<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

[X]              Quarterly Report Pursuant to Section 13 or 15(d) of the
                  Securities Exchange Act of 1934. For the quarterly period
                  ended September 30, 1998.

[ ]              Transition Report Pursuant to Section 13 or 15(d) of the
                  Securities Exchange Act of 1934. For the transition period
                  from ___________ to _________________.


                        Commission file number 001-13553


                       BAYARD DRILLING TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)


             DELAWARE                                        73-1508021
   (State or other jurisdiction                           (I.R.S. Employer
of incorporation or organization)                        Identification No.)

     4005 NW EXPRESSWAY, SUITE 550E                          73116-1679
        OKLAHOMA CITY, OKLAHOMA                              (Zip Code)
(Address of principal executive offices)


                                 (405) 840-9550
              (Registrant's telephone number, including area code)

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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                                                          YES  X    NO
                                                             -----     -----

Outstanding shares of the registrant's common stock, par value $0.01 per share,
at October 30, 1998: 18,197,945


<PAGE>   2




                       BAYARD DRILLING TECHNOLOGIES, INC.

                                      INDEX

<TABLE>
<CAPTION>

                                                                                                           PAGE NO.
<S>          <C>                                                                                           <C>
PART I.      FINANCIAL INFORMATION

Item 1.      Financial Statements

             Balance Sheets - September 30, 1998 (unaudited) and December 31, 1997...........................1

             Statements of Operations (unaudited) - Three months and nine months
             ended September 30, 1998 and 1997...............................................................2

             Statements of Equity (Deficit) for the years ended December 31, 1996 and
             1997 and nine months ended September 30, 1998 (unaudited).......................................3

             Statements of Cash Flows (unaudited) - Nine months ended September 30,
             1998 and 1997...................................................................................4

             Notes to Financial Statements (unaudited).......................................................5

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

PART II.     OTHER INFORMATION

Item 1.      Legal Proceedings...............................................................................15

Item 2.      Changes in Securities and Use of Proceeds.......................................................15

Item 4.      Submission of Matters to a Vote of Security Holders.............................................16

Item 6.      Exhibits and reports on Form 8-K................................................................17

Signatures...................................................................................................21

Index to Exhibits............................................................................................22

</TABLE>


                                        i

<PAGE>   3



                          PART I. FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS

                       BAYARD DRILLING TECHNOLOGIES, INC.


                                 BALANCE SHEETS
                      (In thousands, except per share data)
                (Information at September 30, 1998 is unaudited)


<TABLE>
<CAPTION>
                                     ASSETS

                                                                                  DECEMBER 31,  SEPTEMBER 30,
CURRENT ASSETS:                                                                       1997         1998
                                                                                   ----------    ----------
<S>                                                                                <C>           <C>
     Cash ......................................................................   $   49,302    $   19,148
     Restricted investments ....................................................          880           525
     Accounts receivable .......................................................       19,491        15,750
     Prepaid expenses and other current assets .................................          538         3,702
                                                                                   ----------    ----------
               Total current assets ............................................       70,211        39,125
Property, plant and equipment, net .............................................      155,673       283,659
Goodwill, net of accumulated amortization of $375 at
     December 31, 1997 and $1,029 at September 30,1998 .........................       12,704        12,050
Other assets ...................................................................        1,900         5,008
                                                                                   ----------    ----------
               Total assets ....................................................   $  240,488    $  339,842
                                                                                   ==========    ==========


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable ..........................................................   $    8,246    $   13,596
     Payable to affiliate ......................................................          494           415
     Accrued liabilities .......................................................        5,067        11,696
     Current portion of long-term debt .........................................        7,450         6,000
                                                                                   ----------    ----------
               Total current liabilities .......................................       21,257        31,707
                                                                                   ----------    ----------
Deferred income tax liabilities ................................................       13,554        14,085
                                                                                   ----------    ----------
Other long term liabilities ....................................................        2,055         1,572
                                                                                   ----------    ----------
Long-term debt, less current maturities ........................................       23,069        13,222
                                                                                   ----------    ----------
Subordinated notes, net of debt discount of $429 at
     December 31, 1997 .........................................................        2,091            --
                                                                                   ----------    ----------
Notes payable, 11% Senior Notes due 2005 .......................................           --       100,000
                                                                                   ----------    ----------
Commitments and Contingencies

STOCKHOLDERS' EQUITY:
     Preferred stock, $0.01 par value, 20,000,000 shares authorized; none
           issued or outstanding
     Common Stock, $0.01 par value, 100,000,000 shares authorized; 18,183,945
           shares issued and outstanding at December 31, 1997;
           18,193,945 at September 30, 1998 ....................................          182           182
     Additional paid-in capital (net of deferred compensation of $258 at
           December 31, 1997 and $219 at September 30, 1998) ...................      180,400       180,489
     Accumulated deficit .......................................................       (2,120)       (1,415)
                                                                                   ----------    ----------
           Total stockholders' equity ..........................................      178,462       179,256
                                                                                   ----------    ----------
           Total liabilities and stockholders' equity ..........................   $  240,488    $  339,842
                                                                                   ==========    ==========
</TABLE>


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



                                       1



<PAGE>   4

                       BAYARD DRILLING TECHNOLOGIES, INC.

                            STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)
                                   (Unaudited)


<TABLE>
<CAPTION>




                                                                                THREE MONTHS ENDE        NINE MONTHS ENDED
                                                                                   SEPTEMBER 30,           SEPTEMBER 30
                                                                               --------------------    --------------------
                                                                                 1997        1998        1997        1998
                                                                               --------    --------    --------    --------
<S>                                                                            <C>         <C>         <C>         <C>     
REVENUES:
Drilling ...................................................................   $ 18,107    $ 20,625    $ 33,214    $ 64,802
                                                                               --------    --------    --------    --------

COST AND EXPENSES:
Drilling ...................................................................     13,349      15,987      24,246      48,447
General and administrative .................................................        447         905       1,181       2,374
Depreciation and amortization ..............................................      2,273       3,876       4,918      10,352
                                                                               --------    --------    --------    --------
Total costs and expenses ...................................................     16,069      20,768      30,345      61,173
                                                                               --------    --------    --------    --------
Operating income (loss) ....................................................      2,038        (143)      2,869       3,629
                                                                               --------    --------    --------    --------
OTHER INCOME (EXPENSE):
Interest expense ...........................................................     (1,190)     (2,824)     (2,172)     (3,392)
Interest income ............................................................         17         416          68       1,217
Gain on sale of assets .....................................................        243         102         303         354
Other ......................................................................         (3)        (56)          5          (7)
                                                                               --------    --------    --------    --------
Total other income (expense) ...............................................       (933)     (2,362)     (1,796)     (1,828)
                                                                               --------    --------    --------    --------
Earnings (loss) before income
  taxes and extraordinary Item .............................................      1,105      (2,505)      1,073       1,801
Income tax (benefit) - deferred ............................................        422      (1,052)        410         758
                                                                               --------    --------    --------    --------
Net income (loss) before extraordinary item ................................        683      (1,453)        663       1,043

Extraordinary loss, net of income taxes of $245 ............................         --          --          --        (338)
                                                                               --------    --------    --------    --------
Net earnings (loss) ........................................................   $    683    $ (1,453)   $    663    $    705
                                                                               --------    --------    --------    --------
EARNINGS (LOSS) PER SHARE:
    Basic:

       Before extraordinary item ...........................................   $    .09    $   (.08)   $    .10    $    .06
                                                                               --------    --------    --------    --------
       Extraordinary item ..................................................         --          --          --    $   (.02)
                                                                               --------    --------    --------    --------
       Net earnings ........................................................   $    .09    $   (.08)   $    .10    $    .04
                                                                               --------    --------    --------    --------
    Diluted:
                                                                               --------    --------    --------    --------
       Before extraordinary item ...........................................   $    .09    $   (.08)   $    .07    $    .06
                                                                               --------    --------    --------    --------
       Extraordinary item ..................................................         --          --    $     --    $   (.02)
                                                                               --------    --------    --------    --------
       Net earnings ........................................................   $    .09    $   (.08)   $    .07    $    .04
                                                                               --------    --------    --------    --------
Weighted average common shares outstanding, basic ..........................      7,556      18,194       6,679      18,191
                                                                               --------    --------    --------    --------
Weighted average common shares outstanding, diluted ........................     10,877      18,194       9,607      18,474
                                                                               --------    --------    --------    --------

</TABLE>


   The accompanying notes are an integral part of these financial statements



                                       2

<PAGE>   5



                       BAYARD DRILLING TECHNOLOGIES, INC.

                         STATEMENTS OF EQUITY (DEFICIT)
                                 (In thousands)


<TABLE>
<CAPTION>

                                                                                    STOCKHOLDERS' EQUITY
                                                                   -----------------------------------------------------------
                                                       PARTNERS                ADDITIONAL
                                                       CAPITAL       COMMON     PAID-IN    DEFERRED      ACCUM
                                                      (DEFICIT)      STOCK      CAPITAL      COMP        DEFICIT       TOTAL
                                                      ---------    ---------   ---------   ---------    ---------    ---------
<S>                                                   <C>          <C>         <C>         <C>          <C>          <C> 
Balance at December 31, 1995 ......................   $    (276)        $---        $---        $---         $---         $---
   Net earnings through date of corporate
        Capitalization ............................         447           --          --          --           --           --
   Net increase in equity arising from affiliate
        Transactions ..............................       5,285           --          --          --           --           --
   Issuance of stock in corporate capitalization ..      (5,456)          20       5,436          --           --        5,456
   Sale of stock ..................................          --           20       9,980          --           --       10,000
   Issuance of stock options and warrants for
      drilling agreements and debt ................          --           --       1,319          --           --        1,319
   Issuance of stock and options for property
      and equipment ...............................          --           16       9,494          --           --        9,510
   Net loss from date of corporate capitalization
      To December 31, 1996 ........................          --           --          --          --          (34)         (34)
                                                      ---------    ---------   ---------   ---------    ---------    ---------

Balance at December 31, 1996 ......................          --           56      26,229          --          (34)      26,251
   Net loss .......................................          --           --          --          --       (2,086)      (2,086)
   Issuance of stock options to employees .........          --           --          60         (53)          --            7
   Sale of stock ..................................          --           89     107,020          --           --      107,109
   Issuance of stock options and warrants .........          --           --       5,068          --           --        5,068
   Executive compensation agreements ..............          --           --         250        (205)          --           45
   Issuance of stock for acquisitions .............          --           37      42,031          --           --       42,068
                                                      ---------    ---------   ---------   ---------    ---------    ---------

Balance at December 31, 1997 ......................          --          182     180,658        (258)      (2,120)     178,462
   Net income (unaudited) .........................          --           --          --          --          705          705
   Exercise stock options (unaudited) .............          --           --          50          --           --           50
   Executive compensation agreements (unaudited) ..          --           --          --          39           --           39
                                                      ---------    ---------   ---------   ---------    ---------    ---------

Balance at September 30, 1998 (unaudited) .........   $      --    $     182   $ 180,708   $    (219)   $  (1,415)   $ 179,256
                                                      =========    =========   =========   =========    =========    =========
</TABLE>


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



                                       3

<PAGE>   6



                       BAYARD DRILLING TECHNOLOGIES, INC.

