$
6,664Deferred:Federal


(2,655
)

2,215


25,157State


(228
)

305


272Foreign





(646
)

(1,162
)Total

$
(1,994
)
$
3,645

$
30,931


A
reconciliation of the provision (benefit) for income taxes and the amount computed by applying the federal statutory income tax rate to income before taxes and extraordinary item for
the years ended March 31, 2000, 2001 and 2002 is as follows (in thousands):

2000

2001

2002Income tax expense (benefit) at statutory rate

$
(2,791
)
$
3,065

$
28,119State taxes


(228
)

217


177Foreign taxes


889


(28
)

2,491Non-deductible expenses and other


136


391


144Total

$
(1,994
)
$
3,645

$
30,931


F-17

---

The
tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at March 31 are (in thousands):

2001

2002Deferred tax assets:Net operating loss carryforwards

$
69,547

$
96,817Accrued reserves


19,997


2,730Inventory reserves and unicap


6,734


3,642Foreign tax credit


1,779


1,779Other


1,162


11,388Total


99,219


116,356Valuation allowance


(1,779
)

(1,779
)Total


97,440


114,577Deferred tax liabilities:Depreciation differences on properties and equipment


(184,057
)

(222,653
)Other


(5,314
)

(10,881
)Total


(189,371
)

(233,534
)Net deferred tax liability

$
(91,931
)
$
(118,957
)


A
valuation allowance was established at March 31, 2000 against the Company's deferred tax assets related to foreign tax credits. The Company believes that it is probable that all
other deferred tax assets will be realized on future tax returns, primarily from the generation of future taxable income through both profitable operations and future reversals of existing taxable
temporary differences.

At
March 31, 2002, the Company had net operating loss ("NOL") carryforwards of approximately $240.7 million available to offset future taxable income. Annual
utilization of the carryforwards could be limited by Section 382 of the Internal Revenue Code of 1986, as amended. If not utilized, the NOL carryforwards will expire as follows (in thousands):

2008

$
6282009


1,8492010


1,9432011


9532018


5,2372019


36,2772020


61,0452021


66,3672022


66,398Total

$
240,697


F-18

---



7. Stockholders' Equity

Common Stock

Under the Employee Stock Purchase Plan, 46 employees of the Company purchased a total of 17,606 shares of common stock during the year ended March 31,
2002.

Initial Public Offering

During the quarter ended June 30, 2000, the Company completed an initial public offering of 7,275,000 shares of its common stock (which includes 275,000
shares of common stock issued pursuant to an overallotment option granted to the underwriters), which provided the Company with net proceeds (after deducting underwriting discounts and commissions) of
approximately $149.2 million. Concurrently with the initial public offering, the Company implemented a recapitalization pursuant to which all existing classes of the Company's stock including
the preferred stock were converted into common stock.

Mergers & Acquisitions

The Company completed the merger of Gas Compression Services, Inc. ("GCSI") into Universal on September 15, 2000. In the merger, the GCSI
shareholders received approximately $12 million in cash, 1,400,726 shares of the Company's common stock and the Company assumed or refinanced approximately $63 million of indebtedness of
GCSI. In connection with the merger, the Company entered into an escrow agreement with the selling shareholders of GCSI pursuant to which certain of
the shares issued to the shareholders are being held in escrow to indemnify the Company against certain losses it may incur. On October 17, 2001, 28,379 of these escrow shares of the Company's
common stock were released to the Company to satisfy certain indemnified matters.

On
February 9, 2001, the Company completed its acquisition of Weatherford Global Compression Services and certain related entities ("WGC"), a supplier of natural gas compression
equipment and services and a division of Weatherford International, Inc. Under the terms of the agreement, a subsidiary of Weatherford International was merged into Universal in exchange for
13.75 million restricted shares of the Company's common stock, which represented approximately 48% of the outstanding shares of the combined company.

On
July 11, 2001, the Company acquired KCI, a Tulsa, Oklahoma based fabricator of large horsepower compressors for approximately $25.8 million in cash and 694,927 shares of
the Company's common stock. In addition, the Company incurred costs and assumed other liabilities related to the transaction of approximately $6 million. Concurrently with the acquisition, the
Company repaid substantially all of KCI's approximately $51 million of indebtedness.

Stock Options

In order to motivate and retain key employees, the Company established an incentive stock option plan. The incentive stock plan became effective on
February 20, 1998, and on that date certain key employees were granted stock options. The options are exercisable over a ten-year period. Upon the

F-19

---

closing of the Company's initial public offering in May 2000, all outstanding options were accelerated and became fully vested. All other options generally vest over the following time period:

Year 1

331/3
%Year 2

331/3
%Year 3

331/3
%


The
Company has elected to follow Accounting Principles Board ("APB") No. 25,Accounting for Stock Issued to Employeesand related
interpretations in accounting for its stock-based compensation and to provide the disclosures required under SFAS No. 123,Accounting for Stock Based
Compensation.

APB
No. 25 requires no recognition of compensation expense for the stock-based compensation arrangements provided by the Company, namely option grants where the exercise price is
equal to the market value at the date of grant. However, APB No. 25 requires recognition of compensation expense for variable award plans over the vesting periods of such plans, based upon the
then-current market values of the underlying stock. In contrast, SFAS No. 123 requires recognition of compensation expense for grants of stock, stock options, and other equity
instruments, over the vesting periods of such grants, based on the estimated grant-date fair values of those grants.

Under
the stock option plan, options to purchase common stock may be granted until 2011. Options generally are granted at fair market value at the date of grant, are exercisable in
installments beginning one year from the date of grant, and expire 10 years after the date of grant.

As
of March 31, 2002, 2,734,246 stock options were outstanding under the plan. Transactions are summarized as follows:

Stock
Options

Weighted-Average
Exercise PriceOptions outstanding, March 31, 2000

273,233


6.73Granted

1,139,803


25.03Exercised

(68,268
)

14.19Forfeited

(33,224
)

25.50Options outstanding, March 31, 2001

1,311,544

$
21.63Granted

1,545,500


25.66Exercised

(109,419
)

10.04Forfeited

(13,379
)

19.00Options outstanding, March 31, 2002

2,734,246

$
24.52Shares exercisable at March 31, 2000




Shares exercisable at March 31, 2001

439,537

$
15.02Shares exercisable at March 31, 2002

570,280

$
17.94


F-20

---

Exercise
prices for options outstanding as of March 31, 2002 ranged from $6.73 to $37.95. The following table provides certain information with respect to stock options
outstanding at March 31, 2002:

Range of Exercise Prices

Stock Options
Outstanding

Weighted Average
Exercise Price

Weighted Average
Remaining
Contractual LifeUnder $7.00

265,663

$
6.73

6.7$7.00 - $19.99(a)






$20.00 - $30.00

1,585,182


22.65

9.3Over $30.00

883,401


33.21

8.92,734,246

$
24.52

8.9


The
following table provides certain information with respect to stock options exercisable at March 31, 2002:

Range of Exercise Prices

Stock Options
Exercisable

Weighted Average
Exercise PriceUnder $7.00

265,663

$
6.73$7.00 - $19.99(a)




$20.00 - $30.00

304,617


27.72570,280

$
17.94


---

In
electing to continue to follow APB No. 25 for expense recognition purposes, the Company is obligated to provide the expanded disclosures required under SFAS No. 123 for
stock-based compensation granted in 1998 and thereafter, including, if materially different from reported results disclosure of pro forma net income and earnings per share had compensation expense
relating to 2000, 2001, and 2002 grants been measured under the fair value recognition provisions of SFAS No. 123.

The
weighted-average fair values at date of grant for options granted during 2000, 2001 and 2002 were $6.73, $9.94 and $10.41, respectively, and were estimated using the Black-Scholes
option valuation model with the following weighted-average assumptions:

2000

2001

2002Expected life in years

3.00

3.00

3.00Interest rate

6.40
%
4.33
%
4.95
%Volatility

0.00
%
53.21
%
54.00
%Dividend yield

0.00
%
0.00
%
0.00
%


F-21

---

The
following table summarizes results as if we had recorded compensation expense under the provisions of SFAS No. 123 for the 2000, 2001 and 2002 option grants:

Year Ended March 31,2000

2001

2002(In thousands except
per share amounts)Net Income (loss):As reported

$
(5,982
)
$
(4,391
)
$
49,408Pro forma

$
(12,026
)
$
(13,187
)
$
33,330Basic earnings per share:As reported

$
(2.44
)
$
(0.30
)
$
1.65Pro forma

$
(4.91
)
$
(0.90
)
$
1.11Diluted earnings per share:As reported

$
(2.44
)
$
(0.29
)
$
1.63Pro forma

$
(4.91
)
$
(0.87
)
$
1.10


8. Employee Benefits

The Company has a defined contribution 401(k) plan covering substantially all employees. The Company makes matching contributions under this plan equal to 50% of
each participant's contribution of up to 6% of the participant's compensation. Company contributions to the plan were approximately $473,000 and $614,000 for the years ended March 31, 2000 and
2001, respectively. In September 2001, the Company amended its 401(k) plan for all domestic employees. The amended plan allows the Company to make matching contributions in the form of Company
stock, instead of cash. For the fiscal year ended March 2002 the Company cash and stock contributions to the plan were approximately $0.5 and $0.8 million, respectively.

9. Related-Party Transactions

Management Agreement

Castle Harlan Inc., an affiliate of a significant stockholder of the Company, entered into an agreement whereby, in exchange for certain management
services rendered, the Company agreed to pay a fee to Castle Harlan Inc. totaling $3 million per year. The amount was paid in advance for the first year and quarterly in advance
thereafter. The agreement was for a term of five years, renewable automatically from year to year thereafter unless Castle Harlan Inc. or its affiliates beneficially own less than 20% of the
then outstanding stock of the Company. The Company paid Castle Harlan Inc. $3 million during the year ended March 31, 2000. The fee was recorded at the rate of $750,000 per
quarter in selling, general and administrative expenses.

In
connection with the initial public offering in the quarter ended June 30, 2000, the Company terminated its Management Agreement with Castle Harlan, Inc. In exchange for
such termination, the Company paid $3 million in cash and issued 136,364 shares of its common stock to Castle Harlan.

F-22

---

Finder's Fee/Consulting Arrangement

The Company paid a member of its Board of Directors (the "Director") an annual consulting fee of $150,000 for consulting services for a stated term of five years.
The agreement provided for automatic extensions for one-year periods unless terminated by the parties. The Company paid the Director $140,264 during the year ended March 31, 2000.
In connection with the initial public offering in the quarter ended June 30, 2000, the Company terminated the agreement and paid him $150,000 in cash and issued him 6,818 shares of common
stock.

Transitional Services Agreement

Concurrently with the closing of the Weatherford Global acquisition, Weatherford and WGC, as the Company's subsidiary, entered into a transitional services
agreement under which Weatherford will continue to provide certain administrative and support services, such as shared corporate office space
and general communication and information services, to WGC until June 9, 2001. WGC paid Weatherford $125,000 for the first thirty days of these services. For the period subsequent to the
initial thirty days, Weatherford Global, as the Company's subsidiary, will pay Weatherford a fee based on a proportional amount of Weatherford's costs and expenses in providing the services plus a 10%
management fee. Amounts paid under this agreement have been immaterial.

10. Commitments and Contingencies

Rent expense for the years ended March 31, 2000, 2001 and 2002 was approximately $0.4 million, $0.5 million, and $0.5 million,
respectively. Commitments for future lease payments were not significant at March 31, 2002.

An
environmental assessment of the operations, physical premises and assets of the Company was completed in connection with the Tidewater Acquisition. The Company has recorded a
provision of approximately $1.1 million and $0.9 million at March 31, 2001 and 2002, respectively, for environmental remediation costs.

In
the ordinary course of business, the Company is involved in various pending or threatened legal actions. In the opinion of management, the amount of ultimate liability, if any, with
respect to these actions will not have a materially adverse effect on the Company's financial position, operating results or cash flows.

The
Company has no other commitments or contingent liabilities which, in the judgment of management, would result in losses that would materially affect the Company's consolidated
financial position or operating results.

11. Industry Segments and Geographic Information

Prior to the Weatherford Global acquisition, the Company had three principal industry segments: domestic rental and maintenance, international rental and
maintenance (including Canada) and fabrication. Due to the Weatherford Global merger, the changing nature of the markets the Company serves, and in order to align itself with those markets, the
Company changed its internal business organization during fiscal 2001. In addition, during the second quarter of fiscal 2002, the Company changed the name of its rental and maintenance segments to
contract compression. During the fourth quarter of fiscal 2002, the Company changed the name of its parts sales and service segment to

F-23

---

aftermarket services. The Company is now organized into four businesses or operating segments: domestic contract compression, international contract compression (including Canada), fabrication, and
aftermarket services. The two contract compression segments provide natural gas compression rental and maintenance services to meet specific customer requirements. The international contract
compression segment represents all of the Company's international rental and maintenance operations (including Canada). The fabrication segment provides services related to the design, fabrication and
sale of natural gas and air compression packages to meet customer specifications. The aftermarket services segment involves the sale of parts and the service of compressor units owned by producers and
gatherers of natural gas.

