**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 March 31, 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 May
      9, 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 March 31, 2007 (unaudited) and December 31,
                  2006
              
              3Consolidated
                  Statements of Operations for the three months ended March 31, 2007
                  and
                  2006 (unaudited)
              
              4Consolidated
                  Statement of Stockholders’ Equity for the three months ended March 31,
                  2007 (unaudited)
              
              5Consolidated
                  Statements of Cash Flows for the three months ended March 31, 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**
              
              14**Item 3.**
              
              **Quantitative
                  and Qualitative Disclosures about Market
                  Risks**
              
              19**Item 4.**
              
              **Controls
                  and Procedures**
              
              19**PART
                  II—OTHER INFORMATION****Item 1.**
              
              **Legal
                  Proceedings**
              
              20**Item 1A.**
              
              **Risk
                  Factors**
              
              20**Item 2.**
              
              **Unregistered
                  Sale of Equity Securities and Use of Proceeds**
              
              20**Item 3.**
              
              **Defaults
                  Upon Senior Securities**
              
              20**Item 4.**
              
              **Submission
                  of Matters to Vote of Security Holders**
              
              20**Item 5.**
              
              **Other
                  Information**
              
              20**Item 6.**
              
              **Exhibits**
              
              21**Signatures**
              
              22
  -2-
 ***Table
            of Contents***


**Bronco
                  Drilling Company, Inc. and
                  Subsidiaries**CONSOLIDATED
                  BALANCE SHEETS(Amounts
                  in thousands except share par value)**March
                  31,**
              
              **December
                  31,****2007**
              
              **2006****ASSETS**
              
              **(Unaudited)**CURRENT
                  ASSETSCash
                  and cash equivalents
              
              $
              1,939
              
              $
              10,608ReceivablesTrade,
                  net of allowance for doubtful accounts of$494
                  and $400 in 2007 and 2006, respectively
              
              
              61,091
              
              
              60,282Contract
                  drilling in progress
              
              
              2,078
              
              
              1,989Current
                  deferred income taxes
              
              
              191
              
              
              155Prepaid
                  expenses
              
              
              989
              
              
              338Total
                  current assets
              
              
              66,288
              
              
              73,372PROPERTY
                  AND EQUIPMENT - AT COSTDrilling
                  rigs and related equipment
              
              
              435,808
              
              
              396,499Transportation,
                  office and other equipment
              
              
              39,471
              
              
              29,928475,279
              
              
              426,427Less
                  accumulated depreciation
              
              
              55,009
              
              
              44,505420,270
              
              
              381,922OTHER
                  ASSETSGoodwill
              
              
              22,156
              
              
              21,280Restricted
                  cash and deposit
              
              
              2,600
              
              
              2,600Intangibles,
                  net, and other
              
              
              6,902
              
              
              3,31431,658
              
              
              27,194$
              518,216
              
              $
              482,488**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**CURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              18,331
              
              $
              19,677Accrued
                  liabilitiesPayroll
                  related
              
              
              5,943
              
              
              7,587Deferred
                  revenue and other
              
              
              3,125
              
              
              4,180Income
                  tax payable
              
              
              1,323
              
              
              3,724Current
                  maturities of long-term debt
              
              
              850
              
              
              636Total
                  current liabilities
              
              
              29,572
              
              
              35,804LONG-TERM
                  DEBT, less current maturities
              
              
              66,706
              
              
              64,091DEFERRED
                  INCOME TAXES
              
              
              54,751
              
              
              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
                  March 31, 2007 and December 31, 2006
              
              
              260
              
              
              250Additional
                  paid-in capital
              
              
              295,161
              
              
              279,355Retained
                  earnings
              
              
              71,766
              
              
              60,380Total
                  stockholders' equity
              
              
              367,187
              
              
              339,985$
              518,216
              
              $
              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 March 31,****2007**
              
              **2006****(Unaudited)**REVENUESContract
                drilling revenues, including 4% and 4%to
                  related parties
              
