UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 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 September 30, 1996.

             [ ] 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 0-27732

                        DAWSON PRODUCTION SERVICES, INC.
             (Exact name of registrant as specified in its charter)

            TEXAS                                            74-2231546
  (State or other jurisdiction                            (I.R.S. Employer
     or organization)                                     Identification No.)

      901 N.E. Loop 410, Suite 700
          San Antonio, Texas                                  78209-1306
(Address of principal executive offices)                      (Zip Code)

        Registrants telephone number, including area code: (210) 828-1838

                                 NOT APPLICABLE
              (Former name, former address and former fiscal year,
                          if changed since last report)

         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 and 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   [  ]

     The number of shares outstanding of each of the issuer's classes of common
stock., as of November 11, 1996: Common Stock, $0.01 par value - 6,391,125
shares.
<PAGE>
                        DAWSON PRODUCTION SERVICES, INC.
                               INDEX TO FORM 10-Q

                                                                          PAGE 1
                                                                          ------
PART I.        FINANCIAL INFORMATION

     Item 1.   Financial Statements (Unaudited)

               Consolidated Balance Sheets-
               March 31, 1996 and September 30, 1996 ......................   1

               Consolidated Statements of Operations-
               Three Months Ended September 30, 1995 and 1996
               and Six Months Ended September 30, 1995 and 1996 ...........   2

               Consolidated Statements of Cash Flows-
               Six Months Ended September 30, 1995 and 1996 ...............   3

               Notes to Interim Consolidated Financial Statements .........   4

     Item 2.   Management's Discussion and Analysis of Financial
               Condition and Results of Operations ........................   6


PART II.       OTHER INFORMATION ..........................................  10


SIGNATURE .................................................................  12
<PAGE>
                                     PART I

ITEM 1. FINANCIAL STATEMENTS (unaudited)

                        DAWSON PRODUCTION SERVICES, INC.
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
                                                                             March 31,     September 30,
                                                                               1996            1996
                                                                                            (unaudited)
                                                                           ------------    ------------
<S>                                                                        <C>             <C>
Current assets:
     Cash and cash equivalents .........................................   $ 13,863,108    $  9,364,032
     Trade receivables (net of allowance for doubtful accounts of
         $290,839 and $307,236, respectively) ..........................      8,773,156      13,687,635
     Other receivables .................................................         95,202         281,536
     Income taxes receivable ...........................................        740,768         290,768
     Prepaid expenses and other ........................................        215,497         882,996
                                                                           ------------    ------------
               Total current assets ....................................     23,687,731      24,506,967
 Net property and equipment, substantially all pledged .................     29,114,671      39,209,362
Goodwill and other assets ..............................................      3,565,555      10,375,613
                                                                           ------------    ------------
               Total assets ............................................   $ 56,367,957    $ 74,091,942
                                                                           ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Accounts payable ..................................................   $  2,909,390    $  4,114,105
     Accrued liabilities ...............................................      2,825,926       3,237,185
     Current portion of long-term debt .................................         20,055       3,646,947
     Current portion of obligations under capital leases ...............      1,167,384       1,707,665
                                                                           ------------    ------------
               Total current liabilities ...............................      6,922,755      12,705,902
                                                                           ------------    ------------
 Long-term debt, net of current portion ................................      1,530,903       8,730,100
 Obligations under capital leases, net of current portion ..............      2,163,610       1,478,405
Deferred income taxes ..................................................         56,310       3,244,169
Shareholders' equity :
    Preferred stock, no par value 560,600 shares authorized, none
         issued and outstanding ........................................           --              --
    Common stock, $.01 par value, 20,560,600 shares authorized,
         6,382,526 and 6,391,126 issued and outstanding, respectively ..         63,826          63,912
    Paid-in capital ....................................................     41,458,254      41,522,152
    Retained earnings ..................................................      4,314,177       6,489,180
    Notes receivable from officers .....................................       (141,878)       (141,878)
                                                                           ------------    ------------
               Total shareholders' equity ..............................     45,694,379      47,933,366
Commitments and contingencies                                              ------------    ------------
               Total liabilities and equity ............................   $ 56,367,957    $ 74,091,942
                                                                           ============    ============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       1
<PAGE>
                        DAWSON PRODUCTION SERVICES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                        Three Months Ended             Six Months Ended
                                                                            September 30,                 September 30,
                                                                  ----------------------------   ----------------------------
                                                                        1995           1996           1995            1996
                                                                  -------------   -------------  -------------   -------------
<S>                                                               <C>             <C>            <C>             <C>
Revenues ......................................................   $ 13,240,504    $ 19,133,840   $ 25,888,387    $ 33,811,434
Costs and expenses:
     Operating ................................................      8,735,545      12,400,558     16,875,158      21,893,507
     General and administrative ...............................      2,080,994       3,078,743      4,238,011       5,338,804
     Depreciation and amortization ............................      1,004,066       1,500,735      2,016,424       2,875,974
                                                                  -------------   -------------  -------------   -------------
               Total costs and expenses .......................     11,820,605      16,980,036     23,129,593      30,108,285
                                                                  -------------   -------------  -------------   -------------
                 Operating income .............................      1,419,899       2,153,804      2,758,794       3,703,149
                                                                  -------------   -------------  -------------   -------------
Other income and expenses:
     Interest expense .........................................        474,089         230,642        952,872         296,022
      Other expense (income), net .............................        (16,252)            781        (27,207)       (121,820)
                                                                  -------------   -------------  -------------   -------------
               Total other income and expenses ................        457,837         231,423        925,665         174,202
                                                                  -------------   -------------  -------------   -------------
               Income before minority interest and income taxes        962,062       1,922,381      1,833,129       3,528,947
Minority interest in consolidated subsidiary ..................        396,073            --          787,001            --
                                                                  -------------   -------------  -------------   -------------
Income before income taxes ....................................        565,989       1,922,381      1,046,128       3,528,947
Provision for income taxes ....................................        244,007         762,984        398,000       1,353,944
                                                                  -------------   -------------  -------------   -------------
Net income ....................................................        321,982       1,159,397        648,128       2,175,003
                                                                  -------------   -------------  -------------   -------------
Preferred stock dividends .....................................           --              --           50,086            --
                                                                  -------------   -------------  -------------   -------------
Net income applicable to common stock .........................   $    321,982    $  1,159,397   $    598,042    $  2,175,003
                                                                  =============   =============  =============   =============
Earnings per common share:
     Primary ..................................................   $       0.12    $       0.18   $       0.25    $       0.33
     Fully diluted ............................................   $       0.12    $       0.18   $       0.23    $       0.33

