UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549





FORM
10-Q





x
            Quarterly
      Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934


For the
quarterly period ended March 31, 2009





o
            Transition
      Report pursuant to 13 or 15(d) of the Securities Exchange Act of
      1934





For the
transition period   to





Commission File
Number: 000-53260





Best
Energy Services, Inc.


(Exact
name of small business issuer as specified in its charter)





Nevada
            02-0789714(State
      or Other Jurisdiction of Incorporation or
    Organization)
            (I.R.S.
      Employer Identification No.)





10375
Richmond Avenue, Suite 2000, Houston TX 77042


(Address
of Principal Executive Offices)  (Zip Code)


(713)
933-2600


(Issuer’s
Telephone Number, including Area Code)





Securities
registered under Section 12(b) of the Exchange Act:None





Securities
registered under Section 12(g) of the Exchange Act:


Common
Stock, par value $0.001 per share


(Title of
Class)





Check
whether the issuer (1) 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 issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 daysx
  Yeso   No





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files).        Yes    ̈   No   ̈





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,” “large accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act (check one):




Large
      Accelerated filer o
              Accelerated
      fileroNon-Accelerated
      filero (Do not check if a smaller
      reporting company)
              Smaller
      Reporting Company x
   Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes  o   No x




State the
number of shares outstanding of each of the issuer’s classes of common stock, as
of the latest practicable date: 20,967,109 common shares as of April 30,
2009.













-1-




BEST
ENERGY SERVICES, INC.








Table
of Contents








PagePART I. FINANCIAL INFORMATIONItem 1.Unaudited Consolidated Financial
      Statements
            3Unaudited Consolidated Balance Sheets as of March 31,
      2009 and December 31, 2008
            3Unaudited Consolidated Statements of Operations for the
      Three Months Ended March 31, 2009 and April 30, 2008
            4Unaudited Consolidated Statements of Cash Flow for the
      Three Months Ended March 31, 2009 and April 30, 2008
            5Notes to Unaudited Consolidated Financial
      Statements
            6Item 2. Management’s Discussion and Analysis of
      Financial Condition and Results of Operations
            13Item 3. Quantitative and Qualitative Disclosures About
      Market Risk
            19Item 4. Controls and Procedures
            19PART II. OTHER INFORMATIONItem 1. Legal Proceedings
            20Item 1A. Risk Factors
            20Item 2. Unregistered Sales of Equity Securities and Use
      of Proceeds
            20Item 3. Defaults Upon Senior
    Securities
            20Item 4. Submission of Matters to a Vote of Security
      Holders
            20Item 5. Other Information
            20Item 6. Exhibits
            20Signatures
            20















-2-




PART I


Item
1. Financial Statements





Best Energy Services, Inc.


Consolidated Balance Sheets


(Unaudited)





ASSETS
            
            March
      31, 2009
            
            
            December
      31, 2008Current
      assetsCash
            
            $
            109,246
            
            
            $
            249,330Accounts
      receivable, net of allowance for doubtful accounts of $105,485 and
      $106,237, respectively
            
            
            1,950,462
            
            
            
            3,602,118Prepaid
      and other current assets
            
            
            158,083
            
            
            
            123,053Total
      current assets
            
            
            2,217,791
            
            
            
            3,974,501Property
      and equipment, net
            
            
            29,946,306
            
            
            
            30,877,472Deferred
      financing costs, net
            
            
            194,454
            
            
            
            -Goodwill
      and other intangible assets
            
            
            7,557,309
            
            
            
            7,557,309TOTAL
      ASSETS
            
            $
            39,915,860
            
            
            $
            42,409,282LIABILITIES
      AND STOCKHOLDER’S EQUITYCurrent
      liabilitiesAccounts
      payable and accrued liabilities
            
            $
            221,129
            
            
            $
            678,834Bank
      overdraft
            
            
            48,974
            
            
            
            -Current
      portion of accrued officer compensation
            
            
            135,000
            
            
            
            140,000Preferred
      stock dividends payable
            
            
            1,021,014
            
            
            
            765,761Current
      portion of loans payable
            
            
            1,417,705
            
            
            
            21,802,193Total
      current liabilities
            
            
            2,843,822
            
            
            
            23,386,788Accrued
      officer compensation, net of current portion
            
            
            380,000
            
            
            
            410,000Loans
      payable, net of current portion
            
            
            19,403,006
            
            
            
            134,836Deferred
      income taxes
            
            
            8,569,508
            
            
            
            8,708,454TOTAL
      LIABILITIES
            
            
            31,196,336
            
            
            
            32,640,078STOCKHOLDERS’
      EQUITYSeries
      A Preferred Stock, 2,250,000 shares authorized, 1,458,592 shares issued
      and outstanding, at redemption value of $10 per share
            
            
            14,585,920
            
            
            
            14,585,920Common
      stock, $0.001 par value per share; 90,000,000 shares authorized;
      20,967,109 and 20,891,366 shares issued and outstanding,
      respectively
            
            
            20,967
            
            
            
            20,891Additional
      paid-in capital
            
            
            2,549,772
            
            
            
            2,452,350Retained
      deficit
            
            
            (8,437,135
            )
            
            
            (7,289,957
            )Total
      stockholders’ equity
            
            
            8,719,524
            
            
            
            9,769,204TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            39,915,860
            
            
            $
            42,409,282





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










-3-













Best
Energy Services, Inc.


Consolidated Statements of Operations


For
the three months ended March 31, 2009 and April 30, 2008


(Unaudited)





Three
      months endedMarch
      31, 2009
            
            
            April
      30, 2008RevenuesWell
      service revenue
            
            $
            1,877,389
            
            
            $
            3,873,798Drilling
      service revenue
            
            
            828,559
            
            
            
            301,088Geological
      services revenue
            
            
            120,411
            
            
            
            110,842Total
      revenue
            
            
            2,826,359
            
            
            
            4,285,728Costs
      and expenses:Direct
      cost of revenue
            
            
            1,735,940
            
            
            
            1,973,668Business
      unit operating expenses
            
            
            540,200
            
            
            
            1,278,657Depreciation
      and amortization
            
            
            934,017
            
            
            
            719,521General
      and administrative expense
            
            
            679,306
            
            
            
            1,881,667Total
      operating costs and expenses
            
            
            3,889,463
            
            
            
            5,853,513Loss
      from operations
            
            
            (1,063,104
            )
            
            
            (1,567,785
            )Other
      income (expense):Interest
      income
            
            
            752
            
            
            
            19,111Interest
      expense
            
            
            (223,773
            )
            
            
            (2,857,487
            )Loss
      before provision for income taxes
            
            
            (1,286,125
            )
            
            
            (4,406,161
            )Income
      tax
            
            
            -
            
            
            
            -Deferred
      income tax benefit
            
            
            138,947
            
            
            
            -Net
      loss
            
            
            (1,147,178
            )
            
            
            (4,406,161
            )Preferred
      stock dividend
            
            
            (255,254
            )
            
            
            -Net
      loss attributable to common shareholders
            
            $
            (1,402,432
            )
            
            $
            (4,406,161
            )Net
      loss per share – basic and diluted
            
            $
            (0.07
            )
            
            $
            (0.26
            )Weighted
      average common shares outstanding – basic and diluted
            
            
            20,942,971
            
            
            
            16,956,702





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










-4-










Best
Energy Services, Inc.


