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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





Form 10-Q





(Mark One)



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended March 31, 2009

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission file number333-150853-4





Forbes Energy Services Ltd.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Bermuda                                                        |  | 98-0581100                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                             |  |           
|-------------------------------------------- |  | ----------
|3000 South Business Highway 281 Alice, Texas |  | 78332     
|(Address of principal executive offices)     |  | (Zip Code)

Registrants telephone number, including area code:

(361) 664-0549





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

Indicate by check
mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 ̈  Yes     ̈  No

Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act.



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|  |  |                                                                     |  |   |  |                          
|- |  | ------------------------------------------------------------------- |  | - |  | -------------------------
| ̈ |  | Large accelerated filer                                             |  |  ̈ |  | Accelerated filer        
|x |  | Non-accelerated filer (Do not check if a smaller reporting company) |  |  ̈ |  | Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule
12b-2).

 ̈  Yes    x  No

Shares outstanding of each of the registrants classes of common stock as of March 31, 2009:



|                                              |  |                                 
|--------------------------------------------- |  | --------------------------------
|Class                                         |  | Outstanding as of March 31, 2009
|Common Stock, $.01 par value(1)               |  | 32,611,200                      
|Class B non-voting shares, $0.01 par value(1) |  | 29,500,000                      



|(1) | See Footnote 16
|--- | ---------------









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TABLE OF CONTENTS



|                                                                                              |  |     
|--------------------------------------------------------------------------------------------- |  | ----
|                                                                                              |  | Page
|Part IFinancial Information                                                                  |  |     
|Item 1. Condensed Consolidated Financial Statements                                           |  | 5   
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations |  | 24  
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |  | 30  
|Item 4T. Controls and Procedures                                                              |  | 30  
|                                                                                              | 
|Part IIOther Information                                                                     |  |     
|Item 1. Legal Proceedings                                                                     |  | 32  
|Item 1A. Risk Factors                                                                         |  | 32  
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 32  
|Item 3. Defaults Upon Senior Securities                                                       |  | 32  
|Item 4. Submission of Matters to Vote of Security Holders                                     |  | 32  
|Item 5. Other Information                                                                     |  | 32  
|Item 6. Exhibits                                                                              |  | 32  
|Signatures                                                                                    |  | 35  



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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and any oral statements made in connection with it include certain forward-looking statements within the meaning of
the federal securities laws. You can generally identify forward-looking statements by the appearance in such a statement of words like anticipate, believe, continue, could, estimate,
expect, intend, may, plan, potential, predict, project, should or will or other comparable words or the negative of these words. When you
consider our forward-looking statements, you should keep in mind the risk factors we describe and other cautionary statements we make in this Quarterly Report on Form 10-Q. Our forward-looking statements are only predictions based on expectations
that we believe are reasonable. Our actual results could differ materially from those anticipated in, or implied by, these forward-looking statements as a result of known risks and uncertainties set forth below and elsewhere in this Quarterly Report
on Form 10-Q. These factors include or relate to the following:



| |  |  | supply and demand for oilfield services and industry activity levels;
| | - |  | ---------------------------------------------------------------------



| |  |  | potential for excess capacity;
| | - |  | ------------------------------



| |  |  | spending on the oil and natural gas industry given the recent worldwide economic downturn;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | our level of indebtedness in the current depressed market;
| | - |  | ----------------------------------------------------------



| |  |  | impairment of our long-term assets;
| | - |  | -----------------------------------



| |  |  | our ability to maintain stable pricing;
| | - |  | ---------------------------------------



| |  |  | competition;
| | - |  | ------------



| |  |  | substantial capital requirements;
| | - |  | ---------------------------------



| |  |  | significant operating and financial restrictions under our indenture and credit facility;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | technological obsolescence of operating equipment;
| | - |  | --------------------------------------------------



| |  |  | dependence on certain key employees;
| | - |  | ------------------------------------



| |  |  | concentration of customers;
| | - |  | ---------------------------



| |  |  | substantial additional costs of compliance with reporting obligations, including the Sarbanes-Oxley Act;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | material weaknesses in internal controls over financial reporting;
| | - |  | ------------------------------------------------------------------



| |  |  | seasonality of oilfield services activity;
| | - |  | ------------------------------------------



| |  |  | dependence on equipment suppliers not party to written contracts;
| | - |  | -----------------------------------------------------------------



| |  |  | collection of accounts receivable;
| | - |  | ----------------------------------



| |  |  | environmental and other governmental regulation;
| | - |  | ------------------------------------------------



| |  |  | risks inherent in our operations;
| | - |  | ---------------------------------



| |  |  | market response to global demands to curtail use of oil and natural gas;
| | - |  | ------------------------------------------------------------------------



| |  |  | change of control;
| | - |  | ------------------



| |  |  | conflicts of interest between the principal equity investors and noteholders;
| | - |  | -----------------------------------------------------------------------------



| |  |  | results of legal proceedings;
| | - |  | -----------------------------



| |  |  | ability to fully integrate future acquisitions;
| | - |  | -----------------------------------------------



| |  |  | variation from projected operating and financial data;
| | - |  | ------------------------------------------------------



| |  |  | variation from budgeted and projected capital expenditures;
| | - |  | -----------------------------------------------------------



| |  |  | volatility of global financial markets; and
| | - |  | -------------------------------------------



| |  |  | the other factors discussed under Risk Factors.
| | - |  | -------------------------------------------------

We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. To the extent these risks, uncertainties and assumptions give rise to
events that vary from our expectations, the forward-looking events discussed in this Quarterly Report on Form 10-Q may not occur. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement. The
above description of risks and uncertainties is by no means all-inclusive, but is designed to highlight what we believe are important factors to consider.



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PART IFINANCIAL INFORMATION



|Item 1. | Condensed Consolidated Financial Statements
|------- | -------------------------------------------

Forbes Energy Services Ltd. and Subsidiaries (a/k/a the Forbes Group)

Condensed Consolidated Balance Sheets (unaudited)



|                                                                                                       |  |               |             |   |                  |   |             |  
|------------------------------------------------------------------------------------------------------ |  | ------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                       |  | March 31,2009 |             |   | December 31,2008 |  
|Assets                                                                                                 |  |               |             |   |                  |   |             |  
|Current assets                                                                                         |  |               |             |   |                  |   |             |  
|Cash and cash equivalents                                                                              |  | $             | 39,548,808  |   |                  | $ | 23,469,067  |  
|Accounts receivable  trade, net                                                                       |  |               | 50,867,905  |   |                  |   | 69,095,522  |  
|Accounts receivable  related parties                                                                  |  |               | 117,858     |   |                  |   | 97,672      |  
|Accounts receivable  other                                                                            |  |               | 1,443,151   |   |                  |   | 605,925     |  
|Prepaid expenses                                                                                       |  |               | 4,929,770   |   |                  |   | 5,266,256   |  
|Other current assets                                                                                   |  |               | 2,044,586   |   |                  |   | 1,108,846   |  
|                                                                                                       |  |               |             |   |                  |   |             |  
|Total current assets                                                                                   |  |               | 98,952,078  |   |                  |   | 99,643,288  |  
|Property and equipment, net                                                                            |  |               | 327,382,314 |   |                  |   | 330,951,116 |  
|Intangible assets, net                                                                                 |  |               | 38,744,678  |   |                  |   | 39,459,977  |  
|Deferred financing costs, net                                                                          |  |               | 12,003,893  |   |                  |   | 12,709,207  |  
|Other assets                                                                                           |  |               | 37,803      |   |                  |   | 37,803      |  
|                                                                                                       |  |               |             |   |                  |   |             |  
|Total assets                                                                                           |  | $             | 477,120,766 |   |                  | $ | 482,801,391 |  
|                                                                                                       |  |               |             |   |                  |   |             |  
|Liabilities and Shareholders Equity                                                                   |  |               |             |   |                  |   |             |  
|Current liabilities                                                                                    |  |               |             |   |                  |   |             |  
|Accounts payable  trade                                                                               |  | $             | 29,020,104  |   |                  | $ | 28,653,204  |  
|Accounts payable  related parties                                                                     |  |               | 321,796     |   |                  |   | 277,154     |  
|Income tax payable                                                                                     |  |               | 1,153,307   |   |                  |   | 1,005,872   |  
|Accrued interest payable                                                                               |  |               | 2,991,844   |   |                  |   | 8,488,560   |  
|Accrued expenses                                                                                       |  |               | 10,265,170  |   |                  |   | 11,699,652  |  
|Current maturities of long-term debt                                                                   |  |               | 3,772,082   |   |                  |   | 6,811,802   |  
|                                                                                                       |  |               |             |   |                  |   |             |  
|Total current liabilities                                                                              |  |               | 47,524,303  |   |                  |   | 56,936,244  |  
|Long-term debt, net of current maturities                                                              |  |               | 215,950,784 |   |                  |   | 205,378,040 |  
|Deferred tax liability                                                                                 |  |               | 59,142,240  |   |                  |   | 62,068,620  |  
|                                                                                                       |  |               |             |   |                  |   |             |  
|Total liabilities                                                                                      |  |               | 322,617,327 |   |                  |   | 324,382,904 |  
|                                                                                                       |  |               |             |   |                  |   |             |  
|Commitments and contingencies (Note 10)                                                                |  |               |             |   |                  |   |             |  
|Shareholders equity                                                                                   |  |               |             |   |                  |   |             |  
|Preference shares, $.01 par value, 10,000,000 shares authorized                                        |  |               |            |   |                  |   |            |  
|Common shares, $.01 par value, 450,000,000 shares authorized, 32,611,200 shares issued and outstanding |  |               | 326,112     |   |                  |   | 326,112     |  
|Class B shares, $.01 par value, 40,000,000 shares authorized, 29,500,000 shares issued and outstanding |  |               | 295,000     |   |                  |   | 295,000     |  
|Additional paid-in capital                                                                             |  |               | 167,296,496 |   |                  |   | 166,676,054 |  
|Accumulated deficit                                                                                    |  |               | (13,414,169 | ) |                  |   | (8,878,679  | )
|                                                                                                       |  |               |             |   |                  |   |             |  
|Total shareholders equity                                                                             |  |               | 154,503,439 |   |                  |   | 158,418,487 |  
|                                                                                                       |  |               |             |   |                  |   |             |  
|Total liabilities and shareholders equity                                                             |  | $             | 477,120,766 |   |                  | $ | 482,801,391 |  
|                                                                                                       |  |               |             |   |                  |   |             |  

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



5



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Forbes Energy Services Ltd. and Subsidiaries (a/k/a the Forbes Group)

Condensed Consolidated Statements of Operations (unaudited)



|                                                        |  |                              |            |   |                           |   |            |  
|------------------------------------------------------- |  | ---------------------------- | ---------- | - | ------------------------- | - | ---------- | -
|                                                        |  | Three Months Ended March 31, |           
|                                                        |  | 2009                         |            |   | 2008                      |  
|                                                        |  |                              |            |   | (As Restated-See Note 17) |  
|Revenues                                                |  |                              |            |   |                           |   |            |  
|Well servicing                                          |  | $                            | 31,539,008 |   |                           | $ | 39,284,338 |  
|Fluid logistics                                         |  |                              | 31,892,374 |   |                           |   | 31,238,521 |  
|                                                        |  |                              |            |   |                           |   |            |  
|Total revenues                                          |  |                              | 63,431,382 |   |                           |   | 70,522,859 |  
|                                                        |  |                              |            |   |                           |   |            |  
|Expenses                                                |  |                              |            |   |                           |   |            |  
|Well servicing                                          |  |                              | 26,395,709 |   |                           |   | 24,404,782 |  
|Fluid logistics                                         |  |                              | 23,231,621 |   |                           |   | 22,294,883 |  
|General and administrative                              |  |                              | 5,773,879  |   |                           |   | 3,142,681  |  
|Depreciation and amortization                           |  |                              | 9,691,372  |   |                           |   | 7,040,023  |  
|                                                        |  |                              |            |   |                           |   |            |  
|Total expenses                                          |  |                              | 65,092,581 |   |                           |   | 56,882,369 |  
|                                                        |  |                              |            |   |                           |   |            |  
|Operating income (loss)                                 |  |                              | (1,661,199 | ) |                           |   | 13,640,490 |  
|                                                        |  |                             
|Other income (expense)                                  |  |                              |            |   |                           |   |            |  
|Interest expense, net                                   |  |                              | (6,653,677 | ) |                           |   | (5,975,126 | )
|Gain on early extinguishment of debt                    |  |                              | 973,908    |   |                           |   |           |  
|Other income                                            |  |                              | 26,533     |   |                           |   | 29,534     |  
|                                                        |  |                              |            |   |                           |   |            |  
|Income (loss) before taxes                              |  |                              | (7,314,435 | ) |                           |   | 7,694,898  |  
|                                                        |  |                             
|Income tax expense (benefit)                            |  |                              | (2,778,945 | ) |                           |   | 172,000    |  
|                                                        |  |                              |            |   |                           |   |            |  
|Net income (loss)                                       |  | $                            | (4,535,490 | ) |                           | $ | 7,522,898  |  
|                                                        |  |                              |            |   |                           |   |            |  
|Loss per share of common stock                          |  |                              |            |   |                           |   |            |  
|Basic                                                   |  | $                            | (0.07      | ) |                           |   |            |  
|Diluted                                                 |  | $                            | (0.07      | ) |                           |   |            |  
|                                                        |  |                             
|Weighted average number of shares outstanding           |  |                              |            |   |                           |   |            |  
|Basic                                                   |  |                              | 62,111,200 |   |                           |   |            |  
|Diluted                                                 |  |                              | 62,111,200 |   |                           |   |            |  
|                                                        |  |                             
|Pro forma earnings per share - see Note 12              |  |                              |            |   |                           |   |            |  
|Basic                                                   |  |                              |            |   |                           | $ | 0.09       |  
|Diluted                                                 |  |                              |            |   |                           | $ | 0.09       |  
|                                                        |  |                             
|Pro forma weighted average number of shares outstanding |  |                              |            |   |                           |   |            |  
|Basic                                                   |  |                              |            |   |                           |   | 54,144,700 |  
|Diluted                                                 |  |                              |            |   |                           |   | 54,144,700 |  

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



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Forbes Energy Services Ltd. and Subsidiaries (a/k/a the Forbes Group)

Condensed Consolidated Statements of Cash Flows (unaudited)



|                                                                                        |  |                              |            |   |                           |   |              |  
|--------------------------------------------------------------------------------------- |  | ---------------------------- | ---------- | - | ------------------------- | - | ------------ | -
|                                                                                        |  | Three Months Ended March 31, |           
|                                                                                        |  | 2009                         |            |   | 2008                      |  
|                                                                                        |  |                              |            |   | (As Restated-See Note 17) |  
|Cash flows from operating activities                                                    |  |                              |            |   |                           |   |              |  
|Net income (loss)                                                                       |  | $                            | (4,535,490 | ) |                           | $ | 7,522,898    |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities |  |                              |            |   |                           |   |              |  
|Depreciation and amortization expense                                                   |  |                              | 9,691,372  |   |                           |   | 7,040,023    |  
|Amortization of Senior Secured Notes Discount                                           |  |                              | 238,048    |   |                           |   |             |  
|Stock-based compensation                                                                |  |                              | 624,736    |   |                           |   |             |  
|Deferred tax expense (benefit)                                                          |  |                              | (2,926,380 | ) |                           |   | 22,000       |  
|Gain on disposal of assets, net                                                         |  |                              | (57,304    | ) |                           |   |             |  
|Gain on early extinguishment of debt                                                    |  |                              | (973,908   | ) |                           |   |             |  
|Bad debt expense                                                                        |  |                              | 1,086,592  |   |                           |   | 319          |  
|Deferred loan cost amortization                                                         |  |                              | 444,222    |   |                           |   | 1,150,100    |  
|Changes in operating assets and liabilities:                                            |  |                              |            |   |                           |   |              |  
|Accounts receivable                                                                     |  |                              | 15,957,094 |   |                           |   | (6,160,135   | )
|Accounts receivable - related party                                                     |  |                              | (20,186    | ) |                           |   | 67,643       |  
|Prepaid expenses                                                                        |  |                              | 336,486    |   |                           |   | (762,024     | )
|Other assets                                                                            |  |                              | (935,740   | ) |                           |   | (60,899      | )
|Accounts payable                                                                        |  |                              | 2,478,820  |   |                           |   | 1,026,422    |  
|Accounts payable - related party                                                        |  |                              | 44,642     |   |                           |   | (1,539,146   | )
|Accrued expenses                                                                        |  |                              | (1,434,482 | ) |                           |   | 2,778,822    |  
|Income taxes payable                                                                    |  |                              | 147,435    |   |                           |   |             |  
|Interest payable                                                                        |  |                              | (5,496,716 | ) |                           |   | 2,519,370    |  
|                                                                                        |  |                              |            |   |                           |   |              |  
|Net cash provided by operating activities                                               |  |                              | 14,669,241 |   |                           |   | 13,605,393   |  
|                                                                                        |  |                              |            |   |                           |   |              |  
|Cash flows from investing activities                                                    |  |                              |            |   |                           |   |              |  
|Insurance proceeds                                                                      |  |                              | 826,081    |   |                           |   |             |  
|Proceeds from disposition of equipment                                                  |  |                              |           |   |                           |   |             |  
|Purchase of property and equipment                                                      |  |                              | (7,941,263 | ) |                           |   | (84,853,795  | )
|                                                                                        |  |                              |            |   |                           |   |              |  
|Net cash used in investing activities                                                   |  |                              | (7,115,182 | ) |                           |   | (84,853,795  | )
|                                                                                        |  |                              |            |   |                           |   |              |  
|Cash flows from financing activities                                                    |  |                              |            |   |                           |   |              |  
|Proceeds from senior secured notes                                                      |  |                              |           |   |                           |   | 200,242,584  |  
|Borrowings under the Credit Facility                                                    |  |                              | 12,000,000 |   |                           |   |             |  
|Retirement of senior secured notes                                                      |  |                              | (2,015,000 | ) |                           |   |             |  
|Repayment of debt                                                                       |  |                              | (1,455,024 | ) |                           |   | (101,660,042 | )
|Payments related to issuance of common stock                                            |  |                              | (4,294     | ) |                           |   |             |  
|Payments for debt issuance costs                                                        |  |                              |           |   |                           |   | (11,311,116  | )
|Repayments of related party debt                                                        |  |                              |           |   |                           |   | (7,048,075   | )
|Members cash distributions                                                             |  |                              |           |   |                           |   | (3,232,001   | )
|                                                                                        |  |                              |            |   |                           |   |              |  
|Net cash provided by financing activities                                               |  |                              | 8,525,682  |   |                           |   | 76,991,350   |  
|                                                                                        |  |                              |            |   |                           |   |              |  
|Net increase in cash and cash equivalents                                               |  |                              | 16,079,741 |   |                           |   | 5,742,948    |  
|                                                                                        |  |                             
|Cash and cash equivalents                                                               |  |                              |            |   |                           |   |              |  
|                                                                                        |  |                             
|Beginning of period                                                                     |  |                              | 23,469,067 |   |                           |   | 5,209,345    |  
|                                                                                        |  |                              |            |   |                           |   |              |  
|End of period                                                                           |  | $                            | 39,548,808 |   |                           | $ | 10,952,293   |  
|                                                                                        |  |                              |            |   |                           |   |              |  