Weighted average common  and common equivalent
   shares outstanding:
     Primary ..................................................      2,420,294       6,502,933      2,384,359       6,510,428
     Fully diluted ............................................      3,124,792       6,540,618      3,095,826       6,527,796

</TABLE>
          See accompanying notes to consolidated financial statements.

                                       2
<PAGE>
                        DAWSON PRODUCTION SERVICES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                     Six Months Ended
                                                                       September 30,
                                                                 ---------------------------
                                                                    1995           1996
                                                                 -----------    ------------
<S>                                                              <C>            <C>
Cash flows from operating activities:
     Net income ..............................................   $   648,128    $  2,175,003
Adjustments to reconcile net income to net cash
 provided by operating activities:
     Minority interest in net income of subsidiary company ...       787,001            --
     Depreciation and amortization ...........................     2,016,424       2,875,974
     Allowance for doubtful accounts .........................       (48,088)         53,603
     (Gain) loss on sale of assets ...........................       (19,176)         81,826
     Increase (decrease) in deferred income taxes ............        26,740         978,192
     Decrease (increase) in receivables ......................      (509,666)       (721,886)
     Decrease (increase) in prepaid expense and other ........      (604,779)       (463,526)
     Decrease (increase) in other assets .....................        68,092          10,014
     Increase (decrease) in accounts payable .................       184,904         378,408
     Increase (decrease) in income tax payable ...............      (184,375)        (17,980)
     Increase (decrease) in accrued expenses .................       (38,762)       (506,176)
                                                                 -----------    ------------
                 Net cash provided by operating activities ...     2,326,443       4,843,452
Cash flows from investing activities:
     Acquisitions ............................................          --       (12,958,413)
     Additions to property and equipment .....................    (2,689,532)     (2,236,135)
     Proceeds from sales of property .........................       195,578          65,428
                                                                 -----------    ------------
                  Net cash used in investing activities ......    (2,493,954)    (15,129,120)
Cash flows from financing activities:
     Long-term borrowings ....................................       170,100       7,261,330
     Payments on long-term debt ..............................      (781,757)       (462,451)
     Capital lease payments ..................................      (320,277)     (1,076,271)
     Exercise of common stock options and warrants ...........          --            63,984
     Cash dividends on preferred stock .......................       (50,086)           --
      Subsidiary distributions to minority owner .............      (131,935)           --
                                                                 -----------    ------------
                   Net cash (used) provided in
                    financing activities .....................    (1,113,955)      5,786,592
                                                                 -----------    ------------
                   Net increase (decrease) in cash ...........    (1,281,466)     (4,499,076)
      Cash and cash equivalents at the beginning of the period     2,796,540      13,863,108
                                                                 -----------    ------------