Consolidated Statements of Cash Flow


For
the three months ended March 31, 2009 and April 30, 2009


(Unaudited)





Three
      months endedMarch
      31, 2009
            
            
            April
      30,
              2008Cash
      flow from operating activities:Net
      loss
            
            $
            (1,147,178
            )
            
            $
            (4,406,161
            )Adjustments
      to reconcile net loss to net cash used by operating
      activities:Deferred
      income tax benefit
            
            
            (138,947
            )Depreciation
      and amortization
            
            
            934,017
            
            
            
            719,521Stock-based
      compensation
            
            
            352,751
            
            
            
            159,106Non-cash
      interest expense
            
            
            220,999
            
            
            
            2,677,114Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            1,651,656
            
            
            
            (989,132
            )Prepaid
      expenses and other current assets
            
            
            (35,030)
            
            
            
            (150,000
            )Accounts
      payable, accrued liabilities and other
            
            
            (408,730
            )
            
            
            1,333,591Accrued
      officer compensation
            
            
            (35,000)
            
            
            
            (1,027,022
            )Net
      cash provided by (used in) operating activities
            
            
            1,394,538
            
            
            
            (1,682,983
            )Cash
      flows from investing activities:Acquisition
      of businesses, net of cash acquired
            
            
            -
            
            
            
            (29,947,643
            )Capital
      expenditures, net
            
            
            (2,851
            )
            
            
            (156,098
            )Net
      cash used in investing activities
            
            
            (2,851
            )
            
            
            (30,103,741
            )Cash
      flows from financing activities:Proceeds
      from issuance of Term Loan
            
            
            -
            
            
            
            5,850,000Repayments
      of Term Loan
            
            
            (292,500
            )
            
            
            (195,000
            )Net
      borrowings (repayments) under Revolving Advances
            
            
            (972,512
            )
            
            
            15,330,122Net
      repayments of other notes payable
            
            
            (72,305
            )
            
            
            (29,153
            )Proceeds
      from issuance of Units in private placement
            
            
            -
            
            
            
            11,848,080Payment
      of deferred financing costs
            
            
            (194,454
            )
            
            
            (921,066
            )Net
      cash (used in) provided by financing activities
            
            
            (1,531,771
            )
            
            
            31,882,983Net
      change in cash and cash equivalents
            
            
            (140,084
            )
            
            
            96,259Cash
      and cash equivalents, beginning of period
            
            
            249,330
            
            
            
            5Cash
      and cash equivalents, end of period
            
            $
            109,246
            
            
            $
            96,264Supplemental
      disclosures of cash flow information:Cash
      paid for interest
            
            $
            2,774
            
            
            $
            179,250Cash
      paid for income taxes
            
            $
            -
            
            
            $
            150,000Noncash
      investing and financing activities:Units
      issued in exchange for collateral agreements
            
            $
            -
            
            
            $
            2,500,000Retirement
      of common shares
            
            
            -
            
            
            
            6,080Stock
      options exercised
            
            
            76
            
            
            
            -Accrued
      dividends on preferred stock
            
            
            255,253
            
            
            
            -




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


-5-










Best
Energy Services, Inc.


Notes to Unaudited Consolidated Financial
Statements


March
31, 2009





Note
1 - Basis of Presentation





The
accompanying unaudited interim consolidated financial statements have been
prepared pursuant to accounting principles generally accepted in the United
States of America and the rules and regulations of the Securities and Exchange
Commission and should be read in conjunction with the audited financial
statements and notes thereto contained in Best Energy’s Annual Report filed with
the SEC on Form 10-K.  In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a
fair presentation of financial position and the results of operations
for the interim periods presented have been reflected herein. The results of
operations for interim periods are not necessarily indicative of the results to
be expected for the full year. Notes to the financial statements which
substantially duplicate the disclosure contained in the audited financial
statements for fiscal 2008 as reported in the Form 10-K have been
omitted.  These consolidated financial statements include the accounts
of Best Energy and its wholly-owned subsidiaries BWS and BBD.  All
significant inter-company balances and transactions have been
eliminated.





Change
in year end





In
February 2008, Best Energy acquired two companies and certain assets from three
other companies, all of which are engaged in well servicing, drilling and
related complementary services for the oil and gas, water and minerals
industries.  Concurrent with these acquisitions we abandoned our
prior business plan and changed our name to Best Energy Services,
Inc.  In addition, as a result of these acquisitions, our Board of
Directors elected to change our fiscal year-end to December 31, effective
December 31, 2008, to match the calendar year-ends of the acquired
companies.





Prior to
the acquisitions, our fiscal year end was January 31.  As a result of
the acquisitions, on February 14, 2008, our board of directors elected to change
our year end to December 31 effective in the fourth calendar quarter of 2008, to
match the year end of the acquired companies.   Accordingly, we filed
an annual report on Form 10-K for the year ended January 31, 2008 and
subsequently filed quarterly reports in 2008 on Form 10-Q for the quarters ended
April 30, July 31, and October 31.  In addition, we filed a Transition
Report on Form 10-K for the eleven months ended December 31, 2008.  We have
determined that revising our prior year interim financial statements to conform
to the current year quarterly presentation would be unduly cumbersome and
costly.  Consequently, this report includes statements of operations
and cash flow for the three month periods ended March 31, 2009 and April 30,
2008.  We believe that these periods are generally comparable other
than the seasonal effects of drilling operations.  Our operations in
Utah are subject to Bureau of Land Management restrictions on land usage for
drilling activity during the winter months. In addition, weather conditions in
Kansas in the first four months of the year are generally unpredictable due to
potentially heavy snow falls and tornadoes.





Note
2-Summary of Significant Accounting Policies





Use
of Estimates





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





Reclassifications





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




Cash
and Cash Equivalents





We
consider all highly liquid investments with maturities from date of purchase of
three months or less to be cash equivalents. Cash and cash equivalents consist
of cash on deposit with domestic banks and, at times, may exceed federally
insured limits.  As of March 31, 2009, we had no cash balances in
excess of federally insured limits.





-6-


Credit
Risk




We are
subject to credit risk relative to our trade receivables. However, credit risk
with respect to trade receivables is minimized due to the nature of our customer
base.





Goodwill





Goodwill
represents the excess of purchase price and related costs over the value
assigned to the net tangible assets of businesses acquired. These business
acquisitions include BWS, BBD, BB Drilling and DSS in February
2008.  We evaluate goodwill for impairment utilizing undiscounted
projected cash flows in accordance with SFAS No. 142, “Goodwill and Other
Intangible Assets.”  As of March 31, 2009, we believe that no such
impairment has occurred. Goodwill has been adjusted for purchase price
adjustments recognized during the current fiscal year.





