SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 FORM 10-KSB/A
                                AMENDMENT NO. 1

[x]  Annual Report  Pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 [No Fee Required] for the fiscal year ended December 31, 2003.

[ ]  Transition  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934 [No Fee Required] Commission file number: 33-61888-FW

                      Commission file number: 033-61888-FW
                                COMPRESSCO, INC.
                 (Name of small business issuer in its charter)

            DELAWARE                                           72-1235449
   (State or other jurisdiction of                           (I.R.S. Employer
    incorporation or organization)                           Identification No.)

  1313 SE 25th Street, OKLAHOMA CITY, OKLAHOMA                      73129
   (Address of principal executive offices)                       (Zip Code)

Issuer's telephone number:                                      (405) 677-0221

Securities registered pursuant to Section 12(b) of the Act:          NONE

Securities registered pursuant to Section 12(g) of the Act:          NONE

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days.

          YES  / X /  NO   /   /

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B not contained in this form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]

     State issuer's  revenues for its most recent fiscal year:  $22,755,688

     The aggregate  market value of the voting stock held by  non-affiliates  of
     the registrant as of February 29, 2004 was $16,700,875

     The number of shares outstanding of the issuer's classes of Common Stock as
     of February 29, 2004:

     Common Stock, $1.00 Par Value - 153,235 shares

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE


                                       1
<PAGE>


                                     PART I

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This Annual  Report on Form 10-KSB  (this  "Report" or this "Form  10-KSB")
contains  certain   forward-looking   statements  and  information  relating  to
Compressco, Inc. (the "Company") and its subsidiaries,  our industry and the oil
and gas  industry  that is based on the  beliefs of our  management,  as well as
assumptions  made by and  information  currently  available to  management.  All
statements  other than statements of historical  facts contained in this Report,
including statements  regarding our future financial position,  growth strategy,
budgets,  projected  costs,  plans  and  objectives  of  management  for  future
operations, are forward-looking statements. Although we believe our expectations
reflected  in  these   forward-looking   statements   are  based  on  reasonable
assumptions,  no assurance  can be given that these  expectations  will prove to
have been correct.  Important  factors that could cause actual results to differ
materially from the  expectations  reflected in the  forward-looking  statements
include, among other things:

     o    conditions  in the gas and oil  industry,  including  the  demand  for
          natural gas and the price of oil and natural gas,

     o    competition  among the various  providers of compression  services and
          products,

     o    changes in safety, health and environmental  regulations pertaining to
          the production and transportation of natural gas,

     o    changes in economic or political conditions in the markets in which we
          operate, and

     o    introduction of competing technologies by other companies.

     In addition, the factors described in "Item 6. Management's  Discussion and
Analysis of Financial Condition and Results of  Operations--Risk  Factors" could
cause our actual results to differ materially from the expectations reflected in
the  forward-looking  statements  contained  herein.  These statements relate to
future  events  or  our  future  financial  performance.  These  forward-looking
statements  may be  found  in  "Item.  1.  Description  of  Business,"  "Item 6.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations" and other sections of this Report.  In some cases,  you can identify
forward-looking  statements  by  terminology  such as "may,"  "will,"  "should,"
"expect,"  "plan," "intend,"  "anticipate,"  "believe,"  "estimate,"  "predict,"
"potential,"  or  "continue,"  the  negative  of such terms or other  comparable
terminology.  The forward-looking statements in this Report are based largely on
our  expectations and are subject to a number of risks and  uncertainties  which
may be beyond  our  control.  Actual  results  may  differ  materially  from the
anticipated  or implied  results in the  forward-looking  statements.  We do not
intend to publicly update or revise any forward-looking statements, whether as a
result of new information,  future events or otherwise.  In light of these risks
and uncertainties, we can give no assurances that the forward-looking events and
circumstances included in this Report will occur.

ITEM 1.     DESCRIPTION OF BUSINESS.

HISTORY AND ORGANIZATION

     Compressco,  Inc., formerly Emerging Alpha Corporation, was incorporated in
the State of Delaware on February 10, 1993 for the purpose of acquiring business
opportunities.  On October 29, 1999,  we purchased  Compressco  Field  Services,
Inc., an Oklahoma corporation,  and Compressco Testing L.L.C.  Subsequent to the
acquisition, the two companies became our wholly owned subsidiaries.

     In January 2000 the Company  established  a wholly owned energy  production
subsidiary,  Providence  Natural Gas, Inc., to acquire certain pressure depleted
reservoirs,  having  key  reservoir  characteristics  known to be  receptive  to
well-head  compression.  We were not  successful in this endeavor and management
has  elected to sell the  acquired  natural  gas well in January  2003 and cease
operations.

     In  October  2001,  we  established  a wholly  owned  Canadian  subsidiary,
Compressco Canada, Inc., to market the sale and rental of compressors in Canada.
During the fall of 2001,  we hired a Canadian  representative,  opened an office
and began to service the Canadian  market.  At December  31, 2003,  our Canadian
operations  had 97  compressors  on rental  and have sold 28  compressors  since
inception.  At December 31, 2003, our Canadian  operations had 2 compressors off
rental and 15  compressors  in transit to Canada to be placed on rental in early
2004.

                                       2
<PAGE>

COMPANY OVERVIEW AND STRATEGY

OVERVIEW

     We are a unique  leading  provider of natural  gas and oil well  production
enhancement   strategies.   These  enhancement  strategies  principally  involve
reducing bottom hole pressures,  removing well bore liquids, and overcoming high
delivery  pressures  in older mature  fields.  Our Sales  Engineers,  Senior Gas
Production  Specialists  and Service  Representatives,  in conjunction  with our
patented Gas Jack(R)  compressor/production  unit fleet,  provide well operators
with the  ability to  increase  daily  produced  volumes  and  proven  producing
reserves. As part of our operations,  we also design and fabricate  low-pressure
natural gas compressors, which include our patented designs.

     Central to our marketing and expansion  efforts is our emphasis on geologic
research and well data analysis.  By focusing on geologic  basins with reservoir
characteristics known to be conducive to our technology,  we can greatly improve
our success  rates.  Furthermore,  with the data  available  publicly at various
regional geologic  libraries,  we are able to identify  candidate wells that our
customers  operate  for  testing.  By  doing  so we are  able  to  differentiate
ourselves from others in the industry by showing up with specific  solutions and
ideas to make our customers more money.

     Through our principal operating  subsidiary,  Compressco Field Services, we
have been involved in the natural gas and oil services  industry since 1990, and
have improved our products and services  since that time. We offer for rental or
sale four models of Gas Jack(R) brand  compressors/productions  units,  which we
believe are superior to our competitors'  compressors because they are more fuel
efficient and more reliably handle  variable liquid  conditions in the wellbore.
In addition,  the Gas Jack(R) unit includes  compression,  liquid separation and
optional gas metering all on one economic  compact  skid.  Our Gas Jack(R) units
utilize  patented  designs that allow  operators to increase  production  and to
extend the  productive  lives of  low-volume  or marginal gas and oil wells.  In
addition, with our E-Pumper(TM) product, a remote operation monitoring and alarm
system,  our customers are able to better monitor their wells,  thereby reducing
costly down time.  Through Compressco Testing we provide natural gas measurement
products, services and natural gas well monitoring.

     In connection with the acquisition of our principal operating subsidiary by
a new investor  group in October 1999, we installed a new  management  team, and
placed a new emphasis on leveraging our  proprietary  technology to aggressively
grow our business. As of December 31, 2003, we had 1,079 compressors in service,
which  represented an increase of  approximately  42% over the past year.  Total
revenues  for the year ended  December 31, 2003 were $22.8  million  compared to
$14.9 million for the year ended  December 31, 2002, an increase of $7.9 million
or 53%. For the year ended December 31, 2003, our revenue  related to compressor
rentals was $17.9 million  compared to $12.7 million for the year ended December
31,  2002,  an increase of $5.2  million,  or 41%.  The revenue from the sale of
compressor units increased in 2003 to $3,054,101 from $952,094 due to selling 58
units in 2003  compared to 24 units in 2002.  The  increase in the number of net
units  placed on rental and  compressors  sold in 2003 was due to our  increased
domestic  sales staff in 2003,  increased  activity in our Canadian  operations,
combined  with the higher  price of natural  gas during  2003,  which  increased
demand for our products and services.

     We service  our  rental  compressor  fleet as well as  provide  maintenance
services  through  our  50  mobile  field  technicians.  Currently,  all  of our
technicians are based in the mid-continent  hydrocarbon producing regions of the
United States and western  Canada.  These are the areas in which the majority of
our customers operate.  As a result, we are able to provide quality  maintenance
service without the expense of maintaining many costly service centers.

INDUSTRY CONDITIONS

     As natural  gas fields  age,  they lose  pressure,  thereby  requiring  new
production  enhancement  technologies  to  produce  the  remaining  reserves  at
economic volumes.

     The demand for our production  enhancement  service is linked to the prices
of natural  gas,  although we are not as affected by  commodity  pricing as, for
example,  a drilling rig  contractor.  As a result,  our  financial  performance
historically has been less affected by the short-term market cycles and volatile
commodity  prices of oil and natural gas than some companies  operating in other
sectors of the energy industry. Demand for our services has increased over time,
even during periods of volatile  natural gas prices.  We believe the natural gas
compression and production  enhancement  service  industry will continue to have
significant growth potential, especially as it relates to marginal wells, due to
the following factors:

                                       3

<PAGE>


     o    The number of new gas wells drilled in the United States has been on a
          downward trend for the past several years;

     o    Many existing, mature gas fields in the United States are experiencing
          a more rapid loss of  pressure  than  older  fields and are  requiring
          production  enhancement  at  earlier  stages  to  maintain  production
          levels;

     o    High activity can not overcome  geologic  reality-reduced  supply from
          older basins;

     o    Natural  gas  consumption  is  increasing  in the United  States at an
          average   rate  of   approximately   2.0%  to  2.5%   per   year   and
          internationally  at an average rate of approximately  3.0% to 4.0% per
          year; and

     o    Natural  gas  producers  are   increasingly   outsourcing   production
          enhancement  services to reduce  overall  cost,  improve  performance,
          reduce  capital  requirements  and better  meet  changing  compression
          needs.

     We believe that we are well  positioned to participate in the future growth
in this industry as we are one of the few  compression  service  providers  with
fuel-efficient  compressors that are designed to maximize and extend the reserve
life of marginal wells.

OUR GROWTH STRATEGY

     Our growth  strategy is to continue to focus on meeting the evolving  needs
and demands of our  customers by  providing  consistent,  superior  services and
dependable,  high quality products. We will continue to serve existing customers
and increase market share of our core service area located in the  mid-continent
hydrocarbon  producing regions of the United States and western Canada.  The key
elements of our strategy are described below:

     o    Expanding  our sales and  service  coverage  in our core  markets.  We
          intend to expand the  coverage  of our sales force by  increasing  the
          number of sales and marketing  personnel  that we employ to market to,
          advise and service our  customers in the south  central  United States
          and Canada.

     o    Expanding  into new  geographic  areas.  Currently the majority of our
          customers operate in the south central United States. We believe there
          are,  however,  gas fields in other  regions of the United  States and
          Canada that would benefit by our compression products. Accordingly, we
          intend to expand our presence by engaging sales and service  personnel
          outside our core geographic markets.

     o    Continuing a  standardized  approach to our business.  Since we design
          and  fabricate  four  models of  compressors,  we are able to  develop
          expertise in operating and  maintaining our  compressors,  provide our
          customers  with  consistent,   high  quality  service,   optimize  our
          inventory,  reduce our costs and train our service  technicians faster
          and more effectively.

OPERATIONS

     Compressor Fleet

     Since inception in 1990 we have manufactured a total of 1,469  compressors,
including 383 units in the year ended  December 31, 2003. As of the end of 2003,
we had a compressor fleet of 1,166 units; of these units, 1,079 are currently on
rent.  Our rental  agreements  are  primarily on a month to month  basis.  These
units, as well as certain sold units,  are maintained by our company  personnel.
Since inception in 1990, an aggregate of 313 units has been sold to customers in
the United States, Canada, Holland, Indonesia and Argentina.