                            STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                         NINE MONTHS ENDED
                                                                       ---------------------
                                                                            SEPTEMBER 30,
                                                                         1997         1998
                                                                      ---------    ---------
<S>                                                                   <C>          <C>      
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net earnings ...................................................   $     663    $     705
   Adjustments to reconcile net earnings to net cash
      Provided by operating activities:
      Depreciation and amortization ...............................       4,918       10,352
      Gain on sale of assets ......................................        (303)        (354)
      Compensation expense ........................................          21           39
      Deferred income taxes .......................................         410          758
      Change in assets and liabilities, net of effects of affiliate
            Transactions -
            (Increase) decrease in accounts receivable ............     (12,526)       3,741
            Increase in other assets ..............................      (1,030)      (3,590)
            Increase (decrease) in accrued liabilities ............       3,564        6,629
            Increase in accounts payable ..........................      12,895        5,350
            Decrease in payable to affiliate ......................          --          (79)
            Decrease in other liabilities .........................          --         (483)
                                                                      ---------    ---------
               Net cash provided by operating activities ..........       8,612       23,068
                                                                      ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of property and equipment ..........................     (50,454)    (138,017)
   Acquisition of businesses ......................................     (26,056)          --
   Proceeds from sale of assets ...................................         781          688
   Proceeds from sale of investments ..............................          --          355
   Purchase of investments ........................................        (730)          --
                                                                      ---------    ---------
               Net cash used in investing activities ..............     (76,459)    (136,974)
                                                                      ---------    ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from borrowings .......................................      47,944           --
   Proceeds from exercise of options ..............................          --           50
   Proceeds from issuance of stock ................................      11,230           --
   Proceeds from issuance of notes, net of issuance costs .........          --       97,450
   Payments on long-term debt .....................................      (4,114)     (13,748)
   Borrowings under line of credit ................................       7,906           --
                                                                      ---------    ---------
              Net cash provided by financing activities ...........      62,966       83,752
                                                                      ---------    ---------
Net change in cash ................................................      (4,881)     (30,154)
Cash at beginning of period .......................................       4,963       49,302
                                                                      =========    =========
Cash at end of period .............................................   $      82    $  19,148
                                                                      =========    =========
Cash paid during the period for interest ..........................   $   2,275    $   2,110
Cash paid during the period for income taxes ......................   $      --    $      --
                                                                      =========    =========
</TABLE>



                                       4

<PAGE>   7



                       BAYARD DRILLING TECHNOLOGIES, INC.

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

1. In the opinion of management of Bayard Drilling Technologies, Inc. ("Bayard"
or the "Company"), the unaudited interim financial statements for the nine
months ended September 30, 1998 and 1997 include all adjustments, consisting of
normal recurring accruals, necessary to present fairly the Company's financial
position as of September 30, 1998 and results of operations and cash flows for
the nine months ended September 30, 1998 and 1997. Results for the period ended
September 30, 1998 are not necessarily indicative of the results to be expected
for the entire fiscal year. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1997.

2. Earnings per share are computed based on the weighted average number of basic
and diluted shares outstanding during the period pursuant to SFAS No. 128. SFAS
No. 128 simplifies the standards for computing earnings per share by replacing
the presentation of primary earnings per share with a presentation of basic
earnings per share and by simplifying the calculation of diluted earnings per
share.

3. Effective July 1, 1997, the Company changed the estimated remaining lives of
its drilling rigs and other related drilling equipment to 180 months from
remaining lives of 144 months. These changes were made to more closely
approximate the remaining useful lives of such assets.

4. On October 16, 1997, the Company completed the acquisition of Bonray Drilling
Corporation ("Bonray Acquisition"), subject to certain working capital
adjustments, for 3,015,000 shares of the Company's Common Stock, par value $0.01
per share (the "Common Stock"). The Bonray Acquisition was accounted for as a
purchase. In the Bonray Acquisition, the Company acquired 13 rigs, including
seven rigs with depth capacities of 15,000 feet or greater and two diesel
electric silicon controlled rectifier rigs. At the time of the Bonray
Acquisition, twelve of Bonray's rigs were operating and under contract and one
was awaiting refurbishment. On March 30, 1998, the Securities and Exchange
Commission declared effective a Registration Statement on Form S-1 (Commission
File No. 333-43535) pursuant to which the Company registered 2,955,000 shares of
Common Stock in connection with a registration rights agreement entered into at
the time of the Bonray Acquisition.

5. In November 1997, the Company and certain of its stockholders consummated an
initial public offering (the "Initial Public Offering"); pursuant to which the
Company registered the sale of an aggregate of 11,040,000 shares of Common
Stock. In the Initial Public Offering, the Company issued and sold 4,229,050
shares of Common Stock and certain stockholders of the Company sold 6,810,950
shares of Common Stock. The Company received net proceeds of $89.5 million for
the shares sold by it in the Initial Public Offering. Through September 30, 1998
these net proceeds have been used as follows: (i) $50.1 million to purchase
machinery and equipment; (ii) $38.6 million to repay indebtedness, including
$6.2 million prepaid in May 1998 on the amount outstanding under the Company's
term loan facility; and (iii) $817,125 to pay The CIT Group/Equipment Financing,
Inc. ("CIT") in connection with the exercise by CIT of a warrant for 150,000
shares of Common Stock.

6. On June 26, 1998, the Company completed the acquisition of 25 drilling rigs
and certain related equipment and other assets from TransTexas Gas Corporation
("TransTexas") for $75 million in cash ("the TransTexas Acquisition"). The
purchase was accomplished through the issuance of $100 million of the Company's
11% Senior Notes due 2005 (the "Senior Notes Offering"). The Company received
net proceeds of approximately $97 million, and will use the additional proceeds
for general corporate purposes, possibly including capital expenditures for
acquisitions of additional drilling rigs and related equipment and the
refurbishment of rigs. All of the acquired rigs are mechanical rigs capable of
drilling to depths of 12,000 feet or greater, with twelve of the rigs capable of
drilling to depths of 20,000 feet or greater. Four of the drilling rigs are
awaiting refurbishment. In addition, the Company and TransTexas have entered
into an Alliance Agreement that provides that for a period of 30 months, if
TransTexas engages in any land drilling activities in Alabama, Louisiana,
Mississippi, Oklahoma, New Mexico or Texas, TransTexas will engage the Company
to provide up to 15 of the Company's rigs for wells on which TransTexas serves
as operator.




                                       5

<PAGE>   8



7. Prior to the consummation of the Senior Notes Offering, the Company completed
a reorganization of its corporate structure and obtained the release of certain
collateral for its secured indebtedness. In the reorganization of the corporate
structure, Bayard and its subsidiaries Trend, Bayard Drilling, L.L.C. and Bonray
transferred substantially all of their drilling rigs, associated equipment and
other assets to a wholly owned partnership, Bayard Drilling, L.P. ("Bayard
Drilling"), subject to the transferors' secured indebtedness, in exchange for
the assumption by Bayard Drilling of associated liabilities and the issuance by
Bayard Drilling of partnership interests. Concurrently with the transfers, (i)
the Company's secured lenders under its bank loan arrangements (consisting of a
term loan and a revolving loan) released from liens securing the term loan all
assets except 12 drilling rigs and associated equipment and released from liens
securing the revolving loan all drilling rigs and drilling contracts, except the
12 rigs remaining as collateral under the term loan and the drilling contracts
associated with those 12 rigs, (ii) Bayard Drilling and its general partner
Bayard Drilling, L.L.C. issued guarantees in favor of the lenders and (iii) the
Company repaid approximately $6.2 million of its indebtedness to the lenders
under its term loan. The Company recorded an extraordinary loss of $338,000 (net
of income tax effect of $245,000) in the second quarter of 1998 relating to the
early extinguishment of certain subordinate debt in the amount of approximately
$2.5 million and from the payment on term notes in the amount of $6.2 million
using proceeds from the Initial Public Offering.

8. On October 19, 1998, the Company and Nabors Industries, Inc. ("Nabors")
announced that they had executed a definitive agreement pursuant to which the
Company will merge with a wholly owned, newly created, special subsidiary of
Nabors, with the Company surviving as a wholly owned subsidiary of Nabors.
Pursuant to the merger, each of the approximately 18.2 million outstanding
shares of the Company will be exchanged for .375 shares of Nabors plus $.30 per
share in cash.


                       BAYARD DRILLING TECHNOLOGIES, INC.


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

GENERAL

         Bayard Drilling Technologies, Inc. (the "Company") is a leading
provider of contract land drilling services to major and independent oil and gas
companies. The Company was formed in December 1996 through a series of
transactions (the "Formation Transactions") that established the Company as a
regional competitor with ten rigs. Since that time, the Company has grown to
operate the fifth largest land drilling fleet in the United States with a total
of 87 rigs, 73 of which are currently being marketed. This growth is due
primarily to, and the Company's operations have been significantly affected by,
the following transactions:

         o Trend Acquisition. In May 1997, the Company completed the acquisition
of Trend Drilling Co. and its 14 rigs ("Trend") for $18 million in cash and
250,000 shares of the Company's common stock, par value $0.01 per share (the
"Common Stock") (the "Trend Acquisition").

         o Ward Acquisition. Also in May 1997, the Company acquired the assets
of Ward Drilling Company, Inc. including six rigs ("Ward") for $8 million in
cash, 400,000 shares of Common Stock and warrants to purchase an additional
200,000 shares of Common Stock (the "Ward Acquisition").

         o Bonray Acquisition. In October 1997, the Company acquired Bonray
Drilling Corporation ("Bonray") from DLB Oil & Gas, Inc. ("DLB") for 3,015,000
shares of Common Stock (the "Bonray Acquisition"). In the Bonray Acquisition,
the Company acquired 13 rigs, including seven rigs with depth capacities of
15,000 feet or greater and two diesel electric silicon controlled rectifier
rigs.

         o Oliver Acquisition. On January 9, 1998, the Company purchased six
additional rigs from R. T. Oliver Drilling, Inc. for approximately $14 million
in cash (the "Oliver Acquisition"). The Company expects to refurbish and
purchase complementary equipment, including drill pipe, for these rigs as market
conditions warrant.

         o Individual Rig Acquisitions. In addition to the Trend, Ward, Bonray
and Oliver Acquisitions, the Company has invested $5.5 million to acquire six
rigs in five transactions involving purchases of individual rigs or 






                                       6

<PAGE>   9


rig components (the "Individual Rig Acquisitions" and, together with the
Formation Transactions and the Trend, Ward, Bonray and Oliver Acquisitions, the
"Consolidation Transactions"). In addition, the Company has purchased one rig
for approximately $54,000 and has one rig, which may be assembled from
inventoried components. In August 1997, the Company sold one rig.

         o Initial Public Offering. In November 1997, the Company completed an
initial public offering (the "Initial Public Offering ") of 11,040,000 shares of
common stock, par value $0.01 per share ("Common Stock") of the Company. The
Company sold 4,229,050 shares of Common Stock in the Initial Public Offering and
received net proceeds of $89.5 million.

         o Refurbishment. The Consolidation Transactions included a number of
rigs in need of refurbishment. From January 1, 1997 through September 30, 1998,
the Company completed refurbishment of 15 rigs at an average cost of
approximately $2.7 million per rig (including drill pipe). These rigs were
placed in service at various dates between January 1997 and September, 1998. At
September 30, 1998 the Company had 14 additional rigs in various stages of
refurbishment. The Company recently revised its schedule for rig refurbishment
as a result of changes in market conditions that have caused an industry-wide
decrease in rig utilization. The Company anticipates refurbishing and placing
the remaining 14 rigs into service as market conditions warrant.

         o TransTexas Acquisition. In June 1998, the Company completed the
acquisition of 25 drilling rigs and certain related equipment and other assets
from TransTexas Gas Corporation ("TransTexas") for $75 million in cash (the
"TransTexas Acquisition"). This transaction was financed through an offering
(the "Senior Notes Offering") of $100 million of the Company's 11% Senior Notes
due 2005.

