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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

Mark One:
         |X| Annual Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934. For the fiscal year ended December 31, 2000; or

         |_| Transition Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 For the transition period from __________ to
         __________.

                           COMMISSION FILE NO. 0-18754

                          BLACK WARRIOR WIRELINE CORP.
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             (Exact name of Registrant as specified in its charter)

DELAWARE                                                              11-2904094
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(State or other jurisdiction of                                    (IRS Employer
Incorporation or organization)                               Identification No.)

3748 HIGHWAY #45 NORTH, COLUMBUS, MISSISSIPPI                              39701
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(Address of Principal Executive Offices)                              (Zip Code)

                                 (662) 329-1047
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              (Registrant's telephone number, including area code)

    Securities Registered Pursuant to Section 12(b) of the Exchange Act: NONE

      Securities Registered Pursuant to Section 12(g) of the Exchange Act:
                              (Title of Each Class)
                    COMMON STOCK, PAR VALUE $.0005 PER SHARE

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past twelve (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 ninety (90) days. |X| Yes |_| No

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K, or any
amendment to this Form 10-K. [ ]

     State the aggregate market value of the voting stock held by non-affiliates
 as of March 30, 2001:
              COMMON STOCK, PAR VALUE $.0005 PER SHARE, $7,122,953
    (Non-affiliates have been determined on the basis of holdings set forth
under Item 12 of this Annual Report on Form 10-K.)
    Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
                  Class:  COMMON STOCK, PAR VALUE $.0005 PER SHARE
                  Outstanding at March 30, 2001:  12,496,408 SHARES

                       DOCUMENTS INCORPORATED BY REFERENCE
 No documents are incorporated by reference into this Annual Report on Form 10-K

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<PAGE>




                                     PART I

         ITEM 1.  BUSINESS

GENERAL

         Black Warrior Wireline Corp. (the "Company") is an oil and gas service
company currently providing various services to oil and gas well operators
primarily in the Black Warrior and Mississippi Salt Dome Basins in Alabama and
Mississippi, the Permian Basin in West Texas and New Mexico, the San Juan Basin
in New Mexico, Colorado and Utah, the East Texas and Austin Chalk Basins in East
Texas, the Powder River and Green River Basins in Wyoming and Montana, the
Williston Basin in North Dakota and areas of the Gulf of Mexico offshore
Louisiana and South Texas. The Company's principal lines of business include (a)
wireline services, (b) directional drilling services , and (c) workover
services. Since November 1996, the Company completed seven material
acquisitions, the most recent of which were the acquisitions of the drilling
assets of Phoenix Drilling Services, Inc., in March 1998 and Petro Wireline in
June 1998.

RECENT RECAPITALIZATION

         On January 24, 2000, the Company entered into a Loan and Security
Agreement (the "Loan Agreement") with Coast Business Credit, a division of
Southern Pacific Bank ("Coast"), and an amendment thereto dated January 29,
2001. Pursuant to the Loan Agreement, the Company is enabled to make secured
borrowings in the aggregate amount of up to the lesser of $25.0 million or such
maximum aggregate amount as is available to be borrowed under a receivables loan
and two term loans described below. Of such amount, $14.5 million, based on the
lesser of 75% of the appraised net eligible forced liquidation value of the
Company's equipment or $14.5 million, is a term loan, an additional $2.0 million
is a term loan, and the balance is available to be borrowed in an amount not
exceeding 80% of the Company's eligible receivables. On February 15, 2000, the
Company borrowed an aggregate of $15.6 million pursuant to the Loan Agreement.
The proceeds were used to repay the Company's former senior secured lender in
the amount of $13.5 million, to repay other indebtedness aggregating $1.5
million, and the balance was used for general corporate purposes, including the
payment of outstanding accounts payable. In addition, commencing on December 17,
1999 and during the first quarter of 2000, the Company sold to private investors
$7.0 million principal amount of convertible promissory notes originally due on
January 15, 2001, which were extended to June 30, 2001 in January 2001, and
warrants to purchase 28.7 million shares of Common Stock. All of the Company's
remaining indebtedness is subordinated to the Company's indebtedness to Coast.

         During the first quarter of 2000, the Company executed a Compromise
Agreement with Release with Bendover Company ("Bendover") whereby Bendover
agreed to return to the

<PAGE>

Company promissory notes aggregating $2,000,000 principal amount and receive in
exchange 2,666,667 shares of the Company's common stock and a promissory note in
the principal amount of $1,182,890 due on January 15, 2001, bearing interest at
10% per annum. On January 15, 2001, the note was extended to June 15, 2001,
bearing interest at 20% per annum, with 10% per annum interest paid monthly and
the balance paid on maturity of the note.

WIRELINE SERVICES

         The Company's wireline logging service activities contributed revenues
of $21.6 million (approximately 47.3% of revenues) in 2000, $17.7 million
(approximately 60.5% of revenues) in 1999, and $11.6 million (approximately
33.7% of revenues) in 1998. At December 31, 2000, the Company owned 50
operational motor vehicle mounted wireline units, of which 36 are equipped with
a state-of-the-art computer system, 6 are analog equipped and 8 are devoted
exclusively to hoisting operations. In the third quarter of 1998, the Company
commenced providing wireline services offshore to customers with operations in
the Gulf of Mexico. As of December 31, 2000, the Company owned 8 operational
cased-hole wireline units skid-mounted for offshore work, all of which are
equipped with state of the art computers.

         Truck or skid-mounted wireline logging services are used to evaluate
downhole conditions at various stages of the process of drilling and completing
oil and gas wells as well as at various times thereafter until the well is
depleted and abandoned. Such services are provided using a wireline unit
equipped with an armored cable that is lowered by winch into an existing well.
The cable lowers instruments and tools into the well to perform a variety of
services and tests. The wireline unit's instrument cab contains electronic
equipment to supply power to the downhole instruments, to receive and record
data from those instruments in order to produce the "logs" which define specific
characteristics of each formation and to display the data received from
downhole. The Company's wireline units are equipped with state-of-the-art
computerized systems or analog equipment.

         Open hole wireline services are performed after the drilling of the
well but prior to its completion. Cased hole wireline services are performed
during and after the completion of the well, as well as from time to time
thereafter during the life of the well. The Company's services primarily relate
to providing cased hole wireline services. Cased hole services include
radioactive and acoustic logging used to evaluate downhole conditions such as
lithology, porosity, production patterns and the cement bonding effectiveness
between the casing and the formation. Other cased hole services include
perforating, which opens up the casing to allow production from the
formation(s), and free-point and back-off, which locates and frees pipe that has
become lodged in the well. Cased hole services are used in the initial
completion of the well and in virtually all subsequent workover and stimulation
projects throughout the life of the well. The Company performs these services on
a contract basis at the well site for operators and producers of the wells
primarily on a bid basis at prices related to Company standard prices.

                                      -2-

<PAGE>


         These services are routinely provided to the Company's customers and
are subject to the customers' time schedule, weather conditions, availability of
Company personnel and complexity of the operation. These procedures generally
take approximately one to one-and-one-half days to perform.

         Manufacturing. The Company operates a manufacturing facility located in
Laurel, Mississippi to assemble and install wireline service equipment, both
mounted on motor vehicles and on wireline skids, for internal use and for sale
to others. During the year ended December 31, 2000, the Company manufactured for
internal use 6 new wireline trucks and 4 new offshore wireline skids. The
manufacturing facility also totally refurbished for internal use 4 wireline
trucks.

DIRECTIONAL DRILLING SERVICES

         The Company's directional drilling services contributed revenues of
$22.9 million (approximately 50.2% of revenues) in 2000, $10.3 million
(approximately 35.2% of revenues) in 1999 and $21.3 million (approximately 61.9%
of revenues) in 1998.

         Directional drilling is the intentional deviation of a well bore. The
deviation is achieved by utilizing downhole motors and guidance equipment to
move the well bore in a given direction and intersect a target formation at an
angle up to horizontal.

         On March 16, 1998, the Company completed the acquisition of the
domestic oil and gas well directional drilling and downhole survey service
business, including the related operating assets, from Phoenix Drilling
Services, Inc. This acquisition contributed to further increases in the
Company's revenues from directional drilling services commenced by the
acquisition of Diamondback Directional, Inc. in October, 1997. In addition, the
Phoenix acquisition has enabled the Company to provide downhole survey services
to the oil and gas industry. Prior to October, 1997, the Company had no revenues
from directional drilling services.

         The Company's Multi-Shot division provides directional surveying
services and directional surveying equipment to operators in the oil and gas
industry. These services include gyros, magnetic, single shot, high accuracy
magnetic probe, electric surface recording gyro, and MWD (measurement while
drilling). Management of the Company believes these services are
state-of-the-art.

                                      -3-

<PAGE>

WORKOVER AND COMPLETION SERVICES

         These activities contributed revenues of $1.1 million (approximately
2.5% of revenues) in 2000, $1.3 million (approximately 4.3% of revenues) in
1999, and $1.5 million (approximately 4.4% of revenues) in 1998. These services
are performed primarily on an hourly basis.

         Workover services include those operations performed on wells when
originally completed and on wells previously placed in production and requiring
additional work to restore or increase production. A completion or workover rig
is used to position tubing, pumps and other production equipment in a cased
hole. The unit is used for the initial completion of the well and subsequent
workover and remedial service. A completion or workover rig is generally a four
to six axle truck-mounted hoist unit with a 85 to 100 foot derrick capable of
lowering and hoisting up to 300,000 pound loads.

OTHER SERVICES

         The Company also engages in other oil and gas well service activities
including, primarily, the sale, rental and service of tools and equipment used
in the oil field services industry and conducts tool and equipment inspection,
maintenance and testing services. These activities are not deemed by management
to be material.

PRINCIPAL CUSTOMERS AND MARKETING

         During the year ended December 31, 2000, no single customer accounted
for more than 10% of the Company's net revenues. During the year ended December
31, 1999, two customers (Collins & Ware, Inc. and Burlington Resources)
accounted for approximately 21.0% of the Company's net revenues.

         The Company does not have any long-term agreements with its customers
and services are provided pursuant to short-term agreements negotiated by the
Company with the customer.

         The Company's services are marketed by its executive officers and a
sales staff of approximately eighteen persons working from its district offices.
In addition, the Company utilizes the services of a non-affiliated marketing
group. The Company relies extensively on its reputation in the industry to
create customer awareness of its services.

                                      -4-

<PAGE>

OPERATING HAZARDS AND INSURANCE

         The services of the Company are used in oil and gas well drilling,
workover and production operations that are subject to inherent risks such as
blow-outs, fires, poisonous gas and other oil and gas field hazards, many of
which can cause personal injury and loss of life, severely damage or destroy
equipment, suspend production operations and cause substantial damage to
property of others. Ordinarily, the operator of the well assumes the risk of
damage to the well, the producing reservoir and surrounding property and revenue
loss in the event of accident, except in the case of gross or willful negligence
on the part of the Company or its employees.

         The Company has general liability, property, casualty, officers' and
directors', and workers' compensation insurance. Although, in the opinion of the
Company's management, the limits of its insurance coverage are consistent with
industry practices, such insurance may not be adequate to protect the Company
against liability or losses occurring from all the consequences of such risks or
incidents. The occurrence of an event not fully covered by insurance (and a
determination of the liability of Company for consequential losses or damages)
could result in substantial losses to the Company and have a materially adverse
effect upon its financial condition, results of operations, and cash flows.

         The Company maintains two policies totaling $2.0 million on the life of
William L. Jenkins, its President and Chief Executive Officer, and maintains
$1.0 million policies on the lives of each of Allen R. Neel, Executive
Vice-President, Danny Ray Thornton, Vice President, and Alan Mann, Director. See
Item 10, "Directors and Executive Officers of the Registrant." The benefits
under such policies are payable to the Company.

COMPETITION

         Most of the Company's competitors are divisions of larger diversified
corporations which offer a wide range of oilfield services. Its chief
competitors include Halliburton Company, Schlumberger, Ltd. and Baker Hughes
Incorporated, as well as a number of other companies active in the industry.
These competitors have substantially greater economic resources than the
Company. Recent business combinations involving oil and gas service companies
may have the effect of intensifying competition in the industry. The decline in
1998 and early 1999 in demand for oil and natural gas well services resulted in
intensified competition. While competition throughout 2000 and to the present
time is intense, with the improved demand for oil and gas well services, the
Company's ability to compete with other suppliers of services has improved.
Competition principally occurs in the areas of technology, price, quality of
products and field personnel, equipment availability and facility locations.
Although price competition remains a

                                      -5-

<PAGE>

significant characteristic of the industry, the Company's ability to offer more
technologically advanced services is believed by management to have reduced the
extent of the Company's exposure to severe price competition. The Company
continues to make a conscious effort to compete, not just on price, but on its
ability to offer advanced technology, experienced personnel, and a safe working
environment.

         The Company's growth is dependent upon its ability to attract and
retain skilled oilfield and management personnel. The competition for such
qualified employees is frequently intense and there can be no assurance that
sufficient qualified persons will be available at such times as the Company
requires their services.

REGULATION

         The oil and gas business is a heavily regulated industry. The Company's
activities are subject to various licensing requirements and minimum safety
procedures and specifications, anti-pollution controls on equipment, waste
discharge and other environmental and conservation requirements imposed by
federal and state regulatory authorities. Numerous governmental agencies issue
regulations to implement and enforce laws which are often difficult and costly
to comply with, and the violation of which may result in the revocation of
permits, issuance of corrective action orders, assessment of administrative and
civil penalties and even criminal proceedings.


         In its operations, the Company is subject to the following statutes,
among others:

    o    The federal Resource Conservation and Recovery Act and comparable state
         statutes. The U.S. Environmental Protection Agency (EPA) and state
         agencies have limited the approved methods of disposal for some types
         of hazardous and non-hazardous wastes. The Company generates wastes,
         some of which are hazardous wastes.

    o    The federal Comprehensive Environmental Response, Compensation, and
         Liability Act, also known as the "Superfund" law, and comparable state
         statutes impose liability, without regard to fault or legality of the
         original conduct, on classes of persons that are considered to have
         contributed to the release of a "hazardous substance" into the
         environment. These persons include the owner or operator of the
         disposal site or the site where the release occurred and companies that
         disposed of or arranged for the disposal of the hazardous substances at
         the site where the release occurred.

    o    The federal Water Pollution Control Act and analogous state laws impose
         restrictions and strict controls regarding the discharge of pollutants
         into state waters or waters of the

                                      -6-

<PAGE>

         United States. The discharge of pollutants are prohibited unless
         permitted by the EPA or applicable state agencies. In addition, the Oil
         Pollution Act of 1990 as amended by the Coast Guard Authorization Act
         of 1996, imposes a variety of requirements on "responsible parties"
         related to the prevention of oil spills and liability for damages,
         including natural resource damages, resulting from such spills in
         waters of the United States.

         Management of the Company believes that the Company is in substantial
         compliance with the above laws.

         The Company is not currently the subject of any, nor is it aware of
any, threatened investigations or actions under any federal or state
environmental, occupational safety or other regulatory laws. The Company
believes that it will be able to continue compliance with such laws and
regulations without a material adverse effect on its earnings and competitive
position. However, there can be no assurance that unknown future changes in such
laws and regulations would not have such an effect if and when such changes
occur.

EMPLOYEES

         As of March 26, 2001, the Company employed approximately 344 persons on
a full-time basis. Of the Company's employees, 23 are management personnel, 17
are administrative personnel and 304 are operational personnel. The Company also
uses the services of approximately 20 to 30 independent contract drillers and
directional guidance personnel. None of the Company's employees is represented
by a labor union, and the Company is not aware of any current activities to
unionize its employees. Management of the Company considers the relationship
between the Company and its employees to be good.

INCORPORATION

         The Company was incorporated under the laws of the State of Delaware in
1987 under the name Teletek, Ltd. and in June 1989 Teletek, Ltd. merged with a
predecessor of the Company incorporated under the laws of the State of Alabama
and concurrently changed its name to Black Warrior Wireline Corp. The Company
and its predecessors have been engaged in providing wireline and other oil and
gas well support services since 1984.

                                      -7-

<PAGE>


CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.

         With the exception of historical matters, the matters discussed in this
Report are "forward-looking statements" as defined under the Securities Exchange
Act of 1934, as amended, that involve risks and uncertainties. The Company
intends that the forward-looking statements herein be covered by the safe-harbor
provisions for forward-looking statements contained in the Securities Exchange
Act of 1934, as amended, and this statement is included for the purpose of
complying with these safe-harbor provisions. Forward-looking statements include,
but are not limited to, the matters described below, as well as "Item 1.
Business - General," "- Principal Customers and Marketing," "--Operating Hazards
and Insurance," "--Competition," and "--Regulation." "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
General," "-Twelve-Month Periods Ended December 31, 2000 and 1999",
"-Twelve-Month Periods Ended December 31, 1999 and 1998", "- Liquidity and
Capital Resources" and "Item 7A. Quantitative and Qualitative Disclosure About
Market Risk." Such forward-looking statements relate to the Company's ability,
to generate revenues and attain and maintain profitability and cash flow, the
improvement in, stability and level of prices for oil and natural gas, pricing
in the oil and gas services industry and the willingness of customers to commit
for oil and natural gas well services, the ability of the Company to implement
any of the possible alternative means to maximize shareholder value in
conjunction with its agreement retaining Growth Capital Partners, including any
possible merger, sale of assets or other business combination transaction
involving the Company or raising additional debt or equity capital, to maintain,
implement and, if appropriate, expand its cost-cutting program instituted in
1998, the ability of the Company to compete in the premium services market, the
ability of the Company to meet or refinance its debt obligations as they come
due or to obtain extensions of the maturity dates for the payment of principal,
the ability of the Company to re-deploy its equipment among regional operations
as required, the ability of the Company to provide services using state of the
art tooling, the ability of the Company to raise additional capital to meet its
requirements and to obtain additional financing when required, and its ability
to maintain compliance with the covenants of its various loan documents and
other agreements pursuant to which securities have been issued. The inability of
the Company to meet these objectives or the consequences on the Company from
adverse developments in general economic conditions, adverse developments in the
oil and gas industry, declines and fluctuations in the prices for oil and
natural gas and the absence of any material decline in those prices, and other
factors could have a material adverse effect on the Company. The Company
cautions readers that various risk factors described below could cause the
Company's operating results, and financial condition to differ materially from
those expressed in any forward-looking statements made by the Company and could
adversely affect the Company's financial condition and its ability to pursue its
business strategy and plans. Risk factors that could affect the Company's
revenues, profitability and future business operations include, among others,
the following:

                                      -8-

<PAGE>


         Substantial Outstanding Indebtedness; Recent Losses; Current Maturities
of Indebtedness; Risks of Defaults. At December 31, 2000, the Company's total
indebtedness, inclusive of accrued interest, was approximately $51.9 million.
The Company had outstanding at February 28, 2001 total indebtedness, inclusive
of accrued interest, of $52.6 million. The Company has incurred net losses of
$4.2 million in 2000, $8.0 million in 1999 and $21.0 million in 1998. At
December 31, 2000, its current liabilities exceeded its current assets by $44.6
million. The Company's level of indebtedness and the potential defaults
thereunder, together with its recent history of losses, pose substantial risk to
the Company and the holders of its securities, including the possibility that
the Company may not be able to generate sufficient cash flow to pay the
principal of and interest on the indebtedness when due or to refinance such
indebtedness.

         At December 31, 2000, on the basis of its balance sheet at that date,
the Company had approximately $48.4 million of current indebtedness. Of this
indebtedness, the Company intends to seek to extend the maturity of
approximately $26.8 million of indebtedness, including any deferred excess cash
flow payments due through December 31, 2000, into 2002 and to seek, through
obtaining any required waivers or other accommodations of any covenant defaults
under loan documents, to repay an aggregate of $3 million in 2001 and $17.4
million in 2002 and thereafter. The Company will also seek to defer payment of
the excess cash flow payments accruing for the period January 1, 2001 through
June 30, 2001. If the Company is unable to obtain the required extensions and
waivers, it will seek to refinance approximately $20.3 million of indebtedness.
There can be no assurance that the Company will be successful in extending the
maturity or refinancing any part or all of its indebtedness. The inability of
the Company to obtain extensions of the due dates of principal payments or to
repay or refinance this indebtedness could cause, under the terms of such debt
agreements and the cross default provisions of other debt agreements, virtually
all the outstanding indebtedness to be accelerated and declared immediately due
and payable. Defaults in the repayment of this indebtedness, either at maturity
or by acceleration of the due date, could lead the creditors to foreclose on
substantially all of the Company's assets.

         Restrictions On Operations Imposed by Lenders; Borrowings Secured by
Substantially All the Company's Assets; Need to Rely on St. James for Funds. The
Company has outstanding at February 29, 2001 senior secured indebtedness
aggregating approximately $20.9 million under the Loan Agreement with Coast.
This indebtedness is collateralized by substantially all the Company's assets.
The instruments governing the Company's indebtedness to Coast impose

                                      -9-

<PAGE>


significant operating and financial restrictions on the Company. Financial
covenants in the Loan Agreement, as amended in January 2001, require the Company
to have a tangible net worth of $5.0 million on September 30, 2000 and
increasing quarterly thereafter by 80% of the Company's net income for the
quarter and by at least $1.0 million on June 30, 2001 and have a debt service
coverage ratio of 1.0 to 1.0 through September 30, 2000 and thereafter of 1.25
to 1.00 quarterly. Such restrictions, as well as various other affirmative and
negative covenants in the Loan Agreement, affect, and in many respects
significantly limit or prohibit, among other things, the ability of the Company
to incur additional indebtedness, pay dividends, repay indebtedness prior to its
stated maturity, sell assets or engage in mergers or acquisitions. These
restrictions also limit the ability of the Company to effect future financings,
make certain capital expenditures, withstand a downturn in the Company's
business or economy in general, or otherwise conduct necessary corporate
activities. The Loan Agreement places restrictions on the Company's ability to
borrow money under the revolving credit provisions of the Loan Agreement. The
Company's ability to borrow under this revolving credit arrangement is necessary
to fund the Company's ongoing operations. If the Company were to default on its
indebtedness owing to Coast and such indebtedness was accelerated, so as to
become due and immediately payable, there can be no assurance that the assets of
the Company would be sufficient to repay in full such indebtedness and the
Company's other liabilities. In addition, the acceleration of the Company's
indebtedness owing to Coast would constitute a default under other indebtedness
of the Company, which may result in such other indebtedness also becoming
immediately due and payable. Under such circumstances, the holders of the
Company's Common Stock may realize little or nothing on their investment in the
Company. Even if additional financing could be obtained, there can be no
assurance that it would be on terms that are favorable or acceptable to the
Company or its equity security holders.

         Principal and interest under the Coast Loan Agreement has been
guaranteed, subject to certain limitations, by St. James, principal stockholders
of the Company, and Charles Underbrink, a partner of St. James and a Director of
the Company. In addition, St. James has guaranteed all of the Company's
contractual obligations under the Loan Agreement, subject to certain
limitations. As amended in January 2001, the guaranty of St. James is backed by
a letter of credit in the amount of $8.2 million. Loans under the Loan Agreement
were subject to the fulfillment of a number of closing conditions and continue
to be subject to the accuracy of the Company's representations and warranties
and compliance with its covenants in the Loan Agreement.

         Under the January 2001 amendment to the Loan Agreement, if assets or
ownership interests in the Company are not sold on or before June 30, 2001 to
pay all obligations owing to Coast on or before June 30, 2001, including
deferred excess cash flow payments the Company is required to make for the
months of August 2000 through June 2001 and which aggregated $1.0 million at
December 31, 2000 and $2.5 million at March 31, 2001, then St. James is required
to make an additional equity investment in the Company sufficient to pay to
Coast the deferred excess cash flow payments. The failure of St. James to make
such investment is an event of default under the Loan Agreement.

                                      -10-

<PAGE>

         By virtue of its guarantees, in the event of a default under the
Company's Loan Agreement with Coast, Coast may seek to collect from St. James
Capital Partners, L.P. ("SJCP") and SJMB, L.L.C ("SJMB"), as well as Mr.
Underbrink, the outstanding principal and interest on the Company's obligation
to Coast. Mr. Underbrink's liability is limited to no more than $5.0 million.
Without continued improvement in the Company's revenues and operating results,
the Company may be substantially dependent upon the continuing support of SJCP
and SJMB during 2001 to fund its ongoing obligations, including its obligations
to Coast.

         Explanatory Paragraph of Auditor's Report. The report of the Company's
independent auditors on its audit of the Company's financial statements as of
December 31, 2000 contains an explanatory paragraph that describes an
uncertainty as to the Company's ability to continue as a going concern. Although
the Company is addressing that concern by seeking extensions of the due date of
the principal of indebtedness to be repaid in 2001 owing to Coast and to the
holders of other notes issued in January 2000, there can be no assurance that
these efforts will be successful or that the Company's levels of cash flow in
the year 2001, which have improved by virtue of the improvement in the Company's
operating results in early 2001, will enable the Company to meet these payments
or refinance these obligations if it is unsuccessful in obtaining the extensions
requested. Failure to obtain these extensions may result in events of default
under the terms of the debt instruments enabling the lenders to declare the
entire principal of such indebtedness due and payable and further resulting in
cross-defaults under other of the Company's outstanding debt agreements. Under
such circumstances, substantially all of the Company's outstanding indebtedness
may become immediately due and payable.

