<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 JUNE 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 August 10, 1999 there were 28,608,551 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)

<TABLE>
<CAPTION>
                                                                                         June 30,              December 31,
                                                                                           1999                    1998
                                                                                     ----------------         ---------------
<S>                                                                                   <C>                      <C>
                                               ASSETS
Current assets:
      Cash and cash equivalents                                                            $ 17,792                $ 11,503
      Accounts receivable:
         Trade, net                                                                          75,112                  70,205
         Other                                                                                2,586                       -
      Inventory                                                                              66,856                  63,044
      Costs and estimated earnings in excess of billings
           on uncompleted contracts                                                           8,457                   7,871
      Prepaid taxes                                                                           8,425                   9,466
      Other current assets                                                                    7,044                   2,967
                                                                                           --------                --------
           Total current assets                                                             186,272                 165,056
                                                                                           --------                --------
 Property, plant and equipment:
      Compression equipment and facilities                                                  323,506                 422,896
      Land and buildings                                                                     17,859                  15,044
      Transportation and shop equipment                                                      23,650                  21,667
      Other                                                                                  15,376                  11,119
                                                                                           --------                --------
                                                                                            380,391                 470,726
      Accumulated depreciation                                                              (64,625)                (78,228)
                                                                                           --------                --------
           Net property, plant and equipment                                                315,766                 392,498
                                                                                           --------                --------
 Intangible and other assets                                                                 52,647                  57,036
                                                                                           --------                --------
                                                                                           $554,685                $614,590
                                                                                           ========                ========

                       LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
      Current maturities of long-term debt                                                 $    446                $    444
      Accounts payable, trade                                                                16,835                  23,361
      Accrued liabilities                                                                    17,469                  17,599
      Advance billings                                                                        9,845                   9,694
      Billings on uncompleted contracts in excess of
           costs and estimated earnings                                                         989                     694
                                                                                           --------                --------
           Total current liabilities                                                         45,584                  51,792

 Long-term debt                                                                              39,421                 156,943
 Other liabilities                                                                           83,337                  42,858
 Deferred income taxes                                                                       52,662                  46,284
                                                                                           --------                --------
           Total liabilities                                                                221,004                 297,877
                                                                                           --------                --------
 Common stockholders' equity:
      Common stock, $.001 par value; 100 million shares authorized;
           28,608,551 and 28,590,472 shares issued and
           outstanding, respectively                                                             29                      29
      Additional paid-in capital                                                            269,794                 269,005
      Notes receivable - employee stockholders                                              (10,707)                (10,146)
      Accumulated other comprehensive income (loss)                                            (229)                    152
      Retained  earnings                                                                     78,119                  60,998
      Treasury stock - 175,547 common shares, at cost                                        (3,325)                 (3,325)
                                                                                           --------                --------
           Total common stockholders' equity                                                333,681                 316,713
                                                                                           --------                --------
                                                                                           $554,685                $614,590
                                                                                           ========                ========
</TABLE>

