**UNITED
            STATES**
 **SECURITIES
            AND EXCHANGE COMMISSION**
 **Washington,
            D.C. 20549**
 
 
 **FORM
            10-Q**
 
 
 
 
 **(Mark
            One)**
 x
                  **QUARTERLY
                      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                      ACT OF
                      1934**
 
 **For
            the quarterly period ended June 30, 2007**
 
 **OR**
   ̈
                  **TRANSITION
                      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                      ACT OF
                      1934**
 
 **For
            the transition period from** **** **to** ****
 
 **Commission
            File Number 000-51471**
 
 
 
 **BRONCO
            DRILLING COMPANY, INC.**
 **(Exact
            name of registrant as specified in its charter)**
 
 
  **Delaware**
                  
                  **20-2902156****(State
                      or other jurisdiction of**
                    **incorporation
                      or organization)**
                  
                  **(I.R.S.
                      Employer**
                    **Identification
                      No.)**
 
 **16217
            North May Avenue**
 **Edmond,
            OK 73013**
 **(Address
            of principal executive offices) (Zip Code)**
 
 **(405)
            242-4444**
 **(Registrant’s
            telephone number, including area code)**
  
 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  ࿠མ
 
 Indicate
            by check mark whether the registrant is a large accelerated filer, an
            accelerated filer, or a non-accelerated filer. See definition of “accelerated
            filer and large accelerated filer” in rule 12b-2 of the Exchange Act. (Check
            one):
 
 Large
            accelerated filer  ̈ Accelerated
            filer x Non-accelerated
            filer  ̈
 
 Indicate
            by check mark whether the registrant is a shell company (as defined in
            Rule
            12b-2 of the Exchange Act.):    Yes  ̈ No x
 
 As
            of
            August 3, 2007, 26,019,441 shares of common stock were outstanding.
 ***Table
              of Contents***
 **BRONCO
            DRILLING COMPANY, INC.**
 
 **INDEX**
 
 **Page****PART
                      I—FINANCIAL INFORMATION****Item 1.**
                  
                  **Financial
                      Statements****Bronco
                      Drilling Company, Inc.:**Consolidated
                      Balance Sheets as of June 30, 2007 (unaudited) and December
                      31,
                      2006
                  
                  3Consolidated
                      Statements of Operations for the three months and six months
                      ended June
                      30, 2007 and 2006 (unaudited)
                  
                  4Consolidated
                      Statement of Stockholders’ Equity for the six months ended June 30, 2007
                      (unaudited)
                  
                  5Consolidated
                      Statements of Cash Flows for the six months ended June 30,
                      2007 and 2006
                      (unaudited)
                  
                  6Notes
                      to Consolidated Financial Statements (unaudited)
                  
                  7**Item 2.**
                  
                  **Management’s
                      Discussion and Analysis of Financial Condition and Results
                      of
                      Operations**
                  
                  13**Item 3.**
                  
                  **Quantitative
                      and Qualitative Disclosures about Market
                      Risks**
                  
                  18**Item 4.**
                  
                  **Controls
                      and Procedures**
                  
                  18**PART
                      II—OTHER INFORMATION****Item 1.**
                  
                  **Legal
                      Proceedings**
                  
                  19**Item 1A.**
                  
                  **Risk
                      Factors**
                  
                  19**Item 2.**
                  
                  **Unregistered
                      Sale of Equity Securities and Use of Proceeds**
                  
                  19**Item 3.**
                  
                  **Defaults
                      Upon Senior Securities**
                  
                  19**Item 4.**
                  
                  **Submission
                      of Matters to Vote of Security Holders**
                  
                  19**Item 5.**
                  
                  **Other
                      Information**
                  
                  19**Item 6.**
                  
                  **Exhibits**
                  
                  20**Signatures**
                  
                  21**Index
                      to Exhibits**
                  
                  22
 -2-
 ***Table
              of Contents***




**PART
        I: FINANCIAL INFORMATION**
  Item
        1. Financial
        Statements
  **Bronco
                    Drilling Company, Inc. and Subsidia****ries**CONSOLIDATED
                    BALANCE SHEETS(Amounts
                    in thousands except share par value)**June
                    30,**
                
                **December
                    31,****2007**
                
                **2006****ASSETS**
                
                **(Unaudited)**CURRENT
                    ASSETSCash
                    and cash equivalents
                
                $
                4,823
                
                $
                10,608ReceivablesTrade
                    and other, net of allowance for doubtful accounts of$1,178
                    and $400 in 2007 and 2006, respectively
                
                
                58,690
                
                
                60,282Contract
                    drilling in progress
                
                
                3,390
                
                
                1,989Income
                    tax receivable
                
                
                1,223
                
                
                -Current
                    deferred income taxes
                
                
                456
                
                
                155Prepaid
                    expenses
                
                
                1,213
                
                
                338Total
                    current assets
                
                
                69,795
                
                
                73,372PROPERTY
                    AND EQUIPMENT - AT COSTDrilling
                    rigs and related equipment
                
                
                453,271
                
                
                396,499Transportation,
                    office and other equipment
                
                
                39,543
                
                
                29,928492,814
                
                
                426,427Less
                    accumulated depreciation
                
                
                64,668
                
                
                44,505428,146
                
                
                381,922OTHER
                    ASSETSGoodwill
                
                
                22,144
                
                
                21,280Restricted
                    cash and deposit
                
                
                2,745
                
                
                2,600Intangibles,
                    net, and other
                
                
                6,355
                
                
                3,31431,244
                
                
                27,194$
                529,185
                
                $
                482,488**LIABILITIES
                    AND STOCKHOLDERS' EQUITY**CURRENT
                    LIABILITIESAccounts
                    payable
                
                $
                15,169
                
                $
                19,677Accrued
                    liabilitiesPayroll
                    related
                
                
                7,916
                
                
                7,587Deferred
                    revenue and other
                
                
                3,562
                
                
                4,180Income
                    tax payable
                
                
                -
                
                
                3,724Current
                    maturities of long-term debt
                
                
                901
                
                
                636Total
                    current liabilities
                
                
                27,548
                
                
                35,804LONG-TERM
                    DEBT, less current maturities
                
                
                66,531
                
                
                64,091DEFERRED
                    INCOME TAXES
                
                
                58,223
                
                
                42,608COMMITMENTS
                    AND CONTINGENCIES (Note 6)STOCKHOLDERS'
                    EQUITYCommon
                    stock, $.01 par value, 100,000 shares authorized;26,019
                    and 24,938 shares issued and outstandingat
                    June 30, 2007 and December 31, 2006
                
                
                260
                
                
                250Additional
                    paid-in capital
                
                
                296,142
                
                
                279,355Retained
                    earnings
                
                
                80,481
                
                
                60,380Total
                    stockholders' equity
                
                
                376,883
                
                
                339,985$
                529,185
                
                $
                482,488The
                    accompanying notes are an integral part of these
                    statements.
  -3-
 ***Table
              of Contents***


**Bronco
                  Drilling Company, Inc. and Subsidiaries**CONSOLIDATED
                  STATEMENTS OF OPERATIONS(Amounts
                  in thousands, except per share amounts)**Three
                  Months Ended June 30,**
              
              **Six
                  Months Ended June 30,****2007**
              
              **2006**
              
              **2007**
              
              **2006****(Unaudited)**
              
              **(Unaudited)**REVENUESContract
                Drilling Revenues, including0%,
                  4%, 2% and 4% to related parties
              
              
              
              
              $
              69,291
              
              $
              67,110
              
              $
              143,870
              
              $
              123,497Well
                  service
              
              
              
              
              
              5,429
              
              
              -
              
              
              9,831
              
              
              -74,720
              
              
              67,110
              
              
              153,701
              
              
              123,497EXPENSESContract
                  drilling
              
              
              
              
              
              40,514
              
              
              33,171
              
              
              81,313
              
              
              60,895Well
                  service
              
              
              
              
              
              3,280
              
              
              -
              
              
              5,922
              
              
              -Depreciation
                  and amortization
              
              
              
              
              
              10,894
              
              
              6,805
              
              
              22,099
              
              
              12,742General
                  and administrative
              
              
              
              
              
              5,399
              
              
              3,576
              
              
              10,091
              
              
              7,05060,087
              
              
              43,552
              
              
              119,425
              
              
              80,687Income
                  from operations
              
              
              
              
              
              14,633
              
              
              23,558
              
              
              34,276
              
              
              42,810OTHER
                  INCOME (EXPENSE)Interest
                  expense
              
              
              
              
              
              (795
              )
              
              (280
              )
              
              (2,062
              )
              
              (365
              )Loss
                  from early extinguishment of debt
              
              
              
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,000
              )Interest
                  income
              
              
              
              
              
              203
              
              
              77
              
              
              250
              
              
              123Other
              
              
              
              
              
              101
              
              
              121
              
              
              166
              
              
              170(491
              )
              
              (82
              )
              
              (1,646
              )
              
              (1,072
              )Income
                  before income taxes
              
              
              
              
              
              14,142
              
              
              23,476
              
              
              32,630
              
              
              41,738Income
                  tax expense
              
              5,428
              
              
              8,747
              
              
              12,529
              
              
              15,663NET
                  INCOME
              
              
              
              
              $
              8,714
              
              $
              14,729
              
              $
              20,101
              
              $
              26,075Income
                  per common share-Basic
              $
              0.33
              
              $
              0.59
              
              $
              0.77
              
              $
              1.08Income
                  per common share-Diluted
              $
              0.33
              
              $
              0.59
              
              $
              0.77
              
              $
              1.08Weighted
                  average number of shares outstanding-Basic
              
              26,019
              
              
              24,938
              
              
              25,963
              
              
              24,227Weighted
                  average number of shares outstanding-Diluted
              
              26,116
              
              
              24,958
              
              
              26,028
              
              
              24,252The
                  accompanying notes are an integral part of these
                  statements.


-4-
 ***Table
          of Contents***




**Bronco
                  Drilling Company Inc.**CONSOLIDATED
                  STATEMENT OF STOCKHOLDERS' EQUITY(Amounts
                  in thousands)For
                  the six-months ended June 30, 2007(Unaudited)**Additional**
              
              
              
              **Total****Common**
              
              **Common**
              
              **Paid
                  In**
              
              **Retained**
              
              **Stockholders'****Shares**
              
              **Amount**
              
              **Capital**
              
              **Earnings**
              
              **Equity**Balance
                  as of January 1, 2007
              
              
              24,938
              
              $
              250
              
              $
              279,355
              
              $
              60,380
              
              $
              339,985Stock
                  issued in acquisition
              
              
              1,070
              
              
              10
              
              
              15,114
              
              
              -
              
              
              15,124Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              20,101
              
              
              20,101Stock
                  compensation
              
              
              11
              
              
              -
              
              
              1,673
              
              
              -
              
              
              1,673Balance
                  as of June 30, 2007
              
              
              26,019
              
              $
              260
              
              $
              296,142
              
              $
              80,481
              
              $
              376,883The
                  accompanying notes are an integral part of these
                  statements.
 
 -5-
 ***Table
            of Contents***


**Bronco
                  Drilling Company, Inc. and Subsidiaries**CONSOLIDATED
                  STATEMENTS OF CASH FLOWS(Amounts
                  in thousands)**Six
                  Months Ended June 30****2007**
              
              **2006****(Unaudited)**Cash
                  flows from operating activities:Net
                  income
              
              $
              20,101
              
              $
              26,075Adjustments
                  to reconcile net income to net cashprovided
                  by operating activities:Depreciation
                  and amortization
              
              
              22,393
              
              
              12,986Bad
                  debt expense
              
              
              1,520
              
              
              34Gain
                  on sale of asset
              
              
              (691
              )
              
              (946
              )Write
                  off of debt issue costs
              
              
              -
              
              
              267Stock
                  compensation
              
              
              1,673
              
              
              1,341Provision
                  for deferred income taxes
              
              
              7,606
              
              
              6,848Changes
                  in current assets and liabilities:Receivables
              
              
              1,767
              
              
              (14,711
              )Contract
                  drilling in progress
              
              
              (1,401
              )
              
              (694
              )Prepaid
                  expenses
              
              
              (877
              )
              
              (403
              )Other
                  assets
              
              
              (450
              )
              
              203Accounts
                  payable
              
              
              (13,458
              )
              
              (5,609
              )Accrued
                  expenses
              
              
              (289
              )
              
              4,412Income
                  taxes receivable/payable
              
              
              (4,947
              )
              
              833Net
                  cash provided by operating activities
              
              
              32,947
              
              
              30,636Cash
                  flows from investing activities:Restricted
                  cash account
              
              
              -
              
              
              518Business
                  acquisitions, net of cash acquired
              
              
              (2,337
              )
              
              (16,028
              )Proceeds
                  from sale of asset
              
              
              2,446
              
              
              950Purchase
                  of property and equipment
              
              
              (31,826
              )
              
              (67,548
              )Net
                  cash used in investing activities
              
              
              (31,717
              )
              
              (82,108
              )Cash
                  flows from financing activities:Proceeds
                  from borrowings
              
              
              12,000
              
              
              37,000Payments
                  of debt
              
              
              (19,015
              )
              
              (34,620
              )Debt
                  issue costs
              
              
              -
              
              
              (1,665
              )Proceeds
                  from sale of common stock, netof
                  offering costs of $577
              
              
              -
              
              
              36,229Net
                  cash (used in) provided by financing activities
              
              
              (7,015
              )
              
              36,944Net
                  decrease in cash and cash equivalents
              
              
              (5,785
              )
              
              (14,528
              )Beginning
                  cash and cash equivalents
              
              
              10,608
              
              
              17,039Ending
                  cash and cash equivalents
              
              $
              4,823
              
              $
              2,511Supplementary
                  disclosure of cash flow information:Interest
                  paid, net of amount capitalized
              
              $
              1,971
              
              $
              -Income
                  taxes paid
              
              
              9,870
              
              
              7,983Supplementary
                  disclosure of non-cash investing and financing:Liabilities
                  assumed in acquisition
              
              
              8,527
              
              
              -Common
                  stock issued for acquisition
              
              
              15,124
              
              
              1,816Debt
                  assumed in acquisition
              
              
              6,516
              
              
              -Note
                  issued for acquisition of property and equipment
              
              
              3,205
              
              
              3,190The
                  accompanying notes are an integral part of these
                  statements.
 