         The Company's loan agreement with Coast requires the Company to provide
various reports to Coast, including, among others, an obligation to provide to
Coast within 90 days following the end of each fiscal year annual financial
statements containing an unqualified opinion and certified by an independent
certified public accountant acceptable to Coast. The Company was delayed in
providing its financial statements for 2000 to Coast beyond the 90 days. There
can be no assurance that Coast may not treat the auditor's report on the
Company's December 31, 2000 financial statements containing an explanatory
paragraph as a qualified opinion or the delay in providing the financial
statements as an event of default under the Loan Agreement and claim that the
Company is in violation of its reporting obligations to Coast under the Loan
Agreement. The Company has not obtained a waiver from Coast with respect to
either of the foregoing. Under such circumstances, Coast may claim it is
entitled to accelerate the maturity of all of the indebtedness of the Company
owing to it.

                                      -11-

<PAGE>

         Recent Fluctuations in Levels of Prices for Oil and Natural Gas;
Possible Adverse Impact on the Company's Revenues. The business environment for
the Company and its corresponding operating results are affected significantly
by petroleum industry exploration and production expenditures. These
expenditures are influenced strongly by oil company expectations about the
supply and demand for oil and natural gas, energy prices, and finding and
development costs. Petroleum supply and demand, pricing, and finding and
development costs, in turn, are influenced by numerous factors including, but
not limited to, the extent of domestic production, the level of imports of
foreign natural gas and oil, the general level of market demand on a regional,
national and worldwide basis, domestic and foreign economic conditions that
determine levels of industrial production, political events in foreign oil
producing regions, and variations in governmental regulations and tax laws or
the imposition of new governmental requirements upon the natural gas and oil
industry, among other factors. Prices for natural gas and oil are subject to
worldwide fluctuation in response to relatively minor changes in supply of and
demand for natural gas and oil, market uncertainty and a variety of additional
factors that are beyond the Company's control.

         Crude oil prices experienced record low levels in 1998, trading below
$15/bbl for most of the year and averaging only $14.41/bbl - the lowest yearly
average recorded since 1983 and down over 30 percent from prior-year levels.
Prices were lower due to increased supply from renewed Iraqi exports, increased
OPEC and non-OPEC production, higher inventories (particularly in North America)
and a simultaneous slowing of demand growth due to the Asian economic downturn
and a generally warmer than normal winter. U.S. natural gas weakened in 1998
compared to the prior year periods, also due to abnormally warm winter weather.
In response to lower oil prices which continued into 1999, oil companies cut
upstream capital spending, particularly in the second half of 1998.

         As a consequence of the decline in levels of oil and natural gas prices
throughout 1999 from levels experienced in 1997 and 1996, producers of oil and
natural gas curtailed their utilization of oil and natural gas well service
activities. Increases in oil and natural gas prices since mid-1999 have resulted
in an increase in demand for oil and natural gas well services. This has
impacted favorably the utilization of the Company's services and recent
revenues. There can be no assurance that the Company will continue to experience
an ongoing increase in the demand for and utilization of its services. Future
declines in oil and natural gas prices can be expected to adversely impact the
Company's revenues.

         Material Charge to Operations During 1998. In accordance with SFAS No.
121 Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of, the Company recognizes impairment losses on long-lived assets
used in operations when indicators of impairment are present and the projected
undiscounted cash flows over the life of

                                      -12-

<PAGE>

the assets are less than the asset's carrying amount. If an impairment exists,
the amount of such impairment is calculated based on projections of future
discounted cash flows. These projections are for a period of five years using a
discount rate and terminal value multiple that would be customary for evaluating
current oil and gas service company transactions.

       The Company considers external factors in making its assessment.
Specifically, changes in oil prices and other economic conditions surrounding
the industry, consolidation within the industry, competition from other oil and
gas well service providers, the ability to employ and maintain a skilled
workforce, and other pertinent factors are among the factors that could lead
management to reassess the realizability and/or amortization periods of its
goodwill.

         In 1998, the Company experienced a large decline in demand for its
services as a result of a substantial decrease in the price of oil and natural
gas, as well as the loss of a major customer. Consequently, management evaluated
the recoverability of its long-lived assets in relation to its business
segments. The analysis was first performed on an undiscounted basis which
indicated impairment in its directional drilling segment. The impairment was
then calculated using projections of discounted cash flows over five years
utilizing a discount rate and terminal value multiple commensurate with current
oil and gas services company transactions. At December 31, 1998, the discount
rate and the terminal multiple used was 12% and 6.5, respectively. The
assumptions used in this analysis represent management's best estimate of future
results.

         The analysis resulted in a charge to operations for the year ended
December 31, 1998 of $11.1 million which consisted of a write-down of
approximately $8.1 million, approximately $2.4 million, and approximately
$624,000, to goodwill, property, plant and equipment, and inventory,
respectively.

         Substantial Dilution. The Company has outstanding as of February 28,
2001, common stock purchase warrants, options and convertible securities
entitled to purchase or be converted into an aggregate of 115,928,690 shares of
the Company's Common Stock at exercise and conversion prices ranging from $0.75
to $8.01. Accordingly, if all such securities were exercised or converted, the
12,496,408 shares of Common Stock issued and outstanding on February 28, 2001,
would represent 9.8% of the shares outstanding on a fully diluted basis.

         Possible Scarcity of Trained Personnel. The operation of the wireline,
directional drilling and other oil and gas well service equipment utilized by
the Company requires the services of employees having the technical training and
experience necessary to obtain the proper operational results. The Company's
operations are to a considerable extent dependent upon the continuing
availability of personnel with the necessary level of training and experience to
adequately operate its equipment. In the event the Company should suffer any
material loss of personnel to competitors or be unable to employ additional or
replacement personnel with the

                                      -13-

<PAGE>

requisite level of training and experience to adequately operate its equipment
its operations could be adversely affected. The recent improvement in the market
for oil and gas well services has increased the demand for such personnel, with
a resulting scarcity in certain market sectors. While the Company believes that
its wage rates are competitive and that its relationship with its workforce is
good, a significant increase in the wages paid by other employers could result
in a reduction in the Company's workforce, increases in wage rates, or both. If
either of these events occurred for a significant period of time, the Company's
revenues could be impacted. There can be no assurance that the Company's
operations and a continued improvement in its revenues may not be adversely
affected by a scarcity of operating personnel.

         Dependence on Major Customers. Historically, a large portion of the
Company's revenues has been generated from a relatively small number of
companies. During the year ended December 31, 2000, one customer (Burlington
Resources) accounted for approximately 7.1% of the Company's revenues. During
1999, two customers each accounted for in excess of 10% of the Company's
revenues. Collins & Ware, Inc., a company in which St. James had a significant
ownership interest, accounted for 10.1% of revenues and Burlington Resources
accounted for 10.9% of revenues. A significant reduction in business done by the
Company with its principal customers, if not offset by revenues from new or
existing customers, could have a material adverse effect on the Company's
business, results of operations and prospects.

         Substantial Control by Principal Investor. As of February 28, 2001,
SJCP, including certain of its affiliated entities and partners, collectively
referred to as ("St. James"), held 5,017,481 shares of Common Stock, promissory
notes of the Company convertible into 29,933,334 shares of Common Stock and
warrants to purchase an additional 53,850,276 shares of Common Stock. Upon
conversion of the notes and exercise of the warrants, St. James would hold an
aggregate of 88,801,091 shares representing 92.2% of the Company's shares of
Common Stock then outstanding. In addition, St. James has certain additional
contractual rights which, among other things, give to St. James the right to
nominate one person for election to the Company's Board of Directors, certain
preferential rights to provide future financings for the Company, subject to
certain exceptions, prohibitions against the Company consolidating, merging or
entering into a share exchange with another person, with certain exceptions,
without the consent of St. James. The foregoing give St. James the ability to
exert significant influence over the business and affairs of the Company. The
interests of St. James may not always be the same as the interests of the
Company's other securityholders.

         Intense Competition. The wireline, directional drilling, workover and
well servicing industry is an intensely competitive and cyclical business. A
number of large and small contractors provide competition in all areas of the
Company's business. The wireline service trucks and other equipment used is
mobile and can be moved from one region to another in response to increased
demand. Many of the Company's competitors have greater financial resources than
the Company, which may enable them to better withstand industry downturns, to
compete more effectively on the basis of price, and to acquire existing or new
equipment.

                                      -14-

<PAGE>


         Operating Hazards and Uninsured Risks. The Company's insurance coverage
may not in all situations provide sufficient funds to protect the Company from
all liabilities that could result from its operations. Oil and gas well service
operations are subject to the many hazards inherent in the oil and gas drilling
and production industry. These hazards can result in personal injury and loss of
life, severe damage to or destruction of property and equipment, pollution or
environmental damage and suspension of operations. The Company maintains
insurance protection as it deems appropriate, but injuries and losses may occur
under circumstances not covered by the Company's insurance.

         Environmental Risks. The Company is subject to numerous domestic
governmental regulations that relate directly or indirectly to its operations,
including certain regulations controlling the discharge of materials into the
environment, requiring removal and cleanup under certain circumstances, or
otherwise relating to the protection of the environment. Laws and regulations
protecting the environment have become more stringent in recent years and may in
certain circumstances impose "strict liability" and render a company liable for
environmental damage without regard to negligence or fault on the part of such
company. Such laws and regulations may expose the Company to liability for the
conduct of, or conditions caused by others, or for acts of the Company that were
in compliance with all applicable laws at the time such acts were performed. The
application of these requirements or the adoption of new requirements could have
a material adverse effect on the Company.

         Seasonality and Weather Risks. The Company's operations are subject to
seasonal variations in weather conditions, daylight hours and favorable weather
conditions for its off-shore wireline operations. Since the Company's activities
take place outdoors, the average number of hours worked per day, and therefore
the number of wells serviced per day, generally is less in winter months than in
summer months, due to an increase in snow, rain, fog and cold conditions and a
decrease in daylight hours. Furthermore, demand for the Company's wireline
services by oil and gas companies in the first quarter is generally lower than
at other times of the year. As a result, the Company's revenue and gross profit
during the first quarter of each year are typically low as compared to the other
quarters.

         Dependence on Key Personnel. The Company's success depends on, among
other things, the continued active participation of William L. Jenkins,
President, Allen R. Neel, Executive Vice-President, Danny R. Thornton,
Vice-President, Wireline Services, Gary J. Vaughn, Vice-President, Directional
Drilling Services, and certain of the Company's other officers and key operating
personnel. The loss of the services of any one of these persons could have a
material adverse effect on the Company. The Company has entered into employment
agreements with each of its executive officers, including Messrs. Jenkins
(through December 2001) and Thornton and Neel (through April 1, 2006), and has
purchased "key-man" life insurance with respect to each of such persons.

                                      -15-

<PAGE>

         Absence of Dividends. The Company has not declared or paid any cash
dividends on the Common Stock and currently anticipates that, for the
foreseeable future, any earnings will be retained for the development of the
Company's business. Accordingly, no cash dividends are contemplated to be
declared or paid on the Common Stock. In addition, the Company's existing loan
agreements prohibit the payment of cash dividends. See "Item 5. Market for
Registrant's Common Equity and Related Stockholder Matters."

ITEM 2.  PROPERTIES

         The Company leases 3,500 square feet of office space in Columbus,
Mississippi for a five-year term expiring on September 30, 2001 for its
executive offices. The monthly rental is $1,900, plus electric and gas
utilities.

         The Company also leases an approximately 787 square foot office in
Conroe, Texas used for executive offices. These offices are leased for a rental
of $1,049 per month pursuant to a lease expiring October 1, 2001.

         The Company maintains District Offices at 22 locations throughout its
service area and a manufacturing facility in Laurel, Mississippi. The aggregate
annual rental for these facilities is $578,000. Of such facilities, three are
owned by the Company and the others are leased with rental periods of from a
month-to-month basis to five years. The Company believes that all of the
facilities are adequate for its current requirements.

ITEM 3.  LEGAL PROCEEDINGS

                  The Company is a defendant in a number of legal proceedings
which it considers to be routine litigation that is incidental to its business.
The Company does not expect to incur any material liability as a consequence of
such litigation.

                                      -16-

<PAGE>


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

         No matter was submitted during the fourth quarter of the fiscal year
ended December 31, 2000, to a vote of security holders of the Company, through
the solicitation of proxies, or otherwise.

         On February 9, 2001, at an annual meeting, the stockholders of the
Company approved the adoption of the following proposals:

         The election of William L. Jenkins, Charles E. Underbrink, John L.
Thompson and Alan W. Mann as directors of the Company to hold office until the
next Annual Meeting of Stockholders and until their successors are elected and
qualified.

                                           Votes For              Votes Withheld
                                           ---------              --------------

                William L. Jenkins        10,609,048                 102,867
                Charles E. Underbrink     10,676,576                 35,339
                John L. Thompson          10,676,576                 35,339
                Alan W. Mann              10,676,576                 35,339

         A proposal to approve an amendment to the Company's 1997 Omnibus
Incentive Plan to increase the number of shares reserved for the grant of
options thereunder from 600,000 shares to 1,000,000 shares was approved by the
following vote:

         For 9,264,012;   Against 66,581;  Abstain 56,035;   Not Voted 1,325,287

         A proposal to approve an amendment to the Company's 1997 Non-Employee
Stock Option Plan to increase the number of shares reserved for the grant of
options thereunder from 100,000 shares to 300,000 shares was approved by the
following vote:

         For 9,254,733;   Against 75,860;  Abstain 56,035;   Not Voted 1,325,287

         A proposal to approve the adoption of the Company's 2000 Stock
Incentive Plan pursuant to which 17,500,000 shares will be reserved for the
grant of options thereunder was approved by the following vote:

         For 9,198,261;   Against 67,307;  Abstain 121,060;  Not Voted 1,325,287

                                      -17-

<PAGE>


         A proposal to amend the Certificate of Incorporation of the Company to
increase the authorized shares of Common Stock, par value $.0005 per share, from
12,500,000 shares to 175,000,000 shares was approved by the following vote:

         For 10,642,127;  Against 55,238;  Abstain 14,550;   Not Voted 0






                                      -18-

<PAGE>


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

         The Company's Common Stock is quoted in the OTC Bulletin Board under
the trading symbol BWWL. The following table sets forth the bid prices for the
Company's Common Stock for the periods indicated as provided by the OTC Bulletin
Board:



                                                        BID PRICES
                                           -------------------------------------
                         1999                    HIGH                  LOW
             -------------------------------------------------------------------

                First Quarter                    $2.50                $1.00
                Second Quarter                   $1.25                $0.88
                Third Quarter                    $1.56                $0.81
                Fourth Quarter                   $1.00                $0.25

                                                        BID PRICES
                                           -------------------------------------
                         2000                    HIGH                  LOW
             -------------------------------------------------------------------

                First Quarter                    $0.88                $0.38
                Second Quarter                   $0.94                $0.50
                Third Quarter                    $0.81                $0.38
                Fourth Quarter                   $0.66                $0.31

                                                        BID PRICES
                                           -------------------------------------
                         2001                    HIGH                  LOW
             -------------------------------------------------------------------


                First Quarter                    $0.60                $0.31
                Second Quarter (through April
                27, 2001)                        $1.25                $0.57


         The foregoing amounts represent inter-dealer quotations without
adjustment for retail markups, markdowns or commissions, and do not represent
the prices of actual transactions. On May 8, 2001, the closing bid quotation for
the Common Stock, as reported by the OTC Bulletin Board, was $0.58.

                                      -19-

<PAGE>


         As of March 30, 2001, the Company had approximately 447 shareholders of
record and believes it has in excess of 500 beneficial holders of its Common
Stock. The Company has never paid a cash dividend on its Common Stock and
management has no present intention of commencing to pay dividends and is unable
to do so under the terms of outstanding loan agreements.

ITEM 6.  SELECTED FINANCIAL DATA

         Set forth below is certain financial information for each of the five
years ended December 31, 2000 taken from the Company's audited consolidated
financial statements:

<TABLE>

                                                DECEMBER 31,
                    ---------------------------------------------------------------------
                        2000          1999          1998           1997          1996
                        ----          ----          ----           ----          ----
<S>                 <C>           <C>            <C>           <C>            <C>

Revenues(1)         $45,699,409   $29,293,373    $34,436,553   $17,062,542    $7,582,021
Income (loss)            $7,233   $(4,761,656)  $(19,417,737)   $1,180,492      $587,850
from
operations
Net income                $(.55)       $(1.81)        $(5.86)        $0.14         $1.96
(loss) per common
share - diluted
Total assets        $42,874,974   $36,331,984    $36,814,850   $26,085,983    $5,310,674
Total               $58,753,433   $54,478,858    $48,151,206   $20,488,710    $3,052,916
Liabilities(2)
Cash Dividends            - 0 -         - 0 -          - 0 -         - 0 -         - 0 -

</TABLE>

-----------------------

(1) See Note 3 to Notes to Financial Statements for information regarding
    acquisitions made by the Company.
(2) See Note 6 to Notes to Financial Statements for information relating to the
    Company's outstanding indebtedness.

                                      -20-


<PAGE>



ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION

GENERAL

         The Company's results of operations are affected primarily by the
extent of utilization and rates paid for its services and equipment. The energy
services sector is completely dependent upon the upstream spending of the
exploration and production side of the industry. Much of the activity increase
from the exploration and production side of the industry during the latter half
of 1999 was in the area of infield recovery of properties shut-in as a result of
depressed commodity prices. These infield recovery efforts were those that would
provide the least capital expenditure, least risk of capital and would result in
a more rapid improvement of cash flow streams due to higher commodity pricing.
With the increase of commodity prices that occurred since the beginning of 2000
and anticipated continued price stability along with the Company's debt
refinancing, the Company believes it is positioned to experience an increase in
demand for its services due in large part to the broad base of services offered.
There can be no assurance that the Company will continue to experience any
material increase in the demand for and utilization of its services and its
revenues.

         The following table sets forth the Company's revenues from its three
principal lines of business for each of the years ended December 31, 2000, 1999
and 1998 (in thousands):


                             2000          1999                  1998
--------------------------------------------------------------------------------


Wireline Services         $ 21,637       $ 17,727             $ 11,592

Directional Drilling        22,918         10,310               21,311

Workover and Completion      1,144          1,256                1,533


                    ------------------------------------------------------------
                          $ 45,699       $ 29,293             $ 34,437
                    ============================================================

         Management may in the future seek to raise additional capital, which
may be either debt or equity capital or a combination thereof or enter into
another material transaction involving the Company, including a possible sale of
the Company. As of May 15, 2001, no specific plans or proposals have been made
with regard to any additional financing or any other transaction. The Company
may engage in other material corporate transactions. The Company retained Growth

                                      -21-

<PAGE>

Capital Partners, L.P. ("GCP") as its financial advisor to the Company in
connection with examining various alternative means to maximize shareholder
value including a possible merger, sale of assets or other business combination
involving the Company or a possible private placement of equity and/or
equity-related securities. In the last quarter of 2000 and the first quarter of
2001, the Company and GPC on the Company's behalf explored the possibilities of
the Company entering into a business combination or other material transaction.
While information was provided to prospective acquirors and discussions held, no
agreements or agreements in principal were entered into as a consequence of
those activities and the Company is not engaged in any negotiations at May 15,
2001 that may lead to its acquisition or other material transaction. The Company
believes that at that time its operating results had not shown sufficient
improvement for a sufficient period of time to enable the Company to realize an
acceptable price in such a transaction. Nevertheless, subject to the Company's
operating results continuing at recent levels, the Company may again at a future
date seek to pursue a transaction leading to the possible acquisition of the
Company or a sale of some or all its assets. Any such transaction would be
dependent upon the ability of the Company to realize an acceptable price. There
can be no assurance that the Company will seek to enter into such a transaction
and no representation is made as to the terms on which any such a transaction
may be entered into or that such a transaction will occur. In the event the
Company should seek or be required to raise additional equity capital, there can
be no assurance that such a transaction will not dilute the interests of the
Company's existing security holders. Fluctuations in interest rates may
adversely affect the Company's ability to raise capital.

TWELVE-MONTH PERIODS ENDED DECEMBER 31, 2000 AND 1999

         Revenues increased by approximately $16.4 million or 56.0% to $45.7
million for the year ended December 31, 2000 as compared to revenues of $29.3
million for the year ended December 31, 1999. Wireline services revenues
increased by approximately $3.9 million in 2000 primarily due to the increased
demand for the Company's services. Directional drilling revenues increased by
approximately $12.6 million as a consequence of the general level of oil and
natural gas well drilling activity which improved dramatically in the latter
half of 2000.

         Operating costs increased by $10.4 million for the year ended December
31, 2000, as compared to 1999. This increase was due primarily to the increase
in corresponding revenues of the Company as compared to 1999. Salaries and
benefits increased by $4.1 million for 2000 as compared to 1999. This was due
primarily to the Company's increased employee base as well as the level of
activity. Operating costs as a percentage of revenues decreased to 72.8% in 2000
from 77.8% in 1999 primarily because of the increased utilization of the
Company's assets.

                                      -22-

<PAGE>


         Selling, general and administrative expenses increased by approximately
$783,000 from $6.3 million in 1999 to $7.0 million in 2000. As a percentage of
revenues, selling, general and administrative expenses decreased from 21.4% in
1999 to 15.4% in 2000, primarily as a result of the revenue level generated in
2000 and the cost reduction program implemented in 1998.

         Depreciation and amortization increased from $5.0 million in 1999, to
$5.4 million in 2000, primarily because of the higher asset base of depreciable
properties in 2000 over 1999 due to the Company's capital expenditures of $5.7
million in 2000.

         Interest expense and amortization of debt discount increased by $1.6
million for 2000 as compared to 1999. This was directly related to the increased
amounts of indebtedness outstanding in 2000.

         Net gain or loss on sale of fixed assets increased in 2000 to a net
gain of $10,000 from a $7,000 net loss in 1999. Other income decreased by
$17,000 in 2000.

         The provision for income taxes was $-0- in both 2000 and 1999. The
provision is $0 due to the fact that a full valuation allowance has been
recorded against the net deferred tax assets generated in each of the years
ended December 31, 2000 and 1999.

         During the first two quarters of 2000, the Company executed agreements
with certain of its vendors to discount the outstanding obligations due to these
vendors. The agreements provided for a decrease in the outstanding obligations
of $968,575. Accordingly, the Company has recognized an extraordinary gain on
extinguishments of debt of $968,575, net of income taxes of $0.

         The Company's net loss for 2000 was $4.2 million, compared with $8.0
million in 1999. The Company's loss was primarily attributable to the reduced
demand for the Company's services in the first half of 2000. The improvement in
operating results was the result of increased revenues and the increase in
demand for the Company's services in the latter half of 2000.

TWELVE-MONTH PERIODS ENDED DECEMBER 31, 1999 AND 1998

         Revenues decreased by $5.1 million or 14.9% to $29.3 million for the
year ended December 31, 1999 as compared to revenues of $34.4 million for the
year ended December 31, 1998. Wireline services revenues increased by $6.1
million in 1999 primarily because of the acquisition of Petro Wireline and the
Company's establishment of an offshore wireline operation and a new onshore
wireline facility at Minden, Louisiana and Corpus Christi, Texas. Directional
drilling revenues decreased as a consequence of the general level of oil and
natural gas well drilling activity which remained depressed for most of 1999.

                                      -23-

<PAGE>

         Operating costs decreased by $7.7 million for the year ended December
31, 1999, as compared to 1998. This decrease was due primarily to a combination
of the Company's cost reduction program and the reduced demand for the Company's
services. Salaries and benefits decreased by $3.9 million for 1999 as compared
to 1998. This was due primarily to the Company's cost reduction program
implemented in 1998 and continuing through 1999. Operating costs as a percentage
of revenues decreased to 77.8% in 1999 from 88.5% in 1998 primarily because of
the cost reduction program implemented in 1998.

         Selling, general and administrative expenses decreased by approximately
$1.2 million from $7.5 million in 1998 to $6.3 million in 1999. As a percentage
of revenues, selling, general and administrative expenses decreased from 21.6%
in 1998 to 21.4% in 1999, primarily as a result of the revenue level generated
in 1999 and the cost reduction program implemented in 1998.

         Depreciation and amortization increased from $4.8 million in 1998, to
$5.0 million in 1999, primarily because of the higher asset base of depreciable
properties in 1999 over 1998 due to the inclusion of a full year's depreciation
on the assets associated with the Phoenix and Petro-Log acquisitions and
operations in Houma, Louisiana.