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



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Forbes Energy Services Ltd. and Subsidiaries (a/k/a the Forbes Group)

Notes to Consolidated Financial Statements



|1. | Organization and Nature of Operations
|-- | -------------------------------------

Nature of
Business

Forbes Energy Services Ltd. (FES Ltd) and its subsidiaries, Forbes Energy Services LLC (FES LLC),
Forbes Energy Capital Inc. (FES CAP), C.C. Forbes, LLC (CCF), TX Energy Services, LLC (TES), Superior Tubing Testers, LLC (STT) and Forbes Energy International, LLC (FEI LLC) are
headquartered in Alice, Texas, and conduct business primarily in the state of Texas. In late 2008, FES LLC and FEI LLC formed Forbes Energy Services México, S. de R.L. de C.V. and Forbes Energy Services México Servicios de Personal S.
de R.L. de C.V., collectively, the Mexican subsidiaries, each a Mexican limited liability partnership (sociedad de responsabilidad limitada de capital variable), to conduct operations in Mexico. As used in these condensed consolidated financial
statements, the Company, the Forbes Group, we, or our means FES Ltd and all subsidiaries on and after May 29, 2008 (the date of the Bermuda Reorganization discussed below) and FES LLC and its
subsidiaries from January 1, 2008 to May 28, 2008.

The Forbes Group is an independent oilfield services contractor that provides
a wide range of well site services to oil and natural gas drilling and producing companies to help develop and enhance the production of oil and natural gas. These services include fluid hauling, fluid disposal, well maintenance, completion
services, workovers and recompletions, plugging and abandonment, and tubing testing. The Forbes Groups operations are concentrated in the major onshore oil and natural gas producing regions of Texas, with one location in Baxterville,
Mississippi and one location in Poza Rica, Mexico.

FES LLC is a Delaware limited liability company formed effective January 1, 2008
to act as the holding company for the three wholly-owned operating companies, CCF, TES, and STT. In the reorganization (the Delaware Reorganization), ownership of each of such three operating subsidiaries comprising our business was
transferred to FES LLC by their equity investors in exchange for equity interests in FES LLC. Although FES LLC was the legal acquirer in the Delaware Reorganization, CCF was considered the acquirer for accounting purposes. As a result of this
determination, the net assets of CCF remain at their historical cost, while purchase accounting was applied to TES and STT. The purchase prices of TES and STT were based on estimates of the enterprise value of each company. Amounts allocated to
identifiable tangible and intangible assets acquired and liabilities assumed were based on valuations. FES LLC allocated $14.5 million as a step-up in book value to property and equipment of TES, $4.4 million to goodwill, and
$42.3 million to other intangible assets. Total value added to the assets and shareholders equity was $61.2 million as a result of the Delaware Reorganization.

FES Ltd is a Bermuda corporation formed effective April 9, 2008 to act as the holding company for FES LLC and its subsidiaries. At the time of FES Ltds organization, 200 common shares were issued. On
May 29, 2008, concurrent with the Initial Equity Offering, all of the members of FES LLC assigned 63% of their membership interests in FES LLC to FES Ltd in exchange for 29,500,000 shares of FES Ltds Class B non-voting stock. Upon
consummation of the Initial Equity Offering, FES Ltd contributed $120,000,000 cash as additional capital to FES LLC, and FES LLC used the funds to redeem the remaining outstanding membership interests held by the members of FES LLC, other than FES
Ltd. The result was that FES LLC and its subsidiaries became wholly-owned subsidiaries of FES Ltd. The foregoing is referred to herein as the Bermuda Reorganization. This transaction was accounted for as a transaction between entities
under common control and deemed to be effective for accounting purposes as of January 1, 2008.

On May 29, 2008, FES Ltd
completed its Canadian initial public offering and simultaneous U.S. private placement of its common shares (the Initial Equity Offering). In the Initial Equity Offering, FES Ltd sold 24,644,500 common shares for CDN $7.00 per share
and the common shares are listed on the Toronto Stock Exchange under the symbol FRB.TO. Gross proceeds from the Initial Equity Offering were CDN $172,511,500 (USD $173,920,254) and net proceeds from the Initial Equity Offering after expenses were
CDN $162,465,730 (USD $163,792,449).



|2. | Risk and Uncertainties
|-- | ----------------------

As an independent oilfield
services contractor that provides a broad range of drilling-related and production-related services to oil and natural gas companies, primarily onshore in Texas, our revenue, profitability, cash flows and future rate of growth are substantially
dependent on our ability to (1) maintain adequate equipment utilization, (2) maintain adequate pricing for the services we provide, and (3) maintain a trained work force. Failure to do so could adversely affect our financial position,
results of operations, and cash flows.

Because our revenues are generated primarily from customers who are subject to the same factors
generally impacting the oil and natural gas industry, our operations are also susceptible to market volatility resulting from economic, cyclical, weather related or other factors related to such industry. Changes in the level of operating and
capital spending



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in the industry, decreases in oil and natural gas prices, or industry perception about future oil and natural gas prices could materially decrease the demand
for our services, adversely affecting our financial position, results of operations and cash flows.

Our Credit Facility (as defined below)
and the indenture governing our Senior Secured Notes (as defined below) and the debt outstanding thereunder impose significant restrictions on us and increase our vulnerability to adverse economic and industry conditions that could limit our ability
to obtain additional or replacement financing. While the principal indebtedness of the Credit Facility is not scheduled for repayment until April 2012 and the Senior Secured Notes not until February 2015, our inability to satisfy any obligations
under these agreements would constitute an event of default. Under the Credit Facility, an event of default will be deemed to have occurred if there is a change in control of the Forbes Group or if a material adverse change occurs in regards to the
consolidated financial position of the Forbes Group, the consolidated business, assets, operations, properties or prospects of the Forbes Group, the Forbes Groups ability to timely pay the obligations under the Credit Facility or the
enforceability of the material terms of any material loan document against the Forbes Group. The lender under the Credit Facility could, at some future date, make a determination that such a material adverse change has occurred, which is outside the
control of the Forbes Group. The indenture governing the Senior Secured Notes does not have similar material adverse change or change in control events of default but does require an offer to redeem the Senior Secured Notes in the event of a change
in control. It contains a cross-default provision that would be triggered if the debt under the Credit Facility were accelerated. See a discussion of cross-default provisions in Note 7, below. A default could result in all or a portion of our
outstanding debt becoming immediately due and payable. If this should occur, we might not be able to obtain waivers or secure alternative financing to satisfy all of our obligations simultaneously. Given current market conditions, our ability to
access the capital markets or to effect any asset sales might be restricted at a time when we would like or need to raise capital. In addition, the current economic conditions could also impact our customers and vendors and may cause them to fail to
meet their obligations to us with little or no warning. These events could have a material adverse effect on our business, financial position, results of operations and cash flows and our ability to satisfy the obligations under our debt agreements.

Although we currently believe our liquidity and projected cash flows from operations will be sufficient to meet our cash requirements for
the next twelve months and the foreseeable future, the factors described above create uncertainty. The continued compliance with our debt covenants is dependent upon us obtaining a minimum level of earnings before interest, taxes, depreciation,
amortization and goodwill impairments, or adjusted EBITDA, and maintaining a minimum level of net worth. Our forecasted adjusted EBITDA and net worth contain certain estimates and assumptions regarding rig and truck utilization, average hourly
rates, and operating and general and administrative expenses, which could prove to be inaccurate. A material deviation from one or more of these estimates or assumptions could result in a violation of one or more of our contractual covenants, which
could result in all or a portion of our outstanding debt becoming immediately due and payable. Within certain constraints, we can conserve capital by reducing or delaying capital expenditures, deferring non-regulatory maintenance expenditures and
further reducing operating and administrative costs. Postponing or eliminating capital expenditures would delay or reduce future cash flows, and we believe these actions can provide us the flexibility to match our capital commitments to our
available capital resources.



|3. | Basis of Presentation
|-- | ---------------------

Interim Financial
Information

The unaudited condensed consolidated financial statements of the Forbes Group are prepared in conformity with accounting
principles generally accepted in the United States of America, or GAAP. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted. Therefore, these
financial statements should be read along with the annual audited consolidated financial statements and notes thereto included in Forbes Groups Annual Report on Form 10-K for the year ended December 31, 2008. In managements opinion,
all adjustments necessary for a fair statement are reflected in the interim periods presented. Interim results for the three months ended March 31, 2009 may not be indicative of results that will be realized for the full year ending
December 31, 2009.

The Forbes Groups condensed consolidated financial statements as of and for the three months ended
March 31, 2009 include the accounts of FES Ltd and all its wholly-owned and consolidated subsidiaries and, for the three months ended March 31, 2008, include the accounts of FES LLC and all its wholly-owned and consolidated subsidiaries.

Income Taxes

The
Forbes Group was not subject to federal income tax until May 29, 2008 upon completion of the Initial Equity Offering and related Bermuda Reorganization. Prior to May 29, 2008, all income, losses, credits and deductions of the Forbes Group
were passed through to the members individual tax returns. Accordingly, no provision for U.S. federal



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income taxes is included in the accompanying condensed consolidated financial statements for the three months ended March 31, 2008.

Use of Estimates

The preparation of
consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management believes that these estimates and assumptions provide a reasonable basis
for the fair statement of the condensed consolidated financial statements.

Recently Adopted Accounting Pronouncements

The Company adopted Financial Accounting Standards Board (FASB) Staff Position No. 157-2, Effective Date of FASB Statement
No. 157 (FSP 157-2) on January 1, 2008, which delayed the effective date of Statement of Financial Accounting Standards No. 157 Fair Value Measurements (SFAS 157) for all non-financial assets and non-financial
liabilities, except for items that are recognized or disclosed at fair value on a recurring basis (at least annually). This standard did not have a material impact on the Companys financial condition and results of operations. See Note 8,
Fair Value Measurements.

The Company adopted FASB No. 141(R), Business Combinations (SFAS 141(R)) which
significantly changed the accounting for and reporting of business combination transactions. This standard was effective for the Company for business combination transactions for which the acquisition date was on or after January 1, 2009. No
business combination transactions occurred during the three months ended March 31, 2009.

The Company adopted FASB Staff Position
(FSP) No. 142-3, Determining the Useful Life of Intangible Assets (FSP 142-3) on January 1, 2009. FSP 142-3 amended the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the
consistency between the useful life of an intangible asset and the period of expected cash flows used to measure such assets fair value. The adoption of FSP 142-3 did not have a material impact on the Companys financial statements.

Recently Issued Accounting Pronouncements

In January 2009, the FASB issued FSP No. FAS 107-b and APB 28-a, which would amend SFAS No. 107, Disclosures About Fair Value of Financial Instruments and APB Opinion No. 28, Interim
Financial Reporting, to require disclosure of the fair value of financial instruments in interim financial statements as well as annual financial statements. In addition, entities would be required to disclose the method and significant
assumptions used to estimate the fair value of financial instruments. This guidance will become effective for interim and annual periods ending after June 15, 2009. We are currently evaluating the effect this guidance may have on our financial
statements.



|4. | Intangible Assets
|-- | -----------------

The following sets forth the
identified intangible assets by major asset class:



|                        |  |                      |            |                         |   |               |  |                     |            |                         |   |               |  |   |           |  |   |           
|----------------------- |  | -------------------- | ---------- | ----------------------- | - | ------------- |  | ------------------- | ---------- | ----------------------- | - | ------------- |  | - | --------- |  | - | ----------
|                        |  | As of March 31, 2009 |            | As of December 31, 2008
|                        |  | Gross CarryingValue  |            | AccumulatedAmortization |   | Net BookValue |  | Gross CarryingValue |            | AccumulatedAmortization |   | Net BookValue
|Customer relationships  |  | $                    | 31,895,919 |                         | $ | 2,657,993     |  | $                   | 29,237,926 |                         | $ | 31,895,919    |  | $ | 2,126,395 |  | $ | 29,769,524
|Trade name              |  |                      | 8,049,750  |                         |   | 670,812       |  |                     | 7,378,938  |                         |   | 8,049,750     |  |   | 536,650   |  |   | 7,513,100 
|Safety training program |  |                      | 1,181,924  |                         |   | 98,494        |  |                     | 1,083,430  |                         |   | 1,181,924     |  |   | 78,795    |  |   | 1,103,129 
|Dispatch software       |  |                      | 1,135,282  |                         |   | 141,910       |  |                     | 993,372    |                         |   | 1,135,282     |  |   | 113,528   |  |   | 1,021,754 
|Other                   |  |                      | 58,300     |                         |   | 7,288         |  |                     | 51,012     |                         |   | 58,300        |  |   | 5,830     |  |   | 52,470    
|                        |  |                      |            |                         |   |               |  |                     |            |                         |   |               |  |   |           |  |   |           
|                        |  | $                    | 42,321,175 |                         | $ | 3,576,497     |  | $                   | 38,744,678 |                         | $ | 42,321,175    |  | $ | 2,861,198 |  | $ | 39,459,977
|                        |  |                      |            |                         |   |               |  |                     |            |                         |   |               |  |   |           |  |   |           

The amortization period for customer relationships, trade name, and safety training is 15 years.
The amortization period for dispatch software is 10 years. The Company expenses costs associated with extensions or renewals of intangibles assets. There were no such extensions or renewals in the quarter ended March 31, 2009. Amortization
expense is calculated using the straight-line method over the period indicated. Aggregate amortization expense of intangible assets for the three months ended March 31, 2009 and 2008 was approximately $0.7 million and $0.7 million,
respectively. Amortization expense associated with identified intangible assets is expected to be approximately $2.9 million in each of the next five years. The weighted average amortization period of intangible assets is 13 years.



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|5. | Stock-Based Compensation
|-- | ------------------------

From time to time, the
Company grants stock options to its employees, including executive officers, and directors from its 2008 Incentive Compensation Plan. Standard options vest over a three-year period, with approximately one third vesting on the first, second and third
anniversaries of the date of grant. For most grantees, options expire at the earlier of either one year after the termination of grantees employment by reason of death, disability or retirement, ninety days after termination of the
grantees employment other than upon grantees death, disability or retirement, or ten years after the date of grant.

The
following table presents a summary of the Companys stock option activity for the three months ended March 31, 2009. There was no activity in the three months ended March 31, 2008.



|                                          |  |           |   |  |                               |      |                                          |            |                         |  
|----------------------------------------- |  | --------- | - |  | ----------------------------- | ---- | ---------------------------------------- | ---------- | ----------------------- | -
|                                          |  | Shares    |   |  | Weighted-AverageExercisePrice |      | Weighted-AverageRemainingContractualTerm |            | AggregateIntrinsicValue
|Options outstanding at December 31, 2008: |  | 2,770,000 |   |  | CDN$                          | 7.00 |                                          | 9.41 years |                         | 
|Stock options:                            |  |           |   |  |                               |      |                                          |            |                         |  
|Granted                                   |  |          |   |  |                               |     |                                          |            |                         |  
|Exercised                                 |  |          |   |  |                               |     |                                          |            |                         |  
|Forfeited                                 |  | (90,000   | ) |  |                               |     |                                          |            |                         |  
|                                          |  |           |   |  |                               |      |                                          |            |                         |  
|Options outstanding at March 31, 2009:    |  | 2,680,000 |   |  | CDN$                          | 7.00 |                                          | 9.17 years |                         | 
|                                          |  |           |   |  |                               |      |                                          |            |                         |  
|Vested at March 31, 2009                  |  |          |   |  |                               |     |                                          |           |                         | 
|                                          |  |           |   |  |                               |      |                                          |            |                         |  
|Exercisable at March 31, 2009             |  |          |   |  |                               |     |                                          |           |                         | 
|                                          |  |           |   |  |                               |      |                                          |            |                         |  

During the three months ended March 31, 2009 the Company recorded total stock based
compensation expense of $0.6 million. For the three month period ended March 31, 2008 no stock based compensation was recorded because no options were issued until May 29, 2008. No stock-based compensation costs were capitalized as of
March 31, 2009. As of March 31, 2009, total unrecognized stock-based compensation costs amounted to $5.3 million (net of estimated forfeitures) and is expected to be recorded over a weighted-average period of 2.4 years.

