<PAGE>

                                   FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

     OR

[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
     FOR THE TRANSITION PERIOD FROM _________ TO __________


Commission File Number                                                1-13071

                           HANOVER COMPRESSOR COMPANY
             (Exact name of registrant as specified in its charter)


            Delaware                                   75-2344249
(State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                    Identification No.)

                          12001 North Houston Rosslyn
                             Houston, Texas  77086
                   (Address of principal executive offices)

                                (281) 447-8787
             (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes  [X]
No   [_]

As of November 8, 1999 there were 28,723,798 shares of the Company's common
stock, $0.001 par value, outstanding.
<PAGE>
                          HANOVER COMPRESSOR COMPANY
                     CONDENSED CONSOLIDATED BALANCE SHEET
                                  (unaudited)
       (in thousands of dollars, except for par value and share amounts)

                                                      September 30, December 31,
                                                           1999       1998
                                                         ---------  ---------
                         ASSETS
Current assets:
   Cash and cash equivalents                             $   9,090  $  11,503
   Accounts receivable trade, net                           87,488     70,205
   Inventory                                                66,078     63,044
   Costs and estimated earnings in excess of billings
        on uncompleted contracts                            10,215      7,871
   Prepaid taxes                                            11,924      9,466
   Other current assets                                      5,593      2,967
                                                         ---------  ---------
        Total current assets                               190,388    165,056
                                                         ---------  ---------
Property, plant and equipment:
   Compression equipment and facilities                    444,407    422,896
   Land and buildings                                       18,513     15,044
   Transportation and shop equipment                        25,149     21,667
   Other                                                    11,322     11,119
                                                         ---------  ---------
                                                           499,391    470,726
   Accumulated depreciation                                (72,864)   (78,228)
                                                         ---------  ---------
        Net property, plant and equipment                  426,527    392,498
                                                         ---------  ---------

Intangible and other assets                                 67,065     57,036
                                                         ---------  ---------
                                                         $ 683,980  $ 614,590
                                                         =========  =========
        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current maturities of long-term debt                  $     562  $     444
   Accounts payable, trade                                  25,466     23,361
   Accrued liabilities                                      18,957     17,599
   Advance billings                                         12,520      9,694
   Billings on uncompleted contracts in excess of
           costs and estimated earnings                      3,017        694
                                                         ---------  ---------
        Total current liabilities                           60,522     51,792

Long-term debt                                             124,540    156,943
Other liabilities                                           83,330     42,858
Deferred income taxes                                       66,774     46,284
                                                         ---------  ---------
        Total liabilities                                  335,166    297,877
                                                         ---------  ---------
Common stockholders' equity:
   Common stock, $.001 par value; 100 million shares authorized;
        28,713,798 and 28,590,472 shares issued and
        outstanding, respectively                               29         29
   Additional paid-in capital                              271,604    269,005
   Notes receivable - employee stockholders                 (9,411)   (10,146)
   Accumulated other comprehensive income (loss)              (329)       152
   Retained earnings                                        88,507     60,998
   Treasury stock - 83,697 and 175,547 common shares,
          respectively, at cost                             (1,586)    (3,325)
                                                         ---------  ---------
        Total common stockholders' equity                  348,814    316,713
                                                         ---------  ---------
                                                         $ 683,980  $ 614,590
                                                         =========  =========