     The Gas Jack(R) compressor utilizes an integral design as the frame for the
compressor. A Ford industrial 460 cubic inch V-8 is modified so that one bank of
four  cylinders  uses  natural gas from the well to power the other bank of four
cylinders that provide  compression.  This  configuration is capable of handling
suction pressures from vacuum conditions of up to 12 inches vacuum and discharge

                                       4
<PAGE>

pressures of up to 350 PSIG. This configuration  allows the Company to provide a
moderately  priced,  reliable well head  compressor that is easy to maintain and
does not require special parts, tools, fluids or training to operate. The design
also allows for a compact unit that is easily  transported and requires  minimal
site preparation,  which assists the producer in testing and evaluating  subject
properties.


     Fabrication

     Our current  manufacturing staff and facility is capable of producing up to
60 new units per month, as well as the required reconditioning of units that are
returned  from rental.  Over the last few years,  we have  improved our shop and
suppliers scheduling,  implemented shop and supplier quality control,  maximized
the use of our  existing  facility  and  personnel.  This has  resulted  in cost
reductions,   minimized  rework,   improved   inventory  control  and  increased
production efficiency.

COMPETITION

     Our  competitors  include  compressor  rental,   plunger  lift,  and  other
artificial lift product and service providers. In many instances, we utilize our
technology in conjunction  with other  artificial lift  technologies in order to
effectively maximize a well's production.

     Primary  competition for our compression  manufacturing and rental services
business is from various local and regional packagers that generally use a screw
compressor with a separate  engine driver or a  reciprocating  compressor with a
separate engine driver. Our Gas Jack compressor competes with these packagers by
making use of the engine for both  compression  and drive thereby  eliminating a
significant  amount of the cost  associated  with the competitor  offerings.  We
believe that our patented technology helps us to maintain a competitive position
in the marginal well application of compressor  technology.  The gas compression
industry is highly  competitive but we believe we are positioned well because we
have focused our  products  and efforts on low volume,  low pressure oil and gas
wells.

EMPLOYEES

     As of  December  31,  2003 we had a  total  of 109  employees.  None of our
employees are subject to a collective bargaining agreement.

CUSTOMERS AND SUPPLIERS

     As of December 31, 2003, we had  approximately  385  customers.  During the
year  ended  December  31,  2003,  we did not  have  sales  to any one  customer
comprising more than 10% of our total revenues.  As of December 31, 2003, we had
one customer,  Chesapeake Operating Inc., which amounted to approximately 15% of
our total accounts receivable balance.

     We  purchase  a  substantial   portion  of  its  equipment,   specifically,
compressor engines and related items, from one supplier, Ford Motor Company.

ITEM 2.   DESCRIPTION OF PROPERTY.

     We  lease   approximately   20,000   square  feet  of  space,   located  on
approximately three acres, that is used for administrative offices,  fabrication
facilities,  warehouse  and outside  storage  space in Oklahoma  City,  Oklahoma
pursuant to a lease agreement  expiring on August 31, 2004. We have an option to
purchase the facility for $550,000 in August 2004.

ITEM 3.   LEGAL PROCEEDINGS.

     None.

                                       5

<PAGE>


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

     No matters  were  submitted to a vote of security  holders  during the last
quarter of the fiscal period ended December 31, 2003.

                                     PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Our  Common  Stock is not and has not been  traded on a stock  exchange  or
national  quotation system. As of December 31, 2003, there were 332 stockholders
of record.  No dividends  have been paid and none are expected to be paid in the
foreseeable  future. In addition,  our ability to pay dividends is restricted by
our existing bank credit facility.

     In March  2000,  we issued  70,002  shares of our  common  stock  through a
private  placement for $30.00 per share or total  proceeds of $2.1 million.  The
equity proceeds were used in part to repay  borrowings under our credit facility
and the  remaining  proceeds  were  used  primarily  to fund the  growth  in our
compressor fleet.

     In  December  2000 and  January  2001,  we  completed  an  offering  of our
subordinated  promissory notes and warrants to purchase our common stock through
a private  placement.  As of December 31, 2003,  $5,550,000 of the  subordinated
promissory  notes  were  issued.   These  notes  are   subordinated,   unsecured
obligations  of ours and rank junior to all of our  existing  and future  senior
indebtedness.  The notes are  convertible by the holder into common stock of the
Company at anytime  prior to maturity at a  conversion  price of $150 per share.
The notes  mature on the  earlier  of (1) the  consummation  of an  underwritten
public offering of our capital stock or (2) March 31, 2005. We may, at any time,
prepay any part of the principal balance on the notes, in increments of $10,000,
without  premium or penalty  prior to maturity.  Interest was payable at 13% per
annum,  10% per annum effective from April 1, 2003, and is payable  quarterly in
arrears.  Each purchaser of the notes also received  warrants to purchase shares
of our common stock at a purchase price of $120 per share. Each $1,000 of issued
principal  amount of notes  received  warrants to purchase  8.4 shares of common
stock, or a total of 46,620 shares. Of the total proceeds received, $100,000 was
allocated to the stock warrants.

     The offerings described above were completed in private placements pursuant
to Section 4(2) of the Securities Act of 1933.

ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>

               SELECTED CONSOLIDATED FINANCIAL DATA FOR COMPRESSCO

                                                                     Year Ended                   Year Ended
                                                                  December 31, 2003           December 31, 2002
                                                                ------------------------    ------------------------
<S>                                                                         <C>                        <C>

STATEMENT OF OPERATIONS DATA:
Operating Revenues..........................................       $   22,755,688              $     14,921,504
Cost of Sales and Expenses..................................           16,389,361                    11,471,968
Operating Income............................................            6,366,327                     3,449,536
Net Income..................................................            3,316,024                     1,217,339

BALANCE SHEET DATA (AT END OF PERIOD):
Cash........................................................       $      388,030              $        317,707
Total Assets................................................           32,721,610                    21,529,399
Total Liabilities...........................................           24,541,240                    16,744,890
Stockholders' Equity........................................            8,180,370                     4,784,509
</TABLE>

                                       6
<PAGE>


The following discussion regarding the consolidated financial statements of the
Company should be read in conjunction with the consolidated financial statements
and notes thereto.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

     Total  revenues  for the year  ended  December  31,  2003 were  $22,755,688
compared to  $14,921,504  for the year ended  December 31, 2002,  an increase of
$7,834,184 or 53%. The increase was due primarily to increased  rental  revenue,
which increased in 2003 to $17,914,457  from $12,674,142 in 2002, an increase of
$5,240,315  or 41%.  The  increase in rental  revenue was due to the  compressor
units on rental  increasing  42% from 761 at December 31, 2002 to 1,079 units at
December  31, 2003  combined  with a full years of rental  revenue  from the 103
units  placed on rental  during 2002.  The revenue  from the sale of  compressor
units  increased in 2003 to $3,054,101  from $952,094 due to selling 57 units in
2003  compared  to 24 units in 2002.  The  increase  in the  number of net units
placed on rental and compressors sold in 2003 was due to our increased  domestic
sales staff in 2003,  increased  activity in our Canadian  operations,  combined
with the higher price of natural gas during 2003, which increased demand.

     The total cost of sales and operating  expenses for the year ended December
31, 2003 were $14,425,333,  or 63.4% of total revenues,  compared to $9,871,293,
or 66.2%, for the year ended December 31, 2002.  Operating expenses for the year
ended December 31, 2003 were $12,377,657or  63.9% of rental and service revenues
compared to $ 9,165,496,  or 67.1% for the year ended  December  31,  2002.  The
decrease in cost of sales and operating  expenses as a percentage of revenues in
2003 was due to the growth in rental revenue in 2003,  resulting from increasing
the rental units in service and increased rental rates,  with lower increases in
operating  expenses to support the increased  number of units in service and the
increase in the number of compressors sold in 2003.

     We  manufactured  383  compressors  in the year  ended  December  31,  2003
compared to 70 in the year ended  December 31, 2002.  The increase in the number
of  compressors  manufactured  was  due to  higher  demand  as a  result  of our
increased  domestic  sales staff in 2003,  increased  activity  in our  Canadian
operation,  combined  with the higher  price of natural  gas in 2003.  We had 87
compressors  off rental as of December 31, 2003  compared to 80 units off rental
at December 31, 2002. We manufacture  new  compressors,  as needed,  to meet the
needs of our domestic and Canadian operations.

     Depreciation and amortization  expense increased to $1,964,028 for the year
ended  December 31, 2003 compared to $1,600,675  for the year ended December 31,
2002. The increase was due to the increase in our compressor  fleet in 2003 from
841 units at December 31, 2002 to 1,166 units at December 31, 2003 combined with
a full years of  depreciation  expense  revenue  from the 41 units  added to our
compressor fleet during 2002.

     Operating  income  for the year  ended  December  31,  2003 was  $6,366,327
compared to $3,449,536  for the year ended December 31, 2002.  Operating  income
for the year ended  December  31,  2003 was 28.0% of total  revenue for the year
ended  December 31, 2003 compared to 23.1% for the year ended December 31, 2002.
The increase in operating  income as a percentage of revenues in 2003 was due to
the growth in rental revenue in 2003, resulting from increasing the rental units
in service  and  increased  rental  rates,  with lower  increases  in  operating
expenses to support the increased number of units in service and the increase in
the number of compressors sold in 2003.

     For the year ended  December  31,  2003,  interest  expense was  $1,106,859
compared to $1,268,413 of interest expense for the year ended December 31, 2002.
The decrease in 2003 interest  expense was due to lower  interest  rates in 2003
compared to 2002.

     Provision  for  income  taxes  for the year  ended  December  31,  2003 was
$2,027,849  (38% effective  rate) compared to $963,784 (44% effective  rate) for
2002. The decrease in the effective income tax rate in 2003 was primarily due to
utilizing  the  Canadian  income  tax loss carry  forward  from 2002 to offset a
portion of Canadian income generated in 2003.

     As a result of the factors  described above, 2003 net income was $3,316,024
compared to net income of $1,217,339 for the year ended December 31, 2002.

                                       7

<PAGE>


CRITICAL ACCOUNTING POLICIES AND PRACTICES

     The use of  estimates  is necessary  in the  preparation  of our  financial
statements.  The circumstances that make these judgments  difficult,  subjective
and  complex  have to do with the need to make  estimates  about  the  effect of
matters that are  inherently  uncertain.  The use of estimates  and  assumptions
affects  the  reported  amounts  of assets  and  liabilities  at the date of the
financial  statements,  as  well  as,  the  amounts  of  revenues  and  expenses
recognized  during the  reporting  period.  The most  significant  estimates and
assumptions  that affect reported  results are those related to the depreciation
of our compressor fleet and the capitalization of fabrication shop costs related
to the  building of  compressors.  Changes in the lives or salvage  value of the
compressors   would  impact  our  calculation  of  depreciation   expense.   The
capitalization  of fabrication shop costs is based on the ratio of time spent on
fabricating  compressors and will vary with the level of production.  Management
believes it is necessary to  understand  the  Company's  significant  accounting
policies, "Item 7, Financial Statements and Supplementary Data--Note 2 - Summary
of Significant  Accounting Policies" of this Form 10-KSB, in order to understand
our  financial  condition,   changes  in  financial  condition  and  results  of
operations.

LIQUIDITY AND CAPITAL RESOURCES

     As of June 30,  2003,  we entered into a credit  agreement  with a bank and
repaid all  amounts due on its prior line of credit and term  facilities.  Under
the new credit  agreement we may borrow up to the lesser of  $17,500,000  or the
sum of (i) 85% of the aggregate amount of eligible receivables,  (ii) 50% of the
aggregate  amount  of  eligible  inventory,  and  (iii)  the lower of 80% of the
appraised  orderly  liquidated  value  or the net book  value of its  compressor
fleet.  In addition no additional  borrowings  are allowed if utilization of the
compressor  fleet falls below 70%. As of December 31, 2003, the utilization rate
of the compressor  fleet was 92.5%.  The balance  outstanding  under the line of
credit agreement as of December 31, 2003 was  $12,366,596.  The borrowings under
the  credit  facility  bear  interest  between  0.25% and 0.5% over Wall  Street
Journal  Prime Rate (4.25% at December  31, 2003) or between 3.0% and 3.25% over
LIBOR  (4.15% at  December  31,  2003) based on the  Company's  ratio of debt to
earnings before interest, taxes, depreciation and amortization.  Interest is due
quarterly with all outstanding borrowings due at maturity on the earlier of June
30,  2006  or 45 days  prior  to the  maturity  of the  $5,550,000  subordinated
promissory  notes  currently  due March 31,  2005.  The loan is secured with our
assets and compressor rental agreements. Our credit facility imposes a number of
financial and  restrictive  covenants  that among  things,  limit our ability to
incur additional  indebtedness,  create liens and pay dividends.  As of December
31,  2003,  we were in  compliance  with its loan  covenant  ratios.  Management
believes  that we will be in  compliance  with the  covenants  under the  credit
facility at least through 2004.