              
              
              
              $
              74,501
              
              $
              56,387Well
                  service
              
              
              
              
              
              4,403
              
              
              -78,904
              
              
              56,387EXPENSESContract
                  drilling
              
              
              
              
              
              40,800
              
              
              27,995Well
                  service
              
              
              
              
              
              2,642
              
              
              -Depreciation
                  and amortization
              
              
              
              
              
              11,205
              
              
              5,937General
                  and administrative
              
              
              
              
              
              4,693
              
              
              3,20359,340
              
              
              37,135Income
                  from operations
              
              
              
              
              
              19,564
              
              
              19,252OTHER
                  INCOME (EXPENSE)Interest
                  expense
              
              
              
              
              
              (1,268
              )
              
              (85
              )Loss
                  from early extinguishment of debt
              
              
              
              
              
              -
              
              
              (1,000
              )Interest
                  income
              
              
              
              
              
              48
              
              
              46Other
              
              
              
              
              
              143
              
              
              49(1,077
              )
              
              (990
              )Income
                  before income taxes
              
              
              
              
              
              18,487
              
              
              18,262Income
                  tax expense
              
              7,101
              
              
              6,915NET
                  INCOME
              
              
              
              
              $
              11,386
              
              $
              11,347Income
                  per common share-Basic
              $
              0.44
              
              $
              0.48Income
                  per common share-Diluted
              $
              0.44
              
              $
              0.48Weighted
                  average number of shares outstanding-Basic
              
              25,907
              
              
              23,508Weighted
                  average number of shares outstanding-Diluted
              
              25,909
              
              
              23,672The
                  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 three-months ended March 31, 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
              
              
              -
              
              
              -
              
              
              -
              
              
              11,386
              
              
              11,386Stock
                  compensation
              
              
              11
              
              
              -
              
              
              692
              
              
              -
              
              
              692Balance
                  as of March 31, 2007
              
              
              26,019
              
              $
              260
              
              $
              295,161
              
              $
              71,766
              
              $
              367,187The
                  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)**Three
                Months Ended March 31****2007**
            
            **2006****(Unaudited)**Cash
                flows from operating activities:Net
                income
            
            $
            11,386
            
            $
            11,347Adjustments
                to reconcile net income to net cashprovided
                by operating activities:Depreciation
                and amortization
            
            
            11,346
            
            
            6,047Bad
                debt expense
            
            
            338
            
            
            -Gain
                on sale of asset
            
            
            (320
            )
            
            -Write
                off of debt issue costs
            
            
            -
            
            
            267Stock
                compensation
            
            
            692
            
            
            530Provision
                for deferred income taxes
            
            
            4,398
            
            
            3,323Changes
                in current assets and liabilities:Receivables
            
            
            548
            
            
            (5,306
            )Contract
                drilling in progress
            
            
            (89
            )
            
            (505
            )Prepaid
                expenses
            
            
            (460
            )
            
            (558
            )Other
                assets
            
            
            (507
            )
            
            250Accounts
                payable
            
            
            (7,015
            )
            
            (5,032
            )Accrued
                expenses
            
            
            (2,699
            )
            
            2,351Income
                taxes payable
            
            
            (2,402
            )
            
            2,130Net
                cash provided by operating activities
            
            
            15,216
            
            
            14,844Cash
                flows from investing activities:Restricted
                cash account
            
            
            -
            
            
            801Business
                acquisitions, net of cash acquired
            
            
            (2,337
            )
            
            (16,405
            )Proceeds
                from sale of asset
            
            
            1,424
            
            
            -Purchase
                of property and equipment
            
            
            (16,209
            )
            
            (25,844
            )Net
                cash used in investing activities
            
            
            (17,122
            )
            
            (41,448
            )Cash
                flows from financing activities:Proceeds
                from borrowings
            
            
            8,000
            
            
            15,000Payments
                of debt
            
            
            (14,763
            )
            