         The historical financial results presented herein include the effects
of the foregoing transactions and the operations of the related rigs only for
the periods after such transactions. In addition, the historical financial
results include periods in which a number of rigs were being refurbished and did
not contribute to revenues. Accordingly, the Company does not believe that the
historical statements of operations presented herein are necessarily indicative
of the Company's future operating results, or that comparisons of financial
results between the periods presented herein are necessarily meaningful,
particularly in light of the magnitude of the Company's recent acquisitions and
rig refurbishment projects. This discussion and analysis should be read in
conjunction with the consolidated financial statements of the Company and notes
thereto included elsewhere herein and the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.

DOMESTIC LAND DRILLING INDUSTRY OVERVIEW

         Demand for the Company's contract land drilling services is
substantially dependent upon, and affected by, the level of domestic oil and gas
exploration and development activity. Industry sources estimate that from its
peak in 1982, the supply of domestic rigs has fallen as a result of normal
attrition, cannibalization of components to refurbish rigs, the inability of
smaller competitors to raise capital needed to upgrade and modernize rigs and
the export of rigs to international markets. As a result of these factors, the
contract land drilling industry has been cyclical with significant volatility in
profitability and rig values.

         The Company's operating margins are influenced by contract drilling
rates, operating costs and drilling rig utilization. Although the Company
believes that improved technologies, the long-term decline in the supply of rigs
and stable oil and gas prices contributed to increased activity in the
exploration and production sector during 1997, there has been a general decline
in oil and, to a lesser extent, gas prices during 1998 and there can be no
assurance that such decline will not continue. The recent decline in oil and gas
prices has contributed to a decrease in the Company's rig utilization rates from
95% for the third quarter of 1997 to 48% for the third quarter of 1998. There
can be no assurance that oil and gas prices will not continue to decline or that
any such decline would not have a material adverse effect on the Company's
utilization rates. In addition, ongoing movement or reactivation of land
drilling rigs (including the movement of rigs from outside the United States
into domestic markets) or new construction of drilling rigs could increase rig
supply and adversely affect contract drilling rates and utilization levels. The
Company cannot predict the future level of demand for its contract drilling
services, future conditions in the contract drilling industry or future contract
drilling rates.




                                       7

<PAGE>   10

FINANCIAL CONDITION AND LIQUIDITY

         Since December 1996, the Company has completed the Consolidation
Transactions and in June 1998 consummated the TransTexas Acquisition. The
Formation Transactions involved the issuance of an aggregate of 5,600,000 shares
of Common Stock in consideration for the contribution to the Company of 16 rigs
and $10 million in cash. At the time of the Formation Transactions, the Company
entered into a $24 million term loan facility with The CIT Group/Equipment
Financing, Inc. ("CIT"), principally for the refurbishment of certain of the
Company's rigs. In May 1997, contemporaneously with the Trend Acquisition and in
anticipation of the Ward Acquisition, the Company completed a financing
transaction in which it (i) issued to Chesapeake Energy Corporation
("Chesapeake") and Energy Spectrum Partners LP ("Energy Spectrum") additional
shares of Common Stock, and two series of warrants together with subordinated
notes due May 1, 2003 (the "Subordinated Notes") for $28.5 million in cash and
(ii) increased the availability under its debt facilities from $24 million to
$40.5 million.

         In November 1997, the Company and certain of its stockholders
consummated the Initial Public Offering, pursuant to which the Company
registered the sale of an aggregate of 11,040,000 shares of Common Stock. In the
Initial Public Offering, the Company issued and sold 4,229,050 shares of Common
Stock and certain stockholders of the Company sold 6,810,950 shares of Common
Stock. The Company received net proceeds of $89.5 million for the shares sold by
it in the Initial Public Offering. Through September 30, 1998 these net proceeds
have been used as follows: (i) $50.1 million to purchase machinery and
equipment; (ii) $38.6 million to repay indebtedness, including $6.2 million
prepaid in May 1998 on the amount outstanding under the Term Loan (as herein
defined) and (iii) $817,125 to pay CIT in connection with the exercise of
certain options to purchase Common Stock.

         Currently, the Company's primary bank debt facilities consist of a term
loan (the "Term Loan") under an agreement (the "Term Loan Agreement") with CIT
and Fleet Capital Corporation ("Fleet"), under which $16.7 million was
outstanding as of September 30, 1998 and a $10 million revolving loan facility
under an agreement (the "Revolving Loan Agreement" and, together with the Term
Loan Agreement, the "Loan Agreements") with Fleet under which the Company has no
outstanding borrowings other than approximately $1.3 million in letters of
credit as of September 30, 1998. On June 26, 1998, the Company issued $100
million of its 11% Senior Notes due 2005 (together with the registered notes
issued in exchange therefor, the "Senior Notes") and used $75 million of such
proceeds to fund the TransTexas Acquisition. Further information regarding the
Loan Agreements and the Senior Notes is set forth below under "Financing
Activities."

         The Company's principal requirements for capital, in addition to the
funding of ongoing contract drilling operations, have been capital expenditures,
including the refurbishment of existing rigs and acquisitions. From December
1996 through September 30, 1998, the Company spent $20.7 million on the Trend
Acquisition, $11.9 million on the Ward Acquisition, $35 million on the Bonray
Acquisition, $14 million on the Oliver Acquisition, $5.5 million on the
Individual Rig Acquisitions, approximately $106.8 million on refurbishments and
other related equipment purchases, including drill pipe, and $75 million on the
TransTexas Acquisition. As a result, the Company's net property and equipment
increased from $27 million at December 31, 1996 to $155.7 million at December
31, 1997 and $283.7 million at September 30, 1998. The Company's principal
sources of liquidity have been the issuance of Common Stock, the Senior Notes,
warrants to purchase Common Stock and the Subordinated Notes and borrowings
under the Loan Agreements. As of September 30, 1998 the Company has $100 million
principal amount of Senior Notes outstanding as a result of the Senior Notes
Offering, $16.7 million of borrowings outstanding under the Term Loan Agreement,
no borrowings outstanding under the Revolving Loan Agreement and no outstanding
Subordinated Notes. The Company expects to fund its capital requirements for
1998 through the application of the remaining proceeds from the Senior Notes
Offering, cash flow from operations, and, to the extent required, borrowings
under the Loan Agreements. The Company believes that such sources of funds will
be sufficient to meet the Company's anticipated uses for 1998.

         The most significant change in the Company's balance sheet from
December 31, 1997 to September 30, 1998 was a $128 million increase in net
property and equipment and the issuance of $100 million of Senior Notes. During
this same period, long-term debt, net of current maturities, decreased by $9.8
million and stockholders' equity increased by $.8 million.

         From December 31, 1997 to September 30, 1998, the Company's working
capital position decreased by $41.5 million to $7.4 million. This was primarily
the result of additions to fixed assets.




                                       8


<PAGE>   11

Operating Activities

         During the nine months ended September 30, 1998, net cash provided from
operating activities totaled $23 million. The Company generated cash from
operations of $11.5 million and working capital changes provided $11.5 million.

Investing Activities

         During the nine months ended September 30, 1998, the Company invested
$138 million in fixed assets, including $11.1 million in the Oliver Acquisition
and $75 million in the TransTexas Acquisition. Rig refurbishment costs totaling
$38.5 million includes the Oliver Acquisition costs, refurbishments of $14.5
million on rigs currently being marketed, and $13.5 million of equipment for
future refurbishment programs. Total investment in drill pipe was $12.8 million.

Financing Activities

         During the nine months ended September 30, 1998, the Company's payments
under the Loan Agreements totaled $13.7 million.

         In April 1998, the Company redeemed in full the $2.52 million principal
amount of Subordinated Notes issued to Energy Spectrum together with accrued
interest of $47,740. In connection therewith, Energy Spectrum waived its rights
to require the Company to redeem the Subordinated Notes at 110% of par value.
This redemption, coupled with the redemption of $18 million principal amount of
Subordinated Notes from Chesapeake at the time of the Initial Public Offering,
leaves no Subordinated Notes outstanding.

         On June 26, 1998, the Company issued $100 million of Senior Notes and
used $75 million of such proceeds to fund the TransTexas Acquisition. The
Company used the remaining proceeds for general corporate purposes, possibly
including acquisitions of additional drilling rigs and related equipment and the
refurbishment of rigs. The Senior Notes mature on June 30, 2005. Interest on the
Senior Notes is payable semi-annually on June 30 and December 31 of each year,
commencing on December 31, 1998. The Senior Notes are not redeemable prior to
June 30, 2003, on or after which the Senior Notes will be redeemable, in whole
or in part, at the option of the Company, at the redemption prices set forth in
the Indenture relating to the Senior Notes (the "Indenture"), plus accrued and
unpaid interest and certain other charges, if any, thereon to the date of
redemption. In addition, at any time on or before June 30, 2001, the Company may
redeem up to 35% of the original aggregate principal amount of the Senior Notes
with the net proceeds of certain qualifying equity offerings at a redemption
price equal to 111% of the principal amount thereof, plus accrued and unpaid
interest and certain other charges, if any, thereon to the date of redemption,
provided that at least $65 million in aggregate principal amount of Senior Notes
remains outstanding immediately after the occurrence of such redemption. Upon a
transaction resulting in a change of control, each holder of the Senior Notes
will have the right to require the Company to repurchase all or any part of such
holder's Senior Notes at a price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest and certain other charges, if any, thereon to
the date of repurchase. The Senior Notes are senior unsecured obligations of the
Company and rank pari passu in right of payment with all existing and future
senior indebtedness and other senior obligations of the Company, and senior in
right of payment to all future subordinated indebtedness of the Company.