     In December 2000 and January 2001, we completed an offering of subordinated
promissory notes and stock warrants to qualified private investors.  At December
31, 2002, $5,550,000 of the subordinated promissory notes were issued. The notes
are  subordinated  unsecured  obligations of the Company and rank subordinate to
all  existing  indebtedness  of the  Company.  In March 2003 the Company and the
holders of the  subordinated  promissory  notes  agreed to amend the  promissory
notes to extend the  maturity  date from  December  31, 2002 to March 31,  2005,
change the interest from 13% to 10%  effective  April 1, 2003 and make the notes
convertible  by the holder into common stock of the Company at anytime  prior to
maturity  at a  conversion  price of $150 per  share.  The  notes  mature on the
earlier  of (1) the  consummation  of an  underwritten  public  offering  of the
Company's  capital  stock or (2) March 31,  2005.  The Company  may, at any time
prepay any part of the principal balance on the notes, in increments of $10,000,
without  premium or penalty  prior to  maturity.  Interest is payable at 13% per
annum, 10% effective April 1, 2003, and is payable quarterly in arrears.  Of the
total proceeds received, $100,000 was allocated to the stock warrants.

     In March  2000,  we issued  70,002  shares of our  common  stock  through a
private  placement for $30.00 per share or total  proceeds of $2.1 million.  The
equity proceeds were used in part to repay  borrowings under our credit facility
and the  remaining  proceeds  were  used  primarily  to fund the  growth  in our
compressor fleet.

     Management  believes  that cash flow from  operations  and funds  available
under its credit  facilities will provide the necessary  working capital to fund
our requirements for current  operations  through 2004.  However,  in connection
with any expansion of operations or acquisition activities, it is likely that we
will need additional sources of debt or equity financing.  Our projected capital
expenditures for 2004, based on current market conditions, are approximately $13
million.  We cannot  provide  assurance that these funds will be available or if
available will be available on satisfactory terms.

                                       8
<PAGE>

RISK FACTORS

     As  described  in  "Part  I.   Special   Note   Regarding   Forward-Looking
Statements,"  this Report  contains  forward-looking  statements  regarding  our
business and 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
negatively  impacted.  Additional  risks not  presently  known to us or which we
currently consider immaterial may also negatively impact us.

RISKS INHERENT IN OUR INDUSTRY

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

     Gas  compression  operations are  materially  dependent upon the demand for
natural gas. Demand may be affected by, among other factors, natural gas prices,
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 compression services and products. This could
materially adversely affect our results of operations.

We intend to make  substantial  capital  investments  to  implement  our  growth
strategy.

     We anticipate that we will continue to make substantial capital investments
to  increase  expand  our  compressor  rental  fleet and  enhance  our sales and
marketing  and service  operations.  For the year ended  December 31, 2003,  our
capital expenditures totaled approximately $9 million, primarily associated with
the expansion of our  compressor  rental fleet.  Historically,  we have financed
these  expenditures  through  equity  placements  and  bank  facilities.   These
significant capital  expenditures  require cash that we could otherwise apply to
other business needs.  However,  if we do not incur these expenditures while our
competitors  make  substantial  investments  to improve  their rental fleets and
other  services,  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 growth.

Our  business  subjects us to potential  liabilities  that may not be covered by
insurance.

     Natural gas service  operations  are  subject to  inherent  risks,  such as
equipment  defects,  malfunction  and failures and natural  disasters  which can
result in  uncontrollable  flows of gas or well  fluids,  fires and  explosions.
These  risks could  expose us to  substantial  liability  for  personal  injury,
wrongful 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,
there can be no assurance  that  insurance  will be  generally  available in the
future or, if available, that premiums will 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  federal,  state and local laws and
regulatory standards, including regulations regarding the discharge of materials
into the  environment,  emission  controls  and other  environmental  protection
concerns.  Environmental  laws and  regulations  may, in certain  circumstances,
impose "strict liability" for environmental  contamination,  rendering us liable
for cleanup 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  operators  or other third  parties.  In  addition,  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.  Cleanup
costs and other damages  arising as a result of  environmental  laws,  and costs
associated  with changes in existing  environmental  laws and regulations or the
adoption  of new laws and  regulations  could be  substantial  and could  have a


                                      9
<PAGE>


material  adverse effect on our operations  and financial  condition.  Moreover,
failure to comply with these  environmental  laws and  regulations may result in
the imposition of administrative, civil and criminal penalties.

     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  otherwise  recycle  hazardous  wastes and
substances,  such as solvents,  thinner,  waste paint,  waste oil and  sandblast
material.  Although it is our policy to utilize generally accepted operating and
disposal  practices  in  accordance  with  applicable   environmental  laws  and
regulations, hydrocarbons or other 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 wastes have been taken for disposal.  These  properties and
the  wastes  disposed  on them may be  subject to  investigatory,  remedial  and
monitoring requirements under federal, state and local environmental laws.

     We  believe  that  our  operations  are  in  substantial   compliance  with
applicable environmental laws and regulations. Nevertheless, the modification or
interpretation  of  existing  federal,  state  and local  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 operate in a highly competitive industry.

     The natural gas  compression  service and engineered  products  business is
highly  competitive.  Our main competitors are large national and  multinational
companies,  which  have  significantly  greater  financial  resources  than  our
company. These competitors offer a wide range of compressors for sale or rental.
If these  companies  substantially  increase  the  resources  they devote to the
development  and marketing of competitive  products and services,  we may not be
able to compete effectively.

RISKS SPECIFIC TO AN INVESTMENT IN OUR COMPANY

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

     All models of Gas Jack(R)  compressors  that we fabricate  are powered by a
Ford 460 cubic inch V-8 engine.  Ford has  discontinued  the  production of this
engine  model.  As a  result,  we have  implemented  a  strategy  of  purchasing
remanufactured  Ford  460  engines.  Although  we  have  not yet  experienced  a
significant  delay in receiving  the  requisite  engines,  a prolonged  delay or
substantial increase in the cost of new or remanufactured Ford 460 engines could
materially adversely affect our results of operations.

     In addition,  all of our compressor  models share many  components  that we
obtain 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.

We are highly leveraged and vulnerable to interest rate changes.

     As of December 31, 2003, we had approximately  $17.9 million in outstanding
indebtedness,  including  the current  portion of long-term  debt,  representing
approximately  68% of our total  capitalization.  Of this amount,  approximately
$12.4 million bears interest at floating rates.  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. In addition, a substantial portion of
our cash flow must be used to service our debt,  which may affect our ability to
capital expenditures.

Our  patents  may  not be  adequate  or  enforceable  and  others  may  use  our
proprietary technology.

     We have applied for and have  received  four  patents  related to the fully
integrated engine design that we use in our Gas Jack(R)  compressors.  It is our
understanding that our patents are narrowly drafted. We can offer no assurances,

                                       10

<PAGE>

however,  that these patents will be  enforceable.  In addition,  we know of one
fabricator  using a design,  for which he also obtained a patent that is similar
to our patented design. If the protection of our intellectual property proves to
be inadequate,  others may use our proprietary developments without compensating
us and in competition against us, giving cost advantages to our competitors.

Our success  depends on key  members of our  management  team,  the loss of whom
could disrupt our business.

     Our  success   depends  to  a   significant   degree  upon  the   continued
contributions of key management,  operations,  engineering, sales and marketing,
customer  support,  finance and  manufacturing  personnel.  We are  particularly
dependent on Brooks Mims Talton, our Chief Executive Officer.  The Company has a
$1.0 million key employee policy on Mr. Talton.  Furthermore, we do not maintain
and do not intend to obtain key  employee  life  insurance  for any of our other
employees.  The  departure  of any of our key  personnel  could  have a material
adverse effect on our business,  operating results and financial  condition.  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,  we derive  all of our  operating
income from our operating  subsidiaries.  We do not have any significant  assets
other  than the  equity  of our  operating  subsidiaries.  Consequently,  we are
dependent  on the  earnings  and  cash  flow of our  subsidiaries  to  meet  our
obligations and pay dividends. Our subsidiaries are separate legal entities that
are not legally  obligated to make funds  available to us. We cannot  assure you
that our  subsidiaries  will be able to, or be  permitted  to, pay to us amounts
necessary to meet our obligations or to pay dividends.

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  certificate of  incorporation  and bylaws that
may make it more difficult for a third party to acquire,  or attempt 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 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 certificate of  incorporation  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.

ITEM 7.   FINANCIAL STATEMENTS.

     The  consolidated  financial  statements  of  the  Company  required  to be
included in Item 7 are set forth in the Financial  Statements  beginning on page
F-1.

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE.

     None.

ITEM 8A.  CONTROLS AND PROCEDURES.

     (a)  Evaluation  of  disclosure   controls  and  procedures.   We  maintain
disclosure controls and procedures designed to provide reasonable assurance that
information  required  to be  disclosed  in the  reports we file with the SEC is
recorded,  processed,  summarized and reported within the time periods specified
in the rules of the SEC. Within 90 days prior to the filing of the Annual Report
on Form  10KSB,  we carried out an  evaluation,  under the  supervision  and the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer,  of the design and operation of these disclosure controls and
procedures pursuant to the Exchange Act Rule 13a-14. Based upon that evaluation,
our Chief  Executive  Officer and Chief  Financial  Officer  concluded  that our
disclosure  controls and  procedures  are  effective in timely  alerting them to
material  information  relating  to  the  company  (including  our  consolidated
subsidiaries) required to be included in our periodic SEC filings.

                                       11

<PAGE>

     (b)  Changes in internal  controls.  There were no  significant  changes in
internal controls or other factors that could significantly  affect our internal
controls subsequent to the date of our evaluation.

                                    PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

DIRECTORS AND EXECUTIVE OFFICERS

     Directors are elected to serve until the annual meeting of shareholders and
until their  successors  have been  elected  and have  qualified.  Officers  are
appointed to serve,  subject to the discretion of the Board of Directors,  until
the meeting of the Board following the annual meeting of shareholders  and until
their successors have been elected and have qualified.
<TABLE>
<CAPTION>


                                                             YEAR              OFFICE WITH
                  NAME                         AGE          ELECTED              COMPANY
               ----------                    -------     -------------      ------------------
<S>                                           <C>             <C>                   <C>

Burt H. Keenan                                 64            1993            Chairman of the Board
Brooks Mims Talton, III                        37            1999            Chief Executive Officer and Director
Kenneth R. Reagan                              69            2001            Chief Operating Officer
Gary McBride                                   51            2000            Chief Financial Officer
Jerry W. Jarrell                               62            2000            Director and Secretary
D. B. H. Chaffe III                            70            1993            Director
Jack Rettig                                    50            1999            Director
J. Michael Drennen                             51            2000            Director

</TABLE>


Each officer and director will devote only such time to the business  affairs of
the Company as he deems  appropriate,  as discussed under the caption "Executive
Compensation".

     Burt H. Keenan has served as our  Chairman of the Board since  inception in
February 1993. He also served as President  until October 1999. From August 1999
to  September  2000,  he was a  non-executive  Director  of  Independent  Energy
Holdings  PLC.  From April 1991 to August 1999,  Mr.  Keenan served as Executive
Chairman of Independent Energy. In September 2000, Independent Energy became the
subject of a  receivership  proceeding  under U.K. law.  Since 1987, he has been
associated with Chaffe & Associates, Inc., an investment banking firm located in
New Orleans,  Louisiana,  where he specializes in capital formation for emerging
and middle  market  companies.  From 1969 to 1986,  Mr.  Keenan was the founder,
Chairman  and CEO of  Offshore  Logistics,  Inc.,  a public oil and gas  service
company  operating a fleet of marine service vessels and helicopters  worldwide.
Mr.  Keenan  was a  member  of the  National  Advisory  Council  on  Oceans  and
Atmosphere,  a United States  Presidential  Commission,  and of various industry
associations.  Mr. Keenan  received  Bachelors  and Masters  degrees in business
administration from Tulane University.