            (34,562
            )Debt
                issue costs
            
            
            -
            
            
            (1,596
            )Proceeds
                from sale of common stock, netof
                offering costs of $434
            
            
            -
            
            
            36,372Net
                cash (used in) provided by financing activities
            
            
            (6,763
            )
            
            15,214Net
                decrease in cash and cash equivalents
            
            
            (8,669
            )
            
            (11,390
            )Beginning
                cash and cash equivalents
            
            
            10,608
            
            
            17,039Ending
                cash and cash equivalents
            
            $
            1,939
            
            $
            5,649Supplementary
                disclosure of cash flow information:Interest
                paid, net of amount capitalized
            
            $
            972
            
            $
            27Income
                taxes paid
            
            
            5,104
            
            
            1,463Supplementary
                disclosure of non-cash investing and financing:Liabilities
                assumed in acquisition
            
            
            8,527
            
            
            -Common
                stock issued for acquisition
            
            
            15,124
            
            
            1,815Debt
                assumed in acquisition
            
            
            6,516
            
            
            -Note
                issued for acquisition of property and equipment
            
            
            3,077
            
            
            -The
                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 amounts)





**1.
      Organization and Summary of Significant Accounting
      Policies**





*Business
      and Principles of Consolidation*





Bronco
      Drilling Company, Inc. (the “Company”) provides contract land drilling 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 March
      31, 2007, the related results of operations for the three months ended March
      31,
      2007 and 2006 and the cash flows for the three months ended March 31, 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 ended March 31, 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 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 $62,397 and $57,247 as of
      March
      31, 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 three months ended March 31, 2007 and
      2006,
      the Company capitalized $454 and $1,129, 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 operation 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 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 $819 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 having to record goodwill, all of which is not deductible for tax
      purposes. The amortizable intangibles acquired include customer lists and trade
      name, which will be amortized over four and two 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 intends
      to deploy the remaining seven rigs periodically over the coming months with
      all
      31 expected to be active by the end of the second quarter of 2007. 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 Well Services:




Assets
                  acquired:Cash
              
              $
              163Prepaid
                  Expenses
              
              
              227Accounts
                  Receivable
              
              
              1,694Drilling
                  equipment
              
              
              -Workover
                  equipment
              
              
              23,912Vehicles
              
              
              1,943Other
                  equipment
              
              
              244Customer
                  Lists
              
              
              3,380Trade
                  Name
              
              
              190Goodwill
              
              
              871$
              32,624


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 March 31, 2007 on the basis of 25,907,000 and 25,909,000
          weighted average shares issued basic and diluted. Pro forma per share
          information is presented for the three months ended March 31, 2006 on the
          basis
          of 24,578,000 and 24,742,000 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****(Unaudited)****Three
                    Months Ended March 31,****2007**
                
                **2006**Total
                    revenues
                
                $
                79,259
                
                $
                60,531Net
                    income
                
                $
                11,400
                
                $
                10,534Net
                    income per common share:Basic
                
                $
                0.44
                
                $
                0.43Diluted
                
                $
                0.44
                
                $
                0.43
 -8-
 ***Table
              of Contents***
  **3.
          Long-term Debt**


Long-term
        debt consists of the following:
 **March
                  31,**
              
              **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)
              
              $
              5,534
              
              $
              4,167Revolving
                  credit facility with Fortis Capital, 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 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
                  byforklifts,
                payable in thirty-six monthly
                installments of $11, due December 1, 2009. (4)
              
              
              359
              
              
              393Note
                  payable to Holliday American Mortgage, collateralized by the building,
                  payablein
                principal and interest installments of $14,
                interest on the note is 6.0% with a duedate
                of January 1,
                2021. (5)
              
              
              1,577
              
              
              -Notes
                  payable to General Motors Acceptance Corporation,collateralized
                  by trucks,payable
                  in principal and interest installments of
                  $3, various due dates.
              