         Each of the Company's wholly owned domestic subsidiaries (each, a
"Guarantor") has issued a guarantee (a "Guarantee") of the Company's obligations
under the Notes. The Guarantees are senior unsecured obligations of each
respective Guarantor and rank pari passu in right of payment with all other
indebtedness and liabilities of such Guarantor that are not subordinated by
their terms to other indebtedness of such Guarantor, and senior in right of
payment to all subordinated indebtedness of such Guarantor.

         The Company had outstanding at September 30, 1998 $16.7 million of long
term debt under the Term Loan Agreement. The Term Loan was incurred to finance
the purchase of certain land drilling rigs, the refurbishment of such rigs and
equipment and for working capital purposes. On May 14, 1998, in connection with
the Company's corporate reorganization into a holding company structure, (i) the
Company prepaid $6.2 million of the Term Loan, obtained a release of all
collateral for the Term Loan, except 12 drilling rigs and related equipment, and
transferred to Bayard Drilling, L.P., the Company's wholly owned operating
subsidiary ("Bayard Drilling"), substantially all of its assets, subject to such
liens, and (ii) Bayard Drilling and Bayard Drilling, L.L.C., another wholly
owned subsidiary of the Company ("Bayard L.L.C."), agreed to guarantee the Term
Loan. Prior to such prepayment and 




                                       9

<PAGE>   12

collateral release, the Term Loan was secured by substantially all of the assets
of Bayard and Trend. In connection with the Senior Notes Offering, the Term Loan
was further amended to add Bonray as a guarantor of the Company's obligations.

         The Term Loan Agreement requires the Company and its subsidiaries to
maintain collateral security for the Term Loan based on appraised fair market
value and orderly liquidation value of the Company's drilling rigs and
associated rig equipment equivalent to the balance of the Term Loan, and adhere
to specified cash flow, leverage and liquidity ratios and minimum net worth and
liquidity requirements. The Term Loan Agreement contains restrictions on, among
other things, the ability of the Company and its subsidiaries to pay dividends,
make investments, incur indebtedness and liens, and make capital expenditures
and requires the maintenance of liquidity of $3 million through December 31,
1998. The Term Loan Agreement also contains affirmative covenants typical of
secured loan arrangements with finance companies, such as requiring financial
reports, insurance maintenance, legal, environmental and permit compliance. The
Company is prohibited from prepaying the Term Loan until after December 31,
1999.

         The Term Loan bears interest at the Company's choice of LIBOR plus
4.25% per annum (9.89% at September 30, 1998) or the prime rate of The Chase
Manhattan Bank plus 2.00% per annum and requires equal monthly payments of
principal, together with accrued interest, in amounts sufficient to repay
borrowings at maturity on March 31, 2002.

         The Revolving Loan Agreement provides revolving credit loans, subject
to a borrowing base comprised of a portion of the Company's accounts receivable,
of up to $10 million ($2 million of which is available for letters of credit)
for general corporate purposes. The Company has not borrowed under the Revolving
Loan Agreement since November 1997 but has approximately $1.3 million of letters
of credit outstanding thereunder.

         Any borrowings under the Revolving Loan Agreement would bear interest
based on Fleet National Bank's prime rate plus 1.5% (approximately 10.0% at
September 30, 1998). A portion of the proceeds from the Initial Public Offering
was used to repay all outstanding amounts under the Revolving Loan Agreement.
The Company pays certain fees under the Revolving Loan Agreement, including a
commitment fee equal to 0.5% of the unused portion of the maximum commitment.
Fleet's commitment to lend under the Revolving Loan Agreement ends in April
2000. The Company may terminate the Revolving Loan Agreement upon 60 days' prior
written notice to Fleet and the payment of a termination fee of 2% of the
facility.

         The Revolving Loan Agreement is collateralized by certain assets of
Bayard and Trend that were transferred to Bayard Drilling pursuant to the
Company's corporate reorganization into a holding company structure, including
accounts receivable, certain equipment and inventory, the Company's El Reno,
Oklahoma yard and the same 12 drilling rigs that collateralize the Term Loan
Agreement, together with equipment and drilling contracts related to such rigs.
The Revolving Loan Agreement is also collateralized by the receivables and
certain other assets of Bayard, Bayard Drilling, Bayard LLC, Trend and Bonray.
Until May 14, 1998, the Revolving Loan Agreement was also collateralized by all
drilling rigs of Bayard and Trend, upon which date Fleet released all but such
12 rigs and related assets. Bayard Drilling, Bayard LLC, Trend and Bonray have
agreed to guarantee the obligations under the Revolving Loan Agreement. The
Revolving Loan Agreement contains customary restrictive covenants that are
substantially similar to the covenants contained in the Term Loan Agreement.

         The Company also has issued three amortizing term notes (the "Top Drive
Notes") totaling approximately $2.5 million outstanding at September 30, 1998.
This debt bears interest at 9.5% per annum and is collateralized by certain
equipment (top drives) of the Company and letters of credit in amounts totaling
approximately $700,000. The debt represented by the Top Drive Notes matures in
July, October and November of 2000. The note agreement relating to the Top Drive
Notes does not contain any restrictive financial covenants but contains a cross
default to the Term Loan Agreement and the Revolving Loan Agreement.

Other Matters

         On October 19, 1998, the Company and Nabors Industries, Inc. ("Nabors")
announced that they had executed a definitive agreement pursuant to which the
Company will merge with a wholly owned, newly created, special subsidiary of
Nabors, with the Company surviving as a wholly owned subsidiary of Nabors.
Pursuant to the merger, each of the approximately 18.2 million outstanding
shares of the Company will be exchanged for .375 shares of Nabors plus $.30 per
share in cash.





                                       10


<PAGE>   13
         The transaction consists of approximately $100 million in equity and
$120 million in debt, which will remain the obligation of the Company after the
merger. The merger will be accounted for under the purchase method and is
expected to close around the end of 1998. The consummation of the merger is
subject to the approval of Bayard's shareholders and the customary regulatory
approvals.

         The Company and TransTexas expect to amend certain of their agreements
in order to (i) reduce to $1 million the amount that TransTexas must maintain in
escrow for payment of future obligations, (ii) extend TransTexas's payment terms
on outstanding invoices from 30 days to 60 days and (iii) permit the Company to
immediately discontinue providing all drilling services to TransTexas if
TransTexas fails to pay any invoice as and when required or fails to maintain
the $1.0 million balance in escrow. As of the date of this report, TransTexas is
approximately $800,000 in arrears (after netting the amount currently held in
escrow). If the parties enter into such an amendment, TransTexas will not be in
arrears on any payment. If the parties do not enter into such amendment, the
Company may decide to discontinue providing drilling services to TransTexas.

         One of the Company's customers filed a voluntary petition for relief
under Chapter 11 of the United States Bankruptcy Code in October 1998. At the
time of this report, the Company does not have sufficient information to
determine what, if any, of the amounts outstanding from this customer may be
uncollectible. Accordingly, no adjustments have been recorded to this customer's
accounts receivable, which amounts to approximately $550,000.

RESULTS OF OPERATIONS

         Comparison of Three Months Ended September 30, 1998 and 1997

<TABLE>
<CAPTION>
                                                1997                      
                            --------------------------------------------  
                             Gulf Coast      Mid-Continent       Total     
<S>                          <C>            <C>             <C>

Rig days worked (1) .....          1,096           1,910           3,006  
Per day amounts:
   Revenues (2) .........         $ 6,77    $      5,592    $      6,024  

   Costs (2) ............   $      5,180    $      4,016    $      4,441  

   Margin (2) ...........   $      1,595    $      1,576    $      1,583  

Drilling revenue (3) ....   $  7,426,000    $ 10,681,000    $ 18,107,000  
Drilling costs (3)(4) ...   $  5,678,000    $  7,671,000    $ 13,349,000  

Operating margin ........   $  1,748,000    $  3,010,000    $  4,758,000  
Utilization rate ........             99%             93%             95% 


<CAPTION>
                                                      1998
                            ------------------------------------------------------------
                             Gulf Coast      Mid-Continent      South          Total
                                                Texas

<S>                         <C>             <C>             <C>             <C>
Rig days worked (1) .....            608           2,072             454           3,134
Per day amounts:
   Revenues (2) .........   $      7,008    $      5,948    $      8,059    $      6,459

   Costs (2) ............   $      5,742    $      4,785    $      4,874    $      4,983

   Margin (2) ...........   $      1,266    $      1,163    $      3,185    $ 3,1851,476

Drilling revenue (3) ....   $  4,261,000    $ 12,324,000    $  4,040,000    $ 20,625,000
Drilling costs (3)(4) ...   $  3,491,000    $  9,914,000    $  2,582,000    $ 15,987,000

Operating margin ........   $    770,000    $  2,410,000    $  1,458,000    $  4,638,000
Utilization rate ........             50%             60%             24%             48%
</TABLE>

                                                                             
(1)      Rig days worked represents the number of rigs being marketed by the 
         Company multiplied by the number of days during which such rigs are 
         being operated, mobilized, assembled or dismantled while under      
         contract. Rig days are a common measurement of both utilization rates
         and fleet size.

(2)      Represents total contract drilling revenues (including mobilization
         revenues and reimbursement for fuel and other costs) divided by the
         total number of rig days worked by the Company's drilling rig fleet
         marketed during the period.

(3)      Drilling revenues for South Texas for the three months ended September
         30, 1998 include trucking revenues of approximately $342,000 and other
         revenues of approximately $39,000, which are excluded in calculating
         per day amounts. Drilling costs include approximately $369,000, which
         are also excluded in calculating per day amounts.

(4)      Drilling costs exclude depreciation and amortization and general and
         administrative expenses.


                                       11
<PAGE>   14

         Drilling revenues increased approximately $2.5 million, or 14% to $20.6
million for the three months ended September 30, 1998, from $18.1 million for
the three months ended June 30, 1997. Drilling revenues increased due to a 128
day, or 4%, increase in rig days worked, and a $435, or 7%, increase in the
average revenue per day. The increase in days worked was a result of an increase
in the average number of rigs owned and available for service. As of September
30, 1998, the Company had 73 rigs available for service. The increase in rigs
available for service was principally the result of the Consolidation
Transactions. Rig days worked consisted of 608 days worked in the Gulf Coast
region, 2,072 days worked in the Mid-Continent region, and 454 days worked in
the South Texas region. Increases in revenues per day were a result of the
increase in the dayrates and the average number of land drilling rigs being
marketed by the Company, offset by a decrease in the utilization rate from 95%
to 48%.