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

<PAGE>

                          HANOVER COMPRESSOR COMPANY
      CONDENSED CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME
                                  (unaudited)
              (in thousands of dollars, except per share amounts)
<TABLE>
<CAPTION>
                                                       Three months              Nine months
                                                    ended September 30,       ended September 30,
                                                    -------------------     ----------------------
                                                      1999       1998         1999         1998
                                                    --------   --------     ---------    ---------
<S>                                                <C>        <C>          <C>          <C>
Revenues:
   Rentals                                          $ 50,042   $ 38,534     $ 137,749    $ 105,711
   Parts and service                                   9,035      7,677        21,398       18,281
   Compressor fabrication                             16,493     12,601        35,441       44,576
   Production equipment fabrication                    7,733     11,945        21,177       30,052
   Gain on sale of assets                              1,063        105         4,799        2,142
   Other                                                  96        934         2,141        1,416
                                                    --------   --------     ---------    ---------
                                                      84,462     71,796       222,705      202,178
                                                    --------   --------     ---------    ---------
Expenses:
   Rentals                                            16,228     12,322        45,454       35,479
   Parts and service                                   5,349      5,976        13,484       13,903
   Compressor fabrication                             13,785     10,910        29,102       37,888
   Production equipment fabrication                    5,727      7,747        15,664       19,693
   Selling, general and administrative                 8,851      7,081        24,232       19,866
   Depreciation and amortization                       9,086      9,486        28,536       28,588
   Leasing expense                                     7,143      2,776        14,727        2,776
   Interest expense                                    1,804      2,347         7,841        9,228
                                                    --------   --------     ---------    ---------
                                                      67,973     58,645       179,040      167,421
                                                    --------   --------     ---------    ---------
Income before income taxes                            16,489     13,151        43,665       34,757
Provision for income taxes                             6,101      5,103        16,156       13,486
                                                    --------   --------     ---------    ---------
Net income                                            10,388      8,048        27,509       21,271
                                                    --------   --------     ---------    ---------
Other comprehensive loss, net of tax:
   Foreign currency translation adjustment               100         82           481           84
                                                    --------   --------     ---------    ---------
Comprehensive income                                $ 10,288   $  7,966     $  27,028    $  21,187
                                                    ========   ========     =========    =========
Weighted average common and common
   equivalent shares outstanding:
         Basic                                        28,542     28,531        28,483       28,504
                                                    --------   --------     ---------    ---------
         Diluted                                      30,728     30,152        30,487       30,133
                                                    --------   --------     ---------    ---------
Earnings per common share:
         Basic                                      $   0.36   $   0.28     $    0.97    $    0.75
                                                    --------   --------     ---------    ---------
         Diluted                                    $   0.34   $   0.27     $    0.90    $    0.71
                                                    --------   --------     ---------    ---------
</TABLE>
        The accompanying notes are an integral part of these condensed
                      consolidated financial statements.
<PAGE>
                          HANOVER COMPRESSOR COMPANY
                CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (unaudited)
                           (in thousands of dollars)
<TABLE>
<CAPTION>
                                                                       Nine Months
                                                                    ended September 30,
                                                                --------------------------
                                                                  1999             1998
                                                                ---------        ---------
<S>                                                            <C>              <C>
Cash flows from operating activities:
   Net income                                                   $  27,509        $  21,271
   Adjustments:
       Depreciation and amortization                               28,536           28,588
       Amortization of debt issuance costs and debt discount          725              557
       Bad debt expense                                               723              394
       Gain on sale of assets                                      (4,799)          (2,142)
       Equity in income of nonconsolidated affiliates                (647)            (819)
       Deferred income taxes                                       10,248            6,391
       Changes in assets and liabilities:
           Accounts receivable                                    (16,995)         (19,848)
           Inventory                                               (1,434)         (22,654)
           Costs and estimated earnings in excess of billings on
               uncompleted contracts                                  (21)          (6,900)
           Accounts payable and other liabilities                   2,317           15,966
           Advance billings                                         2,826            1,235
           Other                                                   (7,561)         (13,460)
                                                                ---------        ---------
Net cash provided by operating activities                          41,427            8,579
                                                                ---------        ---------
Cash flows from investing activities:
   Cash used for business acquisitions                            (35,312)         (17,137)
   Capital expenditures                                          (200,752)        (119,405)
   Repayment of advances to unconsolidated subsidiaries             8,000                -
   Investment in nonconsolidated subsidiaries                      (4,906)               -
   Proceeds from sale of fixed assets                             220,584          206,998
                                                                ---------        ---------
Net cash provided by (used in) investing activities               (12,386)          70,456
                                                                ---------        ---------
Cash flows from financing activities:
   Net repayment on revolving credit facility                     (25,000)         (71,453)
   Repayments of shareholder notes                                  1,488               75
   Equity issuance costs                                                -             (162)
   Proceeds from warrant conversions and stock option exercises       330                -
   Debt issuance costs                                                  -           (1,384)
   Repayment of long-term debt                                     (8,194)            (819)
   Purchase of treasury stock                                           -           (2,048)
   Other                                                                -               11
                                                                ---------        ---------
Net cash used in financing activities                             (31,376)         (75,780)
                                                                ---------        ---------
Effect of exchange rate changes on cash and equivalents               (78)            (154)
                                                                ---------        ---------
Net increase (decrease) in cash and cash equivalents               (2,413)           3,101
Cash and cash equivalents at beginning of period                   11,503            4,561
                                                                ---------        ---------
Cash and cash equivalents at end of period                      $   9,090        $   7,662
                                                                =========        =========
Supplemental disclosure of cash flow information:
   Common stock issued in exchange for note
   receivable                                                   $     753
   Property sold in exchange for note receivable                $   3,480        $   1,500