              
              86
              
              
              -67,556
              
              
              64,727Less
                  current installments
              
              
              850
              
              
              636$
              66,706
              
              $
              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
                    installments in an aggregate amount not to exceed $6,000. The
                    proceeds of
                    the term loans were used to purchase five cranes. The loans mature
                    from
                    2013 to 2015.(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
                  $120,000 at March 31, 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. 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 paid for the three months ended March 31, 2007
                  were $161.
                  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
                    March 31,
                    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 commitmentsunder 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 installments 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 Mortgage 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 March 31, 2007 is as
          follows:
 2008
                  
                  $
                  8502009
                  
                  
                  60,8942010
                  
                  
                  8992011
                  
                  
                  8562012
                  
                  
                  9052013
                      and thereafter
                  
                  
                  3,152$
                  67,556


**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 March
          31,
          2007 and December 31, 2006, the Company had a deposit of $2,600 with an
          insurance company collateralizing the letter of credit. The deposit is
          reflected
          in restricted cash and deposit. Accrued expenses at March 31, 2007 and
          December
          31, 2006 included approximately $2,432 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 $50
          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
          March 31, 2007 and December 31, 2006 included approximately $280 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 months ended March 31, 2007. The Company paid Gulfport
          approximately $49 in consideration for these services during the three
          months
          ended March 31, 2006. At March 31, 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 $2,616 and $2,199
          to
          affiliated entities during the three months ended March 31, 2007 and 2006,
          respectively. The Company had receivables from affiliates of $5 and $1,016
          at
          March 31, 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 $146 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****March
                    31,****2007**
                
                **2006**Basic:Net
                    income
                
                $
                11,386
                
                $
                11,347Weighted
                    average shares
                
                
                25,907
                
                
                23,508Earnings
                    per share
                
                $
                0.44
                
                $
                0.48Diluted:Net
                    income
                
                $
                11,386
                
                $
                11,347Weighted
                    average shares:Outstanding
                    (thousands)
                
                
                25,907
                
                
                23,508Options
                    (thousands)
                
                
                2
                
                
                16425,909
                
                
                23,672Income
                    per share
                
                $
                0.44
                
                $
                0.48
  The
            weighted average number of diluted shares excludes 299,167 shares for the
            three months ended March 31, 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 $528 and $530 for the three months ended March 31,
            2007 and
            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”) 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 1,000,000 shares underlying
            options
            granted to employees under the 2005 Plan prior to the adoption of the
            2006 Plan.
  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
            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 Stock Incentive 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. The 2005 Plan provides 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 three months ended March
            31, 2006. We did not grant any options during the three months ended
            March 31,
            2007.
 -11-
 ***Table
                of Contents***
 **March
                          31,****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 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. The following table provides information relating
                to
                activity in the 2005 and 2006 Plans during the first three 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
                        
                        
                        -
                        
                        
                        -Forfeited/expired
                        
                        
                        33
                        
                        
                        21.03Options
                            outstanding at March 31, 2007
                        
                        
                        799
                        
                        $
                        20.36
                        
                        
                        8.67
                        
                        $
                        (3,032
                        )Options
                            fully vested and exercisable at March 31, 2007
                        
                        
                        351
                        
                        $
                        19.84
                        
                        
                        8.61
                        
                        $
                        (1,145
                        )
 **Weighted
                              Average**
                          
                          **Aggregate****Grant
                              Date**
                          
                          **Grant
                              Date****Shares**
                          
                          **Fair
                              Value**
                          
                          **Fair
                              Value**Options
                              nonvested at December 31, 2006
                          
                          
                          513
                          
                          $
                          11.11
                          
                          $
                          5,700Granted
                          
                          
                          -
                          
                          
                          -
                          
                          
                          -Vested
                          
                          
                          46
                          
                          
                          11.20
                          
                          
                          512Forfeited/expired
                          
                          
                          19
                          
                          
                          10.88
                          
                          
                          206Options
                              nonvested at March 31, 2007
                          
                          
                          448
                          
                          $
                          11.11
                          
                          $
                          4,982
 As
                      of
                      March 31, 2007, there was $4,982 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 1.72 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
                      months ended March
                      31, 2007, related to shares of restricted stock was $164. Restricted
                      stock
                      activity for the three months ended March 31, 2007 follows:
 **Weighted
                                  Average****Grant
                                  Date****Shares**
                              