         Drilling costs increased by approximately $2.6 million, or 20%, to $16
million for the three months ended September 30, 1998, from $13.3 million for
the three months ended September 30, 1997. The increase in drilling operating
expenses was a direct result of the increase in the number of rigs owned and
available for service and the corresponding 128 day increase in the days worked.

         The Company's operating margin decreased by approximately $.2 million,
or 2.5%, to $4.6 million for the three months ended September 30, 1998, as
compared to $4.8 million for the three months ended September 30, 1997. The
decrease in operating margin resulted from the decrease in rig utilization..

         Depreciation and amortization expense increased by $1.6 million, or
71%, to $3.9 million for the three months ended September 30, 1998, as compared
to $2.3 million for the three months ended September 30, 1997. The increase was
primarily due to additional depreciation associated with the Consolidation
Transactions.

         General and administrative expense increased by $458,000, or 102%, to
$905,000 for the three months ended September 30, 1998, from $447,000 for the
same period of 1997 due primarily to increased payroll costs associated with new
management and increased corporate staff and increased legal fees due to the
Company's acquisition activities and public status.

         Interest expense was $2.8 million for the three months ended September
30, 1998 as compared to $1.2 million for the three months ended September 30,
1997 due to the $100 million 11% Senior notes due in the year 2005.

         Other income increased for the three months ended September 30, 1998 as
compared to the three months ended September 30, 1997, primarily due to interest
income received on funds being invested in short-term investments, partially
offset by the decrease in gain recognized on the sale of assets.

         For the three months ended September 30, 1998, the income tax benefit
was $1.1 million compared to the income tax provision of $422,000 for the same
three months of 1997. This benefit was due to the loss before income taxes
recognized in the amount of $2.5 million for the three month ended September 30,
1998 versus the earnings before income taxes recognized in the amount of $1.1
million for this same period of 1997.



         Comparison of Nine Months Ended September 30, 1998 and 1997
<TABLE>
<CAPTION>

                                               1997                                                 1998
                            ----------------------------------------     --------------------------------------------------------
                            Gulf Coast     Mid-Continent     Total       Gulf Coast   Mid-Continent      South          Total
                                                                                                         Texas
<S>                          <C>            <C>            <C>            <C>            <C>           <C>            <C>   

Rig days worked (1) .....         2,436          3,253          5,689          2,293          7,401            484         10,178
Per day amounts:
   Revenues (2) .........   $     6,581    $     5,282    $     5,838    $     7,629          5,812          8,074          6,329

   Costs (2) ............   $     4,713    $     3,924    $     4,262    $     5,633    $     4,434    $     4,849    $     4,724


   Margin (2) ...........   $     1,868    $     1,358    $     1,576    $     1,996    $     1,378    $     3,225    $     1,605

Drilling revenue (3) ....   $16,031,000    $17,183,000    $33,214,000    $17,494,000    $43,018,000    $ 4,290,000    $64,802,000
Drilling costs (3)(4) ...   $11,481,000    $12,765,000    $24,246,000    $12,916,000    $32,815,000    $ 2,716,000    $48,447,000

Operating margin ........   $ 4,550,000    $ 4,418,000    $ 8,968,000    $ 4,578,000    $10,203,000    $ 1,574,000    $16,355,000

Utilization rate ........            98%            91%            96%            61%            75%            24%            65%


</TABLE>




                                       12
<PAGE>   15



(1)  Rig days worked represents the number of rigs being marketed by the Company
     multiplied by the number of days during which such rigs are being operated,
     mobilized, assembled or dismantled while under contract.
     Rig days are a common measurement of both utilization rates and fleet size.

(2)  Represents total contract drilling revenues (including mobilization
     revenues and reimbursement for fuel and other costs) divided by the total
     number of rig days worked by the Company's drilling rig fleet marketed
     during the period.

(3)  Drilling revenues for South Texas for the nine months ended September 30,
     1998 include trucking revenues of approximately $342,000 and other revenues
     of approximately $39,000, which are excluded in calculating per day
     amounts. Drilling costs include approximately $369,000, which are also
     excluded in calculating per day amounts.

(4)  Drilling costs exclude depreciation and amortization and general and
     administrative expenses.

         Drilling revenues increased approximately $31.6 million, or 95% to
$64.8 million for the nine months ended September 30, 1998, from $33.2 million
for the nine months ended September 30, 1997. Drilling revenues increased due to
a 4,489 day, or 79%, increase in rig days worked, and a $491, or 8.4%, increase
in the average revenue per day. The increase in days worked was a result of an
increase in the average number of rigs owned and available for service. As of
September 30, 1998, the Company had 73 rigs available for service. The increase
in rigs available for service was principally the result of the Consolidation
Transactions. Rig days worked consisted of 2,293 days worked in the Gulf Coast
region, 7,401 days worked in the Mid-Continent region, and 484 days worked in
the South Texas region. Increases in revenues per day were a result of the
increase in the dayrates and the average number of land drilling rigs being
marketed by the Company, offset by a decrease in the utilization rate from 96%
to 65%.

         Drilling costs increased by approximately $24.2 million, or 100%, to
$48.4 million for the nine months ended September 30, 1998, from $24.2 million
for the nine months ended September 30, 1997. The increase in drilling operating
expenses was a direct result of the increase in the number of rigs owned and
available for service and the corresponding 4,489 day increase in the days
worked.

         The Company's operating margin increased by approximately $7.4 million,
or 82%, to $16.4 million for the nine months ended September 30, 1998, as
compared to $9 million for the nine months ended September 30, 1997. The
increase in operating margin resulted from the increase in the average revenue
per day and the increase in days worked.

         Depreciation and amortization expense increased by $5.4 million, or
110%, to $10.4 million for the nine months ended September 30, 1998, as compared
to $4.9 million for the nine months ended September 30, 1997. The increase was
primarily due to additional depreciation associated with the Consolidation
Transactions.

         General and administrative expense increased by $1.2 million, or 101%,
to $2.4 million for the nine months ended September 30, 1998, from $1.2 million
for the same period of 1997 due primarily to increased payroll costs associated
with new management and increased corporate staff and increased legal fees due
to the Company's acquisition activities and public status.

         Interest expense was $3.4 million for the nine months ended September
30, 1998 as compared to $2.2 million for the nine months ended September 30,
1997 due to the $100 million Senior notes due in the year 2005.

         Other income increased for the nine months ended September 30, 1998 as
compared to the nine months ended September 30, 1997, primarily due to interest
income received on funds being invested in short-term investments and the gain
recognized on the sale of assets.



                                       13

<PAGE>   16

         For the nine months ended September 30, 1998, the income tax provision
was $758,000 compared to $410,000 for the first nine months of 1997. This
increase is due to the increase in pretax income for the first nine months of
September 1998 versus the first nine months of 1997.

         For the nine months ended September 30, 1998, the Company recorded an
extraordinary loss in the amount of $338,000 (net of income taxes of $245,000)
from the early extinguishment of certain subordinate debt in the amount of
approximately $2.5 million, and from the payment on term notes in the amount of
$6.2 million using proceeds from the Initial Public Offering.


INFLATION AND CHANGING PRICES

         Contract drilling revenues do not necessarily track the changes in
general inflation as they tend to respond to the level of activity on the part
of the oil and gas industry in combination with the supply of equipment and the
number of competing companies. Capital and operating costs are influenced to a
larger extent by specific price changes in the oil and gas industry and to a
lesser extent by changes in general inflation.

YEAR 2000 COMPUTER ISSUES

         The Company has reviewed its computer systems and hardware to locate
potential operational problems associated with the year 2000. Such review will
continue until all potential problems are located and resolved. The Company
believes that all year 2000 problems in its computer systems have been or will
be resolved in a timely manner and have not caused and will not cause disruption
of its operations or have a material adverse effect on its financial condition
or results of operations. However, it is possible that the Company's cash flows
could be disrupted by year 2000 problems experienced by its customers, financial
institutions or other persons. The Company is unable to quantify the effect, if
any, of year 2000 computer problems that may be experienced by these third
parties.

FORWARD LOOKING INFORMATION

         This Report contains forward-looking statements and information that
are based on the beliefs of the Company's management as well as assumptions made
by and information currently available to management. All statements other than
statements of historical fact included in this Report constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, including but not limited to statements identified by the words
"anticipate," "believe," "intend," "estimate" and "expect" and similar
expressions. Such statements reflect the Company's current views with respect to
future events, based on what it believes are reasonable assumptions; however,
such statements are subject to certain risks, uncertainties and assumptions,
including but not limited to the risk factors set forth in the Company's
Registration Statements on Form S-1 (Registration No. 333-43535) and Form S-4
(Registration No. 333-59623), copies of which may be obtained from the
Securities and Exchange Commission or from the Internet site maintained by the
Commission at http://www.sec.gov. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those in the forward-looking statements.
The Company disclaims any intention or obligation to update or review any
forward-looking statements or information, whether as a result of new
information, future events or otherwise.


                                       14

<PAGE>   17



                           PART II. OTHER INFORMATION


ITEM 1.       LEGAL PROCEEDINGS.

         A purported class action lawsuit is pending against the Company,
certain directors and officers of the Company, the underwriters of the Initial
Public Offering, and certain current and former stockholders of the Company,
alleging violations of federal securities laws in connection with the Initial
Public Offering. The lawsuit, Yuan et al. v. Bayard Drilling Technologies, Inc.,
et al. ("Yuan"), was filed on February 3, 1998 in the United States District
Court for the Western District of Oklahoma. The defendants in this case include
the Company, Chesapeake, Energy Spectrum LLC, James E. Brown, David E. Grose,
Carl B. Anderson, III, Merrill A. Miller, Jr., Sidney L. Tassin, Lew O. Ward,
Mike Mullen, Roy T. Oliver, Donaldson, Lufkin & Jenrette Securities Corporation,
Lehman Brothers, Inc., Prudential Securities, Inc., Rauscher Pierce Refsnes,
Inc. (a predecessor to Dain Rauscher, Incorporated) and Raymond James &
Associates, Inc.

         The plaintiffs in this lawsuit purport to sue on their own behalf and
on behalf of all persons who purchased shares of Common Stock on or traceable to
the Initial Public Offering. In the lawsuit, plaintiffs allege claims under the
Securities Act of 1933 and the Oklahoma Securities Act. The plaintiffs allege
that the registration statement and prospectus for the Initial Public Offering
contained materially false and misleading information and omitted to disclose
material facts. In particular, the plaintiffs allege that such registration
statement and prospectus failed to disclose financial difficulties of
Chesapeake, the Company's largest customer, and the effects of such difficulties
on Chesapeake's ability to continue to provide the Company with substantial
drilling contracts. The petitions further allege that the Company failed to
disclose pre-offering negotiations with R.T. Oliver Drilling, Inc., whom the
plaintiffs allege was a related party, for the purchase of drilling rigs. In
addition, the petitions allege that the Company failed to disclose that its
growth strategy required costly refurbishment of older drilling rigs that would
dramatically increase the Company's costs, which could not be sustained by
internally generated cash flows, and would negatively impact the Company's
liquidity. Plaintiffs are seeking rescission and damages.