The
Company's reportable segments are strategic business units that offer different products and services. They are managed separately since each business requires different marketing
strategies due to customer specifications. The Company evaluates the performance of its reportable segments based on gross margin and operating income. Gross margin is defined as total revenue less
rental expense, cost of sales (exclusive of depreciation and amortization), gain on asset sales and interest income. Operating income excludes non-recurring charges, interest and other
income, interest expense and income taxes. Additionally, the Company has no material sales to other segments, and accordingly, there are no inter-segment revenues to be reported.

The
following table presents sales and other financial information by industry segment for the year ended March 31, 2000 (in thousands):

|                              |  | Domestic
Contract
Compression |         | International
Contract
Compression |   | Fabrication |  | Aftermarket
Services |        | Total
|----------------------------- |  | ----------------------------- | ------- | ---------------------------------- | - | ----------- |  | -------------------- | ------ | -----
|Revenues                      |  | $                             | 83,577  |                                    | $ | 14,718      |  | $                    | 25,258 |      
|Gross margin                  |  |                               | 52,411  |                                    |   | 10,532      |  |                      | 3,358  |      
|Depreciation and amortization |  |                               | 20,991  |                                    |   | 4,084       |  |                      | 524    |      
|Capital expenditures          |  |                               | 50,980  |                                    |   | 8,079       |  |                      | 899    |      
|Identifiable assets           |  |                               | 408,491 |                                    |   | 49,204      |  |                      | 10,205 |      

The
following table presents sales and other financial information by industry segment for the year ended March 31, 2001 (in thousands):

|                              |  | Domestic
Contract
Compression |         | International
Contract
Compression |   | Fabrication |  | Aftermarket
Services |        | Total
|----------------------------- |  | ----------------------------- | ------- | ---------------------------------- | - | ----------- |  | -------------------- | ------ | -----
|Revenues                      |  | $                             | 126,686 |                                    | $ | 22,549      |  | $                    | 61,779 |      
|Gross margin                  |  |                               | 80,465  |                                    |   | 16,425      |  |                      | 9,041  |      
|Depreciation and amortization |  |                               | 25,710  |                                    |   | 5,924       |  |                      | 1,087  |      
|Capital expenditures          |  |                               | 54,749  |                                    |   | 11,560      |  |                      | 746    |      
|Identifiable assets           |  |                               | 775,781 |                                    |   | 178,718     |  |                      | 88,170 |      

F-24

---

The
following table presents sales and other financial information by industry segment for the year ended March 31, 2002 (in thousands):

|                              |  | Domestic
Contract
Compression |         | International
Contract
Compression |   | Fabrication |  | Aftermarket
Services |         | Total
|----------------------------- |  | ----------------------------- | ------- | ---------------------------------- | - | ----------- |  | -------------------- | ------- | -----
|Revenues                      |  | $                             | 267,550 |                                    | $ | 60,185      |  | $                    | 211,265 |      
|Gross margin                  |  |                               | 169,892 |                                    |   | 43,411      |  |                      | 24,347  |      
|Depreciation and amortization |  |                               | 37,776  |                                    |   | 9,653       |  |                      | 518     |      
|Capital expenditures          |  |                               | 146,145 |                                    |   | 37,343      |  |                      | 2,004   |      
|Identifiable assets           |  |                               | 808,583 |                                    |   | 206,610     |  |                      | 115,877 |      

Geographic Area

The following table illustrates revenues and total assets by geographic locations for the year ended March 31, 2000 (in thousands):

|                    |  | United States |         | Canada |   | Latin America |  | Asia Pacific |        | Total
|------------------- |  | ------------- | ------- | ------ | - | ------------- |  | ------------ | ------ | -----
|Revenues            |  | $             | 119,411 |        | $ |              |  | $            | 15,946 |      
|Identifiable assets |  |               | 418,785 |        |   | 64            |  |              | 48,710 |      

The
following table illustrates revenues and total assets by geographic locations for the year ended March 31, 2001 (in thousands):

|                    |  | United States |         | Canada |   | Latin America |  | Asia Pacific |         | Total
|------------------- |  | ------------- | ------- | ------ | - | ------------- |  | ------------ | ------- | -----
|Revenues            |  | $             | 196,957 |        | $ | 9,495         |  | $            | 23,826  |      
|Identifiable assets |  |               | 915,200 |        |   | 89,578        |  |              | 142,449 |      

The
following table illustrates revenues and total assets by geographic locations for the year ended March 31, 2002 (in thousands):

|                    |  | United States |           | Canada |   | Latin America |  | Asia Pacific |         | Total
|------------------- |  | ------------- | --------- | ------ | - | ------------- |  | ------------ | ------- | -----
|Revenues            |  | $             | 524,475   |        | $ | 91,615        |  | $            | 55,909  |      
|Identifiable assets |  |               | 1,058,332 |        |   | 85,335        |  |              | 102,499 |      

No
one customer accounted for more than 10% of net sales for any of the periods presented.

F-25

---



12. Selected Quarterly Financial Data (Unaudited)

Summarized quarterly financial data for the years ended March 31, 2000, 2001 and 2002 is as follows (in thousands):

|      |                                   | June 30 |   | September 30 |   | December 31 |         | March 31 |  
|----- | --------------------------------- | ------- | - | ------------ | - | ----------- | ------- | -------- | -
|2000: |                                   |         |   |              |   |             |         |          |  
|      | Revenue                           |         | $ | 33,808       |   | $           | 34,988  |          | $
|      | Operating income                  |         |   | 5,968        |   |             | 6,636   |          |  
|      | Net loss                          |         |   | (1,238       | ) |             | (1,578  | )        |  
|      | Earnings per common sharebasic   |         | $ | (0.51        | ) | $           | (0.64   | )        | $
|      | Earnings per common sharediluted |         | $ | (0.51        | ) | $           | (0.64   | )        | $
|2001: |                                   |         |   |              |   |             |         |          |  
|      | Revenue                           |         | $ | 34,760       |   | $           | 38,853  |          | $
|      | Operating income                  |         |   | 7,507        |   |             | 8,018   |          |  
|      | Net income (loss)                 |         |   | (10,928      | ) |             | 1,753   |          |  
|      | Earnings per common sharebasic   |         | $ | (1.24        | ) | $           | 0.13    |          | $
|      | Earnings per common sharediluted |         | $ | (1.24        | ) | $           | 0.13    |          | $
|2002: |                                   |         |   |              |   |             |         |          |  
|      | Revenue                           |         | $ | 140,361      |   | $           | 174,308 |          | $
|      | Operating income                  |         |   | 22,872       |   |             | 27,631  |          |  
|      | Net income                        |         |   | 10,545       |   |             | 12,793  |          |  
|      | Earnings per common sharebasic   |         | $ | 0.37         |   | $           | 0.42    |          | $
|      | Earnings per common sharediluted |         | $ | 0.37         |   | $           | 0.42    |          | $

13. Operating Lease Facilities

Prior to the Weatherford Global acquisition on February 9, 2001, the Company had residual value guarantees on the equipment under the operating lease
facility of approximately 85% of the funded amounts that were due upon termination of the lease and which could have been satisfied by a cash payment or the exercise of a purchase option for the full
funded amount and any related costs and expenses. The facility contained certain covenants restricting the Company's operations, including its ability to enter into acquisition and sales transactions,
incur additional indebtedness, permit additional liens on its assets and pay dividends. This facility was collateralized by liens on the lessor's compression equipment subject to the lease with
Universal and certain related rights. Under the operating lease facility, Universal was the lessee and the Company guaranteed certain of Universal's obligations thereunder. The Company replaced this
facility with new operating lease facilities.

In
connection with the Weatherford Global acquisition, on February 9, 2001, the Company raised $427 million under a new seven-year term senior secured notes
operating lease facility (the "high-yield operating lease facility") funded primarily through an offering of $350 million 87/8% senior secured notes due 2008 by an
unaffiliated special operating entity that is the lessor under the operating lease. The Company also concurrently entered into a $125 million secured revolving credit facility and a
$200 million asset-backed securitization operating lease facility (the "ABS operating lease facility"), which facility consists of a series of six leases with terms ranging from three to eight
years. At the closing of the Weatherford Global acquisition, the Company funded approximately $80 million under the ABS operating lease facility and had no amounts outstanding under the
revolving credit facility. The proceeds from the two operating lease facilities were used to restructure previous operating lease

F-26

---

obligations and refinance certain existing indebtedness of the Company (including the previous operating lease facility described above in the first paragraph) and Weatherford Global.

On
October 23, 2001, the Company increased the high-yield operating lease facility by $122 million, which was funded through the unaffiliated entity's offering
of an additional $100 million of 87/8% senior secured notes due 2008, together with an $18.3 million increase in its borrowings under an existing term loan and an
additional $3.7 million equity investment in such entity that is the lessor under the operating lease. The net proceeds from the sale of equipment under the high-yield operating
lease facility were used to repay all of the outstanding indebtedness under the revolving credit facility, with the remaining proceeds used to repay a portion of the obligations under the ABS
operating lease facility and for general corporate purposes.

Under
the operating lease facilities, Universal, or a subsidiary of Universal, as lessee, makes rental payments to the lessor for the leased equipment. The Company guarantees certain of
Universal's obligations under the operating lease facilities. Under the high-yield operating lease facility, the rental payments include amounts based on the interest accrued on the
87/8% senior secured notes and an amount based on LIBOR or a variable base rate equal to the sum of the interest accrued on the lessor's term loan, the yield on the equity investment in
the lessor and other fees. The equipment leased by Universal under the high-yield operating lease facility includes the equipment that had an appraised value as of February 2001 of
approximately $427 million and additional equipment with an appraised value as of October 2001 of approximately $122 million. Universal has residual value guarantees on the
equipment under the high-yield operating lease facility of approximately 82% of the funded amounts that are due upon termination of the lease in the event a purchase option for the full
funded amount and any related costs and expenses or renewal options are not selected by the lessee.

Under
the ABS operating lease facility, the rental payments are based on LIBOR or a variable base rate equal to the sum of the interest accrued on the outstanding notes plus the yield on
the equity investment in the facility. The ABS operating lease facility is collateralized by a first priority security interest in all of the assets under the facility. Pursuant to the lease, a
wholly-owned subsidiary of Universal has guaranteed the residual value of the equipment under the facility in an amount equal to approximately 85% of the funded amount in the ABS operating lease
facility that is due upon termination of the lease in the event a purchase option for the full funded amount and any related costs and expenses or renewal options are not selected by the lessee.

Lease
payments equal to the interest on the 87/8% senior discount notes issued by the unaffiliated entity under the high-yield operating lease facility are
payable semi-annually on August 15 and February 15, which commenced on August 15, 2001.

At
March 31, 2002, the Company had outstanding operating lease balances totaling $708.5 million, consisting of $549.0 million under its high-yield
operating lease facility and $159.5 million under its ABS operating lease facility. The equipment sold under the high-yield operating lease facility had a net book value of
approximately $472.5 million and resulted in a deferred gain of approximately $76.5 million to the Company. The equipment sold under the ABS operating lease facility had a book value of
approximately $121.7 million and resulted in a deferred gain of approximately $37.8 million to the Company.

The
Company annually assesses whether it is probable that the value of the property at the end of the lease terms will be less than the respective residual value guarantee for each
operating lease. On

F-27

---

the date the deficiency becomes probable, the expected deficiency (up to the maximum for which the Company is responsible) would be accrued by the Company using the straight-line method
over the remaining term of the leases.

Based
on interest rates and funding amounts as of March 31, 2002, the future minimum lease payments under the high-yield operating lease facility and the ABS operating
lease facility as of March 31, 2002 are $56.4 million for each of the next five years.

14. Extraordinary Losses

During the year ended March 31, 2001, the Company incurred extraordinary losses of $15.2 million ($9.5 million net of tax) related to its
debt restructuring that occurred concurrently with the Company's initial public offering.

15. Non-Recurring Charges

During the year ended March 31, 2001, the Company recorded restructuring charges of $8.7 million ($5.1 million net of tax, or earnings per
share of $0.34). The primary components of this charge were costs associated with the early termination of a management agreement in the amount of $6.5 million, a consulting agreement in the
amount of $0.3 million, estimated severance for Universal employees terminated or identified as transitional in connection with the WGC merger in the amount of $0.8 million, fees
associated with closing of Universal locations in connection with the WGC merger in the amount of $0.9 million and other related fees in connection with the Company's initial public offering
and concurrent financing transactions in the amount of $0.2 million. At March 31, 2001 $1.5 million was included in accrued liabilities representing the portion of the
restructuring charge not yet expended.

F-28

---

INDEPENDENT AUDITORS' REPORT

To the Board of Directors of
Universal Compression, Inc.