 -6-
 ***Table
            of Contents***




**Bronco
      Drilling Company and Subsidiaries**


NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 ($
        Amounts in thousands, except per share and share amounts)
 
 **1.
        Organization and Summary of Significant Accounting
        Policies**
 
 *Unless
        the context requires otherwise, references in this quarterly report to “Bronco,”
the “Company,” “we,” “us,” and “our” are to Bronco Drilling Company, Inc., a
        Delaware corporation, and its consolidated subsidiaries.*
 
 *Business
        and Principles of Consolidation*
 
 Bronco
        Drilling Company, Inc., a Delaware corporation, provides contract land drilling
        and workover services to oil and natural gas exploration and production
        companies, primarily in Oklahoma and Texas. The accompanying consolidated
        financial statements include the Company’s accounts and the accounts of its
        wholly owned subsidiaries. All intercompany accounts and transactions have
        been
        eliminated in consolidation.
 
 The
        Company has prepared the accompanying unaudited consolidated financial
        statements and related notes in accordance with accounting principles generally
        accepted in the United States of America for interim financial information
        and
        with the instructions of Form 10-Q and Regulation S-X. In preparing the
        financial statements, the Company made various estimates and assumptions
        that
        affect the amounts of assets and liabilities the Company reports as of the
        dates
        of the balance sheets and amounts the Company reports for the periods shown
        in
        the consolidated statements of operations, stockholders’ equity and cash flows.
        The Company’s actual results could differ significantly from those estimates.
        Material estimates that are particularly susceptible to significant changes
        in
        the near term relate to the Company’s recognition of revenues and accrued
        expenses, estimate of the allowance for doubtful accounts, estimate of asset
        impairments, estimate of deferred taxes and determination of depreciation
        and
        amortization expense.
 
 In
        management’s opinion, the accompanying unaudited consolidated financial
        statements contain all adjustments (consisting of normal recurring accruals)
        necessary to present fairly the financial position of the Company as of June
        30,
        2007, the related results of operations for the three months and six months
        ended June 30, 2007 and 2006 and the cash flows for the six months ended
        June
        30, 2007 and 2006. The information included in this Quarterly Report on Form
        10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K
        for the year ended December 31, 2006.
 
 The
        results of operations for the three months and six months ended June 30,
        2007
        are not necessarily an indication of the results expected for the full
        year.
 
 A
        summary
        of the significant accounting policies consistently applied in the preparation
        of the accompanying consolidated financial statements follows.
 
 *Cash
        and Cash Equivalents*
 
 The
        Company considers all highly liquid debt instruments purchased with a maturity
        of three months or less and money market mutual funds to be cash
        equivalents.
 
 The
        Company maintains its cash and cash equivalents in accounts and instruments
        which may not be federally insured. The Company has not experienced any losses
        in such accounts and believes it is not exposed to any significant credit
        risks
        on cash and cash equivalents.
  *Property
        and Equipment*
 
 Property
        and equipment, including renewals and betterments, are capitalized and stated
        at
        cost, while maintenance and repairs are expensed currently. Assets are
        depreciated on a straight-line basis. The depreciable lives of drilling and
        workover rigs and related equipment are three to 15 years. The depreciable
        life
        of other equipment is three years. Depreciation is not commenced until acquired
        or refurbished rigs are placed in service. Once placed in service, depreciation
        continues when rigs are being repaired, refurbished or between periods of
        deployment. Assets not placed in service and not being depreciated were $63,205
        and $57,247 as of June 30, 2007 and December 31, 2006, respectively. Gains
        and losses on dispositions are included in operating revenues.
 
 The
        Company capitalizes interest as a component of the cost of drilling rigs
        constructed for its own use. For the six months ended June 30, 2007 and 2006,
        the Company capitalized $903 and $2,031, respectively, and for the three
        months
        ended June 30, 2007 and 2006, the Company capitalized $449 and $902,
        respectively, of interest costs incurred during the construction periods
        of
        certain drilling rigs.
 
 The
        Company reviews long-lived assets to be held and used for impairment whenever
        events or changes in circumstances indicate that the carrying amount of the
        assets may not be recoverable. If the sum of the undiscounted expected future
        cash flows is less than the carrying amount of the assets, the Company
        recognizes an impairment loss based upon fair value of the asset.
 
 On
        January 2, 2007, the Company purchased an approximately 18,100 square foot
        building located in Edmond, Oklahoma for cash of $1,400 and the assumption
        of
        existing debt of approximately $1,590.
 
 *Income
        Taxes*
 
 Pursuant
        to Statement of Financial Accounting Standards (“SFAS”) No. 109, “ *Accounting
        for Income Taxes,* ”
the
        Company follows the asset and liability method of accounting for income taxes,
        under which the Company recognizes deferred tax assets and liabilities for
        the
        future tax consequences attributable to differences between the financial
        statement carrying amounts of existing assets and liabilities and their
        respective tax bases. Deferred tax assets and liabilities were measured using
        enacted tax rates expected to apply to taxable income in the years in which
        the
        Company expects to recover or settle those temporary differences. A statutory
        Federal tax rate of 35% and effective state tax rate of 3.7% (net of Federal
        income tax effects) were used for the enacted tax rates for all
        periods.
 
 As
        changes in tax laws or rates are enacted, deferred income tax assets and
        liabilities are adjusted through the provision for income taxes. Deferred
        tax
        assets are reduced by a valuation allowance if, based on available evidence,
        it
        is more likely than not that some portion or all of the deferred tax assets
        will
        not be realized. The classification of current and noncurrent deferred tax
        assets and liabilities is based primarily on the classification of the assets
        and liabilities generating the difference.
 
 *Net
        Income Per Common Share*
 
 The
        Company computes and presents net income per common share in accordance with
        SFAS No. 128, “ *Earnings
        per Shar* e.”
This
        standard requires dual presentation of basic and diluted net income per share
        on
        the face of the Company’s statement of operations. Basic net income per common
        share is computed by dividing net income or loss attributable to common stock
        by
        the weighted average number of common shares outstanding for the period.
        Diluted
        net income per common share reflects the potential dilution that could occur
        if
        options or other contracts to issue common stock were exercised or converted
        into common stock.
  *Stock-based
          Compensation*
 The
            Company adopted SFAS No. 123(R), “*Share-Based Payment*” upon
            granting its first stock options on August 16, 2005. SFAS No. 123(R)
            requires a public entity to measure the costs of employee services received
            in
            exchange for an award of equity or liability instruments based on the
            grant-date
            fair value of the award. That cost will be recognized over the periods
            during
            which an employee is required to provide service in exchange for the
            award.


-7-
 ***Table
            of Contents***
  *Recent
        Accounting Pronouncements*
 
 The
        Company adopted FASB Interpretation 48, Accounting for Uncertainty in Income
        Taxes (“FIN 48”), on January 1, 2007. The adoption of FIN 48 did not have a
        material effect on our consolidated financial position or results of operations.
        The Company is subject to U.S. federal income tax as well as income tax of
        multiple state jurisdictions. Our 2005 − 2006 U.S. federal and state income tax
        returns remain open to examination by the Internal Revenue Service (IRS).
        The
        Company is continuing its practice of recognizing interest and/or penalties
        related to income tax matters as income tax expense.
 
 In
        September 2006, the FASB issued SFAS No. 157 (“SFAS 157”), “Fair Value
        Measurements.” SFAS 157 defines fair value, establishes a framework for
        measuring fair value in generally accepted accounting principles (“GAAP”), and
        expands disclosures about fair value measurements. SFAS 157 applies under
        other
        accounting pronouncements that require or permit fair value measurements,
        the
        FASB having previously concluded in those accounting pronouncements that
        fair
        value is the relevant measurement attribute. Accordingly, SFAS 157 does not
        require any new fair value measurements. However, for some entities, the
        application of SFAS 157 will change current practice. SFAS 157 is effective
        for
        fiscal years beginning after November 15, 2007. The Company does not expect
        the
        adoption of SFAS 157 to have a material impact on its financial position
        or
        results of operations and financial condition.
 
 In
        February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), “The Fair Value Option
        for Financial Assets and Financial Liabilities−−Including an amendment of FASB
        Statement No. 115.” SFAS No. 159 permits entities to choose to measure many
        financial instruments and certain other items at fair value. Unrealized gains
        and losses on items for which the fair value option has been elected will
        be
        recognized in earnings at each subsequent reporting date. SFAS No. 159 is
        effective for fiscal years beginning January 1, 2008. The Company is evaluating
        the impact that the adoption of SFAS No. 159 may have on its consolidated
        financial statements.
 
 **2.
        Acquisitions**
 
 On
        January 18, 2006, the Company completed the acquisition of six land
        drilling rigs and certain other assets, including heavy haul trucks and excess
        rig equipment and inventory, from Big A Drilling, L.L.C. (“Big A”). The results
        of Big A’s operations have been included in the consolidated financial
        statements since that date. The purchase price for the assets consisted of
        $16,028 in cash and 72,571 shares of our common stock with a fair market
        value
        of $1,816. At closing, the Company also entered into a lease agreement with
        an
        affiliate of Big A under which it leased a rig refurbishment yard located
        in
        Woodward, Oklahoma. The lease had an initial term of six months, and the
        Company
        has the option to extend the initial term for a period of three years following
        the expiration of the initial term. The lease is currently month-to-month.
        The
        purchase price has been allocated to property and equipment totaling $17,077,
        goodwill of $380 and customer lists of $387. Customer lists are being amortized
        over an expected life of four years. The entire amount allocated to goodwill
        is
        considered deductible for tax purposes.
 
 On
        January 9, 2007, the Company completed the acquisition of 31 workover rigs,
        24
        of which were in service at the time of the acquisition, from Eagle Well
        Service, Inc. (“Eagle”) and related subsidiaries for $2,500 in cash, 1,070,390
        shares of our common stock with a fair market value of $15,124, and the
        assumption of debt of $6,516, liabilities of $800 and additional deferred
        income
        taxes of $7,708. This acquisition provided a platform for the Company to
        expand
        into the well service industry. The Company acquired the stock of Eagle,
        which
        was accounted for using the purchase method of accounting. The deferred tax
        liability assumed in the acquisition was the main factor that resulted in
        the
        Company recording goodwill, all of which is not deductible for tax purposes.
        The
        amortizable intangibles acquired include trade name and customer lists, which
        will be amortized over two and four years, respectively. The operations related
        to the Eagle acquisition are included in the Company’s statement of operations
        as of the respective closing date. The Company is in the process of gathering
        additional information to finalize the fair value of assets acquired and
        the
        purchase price allocation is subject to change.
 
 The
        following table summarizes the allocation of purchase price to the Company’s
        acquisition of Eagle:
  Assets
                      acquired:Cash
                  
                  $
                  163Prepaid
                      Expenses
                  
                  
                  227Accounts
                      Receivable
                  
                  
                  1,694Drilling
                      equipment
                  
                  
                  -Workover
                      equipment
                  
                  
                  23,912Vehicles
                  
                  
                  1,943Other
                      equipment
                  
                  
                  244Customer
                      Lists
                  
                  
                  3,380Trade
                      Name
                  
                  
                  190Goodwill
                  
                  
                  852$
                  32,605


The
        following pro forma information gives effect to the Eagle acquisition as
        though
        it was effective at the beginning of each year presented. It also gives effect
        to the Big A acquisition as though it was effective at the beginning of 2006.
        Pro forma adjustments primarily relate to additional depreciation, amortization
        and interest costs. The information reflects the Company’s historical data and
        historical data from the acquired business for the periods indicated. The
        pro
        forma data may not be indicative of the results the Company would have achieved
        had it completed the acquisition at the beginning of each period presented,
        or
        that it may achieve in the future. The pro forma financial information should
        be
        read in conjunction with the accompanying historical financial statements.
        Pro
        forma income per basic and diluted common share is computed based on the
        weighted average pro forma number of basic and diluted shares assumed to
        be
        outstanding during the period. Pro forma per share information is presented
        for
        the three months ended June 30, 2007 on the basis of 26,019,000 and 26,117,000
        weighted average shares issued basic and diluted. Pro forma per share
        information is presented for the six months ended June 30, 2007 on the basis
        of
        25,963,000 and 26,028,000 weighted average shares issued basic and diluted.
        Pro
        forma per share information is presented for the three months ended June
        30,
        2006 on the basis of 26,008,000 and 26,028,000 weighted average shares issued
        basic and diluted. Pro forma per share information is presented for the six
        months ended June 30, 2006 on the basis of 25,297,000 and 25,322,000 weighted
        average shares issued basic and diluted. Dilutive pro forma effect is given
        to
        shares that are issuable upon the exercise of outstanding options under an
        employee stock option plan.
 **Pro
                      Forma****Three
                      Months Ended June 30,**
                  
                  **Six
                      Months Ended June 30,****2007**
                  
                  **2006**
                  
                  **2007**
                  
                  **2006**Total
                      revenues
                  
                  $
                  74,720
                  
                  $
                  71,255
                  
                  $
                  154,056
                  
                  $
                  130,961Net
                      income
                  
                  $
                  8,714
                  
                  $
                  13,916
                  
                  $
                  20,114
                  
                  $
                  25,213Net
                      income per common share:Basic
                  
                  $
                  0.33
                  
                  $
                  0.54
                  
                  $
                  0.77
                  
                  $
                  1.00Diluted
                  
                  $
                  0.33
                  
                  $
                  0.53
                  
                  $
                  0.77
                  
                  $
                  1.00
 -8-
 ***Table
                of Contents***
  **3.
            Long-term Debt**
 Long-term
            debt consists of the following:
 **June
                      30,**
                  
                  **December
                      31,****2007**
                  
                  **2006**Notes
                      payable to De Lage Landen Financial Services, collateralized
                      by
                      cranes,payable
                      in ninety-six monthly principal and interest installments of
                      $81Interest
                      on the notes ranges from 6.74% - 7.07%, with various due dates
                      (1)
                  
                  $
                  5,407
                  
                  $
                  4,167Revolving
                      credit facility with Fortis Capital Corp., collateralized by
                      the Company's
                      assets,and
                      matures on January 13, 2009. Loans under the revolving credit
                      facilitybear
                      interest at variable rates as defined in the credit agreement.
                      (2)
                  
                  
                  60,000
                  
                  
                  60,000Notes
                      payable to Ford Credit, collateralized by trucks,payable
                      in monthly principal and interest installments of $4.Interest
                      on the notes is 7.99%-8.99% with various due dates. (3)
                  
                  
                  -
                  
                  
                  167Note
                      payable to John Deere Construction & Forestry Company, collateralized
                      by forklifts,
                    payable
                      in thirty-six monthly installments of $11, due December 1,
                      2009.
                      (4)
                  
                  
                  337
                  
                  
                  393Note
                      payable to Holliday American Mortgage, collateralized by the
                      building,
                      payable in
                    principal
                      and interest installments of $14, interest on the note is 6.0%
                      with a due
                      date of
                    January
                      1, 2021. (5)
                  
                  
                  1,546
                  
                  
                  -Notes
                      payable to General Motors Acceptance Corporation, collateralized
                      by
                      trucks, payable in
                    monthly
                      principal and interest installments of $5, various due
                      dates.
                  