Income
Taxes





The
Company recognizes deferred tax assets and liabilities for the future tax
consequences attributed to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
basis.  Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.  Under
SFAS 109, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.  If it is more likely than not that some portion of a deferred
tax asset will not be realized, a valuation allowance is
recognized.





Segmental
Reporting





SFAS No.
131,“Disclosures about Segments of an Enterprise and Related Information”
establishes standards for reporting information about operating segments on a
basis consistent with the Company’s internal organization structure as well as
information about geographical areas, business segments and major
customers in financial statements. In January 2009, the Company combined
division Mud Logging and Rig Housing as Geological Service Division. The Company
continues to have business operations in the drilling and well services
segments. Accordingly, the Company operates in three business
segments.








Recently
Issued Accounting Standards and Developments.





In June
2008, EITF 07-5, “Determining Whether an Instrument (or Embedded Feature) Is
Indexed to an Entity’s Own Stock” was issued. This standard triggers liability
accounting on all options and warrants exercisable at strike prices denominated
in any currency other than the Company’s functional currency or warrants with
certain reset provisions to the strike price because of a “down-round”
financing. This Issue is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and interim periods within those fiscal
years. Early application is not permitted. We adopted EITF 07-5 on January 1,
2009 and analyzed all of the outstanding warrants and none contained down-round
reset exercise price provisions which would have precluded equity
treatment.  Therefore, the adoption did not have a material impact on
our financial position, results of operations or cash flows.





FASB
Staff Position FSP No. 141(R)-1 Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies,
(“FSP 141(R)-1”), issued in February 2009, amends the provisions in
Statement 141(R) for the initial recognition and measurement, subsequent
measurement and accounting, and disclosures for assets and liabilities arising
from contingencies in business combinations. The FSP eliminates the distinction
between contractual and non-contractual contingencies, including the initial
recognition and measurement criteria in Statement 141(R) and instead carries
forward most of the provisions in SFAS 141 for acquired contingencies. FSP
141(R)-1 is effective for contingent assets and contingent liabilities acquired
in business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after
December 15, 2008. Best will integrate the provisions of this FSP as
appropriate to future business combinations.





We do not
believe that the adoption of recent accounting pronouncements will have a
material effect on our consolidated results of operations, financial position,
or cash flows.





-7-


Note
3 – Loans payable





On April
15, 2009, we entered into an amendment to our existing credit agreement with PNC
Bank N.A. (“Amended Credit Agreement”).  The Amended Credit Agreement
provides for a term loan and a revolving credit portion.  Under the
terms of the Amended Credit Agreement, the term loan portion increased from
approximately $5.0 million to $19.2 million, as a result of a portion of the
revolving portion of the debt being transferred to the term loan
portion.  The maturity date of the term loan was changed to March 31,
2011.  The term loan requires monthly principal payments beginning May
1, 2009 and on the first day of each month thereafter as follows:




·
            From
      May 1, 2009 to December 31, 2009 -
$98,500;


·
            From
      January 1, 2010 to December 31, 2010 - $125,000;
  and


·
            $150,000
      thereafter until March 31, 2011.





The term
loan bears interest at a rate equal to an alternate base rate (which is
generally the greater of the federal funds open rate plus 1⁄2%, PNC’s base
commercial lending rate and the daily LIBOR rate) plus 2.5% or the
greater of the Eurodollar Rate or 2% plus 3.75%, as those
terms are defined in the Amended Credit Agreement.  The term loan also
requires an annual 25% recapture of Excess Cash Flow applied to the principal
balance. Excess Cash Flow is defined as EBIDTA less cash tax payments,
non-financed capital expenditures and payments of principal on the term loan and
interest on indebtedness for borrowed money.





The
revolving credit portion of the debt, $953,378 on April 15,2009, may be borrowed
and re-borrowed until maturity on March 31, 2011 and bears interest at the same
rate as the term loan.  The amount available is the lesser of $4.0
million and an amount equal to 85% of eligible receivables plus 100% of the
balance in the cash collateral account plus the undrawn amount of letters of
credit minus such reserves as PNC deems appropriate.  At March 31,
2009, there was approximately $300,000 available under the Credit Agreement
before the amendment.




Borrowings
under the Amended Credit Agreement are secured by all of our assets and
equipment and by all of the assets and equipment of BWS and BBD, and the assets
acquired from BB Drilling, DSS, and ARH.  Any equipment and assets
purchased in the future will, once acquired, also be subject to the security
interest in favor of PNC Bank, N.A.




Under our
Amended Credit Agreement, we are subject to customary covenants, including
certain financial covenants and reporting requirements. Beginning on March 31,
2010, we are required to maintain a fixed charge coverage ratio, (defined as the
ratio of EBITDA minus capital expenditures (except capital expenditures financed
by lenders other than under the Amended Credit Agreement) made during such
period minus cash taxes paid during such period minus all dividends and
distributions paid during such period (including, without limitation, all
payments to the holders of the Series A Preferred Stock), to all senior debt
payments as follows:




Fiscal Quarter Ending:
            Fixed
              Coverage Ratio:March
      31, 2010
            1.05
      to 1.0June
      30, 2010
            1.10
      to 1.0September
      30, 2010
            1.15
      to 1.0December
      31, 2010
            1.20
      to 1.0March
      31, 2011
            1.25
      to 1.0







We also
are required to maintain a minimum EBITDA as follows:




Fiscal Quarter Ending:
            Minimum EBITDA:Three
      months ended March 31, 2009
            $  216,000Six
      months ended June 30, 2009
            902,000Nine
      months ended September 30, 2009
            1,744,000Twelve
      months ended December 31, 2009
            2,385,000







-8-


Under the
terms of our Amended Credit Agreement, we may not pay cash dividends on our
common stock or our preferred stock or redeem any shares of our common stock or
preferred stock.




Our
amended credit agreement has set forth minimum rig utilization requirements for
the three-month period then ending for Best Well Service of not less than the
percentage set forth in the table below:




Fiscal Quarter Ending
            Minimum
              Rig
              UtilizationMarch
      31, 2009
            25%June
      30, 2009
            30%September
      30,2009
            34%December
      31, 2009
            34%March
      31, 2010
            48%June
      30, 2010
            54%September
      30, 2010
            58%December
      31, 2010
            58%March
      31, 2011
            58%







Our Rig
Utilization rate was 37% for quarter ended March 31, 2009.




In
addition to the foregoing and other customary covenants, our Amended Credit
Agreement contains a number of covenants that, among other things, will restrict
our ability to:




·
            incur
      or guarantee additional
indebtedness;




·
            transfer
      or sell assets;




·
            create
      liens on assets;




·
            engage
      in transactions with affiliates other than on an “arm’s-length” basis;
      and




·
            make
      any change in the principal nature of our
  business.




Our
Amended Credit Agreement also contains customary events of default, including
nonpayment of principal or interest, violations of covenants, cross default and
cross acceleration to certain other indebtedness, bankruptcy, a change of
control and material judgments and liabilities.





The
amounts owed under the credit facility had been classified as current in the
December 31, 2008 balance sheet.  As a result of the loan modification
subsequent to the end of the period, these amounts have been reclassified to
long term debt based on management’s intent and ability to refinance these
amounts into long-term debt.