We
have audited the accompanying consolidated balance sheets of Universal Compression, Inc. and subsidiaries (the "Company") as of March 31, 2001 and 2002, and the related
consolidated statements of operations, stockholder's equity and cash flows for each of the three years in the period ended March 31, 2002. Our audits also included the financial statement
schedule listed in the Index at E-1, which represents Schedule II to the consolidated financial statements of the Company. These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2001 and 2002, and the
results of its operations and its cash flows for each of the three years in the period ended March 31, 2002, in conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

As
discussed in Note 1 to the consolidated financial statements, in the year ended March 31, 2002 the Company changed its method of accounting and reporting for goodwill to
conform to the Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."

/s/
DELOITTE & TOUCHE LLP

Houston,
Texas
June 14, 2002

F-29

---



UNIVERSAL COMPRESSION, INC.        CONSOLIDATED BALANCE SHEETS        (In thousands)

|                                                                                                                           |                                                                                                                      | March 31,
2001                             |         | March 31,
2002 |          
|-------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | -------------- | ---------
|ASSETS                                                                                                                     |                                                                                                                     
|Current assets:                                                                                                            |                                                                                                                      |                                            |         |                |          
|                                                                                                                           | Cash and cash equivalents                                                                                            |                                            | $       | 12,279         |          
|                                                                                                                           | Accounts receivable, net of allowance for bad debts of $2,771 and $7,470 as of March 31, 2001 and 2002, respectively |                                            |         | 87,088         |          
|                                                                                                                           | Current portion of notes receivable                                                                                  |                                            |         | 3,928          |          
|                                                                                                                           | Inventories, net of reserve for obsolescence of $17,607 and $10,537 as of March 31, 2001 and 2002, respectively      |                                            |         | 120,939        |          
|                                                                                                                           | Current deferred tax asset                                                                                           |                                            |         |               |          
|                                                                                                                           | Other                                                                                                                |                                            |         | 20,131         |          
|                                                                                                                           |                                                                                                                      |                                            |         |                |          
|                                                                                                                           |                                                                                                                      | Total current assets                       |         |                | 244,365  
|Property, plant and equipment                                                                                              |                                                                                                                      |                                            | 592,449 |                |          
|Other property                                                                                                             |                                                                                                                      |                                            | 52,810  |                |          
|Accumulated depreciation                                                                                                   |                                                                                                                      |                                            | (55,634 | )              |          
|                                                                                                                           |                                                                                                                      |                                            |         |                |          
|                                                                                                                           |                                                                                                                      | Net property, plant and equipment          |         |                | 589,625  
|Goodwill, net of accumulated amortization of $8,754 as of March 31, 2001 and 2002                                          |                                                                                                                      |                                            | 294,127 |                |          
|Notes receivable                                                                                                           |                                                                                                                      |                                            | 4,803   |                |          
|Other non-current assets, net of accumulated amortization of $1,777 and $5,031 as of March 31, 2001 and 2002, respectively |                                                                                                                      |                                            | 30,819  |                |          
|Non-current deferred tax asset                                                                                             |                                                                                                                      |                                            | 7,795   |                |          
|                                                                                                                           |                                                                                                                      |                                            |         |                |          
|                                                                                                                           |                                                                                                                      | Total assets                               |         | $              | 1,171,534
|                                                                                                                           |                                                                                                                      |                                            |         |                |          
|LIABILITIES AND STOCKHOLDER'S EQUITY                                                                                       |                                                                                                                     
|Current liabilities:                                                                                                       |                                                                                                                      |                                            |         |                |          
|                                                                                                                           | Accounts payable, trade                                                                                              |                                            | $       | 67,450         |          
|                                                                                                                           | Accrued liabilities                                                                                                  |                                            |         | 62,143         |          
|                                                                                                                           | Current deferred tax liability                                                                                       |                                            |         | 13,938         |          
|                                                                                                                           | Current portion of long-term debt and capital lease obligation                                                       |                                            |         | 3,452          |          
|                                                                                                                           |                                                                                                                      |                                            |         |                |          
|                                                                                                                           |                                                                                                                      | Total current liabilities                  |         |                | 146,983  
|Capital lease obligations                                                                                                  |                                                                                                                      |                                            | 6,086   |                |          
|Long-term debt                                                                                                             |                                                                                                                      |                                            | 205,569 |                |          
|Non-current deferred tax liability                                                                                         |                                                                                                                      |                                            | 90,126  |                |          
|Deferred gain                                                                                                              |                                                                                                                      |                                            | 75,146  |                |          
|Other liabilities                                                                                                          |                                                                                                                      |                                            |        |                |          
|                                                                                                                           |                                                                                                                      |                                            |         |                |          
|                                                                                                                           |                                                                                                                      | Total liabilities                          |         |                | 523,910  
|Commitments and contingencies (see note 10)                                                                                |                                                                                                                      |                                            |         |                |          
|Stockholder's equity:                                                                                                      |                                                                                                                      |                                            |         |                |          
|Common stock, $10 par value, 5,000 shares authorized, 4,910 shares issued and outstanding as of March 31, 2001 and 2002    |                                                                                                                      |                                            | 49      |                |          
|Additional paid-in capital                                                                                                 |                                                                                                                      |                                            | 651,607 |                |          
|Other comprehensive income (loss)                                                                                          |                                                                                                                      |                                            | 845     |                |          
|Retained earnings (deficit)                                                                                                |                                                                                                                      |                                            | (4,877  | )              |          
|                                                                                                                           |                                                                                                                      |                                            |         |                |          
|                                                                                                                           |                                                                                                                      | Total stockholder's equity                 |         |                | 647,624  
|                                                                                                                           |                                                                                                                      |                                            |         |                |          
|                                                                                                                           |                                                                                                                      | Total liabilities and stockholder's equity |         | $              | 1,171,534
|                                                                                                                           |                                                                                                                      |                                            |         |                |          

See
accompanying notes to consolidated financial statements.

F-30

---

UNIVERSAL COMPRESSION, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (In thousands)

|                                                          |                                                      | For the Year Ended March 31,
|--------------------------------------------------------- | ---------------------------------------------------- | ----------------------------
|
|Revenues:                                                 |                                                      |                             
|                                                          | Contract compression                                 |                             
|                                                          | Fabrication and aftermarket services                 |                             
|                                                          |                                                      |                             
|                                                          |                                                      | Total revenues              
|Costs and expenses:                                       |                                                      |                             
|                                                          | Contract compressiondirect costs                    |                             
|                                                          | Fabrication and aftermarket servicesdirect costs    |                             
|                                                          | Depreciation and amortization                        |                             
|                                                          | Selling, general and administrative                  |                             
|                                                          | Operating lease                                      |                             
|                                                          | Interest expense, net                                |                             
|                                                          | Other (income) / expense, net                        |                             
|                                                          | Non-recurring charges                                |                             
|                                                          |                                                      |                             
|                                                          |                                                      | Total costs and expenses    
|                                                          |                                                      |                             
|Income (loss) before income taxes and extraordinary items |                                                      |                             
|Income tax expense (benefit)                              |                                                      |                             
|                                                          |                                                      |                             
|                                                          | Income (loss) before extraordinary items             |                             
|                                                          |                                                      |                             
|                                                          | Extraordinary loss, net of $3,979 income tax benefit |                             
|                                                          |                                                      |                             
|                                                          |                                                      | Net income (loss)           
|                                                          |                                                      |                             

See
accompanying notes to consolidated financial statements.

F-31

---



UNIVERSAL COMPRESSION, INC        CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY    For the years ended March 31, 2000, 2001 and 2002    (In thousands)

|                                        |                                    | Common
Stock |    | Additional
Paid in
Capital |   | Retained
Earnings
(Deficit) |         | Other
Comprehensive
Income (loss) |        | Total  |  
|--------------------------------------- | ---------------------------------- | ------------ | -- | -------------------------- | - | --------------------------- | ------- | --------------------------------- | ------ | ------ | -
|Balance, March 31, 1999                 |                                    | $            | 49 |                            | $ | 105,131                     |         | $                                 | 128    |        | $
|                                        |                                    |              |    |                            |   |                             |         |                                   |        |        |  
|                                        | Net loss                           |              |    |                           |   |                             |        |                                   |        | (3,863 | )
|Balance, March 31, 2000                 |                                    | $            | 49 |                            | $ | 105,131                     |         | $                                 | (3,735 | )      |  
|                                        |                                    |              |    |                            |   |                             |         |                                   |        |        |  
|                                        | Investment in subsidiary by parent |              |    |                           |   |                             | 116,815 |                                   |        |       |  
|                                        | Acquisitions                       |              |    |                           |   |                             | 429,661 |                                   |        |       |  
|                                        | Net loss                           |              |    |                           |   |                             |        |                                   |        | (1,142 | )
|Foreign currency transaction adjustment |                                    |              |   |                            |   |                            |         |                                   |       |        | $
|                                        |                                    |              |    |                            |   |                             |         |                                   |        |        |  
|Comprehensive loss                      |                                    |              |    |                            |   |                             |         |                                   |        |        |  
|                                        |                                    |              |    |                            |   |                             |         |                                   |        |        |  
|Balance, March 31, 2001                 |                                    | $            | 49 |                            | $ | 651,607                     |         | $                                 | (4,877 | )      | $
|                                        |                                    |              |    |                            |   |                             |         |                                   |        |        |  
|Investment in subsidiary by parent      |                                    |              |   |                            |   | 36,726                      |         |                                   |       |        |  
|Acquisitions                            |                                    |              |   |                            |   | 20,000                      |         |                                   |       |        |  
|Net income                              |                                    |              |   |                            |   |                            |         |                                   | 49,408 |        |  
|Foreign currency translation adjustment |                                    |              |   |                            |   |                            |         |                                   |       |        |  
|                                        |                                    |              |    |                            |   |                             |         |                                   |        |        |  
|Comprehensive loss                      |                                    |              |    |                            |   |                             |         |                                   |        |        |  
|                                        |                                    |              |    |                            |   |                             |         |                                   |        |        |  
|Balance, March 31, 2002                 |                                    | $            | 49 |                            | $ | 708,333                     |         | $                                 | 44,531 |        | $
|                                        |                                    |              |    |                            |   |                             |         |                                   |        |        |  

See
accompanying notes to consolidated financial statements.

F-32

---

UNIVERSAL COMPRESSION, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS    (In thousands)

|                                                     |                                                                                                                     | For the Year Ended March 31,        |                                           
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ------------------------------------------
|
|Cash flows from operating activities:                |                                                                                                                     |                                     |                                           
|                                                     | Net income (loss)                                                                                                   |                                     | $                                         
|                                                     | Adjustments to reconcile net income (loss) to cash provided by operating activities, net of effect of acquisitions: |                                     |                                           
|                                                     |                                                                                                                     | Depreciation and amortization       |                                           
|                                                     |                                                                                                                     | (Gain) loss on asset sales          |                                           
|                                                     |                                                                                                                     | Amortization of debt issuance costs |                                           
|                                                     |                                                                                                                     | Accretion of discount notes         |                                           
|                                                     |                                                                                                                     |                                     | Increase (decrease) in deferred taxes     
|                                                     |                                                                                                                     |                                     | (Increase) decrease in other assets       
|                                                     |                                                                                                                     |                                     | (Increase) decrease in receivables        
|                                                     |                                                                                                                     |                                     | (Increase) decrease in inventories        
|                                                     |                                                                                                                     |                                     | Increase in accounts payable              
|                                                     |                                                                                                                     |                                     | Increase (decrease) in accrued liabilities
|                                                     |                                                                                                                     |                                     | Increase (decrease) in payable to parent  
|                                                     |                                                                                                                     |                                     | Other                                     
|                                                     |                                                                                                                     |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           
|Cash flows from investing activities:                |                                                                                                                     |                                     |                                           
|                                                     | Additions to property, plant and equipment                                                                          |                                     |                                           
|                                                     | Acquisition of Weatherford Global                                                                                   |                                     |                                           
|                                                     | Other acquisitions                                                                                                  |                                     |                                           
|                                                     | Proceeds from sale of property, plant and equipment                                                                 |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           
|Cash flows from financing activities:                |                                                                                                                     |                                     |                                           
|                                                     | Principal repayments of long-term debt                                                                              |                                     |                                           
|                                                     | Net repayment under revolving line of credit                                                                        |                                     |                                           
|                                                     | Net proceeds (repayment) on sale-leaseback of vehicles                                                              |                                     |                                           
|                                                     | Net proceeds (repayment) of financing lease                                                                         |                                     |                                           
|                                                     | Investment in subsidiary by parent                                                                                  |                                     |                                           
|                                                     | Debt issuance costs                                                                                                 |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           
|Net increase (decrease) in cash and cash equivalents |                                                                                                                     |                                     | (1,524                                    
|                                                     |                                                                                                                     |                                     |                                           
|Cash and cash equivalents at beginning of period     |                                                                                                                     |                                     | 2,927                                     
|                                                     |                                                                                                                     |                                     |                                           
|Cash and cash equivalents at end of period           |                                                                                                                     | $                                   | 1,403                                     
|                                                     |                                                                                                                     |                                     |                                           
|Supplemental disclosure of cash flow information:    |                                                                                                                     |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           
|                                                     |                                                                                                                     |                                     |                                           

See
accompanying notes to consolidated financial statements.