                  
                  142
                  
                  
                  -67,432
                  
                  
                  64,727Less
                      current installments
                  
                  
                  901
                  
                  
                  636$
                  66,531
                  
                  $
                  64,091
 (1)
                  On
                      December 7, 2005, January 4, 2006, June 12, 2006 and March 12,
                      2007, the Company entered into Term Loan and Security Agreements
                      with De
                      Lage Landen Financial Services, Inc. The loans provide for
                      term
                      installment notes in an aggregate amount not to exceed $6,000.
                      The
                      proceeds of the term loans were used to purchase five
                      cranes.
 (2)
                  On
                      January 13, 2006, we entered into a $150.0 million revolving credit
                      facility with Fortis Capital Corp., as administrative agent,
                      lead arranger
                      and sole bookrunner, and a syndicate of lenders, which include
                      The Royal
                      Bank of Scotland plc, The CIT Group/Business Credit, Inc.,
                      Calyon
                      Corporate and Investment Bank, Merrill Lynch Capital, Comerica
                      Bank and
                      Caterpillar Financial Services Corporation. The revolving credit
                      facility
                      matures on January 13, 2009. The initial aggregate revolving
                      commitment of $150.0 million is automatically and permanently
                      reduced by
                      $10.0 million at the end of each fiscal quarter starting September
                      30,
                      2006. The aggregate revolving commitment was $110,000 as of
                      June 30, 2007.
                      Loans under the revolving credit facility bear interest at
                      LIBOR plus a
                      margin that can range from 2.0% to 3.0% or, at our option,
                      the prime rate
                      plus a margin that can range from 1.0% to 2.0%, depending on
                      the ratio of
                      our outstanding senior debt to “Adjusted EBITDA” as defined in the credit
                      agreement. Interest payments shall be made on advances made at prime
                      on the last business day of each calendar quarter and on the
                      date such
                      advance shall be paid in full, while advances made at LIBOR
                      are payable on
                      the last day of each interest period which could be one, two,
                      three, or
                      six months as selected by the Company. Interest payments shall
                      be made at
                      three month intervals from the first day of such interest period
                      if the
                      period is greater than three months. Our borrowings under this
                      revolving
                      credit facility were used to fund a portion of the Big A acquisition
                      and
                      to repay in full all outstanding borrowings under our term
                      loan with
                      Merrill Lynch Capital and our revolving line of credit with
                      International
                      Bank of Commerce.  The
                      revolving credit facility also provides for a quarterly commitment
                      fee of
                      0.5% per annum of the unused portion of the revolving credit
                      facility, and fees for each letter of credit issued under the
                      facility.
                      Commitment fees expense for the three months and six months
                      ended June 30,
                      2007 were $68 and $149. Our subsidiaries have guaranteed the
                      loans and
                      other obligations under the revolving credit facility. The
                      obligations
                      under the revolving credit facility and the related guarantees
                      are secured
                      by a first priority security interest in substantially all
                      of our assets,
                      as well as the shares of capital stock of our direct and indirect
                      subsidiaries.  The
              revolving credit facility contains customary covenants for facilities
              of this
              type, including among other things, covenants that restrict our ability
              to make
              capital expenditures, incur indebtedness, incur liens, dispose of property,
              repay debt, pay dividends, repurchase shares and make certain acquisitions.
              The
              financial covenants are a minimum fixed charge coverage ratio of 1.75
              to 1.00
              and a maximum total leverage ratio of 2.00 to 1.00. The Company was
              in
              compliance with all covenants at June 30, 2007. The revolving credit
              facility
              provides for mandatory prepayments under certain circumstances as more
              fully
              discussed in the revolving credit facility. The
              revolving credit facility contains various events of default, including
              failure
              to pay principal and interest when due, breach of covenants, materially
              incorrect representations, default under certain other agreements,
              bankruptcy or
              insolvency, the occurrence of specified ERISA events, entry of enforceable
              judgments against us in excess of $3.0 million not stayed, and the
              occurrence of
              a change of control. If an event of default occurs, all commitments
              under the
              revolving credit facility may be terminated and all of our obligations
              under the
              revolving credit facility could be accelerated by the lenders, causing
              all loans
              outstanding (including accrued interest and fees payable thereunder)
              to be
              declared immediately due and payable.
 
 (3)
                  On
                      various dates during 2006, the Company entered into term loan
                      agreements
                      with Ford Credit. The loans provide for term installment notes
                      in an
                      aggregate not to exceed $174. The proceeds of the term loans
                      were used to
                      purchase eight trucks. These notes were paid off in the first
                      quarter of
                      2007. 
 (4)
                  On
                      November 21, 2006, the Company entered into term loan agreements
                      with John
                      Deere Construction & Forestry Company. The loans provide for term
                      installments in an aggregate not to exceed $403. The proceeds
                      of the term
                      loans were used to purchase two
                      forklifts. 
 (5)
                  On
                      January 2, 2007, the Company assumed a term loan agreement with
                      Holliday
                      American Mortage related to the acquisition of a building.
                      The loan
                      provides for term installments in an aggregate not to exceed
                      $1,590.




-9-
 ***Table
          of Contents***


Long-term
      debt maturing each year subsequent to June 30, 2007 is as follows:


2008
                
                $
                9012009
                
                
                60,9272010
                
                
                9132011
                
                
                8662012
                
                
                9222013
                    and thereafter
                
                
                2,903$
                67,432
  **4.
          Workers’ Compensation and Health Insurance**
 The
            Company is insured under a large deductible workers’ compensation insurance
            policy. The policy generally provides for a $1,000 deductible per covered
            accident. Due to the size of the deductible, the policy requires the
            Company to
            maintain a letter of credit with an insurance company and a bank. At
            June 30,
            2007 and December 31, 2006, the Company had a deposit of $2,745 and $2,600,
            respectively, with an insurance company collateralizing the letter of
            credit.
            The deposit is reflected in restricted cash and deposit. Accrued expenses
            at
            June 30, 2007 and December 31, 2006 included approximately $3,178 and
            $1,869,
            respectively, for estimated but not reported costs and premium accruals
            related
            to our workers’ compensation insurance.
 
 On
            November 1, 2005, the Company initiated a self-insurance program for major
            medical, hospitalization and dental coverage for employees and their
            dependents,
            which is partially funded by payroll deductions. The Company provided
            for both
            reported and incurred but not reported medical costs in the accompanying
            consolidated balance sheets. The Company has a maximum liability of $75
            per
            employee/dependent per year. Amounts in excess of the stated maximum
            are covered
            under a separate policy provided by an insurance company. Accrued expenses
            at
            June 30, 2007 and December 31, 2006 included approximately $203 and $404,
            respectively, for the Company’s estimate of incurred but not reported costs
            related to the self-insurance portion of the Company’s health
            insurance.
 
 **5.
            Transactions with Affiliates**
 
 Effective
            April 1, 2005, the Company entered into an administrative services
            agreement with its then affiliate Gulfport Energy Corporation (“Gulfport”).
            Under this agreement, Gulfport agreed to provide certain services to
            the
            Company, including accounting, human resources, legal and technical support
            services. In return for the services, the Company agreed to pay Gulfport
            an
            annual fee of approximately $414 payable in equal monthly installments
            during
            the term of this agreement. In addition, the Company leased approximately
            1,200
            square feet of office space from Gulfport for the Company’s headquarters for an
            annual rent of $21 payable in equal monthly installments. The services
            the
            Company received under the administrative services agreement and the
            fees for
            such services could be amended by mutual agreement of the parties. In
            January
            2006, the Company reduced the level of administrative services being
            provided by
            Gulfport and increased its office space to approximately 2,500 square
            feet. As a
            result, the Company’s annual fee for administrative services was reduced to
            approximately $150 and its annual rental was increased to approximately
            $44. The
            administrative services agreement had a three-year term, and upon expiration
            of
            that term the agreement would continue on a month-to-month basis until
            cancelled
            by either party with at least 30 days prior written notice. The administrative
            services agreement was terminable (1) by the Company at any time with at
            least 30 days prior written notice to Gulfport and (2) by either party if
            the other party is in material breach of the agreement and such breach
            had not
            been cured within 30 days of receipt of written notice of such breach.
            The
            Company terminated the administrative services agreement effective April
            1,
            2006. As a result, the Company incurred no expense related to this agreement
            during the three and six months ended June 30, 2007. The Company paid
            Gulfport
            approximately $0 and $49 in consideration for these services during the
            three
            and six months ended June 30, 2006, respectively. At June 30, 2007 and
            December 31, 2006, $0 was owed to Gulfport and included in accounts
            payable. Prior to entry into this administrative services agreement,
            the Company
            reimbursed Gulfport for its dedicated employee time, office space and
            general
            and administrative costs based upon the pro rata share of time its employees
            spent performing service for the Company.
 
 Additionally,
            the Company provided contract drilling services totaling $0 and $2,616
            to
            affiliated entities during the three and six months ended June 30, 2007.
            The
            Company provided contract drilling services totaling $2,953 and $5,123
            to
            affiliated entities during the three and six months ended June 30, 2006,
            respectively. The Company had receivables from affiliates of $0 and $1,016
            at
            June 30, 2007 and December 31, 2006, respectively.
 
 **6.
            Commitments and Contingencies**
 
 The
            Company currently has a lawsuit pending in which the Company sued the
            defendant,
            an oil and gas operating company, for approximately $942 as a result
            of the
            defendant’s refusal to make payment pursuant to the terms of its drilling
            contract. The defendant has countersued for damages in excess of $2,800,
            alleging breach of contract, negligence, gross negligence and breach
            of
            warranties. Mediation was conducted and no settlement was reached. Settlement
            discussions are ongoing. It is not possible to predict the outcome of
            this
            matter. An allowance of $842 has been provided for a portion of the amounts
            receivable under the drilling contract. No amounts have been accrued
            for damages
            sought in the counterclaim. Legal fees associated with the lawsuit have
            been
            expensed during the period incurred. Should the amounts ultimately not
            be
            collected or if any amounts are due under the counterclaims then additional
            expenses will be recorded.
 
 Various
            other claims and lawsuits, incidental to the ordinary course of business,
            are
            pending against the Company. In the opinion of management, all matters
            are
            adequately covered by insurance or, if not covered, are not expected
            to have a
            material effect on the Company’s consolidated financial position, results of
            operations or cash flows.
 
 -10-
 ***Table
                of Contents***
 **7.
                Net Income Per Common Share**
 
 The
                following table presents a reconciliation of the numerators and denominators
                of
                the basic and diluted earnings per share (“EPS”) and diluted EPS comparisons as
                required by SFAS No. 128:
 **Three
                        Months Ended**
                    
                    **Six
                        Months Ended****June
                        30,**
                    
                    **June
                        30,****2007**
                    
                    **2006**
                    
                    **2007**
                    
                    **2006**Basic:Net
                        income
                    
                    $
                    8,714
                    
                    $
                    14,729
                    
                    $
                    20,101
                    
                    $
                    26,075Weighted
                        average shares
                    
                    
                    26,019
                    
                    
                    24,938
                    
                    
                    25,963
                    
                    
                    24,227Earnings
                        per share
                    
                    $
                    0.33
                    
                    $
                    0.59
                    
                    $
                    0.77
                    
                    $
                    1.08Diluted:Net
                        income
                    
                    $
                    8,714
                    
                    $
                    14,729
                    
                    $
                    20,101
                    
                    $
                    26,075Weighted
                        average shares:Outstanding
                        (thousands)
                    
                    
                    26,019
                    
                    
                    24,938
                    
                    
                    25,963
                    
                    
                    24,227Restricted
                        Stock (thousands)
                    
                    
                    97
                    
                    
                    20
                    
                    
                    65
                    
                    
                    2526,116
                    
                    
                    24,958
                    
                    
                    26,028
                    
                    
                    24,252Income
                        per share
                    
                    $
                    0.33
                    
                    $
                    0.59
                    
                    $
                    0.77
                    
                    $
                    1.08
 The
            weighted average number of diluted shares excludes 25,584 and 31,310
            shares for
            the three and six months ended June 30, 2007 for options due to their
            antidilutive effects.


**8.
        Equity Transactions**
 
 Effective
        January 18, 2006, the Company issued 72,571 shares of common stock to the
        equity owners of Big A in connection with the Company’s acquisition of the
        assets of Big A. (See Note 2)
 
 In
        March
        2006, the Company closed a public offering of 3,450,000 shares of common
        stock
        at a price of $22.75 per share. In the offering, a total of 1,700,000 shares
        were sold by the Company and 1,750,000 shares were sold by the selling
        stockholder. The offering resulted in net proceeds to the Company of
        approximately $36,229, excluding offering expenses of $577. The Company did
        not
        receive any proceeds from the sale of shares by the selling
        stockholder.
 