             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                         Six months
                                                     ended June 30,                      ended June 30,
                                              -----------------------------       -----------------------------
                                                 1999               1998             1999               1998
                                              -----------        ----------       -----------        ----------
<S>                                           <C>                <C>               <C>               <C>
Revenues:
      Rentals                                    $45,273           $35,249          $ 87,707          $ 67,177
      Parts and service                            7,732             7,360            12,363            10,604
      Compressor fabrication                      11,707            15,691            18,948            31,975
      Production equipment fabrication             7,558             9,149            13,444            18,107
      Gain on sale of assets                         269             1,290             3,736             2,037
      Other                                        1,260               194             2,045               482
                                                 -------           -------          --------          --------
                                                  73,799            68,933           138,243           130,382
                                                 -------           -------          --------          --------
 Expenses:
      Rentals                                     15,252            11,972            29,226            23,158
      Parts and service                            4,711             5,828             8,135             7,926
      Compressor fabrication                       9,660            13,245            15,317            26,978
      Production equipment fabrication             5,495             5,925             9,937            11,946
      Selling, general and administrative          7,984             6,737            15,381            12,785
      Depreciation and amortization               10,237             9,988            19,450            19,102
      Leasing expense                              4,074                 -             7,584                 -
      Interest expense                             2,923             3,796             6,037             6,881
                                                 -------           -------          --------          --------
                                                  60,336            57,491           111,067           108,776
                                                 -------           -------          --------          --------
 Income before income taxes                       13,463            11,442            27,176            21,606
 Provision for income taxes                        4,981             4,470            10,055             8,383
                                                 -------           -------          --------          --------
 Net income                                        8,482             6,972            17,121            13,223
                                                 -------           -------          --------          --------
 Other comprehensive loss, net of tax:
   Foreign currency translation adjustment           (72)               (2)             (381)               (2)
                                                 -------           -------          --------          --------
 Comprehensive income                            $ 8,410      $      6,970          $ 16,740          $ 13,221
                                                 =======           =======          ========          ========
  Net income available to common stockholders    $ 8,482      $      6,972          $ 17,121          $ 13,223
                                                 =======           =======          ========          ========
 Weighted average common and common
   equivalent shares outstanding:
      Basic                                       28,471            28,519            28,453            28,490
                                                 -------           -------          --------          --------
      Diluted                                     30,443            30,244            30,320            30,124
                                                 -------           -------          --------          --------
 Earnings per common share:
      Basic                                      $  0.30           $  0.24          $   0.60          $   0.46
                                                 -------           -------          --------          --------
      Diluted                                    $  0.28           $  0.23          $   0.56          $   0.44
                                                 -------           -------          --------          --------
</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>
                                                                                                         Six Months
                                                                                              ---------------------------------
                                                                                                        ended June 30,
                                                                                              ---------------------------------
                                                                                                  1999                 1998
                                                                                              -------------        ------------
<S>                                                                                           <C>                   <C>
Cash flows from operating activities:
   Net income                                                                                   $  17,121            $ 13,223
   Adjustments:
       Depreciation and amortization                                                               19,450              19,102
       Amortization of debt issuance costs and debt discount                                          357                 374
       Bad debt expense                                                                               326                 312
       Gain on sale of assets                                                                      (3,736)             (2,037)
       Equity in income of nonconsolidated affiliates                                                (377)               (211)
       Deferred income taxes                                                                        6,378               4,031
       Changes in assets and liabilities:
           Accounts receivable                                                                     (7,819)            (11,003)
           Inventory                                                                               (3,812)            (18,210)
           Costs and estimated earnings in excess of billings on
              uncompleted contracts                                                                  (291)                 48
           Accounts payable and other liabilities                                                  (6,647)             12,958
           Advance billings                                                                           151                 821
           Other                                                                                   (4,361)             (3,694)
                                                                                                ---------            --------
   Net cash provided by operating activities                                                       16,740              15,714
                                                                                                ---------            --------
Cash flows from investing activities:
   Cash used for business acquisition                                                                   -             (17,137)
   Capital expenditures                                                                          (117,825)            (87,469)
   Repayment of advances to unconsolidated subsidiaries                                             8,000                   -
   Proceeds from sale of fixed assets                                                             216,867               6,955
                                                                                                ---------            --------
   Net cash provided by (used in) investing activities                                            107,042             (97,651)
                                                                                                ---------            --------
Cash flows from financing activities:
   Net borrowings (repayment) on revolving credit facility                                       (117,500)             83,800
   Repayments of shareholder notes                                                                    193                  75
   Equity issuance costs                                                                                -                (162)
   Proceeds from warrant conversions and stock option exercises                                        80                   5
   Debt issuance costs                                                                                  -                (104)
   Repayment of long-term debt                                                                       (234)               (688)
                                                                                                ---------            --------
   Net cash provided by (used in) financing activities                                           (117,461)             82,926
                                                                                                ---------            --------
Effect of exchange rate changes on cash and equivalents                                               (32)                  -
                                                                                                ---------            --------
Net increase in cash and cash equivalents                                                           6,289                 989
Cash and cash equivalents at beginning of period                                                   11,503               4,561
                                                                                                ---------            --------
Cash and cash equivalents at end of period                                                      $  17,792            $  5,550
                                                                                                =========            ========