F-33

---



UNIVERSAL COMPRESSION, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Summary of Significant Accounting Policies

Organization

Universal Compression, Inc. was formed on December 12, 1997 for the purpose of acquiring Tidewater Compression Service, Inc. ("TCS") from
Tidewater Inc. ("Tidewater"). Upon completion of the acquisition on February 20, 1998 (the "Tidewater Acquisition"), TCS changed its name to Universal Compression, Inc.
("Universal") Universal is a wholly owned subsidiary of Universal Compression Holdings, Inc. ("Holdings").

During
the quarter ended June 30, 2000, we completed an initial public offering of 7,275,000 shares of our common stock, par value $0.01 per share, which provided us with net
proceeds (after deducting underwriting discounts and commissions) of approximately $149.2 million. Concurrently with our initial public offering, we implemented a recapitalization pursuant to
which all then existing classes of our stock were converted into common stock.

On
February 9, 2001, we completed our acquisition of Weatherford Global Compression Services, L.P. and certain related entities ("Weatherford Global"), a supplier of natural gas
compression equipment and services and a division of Weatherford International, Inc. Under the terms of the agreement, a subsidiary of Weatherford International, Inc. was merged into
Universal in exchange for 13,750,000 shares of our common stock.

Since
our initial public offering, we have completed seven acquisitions. Our completed acquisitions include Gas Compression Services, Inc. ("GCSI") in September 2000,
Weatherford Global and ISS Compression ("IEW") in February 2001, Compressor System International, Inc. ("CSII") in April 2001, KCI, Inc. ("KCI") and Louisiana Compressor
Maintenance ("LCM") in July 2001, and Technical Compression Service, Inc. ("TCSI") in October 2001. GCSI added approximately 138,000 horsepower to our fleet and provided us with
an increased customer base, additional market segments and additional fabrication capabilities. Weatherford Global added approximately 950,000 horsepower, which expanded both our domestic and
international presence and more than doubled our size at the time. IEW added approximately 26,000 horsepower to our fleet, as well as important offshore Gulf of Mexico service capabilities. CSII added
approximately 34,000 horsepower in the aggregate to our fleet in Mexico and Argentina. KCI added approximately 125,000 horsepower to our domestic fleet as well as significant fabrication expertise and
capabilities, a 100,000 square foot fabrication facility in Tulsa, Oklahoma and expertise in the pipeline compression and related natural gas markets. LCM enhanced our position as a supplier of
maintenance, repair, overhaul and upgrade services to natural gas pipeline and related markets. TCSI added to our compression parts and service capabilities for the natural gas producing industry as
well as the refinery and petrochemical industries.

Nature of Operations

Universal is the second largest natural gas compression services company in the world in terms of contract compression fleet horsepower. Universal provides a full
range of contract compression services, which include sales, operations, maintenance and fabrication services and products to the natural gas industry, both domestically and internationally. The
compressors are used by oil and gas producers and processors and pipeline companies primarily to boost the pressure of natural gas from the wellhead into gas gathering systems, gas processing plants
or into and through high pressure pipelines to be delivered to the end-users. Universal also designs and fabricates compressors for its own fleet as well as for sale to customers, and
sells parts as well as services compressor units for its customers.

F-34

---

Principles of Consolidation

The accompanying consolidated financial statements include Universal and its wholly owned subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.

Reclassifications

Certain reclassifications have been made to the prior year amounts to conform to the current year presentation.

Use of Estimates

In preparing Universal's financial statements, management makes estimates and assumptions that affect the amounts reported in the financial statements and related
disclosures. Actual results may differ from these estimates.

Cash and Cash Equivalents

Universal considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash flows are computed
using the indirect method.

Revenue Recognition

Revenue is recognized by Universal's four reportable business segments using the following criteria: (a) persuasive evidence of an exchange arrangement
exists, (b) delivery has occurred or services have been rendered, (c) the buyer's price is fixed or determinable and (d) collectibility is reasonably assured.

Revenue
from contract compression services is recorded when earned over the period of compression services and maintenance contracts, which generally range from one month to several
years. Aftermarket services revenue is recorded as products are delivered or services are performed for the customer.

Fabrication
revenue is recognized using the completed-contract method, which recognizes revenue upon completion of the contract. This method is used because the typical contract is
completed within two to three months and financial position and results of operations do not vary significantly from those, which would result from use of the
percentage-of-completion method.

Concentration of Credit Risk

Trade accounts receivable are due from companies of varying size engaged principally in oil and gas activities in the United States and in certain international
locations such as South America, Southeast Asia, Europe and Canada. Universal reviews the financial condition of customers prior to extending credit and periodically updates customer credit
information. Payment terms are on a short-term basis and in accordance with industry standards. No single customer accounts for 10% or more of Universal's revenues. For the years ended
March 31, 2000, 2001 and 2002, Universal wrote off bad debts, net of recoveries totaling $116,000, $77,000 and $94,000, respectively.

F-35

---

Inventories

Inventories are recorded at the lower of average cost (first in first out FIFO method) or market (net realizable value). Some items of compression equipment are
acquired and placed in inventories for subsequent sale or compression services to others. Acquisitions of these assets are considered operating activities in the statement of cash flows.

Properties and Equipment

Properties and equipment are carried at cost. Depreciation for financial reporting purposes is computed on the straight-line basis beginning with the
first compression service, with salvage values of 20% for compression equipment, using estimated useful lives of:

Compression equipment

15 yearsOther properties and equipment

2-25 years


Maintenance
and repairs are charged to expenses as incurred. Overhauls and major improvements that increase the value or extend the life of contract compressor units are capitalized and
depreciated over
the estimated period of 6.5 years. Depreciation expense for the years ended March 31, 2000, 2001 and 2002 was $23.3 million, $29.9 million and $48.3 million,
respectively.

Properties
and equipment are reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable based upon undiscounted cash
flows. Any impairment losses are measured based upon the excess of the carrying value over the fair value. Universal has not recognized any impairment losses for any of the periods presented.

Goodwill

Goodwill represents the purchase price of an acquired entity in excess of the fair market value assigned to its assets and liabilities. Through March 31,
2001 goodwill was amortized on a straight-line basis over 40 years. Effective April 1, 2002 we discontinued amortization of goodwill with our adoption of Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 addresses accounting and reporting for intangible assets acquired
individually or with a group of other assets (but not those acquired in a business combination) at acquisition. It also addresses financial accounting and reporting for goodwill and other intangible
assets subsequent to their acquisition. At March 31, 2002 we performed an impairment analysis on our goodwill in accordance with SFAS No. 142 and determined that no impairment had
occurred.

The
following table sets forth adjusted net income as if SFAS No. 142 had been effective and the Company adopted it on April 1, 1999 (in thousands):

For the Year Ended March 31,2000

2001

2002Reported net income (loss)

$
(5,982
)
$
(4,391
)
$
49,408Add back: Goodwill amortization


2,046


2,085


Adjusted net income

$
(3,936
)
$
(2,306
)
$
49,408


F-36

---

Other Non-Current Assets

Included in other non-current assets are debt issuance costs, net of accumulated amortization, totaling approximately $18.5 million and
$19.6 million at March 31, 2001 and 2002, respectively. Such costs are amortized over the period of the respective debt agreements on a straight-line method which
approximates the effective interest method.

Income Taxes

Universal accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in Universal's financial statements or tax returns. In estimating future tax consequences, all expected future events are considered other
than enactments of changes in the tax law or rates.

Foreign Currency Translation

The majority of Universal's foreign subsidiaries have designated the local currency as their functional currency and, as such, gains and losses resulting from
financial statement translation of foreign operations are included as a separate component of accumulated other comprehensive loss within stockholders' equity. For those foreign subsidiaries that have
designated the United States Dollar as the functional currency, transaction gains and losses resulting from financial statement translation of foreign operations are included in the consolidated
statements of operations as incurred.

Fair Value of Financial Instruments

Universal's financial instruments consist of trade receivables and payables (which have carrying values that approximate fair value) and long-term
debt. The fair value of Universal's revolving credit facility (see Note 4) is representative of its carrying value based upon variable rate terms. The fair value of the senior discount notes
was approximately $252.1 million and $253.7 million, as compared to a carrying amount of $200.8 million and $215.9 million at March 31, 2001 and 2002, respectively.
The estimated fair value amounts have been determined by Universal using appropriate valuation methodologies and
information available to management as of March 31, 2002 based on the quoted market price from brokers of these notes.

Environmental Liabilities

The costs to remediate and monitor environmental matters are accrued when such liabilities are considered probable and a reasonable estimate of such costs is
determinable.

New Accounting Pronouncements

In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets".
SFAS No. 144 provides new guidance on the recognition of impairment losses on long-lived assets to be held and used or to be disposed of and also broadens the definition of
what constitutes a discontinued operation and how the results of a discontinued operation are to be measured and presented. SFAS No. 144 supersedes SFAS No. 121 "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" and Accounting Principle Board

F-37

---

Opinion No. 30, while retaining many of the requirements of these two statements. Under SFAS No. 144, assets held for sale that are a component of an entity will be included in
discontinued operations if the operations and cash flows will be or have been eliminated from the ongoing operations of the entity and the entity will not have any significant continuing involvement
in the operations prospectively. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 does not materially change the methods
used by the Company to measure impairment losses on long-lived assets, but may result in additional future dispositions being reported as discontinued operations. The Company adopted
SFAS No. 144 on April 1, 2002. Based on the Company's review of SFAS No. 144, no impairment existed as of March 31, 2002.

2.    Mergers & Acquisitions

On April 23, 2001, Universal acquired the international operations of CSII based in Midland, Texas for approximately $30 million in cash. The
acquisition resulted in goodwill of $13.3 million, which is not subject to amortization.

On
July 11, 2001, Universal acquired KCI, a Tulsa, Oklahoma based fabricator of large horsepower compressors for approximately $25.8 million in cash and 694,927 shares of
Universal's common stock. In addition, Universal incurred costs and assumed other liabilities related to the transaction of approximately $6 million. Concurrently with the acquisition,
Universal repaid substantially all of KCI's approximately $51 million of indebtedness. In order to fund the acquisition, Universal used
approximately $50 million of the availability under its revolving credit facility and $27.3 million of the funds received from the offering in July 2001. The acquisition resulted
in goodwill of $40.3 million.

On
July 13, 2001, Universal acquired LCM, a Houma, Louisiana based supplier of maintenance, repair, overhaul and upgrade services to the natural gas pipeline and related markets
for approximately $26.0 million in cash. In order to fund the acquisition, Universal used approximately $25 million of the availability under its revolving credit facility and
$1.3 million of the funds received from the offering. The acquisition resulted in goodwill of $14.1 million.

On
October 3, 2001, Universal acquired TCSI, located in Belle Chase, Louisiana. TCSI provides compression parts and services to the natural gas producing industry as well as to
the refinery and petrochemical industries. Under the terms of the purchase agreement, Universal acquired TCSI for approximately $22.5 million in cash. In order to fund the acquisition,
Universal used approximately $19 million under its ABS Operating lease facility and approximately $3.5 million under its revolving credit facility. The acquisition resulted in goodwill
of $17.2 million.

On
September 15, 2000, Universal completed the merger of GCSI, a supplier of natural gas compression equipment and services with fabrication and overhaul facilities in Michigan
and Texas. In connection with the merger, Universal entered into an escrow agreement with the selling shareholders of GCSI pursuant to which certain of the shares issued to the shareholders are being
held in escrow to indemnify Universal against certain losses it may incur. On October 17, 2001, 28,379 of these escrow shares of Universal's common stock were released to Universal to satisfy
certain indemnified matters. Goodwill related to the GCSI acquisition amounted to $30.5 million at March 31, 2002.

Universal's
acquisitions were accounted for as purchases and accordingly, the results of operations of the acquired businesses are included in the accompanying financial statements from
the dates of acquisition. In addition, Universal is permitted to make, and has occasionally made, changes to their

F-38

---

purchase price allocation during the first year after completing each acquisition. Goodwill in the amounts listed below has been recognized for the amount of the excess of the purchase price paid
over the fair market value of the net assets acquired and is accounted for in accordance with SFAS 142.

For the Year Ended March 31,2001

2002Weatherford Global Compression Services

$
164,492

$
168,075Tidewater Compression Service


104,202


104,202KCI, Inc.





40,343Gas Compressors Services Inc.


32,668


30,534Technical Compression Services, Inc.





17,232Louisiana Compression Maintenance





14,133Compressor System International, Inc.