In
connection with refinancing the credit facility, we incurred costs associated
with the transaction of $194,454.  These costs have been capitalized
as deferred financing costs and will be amortized over the life of the Amended
Credit Agreement using the interest method.





Future
minimum payments under notes payable (as amended subsequent to the end of the
period) are as follows:





For
      the twelve months
              ending
      March 31,
            
            Amount2009
            
            $  1,417,7052010
            
            19,379,4292011
            
            23,577








-9-


Note 4 -Stock Options





Stock
Options





Incentive
and non-qualified stock options issued to directors, officers, employees and
consultants are issued at an exercise price equal to or greater than the fair
market value of the stock at the date of grant.  The stock options
vest over a period from zero to one year, and expire five years from the date of
grant.  Upon exercise of stock options, new shares of common stock are
issued.  Compensation cost related to stock options is recognized on a
straight-line basis over the vesting or service period and is net of expected
forfeitures.





The fair
value of each stock option granted is estimated on the date of grant using a
Black-Scholes option pricing model.  The following table presents the
assumptions used in the option pricing model for options granted during the
three months ended March 31, 2009.  The expected life of the options
represents the period of time the options are expected to be
outstanding.  The expected term of options granted was derived based
on a weighting between the average midpoint between vesting and the contractual
term.  Our expected volatility is based on the historical volatility
of comparable companies for a period approximating the expected life, due to the
limited trading history of our common stock.  The risk-free interest
rate is based on the observed U.S. Treasury yield curve in effect at the time
the options were granted.  The dividend yield is based on the fact
that we do not anticipate paying any dividends on common stock in the near
term.





Expected
      life (years)
            2.50
            yearsRisk-free
      interest rate
            1.35
            %Volatility
            120.00
            %Dividend
      yield
            0.00
            %





A summary
of our stock option activity and related information is presented
below:





WeightedAverageNumber of
            
            Exercise PriceOptions
            
            Per OptionOptions
      outstanding at December 31, 2008
            
            
            2,845,000
            
            
            $
            0.30Granted
            
            
            400,000
            
            
            
            0.25Exercised
            
            
            (150,000
            )
            
            
            0.50Forfeited
            
            
            -
            
            
            
            -Options
      outstanding at March 31, 2009
            
            
            3,095,000
            
            
            $
            0.29Options
      vested and exercisable at December 31, 2008
            
            
            3,095,000
            
            
            $
            0.29





During
the three months ended March 31, 2009, 400,000 options were granted with a
weighted average grant date fair value of $0.86.  During the three
months ended March 31, 2009, 150,000 options were exercised in a cashless
exercise which resulted in 75,743 shares being issued.  No options
were forfeited or expired.  As of March 31, 2009, there was no
unrecognized compensation cost related to non-vested stock
options.  We recognized $352,751 of stock-based compensation expense
related to stock options during the three months ended March 31,
2009.  As of March 31, 2009, the weighted-average remaining life of
the outstanding stock options is 4.45 years.




The
aggregate intrinsic value of stock options outstanding at December 31, 2008 was
nil.  The intrinsic value for stock options outstanding is calculated
as the amount by which the quoted price of our common stock as of March 31, 2009
exceeds the exercise price of the option.





-10-


Note
5 - Stockholders’ Equity





Dividends





As of
March 31, 2009, there was $1,021,014 of accrued and unpaid dividends on the
Series A Preferred Stock.





We have
not paid or declared any dividends on our common stock and currently intend to
retain earnings to redeem the Series A Preferred Stock (to the extent
permissible under the Amended Credit Agreement) and to fund our working capital
needs and growth opportunities. Any future dividends on common stock will be at
the discretion of our board of directors after taking into account various
factors it deems relevant, including our financial condition and performance,
cash needs, income tax consequences and the restrictions Nevada and other
applicable laws and our credit facilities then impose. Our debt arrangements
include provisions that generally prohibit us from paying dividends, other than
dividends in kind, on our preferred stock.





Common
stock





During
the three months ended March 31, 2009, 75,743 shares of common stock were issued
as a result of a cashless exercise of options to purchase 150,000 shares of
common stock.





Note
6 - Related Party Transactions




On
February 14, 2008, we leased certain real property from Mr. Tony Bruce, our
director and President, for a period of three years for $3,500 per month in base
rent.





On
February 22, 2008, we leased real property necessary to run our rig housing
operations from Mr. Larry Hargrave, our former CEO a current director of the
Company, for a period of three years for $6,000 per month in base
rent.





In
January 2009, the Company entered into a consultancy agreement with Larry
Hargrave, the Company’s former Chief Executive Officer, covering the period
January 15, 2009 to June 15, 2009 at $10,000 per month.





-11-


Note
7 – Segment information





Our
operations have been organized and aligned within the following three reportable
segments:




·
            Well
      Services (Best Well Service, Inc.);


·
            Drilling
      Services (Bob Beeman Drilling
Company);


·
            Geological
      Services





Our
operations are both product and services based, and the reportable operating
segments presented below include our well services operations, drilling services
operations, mud logging and construction of portable rig housing for rig
sites.





Our
reportable segment information is as follows as of and for the three months
ended March 31, 2009:





SegmentsWell
              Service
            
            
            Drilling
              Services
            
            
            Geological
      Services
            
            
            Segments
              TotalRevenue
            
            $
            1,877,389
            
            
            $
            828,559
            
            
            $
            120,411
            
            
            $
            2,826,359Gross
      profit (loss)
            
            $
            549,928
            
            
            $
            366,183
            
            
            $
            (365,892
            )
            
            $
            550,219





Our
reportable segment information is as follows as of and for the three months
ended April 30, 2008 :




SegmentsWell
      Service
            
            Drilling
      Services
            Geological
      Services
            Segments
      TotalRevenue
            
            $
            3,873,798
            
            
            $
            301,088
            
            
            $
            110,842
            
            
            $
            4,285,728Gross
      profit
            
            $
            1,412,064
            
            
            $
            (345,153
            )
            
            $
            (33,508
            )
            
            $
            1,033,403




The
following table reconciles gross profit from reportable segments to our
consolidated income from continuing operations before income taxes for the three
months ended March 31, 2009 and April 30, 2008:





Three
      months endedMarch
      31, 2009
            
            
            April
      30, 2008Gross
      profit from reportable segments
            
            $
            550,219
            
            
            $
            1,033,403Depreciation
            
            
            (934,017
            )
            
            
            (719,521
            )General
      and administrative expenses
            
            
            (679,306
            )
            
            
            (1,881,667
            )Loss
      from operations
            
            
            (1,063,104
            )
            
            
            (1,567,785
            )Other
      expense, net
            
            
            (223,021
            )
            
            
            (2,838,376
            )Net
      loss from continuing operations before income taxes
            
            $
            (1,286,125
            )
            
            $
            (4,406,161
            )





Assets by
reportable segment as of March 31, 2009 and December 31, 2008 are as
follows:





SegmentsWell
      Service
            
            Drilling
      Services
            Geological
      Services
            Segments
      TotalMarch
      31, 2009
            
            $
            20,125,434
            
            
            $
            8,982,737
            
            
            $
            2,533,402
            
            
            $
            31,641,573April
      30, 2008
            
            
            23,261,196
            
            
            
            9,021,296
            
            
            
            354,201
            
            
            
            32,636,693







The
following table reconciles assets from reportable segments to our consolidated
assets as of March 31, 2009 and April 30, 2008:





March
      31, 2009
            
            
            April
      30, 2008Assets
      from reportable segments
            
            $
            31,641,573
            
            
            $
            32,636,693Goodwill
            
            
            7,557,309
            
            
            
            7,557,309Other
      corporate assets
            
            
            716,978
            
            
            
            2,215,280Total
      consolidated assets
            
            $
            39,915,860
            
            
            $
            42,409,282








Note
8 –Subsequent event





Subsequent
to March 31, 2009, we entered into the Amended Credit Agreement.  See
Note 3 – Loans Payable for more information.