     Brooks  Mims  Talton,  III has  served as our  President,  Chief  Executive
Officer and a Director  since October 1999. He is also the founder and President
of GJ Measurement,  L.L.C.,  which we acquired in October 1999,  operating since
1994 as a natural  gas  measurement,  monitoring  and control  systems  company.
Customers  range from small  independents  to major oil and gas companies.  From
1991 to 1994, he was founder and Co-owner of Well Link Corporation. From 1989 to
1991 he operated as a sole proprietor,  Mims Oil Tools specializing in automated
plunger lift  production  systems.  Prior to 1989, Mr. Talton worked for two oil
and gas exploration and production  companies  performing  prospect research and
development.  Mr. Talton serves on the Board of Advisory of the Greater Oklahoma
City  Chamber of  Commerce,  in addition to being active in a number of regional
and  national  industry  associations.  Mr.  Talton  is a  member  of the  Young
President's  Organization and TEC, an  international  organization of CEO's. Mr.
Talton holds a B. A. Political Science with an emphasis on Energy/Public  Policy
from the University of Oklahoma.

                                       12
<PAGE>

     Kenneth R. Reagan was employed in February 2001 as Chief Operating Officer.
Mr. Reagan was with Weatherford Compression Company from 1988 to 1998 serving as
Senior Area Sales Manager in Oklahoma  City in 1997 and 1998; as Vice  President
of Sales and  Marketing in Houston and Oklahoma  City from 1991 to 1996;  and as
Vice  President of Service in Corpus  Christi from 1988 to 1990.  He worked with
Waukesha-Pierce  Industries,  Inc. from 1960 to 1988  including  service as Vice
President of Operations - Engine  Division from 1984 to 1988 and Vice  President
of Marketing  from 1981 to 1984.  Mr.  Reagan  received a  bachelor's  degree in
geology from the University of Oklahoma in 1958.

     Gary McBride was employed in November 2000 and,  effective January 1, 2001,
replaced Jerry W. Jarrell as the Chief Financial Officer. Mr. McBride previously
served as  Vice-President of Finance with Cain's Coffee Company in Oklahoma City
and had been with Cain's since 1980. Cain's is a regional roaster,  manufacturer
and distributor of coffee,  tea and spices with annual revenue of  approximately
$90 million and 550 employees.  Mr.  McBride  attended the University of Central
Oklahoma  earning  a B.  S.  degree  in  accounting  and is a  certified  public
accountant.

     Jerry W. Jarrell served as our Chief  Financial  Officer since inception in
February 1993 through  December  2000.  Effective  January 1, 2001,  Mr. Jarrell
resigned as Chief  Financial  Officer  and was  replaced  by Gary  McBride.  Mr.
Jarrell continues to serve as a director and secretary of the Company.  From May
1998 to September  2000, he was a non-executive  Director of Independent  Energy
Holdings PLC. From April 1991 to May 1998, Mr. Jarrell was an Executive Director
and  Chief  Financial   Officer  of  Independent   Energy.  In  September  2000,
Independent  Energy became the subject of a receivership  proceeding  under U.K.
law. He served as Chief  Financial  Officer for the  Woodson  Companies,  an oil
field  construction  company,  from  1977 to 1990.  From  1971 to  1977,  he was
Secretary-Controller  for  Offshore  Logistics.  From  1966  to  1971,  he was a
Certified Public Accountant with Arthur Andersen and Company,  and holds a B. S.
degree in accounting from Louisiana Tech University.

     D.B.H. Chaffe III has been President and CEO of Chaffe & Associates,  Inc.,
an investment banking firm located in New Orleans,  Louisiana,  since 1982. From
1981  to  1985,  Mr.  Chaffe  was  President,  CEO and  Treasurer  of  Becker  &
Associates,  Inc., a marine  contracting firm,  following a leveraged buy-out by
Mr. Chaffe and two other  individuals.  From 1969 to 1981, he was Executive Vice
President and Director and head of corporate finance at Howard, Weil, Labouisse,
Friedrichs,  Inc., Prior to 1969, Mr. Chaffe was a registered representative and
principal of investment banking firms. He has served on advisory  committees and
has been a member of National Securities  Associations and stock exchanges.  Mr.
Chaffe received a bachelor's degree in engineering from Tulane University.

          Jack Rettig was President of Moores Wireline, an oilfield service
company, from 1993 to 1998 and currently is an independent consultant. During
1978 to 1993 he worked with various exploration and production companies
including Exxon, Tee Operating, Pacific Enterprises and Walter International. He
graduated from Louisiana State University in 1978 with a BS in mechanical
engineering and is a registered professional engineer.

     J. Michael  Drennen is currently a Vice  President  with Crawley  Petroleum
Corporation,  an independent oil and gas producer in Oklahoma City, Oklahoma. He
was with  Devon  Energy  from  1976 to 2001.  During  this  time he had held the
positions of Manager of Corporate Acquisitions Engineering, Manager of Reservoir
and Acquisitions  Engineering,  Manager of Production and District Engineer. Mr.
Drennen is a registered  petroleum engineer and graduated from the University of
Oklahoma in 1974 with BS in petroleum engineering.

INDEMNIFICATION

     The  Delaware  Supreme  Court  has held that  directors'  duty of care to a
corporation and its stockholders  requires the exercise of an informed  business
judgment.   Having  become  informed  of  all  material  information  reasonably
available to them,  directors  must act with  requisite care in the discharge of
their duties. The Delaware General Corporation Law permits a corporation through
its  certificate of  incorporation  to exonerate or indemnify its directors from
personal  liability to the corporation or its  stockholders for monetary damages
or breach of fiduciary duty of care as a director, with certain exceptions.  The
Companies have adopted these exoneration and  indemnification  provisions in the
Delaware   General   Corporation  Law  in  their   respective   certificates  of

                                       13
<PAGE>


incorporation and bylaws. The exceptions include a breach of the director's duty
of loyalty,  acts or omissions  not in good faith or which  involve  intentional
misconduct or knowing violations of law, improper declarations of dividends, and
transaction from which the directors derived an improper  personal benefit.  The
Company's Certificate of Incorporation exonerates its directors,  acting in such
capacity,  from  monetary  liability to the extent  permitted by this  statutory
provision.   The  limitation  of  liability   provision  does  not  eliminate  a
stockholder's  right  to  seek  non-monetary,  equitable  remedies  such  as  an
injunction  or recision to redress an action taken by directors.  However,  as a
practical matter, equitable remedies may not be available in all situations, and
there may be instances in which no effective remedy is available.

     The extent to which the indemnification  provisions of the Delaware General
Corporation  Law and the Companies'  certificates  of  incorporation  and bylaws
provide  indemnification to officers and directors for violations of the federal
securities  laws  has  not  been  settled  by  court  precedent.  The  Companies
understand that, in the position of the Securities and Exchange Commission, such
indemnification is against public policy and is unenforceable.

CODE OF ETHICS

     We have not yet  adopted a code of ethics  that  applies  to our  principal
executive officers,  principal financial officer or principal accounting officer
as our recent  focus has been  codifying  internal  controls  as required by the
Sarbanes-Oxley Act.

ITEM 10.  EXECUTIVE COMPENSATION.

BOARD COMMITTEES

AUDIT COMMITTEE

     Our audit committee consists of Jerry W. Jarrell, Burt H. Keenan and D.B.H.
Chaffe III. The audit committee makes  recommendations to the board of directors
regarding the selection of independent  auditors,  reviews the results and scope
of the  audit  and other  services  provided  by our  independent  auditors  and
evaluates our internal accounting procedures.

COMPENSATION COMMITTEE

     Our  compensation  committee  consists of Burt H.  Keenan,  Jack Rettig and
Jerry W. Jarrell. The compensation  committee reviews and approves  compensation
and  benefits  for our  executive  officers.  The  compensation  committee  also
administers our  compensation and stock plans and makes  recommendations  to the
board of directors regarding such matters.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Until  October  1999,  the Company  had no  employees  and no  compensation
committee. No member of the compensation committee is or has been an employee of
the Company at any time.  None of our executive  officers  serves as a member of
the board of directors or  compensation  committee of any other company that has
one or more executive  officers serving as a member of our board of directors or
compensation committee.

DIRECTOR COMPENSATION

     Other than  reimbursing  directors for customary  and  reasonable  expenses
incurred in  attending  board of directors  and  committee  meetings,  we do not
currently compensate our directors.

EXECUTIVE COMPENSATION

     The following  table sets forth all  compensation  awarded to, earned by or
paid to the named  executive  officers for the years ended December 31, 2003 and
2002. The  remuneration  described in the table includes the cost to the Company
of benefits  furnished to the named executive  officers,  including premiums for
health  insurance  and  other  benefits  provided  to such  individual  that are
extended in connection with the conduct of the Company's business.

                                       14
<PAGE>
<TABLE>
<CAPTION>


                                                       ANNUAL                 LONG-TERM
                                                    COMPENSATION            COMPENSATION
                                                   ----------------          SECURITIES
                                                                        ------------------------
                                                                              UNDERLYING              ALL OTHER
NAME AND PRINCIPAL POSITION                      SALARY       BONUS             OPTIONS              COMPENSATION
--------------------------------------------- ------------  ----------- ----------------------   -----------------------
<S>                                                <C>            <C>               <C>                 <C>

Year ended December 31, 2003:
Burt H. Keenan, Chairman of the Board              --             --              --                     $6,168
Brooks Mims Talton, CEO                         $100,000       $114,822           --                      8,673
Kenneth R. Reagan, COO                            82,000         83,231           --                      7,066
Gary McBride, CFO                                 93,000         65,005           --                      8,937

Year ended December 31, 2002:
Burt H. Keenan, Chairman of the Board              --             --              --                       --
Brooks Mims Talton, CEO                          $86,154        $50,000           --                     $7,636
Kenneth R. Reagan, COO                           $77,881        $19,000           --                     $6,068
Gary McBride, CFO                                $93,000        $18,000           --                     $8,407

</TABLE>

OPTION GRANTS

     No options were  granted to the named  executive  officers  during the year
ended December 31, 2003.

2003 OPTION EXERCISES AND YEAR-END OPTION VALUES

     The following  table sets forth  information  concerning the value realized
upon  exercise of options  during  2003 and the number and value of  unexercised
options held by the named executive  officers at December 31, 2003. The value of
the  unexercised  in-the-money  options is based on the fair market value of our
common stock as of December 31, 2003, determined by the board of directors to be
$157.00 per share, minus the per share exercise price,  multiplied by the number
of shares  underlying the option.  The fair market value of our common stock was
determined  based on the results of the year ending  December 31, 2003 and using
industry  wide  multiplies of earnings per share and earnings  before  interest,
taxes,  depreciation and  amortization  expenses and a total of 48% discount for
the lack of control and  marketability of the common stock at this time.

<TABLE>
<CAPTION>


                         SHARES                                                           VALUE OF UNEXERCISED IN-
                         ACQUIRED                           NUMBER OF UNEXERCISED           THE-MONEY OPTIONS AT
                           ON              VALUE        OPTIONS AT DECEMBER 31, 2003         DECEMBER 31, 2003
NAME                     EXERCISE        REALIZED        EXERCISABLE     UNEXERCISABLE   EXERCISABLE     UNEXERCISABLE
-----------------        ----------   -------------     -------------  --------------    ------------    --------------
<S>                         <C>              <C>             <C>           <C>               <C>               <C>

Burt H.Keenan.......        --             --              6,500           --              $900,500           --
Brooks Mims Talton.         --             --               --             --                --               --
Kenneth R.  Reagan...       --             --               --            3,000              --            $381,000
Gary  McBride.........      --             --             3,000           --               $381,000           --

</TABLE>


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
          AND RELATED STOCKHOLDER MATTERS.

     The  following  table  sets  forth,  as of  February  29,  2004,  the stock
ownership of all persons known to own  beneficially  five percent or more of the
Company's   Common  Stock  and  all  directors  and  officers  of  the  Company,
individually  and as a group.  Each person has sole voting and investment  power
over the shares indicated, except as noted.