At March 31, 2009, 2,540,000 shares were available for future grants under the 2008 Incentive Compensation Plan



|6. | Property and Equipment
|-- | ----------------------

Property and equipment
consisted of the following:



|                          |  |                        |  |               |             |   |                   |   |             |  
|------------------------- |  | ---------------------- |  | ------------- | ----------- | - | ----------------- | - | ----------- | -
|                          |  | EstimatedLife in Years |  | March 31,2009 |             |   | December 31, 2008 |  
|Well servicing equipment  |  | 3-15 years             |  | $             | 282,670,229 |   |                   | $ | 278,168,921 |  
|Autos and trucks          |  | 5-10 years             |  |               | 78,924,985  |   |                   |   | 78,043,817  |  
|Disposal wells            |  | 5-15 years             |  |               | 14,891,861  |   |                   |   | 15,028,481  |  
|Building and improvements |  | 5-30 years             |  |               | 4,578,976   |   |                   |   | 4,598,976   |  
|Furniture and fixtures    |  | 3-10 years             |  |               | 2,148,862   |   |                   |   | 2,140,493   |  
|Land                      |  |                        |  |               | 91,242      |   |                   |   | 91,242      |  
|Other                     |  | 3-15 years             |  |               | 58,940      |   |                   |   | 65,503      |  
|                          |  |                        |  |               |             |   |                   |   |             |  
|                          |  |                        |  |               | 383,365,095 |   |                   |   | 378,137,433 |  
|Accumulated depreciation  |  |                        |  |               | (55,982,781 | ) |                   |   | (47,186,317 | )
|                          |  |                        |  |               |             |   |                   |   |             |  
|                          |  |                        |  | $             | 327,382,314 |   |                   | $ | 330,951,116 |  
|                          |  |                        |  |               |             |   |                   |   |             |  

Depreciation expense was $8.8 million and $5.5 million for the quarters ended March 31, 2009
and 2008, respectively.



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|7. | Long-Term Debt
|-- | --------------

Long-term debt at March 31,
2009 and December 31, 2008, consisted of the following:



|                          |  |                |             |   |                   |   |             |  
|------------------------- |  | -------------- | ----------- | - | ----------------- | - | ----------- | -
|                          |  | March 31, 2009 |             |   | December 31, 2008 |  
|11% Senior Secured Notes  |  | $              | 197,750,087 |   |                   | $ | 200,762,039 |  
|Revolving Credit Facility |  |                | 12,000,000  |   |                   |   |            |  
|Other equipment notes     |  |                | 7,803,564   |   |                   |   | 8,185,907   |  
|Insurance notes           |  |                | 2,169,215   |   |                   |   | 3,241,896   |  
|                          |  |                |             |   |                   |   |             |  
|                          |  |                | 219,722,866 |   |                   |   | 212,189,842 |  
|Less: Current maturities  |  |                | (3,772,082  | ) |                   |   | (6,811,802  | )
|                          |  |                |             |   |                   |   |             |  
|                          |  | $              | 215,950,784 |   |                   | $ | 205,378,040 |  
|                          |  |                |             |   |                   |   |             |  

Senior Secured Notes

On February 12, 2008, FES LLC and FES CAP issued $205.0 million in principal amount of 11% senior secured notes (together with notes issued in
exchange therefor, the Senior Secured Notes). The Forbes Group reflects $197.8 million of debt outstanding in its balance sheet as of March 31, 2009 which recognizes the original issue discount as the Senior Secured Notes were
issued at 97.635% of par and the repurchase of certain Senior Secured Notes as described below. After offering expenses, the Forbes Group realized net proceeds of approximately $188.7 million which was used to repay and fully extinguish all of
the Forbes Groups outstanding long-term debt and most current maturities, in addition to outstanding equipment vendor financings that were incurred prior to the issuance. The Senior Secured Notes mature on February 15, 2015, and require
semi-annual interest payments at an annual rate of 11% on February 15 and August 15 of each year until maturity. No principal payments are due until maturity. The Senior Secured Notes are senior obligations and rank equally in right of
payment with other existing and future senior indebtedness and senior in right of payment to any subordinated indebtedness incurred by the Forbes Group in the future.

The Senior Secured Notes are guaranteed by FES Ltd, the parent company of FES LLC and Forbes Energy Capital Inc., as well as the domestic operating subsidiaries (the Guarantor Subs) of FES LLC, which
includes CCF, TES and STT. All of the Guarantor Subs are 100% owned and guarantee the securities on a full and unconditional and joint and several basis. FES Ltd has two 100% owned indirect subsidiaries, the
Mexican subsidiaries (the Non-Guarantor Subs), that have not guaranteed the Senior Secured Notes. FES Ltd has independent operations through a branch office in Mexico. The Guarantor Subs represent the majority of the Companys
operations. There are no significant restrictions on FES Ltds ability or the ability of any guarantor to obtain funds from its subsidiaries by such means as a dividend or loan except for certain restrictions contained in the Credit Facility
restricting payment of dividends by the principal operating subsidiaries. See Note 15 for condensed consolidating information required by Rule 3-10 of Regulation S-X.

The indenture, as recently amended, required the Forbes Group to pay $2 million in cash during the first quarter of 2009 and requires the Forbes Group to pay an additional $8 million in cash by the end of the second
quarter of 2010 to repurchase Senior Secured Notes upon specified terms and conditions. Pursuant to this requirement, in the quarter ended March 31, 2009, the Forbes Group paid $2 million in cash to repurchase, at a discount, $3,250,000 of
Senior Secured Notes. The Forbes Group realized a net gain on this repurchase of approximately $974,000 after writing down a portion of the original bond discount and writing off a portion of the deferred financing costs.

The Forbes Group may, at its option, redeem all or part of the Senior Secured Notes from time to time at specified redemption prices and subject to
certain conditions required by the indenture governing the Senior Secured Notes. The Forbes Group is required to make an offer to purchase the notes and to repurchase any notes for which the offer is accepted at 101% of their principal amount, plus
accrued and unpaid interest, if there is a change of control or if the Forbes Group has excess cash flow. The Forbes Group is required to make an offer to repurchase the notes and to repurchase any notes for which the offer is accepted at 100% of
their principal amount, plus accrued and unpaid interest, following certain asset sales.

The Forbes Group is permitted under the terms of
the indenture to incur additional indebtedness in the future, provided that certain financial conditions set forth in the Indenture are satisfied. The Forbes Group is subject to certain covenants contained in the indenture, including provisions that
limit or restrict the Forbes Groups and certain future subsidiaries abilities to incur additional debt, to create, incur or permit to exist certain liens on assets, to make certain dispositions of assets, to make payments on certain
subordinated indebtedness, to pay dividends or certain other payments to equity holders, to engage in mergers, consolidations or other fundamental changes, to change the nature of its business, to engage in transactions with affiliates or to make
capital expenditures in excess of certain amounts based on the year in which such expenditures are made.

Details of two of the significant
restrictive covenants in the indenture are set forth below:



| |  |  | Limitation on the incurrence of additional debtIn addition to certain defined Permitted Debt, the Forbes Group may only incur additional debt if it is
unsecured and if the Fixed Charge Coverage Ratio (as defined) for the most
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | recently completed four full fiscal quarters is at least 2.5 to 1.0 until December 31, 2009, and 3.0 to 1.0 thereafter. As of March 31, 2009 the
Forbes Group could incur an additional $22 million in debt as Permitted Debt and under the Fixed Charge Coverage Ratio Test.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Limitations on capital expendituresSubject to certain adjustments, permitted Adjusted Capital Expenditures (as defined) that may be made by the Forbes Group
are limited to $35 million for the fiscal year ending December 31, 2009.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Citibank Credit Agreement

On April 10, 2008, the Forbes Group entered into a credit agreement (the Credit Agreement) with Citibank, N.A., which
provides for a four-year senior secured revolving credit facility for up to $20 million (the Credit Facility). The Forbes Group can use the proceeds for general corporate purposes. Any unpaid principal amount is due on the maturity
date.

Borrowings under the Credit Facility accrue interest, at the Forbes Groups option, at either (i) the greater of the
Federal Funds Effective Rate in effect on such day plus 0.5% and the Citibank, N.A. prime rate plus a margin of up to 1.25%, or (ii) the London Interbank Offered Rate, plus a margin of 1.75% to 2.25%. The applicable interest rate
margin is based on the Forbes Groups leverage ratio, as defined in the credit agreement governing the Credit Facility. Unpaid interest accrued on outstanding loans is payable quarterly.

The Credit Facility is secured by first priority security interests in substantially all of the Forbes Groups assets that rank senior to the
security interests granted to the holders of the Senior Secured Notes. The credit agreement also contains customary representations, warranties and covenants for the type and nature of the Credit Facility, including certain limitations or
restrictions on the Forbes Groups and certain future subsidiaries ability to incur additional debt, guarantee others obligations, create, incur or permit to exist certain liens on assets, make investments or acquisitions, make
certain dispositions of assets, make payments on certain subordinated indebtedness, pay dividends or certain other payments to equity holders, engage in mergers, consolidations or other fundamental changes, change the nature of its business and
engage in transactions with affiliates. The rights of the lender under the Credit Facility vis-à-vis the trustee and collateral agent under the indenture governing the Senior Secured Notes are governed by an intercreditor agreement among the
Forbes Group, Citibank, N.A., the lender under the Credit Facility, and Wells Fargo Bank, National Association, the trustee and collateral agent under the indenture governing the Senior Secured Notes.

The Credit Agreement contains the following restrictive financial covenants, which provide that the Forbes Group shall not:



| |  |  | Permit for the trailing twelve months as of the end of any fiscal quarter the ratio of Consolidated EBITDA to Consolidated Interest Expense, as both capitalized
terms are defined in the Credit Agreement, to be less than 1.5 to 1.0. As of March 31, 2009 this ratio was 3.2 to 1.0.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Permit Consolidated Net Worth to be less than $63.4 million for the fiscal year ended December 31, 2008, and for each fiscal year thereafter Consolidated Net
Worth to be less than $63.4 million plus 50% of Consolidated Net Income for such year, as both capitalized terms are defined in the Credit Agreement. As of March 31, 2009, Consolidated Net Worth exceeded the minimum covenant amount by
approximately $91.1 million.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Permit the ratio of Senior Funded Debt to Consolidated Net Worth, as both capitalized terms are defined in the Credit Agreement, to be not greater than 2.5 to 1.0
for each fiscal quarter through September 30, 2008, and for fiscal quarters ending December 31, 2008 and thereafter, 2.0 to 1.0. As of March 31, 2009 this ratio was 1.4 to 1.0.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Permit the ratio of Consolidated Senior Funded Debt to Consolidated EBITDA, as both capitalized terms are defined in the Credit Agreement, to be more than 5.5 to
1.0 as of the last day of any fiscal quarter. As of March 31, 2009 this ratio was 2.5 to 1.0 (the capitalized terms used above have the meanings set forth in the Credit Agreement).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Credit Agreement contains a provision that makes the occurrence of any Material Adverse Change an event of default. A Material Adverse
Change is defined in the Credit Agreement to mean a material and adverse change from the state of affairs presented in the audited December 31, 2007 (the date of the most recent audit at the time the Credit Facility was finalized)
financial statements for the Forbes Group or as represented or warranted in any loan document to (a) the consolidated financial position of the Forbes Group, (b) the consolidated business, assets, operations, properties or prospects of the
Forbes Group, (c) the Forbes Groups ability to pay the obligations under the Credit Agreement or (d) the enforceability of the material terms of any material loan document against the Forbes Group. The occurrence of an event of
default would allow the lender to accelerate the debt under the Credit Agreement. The Credit Agreement contains a cross-default provision that is triggered on the failure to comply with any other materially significant contract (including the
indenture) if such failure is not remedied within any applicable grace period. The indenture contains a cross-default provision that is triggered on the default of any instrument evidencing or securing indebtedness (including the Credit Agreement),
if that default is caused by failure to pay principal or interest prior to the expiration of any applicable grace period or if that default results in the acceleration of such indebtedness prior to its maturity, and such indebtedness, together with
all other indebtedness where there has been such a default,



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aggregates $5.0 million or more. The Forbes Group is in compliance with the Credit Agreement.

Significant adverse changes in our expected utilization levels and prices we are able to charge our customers could have a material adverse affect on our
financial condition and results of operations and our ability to maintain future compliance with these covenants.

As of March 31,
2009, the Forbes Group had an outstanding principal balance of $12.0 million under the Credit Agreement.



|8. | Fair Value Measurements
|-- | -----------------------

As of January 1,
2009, SFAS 157 is applicable to all financial assets and liabilities as well as non-financial assets and liabilities. SFAS 157 defines fair value, establishes a framework for measuring fair value when an entity is required to use a fair value
measure for recognition or disclosure purposes and expands the disclosures about fair value measurements. SFAS 157 only applies when other standards require or permit the fair value measurement of assets and liabilities. It does not expand the use
of fair value measurements.

As defined in SFAS 157, fair value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date (exit price). SFAS 157 requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. The
statement requires that fair value measurements be classified and disclosed in one of the following categories:



|         |  |                                                                                                                                                                                                                                                                                                                                                    
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Level 1: |  | Valuation based on quoted market prices for identical assets and liabilities in active markets.                                                                                                                                                                                                                                                    
|         | 
|Level 2: |  | Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or
similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
|         | 
|Level 3: |  | Valuation based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant
judgment.                                                                                                                                          

As required by SFAS 157, financial assets and liabilities are classified based on the lowest level
of three specific levels input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and
liabilities and their placement within the fair value hierarchy levels.

The Company does not have assets or liabilities that are measured
at fair value on a recurring basis. The Company did not revalue any assets or liabilities at fair value subsequent to initial recognition during the three months ended March 31, 2009.

The Companys financial instruments that are not recorded at fair value include accounts receivable, accounts payable, accrued liabilities, and
debt. We believe the carrying value of accounts receivable, accounts payable, and accrued liabilities approximates fair value due to the short maturity of these instruments.

Our fair value assessment incorporates a variety of considerations, including the short-term duration of the instruments, our credit rating, and our
historical incurrence of and expected future insignificance of bad debt expense, which includes and evaluation of counterparty credit risk. The estimated fair value of our 11% Senior Secured Notes is $121.1 million and $113.8 million based on market
trading prices at March 31, 2009 and December 31, 2008, respectively. The fair value of Other Equipment Notes approximates carrying value at March 31, 2009 and December 31, 2008, respectively.

The carrying amount of the variable rate long-term debt approximates fair value because the borrowing rate is based on a variable market rate of
interest.



|9. | Related Party Transactions
|-- | --------------------------

In connection with the
Bermuda Reorganization effective May 29, 2008 each of two executive officers/directors and one additional director contributed approximately 63% of their respective ownership interests in FES LLC to FES Ltd in exchange for 29,500,000 shares of
FES Ltd Class B non-voting stock. Each was paid $36 million for his or her then remaining approximately 37% of the ownership interests in FES LLC originally held by such person from proceeds of FES Ltds Initial Equity Offering.

The Forbes Group enters into transactions with related parties in the normal course of conducting business. Accounts Receivablerelated parties and
Accounts Payablerelated parties result from transactions with related parties which are at terms consistent with those available to third-party customers and from third-party vendors.

Certain members of the Forbes Group are also owners and managers of Alice Environmental Services, LP (AES). The Forbes Group has entered into
the following transactions with AES and its subsidiaries:



| |  |  | AES, through a wholly owned subsidiary, owned and operated an oil field supply store from which the Forbes Group purchased oil field supplies. This supply store was
sold to an independent third party in May 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | AES owns aircraft that the Forbes Group uses on a regular basis.
| | - |  | ----------------------------------------------------------------



| |  |  | The Forbes Group has also entered into long-term operating leases with AES for well service rigs, vacuum trucks and related equipment.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------

The Forbes Group recognized revenues from AES of approximately $0 and $11,000, related to rig, trucking, and equipment and facilities rental
activities; expenses of approximately $2.1 million and $1.5 million and capital expenditures of $0 and $2.1 million for the three months ended March 31, 2009 and 2008, respectively. During December 2008, the Forbes Group leased
10 workover rigs from AES under long-term operating leases. Accounts payable to AES as of March 31, 2009 and December 31, 2008, resulting from such transactions were $194,000 and $106,000, respectively. Accounts receivable from AES as of
March 31, 2009 and December 31, 2008, resulting from such transactions were $0 and $76,000, respectively.

Dorsal Services, Inc.
is a trucking service provider that provides services to the Forbes Group. One of FES Ltds executive officers, who also serves as a director of FES Ltd, is a partial owner of Dorsal Services, Inc. The Forbes Group recognized revenues of
approximately $38,000 and $11,000 related to trucking services, equipment rental, and wash out activities; expenses of approximately $60,000 and $198,000; and capital expenditures of approximately $0 and $28,000 from transactions with Dorsal
Services, Inc. for the three months ended March 31, 2009 and 2008, respectively. The Forbes Group had accounts receivable from Dorsal Services, Inc. of $117,000 and 97,000 as of March 31, 2009 and December 31, 2008, respectively,
resulting from such transactions. The Forbes Group had accounts payable to Dorsal Services, Inc. of $46,000 and $89,000 as of March 31, 2009 and December 31, 2008, resulting from such transactions.

Tasco Tool Services, Inc. is a down-hole tool company that is partially owned and managed by a company that is owned by two officers of FES Ltd. Tasco
rents and sells tools to the Forbes Group from time to time. The Forbes Group had revenues from Tasco of $0 and $0 and recognized expenses of approximately $38,000 and $7,000 and capital expenditures of $12,000 and $20,000 related to transactions
with Tasco for the three months ended March 31, 2009 and 2008, respectively. Accounts payable to Tasco as of March 31, 2009 and December 31, 2008 were $39,000 and $40,000, respectively, resulting from these transactions.

FCJ Management (FCJ) is a corporation that leases land and facilities to the Forbes Group and is owned by two of the executive officers of
FES Ltd, who also serve as directors of FES Ltd, and a manager of one of the subsidiaries of FES Ltd. The Forbes Group recognized expenses of $3,000 and $0 for the three months ended March 31, 2009 and 2008, respectively. No revenues have been
recognized from FCJ for any period. The Forbes Group had no accounts receivable from FCJ or accounts payable to FCJ as of March 31, 2009 or December 31, 2008.