13,312ISS Compression


1,519


1,251Total


302,881


389,082Less accumulated amortization


(8,754
)

(8,754
)Goodwill, net

$
294,127

$
380,328


The
changes in the carrying amount of goodwill for the year ended March 31, 2002, are as follows (in thousands):

|                                  |  | Domestic Contract Compression |         | International Contract Compression |   | Aftermarket Services |  | Fabrication |        | Total
|--------------------------------- |  | ----------------------------- | ------- | ---------------------------------- | - | -------------------- |  | ----------- | ------ | -----
|Balance as of March 31, 2001      |  | $                             | 242,703 |                                    | $ | 26,970               |  | $           | 13,813 |      
|Goodwill acquired during the year |  |                               | 22,189  |                                    |   | 13,312               |  |             | 31,365 |      
|Purchase accounting adjustments   |  |                               | 975     |                                    |   | 108                  |  |             | 55     |      
|Balance as of March 31, 2002      |  | $                             | 265,866 |                                    | $ | 40,390               |  | $           | 45,234 |      

3.    Inventories, Net

Inventories, net consisted of the following (in thousands):

For the Year Ended March 31,2001

2002Raw materials

$
59,790

$
67,912Work-in-progress


35,012


25,114Finished goods


26,137


9,722Total

$
120,939

$
102,748


Inventory
for Fabrication operations included in the above balances amounted to $46.1 million and $41.5 million for March 31, 2001 and 2002, respectively.

F-39

---

4.    Long-Term Debt

Universal's debt at March 31 consisted of the following (in thousands):

As of March 31,2001

2002Senior discount notes, bearing interest of 97/8% per annum, due 2008, net of discount of $39,700 and $18,835 at March 31, 2001 and 2002, respectively, unsecured

$
200,800

$
215,915Various term loans due between August 2005 and April 2014. The March 31, 2001 and 2002 average rates were 7.85% and 6.44%, respectively, and the weighted average rate for fiscal 2002 was 8.975% and 6.73%


4,091


3,735Limited revenue obligation bonds, bearing interest of 4.5%


1,200


Other





38Total Debt


206,091


219,688Less current maturities


522


361Total long-term debt

$
205,569

$
219,327


On
February 20, 1998, Universal issued $242.5 million of its 97/8% senior discount notes due February 15, 2008 in a private placement. The
97/8% senior discount notes were offered at a substantial discount from their principal amount. Universal subsequently exchanged the notes for publicly tradable notes pursuant to a
registered exchange offer under the Securities Act. As of March 31, 2002, approximately $215.9 million aggregate principal amount of 97/8% senior discount notes was
outstanding.

Universal's
senior secured credit agreement ("Credit Agreement") provides for up to $125 million under the revolving credit facility, which includes a sub-limit for
letters of credit. The revolver bears interest at Universal's option of a base rate or LIBOR plus, in each case, a variable amount depending on its operating results.

The
available capacity on the revolving credit facility at March 31, 2001 and 2002 was approximately $110 million and $125 million, respectively, after giving effect
to outstanding letters of credit. The interest rates on the prior revolving credit facility at March 31, 2001 and 2002 were 7.58% and 6.0%, respectively. Under the revolving credit facility, a
commitment fee of 0.50% per annum on the average available commitment is payable quarterly.

The
Credit Agreement contains certain financial covenants and limitations on, among other things, acquisitions, sales, indebtedness and liens. The Credit Agreement also limits the
payment of cash dividends related to Universal paying up to $1 million to Universal in any given fiscal year. In addition, Universal has substantial dividend payment restrictions under the
indenture related to the senior discount notes. Universal was in compliance with all such covenants and limitations at March 31, 2001 and 2002. As defined by the Credit Agreement, any "change
of control" would result in an "Event of Default" and all amounts outstanding under the Credit Agreement would become due and payable. All principal amounts and accrued interest would become due
without further notice.

Universal
is not, and has not been, a lender to, affiliate of or investor in any manner with any of its lessors.

F-40

---

Maturities
of long-term debt as of March 31, 2002 are as follows (in thousands):

2003

$
3612004


3592005


3892006


4222007


456Thereafter


217,701Total

$
219,688


5.    Capital Leases

On June 17, 1999, Universal signed a master lease agreement with GE Capital Fleet Services completing a sale and leaseback of the majority of its service
vehicle fleet. Under the agreement, the vehicles were
sold and leased back by Universal at lease terms ranging from 20 months to 56 months and will continue to be deployed by Universal under its normal operating procedures.

In
connection with the GCSI and Weatherford Global acquisitions, we have additional capital leases with GE Capital and Ford Motor Credit.

Properties
and equipment at March 31, 2002 include the following amounts for capitalized leases (in thousands):

For the Year Ended March 31,2001

2002Compression equipment

$
4,290

$
Service vehicles


9,771


11,809Less accumulated depreciation


(3,915
)

(1,844
)Net assets under capital leases

$
10,146

$
9,965


Future
minimum lease payments under non-cancelable capital leases as of March 31, 2002 are as follows (in thousands):

2002

$
3,4402003


1,9362004


1,1832005


2722006


98Thereafter


145Total

$
7,074


F-41

---



6.    Income Taxes

For the years ended March 31, 2000 and 2001, substantially all of Universal's income and losses before income taxes were derived from its United States
operations. During 2002, Universal made acquisitions and experienced internal growth, which resulted in an increase in its international operations and a deferred foreign tax benefit.

Income
tax expense (benefit) for the years ended March 31, 2000, 2001 and 2002 consisted of the following (in thousands):

2000

2001

2002Current:Foreign

$
889

$
1,771

$
6,664Deferred:Federal


(1,460
)

2,426


25,157State


(125
)

320


272Foreign





(646
)

(1,162
)Total

$
(696
)
$
3,871

$
30,931


A
reconciliation of the provision (benefit) for income taxes and the amount computed by applying the federal statutory income tax rate to income before taxes and extraordinary item for
the years ended March 31, 2000, 2001 and 2002 is as follows (in thousands):

2000

2001

2002Income taxes (benefit) at statutory rate

$
(1,595
)
$
3,276

$
28,119State taxes


(125
)

232


177Foreign taxes


889


(28
)

2,491Non-deductible expenses and other


135


391


144Total

$
(696
)
$
3,871

$
30,931


F-42

---

The
tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at March 31 are (in thousands):

2001

2002Deferred tax assets:Net operating loss carryforwards

$
65,199

$
92,479Accrued reserves


19,997


2,730Inventory reserves and unicap


6,734


3,642Foreign tax credit


1,779


1,779Other


1,162


11,388Total


94,881


112,018Valuation allowance


(1,779
)

(1,779
)Total


93,102


110,239Deferred tax liabilities:Depreciation differences on properties and equipment


(184,057
)

(222,653
)Other


(5,314
)

(10,881
)Total


(189,371
)

(233,534
)Net deferred tax liability

$
(96,269
)
$
(123,295
)


A
valuation allowance was established at March 31, 2000 against Universal's deferred tax assets related to foreign tax credits. Universal believes that it is probable that all
other deferred tax assets will be realized on future tax returns, primarily from the generation of future taxable income through both profitable operations and future reversals of existing taxable
temporary differences.

At
March 31, 2002, Universal had net operating loss ("NOL") carryforwards of approximately $228.6 million available to offset future taxable income. Annual
utilization of the carryforwards could be limited by Section 382 of the Internal Revenue Code of 1986, as amended. If not utilized, the NOL carryforwards will expire as follows (in thousands):

2008

$
6282009


1,8492010


1,9432011


9532018


4,9272019


33,1972020


57,6182021


61,1352022


66,398Total

$
228,648


7.    Employee Benefits

Universal has a defined contribution 401(k) plan covering substantially all employees. Universal makes matching contributions under this plan equal to 50% of each
participant's contribution of up to

F-43

---

6% of the participant's compensation. Company contributions to the plan were approximately $473,000 and $614,000 for the years ended March 31, 2000 and 2001, respectively. In
September 2001, Universal amended its 401(k) plan for all domestic employees. The amended plan allows Universal to make matching contributions in the form of Company stock, instead of cash. For
the fiscal year ended March 2002 Universal cash and stock contributions to the plan were approximately $0.5 and $0.8 million, respectively.

8.    Related-Party Transactions

Management Agreement

Castle Harlan Inc., an affiliate of a significant stockholder of Holdings, entered into an agreement whereby, in exchange for certain management services
rendered, Holdings agreed to pay a fee to Castle Harlan Inc. totaling $3 million per year. The amount was paid in advance for the first year and quarterly in advance thereafter. The
agreement was for a term of five years, renewable automatically from year to year thereafter unless Castle Harlan Inc. or its affiliates beneficially own less than 20% of the then outstanding
stock of Holdings. Holdings paid Castle Harlan Inc. $3 million during the year ended March 31, 2000. The fee was recorded at the rate of $750,000 per quarter in selling, general
and administrative expenses.

In
connection with the initial public offering in the quarter ended June 30, 2000, Holdings terminated its Management Agreement with Castle Harlan, Inc. In exchange for
such termination, Holdings paid $3 million in cash and issued 136,364 shares of its common stock to Castle Harlan.

Finder's Fee/Consulting Arrangement

Holdings paid a member of its Board of Directors (the "Director") an annual consulting fee of $150,000 for consulting services for a stated term of five years.
The agreement provided for automatic extensions for one-year periods unless terminated by the parties. Holdings paid the Director $140,264 during the year ended March 31, 2000. In
connection with the initial public offering in the quarter ended June 30, 2000, Holdings terminated the agreement and paid him $150,000 in cash and issued him 6,818 shares of common stock.

Transitional Services Agreement

Concurrently with the closing of the Weatherford Global acquisition, Weatherford and WGC, as Holding's subsidiary, entered into a transitional services agreement
under which Weatherford will continue to provide certain administrative and support services, such as shared corporate office space and general communication and information services, to WGC until
June 9, 2001. WGC paid Weatherford $125,000 for the first thirty days of these services. For the period subsequent to the initial thirty days, Weatherford Global, as Holding's subsidiary, will
pay Weatherford a fee based on a proportional amount of Weatherford's costs and expenses in providing the services plus a 10% management fee. Amounts paid under this agreement have been immaterial.

F-44

---

9.    Commitments and Contingencies

Rent expense for the years ended March 31, 2000, 2001 and 2002 was approximately $0.4 million, $0.5 million, and $0.5 million
respectively. Commitments for future lease payments were not significant at March 31, 2002.

An
environmental assessment of the operations, physical premises and assets of Universal was completed in connection with the Tidewater Acquisition. Universal has recorded a provision of
approximately $1.1 million and $0.9 million at March 31, 2001 and 2002, respectively, for environmental remediation costs.

In
the ordinary course of business, Universal is involved in various pending or threatened legal actions. In the opinion of management, the amount of ultimate liability, if any, with
respect to these actions will not have a materially adverse effect on Universal's financial position, operating results or cash flows.

Universal
has no other commitments or contingent liabilities which, in the judgment of management, would result in losses that would materially affect Universal's consolidated financial
position or operating results.

10.    Industry Segments and Geographic Information

Prior to the Weatherford Global acquisition, Universal had three principal industry segments: domestic rental and maintenance, international rental and
maintenance (including Canada) and fabrication. Due
to the Weatherford Global merger, the changing nature of the markets Universal serves, and in order to align itself with those markets, Universal changed its internal business organization during
fiscal 2001. In addition, during the second quarter of fiscal 2002, Universal changed the name of its rental and maintenance segments to contract compression. During the fourth quarter of fiscal 2002,
Universal changed the name of its parts sales and service segment to aftermarket services. Universal is now organized into four businesses or operating segments: domestic contract compression,
international contract compression (including Canada), fabrication, and aftermarket services. The two contract compression segments provide natural gas compression rental and maintenance services to
meet specific customer requirements. The international contract compression segment represents all of Universal's international rental and maintenance operations (including Canada). The fabrication
segment provides services related to the design, fabrication and sale of natural gas and air compression packages to meet customer specifications. The aftermarket services segment involves the sale of
parts and the service of compressor units owned by producers and gatherers of natural gas.

Universal's
reportable segments are strategic business units that offer different products and services. They are managed separately since each business requires different marketing
strategies due to customer specifications. Universal evaluates the performance of its reportable segments based on gross margin and operating income. Gross margin is defined as total revenue less
rental expense, cost of sales (exclusive of depreciation and amortization), gain on asset sales and interest income. Operating income excludes non-recurring charges, interest and other
income, interest expense and income taxes. Additionally, Universal has no material sales to other segments, and accordingly, there are no inter-segment revenues to be reported.