                                       15
<PAGE>
<TABLE>
<CAPTION>



                                                                       NUMBER OF SHARES OF
                                                                          COMMON STOCK
                              NAME                                     BENEFICIALLY OWNED                PERCENT
                           ----------                             ---------------------------          -------------
<S>                                                                               <C>                       <C>

5% Stockholders:
John E. Koerner (1)                                                           17,533                     10.9%
James Reiss, Jr. (2)                                                          14,200                      8.6%
Antony F. Lundy (3)                                                           13,606                      8.8%

Officers and Directors:
Burt H. Keenan (4)                                                            20,470                     12.3%
Brooks Mims Talton                                                            25,833                     16.9%
Kenneth Reagan                                                                    --                        --
Gary McBride (5)                                                               3,000                      1.9%
Jerry W. Jarrell (6)                                                           9,132                      5.7%
D. B. H. Chaffe III (7)                                                        6,320                      4.1%
Jack Rettig (8)                                                               11,172                      7.1%
Michael Drennen (9)                                                            2,000                      1.3%
All officers and directors as a group (8 persons) (10)                        77,927                     42.3%

(1)       Includes  4,200 shares  issuable  upon  exercise of stock  warrants  and 3,333  shares  issuable  upon the  conversion  of
          subordinated promissory notes held by Koerner Capital Corporation.
(2)       Includes  4,200 shares  issuable  upon  exercise of stock  warrants  and 3,333  shares  issuable  upon the  conversion  of
          subordinated promissory notes held by Mr. Reiss.
(3)       Includes  2,940 shares  issuable  upon  exercise of stock  warrants  and 2,333  shares  issuable  upon the  conversion  of
          subordinated promissory notes held by Mr. Lundy.
(4)       Includes 6,300 shares  issuable upon exercise of stock  warrants and 6,500 shares  issuable upon exercise of stock options
          held by Mr. Keenan.
(5)       Includes 3,000 shares issuable upon exercise of stock options held by Mr. McBride.
(6)       Includes 840 shares  issuable upon exercise of stock  warrants,  667 shares  issuable upon the conversion of  subordinated
          promissory notes and 5,500 shares issuable upon exercise of stock options held by Mr. Jarrell.
(7)       Includes 2,000 shares issuable upon exercise of stock options held by Mr. Chaffe.
(8)       Includes 1,260 shares issuable upon exercise of stock warrants,  1,000 shares issuable upon the conversion of subordinated
          promissory notes and 2,000 shares issuable upon exercise of stock options held by Mr. Rettig.
(9)       Includes 2,000 shares issuable upon exercise of stock options held by Mr. Drennen.
(10)      Includes 8,400 shares issuable upon exercise of stock warrants,  1,667 shares issuable upon the conversion of subordinated
          promissory  notes and 21,000  shares  issuable upon  exercise of stock  options held by the named  executive  officers and
          directors.

</TABLE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

          Consulting Agreement

     The Company  has an oral  agreement  with Burt H.  Keenan,  a director,  to
provide consulting  services to the Company.  The agreement,  which commenced on
January  1, 2003,  provides  for $2,000  compensation  per month and  expires in
December  2004.  The  Company has an oral  agreement  with Jerry W.  Jarrell,  a
director,  to provide consulting services to the Company.  The agreement,  which
commenced on January 1, 1995,  currently  provides for $2,000  compensation  per
month and expires in October 2004.

STOCK OPTION PLAN

     The Company,  by  resolution  of its Board of Directors  and  stockholders,
adopted a 1993 Stock Option Plan (the  "Plan") on February  16,  1993.  The Plan
enables  each  Company  to offer  an  incentive  based  compensation  system  to
employees,  officers and directors and to employees of companies who do business
with the Company.

     In the discretion of a committee  comprised of non-employee  directors (the
"Committee"),  directors,  officers,  and key  employees  of the Company and its
subsidiaries  or  employees of  companies  with which the Company does  business
become  participants  in the Plan  upon  receiving  grants  in the form of stock
options or restricted  stock.  A total of 2,000,000  shares are  authorized  for
issuance  under the Plan,  of which  33,750  shares are issuable  under  options
granted to officers,  directors  and key  employees  at December  31, 2003.  The
Company may increase the number of shares authorized for issuance under the Plan

                                       16
<PAGE>

or may  make  other  material  modifications  to the  Plan  without  shareholder
approval.  However,  no amendment  may change the existing  rights of any option
holder.

     Any shares which are subject to an award but are not used because the terms
and  conditions  of the  award  are not met,  or any  shares  which  are used by
participants to pay all or part of the purchase price of any option may again be
used for awards  under the Plan.  However,  shares with respect to which a stock
appreciation right has been exercised may not again be made subject to an award.

     Stock  options may be granted as  non-qualified  stock options or incentive
stock  options,  but incentive  stock options may not be granted at a price less
than  110% of the  fair  market  value of the  stock  as of the  date of  grant;
non-qualified  stock options may not be granted at a price less than 85% of fair
market value of the stock as of the date of grant.  Restricted  stock may not be
granted under the Plan in connection with incentive stock options.

     Stock  options  may be  exercised  during  a  period  of time  fixed by the
Committee except that no stock option may be exercised more than ten years after
the date of grant or three years after death or disability,  whichever is later.
In the discretion of the Committee, payment of the purchase price for the shares
of stock  acquired  through the  exercise of a stock option may be made in cash,
shares of the Company's Common Stock or by delivery of recourse promissory notes
or a combination  of notes,  cash and shares of the Company's  Common Stock or a
combination  thereof.  Incentive  stock options may only be issued to directors,
officers and employees of the Company.

     Stock  options  granted  under the Plan may include the right to acquire an
Accelerated  Ownership  Non-Qualified  Stock Option  ("AO").  If an option grant
contains  the AO feature and if a  participant  pays all or part of the purchase
price of the  option  with  shares  of the  Company's  Common  Stock,  then upon
exercise of the option the participant is granted an AO to purchase, at the fair
market  value as of the date of the AO  grant,  the  number  of shares of common
stock of the Company  equal to the sum of the number of whole shares used by the
participant in payment of the purchase price and the number of whole shares,  if
any,  withheld  by the Company as payment for  withholding  taxes.  An AO may be
exercised  between the date of grant and the date of  expiration,  which will be
the same as the date of expiration of the option to which the AO is related.

     Stock  appreciation  rights  and/or  restricted  stock  may be  granted  in
conjunction  with, or may be unrelated to stock  options.  A stock  appreciation
right entitles a participant to receive a payment,  in cash or common stock or a
combination  thereof,  in an amount equal to the excess of the fair market value
of the stock at the time of exercise  over the fair market  value as of the date
of grant.  Stock  appreciation  rights may be exercised  during a period of time
fixed by the  Committee not to exceed ten years after the date of grant or three
years after death or disability, whichever is later.

     Restricted  stock  requires  the  recipient  to  continue  in service as an
officer,  director,  employee  or  consultant  for a fixed  period  of time  for
ownership  of the shares to vest.  If  restricted  shares or stock  appreciation
rights  are  issued  in  tandem  with  options,  the  restricted  stock or stock
appreciation  right is canceled  upon exercise of the option and the option will
likewise terminate upon vesting of the restricted shares.

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  Exhibits. The following exhibits of the Company are included herein.

     3.   Certificate of Incorporation and Bylaws

                *3.1     Restated Certificate of Incorporation
                *3.2     Bylaws
                *3.3     Proposed Certificate of Amendment to the Restated
                           Certificate of Incorporation

     10.  Material Contracts

                *10.1    1993 Stock Option Plan
                *10.2    Form of Stock Option Agreements with Messrs. Keenan,
                           Killeen,  Jarrell and Chaffe with Schedule of Details
               **10.3    Stock Purchase Agreement, dated as of October 29, 1999,
                           by and between the Company and the Stockholders of
                           Gas Jack, Inc.

                                       17
<PAGE>

              ***10.4    Securities Purchase Agreement, dated as of December
                           22, 2000, between the Company and each investor
                           party thereto
              ***10.5    Stock Warrant Agreement, dated as of December 22, 2000,
                           between the Company and each investor party thereto
              ***10.6    Subordinated Promissory Note, dated December 22, 2000,
                           issued by the Company to each purchaser of the notes
              ***10.7    Registration Rights Agreement, dated as of December 22,
                           2000, between the Company and each investor party
                           thereto
             ****10.8    Credit Agreement, dated June 30, 2003, by and among
                           Comerica Bank - Texas, the Company and Compressco
                           Field Services, Inc.
                  +31     Certification Pursuant to Section 302 of the Sarbanes-
                           Oxley Act of 2002
                  +32     Certification Pursuant to Section 906 of the Sarbanes-
                           Oxley Act of 2002
------------------

     +Filed herewith.
     *Filed with Registration Statement on Form SB-2, File No. 33-61888-FW and
        incorporated by reference herein.
    **Filed with Current Report on Form 8-K (October 29, 1999) and incorporated
        by reference herein.
   ***Filed with Annual Report on 10-KSB for the year ended December 31, 2000
        and incorporated by reference herein. ****Filed with Quarterly Report on
        10-QSB for the quarter ended June 30, 2003 and incorporated by reference
        herein.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Audit Fees

     Ernst &  Young  LLP's  aggregate  fees  billed  for  professional  services
rendered for the audit of our annual  financial  statements  for the 2003 fiscal
year and the review of the financial statements included in our Forms 10-QSB for
the 2003 fiscal year were $60,000.  The  engagement of Ernst & Young LLP for the
2003 fiscal year and the scope of  audit-related  services,  including the audit
and reviews described above were pre-approved by our audit committee.

     Ernst &  Young  LLP's aggregate  fees  billed  for  professional  services
rendered for the audit of our annual  financial  statements  for the 2002 fiscal
year and the review of the financial statements included in our Forms 10-QSB for
the 2002 fiscal year were $43,000.  The  engagement of Ernst & Young LLP for the
2002 fiscal year and the scope of  audit-related  services,  including the audit
and reviews described above were pre-approved by our audit committee.

Audit-Related Fees

     Ernst & Young LLP did not provide any other  assurance or related  services
in the 2002 or 2003 fiscal years except as  described  under the caption  "Audit
Fees".

Tax Fees

     Ernst & Young LLP's  aggregate  fees for all tax related  services  for the
2003 fiscal year were $425 for tax consulting services.

     Ernst & Young LLP's  aggregate  fees for all tax related  services  for the
2002 fiscal year were $4,261 for tax consulting services.

All Other Fees

     Ernst & Young LLP did not  provide any other  professional  services in the
2002 or 2003 fiscal years other than as described above.

                                       18

<PAGE>




                          INDEX TO FINANCIAL STATEMENTS

                                COMPRESSCO, INC.



Report of Independent Auditors                                          F-2

Consolidated Balance Sheet as of December 31, 2003                      F-3

Consolidated Statements of Operations for the Years Ended
December 31, 2003 and 2002                                              F-4

Consolidated Statements of Comprehensive Income and Stockholders'
Equity for the Years Ended December 31, 2003 and 2002                   F-5

Consolidated Statements of Cash Flows for the Years Ended
December 31, 2003 and 2002                                              F-6

Notes to Consolidated Financial Statements                              F-7


                                      F - 1



<PAGE>




REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of Compressco, Inc.:

We have audited the accompanying consolidated balance sheet of Compressco,  Inc.
and  subsidiaries  as  of  December  31,  2003,  and  the  related  consolidated
statements of operations, comprehensive income and stockholders' equity and cash
flows for the years ended December 31, 2003 and 2002. These financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the United States. 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 audit  provides a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of Compressco,  Inc. as
of December 31, 2003,  and the results of their  operations and their cash flows
for the years ended  December 31, 2003 and 2002, in conformity  with  accounting
principles generally accepted in the United States.