         Two other suits, Khan v. Bayard Drilling Technologies, Inc., et al.
("Khan") and Burkett v. Bayard Drilling Technologies, Inc., et al. ("Burkett"),
which were filed in District Court in and for Oklahoma County, State of Oklahoma
on January 14, 1998 and February 2, 1998, respectively, and alleged essentially
the same claims as Yuan were dismissed without prejudice in May 1998 on a joint
application filed by all parties. The plaintiffs in Khan and Burkett, along with
others, have been appointed as lead plaintiffs in the Yuan federal court suit,
now styled to include the other lead plaintiffs, as Yuan, et al. A motion to 
dismiss the claims in this lawsuit has been filed by the Company and the other 
defendants and is currently pending before the court.

         The Company believes the allegations in the lawsuit referenced above
are without merit and is defending vigorously the claims brought against it. The
Company is unable, however, to predict the outcome of this lawsuit or the costs
to be incurred in connection with its defense and there can be no assurance that
this litigation will be resolved in the Company's favor. An adverse result or
prolonged litigation could have a material adverse effect on the Company's
financial position or results of operations.

ITEM 2.       CHANGES IN SECURITIES AND USE OF PROCEEDS

         On June 26, 1998, the Company issued $100 million principal amount of
its 11% Senior Notes due 2005. The terms of the Senior Notes are governed by an
Indenture, dated June 26, 1998 (the "Indenture"), between the Company, the
Guarantors and U.S. Trust Company of Texas, N.A., as trustee. The Indenture
imposes certain operating and financial restrictions on the Company, including
limitations on the Company's ability to pay dividends or make other
distributions on the Common Stock. For further details regarding restrictions
imposed on the Company by the Indenture and the Senior Notes that may affect the
rights of the holders of Common Stock, reference is made to the Indenture, a
copy of which has been filed with the Commission as an exhibit to this Report.

         On November 3, 1997, the Securities and Exchange Commission declared
effective two Registration Statements on Form S-1 (Commission File Nos.
333-34451 and 333-39393) pursuant to which the Company registered the sale of an
aggregate of 11,040,000 shares of Common Stock. The Initial Public Offering
commenced on November 4, 1997 and was concluded promptly thereafter by the sale
of all 11,040,000 of the registered shares. Of the 11,040,000 shares of Common
Stock registered in the Initial Public Offering, 4,229,050 shares were sold by



                                       15

<PAGE>   18


the Company for an aggregate offering price of $97,268,150 and an aggregate of
6,810,950 shares were sold by certain stockholders for an aggregate offering
price of $156,651,850.

         After deducting expenses of approximately $7,765,600, the net proceeds
to the Company from the Initial Public Offering were $89.5 million. Through
September 30, 1998, the net proceeds received by the Company in the Initial
Public Offering have been used for the following purposes:



<TABLE>
<CAPTION>

PURPOSE                                                                             AMOUNT
-------                                                                         (IN THOUSANDS)
                                                                                --------------
<S>                                                                             <C>

Purchase of machinery and equipment.......................................        $ 50,083

Repayment of indebtedness.................................................          38,600

Payment to CIT in connection with warrant exercise........................             817

Temporary investments (1).................................................               0
                                                                                  --------
         TOTAL ...........................................................        $ 89,500
                                                                                  ========
</TABLE>


(1)      The Company repaid 25% ($6.2 million) of the amount outstanding under
         the Term Loan from a portion of the temporary investments on May 14,
         1998.

         None of the aforementioned expenses or uses of proceeds constituted
direct or indirect payments to directors or officers of the Company or their
associates, to persons owning 10% or more of any class of equity securities of
the Company or to any affiliates of the Company.


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

         The annual meeting of stockholders of Bayard Drilling Technologies,
Inc. was held on May 19, 1998 at 2:00 p.m. at the Courtyard by the Marriott in
Oklahoma City, Oklahoma. A total of 12,264,745 shares of common stock, which is
67 percent of the shares outstanding on April 10, 1998, were represented at the
meeting, either in person or by proxy.

The following directors were elected for the next year.

<TABLE>
<CAPTION>

VOTE TABULATION:
DIRECTORS:                                  FOR                       AGAINST                 ABSTAIN
<S>                                      <C>                          <C>                     <C>
     James E. Brown                      12,154,245                     ---                   110,500
     Carl B. Anderson, III               12,154,245                     ---                   110,500
     Sidney L.Tassin                     12,154,245                     ---                   110,500
     Merrill A. Miller                   12,139,245                     ---                   125,500
     Lew O. Ward                         12,154,245                     ---                   110,500
     Mark Liddell                        12,154,245                     ---                   110,500
</TABLE>


PricewaterhouseCoopers LLC were appointed as independent accountants for the
next year. The vote tabulation was as follows:

<TABLE>
<CAPTION>

VOTE TABULATION:                            FOR                       AGAINST                 ABSTAIN
<S>                                      <C>                          <C>                      <C>   
PricewaterhouseCoopers LLC               12,195,597                   49,950                   19,198
</TABLE>

These were all the matters submitted for a vote to the stockholders at the
annual stockholders meeting.



                                       16
<PAGE>   19




ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

         Exhibit
         Number            Description

         2.1               Agreement and Plan of Merger, dated as of October 19,
                           1998, among Nabors Industries, Inc., Nabors
                           Acquisition Corp. VII and the Company (incorporated
                           by reference to Exhibit 2.1 to the Company's Current
                           Report on Form 8-K filed on October 21, 1998.

         3.1               Restated Certificate of Incorporation of the Company
                           (incorporated by reference to Exhibit 3.1 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         3.2               Amended and Restated Bylaws of the Company, as
                           adopted August 19, 1997 (incorporated by reference to
                           Exhibit 3.2 to the Company's Registration Statement
                           on Form S-1 (Registration No. 333-34451)).

         4.1               Specimen Stock Certificate for due Common Stock, par
                           value $0.01 per share, of the Company (incorporated
                           by reference to Exhibit 4.1 to the Company's
                           Registration Statement on Form S-1 (Registration No.
                           333-34451)).

         4.2               Indenture, dated as of June 26, 1998, by and among
                           the Company and Bayard Drilling, L.L.C., Bayard
                           Drilling, L.P., Bonray Drilling Corporation and Trend
                           Drilling Co., as guarantors, and U.S. Trust Company
                           of Texas, N.A. as trustee (incorporated by reference
                           to Exhibit 4.2 to the Company's Registration
                           Statement on Form S-4 (Registration No. 333-59623)).

         4.3               Registration Rights Agreement, dated as of June 26,
                           1998, by and among the Company, Bayard Drilling,
                           L.L.C., Bayard Drilling, L.P., Bonray Drilling
                           Corporation, Trend Drilling Co., Donaldson, Lufkin &
                           Jenrette Securities Corporation, BT Alex Brown, Dain
                           Rauscher Wessels and Lehman Brothers Inc.
                           (incorporated by reference to Exhibit 4.3 to the
                           Company's Registration Statement on Form S-4
                           (Registration No. 333-59623)).

         4.4               Rights Agreement dated as of August 21, 1998 between
                           the Company and Norwest Bank Minnesota, N.A., as
                           Rights Agent, which includes as Exhibit A the form of
                           Certificate of Designation of Series A Junior
                           Participating Preferred Stock, as Exhibit B the form
                           of Rights Certificate and as Exhibit C the Summary of
                           Rights to Purchase Preferred Stock (incorporated by
                           reference to Exhibit 4.1 to the Company's Current
                           Report on Form 8-K filed on August 24, 1998).

         4.5               First Amendment, dated as of October 19, 1998, to
                           Rights Agreement, dated as of August 21, 1998,
                           between the Company and Norwest Bank Minnesota, N.A.
                           (incorporated by reference to Exhibit 4.1 to the
                           Company's Current Report on Form 8-K filed on October
                           21, 1998).

         10.1              1997 Stock Option and Stock Award Plan of the Company
                           (incorporated by reference to Exhibit 10.1 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.2              Forms of Non-Qualified Stock Option Agreements under
                           the 1997 Stock Option and Stock Award Plan
                           (incorporated by reference to Exhibit 10.2 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.3              Master Agreement, dated as of November 26, 1996, by
                           and among the Company and the stockholders of the
                           Company that are signatories thereto (incorporated by
                           reference to 



                                       17

<PAGE>   20

                           Exhibit 10.5 to the Company's Registration Statement
                           on Form S-1 (Registration No. 333-34451)).

         10.4              Master Drilling Agreement, dated as of December 10,
                           1996, by and among the Company, Chesapeake Energy
                           Corporation and Chesapeake Operating, Inc.
                           (incorporated by reference to Exhibit 10.6 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.5              Form of Chesapeake Drilling Agreement, by and between
                           Chesapeake Operating, Inc., as Operator, and the
                           Company, as Contractor (incorporated by reference to
                           Exhibit 10.7 to the Company's Registration Statement
                           on Form S-1 (Registration No. 333-34451)).

         10.6              Securities Purchase Agreement, dated as of April 30,
                           1997, by and among the Company, Energy Spectrum
                           Partners LP and Chesapeake Energy Corporation (the
                           "May Securities Purchase Agreement") (incorporated by
                           reference to Exhibit 10.10 to the Company's
                           Registration Statement on Form S-1 (Registration No.
                           333-34451)).

         10.7              Form of Subordinated Note of the Company issued
                           pursuant to the May Securities Purchase Agreement
                           (incorporated by reference to Exhibit 10.11 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.8              Form of Series B Warrant to Purchase Common Stock of
                           the Company issued pursuant to the May Securities
                           Purchase Agreement (incorporated by reference to
                           Exhibit 10.13 to the Company's Registration Statement
                           on Form S-1 (Registration No. 333-34451)).

         10.9              Ward Drilling Company, Inc. Warrant to Purchase
                           Common Stock of the Company, dated May 30, 1997
                           (incorporated by reference to Exhibit 10.14 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.10             Preferential Right to Transport Agreement, dated as
                           of May 30, 1997, by and between the Company and
                           Geronimo Trucking Company (incorporated by reference
                           to Exhibit 10.15 to the Company's Registration
                           Statement on Form S-1 (Registration No. 333-34451)).

         10.11             RR&T, Inc. Warrant to Purchase Common Stock of the
                           Company, dated May 1, 1997 (incorporated by reference
                           to Exhibit 10.16 to the Company's Registration
                           Statement on Form S-1 (Registration No. 333-34451)).