      Cash and cash equivalents at the end of the period .....   $ 1,515,074    $  9,364,032
                                                                 ===========    ============

Supplemental disclosures of cash flow information:
   Cash paid for:
                Interest .....................................   $ 1,058,823    $    261,681
                Income taxes .................................       640,000         214,000
Supplemental disclosures of non-cash transactions:
    Assets acquired under capital lease ......................       820,292         904,547
    Conversion of long-term debt to common stock .............        75,000            --
    Note issued to seller in acquisition .....................          --         1,750,000
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>
                         PART I---FINANCIAL INFORMATION

                        DAWSON PRODUCTION SERVICES, INC.
            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.   GENERAL

        The unaudited consolidated financial statements included herein have
been prepared without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted, pursuant to such
rules and regulations. These unaudited consolidated financial statements should
be read in conjunction with Dawson Production Services, Inc. (the "Company's" )
audited consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended March 31, 1996.

        The unaudited consolidated financial information included herein
reflects all adjustments, consisting only of normal recurring adjustments, which
are necessary, in the opinion of management, for a fair presentation of the
Company's financial position or results of operations for the interim periods
presented. The interim information contained herein is not necessarily
indicative of the results to be expected for the full year.

2.   ACQUISITIONS

        In April 1996, the Company acquired the assets of two small production
testing companies in Louisiana. The aggregate purchase price was approximately
$673,000. Goodwill and a non-compete agreement were recognized on these
transactions which amounted to approximately $111,000. These items are being
amortized over a twenty and five year periods, respectively.

        In May 1996, the Company acquired the Texas-based well servicing
division of a non-affiliated company. The aggregate purchase price was $779,000.

        In July 1996, the Company acquired the assets of a trucking company in
Louisiana. The aggregate purchase price was approximately $400,000. Goodwill
recognized on the transaction amounted to $50,000 which is being amortized over
a twenty-year period.


                                       4
<PAGE>
2.   ACQUISITIONS (CONTINUED)

        Effective July 29, 1996, the Company acquired all of the issued and
outstanding stock of Taylor Companies, Inc. for an aggregate purchase price of
$12,750,000, consisting of $11,100,000 in cash and $1,750,000 subordinated
promissory note payable to the selling shareholders. Goodwill recognized on this
transaction amounted to $6,690,000 which is being amortized over a twenty year
period. The Company reported this acquisition and related proforma effects on a
current report on Form 8-K .

        The acquisitions have been accounted for as purchases and, accordingly,
the operating results have been included in the Company's statement of income
since the dates of acquisition. The effect on results of operations would not
have been material if such acquisitions had occurred at the beginning of the
year other than the Taylor acquisition.

        On October 1996, the Company entered into a Letter of Intent to acquire
the oilfield service assets, principally related to liquid services, of Morley
Environmental Services, Inc. for $5.5 million.

3.   LOAN COMMITMENTS

        In July 1996, to finance a portion of the Taylor acquisition, the
Company obtained a loan from a bank in the amount of $7.0 million. The
promissory note carries an annual interest rate of 7.53% and has a maturity date
of November 25, 1996. In September 1996, the Company obtained a take-out
commitment for a term loan in the amount of $7.0 million to replace the
promissory note. Under the terms of the commitment, the Company is required to
pay monthly installments, over a five year period, of $116,666.67 plus accrued
interest on the outstanding balance at the lesser of LIBOR plus 2.25% or the
highest lawful rate. The Company will grant the bank a first lien security
interest in all assets acquired in the Taylor acquisition, and the loan to value
ratio with respect to the secured assets may not exceed 70%. Included in the
commitment agreement are various financial covenants with which the Company must
comply. A portion of the promissory note has been classified as long term at
September 30, 1996 based upon the provisions of the term loan commitment.