Supplemental disclosure of cash flow information:
   Common stock issued in exchange for note receivable                                                752
   Property sold in exchange for note receivable                                               $    2,427               1,500

</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 1,500,000 and 1,219,000 and warrants of 367,000 and
414,000 for the three months ended June 30, 1999 and 1998, respectively.

2.      INVENTORIES

 Inventory consisted of the following amounts (in thousands):

<TABLE>
<CAPTION>
                             June 30,   December 31,
                               1999         1998
                             --------   ------------
<S>                          <C>        <C>

     Parts and supplies       $36,346        $32,808
     Work in progress          21,015         19,962
     Finished goods             9,495         10,274
                              -------        -------
                              $66,856        $63,044
                              =======        =======
</TABLE>
<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 -- $14,000; 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 $0.3 million at June
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.
<PAGE>

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, 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 June 30, 1999 and 1998 (in
thousands).

<TABLE>
<CAPTION>

                                                                      PRODUCTION
                       DOMESTIC      INTERNATIONAL   COMPRESSOR       EQUIPMENT
                        RENTALS        RENTALS       FABRICATION     FABRICATION       OTHER      ELIMINATIONS   CONSOLIDATED
                       ---------     -------------   -----------    ------------      --------   -------------   -------------
<S>                    <C>             <C>             <C>             <C>            <C>         <C>             <C>
June 30,1999:
Revenues from
 external customers     $ 32,537       $ 12,736        $11,707         $ 7,558        $ 9,261            -        $ 73,799
Intersegment sales             -            300         12,143           1,536          9,902     $(23,881)              -
                        --------       --------        -------         -------        -------     --------        --------
  Total revenues          32,537         13,036         23,850           9,094         19,163      (23,881)         73,799

Gross Profit              21,977          8,044          2,047           2,063          4,550            -          38,681

Identifiable assets      350,225        128,546         37,197          20,925         17,792             -        554,685

June 30,1998:
Revenues from
 external customers     $ 25,977       $  9,272        $15,691         $ 9,149        $ 8,844             -       $ 68,933
Intersegment sales             -            300         15,063           1,269          2,698       (19,330)            -
                        --------       --------        -------         -------        -------      --------       --------
  Total revenues          25,977          9,572         30,754          10,418         11,542       (19,330)        68,933

 Gross Profit             16,747          6,530          2,446           3,224          3,016             -         31,963

 </TABLE>

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

<TABLE>
<CAPTION>
                                                                      PRODUCTION
                       DOMESTIC      INTERNATIONAL   COMPRESSOR       EQUIPMENT
                        RENTALS        RENTALS       FABRICATION     FABRICATION       OTHER      ELIMINATIONS   CONSOLIDATED
                       ---------     -------------   -----------    ------------      --------   -------------   -------------
<S>                    <C>             <C>             <C>             <C>            <C>         <C>             <C>
June 30,1999:
Revenues from
 external customers     $ 62,737       $ 24,970        $18,948         $13,444        $18,144            -        $138,243
Intersegment sales             -            600         31,062           2,134         16,543     $(50,339)              -
                        --------       --------        -------         -------        -------     --------        --------
  Total revenues          62,737         25,570         50,010          15,578         34,687      (50,339)        138,243

Gross Profit              42,454         16,027          3,631           3,507         10,009            -          75,628

June 30,1998:
Revenues from
 external customers     $ 50,386       $ 16,791        $31,975         $18,107        $13,123            -        $130,382

Intersegment sales             -            600         28,665           2,684          4,193     $(36,142)              -
                        --------       --------        -------         -------        -------     --------        --------
  Total revenues          50,386         17,391         60,640          20,791         17,316      (36,142)        130,382