                              **Fair
                                  Value**Outstanding
                                  at December 31, 2006
                              
                              
                              67
                              
                              $
                              20.25Granted
                              
                              
                              119
                              
                              
                              15.42Vested
                              
                              
                              11
                              
                              
                              20.39Forfeited/expired
                              
                              
                              -
                              
                              
                              -Outstanding
                                  at March 31, 2007
                              
                              
                              175
                              
                              $
                              17.01
 There
                          was
                          $2,870 of total unrecognized compensation cost related
                          to nonvested restricted
                          stock awards to be recognized over a weighted-average period
                          of 1.87 years as of
                          March 31, 2007.
 -12-
 ***Table
                              of Contents***
  **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 months
                          ended March 31, 2007 and 2006 were $246 and $72, respectively.
  -13-
 ***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 8, 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 52 are marketed, two are in the process of being refurbished and 11
      are held in inventory. We also own a fleet of 67 trucks used to transport our
      rigs and 31 workover rigs, of which 27 are operating with the remaining four
      to
      be delivered and operating by the end of the second quarter.




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 23 inventoried drilling rigs during
      the
      period from November 2003 to March 2007. Upon completion of refurbishment,
      the
      rigs either met or exceeded our operating expectations. 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
      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.





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 20 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 months ended March 31, 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****March
                    31,**
                
                **Years
                    Ended December 31,****2007**
                
                **2006**
                
                **2006**
                
                **2005**
                
                **2004**Average
                    number of operating rigs
                
                
                51
                
                
                39
                
                
                45
                
                
                17
                
                
                9Revenue
                    days
                
                
                3,631
                
                
                3,354
                
                
                15,202
                
                
                5,781
                
                
                2,733Utilization
                    Rates
                
                
                79
                %
                
                96
                %
                
                93
                %
                
                95
                %
                
                81
                %
 
  The
          increase in the number of revenue days in the three month-period ended
          March 31,
          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 one rig in the first quarter
          of 2007, 12 rigs in 2006, and six rigs in 2005, and plan on refurbishing
          two
          additional inventoried rigs during the remainder of 2007.
 -14-
 ***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 indicated:
 
 **At
                    March 31,**
                
                **At
                    December 31,****2007**
                
                **2006**
                
                **2005**
                
                **2004**Crude
                    oil (Bbl)
                
                $
                65.87
                
                $
                61.05
                
                $
                61.04
                
                $
                43.45Natural
                    gas (Mmbtu)
                
                $
                7.73
                
                $
                6.30
                
                $
                11.23
                
                $
                6.15U.S.
                    Land Rig Count
                
                
                1,676
                
                
                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. 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.” This
          point was validated in 2006, as there were 3.4 times the number of wells
          drilled
          as compared to ten years earlier with no increase in production. We believe
          all of these factors tend to support a higher natural gas price environment,
          which should create strong incentives for oil and natural gas exploration
          and
          production companies to increase 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 2006, we did not experience a loss on the one footage contract
          we
          completed. We did not drill any wells pursuant to footage contracts during
          the
          three months ended March 31, 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. We had no footage contracts
          in progress at March 31, 2007 or December 31, 2006. At March 31, 2007 and
          December 31, 2006, our contract drilling in progress totaled $2.1 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.
 -15-
 ***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
          $494,000 and $400,000 at March 31, 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 March 31, 2007, would have resulted
          in a
          corresponding decrease in our net income of approximately $2.8
          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. We record the same depreciation expense whether
          an
          operating rig is idle or working. Depreciation is not recorded on an inventoried
          rig until placed in service. 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 three months ended March 31, 2007 and year ended
          December 31, 2006, we capitalized approximately $454,000 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 $693 and $530 for the three months ended
          March
          31, 2007 and 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 March 31, 2007 and December 31, 2006 included
          accruals of approximately $2.4 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 both March 31, 2007 and December 31, 2006, we had a
          $2.6 million letter of credit. 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 three months ended March 31, 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 Well Services, Inc. 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 $819,000
                  and additional deferred income taxes of $7.7 million. We subsequently
                  deployed three of these rigs and intend to deploy the remaining four
                  rigs periodically over the coming months with the expectation that
                  all 31
                  will be in service by the end of the second quarter of
                  2007.  -16-
 ***Table
              of Contents***
  **Results
          of Operations**
 