        In September 1996, the Company signed a commitment letter for an
acquisition line of credit in the amount of $20.0 million and a working capital
line of credit in the amount of $10.0 million. Interest on advances on the
acquisition line of credit is to be computed at a per annum rate equal to the
lesser of (i) the prime rate of interest of the bank as adjusted from time to
time; (ii) a varying percentage ranging from 2% to 3% over the 180-day LIBOR
rate determined by the total funded debt to cash flow ratio and adjusted to
reflect changes in LIBOR or the total funded debt to cash flow ratio; or (iii)
the highest lawful rate. Interest on advances on the working capital line of
credit are to be computed at a per annum rate equal to the lesser of: (i) the
prime rate of the bank as adjusted from time to time; (ii) a varying percentage
rate ranging from 1.75% to 2.75% over the Company's choice of the 30-day, 90-day
or 180-day LIBOR rate of interest; or (iii) the highest rate permitted by
applicable law. Under terms of the agreement, the Company must maintain minimum
working capital, tangible net worth, current ratios and debt to capital ratios.
The Company intends to pursue efforts to close the above described term loan,
acquisition line of credit and working capital line of credit. However, there
can be no assurance that these loan agreements will be consummated.

4.   COMMITMENTS AND CONTINGENCIES

        The Company is involved in various claims and legal actions arising in  
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the     
Company's consolidated financial position or results of operation.              

                                       5
<PAGE>

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

Forward-Looking  Information

     This section of the Company's Quarterly Report on Form 10-Q contains
forward-looking statements. The statements herein regarding future financial
performance and results and the other statements which are not historical facts
are forward-looking statements and involve risks and uncertainties, including
but not limited to, the Company's ability to consummate the loan transactions
described below, the ability to locate and complete suitable acquisitions,
industry conditions, prices of crude oil and natural gas and other factors.

Results of Operations - Quarters Ended  September 30, 1996 and 1995

     Revenues. Revenues were $19.1 million for the quarter ended September 30,
1996, a 45% increase compared with revenues of $13.2 million for the quarter
ended September 30, 1995. Compared to the same period in 1995, revenues for the
quarter ended September 30, 1996 increased by 11%, 133% and 13% in the workover,
liquid and production services lines of business, respectively. The increase in
revenues is primarily attributable to the acquisition of a liquid services
business, Taylor Companies, Inc. ("Taylor"), in July 1996, the addition of
eleven salt water disposal trucks in March 1996, the addition of six workover
rigs acquired in May 1996 and increased demand in the workover, liquid services
and production services lines of business.

     Costs and Expenses. The Company's costs and expenses for the quarter ended
September 30, 1996 were $17.0 million, a 44% increase compared to costs and
expenses of $11.8 million for the quarter ended September 30, 1995. Operating
expenses for the period increased $3.7 million reflecting the addition of Taylor
and higher demand for services in all lines of business. General and
administrative expenses, which include the field office general and
administrative expenses, increased $1.0 million primarily due to the addition of
Taylor.

     Interest Expense. Interest expense for the quarter ended September 30, 1996
was $0.2 million compared to $0.5 million for the quarter ended September 30,
1995. The decrease of $0.3 million is attributable to the retirement of debt
from funds generated from the Company's initial public offering which was
completed in March 1996. The Company anticipates that interest expense will
increase in future periods due to the incurrence of $7.0 million of debt to
acquire Taylor.

     Minority Interest. The decrease in minority interest of $0.4 million from
the quarter ended September 30, 1995 as compared to the quarter ended September
30, 1996 was due to the acquisition, in November 1995, of the remaining 39%
minority interest in the Company's subsidiary, Dawson Welltech, L.C.

     Net Income. For the quarter ended September 30, 1996, the Company had net
income of $1.2 million, a 261% increase over the $0.3 million in net income for
the quarter ended September 30, 1995. The increase in net income reflects the
acquisition of Taylor , stronger overall market conditions, the purchase of the
remaining minority interest in Dawson Welltech, L.C. and interest savings
resulting from the retirement of debt using a portion of the funds generated
from the Company's initial public offering

                                       6

<PAGE>
completed in March 1996.