         In accordance with SFAS No. 121 Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, the Company
recognizes impairment losses on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows over the
life of the assets are less than the asset's carrying amount. If an impairment
exists, the amount of such impairment is calculated based on projections of
future discounted cash flows. These projections are for a period of five years
using a discount rate and terminal value multiple that would be customary for
evaluating current oil and gas service company transactions.

       The Company considers external factors in making its assessment.
Specifically, changes in oil prices and other economic conditions surrounding
the industry, consolidation within the industry, competition from other oil and
gas well service providers, the ability to employ and maintain a skilled
workforce, and other pertinent factors are among the factors that could lead
management to reassess the realizability and/or amortization periods of its
goodwill.

         In 1998, the Company experienced a large decline in demand for its
services as a result of a large decrease in the price of oil and natural gas, as
well as the loss of a major customer. Consequently, management evaluated the
recoverability of its long-lived assets in relation to its business segments.
The analysis was first performed on an undiscounted basis which indicated

                                      -24-

<PAGE>


impairment in its directional drilling segment. The impairment was then
calculated using projections of discounted cash flows over five years utilizing
a discount rate and terminal value multiple commensurate with current oil and
gas services company transactions. At December 31, 1998, the discount rate and
the terminal multiple used was 12% and 6.5, respectively. The assumptions used
in this analysis represent management's best estimate of future results.

         The analysis resulted in a charge to operations for the year ended
December 31, 1998 of $11.1 million which consisted of a write-down of
approximately $8.1 million, approximately $2.4 million, and approximately
$624,000, to goodwill, property, plant and equipment, and inventory,
respectively.


         Interest expense and amortization of debt discount increased by $0.6
million for 1999 as compared to 1998. This was directly related to the increased
amounts of indebtedness outstanding incurred to finance acquisitions completed
in 1998.

         Net gain or loss on sale of fixed assets decreased in 1999 to a net
loss of $7,000 from a $155,000 net gain in 1998. Other income increased by
$45,000 in 1999.

         Income tax benefit was $0 million in 1999 compared to $1.1 million for
1998. The income tax benefit arises out of the Company's net losses for the
year. See "Note 10 of Notes to Consolidated Financial Statements."

         The Company's net loss for 1999 was $8.0 million. The Company's loss
was primarily attributable to declines in demand for the Company's services and
equipment utilization which arose in 1998 and continued into the first half of
1999 resulting from the declines in prices for oil and natural gas.

LIQUIDITY AND CAPITAL RESOURCES

         Cash used in Company operating activities was $2.9 million for the year
ended December 31, 2000 as compared to cash used in operating activities of
$517,000 for the year ended December 31, 1999. Investing activities of the
Company used cash of $3.6 million during the year ended December 31, 2000 for
the acquisition of property, plant and equipment and was offset by proceeds from
the sale of fixed assets of $15,000. During the year ended December 31, 1999,
acquisitions of property, plant and equipment and other businesses used cash of
$1.8 million offset by proceeds of $35,000 from the sale of fixed assets.
Financing activities provided cash of $31.1 million from the net proceeds from
the issuance of convertible notes and warrants and other borrowings during the
year ended December 31, 2000 offset by principal payments on long-term notes and
capital lease obligations and loan origination costs of $25.7 million. During
the year ended December 31, 1999, the sale of convertible notes and warrants and
other borrowings resulted in proceeds of $6.9 million offset by principal
payments on long-term debt and capital lease obligations and loan origination
costs of $3.2 million.

                                      -25-

<PAGE>

         During the year ended December 31, 2000, the Company expended $2.1
million for the acquisition of property, plant and equipment financed under
capital leases and notes payable. During the year ended December 31, 1999, the
Company expended $108,000 for the acquisition of property, plant and equipment
financed under capital leases and notes payable.

         During 1999 and 2000, the Company experienced a decline in the demand
for its products and services as a result of a significant decrease in the price
of oil and natural gas. The decline in demand materially impacted the Company's
revenues, liquidity and its ability to remain in compliance with covenants in
its loan agreements and meet its obligations during 1999. Management of the
Company believes that the improvement in its revenues is be dependent upon a
continuing period of improved pricing and decisions by oil and natural gas
producers to make commitments to engage in oil and natural gas well
enhancements.

         The Company's outstanding indebtedness includes primarily senior
secured indebtedness aggregating approximately $20.3 million at December 31,
2000, other indebtedness of approximately $8.9 million, and $19.2 million owing
to SJCP and its affiliates.

         At December 31, 2000, on the basis of its balance sheet at that date,
the Company had approximately $48.4 million of current indebtedness. Of this
indebtedness, the Company intends to seek to extend the maturity of
approximately $26.8 million of indebtedness, including any deferred excess cash
flow payments due through December 31, 2000, into 2002 and to seek, through
obtaining any required waivers or other accommodations of any covenant defaults
under loan documents, to repay an aggregate of $3 million in 2001 and $17.4
million in 2002 and thereafter. The Company will also seek to defer payment of
the excess cash flow payments accruing for the period January 1, 2001 through
June 30, 2001. If the Company is unable to obtain the required extensions and
waivers, it will seek to refinance approximately $20.3 million of indebtedness.
There can be no assurance that the Company will be successful in extending the
maturity or refinancing any part or all of its indebtedness. The inability of
the Company to obtain extensions of the due dates of principal payments or to
repay or refinance this indebtedness could cause, under the terms of such debt
agreements and the cross default provisions of other debt agreements, virtually
all the outstanding indebtedness to be accelerated and declared immediately due
and payable. Defaults in the repayment of this indebtedness, either at maturity
or by acceleration of the due date, could lead the creditors to foreclose on
substantially all of the Company's assets.

                                      -26-

<PAGE>


Coast Business Credit Loan and Security Agreement
-------------------------------------------------

         The Company is a party to a Loan Agreement with Coast pursuant to which
it is enabled to make secured borrowings in the aggregate amount of up to the
lesser of $25.0 million or such maximum aggregate amount as is available to be
borrowed under a receivables loan and two term loans described below. Of such
amount, $14.5 million, based on the lesser of 75% of the appraised net eligible
forced liquidation value of the Company's equipment or $14.5 million, is a term
loan (the "Equipment Loan"), an additional $2.0 million is a term loan (the
"Installment Loan"), and the balance is available to be borrowed in an amount
not exceeding 80% of the Company's eligible receivables (the "Receivables
Loan"). The Equipment Loan is repayable commencing on August 30, 2000 in monthly
installments over a term of six years, with interest only payable monthly prior
to August 1, 2000. The Equipment Loan further requires that the Company make
additional monthly principal payments of 50% of its excess cash flow during the
preceding month during the period ending February 28, 2001, and thereafter
additional monthly principal payments of 40% of its excess cash flow during the
preceding month. In January 2001, Coast agreed to defer until June 30, 2001 the
excess cash flow payments otherwise due for the months of August 2000 through
June 2001. At December 31, 2000 and March 31, 2001, the deferred excess cash
flow payment due on or before June 30, 2001 amounted to $1.0 million and $2.5
million, respectively. Excess cash flow is defined to be the Company's net
income before income taxes, depreciation and amortization during a month minus
the sum of principal and interest payments made and taxes paid in cash
("EBITDA"). The Installment Loan is repayable in monthly installments over four
years commencing March 31, 2000, and, after the Equipment Loan is paid in full,
is also repayable out of excess cash flow as provided above. Under the January
2001 amendments to the Loan Agreement, if assets or ownership interests in the
Company are not sold on or before June 30, 2001 to pay all obligations owing to
Coast on or before June 30, 2001, then St. James is required to make an
additional equity investment in the Company sufficient to pay to Coast the
excess cash flow payments deferred for the months of August 2000 through June
2001 and the failure of St. James to make such investment is an event of default
under the Loan Agreement.

         The Loan Agreement ceases to be in effect on February 28, 2003,
provided, however, the Loan Agreement will automatically renew for additional
terms of one year unless either party elects not to renew the term. In the event
the Loan Agreement is not renewed on February 28, 2003, or at the end of any
renewal term thereafter, all borrowings then outstanding under the Loan
Agreement are then due and payable.

         On February 15, 2000, the Company borrowed an aggregate of $15.6
million pursuant to the Loan Agreement. The proceeds were used to repay the
Company's former senior secured lender in the amount of $13.5 million, to repay
other indebtedness aggregating $1.5 million, and the balance was used for
general corporate purposes, including the payment of outstanding accounts
payable.

                                      -27-

<PAGE>


         The Equipment Loan and the Installment Loan bear interest at the prime
rate, as defined, plus 2% per annum, and the Receivables Loan bears interest at
the prime rate, as defined, plus 1% per annum. The Company's obligations under
the Loan Agreement are collateralized by a senior lien and security interest in
substantially all of the Company's assets. Principal and interest under the Loan
Agreement has been guaranteed, subject to certain limitations, by St. James,
principal stockholders of the Company, and Charles Underbrink, a partner of St.
James and a Director of the Company. In addition, St. James has guaranteed all
of the Company's contractual obligations under the Loan Agreement, subject to
certain limitations. As amended in January 2001, the guaranty of St. James is
backed by a letter of credit in the amount of $8.2 million. Loans under the Loan
Agreement were subject to the fulfillment of a number of closing conditions and
continue to be subject to the continuing accuracy of the Company's
representations and warranties and its compliance with the covenants in the Loan
Agreement.

         By virtue of its guarantees, in the event of a default under the
Company's loan agreement with Coast, Coast may seek to collect from SJCP and
SJMB, as well as Mr. Underbrink, the outstanding principal and interest on the
Company's obligation to Coast. Without the continued improvement in the
Company's revenues, the Company may be substantially dependent upon the
continuing support of SJCP and SJMB during 2001 to fund its ongoing obligations,
including its obligations to Coast.

         Events of default under the Loan Agreement include (i) any warranty,
representation, statement, report or certificate delivered to Coast by the
Company being untrue or misleading, (ii) the failure of the Company to pay when
due any loans under the Loan Agreement or any other monetary obligation under
the Loan Agreement, (iii) the total of the Company's loans outstanding exceeding
the Company's maximum borrowing limit under the Loan Agreement, (iv) the breach
of various covenants and obligations of the Company under the Loan Agreement,
(v) the insolvency or business failure of the Company or the commencement of any
reorganization or bankruptcy proceedings, (vi) a change of control of the
Company without Coast's consent, (vii) the inability of the Company to pay its
debts as they come due, (viii) the failure of St. James to make an additional
equity investment in the Company at June 30, 2001, if required, and (ix) certain
other events. Upon such an event of default, Coast may cease making loans to the
Company and accelerate the due date of all indebtedness outstanding under the
Loan Agreement.

         The Company is obligated to fulfill various affirmative and negative
covenants contained in the Loan Agreement. The affirmative covenants include
requirements to comply with various financial covenants, maintain insurance
coverage, apply 30% of the proceeds from the sale of

                                      -28-

<PAGE>

equity securities to the repayment of principal of the term loans, provide
written reports to Coast, and provide Coast with access to the collateral for
the indebtedness. The financial covenants, as amended in January 2001, require
the Company to have a tangible net worth as defined in the Loan Agreement of
$5.0 million on September 30, 2000 and increasing quarterly thereafter by 80% of
the Company's net income for the quarter and by at least $1.0 million on June
30, 2001 and have a debt service coverage ratio of 1.0 to 1.0 through September
30, 2000 and thereafter of 1.25 to 1.00 quarterly. The Company's reporting
obligations include, among others, an obligation to provide to Coast within 90
days following the end of each fiscal year annual financial statements
containing an unqualified opinion and certified by an independent certified
public accountant acceptable to Coast. The Company did not provide the financial
statements for 2000 in a timely manner and has neither sought nor received from
Coast a waiver of this breach. Negative covenants prohibit the Company, without
Coast's consent, from merging or consolidating with another entity; acquiring
assets, subject to certain exceptions; entering into any other transaction
outside the ordinary course of business; selling any assets except in the
ordinary course of business; restrictions on the disposition of inventory;
loaning money, subject to certain exceptions; incurring indebtedness outside the
ordinary course of business which has a material adverse effect on the Company;
paying or declaring any dividend or making any other distributions; or a change
in the Company's capital structure that has a material adverse effect on it.

         At the closing of its initial borrowings, the Company paid a loan fee
of 2% of the maximum amount able to be borrowed under the Loan Agreement and is
obligated to pay an annual fee of 0.5% of such amount. In addition, the Company
is obligated to pay a facility fee of $15,000 each quarter and an unused
facility fee of 0.375% of the undrawn portion of the maximum amount able to be
borrowed. In the event of the sale or transfer of substantially all the assets
or ownership interests in the Company prior to February 28, 2003, Coast is
entitled to a success fee of $250,000. In the event the Loan Agreement is
terminated by the Company, including a termination as a result of the sale of
substantially all the Company's assets or a controlling interest in the Company
with the indebtedness to Coast repaid, Coast is entitled to a fee of $500,000.


Private Sale of $7.0 Million of Notes and Warrants

         Commencing on December 17, 1999 and during the first quarter of 2000,
the Company sold $7.0 million principal amount of convertible promissory notes
(the "Notes") originally due on January 15, 2001 and currently due on June 30,
2001 and warrants ("Warrants") to purchase 28.7 million shares of Common Stock.
The Notes and Warrants were purchased by 47 "accredited investors," (the
"Purchasers") as defined in Regulation D under the Securities Act of 1933, as
amended. Payment of principal and interest on the Notes is collateralized by

                                      -29-

<PAGE>


substantially all the assets of the Company, subject, however, to the terms of a
subordination agreement between the Purchasers and Coast. The Notes bear
interest at 10% per annum through September 30, 2000 and thereafter at the rate
of 15% per annum and are convertible into shares of the Company's Common Stock
at a conversion price of $0.75 per share, subject to anti-dilution adjustment
for certain issuances of securities by the Company at prices per share of Common
Stock less than the conversion price then in effect, in which event the
conversion price is reduced to the lower price at which such shares were issued.
The Warrants are exercisable at a price of $0.75 per share, subject to
anti-dilution adjustment for certain issuances of securities by the Company at
prices per share of Common Stock less than the exercise price then in effect, in
which event the exercise price is reduced to the lower price at which such
shares were issued and the number of shares issuable is adjusted upward. The
shares issuable on conversion of the Notes and exercise of the Warrants have
demand and piggy-back registration rights under the Securities Act of 1933. The
Notes contain various affirmative and negative covenants, including, among
others, a prohibition against the Company consolidating, merging or entering
into a share exchange with another person, with certain exceptions, without the
consent of the Purchasers. Events of default under the Notes include, among
other events, (i) a default in the payment of principal or interest on the
Notes; (ii) a default in the performance of any covenant of the Note Purchase
Agreement or other agreement entered into in connection therewith and the
failure to cure such default; (iii) any representation or warranty of the
Company in the Note Purchase Agreement or other agreement entered into in
connection therewith being untrue in any material respect and such default
remains uncured; (iv) the Company defaults in the payment when due or by
acceleration of any other indebtedness having an aggregate principal amount
outstanding in excess of $100,000 and such default remains uncured; (v) a
judgment for the payment of money in excess of $100,000 is entered against the
Company; and (vi) the commencement of certain bankruptcy or insolvency
proceedings. If an event of default occurs, the Notes may become immediately due
and payable.

Other Matters

         During the first quarter of 2000, the Company executed a Compromise
Agreement With Release with Bendover Company ("Bendover") whereby Bendover
agreed to return to the Company promissory notes aggregating $2,000,000
principal amount and receive in exchange 2,666,667 shares of the Company's
common stock and a promissory note in the principal amount of $1,182,890 due on
January 15, 2001, bearing interest at 10% per annum. The maturity of the
promissory note was subsequently extended to June 15, 2001 at an interest rate
of 20% per annum with 10% per annum paid monthly and the balance deferred until
maturity.

         On March 1, 2000 the Company exercised its option and completed the
purchase of Measurement Specialists, Inc. ("MSI"). The Company paid the
outstanding notes payable related to the acquired assets of approximately
$385,000 and previously issued 144,445 shares of its common stock in connection
with the acquisition.

                                      -30-

<PAGE>


         On December 14, 2000 St. James converted $1,750,000 principal amount of
a note and $2,013,111 of accrued interest on indebtedness owing to it into
5,017,481 shares of the Company's Common Stock at a conversion price of $0.75
per share.

Recently Issued Accounting Pronouncements

         On December 3, 1999, the staff of the Securities and Exchange
Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue
Recognition in Financial Statements. SAB 101 provides guidance as to the
appropriate timing for recognition of revenue. The Company recognizes revenue
upon the delivery of the product to a customer. The Company adopted SAB 101 in
the fourth quarter, as required, and has concluded that SAB 101 did not have any
impact on its financial statements.

         In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("FAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, subsequently amended by SFAS 137
and 138. FAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, (collectively referred to as derivatives) and for hedging activities.
The Company is not holding any derivative financial or commodity instruments and
does not believe adoption in 2001 will have any significant financial statement
impact.

INFLATION

         The Company's revenues have been and are expected to continue to be
affected by fluctuations in the prices for oil and gas. Inflation did not have a
significant effect on the Company's operations in 2000.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         From time to time, the Company holds financial instruments comprised of
debt securities and time deposits. All such instruments are classified as
securities available for sale. The Company does not invest in portfolio equity
securities, or commodities, or use financial derivatives for trading or hedging
purposes. The Company's debt security portfolio represents funds held
temporarily pending use in its business and operations. The Company manages
these funds accordingly. The Company seeks reasonable assuredness of the safety
of principal and

                                      -31-

<PAGE>


market liquidity by investing in rated fixed income securities while, at the
same time, seeking to achieve a favorable rate of return. The Company's market
risk exposure consists of exposure to changes in interest rates and to the risks
of changes in the credit quality of issuers. The Company typically invests in
investment grade securities with a term of three years or less. The Company
believes that any exposure to interest rate risk is not material.

         Under its Loan Agreement with Coast, the Company is subject to market
risk exposure related to changes in the prime interest rate. Assuming the
Company's level of borrowings from Coast at March 31, 2001 remained unchanged
throughout 2001, if a 100 basis point increase in interest rates under the Loan
Agreement prevailed throughout the year, it would increase the Company's 2001
interest expense by approximately $201,000.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Financial Statements of the Company meeting the requirements of
Regulation S-K are filed on the succeeding pages of this Item 8 of this Annual
Report on Form 10-K, as listed below:

         Report of Independent Accountants for the Years Ended
         December 31, 2000, 1999 and 1998.................................   F-1

         Balance Sheets as of
         December 31, 2000 and 1999 ......................................   F-2

         Statements of Operations for the Years Ended
         December 31, 2000, 1999 and 1998.................................   F-3

         Statements of Stockholders Deficit for the
         Years Ended December 31, 2000, 1999, and 1998 ...................   F-4

         Statements of Cash Flows for the Years Ended
         December 31, 2000, 1999 and 1998 ................................   F-5

         Notes to  Financial Statements...................................   F-7

                                      -32-

<PAGE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE:

         During the two fiscal years ended December 31, 2000, the Company has
not filed any Current Report on Form 8-K reporting any change in accountants in
which there was a reported disagreement on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure.









                                      -33-


<PAGE>



                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The following table contains information concerning the current
Directors and executive officers of the Company:


                       NAME           AGE                 POSITION
             -------------------------------------------------------------------

               William L. Jenkins     48    President, Chief Executive Officer
                                                      and Director

                  Allen R. Neel       43  Executive Vice-President and Secretary

                Danny R. Thornton     50        Vice-President/Operations

                   Alan W. Mann       46                Director

                 John L. Thompson     42                Director

               Charles E. Underbrink  46                Director

         William L. Jenkins has been President, Chief Executive Officer and a
Director of the Company since March 1989. From 1973 until 1980, Mr. Jenkins held
a variety of field engineering and training positions with Welex - A Halliburton
Company, in the South and Southwest. From 1980 until March 1989, Mr. Jenkins
worked with Triad Oil & Gas, Inc., as a consultant, providing services to a
number of oil and gas companies. During that time, Mr. Jenkins was involved in
the organization of a number of drilling and oil field service companies,
including a predecessor of the Company, of which he served as
Secretary/Treasurer until 1988. Mr. Jenkins has over twenty years' experience in
the oil field service business. Mr. Jenkins is Mr. Thornton's brother-in-law.

         Allen R. Neel, is the Executive Vice-President and Secretary of the
Company and has been employed by the Company since August 1990. He is currently
in charge of the Company's offshore operations, as well as administration and
legal matters. In 1981, Mr. Neel received his BS Degree in Petroleum Engineering
from the University of Alabama. From 1981 to 1987, Mr. Neel worked in
engineering and sales for Halliburton Services. From 1987 to 1989, he worked as
a District Manager for Graves Well Drilling Co. When the Company acquired the
assets of Graves in 1990, Mr. Neel assumed a position with the Company.

                                      -34-

<PAGE>

         Danny R. Thornton is a Vice-President of the Company and has been
employed by the Company since March 1989. From 1982 to March 1989, Mr. Thornton
was the president and a principal stockholder of Black Warrior Mississippi, the
Company's operational predecessor. Mr. Thornton has been engaged in the oil and
gas services industry in various capacities since 1978. His principal duties
with the Company include supervising and consulting on wireline and workover
operations. Mr. Thornton is Mr. Jenkins' brother-in-law.

         Alan W. Mann was elected a Director effective March 1, 2000. Mr. Mann
became and continues to be employed by the Company since its purchase of
Diamondback Directional, Inc. in 1997. Prior to forming Diamondback Directional,
Inc. in 1995, Mr. Mann was employed by Becfield Drilling Services in operations
and management. Mr. Mann was elected a Director pursuant to the terms of an
agreement entered into with the Company resolving certain litigation between Mr.
Mann and the Company.

         John L. Thompson has been, since 1995, employed as a Director and
President of St. James Capital Corp. and SJMB, L.L.C., Houston-based merchant
banking firms. St. James Capital Corp. also serves as the general partner of St.
James Capital Partners, L.P. and SJMB, L.L.C. serves as the general partner of
SJMB, L.P., investment limited partnerships specializing in merchant banking
related investments. Additionally, he is a Director of Industrial Holdings,
Inc., a publicly-held company. Prior to co-founding St. James Capital Corp. and
SJMB, L.L.C., Mr. Thompson served as a Managing Director of Corporate Finance at
Harris Webb & Garrison, a regional investment banking firm with a focus on
mergers and acquisitions, financial restructuring and private placements of debt
and equity issues. Mr. Thompson was elected to the Company's Board of Directors
pursuant to the terms of agreements between the Company and St. James Capital
Partners, L.P. See Item 13. Certain Relationships and Related Transactions for a
description of the transaction.

         Charles E. Underbrink was elected a Director on April 1, 1998. For more
than the past five years, he has been employed as the Chief Executive Officer
and Chairman of St. James Capital Corp. and SJMB, L.L.C., Houston based merchant
banking firms. Mr. Underbrink is also a Director of Monorail Computer
Corporation, Somerset House Publishing, HUB, Inc. and Industrial Holdings, Inc.

                                      -35-

<PAGE>



COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

         Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and Directors, and persons who beneficially own more than ten
percent (10%) of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, Directors and beneficial owners of more than ten percent
(10%) of the Company's Common Stock are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms that they file. To the best
of the Company's knowledge, based solely on a review of such reports as filed
with the Securities and Exchange Commission, all such persons have complied with
such reporting requirements during the Company's most recent fiscal year except
as follows: Mr. Neel was 436 days late in reporting the grant of an option to
purchase 625,000 shares of the Company's Common Stock granted in February 2000.


ITEM 11. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION - GENERAL

         The following table sets forth the compensation paid or awarded to the
President and Chief Executive Officer of the Company and each other executive
officer of the Company who received compensation exceeding $100,000 during 2000
for all services rendered to the Company in each of the years 2000, 1999 and
1998.

                           SUMMARY COMPENSATION TABLE

<TABLE>

                                     ANNUAL COMPENSATION                      LONG-TERM
                                                                             COMPENSATION
                          ------------------------------------------------------------------------------------
                                                         OTHER       SECURITIES    LONG-TERM      ALL OTHER
       NAME AND                                          ANNUAL      UNDERLYING    INCENTIVE     COMPENSATION
  PRINCIPAL POSITION          YEAR    SALARY   BONUS  COMPENSATION     OPTIONS      PAYOUTS
  ------------------------------------------------------------------------------------------------------------
<S>                           <C>    <C>       <C>    <C>             <C>          <C>              <C>
William L. Jenkins            2000   $274,592                                                       $1,216(1)
   President                  1999   $137,140                                         -0-           $1,216(1)
                              1998   $146,275                          200,000        -0-           $1,216(1)

Allen R. Neel                 2000   $127,500                                                       $8,400(2)
  Executive Vice President    1999   $ 92,761                                         -0-           $8,400(2)
                              1998   $131,334                                         -0-           $8,400(2)

</TABLE>

---------------------------------

(1)      Includes the premiums paid by the Company on a $1,000,000 insurance
         policy on the life of Mr. Jenkins which names his wife as beneficiary
         and owner of the policy.
(2)      Automobile allowance paid to Mr. Neel.