-12-







ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSISOF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS





Statements
we make in the following discussion that express a belief, expectation or
intention, as well as those that are not historical fact, are forward-looking
statements that are subject to risks, uncertainties and assumptions. Our actual
results, performance or achievements, or industry results, could differ
materially from those we express in the following discussion as a result of a
variety of factors, including general economic and business conditions and
industry trends, the continued strength or weakness of the contract land
drilling and well service industry in the geographic areas in which we operate,
decisions about onshore exploration and development projects to be made by oil
and gas companies, the highly competitive nature of our business, the
availability, terms and deployment of capital, the availability of
qualified personnel, and changes in, or our failure or inability to comply with,
government regulations, including those relating to the environment. We have
discussed many of these factors elsewhere in this report, including under
the headings “Disclosure Regarding Forward-Looking Statements” below, in
this Item 2. These factors are not necessarily all the important factors that
could affect us. Unpredictable or unknown factors we have not discussed in this
report could also have material adverse effects on actual results of matters
that are the subject of our forward-looking statements. All forward-looking
statements speak only as of the date on which they are made and we undertake no
duty to update or revise any forward-looking statements. We advise our
shareholders that they should (1) be aware that important factors not referred
to above could affect the accuracy of our forward-looking statements and (2) use
caution and common sense when considering our forward-looking
statements.








Company
Overview





We are an
energy production equipment and services company engaged in well service,
drilling services and related complimentary activities.   We own
a total of 25 workover rigs and 12 drilling rigs, and we conduct our well
service and drilling services primarily in the Rocky Mountain and
Mid-Continent regions of the United States.  We also provide housing
accommodations to the oil and gas drilling industry principally in Texas and
geological mud-logging services to our existing business
segments.





We were
incorporated on October 31, 2006 as Hybrook Resources Corp. under the laws of
the state of Nevada.  From inception through our year ended January
31, 2008, Hybrook was a development stage company with an option to purchase an
85% interest in a mineral claim in British Columbia.  Hybrook did not
exercise its option and no minerals were discovered.  As a result of
the acquisitions discussed below, all mineral exploration activities were
discontinued.





In
February 2008, Best Energy acquired two companies and certain assets from three
other companies, all of which are engaged in well servicing, drilling and
related complementary services for the oil and gas, water and minerals
industries.  Concurrent with these acquisitions we abandoned our prior
business plan and changed our name to Best Energy Services, Inc.  In
addition, as a result of these acquisitions, our Board of Directors elected to
change our fiscal year-end to December 31, effective December 31, 2008, to
match the calendar year-ends of the acquired companies.





The
following discussion and analysis should be read in conjunction with the
accompanying unaudited condensed consolidated financial statements and related
notes as of March 31, 2009 and for the three months ended March 31, 2009 and
April 30, 2008, included elsewhere herein, and the audited consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the transition period ended December 31, 2008.





During
the three months ended March 31, 2009, we relocated our principal executive
offices to 10375Richmond Ave., Suite
2000, Houston, Texas 77042.




Business
Plan





The
implementation of our new business plan has begun with our three acquisitions
that now offer us a footprint in:





·
            The
      Well Service sector


·
            The
      Drilling Services sector


·
            The
      Housing Accomodations sector





As a
result of these acquisitions, we operate in one industry segment, oilfield
services,  which includes well service, drilling services, housing
accommodations and geological mud-logging sectors.





In the Well Service Division,
our acquisition of Best Well Service, Inc., or BWS, brings us a strong footprint
in the hydrocarbon rich Hugoton basin. BWS operates 25 well service rigs in the
Mid-Continent region of the United States.  BWS has distinguished
itself over the years in its service to both major oil companies and large
independents, as well as an employee retention history that we believe is among
the best in the industry.





In the Drilling Services
Division, our acquisition of BBD, and the assets of its affiliates
established us in three separate markets in the Rocky Mountain
region:





·
            Core
      hole drilling minerals;


·
            Water
      well drilling five states; and


·
            Oil
      and gas drilling capability.





We
believe that the BBD acquisition helps establish our presence with these three
customer bases, but we also have a large surplus of underutilized equipment
which we believe can be selectively liquidated.





In the Housing Accommodations
Division, our acquisition of certain assets of a housing accommodations
company  established our presence in the fabrication and/or rental of
crew quarters for the drilling sector. Our operations in this division are
located near our corporate headquarters in Houston, Texas.





In the Mud-logging Division,
we have hired an experienced manager, Cody Hembree, to oversee this new
division. Mr. Hembree brought several off-the-shelf technologies and merged
them as one to create a versatile and robust mud-logging system with
capabilities beyond the industry standard.  The Mud-logging division
will also work closely with housing accommodations to refurbish some of the
existing well site trailers as mud-logging laboratories on site.





-13-


Significant
Developments





New
Management





In
connection with our acquisition of all the issued and outstanding stock of BWS
from its sole shareholder, Tony Bruce, we entered into a one year employment
agreement with Mr. Bruce under which he agreed to serve as a Vice President of
our Central Division.
  Since then, Mr. Bruce has joined our board of directors and on
October 13, 2008 agreed to serve as our President and Chief Operating
Officer.  During the three months ended March 31, 2009, we entered
into a new one-year employment agreement with Mr. Bruce.





On
October 20, 2008, Mark Harrington was named our interim Chief Executive Officer.
Mr. Harrington will continue as our interim Chief Executive
Officer.  On December 19, 2008, Mr. Harrington was appointed as our
permanent Chief Executive Officer.







Credit
Facility





On April
15, 2009, we entered into an amendment to our existing credit agreement with PNC
Bank N.A. (“Amended Credit Agreement”).  The Amended Credit Agreement
provides for a term loan and a revolving credit portion.  Under the
terms of the Amended Credit Agreement, the term loan portion increased from
approximately $5.0 million to $19.2 million, as a result of a portion of the
revolving portion of the debt being transferred to the term loan
portion.  The maturity date of the term loan was changed to March 31,
2011.  The term loan requires monthly principal payments beginning May
1, 2009 and on the first day of each month thereafter as follows:




·
            From
      May 1, 2009 to December 31, 2009 -
$98,500;


·
            From
      January 1, 2010 to December 31, 2010 - $125,000;
  and


·
            $150,000
      thereafter until March 31, 2011.