C&F Partners is an entity that is owned by an officer of FES Ltd. The Forbes Group recognized no revenues for either period. The Forbes Group recognized expenses of $130,000 and zero for the three months ended
March 31, 2009 and 2008, respectively related to aircraft rental. There were no capital expenditures for either period. There were no accounts receivable, and accounts payable were $43,000 and $42,000 as of March 31, 2009 and
December 31, 2008.

The Forbes Group rents or leases fifteen separate properties from AES for separate parcels of land and buildings.
The leases were entered into at various dates subsequent to December 31, 2006. Each lease has a five-year term with the Forbes Group having the option to extend from between one and five years. Aggregate amounts paid for the fifteen rentals and
leases were $0.3 million and $0.1 million for the three months ended March 31, 2009 and 2008, respectively.

The Forbes Group
entered into a waste water disposal operating agreement dated January 1, 2007, with AES pursuant to which AES leases its rights in a certain well bore and receives payments in the form of a minimum fee of $5,000 per month plus $0.15 per barrel
for any barrel injected over 50,000 barrels. Under this agreement, AES also receives a skim oil payment of 20% of the amount realized by the Forbes Group for all oil and hydrocarbons removed from liquids injected into the premises. The
agreement term is for three years and is renewable for successive three year terms as long as AES has rights to the well.

The Forbes Group
entered into a waste water disposal lease agreement dated April 1, 2007, with AES. Under the agreement, the Forbes Group is entitled to use the leased land for the disposal of waste water for a term of five years with three successive three
year renewal periods. The Forbes Group pays a monthly rental of $2,500 per month plus $.05 per barrel for any barrel over 50,000 barrels of waste water injected per month. Additionally, the Forbes Group pays an amount equal to 10% of all oil or
other hydrocarbons removed from liquids injected or any skim oil.

The Forbes Group has a relationship with a bank in which the President,
Chief Executive Officer, and director is also a director of the Forbes Group. As of March 31, 2009 and December 31, 2008, the Forbes Group had $24.5 million and $10.6 million on deposit with this bank.



15



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|10. | Commitments and Contingencies
|--- | -----------------------------

Concentrations of
Credit Risk

Financial instruments which subject the Forbes Group to credit risk consist primarily of cash balances maintained in excess
of federal depository insurance limits and trade receivables. The Forbes Group restricts investment of temporary cash investments to financial institutions with high credit standings. The Forbes Groups customer base consists primarily of
multi-national and independent oil and natural gas producers. The Forbes Group performs ongoing credit evaluations of its customers but generally does not require collateral on its trade receivables. With the industry down-turn customer
concentration is changing. For the three months ended March 31, 2009 Forbes largest customer, five largest customers, and ten largest customers constituted 12.4%, 36.4%, and 48.6% of revenues, respectively. The loss of any one of our top
five customers would have a negative impact on the revenues and profits of the company. Further, our trade accounts receivable are from companies within the oil and natural gas industry and as such Forbes is exposed to normal industry credit risks.
Forbes continually evaluates its reserves for potential credit losses and establishes reserves for such losses.

Self-Insurance

We are self-insured up to retention limits with regard to workers compensation and medical coverage of our
employees. We have deductibles for workers compensation of $250,000 bodily injury per accident and $250,000 per each claim for disease. The medical coverage has a $125,000 deductible per
individual plus a $250,000 aggregate deductible. Deductibles for automobile liability and general liability are $100,000 per occurrence. Workers compensation, general liability and automobile liability have an
aggregate stop loss in the amount of $6,425,250. The Forbes Group has incurred but not processed claims at March 31, 2009 and December 31, 2008 of approximately $2.9 million and $2.0 million, respectively. These claims were unprocessed as
of those respective dates, and their values are estimated and included in accrued expenses in the accompanying consolidated balance sheets.

Litigation

We are subject to various other claims and legal actions that arise in the ordinary course of business. We do
not believe that any of these claims and actions, separately or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations or cash flows, although we cannot guarantee that a material adverse
effect will not occur.



|11. | Supplemental Cash Flow Information
|--- | ----------------------------------



|                                                                     |  |                              |            |   |      |   |           
|-------------------------------------------------------------------- |  | ---------------------------- | ---------- | - | ---- | - | ----------
|                                                                     |  | Three Months Ended March 31,
|                                                                     |  | 2009                         |            |   | 2008
|Cash paid for                                                        |  |                              |            |   |      |   |           
|Interest                                                             |  | $                            | 11,468,591 |   |      | $ | 3,306,456 
|Taxes                                                                |  |                              |           |   |      |   |          
|Supplemental schedule of non-cash investing and financing activities |  |                              |            |   |      |   |           
|Seller-financed purchases of property and equipment                  |  | $                            |           |   |      | $ | 26,477,366
|Changes in accrued capital expenditures                              |  |                              | (2,111,920 | ) |      |   | 36,761,105
|Insurance proceeds receivable                                        |  |                              | 750,000    |   |      |   |          



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|12. | Earnings/(Loss) per Share
|--- | -------------------------

Basic net income per
share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted-average number of common shares outstanding
during the period and potentially dilutive common stock equivalents. Potential common stock equivalents that have been issued by the Forbes Group relate to outstanding stock option and are determined using the treasury stock method.

Concurrent with the Equity Offering on May 29, 2008, we began conducting our business through, a newly formed corporation and holding company.
Historical net income per share was not presented for the three months ended March 31, 2008 because we were structured as a limited liability company, had limited member units and there were no ownership interests that were convertible into
common stock or a common stock equivalent.

The pro forma net income per share reflects the effects related to our Bermuda Reorganization
from a limited liability company to a C corporation, the issuance of our common stock in connection with our Initial Equity Offering and an assumed effective tax rate of 37%.

The following table sets forth the computation of basic and diluted earnings per share:



|                                            |  |                              |            |   |            |   |           
|------------------------------------------- |  | ---------------------------- | ---------- | - | ---------- | - | ----------
|                                            |  | Three Months Ended March 31,
|                                            |  | 2009                         |            |   | 2008      
|                                            |  |                              |            |   | (Proforma)
|Basic:                                      |  |                              |            |   |            |   |           
|Net income (loss)                           |  | $                            | (4,535,490 | ) |            | $ | 4,675,786 
|                                            |  |                              |            |   |            |   |           
|Weighted average common shares              |  |                              | 62,111,200 |   |            |   | 54,144,700
|                                            |  |                              |            |   |            |   |           
|Basic net income (loss) per share           |  | $                            | (0.07      | ) |            | $ | 0.09      
|                                            |  |                              |            |   |            |   |           
|Diluted:                                    |  |                              |            |   |            |   |           
|Net income (loss)                           |  | $                            | (4,535,490 | ) |            | $ | 4,675,786 
|                                            |  |                              |            |   |            |   |           
|Weighted average common shares              |  |                              | 62,111,200 |   |            |   | 54,144,700
|Stock options                               |  |                              |           |   |            |   |          
|                                            |  |                              |            |   |            |   |           
|Weighted average common sharesdiluted      |  |                              | 62,111,200 |   |            |   | 54,144,700
|                                            |  |                              |            |   |            |   |           
|Diluted net income (loss) per sharediluted |  | $                            | (0.07      | ) |            | $ | 0.09      
|                                            |  |                              |            |   |            |   |           

All options for the three months ended March 31, 2009 were anti-dilutive.



|13. | Income Taxes
|--- | ------------

In July 2006, the Financial
Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48), which clarifies the accounting and disclosure for uncertainty in
tax positions, as defined. FIN 48 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company is subject to the provisions of FIN 48 after June 27,
2008 when it became subject to filing under the Securities Exchange Act of 1934. Prior to May 29, 2008, the entities comprising the Forbes Group were flow-through entities for tax purposes; therefore, the former owners are responsible for any tax
adjustments related to prior years, although Management believes no uncertainties exist related to those prior years. The Forbes Group has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income
tax returns and is unaware of any uncertain tax positions. The Company files tax returns in the U.S., Texas, and Mexico. The Forbes Group became subject to federal income taxes on May 29, 2008 and has not yet been required to file a federal income
tax return. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to FIN 48. In addition, the Company was not required to record a cumulative effect adjustment related to the adoption of FIN 48.

The Companys benefit from application of the effective tax rate for the three months ended March 31, 2009 was 38%. The difference between the
effective rate and 35% statutory rate is primarily related to Texas state franchise taxes. For the three months ended March 31, 2008, the effective tax rate was 0% as the Forbes Group was not a taxable entity prior to May 29, 2008 and all
tax attributes were passed through to the owners.

The Forbes Group is subject to the revised Texas Franchise tax. The revised Texas
Franchise tax is an income tax equal to one percent of Texas sourced revenue reduced by the greater of (a) cost of goods sold (as defined by Texas law), (b) compensation (as defined by Texas law) or (c) thirty percent of the
Texas-sourced revenue. The Forbes Group accounts for the revised Texas Franchise tax in accordance with SFAS No. 109, because the tax is derived from a taxable base that consists of income less deductible expenses. For the three months ended
March 31, 2009, the Forbes Group recorded franchise tax expense of $0.2 million.



|14. | Business Segment Information
|--- | ----------------------------

The Forbes Group has
determined that it has two reportable segments organized based on its products and serviceswell servicing and fluid logistics. The accounting policies of the segments are the same as those described in the summary of significant accounting
policies.

Well Servicing

The well servicing segment consists of operations in the U.S. and Mexico, which provides (i) well maintenance, including remedial repairs and removal and replacement of downhole production equipment, (ii) well workovers,



17



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including significant downhole repairs, re-completions and re-perforations, (iii) completion and swabbing activities, and (iv) plugging and
abandoning services. In addition, the Forbes Group has tubing testing units that are used to conduct pressure testing of oil and natural gas production tubing.

Fluid Logistics

The fluid logistics segment consists of operations in the U.S., which provide,
transport, store and dispose of a variety of drilling and produced fluids used in and generated by oil and natural gas production activities. These services are required in most workover and completion projects and are routinely used in daily
producing well operations.

The following table sets forth certain financial information with respect to the Companys reportable
segments:



|                                                            |  |                |             |                 |   |              |  |   |            
|----------------------------------------------------------- |  | -------------- | ----------- | --------------- | - | ------------ |  | - | -----------
|                                                            |  | Well Servicing |             | Fluid Logistics |   | Consolidated
|Three months ended March 31, 2009                           |  |                |             |                 |   |              |  |   |            
|Operating revenues                                          |  | $              | 31,539,008  |                 | $ | 31,892,374   |  | $ | 63,431,382 
|Direct operating costs                                      |  |                | 26,395,709  |                 |   | 23,231,671   |  |   | 49,627,330 
|                                                            |  |                |             |                 |   |              |  |   |            
|Segment profits                                             |  | $              | 5,143,299   |                 | $ | 8,660,753    |  | $ | 13,804,052 
|                                                            |  |                |             |                 |   |              |  |   |            
|Depreciation and amortization                               |  | $              | 5,252,468   |                 | $ | 4,438,904    |  | $ | 9,691,372  
|Capital expenditures                                        |  |                | 6,011,830   |                 |   | 1,317,514    |  |   | 7,329,344  
|Assets                                                      |  |                | 282,294,699 |                 |   | 195,855,690  |  |   | 478,150,389
|                                                            |  |                |            
|Three months ended March 31, 2008 (As Restated-See Note 17) |  |                |             |                 |   |              |  |   |            
|                                                            |  |                |            
|Operating revenues                                          |  | $              | 39,284,338  |                 | $ | 31,238,521   |  | $ | 70,522,859 
|Direct operating costs                                      |  |                | 24,404,782  |                 |   | 22,294,883   |  |   | 46,699,665 
|                                                            |  |                |             |                 |   |              |  |   |            
|Segment profits                                             |  | $              | 14,879,556  |                 | $ | 8,943,638    |  | $ | 23,823,194 
|                                                            |  |                |             |                 |   |              |  |   |            
|Depreciation and amortization                               |  | $              | 3,934,144   |                 | $ | 3,105,879    |  | $ | 7,040,023  
|Capital expenditures                                        |  |                | 37,864,307  |                 |   | 10,228,403   |  |   | 48,092,710 



|                                                                 |  |                              |              |   |                           |   |              |  
|---------------------------------------------------------------- |  | ---------------------------- | ------------ | - | ------------------------- | - | ------------ | -
|                                                                 |  | Three Months Ended March 31, |             
|                                                                 |  | 2009                         |              |   | 2008                      |  
|                                                                 |  |                              |              |   | (As Restated See Note 17) |  
|Reconciliation of the Forbes Group Operating Income as Reported: |  |                              |              |   |                           |   |              |  
|Segment profits                                                  |  | $                            | 13,804,052   |   |                           | $ | 23,823,194   |  
|General and administrative expenses                              |  |                              | 5,773,879    |   |                           |   | 3,142,681    |  
|Depreciation and amortization                                    |  |                              | 9,691,372    |   |                           |   | 7,040,023    |  
|                                                                 |  |                              |              |   |                           |   |              |  
|Operating income (loss)                                          |  |                              | (1,661,199   | ) |                           |   | 13,640,490   |  
|Other income (expenses), net                                     |  |                              | (5,653,236   | ) |                           |   | (5,945,592   | )
|                                                                 |  |                              |              |   |                           |   |              |  
|Income (loss) before income taxes                                |  | $                            | (7,314,435   | ) |                           | $ | 7,694,898    |  
|                                                                 |  |                              |              |   |                           |   |              |  
|                                                                 |  |                             
|                                                                 |  | As atMarch 31, 2009          |              |   | As atDecember 31, 2008    |  
|Reconciliation of the Forbes Group Assets as Reported:           |  |                              |              |   |                           |   |              |  
|Total reportable segments                                        |  | $                            | 478,150,389  |   |                           | $ | 469,286,145  |  
|Eliminate internal transactions                                  |  |                              | (448,164,134 | ) |                           |   | (405,882,394 | )
|Parent                                                           |  |                              | 447,134,511  |   |                           |   | 419,397,640  |  
|                                                                 |  |                              |              |   |                           |   |              |  
|Total assets                                                     |  | $                            | 477,120,766  |   |                           | $ | 482,801,391  |  
|                                                                 |  |                              |              |   |                           |   |              |  

Financial information about geographic areas

Revenue from the Companys non-U.S. operations were $2.7 million and zero for the quarters ended March 31, 2009 and 2008, respectively. All
other revenue was generated by the Companys U.S. operations. Long-lived assets located



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in Mexico were approximately $1.1 million and $0.3 million as of March 31, 2009 and December 31, 2008, respectively. All other long-lived
assets were located in the U.S.



|15. | Guarantor and Non-Guarantor Condensed Consolidating Financial Statements
|--- | ------------------------------------------------------------------------

The Senior Secured Notes are guaranteed by FES Ltd, the parent company of FES LLC and Forbes Energy Capital Inc., as well as the Guarantor Subs. All of the Guarantor Subs are 100% owned and guarantee the
securities on a full and unconditional and joint and several basis. FES Ltd has two 100% owned indirect subsidiaries, that have not guaranteed the Senior Secured Notes. FES Ltd has independent operations through a branch
office in Mexico. The Guarantor Subs represent the majority of the Companys operations. There are no significant restrictions on FES Ltds ability or the ability of any guarantor to obtain funds from its subsidiaries by such means as a
dividend or loan except for certain restrictions contained in the Credit Facility restricting payment of dividends by the principal operating subsidiaries.

These schedules are presented using the equity method of accounting for all periods presented. Under this method, investments in subsidiaries are recorded at cost and adjusted for the Companys share in the
subsidiaries cumulative results of operations, capital contributions and distributions and other changes in equity. Elimination entries relate primarily to the elimination of investments in subsidiaries and associated intercompany balances and
transactions. During the first quarter of 2009, the Companys Mexico Operations became fully functional resulting in customer billings of $2.7 million.

During the three months ended March 31, 2009 the Company concluded that its Mexico operations met the criteria requiring disclosure in accordance with Rule 3-10 of Regulation S-X.

Supplemental financial information for Forbes Energy Services Ltd., the parent, Forbes Energy Services LLC and Forbes Energy Capital, Inc., the issuers,
our combined subsidiary guarantors and our non-guarantor subsidiaries is presented below. The December 31, 2008 supplemental information has not been included because the then existing non-guarantor was deemed to be minor as of and for the
period ending that date.