                                      -36-

<PAGE>

OPTION GRANTS IN YEAR ENDED DECEMBER 31, 2000.
----------------------------------------------

The following table provides information with respect to the above named
executive officers regarding options granted to such persons during the
Company's year ended December 31, 2000.

<TABLE>

                                             % OF TOTAL
                             NUMBER OF        OPTIONS/                                     MARKET
                             SECURITIES         SARS         EXERCISE                     PRICE ON
           NAME              UNDERLYING      GRANTED TO        OR        EXPIRATION       DATE OF
                               SARs/        EMPLOYEES IN      BASE          DATE           GRANT
                          OPTIONS GRANTED    FISCAL YEAR     PRICE
                                (#)                        ($/SHARE)
-------------------------------------------------------------------------------------------------------
<S>                           <C>               <C>          <C>        <C>                 <C>
Allen Neel                    625,000           6.3%         $0.75        February,         $0.59
                                                                            2010

</TABLE>

--------------------------

         On February 9, 2001, the Company's stockholders approved the adoption
of the Company's 2000 Stock Incentive Plan pursuant to which 17,500,000 shares
are reserved for the grant of options. At February 26, 2001, 13,922,000 options
have been granted to 147 employees under the 2000 Stock Incentive Plan. Also on
February 9, 2001, the Company's stockholders approved an amendment to the 1997
Omnibus Incentive Plan increasing the number of shares reserved for the grant of
options to 1,000,000 and an amendment to the 1997 Non-Employee Stock Option Plan
increasing the number of shares reserved for the grant of options to 300,000. As
of February 26, 2001, options to purchase 749,500 shares and 77,000 shares,
respectively, were outstanding under those plans.

STOCK OPTION EXERCISES AND HOLDINGS AT DECEMBER 31, 2000.
--------------------------------------------------------

         The following table provides information with respect to the above
named executive officers regarding Company options exercised during the year
ended December 31, 2000 and options held at December 31, 2000 (such officers did
not exercise any options during the most recent fiscal year).

                                      -37-

<PAGE>

<TABLE>

                                                     NUMBER OF UNEXERCISED         VALUE OF UNEXERCISED
                                                    OPTIONS AT DECEMBER 31,        IN-THE-MONEY OPTIONS
                                                             2000                 AT DECEMBER 31, 2000 (1)

         NAME              SHARES        VALUE       EXERCISABLE    UNEXERCISABLE     EXERCISABLE    UNEXERCISABLE
                          ACQUIRED      REALIZED
                         ON EXERCISE
------------------------------------------------------------------------------------------------------------------
<S>                          <C>           <C>       <C>                 <C>              <C>             <C>
William L. Jenkins           -0-           -0-       200,000(2)          -0-              -0-             -0-
Allen R. Neel                -0-           -0-          705,000          -0-              -0-             -0-

</TABLE>

----------------------------
(1) Based on the closing sales price on December 31, 2000 of $0.375.
(2) Subsequent to December 31, 2000, Mr. Jenkins was granted an option to
    purchase 4,000,000 shares of common stock exercisable at $0.75 per share.

OTHER PLANS

         The Company has not adopted any other long-term incentive plans or
defined benefit or actuarial pension plans.

EMPLOYMENT AGREEMENTS

         The Company has entered into an Employment Agreement, dated January 1,
1998, with William L. Jenkins, to serve as its President, Chief Executive
Officer and a Director of the Company. The Employment Agreement, which
terminates on December 31, 2001, provides for an annual base salary of $225,000.
The Employment Agreement provides for certain increases in Mr. Jenkins base
compensation in the years 1999, 2000 and 2001 if the Company meets certain
performance objectives. Pursuant to the agreement, Mr. Jenkins was granted a
ten-year option to purchase 200,000 shares of the Company's common stock at an
exercise price of $6.6875 per share, the fair market value of the stock on
January 1, 1998, the date the option was granted. With certain exceptions, the
agreement restricts Mr. Jenkins from engaging in activities in competition with
the Company during the term of his employment and, in the event Mr. Jenkins
terminates the agreement prior to its termination date, for a period of eighteen
(18) months thereafter and also in the event he terminates the agreement, from
soliciting for employment any employee of the Company for a period of two years
after termination.

         The Company has entered into five-year employment agreements
terminating on April 1, 2006 with each of Allen R. Neel, Executive
Vice-President and Danny R. Thornton, Vice-President, Operations, of the
Company. Mr. Neel is to receive base compensation of $139,000 per year. Mr.
Thornton receives base compensation of $75,000 per year. On each anniversary

                                      -38-

<PAGE>

date of the agreements, the Company and the employee agree to renegotiate the
base salary taking into account the rate of inflation, overall profitability and
the cash position of the Company, the performance and profitability of the areas
for which the employee is responsible and other factors. The agreements contain
restrictions on such persons engaging in activities in competition with the
Company during the term of their employment and for a period of two years
thereafter.

DIRECTORS' COMPENSATION

         Non-employee Directors of the Company are authorized to receive
compensation in the amount of $5,000 each quarter commencing January 1, 2000. In
addition, the Company's Directors are reimbursed for their out-of-pocket
expenses in attending meetings of the Board of Directors and committees of the
Board.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 30, 2001 (a) by each person
who is known by the Company to own beneficially more than five percent (5%) of
the Company's Common Stock, (b) by each of the Company's Directors and officers,
and (c) by all Directors and officers as a group. As of April 30, 2001, the
Company had 12,496,408 shares of Common Stock outstanding.

                                                                  PERCENTAGE OF
                                               NUMBER OF SHARES    OUTSTANDING
                 NAME AND ADDRESS (1)(2)            OWNED           SHARES(3)
            --------------------------------------------------------------------

            William L. Jenkins                    4,410,000 (4)        26.4%

            Danny R. Thornton                       705,666 (5)         5.3%

            Allen R. Neel                           705,000 (5)         5.3%

            Charles E. Underbrink                70,393,720 (6)        90.4%
            c/o St. James Capital Partners, L.P.
            4295 San Felipe
            Suite 200
            Houston, TX  77027

                                      -39-

<PAGE>

                                                                  PERCENTAGE OF
                                               NUMBER OF SHARES    OUTSTANDING
                 NAME AND ADDRESS (1)(2)            OWNED           SHARES(3)
            --------------------------------------------------------------------


           John L. Thompson                         66,138,310(7)     89.8%
           c/o St. James Capital Partners, L.P.
           4295 San Felipe - Suite 200
           Houston, TX  77027

           St. James Capital Partners, L.P., SJMB,  64,354,699(8)     89.6%
           L.P.,  and affiliates
           4295 San Felipe - Suite 200
           Houston, Texas  77027

           Bendover Corp. (9)                        3,814,235        30.5%
           Alan W. Mann
           M. Dale Jowers
           1053 The Cliffs Blvd.
           Montgomery, TX  77356

           All Directors and Officers as a Group
             (5 persons)                            80,028,621        95.9%



(1)      This tabular information is intended to conform with Rule 13d-3
         promulgated under the Securities Exchange Act of 1934 relating to the
         determination of beneficial ownership of securities. The tabular
         information gives effect to the exercise of warrants or options
         exercisable within 60 days of the date of this table owned in each case
         by the person or group whose percentage ownership is set forth opposite
         the respective percentage and is based on the assumption that no other
         person or group exercise their option.
(2)      Unless otherwise indicated, the address for each of the above is c/o
         Black Warrior Wireline Corp., 3748 Highway #45 North, Columbus,
         Mississippi 39701.
(3)      The percentage of outstanding shares calculation is based upon
         12,496,408 shares outstanding as of April 30, 2001, except as otherwise
         noted.
(4)      Includes 4,200,000 shares issuable on exercise of options.
(5)      Includes 705,000 shares issuable on exercise of an option.
(6)      Includes an aggregate of 64,354,699 shares held directly by SJCP, SJMB
         and their affiliates and shares issuable on exercise of warrants and
         conversion of notes and accrued interest through April 30, 2001 deemed
         held beneficially by Messrs. Underbrink and Thompson because of their
         relationships with SJCP and SJMB. Also includes 4,870,410 shares
         issuable on exercise of warrants and conversion of notes and accrued
         interest through April 30, 2001 held directly by Mr. Underbrink and
         1,168,611 shares issuable on conversion of notes and accrued interest
         through April 30, 2001 held jointly by Messrs. Underbrink and Thompson.
(7)      Includes an aggregate of 64,354,699 shares held directly by SJCP, SJMB
         and their affiliates and shares issuable on exercise of warrants and
         conversion of notes and accrued interest through April 30, 2001 deemed
         held beneficially by Messrs. Underbrink and Thompson because of their
         relationships ith SJCP and SJMB. Also includes 615,000 shares issuable
         on exercise of warrants and conversion of notes and accrued interest
         through April 30, 2001 held directly by Mr. Thompson and 1,168,611
         shares issuable on conversion of notes and accrued interest through
         April 30, 2001 held jointly by Messrs. Underbrink and Thompson.
(8)      Includes shares issuable to St. James Capital Partners, LP and St.
         James Merchanr Bankers L.P. and their affiliates on conversion of notes
         and accrued interest through April 30, 2001 and exercise of warrants.
         See "Item 13. Certain Relationships and Related Transactions."
(9)      Based on information contained in the Schedule 13D dated October 9,
         1997. On October 9, 1997, the Company issued 647,569 shares and paid
         $586,000 in cash to purchase substantially all the assets of
         Diamondback Directional, Inc. (which corporation subsequently changed
         its name to Bendover Corp.). As of December 22, 1999, the Company
         issued an additional 2,666,667 shares to Bendover Corp as part of the
         consideration paid to resolve certain litigation. Messrs. Mann and
         Jowers each own approximately 42.5% of the outstanding capital stock of
         Bendover Corp.

                                      -40-

<PAGE>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Commencing in June 1997 through February, 2000, the Company entered
into a series of transactions with St. James, its affiliates and partners,
whereby the Company sold to St. James on the following dates for an aggregate
purchase price of $24.2 million, the following securities:

        DATE                        SECURITY                  PRINCIPAL AMOUNT
--------------------    --------------------------------     -------------------

June 6, 1997            9% Convertible Promissory Note        $2.0 million (1)
October 9, 1997         7% Convertible Promissory Note        $2.9 million (2)
January 23, 1998        8% Convertible Promissory Note        $10.0 million(3)
October 30, 1998        10% Convertible Promissory Note       $2.0 million (4)
February 18, 1999       10% Convertible Promissory  Note      $2.5 million (5)
December 17, 1999       10% Convertible Promissory Note       $3.1 million (6)
February 14, 2000       15% Convertible Promissory  Note      $1.7 million (7)

        DATE                 NUMBER OF WARRANTS (8)(9)         EXPIRATION DATE
--------------------    ---------------------------------    -------------------

June 6, 1997                        2,442,000                    June 5, 2002

October 9, 1997                     4,478,277                  October 10, 2002

January 23,1998                    16,200,000                  January 23, 2003

October 30, 1998                    4,000,000                  October 30, 2003

February 18, 1999                   4,150,000                 February 18, 2004

December 17, 1999                  12,710,000                 December 31, 2004

February 14, 2000                   6,970,000                 December 31, 2004

--------------------

(1)      Convertible at a current conversion price of $0.75 per share, as
         adjusted through December 17, 1999 pursuant to anti-dilution
         adjustments, into an aggregate of 2,666,667 shares of Common Stock.
(2)      Convertible at a current conversion price of $0.75 per share, as
         adjusted through December 17, 1999 pursuant to anti-dilution
         adjustments, into an aggregate of 3,866,667 shares of Common Stock.
(3)      Convertible at an exercise price of $0.75 per share, as adjusted
         through December 17, 1999 pursuant to anti-dilution adjustments, into
         an aggregate of 13,333,333 shares of Common Stock
(4)      Convertible at a current conversion price of $0.75 per share, as
         adjusted through December 17, 1999 pursuant to anti-dilution
         adjustments, into an aggregate of 2,666,666 shares of Common Stock.

--------------------

                                      -41-

<PAGE>


(5)      Convertible at a current conversion price of $0.75 per share, as
         adjusted through December 17, 1999 pursuant to anti-dilution
         adjustments, into an aggregate of 3,333,333 shares of Common Stock.
(6)      Convertible at a current conversion price of $0.75 per share, subject
         to anti-dilution adjustments, into an aggregate of 4,133,333 Shares of
         Common Stock.
(7)      Convertible at a current conversion price of $0.75 per share, subject
         to anti-dilution adjustments, into an aggregate of 2,266,667 shares of
         Common Stock.
(8)      Each warrant represents the right to purchase one share of Common Stock
         at $0.75 per share, subject to anti-dilution adjustments.
(9)      As adjusted and subject to further anti-dilution adjustment.

         Except for those terms relating to the amounts of securities purchased,
maturity and expiration dates, interest rates, and conversion and exercise
prices, each of such transactions contained substantially identical terms and
conditions relating to the purchase of the securities involved. Payment of
principal and interest on all the notes is collateralized by substantially all
the assets of the Company, subordinated to borrowings by the Company from Coast
in the maximum aggregate amount of $25.0 million. The notes are convertible into
shares of the Company's Common Stock at the conversion prices set forth in the
tables above. The conversion price of the Notes and the exercise price of the
Warrants is subject to anti-dilution adjustments for certain issuances of
securities by the Company at prices per share of Common Stock less than the
conversion or exercise price then in effect in which event the conversion price
and exercise price are reduced to the lower price at which such shares were
issued. As a consequence of several transactions involving the Company and St.
James, the conversion and exercise prices have been reduced pursuant to the
anti-dilution adjustments to $0.75 per share. The shares issuable on conversion
of the notes and exercise of the warrants have demand and piggy-back
registration rights under the Securities Act of 1933. The Company agreed that
one person designated by St. James will be nominated for election to the
Company's Board of Directors. Mr. John L. Thompson, currently a Director of the
Company, serves in this capacity. The Agreements grant St. James certain
preferential rights to provide future financings to the Company, subject to
certain exceptions. The notes also contain various affirmative and negative
covenants, including a prohibition against the Company consolidating, merging or
entering into a share exchange with another person, with certain exceptions,
without the consent of St. James. Events of default under the notes include,
among other events, (i) a default in the payment of principal or interest; (ii)
a default under any of the notes and the failure to cure such default for five
days, which will constitute a cross default under each of the other notes; (iii)
a breach of the Company's covenants, representations and warranties under any of
the Agreements; (iv) a breach under any of the Agreements between the Company
and St. James, subject to certain exceptions; (v) any person or group of persons
acquiring 40% or more of the voting power of the Company's outstanding shares
who was not the owner thereof as of October 30, 1998, a merger of the Company
with another person, its dissolution or liquidation or a sale of all or
substantially all its assets; and (vi) certain events of bankruptcy. In the
event of a default under any of the notes, subject to the terms of an agreement
between St. James and Coast, St. James could seek to foreclose against the
collateral for the notes.

                                      -42-

<PAGE>

         On December 14, 2000, St. James converted $1,750,000 principal amount
of a note and $2,013,111 of accrued interest on indebtedness owing to it into
5,017,481 shares of the Company's Common Stock at a conversion price of $0.75
per share.

         In February, 2000, Hub, Inc., a corporation of which Mr. Underbrink is
a Director, purchased for $500,000 an $800,000 note of the Company payable to
Fleet Capital Corporation, the Company's previous senior secured lender. Hub,
Inc. agreed to accept $500,000 from the Company in payment of the note. Hub,
Inc. was paid $500,000 in January 2000.

         In February 2001, the Company issued to Mr. Underbrink and St. James
five-year warrants to purchase 700,000 and 400,000 shares, respectively, of the
Company's Common Stock at exercise prices of $0.75 per share. The warrants were
issued in consideration of financial accommodations extended to the Company by
Mr. Underbrink and St. James in connection with the Company's borrowings from
Coast and the guarantees of Mr. Underbrink and St. James of that indebtedness.
The holders of the warrants have the right to include the shares issuable on
exercise included in any registration statement filed by the Company under the
Securities Act of 1933, as amended, subject to certain limitations.

         On June 17, 1999, the Company sold approximately $329,000 of trade
accounts receivable, which was fully reserved due to the customer declaring
bankruptcy, to RJ Air, LLC, an entity partially owned by John L. Thompson, a
member of the Company's Board of Director's, for $200,000. As of December 31,
2000, the Company has collected $100,000 of the sale price and the remaining
$100,000 is included in deferred revenue on the balance sheet. Mr. Thompson has
agreed to pay to the Company the remaining $100,000 of the purchase price. Mr.
Thompson's obligation is without interest or a fixed due date.

         An aggregate of $15.7 million principal amount of notes owing to St.
James was due on March 16, 2001. On April 20, 2001, St. James agreed to extend
the maturity date of these notes to September 30, 2001 in consideration for the
Company agreeing to increase the interest rate on the notes to 10% per annum
commencing March 17, 2001 through September 30, 2001. If not repaid on September
30, 2001, the interest rate on the notes would increase to 15% per annum. In
addition, the Company agreed to accelerate the maturity date on a note in the
principal amount of $2.0 million to September 30, 2001 from June 2002.

         On November 20, 2000, the Company entered into an equipment lease with
Big Foot Rental Tool Service, L.L.C., a Louisiana limited liability company of
which Mr. Neel is an approximately 20% owner. The Company leased for a term of
twenty-four months oil and gas well service equipment with an original cost of
approximately $539,000. The agreement provides for monthly rental payments of
approximately $24,200 over the term of the lease. At the expiration of the
lease, the Company has the option to purchase the equipment for approximately
$54,000.

                                      -43-

<PAGE>


         The Company entered into the lease with Big Foot Rental Tool Service,
L.L.C. to provide needed well service equipment at times when other sources of
financing to acquire the equipment was unavailable.









                                      -44-
<PAGE>


                           GLOSSARY OF INDUSTRY TERMS

         The following are definitions of certain technical terms used in this
Annual Report relating to the Company's business:

         "3-D Seismic" Involves the acquisition of a dense grid of seismic data
over a precisely defined area. An energy source creates an acoustic impulse that
penetrates the subsurface and is reflected off underlying rock layers. This
reflected energy is recorded by sensitive receivers (geophones connected to
sophisticated computers). The resulting data is then analyzed and interpreted by
geophysicists and used by oil and natural gas producing companies in the
acquisition of new leases, the selection of drilling locations and for reservoir
management. The technology is particularly useful with directional drilling. 3-D
Seismic data provides greater precision and improved subsurface resolution than
is provided by 2-D seismic surveys.

         "Casing" Steel pipe lowered into the drilled hole (borehole) to prevent
"caving in" and to provide isolation of zones and permit production of
hydrocarbons

         "Cased Hole" The drilled hole after casing has been lowered and
cemented in place.

         "Directional Drilling" Enables the drilling of computer guided
directional wellbores from existing or newly drilled wells intended to increase
the exposure of the well bore to producing hydrocarbon zones. Directional
drilling is facilitated through the use of 3-D Seismic technology.

         "Downhole" Any part of the borehole below the ground surface.

         "Junk Basket" A mechanical device lowered into the borehole with
wireline to remove extraneous or unwanted debris. A gauge ring is run
simultaneously to check conformity of hole size.

         "Cement Bond Log" A cement quality and bonding evaluation performed
with sonic transmitters and receivers lowered into the borehole with wireline.
This survey is recorded by surface computers.

         "Hoisting and Steering Services" Services provided utilizing the
Company's wireline trucks and equipment for operating surveying equipment and
steering tools owned and operated by others.

                                      -45-

<PAGE>


         "Logs" (a) Open Hole: The measurement of properties of formations to
determine hydrocarbon bearing characteristics. Open hole logs are mainly
radioactive (porosity) and electric (resistivity).

                (b) Cased Hole: The measurement of gamma rays (different
formations have different levels), casing collars (joints in casing) for
correlation to open hole depths, and cement quality and bonding. Porosity logs
can be run in cased holes with Compensation Neutron Tools.

         "Rigs" (a) A drilling rig is one which drills the borehole. This rig
normally is used for setting the casing in the borehole.

                (b) A completion or workover rig is used to position tubing,
pumps and other production  equipment in the cased hole. As the name implies,
this is used for  subsequent  "workover" or remedial service.

         "Winch Unit" A powerful machine with one or more drums on which to coil
a cable or chain for hauling or hoisting.

         "Workover" Operations pertaining to work on wells previously placed in
production but needing additional work in order to restore or increase
production.







                                      -46-



<PAGE>


                                     PART IV


ITEM 14.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

                  The Exhibits required by Regulation S-K are set forth in the
following list and are filed either by incorporation by reference from previous
filings with the Securities and Exchange Commission or by attachment to this
Annual Report on Form 10-KSB as so indicated in such list.

         Exhibit           Designation
         -------           -----------

           3.2             Restated Certificate of Incorporation of the Company,
                           as filed with the Secretary of State of the State of
                           Delaware on June 21, 1989 (incorporated by reference
                           to the Company's Annual Report on Form 10-KSB for the
                           fiscal year ended December 31, 1990).

           3.2.1           Certificate of Amendment to the Company's Certificate
                           of Incorporation as filed with the Secretary of State
                           of the State of Delaware on February 13, 2001.
                           (incorporated by reference to the Company's
                           Registration Statement on Form S-8, effective date
                           March 21, 2001.)

           3.3             By-Laws of the Company (incorporated by reference to
                           the Company's Registration Statement on Form S-18,
                           effective date December 6, 1988).

          10.1             Employment Agreement, dated September 18, 1996,
                           between William L. Jenkins and the Company. (Filed as
                           Exhibit 10.1 to the Company's Annual Report on Form
                           10-KSB for the fiscal year ended December 31, 1996.)

          10.2             Employment Agreement, dated January 31, 1997, between
                           Danny Ray Thornton and the Company, and amendment
                           thereto.

          10.3             Employment Agreement, dated January 31,1997, between
                           Allen R. Neel and the Company, and amendment thereto.

          10.4             Purchase and Sale Agreement dated June 6, 1997
                           between Black Warrior Wireline Corp. and Vernon E.
                           Tew, Jr., Mark R. Roberts, E.J. Wooten, Chester
                           Whatley and William A. Tew. (Filed as an exhibit to
                           the Company's Current Report on Form 8-K for June 6,
                           1997)

                                      -47-

<PAGE>


          10.5             Purchase and Sale Agreement dated June 9, 1997
                           between Black Warrior Wireline Corp. and John L.
                           Morton, Theodore W. Morton, and John D. Morton.
                           (Filed as an exhibit to the Company's Current Report
                           on Form 8-K for June 6, 1997)

          10.6             Agreement for Purchase and Sale dated June 6, 1997
                           between Black Warrior Wireline Corp. and St. James
                           Capital Partners, L.P. (Filed as an exhibit to the
                           Company's Current Report on Form 8-K for June 6,
                           1997)

          10.7             $2,000,000 Convertible Promissory Note dated June 6,
                           1997 issued to St. James Capital Partners, L.P.
                           (Filed as an exhibit to the Company's Current Report
                           on Form 8-K for June 6, 1997)

          10.8             $3,000,000 Bridge Loan Promissory Note dated June 6,
                           1997 issued to St. James Capital Partners, L.P.
                           (Filed as an exhibit to the Company's Current Report
                           on Form 8-K for June 6, 1997)

          10.9             Warrant dated June 6, 1997 to purchase 546,000 shares
                           of Common Stock issued to St. James Capital Partners,
                           L.P. (Filed as an exhibit to the Company's Annual
                           Report on Form 10-KSB for the year ended December 31,
                           1997).

          10.10            Warrant dated June 6, 1997 to purchase 120,000 shares
                           of Common Stock issued to St. James Capital Partners,
                           L.P. (Filed as an exhibit to the Company's Annual
                           Report on Form 10-KSB for the year ended December 31,
                           1997).

          10.11            Registration Rights Agreement between Black Warrior
                           Wireline Corp. and St. James Capital Partners, L.P.
                           dated June 6, 1997. (Filed as an exhibit to the
                           Company's Current Report on Form 8-K for June 6,
                           1997)

          10.12            Asset Purchase Agreement dated as of September 1,
                           1997 between Black Warrior Wireline Corp. and
                           Diamondback Directional, Inc., Alan Mann and Michael
                           Dale Jowers. (Filed as an exhibit to the Company's
                           Current Report on Form 8-K for October 9, 1997).

                                      -48-

<PAGE>


          10.13            Employment Agreement effective as of September 1,
                           1997 between the Company and Alan Mann. (Filed as an
                           exhibit to the Company's Current Report on Form 8-K
                           for October 9, 1997).

          10.14            Employment Agreement effective as of September 1,
                           1997 between the Company and Michael Dale Jowers.
                           (Filed as an exhibit to the Company's Current Report
                           on Form 8-K for October 9, 1997).