Oklahoma City, Oklahoma                         Ernst & Young LLP
February 10, 2004

                                     F - 2

<PAGE>
<TABLE>
<CAPTION>


                                COMPRESSCO, INC.
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2003

                                           ASSETS
CURRENT ASSETS:
<S>                                                                                   <C>

       Cash                                                                     $      388,030
       Accounts receivable, net of allowance of $147,226                             4,238,653
       Inventories                                                                   3,427,074
       Prepaid expenses                                                                222,272
       Deferred income tax asset                                                        57,570
                                                                                --------------
           Total current assets                                                      8,333,599
                                                                                --------------

COMPRESSORS, cost                                                                   27,642,207
           Less- Accumulated depreciation                                           (4,593,948)
                                                                                --------------
           Total compressors, net                                                   23,048,259
                                                                                --------------

VEHICLES, EQUIPMENT and OTHER PROPERTY, cost                                         1,970,129
           Less- Accumulated depreciation                                             (738,965)
                                                                                --------------
           Total vehicles, equipment and other property, net                         1,231,164
                                                                                --------------

OTHER ASSETS                                                                           108,588
                                                                                --------------
           Total assets                                                         $   32,721,610
                                                                                ============

           LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
       Accounts payable                                                         $    1,778,308
       Accrued liabilities                                                           1,024,411
       Income taxes payable                                                            202,699
       Deferred revenues                                                                34,495
                                                                                --------------
           Total current liabilities                                                 3,039,913
                                                                                -------------

LONG-TERM DEBT                                                                      17,916,596
                                                                                --------------

DEFERRED INCOME TAXES                                                                3,584,731
                                                                                --------------

           Total liabilities                                                        24,541,240
                                                                                --------------

COMMITMENTS (Note 8)

STOCKHOLDERS' EQUITY:
       Preferred stock, $1 par value; 200,000 shares authorized; no
           shares issued or outstanding                                               -
       Common stock, $1 par value; 500,000 shares authorized;
           153,235 shares issued and outstanding                                       153,235
       Warrants outstanding                                                            100,000
       Additional paid-in capital                                                    2,663,715
       Accumulated other comprehensive income, net of tax expense of $50,000            79,837
       Retained earnings                                                             5,183,583
                                                                                 -------------
           Total stockholders' equity                                                8,180,370

           Total liabilities and stockholders' equity                              $32,721,610
                                                                                   ===========

 The accompanying notes are an integral part of this consolidated balance sheet.
</TABLE>

                                     F - 3
<PAGE>

<TABLE>
<CAPTION>

                                COMPRESSCO, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


                                                                          2003                      2002
<S>                                                                         <C>                      <C>

REVENUES:
       Rental revenue                                                 $ 17,914,457              $ 12,674,142
       Sales - Compressors and parts                                     3,388,873                 1,248,076
       Service and other                                                 1,452,358                   999,286
                                                                      ------------              ------------
           Total revenues                                               22,755,688                14,921,504
                                                                      ------------              ------------

COST OF SALES AND EXPENSES:
       Cost of sales                                                     2,047,676                   705,797
       Operating expenses                                               12,377,657                 9,165,496
       Depreciation and amortization expense                             1,964,028                 1,600,675
                                                                      ------------              ------------
           Total cost of sales and expenses                             16,389,361                11,471,968
                                                                      ------------              ------------

OPERATING INCOME                                                         6,366,327                 3,449,536

OTHER INCOME (EXPENSE):
       Gain on sale of assets                                               84,405                     ---
       Interest expense                                                 (1,106,859)               (1,268,413)
                                                                      ------------              -----------
               Total income (expense)                                   (1,022,454)               (1,268,413)

INCOME BEFORE PROVISION
     FOR INCOME TAXES                                                    5,343,873                 2,181,123

PROVISION FOR INCOME TAXES                                               2,027,849                   963,784
                                                                      ------------              ------------

NET INCOME                                                            $  3,316,024              $  1,217,339
                                                                      ============              ============

BASIC EARNINGS PER  COMMON SHARE                                         $   21.64                  $   7.94
                                                                         ==========                 ========

DILUTED  EARNINGS  PER  COMMON SHARE                                     $   16.08                  $   7.00
                                                                         ==========                 ========

              The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                     F - 4



<PAGE>

<TABLE>
<CAPTION>

                                COMPRESSCO, INC.

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                  AND STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
                           DECEMBER 31, 2003 AND 2002


                                                                                             ACCUMULATED
                             COMPREHENSIVE      COMMON STOCK                                   OTHER
                                INCOME                    PAR       STOCK       PAID-IN     COMPREHENSIVE    RETAINED
                                ------        SHARES     VALUE     WARRANTS     CAPITAL         INCOME        EARNINGS     TOTAL
                                              ------     -----     --------     -------         ------        --------     -----
<S>                                <C>           <C>     <C>          <C>         <C>              <C>           <C>          <C>

Balance December 31, 2001    $    -           153,235   $153,235   $ 100,000   $2,663,715      $   -         $ 650,220   $3,567,170

Net income                    1,217,339           -          -           -          -              -         1,217,339    1,217,339
                             ----------       -------- ---------   ---------   ---------       ---------     ---------   ---------

Balance December 31, 2002    $1,217,339       153,235    153,235     100,000    2,663,715          -          1,867,559   4,784,509

Net income                   $3,316,024          -         -            -           -              -          3,316,024   3,316,024

Foreign currency translation
adjustment net of income tax     79,837          -         -            -           -            79,837         -           79,837
                               --------       -------  ---------    ---------  --------         ---------    ---------   -----------

Total comprehensive income   $3,395,861
                             ==========

Balance December 31, 2003                     153,235  $ 153,235   $ 100,000   $2,663,715      $ 79,837      $5,183,583  $8,180,370
                                              =======  =========  ==========   ==========      ==========    ==========  ===========



                    The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>

                                     F - 5

<PAGE>



<TABLE>
<CAPTION>

                                COMPRESSCO, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

                                                                            2003                      2002
<S>                                                                        <C>                         <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income                                                     $   3,316,024             $   1,217,339
        Adjustments to reconcile net income to net
        cash provided by (used in) operating activities-
             Depreciation and amortization                               1,964,028                 1,600,675
             Provision for bad debts                                        82,270                   109,353
             Amortization of discount on subordinated                       33,333                    33,333
             promissory notes
             Amortization of deferred financing costs                       53,703                    38,532
             Other assets                                                  (15,327)                   12,192
             Gain on sale of operating equipment                           (84,405)                     (140)
             Deferred income taxes                                       1,825,150                   963,784
             Changes in current assets and liabilities:
                   Accounts receivable                                  (2,082,073)                 (750,792)
                   Notes receivable                                           ---                     23,662
                   Inventories                                          (1,398,411)                  (67,317)
                   Prepaids and other                                       23,088                   (58,449)
                   Accounts payable                                      1,255,219                    40,862
                   Accrued liabilities                                     416,291                   (43,472)
                   Income taxes payable                                    202,699                     ---
                   Deferred revenues                                      (231,744)                  266,239
                                                                     -------------              ------------
                      Net cash provided by operating activities          5,359,845                 3,385,801
                                                                     -------------              ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Additions to compressors                                          (8,959,663)               (1,630,577)
      Additions to vehicles and other property                            (679,947)                 (360,516)
      Proceeds from sale of operating equipment                            191,600                     8,980
                                                                    --------------              ------------
          Net cash used in investing activities                         (9,448,010)               (1,982,113)
                                                                     -------------            --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from new bank credit agreement                           12,366,596                    ---
      Proceeds from line of credit                                      10,249,141                12,750,842
      Principal payments on line of credit                             (17,343,695)              (13,330,448)
      Principal payments on notes payable                               (1,026,642)                 (559,999)
      Deferred financing costs                                             (86,912)                   ---
          Net cash (used in) provided by financing activities            4,158,488                (1,139,605)
                                                                     -------------              ------------

NET INCREASE IN CASH AND
CASH EQUIVALENTS                                                            70,323                   264,083

CASH AND CASH EQUIVALENTS, BEGINNING
     OF PERIOD                                                             317,707                    53,624
                                                                     -------------             -------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                               $   388,030                 $ 317,707
                                                                        ==========                 ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
     INFORMATION:
      Cash paid during the period for:
               Interest                                              $   1,105,849              $  1,201,224
               Income taxes                                                  --                        --

SUPPLEMENTAL DISCLOSURES OF NONCASH
     INVESTING AND FINANCING ACTIVITIES                                      None                    None

           The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>


                                     F - 6

<PAGE>

                                COMPRESSCO, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     ORGANIZATION:

Compressco,  Inc.,  formerly  Emerging Alpha  Corporation (the  "Company"),  was
incorporated  in the State of Delaware  on February  10, 1993 for the purpose of
acquiring  business  opportunities.  On October 29, 1999, the Company  purchased
Compressco Field Services, Inc., an Oklahoma corporation, and Compressco Testing
L.L.C. The two companies are wholly owned subsidiaries of the Company.

The  Company is engaged  primarily  in the  manufacture,  rental and  service of
natural gas compressors that provide economical well head compression to mature,
low pressure natural gas wells. The Company's compressors are currently sold and
leased  to  natural  gas  producers   located  primarily  in  the  mid-continent
hydrocarbon   producing  regions  of  the  United  States  and  western  Canada.
Compressco  Testing  L.L.C.  is a natural gas  measurement,  testing and service
company, based in Oklahoma City that began operations in September 1999.

In  January  2000 the  Company  established  a wholly  owned  energy  production
subsidiary,  Providence  Natural Gas, Inc.,  ("Providence")  to acquire  certain
pressure depleted reservoirs,  having key reservoir  characteristics known to be
receptive  to  well-head  compression.  The Company was not  successful  in this
endeavor and  management  has elected to sell the  acquired  natural gas well in
January 2003 and cease operations.

In October 2001,  the Company  established a wholly owned  Canadian  subsidiary,
Compressco Canada, Inc., to market the sale and rental of compressors in Canada.
During the fall of 2001 the Company hired a Canadian  representative,  opened an
office and began to service  the  Canadian  market.  At  December  31,  2003 the
Company  had 97  compressors  on  rental  and  has  sold  28  compressors  since
inception. At December 31, 2003, the Company had 2 compressors off rental and 15
compressors in transit to Canada to be placed on rental in early 2004.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

The  accompanying  consolidated  financial  statements  include the accounts and
operations of the Company for the year ended December 31, 2003. All  significant
inter company accounts and transactions have been eliminated in the consolidated
financial statements.

CASH

The Company considers all highly liquid  investments with initial  maturities of
three months or less to be cash equivalents.

INVENTORIES

Inventories consist primarily of compressor components and parts, and
work-in-progress, and are stated at the lower of cost or market using the
standard cost method.

OTHER ASSETS

The Company  includes in other assets gross deferred  financing costs of $86,912
related to the new bank credit  agreement  entered into effective June 30, 2003.
These costs are being  amortized  on a straight  line basis over the  three-year
life of the related financing.  Accumulated amortization as of December 31, 2003
was $14,484.

COMPRESSORS, VEHICLES, EQUIPMENT AND OTHER PROPERTY

Compressors  include  units  currently  being  rented  and  available  for rent.
Compressors,  vehicles  and  equipment  are  recorded at cost.  Depreciation  is
computed using the straight-line  method based on the following estimated useful
lives:

                                     F - 7
<PAGE>


              Compressors                            12 years
              Equipment and other property            7 years
              Vehicles                                5 years
              Information systems                     3 years


REVENUE RECOGNITION

Revenue on the sale of  compressors  and parts is  recognized  upon  shipment of
goods to customers.  The Company rents compressors to customers on terms ranging
from two weeks to one  month.  As of  December  31,  2003,  all  monthly  rental
agreements are cancellable with 30 days written notice by the customer. Revenues
from rental and service  agreements  are  recognized as earned over the lives of
the respective agreements.

FABRICATION SHOP OVERHEAD COSTS

The Company  capitalizes  certain fabrication shop overhead costs as part of the
total cost of the compressors fabricated. The amount capitalized is based on the
ratio of time spent on fabricating  compressors  and will vary with the level of
production.  The  fabrication  shop costs  include  payroll,  burden,  supplies,
utilities,  rent,  freight  and other  miscellaneous  costs.  The portion of the
fabrication  shop  overhead  costs  that  is  not  capitalized  as  part  of the
compressors is expensed in the period incurred.

INCOME TAXES

Deferred  income  taxes are provided to reflect the future tax  consequences  of
differences  between the tax bases of assets and  liabilities and their reported
amounts in the financial statements.  Deferred income tax assets and liabilities
are computed  using the  currently  enacted tax laws and rates that apply to the
periods in which they are expected to affect taxable income.  Income tax expense
is the current tax  payable or  refundable  benefit for the period plus or minus
the net change in the deferred tax assets and liabilities.

Deferred  taxes are  classified  as  current  or  noncurrent,  depending  on the
classification of the assets and liabilities to which they relate.  Deferred tax
arising from temporary differences that are not related to an asset or liability
are  classified  as current or  noncurrent  depending on the period in which the
temporary  differences  are  expected  to be  used.  A  valuation  allowance  is
established  when it is more  likely  than not that some  portion  or all of the
deferred tax assets will not be realized.