Acquisitions of businesses:
   Property, plant and equipment acquired                       $  39,105        $  17,156
   Other noncash assets acquired                                   11,311            5,613
   Liabilities assumed                                              1,562              359
   Deferred taxes                                                  10,242            5,273
   Common Stock issued                                              3,300                -
</TABLE>

        The accompanying notes are an integral part of these condensed
                      consolidated financial statements.
<PAGE>

                          HANOVER COMPRESSOR COMPANY
              Notes to Condensed Consolidated Financial Statements

1.   BASIS OF PRESENTATION

  The accompanying unaudited condensed consolidated financial statements of
Hanover Compressor Company (the "Company") included herein have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the rules and regulations of the Securities and Exchange
Commission.  Accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is the opinion of
management that the information furnished includes all adjustments, consisting
only of normal recurring adjustments, which are necessary to present fairly the
financial position, results of operations, and cash flows of the Company for the
periods indicated.  The financial statement information included herein should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K/A for the year
ended December 31, 1998.  These interim results are not necessarily indicative
of results for a full year.

     EARNINGS PER COMMON SHARE

  Basic earnings per common share is computed using the weighted average number
of shares outstanding for the period. Diluted earnings per common share is
computed using the weighted average number of shares outstanding adjusted for
the incremental shares attributed to outstanding options and warrants to
purchase common stock. Included in diluted shares are common stock equivalents
relating to options of 1,645,000 and 1,228,000 and warrants of 359,000 and
401,000 for the nine months ended September 30, 1999 and 1998, respectively.

2.   INVENTORIES

  Inventory consisted of the following amounts (in thousands):

                             September 30,   December 31,
                                 1999            1998
                             -------------   ------------
     Parts and supplies          $38,458        $32,808
     Work in progress             22,936         19,962
     Finished goods                4,684         10,274
                                 -------        -------
                                 $66,078        $63,044
                                 =======        =======
<PAGE>

3.   SALES AND LEASE BACK OF EQUIPMENT

  In June 1999, the Company completed a $200 million sale and lease back of
certain compression equipment. The lease back of the equipment is recorded as an
operating lease. Under the agreement, the equipment was sold and leased back by
the Company for a 5 year period and will continue to be deployed by the Company
under its normal operating procedures.  At any time, the Company has the option
to repurchase the equipment at fair market value. The lease provides for a
substantial residual value guarantee (approximately $165 million) by the
Company, which is due upon termination of the lease and which may be satisfied
by a cash payment or the exercise of a purchase option by the Company. The
equipment sold had a book value of approximately $160 million and the equipment
sale resulted in a gain of approximately $40 million that is deferred until the
end of the lease. If the Company does not exercise its purchase options under
the agreement, the deferred gain will be recognized to the extent it exceeds
required payments by the Company under the residual value guarantee and other
requirements of the agreement.

  Previously, in July 1998, the Company completed another $200 million sale and
lease back of certain compression equipment. The lease back of the equipment is
recorded as an operating lease. Under the agreement, the equipment was sold and
leased back by the Company for a 5 year period and will continue to be deployed
by the Company under its normal operating procedures.  At any time, the Company
has the option to repurchase the equipment at fair market value.

  Both lease agreements call for variable quarterly payments that fluctuate with
the London Interbank Borrowing Rate. The following provides future minimum lease
payments under the leasing arrangements exclusive of any guarantee payments (in
thousands): 1999 -- $7,000; 2000 -- $28,000; 2001 -- $28,000; 2002 -- $28,000;
2003 -- $22,000; 2004 -- $14,000.

  In July, 1998 and in connection with the 1998 leasing transaction, the Company
entered into two-year swap transactions to manage lease rental exposure with
notional amounts of $75,000,000 and $125,000,000 and strike rates of 5.51% and
5.56%, respectively.  The differential paid or received on the swap transactions
is recognized as an adjustment to leasing expense.  The counterparty to this
contractual arrangement is a major financial institution with which the Company
also has other financial relationships.  The Company is exposed to credit loss
in the event of nonperformance by this counterparty.  However, the Company does
not anticipate nonperformance by this party and no material loss would be
expected from their nonperformance.  The fair market value of these interest
rate swaps is based on market quotes and is approximately $1 million at
September 30,1999.