The term
loan bears interest at a rate equal to an alternate base rate (which is
generally the greater of the federal funds open rate plus 1⁄2%, PNC’s base
commercial lending rate and the daily LIBOR rate) plus 2.5% or the
greater of the Eurodollar Rate or 2% plus 3.75%, as those
terms are defined in the Amended Credit Agreement.  The term loan also
requires an annual 25% recapture of Excess Cash Flow applied to the principal
balance. Excess Cash Flow is defined as EBIDTA less cash tax payments,
non-financed capital expenditures and payments of principal on the term loan and
interest on indebtedness for borrowed money.





The
revolving credit portion of the debt, $928,000 on April 15,2009, may be borrowed
and re-borrowed until maturity on March 31, 2011 and bears interest at the same
rate as the term loan.  The amount available is the lesser of $4.0
million and an amount equal to 85% of eligible receivables plus 100% of the
balance in the cash collateral account plus the undrawn amount of letters of
credit minus such reserves as PNC deems appropriate.




Borrowings
under the Credit Agreement are secured by all of our assets and equipment and by
all of the assets and equipment of BWS and BBD, and the assets acquired from BB
Drilling, DSS, and ARH.  Any equipment and assets purchased in the
future will, once acquired, also be subject to the security interest in favor of
PNC Bank, N.A.




Under our
Amended Credit Agreement, we are subject to customary covenants, including
certain financial covenants and reporting requirements. Beginning on March 31,
2010, we are required to maintain a fixed charge coverage ratio, (defined as the
ratio of EBITDA minus capital expenditures (except capital expenditures financed
by lenders other than under the Amended Credit Agreement) made during such
period minus cash taxes paid during such period minus all dividends and
distributions paid during such period (including, without limitation, all
payments to the holders of the Series A Preferred Stock), to all senior debt
payments as follows:




Fiscal Quarter Ending:
            Fixed
              Coverage Ratio:March
      31, 2010
            1.05
      to 1.0June
      30, 2010
            1.10
      to 1.0September
      30, 2010
            1.15
      to 1.0December
      31, 2010
            1.20
      to 1.0March
      31, 2011
            1.25
      to 1.0







We also
are required to maintain a minimum EBITDA as follows:




Fiscal Quarter Ending:
            Minimum EBITDA:Three
      months ended March 31, 2009
            $  216,000Six
      months ended June 30, 2009
            902,000Nine
      months ended September 30, 2009
            1,744,000Twelve
      months ended December 31, 2009
            2,385,000







-14-


Under the
terms of our Amended Credit Agreement, we may not pay cash dividends on our
common stock or our preferred stock or redeem any shares of our common stock or
preferred stock.




Our
amended credit agreement has set forth minimum rig utilization requirements for
the three-month period then ending for Best Well Service of not less than the
percentage set forth in the table below:




Fiscal Quarter Ending
            Minimum
              Rig
              UtilizationMarch
      31, 2009
            25%June
      30, 2009
            30%September
      30,2009
            34%December
      31, 2009
            34%March
      31, 2010
            48%June
      30, 2010
            54%September
      30, 2010
            58%December
      31, 2010
            58%March
      31, 2011
            58%







Our Rig
Utilization rate was 37% for quarter ended March 31, 2009.




In
addition to the foregoing and other customary covenants, our Amended Credit
Agreement contains a number of covenants that, among other things, will restrict
our ability to:




·
            incur
      or guarantee additional
indebtedness;




·
            transfer
      or sell assets;




·
            create
      liens on assets;




·
            engage
      in transactions with affiliates other than on an “arm’s-length” basis;
      and




·
            make
      any change in the principal nature of our
  business.




Our
Amended Credit Agreement also contains customary events of default, including
nonpayment of principal or interest, violations of covenants, cross default and
cross acceleration to certain other indebtedness, bankruptcy, a change of
control and material judgments and liabilities.





The
amounts owed under the credit facility had been classified as current in the
December 31, 2008 balance sheet.  As a result of the loan modification
subsequent to the end of the period, these amounts have been reclassified to
long term debt based on management’s intent and ability to refinance these
amounts into long-term debt.





In
connection with refinancing the credit facility, we incurred costs associated
with the transaction of $194,454.  These costs have been capitalized
as deferred financing costs and will be amortized over the life of the Amended
Credit Agreement using the interest method.







Market
Conditions in Our Industry





The
United States oil field 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 now serve and affect the demand for our drilling
services and the day rates we can charge for our rigs. This volatility also
affects the demand for other oil field services we provide, such as portable rig
housing and mud logging. 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.








-15-


Critical
Accounting Policies





Use
of Estimates





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





Impairment
of Long-Lived Assets





Long-lived
assets, including property and equipment, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
long-lived asset may not be recoverable. The carrying amount of a long-lived
asset is not recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset. If it is
determined that an impairment loss has occurred, the loss is measured as the
amount by which the carrying amount of the long-lived asset exceeds its fair
value.





Goodwill





Goodwill
represents the excess of purchase price and related costs over the value
assigned to the net tangible assets of businesses acquired. These business
acquisitions include BWS, BBD, BB Drilling and DSS in February
2008.  We evaluate goodwill for impairment utilizing undiscounted
projected cash flows in accordance with SFAS No. 142, “Goodwill and Other
Intangible Assets.”  As of March 31, 2009, we believe that no such
impairment has occurred. Goodwill has been adjusted for purchase price
adjustments recognized during the current fiscal year.





Financial
Instruments





The
carrying value of our financial instruments, consisting of cash, recoverable
advances, accounts payable and accrued liabilities and due to related party
approximate their fair value due to the short maturity of such
instruments.  Unless otherwise noted, it is our management’s opinion
that we are not exposed to significant interest, exchange or credit risks
arising from these financial instruments.





We follow
FASB Statement of Financial Accounting Standards No. 150 (FAS-150),Accounting for Certain Financial
Instrumentswith
Characteristics of Both Liabilities and Equity.   FAS 150
establishes standards for issuers of financial instruments with characteristics
of both liabilities and equity related to the classification and measurement of
those instruments and we apply the provisions of this statement in the
determination of whether its mandatorily redeemable preferred stock is properly
classified as a liability or equity.





Revenue
Recognition





We
recognize service revenue based on rate agreements in effect with customers as
the service is provided and realization is assured.  We recognize
equipment sales revenue when risk of loss has transferred to the purchaser and
collectability is reasonably assured.





Stock-based
compensation





We
account for stock-based compensation in accordance with SFAS No. 123 (R),Share—Based Payment, which
establishes accounting for stock-based payment transactions for employee
services and goods and services received from non-employees.  Under
the provisions of SFAS No. 123(R), stock-based compensation cost is measured at
the date of grant, based on the calculated fair value of the award, and is
recognized as expense over the employee’s or non-employee’s service period,
which is generally the vesting period of the equity grant.