F-45

---

The
following table presents sales and other financial information by industry segment for the year ended March 31, 2000 (in thousands):

|                              |  | Domestic
Contract
Compression |         | International
Contract
Compression |   | Fabrication |  | Aftermarket
Services |        | Total
|----------------------------- |  | ----------------------------- | ------- | ---------------------------------- | - | ----------- |  | -------------------- | ------ | -----
|Revenues                      |  | $                             | 83,577  |                                    | $ | 14,718      |  | $                    | 25,258 |      
|Gross margin                  |  |                               | 52,411  |                                    |   | 10,532      |  |                      | 3,358  |      
|Depreciation and amortization |  |                               | 20,985  |                                    |   | 4,084       |  |                      | 524    |      
|Capital expenditures          |  |                               | 50,980  |                                    |   | 8,079       |  |                      | 899    |      
|Identifiable assets           |  |                               | 404,894 |                                    |   | 49,204      |  |                      | 10,205 |      

The
following table presents sales and other financial information by industry segment for the year ended March 31, 2001 (in thousands):

|                              |  | Domestic
Contract
Compression |         | International
Contract
Compression |   | Fabrication |  | Aftermarket
Services |        | Total
|----------------------------- |  | ----------------------------- | ------- | ---------------------------------- | - | ----------- |  | -------------------- | ------ | -----
|Revenues                      |  | $                             | 126,686 |                                    | $ | 22,549      |  | $                    | 61,779 |      
|Gross margin                  |  |                               | 80,465  |                                    |   | 16,425      |  |                      | 9,041  |      
|Depreciation and amortization |  |                               | 25,704  |                                    |   | 5,924       |  |                      | 1,087  |      
|Capital expenditures          |  |                               | 54,749  |                                    |   | 11,560      |  |                      | 746    |      
|Identifiable assets           |  |                               | 771,059 |                                    |   | 178,718     |  |                      | 88,170 |      

The
following table presents sales and other financial information by industry segment for the year ended March 31, 2002 (in thousands):

|                              |  | Domestic
Contract
Compression |         | International
Contract
Compression |   | Fabrication |  | Aftermarket
Services |         | Total
|----------------------------- |  | ----------------------------- | ------- | ---------------------------------- | - | ----------- |  | -------------------- | ------- | -----
|Revenues                      |  | $                             | 267,550 |                                    | $ | 60,185      |  | $                    | 211,265 |      
|Gross margin                  |  |                               | 169,892 |                                    |   | 43,411      |  |                      | 24,347  |      
|Depreciation and amortization |  |                               | 37,776  |                                    |   | 9,653       |  |                      | 518     |      
|Capital expenditures          |  |                               | 146,145 |                                    |   | 37,373      |  |                      | 2,004   |      
|Identifiable assets           |  |                               | 808,200 |                                    |   | 206,610     |  |                      | 115,877 |      

Geographic Area

The following table illustrates revenues and total assets by geographic locations for the year ended March 31, 2000 (in thousands):

|                    |  | United States |         | Canada |   | Latin America |  | Asia Pacific |        | Total
|------------------- |  | ------------- | ------- | ------ | - | ------------- |  | ------------ | ------ | -----
|Revenues            |  | $             | 119,411 |        | $ |              |  | $            | 15,946 |      
|Identifiable assets |  |               | 415,188 |        |   | 64            |  |              | 48,710 |      

F-46

---

The
following table illustrates revenues and total assets by geographic locations for the year ended March 31, 2001 (in thousands):

|                    |  | United States |         | Canada |   | Latin America |  | Asia Pacific |         | Total
|------------------- |  | ------------- | ------- | ------ | - | ------------- |  | ------------ | ------- | -----
|Revenues            |  | $             | 196,957 |        | $ | 9,495         |  | $            | 23,826  |      
|Identifiable assets |  |               | 910,478 |        |   | 89,578        |  |              | 142,449 |      

The
following table illustrates revenues and total assets by geographic locations for the year ended March 31, 2002 (in thousands):

|                    |  | United States |           | Canada |   | Latin America |  | Asia Pacific |         | Total
|------------------- |  | ------------- | --------- | ------ | - | ------------- |  | ------------ | ------- | -----
|Revenues            |  | $             | 524,475   |        | $ | 91,615        |  | $            | 55,909  |      
|Identifiable assets |  |               | 1,057,947 |        |   | 85,336        |  |              | 102,499 |      

No
one customer accounted for more than 10% of net sales for any of the periods presented.

11.    Selected Quarterly Financial Data (Unaudited)

Summarized quarterly financial data for the years ended March 31, 2000, 2001 and 2002 is as follows (in thousands):

|      |                   | June 30 |   | September 30 |   | December 31 |         | March 31 |  
|----- | ----------------- | ------- | - | ------------ | - | ----------- | ------- | -------- | -
|2000: |                   |         |   |              |   |             |         |          |  
|      | Revenue           |         | $ | 33,808       |   | $           | 34,988  |          | $
|      | Operating income  |         |   | 5,968        |   |             | 6,633   |          |  
|      | Net loss          |         |   | (732         | ) |             | (1,052  | )        |  
|2001: |                   |         |   |              |   |             |         |          |  
|      | Revenue           |         | $ | 34,760       |   | $           | 38,853  |          | $
|      | Operating income  |         |   | 7,507        |   |             | 8,018   |          |  
|      | Net income (loss) |         |   | (7,682       | ) |             | 1,754   |          |  
|2002: |                   |         |   |              |   |             |         |          |  
|      | Revenue           |         | $ | 140,361      |   | $           | 174,308 |          | $
|      | Operating income  |         |   | 22,872       |   |             | 27,631  |          |  
|      | Net income        |         |   | 10,545       |   |             | 12,793  |          |  

12.    Operating Lease Facilities

Prior to the Weatherford Global acquisition on February 9, 2001, Universal had residual value guarantees on the equipment under the operating lease
facility of approximately 85% of the funded amounts that were due upon termination of the lease and which could have been satisfied by a cash payment or the exercise of a purchase option for the full
funded amount and any related costs and expenses. The facility contained certain covenants restricting Universal's operations, including its ability to enter into acquisition and sales transactions,
incur additional indebtedness, permit additional liens on its assets and pay dividends. This facility was collateralized by liens on the lessor's compression equipment subject to the lease with
Universal and certain related rights. Under the operating lease facility, Universal was the lessee and Holdings guaranteed certain of Universal's obligations thereunder. Universal replaced this
facility with two new operating lease facilities.

F-47

---

In
connection with the Weatherford Global acquisition, on February 9, 2001, Universal raised $427 million under a new seven-year term senior secured notes
operating lease facility (the "high-yield operating lease facility") funded primarily through an offering of $350 million 87/8% senior secured notes due 2008 by an
unaffiliated special operating entity that is the lessor under the operating lease. Universal also concurrently entered into a $125 million secured revolving credit facility and a
$200 million asset-backed securitization operating lease facility (the "ABS operating lease facility"), which facility consists of a series of six leases with terms ranging from three to eight
years. At the closing of the Weatherford Global acquisition, Universal funded approximately $80 million under the ABS operating lease facility and had no amounts outstanding under the revolving
credit facility. The proceeds from the two operating lease facilities were used to restructure previous operating lease obligations and refinance certain existing indebtedness of Universal (including
the previous operating lease facility described above in the first paragraph) and Weatherford Global.

On
October 23, 2001, Universal increased the high-yield operating lease facility by $122 million, which was funded through the unaffiliated entity's offering of
an additional $100 million of 87/8% senior secured notes due 2008, together with an $18.3 million increase in its borrowings under an existing term loan and an additional
$3.7 million equity investment in such entity that is the lessor under the operating lease. The net proceeds from the sale of equipment under the high-yield operating lease facility
were used to repay all of the outstanding indebtedness under the revolving credit facility, with the remaining proceeds used to repay a portion of the obligations under the ABS operating lease
facility and for general corporate purposes.

Under
the operating lease facilities, Universal, or a subsidiary of Universal, as lessee, makes rental payments to the lessor for the leased equipment. Universal guarantees certain of
Universal's obligations under the operating lease facilities. Under the high-yield operating lease facility, the rental payments include amounts based on the interest accrued on the
87/8% senior secured notes and an amount based on LIBOR or a variable base rate equal to the sum of the interest accrued on the lessor's term loan, the yield on the equity investment in
the lessor and other fees. The equipment leased by Universal under the high-yield operating lease facility includes the equipment that had an appraised value as of February 2001 of
approximately $427 million and additional equipment with an appraised value as of October 2001 of approximately $122 million. Universal has residual value guarantees on the
equipment under the high yield operating lease facility of approximately 82% of the funded amounts that are due upon termination of the lease in the event a purchase option for the full funded amount
and any related costs and expenses or renewal options are not selected by the lessee.

Under
the ABS operating lease facility, the rental payments are based on LIBOR or a variable base rate equal to the sum of the interest accrued on the outstanding notes plus the yield on
the equity investment in the facility. The ABS operating lease facility is collateralized by a first priority security interest in all of the assets under the facility. Pursuant to the lease, a
wholly-owned subsidiary of Universal has guaranteed the residual value of the equipment under the facility in an amount equal to approximately 85% of the funded amount in the ABS operating lease
facility that is due upon termination of the lease in the event a purchase option for the full funded amount and any related costs and expenses or renewal options are not selected by the lessee.

Lease
payments equal to the interest on the 87/8% senior discount notes issued by the unaffiliated special operating entity under the high-yield operating
lease facility are payable semi-annually on August 15 and February 15, which commenced on August 15, 2001.

F-48

---

At
March 31, 2002, Universal had outstanding operating lease balances totaling $708.5 million, consisting of $549.0 million under its high-yield
operating lease facility and $159.5 million under its ABS operating lease facility. The equipment sold under the high-yield operating lease facility had a net book value of
approximately $472.5 million and resulted in a deferred gain of approximately $76.5 million to Universal. The equipment sold under the ABS operating lease facility had a book value of
approximately $121.7 million and resulted in a deferred gain of approximately $37.8 million to Universal.

Universal
annually assesses whether it is probable that the value of the property at the end of the lease terms will be less than the respective residual value guarantee for each
operating lease. On the date the deficiency becomes probable, the expected deficiency (up to the maximum for which Universal is responsible) would be accrued by Universal using the
straight-line method over the remaining term of the leases.

Based
on interest rates and funding amounts as of March 31, 2002, the future minimum lease payments under the high-yield operating lease facility and the ABS operating
lease facility as of March 31, 2002 are $56.4 million for each of the next five years.

13.    Extraordinary Losses

During the year ended March 31, 2001, Universal incurred extraordinary losses of $10.6 million ($6.6 million net of tax) related to its debt
restructuring that occurred concurrently with Universal's initial public offering of its common stock.

14.    Non-Recurring Charges

During the year ended March 31, 2001, Universal recorded restructuring charges of $8.7 million ($5.1 million net of tax, or earnings per
share of $0.34). The primary components of this charge were costs associated with the early termination of a management agreement in the amount of $6.5 million, a consulting agreement in the
amount of $0.3 million, estimated severance for Universal employees terminated or identified as transitional in connection with the WGC merger in the amount of $0.8 million, fees
associated with closing of Universal locations in connection with the WGC merger in the amount of $0.9 million and other related fees in connection with Universal's initial public offering and
concurrent financing transactions in the amount of $0.2 million. At March 31, 2001 $1.5 million was included in accrued liabilities representing the portion of the restructuring
charge not yet expended.

F-49

---



UNIVERSAL COMPRESSION HOLDINGS, INC.  UNIVERSAL COMPRESSION, INC.

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

|Item                                 |  | Balance at
Beginning
of Period |       | Charged to
Costs and
Expenses(1) |   | Payments/
Deductions(2) |  | Acquired
Allowances(3) |     | Balance at
Close of
Period
|------------------------------------ |  | ------------------------------ | ----- | -------------------------------- | - | ----------------------- |  | ---------------------- | --- | --------------------------
|
|2000 Allowance for doubtful accounts |  | $                              | 123   |                                  | $ | 220                     |  | $                      | 116 |                           
|2001 Allowance for doubtful accounts |  | $                              | 227   |                                  | $ | 235                     |  | $                      | 77  |                           
|2002 Allowance for doubtful accounts |  | $                              | 2,771 |                                  | $ | 2,349                   |  | $                      | 94  |                           

---

|Item                                    |  | Balance at Beginning of Period |        | Charged to Costs and Expenses(1) |   | Inventory Write-offs(2) |  | Acquired Reserves/(Deductions)(3) |       | Balance at Close of Period
|--------------------------------------- |  | ------------------------------ | ------ | -------------------------------- | - | ----------------------- |  | --------------------------------- | ----- | --------------------------
|2000 Reserve for inventory obsolescence |  | $                              | 1,335  |                                  | $ |                        |  | $                                 | 330   |                           
|2001 Reserve for inventory obsolescence |  | $                              | 1,005  |                                  |   |                         |  | $                                 | 587   |                           
|2002 Reserve for inventory obsolescence |  | $                              | 17,607 |                                  | $ | 475                     |  | $                                 | 2,522 |                           

---

E-1

---



SIGNATURES

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, on June 27, 2002.

| |  | UNIVERSAL COMPRESSION HOLDINGS, INC.
| |  | ------------------------------------
| |  | By:                                 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Stephen A. Snider, Ernie L. Danner, Richard W. FitzGerald
and Mark L. Carlton, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities, to sign any and 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 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
as fully to all said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue thereof.