4.   COMMITMENTS AND CONTINGENCIES

  In the ordinary course of business the Company is involved in various pending
or threatened legal actions.  While management is unable to predict the ultimate
outcome of these actions, it believes that any ultimate liability arising from
these actions will not have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.


5.   INDUSTRY SEGMENTS

  The Company manages its business segments primarily on the type of product or
service provided.  The Company has four principal industry segments: Rentals -
Domestic,
<PAGE>

Rentals - International, Compressor Fabrication and Production Equipment
Fabrication. The Rental segments provide natural gas compression rental and
maintenance services to meet specific customer requirements. The Compressor
Fabrication segment involves the design, fabrication and sale of natural gas
compression units to meet unique customer specifications. The Production
Equipment Fabrication segment designs, fabricates and sells equipment utilized
in the production of crude oil and natural gas.

     The Company evaluates the performance of its segments based on segment
gross profit.  Segment gross profit for each segment includes direct operating
expenses.  Costs excluded from segment gross profit include selling, general and
administrative, depreciation and amortization, leasing, interest and income
taxes.  Amounts defined as "Other" include sales of assets, results of other
insignificant operations, corporate related items primarily related to cash
management activities and parts and service operations which are not separately
managed.  Revenues include sales to external customers and intersegment sales.
Intersegment sales are accounted for at cost and are eliminated in
consolidation.  Identifiable assets are tangible and intangible assets that are
identified with the operations of a particular industry segment, or which are
allocated when used jointly.

     The following table presents sales and other financial information by
industry segment for the three months ended September 30, 1999 and 1998 (in
thousands).

<TABLE>
<CAPTION>
                                                                         PRODUCTION
                          DOMESTIC      INTERNATIONAL    COMPRESSOR       EQUIPMENT                  ELIMINA-
                           RENTALS         RENTALS       FABRICATION     FABRICATION      OTHER       TIONS        CONSOLIDATED
                          --------      -------------    -----------     -----------      -----      --------      ------------
<S>                    <C>              <C>              <C>             <C>          <C>           <C>            <C>
September 30, 1999:
Revenues from
 external customers    $      35,777   $       14,265   $      16,493   $     7,733   $   10,194             -    $     84,462
Intersegment sales                 -              300          14,194           856        1,412   $   (16,762)              -
                        ------------    -------------    ------------    ----------    ---------    ----------     -----------
  Total revenues              35,777           14,565          30,687         8,589       11,606       (16,762)         84,462
Gross Profit                  23,665           10,149           2,708         2,006        4,845             -          43,373
Identifiable assets          466,795          133,545          51,366        23,184        9,090             -         683,980

September 30, 1998:
Revenues from
 external customers    $      27,488   $       11,046   $      12,601   $    11,945   $    8,716             -    $     71,796
Intersegment sales                 -              300          17,061           697        2,263   $   (20,321)              -
                        ------------    -------------    ------------    ----------    ---------    ----------     -----------
  Total revenues              27,488           11,346          29,662        12,642       10,979       (20,321)         71,796
Gross Profit                  18,510            7,702           1,691         4,198        2,740             -          34,841
</TABLE>
<PAGE>

     The following table presents sales and other financial information by
industry segment for the nine months ended September 30, 1999 and 1998 (in
thousands).

<TABLE>
<CAPTION>
                                                                         PRODUCTION
                          DOMESTIC      INTERNATIONAL    COMPRESSOR       EQUIPMENT                  ELIMINA-
                           RENTALS         RENTALS       FABRICATION     FABRICATION      OTHER       TIONS        CONSOLIDATED
                          --------      -------------    -----------     -----------      -----      --------      ------------
<S>                    <C>              <C>              <C>             <C>          <C>           <C>            <C>
September 30, 1999:
Revenues  from
 external customers     $    98,514    $      39,235    $     35,441   $     21,177    $   28,338            -    $    222,705
Intersegment sales                -              900          45,256          2,990        17,955   $  (67,101)              -
                         ----------     ------------     -----------    -----------     ---------    ---------     -----------
  Total revenues             98,514           40,135          80,697         24,167        46,293      (67,101)        222,705
Gross Profit                 66,119           26,176           6,339          5,513        14,854            -         119,001

September 30, 1998:
Revenues from
 external customers     $    77,874    $      27,837    $     44,576   $     30,052    $   21,839            -    $    202,178
Intersegment sales                -              900          45,726          3,381         6,456   $  (56,463)              -
                         ----------     ------------     -----------    -----------     ---------    ---------     -----------
  Total revenues             77,874           28,737          90,302         33,433        28,295      (56,463)        202,178