 ***Three
          Months Ended March 31, 2007 Compared to Three Months Ended March 31,
          2006***
  *Contract
          Drilling Revenue.* For
          the three months ended March 31, 2007, we reported contract drilling revenues
          of
          $74.5 million, a 32% increase from revenues of $56.4 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 three months ended March 31,
          2007 as
          compared to the same period in 2006. Average dayrates for our drilling
          services
          increased $3,126, or 20%, to $18,749 for the three months ended March 31,
          2007
          from $15,623 in the same period in 2006. Revenue days increased 8% to 3,631
          days
          for the three months ended March 31, 2007 from 3,354 days during the same
          period
          in 2006. Our average number of operating rigs increased to 52 from 39,
          or 33%,
          for the three months ended March 31, 2007 as compared to the same period
          in
          2006. The increase in the number of revenue days for the three months ended
          March 31, 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 79% for the three months
          ended March 31, 2007 from 96% for the three months ended March 31, 2006.
          This
          17% decrease was due primarily to a more competitive market resulting from
          an
          increase in the supply of drilling rigs and unfavorable weather
          conditions in the first quarter.
  *Contract
          Drilling Expense.* Direct
          rig cost increased $12.8 million to $40.8 million for the three months
          ended
          March 31, 2007 from $28.0 million for the same period in 2006. This 46%
          increase
          is primarily due to the increase in revenue days and the increase in average
          number of operating rigs in our fleet for the three months ended March
          31, 2007
          as compared to the same period in 2006. As a percentage of contract drilling
          revenue, drilling expense increased to 55% for the three-month period ended
          March 31, 2007 from 50% for the same period in 2006 due primarily to
          expenses related to the retention of crews of idle rigs.
  *Depreciation
          Expense.* Depreciation
          expense increased $5.3 million to $11.2 million for the three months ended
          March
          31, 2007 from $5.9 million for the same period in 2006. The increase is
          primarily due to the 45% increase in fixed assets, including the deployment
          of
          twelve additional
          rigs from our inventory and the Eagle Well Services 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 $1.5 million to $4.7 million for the
          three
          months ended March 31, 2007 from $3.2 million for the same period in 2006.
          The
          increase is the result of an increase in yard expense of $717,000, an increase
          in payroll costs of $316,000, an increase in bad debt expense of $185,000,
          and an increase in stock compensation expense of $163,000. The increase
          in yard
          expense is primarily due to the acquisition of Eagle Well Services 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 $1.2 million to $1.3 million for the three months ended
          March
          31, 2007 from $85,000 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 $454,000 of interest for the three
          months
          ended March 31, 2007 as compared to $1.1 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 $7.1 million for the three months ended March
          31,
          2007, of which $4.4 million is deferred tax expense. This compares to a
          deferred
          tax expense of $6.9 million for the three months ended March 31, 2006.
          This
          increase is due to an increase in pre-tax income and an increase in our
          effective tax rate.
 