 Effective
        January 9, 2007, the Company issued 1,070,390 shares of common stock to the
        equity owners of Eagle in connection with the Company’s acquisition of Eagle.
 
 **9.
        Stock Options and Stock Option Plan**
 
 The
        Company’s 2005 Stock Incentive Plan was adopted on July 20, 2005 and
        amended on November 16, 2005 (the “2005 Plan”) which is described below.
        The compensation cost that has been charged against income before taxes related
        to stock options was $480 and $1,007 for the three and six months ended June
        30,
        2007, respectively, and $811 and $1,341 for the three and six months ended
        June
        30, 2006, respectively. These options are reported as equity instruments
        and
        their fair value is amortized to expense using the straight line method over
        the
        vesting period. The shares of stock issued once the options are exercised
        will
        be from authorized but unissued common stock.
 
 The
        Company receives a tax deduction for certain stock option exercises during
        the
        period the options are exercised, generally for the excess of the price at
        which
        the options are sold over the exercise price of the options. There have been
        no
        stock options exercised under the 2005 Plan.
 
 The
        purpose of the 2005 Plan was to enable the Company, and any of its affiliates,
        to attract and retain the services of the types of employees, consultants
        and
        directors who will contribute to its long-range success and to provide
        incentives which are linked directly to increases in share value which will
        inure to the benefit of the Company’s stockholders. The 2005 Plan provided a
        means by which eligible recipients of awards may be given an opportunity
        to
        benefit from increases in value of the Company’s common stock through the
        granting of incentive stock options and nonstatutory stock options. Eligible
        award recipients under the 2005 Plan were employees, consultants and directors
        of the Company and its affiliates. Incentive stock options under the 2005
        Plan
        could be granted only to employees. Awards other than incentive stock options
        under the 2005 Plan could be granted to employees, consultants and directors.
        The shares that may be issued upon exercise of the options will be from
        authorized but unissued common stock, and the maximum aggregate amount of
        such
        common stock which could be issued upon exercise of all awards under the
        plan,
        including incentive stock options, could not exceed 1,000,000 shares, subject
        to
        adjustment to reflect certain corporate transactions or changes in the Company’s
        capital structure.
 
 The
        Company’s board of directors and a majority of the Company’s stockholders
        approved the Company’s 2006 Stock Incentive Plan (the “2006 Plan,” and together
        with the 2005 Plan, the “Plans”), effective April 20, 2006. No further awards
        will be made under the 2005 Plan. The purpose of the 2006 Plan provides
        a means by which eligible recipients of awards may be given an opportunity
        to
        benefit from increases in value of the Company’s common stock through the
        granting of one or more of the following awards: (1) incentive stock options,
        (2) nonstatutory stock options, (3) restricted awards, (4) performance awards
        and (5) stock appreciation rights. The maximum aggregate amount of the Company’s
        common stock which may be issued upon exercise of all awards under the 2006
        Plan, may not exceed 2,500,000 shares, less shares underlying options granted
        to
        employees under the 2005 Plan prior to the adoption of the 2006
        Plan.
  On
        April
        20, 2007, the Company filed a Tender Offer Statement on Schedule TO relating
        to
        the Company’s offer to eligible directors, officers, employees and consultants
        to exchange certain outstanding options to purchase shares of our common
        stock
        for restricted stock awards consisting of the right to receive restricted
        shares
        of our common stock (the “Restricted Stock Awards”). The offer expired on May
        21, 2007. Pursuant to the offer, the Company accepted for cancellation eligible
        options to purchase 729,000 shares of the Company’s common stock tendered by
        directors, officers, employees and consultants eligible to participate in
        the
        offer. Subject to the terms and conditions of the offer, on May 21, 2007
        the
        Company granted one Restricted Stock Award in exchange for every two shares
        of
        common stock underlying the eligible options tendered. The Restricted Stock
        Awards will vest in equal amounts on January 1, 2008 and
        January 1, 2009, subject to earlier vesting or forfeiture in certain
        circumstances. We granted the Restricted Stock Awards under the 2006 Plan.
  An
        incremental cost was computed in accordance with SFAS No. 123(R) upon the
        conversion of options to restricted stock. The incremental cost was measured
        as
        the excess of the fair value of the modified award over the fair value to
        the
        original award immediately preceding conversion, measured based on the share
        price and other pertinent factors at that date. The incremental cost to be
        recognized over the vesting period of the modified award is $387.
  The
        fair
        value of each option award is estimated on the date of grant using a
        Black-Scholes valuation model that uses the assumptions noted in the following
        table. Expected volatilities are based on the historical volatility of a
 -11-
 ***Table
            of Contents***
  selected
        peer. The majority of the Company’s options are held by
        employees that make up one group with similar expected exercise behavior
        for
        valuation purposes.  The expected term of options granted is estimated
        based on an average of the vesting period and the contractual period. The
        risk-free rate for periods within the contractual life of the option is based
        on
        the U.S. Treasury yield curve in effect at the time of the grant.
  Under
        the
        2005 Plan, employee stock options become exercisable in equal monthly
        installments over a three-year period, and all options generally expire ten
        years after the date of grant. Under the 2006 Plan, employee stock options
        become exercisable to the extent the options have become vested pursuant
        to the
        vesting schedule set forth in the applicable stock option award certificate,
        and
        all options generally expire ten years after the date of grant. The Plans
        provide that all options must have an exercise price not less than the fair
        market value of the Company’s common stock on the date of the grant. The
        following table summarizes the assumptions
        used in the Black-Scholes option-pricing model for the six months ended June
        30,
        2006. We did not grant any options during the six months ended June 30,
        2007.
  **June
                    30,****2006**Expected
                    volatility
                
                48%Expected
                    life in years
                
                5.77Weighted
                    average risk free interest rate
                
                4.65%
 The
            Company has not declared dividends since it became a public company and
            does not
            intend to do so in the foreseeable future, and thus did not use a dividend
            yield. Expected life has been determined using the permitted simplified
            method.
            In each case, the actual value that will be realized, if any, will depend
            on the
            future performance of the common stock and overall stock market conditions.
            There is no assurance that the value an optionee actually realizes will
            be at or
            near the value estimated using the Black-Scholes model. The following
            table
            provides information relating to activity in the 2005 and 2006 Plans
            during the
            first six months of 2007:
 **Weighted**
                    
                    **Weighted****Average**
                    
                    **Average
                        Remaining**
                    
                    **Aggregate****Exercise
                        Price**
                    
                    **Contractual**
                    
                    **Intrinsic****Shares**
                    
                    **per
                        Share**
                    
                    **Life**
                    
                    **Value**Options
                        outstanding at December 31, 2006
                    
                    
                    832
                    
                    $
                    20.39
                    
                    
                    8.91
                    
                    $
                    (2,632
                    )Granted
                    
                    
                    -
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    -Converted
                    
                    
                    (729
                    )
                    
                    20.09Forfeited/expired
                    
                    
                    (38
                    )
                    
                    21.71Options
                        outstanding at June 30, 2007
                    
                    
                    65
                    
                    $
                    23.02
                    
                    
                    8.78
                    
                    
                    (430
                    )Options
                        fully vested and exercisable at June 30, 2007
                    
                    
                    28
                    
                    $
                    23.81
                    
                    
                    8.72
                    
                    $
                    (204
                    )


**Weighted
                    Average**
                
                **Aggregate****Grant
                    Date**
                
                **Grant
                    Date****Shares**
                
                **Fair
                    Value**
                
                **Fair
                    Value**Options
                    nonvested at December 31, 2006
                
                
                513
                
                $
                11.11
                
                $
                5,700Granted
                
                
                -
                
                
                -
                
                
                -Vested
                
                
                (92
                )
                
                11.05
                
                
                1,012Converted
                
                
                (360
                )
                
                11.07
                
                
                3,986Forfeited/expired
                
                
                (24
                )
                
                11.40
                
                
                273Options
                    nonvested at June 30, 2007
                
                
                37
                
                $
                11.45
                
                $
                429


As
      of
      June 30, 2007, there was $429 of total unrecognized compensation cost related
      to
      nonvested share-based compensation arrangements granted under the 2005 and
      2006
      Plans. That cost is expected to be recognized over a weighted-average period
      of
      1.83 years.


**10.
        Restricted Stock**
 
 Under
        all
        restricted stock awards to date, shares were issued when granted and nonvested
        shares are subject to forfeiture for failure to fulfill service conditions.
        Restricted stock awards are valued at the grant date market value of the
        underlying common stock and are being amortized to operations over the
        respective vesting period. Compensation expense for the three and six months
        ended June 30, 2007, related to shares of restricted stock was $501 and $666,
        respectively. Restricted stock activity for the six months ended June 30,
        2007
        follows:
 **Weighted
                    Average****Grant
                    Date****Shares**
                
                **Fair
                    Value**Outstanding
                    at December 31, 2006
                
                
                67
                
                $
                20.25Granted
                
                
                119
                
                
                15.42Converted
                
                
                365
                
                
                16.69Vested
                
                
                (11
                )
                
                20.25Forfeited/expired
                
                
                -
                
                
                -Outstanding
                    at June 30, 2007
                
                
                540
                
                $
                16.79


There
      was
      $6,755 of total unrecognized compensation cost related to nonvested restricted
      stock awards to be recognized over a weighted-average period of 1.50 years
      as of
      June 30, 2007.




**11.
      Employee Benefit Plans**





The
      Company implemented a new 401(k) retirement plan for its eligible employees
      during 2006. Under the plan, the Company matches 100% of employees’
contributions up to 5% of eligible compensation. Employee and employer
      contributions vest immediately. The Company’s contributions for the three and
      six months ended June 30, 2007 were $265 and $511, respectively, and $202 and
      $274 for the three and six months ended June 30, 2006,
      respectively.


-12-
 ***Table
          of Contents***


**ITEM 2.
      Management’s Discussion and Analysis of Financial
      Condition and Results of Operations**





The
      following discussion and analysis should be read in conjunction with the
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operations” section and audited consolidated financial statements and related
      notes thereto included in our Annual Report on Form 10-K, filed with the
      Securities and Exchange Commission, or SEC, on March 9, 2007 and with the
      unaudited consolidated financial statements and related notes thereto presented
      in this Quarterly Report on Form 10-Q.





**Disclosure
      Regarding Forward-Looking Statements**





Our
      disclosure and analysis in this Form 10-Q may include forward-looking statements
      within the meaning of Section 27A of the Securities Act of 1933, as
      amended, or the Securities Act, Section 21E of the Securities Exchange Act
      of 1934, as amended, or the Exchange Act, and the Private Securities Litigation
      Reform Act of 1995, that are subject to risks and uncertainties. Forward-looking
      statements give our current expectations and projections relating to our
      financial condition, results of operations, plans, objectives, future
      performance and business. You can identify these statements by the fact that
      they do not relate strictly to historical or current facts. These statements
      may
      include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,”
“plan,” “believe” and other words and terms of similar meaning in connection
      with any discussion of the timing or nature of future operating or financial
      performance or other events. All statements other than statements of historical
      facts included in this Form 10-Q that address activities, events or developments
      that we expect, believe or anticipate will or may occur in the future are
      forward-looking statements.





These
      forward-looking statements are largely based on our expectations and beliefs
      concerning future events, which reflect estimates and assumptions made by our
      management. These estimates and assumptions reflect our best judgment based
      on
      currently known market conditions and other factors relating to our operations
      and business environment, all of which are difficult to predict and many of
      which are beyond our control.





Although
      we believe our estimates and assumptions to be reasonable, they are inherently
      uncertain and involve a number of risks and uncertainties that are beyond our
      control. In addition, management’s assumptions about future events may prove to
      be inaccurate. Management cautions all readers that the forward-looking
      statements contained in this Form 10-Q are not guarantees of future performance,
      and we cannot assure any reader that those statements will be realized or the
      forward-looking events and circumstances will occur. Actual results may differ
      materially from those anticipated or implied in the forward-looking statements
      due to the factors listed in the “Management’s Discussion and Analysis of
      Financial Condition and Results of Operations” and “Risk Factors” sections of
      this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K. All
      forward-looking statements speak only as of the date of this Form 10-Q. We
      do
      not intend to publicly update or revise any forward-looking statements as a
      result of new information, future events or otherwise, except as required by
      law. These cautionary statements qualify all forward-looking statements
      attributable to us or persons acting on our behalf.





**Overview**





We
      provide contract land drilling services to oil and natural gas exploration
      and
      production companies. We currently own a fleet of 65 land drilling rigs, of
      which 54 are marketed and 11 are held in inventory. We also own a fleet of
      43
      workover rigs, of which 30 are marketed, 11 are in the process of being
      refurbished and two are held in inventory. We also currently own a fleet of
      69
      trucks used to transport our rigs.





We
      commenced operations in 2001 with the purchase of one stacked 650-horsepower
      rig
      that we refurbished and deployed. We subsequently made selective acquisitions
      of
      both operational and inventoried rigs, as well as ancillary equipment.
      O ur
      management team has significant experience not only with acquiring rigs, but
      also with refurbishing and deploying inventoried rigs. We have successfully
      refurbished and brought into operation 24 inventoried drilling rigs during
      the
      period from November 2003 to July 2007. In addition, we have a 41,000 square
      foot machine shop in Oklahoma City which allows us to refurbish and repair
      our
      rigs and equipment in-house. This facility, which complements our four drilling
      rig refurbishment yards, significantly reduces our reliance on outside machine
      shops and the attendant risk of third-party delays in our rig refurbishment
      program.