          10.15            Registration Rights Agreement dated October 10, 1997
                           between the Company and DDI. (Filed as an exhibit to
                           the Company's Current Report on Form 8-K for October
                           9, 1997).

          10.16            $3.0 million promissory note due August 31, 1999
                           issued to DDI. (Filed as an exhibit to the Company's
                           Current Report on Form 8-K for October 9, 1997).

          10.17            Agreement for Purchase and Sale dated October 9, 1997
                           between Black Warrior Wireline Corp. and St. James
                           Capital Partners, L.P. (Filed as an exhibit to the
                           Company's Current Report on Form 8-K for October 9,
                           1997).

          10.18            $2,900,000 Convertible Promissory Note dated October
                           10, 1997 issued to St. James Capital Partners, L.P.
                           (Filed as an exhibit to the Company's Current Report
                           on Form 8-K for October 9, 1997).

          10.19            Warrant dated October 10, 1997 to purchase 725,000
                           shares of Common Stock issued to St. James Capital
                           Partners, L.P. (Filed as an exhibit to the Company's
                           Current Report on Form 8-K for October 9, 1997).

          10.20            Amendment No. 1 to Registration Rights Agreement
                           between Black Warrior Wireline Corp. and St. James
                           Capital Partners, L.P. dated October 10, 1997. (Filed
                           as an exhibit to the Company's Current Report on Form
                           8-K for October 9, 1997).

          10.21            Asset Purchase Agreement dated as of January 1, 1998
                           between Black Warrior Wireline Corp. and Phoenix
                           Drilling Services, Inc. (Filed as an exhibit to the
                           Company's Current Report on Form 8-K for January 23,
                           1998).


                                      -49-

<PAGE>

          10.22            Agreement for Purchase and Sale dated January 23,
                           1998 between Black Warrior Wireline Corp. and St.
                           James Capital Partners, L.P. (Filed as an exhibit to
                           the Company's Current Report on Form 8-K for January
                           23, 1998).

          10.23            $10,000,000 Convertible Promissory Note dated January
                           23, 1998 issued to St. James Capital Partners, L.P.
                           Filed as an exhibit to the Company's Current Report
                           on Form 8-K for January 23, 1998).

          10.24            Warrant dated January 23, 1998 to purchase 200,000
                           shares of Common Stock issued to St. James Capital
                           Partners, L.P. (Filed as an exhibit to the Company's
                           Current Report on Form 8-K for January 23, 1998).

          10.25            Amendment No. 2 to Registration Rights Agreement
                           between Black Warrior Wireline Corp. and St. James
                           Capital Partners, L.P. dated January 23, 1998. (Filed
                           as an exhibit to the Company's Current Report on Form
                           8-K for January 23, 1998).

          10.26            Loan and Security Agreement by and between the
                           Company and Coast Business Credit, a division of
                           Southern Pacific Bank, dated as of January 24, 2000.
                           (Filed as an exhibit to the Company's Current Report
                           on Form 8-K for February 15, 2000).

          10.26.1          First Amendment to Loan and Security Agreement
                           between Coast Business Credit, a division of Southern
                           Pacific Bank, and the Company dated January 29, 2001.
                           (Filed as an exhibit to the Company's Current Report
                           on Form 8-K for January 29, 2001).

          10.27            Form of Agreement for Purchase and Sale dated as of
                           December 17, 1999 between the Company and the
                           Purchasers. (Filed as an exhibit to the Company's
                           Current Report on Form 8-K for February 15, 2000).

          10.28            Form of Promissory Note dated December 17, 1999.
                           (Filed as an exhibit to the Company's Current Report
                           on Form 8-K for February 15, 2000).

          10.29.1          Compromise Agreement with Release dated December 22,
                           1999 among the Company, Bendover Company, Alan Mann
                           and Michael Dale Jowers. (Filed as an exhibit to the
                           Company's Current Report on Form 8-K for February 15,
                           2000).

                                      -50-

<PAGE>


          10.30            Letter dated April 12, 2000 to the Company from SJCP,
                           SJMB and Charles Underbrink (Filed as an exhibit to
                           the Company's Annual Report on Form 10-KSB for the
                           year ended December 31, 1999).

          10.31            Agreement for Purchase and Sale dated February 9,
                           2001 between the Company and Charles E. Underbrink.

          10.32            Warrant dated February 9, 2001 to purchase 700,000
                           shares of Common Stock issued to Charles E.
                           Underbrink.

          10.33            Registration Rights Agreement dated February 9, 2001
                           between the Company and Charles E. Underbrink.

          10.34            Agreement for Purchase and Sale dated February 9,
                           2001 between the Company and St. James Capital
                           Partners, L.P.

          10.35            Warrant dated February 9, 2001 to purchase 400,000
                           shares of Common Stock issued to St. James Capital
                           Partners, L.P.

          10.36            Registration Rights Agreement dated February 9, 2001
                           between the Company and St. James Capital Partners,
                           L.P.

          21               Subsidiaries. The Company has no subsidiaries.

          23               Consent of PricewaterhouseCoopers, LLP

---------------------------------

         (b)      Reports on Form 8-K.

         During the quarter ended December 31, 2000, the Company did not file
any Current Reports on Form 8-K.


                                      -51-

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

         Dated: May 25, 2001


                                                   BLACK WARRIOR WIRELINE CORP.


                                            By:    /s/ William L. Jenkins
                                                   -----------------------------
                                                   William L. Jenkins, President


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>


Signature                       Capacity                                          Date
---------                       --------                                          ----
<S>                             <C>                                               <C>



/s/ William L. Jenkins          President,  CEO and Director                      May 25, 2001
---------------------------     (Principal Executive Officer)
William L. Jenkins


/s/ Ron E. Whitter              Vice President - Finance                          May 25, 2001
---------------------------     (Principal Financial and Accounting Officer)
Ron E. Whitter


/s/ John L. Thomspon            Director                                          May 25, 2001
---------------------------
John L. Thompson

/s/ Charles E. Underbrink       Director                                          May 25, 2001
---------------------------
Charles E. Underbrink

/s/ Alan W. Mann                Director                                          May 25, 2001
---------------------------
Alan W. Mann


</TABLE>

                                      -52-

<PAGE>



BLACK WARRIOR WIRELINE CORP.
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 2000,
  1999 AND 1998


<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

The Stockholders and Board of Directors
  Black Warrior Wireline Corp.
  Columbus, Mississippi

In our opinion, the accompanying balance sheets and related statements of
operations, stockholders' deficit, and cash flows present fairly, in all
material respects, the financial position of Black Warrior Wireline Corp. at
December 31, 2000 and 1999, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 18 to the
financial statements, the Company's working capital deficiency, operating losses
and lack of liquidity raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regards to these matters are
also described in Note 18 to the financial statements. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.



April 13, 2001, except as to the eighth
  paragraph of Note 18, which is as of
  May 15, 2001
Memphis, TN

<PAGE>


BLACK WARRIOR WIRELINE CORP.
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                            2000                1999
                                                                                        ------------        ------------
<S>                                                                                     <C>                 <C>
                                     ASSETS
Current assets:
   Cash and cash equivalents                                                            $  1,373,699        $  2,425,808
   Short-term investments                                                                     50,000              50,000
   Accounts receivable, less allowance of $418,252 and $1,006,068, respectively           11,432,218           4,971,251
   Prepaid expenses                                                                          472,791             175,268
   Other receivables                                                                          45,127              46,392
   Other current assets                                                                      728,247             526,884
                                                                                        ------------        ------------
       Total current assets                                                               14,102,082           8,195,603
Land and building, held for sale                                                             250,000             400,000
Inventories                                                                                4,693,906           4,285,206
Property, plant and equipment, less accumulated depreciation                              19,873,844          19,457,361
Other assets                                                                                 837,040             704,649
Goodwill, less accumulated amortization of $532,777 and $361,714, respectively             3,118,102           3,289,165
                                                                                        ------------        ------------

       Total assets                                                                     $ 42,874,974        $ 36,331,984
                                                                                        ============        ============

                       LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
   Accounts payable                                                                     $  4,844,870        $  6,936,572
   Accrued salaries and vacation                                                             754,591             249,296
   Accrued interest payable                                                                3,440,148           3,027,901
   Other accrued expenses                                                                  1,162,812             777,598
   Notes payable and capital lease obligations to related parties                         21,896,639           3,041,234
   Current maturities of long-term debt and capital lease obligations                     26,554,373           8,391,346
                                                                                        ------------        ------------
       Total current liabilities                                                          58,653,433          22,423,947
Notes payable and capital lease obligation to related parties                                     --          21,412,356
Long-term debt and capital lease obligations, less current maturities                             --          10,542,555
Deferred revenue                                                                             100,000             100,000
                                                                                        ------------        ------------
       Total liabilities                                                                  58,753,433          54,478,858
                                                                                        ------------        ------------

Commitments and contingencies (Notes 4, 6, 7, 8, 14 and 15)

Stockholders' deficit:
   Preferred stock, $.0005 par value, 2,500,000 shares authorized,
     none issued at December 31, 2000 or 1999                                                        --                  --
   Common stock, $.0005 par value, 12,500,000 shares authorized,
      12,496,408 and 4,812,260 shares issued
      and outstanding at December 31, 2000 and 1999, respectively                                 6,248               2,406
   Additional paid-in capital                                                                19,764,891          13,316,081
   Accumulated deficit                                                                      (35,066,205)        (30,881,968)
   Treasury stock, at cost, 4,620 shares at December 31, 2000 and 1999                         (583,393)           (583,393)
                                                                                           ------------        ------------
       Total stockholders' deficit                                                          (15,878,459)        (18,146,874)
                                                                                           ------------        ------------

       Total liabilities and stockholders' deficit                                         $ 42,874,974        $ 36,331,984
                                                                                           ============        ============
</TABLE>



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



                                      F-2
<PAGE>

BLACK WARRIOR WIRELINE CORP.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                  2000                  1999                  1998
                                                              ------------          ------------          ------------
<S>                                                           <C>                   <C>                   <C>
Revenues                                                      $ 45,699,409          $ 29,293,373          $ 34,436,553

Operating costs                                                 33,230,672            22,788,586            30,484,788

Selling, general and administrative expenses                     7,041,725             6,258,365             7,453,547

Depreciation and amortization                                    5,419,779             5,008,078             4,815,955

Impairment loss (Note 20)                                               --                    --            11,100,000
                                                              ------------          ------------          ------------

     Income (loss) from operations                                   7,233            (4,761,656)          (19,417,737)

Interest expense and amortization of debt discount              (5,110,809)           (3,484,999)           (2,867,575)

Loss from impairment of non-operating land
   and building held for sale (Note 2)                            (150,000)                   --                    --

Net gain (loss) on sale of fixed assets                             10,345                (7,263)              154,986

Other income                                                        90,418               106,741                61,948
                                                              ------------          ------------          ------------

     Loss before benefit for income taxes and
      extraordinary gain                                        (5,152,813)           (8,147,177)          (22,068,378)

Benefit for income taxes                                                --                    --            (1,051,698)
                                                              ------------          ------------          ------------

     Loss before extraordinary gain                             (5,152,813)           (8,147,177)          (21,016,680)

Extraordinary gain on extinguishment of debt, net of
   income taxes of $0 (Note 13)                                    968,576               127,671                    --
                                                              ------------          ------------          ------------

     Net loss                                                 $ (4,184,237)         $ (8,019,506)         $(21,016,680)
                                                              ============          ============          ============

Net loss per share - basic:

     Loss before extraordinary gain                           $       (.68)         $      (1.84)         $      (5.86)

     Extraordinary gain on extinguishment of debt                      .13                   .03                    --
                                                              ------------          ------------          ------------

Net loss per share - basic                                    $       (.55)         $      (1.81)         $      (5.86)
                                                              ============          ============          ============

Net loss per share - diluted:

     Loss before extraordinary gain                           $       (.68)         $      (1.84)         $      (5.86)

     Extraordinary gain on extinguishment of debt                      .13                   .03          $         --
                                                              ------------          ------------          ------------

Net loss per share - diluted                                  $       (.55)         $      (1.81)         $      (5.86)
                                                              ============          ============          ============

Weighted average common shares outstanding                       7,619,927             4,424,035             3,589,235
                                                              ============          ============          ============

Weighted average common shares
   outstanding with dilutive securities                          7,619,927             4,424,035             3,589,235
                                                              ============          ============          ============

</TABLE>


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


                                      F-3
<PAGE>

BLACK WARRIOR WIRELINE CORP.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                              COMMON
                                       COMMON STOCK                                           STOCK           TREASURY STOCK
                                    ---------------------     PAID-IN        ACCUMULATED      TO BE         ------------------
                                    SHARES      PAR VALUE     CAPITAL          DEFICIT        ISSUED        SHARES        COST
                                    ------      ---------     -------          -------        ------        ------        ----
<S>                                <C>           <C>       <C>              <C>              <C>             <C>       <C>
Balance, December 31, 1997         2,990,254     $1,495    $ 7,744,953      $ (1,845,782)    $ 280,000       4,620     $(583,393)

Shares issued in private
   placement                         596,000        298      3,035,268

Shares issued in private
   placement                         176,364         88        902,012

Shares issued in connection
   with prior year acquisition       133,333         66        279,934                        (280,000)

Shares issued from exercise of
   warrants                            1,500          1          2,999

Issuance of warrants                                           142,385

Net loss for the year ended
   December 31, 1998                                                         (21,016,680)
                                   ---------      -----     ----------       -----------      ------------   -----      --------


Balance, December 31, 1998         3,897,451      1,948     12,107,551       (22,862,462)           --       4,620      (583,393)

Shares issued to individuals in
   settlement of potential
   litigation                        770,364        386        914,421

Shares issued in connection
   with acquisition                   94,445         47         64,884

Shares issued in connection
   with acquisition                   50,000         25         64,975

Issuance of warrants                                           164,250

Net loss for the year ended
   December 31, 1999                                                          (8,019,506)
                                   ---------      -----     ----------       -----------      ------------   -----      --------

Balance, December 31, 1999         4,812,260      2,406     13,316,081       (30,881,968)           --       4,620      (583,393)

Conversion of note payable
   and accrued interest
   to related party (Note 6)       5,017,481      2,509      3,760,602

Conversion of note payable
   to related party for
   settlement of
   litigation (Note 6)             2,666,667      1,333      1,998,667

Issuance of stock
   options to non-employees                                    246,041

Forgiveness of debt by
   related party (Note 4)                                      300,000

Issuance of warrants                                           143,500

Net loss for the year ended
   December 31, 2000                                                          (4,184,237)
                                   ---------      -----     ----------       -----------     -------------   -----      --------

Balance, December 31, 2000         12,496,408    $6,248    $ 19,764,891     $(35,066,205)    $    --         4,620     $(583,393)
                                   ==========    ======    ============     ============     =============   =====     =========
</TABLE>



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


                                      F-4
<PAGE>

BLACK WARRIOR WIRELINE CORP.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                           2000            1999            1998
                                                                                       ------------    ------------    ------------
<S>                                                                                    <C>             <C>             <C>
Cash flows from operating activities:
   Net loss                                                                            $ (4,184,237)   $ (8,019,506)   $(21,016,680)
   Adjustments to reconcile net loss to net cash used in
      operating activities:
       Depreciation                                                                       5,248,716       4,850,772       4,398,762
       Amortization                                                                         171,063         157,306         417,193
       Amortization of debt issue costs                                                   1,370,917         303,487
       Provision for doubtful accounts                                                     (671,859)       (686,796)      2,279,922
       Issuance of shares in consideration of claims released                                               914,807
       Net (gain) loss on disposition of property, plant and equipment                      (10,345)          7,263        (154,986)
       Impairment loss                                                                      150,000                      11,100,000
       Issuance of shares as compensation for services                                      246,041
       Extraordinary gain on extinguishment of debt                                        (968,576)       (127,671)
       Deferred tax benefit                                                                                              (1,051,698)
       Other                                                                                                188,953
       Change in:
         Accounts receivable                                                             (5,789,107)       (688,451)       (416,237)
         Prepaid expenses                                                                  (297,523)        (64,689)        174,006
         Other receivables                                                                    1,265          89,881        (221,327)
         Other current assets                                                              (201,363)        (28,072)        (18,497)
         Inventories                                                                       (408,700)         (6,605)         97,304
         Other assets                                                                       (60,960)        (50,356)        331,133
         Accounts payable and accrued liabilities                                         2,492,740       2,643,171       3,255,141
                                                                                       ------------    ------------    ------------
             Cash used in operating activities                                           (2,911,928)       (516,506)       (825,964)
                                                                                       ------------    ------------    ------------
Cash flows from investing activities:
   Acquisitions of property, plant and equipment                                         (3,609,108)     (1,803,041)     (5,992,397)
   Proceeds from sale of property, plant and equipment                                       15,450          34,820         295,658
   Acquisitions of businesses, net of cash acquired                                                                        (533,224)
                                                                                       ------------    ------------    ------------
             Cash used in investing activities                                           (3,593,658)     (1,768,221)     (6,229,963)
                                                                                       ------------    ------------    ------------
Cash flows from financing activities:
   Proceeds from bank and other borrowings                                               31,144,947       6,921,955       3,697,054
   Principal payments on long-term debt, notes payable and
     capital lease obligations                                                          (27,047,898)     (1,639,972)     (2,376,487)
   Proceeds (payments) from (on) working revolver, net                                    2,495,178      (1,424,378)      2,769,856
   Debt issue costs                                                                      (1,138,750)       (188,312)       (369,765)
   Proceeds from issuance of common stock, net                                                                            3,940,666
                                                                                       ------------    ------------    ------------
             Cash provided by financing activities                                        5,453,477       3,669,293       7,661,324
                                                                                       ------------    ------------    ------------
             Net (decrease) increase in cash and cash equivalents                        (1,052,109)      1,384,566         605,397
Cash and cash equivalents, beginning of year                                              2,425,808       1,041,242         435,845
                                                                                       ------------    ------------    ------------
Cash and cash equivalents, end of year                                                 $  1,373,699    $  2,425,808    $  1,041,242
                                                                                       ============    ============    ============


Supplemental disclosure of cash flow information:
   Cash paid during the year for:

     Interest                                                                          $  2,685,452    $  1,984,772    $  1,559,296
                                                                                       ============    ============    ============

     Income taxes                                                                      $         --    $         --    $         --
                                                                                       ============    ============    ============

</TABLE>



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

                                      F-5
<PAGE>

BLACK WARRIOR WIRELINE CORP.
STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                          2000             1999             1998
                                                                                       -----------      -----------      -----------
<S>                                                                                    <C>              <C>              <C>
Supplemental schedule of noncash investing and financing activities:
   Default on notes receivable relating to land and building sale (Note 2)                                               $   500,000
   Acquisition of property, plant and equipment financed under capital
     leases and notes payable                                                          $ 2,061,194      $   107,527      $   897,509
   Notes payable incurred in connection with acquisitions of businesses                                                  $20,201,140
   Stock warrants issued                                                               $   143,500      $   164,250      $   142,383
   Acquisition of property, plant and equipment through stock issuance                                  $   129,859
   Conversion of notes and interest payable to related parties to
     equity (Note 6)                                                                   $ 5,763,111
   Forgiveness of related party debt (Note 4)                                          $   300,000
</TABLE>


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


                                      F-6
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

NOTE 1 - GENERAL INFORMATION

Black Warrior Wireline Corp. (the "Company"), a Delaware corporation, is an oil
and gas service company currently providing various services to oil and gas well
operators primarily in the Black Warrior and Mississippi Salt Dome Basins in
Alabama and Mississippi, the Permian Basin in West Texas and New Mexico, the San
Juan Basin in New Mexico, Colorado and Utah, the East Texas and Austin Chalk
Basins in East Texas, the Anadarko Basin in Oklahoma, the Powder River and Green
River Basins in Wyoming and Montana, Williston Basin in North Dakota and the
Gulf of Mexico offshore of Louisiana and in South Texas. The Company's principal
lines of business include (a) wireline services, (b) directional oil and gas
well drilling activities and (c) workover services. Further discussion on
business segments is located in Note 17.

During the third quarter of 1999, the Company merged Boone Wireline Co., its
wholly-owned subsidiary, into Black Warrior Wireline Corp. Boone Wireline Co.
was subsequently dissolved. The dissolution had no effect on prior or current
year earnings or equity.


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS - The Company considers all highly liquid investments
with original maturities of three months or less to be cash equivalents.

ACCOUNTS RECEIVABLE - Included in accounts receivable are recoverable costs and
related profits not billed, which consist primarily of revenue recognized on
contracts for which billings had not been presented to the contract owners
because the amounts were not billable at the balance sheet date. Unbilled
amounts included in accounts receivable totaled $1,024,105 and $492,550 at
December 31, 2000 and 1999, respectively.

INVENTORIES - Inventories consist of tool components, subassemblies and
expendable parts used in directional oil and gas well drilling activities. Tools
manufactured and assembled are transferred to property, plant and equipment as
completed at the total cost of components, subassemblies and expendable parts of
each tool. Components, subassemblies and expendable parts are capitalized as
inventory and expensed as tools are repaired and maintained. Inventories are
classified as a long-term asset rather than a current asset as is consistent
with industry practice (see Note 20).

LAND AND BUILDING, HELD FOR SALE - Land and building held for sale is stated at
the lower of cost or estimated net realizable value. During 1997, the Company
exchanged land and building with a basis of $400,000 for a $500,000 note
receivable. The Company did not recognize the $100,000 gain as no down payment
was received. The $100,000 was included in deferred revenue at December 31,
1997. During 1998, the buyer failed to pay the note receivable when it became
due. Accordingly, the transaction has been reversed and the land and building
are recorded on the balance sheet at cost. During 2000, it was determined that
the land and building held for resale was impaired. The Company recorded a loss
from impairment of the assets held for resale of $150,000 in the statement of
operations.

PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is stated at cost.
The cost of maintenance and repairs is charged to expense when incurred; the
cost of betterments is capitalized. The cost of assets sold or otherwise
disposed of and the related accumulated depreciation are removed from the
accounts and the gain or loss on such disposition is included in income.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, which range from two to ten years. At December 31,
2000 and 1999, significantly all of the property, plant and equipment has been
pledged as collateral for the Company's borrowings (see Note 6).




                                      F-7
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

GOODWILL - Goodwill is stated at cost and is being amortized on a straight-line
basis principally over twenty-five years. The Company assesses the
recoverability and the amortization period of goodwill not identified with
impaired assets by determining whether the amount can be recovered through
undiscounted cash flows of the businesses acquired, excluding interest expense
and amortization, over the remaining amortization period. If impairment was
indicated by this analysis, measurement of the loss would be based on the fair
market value of the businesses acquired calculated by discounting projected
future cash flows. The projections would be over a five year period using a
discount rate and terminal value multiple commensurate with current oil and gas
service companies.

The Company considers external factors in making its assessment. Specifically,
changes in oil and natural gas prices and other economic conditions surrounding
the industry, consolidation within the industry, competition from other oil and
gas well service providers, the ability to employ and maintain a skilled
workforce and other pertinent factors are among the items that could lead
management to reassess the realizability and/or amortization periods of its
goodwill (see Note 20).

LONG-LIVED ASSETS - In accordance with SFAS No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, the
Company recognizes impairment losses on long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash flows over
the life of the assets are less than the asset's carrying amount. If an
impairment exists, the amount of such impairment is calculated based on
projections of future discounted cash flows. These projections are for a period
of five years using a discount rate and terminal value multiple that would be
customary for evaluating current oil and gas service company transactions.

The Company considers external factors in making its assessment. Specifically,
changes in oil and natural gas prices and other economic conditions surrounding
the industry, consolidation within the industry, competition from other oil and
gas well service providers, the ability to employ and maintain a skilled
workforce and other pertinent factors are among the items that could lead
management to reassess the realizability and/or amortization periods of its
long-lived assets (see Note 20).

INCOME TAXES - The Company accounts for income taxes under an asset and
liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. In estimating
future tax consequences, the Company generally considers all expected future
events other than enactments of changes in the tax laws or rates.

STOCK-BASED COMPENSATION - In accordance with the provisions of SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, the Company has chosen to continue
applying the accounting provisions of Accounting Principles Board ("APB")
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, to its stock-based
employee compensation arrangements.

USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from these estimates.

BASIS OF PRESENTATION - Certain prior year amounts have been reclassified to
conform to current year presentation.

REVENUE RECOGNITION - Revenues are recognized at the time services are
performed.



                                      F-8
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

EARNINGS PER SHARE - In accordance with SFAS No. 128, EARNINGS PER SHARE, the
Company presents basic and diluted earnings per share ("EPS") on the face of the
statement of operations and a reconciliation of the numerator and denominator of
the basic EPS computation to the numerator and denominator of the diluted EPS
computation.

Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that shared in the
earnings of the entity. The number of common stock equivalents is determined
using the treasury stock method. Options have a dilutive effect under the
treasury stock method only when the average market price of the common stock
during the period exceeds the exercise price of the options.