Gross Profit                 50,952           19,279           6,688         10,359         7,937            -          95,215
</TABLE>
<PAGE>

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

  Certain matters discussed in this document are "forward-looking statements"
intended to qualify for the safe harbors from liability established by the
Private Securities Litigation Reform Act of 1995.  These forward-looking
statements can generally be identified as such because the context of the
statement will include words such as the Company "believes", "anticipates",
"expects", "estimates" or words of similar import.  Similarly, statements that
describe the Company's future plans, objectives or goals are also forward-
looking statements.  Such forward-looking statements are subject to certain
risks and uncertainties which could cause actual results to differ materially
from those anticipated as of the date of this report.  The risks and
uncertainties include (1) the loss of market share through competition, (2) the
introduction of competing technologies by other companies, (3) a prolonged
substantial reduction in natural gas prices which would cause a decline in the
demand for the Company's compression and oil and gas production equipment, (4)
new governmental safety, health and environmental regulations which could
require significant capital expenditures by the Company and (5) changes in
economic or political conditions in the countries in which the Company operates.
The forward-looking statements included herein are only made as of the date of
this report and the Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.

GENERAL

  The Company is the market leader in full service natural gas compression and a
leading provider of service, fabrication and equipment for contract natural gas
handling applications.  The Company provides this equipment on a rental,
contract compression, maintenance and acquisition leaseback basis. Founded in
1990 and publicly held since 1997, the Company's customers include premier
independent and major natural gas production, processing and transportation
companies throughout the Western Hemisphere.  As of September 30, 1999, the
Company operated a fleet of 3,716 compression rental units with an aggregate
capacity of approximately 1,345,000 horsepower.

  On June 15, 1999, the Company completed a $200 million, 5-year lease
transaction (the "Equipment Lease") arranged by Chase Securities Inc.  The
transaction has been structured as a sale and lease back of compression
equipment to Hanover Equipment Trust 1999A, a Delaware business trust (the
"Trust").  Under the Equipment Lease, the compression equipment was sold to the
Trust for $200 million and leased back by the Company for a 5-year period.  The
compression equipment will continue to be deployed by the Company under its
normal operating procedures.  Additionally, the Company has the option to
repurchase the equipment from the Trust at any time.  The lease provides for a
residual value guarantee (approximately 83% of the total cost) by the Company,
which is due upon termination of the lease and which may be satisfied by a cash
payment or the exercise of a purchase option by the Company.  The sale of the
equipment resulted in a gain of approximately $40 million, which is being
deferred until the end of the lease.
<PAGE>

  Proceeds from the Equipment Lease were used to repay borrowings under the
Company's existing $200 million revolving credit facility with The Chase
Manhattan Bank, as agent (the "Bank Credit Agreement").

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998

REVENUES

  The Company's total revenues increased by $12.7 million, or 18%, to $84.5
million during the three months ended September 30, 1999 from $71.8 million
during the three months ended September 30, 1998. The increase resulted
primarily from growth of the Company's natural gas compressor rental fleet but
was offset by decreases in production equipment fabrication revenue.

  Revenues from rentals increased by $11.5 million, or 30%, to $50.0 million
during the three months ended September 30, 1999 from $38.5 million during the
three months ended September 30, 1998. Domestic revenues from rentals increased
by $8.3 million, or 30%, to $35.8 million during the three months ended
September 30, 1999 from $27.5 million during the three months ended September
30, 1998.  International rental revenues increased by $3.2 million, or 29%, to
$14.2 million during the three months ended September 30, 1999 from $11.0
million during the three months ended September 30, 1998.  The increase in both
domestic and international rental revenue resulted from expansion of the
Company's rental fleet. Domestic horsepower in the rental fleet increased by 40%
from approximately 791,000 horsepower at September 30, 1998 to approximately
1,104,000 horsepower at September 30, 1999.  In addition, international
horsepower increased by 61% from approximately 150,000 horsepower at September
30, 1998 to approximately 241,000 horsepower at September 30, 1999.