We
      currently operate our drilling rigs in Oklahoma, Louisiana, Texas, North Dakota,
      Kansas and Colorado. Our workover rigs are currently operating in Oklahoma,
      Texas, Kansas, Colorado, and New Mexico. A majority of the wells we have drilled
      for our customers have been drilled in search of natural gas reserves. Natural
      gas is often found in deep and complex geologic formations that generally
      require higher horsepower, premium rigs and experienced crews to reach targeted
      depths. Our current fleet of 65 rigs includes 38 rigs ranging from 950 to 2,500
      horsepower. Accordingly, such rigs can, or in the case of inventoried rigs
      upon
      refurbishment, will be able to, reach the depths required to explore for deep
      natural gas reserves. Our higher horsepower land drilling rigs can also drill
      horizontal wells, which are increasing as a percentage of total wells drilled
      in
      North America. We believe our premium rig fleet, inventory and experienced
      crews
      position us to benefit from the natural gas drilling activity in our core
      operating areas.





We
      earn
      our contract drilling revenues by drilling oil and natural gas wells for our
      customers. We obtain our contracts for drilling oil and natural gas wells either
      through competitive bidding or through direct negotiations with customers.
      Our
      drilling contracts generally provide for compensation on either a daywork or
      footage basis. We have not historically entered into turnkey contracts and
      do
      not intend to enter into turnkey contracts, subject to changes in market
      conditions, although it is possible that we may acquire such contracts in
      connection with future acquisitions. Contract terms we offer generally depend
      on
      the complexity and risk of operations, the on-site drilling conditions, the
      type
      of equipment used and the anticipated duration of the work to be performed.
      Although we currently have 16 of our rigs operating under agreements with terms
      ranging from one to two years, our contracts generally provide for the drilling
      of a single well and typically permit the customer to terminate on short
      notice.





A
      significant performance measurement in our industry is operating rig
      utilization. We compute operating rig utilization rates by dividing revenue
      days
      by total available days during a period. Total available days are the number
      of
      calendar days during the period that we have owned the operating rig. Revenue
      days for each operating rig are days when the rig is earning revenues under
      a
      contract, i.e. when the rig begins moving to the drilling location until the
      rig
      is released from the contract. On daywork contracts, during the mobilization
      period we typically earn a fixed amount of revenue based on the mobilization
      rate stated in the contract. We begin earning our contracted daywork rate when
      we begin drilling the well. Occasionally, in periods of increased demand, we
      will receive a percentage of the contracted dayrate during the mobilization
      period. We account for these revenues as mobilization fees.





For
      the
      three and six months ended June 30, 2007 and 2006 and years ended
      December 31, 2006, 2005 and 2004, our rig utilization rates, revenue days
      and average number of operating rigs were as follows


**Three
                  Months Ended**
              
              **Six
                  Months Ended****June
                  30,**
              
              **June
                  30,**
              
              **Years
                  Ended December 31,****2007**
              
              **2006**
              
              **2007**
              
              **2006**
              
              **2006**
              
              **2005**
              
              **2004**Average
                  number of operating rigs
              
              
              52
              
              
              43
              
              
              52
              
              
              41
              
              
              45
              
              
              17
              
              
              9Revenue
                  days
              
              
              3,624
              
              
              3,631
              
              
              7,255
              
              
              6,985
              
              
              15,202
              
              
              5,781
              
              
              2,733Utilization
                  Rates
              
              
              76
              %
              
              92
              %
              
              78
              %
              
              94
              %
              
              93
              %
              
              95
              %
              
              81
              %
 The
          increase in the number of revenue days in the three and six month-period
          ended
          June 30, 2007 as compared to the same period in 2006 is attributable to
          the
          increase in the size of our operating rig fleet partially offset by a decrease
          in our rig utilization rate.
 
 We
          devote
          substantial resources to maintaining, upgrading and expanding our rig fleet.
          We
          substantially completed the refurbishment of three rigs to date in 2007,
          12 rigs
          in 2006 and six rigs in 2005.
 -13-
 ***Table
              of Contents***
  **Market
          Conditions in Our Industry**
 
 The
          United States contract land drilling services industry is highly cyclical.
          Volatility in oil and natural gas prices can produce wide swings in the
          levels
          of overall drilling activity in the markets we serve and affect the demand
          for
          our drilling services and the dayrates we can charge for our rigs. The
          availability of financing sources, past trends in oil and natural gas prices
          and
          the outlook for future oil and natural gas prices strongly influence the
          number
          of wells oil and natural gas exploration and production companies decide
          to
          drill.
 
 The
          following table depicts the prices for near month delivery contracts for
          crude
          oil and natural gas as traded on the NYMEX, as well as the most recent
          Baker
          Hughes domestic land rig count, on the dates indicate
  **At
                      June 30,**
                  
                  **At
                      December 31,****2007**
                  
                  **2006**
                  
                  **2005**
                  
                  **2004**Crude
                      oil (Bbl)
                  
                  $
                  70.47
                  
                  $
                  61.05
                  
                  $
                  61.04
                  
                  $
                  43.45Natural
                      gas (Mmbtu)
                  
                  $
                  6.77
                  
                  $
                  6.30
                  
                  $
                  11.23
                  
                  $
                  6.15U.S.
                      Land Rig Count
                  
                  
                  1,697
                  
                  
                  1,626
                  
                  
                  1,391
                  
                  
                  1,138


We
      believe capital spent on incremental natural gas production will be driven
      by an
      increase in hydrocarbon demand as well as changes in the supply of natural
      gas.
      The Energy Information Administration (EIA) has estimated that U.S. consumption
      of natural gas exceeded domestic production by 13% in 2006 and forecasts that
      U.S. consumption of natural gas will exceed U.S. domestic production by 24%
      in
      2010.





Due
      to
      its clean burning nature and strong transportation infrastructure natural gas
      has become extremely popular as a major source of energy in the U.S., for both
      consumers and industry. Many utilities, for example, have shifted away from
      coal
      or oil to natural gas to meet growing electricity demand. As a result, demand
      for natural gas is expected to rise by more than 20 percent between now and
      2030. EIA
      projects that traditional North American producing areas will provide 75% of
      long-term U.S. gas needs, but will be unable to meet this long-term projected
      demand.





In
      addition, a study published by the National Petroleum Council in September
      2003
      concluded from drilling and production data over the preceding ten years that
      average “initial production rates from new wells have been sustained through the
      use of advanced technology; however, production declines from these initial
      rates have increased significantly; and recoverable volumes from new wells
      drilled in mature producing basins have declined over time.” For example, in
      2006, as there were 3.4 times the number of wells drilled as compared to ten
      years earlier, with no increase in production according to the EIA.





We
      believe all of these factors tend to support a sustained higher natural gas
      price environment, which should create strong incentives for oil and natural
      gas
      exploration and production companies to maintain high levels of drilling
      activity in the U.S.





**Critical
      Accounting Policies and Estimates**





Our
      discussion and analysis of our financial condition and results of operations
      is
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting policies that are described in the notes to our
      consolidated financial statements. The preparation of the consolidated financial
      statements requires our management to make estimates and judgments that affect
      the reported amounts of our assets, liabilities, revenues and expenses, and
      related disclosure of contingent assets and liabilities. We continually evaluate
      our judgments and estimates in determining our financial condition and operating
      results. Estimates are based upon information available as of the date of the
      financial statements and, accordingly, actual results could differ from these
      estimates, sometimes materially. Critical accounting policies and estimates
      are
      defined as those that are both most important to the portrayal of our financial
      condition and operating results and require management’s most subjective
      judgments. The most critical accounting policies and estimates are described
      below.





***Revenue
      and Cost Recognition*** —We
      earn
      our revenues by drilling oil and natural gas wells for our customers under
      daywork or footage contracts, which usually provide for the drilling of a single
      well. We recognize revenues on daywork contracts for the days completed based
      on
      the dayrate each contract specifies. Mobilization revenues and costs are
      deferred and recognized over the drilling days of the related drilling contract.
      Individual contracts are usually completed in less than 120 days. We follow
      the
      percentage-of- completion method of accounting for footage contract drilling
      arrangements. Under this method, drilling revenues and costs related to a well
      in progress are recognized proportionately over the time it takes to drill
      the
      well.





Percentage
      of completion is determined based upon the amount of expenses incurred through
      the measurement date as compared to total estimated expenses to be incurred
      drilling the well. Mobilization costs are not included in costs incurred for
      percentage-of-completion calculations. Mobilization costs on footage contracts
      and daywork contracts are deferred and recognized over the days of actual
      drilling. Under the percentage-of-completion method, management estimates are
      relied upon in the determination of the total estimated expenses to be incurred
      drilling the well. When estimates of revenues and expenses indicate a loss
      on a
      contract, the total estimated loss is accrued.





Our
      management has determined that it is appropriate to use the
      percentage-of-completion method to recognize revenue on our footage contracts,
      which we believe is the predominant practice in the industry. Although our
      footage contracts do not have express terms that provide us with rights to
      receive payment for the work that we perform prior to drilling wells to the
      agreed upon depth, we use this method because, as provided in applicable
      accounting literature, we believe we achieve a continuous sale for our
      work-in-progress and we believe, under applicable state law, we ultimately
      could
      recover the fair value of our work-in-progress even in the event we were unable
      to drill to the agreed upon depth in breach of the applicable contract. However,
      ultimate recovery of that value, in the event we were unable to drill to the
      agreed upon depth in breach of the contract, would be subject to negotiations
      with the customer and the possibility of litigation.





We
      are
      entitled to receive payment under footage contracts when we deliver to our
      customer a well completed to the depth specified in the contract, unless the
      customer authorizes us to drill to a shallower depth. Since inception, we have
      completed all our footage contracts. Although our initial cost estimates for
      footage contracts do not include cost estimates for risks such as stuck drill
      pipe or loss of circulation, we believe that our experienced management team,
      our knowledge of geologic formations in our areas of operation, the condition
      of
      our drilling equipment and our experienced crews enable us to make reasonably
      dependable cost estimates and complete contracts according to our drilling
      plan.
      While we do bear the risk of loss for cost overruns and other events that are
      not specifically provided for in our initial cost estimates, our pricing of
      footage contracts takes such risks into consideration. When we encounter, during
      the course of our drilling operations, conditions unforeseen in the preparation
      of our original cost estimate, we immediately adjust our cost estimate for
      the
      additional costs to complete the contracts. If we anticipate a loss on a
      contract in progress at the end of a reporting period due to a change in our
      cost estimate, we immediately accrue the entire amount of the estimated loss,
      including all costs that are included in our revised estimated cost to complete
      that contract, in our consolidated statement of operations for that reporting
      period. During 2007 and 2006, we did not experience a loss on the one footage
      contract we completed. We drilled one well pursuant to a footage contract during
      the three and six months ended June 30, 2007. We are more likely to encounter
      losses on footage contracts in years in which revenue rates are lower for all
      types of contracts.





Revenues
      and costs during a reporting period could be affected by contracts in progress
      at the end of a reporting period that have not been completed before our
      financial statements for that period are released. At June 30, 2007, our footage
      drilling in progress totaled $152,000. At June 30, 2007 and December 31,
      2006, our contract drilling in progress totaled $3.2 million and $2.0 million,
      respectively, all of which relates to the revenue recognized but not yet billed
      or costs deferred on daywork contracts in progress.





We
      accrue
      estimated contract costs on footage contracts for each day of work completed
      based on our estimate of the total costs to complete the contract divided by
      our
      estimate of the number of days to complete the contract. Contract costs include
      labor, materials, supplies, repairs and maintenance and operating overhead
      allocations. In addition, the occurrence of uninsured or under-insured losses
      or
      operating cost overruns on our footage contracts could have a material adverse
      effect on our financial position and results of operations. Therefore, our
      actual results could differ significantly if our cost estimates are later
      revised from our original estimates for contracts in progress at the end of
      a
      reporting period that were not completed prior to the release of our financial
      statements.


-14-
 ***Table
          of Contents***




***Accounts
      Receivable*** —We
      evaluate the creditworthiness of our customers based on their financial
      information, if available, information obtained from major industry suppliers,
      current prices of oil and natural gas and any past experience we have with
      the
      customer. Consequently, an adverse change in those factors could affect our
      estimate of our allowance for doubtful accounts. In some instances, we require
      new customers to establish escrow accounts or make prepayments. We typically
      invoice our customers at 30-day intervals during the performance of daywork
      contracts and upon completion of the daywork contract. Footage contracts are
      invoiced upon completion of the contract. Our typical contract provides for
      payment of invoices in 10 to 30 days. We generally do not extend payment terms
      beyond 30 days and have not extended payment terms beyond 60 days for any of
      our
      contracts in the last three years. Our allowance for doubtful accounts was
      $1.2
      million and $400,000 at June 30, 2007 and December 31, 2006, respectively.
      Any allowance established is subject to judgment and estimates made by
      management. We determine our allowance by considering a number of factors,
      including the length of time trade accounts receivable are past due, our
      previous loss history, our customer’s current ability to pay its obligation to
      us and the condition of the general economy and the industry as a whole. We
      write off specific accounts receivable when they become uncollectible and
      payments subsequently received on such receivables reduce the allowance for
      doubtful accounts.





If
      a
      customer defaults on its payment obligation to us under a footage contract,
      we
      would need to rely on applicable law to enforce our lien rights, because our
      footage contracts do not expressly grant to us a security interest in the work
      we have completed under the contract and we have no ownership rights in the
      work-in-progress or completed drilling work, except any rights arising under
      the
      applicable lien statute on foreclosure. If we were unable to drill to the agreed
      on depth in breach of the contract, we might also need to rely on equitable
      remedies outside of the contract, including quantum meruit, available in
      applicable courts to recover the fair value of our work-in-progress under a
      footage contract.