Gross Profit              32,443         11,576          4,997           6,161          5,197            -          60,374
</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 June 30, 1999, the Company
operated a fleet of 3,374 compression rental units with an aggregate capacity of
approximately 1,258,000 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 sales price) 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 JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998

REVENUES

  The Company's total revenues increased by $4.9 million, or 7%, to $73.8
million during the three months ended June 30, 1999 from $68.9 million during
the three months ended June 30, 1998. The increase resulted primarily 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 $10.1 million, or 28%, to $45.3 million
during the three months ended June 30, 1999 from $35.2 million during the three
months ended June 30, 1998. Domestic revenues from rentals increased by $6.6
million, or 25%, to $32.6 million during the three months ended June 30, 1999
from $26.0 million during the three months ended June 30, 1998.  International
rental revenues increased by $3.5 million, or 37%, to $12.7 million during the
three months ended June 30, 1999 from $9.2 million during the three months ended
June 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 39% from approximately 751,000 horsepower at June
30, 1998 to approximately 1,046,000 horsepower at June 30, 1999.  In addition,
international horsepower increased by 44% from approximately 147,000 horsepower
at June 30, 1998 to approximately 212,000 horsepower at June 30, 1999.

   Revenue from parts and service increased by $.3 million, or 5% to $7.7
million during the three months ended June 30, 1999 from $7.4 million during the
three months ended June 30, 1998.  Revenues from the fabrication and sale of
compressor equipment to third parties decreased by $4.0 million, or 25%, to
$11.7 million during the three months ended June 30, 1999 from $15.7 million
during the three months ended June 30, 1998. During the three months ended June
30, 1999, an aggregate of approximately 65,000 horsepower of compression
equipment was fabricated compared to approximately 60,000 horsepower fabricated
during the three months ended June 30, 1998. The revenue decrease during the
quarter was due to a project where the customer supplied its engines which are
typically provided by the Company.

  Revenues from the fabrication and sale of production equipment decreased by
$1.6 million, or 17%, to $7.6 million during the three months ended June 30,
1999 from $9.2 million during the three months ended June 30, 1998 primarily due
to the decline in well completions resulting from lower energy prices.
<PAGE>

EXPENSES

  Rentals operating expenses increased by $3.3 million, or 27%, to $15.3 million
during the three months ended June 30, 1999 from $12.0 million during the three
months ended June 30, 1998.  The increase resulted primarily from the
corresponding 28% increase in revenues from rentals over the corresponding
period in 1998.  Operating expense of parts and service decreased by $1.1
million, or 19% to $4.7 million primarily due to sales of engines that
the Company purchased with favorable pricing. Operating expenses of compressor
fabrication decreased by $3.5 million, or 27%, to $9.7 million during the three
months ended June 30, 1999 from $13.2 million during the three months ended June
30, 1998 commensurate with the corresponding decrease in compressor fabrication
revenue. The operating expenses attributable to production equipment fabrication
decreased by $0.4 million, or 7%, to $5.5 million during the three months ended
June 30, 1999 from $5.9 million during the three months ended June 30, 1998,
resulting from the decrease in revenue from the production equipment fabrication
as previously discussed.

  Selling, general and administrative expenses increased $1.3 million, or 19%,
to $8.0 million during the three months ended June 30, 1999 from $6.7 million
during the three months ended June 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
June 30, 1999 increased 22% to $30.7 million from $25.2 million for the three
months ended June 30, 1998 primarily due to the increase in the Company's rental
revenue for reasons previously discussed.

  Depreciation and amortization increased by $0.2 million to $10.2 million
during the three months ended June 30, 1999 compared to $10.0 million during the
three months ended June 30, 1998.

  Interest expense decreased by $0.9 million to $2.9 million during the three
months ended June 30, 1999 from $3.8 million for the three months ended June 30,
1998.   The Company incurred leasing expense of  $4.1 million during the three
months ended June 30, 1999, resulting from the Equipment Leases entered into
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 $0.5 million, or 11%, to $5.0
million during the three months ended June 30, 1999 from $4.5 million during the
three months ended June 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 June 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 set up in 1998.