         10.12             Mike Mullen Warrant to Purchase Common Stock of the
                           Company, dated May 1, 1997 (incorporated by reference
                           to Exhibit 10.17 to the Company's Registration
                           Statement on Form S-1 (Registration No. 333-34451)).

         10.13             Amended and Restated Loan and Security Agreement,
                           dated as of June 18, 1998, by and among Fleet Capital
                           Corporation, the Company and Bayard Drilling, L.P.*

         10.14             Second Amended and Restated Loan Agreement, dated as
                           of June 18, 1998, by and among the CIT
                           Group/Equipment Financing, Inc. and Fleet Capital
                           Corporation, as Lenders, and the Company, as Borrower
                           (incorporated by reference to Exhibit 10.14 to the
                           Company's Registration Statement on Form S-4
                           (Registration No. 333-59623)).

         10.15             Employment Agreement dated as of December 10, 1996,
                           by and between the Company and James E. Brown
                           (incorporated by reference to Exhibit 10.21 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.16             Restricted Stock Award Agreement, dated as of
                           December 10, 1996, by and between the Company and
                           James E. Brown (incorporated by reference to Exhibit
                           10.22 to the Company's Registration Statement on Form
                           S-1 (Registration No. 333-34451)).



                                       18


<PAGE>   21

         10.17             Employment Agreement dated as of January 1, 1997, by
                           and between the Company and Ed Jacob (incorporated by
                           reference to Exhibit 10.23 to the Company's
                           Registration Statement on Form S-1 (Registration No.
                           333-34451)).

         10.18             Employment Agreement dated as of July 16, 1997, by
                           and between the Company and David E. Grose
                           (incorporated by reference to Exhibit 10.24 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.19             Letter Agreement, dated as of August 20, 1997, by and
                           between the Company and Chesapeake Energy Corporation
                           (incorporated by reference to Exhibit 10.25 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.20             Form of Indemnification Agreement entered into by the
                           Company and each of the directors and certain
                           officers of the Company in connection with the
                           Initial Public Offering (incorporated by reference to
                           Exhibit 10.26 to the Company's Registration Statement
                           on Form S-1 (Registration No. 333-34451)).

         10.21             Agreement and Plan of Merger, dated as of October 9,
                           1997, by and among DLB Oil & Gas, Inc., the Company,
                           Bonray Acquisition Corp. and Bonray Drilling
                           Corporation (incorporated by reference to Exhibit
                           10.27 to the Company's Registration Statement on Form
                           S-1 (Registration No. 333-34451)).

         10.22             1997 Non-Employee Directors' Stock Option Plan of the
                           Company (incorporated by reference to Exhibit 10.28
                           to the Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.23             Form of Nonqualified Option Agreement under the 1997
                           Non-Employee Directors' Option Plan of the Company
                           (incorporated by reference to Exhibit 10.29 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.24             Registration Rights Agreement, dated as of October
                           16, 1997, by and among the Company, DLB Oil & Gas,
                           Inc. and Donaldson, Lufkin & Jenrette Securities
                           Corporation (incorporated by reference to Exhibit
                           10.30 to the Company's Registration Statement on Form
                           S-1 (Registration No. 333-34451)).

         10.25             Letter Agreement, dated as of October 3, 1997, by and
                           between the Company and The CIT Group/Equipment
                           Financing, Inc. (incorporated by reference to Exhibit
                           10.31 to the Company's Registration Statement on Form
                           S-1 (Registration No. 333-34451)).

         10.26             Second Amended and Restated Registration Rights
                           Agreement, dated as of October 30, 1997, by and among
                           the Company and the stockholders of the Company that
                           are signatories thereto (incorporated by reference to
                           Exhibit 10.32 to the Company's Registration Statement
                           on Form S-1 (Registration No. 333-34451)).

         10.27             Stock Transfer Restriction Agreement, dated as of
                           November 3, 1997, by and between the Company and
                           Donaldson, Lufkin & Jenrette Securities Corporation
                           (incorporated by reference to Exhibit 10.27 to the
                           Company's Registration Statement on Form S-1 dated
                           December 31, 1997, Registration No. 333-43535).

         10.28             Asset Purchase Agreement, dated as of November 25,
                           1997, by and between the Company and R.T. Oliver
                           Drilling, Inc (incorporated by reference to Exhibit
                           10.28 to the Company's Registration Statement on Form
                           S-1 dated December 31, 1997, Registration No.
                           333-43535).

         10.29             Asset Purchase Agreement, dated as of May 26, 1998,
                           by and among Bayard Drilling, L.P., Bayard Drilling
                           Technologies, Inc. and TransTexas Gas Corporation
                           (incorporated by reference to Exhibit 10.29 to the
                           Company's Current Report on Form 8-K filed on June 2,
                           1998).





                                       19
<PAGE>   22

         10.30             Drilling Alliance Agreement, dated as of June 26,
                           1998, by and between Bayard Drilling, L.P. and
                           TransTexas Gas Corporation (incorporated by reference
                           to Exhibit 10.30 to the Company's Current Report on
                           Form 8-K filed on July 9, 1998).

         10.31             Purchase Agreement, dated as of June 19, 1998, by and
                           among the Company, Bayard Drilling, L.L.C., Bayard
                           Drilling, L.P., Bonray Drilling Corporation, Trend
                           Drilling Co., Donaldson, Lufkin & Jenrette Securities
                           Corporation, BT Alex Brown, Dain Rauscher Wessels and
                           Lehman Brothers Inc. (incorporated by reference to
                           Exhibit 10.31 to the Company's Registration Statement
                           on Form S-4 (Registration No. 333-59623)).

         10.32             Waiver of Certain Rights Under Second Amended and
                           Restated Stockholders and Voting Agreement dated June
                           2, 1998, by Charles E. Davidson, Mark Liddell and
                           Mike Liddell (incorporated by reference to Exhibit
                           10.32 to the Company's Registration Statement on Form
                           S-4 (Registration No. 333-59623)).

         10.33             Stock Option Agreement, dated as of October 19, 1998,
                           between Nabors Industries, Inc. and the Company
                           (incorporated by reference to Exhibit 10.1 to the
                           Company's Current Report on Form 8-K filed on October
                           21, 1998).

         27.1              Financial Data Schedule. *

         99.1              Stockholder Agreement, dated as of October 19, 1998,
                           between Nabors Industries, Inc. and James E. Brown
                           (incorporated by reference to Exhibit 99.1 to the
                           Company's Current Report on Form 8-K filed on October
                           21, 1998).

         99.2              Stockholder Agreement, dated as of October 19, 1998,
                           between Nabors Industries, Inc. and Carl B. Anderson,
                           III (incorporated by reference to Exhibit 99.2 to the
                           Company's Current Report on Form 8-K filed on October
                           21, 1998).

         99.3              Stockholder Agreement, dated as of October 19, 1998,
                           between Nabors Industries, Inc. and AnSon Partners
                           Limited Partnership (incorporated by reference to
                           Exhibit 99.3 to the Company's Current Report on Form
                           8-K filed on October 21, 1998).

         99.4              Stockholder Agreement, dated as of October 19, 1998,
                           between Nabors Industries, Inc. and Energy Spectrum
                           Partners, L.P. (incorporated by reference to Exhibit
                           99.4 to the Company's Current Report on Form 8-K
                           filed on October 21, 1998).

         99.5              Stockholder Agreement, dated as of October 19, 1998,
                           between Nabors Industries, Inc. and Wil-Cas
                           Investments, L.P. (incorporated by reference to
                           Exhibit 99.5 to the Company's Current Report on Form
                           8-K filed on October 21, 1998).

(B) REPORTS ON FORM 8-K

         On July 9, 1998, the Company filed a Current Report on Form 8-K, dated
         June 26, 1998, reporting under Item 2 (acquisition or disposition of
         assets). On August 24, 1998, the Company filed a Current Report on Form
         8-K, dated August 21, 1998, reporting under Item 5 (other events). On
         October 21, 1998, the Company filed a Current Report on Form 8-K, dated
         October 19, 1998, reporting under Item 5 (other events).

---------------
* Filed herewith





                                       20
<PAGE>   23



                                   SIGNATURES



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



                                          BAYARD DRILLING TECHNOLOGIES, INC.



DATE        October 30, 1998                    /s/  James E. Brown
     -------------------------------      -------------------------------------
                                          James E. Brown, Chairman, President
                                          and Chief Executive Officer



DATE        October 30, 1998                    /s/  David E. Grose
     -------------------------------      -------------------------------------
                                          David E. Grose, Vice President and
                                          Chief Financial Officer
                                          (Principal Financial Officer)




                                       21

<PAGE>   24



                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>

         Exhibit
         Number            Description
         -------           -----------
         <S>               <C>
         2.1               Agreement and Plan of Merger, dated as of October 19,
                           1998, among Nabors Industries, Inc., Nabors
                           Acquisition Corp. VII and the Company (incorporated
                           by reference to Exhibit 2.1 to the Company's Current
                           Report on Form 8-K filed on October 21, 1998.

         3.1               Restated Certificate of Incorporation of the Company
                           (incorporated by reference to Exhibit 3.1 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         3.2               Amended and Restated Bylaws of the Company, as
                           adopted August 19, 1997 (incorporated by reference to
                           Exhibit 3.2 to the Company's Registration Statement
                           on Form S-1 (Registration No. 333-34451)).

         4.1               Specimen Stock Certificate for due Common Stock, par
                           value $0.01 per share, of the Company (incorporated
                           by reference to Exhibit 4.1 to the Company's
                           Registration Statement on Form S-1 (Registration No.
                           333-34451)).

         4.2               Indenture, dated as of June 26, 1998, by and among
                           the Company and Bayard Drilling, L.L.C., Bayard
                           Drilling, L.P., Bonray Drilling Corporation and Trend
                           Drilling Co., as guarantors, and U.S. Trust Company
                           of Texas, N.A. as trustee (incorporated by reference
                           to Exhibit 4.2 to the Company's Registration
                           Statement on Form S-4 (Registration No. 333-59623)).

         4.3               Registration Rights Agreement, dated as of June 26,
                           1998, by and among the Company, Bayard Drilling,
                           L.L.C., Bayard Drilling, L.P., Bonray Drilling
                           Corporation, Trend Drilling Co., Donaldson, Lufkin &
                           Jenrette Securities Corporation, BT Alex Brown, Dain
                           Rauscher Wessels and Lehman Brothers Inc.
                           (incorporated by reference to Exhibit 4.3 to the
                           Company's Registration Statement on Form S-4
                           (Registration No. 333-59623)).

         4.4               Rights Agreement dated as of August 21, 1998 between
                           the Company and Norwest Bank Minnesota, N.A., as
                           Rights Agent, which includes as Exhibit A the form of
                           Certificate of Designation of Series A Junior
                           Participating Preferred Stock, as Exhibit B the form
                           of Rights Certificate and as Exhibit C the Summary of
                           Rights to Purchase Preferred Stock (incorporated by
                           reference to Exhibit 4.1 to the Company's Current
                           Report on Form 8-K filed on August 24, 1998).