SEGMENT REPORTING - In 1998, the Company adopted SFAS 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION ("SFAS No. 131"), which
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
selected information about operating segments in interim financial reports.
Financial information is required to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The financial information required includes a measure of
segment profit or loss, certain specific revenue and expense items, segment
assets and a reconciliation of each category to the general financial
statements. The descriptive information required includes the way that the
operating segments were determined, the products and services provided by the
operating segments, differences between the measurements used in reporting
segment information and those used in the general purpose financial statements
and changes in the measurement of segment amounts from period to period. The
adoption of SFAS No. 131 did not affect results of operations or financial
position, but did affect the disclosure of segment information (see Note 17).

RECENT ACCOUNTING PRONOUNCEMENTS - On December 31, 1999, the Securities and
Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB
101"), REVENUE RECOGNITION IN FINANCIAL STATEMENTS. SAB 101 provides guidance as
to the appropriate timing for recognition of revenue. The Company adopted SAB
101 in the fourth quarter, as required, and has concluded that SAB 101 did not
have any impact on its financial statements.

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES ("SFAS 133"), subsequently amended by SFAS 137 and 138. SFAS
133 established accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively called derivatives) and for hedging activities. The Company did
not hold any derivative financial or commodity instruments as of December 31,
2000 and does not believe adoption of SFAS 133 in 2001 will have any significant
financial statement impact.

NOTE 3 - ACQUISITIONS

On March 16, 1998, the Company acquired from Phoenix Drilling Services, Inc.
("Phoenix") the assets of its domestic oil and gas well directional drilling and
downhole survey service business ("Phoenix Acquisition") for $19,000,000. The
purchase price was financed with the proceeds of various notes totaling
$19,000,000. For financial statement purposes, the Phoenix Acquisition was
accounted for as a purchase and, accordingly, Phoenix's results are included in
the financial statements since the date of acquisition. The excess of the
purchase price of Phoenix over net assets acquired, goodwill, approximated


                                      F-9
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

$2,760,000 and was being amortized over twenty-five years. The following is a
summary of assets acquired, liabilities assumed and consideration paid in
connection with the acquisition:


Fair value of assets acquired, including goodwill                   $20,219,422
Cash paid for assets acquired and transaction
   costs incurred                                                      (510,765)
                                                                    -----------

         Liabilities assumed or incurred                            $ 19,708,657
                                                                    -----------


During the fourth quarter of 1998, the Company assessed the recoverability of
long-lived assets relating to the Phoenix Acquisition. The Company concluded
that the goodwill and certain inventories and property, plant and equipment were
impaired (see Note 20).

On June 1, 1998, the Company acquired Petro Wireline, Inc. ("Petro
Acquisition"), which is engaged in the wireline business in the four-corners
region of New Mexico, Colorado, Utah and Arizona, for $875,000. The purchase
price was financed with the proceeds of various notes totaling $875,000. For
financial statement purposes, the Petro Acquisition was accounted for as a
purchase and, accordingly, Petro Wireline's results are included in the
financial statements since the date of acquisition. The excess of the purchase
price of Petro Wireline over net assets acquired, goodwill, approximated $87,000
and is being amortized over twenty-five years.


Fair value of assets acquired, including goodwill                     $ 966,091
Cash paid for assets acquired and transaction costs incurred            (22,459)
                                                                     ----------

         Liabilities assumed or debt incurred                          $943,632
                                                                     ----------


On March 1, 2000, the Company executed its option to purchase the assets of MSI.
The option to purchase and extensions to the option called for the Company to
pay approximately $75,000, issue 144,445 shares of the Company's common stock
and pay outstanding notes payable related to the acquired assets of
approximately $385,000. The shares were issued during 1999. The acquisition was
accounted for as a purchase. There was no goodwill associated with this
purchase.

The following table presents unaudited pro forma results of operations for the
years ended December 31, 2000, 1999 and 1998, as if the acquisitions had
occurred at the beginning of the years presented. The pro forma summary
information does not necessarily reflect the results of operations as they
actually would have been if the acquisitions had occurred at the beginning of
the years presented.



                                      F-10
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                              2000               1999              1998
                                                           (Unaudited)        (Unaudited)       (Unaudited)
                                                          --------------    --------------    --------------
<S>                                                       <C>               <C>               <C>
Revenues                                                  $   45,699,409    $   29,293,373    $   38,688,771
                                                          --------------    --------------    --------------
Loss before benefit for income taxes
   and extraordinary gain                                 $   (5,152,813)   $   (8,147,177)   $  (22,259,312)
                                                          --------------    --------------    --------------
Net loss                                                  $   (4,184,237)   $   (8,019,506)   $  (21,278,034)
                                                          --------------    --------------    --------------

Net loss per share - basic:

   Loss before extraordinary gain                         $         (.68)   $        (1.84)   $        (5.72)
   Extraordinary gain on extinguishment of debt                      .13               .03                --
                                                          --------------    --------------    --------------
Net loss per share - basic                                $         (.55)   $        (1.81)   $        (5.72)
                                                          --------------    --------------    --------------

Net loss per share - diluted:

   Loss before extraordinary gain                         $         (.68)   $        (1.84)   $        (5.72)
   Extraordinary gain on extinguishment of debt                      .13               .03                --
                                                          --------------    --------------    --------------
Net loss per share - diluted                              $         (.55)   $        (1.81)   $        (5.72)
                                                          --------------    --------------    --------------
</TABLE>


The unaudited pro forma results include the historical accounts of the Company
and historical accounts of the acquired businesses and pro forma adjustments,
including the amortization of the excess purchase price over the fair value of
the net assets acquired, the increase in interest expense resulting from
borrowings used to finance the acquisitions and the change in depreciation
expense as a result of purchase price adjustments.

NOTE 4 - RELATED PARTY TRANSACTIONS

During 1997, the Company acquired substantially all of the assets and certain of
the liabilities of Diamondback Directional Drilling, Inc. ("DDI"). In connection
with the acquisition, the Company issued debt of approximately $3,200,000 to the
former owners of DDI. One of the majority stockholders of DDI is now an officer
and director of the Company. The notes bear interest at 6.5% and were due August
1999, with quarterly interest payments due beginning in January 1998. In
conjunction with the refinancing further described in Note 6, this note was
restructured in the first quarter of 2000 to require monthly interest payments.
There was no accrued interest outstanding on this note at December 31, 2000 or
December 31, 1999. Interest expense on this note totaled $121,194, $206,888 and
$206,888 for the years ended December 31, 2000, 1999 and 1998, respectively.

The Company has executed notes payable to St. James Merchant Bankers, L.P
("SJMB") and St. James Capital Partners, L.P. ("SJCP"), whose chief executive
officer and president both serve on the Company's Board of Directors, in
connection with acquisitions and to provide funding for operations. At December
31, 2000 and 1999, notes due to SJMB, SJCP and their principal partners totaled
$18,200,000 and $19,950,000, respectively. The notes bear interest at rates from
7% to 10%. Interest expense and accrued interest associated with these notes
were as follows:



                                      F-11
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

                                 2000             1999             1998
                              ----------       ----------       ----------

Interest expense              $2,326,000       $1,630,000       $1,191,000
Accrued interest              $3,241,000       $2,928,000


In connection with the Phoenix Acquisition, the Company borrowed $1,000,000 from
Falcon Seaboard Investment Co., L.P. ("Falcon Seaboard"), which is affiliated
with SJCP. The note bears interest at 8% with the principal and interest due in
March 2001. Accrued interest payable on this borrowing totaled approximately
$235,000 and $155,000 as of December 31, 2000 and 1999, respectively. Interest
expense on this note approximated $80,000, $80,000 and $75,000 for each of the
three years ended December 31, 2000, 1999 and 1998, respectively.

At December 31, 2000 and 1999, the Company has a mortgage note payable of
$230,000, originally $380,000, to the former owner of Dyna Jet, an employee of
the Company through November 1998. (See Note 6). Interest of $1,500 is paid
monthly. Interest expense totaled $18,000 for each of the three years ended
December 31, 2000, 1999, and 1998, respectively.

In connection with the Petro Acquisition, the Company has a $175,000 promissory
note, originally $350,000, to a limited partnership partially owned by a person
who is now an employee of the Company. The note bears interest at 1.5% above the
prime rate for commercial loans adjusted as of the first day of each month
during the term of the note. Principal of $116,667 and accrued interest to date
are due and payable each June until June 1, 2001. At December 31, 1999, the
Company had accrued interest payable of approximately $56,000 relating to this
note. Interest expense totaled $3,200, $26,250 and $16,188 for the three years
ended December 31, 2000, 1999 and 1998, respectively. In connection with the
refinancing agreement described in Note 6, this note was paid in full during the
first quarter of 2000.

During 2000, the Company entered into three capital leases totaling $918,000
with MWD Technology Company ("MWD"). The principal owners of MWD include
employees of the Company. There was $779,774 outstanding on these leases as of
December 31, 2000. The leases have a stated interest rate of 52.72% and expire
in December 2001. Interest expense and accrued interest for the leases totaled
approximately $81,000 and $0, respectively, for the year ended December 31,
2000.

On November 20, 2000, the Company entered into a capital lease agreement for
approximately $539,000 with Big Foot Tool Rental Service, LLC, which is
partially owned by an officer and an employee of the Company. There was $503,975
outstanding on this lease as of December 31, 2000. The interest rate is 14.88%
and the lease agreement expires in December 2002. Interest expense and accrued
interest for the lease totaled approximately $8,984 and $0, respectively, for
the year ended December 31, 2000.

At December 31, 2000 and 1999, the Company had a remaining accrual of
approximately $21,000 relating to the Company's commitment to pay the Company
president's tax liability resulting from previously issued common stock as a
bonus.

During the first quarter of 2000, Hub, Inc. purchased a note payable to Fleet
Capital Corporation ("Fleet") of approximately $800,000 for $500,000. In
connection with this transaction, Fleet released the Company from all
indebtedness to Fleet. Hub, Inc. agreed to cancel the note in exchange for a
payment of $500,000. A board member of the Company is a principal in Hub, Inc.
This note was paid in full in connection with the refinancing plan more fully
described in Note 6.



                                      F-12
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

At December 31, 1999 and through part of 2000, SJMB held a significant ownership
interest in Collins and Ware, Inc., which is a customer of the Company. Sales to
Collins and Ware, Inc. during 2000 and 1999 were approximately $783,000 and
$2,956,000, respectively.

During the year ended December 31, 1998, the Company paid approximately $902,000
to SJCP for consulting fees.

See Notes 6 and 8 for financing arrangements and common stock transactions with
related parties.

NOTE 5 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment includes the following at December 31, 2000 and
1999:

                                                   2000           1999
                                                ----------    ----------

Vehicles                                       $ 9,724,178    $ 8,672,351
Land and building                                  245,000        245,000
Workover rigs and related equipment                601,730        438,155
Operating equipment                             27,607,639     23,336,048
Office equipment                                   703,183        576,648
                                                ----------    -----------

                                                38,881,730     33,268,202
Less: accumulated depreciation                  19,007,886     13,810,841
                                                ----------    -----------

     Net property, plant and equipment         $19,873,844    $19,457,361
                                                ----------    -----------



Depreciation expense for the years ended December 31, 2000, 1999 and 1998 was
$5,248,716, $4,850,772 and $4,398,762, respectively.


                                      F-13
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

The following is a summary of the equipment under capital leases (included
above) at December 31, 2000 and 1999:


                                                     2000            1999
                                                  ----------      ----------

Workover rigs and related equipment               $  158,909      $  158,909
Operating equipment                                1,657,235
Vehicles                                             403,959         257,508
                                                  ----------      ----------

                                                   2,220,103         416,417
Less: accumulated depreciation                       170,430         170,248
                                                  ----------      ----------

     Net equipment under capital lease            $2,049,673      $  246,169
                                                  ==========      ==========


NOTE 6 - LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS

At December 31, 2000 and 1999, long-term debt and other financing arrangements
consisted of the following:

<TABLE>
<CAPTION>
                                                                                                      2000             1999
                                                                                                   -----------      -----------
<S>                                                                                                <C>              <C>
Notes payable to Trustmark Bank, monthly payments of varying amounts
 through September 2004, including interest ranging from 8.85% to 9.65%                            $    92,624      $        --

Capitalized leases, monthly payments required in varying amounts
 through December 2005, interest ranging from 4.90% to 10.73%                                          499,527               --

Notes payable to Coast Business Credit, monthly payments of
 $243,056 and monthly payments of excess cash flows, as defined, through February 2002,
 interest at prime plus 2.00% (11.50% at December 31, 2000)                                         14,831,098               --

Revolving line of credit to Coast Business Credit, interest at prime
 plus 1%  (10.50% at December 31, 2000)                                                              5,500,392               --

Note payable to Imperial Finance Corporation, monthly payments
 of $37,710 through July 2001, including interest at 7.90%                                             184,884               --

Notes payable to Trustmark Bank, monthly payments in varying amounts
 through January 2004, including interest ranging from 7.75% to 8.75%                                       --           91,371

Installment notes payable, monthly payments required in varying amounts
 through November 2003, interest at rates ranging from 5.90% to 12.54%                                      --        1,708,658

Capitalized leases, monthly payments required in varying amounts through
 July 2001, including interest ranging from 5.00% to 6.25%                                                  --          173,065
</TABLE>


                                      F-14
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<S>                                                                                           <C>              <C>
Notes payable to General Electric Capital Corporation, monthly payments
 required in varying amounts through January 2003, interest at 8.75%                                   --        4,383,546

Notes payable to Fleet Capital Corporation, monthly payments required in
 varying amounts through March 2002, interest rates ranging from 8.75% to 9.00%                        --       10,707,211

10% convertible notes payable to various individuals, with interest rate
 increasing to 15% effective September 30, 2000, subordinated to Coast debt
 Principal and interest due January 2001. Convertible at $0.75 per share at
 anytime up to 30 business days following maturity (see description below
 regarding extension of maturity date)                                                          5,450,000        1,950,000
                                                                                              -----------      -----------
                                                                                               26,558,525       19,013,851
     Less:
       Current portion of long-term debt (see below)                                           26,554,373        8,391,346
       Unamortized discount on long-term debt                                                       4,152           79,950
                                                                                              -----------      -----------

     Long-term debt and capital lease obligations, less current maturities                    $        --      $10,542,555
                                                                                              ===========      ===========
</TABLE>



                                      F-15
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

Notes payable to related parties consist of the following at December 31, 2000
and 1999:

<TABLE>
<CAPTION>
                                                                                                2000               1999
                                                                                             -----------        -----------
<S>                                                                                          <C>                <C>
Note payable to former owner of DDI, principal due August 1999, interest due
 quarterly at 10.0% (see description below regarding extension of
 maturity date)                                                                              $ 1,182,890        $ 3,182,890

7% convertible note payable to SJCP, principal and interest orignially due
 October 1999, extended to March 2001. Convertible at $0.75 per share at any
 time up to 30 business days following maturity (see description below
 regarding extension of maturity date and increase in interest rate)                           2,900,000          2,900,000

9% convertible note payable to SJCP, principal and interest due June 2002
 Convertible at $0.75 per share at any time up to 30 business days following
 maturity (see description below regarding acceleration of maturity date
 and increase in interest rate)                                                                2,000,000          2,000,000

Promissory note payable to the former owners of Petro Wireline, Inc., due and
 payable each year in 1/3 increments starting in June 1999, including interest
 of 1.5% above the prime rate for commercial loans adjusted first
 day of every month                                                                                   --            175,000

8% convertible note payable to SJMB, principal and interest due March 2001
 Convertible at $0.75 per share at anytime up to 30 business days following
 maturity (see description below regarding extension of maturity date
 and increase in interest rate)                                                                7,250,000          9,000,000

8% convertible note payable to Falcon Seaboard, principal and interest due March
 2001. Convertible at $0.75 per share at any time up to 30 business days
 following maturity (see description below regarding
 extension of maturity date and increase in interest rate)                                     1,000,000          1,000,000

10% convertible note payable to SJMB, principal and interest due March 2001
 Convertible at $0.75 per share at anytime up to 30 business days following
 maturity (see description below regarding extension of maturity date)                         2,000,000          2,000,000

10% convertible note payable to SJMB, principal and interest due March 2001
 Convertible at $0.75 per share at anytime up to 30 business days following
 maturity (see description below regarding extension of maturity date)                         2,500,000          2,500,000

10% convertible note payable to SJMB interest rate increasing to 15% effective
 September 30, 2000, principal and interest due January 2001. Convertible at
 $0.75 per share at anytime up to 30 business days following
 maturity (see description below regarding extension of maturity date)                           750,000            750,000

10% convertible note payable to directors of SJMB interest rate increasing to
 15% effective September 30, 2000, principal and interest due January 2001
 Convertible at $0.75 per share at anytime up to 30 business days following
 maturity (see description below regarding extension of maturity date)                           800,000            800,000

Note payable to former owner of Dyna Jet, Inc. due and payable in November
 2001 with interest at the rate of the lesser of $1,500 per month or 8% per
 annum on unpaid balance                                                                         230,000            230,000

Capital lease obligations to MWD Technologies Company, monthly payments in
 varying amounts through 2001, including interest
 at 52.27%                                                                                       779,774                 --

Capital lease obligation to Big Foot Tool Rental Service, LLC, monthly
 payments in varying amounts through 2003, including interest at 14.88%                          503,975                 --
                                                                                             -----------        -----------

                                                                                              21,896,639         24,537,890
     Less:
       Current portion of notes payable to related parties (see below)                        21,896,639          3,041,234
       Unamortized discount on notes payable                                                          --             84,300
                                                                                             -----------        -----------

     Total long-term notes payable to related parties                                        $        --        $21,412,356
                                                                                             ===========        ===========

</TABLE>



                                      F-16
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

During the first quarter of 2000, the Company executed a refinancing plan. As
part of the refinancing plan, the Company entered into a Loan and Security
Agreement (the "Loan Agreement") with Coast Business Credit, a division of
Southern Pacific Bank ("Coast") in the amount of $25,000,000, obtained private
financing of $3,500,000 and executed a compromise agreement of release with the
former owner of DDI which provided for the conversion of $2,000,000 of debt to
equity.

Pursuant to the Loan Agreement, the Company may make collateralized borrowings
in the aggregate amount of up to the lesser of $25,000,000 or such maximum
aggregate amount as is available to be borrowed under a receivables loan and two
term loans described below. Of such amount, $14,500,000, based on the lesser of
75% of the appraised net eligible forced liquidation value of the Company's
equipment or $14,500,000, is a term loan (the "Equipment Loan"), an additional
$2,000,000 is a term loan (the "Installment Loan") and the balance is available
to be borrowed in an amount not exceeding 80% of the Company's eligible
receivables (the "Receivables Loan"). The Equipment Loan is repayable commencing
on August 30, 2000 in monthly installments over a term of six years, with
interest only payable monthly prior to August 1, 2000. The Equipment Loan
further requires that the Company make additional monthly principal payments of
50% of its excess cash flow during the preceding month for each month during the
period ending February 28, 2001 and thereafter additional monthly principal
payments of 40% of its excess cash flow during the preceding month. Excess cash
flow is defined to be the Company's net income before income taxes, depreciation
and amortization minus the sum of principal and interest payments made and taxes
paid in cash ("EBITDA"). The Installment Loan is repayable in monthly
installments over four years commencing March 31, 2000 and, after the Equipment
Loan is paid in full, is also repayable out of excess cash flow as provided
above. The Loan Agreement ceases to be in effect on February 28, 2003, provided,
however, the Loan Agreement will automatically renew for additional terms of one
year unless either party elects not to renew the term. In the event the Loan
Agreement is not renewed on February 28, 2003, or at the end of any renewal term
thereafter, all borrowings then outstanding under the Loan Agreement are then
due and payable. The Loan Agreement has been guaranteed by SJMB, SJCP and a
personal guarantee by a board member of the Company, who is also an investor in
SJMB and SJCP. The Company borrowed an aggregate of $15,600,000 pursuant to the
Loan Agreements. The proceeds were used to repay the Company's former senior
secured lenders in the amount of $13,500,000, to repay other indebtedness
aggregating $1,500,000 and the balance was used for general corporate purposes,
including the payment of outstanding accounts payable.

During 2000, the Company was in violation of certain general and financial
convenants of its loan and security agreement with Coast. Due to normal cross
default provisions, the Company was in default on all other debt. No waivers
were obtained for these covenant violations and events of default. These
violations were cured in connection with an Amendment to the Loan and Security
Agreement with Coast, finalized during the first quarter of 2001.

Under the 2001 Amendment to the Loan Agreement, if assets or ownership interest
in the Company are not sold on or before June 30, 2001 to pay all obligations
owing to Coast on or before June 30, 2001, then SJMB/SJCP is required to make an
additional equity investment in the Company sufficient to pay to Coast the
deferred excess cash flow payments, as defined. The excess cash flow payments
due Coast, absent the deferral to June 30, 2001, aggregate approximately $2.5
million as of March 31, 2001. The Company anticipates the required excess flow
payment will continue to increase through June 30, 2001. The failure of
SJMB/SJCP to make such investment is an event of default under the Loan
Agreement.

By virtue of its guarantees, in the event of a default under the Company's Loan
Agreement with Coast, Coast may seek to collect from SJCP and SJMB, as well as
Mr. Underbrink, a board member, the outstanding principal and interest on the
Company's obligation to Coast. Mr. Underbrink's liability is limited to no more
than $5.0 million. As amended in January 2001, the guaranty of SJCP/SJMB is
backed



                                      F-17
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

by a letter of credit in the amount of $8.2 million. Without continued
improvement in the Company's revenues and operating results, the Company may be
substantially dependent upon the continuing support of SJCP and SJMB during 2001
to fund its ongoing obligations, including its obligations to Coast.

Due to the debt convenant violations and events of default described above, the
Company operated in 2000 under forbearance from its lenders. As further
described in the Amendment to the Loan Agreement, Coast amended certain
financial convenants and has delayed the required excess cash flow payments for
the period August 2000 to June 2001, until June 30, 2001.

In connection with the refinancing plan, the related party debt holders signed
subordination agreements with respect to the new indebtedness. These
subordination agreements preclude the repayment of this debt prior to the
repayment of the new indebtedness which is due to be repaid during 2001.

The Company also executed a Compromise Agreement of Release with Bendover
Company ("Bendover"), which is the successor company of DDI, in connection with
the refinancing plan whereby the parties compromised and settled their disputes
arising out of the Company's acquisition of the assets of DDI in October 1997.
Pursuant to the agreement, Bendover agreed to return to the Company promissory
notes aggregating $2,000,000 principal amount and receive in exchange 2,666,667
shares of the Company's common stock and a promissory note in the principal
amount of $1,182,890 due on January 15, 2001, bearing interest at 10% per annum.
Interest is paid monthly on this note. The agreement also provides for the
election of Alan Mann, a principal stockholder of Bendover, as a Director of the
Company, the payment of approximately $26,000 to Mr. Mann on account of
outstanding claims against the Company and the dismissal of the lawsuit between
the Company and Bendover. On January 15, 2001, the maturity date of this note
was extended to June 15, 2001. In conjunction with this extension, the interest
rate was increased to 20%, with one-half of the interest (10%) to be paid
monthly and the remaining amount to be accrued and paid in full on June 15,
2001.

During the first quarter of 2001, the Company executed a refinancing plan (the
"2001 Plan"), whereby the maturity dates for an aggregate of $15,650,000
principal amount of notes owed to SJMB, SJCP or to Falcon Seaboard originally
due March 16, 2001 was extended to September 30, 2001. The interest rates on
these notes were increased to 10% per annum commencing March 17, 2001 through
September 30, 2001. If not repaid on September 30, 2001, the interest rate on
the notes would increase to 15% per annum. Additional notes totaling $1,550,000
owed to the directors of SJMB, with original maturity dates of January 2001,
were also extended to June 30, 2001. In addition, the Company agreed to
accelerate the maturity date on a note on the principal amount of $2.0 million
to September 30, 2001 from June 2002. The maturity dates of $5,400,000 of the
$5,450,000 non-related party notes payable with an interest rate of 15% at
year-end was also extended to June 30, 2001.

In conjunction with the 2001 Plan, $500,000 of the $5,450,000 notes payable were
repurchased from the former note holders by related parties, including a member
of the Board of Directors, an officer and several employees of the Company,
affiliates of St. James and Hub, Inc. These notes bear interest at 15% and are
due on June 30, 2001.

During December 2000, SJMB exercised its option and converted $1,750,000 of its
$9,000,000 note payable and $2,013,111 of related accrued interest to equity in
return for 5,017,481 shares of common stock.

Under the terms of the SJCP notes payable, SJCP has rights, which include the
right to nominate one person for election to the Company's board of directors
and has certain preferential rights to provide future financing. The note
agreement also contains prohibitions against consolidating, merging or entering
into a share exchange with another person without SJCP's consent.



                                      F-18
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

Substantially all of the Company's assets are pledged as collateral for the
senior debts described above.