NET INCOME

  Net income increased $1.5 million, or 22%, to $8.5 million during the three
months ended June 30, 1999 from $7.0 million during the three months ended June
30, 1998 for the reasons discussed above.

SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998

REVENUES

  The Company's total revenues increased by $7.8 million, or 6%, to $138.2
million during the six months ended June 30, 1999 from $130.4 million during the
six months ended June 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 $20.5 million, or 31%, to $87.7 million
during the six months ended June 30, 1999 from $67.2 million during the six
months ended June 30, 1998.  Domestic revenues from rentals increased by $12.3
million, or 25%, to $62.7 million during the six months ended June 30, 1999 from
$50.4 million during the six months ended June 30, 1998.  International revenues
from rentals and maintenance increased by $8.2 million, or 49%, to $25.0 million
during the six months ended June 30, 1999 from $16.8 million during the six
months ended June 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 $1.8 million, or 17% to $12.4
million during the six months ended June 30, 1999 from $10.6 million during the
six months ended June 30, 1998.  Revenues from the fabrication and sale of
compressor equipment to third parties decreased by $13.1 million, or 41%, to
$18.9 million during the six months ended June 30, 1999 from $32.0 million
during the six months ended June 30, 1998. During the six months ended June 30,
1999, an aggregate of approximately 119,000 horsepower of compression equipment
was fabricated compared to 115,000 horsepower for the six months ended June 30,
1998. The Company believes the revenue decrease during the six month period is
due in part to a project where a customer supplied its own engines which are
typically provided by the  Company and in part to lower prices in the energy
industry.

  Revenues from the fabrication and sale of production equipment decreased by
$4.7 million, or 26%, to $13.4 million during the six months ended June 30, 1999
from $18.1 million during the six months ended June 30, 1998 primarily due to
the decline in well completions resulting from lower energy prices.
<PAGE>

  The Company recognized gains on sales of assets of $3.7 million during the six
months ended June 30, 1999 compared to $2.0 million during the three months
ended March 31, 1999. The increase is primarily due to the increase in
horsepower sold from the rental fleet to a major international customer which
exercised its option during March 1999, to purchase equipment it previously
rented. For the six months ended June 30, 1999, the Company sold approximately
17,000 horsepower compared to approximately 11,000 horsepower for the six months
ended June 30, 1998.

EXPENSES

  Rentals operating expenses increased by $6.0 million, or 26%, to $29.2 million
during the six months ended June 30, 1999 from $23.2 million during the six
months ended June 30, 1998.  The increase resulted primarily from the
corresponding 31% increase in revenues from rentals over the corresponding
period in 1998.  Operating expense of parts and service increased by $0.2
million, or 3% to $8.1 million for the reasons previously discussed.  Operating
expenses of compressor fabrication decreased by $11.7 million, or 43%, to $15.3
million during the six months ended June 30, 1999 from $27.0 million during the
six months ended June 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
$2.0 million, or 17%, to $9.9 million during the six months ended June 30, 1999
from $11.9 million during the six months ended June 30, 1998,  resulting from
the decrease in revenue from the production equipment fabrication as previously
discussed.

  Selling, general and administrative expenses increased $2.6 million, or 20%,
to $15.4 million during the six months ended June 30, 1999 from $12.8 million
during the six months ended June 30, 1998.  The increase in these expenses
resulted from the increased activity in the Company's rental business segments
as described above.

  Depreciation and amortization increased by $0.4 million, or 2%, to $19.5
million during the six months ended June 30, 1999 from $19.1 million during the
six months ended June 30, 1998.

  Interest expense decreased by $0.9 million, or 12%, to $6.0 million during the
six months ended June 30, 1999 from $6.9 million during the six months ended
June 30, 1998. The decrease in interest expense resulted from the Equipment
Leases entered into July, 1998 and June, 1999 the proceeds from which were used
to repay borrowings under the Bank Credit Agreement. Consequently, the Company
incurred leasing expense of $7.6 million during the six months ended June 30,
1999.