         4.5               First Amendment, dated as of October 19, 1998, to
                           Rights Agreement, dated as of August 21, 1998,
                           between the Company and Norwest Bank Minnesota, N.A.
                           (incorporated by reference to Exhibit 4.1 to the
                           Company's Current Report on Form 8-K filed on October
                           21, 1998).

         10.1              1997 Stock Option and Stock Award Plan of the Company
                           (incorporated by reference to Exhibit 10.1 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.2              Forms of Non-Qualified Stock Option Agreements under
                           the 1997 Stock Option and Stock Award Plan
                           (incorporated by reference to Exhibit 10.2 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.3              Master Agreement, dated as of November 26, 1996, by
                           and among the Company and the stockholders of the
                           Company that are signatories thereto (incorporated by
                           reference to Exhibit 10.5 to the Company's 
                           Registration Statement on Form S-1 (Registration 
                           No. 333-34451)).

</TABLE>




                                       22

<PAGE>   25

<TABLE>
         <S>               <C>
         10.4              Master Drilling Agreement, dated as of December 10,
                           1996, by and among the Company, Chesapeake Energy
                           Corporation and Chesapeake Operating, Inc.
                           (incorporated by reference to Exhibit 10.6 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.5              Form of Chesapeake Drilling Agreement, by and between
                           Chesapeake Operating, Inc., as Operator, and the
                           Company, as Contractor (incorporated by reference to
                           Exhibit 10.7 to the Company's Registration Statement
                           on Form S-1 (Registration No. 333-34451)).

         10.6              Securities Purchase Agreement, dated as of April 30,
                           1997, by and among the Company, Energy Spectrum
                           Partners LP and Chesapeake Energy Corporation (the
                           "May Securities Purchase Agreement") (incorporated by
                           reference to Exhibit 10.10 to the Company's
                           Registration Statement on Form S-1 (Registration No.
                           333-34451)).

         10.7              Form of Subordinated Note of the Company issued
                           pursuant to the May Securities Purchase Agreement
                           (incorporated by reference to Exhibit 10.11 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.8              Form of Series B Warrant to Purchase Common Stock of
                           the Company issued pursuant to the May Securities
                           Purchase Agreement (incorporated by reference to
                           Exhibit 10.13 to the Company's Registration Statement
                           on Form S-1 (Registration No. 333-34451)).

         10.9              Ward Drilling Company, Inc. Warrant to Purchase
                           Common Stock of the Company, dated May 30, 1997
                           (incorporated by reference to Exhibit 10.14 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.10             Preferential Right to Transport Agreement, dated as
                           of May 30, 1997, by and between the Company and
                           Geronimo Trucking Company (incorporated by reference
                           to Exhibit 10.15 to the Company's Registration
                           Statement on Form S-1 (Registration No. 333-34451)).

         10.11             RR&T, Inc. Warrant to Purchase Common Stock of the
                           Company, dated May 1, 1997 (incorporated by reference
                           to Exhibit 10.16 to the Company's Registration
                           Statement on Form S-1 (Registration No. 333-34451)).

         10.12             Mike Mullen Warrant to Purchase Common Stock of the
                           Company, dated May 1, 1997 (incorporated by reference
                           to Exhibit 10.17 to the Company's Registration
                           Statement on Form S-1 (Registration No. 333-34451)).

         10.13             Amended and Restated Loan and Security Agreement,
                           dated as of June 18, 1998, by and among Fleet Capital
                           Corporation, the Company and Bayard Drilling, L.P.*

         10.14             Second Amended and Restated Loan Agreement, dated as
                           of June 18, 1998, by and among the CIT
                           Group/Equipment Financing, Inc. and Fleet Capital
                           Corporation, as Lenders, and the Company, as Borrower
                           (incorporated by reference to Exhibit 10.14 to the
                           Company's Registration Statement on Form S-4
                           (Registration No. 333-59623)).

         10.15             Employment Agreement dated as of December 10, 1996,
                           by and between the Company and James E. Brown
                           (incorporated by reference to Exhibit 10.21 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.16             Restricted Stock Award Agreement, dated as of
                           December 10, 1996, by and between the Company and
                           James E. Brown (incorporated by reference to Exhibit
                           10.22 to the Company's Registration Statement on Form
                           S-1 (Registration No. 333-34451)).

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         <S>               <C>
         10.17             Employment Agreement dated as of January 1, 1997, by
                           and between the Company and Ed Jacob (incorporated by
                           reference to Exhibit 10.23 to the Company's
                           Registration Statement on Form S-1 (Registration No.
                           333-34451)).

         10.18             Employment Agreement dated as of July 16, 1997, by
                           and between the Company and David E. Grose
                           (incorporated by reference to Exhibit 10.24 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.19             Letter Agreement, dated as of August 20, 1997, by and
                           between the Company and Chesapeake Energy Corporation
                           (incorporated by reference to Exhibit 10.25 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.20             Form of Indemnification Agreement entered into by the
                           Company and each of the directors and certain
                           officers of the Company in connection with the
                           Initial Public Offering (incorporated by reference to
                           Exhibit 10.26 to the Company's Registration Statement
                           on Form S-1 (Registration No. 333-34451)).

         10.21             Agreement and Plan of Merger, dated as of October 9,
                           1997, by and among DLB Oil & Gas, Inc., the Company,
                           Bonray Acquisition Corp. and Bonray Drilling
                           Corporation (incorporated by reference to Exhibit
                           10.27 to the Company's Registration Statement on Form
                           S-1 (Registration No. 333-34451)).

         10.22             1997 Non-Employee Directors' Stock Option Plan of the
                           Company (incorporated by reference to Exhibit 10.28
                           to the Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.23             Form of Nonqualified Option Agreement under the 1997
                           Non-Employee Directors' Option Plan of the Company
                           (incorporated by reference to Exhibit 10.29 to the
                           Company's Registration Statement on Form S-1
                           (Registration No. 333-34451)).

         10.24             Registration Rights Agreement, dated as of October
                           16, 1997, by and among the Company, DLB Oil & Gas,
                           Inc. and Donaldson, Lufkin & Jenrette Securities
                           Corporation (incorporated by reference to Exhibit
                           10.30 to the Company's Registration Statement on Form
                           S-1 (Registration No. 333-34451)).

         10.25             Letter Agreement, dated as of October 3, 1997, by and
                           between the Company and The CIT Group/Equipment
                           Financing, Inc. (incorporated by reference to Exhibit
                           10.31 to the Company's Registration Statement on Form
                           S-1 (Registration No. 333-34451)).

         10.26             Second Amended and Restated Registration Rights
                           Agreement, dated as of October 30, 1997, by and among
                           the Company and the stockholders of the Company that
                           are signatories thereto (incorporated by reference to
                           Exhibit 10.32 to the Company's Registration Statement
                           on Form S-1 (Registration No. 333-34451)).

         10.27             Stock Transfer Restriction Agreement, dated as of
                           November 3, 1997, by and between the Company and
                           Donaldson, Lufkin & Jenrette Securities Corporation
                           (incorporated by reference to Exhibit 10.27 to the
                           Company's Registration Statement on Form S-1 dated
                           December 31, 1997, Registration No. 333-43535).

         10.28             Asset Purchase Agreement, dated as of November 25,
                           1997, by and between the Company and R.T. Oliver
                           Drilling, Inc (incorporated by reference to Exhibit
                           10.28 to the Company's Registration Statement on Form
                           S-1 dated December 31, 1997, Registration No.
                           333-43535).

         10.29             Asset Purchase Agreement, dated as of May 26, 1998,
                           by and among Bayard Drilling, L.P., Bayard Drilling
                           Technologies, Inc. and TransTexas Gas Corporation
                           (incorporated by reference to Exhibit 10.29 to the
                           Company's Current Report on Form 8-K filed on June 2,
                           1998).

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<PAGE>   27

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         10.30             Drilling Alliance Agreement, dated as of June 26,
                           1998, by and between Bayard Drilling, L.P. and
                           TransTexas Gas Corporation (incorporated by reference
                           to Exhibit 10.30 to the Company's Current Report on
                           Form 8-K filed on July 9, 1998).

         10.31             Purchase Agreement, dated as of June 19, 1998, by and
                           among the Company, Bayard Drilling, L.L.C., Bayard
                           Drilling, L.P., Bonray Drilling Corporation, Trend
                           Drilling Co., Donaldson, Lufkin & Jenrette Securities
                           Corporation, BT Alex Brown, Dain Rauscher Wessels and
                           Lehman Brothers Inc. (incorporated by reference to
                           Exhibit 10.31 to the Company's Registration Statement
                           on Form S-4 (Registration No. 333-59623)).

         10.32             Waiver of Certain Rights Under Second Amended and
                           Restated Stockholders and Voting Agreement dated June
                           2, 1998, by Charles E. Davidson, Mark Liddell and
                           Mike Liddell (incorporated by reference to Exhibit
                           10.32 to the Company's Registration Statement on Form
                           S-4 (Registration No. 333-59623)).

         10.33             Stock Option Agreement, dated as of October 19, 1998,
                           between Nabors Industries, Inc. and the Company
                           (incorporated by reference to Exhibit 10.1 to the
                           Company's Current Report on Form 8-K filed on October
                           21, 1998).

         27.1              Financial Data Schedule. *

         99.1              Stockholder Agreement, dated as of October 19, 1998,
                           between Nabors Industries, Inc. and James E. Brown
                           (incorporated by reference to Exhibit 99.1 to the
                           Company's Current Report on Form 8-K filed on October
                           21, 1998).

         99.2              Stockholder Agreement, dated as of October 19, 1998,
                           between Nabors Industries, Inc. and Carl B. Anderson,
                           III (incorporated by reference to Exhibit 99.2 to the
                           Company's Current Report on Form 8-K filed on October
                           21, 1998).

         99.3              Stockholder Agreement, dated as of October 19, 1998,
                           between Nabors Industries, Inc. and AnSon Partners
                           Limited Partnership (incorporated by reference to
                           Exhibit 99.3 to the Company's Current Report on Form
                           8-K filed on October 21, 1998).

         99.4              Stockholder Agreement, dated as of October 19, 1998,
                           between Nabors Industries, Inc. and Energy Spectrum
                           Partners, L.P. (incorporated by reference to Exhibit
                           99.4 to the Company's Current Report on Form 8-K
                           filed on October 21, 1998).

         99.5              Stockholder Agreement, dated as of October 19, 1998,
                           between Nabors Industries, Inc. and Wil-Cas
                           Investments, L.P. (incorporated by reference to
                           Exhibit 99.5 to the Company's Current Report on Form
                           8-K filed on October 21, 1998).

</TABLE>

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        * Filed herewith





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