Income
(Loss) per Share





We report
basic loss per share in accordance with FAS No. 128, “Earnings per
Share.”  Basic loss per share is computed using the weighted average
number of shares outstanding during the period.  Fully diluted
earnings (loss) per share is computed similar to basic income (loss) per share
except that the denominator is increased to include the number of common stock
equivalents (primarily outstanding options and warrants).  Common
stock equivalents represent the dilutive effect of the assumed exercise of the
outstanding stock options and warrants, using the treasury stock method, at
either the beginning of the respective period presented or the date of issuance,
whichever is later, and only if the common stock equivalents are considered
dilutive based upon our net income (loss) position at the calculation
date.  Diluted loss per share has not been provided as it is
anti-dilutive.





-16-


Results
of Operations





Three
months Ended March 31, 2009 compared with the Three Months Ended April 30,
2008





Revenues
were $2.8 million for the three months ended March 31, 2009 compared with
revenue of $4.3 million for the three months ended April 30, 2008. The decrease
of $1.5 million was primarily the result of decreased revenue of $2.0 million
from the well service segment offset by a slight increase of $0.5 million from
the drilling segment.  Rig utilization rates have decreased from the
prior year due to bad weather conditions in Kansas in the late winter in 2009
and a downturn in drilling activity caused by low oil and gas
prices.





Operating
Expenses were $3.9 million for the three months ended March 31, 2009
compared with $5.9 million for the three months ended April 30, 2008 resulting
in a decrease of $2.0 million.  This decrease was primarily a result
of decreases in business unit operating expenses of $0.7 million and general and
administrative expenses of $1.2 million.  Since the acquisitions in
February 2008, we have worked to decrease operating costs by capitalizing on the
synergies of the combined businesses and streamlining operations.





Net loss from
operations was $1.1 million for the three months ended March 31, 2009
compared with a net loss of $1.6 for the three months ended April 30, 2008
resulting in a decreased loss of $0.5 million.  Decreased operating
costs, only partially offset by decreased revenue, contributed to the
improvement in net loss from operations.





General and
administrative expenses for the three month period ended March 31, 2009
were $0.7 million compared with expense of $2 Million for the three month period
ended April 30, 2008. In the first quarter of 2008, there were large
acquisition costs booked, which were non-recurring charges and hence not
included in the 1st quarter
of 2009.  Also, management has made a concerted effort in 2009 to
reduce corporate overhead through downsizing office space, reduction in
corporate staff and other overhead expenses.





Interest
expensedecreased
by $2.6 million for the three month period ended March 31, 2009, compared with
the three month period ended April 30, 2008.  This decrease is
primarily due to the utilization of the PNC Bank credit facility and the
amortization of deferred financing costs during the three months ended April 30,
2008.





Net Loss
was $1.1 million or $0.07 per common share after accrued preferred dividends for
the three months ended March 31, 2009 compared with a net loss of $4.4 million
$0.26 per share for the three months ended April 30, 2008 resulting in an
decreased loss of $3.3 million.  The improvement in the net loss was
primarily caused by the amortization of deferred financing costs in 2008 of $2.5
million and the decrease in operating costs of $2.0 million.





Liquidity
and Capital Resources




Historical
Cash Flows






The
following table summarizes our cash flows for the three months ended March 31,
2009 and April 30, 2008:




Three
      months endedMarch
      31, 2009
            
            April
      30,2008Net
      cash provided by (used in) operating activities
            
            $
            1,394,538
            
            
            $
            (1,682,983
            )Net
      cash used in investing activities:Capital
      expenditures, net
            
            
            (2,851
            )
            
            
            (156,098
            )Acquisitions
      , net of cash acquired
            
            
            -
            
            
            
            (29,947,643
            )Cash
      provided by (used in) financing activities:Proceeds
      from issuance of term loan
            
            
            -
            
            
            
            5,850,000Repayments
      of term loan
            
            
            (292,500
            )
            
            
            (195,000
            )Net
      borrowings (repayments) under revolving loan
            
            
            (972,512
            )
            
            
            15,330,122Net
      repayments of other notes payable
            
            
            (72,305
            )
            
            
            (29,153)Proceeds
      from issuance of Units in private placement
            
            
            -
            
            
            
            11,848,080Payment
      of deferred financing costs
            
            
            (194,454
            )
            
            
            (921,066
            )Net
      increase (decrease) in cash and cash equivalents
            
            $
            (140,084
            )
            
            $
            96,259




-17-


Operating
activities during the three months ended March 31, 2009 provided us $1.1 million
of cash compared to using $1.7 million in the three months ended April 30,
2008.  Contributing to the improved cash flow from operations was a
decrease in accounts receivable of $1.7 million for the three months ended March
31, 2009 compared with an increase in accounts receivable of $1.0 million for
the three months ended April 30, 2008.





Investing
activities used $0.0 million for the three months ended March 31, 2009 compared
to $30.1 million for the three months ended April 30,
2008.  Expenditures for the three months ended April 30, 2008 were
primarily for the acquisitions of businesses described above.





Financing
activities used cash of $1.3 million for the three months ended March 31, 2009
compared to providing cash of $31.9 million for the three months ended April 30,
2008.  Uses of cash during the three months ended March 31, 2009 were
primarily related to the repayment of debt and expenditures incurred for
deferred financing costs in connection with the amendment of the credit
facility.  Sources of cash during the three months ended April 30,
2008 included cash received for the term and revolving portions of the credit
facility and proceeds received from the private placement of Units.





Working
capital deficit





At March
31, 2009, our current liabilities of $2.8 million exceeded our current assets of
$2.2 million resulting in a working capital deficit of $0.6
million.  This compares to a working capital deficit of $19.4
million.  The improvement in the working capital deficit is primarily
the result of decrease in current liabilities due to the reclassification of the
majority of our loans payable to noncurrent as a result of the Amended Credit
Facility.  Current liabilities at March 31, 2009, include primarily
preferred stock dividends payable of $1.0 million, current portion of loans
payable of $1.4 million, accounts payable of $0.2 million and the current
portion of accrued officer compensation of $0.1 million.  Preferred
stock dividends are not expected to be paid in cash.  They will be
paid in-kind through the issuance of additional shares of preferred
stock.





Sources
of Liquidity




Our
sources of liquidity include our current cash and cash equivalents, availability
under the revolving portion of our Amended Credit Agreement, and internally
generated cash flows from operations.  We continue to explore other
sources of financing that are available to us including possible sales of stock
or issuance of subordinated debt.




Our
availability under the Amended Credit Agreement as of March 31, 2009 was
approximately $0.3 million and as of April 15, 2009 was approximately
$0.2million.





Off-Balance
Sheet Arrangements





As of
March 31, 2009, we had no transactions, agreements or other contractual
arrangements with unconsolidated entities or financial partnerships, often
referred to as special purpose entities, which generally are established for the
purpose of facilitating off-balance sheet arrangements.