INCOME TAXES

  The provision for income taxes increased by $1.7 million, or 20%, to $10.1
million during the six months ended June 30, 1999 from $8.4 million during the
six months ended June 30, 1998.  The increase resulted primarily from the
corresponding increase in income before taxes.  The effective income tax rates
during the six months ended June 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 set up in 1998.
<PAGE>

NET INCOME

  Net income increased $3.9 million, or 30%, to $17.1 million during the six
months ended June 30, 1999 from $13.2 million during the six months ended June
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 $117.8 million for the six months ended
June 30, 1999 as compared to $87.5 million for the six-month period ended June
30, 1999.

  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 $191 million of availability under
the Credit Facility at June 30, 1999. The Company believes its available Credit
Facility plus available cash and internally generated funds will be sufficient
to fund its anticipated level of 1999 capital expenditures estimated to be
approximately $100 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".

  Primarily to accommodate its growth, the Company has installed or plans to
install various modifications or upgrade existing computer software and hardware
which include, among others things, an accommodation of 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
expects that all hardware and software upgrades will be substantially completed
by October 1999.

  The Company has reviewed its machinery and equipment operations 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 communicating 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
<PAGE>

Company has not developed contingency plans to address any possible operation
disruptions resulting from third party failures but expects to do so by the end
of 1999.

Item 3. Quantitative 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 June 30, 1999, the fair market value of these
interest rate swaps is approximately $0.3 million. The Company does not use
derivative financial instruments to mitigate foreign currency risk.


<PAGE>

PART II.   OTHER INFORMATION

Item 4.  As its Annual Meeting of Stockholders held on May 19, 1999, the Company
presented the following matters to the stockholders for action and the votes
cast are indicated below:

<TABLE>
<CAPTION>
                       Matter                           For                     Withheld
             ---------------------------   -----------------------------   ------------------
<S>          <C>                           <C>                             <C>
1.           Re-election of Directors
             Michael A. O'Connor                              25,604,841               32,875
             Michael J. McGhan                                25,604,841               32,875
             William S. Goldberg                              25,604,841               32,875
             Ted Collins, Jr.                                 25,604,841               32,875
             Melvyn N. Klein                                  25,604,841               32,875
             Alvin V. Shoemaker                               25,604,841               32,875
             Robert A. Fergason                               25,604,841               32,875
             Carl M. Koupal, Jr.                              25,604,641               33,075

2.           Reappointment of PricewaterhouseCoopers LLP as Independent Accountants.

                         For                          Against                   Abstain
             ---------------------------   -----------------------------   ------------------
                              25,604,841                               0               32,875
</TABLE>
<PAGE>

II.   OTHER INFORMATION

Item 6:  Exhibits and reports on Form 8-K

(a)  Exhibits

10.36     Lease dated as of June 15, 1998 between Hanover Equipment Trust 1999
          and the Company.

10.37     Guarantee dated as of June 15, 1999 and made by the Company,
          Hanover/Smith, Inc., Hanover Maintech, Inc. and Hanover Land  Company.

10.38     Participation Agreement dated as of June 15, 1999 among the Company,
          the Trust, Societe Generale Financial Corporation and FTBC Leasing
          Corp., The Chase Manhattan Bank, as agent, and Wilmington Trust
          Company.

10.39     Security Agreement dated as of June 15, 1999 made by the Trust in
          favor The Chase Manhattan Bank, as agent.

10.40     Lease Supplement No. 1 dated June 15, 1999 between the Trust and the
          Company.

10.41     Lessee's and Guarantor's Consent dated as of June 15, 1999 made by the
          Company, Hanover/Smith, Inc., Hanover Maintech, Inc. and Hanover Land
          Company.

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:  August 13, 1999
By:

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

Date:  August 13, 1999
By:

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