***Asset
      Impairment and Depreciation*** —We
      review long-lived assets to be held and used for impairment whenever events
      or
      changes in circumstances indicate that the carrying amount of the assets may
      not
      be recoverable. We also evaluate the carrying value of goodwill during the
      fourth quarter of each year and between annual evaluations if events occur
      or
      circumstances change that would more likely than not reduce the fair value
      below
      its carrying amount. Factors that we consider important and could trigger an
      impairment review would be our customers’ financial condition and any
      significant negative industry or economic trends. More specifically, among
      other
      things, we consider our contract revenue rates, our rig utilization rates,
      cash
      flows from our drilling rigs, current oil and natural gas prices, industry
      analysts’ outlook for the industry and their view of our customers’ access to
      debt or equity and the trends in the price of used drilling equipment observed
      by our management. If a review of our drilling rigs, intangible assets and
      goodwill indicate that our carrying value exceeds the estimated undiscounted
      future cash flows, we are required under applicable accounting standards to
      write down the drilling equipment, intangible assets and goodwill to its fair
      market value. A one percent write-down in the cost of our drilling equipment,
      intangible assets and goodwill, at June 30, 2007, would have resulted in a
      corresponding decrease in our net income of approximately $2.7
      million.





Our
      determination of the estimated useful lives of our depreciable assets, directly
      affects our determination of depreciation expense and deferred taxes. A decrease
      in the useful life of our drilling equipment would increase depreciation expense
      and reduce deferred taxes. We provide for depreciation of our drilling rigs,
      transportation and other equipment on a straight-line method over useful lives
      that we have estimated and that range from three to fifteen years after the
      rig
      was placed into service. Depreciation commences once a rig is placed in service
      and continues uninterrupted whether the rig is idle or working. Our estimates
      of
      the useful lives of our drilling, transportation and other equipment are based
      on our experience in the drilling industry with similar equipment.





We
      capitalize interest cost as a component of drilling rigs refurbished for our
      own
      use. During the six months ended June 30, 2007 and year ended December 31,
      2006, we capitalized approximately $903,000 and $3.6 million,
      respectively.




***Stock
      Based Compensation*** — ****** We
      have
      adopted SFAS No. 123(R), “ *Share-Based
      Payment* ”
upon
      granting our first stock options on August 16, 2005. SFAS No. 123(R)
      requires a public entity to measure the costs of employee services received
      in
      exchange for an award of equity or liability instruments based on the grant-date
      fair value of the award. That cost will be recognized over the periods during
      which an employee is required to provide service in exchange for the award.
      Stock compensation expense was $981,000 and $1.7 million for the three and
      six
      months ended June 30, 2007, respectively, and $811,000 and $1.3 million for
      the
      three and six months ended June 30, 2006, respectively.




The
      fair
      value of each option award is estimated on the date of grant using a
      Black-Scholes valuation model that uses various assumptions related to
      volatility, expected life, forfeitures, exercise patterns, risk free rates
      and
      expected dividends. Expected volatilities are based on the historical volatility
      of a selected peer and other factors. The majority of our options are held
      by
      employees that make up one group with similar expected exercise behavior for
      valuation purposes. The expected term of options granted is estimated based
      on
      an average of the vesting period and the contractual period. The risk-free
      rate
      for periods within the contractual life of the option is based on the U.S.
      Treasury yield curve in effect at the time of the grant.




We
      have
      not declared dividends since we became a public company and do not intend to
      do
      so in the foreseeable future, and thus did not use a dividend yield. Expected
      life has been determined using the permitted short cut method. In each case,
      the
      actual value that will be realized, if any, will depend on the future
      performance of the common stock and overall stock market conditions. There
      is no
      assurance that the value an optionee actually realizes will be at or near the
      value estimated using the Black-Scholes model.




Under
      our
      stock incentive plans, employee stock options become exercisable in equal
      monthly installments over a three-year period, and all options generally expire
      ten years after the date of grant. The plans provide that all options must
      have
      an exercise price not less than the fair market value of our common stock on
      the
      date of the grant.





***Deferred
      Income Taxes*** —We
      provide deferred income taxes for the basis difference in our property and
      equipment, stock compensation expense, and other items between financial
      reporting and tax reporting purposes. For property and equipment, basis
      differences arise from differences in depreciation periods and methods and
      the
      value of assets acquired in a business acquisition where we acquire the stock
      in
      an entity rather than just its assets. For financial reporting purposes, we
      depreciate the various components of our drilling rigs and refurbishments over
      fifteen years, while federal income tax rules require that we depreciate
      drilling rigs and refurbishments over five years. Therefore, in the first five
      years of our ownership of a drilling rig, our tax depreciation exceeds our
      financial reporting depreciation, resulting in our providing deferred taxes
      on
      this depreciation difference. After five years, financial reporting depreciation
      exceeds tax depreciation, and the deferred tax liability begins to
      reverse.





***Other
      Accounting Estimates*** —Our
      other accrued expenses as of June 30, 2007 and December 31, 2006 included
      accruals of approximately $3.2 million and $1.9 million, respectively, for
      costs
      under our workers’ compensation insurance. We have a deductible of $1.0 million
      per covered accident under our workers’ compensation insurance. Our insurance
      policy requires us to maintain a letter of credit to cover payments by us of
      that deductible. As of June 30, 2007 and December 31, 2006, we had $2.7 and
      2.6 million in letters of credit, respectively. We accrue for these costs as
      claims are incurred based on cost estimates established for each claim by the
      insurance companies providing the administrative services for processing the
      claims, including an estimate for incurred but not reported claims, estimates
      for claims paid directly by us, our estimate of the administrative costs
      associated with these claims and our historical experience with these types
      of
      claims. We also have a self-insurance program for major medical hospitalization
      and dental coverage for employees and their dependents. The Company recognizes
      both reported and incurred but not reported costs related to the self-insurance
      portion of our health insurance. Since the accrual is based on estimates of
      expenses for claims, the ultimate amounts paid may differ from accrued
      amounts.




**Recent
        Highlights**
 
 The
        following are highlights that impacted our liquidity or results of operations
        for the six months ended June 30, 2007:
  ·
            On
                January 2, 2007, we purchased an approximately 18,100 square foot
                building
                located in Edmond, Oklahoma for a total purchase price of $3.0 million,
                less an amount equal to one-half of the principal reduction on the
                seller’s loan secured by the property between the effective date of the
                purchase agreement and the closing. We paid $1.4 million in cash
                and
                assumed debt of approximately $1.6 million. Prior to closing, we
                subleased
                a total of 9,050 square feet of the building from its tenants until
                the
                closing date for a monthly rental of
                $8,341. 
 ·
            On
                January 9, 2007, we completed the acquisition of 31 workover rigs,
                24 of
                which were operating, from Eagle and related subsidiaries for $2.5
                million
                in cash, 1,070,390 shares of our common stock, and the assumption
                of debt
                of $6.5 million, liabilities of $800,000 and additional deferred
                income
                taxes of $7.7 million. We subsequently deployed the remaining rigs
                periodically during the second quarter of
                2007.  -15-
 ***Table
            of Contents***
  **Results
        of Operations**
 
 ***Three
        Months Ended June 30, 2007 Compared to Three Months Ended June 30,
        2006***
  *Contract
        Drilling Revenue.* For
        the three months ended June 30, 2007, we reported contract drilling revenues
        of
        $69.3 million, a 3% increase from revenues of $67.1 million for the same
        period
        in 2006. The increase is primarily due to an increase in dayrates and average
        number of rigs working for the three months ended June 30, 2007 as compared
        to
        the same period in 2006, partially offset by a decrease in revenue days.
        Average
        dayrates for our drilling services increased $649, or 4%, to $17,796 for
        the
        three months ended June 30, 2007 from $17,147 in the same period in 2006.
        Revenue days decreased to 3,624 days for the three months ended June 30,
        2007
        from 3,631 days during the same period in 2006. Our average number of operating
        rigs increased to 52 from 43, or 21%, for the three months ended June 30,
        2007
        as compared to the same period in 2006. The decrease in the number of revenue
        days for the three months ended June 30, 2007 as compared to the same period
        in
        2006 is attributable to a decrease in our rig utilization rate to 76% for
        the
        three months ended June 30, 2007 from 92% for the three months ended June
        30,
        2006 offset by the increase in the size of our operating rig fleet due to
        refurbishments. The 16% decrease in utilization was primarily due to a more
        competitive market resulting from an increase in the supply of drilling rigs
        and
        unfavorable weather conditions in the second quarter.
  *Contract
        Drilling Expense.* Direct
        rig cost increased $7.3 million to $40.5 million for the three months ended
        June
        30, 2007 from $33.2 million for the same period in 2006. This 22% increase
        is
        primarily due to the increase in available days as the result of the increase
        in
        average number of operating rigs in our fleet for the three months ended
        June
        30, 2007 as compared to the same period in 2006. As a percentage of contract
        drilling revenue, drilling expense increased to 58% for the three-month period
        ended June 30, 2007 from 49% for the same period in 2006 due primarily to
        expenses related to the retention of crews of idle rigs.
  *Depreciation
        Expense.* Depreciation
        expense increased $4.1million to $10.9 million for the three months ended
        June
        30, 2007 from $6.8 million for the same period in 2006. The increase is
        primarily due to the 35% increase in fixed assets, including the deployment
        of
        nine additional rigs from our inventory and the Eagle acquisition, as well
        as
        incremental increases in ancillary equipment, all of which occurred after
        the
        2006 period.
  *General
        and Administrative Expense* . General
        and administrative expense increased $1.8 million to $5.4 million for the
        three
        months ended June 30, 2007 from $3.6 million for the same period in 2006.
        The
        increase is the result of an increase in bad debt expense of $1.2 million,
        an
        increase in payroll costs of $222,000, an increase in stock compensation
        expense of $178,000, and an increase in yard expense of $139,000. The increase
        in yard expense is primarily due to the acquisition of Eagle during the first
        quarter and the increase in payroll is primarily due to our increased employee
        count due both to organic growth and acquisitions as well as selected wage
        increases.
  *Interest
        Expense* . Interest
        expense increased $515,000 to $795,000 for the three months ended June 30,
        2007
        from $280,000 for the same period in 2006. The increase is due to a decrease
        in
        the capitalization of interest expense related to our rig refurbishment program.
        We capitalized $449,000 of interest for the three months ended June 30, 2007
        as
        compared to $902,000 for the same period in 2006 as part of our rig
        refurbishment program. The increase is also attributable to an increase in
        the
        average debt outstanding during the respective periods.
  *Tax
        Expense (Benefit)* . We
        recorded a tax expense of $5.4 million for the three months ended June 30,
        2007,
        of which $2.4 million is deferred tax expense. This compares to a deferred
        tax
        expense of $8.7 million for the three months ended June 30, 2006. This decrease
        is due to a decrease in pre-tax income.
 
 ***Six
        Months Ended June 30, 2007 Compared to Six Months Ended June 30,
        2006***
  *Contract
        Drilling Revenue.* For
        the six months ended June 30, 2007, we reported contract drilling revenues
        of
        $143.9 million, a 16% increase from revenues of $123.5 million for the same
        period in 2006. The increase is primarily due to an increase in dayrates,
        revenue days, and average number of rigs working for the six months ended
        June
        30, 2007 as compared to the same period in 2006. Average dayrates for our
        drilling services increased $1,854, or 11%, to $18,267 for the six months
        ended
        June 30, 2007 from $16,413 in the same period in 2006. Revenue days increased
        4%
        to 7,255 days for the six months ended June 30, 2007 from 6,985 days during
        the
        same period in 2006. Our average number of operating rigs increased to 52
        from
        41, or 26%, for the six months ended June 30, 2007 as compared to the same
        period in 2006. The increase in the number of revenue days for the six months
        ended June 30, 2007 as compared to the same period in 2006 is attributable
        to
        the increase in the size of our operating rig fleet due to refurbishments
        partially offset by a decrease in our rig utilization rate to 78% for the
        six
        months ended June 30, 2007 from 94% for the six months ended June 30, 2006.
        This
        16% decrease was primarily due to a more competitive market resulting from
        an
        increase in the supply of drilling rigs and unfavorable weather conditions
        during the first six months of 2007.
  *Contract
        Drilling Expense.* Direct
        rig cost increased $20.4 million to $81.3 million for the six months ended
        June
        30, 2007 from $60.9 million for the same period in 2006. This 34% increase
        is
        primarily due to the increase in revenue days and the increase in average
        number
        of operating rigs in our fleet for the six months ended June 30, 2007 as
        compared to the same period in 2006. As a percentage of contract drilling
        revenue, drilling expense increased to 57% for the six month period ended
        June
        30, 2007 from 49% for the same period in 2006 due primarily to expenses related
        to the retention of crews of idle rigs.
  *Depreciation
        Expense.* Depreciation
        expense increased $9.4 million to $22.1 million for the six months ended
        June
        30, 2007 from $12.7 million for the same period in 2006. The increase is
        primarily due to the 35% increase in fixed assets, including the deployment
        of
        nine additional rigs from our inventory and the Eagle acquisition, as well
        as
        incremental increases in ancillary equipment, all of which occurred after
        the
        2006 period.
  *General
        and Administrative Expense* . General
        and administrative expense increased $3.0 million to $10.1 million for the
        six
        months ended June 30, 2007 from $7.1 million for the same period in 2006.
        The
        increase is the result of an increase in bad debt expense of $1.3 million,
        an
        increase in payroll costs of $537,000, an increase in yard expense of
        $521,000, and an increase in stock compensation expense of $333,000. The
        increase in yard expense is primarily due to the acquisition of Eagle during
        the
        first quarter and the increase in payroll is primarily due to our increased
        employee count due both to organic growth and acquisitions as well as selected
        wage increases.
  *Interest
        Expense* . Interest
        expense increased $1.7 million to $2.1 million for the six months ended June
        30,
        2007 from $366,000 for the same period in 2006. The increase is due to a
        decrease in the capitalization of interest expense related to our rig
        refurbishment program. We capitalized $903,000 of interest for the six months
        ended June 30, 2007 as compared to $2.0 million for the same period in 2006
        as
        part of our rig refurbishment program. The increase is also attributable
        to an
        increase in the average debt outstanding during the respective
        periods.
  *Tax
        Expense (Benefit)* . We
        recorded a tax expense of $12.5 million for the six months ended June 30,
        2007,
        of which $7.6 million is deferred tax expense. This compares to a deferred
        tax
        expense of $15.7 million for the six months ended June 30, 2006. This decrease
        is due to a decrease in pre-tax income.
 