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Condensed Consolidating Balance Sheet

As of March 31, 2009



|                                           |  |        |             |   |         |   |                       |  |   |                           |   |  |              |            |   |              |   |              |   |  |   |            
|------------------------------------------ |  | ------ | ----------- | - | ------- | - | --------------------- |  | - | ------------------------- | - |  | ------------ | ---------- | - | ------------ | - | ------------ | - |  | - | -----------
|                                           |  | Parent |             |   | Issuers |   | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Eliminations |            |   | Consolidated
|Assets                                     |  |        |             |   |         |   |                       |  |   |                           |   |  |              |            |   |              |   |              |   |  |   |            
|Current assets                             |  |        |             |   |         |   |                       |  |   |                           |   |  |              |            |   |              |   |              |   |  |   |            
|Cash and cash equivalents                  |  | $      | 127,432     |   |         | $ | 11,439,627            |  | $ | 27,640,273                |   |  | $            | 341,476    |   |              | $ |             |   |  | $ | 39,548,808 
|Accounts receivable                        |  |        | 3,133,199   |   |         |   | 34,903                |  |   | 49,260,812                |   |  |              |           |   |              |   |             |   |  |   | 52,428,914 
|Prepaid expenses                           |  |        |            |   |         |   | 1,144,837             |  |   | 3,713,201                 |   |  |              | 71,732     |   |              |   |             |   |  |   | 4,929,770  
|Other current assets                       |  |        |            |   |         |   |                      |  |   | 2,044,586                 |   |  |              |           |   |              |   |             |   |  |   | 2,044,586  
|                                           |  |        |             |   |         |   |                       |  |   |                           |   |  |              |            |   |              |   |              |   |  |   |            
|Total current assets                       |  |        | 3,260,631   |   |         |   | 12,619,367            |  |   | 82,658,872                |   |  |              | 413,208    |   |              |   |             |   |  |   | 98,952,078 
|Property and equipment, net                |  |        |            |   |         |   |                      |  |   | 326,274,572               |   |  |              | 1,107,742  |   |              |   |             |   |  |   | 327,382,314
|Investments in affiliates                  |  |        | 71,981,181  |   |         |   | 106,227,004           |  |   | (1,084,807                | ) |  |              |           |   |              |   | (177,123,378 | ) |  |   |           
|Intercompany receivables                   |  |        | 86,067,747  |   |         |   | 329,854,858           |  |   | 32,242,249                |   |  |              | 3,113,348  |   |              |   | (451,278,202 | ) |  |   |           
|Intangible assets, net                     |  |        |            |   |         |   |                      |  |   | 38,744,678                |   |  |              |           |   |              |   |             |   |  |   | 38,744,678 
|Deferred financing costs, net              |  |        |            |   |         |   | 11,952,520            |  |   | 51,373                    |   |  |              |           |   |              |   |             |   |  |   | 12,003,893 
|Other assets                               |  |        |            |   |         |   |                      |  |   | 26,659                    |   |  |              | 11,144     |   |              |   |             |   |  |   | 37,803     
|                                           |  |        |             |   |         |   |                       |  |   |                           |   |  |              |            |   |              |   |              |   |  |   |            
|Total assets                               |  | $      | 161,309,559 |   |         | $ | 460,653,749           |  | $ | 478,913,596               |   |  | $            | 4,645,442  |   |              | $ | (628,401,580 | ) |  | $ | 477,120,766
|                                           |  |        |             |   |         |   |                       |  |   |                           |   |  |              |            |   |              |   |              |   |  |   |            
|Liabilities and Shareholders Equity       |  |        |             |   |         |   |                       |  |   |                           |   |  |              |            |   |              |   |              |   |  |   |            
|Current liabilities                        |  |        |             |   |         |   |                       |  |   |                           |   |  |              |            |   |              |   |              |   |  |   |            
|Accounts payable                           |  | $      | 600         |   |         | $ | 1,205,853             |  | $ | 27,948,363                |   |  | $            | 187,084    |   |              | $ |             |   |  | $ | 29,341,900 
|Income taxes payable                       |  |        |            |   |         |   |                      |  |   | 1,094,085                 |   |  |              | 59,222     |   |              |   |             |   |  |   | 1,153,307  
|Accrued liabilities                        |  |        |            |   |         |   | 2,939,301             |  |   | 9,848,683                 |   |  |              | 469,030    |   |              |   |             |   |  |   | 13,257,014 
|Current maturities of long-term debt       |  |        |            |   |         |   |                      |  |   | 3,772,082                 |   |  |              |           |   |              |   |             |   |  |   | 3,772,082  
|                                           |  |        |             |   |         |   |                       |  |   |                           |   |  |              |            |   |              |   |              |   |  |   |            
|Total current liabilities                  |  |        | 600         |   |         |   | 4,145,154             |  |   | 42,663,213                |   |  |              | 715,336    |   |              |   |             |   |  |   | 47,524,303 
|Long-term debt, net of current maturities  |  |        |            |   |         |   | 197,750,087           |  |   | 18,200,697                |   |  |              |           |   |              |   |             |   |  |   | 215,950,784
|Intercompany payables                      |  |        | 19,588,007  |   |         |   | 186,777,327           |  |   | 239,897,847               |   |  |              | 5,015,022  |   |              |   | (451,278,203 | ) |  |   |           
|Deferred tax liability                     |  |        | (12,782,487 | ) |         |   |                      |  |   | 71,924,727                |   |  |              |           |   |              |   |             |   |  |   | 59,142,240 
|                                           |  |        |             |   |         |   |                       |  |   |                           |   |  |              |            |   |              |   |              |   |  |   |            
|Total liabilities                          |  |        | 6,806,120   |   |         |   | 388,672,568           |  |   | 372,686,484               |   |  |              | 5,730,358  |   |              |   | (451,278,203 | ) |  |   | 322,617,327
|                                           |  |        |             |   |         |   |                       |  |   |                           |   |  |              |            |   |              |   |              |   |  |   |            
|Shareholders equity                       |  |        | 154,503,439 |   |         |   | 71,981,181            |  |   | 106,227,112               |   |  |              | (1,084,916 | ) |              |   | (177,123,377 | ) |  |   | 154,503,439
|                                           |  |        |             |   |         |   |                       |  |   |                           |   |  |              |            |   |              |   |              |   |  |   |            
|Total liabilities and shareholders equity |  | $      | 161,309,559 |   |         | $ | 460,653,749           |  | $ | 478,913,596               |   |  | $            | 4,645,442  |   |              | $ | (628,401,580 | ) |  | $ | 477,120,766
|                                           |  |        |             |   |         |   |                       |  |   |                           |   |  |              |            |   |              |   |              |   |  |   |            



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Condensed Consolidating Statement of Operations

For the Three Months Ended March 31, 2009



|                                      |  |        |            |   |         |   |            |                       |  |   |                           |   |  |              |           |   |              |   |            |   |  |   |            |  
|------------------------------------- |  | ------ | ---------- | - | ------- | - | ---------- | --------------------- |  | - | ------------------------- | - |  | ------------ | --------- | - | ------------ | - | ---------- | - |  | - | ---------- | -
|                                      |  | Parent |            |   | Issuers |   |            | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Eliminations |           |   | Consolidated |  
|Revenues                              |  |        |            |   |         |   |            |                       |  |   |                           |   |  |              |           |   |              |   |            |   |  |   |            |  
|Well servicing                        |  | $      | 2,708,534  |   |         | $ |           |                       |  | $ | 29,250,474                |   |  | $            | 2,708,534 |   |              | $ | (3,128,534 | ) |  | $ | 31,539,008 |  
|Fluid logistics                       |  |        |           |   |         |   |           |                       |  |   | 31,892,374                |   |  |              |          |   |              |   |           |   |  |   | 31,892,374 |  
|                                      |  |        |            |   |         |   |            |                       |  |   |                           |   |  |              |           |   |              |   |            |   |  |   |            |  
|Total revenues                        |  |        | 2,708,534  |   |         |   |           |                       |  |   | 61,142,848                |   |  |              | 2,708,534 |   |              |   | (3,128,534 | ) |  |   | 63,431,382 |  
|                                      |  |        |            |   |         |   |            |                       |  |   |                           |   |  |              |           |   |              |   |            |   |  |   |            |  
|Expenses                              |  |        |            |   |         |   |            |                       |  |   |                           |   |  |              |           |   |              |   |            |   |  |   |            |  
|Well servicing                        |  |        | 2,929,255  |   |         |   |           |                       |  |   | 24,517,877                |   |  |              | 2,077,111 |   |              |   | (3,128,534 | ) |  |   | 26,395,709 |  
|Fluid logistics                       |  |        |           |   |         |   |           |                       |  |   | 23,231,621                |   |  |              |          |   |              |   |           |   |  |   | 23,231,621 |  
|General and administrative            |  |        | 436,078    |   |         |   | 2,180,985  |                       |  |   | 2,808,035                 |   |  |              | 348,781   |   |              |   |           |   |  |   | 5,773,879  |  
|Depreciation and amortization         |  |        |           |   |         |   |           |                       |  |   | 9,661,330                 |   |  |              | 30,042    |   |              |   |           |   |  |   | 9,691,372  |  
|                                      |  |        |            |   |         |   |            |                       |  |   |                           |   |  |              |           |   |              |   |            |   |  |   |            |  
|Total expenses                        |  |        | 3,365,333  |   |         |   | 2,180,985  |                       |  |   | 60,218,863                |   |  |              | 2,455,934 |   |              |   | (3,128,534 | ) |  |   | 65,092,581 |  
|                                      |  |        |            |   |         |   |            |                       |  |   |                           |   |  |              |           |   |              |   |            |   |  |   |            |  
|Operating income                      |  |        | (656,799   | ) |         |   | (2,180,985 | )                     |  |   | 923,985                   |   |  |              | 252,600   |   |              |   |           |   |  |   | (1,661,199 | )
|Interest Expense                      |  |        |           |   |         |   | (6,434,307 | )                     |  |   | (219,372                  | ) |  |              | 2         |   |              |   |           |   |  |   | (6,653,677 | )
|Equity in income (loss) of affiliates |  |        | (6,805,071 | ) |         |   | 836,118    |                       |  |   | 152,270                   |   |  |              |          |   |              |   | 5,816,683  |   |  |   |           |  
|Other income, net                     |  |        |           |   |         |   | 974,103    |                       |  |   | 67,433                    |   |  |              | (41,095   | ) |              |   |           |   |  |   | 1,000,441  |  
|                                      |  |        |            |   |         |   |            |                       |  |   |                           |   |  |              |           |   |              |   |            |   |  |   |            |  
|Income before taxes                   |  |        | (7,461,870 | ) |         |   | (6,805,071 | )                     |  |   | 924,316                   |   |  |              | 211,507   |   |              |   | 5,816,683  |   |  |   | (7,314,435 | )
|Income tax expense                    |  |        | (2,926,380 | ) |         |   |           |                       |  |   | 88,213                    |   |  |              | 59,222    |   |              |   |           |   |  |   | (2,778,945 | )
|                                      |  |        |            |   |         |   |            |                       |  |   |                           |   |  |              |           |   |              |   |            |   |  |   |            |  
|Net income (loss)                     |  | $      | (4,535,490 | ) |         | $ | (6,805,071 | )                     |  | $ | 836,103                   |   |  | $            | 152,285   |   |              | $ | 5,816,683  |   |  | $ | (4,535,490 | )
|                                      |  |        |            |   |         |   |            |                       |  |   |                           |   |  |              |           |   |              |   |            |   |  |   |            |  



21



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Condensed Consolidating Statement of Cash Flows

For the Three Months Ended March 31, 2009



|                                                     |  |        |         |   |         |   |            |                       |  |   |                           |   |  |              |           |              |  |   |   |  |   |            |  
|---------------------------------------------------- |  | ------ | ------- | - | ------- | - | ---------- | --------------------- |  | - | ------------------------- | - |  | ------------ | --------- | ------------ |  | - | - |  | - | ---------- | -
|                                                     |  | Parent |         |   | Issuers |   |            | GuarantorSubsidiaries |  |   | Non-GuarantorSubsidiaries |   |  | Eliminations |           | Consolidated | 
|Cash flows from operating activities                 |  |        |         |   |         |   |            |                       |  |   |                           |   |  |              |           |              |  |   |   |  |   |            |  
|Net cash provided by (used in) operating activities  |  | $      | (5,165  | ) |         | $ | 13,257,889 |                       |  | $ | 304,723                   |   |  | $            | 1,111,794 |              |  | $ |  |  | $ | 14,669,241 |  
|                                                     |  |        |         |   |         |   |            |                       |  |   |                           |   |  |              |           |              |  |   |   |  |   |            |  
|Cash flows from investing activities                 |  |        |         |   |         |   |            |                       |  |   |                           |   |  |              |           |              |  |   |   |  |   |            |  
|Insurance Proceeds                                   |  |        |        |   |         |   |           |                       |  |   | 826,081                   |   |  |              |          |              |  |   |  |  |   | 826,081    |  
|Purchase of property and equipment                   |  |        |        |   |         |   |           |                       |  |   | (7,151,164                | ) |  |              | (790,099  | )            |  |   |  |  |   | (7,941,263 | )
|                                                     |  |        |         |   |         |   |            |                       |  |   |                           |   |  |              |           |              |  |   |   |  |   |            |  
|Net cash provided by (used in) investing activities  |  |        |        |   |         |   |           |                       |  |   | (6,325,083                | ) |  |              | (790,099  | )            |  |   |  |  |   | (7,115,182 | )
|                                                     |  |        |         |   |         |   |            |                       |  |   |                           |   |  |              |           |              |  |   |   |  |   |            |  
|Cash flows from financing activities                 |  |        |         |   |         |   |            |                       |  |   |                           |   |  |              |           |              |  |   |   |  |   |            |  
|Payments related to issuance of common stock         |  |        | (4,294  | ) |         |   |           |                       |  |   |                          |   |  |              |          |              |  |   |  |  |   | (4,294     | )
|Net borrowings under the Credit Facility             |  |        |        |   |         |   |           |                       |  |   | 12,000,000                |   |  |              |          |              |  |   |  |  |   | 12,000,000 |  
|Repayments of debt                                   |  |        |        |   |         |   | (2,015,000 | )                     |  |   | (1,455,024                | ) |  |              |          |              |  |   |  |  |   | (3,470,024 | )
|                                                     |  |        |         |   |         |   |            |                       |  |   |                           |   |  |              |           |              |  |   |   |  |   |            |  
|Net cash provided by (used in) financing activities  |  |        | (4,294  | ) |         |   | (2,015,000 | )                     |  |   | 10,544,976                |   |  |              |          |              |  |   |  |  |   | 8,525,682  |  
|                                                     |  |        |         |   |         |   |            |                       |  |   |                           |   |  |              |           |              |  |   |   |  |   |            |  
|Net increase/(decrease) in cash and cash equivalents |  |        | (9,459  | ) |         |   | 11,242,889 |                       |  |   | 4,524,616                 |   |  |              | 321,695   |              |  |   |  |  |   | 16,079,741 |  
|Cash and cash equivalents                            |  |        |         |   |         |   |            |                       |  |   |                           |   |  |              |           |              |  |   |   |  |   |            |  
|Beginning of period                                  |  |        | 136,891 |   |         |   | 196,738    |                       |  |   | 23,115,657                |   |  |              | 19,781    |              |  |   |  |  |   | 23,469,067 |  
|                                                     |  |        |         |   |         |   |            |                       |  |   |                           |   |  |              |           |              |  |   |   |  |   |            |  
|End of period                                        |  | $      | 127,432 |   |         | $ | 11,439,627 |                       |  | $ | 27,640,273                |   |  | $            | 341,476   |              |  | $ |  |  | $ | 39,548,808 |  
|                                                     |  |        |         |   |         |   |            |                       |  |   |                           |   |  |              |           |              |  |   |   |  |   |            |  



|16. | Equity Securities
|--- | -----------------

Common Shares

Holders of common shares have no pre-emptive, redemption, conversion, or sinking fund rights. Holders of common shares are entitled to one vote per
share on all matters submitted to a vote of holders of common shares. Unless a different majority is required by law or by the Companys bye-laws, resolutions to be approved by holders of common shares require approval by a simple majority
of votes cast at a meeting at which a quorum is present. In the event of the liquidation, dissolution, or winding up of the Company, the holders of common shares are entitled to share equally and ratably in the Companys assets, if any,
remaining after the payment of all of its debts and liabilities, subject to any liquidation preference on any issued and outstanding preference shares.

Class B Shares

Holders of Class B shares have all of the rights of holders of common shares, except
for the differences described in this section. The Class B shares are convertible at any time at the discretion of each holder into common shares. Holders of Class B shares have the right to be present at annual shareholder meetings, but,
except as otherwise provided in the Companies Act 1981 of Bermuda and the Companys bye-laws, have no right to vote on any matters at such meetings. Under the bye-laws, the holders of the Class B shares are permitted to vote with the common
shares on an as-converted basis for the following actions:



| |  |  | any increase or decrease in the authorized number of common shares or preference shares;
| | - |  | ----------------------------------------------------------------------------------------



22



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| |  |  | any agreement by the Company or its shareholders regarding a business combination (as defined in the bye-laws);
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | any increase of decrease in the authorized number of members of the board of directors;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | the liquidation, dissolution or winding up of the Company; and
| | - |  | --------------------------------------------------------------



| |  |  | voluntary placement of the Company into receivership proceedings in any relevant jurisdiction.
| | - |  | ----------------------------------------------------------------------------------------------

In addition, the following actions require the approval of holders of 75% of the Class B shares:



| |  |  | any increase or decrease in the authorized number and any issuance of Class B shares;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | any alteration or waiver of any provision of the bye-laws in a manner adverse to the holders of the Class B shares; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | any authorization or any designation, whether by reclassification or otherwise, of any new class or series of shares or any other securities convertible into equity
securities of the Company having voting rights or ranking on a parity with or senior to the Class B shares in right of redemption, liquidation preference, or dividend rights, or any increase in the authorized or designated number of any such new
class or series.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition to the rights above, holders of Class B shares have the right to nominate a majority of the
board of directors for election for as long as such holders own at least a majority of the capital stock of the Company. In the event that such holders own between 25% and 50% of the capital stock of the Company, they shall have the right to
nominate that number of directors commensurate with their percentage ownership of the Company, with such number being not less than two.



|17. | Restatement
|--- | -----------

Subsequent to the issuance of our
unaudited condensed consolidated financial statements for the quarter ended March 31, 2008, we determined that those financial statements included errors relating to goodwill and classification of accounts within stockholders equity. In
connection with the Delaware Reorganization effective January 1, 2008, an error was made in the application of purchase accounting that resulted in the overstatement of goodwill and property and equipment of $28.2 million and $1.8 million,
respectively, and an overstatement of members equity of $30.0 million as of March 31, 2008. A misapplication of purchase accounting also resulted in the incorrect classification of accounts within stockholders equity. As a result, we are
restating our unaudited condensed consolidated financial statements as of and for the quarter ended March 31, 2008 to correct these errors, as follows:

Consolidated Balance Sheet



|                                      |  |                       |             |                        |   |             |             |  |   |            
|------------------------------------- |  | --------------------- | ----------- | ---------------------- | - | ----------- | ----------- |  | - | -----------
|                                      |  | As of March 31, 2008 
|                                      |  | As PreviouslyReported |             | RestatementAdjustments |   |             | As Restated
|Assets                                |  |                       |             |                        |   |             |             |  |   |            
|Property and equipment, net           |  | $                     | 262,400,743 |                        | $ | (1,788,779  | )           |  | $ | 260,611,964
|Goodwill                              |  |                       | 32,597,846  |                        | $ | (28,234,477 | )           |  | $ | 4,363,369  
|Total assets                          |  |                       | 416,719,875 |                        | $ | (30,023,256 | )           |  | $ | 386,696,619
|                                      |  |                       |            
|Liabilities and Members Equity       |  |                       |             |                        |   |             |             |  |   |            
|Members equity                       |  | $                     | 165,915,147 |                        | $ | (30,023,256 | )           |  | $ | 135,891,891
|Total liabilities and members equity |  |                       | 416,719,875 |                        |   | (30,023,256 | )           |  |   | 386,696,619

Consolidated Statements of Operations



|                              |  |                                   |            |                        |   |         |             |  |   |           
|----------------------------- |  | --------------------------------- | ---------- | ---------------------- | - | ------- | ----------- |  | - | ----------
|                              |  | Three Months Ended March 31, 2008
|                              |  | As PreviouslyReported             |            | RestatementAdjustments |   |         | As Restated
|Depreciation and amortization |  | $                                 | 7,122,040  |                        | $ | (82,017 | )           |  | $ | 7,040,023 
|Total expenses                |  |                                   | 56,964,386 |                        |   | (82,017 | )           |  |   | 56,882,369
|Operating income              |  |                                   | 13,558,473 |                        |   | 82,017  |             |  |   | 13,640,490
|Income before taxes           |  |                                   | 7,612,881  |                        |   | 82,017  |             |  |   | 7,694,898 
|Net income                    |  |                                   | 7,440,881  |                        |   | 82,017  |             |  |   | 7,522,898 

Consolidated Statements of Cash Flows



|                                                                                                                         |  |                                   |            |                        |   |         |             |  |   |           
|------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------- | ---------- | ---------------------- | - | ------- | ----------- |  | - | ----------
|                                                                                                                         |  | Three Months Ended March 31, 2008
|                                                                                                                         |  | As PreviouslyReported             |            | RestatementAdjustments |   |         | As Restated
|Cash flows from operating activities:                                                                                    |  |                                   |            |                        |   |         |             |  |   |           
|Net Income                                                                                                               |  | $                                 | 7,440,881  |                        | $ | 82,017  |             |  | $ | 7,522,898 
|Adjustments to reconcile net income to net cash provided by operating activities - Depreciation and amortization expense |  |                                   | 7,122,040  |                        |   | (82,017 | )           |  |   | 7,040,023 
|Net cash provided by operating activities                                                                                |  |                                   | 13,605,393 |                        |   |        |             |  |   | 13,605,393

There was no impact on cash flows from investing and financing activities.

Consolidated Statements of Changes in Members Equity



|                                        |  |                                   |             |                        |   |             |             |  |   |            
|--------------------------------------- |  | --------------------------------- | ----------- | ---------------------- | - | ----------- | ----------- |  | - | -----------
|                                        |  | Three Months Ended March 31, 2008
|                                        |  | As PreviouslyReported             |             | RestatementAdjustments |   |             | As Restated
|January 1, 2008 Delaware reorganization |  | $                                 |            |                        | $ | 35,603,182  |             |  | $ | 35,603,182 
|Acquisition of TES and STT              |  |                                   | 91,247,000  |                        |   | 4,750,812   |             |  |   | 95,997,812 
|Net Income                              |  |                                   | 7,440,881   |                        |   | 82,017      |             |  |   | 7,522,898  
|Total Members Equity                   |  |                                   | 165,915,147 |                        |   | (30,023,256 | )           |  |   | 135,891,891



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying condensed consolidated
financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with the audited financial statements for the year ended December 31, 2008 included in our Annual Report on Form 10-K. Any forward-looking
statements made by or on our behalf are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that such forward-looking statements involve risks and uncertainties in that the
actual results may differ materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ include risks set forth in Part II-Item 1A. Risk Factors included herein.

Overview

Forbes Energy Services Ltd.
(FES Ltd) and its domestic subsidiaries, Forbes Energy Services LLC (FES LLC), Forbes Energy Capital Inc. (FES CAP), C.C. Forbes, LLC (CCF), TX Energy Services, LLC (TES), Superior
Tubing Testers, LLC (STT) and Forbes Energy International, LLC (FEI LLC), are headquartered in Alice, Texas and conduct business primarily in the state of Texas. In late 2008, FES LLC and FEI LLC formed Forbes Energy Services
México, S. de R.L. de C.V. and Forbes Energy Services México Servicios, S. de R.L. de C.V., each a Mexican limited liability partnership (sociedad de responsabilidad limitada de capital variable).

As used in this Quarterly Report on Form 10-Q, the Company, the Forbes Group, we, and our mean FES
Ltd and its subsidiaries on and after May 29, 2008; FES LLC and its subsidiaries from January 1, 2008 to May 28, 2008.

We
are an independent oilfield services contractor that provides a wide range of well site services to oil and natural gas drilling and producing companies to help develop and enhance the production of oil and natural gas. These services include fluid
hauling, fluid disposal, well maintenance, completion services, workovers and recompletions, plugging and abandonment, and tubing testing. Our operations are concentrated in the major onshore oil and natural gas producing regions of Texas, with one
location in Baxterville, Mississippi and one location in Poza Rica, Mexico.

We currently conduct our operations through the following two
business segments:



| |  |  | Well Servicing. Our well servicing segment comprised 49.7% of consolidated revenues for the three months ended March 31, 2009. At March 31, 2009,
our well servicing segment utilized our modern fleet of 170 owned or leased well servicing rigs, which included 162 workover rigs and 8 swabbing rigs, and related assets and equipment These assets are used to provide (i) well
maintenance, including remedial repairs and removal and replacement of downhole production equipment, (ii) well workovers, including significant downhole repairs, re-completions and re-perforations, (iii) completion and swabbing
activities, and (iv) plugging and abandoning services. In addition, we have a fleet of 6 tubing testing units that are used to conduct pressure testing of oil and natural gas production tubing.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fluid Logistics. Our fluid logistics segment comprised 50.3% of consolidated revenues for the three months ended March 31, 2009. Our fluid logistics
segment utilized our fleet of owned or leased fluid transport trucks and related assets, including specialized vacuum, high-pressure pump and tank trucks, frac tanks, water wells, salt water disposal wells and facilities, and related equipment.
These assets are used to provide, transport, store, and dispose of a variety of drilling and produced fluids used in, and generated by, oil and natural gas production. These services are required in most workover and completion projects and are
routinely used in daily operations of producing wells.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We believe that our two business segments are complementary and
create synergies in terms of selling opportunities. Our multiple lines of service allow us to capitalize on our existing customer base to grow within existing markets, generate more business from existing customers, and increase our operating
profits. By offering our customers the ability to reduce the number of vendors they use, we believe we help improve our customers efficiency. This is demonstrated by the fact that 76.8% of our revenues for the three months ended March 31,
2009 were from customers that utilized services of both of our business segments. Further, by having multiple service offerings that span the life cycle of the well, we believe we have a competitive advantage over smaller competitors offering more
limited services.

Factors Affecting Results of Operations

Oil and Natural Gas Prices

Demand for well servicing and fluid logistics services is generally a function of the
willingness of oil and natural gas companies to make operating and capital expenditures to explore for, develop and produce oil and natural gas, which in turn is affected by current and anticipated levels of oil and natural gas prices. Exploration
and production spending is generally categorized as either operating expenditures or capital expenditures. Activities by oil and natural gas companies designed to add oil and natural gas reserves are classified as capital expenditures, and those
associated with maintaining or accelerating production, such as workover and fluid logistics services, are categorized as operating expenditures. Operating expenditures are typically more stable than capital expenditures and are less sensitive to
oil and natural gas price volatility. In contrast, capital expenditures by oil and natural gas companies for drilling are more directly influenced by current and expected oil and natural gas prices and generally reflect the volatility of commodity
prices.

Workover Rig Rates

Our well
servicing segment revenues are dependent on the prevailing market rates for workover rigs. Market dayrates for workover rigs increased from 2003 through the first half of 2008, as high oil and natural gas prices and declining domestic production
resulted in a substantial growth of drilling activity and demand for workover services that are used primarily to maintain or enhance



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production levels of existing producing wells. In the second half of 2008 and to date in 2009, we have experienced declines in demand and significant pricing
pressure that are a result of the general economic decline and, more specifically, the precipitous decline in oil prices. These pricing pressures have resulted in the granting of price decreases to our customers during the three months ended
March 31, 2009.

Fluid Logistics Rates

Our fluid logistics segment revenues are dependent on the prevailing market rates for fluid transport trucks and the related assets, including specialized vacuum, high-pressure pump and tank trucks, frac tanks and salt water disposal wells.
Prior to the general economic decline that commenced in the latter half of 2008, higher oil and natural gas prices resulted in growing demand for drilling and our services and, since the decline, lower oil and natural gas prices have resulted in
reduced demand for drilling and our services. Required disposal of fluids produced from wells and the increased number of wells in service through the first half of 2008 led to a higher demand for fluid logistics services. In the second half of 2008
and to date in 2009, fluid logistics rates have been under significant downward pressure.

Operating Expenses

Prior to the general economic decline, a strong oil and natural gas environment resulted in a higher demand for operating personnel and oilfield supplies
and caused increases in the cost of those goods and services. In the second half of 2008 and to date in 2009, a weaker oil and natural gas environment has resulted in lower demand for operating personnel and oilfield supplies which has allowed us to
decrease our costs, thereby offsetting a portion of the price decreases granted to our customers. Additionally, fuel costs, which comprise a substantial portion of our operating expenses, increased substantially over the last few years and in
particular in the first half of 2008 before declining significantly in recent months. Future earnings and cash flows will be dependent on our ability to manage our overall cost structure and obtain price increases from our customers.

Capital Expenditures and Debt Service Obligations

As
a general matter, our capital expenditures to maintain our assets have been relatively limited. We have incurred indebtedness to invest in new assets to grow our business. As a result, the indebtedness we incurred for our capital expenditures has
significantly increased our debt service obligations. The majority of the net proceeds of the issuance (the Debt Offering) of our $205 million 11% senior secured notes (the Senior Secured Notes) was used to repay
indebtedness incurred on capital expenditures. Most of our new assets have been acquired through bank borrowings, short-term equipment vendor financings, cash flows from operations and other permitted financings. In the near term, we expect our
capital expenditures will primarily relate to our Mexico operation and will be subject to the constraints of the covenants under our indenture and revolving credit facility. As of April 30, 2009, we had approximately $200,000 in additional
capacity available under our revolving credit agreement and cash on hand of $35.4 million. We have had no additional borrowings since March 31, 2009.

Capital Expenditures and Operating Income Margins

The well servicing segment typically has higher operating income margins
along with higher capital expenditures when compared with the fluid logistics segment, which has lower operating margins but also lower capital expenditure requirements. However, with the recent industry downturn, we have experienced less margin
pressure on our fluid logistics segment, which has resulted in more favorable margins in that segment, relative to the well servicing segment.

Presentation

We note that FES LLC and its subsidiary limited liability companies that comprised the Forbes Group until
May 29, 2008 were not subject to federal income tax. All of the income, losses, credit, and deductions of these entities were passed through to the equity owners for purposes of their individual income tax returns, which is why these are
referred to as flow through entities for federal income tax purposes. Accordingly, no provision for income taxes is included in the following discussion and analysis of our historical operations through May 28, 2008. As of
May 29, 2008, in conjunction with the Initial Equity Offering and the related Bermuda Reorganization, the Forbes Group became subject to U.S. federal income tax.



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Results of Operations

The following discussion, as well as the discussion found under Liquidity and Capital Resources, compares our consolidated financial information as of and for the three months ended March 31, 2009 to
the three months March 31, 2008.

Three Months Ended March 31, 2009 Compared to Three Months Ended March 31, 2008

Revenues.For the three months ended March 31, 2009, revenues decreased by $7.1 million, or 10.1%, to $63.4 million when compared to the
same period in the prior year. During the fourth quarter 2008 and first quarter 2009 we experienced declines in demand and significant pricing pressure that are a result of the general economic decline.

Well Servicing  Revenues from the well servicing segment decreased $7.7 million for the period, or 19.7% to $31.5 million compared to the
corresponding period in the prior year. The decrease was largely due to the demand and the decline in oil prices which resulted in a reduced demand for our well services. Well servicing hours were 69,000 and 76,000, and work days were 63 and 64, for
the three months ended March 31, 2009 and 2008, respectively. Also contributing to the decrease in revenues was a 21.2% decrease in billing rates between the two quarters. We utilized 170 well servicing rigs as of March 31, 2009, compared to 125
well servicing rigs at March 31, 2008, a 36.0% increase. Of the 170 rigs available as of March 31, 2009, eight were allocated to Mexico operations. Of the 162 in the U.S. at March 31, 2009, only approximately 50.0% were being utilized due to the
general industry decline. Of the eight allocated to Mexico operations approximately 50.0% were being utilized. Two of the rigs were being readied for service and two were in transit. Management anticipates that six rigs will begin to be utilized in
Mexico by June 30, 2009.

Fluid Logistics  Revenues from the fluid logistics segment increased $0.7 million for the period, or
2.1%, to $31.9 million compared to the corresponding period in the prior year. This increase in revenues was caused in part by increased hours. Fluid transport billable hours were 229,219 and 221,377, and work days were 75 and 77 for the three
months ended March 31, 2009 and 2008 as the Company includes Saturdays in its work days for fluid logistics. These increased hours were offset by customer price reductions of approximately 2.2% and a drop in utilization to 74.7% for the three months
ended March 31, 2009 from 96.3% for the three months ended March 31, 2008. Estimated trucks in service during the three months ended March 31, 2009 and March 31, 2008 were 370 and 287, respectively. Our principal fluid logistics assets at March 31,
2009 and March 31, 2008 were as follows:



|                             |  |                 |  |            |  |      
|---------------------------- |  | --------------- |  | ---------- |  | -----
|                             |  | As of March 31, |  | % Increase
|Asset                        |  | 2009            |  | 2008       | 
|Vacuum trucks                |  | 294             |  | 224        |  | 31.3%
|High-pressure pump trucks    |  | 19              |  | 15         |  | 26.7%
|Other heavy trucks           |  | 57              |  | 48         |  | 18.8%
|Frac tanks (includes leased) |  | 1,370           |  | 1,096      |  | 25.0%
|Salt water disposal wells    |  | 16              |  | 14         |  | 0%   

Operating Expenses. Our operating expenses (excluding general and administrative expenses
and depreciation and amortization) increased to $49.6 million for the three months ended March 31, 2009, from $46.7 million for the three months ended March 31, 2008, a decrease of $2.9 million or 6.3%. Operating expenses as a percentage
of revenues were 78.2% for the three months ended March 31, 2009, compared to 66.2% for the three months ended March 31, 2008. This increase in operating expense as a percentage of our revenues is generally attributable to lower
utilization of our equipment, and a significant reduction in the rates we are able to invoice our customers, which has been partially offset by reductions in labor costs (rates and hours) and fuel price decreases, as discussed below.

Well Servicing Operating expenses from the well servicing segment increased by $2.0 million, or 8.2%, to $26.4 million. Well servicing
operating expenses as a percentage of well servicing revenues were 83.7% for the three months ended March 31, 2009, compared to 62.1% for the three months ended March 31, 2008, an increase of 21.6%. This can be attributed primarily to
a decrease of approximately 21.2% in average billing rates per well service rig between the two quarters. In addition to declining rates from our customers, average well service rig utilization decreased to 56.3% for the three months ended
March 31, 2009 from 94.6% for the three months ended March 31, 2008. These changes were partially offset by the addition of 45 well service rigs between April 1, 2008 and March 31, 2009. Rent equipment increased by $1.3
million primarily due to an additional well service equipment leases. Repairs & maintenance, bad debt expense, property taxes, payroll and rent facilities also increased by $1.1 million, $0.8 million, $0.5 million, $0.5 million and $0.2
million, respectively. The $0.8 million in additional bad debt expense relates primarily to one customer that reportedly may be filing bankruptcy in the near future due to sustained low oil and natural gas prices. Forbes is in discussions with the
customer and has initiated legal action to protect its interest, including the filing of mineral liens against the respective leasehold interests where our services were rendered. Eighty percent of the amount due from this customer was reserved
through an allowance for doubtful accounts. There is a reasonable possibility that the majority of this debt could be collected over the next several years as oil and natural gas reserves deplete resulting in more favorable energy prices. Additional
general industry financial pressures due to the down turn will, more likely than not, result in additional bad debts expense during 2009. Expenses that decreased included supplies & parts, out of town expense and fuel & oil expense
by $1.6 million, $0.5 million and $0.3 million respectfully. These decreases were the result of more aggressive cost management and declining product costs. The changes in expenses and decreases in revenues were in line with managements
expectations and were consistent with the rapidly changing industry.