   Revenue from parts and service increased by $1.3 million, or 18% to $9.0
million during the three months ended September 30, 1999 from $7.7 million
during the three months ended September 30, 1998 primarily due to commissions
earned on third party sales and engineering services. Revenues from the
fabrication and sale of compressor equipment to third parties increased by $3.9
million, or 31%, to $16.5 million during the three months ended September 30,
1999 from $12.6 million during the three months ended September 30, 1998. During
the three months ended September 30, 1999, an aggregate of approximately 76,000
horsepower of compression equipment was fabricated compared to approximately
49,000 horsepower fabricated during the three months ended September 30, 1998.

  Revenues from the fabrication and sale of production equipment decreased by
$4.2 million, or 35%, to $7.7 million during the three months ended September
30, 1999 from $11.9 million during the three months ended September 30, 1998
primarily due to the decline in well completions resulting from lower energy
prices in the early part of 1999.
<PAGE>

EXPENSES

  Rentals operating expenses increased by $3.9 million, or 32%, to $16.2 million
during the three months ended September 30, 1999 from $12.3 million during the
three months ended September 30, 1998. The increase resulted primarily from the
corresponding 30% increase in revenues from rentals over the corresponding
period in 1998. Operating expenses of parts and service decreased by $0.6
million, or 10% to $5.3 million, contrary to the revenue increase, due to the
commissions earned on third party sales and engineering services which have
lower than normal related expenses. Operating expenses of compressor fabrication
increased by $2.9 million, or 26%, to $13.8 million during the three months
ended September 30, 1999 from $10.9 million during the three months ended
September 30, 1998 commensurate with the corresponding increase in compressor
fabrication revenue. The operating expenses attributable to production equipment
fabrication decreased by $2.0 million, or 26%, to $5.7 million during the three
months ended September 30, 1999 from $7.7 million during the three months ended
September 30, 1998, resulting from the decrease in revenue from production
equipment fabrication as previously discussed.

  Selling, general and administrative expenses increased $1.8 million, or 25%,
to $8.9 million during the three months ended September 30, 1999 from $7.1
million during the three months ended September 30, 1998.  The increase resulted
from the increased activity in the Company's rentals business segments as
described above.

  The Company believes that earnings before interest, leasing expense, taxes,
depreciation and amortization (EBITDA) is a standard measure of financial
performance used for valuing companies in the compression industry. EBITDA is a
useful common yardstick as it measures the capacity of companies to generate
cash without reference to how they are capitalized, how they account for
significant non-cash charges for depreciation and amortization associated with
assets used in the business (the bulk of which are long-lived assets in the
compression industry), or what their tax attributes may be. Additionally, since
EBITDA is a basic source of funds not only for growth but to service
indebtedness, lenders in both the private and public debt markets use EBITDA as
a primary determinant of borrowing capacity. EBITDA for the three months ended
September 30, 1999 increased 24% to $34.5 million from $27.8 million for the
three months ended September 30, 1998 primarily due to the increase in the
Company's rental revenue.

  Depreciation and amortization decreased by $0.4 million to $9.1 million during
the three months ended September 30, 1999 compared to $9.5 million during the
three months ended September 30, 1998 due to the Equipment Leases entered into
in July, 1998 and June, 1999.

  Interest expense decreased by $0.5 million to $1.8 million during the three
months ended September 30, 1999 from $2.3 million for the three months ended
September 30, 1998.   The Company incurred leasing expense of  $7.1 million
during the three months ended September 30, 1999 compared to $2.8 million during
the three months ended September 30, 1998 resulting from the Equipment Leases
entered into in July, 1998 and June, 1999.  The Company expects to incur
annual operating lease expense of approximately $28 million, an amount
equivalent to the annual interest expense of the Bank Credit Agreement that was
repaid with the proceeds of the sale of the compression equipment to the Trust.
<PAGE>

INCOME TAXES

  The provision for income taxes increased by $1.0 million, or 20%, to $6.1
million during the three months ended September 30, 1999 from $5.1 million
during the three months ended September 30, 1998.  The increase resulted
primarily from the corresponding increase in income before taxes.  The average
effective income tax rates during the three months ended September 30, 1999 and
1998 were 37% and 39%, respectively.  The decrease in average effective income
tax rates is due to expected benefits from a foreign sales corporation
established in 1998.

NET INCOME

  Net income increased $2.4 million, or 29%, to $10.4 million during the three
months ended September 30, 1999 from $8.0 million during the three months ended
September 30, 1998 for the reasons discussed above.

NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1998

REVENUES

  The Company's total revenues increased by $20.5 million, or 10%, to $222.7
million during the nine months ended September 30, 1999 from $202.2 million
during the nine months ended September 30, 1998. The increase resulted both from
growth of the Company's natural gas compressor rental fleet but was offset by
decreases in compressor fabrication and production equipment fabrication
revenues.