 **Liquidity
        and Capital Resources**
  ***Operating
        Activities*** **.** Net
        cash provided by operating activities was $32.9 million for the six months
        ended
        June 30, 2007 as compared to $30.6 million in 2006. The increase of $2.3
        million
        from 2007 to 2006 was primarily due to increased cash receipts from customers,
        partially offset by higher cash payments to employees and suppliers.
  ***Investing
        Activities*** **.** We
        use a significant portion of our cash flows from operations and financing
        activities for acquisitions and the refurbishment of our rigs. Cash used
        for
        investing activities was $31.7 million for the six months ended June 30,
        2007 as
        compared to $82.1 million for the same period in 2006. For the six months
        ended
        June 30, 2007, we used $31.8 million to refurbish our drilling rigs and $2.3
        million to purchase Eagle. These amounts were partially offset by $2.4 million
        of proceeds received from the sale of assets. During the 2006 period, $16.2
        million related to the Big A acquisition and $67.4 million was used to refurbish
        drilling rigs. These amounts were partially offset by $518,000 received from
        a
        restricted account that is used as security for a letter of credit issued
        to
        workers’ compensation insurance carrier and $950,000 received from the sale of
        assets.
 -16-
 ***Table
            of Contents***
  ***Financing
        Activities*** **.** Our
        cash flows used in financing activities were $7.0 million for the six months
        ended June 30, 2007 as compared to $37.0 million provided by financing
        activities for the same period in 2006. For the six months ended June 30,
        2007,
        our net cash used in financing activities related to principal payments of
        $19.0
        million under our credit agreement with Fortis Capital Corp., partially offset
        by borrowings of $12.0 million under our credit facility with Fortis Capital
        Corp. Our net cash provided by financing activities for the six months ended
        June 30, 2006 related to net proceeds of approximately $36.2 million from
        our
        follow-on offering, borrowings of $37.0 million under our credit agreement
        with
        Fortis Capital Corp., partially offset by principal payments of $30.0 million
        under our credit facility with Fortis Capital Corp. and $4.6 million on a
        promissory note given in connection with our acquisition of all of the
        membership interests of Strata Drilling, L.L.C. and Strata Property, L.L.C.
        (together, “Strata”) discussed below.
 
 ***Sources
        of Liquidity*** **.** Our
        primary sources of liquidity are cash from operations and debt and equity
        financing.
 
 *Debt
        Financing* .
        On
        July 1, 2004, we entered into a revolving line of credit with International
        Bank of Commerce with a borrowing base of the lesser of $2.0 million or 80%
        of
        current receivables. Borrowings under this line bore interest at a rate equal
        to
        the greater of 4.0% or JPMorgan Chase prime (effective rate of 7.25% at
        December 31, 2005). Accrued but unpaid interest was payable monthly. On
        January 1, 2005, we amended our line of credit with International Bank of
        Commerce to increase the borrowing base to the lesser of $3.0 million or
        80% of
        current receivables. The line of credit had a maturity date of November 1,
        2006. It was repaid in full in January 2006 with a portion of the proceeds
        from
        our new revolving credit facility and then terminated.
 
 In
        July
        2005, we acquired all of the membership interests in Strata and a related
        rig
        yard for an aggregate of $20.0 million, of which $13.0 million was paid in
        cash
        and $7.0 million paid in the form of promissory notes issued to the sellers.
        We
        funded the cash portion of the purchase price with a $13.0 million loan from
        Alpha Investors LLC, or Alpha, an entity controlled by Wexford Capital, LLC,
        or
        Wexford. The outstanding principal balance of the loan plus accrued but unpaid
        interest was due in full upon the earlier to occur of the completion of our
        initial public offering and the maturity of the loan on July 1, 2006. We
        repaid this loan in full on August 22, 2005 with a portion of the proceeds
        from our initial public offering. Borrowings under our loan with Alpha bore
        interest at a rate equal to LIBOR plus 5% until September 30, 2005, and
        thereafter were to bear interest at a rate equal to LIBOR plus 7.5%. The
        $7.0
        million original aggregate principal balance of the promissory notes issued
        to
        the sellers was automatically reduced by the amount of any costs and expenses
        we
        paid in connection with the refurbishment of one of the rigs we acquired
        from
        the sellers. The amount due on these notes, net of costs and expenses paid
        by
        us, was $4.5 million at December 31, 2005. The outstanding balance of the
        loan was paid in full on January 5, 2006 upon completion of the
        refurbishment of this rig.
  On
        September 19, 2005, we entered into a term loan and security agreement with
        Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services,
        Inc. The term loan provided for a term installment loan in an aggregate amount
        not to exceed $50.0 million and provided for a commitment by Merrill Lynch
        Capital to advance funds from time to time until December 31, 2005. The
        outstanding balance under the term loan could not exceed 60% of the net orderly
        liquidation value of our operating land drilling rigs. On September 19,
        2005, we borrowed $43.0 million under the term loan. A portion of these
        borrowings, together with proceeds from our initial public offering, were
        used
        to fund the Eagle acquisition. The term loan bore interest on the outstanding
        principal balance at a variable per annum rate equal to LIBOR plus 271 basis
        points (7.1% at December 31, 2005). For the period from September 19,
        2005 to January 1, 2006, interest only was payable monthly on the
        outstanding principal balance. Commencing February 1, 2006, the outstanding
        principal and interest on the term loan were payable in 60 consecutive monthly
        installments, each in an amount equal to one sixtieth of the outstanding
        principal balance on January 1, 2006 plus accrued interest on the
        outstanding principal balance. The maturity date was January 1, 2011. Our
        obligations under the term loan were secured by a first lien and security
        interest on substantially all of our assets and were guaranteed by each of
        our
        principal subsidiaries. The term loan included usual and customary negative
        covenants and events of default for loan agreements of this type. The term
        loan
        also required us to meet certain financial covenants, including maintaining
        a
        minimum Fixed Charge Coverage Ratio and a maximum Total Debt to EBITDA Ratio.
        This term loan was repaid in full in January 2006 with a portion of the proceeds
        from our new revolving credit facility and the term loan was
        terminated.
 
 On
        January 13, 2006, we entered into a $150.0 million revolving credit
        facility with Fortis Capital Corp., as administrative agent, lead arranger
        and
        sole bookrunner, and a syndicate of lenders, which include The Royal Bank
        of
        Scotland plc, The CIT Group/Business Credit, Inc., Calyon Corporate and
        Investment Bank, Merrill Lynch Capital, Comerica Bank and Caterpillar Financial
        Services Corporation. The revolving credit facility matures on January 13,
        2009. The
        initial aggregate revolving commitment of $150.0 million is automatically
        and
        permanently reduced by $10.0 million at the end of each fiscal quarter starting
        September 30, 2006. The aggregate revolving commitment was $110,000 as of
        June
        30, 2007. Loans
        under the revolving credit facility bear interest at LIBOR plus a margin
        that
        can range from 2.0% to 3.0% or, at our option, the prime rate plus a margin
        that
        can range from 1.0% to 2.0%, depending on the ratio of our outstanding senior
        debt to “Adjusted EBITDA” as defined in the credit agreement. Our borrowings
        under this revolving credit facility were used to fund a portion of the Big
        A
        acquisition and to repay in full all outstanding borrowings under our term
        loan
        with Merrill Lynch Capital and our revolving line of credit with International
        Bank of Commerce.
 
 The
        revolving credit facility also provides for a quarterly commitment fee of
        0.5% per annum of the unused portion of the revolving credit facility, and
        fees for each letter of credit issued under the facility. Commitment fees
        expense for the three and six months ended June 30, 2007 were $68,000 and
        $149,000, respectively. Our subsidiaries have guaranteed the loans and other
        obligations under the revolving credit facility. The obligations under the
        revolving credit facility and the related guarantees are secured by a first
        priority security interest in substantially all of our assets, as well as
        the
        shares of capital stock of our direct and indirect subsidiaries.
 
 The
        revolving credit facility contains customary covenants for facilities of
        this
        type, including among other things, covenants that restrict our ability to
        make
        capital expenditures, incur indebtedness, incur liens, dispose of property,
        repay debt, pay dividends, repurchase shares and make certain acquisitions.
        The
        financial covenants are a minimum fixed charge coverage ratio of 1.75 to
        1.00
        and a maximum total leverage ratio of 2.00 to 1.00. The Company was in
        compliance with all covenants at June 30, 2007. The revolving credit facility
        provides for mandatory prepayments under certain circumstances as more fully
        discussed in the revolving credit facility. The revolving credit facility
        contains various events of default, including failure to pay principal and
        interest when due, breach of covenants, materially incorrect representations,
        default under certain other agreements, bankruptcy or insolvency, the occurrence
        of specified ERISA events, entry of enforceable judgments against us in excess
        of $3.0 million not stayed, and the occurrence of a change of control. If
        an
        event of default occurs, all commitments under the revolving credit facility
        may
        be terminated and all of our obligations under the revolving credit facility
        could be accelerated by the lenders, causing all loans outstanding (including
        accrued interest and fees payable thereunder) to be declared immediately
        due and
        payable.
 
 We
        are
        party to term installment loans for an aggregate princi pal
        amount of approximately $6.0 million. These term loans are payable in 96
        monthly
        installments, mature from 2013 - 2015 and have an weighted average annual
        interest rate of 6.94%. The proceeds from these term loans were used to purchase
        cranes.
  We
        are
        party to a term loan agreement with Holliday American Mortgage for an aggregate
        principal amount of approximately $1.6 million related to the acquisition
        of a
        building. This term loan is payable in 166 monthly installments, matures
        in 2021
        and has a interest rate of 6%.
 
 *Issuances
        of Equity.* In
        March
        2006, we closed a public offering of 3,450,000 shares of our common stock
        at a
        price of $22.75 per share. In the offering, a total of 1,700,000 shares were
        sold by us and 1,750,000 shares were sold by the selling stockholder. The
        offering resulted in net proceeds to us of approximately $36.2 million,
        excluding offering expenses of $577,000. We did not receive any proceeds
        from
        the sale of shares by the selling stockholder.
  In
        connection with our acquisitions of Big A and Eagle we issued 72,571 and
        1,070,390 shares of our common stock, respectively. See “Capital Expenditures”
below.
 
 **Capital
        Expenditures.**
 
 During
        2006, we substantially completed the refurbishment of 12 rigs, ranging from
        450
        to 1,500 horsepower. We incurred refurbishment costs of $67.7 million, ranging
        from $544,000 to $7.9 million per rig, which were funded with borrowings
        under
        our various credit facilities, public offerings, and cash flows from
        operations.
 
 In
        January 2006, the refurbishment of a 1,000-horsepower mechanical rig was
        completed pursuant to a $7.0 million seller’s note incurred in the Strata
        acquisition. We designated this Rig No. 43 and repaid the note with
        proceeds from our November 2005 follow-on offering.
 
 On
        January 18, 2006, we purchased six operating rigs and certain other assets,
        including heavy haul trucks and excess rig equipment and inventory, from
        Big A.
        The purchase price for the assets consisted of $16.3 million paid in cash
        and
        72,571 shares of our common stock.
 -17-
 ***Table
            of Contents***
  In
        October 2006, we purchased a 1,000-horsepower electric drilling rig, which
        we
        designated Rig No. 37. We paid approximately $7.4 million for this
        rig.
 
 During
        2007 we substantially completed the refurbishment of three rigs, ranging
        from
        1,200 to 1,500 horsepower. We incurred refurbishment costs of $23.6 million,
        ranging from $7.0 million to $8.7 million per rig, which were funded with
        borrowings under our various credit facilities and cash flows from operations.
 On
        January 2, 2007, we purchased an approximately 18,100 square foot building
        located in Edmond, Oklahoma for cash of $1.4 million and the assumption of
        existing debt of approximately $1.6 million, less one-half of the principal
        reduction on the sellers’ loan secured by the property between the effective
        date and closing. Prior to closing on the building we subleased a total of
        9,050
        square feet of the building from its current tenants for a monthly rental
        of
        $8,341.
 
 On
        January 9, 2007, we completed the acquisition of 31 workover rigs, 24 of
        which
        were operating, from Eagle and related subsidiaries for $2.5 million in cash,
        1,070,390 shares of common stock and the assumption of debt of $6.5 million,
        liabilities of $800,000 and additional deferred income taxes of $7.7 million.
        We
        subsequently deployed the remaining rigs periodically during the second quarter
        of 2007.
 
 We
        believe that cash flow from our operations and borrowings under our revolving
        credit facility will be sufficient to fund our operations for at least the
        next
        12 months. However, additional capital may be required for future rig
        acquisitions. While we would expect to fund such acquisitions with additional
        borrowings and the issuance of debt and equity securities, we cannot assure
        you
        that such funding will be available or, if available, that it will be on
        terms
        acceptable to us.
 
 **Item 3.
        Quantitative and Qualitative Disclosures About Market
        Risks**
 
 We
        are
        subject to market risk exposure related to changes in interest rates on our
        outstanding floating rate debt. Borrowings under our revolving credit facility
        bear interest at a floating rate equal to LIBOR plus a margin that can range
        from 2.0% to 3.0% or, at our option, the prime rate plus a margin that can
        range
        from 1.0% to 2.0%, depending on the ratio of our outstanding senior debt
        to
        adjusted EBITDA. An increase or decrease of 1% in the interest rate would
        have a
        corresponding decrease or increase in our net income (loss) of approximately
        $369,000 annually, based on the $60.0 million outstanding in the aggregate
        under
        our credit facility as of June 30, 2007.
 
 **** **Item 4.
        Controls and Procedures.**
 
 *Evaluation
        of Disclosure Control and Procedures* .
 As
        of the
        end of the period covered by this Quarterly Report on Form 10−Q, our management,
        under the supervision and with the participation of our Chief Executive Officer
        and Chief Financial Officer, evaluated the effectiveness of the design and
        operation of our disclosure controls and procedures (as defined in Rules
        13a−15(e) or 15d−15(e) under the Securities Exchange Act of 1934, as amended).
        Based on that evaluation, our Chief Executive Officer and Chief Financial
        Officer concluded that as of June 30, 2007 our disclosure controls and
        procedures are effective.
 