Fluid Logistics  Operating expenses from the fluid
logistics segment increased by $0.9 million, or 4.0%, to $23.2 million. Fluid logistics operating expenses as a percentage of fluid logistics revenues were 72.8% for the three months ended



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March 31, 2009, compared to 71.4% for the three months ended March 31, 2008. This is primarily attributable to a decrease in average customer
rates of 2.2% between these same two periods which was partially offset by cost reductions. Between these same periods the Forbes added a number of additional heavy trucks as listed in the above schedule. The benefit of these additions was
offset by a decrease in average utilization to 74.7% for the three months ended March 31, 2009 as compared with average utilization of 96.3% for the three months ended March 31, 2008. The increase in fluid logistics operating expenses of
$0.9 million was due in large part to an increase in product and chemical costs of $1.0 million, or 63.3%, for the three months ended March 31, 2009, when compared to the same period in the prior year due to product and chemical price increases
of 97.1%. Product and chemical cost as a percentage of revenues was 7.9% and 5.0% for the three months ended March 31, 2009 and 2008, respectively. Fuel costs decreased by $0.8 million, or 18.5% to $3.5 million due to activity decline in
drilling and well services, more specifically, and the precipitous decline in oil prices. Fuel costs as a percentage of revenues were 10.8% and 13.6% for the three months ended March 31, 2009 and March 31, 2008, respectively. Bad debt
expense increased by $0.2 million primarily because of one customer who reportedly may be filing bankruptcy in the near future due to sustained low oil and natural gas prices. Forbes is in discussions with the customer and has initiated legal action
to protect its interest, including the filing of mineral liens against the respective leasehold interests where our services were rendered. Eighty percent of the amount due from this customer was reserved through an allowance for doubtful accounts.
There is a reasonable possibility that the majority of this debt could be collected over the next several years as oil and natural gas reserves deplete resulting in more favorable energy prices. Additional general industry financial pressures due to
the downturn will, more likely than not, result in additional bad debts expense in 2009. The remaining $0.5 million change is related to various expenses that were consistent with the activity of the business.

General and Administrative Expenses. General and administrative expenses from the consolidated operations increased by approximately $2.7 million,
or 83.7%, to $5.8 million. General and Administrative expense as a percentage of revenues was 9.1% and 4.5% for the three months ended March 31, 2009 and 2008, respectively. Professional fees for accounting and legal services increased by $1.6
million primarily related to the costs associated with the transition from a private to a publicly reporting company. The Company had stock based compensation expense for March 31, 2009 and March 31, 2008 totaling $0.4 million and $0. Wage
and insurance expense totaled $0.7 million.

Depreciation and Amortization. Depreciation and amortization expenses increased by $2.7
million, or 37.7%, to $9.7 million, due to new equipment acquired throughout 2008. Capital expenditures incurred for the three months ended March 31, 2009 were $7.3 million compared to $48.1 million for the three months ended March 31,
2008.

Interest and Other Expenses. Interest and other expenses were $5.7 million in the three months ended March 31, 2009,
compared to $5.9 million in the three months ended March 31, 2008. This decrease is due in part to the repurchase of bonds in the first quarter of 2009.

Income Taxes.We recognized no income tax expense for the three months ended March 31, 2008 as the Company was a nontaxable entity. We recognized an income tax benefit of $2.7 million for the three months
ended March 31, 2009 due to the loss recognized during the quarter.

Liquidity and Capital Resources

Overview

Our Credit Facility (as defined
below) and the indenture governing our Senior Secured Notes and the debt outstanding thereunder impose significant restrictions on us and increase our vulnerability to adverse economic and industry conditions that could limit our ability to obtain
additional or replacement financing. While the principal indebtedness of the Credit Facility is not scheduled for repayment until April 2012 and the Senior Secured Notes not until February 2015, our inability to satisfy any obligations under these
agreements would constitute an event of default. Under the Credit Facility, an event of default will be deemed to have occurred if there is a change in control over us or if a material adverse change occurs with regards to our consolidated financial
position, our consolidated business, assets, operations, properties or prospects, our ability to timely pay the obligations under the Credit Facility or the enforceability of the material terms of any material loan document against us. The lender
under the Credit Facility could, at some future date, make a determination that such a material adverse change has occurred, which is outside our control. The indenture governing the Senior Secured Notes does not have similar material adverse change
or change in control events of default but does require an offer to redeem the Senior Secured Notes in the event of a change in control. It does contain a cross-default provision that would be triggered if the debt under the Credit Facility were
accelerated. See a discussion of cross-default provisions in notes 9 and 10 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2008. A default could result in all or a portion of
our outstanding debt becoming immediately due and payable. If this would occur, we might not be able to obtain waivers or secure alternative financing to satisfy all of our obligations simultaneously. Given current market conditions, our ability to
access the capital markets or to effect any asset sales might be restricted at a time when we would like or need to raise capital. In addition, the current economic conditions could also impact our customers and vendors and may cause then to fail to
meet their obligations to us with little or no warning. These events could have a material adverse



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effect on our business, financial position, results of operations and cash flows and the ability to satisfy the obligations under our debt agreements.

The continued compliance with our debt covenants is dependent upon us obtaining a minimum level of earnings before interest, income taxes,
depreciation, amortization and certain other add backs in accordance with our indenture and Credit Facility, and maintaining a minimum level of net worth. Our forecasted EBITDA and net worth contain certain estimates and assumptions regarding rig
and truck utilization, average hourly rates, and operating and general and administrative expenses, which could prove to be inaccurate. A material deviation from one or more of these estimates or assumptions could result in a violation of one or
more of our contractual covenants, which could result in all or a portion of our outstanding debt becoming immediately due and payable.

Within certain constraints, we can conserve capital by reducing or delaying capital expenditures, deferring non-regulatory maintenance expenditures and further reducing operating and administrative costs. While postponing or eliminating
capital expenditures would delay or reduce future cash flows, we believe these actions can provide us the flexibility to match our capital commitments to our available capital resources. Although we currently believe our cash, cash equivalents,
projected cash flows from operations, and the availability under our Credit Facility will be sufficient to meet our cash requirements for the next year and the foreseeable future, the factors described above create uncertainty.

We have historically funded our operations, including capital expenditures, with bank borrowings, vendor financings, cash flow from operations, the
issuance of our Senior Secured Notes and the proceeds from our Initial Equity Offering and our October 2008 U.S. private placement.

As of
March 31, 2009, we had $39.5 million in cash and cash equivalents, $216.0 million in long-term debt outstanding, $3.8 million in short-term debt outstanding, and $19.0 million of short-term (less than six months) equipment vendor
financings for well servicing rigs and other equipment. In the three months ended March 31, 2009, we incurred $7.3 million in capital expenditures, which included equipment related to rigs, saltwater disposal wells and pickup trucks. We
financed these purchases with cash flow from operations and certain short-term vendor financings. In the fourth quarter of 2008 we entered into four operating leases for equipment that range in term from three to five years for total monthly
payments of $303,000. In the first quarter or 2009 we entered into an additional operating lease for equipment with a five year term and a monthly payment of three thousand dollars.

Cash Flows

Our cash flows depend, to a large degree, on the level of spending by oil and gas
companies development and production activities. Sustained increases or decreases in the price of natural gas or oil could have a material impact on these activities, and could also materially affect our cash flows. Certain sources and uses of cash,
such as the level of discretionary capital expenditures, purchases and sales of investments, issuances and repurchases of debt and of our common shares are within our control and are adjusted as necessary based on market conditions.

Cash Flows from Operating Activities

Net cash
provided by operating activities totaled $14.3 million for the three months ended March 31, 2009, compared to net cash provided by operating activities of $13.6 million for the three months ended March 31, 2008, an increase of $0.7
million. The most significant reason for the increase in net cash flow resulted from a change in working capital related to a reduction in accounts receivable. This cash benefit was partially offset by payment in February of interest on the Senior
Secured Notes. Also, during the three months ended March 31, 2009 and 2008, net loss was reduced for non-cash items, such as depreciation and amortization, in addition to deferred tax expense reflected in the current year as a result of a
change in the Forbes Groups tax status.

Cash Flows Used in Investing Activities

Net cash used in investing activities for the three months ended March 31, 2009 amounted to $6.7 million compared to $84.9 million for the three
months ended March 31, 2008. The significant capital expenditures in the first three months of 2008 were reflective of the expansion of business during all of fiscal 2008. Capital expenditures for the three months ended March 31, 2009 were
primarily for the preparation of equipment to send to Mexico.

Cash Flows from Financing Activities

Cash flows from financing activities for the three months ended March 31, 2009 amounted to $8.5 million compared to $77.0 million for the three
months ended March 31, 2008. During the three months ended March 31, 2009, $12 million was drawn under our Credit Agreement and is reflected in Forbes cash of $39.5 million at March 31, 2009. In addition, $3.25 million in Senior
Secured Notes were repurchased for $2 million at a discount of approximately 61.5%. Other repayments of debt related to equipment and insurance notes. The three months ended March 31, 2008 reflect the original issuance of the Senior Secured
Notes, repayments of other debt with the proceeds, and related debt issuance costs.



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Senior Secured Notes

On February 12, 2008, we issued an aggregate of $205.0 million of 11.0% Senior Secured Notes in the Debt Offering. The notes are our senior secured obligations. The notes are and will be guaranteed on a
senior secured basis by each of our existing and future domestic restricted subsidiaries. The Senior Secured Notes and the guarantees are secured by second priority liens on substantially all of our assets, subject to certain exceptions and
permitted liens. The Senior Secured Notes are subject to redemption and to requirements that we offer to purchase the Senior Secured Notes upon a change of control, following certain asset sales, and if we have excess cash flow for any fiscal year.
The indenture governing the Senior Secured Notes limits our and our restricted subsidiaries ability to, among other things, transfer or sell assets; pay dividends, redeem subordinated indebtedness, make investments or make other restricted
payments; incur or guarantee additional indebtedness or issue disqualified capital stock; make capital expenditures that exceed certain amounts; create, incur or suffer to exist liens; incur dividend or other payment restrictions affecting certain
subsidiaries; consummate a merger, consolidation or sale of all or substantially all of our assets; enter into transactions with affiliates; designate subsidiaries as unrestricted subsidiaries; engage in a business other than a business that is the
same or similar to our current business and reasonably related businesses; and take or omit to take any actions that would adversely affect or impair in any material respect the liens in respect of the collateral securing the Senior Secured Notes.

Revolving Credit Facility

On
April 10, 2008, the Forbes Group entered into a revolving credit facility, the Credit Facility. Borrowings under this Credit Facility accrue interest, at our option, at either (i) the greater of the Federal Funds Effective Rate in effect
on such day plus 0.5% and the prime rate announced from time to time by Citibank, N.A., plus a margin of up to 1.25%, or (ii) the London Interbank Offered Rate, plus a margin of 1.75% to 2.25%. Unpaid interest accrued on outstanding
loans is payable quarterly. The Credit Facility is secured by first priority security interests in substantially all of the Forbes Groups assets, including those of all of the domestic subsidiaries, that rank senior to the security interest
granted to the holders of the Senior Secured Notes. The credit agreement governing the Credit Facility (the Credit Agreement) also contains customary representations, warranties and covenants for the type and nature of the Credit
Facility, including certain limitations or restrictions on the Forbes Groups and certain future subsidiaries ability to incur additional debt, guarantee others obligations, create, incur or permit to exist liens on assets, make
investments or acquisitions, make certain dispositions of assets, make payments on certain subordinated indebtedness, pay dividends or other payments to equity holders, engage in mergers, consolidations or other fundamental changes, sell assets,
change the nature of its business and engage in transactions with affiliates. The Credit Agreement also contains restrictive financial covenants requiring us to maintain a certain Net Worth and certain ratios of Consolidated EBITDA to Consolidated
Interest Expense, Senior Funded Debt to Consolidated Net Worth, and Consolidated Senior Funded Debt to Consolidated EBITDA. The Credit Agreement also contains a provision that makes the occurrence of any Material Adverse Change (The capitalized
terms used in this and the previous sentence have the meanings set forth in the Credit Agreement) an event of default. The rights of the lender under the Credit Facility vis-à-vis the trustee and collateral agent under the indenture governing
the Senior Secured Notes are governed by an intercreditor agreement among the Forbes Group, Citibank, N.A., the lender under the Credit Facility, and Wells Fargo Bank, National Association, the trustee and collateral agent under the indenture
governing the Senior Secured Notes.

As of March 31, 2009, we had $12 million outstanding under the Credit Facility. As of
April 30, 2009 the $20 million Credit Facility had approximately $200,000 in remaining availability due to the $12 million advance and letters of credit related to insurance notes and our Mexico operation.

For additional information with respect to the Credit Facility and the Senior Secured Notes please refer to notes 9 and 10 of our consolidated financial statements
included in our Annual Report on Form 10-K for the year ended December 31, 2008

Contractual Obligations and Financing

There have been no material changes from the information presented in our Annual Report on Form 10-K for the year ended December 31, 2008.

Seasonality

Our operations are impacted by
seasonal factors. Historically, our business has been negatively impacted during the winter months due to inclement weather, fewer daylight hours, and holidays. Our well servicing rigs are mobile, and we operate a significant number of oilfield
vehicles. During periods of heavy snow, ice or rain, we may not be able to move our equipment between locations, thereby reducing our ability to generate rig or truck hours. In addition, the majority of our well servicing rigs work only during
daylight hours. In the winter months when daylight time becomes shorter, this reduces the amount of time that the well servicing rigs can work and, therefore, has a negative impact on total hours worked. Finally, during the fourth quarter, we
historically have experienced significant slowdowns during the Thanksgiving and Christmas holiday seasons.



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Critical Accounting Policies and Estimates

There have been no changes in our critical accounting policies or estimates from those presented in our Annual Report on Form 10-K for the year ended
December 31, 2008.

Recently Adopted Accounting Pronouncements

The Company adopted Financial Accounting Standards Board (FASB) Staff Position No. 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2) on January 1, 2008, which delayed the
effective date of Statement of Financial Accounting Standards No. 157 Fair Value Measurements (SFAS 157) for all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value on
a recurring basis (at least annually). This standard did not have a material impact on the Companys financial condition and results of operations. See Note 8, Fair Value Measurements.

The Company adopted FASB No. 141(R), Business Combinations (SFAS 141(R)) which significantly changed the accounting for and reporting of business
combination transactions. This standard was effective for the Company for business combination transactions for which the acquisition date was on or after January 1, 2009. No business combination transactions occurred during the three months
ended March 31, 2009.

The Company adopted FASB Staff Position (FSP) No. 142-3, Determining the Useful Life of Intangible Assets (FSP
142-3) on January 1, 2009. FSP 142-3 amended the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected
cash flows used to measure such assets fair value. The adoption of FSP 142-3 did not have a material impact on the Companys financial statements.

Recently Issued Accounting Pronouncements

In January 2009, the FASB issued FSP No. FAS 107-b and APB 28-a, which would amend
SFAS No. 107, Disclosures About Fair Value of Financial Instruments and APB Opinion No. 28, Interim Financial Reporting, to require disclosure of the fair value of financial instruments in interim financial
statements as well as annual financial statements. In addition, entities would be required to disclose the method and significant assumptions used to estimate the fair value of financial instruments. This guidance will become effective for interim
and annual periods ending after June 15, 2009. We are currently evaluating the effect this guidance may have on our financial statements.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

In addition to the risks inherent in our operations, we are exposed to financial, market and economic risks. Changes in interest rates may result in changes in the fair market value of our financial instruments,
interest income and interest expense. Our financial instruments that are exposed to interest rate risk are long-term borrowings. The following discussion provides information regarding our exposure to the risks of changing interest rates.

Our primary debt obligations are the outstanding Senior Secured Notes and borrowings under the Credit Facility, if any. Changes in
interest rates do not affect interest expense incurred on our Senior Secured Notes as such notes bear interest at fixed rates. However, changes in interest rates would affect their fair values. In general, the fair market value of debt with a fixed
interest rate will increase as interest rates fall. Conversely, the fair market value of debt will decrease as interest rates rise. A hypothetical change in interest rates of 10% relative to interest rates as of March 31, 2009 would have no
impact on our interest expense for the Senior Secured Notes.

The Credit Facility has a variable interest rate and, therefore, is subject
to interest rate risk. A 100 basis point increase in interest rates on our variable rate debt would result in approximately $120,000 in additional annual interest expense based on the balance outstanding as of March 31, 2009 in the amount of
$12 million.

We have not entered into any derivative financial instrument transactions to manage or reduce market risk or for speculative
purposes.





|Item 4T. | Controls and Procedures
|-------- | -----------------------

Evaluation of
Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer,
evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2009. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to
be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the companys management, including its principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only



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reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2009, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures
were not effective. See Material Weaknesses below.

Change in Internal Control over Financial Reporting

Other than the remediation measure described below under Remediation no change in our internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f )under the Exchange Act) occurred during the fiscal quarter ended March 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Material Weaknesses

In connection with the
preparation of the Forbes Groups consolidated financial statements for the year ended December 31, 2008, we identified control deficiencies that constitute material weaknesses in the design and operation of our internal control over
financial reporting. The following material weaknesses were present at December 31, 2008 and at March 31, 2009.



| |  |  | We did not maintain an appropriate accounting and financial reporting organizational structure to support the activities of the Forbes Group. Specifically, we did
not maintain a sufficient complement of personnel with an appropriate level of accounting knowledge, experience and training to ensure the proper selection, application and implementation of GAAP.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We did not maintain effective controls over the preparation and review of the consolidated financial statements and disclosures. Specifically, effective controls
were not designed and in place around the oversight and review of the consolidated financial statements and disclosures.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We did not design or maintain effective controls over purchase accounting. Specifically, we did not design and maintain effective controls over the accuracy and
completeness of the purchase price allocation associated with the January 1, 2008 Delaware Reorganization. This material weakness resulted in the requirement to restate the Companys unaudited condensed consolidated financial statements
issued and filed for the quarters ended June 30, 2008 and September 30, 2008 (as well as the issued but unfiled financial statements for the quarter ended March 31, 2008).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During the year ended December 31, 2008, we did not design and maintain effective controls over the review of the accuracy and completeness of the income tax
provision. This material weakness resulted in the requirement to restate the Companys unaudited condensed consolidated financial statements issued and filed for the quarters ended June 30, 2008 and September 30, 2008.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These control deficiencies could result in a future material misstatement to substantially all the accounts and
disclosures that would result in a material misstatement to the annual or interim combined financial statements that would not be prevented or detected. Accordingly, we have determined that each of the above control deficiencies represents a
material weakness.