At December 31, 1999, the Company was not in compliance with certain general and
financial covenants of its loan and security agreement with Fleet. The Company
was unable to obtain any waiver of covenant violations. Due to the events of
default and normal cross default provisions of all other debt, the Company's
debt at December 31, 1999 was currently due and payable. The Company operated
throughout 1999 under forbearance agreements with its lenders.

As a result of the refinancing plan discussed above, all obligations currently
due and payable at December 31, 1999, pursuant to the events of default and
cross defaults, were fully satisfied or the maturity date of the debt was
extended. Accordingly, the Company classified its long-term debt as current and
long-term based on the debt maturity schedules of the new indebtedness. The
remaining outstanding indebtedness to the former owner of DDI, subsequent to the
conversion of $2,000,000 of debt to equity, has been classified as current as no
waiver for previous defaults was obtained.

A certificate of deposit in the amount of $50,000 was pledged as collateral for
the Company's corporate credit card line of credit of approximately $100,000.
Borrowings of $61,000 and $0 were outstanding under the corporate credit cards
at December 31, 2000 and 1999, respectively.

Maturities of debt are as follows:


FISCAL
YEAR
-----------

2001 (current)                                            $48,451,012
2002                                                               --
2003                                                               --
2004                                                               --
2005                                                               --
2006                                                               --
Thereafter                                                         --
                                                          -----------

                                                          $48,451,012
                                                          ===========




                                      F-19
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

NOTE 7 - COMMITMENTS

The Company leases land, office space and equipment under various operating and
capital leases. The leases expire at various dates through 2005. Rent expense
was approximately $1,459,000, $1,099,000 and $922,000 for the years ended
December 31, 2000, 1999 and 1998, respectively.

The future minimum lease payments required under noncancelable leases with
initial or remaining terms of one or more years at December 31, 2000 were as
follows:


FISCAL                                              OPERATING        CAPITAL
YEAR                                                 LEASES           LEASES
--------                                           -----------      -----------

2001                                               $   417,129      $ 1,443,983
2002                                                   230,171          457,172
2003                                                    95,465          357,469
2004                                                    82,554           94,960
2005                                                    30,000           62,197
Thereafter                                                  --               --
                                                   -----------      -----------

        Total minimum lease payments               $   855,319        2,415,781
                                                   ===========


Imputed interest                                                       (539,881)
                                                                    -----------

Present value of minimum lease payments,
   including $0 classified as current
   portion of capital lease obligations                             $ 1,875,900
                                                                    ===========



NOTE 8 - COMMON STOCK TRANSACTIONS

Pursuant to an agreement dated December 15, 1998, which was amended on April 15,
1999, through September 30, 1999, the Company issued 144,445 shares of common
stock to Measurement Specialists Inc. ("MSI"). The securities have been issued
in reliance upon Regulation D under the Securities Act of 1933, as amended. The
securities were issued in connection with an option granted by MSI to the
Company to acquire the assets of MSI. The Company completed the acquisition of
MSI, as more fully described in Note 3, during the first quarter of 2000.

Commencing in April 1999, the Company offered to the subscribers in private
sales of the Company's securities, which occurred in March and April 1998, the
right to receive one additional share of the Company's common stock for each
share purchased in the private sale. In exchange, the subscribers were asked to
release the Company from all claims arising out of subscribers' allegations that
the Company breached its agreement to register under the Securities Act of 1933,
as amended (the "Securities Act"), the public offer and sale of the shares sold
to the subscribers in 1998. Subscribers alleged that they were unable to
liquidate their shares purchased as they had expected because of the breach of
this agreement. The Company disputed the claim on the basis that it had timely
filed a registration statement relating to the shares in accordance with the
terms of the agreement. The registration statement remains on file but has not
been declared effective under the Securities Act. The Company made the offer to
subscribers in order to resolve the matter. The offering terminated on May 28,
1999. Accordingly, during the third quarter of 1999, the company issued 770,364
shares of common stock to the subscribers in consideration of their release of
their claims. Two subscribers who had purchased an aggregate of 2,000 shares in
the 1998 private placements did not accept the offer. Management is of the
opinion that if claims are



                                      F-20
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

presented by these shareholders, there would be no material impact on the
Company. No underwriter participated in the sale of the securities and no
compensation was paid to any person in connection with soliciting the issuance
of the shares. The shares of common stock were issued in reliance upon the
exemption from registration requirements of the Securities Act afforded by
Section 4(2) and Regulation D thereunder.

As further discussed in Note 6, the Company issued 2,666,667 shares in the first
quarter of 2000 to the former owner of DDI in return for the dismissal of a
lawsuit between the former owner of DDI and the Company.

<TABLE>
<CAPTION>
                                                                                                          AMOUNT
   MONTH OF        MONTH OF                                                                            RECORDED TO
     BOARD         ISSUANCE/                                            NUMBER              AMOUNT    STOCKHOLDERS'
   APPROVAL        PURCHASE             DESCRIPTION                    OF SHARES           PER SHARE      EQUITY
----------------  ------------  -----------------------------  --------------------------  --------------------------
<S>               <C>                                                            <C>         <C>          <C>
June 1999         June 1999     Issuance to individuals in
                                settlement of potential litigation               770,364     $ 1.19       $  914,421

December 1999     January 2000  Issuance to individual in
                                settlement of litigation                       2,666,667     $  .75      $ 2,000,000
</TABLE>

As of December 31, 2000 and 1999, the Company's certificate of incorporation
permits it to issue up to 12,500,0000 shares of common stock, of which
12,496,408 and 4,812,260 shares were issued and outstanding, respectively. The
Company has outstanding as of December 31, 2000 and 1999 common stock purchase
warrants, options and convertible debt securities entitled to purchase or be
converted into an aggregate of 110,848,684 and 84,286,806 shares, respectively,
of the Company's common stock at exercise and conversion prices ranging from
$0.75 to $8.01. Accordingly, the Company has an insufficient number of shares of
common stock authorized for issuance in the event all its outstanding warrants
and options were exercised and convertible securities were converted. In its
February 9, 2001 shareholders meeting, the Company secured an amendment to its
certificate of incorporation that increased the number of shares the Company was
authorized to issue to 175,000,000. This amendment provides sufficient
authorization of shares in the event the warrants, options and convertible
securities were exercised and converted.

NOTE 9 - STOCK WARRANTS

During 2000, the Company issued warrants to purchase shares of the Company's
common stock with the issuance of certain debt (see Note 6). The warrants gave
the holders the right to purchase up to 14,350,000 shares at $0.75. These
warrants expire December 31, 2004.

During 1999, the Company issued warrants to purchase shares of the Company's
common stock with the issuance of certain debt (see Note 6). The warrants gave
the holders the right to purchase up to 1,075,000 shares at $1.50 and 14,350,000
shares at $0.75. The 1,075,000 warrants expire February 18, 2004 while the
14,350,000 warrants expire December 31, 2004.

During 1998, the Company issued warrants to purchase shares of the Company's
common stock with the issuance of certain debt (see Note 6). The warrants gave
the holders the right to purchase up to 2,000,000 shares at $5.50, 1,333,333
shares at $2.25 and 47,680 shares at $6.05. The 2,000,000 and 47,680 warrants
expire in March 2003 while the 1,333,333 warrants expire in October 2003.



                                      F-21
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

The warrants issued during 2000, 1999 and 1998 are subject to "Full Ratchet"
anti-dilution provisions. In December of 1999, the Company issued the 14,350,000
warrants at an exercise price of $0.75. Consequently, the anti-dilution
provisions on all warrants subject to the provision were triggered. Upon each
adjustment of the exercise price, the holder of the warrant shall thereafter be
entitled to purchase, at the exercise price resulting from the adjustment, the
number of shares of common stock obtained by multiplying the exercise price in
effect immediately prior to the adjustment by the number of shares purchasable
prior to the adjustment and dividing the product thereof by the exercise price
resulting from the adjustment. The following table summarizes information about
warrants outstanding at December 31, 2000:


                                      F-22
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                          DEBT CONVERSION     SJCP           SJCP          SJMB         SJMB           SJMB         SJMB
                               $2.00          $2.75        $4.6327         $6.75        $2.25         $1.50         $0.75
                              EXPIRES        EXPIRES       EXPIRES        EXPIRES      EXPIRES       EXPIRES       EXPIRES
                              09/30/01      06/05/02       10/10/02      03/16/03      10/30/03      2/18/04       12/31/04
                             ---------    -----------    -----------   -----------   -----------   -----------   -----------
<S>                          <C>          <C>            <C>           <C>           <C>           <C>           <C>
Balance, 12/31/97              236,250        666,000        725,000
1998 issuance                                                            1,800,000     1,333,333
Anti-dilution issuance                        148,000        767,759     3,600,000
1998 exercised                  (1,500)
                             ---------    -----------    -----------   -----------   -----------   -----------   -----------
Balance, 12/31/98              234,750        814,000      1,492,759     5,400,000     1,333,333
                             =========    ===========    ===========   ===========   ===========   ===========   ===========

Exercise price, 12/31/98     $    2.00    $      2.25    $      2.25   $      2.25   $      2.25

1999 issuance                                                                                        2,075,000     3,075,000
Anti-dilution issuance                      1,628,000      2,985,518    10,800,000     2,666,666     2,075,000
                             ---------    -----------    -----------   -----------   -----------   -----------   -----------
Balance, 12/31/99              234,750      2,442,000      4,478,277    16,200,000     3,999,999     4,150,000     3,075,000
                             =========    ===========    ===========   ===========   ===========   ===========   ===========

Exercise price, 12/31/99   $      2.00    $      0.75   $      0.75   $      0.75   $      0.75   $      0.75    $      0.75

2000 issuance                                                                                                      3,280,000
                             ---------    -----------    -----------   -----------   -----------   -----------   -----------
Balance, 12/31/00              234,750      2,442,000      4,478,277    16,200,000     3,999,999     4,150,000     6,355,000
                             =========    ===========    ===========   ===========   ===========   ===========   ===========

Exercise price, 12/31/00     $    2.00    $      0.75    $      0.75   $      0.75   $      0.75   $      0.75   $      0.75

<CAPTION>
                          LENDERS AFFILIATED     FALCON        HARRIS WEBB
                               WITH SJMB        SEABOARD       & GARRISON
                                 $0.75            $6.75           $6.05
                                EXPIRES          EXPIRES         EXPIRES
                               12/31/04          3/16/03         3/15/03         TOTAL
                             -----------      -------------   -------------   ------------
<S>                          <C>              <C>             <C>             <C>
Balance, 12/31/97                                                               1,627,250
1998 issuance                                       200,000          47,680     3,381,013
Anti-dilution issuance                              400,000          80,526     4,996,285
1998 exercised                                                                     (1,500)
                             -----------      -------------   -------------   ------------
Balance, 12/31/98                                   600,000         128,206    10,003,048
                             ===========      =============   =============   ============

Exercise price, 12/31/98                      $        2.25   $        2.25

1999 issuance                 11,275,000                                        16,425,000
Anti-dilution issuance                            1,200,000         256,412     21,611,596
                             -----------      -------------   -------------   ------------
Balance, 12/31/99             11,275,000          1,800,000         384,618     48,039,644
                             ===========      =============   =============   ============

Exercise price, 12/31/99     $      0.75      $        0.75   $        0.75

2000 issuance                 11,070,000                                        14,350,000
                             -----------      -------------   -------------   ------------
Balance, 12/31/00             22,345,000          1,800,000         384,618     62,389,644
                             ===========      =============   =============   ============

Exercise price, 12/31/00     $      0.75      $        0.75   $       0.75
</TABLE>


                                      F-23
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

During 1996, the Company issued warrants to purchase shares of the Company's
common stock in connection with the conversion of certain debt. The warrants
give holders the right to purchase up to 303,750 shares of the Company's common
stock at $2 per share. A total of 69,000 of these warrants have been exercised,
including 1,500 exercised in 1998 which resulted in an increase to common stock
and additional paid-in capital of $3,000. No warrants were exercised during 2000
or 1999. The warrants expire on September 30, 2001 and may be redeemed, at the
option of the Company, at the price of $.50 per warrant, provided that the bid
price of common stock has exceeded $5 per share ending on the trading day prior
to the date on which the notice of redemption is given.

NOTE 10 - INCOME TAXES

The benefit for income taxes consists of the following for the years ended
December 31, 2000, 1999, and 1998:

                                  2000             1999                1998
                                 -------        -----------         -----------

Federal:
   Current                       $    --        $        --         $        --
   Deferred                           --                 --            (958,652)
                                 -------        -----------         -----------
                                      --                 --            (958,652)
                                 -------        -----------         -----------
State:
   Current                            --                 --                  --
   Deferred                           --                 --             (93,046)
                                 -------        -----------         -----------
                                      --                 --             (93,046)
                                 -------        -----------         -----------

     Total                       $    --        $        --         $(1,051,698)
                                 =======        ===========         ===========


The benefit for federal income taxes differs from the amount computed by
applying the federal income tax statutory rate of 34% to the loss before benefit
for income taxes and extraordinary gain, as follows:

<TABLE>
<CAPTION>
                                                                             2000                   1999                   1998
                                                                          -----------            -----------            -----------
<S>                                                                       <C>                    <C>                    <C>
Benefit at federal statutory rate                                         $(1,422,641)           $(2,726,632)           $(7,503,249)
State income taxes, net of federal benefit                                   (129,306)              (256,980)              (202,818)
Nondeductible tax expenses                                                     90,394                 78,949
Increase in valuation allowance                                             1,461,553              2,904,663              6,654,369
                                                                          -----------            -----------            -----------

     Benefit for federal income taxes                                     $        --            $        --            $(1,051,698)
                                                                          ===========            ===========            ===========
</TABLE>


At December 31, 2000 and 1999, the Company has available net operating loss
carryforwards of approximately $26,917,000 and $20,308,000, respectively, for
federal tax purposes that expire at various dates through 2021. Additionally,
the Company has state net operating loss carryforwards of approximately
$19,960,000 and $13,351,000 at December 31, 2000 and 1999, respectively, which
expire at various dates through 2021.


                                      F-24
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

Deferred income taxes reflect the impact of temporary differences between
amounts of assets and liabilities recorded for financial reporting purposes and
such amounts as measured in accordance with tax laws. The items which comprise a
significant portion of the deferred tax assets and liabilities are as follows:

                                                       2000            1999
                                                   ------------    ------------

Gross deferred tax assets:
   Allowance for doubtful accounts receivable      $    156,008    $    375,263
   Accrued bonuses and other                            158,738         124,299
   Operating loss carryforwards                      10,039,921       7,574,846
   Goodwill                                           3,770,018       3,993,679
   Valuation allowance                              (11,020,585)     (9,559,032)
                                                   ------------    ------------
     Gross deferred tax asset                         3,104,100       2,509,055
                                                   ------------    ------------

Gross deferred tax liabilities:
   Depreciation                                      (2,991,432)     (2,396,387)
   Other                                               (112,668)       (112,668)
                                                   ------------    ------------
     Gross deferred tax liability                    (3,104,100)     (2,509,055)
                                                   ------------    ------------

     Net deferred tax asset (liability)            $         --    $         --
                                                   ============    ============


The Company is required to record a valuation allowance when it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. At December 31, 2000 and 1999, the Company has recorded a valuation
allowance of $11,020,585 and $9,559,032 against the gross deferred tax asset.

                                      F-25
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

NOTE 11 - LOSS PER SHARE

The calculation of basic and diluted EPS is as follows:

<TABLE>
<CAPTION>
                                                  FOR THE YEAR ENDED 2000                     FOR THE YEAR ENDED 1999
                                         --------------------------------------     ------------------------------------------
                                           Income          Shares      Per Share      Income          Shares         Per Share
                                         (Numerator)    (Denominator)    Amount     (Numerator)    (Denominator)       Amount
                                         -----------      ---------     --------    -----------      ---------       ---------
<S>                                      <C>              <C>           <C>         <C>              <C>             <C>
Net Loss per Share - Basic
Loss before extraordinary gain
   available to common stockholders      $(5,152,813)     7,619,927     $   (.68)   $(8,147,177)     4,424,035       $   (1.84)

Extraordinary gain on
    extinguisment of debt                    968,576      7,619,927          .13        127,671      4,424,035             .03
                                         -----------                    --------     ----------                      ---------

Net loss per share - basic               $(4,184,237)     7,619,927     $   (.55)   $(8,019,506)     4,425,035       $   (1.81)
                                         ===========                    ========    ===========                      =========

EFFECT OF DILUTIVE SECURITIES

Stock warrants
Stock options

Convertible debt debenture

NET LOSS PER SHARE - DILUTED
Loss before extraordinary gain
   available to common stockholders      $(5,152,813)     7,619,927     $   (.68)   $(8,147,177)     4,424,035       $   (1.84)

Extraordinary gain on
    extinguisment of debt                    968,576      7,619,927          .13        127,671      4,424,035             .03
                                         -----------                    --------    -----------                      ---------


Net loss per share-diluted               $(4,184,237)     7,619,927     $   (.55)   $(8,019,506)     4,425,035       $   (1.81)
                                         ===========                    ========    ===========                      =========


<CAPTION>
                                                  FOR THE YEAR ENDED 1998
                                          ------------------------------------------
                                            Income            Shares      Per Share
                                           (Numerator)     (Denominator)   Amount
                                          -------------      ---------    --------
<S>                                       <C>                <C>          <C>
Net Loss per Share - Basic
Loss before extraordinary gain
   available to common stockholders       $ (21,016,680)     3,589,235    $  (5.86)

Extraordinary gain on
    extinguisment of debt                            --      3,589,235          --
                                          -------------                   --------

Net loss per share - basic                $ (21,016,680)     3,589,235    $  (5.86)
                                          =============                   ========

EFFECT OF DILUTIVE SECURITIES

Stock warrants
Stock options

Convertible debt debenture

NET LOSS PER SHARE - DILUTED
Loss before extraordinary gain
   available to common stockholders       $ (21,016,680)     3,589,235    $  (5.86)

Extraordinary gain on
    extinguisment of debt                            --      3,589,235          --
                                         --------------                   ---------

Net loss per share-diluted                $ (21,016,680)     3,589,235    $  (5.86)
                                          =============                   ========
</TABLE>



                                      F-26
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

Options issued to purchase 10,908,750 shares of common stock and warrants to
purchase 62,389,644 shares of common stock at price ranging from $0.75 to $8.01
were outstanding during 2000, but were not included in the computation of the
2000 diluted EPS because the effect would be anti-dilutive.

Options issued to purchase 1,141,750 shares of common stock and warrants to
purchase 48,039,644 shares of common stock at prices ranging from $0.75 to $8.01
were outstanding during 1999, but were not included in the computation of the
1999 diluted EPS because the effect would be anti-dilutive.

Options issued to purchase 1,177,750 shares of common stock and warrants to
purchase 10,003,048 shares of common stock at prices ranging from $1.50 to $8.01
were outstanding during 1998, but were not included in the computation of the
1998 diluted EPS because the effect would be anti-dilutive. There were also
24,000 options that were canceled during 1998 that are not included in the
computation of the 1998 diluted EPS because the effect would be anti-dilutive.

Convertible debt instruments, including convertible interest, which would result
in the issuance of 37,550,290, 35,105,412 and 8,065,234 shares of common stock,
if the conversion features were exercised, were outstanding during 2000, 1999
and 1998 respectively, but were not included in the computation of the 2000,
1999 or 1998 diluted EPS because the effect would be anti-dilutive. The
conversion price of these instruments was $0.75 per share at December 31, 2000,
and 1999 and $2.25 per share at December 31, 1998 and remained outstanding at
December 31, 2000.

NOTE 12 - MAJOR CUSTOMERS

Most of the Company's business activity is with customers engaged in drilling
and operating oil and natural gas wells primarily in the Black Warrior and
Mississippi Salt Dome Basins in Alabama and Mississippi, the Permian Basin in
West Texas and New Mexico, the San Juan Basin in New Mexico, Colorado, and Utah,
the East Texas and Austin Chalk Basins in East Texas, the Powder River and Green
River Basins in Wyoming and Montana, the Williston Basin in North Dakota, and
the Gulf of Mexico offshore of Louisiana and in South Texas. Substantially all
of the Company's accounts receivable at December 31, 2000 and 1999 are from such
customers. Performance in accordance with the credit arrangements is in part
dependent upon the economic condition of the oil and natural gas industry in the
respective geographic areas. The Company does not require its customers to
pledge collateral on their accounts receivable.

The Company earned revenues in excess of 10% of its total revenues from the
following customers for the year ended December 31, 1999 as follows:

                                                                         1999
                                                                      ----------
Collins & Ware, Inc. (a related party)                                $2,955,918
Burlington Resources                                                  $3,200,666


There were no customers from which the Company earned in excess of 10% of its
revenues during the years ended December 31, 2000 or 1998.


                                      F-27
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

NOTE 13 - EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT

During 2000 and 1999, the Company executed agreements with certain of its
vendors to discount the outstanding obligations due to these vendors. The
agreements provided for a decrease in the outstanding obligations of $968,576
and $127,671,  respectively.  Accordingly, the Company has recognized an
extraordinary gain on extinguishment of debt of $968,576 and $127,671,
respectively, net of income taxes of $0.

NOTE 14 - STOCK OPTIONS

The 2000 Stock Incentive Plan ("2000 Incentive Plan") provides for the granting
of incentive stock options or non-qualified stock options to purchase shares of
the Company's common stock to key employees and non-employee directors or
consultants. The 2000 Incentive Plan authorizes the issuance of options to
purchase up to an aggregate of 17,500,000 shares of common stock with maximum
option terms of ten years from the date of the grant. There are five types of
grants that can be made under the 2000 Incentive Plan. The Discretionary Option
Grant Program allows eligible individuals in the Company's employ or service
(including officers and consultants) to be granted options to purchase shares of
common stock at an exercise price equal to not less than the fair market value
of the stock at the date of the grant. All grants made in 2000 were made under
this program. The Stock Issuance Program is a non-compensatory program under
which individuals in the Company's employ or service may be issued shares of
common stock directly through the purchase of such shares at a price not less
than the fair market value at the time of issuance or as a bonus tied to
performance. The Salary Investment Option Grant Program is a compensatory
program which, if activated by the plan administrator, will allow executive
officers and other highly compensated employees the opportunity to apply a
portion of their base salary to the acquisition of special below market stock
grants. The Automatic Option Grant Program causes options to be granted
automatically at periodic intervals to eligible non-employee members of the
Board of Directors to purchase shares of common stock at an exercise price equal
to their fair market value at the date of the grant. The Director Fee Option
Grant Program is a compensatory program which, if activated by the plan
administrator, would allow non-employee Board members the opportunity to apply a
portion of any annual retainer fee otherwise payable to them in cash each year
to the acquisition of special below market option grants.

The Board and shareholders approved the 2000 Incentive Plan on February 11, 2000
and February 9, 2001, respectively. At December 31, 2000, 10,143,000 shares had
been granted, 271,000 shares were cancelled and 7,357,000 remained to be granted
under this plan.

The 1997 Omnibus Incentive Plan ("1997 Omnibus Plan") provides for the granting
of either incentive stock options or nonqualified stock options to purchase
shares of the Company's common stock to key employees responsible for the
direction and management of the Company. The 1997 Omnibus Plan authorizes the
issuance of options to purchase up to an aggregate of 600,000 shares of common
stock, with maximum option terms of ten years from the date of grant. During
1998, the Board authorized an amendment to the 1997 Omnibus Plan to allow
additional issuances of options to purchase 400,000 shares of common stock. This
amendment increases the total aggregate number of shares under the 1997 Omnibus
Plan to 1,000,000. The amendment was approved by the shareholders on February 9,
2001. At December 31, 2000 and 1999, 856,750 and 948,750 options were
outstanding, respectively. At December 31, 2000, 143,250 options remain
available to be granted. Options to purchase 92,000 shares of common stock were
cancelled during 2000.


                                      F-28
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

The 1997 Non-Employee Stock Option Plan ("1997 Non-Employee Plan") provides for
the granting of nonqualified stock options to purchase shares of the Company's
common stock to non-employee directors and consultants. The 1997 Non-Employee
Plan authorizes the issuance of options to purchase up to an aggregate of
100,000 shares of common stock, with maximum option terms of ten years from the
date of grant. During 1998, the Board authorized an amendment to the 1997
Non-Employee Plan to allow additional issuances of options to purchase 200,000
shares of common stock. This amendment increases the total aggregate number of
shares under the 1997 Non-Employee Plan to 300,000. The amendment was approved
by the shareholders on February 9, 2001. At December 31, 2000 and 1999, 100,000
and 113,000 options were outstanding, respectively. Options to purchase 13,000
shares of common stock were cancelled during 2000. At December 31, 2000, 200,000
options remain available to be granted.