 Disclosure
        controls and procedures are controls and procedures designed to ensure that
        information required to be disclosed in our reports filed or submitted under
        the
        Securities Exchange Act of 1934 is recorded, processed, summarized and reported
        within the time periods specified in the SEC's rules and forms; and include
        controls and procedures designed to ensure that information is accumulated
        and
        communicated to our management, and made known to our Chief Executive Officer
        and Chief Financial Officer, particularly during the period when this Quarterly
        Report on Form 10−Q was prepared, as appropriate to allow timely decision
        regarding the required disclosure.
 
 *Changes
        in Internal Control over Financial Reporting* .
 There
        were no changes in our internal control over financial reporting that occurred
        during the second quarter that have materially affected, or are reasonably
        likely to materially affect, our internal control over financial
        reporting.
  -18-
 ***Table
            of Contents***




**PART
        II: OTHER INFORMATION**
 
 **Item 1.
        Legal Proceedings**
 
 Due
        to
        the nature of our business, we are, from time to time, involved in routine
        litigation or subject to disputes or claims related to our business activities,
        including workers’ compensation claims and employment related disputes. In the
        opinion of our management, with the exception of the matters previously
        disclosed in our filings with the SEC, none of the pending litigation, disputes
        or claims against us, if decided adversely, will have a material adverse
        effect
        on our financial condition or results of operations.
 
 **Item 1A.
        Risk Factors**
 
 There
        have been no material changes to the Risk Factors previously disclosed in
        our
        Annual Report on Form 10-K for the year ended December 31, 2006 filed
        with the SEC on March 8, 2007.
 
 **Item 2.
        Unregistered Sales of Equity Securities and Use of
        Proceeds**
 
 None,
        except as previously disclosed.
 
 **Item 3.
        Defaults Upon Senior Securities**
 
 None.
 
 **Item 4.
        Submission of Matters to a Vote of Security Holders**
 
 On
        June 1, 2007, our annual meeting of stockholders was held in Duncan,
        Oklahoma. A total of 22,132,646 of our shares of common stock were present
        or
        represented by proxy at the annual meeting. This represented more than 85%
        of
        our shares outstanding on the record date. At the meeting, our stockholders
        voted on the election of five persons to serve as our directors. Each of
        the
        five nominees, Mike Liddell, D. Frank Harrison, David L. Houston, Gary C.
        Hill
        and William R. Snipes, was elected as a director to serve until our next
        annual
        meeting of stockholders and until his successor is duly elected and
        qualified.
 
 The
        results of the tabulation of the votes cast at our annual meeting are as
        follows:
 
 Proposal-
                  Election of Directors:
              
              **For
                    (#)**
              
              **Withheld (#)**Mike
                  Liddell
              
              20,995,489
              
              1,137,157D.
                  Frank Harrison
              
              21,810,079
              
              332,567David
                  L. Houston
              
              20,597,322
              
              1,535,324Gary
                  C. Hill
              
              21,760,579
              
              372,067William
                  R. Snipes
              
              20,971,829
              
              1,160,817
 
 **Item 5.
        Other Information**
 
 ***Employment
        Agreements***
 
 Effective
        as of August 2, 2007, we entered into employment agreements with Larry Bartlett,
        our Senior Vice President for Rig Operations, and Steven R. Starke, our Chief
        Accounting Officer. Each agreement has a three year term and provides for
        a base
        salary of $225,000 per year for Mr. Bartlett, and $125,000 per year for Mr.
        Starke. Under the agreements, the executives will be eligible to receive
        an
        annual bonus as established by our board of directors (or the compensation
        committee thereof). If we terminate an agreement without cause, or the executive
        terminates his agreement for good reason, the executive is entitled to severance
        pay in an amount equal to: (1) the base salary earned and unpaid through
        the date of such termination plus the executive’s base salary for the remainder
        of the term of his agreement; provided, however, that such amount may not
        be
        less than twice the base salary in effect on the date of the termination;
        plus
        (2) the greater of any target bonus for the year of termination or the
        average of the two immediately preceding years’ annual incentive bonuses; plus
        (3) any vacation pay accrued through the date of the termination. If we or
        the executive terminates the employment agreement within two years following
        a
        change of control, with or without cause or good reason, the executive would
        be
        entitled to a severance payment, payable in a lump sum in cash following
        such
        executive’s termination, in an amount equal to three times his base salary for
        the twelve calendar months immediately preceding the date of termination
        plus the
        greater of any target bonus for the year of termination or the highest bonus
        paid to the executive during the executive’s employment .
        Each
        agreement provides that the executive may not, during the term of his employment
        with us and for a period extending one year from the date of the termination
        of
        his employment with us, disclose any confidential information regarding our
        company or use any such confidential information for any purpose other than
        the
        performance of his employment with us. The executive is also prohibited,
        during
        the term of his employment with us and for a period of six months following
        the
        termination of his employment with us for any reason other than without cause,
        from soliciting, inducing, enticing or attempting to entice any employee,
        contractor, customer, vendor or subcontractor to terminate or breach any
        relationship with us or any of our subsidiaries or affiliates.
 
 ***Amendment
        to Employment Agreements***
 
 Effective
        as of August 2, 2007, we amended our employment
        agreements with D. Frank Harrison, our Chief Executive Officer,
        Zachary M. Graves, our Chief Financial Officer, and Mark Dubberstein, our
        President. The amended agreements (1) revise the definition of the term “good
        reason” as used in the agreements, (2) clarify the executive’s rights upon a
        termination by the executive for good reason, and (3) amend the provisions
        relating to termination upon a change of control. Pursuant to the amendments,
        if
        we or the executive terminate the employment agreement within two years
        following a change of control, with or without cause or good reason, the executive
        would be entitled to a severance payment, payable in a lump sum in cash
        following such executive’s termination, in an amount equal to three times his
        base salary for the twelve calendar months immediately preceding the date
        of
        termination plus an amount equal to the average of his preceding three years’
annual bonuses. An additional amendment was made to Mr. Dubberstein’s employment
        agreement to reflect his promotion to President of the company.
  -19-
 ***Table
            of Contents***


**Item 6.
      Exhibits**





Exhibits:




**Exhibit**
              **No.**
            **Description**2.1
            Merger
                Agreement, dated as of August 11, 2005, by and among Bronco Drilling
                Holdings, L.L.C, Bronco Drilling Company, L.L.C. and Bronco Drilling
                Company, Inc. (incorporated by reference to Exhibit 2.1 to the
                Registration Statement on Form S-1, File No. 333-128861, filed by
                the
                Company with the SEC on October 6, 2005).2.2
            Agreement
                and Plan of Merger by and among the Company, BDC Acquisition Company,
                Eagle Well Service, Inc. (“Eagle”), and the stockholders of Eagle dated as
                of January 9, 2007 (incorporated by reference to Exhibit 2.1 to the
                Company’s Current Report on Form 8-K, File No. 000-51571, filed by the
                Company with the SEC on January 16, 2007).2.3
            Agreement
                and Plan of Merger, effective as of January 9, 2007, by and between
                the
                Company, BDC Acquisition Company, Eagle Well Service, Inc. ("Eagle"),
                Kim
                Snell and the stockholders of Eagle (incorporated by reference to
                Exhibit
                2.1 to the Current Report on Form 8-K, File No. 000-51471, filed
                by the
                Company with the SEC on January 17, 2007).3.1
            Amended
                and Restated Certificate of Incorporation of the Company, dated August
                11,
                2005 (incorporated by reference to Exhibit 2.1 to the Registration
                Statement on Form S-1, File No. 333-128861, filed by the Company
                with the
                SEC on October 6, 2005).3.2
            Bylaws
                of the Company (incorporated by reference to Exhibit 3.2 to Amendment
                No.
                1 to the Registration Statement on Form S-1, File No. 333-125405,
                filed by
                the Company with the SEC on July 14, 2005).4.1
            Form
                of Common Stock certificate (incorporated by reference to Exhibit
                4.1 to
                Amendment No. 2 to the Registration Statement on Form S-1, File No.
                333-125405, filed by the Company with the SEC on August 2,
                2005).*+10.1
            Employment
                Agreement, dated as of August 2, 2007, by and between Bronco Drilling
                Company, Inc. and Larry Bartlett.*+10.2
            Employment
                Agreement, dated as of August 2, 2007, by and between Bronco Drilling
                Company, Inc. and Steven Starke.*+10.3
            Amendment
                to Employment Agreement, dated as of August 2, 2007, by and between
                Bronco
                Drilling Company, Inc. and D. Frank Harrison.*+10.4
            Amendment
                to Employment Agreement, dated as of August 2, 2007, by and between
                Bronco
                Drilling Company, Inc. and Zachary M. Graves.*+10.5
            Amendment
                to Employment Agreement, dated as of August 2, 2007, by and between
                Bronco
                Drilling Company, Inc. and Mark Dubberstein.*31.1
            Certification
                of Chief Executive Officer of Bronco Drilling Company, Inc. pursuant
                to
                Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934,
                as
                amended.*31.2
            Certification
                of Chief Financial Officer of Bronco Drilling Company, Inc. pursuant
                to
                Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934,
                as
                amended*32.1
            Certification
                of Chief Executive Officer of Bronco Drilling Company, Inc. pursuant
                to
                Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934,
                as
                amended, and Section 1350 of Chapter 63 of Title 18 of the United
                States
                Code.*32.2
            Certification
                of Chief Financial Officer of Bronco Drilling Company, Inc. pursuant
                to
                Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934,
                as
                amended, and Section 1350 of Chapter 63 of Title 18 of the United
                States
                Code.




+  Management
      contract, compensatory plan or arrangement.


*  Filed
      herewith.


-20-
 ***Table
          of Contents***


**SIGNATURE**





Pursuant
      to the requirements of the Securities Exchange Act of 1934,
      the Registrant has duly caused this report to be signed on its behalf by the
      undersigned, thereunto duly authorized.




Dated:
                August 3, 2007
            
            **BRONCO
                DRILLING COMPANY, INC.**By:
            
            /s/
                ZACHARY M. GRAVESZachary
                M. GravesChief
                Financial Officer*(Principal
                Accounting and Financial Officer)*Dated:
                August 3, 2007
            
            By:
            
            /s/
                D. FRANK HARRISOND.
                Frank HarrisonChief
                Executive Officer*(Authorized
                Officer and Principal Executive
                Officer)*




-21-
 ***Table
          of Contents***


**Index
      to Exhibits**


2.1
            Merger
                Agreement, dated as of August 11, 2005, by and among Bronco Drilling
                Holdings, L.L.C, Bronco Drilling Company, L.L.C. and Bronco Drilling
                Company, Inc. (incorporated by reference to Exhibit 2.1 to the
                Registration Statement on Form S-1, File No. 333-128861, filed by
                the
                Company with the SEC on October 6, 2005).2.2
            Agreement
                and Plan of Merger by and among the Company, BDC Acquisition Company,
                Eagle Well Service, Inc. (“Eagle”), and the stockholders of Eagle dated as
                of January 9, 2007 (incorporated by reference to Exhibit 2.1 to the
                Company’s Current Report on Form 8-K, File No. 000-51571, filed by the
                Company with the SEC on January 16, 2007).2.3
            Agreement
                and Plan of Merger, effective as of January 9, 2007, by and between
                the
                Company, BDC Acquisition Company, Eagle Well Service, Inc. ("Eagle"),
                Kim
                Snell and the stockholders of Eagle (incorporated by reference to
                Exhibit
                2.1 to the Current Report on Form 8-K, File No. 000-51471, filed
                by the
                Company with the SEC on January 17, 2007).3.1
            Amended
                and Restated Certificate of Incorporation of the Company, dated August
                11,
                2005 (incorporated by reference to Exhibit 2.1 to the Registration
                Statement on Form S-1, File No. 333-128861, filed by the Company
                with the
                SEC on October 6, 2005).3.2
            Bylaws
                of the Company (incorporated by reference to Exhibit 3.2 to Amendment
                No.
                1 to the Registration Statement on Form S-1, File No. 333-125405,
                filed by
                the Company with the SEC on July 14, 2005).4.1
            Form
                of Common Stock certificate (incorporated by reference to Exhibit
                4.1 to
                Amendment No. 2 to the Registration Statement on Form S-1, File No.
                333-125405, filed by the Company with the SEC on August 2,
                2005).*+10.1
            Employment
                Agreement, dated as of August 2, 2007, by and between Bronco Drilling
                Company, Inc. and Larry Bartlett.*+10.2
            Employment
                Agreement, dated as of August 2, 2007, by and between Bronco Drilling
                Company, Inc. and Steven Starke.*+10.3
            Amendment
                to Employment Agreement, dated as of August 2, 2007, by and between
                Bronco
                Drilling Company, Inc. and D. Frank Harrison.*+10.4
            Amendment
                to Employment Agreement, dated as of August 2, 2007, by and between
                Bronco
                Drilling Company, Inc. and Zachary M. Graves.*+10.5
            Amendment
                to Employment Agreement, dated as of August 2, 2007, by and between
                Bronco
                Drilling Company, Inc. and Mark Dubberstein.*31.1
            Certification
                of Chief Executive Officer of Bronco Drilling Company, Inc. pursuant
                to
                Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934,
                as
                amended.*31.2
            Certification
                of Chief Financial Officer of Bronco Drilling Company, Inc. pursuant
                to
                Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934,
                as
                amended.*32.1
            Certification
                of Chief Executive Officer of Bronco Drilling Company, Inc. pursuant
                to
                Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934,
                as
                amended, and Section 1350 of Chapter 63 of Title 18 of the United
                States
                Code.*32.2
            Certification
                of Chief Financial Officer of Bronco Drilling Company, Inc. pursuant
                to
                Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934,
                as
                amended, and Section 1350 of Chapter 63 of Title 18 of the United
                States
                Code.




+  Management
      contract, compensatory plan or arrangement.


*  Filed
      herewith.


-22-