  Revenues from rentals increased by $32.0 million, or 30%, to $137.7 million
during the nine months ended September 30, 1999 from $105.7 million during the
nine months ended September 30, 1998.  Domestic revenues from rentals increased
by $20.6 million, or 27%, to $98.5 million during the nine months ended
September 30, 1999 from $77.9 million during the nine months ended September 30,
1998.  International revenues from rentals and maintenance increased by $11.4
million, or 41%, to $39.2 million during the nine months ended September 30,
1999 from $27.8 million during the nine months ended September 30, 1998.  The
increase in both domestic and international rental and maintenance revenues
resulted primarily from expansion of the Company's rental fleet.

  Revenue from parts and service increased by $3.1 million, or 17% to $21.4
million during the nine months ended September 30, 1999 from $18.3 million
during the nine months ended September 30, 1998.  Revenues from the fabrication
and sale of compressor equipment to third parties decreased by $9.1 million, or
20%, to $35.5 million during the nine months ended September 30, 1999 from $44.6
million during the nine months ended September 30, 1998.  During the nine months
ended September 30, 1999,  an aggregate of approximately 194,000 horsepower of
compression equipment was fabricated compared to 164,000 horsepower for the nine
months ended September 30, 1998.  The Company believes the revenue decrease
during the nine month period is due in part to a project where a customer
supplied its
<PAGE>

own engines which are typically provided by the Company and in part to lower
energy prices earlier in 1999 which reduced the demand for compressors.

  Revenues from the fabrication and sale of production equipment decreased by
$8.9 million, or 30%, to $21.2 million during the nine months ended September
30, 1999 from $30.1 million during the nine months ended September 30, 1998
primarily due to the decline in well completions resulting from lower energy
prices during the first half of 1999.

  The Company recognized gains on sales of assets of $4.8 million during the
nine months ended September 30, 1999 compared to $2.1 million during the nine
months ended September 30, 1998. The increase is primarily due to the increase
in horsepower sold from the rental fleet to customers exercising options to
purchase equipment they previously had rented.  For the nine months ended
September 30, 1999, the Company sold approximately 26,400 horsepower compared to
12,000 horsepower for the nine months ended September 30, 1998.

EXPENSES

  Rentals operating expenses increased by $10.0 million, or 28%, to $45.5
million during the nine months ended September 30, 1999 from $35.5 million
during the nine months ended September 30, 1998. The increase resulted primarily
from the corresponding 30% increase in revenues from rentals over the
corresponding period in 1998. Operating expenses of parts and service decreased
by $.4 million, or 3% to $13.5 million, contrary to the revenue increase, due to
the commissions earned on third party sales, sale of engines and engineering
services which have lower than normal related expenses. Operating expenses of
compressor fabrication decreased by $8.8 million, or 23%, to $29.1 million
during the nine months ended September 30, 1999 from $37.9 million during the
nine months ended September 30, 1998. This expense decrease was a result of the
corresponding decrease in compressor fabrication revenue. In addition, the
operating expenses attributable to production equipment fabrication decreased by
$4.0 million, or 21%, to $15.7 million during the nine months ended September
30, 1999 from $19.7 million during the nine months ended September 30, 1998,
resulting from the decrease in revenue from the production equipment fabrication
as previously discussed.

  Selling, general and administrative expenses increased $4.4 million, or 22%,
to $24.2 million during the nine months ended September 30, 1999 from $19.8
million during the nine months ended September 30, 1998.  The increase in these
expenses resulted from the increased activity in the Company's rental and
maintenance business segment as described above.

  Depreciation and amortization was $28.5 million during the nine months ended
September 30, 1999 compared to $28.6 million during the nine months ended
September 30, 1998. The decrease in depreciation as a result of the equipment
leases entered into in July 1998 and June 1999 was offset by the increase in
depreciation on the additions to the rental fleet.

  Interest expense decreased by $1.4 million, or 15%, to $7.8 million during the
nine months ended September 30, 1999 from $9.2 million during the nine months
ended September 30, 1998.  The decrease in
<PAGE>

interest expense resulted from the Equipment Leases entered into in July 1998
and June 1999. The Company incurred leasing expense of $14.7 million during the
nine months ended September 30, 1999 compared to $2.8 million during the nine
months ended September 30, 1998.