 **Liquidity
          and Capital Resources**
  ***Operating
          Activities*** **.** Net
          cash provided by operating activities was $15.2 million for the three months
          ended March 31, 2007 as compared to $14.8 million in 2006. The increase
          of
          $400,000 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 $17.1 million for the three-months ended March
          31, 2007
          as compared to $41.4 million for the same period in 2006. For the three
          months
          ended March 31, 2007, we used 16.2 million to refurbish our drilling rigs
          and
          $2.3 million to purchase Eagle Well Service, Inc. These amounts were
          partially offset by $1.4 million of proceeds received from the sale of
          assets.
          During the 2006 period, $16.4 million related to the Big A acquisition
          and $25.8
          million was used to refurbish drilling rigs. These amounts were partially
          offset
          by $801,000 received from a restricted account that is used as security
          for a
          letter of credit issued to workers’ compensation insurance carrier.
  ***Financing
          Activities*** **.** Our
          cash flows used in financing activities were $6.8 million for the three
          months
          ended March 31, 2007 as compared to $15.2 million provided by financing
          activities for the same period in 2006. For the three months ended March
          31,
          2007, our net cash used in financing activities related to principal payments
          of
          $14.8 million under our credit agreement with Fortis Capital Corp., partially
          offset by borrowings of $8.0 million under our credit facility with Fortis
          Capital Corp. Our net cash provided by financing activities for the three
          months
          ended March 31, 2006 related to net proceeds of approximately $36.4 million
          from
          our follow-on offering, borrowings of $15.0 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 ("Alpha"), an entity controlled by Wexford Capital
          L.L.C
          ("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.
 -17-
 ***Table
              of Contents***
  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 $120,000 at
          March 31,
          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
          paid
          for the three months ended March 31, 2007 were $161. 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 March 31, 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 the
          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 Drilling and Eagle Well Services,
          Inc.
          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
          Drilling, L.C. The purchase price for the assets consisted of $16.3 million
          paid
          in cash and 72,571 shares of our common stock.
 
 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
          the first quarter of 2007 we completed the refurbishment of a 1,500 horsepower
          rig. We incurred refurbishment costs of $7.0 million which were funded
          with
          borrowings under our various credit facilities and cash flows from operations.
 
 We
          intend
          to complete the refurbishment of two additional inventoried rigs during
          2007 at
          estimated costs (including drill pipe) for $5.9 million
          per rig. The actual cost of refurbishing our rigs will depend upon such
          factors
          as the availability of equipment, unforeseen engineering problems, work
          stoppages, weather interference, unanticipated cost increases, inability
          to
          obtain necessary certifications and approvals, shortages of skilled labor
          and
          the specific customer requirements.
 
 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 Well Services, Inc. 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 $819,000 and additional deferred income taxes
          of
          $7.7 million. We subsequently deployed three of these rigs and intend to
          deploy
          the remaining four rigs periodically over the coming months with the
          expectation that all 31 will be in service by the end of 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.
 -18-
 ***Table
              of Contents***
  **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 new 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 $368,000 annually, based on the $60.0 million outstanding
          in the
          aggregate under our credit facility as of March 31, 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 March 31, 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 first quarter that have materially affected, or are reasonably
          likely
          to materially affect, our internal control over financial
          reporting.
 -19-
 ***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 filing 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**
 
 None.
 
 **Item 5.
          Other Information**
 
 None.
 
  -20-
 ***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 Services 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).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
                  Agreement
                      and Plan of Merger, effective as of January 9, 2007, by and
                      between the
                      Company, BDC Acquisition Company, Eagle Well Services, Inc.,
                      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).*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.
  -21-
 ***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 their behalf by the undersigned,
          thereunto duly authorized.
  Dated:
                    May 9, 2007
                
                **BRONCO
                    DRILLING COMPANY, INC.**By:
                
                /s/
                    Zachary M. GravesZachary
                    M. GravesChief
                    Financial Officer*(Principal
                    Accounting and Financial Officer)*Dated:
                    May 9, 2007
                
                By:
                
                /s/
                    D. Frank HarrisonD.
                    Frank HarrisonChief
                    Executive Officer*(Authorized
                    Officer and Principal Executive
                    Officer)*