Pursuant
to the requirements of the Securities Act of 1934, this report has been signed by the following persons in the capacities indicated on June 27, 2002.

|Signature                                     |  | Title                                                                          
|--------------------------------------------- |  | -------------------------------------------------------------------------------
|                                              |  |                                                                                
|/s/STEPHEN A. SNIDERStephen A. Snider         |  | President, Chief Executive Officer and Director (Principal Executive Officer)  
|/s/RICHARD W. FITZGERALDRichard W. FitzGerald |  | Senior Vice President and Chief Financial Officer (Principal Financial Officer)
|/s/RICARDO ARREDONDORicardo Arredondo         |  | Vice President and Controller (Principal Accounting Officer)                   
|/s/ERNIE L. DANNERErnie L. Danner             |  | Executive Vice President and Director                                          
|/s/THOMAS C. CASEThomas C. Case               |  | Director                                                                       
|                                              |  |                                                                                

II-1

---

|/s/BERNARD J. DUROC-DANNERBernard J. Duroc-Danner |  | Director
|------------------------------------------------- |  | --------
|/s/URIEL E. DUTTONUriel E. Dutton                 |  | Director
|/s/LISA W. RODRIGUEZLisa W. Rodriguez             |  | Director
|/s/WILLIAM M. PRUELLAGEWilliam M. Pruellage       |  | Director
|/s/EDMUND P. SEGNER, IIIEdmund P. Segner, III     |  | Director
|/s/SAMUEL URCISSamuel Urcis                       |  | Director

II-2

---



SIGNATURES

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, on June 27, 2002.

| |  | UNIVERSAL COMPRESSION INC.
| |  | --------------------------
| |  | By:                       

Pursuant
to the requirements of the Securities Exchange act of 1934, this report has been signed by the following persons in the capacities indicated on June 27, 2002.

|Signature                                         |  | Title                                                                          
|------------------------------------------------- |  | -------------------------------------------------------------------------------
|                                                  |  |                                                                                
|By: /s/STEPHEN A. SNIDERStephen A. Snider         |  | President, Chief Executive Officer and Director (Principal Executive Officer)  
|By: /s/RICHARD W. FITZGERALDRichard W. FitzGerald |  | Senior Vice President and Chief Financial Officer (Principal Financial Officer)
|By: /s/RICARDO ARREDONDORicardo Arredondo         |  | Vice President and Controller (Principal Accounting Officer)                   
|By: /s/ERNIE L. DANNERErnie L. Danner             |  | Director                                                                       

II-3

---

EXHIBIT INDEX

|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1         |  | Agreement and Plan of Merger dated as of October 23, 2000, by and among Universal Compression Holdings, Inc., Universal Compression, Inc., Weatherford International, Inc., WEUS Holding, Inc. and Enterra Compression
Company (incorporated by reference to Exhibit 10.1 to Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 28, 2000).                                                    
|3.1         |  | Restated Certificate of Incorporation of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 3.1 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).                                                                                                                                                                                                                                     
|3.2         |  | Restated Bylaws of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 3.2 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000).                                                                                                                                                                                                                                                           
|4.1         |  | Indenture, dated as of February 20, 1998, between Universal Compression, Inc. and the United States Trust Company of New York, as Trustee, with respect to the 97/8% Senior Discount Notes (incorporated by reference to Exhibit
4.3 to Universal Compression, Inc.'s Registration Statement on Form S-4 dated March 19, 1998 (File No. 333-48279)).                                                                                                                      
|4.2         |  | First Supplemental Indenture, dated May 9, 2000, between Universal Compression, Inc. and United States Trust Company of New York, as Trustee, with respect to the 97/8% Senior Discount Notes (incorporated by reference to
Exhibit 4.7 of Amendment No. 2 dated May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).                                                                                        
|4.3         |  | Second Supplemental Indenture, dated as of May 30, 2000, by and among Universal Compression, Inc., Universal Compression Holdings, Inc. and United States Trust Company of New York, as Trustee, with respect to the 97/8%
Senior Discount Notes (incorporated by reference to Exhibit 4.3 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).                                                             
|4.4         |  | Third Supplemental Indenture, dated as of October 15, 2000, by and among Universal Compression, Inc., Gas Compression Finance Corporation, G.C.S. Distributing L.L.C., Gas Compression Realty L.L.C. and United States Trust Company of New York, as
Trustee, with respect to the 97/8% Senior Discount Notes (incorporated by reference to Exhibit 4.4 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30,
2000).
|4.5         |  | Specimen of Universal Compression, Inc.'s 97/8% Senior Discount Notes due 2008 (incorporated by reference to Exhibit 4.2 to Universal Compression, Inc.'s Registration Statement on Form S-4 dated March 19, 1998 (File No.
333-48279)).                                                                                                                                                                                                                                  
|4.6         |  | Specimen common stock certificate of Universal Compression Holdings, Inc. (incorporated by reference to Exhibit 4.1 to Amendment No. 2 dated May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No.
333-34090)).                                                                                                                                                                                                            
|4.7         |  | Indenture, dated as of February 9, 2001, among BRL Universal Equipment 2001 A, L.P. and BRL Universal Equipment Corp., as Issuers, and The Bank of New York, as Indenture Trustee, with respect to the 87/8% Senior Secured
Notes due 2008 (incorporated by reference to Exhibit 10.4 of Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).                                                                   
|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

---

|4.8   |  | First Supplemental Indenture, dated as of September 11, 2001, among BRL Universal Equipment 2001 A, L.P. and BRL Universal Equipment Corp., as Issuers, and The Bank of New York, as Trustee, with respect to the 87/8% Senior
Secured Notes due 2008 (incorporated by reference to Exhibit 4.1 to Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 24, 2001).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.9   |  | Indenture, dated as of February 9, 2001, between BRL Universal Compression Funding I, L.P., issuer, and Wells Fargo Bank Minnesota, National Association, Indenture Trustee, with respect to the ABS operating lease facility (incorporated by reference
to Exhibit 4.10 to Registration Statement on Form S-4 dated March 20, 2001 (File No. 333-57302)).                                                                                  
|4.10  |  | Series 2001-1 Supplement, dated as of February 9, 2001, to Indenture dated as of February 9, 2001, between BRL Universal Compression Funding I, L.P., issuer, and Wells Fargo Bank Minnesota, National Association, Indenture Trustee, with respect
to the ABS operating lease facility (incorporated by reference to Exhibit 4.11 to Registration Statement on Form S-4 dated March 20, 2001 (File No. 333-57302)).                        
|4.11  |  | Amendment No. 1 to Indenture, dated as of October 1, 2001, between BRL Universal Compression Funding I, L.P., as Issuer, and Wells Fargo Bank Minnesota, N.A., as Indenture Trustee (incorporated by reference to Exhibit 4.2 of Universal Compression
Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001).                                                                                             
|4.12* |  | Amendment No. 2 to Indenture, dated as of February 8, 2002, between BRL Universal Compression Funding I, L.P., as Issuer, and Wells Fargo Bank Minnesota, N.A., as Indenture Trustee.                                                                                                                                                                                                                                                       
|4.13* |  | Amendment No. 3 to Indenture, dated as of March 29, 2002, between BRL Universal Compression Funding I, L.P., as Issuer, and Wells Fargo Bank Minnesota, N.A., as Indenture Trustee.                                                                                                                                                                                                                                                         
|4.14* |  | Amendment No. 4 to Indenture, dated as of May 31, 2002, between BRL Universal Compression Funding I, L.P., as Issuer, and Wells Fargo Bank Minnesota, N.A., as Indenture Trustee.                                                                                                                                                                                                                                                           
|9.1   |  | Termination of Voting Trust Agreement, dated October 1, 2001, among Universal Compression Holdings, Inc., John K. Castle, as voting trustee, and the stockholders party thereto (incorporated by reference to Exhibit 9.1 to Universal Compression
Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 7, 2001).                                                                      
|9.2   |  | Termination of Voting Trust Agreement, dated November 12, 2001, among Universal Compression Holdings, Inc., John K. Castle, as voting trustee, and the stockholders party thereto (incorporated by reference to Exhibit 9.2 to Universal Compression
Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 7, 2001).                                                                    
|10.1  |  | Equipment Lease Agreement with respect to the senior secured notes operating lease facility, dated as of February 9, 2001, between BRL Universal Equipment 2001 A, L.P., as Lessor, and Universal Compression, Inc., as Lessee (incorporated by reference
to Exhibit 10.2 to Registration Statement on Form S-4 dated March 20, 2001 (File No. 333-57302)).                                                                                 
|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                             

---

|10.2   |  | First Amendment to Equipment Lease Agreement with respect to the senior secured notes operating lease facility, dated as of October 15, 2001, between BRL Universal Equipment 2001 A, L.P., as Lessor, and Universal Compression, Inc., as Lessee
(incorporated by reference to Exhibit 10.1 to Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 24, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.3   |  | First Amended and Restated Participation Agreement, dated as of October 15, 2001, among Universal Compression, Inc., as Lessee, Universal Compression Holdings, Inc., as Guarantor, BRL Universal Compression Equipment 2001 A, L.P., as Lessor, the
financial institutions listed on the signature pages as Tranche B Lenders, The Bank of New York, not in its individual capacity but as Indenture Trustee, Paying Agent, Transfer Agent and Registrar for the Tranche A Noteholders, BRL Universal
Equipment Management, Inc., as Lessor General Partner, Bankers Trust Company, as Administrative Agent and Collateral Agent for the Tranche B Lenders and Indenture Trustee on behalf of the Tranche A Noteholders, Deutsche Banc Alex. Brown Inc., as
Arranger, The Bank of Nova Scotia, as Syndicate Agent for Tranche B Lenders, Bank One, N.A., as Documentation Agent for Tranche B Lenders, and First Union National Bank, as Managing Agent (incorporated by reference to Exhibit 10.2 to Universal
Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 24, 2001).
|10.4   |  | Participation Agreement Supplement No. 1, dated as of October 23, 2001, among Universal Compression, Inc., as Lessee, Universal Compression Holdings, Inc., as Guarantor, BRL Universal Equipment 2001 A, L.P., as Lessor, and The Bank of New York, not
in its individual capacity but as Indenture Trustee for the Tranche A Noteholders (incorporated by reference to Exhibit 10.3 to Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on
October 24, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|10.5   |  | Tranche B Loan Agreement, dated as of February 9, 2001, among BRL Universal Equipment 2001 A, L.P., as Borrower, Bankers Trust Company, as Administrative Agent and Collateral Agent, and the Tranche B Lenders (incorporated by reference to
Exhibit 10.4 to Registration Statement on Form S-4 dated March 20, 2001 (File No. 333-57302)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.6   |  | First Amendment to Tranche B Loan Agreement, dated as of October 15, 2001, among BRL Universal Equipment 2001 A, L.P. and Bankers Trust Company, as Administrative Agent for Tranche B Lenders and as Collateral Agent (incorporated by reference to
Exhibit 10.4 to Universal Compression Holdings, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 24, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|10.7   |  | Master Equipment Lease Agreement, with respect to the ABS operating lease facility, dated as of February 9, 2001, between BRL Universal Compression Funding I, L.P., as Head Lessor, and UCO Compression LLC, as Head Lessee (incorporated by reference to
Exhibit 10.5 to Registration Statement on Form S-4 dated March 20, 2001 (File No. 333-57302)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.8   |  | Amendment No. 1 to the Master Equipment Lease Agreement, dated February 8, 2002, between BRL Universal Compression Funding I, L.P. and UCO Compression LLC (incorporated by reference to Exhibit 10.11 of Universal Compression Holdings, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended December 31, 2001).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.9*  |  | Amendment No. 2 to the Master Equipment Lease Agreement, dated as of March 29, 2002, between BRL Universal Compression Funding I, L.P. and UCO Compression LLC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.10* |  | Amendment No. 3 to the Master Equipment Lease Agreement, dated as of April 1, 2002, between BRL Universal Compression Funding I, L.P. and UCO Compression LLC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