INCOME TAXES

  The provision for income taxes increased by $2.7 million, or 20%, to $16.2
million during the nine months ended September 30, 1999 from $13.5 million
during the nine months ended September 30, 1998.  The increase resulted
primarily from the corresponding increase in income before taxes.  The effective
income tax rates during the nine months ended September 30, 1999 and 1998 were
37% and 39%, respectively.  The decrease in average effective income rates is
due to expected benefits from a foreign sales corporation established in 1998.

NET INCOME

  Net income increased $6.2 million, or 29%, to $27.5 million during the nine
months ended September 30, 1999 from $21.3 million during the nine months ended
September 30, 1998 for the reasons discussed above.

LIQUIDITY AND CAPITAL RESOURCES

  The Company has historically utilized internally generated funds and equity
and debt financing to finance the growth of its compressor fleet and maintain
sufficient compression and production equipment inventory. Capital expenditures
for property, plant and equipment were $200.8 million for the nine months ended
September 30, 1999 as compared to $119.4 million for the nine months ended
September 30, 1998 as the Company has pursued acquisition leaseback
opportunities where energy producers outsource their compression service needs.
For the nine months ended September 30, 1999, the company has spent
approximately $67.4 million related to acquisition leasebacks as compared to
$14.7 million during the nine months ended September 30, 1998. In addition, the
company utilized $35.3 million to acquire the stock of certain businesses and
the related assets and liabilities.

  The proceeds from the 1999 Equipment Lease agreement were used to repay
borrowings under the Bank Credit Agreement.  As a result of the 1999 Lease
Transaction, the Company has approximately $99 million of availability under the
Credit Facility.  The Company believes its available Credit Facility plus
available cash and internally generated funds will be sufficient to fund its
anticipated level of remaining 1999 capital expenditures estimated to be
approximately $60 million.

IMPACT OF THE YEAR 2000

  Many computer systems, software products and other equipment utilize
microprocessors in which the year is represented by only two digit entries, as
"19" is inferred to be the century.  Date sensitive software may interpret a
date using "00" as the year 1900 rather than the year 2000, which could disrupt
operations due to systems failures or software miscalculations. These date
fields need to accept four digit entries to distinguish dates beginning in the
year 2000. Issues related to this situation are commonly referred to as "Year
2000 issues".
<PAGE>

  Primarily to accommodate its growth, the Company continues to install various
modifications or upgrade existing computer software and hardware. These hardware
and software upgrades accommodate Year 2000 issues. The costs associated with
the software modifications are being incurred in the ordinary course of business
and are not expected to be material in relation to either future operating
results, cash flows or financial condition. The Company has completed
substantially all critical hardware and software upgrades related to Year 2000
issues.

  The Company has reviewed its machinery and equipment operation and believes
that none of the significant machinery and equipment utilized in its core
operations is dependent on microprocessors which may be materially affected by
Year 2000 complications.

  The Company is finalizing communications with its significant customers,
suppliers and vendors to ensure that those parties have appropriate plans to
address Year 2000 issues where they may otherwise impact the operations of the
Company. There is inherent uncertainty related to Year 2000 issues due to the
possibility of failures by third party customers, suppliers and vendors, which
cannot be anticipated. The Company cannot guarantee the systems of other
companies on which it relies will be converted timely and will not have a
material adverse effect on the Company's operations, cash flows or financial
position.  The Company has limited contingency plans in place to address
possible interruptions specific to certain operations resulting from third party
failures.

ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

  The Company is exposed to interest rate and foreign currency risk. The Company
periodically enters into interest rate swaps to manage its exposure to
fluctuations in interest rates. At September 30, 1999, the fair market value of
these interest rate swaps is approximately $1.0 million. The Company does not
use derivative financial instruments to mitigate foreign currency risk.
<PAGE>

PART II.   OTHER INFORMATION

Item 6:  Exhibits and reports on Form 8-K

(a)  Exhibits

27   Financial Data Schedule

(b)  Reports submitted on Form 8-K; none.

All other items specified by Part II of this report are inapplicable and have
been omitted.
<PAGE>

SIGNATURES

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

HANOVER COMPRESSOR COMPANY
Date:  November 12, 1999
By:

/s/ Michael J. McGhan
______________________________________
Michael J. McGhan
President and Chief Executive Officer

Date:  November 12, 1999
By:


/s/ Curtis A. Bedrich
______________________________________
Curtis A. Bedrich
Chief Financial Officer