Contractual
Obligations





Tabular
Disclosure of Contractual Obligations





Over the NextFive Years
            
            
            12
      MonthsNotes
      Payable
            
            $
            20,820,711
            
            
            $
            1,417,705Operating
      Leases
            
            
            378,300
            
            
            
            249,300Employment/Consultant
      Contracts
            
            
            648,000
            
            
            
            648,000Total
            
            $
            21,847,011
            
            
            $
            2,315,005





Subject
to the limitations set forth in the Amended Credit Agreement, our Series A
Preferred Stock must be redeemed using not less than 25% of our net income after
tax each year.  For the three months ended March 31, 2009, we did not
have positive net income after tax and did not redeem any outstanding shares of
Series A Preferred Stock.





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Disclosure
Regarding Forward-Looking Statements





We
caution that this document contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934.  All statements, other than statements of historical facts,
included in or incorporated by reference into this Form 10-Q which address
activities, events or developments which we expect, believe or anticipate will
or may occur in the future are forward-looking statements.  The words
“believes,” “intends,” “expects,” “anticipates,” “projects,” “estimates,”
“predicts,” “plans” and similar expressions, or the negative thereof, are also
intended to identify forward-looking statements.  In particular,
statements, expressed or implied, concerning future operating results, the
ability to increase utilization or redeploy rigs, or the ability to generate
income or cash flows are by nature, forward-looking statements.  These
statements are based on certain assumptions and analyses made by management in
light of its experience and its perception of historical trends, current
conditions and expected future developments as well as other factors it believes
are appropriate in the circumstances.  However, forward-looking
statements are not guarantees of performance and no assurance can be given that
these expectations will be achieved.





Important
factors that could cause actual results to differ materially from the
expectations reflected in the forward-looking statements include, but are not
limited to any of the following:  the timing and extent of changes in
commodity prices for crude oil, natural gas and related products, interest
rates, inflation, the availability of goods and services, operational risks,
availability of capital resources, legislative or regulatory changes, political
developments, and acts of war and terrorism.  A more detailed
discussion on risks relating to the oilfield services industry and to us is
included in our Annual Report on Form 10-K for the year ended January 31,
2008.





In light
of these risks, uncertainties and assumptions, we caution the reader that these
forward-looking statements are subject to risks and uncertainties, many of which
are beyond our control, which could cause actual events or results to differ
materially from those expressed or implied by the statements.  All
subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements.  We undertake no obligations to update or
revise its forward-looking statements, whether as a result of new information,
future events or otherwise.








Item 3. Quantitative and Qualitative Disclosuresabout Market
Risk





Not
required for smaller reporting companies.





Item 4. Controls and Procedures





(a)
Evaluation of Disclosure Controls and Procedures





We
carried out an evaluation, under the supervision and with the participation of
our management, including our principal executive officer and principal
financial officer, of the effectiveness of our disclosure controls and
procedures as of March 31, 2009 (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)).  Based upon that evaluation, our principal executive
officer and principal financial officer concluded that, as of the end of the
period covered in this report, our disclosure controls and procedures were not
effective to ensure that information required to be disclosed in reports filed
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the required time periods and is accumulated and communicated to
our management, including our principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding required
disclosure. In particular, we found control weaknesses in segregation of duties
in the field and home offices. As recently acquired operations are assimilated,
we intend to address these weaknesses by centrally locating payables, check
writing, and implementing controls regarding segregation of duties related to
cash management.  We plan to have these controls in place by year
end.  In the interim, management has been reviewing all disbursements
and cash account activity.





Our
management, including our principal executive officer and principal financial
officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all error or fraud.  A control system,
no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are
met.  Further, the design of a control system must reflect the fact
that there are resource constraints and the benefits of controls must be
considered relative to their costs.  Due to the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, have been
detected.





To
address the material weaknesses, we performed additional analysis and other
post-closing procedures in an effort to ensure our consolidated financial
statements included in this annual report have been prepared in accordance with
generally accepted accounting principles. Accordingly, management believes that
the financial statements included in this report fairly present in all material
respects our financial condition, results of operations and cash flows for the
periods presented.





(b) Changes in Internal Control over
Financial Reporting





There
were no changes in internal control over financial reporting during the quarter
ended March 31, 2009.





-19-









PART II




Item 1. Legal Proceedings





We are
from time to time subject to litigation arising in the normal course of
business. As of the date of this quarterly report on Form 10-Q, there are no
pending or threatened proceedings which are currently anticipated to have a
material adverse effect on our business, financial condition or results of
operations.





In 2008,
Acer Capital Group sued Best Energy, American Rig Housing, and Larry Hargrave
for breach of contract and fraud.  The contract claims arise from an
agreement entered into between American Rig Housing and Acer Capital (the "Acer
Agreement") concerning a going public transaction and certain alleged agreements
concerning bridge financing for the going public transaction between American
Rig Housing and Pipeline Capital (the "Pipeline Agreements), which subsequently
assigned those alleged contracts to Acer Capital.  Under the Acer
Agreement, Acer was to assist with taking American Rig Housing public in return
for certain equity considerations in the new company.  The agreement
also purports to contemplate a fee (the "Break-up Fee") to be paid to Acer in
the event the going public transaction was not consummated.  Acer
claims it is owed this fee.  The defendants in the case dispute that
Acer performed its obligations under the agreement and that the Break-up Fee is
owed.




Under the
so-called Pipeline Agreements, Pipeline was to provide $500,000 in bridge
financing to American Rig Housing in return for, among other things, ten percent
of the equity of the new company.  Acer claims that the amount of
bridge financing was subsequently changed to $150,000 (a proposition that the
defendants dispute), that Acer provided this amount of financing, and that the
defendants did not give it the required equity interest in the new
company.  The defendants claim that neither Pipeline nor Acer
performed their obligations under the putative Pipeline Agreements.




Acer also
alleges fraud against each of the defendants, including Best Energy, claiming
that the defendants made representations to it and Pipeline that were knowingly
false in order to induce them to enter into the Acer Agreement and Pipeline
Agreements.  The defendants dispute that they made any false
representations.




Acer
recently amended its petition to add Andrew Garrett and Mark Harrington as
defendants and to assert new claims for tortuous interference with contract and
prospective business relations and conspiracy.  We believe that we
have meritorious defenses in each of these claims including the defense that we
were not a party to either the Acer Agreement or the Pipeline
Agreements.






Item 1A. Risk Factors





Not
required for smaller reporting companies.





Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds





During
the three months ended March 31, 2009, 75,743 shares of common stock were issued
as a result of a cashless exercise of options to purchase 150,000 shares of
common stock.




Item 3. Defaults Upon Senior Securities





None.




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





None.




Item 5. Other Information





None.





Item 6. Exhibits








31.1
            Certification
      of Chief Executive Officer and Principal Accounting Officer pursuant to
      Section 302 of the Sarbanes - Oxley Act of 2002. (Filed
      herewith)32.1
            Certification
      of Chief Executive Officer and Principal Accounting Officer pursuant to 18
      U.S.C. Section 1350 as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002. (Filed
herewith)
















SIGNATURES





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





Date:
      May 20, 2009
            BEST
      ENERGY SERVICES, INC./s/
      Mark HarringtonMark
      HarringtonChief
      Executive Officer and Principal Accounting
  Officer












-20-