---

|10.11* |  | Amendment No. 4 to the Master Equipment Lease Agreement, dated as of May 31, 2002, between BRL Universal Compression Funding I, L.P. and UCO Compression LLC.                                                                                                                                                                                                                                                                                                                                                        
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.12  |  | Senior Secured Revolving Credit Agreement, dated as of February 9, 2001, among Universal Compression, Inc., as Borrower, First Union National Bank, as Administrative Agent, Bank One, N.A., as Syndication Agent, and the lenders signatory thereto
(incorporated by reference to Exhibit 10.6 to Registration Statement on Form S-4 dated March 20, 2001 (File No. 333-57302)).                                                                                                                                    
|10.13* |  | First Amendment and Supplement to Senior Secured Revolving Credit Agreement, dated as of October 15, 2001, among Universal Compression, Inc., as Borrower, First Union National Bank, as Administrative Agent, Bank One, N.A., as Syndication Agent, and
the lenders signatory thereto.                                                                                                                                                                                                                              
|10.14  |  | Guaranty and Collateral Agreement made by Universal Compression Holdings, Inc. and Universal Compression, Inc. and in favor of First Union National Bank, as Administrative Agent, dated as of February 9, 2001 (incorporated by reference to Exhibit 10.8
to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).                                                                                                                                         
|10.15  |  | Security Agreement (Pledge and Assignment), dated as of February 9, 2001, between Universal Compression International, Inc. and First Union National Bank, as Administrative Agent (incorporated by reference to Exhibit 10.9 to Universal Compression
Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).                                                                                                                                                                      
|10.16  |  | Engagement and Indemnity Letter, dated February 9, 2001 among Universal Compression, Inc., Universal Compression Holdings, Inc., Deutsche Banc Alex. Brown Inc., First Union Securities, Inc., Goldman Sachs & Co., Banc One Capital Markets, Inc.,
Scotia Capital (USA), Inc., BRL Universal Equipment 2001 A, L.P., and BRL Universal Equipment Corp. (incorporated by reference to Exhibit 10.12 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31,
2000).
|10.17  |  | Guaranty made by Universal Compression Holdings, Inc. for the benefit of UCO Compression LLC, BRL Universal Compression Funding I, L.P. and Wells Fargo Bank National Association, dated as of February 9, 2001 (incorporated by reference to
Exhibit 10.11 of Universal Compression Holdings, Inc.'s Registration Statement on Form S-4 filed with the Securities and Exchange Commission on March 20, 2001 (File No. 333-57302)).                                                                                  
|10.18  |  | Management Agreement dated February 9, 2001, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P. (incorporated by reference to Exhibit 10.10 of Universal Compression Holdings, Inc.'s Registration
Statement on Form S-4 filed with the Securities and Exchange Commission on March 20, 2001 (File No. 333-57302)).                                                                                                                                                
|10.19  |  | Amendment No. 1 to Management Agreement dated as of April 30, 2001, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P. (incorporated by reference to Exhibit 10.13 of Universal Compression Holdings,
Inc.'s Registration Statement on Form S-4 filed with the Securities and Exchange Commission on May 11, 2001 (File No. 333-57302)).                                                                                                                           
|10.20  |  | Amendment No. 2 to Management Agreement dated as of July 16, 2001, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P. (incorporated by reference to Exhibit 10.15 of Universal Compression Holdings,
Inc.'s Registration Statement on Form S-4 filed with the Securities and Exchange Commission on November 30, 2001 (File No. 333-74342)).                                                                                                                       
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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|10.21   |  | Amendment No. 3 to Management Agreement dated as of September 14, 2001, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P. (incorporated by reference to Exhibit 10.16 of Universal Compression Holdings,
 Inc.'s Registration Statement on Form S-4 filed with the Securities and Exchange Commission on November 30, 2001 (File No. 333-74342)).
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.22   |  | Amendment No. 4 to Management Agreement, dated as of November 8, 2001, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P. (incorporated by reference to Exhibit 10.8 of Universal Compression Holdings,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001).                                                            
|10.23   |  | Amendment No. 5 to the Management Agreement, dated as of February 8, 2002, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P. (incorporated by reference to Exhibit 10.9 of Universal Compression
Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001).                                                        
|10.24*  |  | Amendment No. 6 to the Management Agreement, dated as of March 29, 2002, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P.                                                                                                                                                                                                                       
|10.25*  |  | Amendment No. 7 to the Management Agreement, dated as of May 31, 2002, among Universal Compression, Inc., UCO Compression LLC and BRL Universal Compression Funding I, L.P.                                                                                                                                                                                                                         
|10.26   |  | Back-up Management Agreement, dated as of February 1, 2002, among Caterpillar Inc., UCO Compression LLC, BRL Universal Compression Funding I, L.P. and Universal Compression, Inc. (incorporated by reference to Exhibit 10.10 of Universal Compression
Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001).                                                    
|10.27  |  | Universal Compression Holdings, Inc. Restricted Stock Plan for Executive Officers (incorporated by reference to Exhibit 4.2 to Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 dated August 17, 2001 (File No. 333-67784)
).                                                                                                                                              
|10.28  |  | Universal Compression Holdings, Inc. Form of Restricted Stock Agreement with respect to the Restricted Stock Plan for Executive Officers (incorporated by reference to Exhibit 10.8 to Universal Compression Holdings, Inc.'s Quarterly Report on Form
10-Q for the quarter ended September 30, 2001).                                                                                              
|10.29  |  | Universal Compression Holdings, Inc. Directors' Stock Plan (incorporated by reference to Exhibit 4.3 to Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 dated August 17, 2001 (File No. 333-67784)).                                                                                                                                                                      
|10.30* |  | Form of Stock Option Agreements under Directors' Stock Plan between Universal Compression Holdings, Inc. and each of Thomas C. Case, Lisa W. Rodriguez, Edmund P. Segner, III, Bernard J. Duroc-Danner, William M. Pruellage,
 Samuel Urcis, Uriel E. Dutton, and Curtis W. Huff.                                                                                                                   
|10.31   |  | Registration Rights Agreement dated February 20, 1998 by and among Universal Compression, Inc., Castle Harlan Partners III, L.P. and each other party listed as signatory thereto (incorporated by reference to Exhibit 10.14 to Universal Compression
Holdings, Inc.'s Registration Statement on Form S-4 dated March 19, 1998 (File No. 333-48283)).                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                     

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|10.32  |  | Registration Rights Agreement, dated July 11, 2001, among Universal Compression Holdings, Inc. and the former shareholders of KCI, Inc. (incorporated by reference to Exhibit 10.1 to Universal Compression Holdings, Inc.'s Current Report on Form 8-K
filed with the Securities and Exchange Commission on July 23, 2001).                                                                                                              
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.33  |  | Registration Rights Agreement, dated July 11, 2001, among Universal Compression Holdings, Inc., MCNIC Compression GP, Inc. and MCNIC Compression LP, Inc. (incorporated by reference to Exhibit 10.2 to Universal Compression Holdings, Inc.'s Current
Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2001).                                                                                            
|10.34  |  | Form of Instruments of Accession to Registration Rights Agreement for each of Richard W. FitzGerald and Valerie L. Banner (incorporated by reference to Exhibit 4.10 to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File
No. 333-34090)).                                                                                                                                                                  
|10.35  |  | Instrument of Accession to Registration Rights Agreement, dated April 28, 2000, for Energy Spectrum Partners LP (incorporated by reference to Exhibit 10.19 to Amendment No. 2 dated May 22, 2000, to Universal Compression Holdings, Inc.'s Registration
Statement on Form S-1 (File No. 333-34090)).                                                                                                                                    
|10.36  |  | Registration Agreement, dated September 15, 2000, by and among Universal Compression Holdings, Inc., the Reuben James Helton Trust dated January 24, 2000, and Michael Pahl (incorporated by reference to Exhibit 4.1 to Universal Compression Holdings,
Inc.'s Current Report on Form 8-K dated September 29, 2000).                                                                                                                     
|10.37  |  | Escrow Agreement, dated as of September 15, 2000, by and among Universal Compression Holdings, Inc., the Reuben James Helton Trust dated January 24, 2000, Garlin Rymes, as representative of the Trust, Michael Pahl and State Street Bank and Trust
Company (incorporated by reference to Exhibit 10.1 to Universal Compression Holdings, Inc.'s and Universal Compression, Inc.'s Current Report on Form 8-K dated September 29, 2000).
|10.38 |  | Universal Compression Holdings, Inc. Incentive Stock Option Plan (incorporated by reference to Exhibit 10 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the period ended September 30, 1998).                                                                                                                                                                                                               
|10.39 |  | Amendment Number One to Incentive Stock Option Plan, dated April 20, 2000 (incorporated by reference to Exhibit 10.3 to Amendment No. 2 dated May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No.
333-34090)).                                                                                                                                                                           
|10.40 |  | Amendment Number Two to Incentive Stock Option Plan, dated May 15, 2000 (incorporated by reference to Exhibit 10.4 to Amendment No. 2 dated May 22, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No.
333-34090)).                                                                                                                                                                             
|10.41 |  | Amendment Number Three to Incentive Stock Option Plan, dated November 27, 2000 (incorporated by reference to Exhibit 4.7 to Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 filed on February 9, 2001).                                                                                                                                                                                                         
|10.42 |  | Stock Option Agreements between Universal Compression Holdings, Inc., and each of Ernie Danner, Stephen Snider, Samuel Urcis and Newton Schnoor (incorporated by reference to Exhibit 10.18 to Universal Compression Holdings, Inc.'s Registration
Statement on Form S-4 dated March 19, 1998 (File No. 333-48283)).                                                                                                                      
|10.43 |  | Stock Option Agreement, dated April 12, 1999, between Universal Compression Holdings, Inc. and Richard W. FitzGerald (incorporated by reference to Exhibit 10.2 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended December 31, 1999).                                                                                                                                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           

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|10.44  |  | Form of Stock Option Agreements between Universal Compression Holdings, Inc. and each of Jack B. Hilburn, H. Patrick Jones and Kirk E. Townsend (incorporated by reference to Exhibit 10.24 to Amendment No. 1 May 3,
2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File No. 333-34090)).                                                                                                                                                                                              
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.45  |  | Stock Option Agreement, effective as of October 18, 2000, by and between Universal Compression Holdings, Inc. and Mark L. Carlton (incorporated by reference to Exhibit 10.6 to Universal Compression Holdings, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2000).                                                                                                                                                                                                                              
|10.46  |  | Form of Stock Option Agreements of Universal Compression Holdings, Inc., effective as of April 20, 2000 (incorporated by reference to Exhibit 10.30 to Amendment No. 2 dated May 22, 2000, to Universal Compression Holdings, Inc.'s Registration
Statement on Form S-1 (File No. 333-34090)).                                                                                                                                                                                                                               
|10.47   |  | Agreement, dated October 27, 1999, among Universal Compression, Inc., Universal Compression Holdings, Inc., and Jack B. Hilburn (incorporated by reference to Exhibit 10.23 to Universal Compression Holdings, Inc.'s Registration Statement on Form
S-1 (File No. 333-34090)).                                                                                                                                                                                                                                              
|10.48  |  | Agreement, dated October 27, 1999, among Universal Compression, Inc., Universal Compression Holdings, Inc. and Kirk E. Townsend (incorporated by reference to Exhibit 10.24 to Universal Compression Holdings, Inc.'s Registration Statement on Form
S-1 (File No. 333-34090)).                                                                                                                                                                                                                                              
|10.49  |  | Form of Agreement for Mark L. Carlton (incorporated by reference to Exhibit 10.9 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K dated March 22, 2001).                                                                                                                                                                                                                                                                                                                                                 
|10.50  |  | Form of Indemnification Agreements for each of Samuel Urcis, Stephen A. Snider, John K. Castle, William M. Pruellage, Newt Schnoor, C. Kent May, Thomas C. Case, Jack B. Hilburn, Ernie L. Danner, Kirk E. Townsend, Hanford P. Jones, Richard W.
FitzGerald, Edmund P. Segner III, Mark L. Carlton, Curtis W. Huff and Uriel E. Dutton (incorporated by reference to Exhibit 10.27 to Amendment No. 1 dated May 3, 2000, to Universal Compression Holdings, Inc.'s Registration Statement on Form S-1 (File
No. 333-34090)).
|10.51  |  | Form of Indemnification Agreement for Bernard J. Duroc-Danner (incorporated by reference to Exhibit 10.8 of Universal Compression Holdings, Inc.'s Current Report on Form 8-K dated March 22, 2001).                                                                                                                                                                                                                                                                                                                         
|10.52  |  | Universal Compression, Inc. Employees' Supplemental Savings Plan (incorporated by reference to Exhibit 10.42 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the year ended March 31, 2001).                                                                                                                                                                                                                                                                                                        
|10.53* |  | Amendment Number 1 to the Universal Compression, Inc. Employees' Supplemental Savings Plan dated as of January 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                      
|10.54  |  | Letter dated March 15, 2001, with respect to certain retirement benefits to be provided to Stephen A. Snider (incorporated by reference to Exhibit 10.43 of Universal Compression Holdings, Inc.'s Annual Report on Form 10-K for the year ended March 31,
2001).                                                                                                                                                                                                                                                            
|10.55  |  | Universal Compression Holdings, Inc. Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.1 to Universal Compression Holdings, Inc.'s Registration Statement on Form S-8 dated August 17, 2001 (File No. 333-67784)).                                                                                                                                                                                                                                                                                        
|10.56* |  | Amendment Number 1 to the Universal Compression Holdings, Inc. Employee Stock Purchase Plan dated as of December 20, 2001.                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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|21.1* |  | List of Subsidiaries.
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