Income taxes  payable are  provided for current  income taxes due on the taxable
income of Compressco Canada, Inc. In 2003, net operating losses from prior years
were used to reduce a portion of the current year taxable  income for Compressco
Canada.  There was no current  income  tax  expense  on the  company's  domestic
operations due to a tax loss being generated for 2003.

EARNINGS PER COMMON SHARE

Basic earnings per common share includes no dilution and is computed by dividing
income available to common stockholders by the weighted-average number of shares
outstanding  for the  period.  The  weighted-average  number of  shares  used to
compute basic earnings per common share was 153,235 for each year.

Diluted earnings per common share for each year was determined on the assumption
that the  stock  options  and  stock  warrants  outstanding  were  exercised  at
beginning of each year.  The  weighted-average  of fully diluted  shares used to
calculate  diluted basic  earnings for the year ended December 31, 2003 and 2002
were 229,266 and 173,989 respectively.

FOREIGN CURRENCY TRANSLATION

Compressco  Canada  Inc.,  maintains  their  accounting  records in their  local
currency,   Canadian  Dollars,  which  is  also  its  functional  currency.  The
functional  currency financial  statements are converted to United States Dollar
equivalents  with the  effect of the  foreign  currency  translation  adjustment
reflected  as a  component  of  accumulated  other  comprehensive  income in the
consolidated statements of comprehensive income and stockholders' equity.

                                     F - 8
<PAGE>

BUSINESS SEGMENTS

The  Company  operates  as a single  reportable  business  segment  pursuant  to
Statement of Financial Accounting  Standards (SFAS) No. 131,  "Disclosures about
Segments of an Enterprise and Related Information" which requires that companies
disclose  segment data based on how management  makes decisions about allocating
resources to segments and measuring performance. All of the Company revenues are
from external  customers and no single customer  amounts to more than 10 percent
of our total revenues.

The Company is domiciled  in the United  States of America  with  operations  in
Canada. The Company attributes revenue to the countries based on the location of
customers.   Long-lived  assets  consists   primarily  of  compressors  and  are
attributed to the countries based on the physical location of the compressors at
a given year-end. Information by geographic area is as follows:

                                               2003              2002
                                               ----              ----
    Revenues:
            United States                  $18,916,054         $14,564,421
       Canada                                3,839,634             357,083
                                            ----------        ------------
       Total revenues                      $22,755,688         $14,921,504
                                           ===========         ===========

    Long-lived assets, net:
       United States                       $20,330,201         $15,626,555
       Canada                                3,949,222             954,644
                                        --------------        ------------
       Total long-lived assets             $24,279,423         $16,581,199
                                           ===========         ===========


USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

STOCK BASED COMPENSATION

The Company  applies APB Opinion No. 25 in accounting  for its fixed price stock
options.  Accordingly,  no compensation  cost for options has been recognized in
the  financial  statements.  The chart below sets forth the Company's net income
and loss per share for year ended December 31, 2003 and 2002, as reported and on
a pro  forma  basis  as if the  compensation  cost of  stock  options  had  been
determined consistent with SFAS 123.


                                                     2003               2002
    Net Income, as reported                      $  3,316,024       $ 1,217,339
        Deduct:  Total stock-based  employee
        compensation    expense   determined
        under  fair value  based  method for
        all  awards,   net  of  related  tax
        effects                                       (94,710)         (104,678)
                                                     --------         ---------
     Pro forma net income                         $ 3,221,314       $  1,112,661
                                                    =========          =========
     Basic Income per Share:
              As reported                         $     21.64       $       7.94
              Pro forma                                 21.02               7.26
     Diluted Income per Share:
           As reported                            $     16.08       $       7.00
           Pro forma                                    15.67               6.40



                                     F - 9
<PAGE>



3.     INVENTORIES:

Inventories consist of the following at December 31, 2003:

              Components and parts                                    $2,849,636
              Work-in-progress                                           577,437
                                                                     -----------
                                                                      $3,427,073
                                                                       =========


4.     LONG-TERM DEBT:

Long-term debt consists of the following at December 31, 2003:

              Subordinated promissory notes (a)                      $ 5,550,000
              Credit agreement (b)                                    12,366,596
                                                                    ------------
              Total long-term debt                                   $17,916,596
                                                                     ===========

(a)  On  December  22,  2000,  the  Company  offered  an issue  of  subordinated
     promissory  notes and stock  warrants  (see Note 10) to  qualified  private
     investors.  At December 31, 2003, $5,550,000 of the subordinated promissory
     notes  were  outstanding.  Of the  $5,550,000  in  proceeds,  $100,000  was
     allocated  to the stock  warrants.  The notes  are  subordinated  unsecured
     obligations   of  the  Company  and  rank   subordinate   to  all  existing
     indebtedness  of the Company.  In March 2003 the Company and the holders of
     the  subordinated  promissory notes agreed to amend the promissory notes to
     extend the maturity to March 31, 2005, change the interest rate from 13% to
     10% effective April 1, 2003 and make  convertible by the holder into common
     stock of the Company at anytime prior to maturity at a conversion  price of
     $150 per share.  The Notes mature on the earlier of (1) the consummation of
     an underwritten public offering of the Company's capital stock or (2) March
     31,  2005.  The Company  may, at any time prepay any part of the  principal
     balance on the Notes, in increments of $10,000,  without premium or penalty
     prior to  maturity.  Interest  is payable at 13% per annum,  10%  effective
     April 1, 2003, and is payable quarterly in arrears.

(b)  The Company  entered  into a new credit  agreement  on June 30, 2003 with a
     bank and  repaid  all  amounts  due on its prior  line of  credit  and term
     facilities. Under the new credit agreement the Company may borrow up to the
     lesser  of  $17,500,000  or the sum of (i) 85% of the  aggregate  amount of
     eligible  receivables,  (ii)  50%  of  the  aggregate  amount  of  eligible
     inventory,  and (iii) the lower of 80% of the appraised orderly  liquidated
     value or the net book  value  of its  compressor  fleet.  In  addition,  no
     additional  draws are permitted under the credit facility if utilization of
     the  compressor  fleet  falls  below 70%.  As of  December  31,  2003,  the
     utilization rate of the compressor fleet was 92.5%. The balance outstanding
     under the line of credit agreement as of December 31, 2003 was $12,366,596.
     As of December 31, 2003 under the terms of the credit agreement the Company
     qualified  to  borrow  the full  $17,500,000  available  under  the  credit
     agreement.  The borrowing under the credit  facility bear interest  between
     0.25% and 0.5% over Wall Street  Journal  Prime Rate (4.25% at December 31,
     2003) or between  3.0% and 3.25% over LIBOR  (4.15% at December  31,  2003)
     based on the Company's  ratio of debt to earnings before  interest,  taxes,
     depreciation  and   amortization.   Interest  is  due  quarterly  with  all
     outstanding  borrowings  due at maturity on the earlier of June 30, 2006 or
     45 days prior to the  maturity of the  $5,550,000  subordinated  promissory
     notes currently due March 31, 2005. The loan is secured with the assets and
     compressor rental agreements of the Company.  The Company's credit facility
     imposes a number of financial and restrictive  covenants that among things,
     limit the Company's ability to incur additional indebtedness,  create liens
     and pay  dividends.  As of December 31, 2003, the Company was in compliance
     with its loan covenant ratios.  Management expects that the Company will be
     in compliance with the covenants under the credit facility for at least the
     next twelve months.

                                     F - 10

<PAGE>


The annual  maturities  of long-term  debt  subsequent  to December 31, 2003 are
shown in the following  table. The bank credit agreement is shown as maturing in
2005 based on its maturity  date being the earlier of the  maturity  date of the
subordinated  promissory notes maturity of March 31, 2005 or the maturity of the
bank credit agreement of June 30, 2006.

                                2004                                ---
                                2005                              17,916,596
                                2006                                ---
                                                                ------------
                                    Total                    $    17,916,596
                                                                =============

The carrying  value of the Company's  financial  instruments  approximates  fair
value at December 31, 2003.

5.     INCOME TAXES:

The  components  of income taxes for the years ended  December 31, 2003 and 2002
are set forth as follows:

                                                      2003               2002
           Current provision                 $      202,699        $          -
           Deferred provision                     1,825,150             963,784
                                                 ----------           ----------
           Income taxes                      $    2,027,849        $    963,784
                                                ============         ===========


The differences  between the provision for income taxes at the expected  Federal
statutory rate and the provision for income taxes  recorded in the  consolidated
statements  of  operations  for the years ended  December  31, 2003 and 2002 are
summarized as follows:


                                                       2003              2002
        Federal income tax at statutory rate      $  1,816,917      $    741,582
        State income taxes, net of Federal
             income tax benefit                        234,062            95,533
        Nondeductible expenses                          38,050            35,300
        Canadian operations                            (61,180)           91,369
                                                   -----------        ----------
             Provision for income taxes           $  2,027,849      $    963,784
                                                 ===============    ============


The significant  components of the Company's deferred tax assets and liabilities
are as follows at December 31, 2003:

           Deferred tax assets:
                 Accounts receivable                          $           57,570
                                                                    ------------
                 Net current deferred tax asset               $           57,570
                                                                      ==========
           Deferred tax liabilities:
                 Depreciation                                 $      (4,761,304)
                 Foreign currency translation                           (50,000)
                 Net operating losses                                 1,226,573
                                                                   ------------
                      Net non-current deferred tax liability  $      (3,584,731)
                                                                     ===========
                                     F - 11
<PAGE>

At December 31, 2003,  the Company has  cumulative  United  States net operating
loss carry forwards of approximately  $3,196,000,  which will begin to expire in
2014.

6. EMPLOYEE BENEFIT PLANS:

401(k) Plan

The Company  implemented a 401(k) plan on October 1, 2001 in which substantially
all full time employees of the Company are eligible to  participate.  The 401(k)
plan  provides  that the  Company  will  match  100% of the  first  1%  employee
contribution  and 50% of the next 2% of employee  contributions to the plan. The
employee vests in the Company's  contribution  50% after one year and 100% after
two years. The Company contributions to the 401(k) plan were $43,396 and $40,154
for the years ended  December 31, 2003 and 2002  respectively.  Hartford Life is
the plan  provider and provides the  investment,  administrative  and  reporting
services for the participants.  The plan assets are invested,  at the employee's
discretion, in a choice of several Hartford funds.

 Stock Ownership and Incentive Stock Option Plan

The  Company's  1993 Stock  Option  Plan  provides  for the  issuance of up to 2
million  shares of common  stock at no less than 85% of market value at the time
of grant (for  non-qualified  options) and no less than 110% of market value for
incentive stock options.

A summary of the  Company's  stock  options as of December 31, 2003 and 2002 and
changes during the years then ended are presented below:


                                                   Number       Weighted-Average
                                                  of Shares      Exercise Price

        Outstanding at December 31, 2001           30,950            $21.64
             Granted                                3,500            $39.00
             Canceled                              (2,400)           $30.00
                                                  -------
        Outstanding at December 31, 2002           32,050            $22.91
                                                  =======
             Granted                                1,700            $39.00
             Canceled
                                                   -----               ---
        Outstanding at December 31, 2003           33,750            $26.54
                                                  =======
        Exercisable at December 31, 2003           23,250            $18.87
                                                  -------

The following table summarizes information about stock options outstanding as of
December 31, 2003:

      Exercise          Number           Weighted Average            Number
         Price       Outstanding       Remaining Life (years)      Exercisable
       ----------    ------------      ----------------------       -----------
       $15.00          17,250                 2.01                   17,250
       $30.00          11,300                 3.14                    6,000
       $39.00           3,500                 4.58                  --------
       $95.00           1,700                 5.50                  --------
                       --------                                     --------
        Total          33,750                  2.83                   23,250
                       ======                                         ======

The stock  options  outstanding  that are not  exercisable  at December 31, 2003
become exercisable  beginning in February 2004 through September 2006. The stock
options are exercisable for a period of three years.

In October 1995, the Financial  Accounting  Standards Board issued  Statement of
Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation,"  effective  for the  Company at March 31,  1997.  Under SFAS 123,
companies  can either  record  expense  based on the fair  value of  stock-based
compensation  upon issuance or elect to remain under the current APB Opinion No.
25 method whereby no compensation  cost is recognized upon grant if the exercise
price of options are 100% or greater than the stock price at the grant date. The
Company accounts for its stock-based compensation plan under APB Opinion No. 25.
Entities  electing to remain with the accounting in APB Opinion No. 25 must make
disclosures as if SFAS 123 had been applied. The disclosure requirements of this
Statement are effective for options granted in fiscal 1996 and later.