Results of Operations - Six Months Ended  September 30, 1996 and 1995

     Revenues. Revenues were $33.8 million for the six months ended September
30, 1996, a 31% increase compared with revenues of $25.9 million for the six
months ended September 30, 1995. Compared to the same period in 1995, revenues
for the six months ended September 30, 1995 increased by 13%, 81% and 8% in the
workover, liquid and production services lines of business, respectively. The
increase in revenues is attributable primarily to the acquisition of the liquid
services business of Taylor in July 1996, the addition of eleven salt water
disposal trucks in March 1996, the addition of six workover rigs acquired in May
1996 and increased demand in the workover, liquid services and production
services lines of business.

     Costs and Expenses. The Company's costs and expenses for the six months
ended September 30, 1996 were $30.1 million, a 30% increase compared to costs
and expenses of $23.1 million for the six months ended September 30, 1995.
Operating expenses for the period increased $5.0 million reflecting the addition
of Taylor and higher demand for services in all lines of business. General and
administrative expenses for the period, which include the field office, general
and administrative expenses, increased $1.1 million primarily due to the
addition of Taylor.

     Interest Expense. Interest expense for the six months ended September 30,
1996 was $0.3 million compared with $1.0 million for the corresponding period in
1995. The decrease of $0.7 million is attributable to the retirement of debt
from funds generated from the Company's initial public offering completed in
March 1996. The Company anticipates that interest expense will increase in
future periods due to the incurrence of $7.0 million in debt to acquire Taylor.

     Minority Interest. The decrease in minority interest of $0.8 million from
the six months ended September 30, 1995 as compared to the six months ended
September 30, 1996 was due to the acquisition in November 1995 of the remaining
39% minority interest in the Company's subsidiary, Dawson Welltech, L.C.

     Net Income. For the six months ended September 30, 1996, the Company had
net income of $2.2 million, a 264% increase over the $0.6 million in net income
for the same period in 1995. The increase in net income reflects the acquisition
of Taylor, stronger overall market conditions, the purchase of the remaining
minority interest in Dawson Welltech, L.C. and interest savings resulting from
the retirement of debt using a portion of the funds generated from the Company's
initial public offering completed in March 1996.

Liquidity and Capital Resources

     Cash Flows. The Company had cash and cash equivalents of $9.4 million at
September 30, 1996 compared to $13.9 million at March 31, 1996. Working capital
was $15.2 million and $16.8 million at September 30, 1996 and March 31, 1996,
respectively. The Company used a net $15.1 million for investing activities in
the six months ended September 30, 1996, primarily for the acquisition of Taylor
and for capital expenditures of $2.2 million. The Company used a net $2.5
million for investing activities in the six months ended September 30, 1995. The
Company anticipates that fiscal 1997 capital expenditures will consist of
approximately $7.0 million for improvements to its existing equipment and
capital additions. Under the Company's September 1996 $7.0 million loan
commitment discussed

                                       7

<PAGE>
below, the Company will not be permitted to spend more than $7.0 million
annually on capital expenditures without obtaining a waiver from its lender.
Acquisitions of additional assets and businesses are expected to continue to be
an important part of the Company's strategy for growth. However, the Company
would, under certain circumstances, need to obtain additional financing to fund
such acquisitions. If the Company is unable to locate suitable acquisitions or
to obtain financing on acceptable terms, the Company's growth will be adversely
affected. While the Company believes it will be able to negotiate favorable
acquisitions and financing transactions, there can be no assurance that this
will be the case.

      In a continuation of the Company's growth strategy, the Company announced
on November 1, 1996 that it had signed a Letter of Intent to acquire the
oilfield service assets, principally related to liquid services, of Mobley
Environmental Services, Inc. for $5.5 million. There can be no assurance that
this transaction will be consummated.

     Credit Facilities and Long-Term Debt. The Company has available a bank line
of credit to finance temporary working capital requirements and to support the
issuance of letters of credit. The maximum availability is the lesser of (i)
$4.0 million or (ii) a calculated amount based on a percentage of accounts
receivable meeting certain criteria. This line of credit is secured by a first
lien security interest on the Company's accounts receivable. At September 30,
1996, the maximum availability was $4.0 million, none of which had been drawn in
cash, and $0.5 million of which was being utilized to support the issuance of
letters of credit related to the Company's workers' compensation coverage.