Additionally, of the 240,000 options outstanding at December 31, 1996, options
to purchase 160,000 shares of the Company's common stock were canceled during
1997. Pertinent information regarding stock options is as follows:


                                      F-29
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                             WEIGHTED
                                                                                              AVERAGE
                                                                                 WEIGHTED   FAIR VALUE
                                                                 RANGE OF        AVERAGE     OF STOCK
                                               NUMBER OF         EXERCISE        EXERCISE       AT                VESTING
                                                OPTIONS           PRICES           PRICE    GRANT DATE          PROVISIONS
                                             -------------     -------------     --------  ------------  ---------------------------
<S>                                             <C>            <C>                 <C>         <C>       <C>
Options outstanding, December 31, 1997            717,250      $1.50 - $8.01       $3.30
                                             ------------

Options cancelled                                 (22,500)         $2.63           $2.63
                                                  (60,000)         $4.63           $4.63
                                                   (5,000)         $4.63           $4.63
                                             ------------
                                                  (87,500)
                                             ------------

Options granted

   Exercise price equals FMV of
     stock at grant date                            7,500          $6.28           $6.28       $6.28     3 year pro rata
                                                   13,000          $6.63           $6.63       $6.63     2 year pro rata
                                                  100,000          $6.50           $6.50       $6.50     5 year pro rata
                                                   68,000          $6.50           $6.50       $6.50     25% immediate; 25% per year
                                                  200,000          $6.69           $6.69       $6.69     25% immediate; 25% per year
                                                    4,500          $8.00           $8.00       $8.00     4 year pro rata
                                             ------------
                                                  393,000
                                             ------------

   Exercise price greater than FMV of
     stock at grant date                          155,000          $7.50           $7.50       $6.81     4 year pro rata
                                             ------------

Options outstanding, December 31, 1998          1,177,750      $1.50 - $8.01       $4.90
                                             ------------

Options cancelled                                 (10,000)         $6.50           $6.50
                                                  (10,000)         $4.63           $4.63
                                                   (5,000)         $4.63           $4.63
                                                   (3,000)         $4.63           $4.63
                                                   (3,000)         $4.63           $4.63
                                                   (5,000)         $6.50           $6.50
                                             ------------
                                                  (36,000)
                                             ------------

Options outstanding, December 31, 1999          1,141,750      $1.50 - $8.01       $3.34
                                             =============

</TABLE>



                                      F-30
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                     WEIGHTED
                                                                                     AVERAGE
                                                                         WEIGHTED   FAIR VALUE
                                                             RANGE OF    AVERAGE     OF STOCK
                                               NUMBER OF     EXERCISE    EXERCISE       AT               VESTING
                                                OPTIONS       PRICES       PRICE    GRANT DATE          PROVISIONS
                                                -------       ------       -----    ----------          ----------
<S>                                          <C>              <C>         <C>         <C>         <C>
Options cancelled                              (13,000)       $6.50       $6.50
                                               (25,000)       $4.63       $4.63
                                               (62,500)       $2.63       $2.63
                                              (275,500)       $0.75       $0.75
                                            ----------
                                              (376,000)
                                            ----------

Options granted
   Exercise price equals FMV of
      stock at grant date                    3,579,500        $0.75       $0.75         $0.75     33% immediate; 33% per year
                                             2,820,000        $0.75       $0.75         $0.75     Immediate
                                            ----------
                                             6,399,500
                                            ----------

   Exercise price greater than FMV
      of stock at grant date                 1,000,000        $0.75       $0.75       $0.5625     125,000 immediate; 25,000 per year
                                               200,000        $0.75       $0.75       $0.5625     50,000 immediate; 10,000 per year
                                                30,000        $0.75       $0.75       $0.4063     3 year pro rata
                                               200,000        $0.75       $0.75       $0.5313     25% immediate; 25% per year
                                               250,000        $0.75       $0.75       $0.5313     125,000 immediate; 25,000 per year
                                               696,000        $0.75       $0.75       $0.5313     79,000 immediate; 25,000 per year
                                               317,500        $0.75       $0.75       $0.5625     33% immediate; 33% per year
                                               100,000        $0.75       $0.75       $0.5625     Immediate
                                               100,000        $0.75       $0.75       $0.5625     50,000 immediate; 10,000 per year
                                               250,000        $0.75       $0.75       $0.4375     125,000 immediate; 25,000 per year
                                               600,000        $0.75       $0.75       $0.4375     25% immediate; 25% per year
                                            ----------
                                             3,743,500
                                            ----------

Options outstanding, December 31, 2000      10,908,750
                                            ==========
</TABLE>




                                      F-31
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

The following table summarizes information about stock options outstanding at
December 31, 2000:

<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING                             OPTIONS EXERCISABLE
                      ------------------------------                    -------------------------
                                          Weighted
                                           Average      Weighted                         Weighted
      Range of          Number            Remaining     Average           Number         Average
      Exercise        Outstanding        Contractual    Exercise        Exercisable      Exercise
       Prices          12/31/00              Life         Price           12/31/00         Price
       ------          --------              ----         -----           --------         -----
<S>                    <C>                   <C>          <C>            <C>               <C>
       $0.75           9,867,500             9.32         $0.75          4,881,046         $0.75
       $1.50              80,000              .75         $1.50             80,000         $1.50
       $2.63             263,750             6.25         $2.63            252,000         $2.63
       $3.00              20,000             1.41         $3.00             20,000         $3.00
       $3.38              10,000             1.50         $3.38             10,000         $3.38
       $4.63             135,000             1.67         $4.63            113,004         $4.63
       $6.28               7,500             5.42         $6.28              2,500         $6.28
       $6.50             140,000             3.06         $6.50             70,000         $6.50
       $6.63              13,000             2.45         $6.63              6,500         $6.63
       $6.69             200,000             7.00         $6.69            150,000         $6.69
       $7.50             155,000             2.41         $7.50             38,750         $7.50
       $8.00               4,500             2.36         $8.00              2,250         $8.00
       $8.01              12,500             1.95         $8.01              7,500         $8.01
                      ----------                                         ---------
                      10,908,750             8.82         $1.16          5,633,550         $1.23
                      ==========                                         =========
</TABLE>


The Company applies principles from SFAS No. 123 in accounting for its stock
option plan. In accordance with SFAS No. 123, the Company has elected not to
report the impact of the fair value of its stock options in the statements of
operations but, instead, to disclose the pro forma effect and to continue to
apply APB Opinion No. 25 and related interpretations in accounting for its stock
options. Accordingly, no compensation expense has been recognized for stock
options issued to employees with an exercise price at fair market value or
above. Compensation expense for options issued to non-employees of the Company
are excluded from the pro forma effect below, as compensation expense has been
recognized in the accompanying financial statements. Had compensation cost for
all of the Company's stock options issued been determined based on the fair
value at the grant dates for awards consistent with the method prescribed in
SFAS No. 123, the Company's net loss and loss per share would have been reduced
or increased to the pro forma amounts indicated as follows:



                                      F-32
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                      2000             1999             1998
                                                                 ---------------  ---------------  ----------------
<S>                                                                <C>              <C>              <C>
Loss before extraordinary gain - as reported                       $ (5,152,813)    $ (8,147,177)    $ (21,016,680)
Extraordinary gain on extinguishment of debt - as reported              968,576          127,671                --
                                                                 ---------------  ---------------  ----------------
Net loss - as reported                                             $ (4,184,237)    $ (8,019,506)    $ (21,016,680)
                                                                   ============     ============     =============

Loss before extraordinary gain - pro forma                         $ (7,031,991)    $ (8,607,989)    $ (21,530,723)
Extraordinary gain on extinguishment of debt - pro forma                968,576          127,671                --
                                                                 ---------------  ---------------  ----------------
Net loss - pro forma                                               $ (6,063,415)    $ (8,480,318)    $ (21,530,723)
                                                                   ============     ============     =============

Loss per share - as reported (basic):

Loss before extraordinary gain - as reported                       $       (.68)    $      (1.84)    $       (5.86)
Extraordinary gain on extinguishment of debt - as reported                  .13              .03                --
                                                                 ---------------  ---------------  ----------------
Net loss per share - as reported (basic)                           $       (.55)    $      (1.81)    $       (5.86)
                                                                 ===============  ===============  ================

Loss per share - pro forma (basic):

Loss before extraordinary gain - pro forma                         $       (.92)    $      (1.95)    $       (6.00)
Extraordinary gain on extinguishment of debt - pro forma                    .13              .03                --
                                                                 ---------------  ---------------  ----------------
Net loss per share - pro forma (basic)                             $       (.79)    $      (1.92)    $       (6.00)
                                                                 ===============  ===============  ================

Loss per share - as reported (diluted):

Loss before extraordinary gain - as reported                       $       (.68)    $      (1.84)    $       (5.86)
Extraordinary gain on extinguishment of debt - as reported                  .13              .03                --
                                                                 ---------------  ---------------  ----------------
Net loss per share - as reported (diluted)                         $       (.55)    $      (1.81)    $       (5.86)
                                                                 ===============  ===============  ================

Loss per share - pro forma (diluted):

Loss before extraordinary gain - pro forma                         $       (.92)    $      (1.95)    $       (6.00)
Extraordinary gain on extinguishment of debt - pro forma                    .13              .03                --
                                                                 ---------------  ---------------  ----------------

Net loss per share - pro forma (diluted)                           $       (.79)    $      (1.92)    $       (6.00)
                                                                 ===============  ===============  ================

</TABLE>


The pro forma amounts reflected above are not representative of the effects on
reported net income (loss) in future years because, in general, the options
granted typically do not vest immediately and additional awards are made each
year.

The fair value of each option grant is estimated on the grant date using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:

                                               2000          1999           1998
                                               ----          ----           ----
Dividend yield                                    0%            0%            0%
Expected life (years)                          3.78          5.62          5.62
Expected volatility                           69.14%         74.7%         74.7%
Risk-free interest rate                        6.43%         5.48%         5.48%


                                      F-33
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

NOTE 15 - CONTINGENCIES

The Company is the subject of various legal actions in the ordinary course of
business. Management does not believe the ultimate outcome of these actions will
have a materially adverse effect on the financial position, results of
operations or cash flows of the Company.

NOTE 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate fair
value:

CASH AND CASH EQUIVALENTS, SHORT-TERM INVESTMENTS, ACCOUNTS RECEIVABLE, CURRENT
PORTION OF LONG-TERM DEBT AND ACCOUNTS PAYABLE - The carrying amount is a
reasonable estimate of the fair value because of the short maturity of these
instruments.

LONG-TERM DEBT - Given the Company's operating results and severe lack of
liquidity, as discussed in Note 18, it is not practical to determine the fair
market value of the long-term debt at December 31, 2000 and 1999.

NOTE 17 - SEGMENT AND RELATED INFORMATION

At December 31, 2000 and 1999, the Company is organized into, and manages its
business based on the performance of, five business units. The business units
have separate management teams and infrastructures that offer different oil and
gas well services. The business units have been aggregated into three reportable
segments: wireline, directional drilling, and workover and completion as the
long-term financial performance of these reportable segments is affected by
similar economic conditions.

WIRELINE - This segment consists of two business units that perform various
procedures to evaluate downhole conditions at different stages of the process of
drilling and completing oil and gas wells as well as various times thereafter
until the well is depleted and abandoned. This segment engages in onshore and
offshore servicing, as well as other oil and gas well service activities
including renting and repairing equipment. The principal markets for this
segment include all major oil and gas producing regions of the United States.
Major customers of this segment for the years ended December 31, 2000 and 1999
included Burlington Resources, Chevron, Inc., Collins and Ware, Inc., Pioneer
Natural Resources and Phillips Petroleum.

DIRECTIONAL DRILLING SERVICES - This segment consists of two business units that
perform procedures to enter an oil producing zone horizontally, using
specialized drilling equipment, and expand the area of interface of hydrocarbons
and thereby greatly enhances recoverability of oil. The segment also engages in
oil and gas well surveying activities. The principal markets for this segment
include all major oil and gas producing regions of the United States. Major
customers of this segment for the years ended December 31, 2000 and 1999
included Texaco E&P, Union Pacific Resources, Clayton Williams Energy, and
Chesapeake Operations.

WORKOVER AND COMPLETION - This segment consists of a business unit in which
services include those operations performed on wells when originally completed
or on wells previously placed in production and requiring additional work to
restore or increase production. The principal market for this segment is the


                                      F-34
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

Black Warrior Basin of Alabama. The major customer of this segment for the years
ended December 31, 2000 and 1999 was Energen Corporation.

The accounting policies of the reportable segments are the same as those
described in Note 2 of Notes to Financial Statements. The Company evaluates the
performance of its operating segments based on earnings before interest, taxes,
depreciation and amortization ("EBITDA"), which is derived from revenues less
operating expenses and selling, general and administrative expenses. Segment
information for the years ended December 31, 2000, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                                                       WORKOVER
                                                     DIRECTIONAL         AND
2000                                  WIRELINE        DRILLING        COMPLETION        TOTAL
-------                            ---------------  --------------  --------------- --------------
<S>                                   <C>             <C>              <C>           <C>
Segment revenues                      $21,636,566     $22,917,970      $ 1,144,873   $ 45,699,409
Segment EBITDA                        $ 4,639,293     $ 3,836,494      $    51,568   $  8,527,355
Segment assets                        $17,975,321     $24,688,389      $   139,649   $ 42,803,359
</TABLE>
<TABLE>
<CAPTION>
                                                                       WORKOVER
                                                     DIRECTIONAL         AND
1999                                  WIRELINE        DRILLING        COMPLETION        TOTAL
-------                            ---------------  --------------  --------------- --------------
<S>                                   <C>             <C>              <C>           <C>
Segment revenues                      $17,726,484     $10,310,319      $ 1,255,970   $ 29,292,773
Segment EBITDA                        $ 1,608,648     $   721,452      $   145,434   $  2,475,534
Segment assets                        $16,710,665     $19,305,569      $   249,285   $ 36,265,519
</TABLE>
<TABLE>
<CAPTION>
                                                                       WORKOVER
                                                     DIRECTIONAL         AND
1998                                  WIRELINE        DRILLING        COMPLETION        TOTAL
-------                            ---------------  --------------  --------------- --------------
<S>                                   <C>            <C>               <C>           <C>
Segment revenues                      $11,591,727    $ 21,311,450      $ 1,533,376   $ 34,436,553
Segment EBITDA                        $(1,589,874)   $(12,028,475)     $   (60,260)   (13,678,609)
Segment assets                        $15,607,165    $ 20,853,147      $   283,868   $ 36,744,180
</TABLE>


The Company has certain expenses and assets which are not allocated to the
individual operating segments. A reconciliation of total segment EBITDA to
income (loss) from operations and total segment assets to total assets for the
years ended December 31, 2000 1999 and 1998 is presented as follows:



                                      F-35
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                     2000             1999              1998
                                                ---------------  ----------------  ---------------
<S>                                               <C>               <C>              <C>
EBITDA

Total segment EBITDA                              $  8,527,355      $  2,475,534     $(13,678,609)
Depreciation and amortization                       (5,419,779)       (5,008,078)      (4,815,955)
Unallocated corporate expense                       (3,100,343)       (2,229,112)        (923,173)
                                                ---------------  ----------------  ---------------

   Income (loss) from operations                  $      7,233      $ (4,761,656)    $(19,417,737)
                                                ---------------  ----------------  ---------------

ASSETS

Total segment assets                              $ 42,803,359      $ 36,265,519     $ 36,744,180
Unallocated corporate assets                            71,615            46,465           70,670
                                                ---------------  ----------------  ---------------

     Total assets                                 $ 42,874,974      $ 36,311,984     $ 36,814,850
                                                  ============      ============     ============

</TABLE>


NOTE 18 - RESULTS OF OPERATIONS AND MANAGEMENT'S PLANS

The Company incurred a loss of $4,184,237 in 2000 and had current liabilities in
excess of current assets of $44,551,351 at December 31, 2000. The Company's
outstanding indebtedness includes primarily senior indebtedness aggregating
approximately $20,331,000 at December 31, 2000, other indebtedness of
approximately $9,924,000 and approximately $18,200,000 owed to SJMB and SJCP
(collectively "St. James") and its affiliates and directors. Currently, the
Company does not have the liquidity necessary to satisfy its current
obligations.

During 2000, the Company experienced an increase in the demand for its products
and services as a result of the increase in the price of oil and natural gas.
However, the increase in demand for its products and services and the resulting
increase in its revenues in 2001 is not expected to be adequate, without other
funding or the deferral of the maturities of its indebtedness, to enable the
Company to pay all of its obligations to lenders in a timely manner. Management
of the Company believes that a continuing period of improved demand and revenues
will be necessary to result in an improvement in the Company's financial
position.

At December 31, 2000, the Company had approximately $48.4 million of current
indebtedness, based upon the classification contained in the balance sheet as of
that date. Of this indebtedness, the Company intends to seek to extend the
maturity of approximately $26.8 million of indebtedness, including any deferred
excess cash flow payments due through December 31, 2000, into 2002 and to seek,
through obtaining any required waivers or other accommodations of any covenant
defaults under loan documents, to repay an aggregate of approximately $3 million
in 2001 and $17.4 million in 2002 and thereafter. If the Company is unable to
obtain the required extensions and waivers, it will seek to refinance
approximately $20.3 million of indebtedness. There can be no assurance that the
Company will be successful in extending the maturity or refinancing any part or
all of its indebtedness. The inability of the Company to obtain extensions of
the due dates of principal payments or to repay or refinance this indebtedness
could cause, under the terms of such debt agreements and the cross default
provisions of other debt agreements, virtually all the outstanding indebtedness
to be accelerated and declared immediately due and payable. Defaults in the
repayment of this indebtedness, either by maturity or by acceleration of the due
date, could lead the creditors to foreclose on substantially all of the
Company's assets.



                                      F-36
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

The Company's loan agreement with Coast requires the Company to provide various
reports to Coast, including, among others, an obligation to provide to Coast
annual financial statements containing an unqualified opinion and certified by
an independent certified public accountant acceptable to Coast within 90 days of
year-end. There can be no assurance that Coast may not treat the auditor's
report on the Company's December 31, 2000 financial statements containing an
explanatory paragraph as a qualified opinion or take exception to the delinquent
filing and claim that the Company is in violation of its reporting obligations
to Coast under the Loan Agreement. Under such circumstances, Coast may claim it
is entitled to accelerate the maturity of all of the indebtedness of the Company
owing to it.

Principal and interest under the Coast Loan Agreement has been guaranteed,
subject to certain limitations, by St. James, principal stockholders of the
Company, and a board member of the Company. In addition, St. James has
guaranteed all of the Company's contractual  obligations under the Loan
Agreement,  subject to certain limitations. As amended in January 2001, the
guaranty of St. James is backed by a letter of credit in the amount of $8.2
million

Under the January 2001 amendment to the Loan Agreement, if assets or ownership
interests in the Company are not sold on or before June 30, 2001 to pay all
obligations owing to Coast on or before June 30, 2001, including deferred excess
cash flow payments the Company is required to make for the months of August 2000
through June 2001 and which aggregated $1.0 million at December 31, 2000 and
$2.5 million at March 31, 2001, then St. James is required to make an additional
equity investment in the Company sufficient to pay to Coast the deferred excess
cash flow payments. The failure of St. James to make such investment is an event
of default under the Loan Agreement.

By virtue of its guarantees, in the event of a default under the Company's Loan
Agreement with Coast, Coast may seek to collect from St. James as well as the
board member providing the guarantee, the outstanding principal and interest on
the Company's obligation to Coast. The board member's liability is limited to no
more than $5.0 million. Without continued improvement in the Company's revenues
and operating results, the Company may be substantially dependent upon the
continuing support of St. James during 2001 to fund its ongoing obligations,
including its obligations to Coast. St. James have confirmed to the Company in
writing that they will support operations of the Company through at least
January 2, 2002.

Management may in the future seek to raise additional capital, which may be
either debt or equity capital or a combination thereof or enter into another
material transaction involving the Company, including a possible sale of the
Company. As of May 15, 2001, no specific plans or proposals have been made with
regard to any additional financing or any other transaction. The Company may
engage in other material corporate transactions. The Company retained Growth
Capital Partners, L.P. ("GCP") as its financial advisor to the Company in
connection with examining various alternative means to maximize shareholder
value including a possible merger, sale of assets or other business combination
involving the Company or a possible private placement of equity and/or
equity-related securities. In the last quarter of 2000 and the first quarter of
2001, the Company and GPC on the Company's behalf explored the possibilities of
the Company entering into a business combination or other material transaction.
While information was provided to prospective acquirers and discussions held, no
agreements or agreements in principal were entered into as a consequence of
those activities and the Company is not engaged in any negotiations at May 15,
2001 that may lead to its acquisition or other material transaction. The Company
believes that at that time its operating results had not shown sufficient
improvement for a sufficient period of time to enable the Company to realize an
acceptable price in such a transaction. Nevertheless, subject to the Company's
operating results continuing at recent levels, the Company may again at a future
date seek to



                                      F-37
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

pursue a transaction leading to the possible acquisition of the Company or a
sale of some or all its assets. Any such transaction would be dependent upon the
ability of the Company to realize an acceptable price. There can be no assurance
that the Company will seek to enter into such a transaction and no
representation is made as to the terms on which any such a transaction may be
entered into or that such a transaction will occur. In the event the Company
should seek or be required to raise additional equity capital, there can be no
assurance that such a transaction will not dilute the interests of the Company's
existing security holders.

Management of the Company is unable to assure that its efforts described above
will be successful.

NOTE 19 - SUBSEQUENT EVENTS

On January 23, 2001, the Board approved the issuance of 700,000 and 400,000
warrants at an exercise price of $0.75 to a director of the Company and SJCP (a
related party) in return for the director and SJCP providing a guarantee of the
excess cash flow payments required to be made to Coast by the Company. The Board
also approved 4,000,000 options at an exercise price of $0.75 per share to the
President of the Company.

On February 9, 2001, the shareholders of the Company voted to amend the
Company's certificate of incorporation to increase the number of common shares
authorized for issuance from 12,500,000 shares to 175,000,000 shares.

NOTE 20 - IMPAIRMENT OF LONG-LIVED ASSETS

During 1998, the Company experienced a material decline in demand for its
services as a result of a significant decrease in the price of oil and natural
gas, as well as the loss of a major customer. Consequently, management evaluated
the recoverability of its long-lived assets in relation to its business
segments. The analysis was first performed on an undiscounted cash flow basis,
which indicated impairment in its directional drilling segment. The impairment
was then calculated using projections of discounted cash flows over five years
utilizing a discount rate and terminal value multiple commensurate with current
oil and gas services company transactions. The discount rate and the terminal
multiple used were 12% and 6.5, respectively. The assumptions used in this
analysis represent management's best estimate of future results.

The analysis resulted in a charge to operations for the year ended December 31,
1998 of $11,100,000 which consisted of a write-down of $8,121,684, $2,354,221
and $624,095 to goodwill, property, plant and equipment and inventory,
respectively.


                                      F-38
<PAGE>

BLACK WARRIOR WIRELINE CORP.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

NOTE 21 - QUARTERLY FINANCIAL DATA (UNAUDITED)


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years ended December 31, 2000 and December 31, 1999
------------------------------------------------------------------------------------------------------------------------------------
                                                                                Income (loss) before
                                                       Income (loss) before     extraordinary gain
                                    Net income (loss)  extraordinary gain on    on extinguishement    Net income      Net income
                        Sales       from operations    extinguishement of debt  of debt, per share      (loss)     (loss), per share
                    ----------------------------------------------------------------------------------------------------------------
<S>                   <C>           <C>                     <C>                      <C>             <C>                <C>
2000
   First Quarter      $ 8,276,366   $ (1,266,095)           $ (2,240,329)            $ (0.31)        $ (1,340,393)      $ (0.19)
   Second Quarter       9,458,689       (269,026)             (1,472,744)              (0.20)          (1,404,105)        (0.19)
   Third Quarter       12,947,142        681,932                (669,285)              (0.09)            (669,285)        (0.09)
   Fourth Quarter      15,017,212        860,422                (770,455)              (0.08)            (770,454)        (0.08)
                    ----------------------------------------------------------------------------------------------------------------

                     $ 45,699,409   $      7,233            $ (5,152,813)            $ (0.68)        $ (4,184,237)      $ (0.55)
                    ================================================================================================================


1999
   First Quarter     $  6,072,282   $ (1,635,367)           $ (2,467,946)            $ (0.63)        $ (2,467,946)      $ (0.63)
   Second Quarter       7,261,416     (1,790,333)             (2,623,715)              (0.62)          (2,623,715)        (0.62)
   Third Quarter        7,379,236       (616,463)             (1,411,676)              (0.30)          (1,411,676)        (0.30)
   Fourth Quarter       8,580,439       (719,493)             (1,643,840)              (0.29)          (1,516,169)        (0.26)
                    ----------------------------------------------------------------------------------------------------------------

                     $ 29,293,373   $ (4,761,656)           $ (8,147,177)            $ (1.84)        $ (8,019,506)      $ (1.81)
                    ================================================================================================================
</TABLE>


                                      F-39