                                     F - 12

<PAGE>

The SFAS No 123 method of accounting is based on several  assumptions and should
not be viewed as indicative of the operations of the Company in future  periods.
The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions used for grants in 2003 and 2002, as follows:

                                               2003                 2002
        Interest rate                          3.32%               3.74%
        Dividend yield                         0.00%               0.00%
        Expected volatility                   110.0%             110.00%
        Expected life                        6 years            6 years

The  weighted  average  fair  value  per  share of  options  granted  using  the
Black-Scholes  option pricing model for 2003 and 2002,  respectively  are $69.44
and $38.38.

7.     RELATED PARTIES:

Certain  directors and their family  members  purchased a total of $1,550,000 of
the  subordinated  promissory  notes  including  13,020 stock  warrants from the
offering  made to private  investors in December  2000.  The directors and their
family  members  purchased  the Notes  and  Warrants  under  the same  terms and
conditions as all other investors.

Certain officers and directors are compensated based on actual time and expenses
devoted to the Company's business.  During the years ended December 31, 2003 and
2002, a consulting  fee of $2,000 per month was paid to a director who served as
the Company's secretary.

8.     COMMITMENTS:

PURCHASE COMMITMENTS

The Company  entered into a purchase  agreement  on December  14,  2000,  with a
supplier to purchase 1,000 compressor  engines by December 31, 2002. At December
31, 2003 the Company has taken  delivery of 548 engines from the  supplier.  The
purchase agreement was amended on February 24, 2003, to provide that the Company
shall purchase 13 engines per month commencing January 1, 2003 and not less than
156  engines  per year  until the  remaining  balance of 452  engines  have been
purchased.  The purchase agreement provides that the Company's  liability to the
supplier  for any failure to  purchase  the full amount of engines is limited to
(i) pay for  engines  delivered,  (ii)  reasonable  direct  out of  pocket  cost
incurred by the supplier in acquiring  material for  production of the number of
engines contemplated by the agreement and (iii) the reasonable costs incurred by
the supplier for work in progress at the time of  termination  of the  agreement
including labor costs and reasonable  quantities of parts and materials  ordered
by the supplier.  The Company has complied with the  requirements of the amended
purchase  agreement  during 2003 and anticipates  staying in compliance over the
remaining life of the agreement.

FACILITIES AND VEHICLE LEASES

The Company has a three year lease terminating  August 31, 2004 for its Oklahoma
City  manufacturing,  warehouse and office  facilities.  The Company has a three
year lease terminating September 5, 2004 for its warehouse and office facilities
in New Mexico.  Compressco Canada has a five year lease terminating December 31,
2008 for its  warehouse  and  office  facilities.  The  Company  leases  certain
vehicles with original terms ranging up to two years.

As  of  December  31,  2003,   future  annual   minimum  lease   payments  under
noncancellable  operating leases were approximately  $451,000 for 2004, $267,000
for 2005, $154,000 for 2006, $79,000 for 2007 and $79,000 for 2008.

Rent expense under all operating leases was approximately  $529,000 and $517,000
for the years ended December 31, 2003 and 2002, respectively.

9.     MAJOR CUSTOMERS:

At December 31, 2003, the Company had  approximately  385 customers.  During the
year  ended  December  31,  2003,  we did not  have  sales  to any one  customer
comprising more than 10% of our total revenues. At December 31, 2003, the

                                     F - 13
<PAGE>

Company  had  one  customer,   Chesapeake  Operating  Inc.,  which  amounted  to
approximately 15% of the Company's total trade accounts receivable balance.

 10.    STOCK WARRANTS:

In connection with the offering of the  subordinated  promissory notes discussed
in Note 4, the Company  issued  stock  warrants  to  purchase  420 shares of the
Company's common stock per every $50,000 amount of Notes purchased. The warrants
have an  exercise  price of $120 per share.  At  December  31,  2003 total stock
warrants of 46,620 were issued and  outstanding.  The warrants  are  exercisable
upon  issuance,  and  expire  on March 31,  2005.  No stock  warrants  have been
exercised as of December 31, 2003.

The Company obtained a valuation as to the amount to be assigned to the warrants
from  the  total  proceeds  received  from  the  issuance  of  the  subordinated
promissory  notes.  Based on the valuation  estimate,  the value assigned to the
warrants  is  $100,000.   This  amount  is  shown  as  outstanding  warrants  in
stockholders' equity and as a discount to the subordinated promissory notes. The
discount will be amortized  over the  three-year  life of the stock  warrants as
additional interest expense.  The effective interest rate on the Notes is 13.84%
when the value of the warrants is taken into consideration.

The value was determined  using the Valrex model,  which is an option  valuation
model that uses established  option pricing theory to price  nontrading  options
and warrants.

11. NET INCOME PER COMMON SHARE

Basic and diluted net income per common share are calculated as follows:
<TABLE>
<CAPTION>

                                                                   Net Income             Shares            Per Share
                                                                  (Numerator)          (Denominator)         Amount
                                                                   ----------           -----------         -----------
<S>                                                                    <C>                  <C>                  <C>

Year Ended December 31, 2003
Basic:
Income available to common stockholders                             $3,316,024            153,235           $  21.64
                                                                                                            ========

Diluted:
Effect of stock options and stock warrants                           ---------             39,031

Effect of conversion of subordinated promissory
notes, net of income tax                                                370,504            37,000
                                                                        -------            ------

Income available to common stockholders plus
assumed exercises of stock options and stock warrants
and conversion of subordinated promissory notes                      $3,686,528           229,266           $  16.08
                                                                     ==========           =======           ========

Year Ended December 31, 2002
Basic:
Income available to common stockholders                              $1,217,339           153,235           $   7.99
                                                                                                            ========

Diluted:
Effect of stock options                                              ----------            20,754
                                                                     ----------          --------

Income available to common stockholders plus
assumed exercises of stock options                                   $1,217,339           173,989           $   7.00
                                                                     ==========           =======           ========
</TABLE>

Stock  warrants for 46,620  commons shares with an exercise price of $120.00 per
share were excluded from the  computation of diluted net income per common share
for the year ended  December 31, 2002 because the warrants'  exercise  price was
greater than the average market price of the common shares.

                                     F - 14

<PAGE>




                                            SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned,  thereunto
duly authorized, on March 30, 2004.



                                        COMPRESSCO, INC.

                                        By: /S/ BROOKS MIMS TALTON
                                            ------------------------------------
                                            Brooks Mims Talton
                                            Chief Executive Officer




     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  Registrant and in the capacities on the
dates indicated.



By:  /S/ BURT H. KEENAN                           Dated:  March 30, 2004
      --------------------------------------
      Burt H. Keenan
      Chairman of Board and Director


By:  /S/ BROOKS MIMS TALTON                       Dated:  March 30, 2004
      --------------------------------------
      Brooks Mims Talton
      Chief Executive Officer,
      President and Director


By:  /S/ GARY MCBRIDE                             Dated:  March 30, 2004
      --------------------------------------
      Gary McBride
      Chief Financial Officer
      (Principal Financial and
      Accounting Officer)


By:  /S/ JERRY W. JARRELL                         Dated:  March 30, 2004
      --------------------------------------
      Jerry W. Jarrell
      Director


                                     S - 1

<PAGE>



                                                                      Exhibit 31

                                Certification of
                             Chief Executive Officer
                               of Compressco, Inc.

I, Brooks Mims Talton, certify that:

     1.   I have reviewed this annual report on Form 10-KSB of Compressco, Inc.;

     2.   Based on my knowledge,  this annual report does not contain any untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under with such  statements  were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  report,  fairly  present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this annual report;

     4.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and have:

          a)    designed such disclosure  controls and procedures to ensure that
                material information  relating to the registrant,  including its
                consolidated subsidiaries,  is made known to us by others within
                those  entities,  particularly  during  the period in which this
                annual report is being prepared;

          b)    evaluated  the  effectiveness  of  the  registrant's  disclosure
                controls and procedures as of a date within 90 days prior to the
                filing of this annual report (the "Evaluation Date"); and

          c)    presented  in this  annual  report  our  conclusions  about  the
                effectiveness of the disclosure controls and procedures based on
                our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent functions):

          a)    all  significant  deficiencies  in the  design or  operation  of
                internal  controls which could adversely affect the registrant's
                ability to record, process,  summarize and report financial data
                and have identified for the  registrant's  auditors any material
                weaknesses in internal controls; and

          b)    any fraud, whether or not material,  that involves management or
                other employees who have a significant  role in the registrant's
                internal controls; and

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this annual report whether there were significant  changes in internal
          controls or in other factors that could significantly  affect internal
          controls  subsequent  to the  date  of  our  most  recent  evaluation,
          including   any   corrective   actions  with  regard  to   significant
          deficiencies and material weaknesses.



Dated:  March 30, 2004                            /S/ BROOKS MIMS TALTON
                                                  ------------------------------
                                                  Brooks Mims Talton
                                                  Chief Executive Officer


<PAGE>

                                Certification of
                             Chief Financial Officer
                               of Compressco, Inc.

I, Gary McBride, certify that:

     1.   I have reviewed this annual report on Form 10-KSB of Compressco, Inc.;

     2.   Based on my knowledge,  this annual report does not contain any untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under with such  statements  were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  report,  fairly  present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this annual report;

     4.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and have:

          a)    designed such disclosure  controls and procedures to ensure that
                material information  relating to the registrant,  including its
                consolidated subsidiaries,  is made known to us by others within
                those  entities,  particularly  during  the period in which this
                annual report is being prepared;

          b)    evaluated  the  effectiveness  of  the  registrant's  disclosure
                controls and procedures as of a date within 90 days prior to the
                filing of this annual report (the "Evaluation Date"); and

          c)    presented  in this  annual  report  our  conclusions  about  the
                effectiveness of the disclosure controls and procedures based on
                our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent functions):

          a)    all  significant  deficiencies  in the  design or  operation  of
                internal  controls which could adversely affect the registrant's
                ability to record, process,  summarize and report financial data
                and have identified for the  registrant's  auditors any material
                weaknesses in internal controls; and

          b)    any fraud, whether or not material,  that involves management or
                other employees who have a significant  role in the registrant's
                internal controls; and

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this annual report whether there were significant  changes in internal
          controls or in other factors that could significantly  affect internal
          controls  subsequent  to the  date  of  our  most  recent  evaluation,
          including   any   corrective   actions  with  regard  to   significant
          deficiencies and material weaknesses.

Dated:  March 30, 2004                       /S/ GARY MCBRIDE
                                             -----------------------------------
                                             Gary McBride
                                             Chief Financial Officer





                                                                      Exhibit 32

                                Certification of
                             Chief Executive Officer
                               of Compressco, Inc.


This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and  accompanies  the annual  report on Form 10-KSB (the "form") for the
year ended December 31, 2003 of Compressco, Inc. (the "Issuer").

I, Brooks Mims Talton, the Chief Executive Officer of Issuer certify that to the
best of my knowledge:

     (i)  the Form 10-KSB fully complies with the  requirements of section 13(a)
          or section  15(d) of the  Securities  Exchange  Act of 1934 (15 U.S.C.
          78m(a) or 78o(d)); and

     (ii) the information  contained in the Form 10-KSB fairly presents,  in all
          material respects,  the financial  condition and results of operations
          of the Issuer.

Dated:  March 30, 2004



         By:  /S/ BROOKS MIMS TALTON
              ------------------------
              Chief Executive Officer




<PAGE>





                                Certification of
                             Chief Financial Officer
                               of Compressco, Inc.


This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and  accompanies  the annual  report on Form 10-KSB (the "form") for the
year ended December 31, 2003 of Compressco, Inc. (the "Issuer").

I, Gary McBride,  the Chief Financial Officer of Issuer certify that to the best
of my knowledge:

     (i)  the Form 10-KSB fully complies with the  requirements of section 13(a)
          or section  15(d) of the  Securities  Exchange  Act of 1934 (15 U.S.C.
          78m(a) or 78o(d)); and

     (ii) the information  contained in the Form 10-KSB fairly presents,  in all
          material respects,  the financial  condition and results of operations
          of the Issuer.

Dated:  March 30, 2004



         By:  /S/ GARY MCBRIDE
         ----------------------
         Chief Financial Officer