Remediation

We
have implemented, or are in the process of implementing and continue to implement, remedial measures to address the above deficiencies on a going-forward basis. Specifically, in mid-2007 we hired a chief financial officer. In early 2008, we hired a
controller and accounting staff, and in mid-2008, established our audit committee. In 2009, in response to the requirement to restate quarterly financial statements for the first, second, and third quarters of 2008, we engaged a professional
services firm to assist our accounting staff with external financial reporting and complex, non-routine accounting issues.

We believe that
certain material weaknesses that existed at December 31, 2007, as reflected in our Form 10-K for the year ended December 31, 2007 and subsequent filings, have been remediated. These material weaknesses primarily related to internal
accounting controls and included controls over recording period end adjustments, controls over revenue, controls over accounts payable, controls over recording invoices to the proper accounts, controls over out-of-town expenses, controls over
un-issued checks, and controls over accrual of liability for insurance expense. These material weaknesses were remediated through the measures taken above, through reorganization of the accounting department, and through engagement of a professional
services firm which assessed our systems and controls, documented our systems and controls, then implemented the processes and controls necessary to address these material weaknesses. On a going-forward basis this firm will provide a periodic
internal audit function.



31



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##### Table of Contents

Beginning with the year ending December 31, 2009, pursuant to Section 404 of the Sarbanes-Oxley
Act, we will be required to deliver a report that assesses the effectiveness of our internal control over financial reporting, and our auditors will be required to audit and report on our assessment of and the effectiveness of our internal control
over financial reporting. We have a substantial effort ahead of us to complete the documentation and testing of our internal control over financial reporting and remediate any additional material weaknesses identified during that activity. We may
not be able to complete the required management assessment by our reporting deadline. An inability to complete this assessment would result in receiving something other than an unqualified report from our auditors with respect to our assessment of
our internal control over financial reporting. In addition, if material weaknesses are not remediated, we would not be able to conclude that our internal control over financial reporting was effective, which would result in the inability of our
external auditors to deliver an unqualified report on the effectiveness of our internal control over financial reporting.

PART
IIOTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

There are
no pending material legal proceedings, and the Forbes Group is not aware of any material threatened legal proceedings, to which the Forbes Group is a party or to which its property is subject, other than in the ordinary course of business.



|Item 1A. | Risk Factors
|-------- | ------------

There were no
material changes from the risk factors previously disclosed in the registrants Annual Report on Form 10-K for the year ended December 31, 2008 in response to Item 1A. Risk Factors to Part II of Form 10-Q.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | Submission of Matters to Vote of Security Holders
|------- | -------------------------------------------------

None.



|Item 5. | Other Information
|------- | -----------------

None.



|Item 6. | Exhibits**
|------- | ----------



|       |  |   |  |                                                                                                                                                                                                                                                                                                                                  
|------ |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  |   |  | Description of Exhibits                                                                                                                                                                                                                                                                                                          
|       |  |  
|2.1    |  |  |  | Agreement and Plan of Reorganization effective January 1, 2008 among Forbes Energy Services LLC and the respective members of C.C. Forbes, LLC, TX Energy Services, LLC and Superior
Tubing Testers, LLC (incorporated by reference to Exhibit 2.1 to the Companys Form S-4/A filed June 27, 2008, Registration No. 333-150853).
|       |  |  
|2.2    |  |  |  | Agreement and Plan of Reorganization effective May 29, 2008 among Forbes Energy Services Ltd. and the members of Forbes Energy Services LLC
(incorporated by reference to Exhibit 2.2 to the Companys Form S-4/A filed June 27, 2008, Registration
No. 333-150853).                                                             
|       |  |  
|3.1    |  |  |  | Memorandum of Association of Forbes Energy Services Ltd. (incorporated by reference to Exhibit 3.11 to the Companys Form S-4/A filed June 27, 2008, Registration
No. 333-150853).                                                                                                                                               
|       |  |  
|3.2    |  |  |  | Amended and Restated Bye-laws of Forbes Energy Services Ltd. (incorporated by reference to Exhibit 3.12 to the Companys Form S-4/A filed June 27, 2008, Registration
No. 333-150853).                                                                                                                                           



32



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|       |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------ |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  |   |  | Description of Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |  |  
|4.1    |  |  |  | Indenture, dated February 12, 2008 among Forbes Energy Services LLC and Forbes Energy Capital Inc., as issuers, the guarantors party thereto and Wells Fargo Bank, National Association, as
trustee (incorporated by reference to Exhibit 4.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 2008).                                                                                                                                                
|       |  |  
|4.2    |  |  |  | Supplemental Indenture (First Supplemental Indenture), dated May 29, 2008 among Forbes Energy Services Ltd., Forbes Energy Services LLC, Forbes Energy Capital Inc., the other Guarantors (as
defined in the Indenture referred to therein) and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).                                               
|       |  |  
|4.3    |  |  |  | Supplemental Indenture (Second Supplemental Indenture, dated effective October 6, 2008 among Forbes Energy Services Ltd., Forbes Energy Services LLC, Forbes Energy Capital Inc., the other
Guarantors (as defined in the Indenture referred to therein) and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 2008).                                    
|       |  |  
|4.4    |  |  |  | Third Supplemental Indenture, dated February 6, 2009 among Forbes Energy Services Ltd., Forbes Energy Services LLC, Forbes Energy Capital Inc., the other Guarantors (as defined in the
Indenture referred to therein) and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K dated February 6, 2009).                                                                                    
|       |  |  
|4.5    |  |  |  | Notation of Guarantee from Forbes Energy Services Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |  |  
|4.6    |  |  |  | Notation of Guarantee from Forbes Energy International, LLC.                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |  |  
|4.7    |  |  |  | Registration Rights Agreement, dated as of February 7, 2008, among Jefferies & Company, Inc., Forbes Energy Services Inc., Forbes Energy Capital Inc. and the guarantors party thereto
(incorporated by reference to Exhibit 4.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 2008).                                                                                                                                                             
|       |  |  
|4.8    |  |  |  | Specimen 144A Global 11% Senior Secured Exchange Note due 2015 (incorporated by reference to Exhibit 4.5 to the Companys Form S-4/A filed June 27, 2008, Registration
No. 333-150853).                                                                                                                                                                                                                                                                                         
|       |  |  
|4.9    |  |  |  | Rights Agreement effective May 19, 2008 between Forbes Energy Services Ltd. and CIBC Mellon Trust Company, as Rights Agent, which includes as Exhibit A the Certificate of
Designations of Series A Junior Participating Preferred Shares, as Exhibit B the form of Right Certificate and as Exhibit C the form of Summary of Rights to Purchase Shares (incorporated by reference to Exhibit 4.8 to the
Companys Form S-4/A filed June 27, 2008, Registration No. 333-150853).
|       |  |  
|10.1   |  |  |  | Credit Agreement dated April 10, 2008 among C.C. Forbes, LLC, TX Energy Services, LLC and Superior Tubing Testers, LLC, as borrowers, Forbes Energy Services LLC, as guarantor, and
Citibank, N.A., as lender, governing the Credit Facility (incorporated by reference to Exhibit 4.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 2008).                                                                                                       
|       |  |  
|10.2   |  |  |  | Intercreditor Agreement dated April 10, 2008 among C.C. Forbes, LLC, TX Energy Services, LLC, Superior Tubing Testers, LLC, as borrowers, Forbes Energy Services LLC and Forbes Energy
Capital Inc., as issuers, Citibank, N.A. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 2008).                                                                         
|       |  |  
|10.3   |  |  |  | Forbes Energy Services Ltd. Incentive Compensation Plan effective May 19, 2008 (incorporated by reference to Exhibit 10.1 to the Companys Form S-4/A filed June 27,
2008, Registration No. 333-150853).                                                                                                                                                                                                                                                                        
|       |  |  
|10.4   |  |  |  | Employment Agreement effective May 1, 2008 by and between John E. Crisp and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.2 to the Companys
Form S-4/A filed June 27, 2008, Registration No. 333-150853).                                                                                                                                                                                                                                                
|       |  |  
|10.5   |  |  |  | Employment Agreement effective May 1, 2008 by and between Charles C. Forbes and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.3 to the Companys
Form S-4/A filed June 27, 2008, Registration No. 333-150853).                                                                                                                                                                                                                                            
|       |  |  
|10.6   |  |  |  | Employment Agreement effective May 1, 2008 by and between L. Melvin Cooper and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.4 to the Companys
Form S-4/A filed June 27, 2008, Registration No. 333-150853).                                                                                                                                                                                                                                             
|       |  |  
|10.7   |  |  |  | Form of Indemnification Agreement for directors, officers and key employees (incorporated by reference to Exhibit 10.5 to the Companys Form S-4/A filed June 27, 2008,
Registration No. 333-150853).                                                                                                                                                                                                                                                                           



33



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##### Table of Contents

|       |  |   |  |                                                                                                                                                                                                                                                                         
|------ |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  |   |  | Description of Exhibits                                                                                                                                                                                                                                                 
|       |  |  
|10.9   |  |  |  | Form of Executive Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.6 to the Companys Form S-4/A filed June 27, 2008, Registration No.
333-150853).                                                                                        
|       |  |  
|10.10  |  |  |  | Form of Director Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.7 to the Companys Form S-4/A filed June 27, 2008, Registration No.
333-150853).                                                                                         
|       |  |  
|10.11  |  |   |  | Commercial Equipment Lease Agreement, dated October 15, 2008 among Forbes Energy Services LLC and Alice Environmental Services, LP. (incorporated by reference to Exhibit 10.1 to the
Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
|       |  |  
|31.1*  |  |  |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                                                                                                          
|       |  |  
|31.2*  |  |  |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                                                                                                          
|       |  |  
|32.1*  |  |  |  | Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                              
|       |  |  
|32.2*  |  |  |  | Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                              



|* | Filed herewith.
|- | ---------------



34



---

##### Table of Contents

SIGNATURES

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



|             |  |  |  |                             |  |                                                                                                                    
|------------ |  |  |  | --------------------------- |  | -------------------------------------------------------------------------------------------------------------------
|             |  |  |  | FORBES ENERGY SERVICES Ltd.
|             |  |  | 
|May 15, 2009 |  |  |  | By:                         |  | /s/ John E. Crisp                                                                                                  
|             |  |  |  |                             |  | John E. Crisp                                                                                                      
|             |  |  |  |                             |  | Chairman, Chief Executive Officer and President (Principal Executive Officer)                                      
|             |  |  | 
|May 15, 2009 |  |  |  | By:                         |  | /s/ L. Melvin Cooper                                                                                               
|             |  |  |  |                             |  | L. Melvin Cooper                                                                                                   
|             |  |  |  |                             |  | Senior Vice President, Chief Financial Officer and
Assistant Secretary (Principal Financial and Accounting Officer)



35



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##### Table of Contents

EXHIBIT INDEX



|       |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------ |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  |   |  | Description of Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       |  |  
|2.1    |  |  |  | Agreement and Plan of Reorganization effective January 1, 2008 among Forbes Energy Services LLC and the respective members of C.C. Forbes, LLC, TX Energy Services, LLC and Superior
Tubing Testers, LLC (incorporated by reference to Exhibit 2.1 to the Companys Form S-4/A filed June 27, 2008, Registration No. 333-150853).                                                                                                                                               
|       |  |  
|2.2    |  |  |  | Agreement and Plan of Reorganization effective May 29, 2008 among Forbes Energy Services Ltd. and the members of Forbes Energy Services LLC (incorporated by reference to Exhibit 2.2
to the Companys Form S-4/A filed June 27, 2008, Registration No. 333-150853).                                                                                                                                                                                                            
|       |  |  
|3.1    |  |  |  | Memorandum of Association of Forbes Energy Services Ltd. (incorporated by reference to Exhibit 3.11 to the Companys Form S-4/A filed June 27, 2008, Registration
No. 333-150853).                                                                                                                                                                                                                                                                                              
|       |  |  
|3.2    |  |  |  | Amended and Restated Bye-laws of Forbes Energy Services Ltd. (incorporated by reference to Exhibit 3.12 to the Companys Form S-4/A filed June 27, 2008, Registration
No. 333-150853).                                                                                                                                                                                                                                                                                          
|       |  |  
|4.1    |  |  |  | Indenture, dated February 12, 2008 among Forbes Energy Services LLC and Forbes Energy Capital Inc., as issuers, the guarantors party thereto and Wells Fargo Bank, National Association,
as trustee (incorporated by reference to Exhibit 4.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 2008).                                                                                                                                                
|       |  |  
|4.2    |  |  |  | Supplemental Indenture (First Supplemental Indenture), dated May 29, 2008 among Forbes Energy Services Ltd., Forbes Energy Services LLC, Forbes Energy Capital Inc., the other Guarantors (as
defined in the Indenture referred to therein) and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).                                               
|       |  |  
|4.3    |  |  |  | Supplemental Indenture (Second Supplemental Indenture, dated effective October 6, 2008 among Forbes Energy Services Ltd., Forbes Energy Services LLC, Forbes Energy Capital Inc., the other
Guarantors (as defined in the Indenture referred to therein) and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 2008).                                    
|       |  |  
|4.4    |  |  |  | Third Supplemental Indenture, dated February 6, 2009 among Forbes Energy Services Ltd., Forbes Energy Services LLC, Forbes Energy Capital Inc., the other Guarantors (as defined in the
Indenture referred to therein) and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K dated February 6, 2009).                                                                                    
|       |  |  
|4.5    |  |  |  | Notation of Guarantee from Forbes Energy Services Ltd.                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |  |  
|4.6    |  |  |  | Notation of Guarantee from Forbes Energy International, LLC.                                                                                                                                                                                                                                                                                                                                                                                                                    
|       |  |  
|4.7    |  |  |  | Registration Rights Agreement, dated as of February 7, 2008, among Jefferies & Company, Inc., Forbes Energy Services Inc., Forbes Energy Capital Inc. and the guarantors party thereto
(incorporated by reference to Exhibit 4.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 2008).                                                                                                                                                             
|       |  |  
|4.8    |  |  |  | Specimen 144A Global 11% Senior Secured Exchange Note due 2015 (incorporated by reference to Exhibit 4.5 to the Companys Form S-4/A filed June 27, 2008, Registration
No. 333-150853).                                                                                                                                                                                                                                                                                         
|       |  |  
|4.9    |  |  |  | Rights Agreement effective May 19, 2008 between Forbes Energy Services Ltd. and CIBC Mellon Trust Company, as Rights Agent, which includes as Exhibit A the Certificate of
Designations of Series A Junior Participating Preferred Shares, as Exhibit B the form of Right Certificate and as Exhibit C the form of Summary of Rights to Purchase Shares (incorporated by reference to Exhibit 4.8 to the
Companys Form S-4/A filed June 27, 2008, Registration No. 333-150853).
|       |  |  
|10.1   |  |  |  | Credit Agreement dated April 10, 2008 among C.C. Forbes, LLC, TX Energy Services, LLC and Superior Tubing Testers, LLC, as borrowers, Forbes Energy Services LLC, as guarantor, and
Citibank, N.A., as lender, governing the Credit Facility (incorporated by reference to Exhibit 4.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 2008).                                                                                                       
|       |  |  
|10.2   |  |  |  | Intercreditor Agreement dated April 10, 2008 among C.C. Forbes, LLC, TX Energy Services, LLC, Superior Tubing Testers, LLC, as borrowers, Forbes Energy Services LLC and Forbes Energy
Capital Inc., as issuers, Citibank, N.A. and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 2008).                                                                         



36



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##### Table of Contents

|       |  |   |  |                                                                                                                                                                                                                                                                         
|------ |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |  |   |  | Description of Exhibits                                                                                                                                                                                                                                                 
|       |  |  
|10.3   |  |  |  | Forbes Energy Services Ltd. Incentive Compensation Plan effective May 19, 2008 (incorporated by reference to Exhibit 10.1 to the Companys Form S-4/A filed June 27,
2008, Registration No. 333-150853).                                                                
|       |  |  
|10.4   |  |  |  | Employment Agreement effective May 1, 2008 by and between John E. Crisp and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.2 to the Companys
Form S-4/A filed June 27, 2008, Registration No. 333-150853).                                        
|       |  |  
|10.5   |  |  |  | Employment Agreement effective May 1, 2008 by and between Charles C. Forbes and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.3 to the Companys
Form S-4/A filed June 27, 2008, Registration No. 333-150853).                                    
|       |  |  
|10.6   |  |  |  | Employment Agreement effective May 1, 2008 by and between L. Melvin Cooper and Forbes Energy Services LLC (incorporated by reference to Exhibit 10.4 to the Companys
Form S-4/A filed June 27, 2008, Registration No. 333-150853).                                     
|       |  |  
|10.7   |  |  |  | Form of Indemnification Agreement for directors, officers and key employees (incorporated by reference to Exhibit 10.5 to the Companys Form S-4/A filed June 27, 2008,
Registration No. 333-150853).                                                                   
|       |  |  
|10.8   |  |  |  | Form of Executive Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.6 to the Companys Form S-4/A filed June 27, 2008, Registration No.
333-150853).                                                                                        
|       |  |  
|10.9   |  |  |  | Form of Director Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.7 to the Companys Form S-4/A filed June 27, 2008, Registration No.
333-150853).                                                                                         
|       |  |  
|10.10  |  |   |  | Commercial Equipment Lease Agreement, dated October 15, 2008 among Forbes Energy Services LLC and Alice Environmental Services, LP. (incorporated by reference to Exhibit 10.1 to the
Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
|       |  |  
|31.1*  |  |  |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                                                                                                          
|       |  |  
|31.2*  |  |  |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).                                                                                                                                                                                          
|       |  |  
|32.1*  |  |  |  | Certification of Chief Executive Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                              
|       |  |  
|32.2*  |  |  |  | Certification of Chief Financial Officer Pursuant to Section 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                              



|* | Filed herewith.
|- | ---------------



37