     In July 1996, to finance a portion of the Taylor acquisition, the Company
obtained a loan from a bank in the amount of $7.0 million . The promissory note
carries an annual interest rate of 7.53% and has a maturity date of November 25,
1996. In September 1996, the Company obtained a take-out commitment for a term
loan in the amount of $7.0 million to replace the promissory note. Under the
terms of the commitment, the Company is required to pay monthly installments,
over a five year period, of $116,666.67 plus accrued interest on the outstanding
balance at the lesser of LIBOR plus 2.25% or the highest lawful rate. The
Company will grant the bank a first lien security interest in all assets
acquired in the Taylor acquisition, and the loan to value ratio with respect to
the secured assets may not exceed 70%. Included in the commitment agreement are
financial covenants under which the borrower must maintain (i) a current ratio
of no less than 1.25 to 1; (ii) a debt to worth ratio no greater than 1.10 to 1;
(iii) a total funded debt to cash flow ratio of no greater than 6 to 1; (iv) a
debt service coverage ratio no less than 1.25 to 1; (v) working capital of no
less than $2.0 million; and (vi) a tangible net worth of no less than $30.0
million. In addition, annual capital expenditures, excluding acquisitions of
businesses, cannot exceed $7.0 million. The Company is currently in compliance
with these provisions. The Company intends to pursue efforts to close the
above-described loan. However, there can be no assurance that this loan
agreement will be consummated.

     In September 1996, the Company signed a commitment letter for an
acquisition line of credit in the amount of $20.0 million and a working capital
line of credit in the amount of $10.0 million. Interest on advances on the
acquisition line of credit is to be computed at a per annum rate equal to the
lesser of: (i) the prime rate of interest of the bank as adjusted from time to
time; (ii) a varying percentage ranging from 2% to 3% over the 180-day LIBOR
rate determined by the total funded debt to cash flow ratio and adjusted to
reflect changes in LIBOR or the total funded debt to cash flow ratio; or (iii)
the highest lawful rate. Interest on advances on the working capital line of
credit are to be computed at a per annum rate equal to the lesser of: (i) the
prime rate of the bank as adjusted from time to time; (ii) a varying percentage
rate ranging from 1.75% to 2.75% over the Company's choice of the 30-day, 90-day
or 180-

                                       8
<PAGE>
day LIBOR rate of interest; or (iii) the highest rate permitted by applicable
law. Under terms of the agreement, the Company must comply with certain
financial commitments, including but not limited to a minimum working capital
requirement, a tangible net worth requirement, current ratios and debt to
capital ratios. The Company intends to pursue efforts to close the above
described term loan, acquisition line of credit and working capital line of
credit. However, there can be no assurance that these loan agreements will be
consummated, and failure to consummate them could have a material adverse effect
on the Company's cash flow and working capital.

     In addition to the foregoing, in connection with the Taylor acquisition,
the Company assumed $0.6 million of debt owed by Randy Taylor to a bank, and
guaranteed payment of approximately $1.5 million of indebtedness owed by Taylor
Services Company, Inc. to the same bank.

Inflation

     Inflation has not had a significant impact on the Company's operations to
date.

                                       9
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         See note 4 herein to the Notes to the Unaudited Consolidated Financial
         Statements.

ITEM 2.  CHANGES IN SECURITIES

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         Not applicable.

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

         No matters have been submitted to a vote of security holders
         during the quarter ended September 30, 1996.

ITEM 5.  OTHER INFORMATION

         Not applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

         (a) Exhibits

             Exhibit #
              10.23            Frost National Bank - Promissory Note
              10.24            Frost National Bank - Negative Pledge Agreement
              11.1             Earnings per share computations

         (b)  Reports on Form 8-K
              In a Current Report on Form 8-K and Form 8-KA dated July 29, 1996,
              the Company reported the acquisition of 100% of the issued and
              outstanding stock of Taylor Companies, Inc.

                                       10
<PAGE>
     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, thereto duly authorized.

                                             DAWSON PRODUCTION SERVICES, INC.

                                             By: /s/ P. MARK STARK
                                                 P. Mark Stark,
                                                 Chief Financial Officer

                                             Date:   November 14, 1996
                                       11