<PAGE>

                                    FORM 10-Q


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

         (Mark One)
            /X/   Quarterly Report pursuant to Section 13 or 15(d) of the
                  Securities Exchange Act of 1934 for the quarterly period ended
                  September 30, 2005; or

            /_/   Transition report pursuant to Section 13 or 15(d) of the
                  Securities Exchange Act of 1934 for the transition period from
                   _____________ to _____________.

                         Commission File Number 0-18754

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

         DELAWARE                                            11-2904094
(State or other jurisdiction of                            (I.R.S employer
incorporation or organization)                             identification No.)

                 100 ROSECREST LANE, COLUMBUS, MISSISSIPPI 39701
                 -----------------------------------------------
               (Address of principal executive offices, zip code)

                                 (662) 329-1047
              ----------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)


         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the issuer
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 is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

         Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         As of November 1, 2005, 16,478,995 shares of the Registrant's Common
Stock, $.0005 par value, were outstanding.



<PAGE>


                          BLACK WARRIOR WIRELINE CORP.

                          QUARTERLY REPORT ON FORM 10-Q

                                      INDEX


PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
                                                                                                  Page
                                                                                                  ----
Item 1.           Financial Statements

<S>                                                                                             <C>
                  Condensed Balance Sheets - September 30, 2005 (unaudited)
                  and December 31, 2004                                                             3

                  Condensed Statements of Operations -
                  Three Months Ended September 30, 2005 (unaudited) and
                  September 30, 2004 (unaudited)                                                    4

                  Condensed Statements of Operations -
                  Nine Months Ended September 30, 2005 (unaudited) and
                  September 30, 2004 (unaudited)                                                    5

                  Condensed Statements of Cash Flows -
                  Nine Months Ended September 30, 2005 (unaudited) and
                  September 30, 2004 (unaudited)                                                    6

                  Notes to Condensed Financial Statements -
                  Three and Nine Months ended September 30, 2005 (unaudited) and
                  September 30, 2004 (unaudited)                                                    7

Item 2.           Management's Discussion and Analysis of
                  Financial Condition and Results of Operations                                    16

Item 3.           Qualitative and Quantitative Disclosures About Market Risk                       26

Item 4.           Controls and Procedures                                                          27


PART II - OTHER INFORMATION

Item 6.           Exhibits                                                                         28
</TABLE>


                                       2
<PAGE>

PART I - FINANCIAL INFORMATION
 ITEM 1.  FINANCIAL STATEMENTS

BLACK WARRIOR WIRELINE CORP.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                    SEPTEMBER 30,        DECEMBER 31,
                                                                                       2005                 2004
                                                                                    (UNAUDITED)
<S>                                                                                  <C>                <C>
                                      ASSETS
Current assets:
     Cash and cash equivalents                                                       $  6,680,113       $  2,647,980
     Accounts receivable, less allowance of $474,022 and $475,449, respectively        10,536,727          8,330,618
     Other receivables                                                                     52,116            216,195
     Prepaid expenses                                                                   1,057,785          3,030,040
     Other current assets                                                               1,456,626          1,440,483
                                                                                     ------------       ------------

           Total current assets                                                        19,783,367         15,665,316

Property, plant and equipment, less accumulated depreciation                           15,145,012         12,978,670
Other assets                                                                              262,152            227,828
Goodwill                                                                                1,237,416          1,237,416
                                                                                     ------------       ------------

           Total assets                                                              $ 36,427,947       $ 30,109,230
                                                                                     ============       ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
     Accounts payable                                                                $  3,155,655       $  2,056,832
     Accrued salaries and vacation                                                      1,001,323            840,537
     Other accrued expenses                                                               796,390          1,683,541
     Accrued interest payable                                                               8,213             51,789
     Current maturities of long-term debt                                               2,086,206          4,156,770
                                                                                     ------------       ------------

           Total current liabilities                                                    7,047,787          8,789,469

Long-term debt, less current maturities                                                 5,253,556          6,393,281
Non current accrued interest payable to related parties                                19,749,260         17,132,739
Notes payable to related parties                                                       23,002,375         23,002,375
                                                                                     ------------       ------------

           Total liabilities                                                           55,052,978         55,317,864
                                                                                     ------------       ------------

Commitments and contingencies (Note 4) Stockholders' deficit:
     Preferred stock, $.0005 par value, 2,500,000 shares authorized,
        none issued at September 30, 2005 or December 31, 2004                               --                 --
     Common stock, $.0005 par value, 175,000,000 shares authorized,
        12,504,148 shares issued and outstanding                                            6,252              6,252
     Additional paid-in capital                                                        20,275,963         20,275,963
     Accumulated deficit                                                              (38,323,853)       (44,907,456)
     Treasury stock, at cost, 4,620 shares                                               (583,393)          (583,393)
                                                                                     ------------       ------------

           Total stockholders' deficit                                                (18,625,031)       (25,208,634)
                                                                                     ------------       ------------

           Total liabilities and stockholders' deficit                               $ 36,427,947       $ 30,109,230
                                                                                     ============       ============
</TABLE>

          See accompanying notes to the condensed financial statements.


                                       3
<PAGE>

Black Warrior Wireline Corp.
CONDENSED STATEMENTS OF OPERATIONS
For the three months ended September 30, 2005 and September 30, 2004
<TABLE>
<CAPTION>
                                                                       SEPTEMBER 30, 2005    SEPTEMBER 30, 2004
                                                                          (UNAUDITED)           (UNAUDITED)

<S>                                                                        <C>                <C>
Revenues                                                                   $ 17,421,589       $ 14,950,787

Operating costs                                                              10,548,294          9,184,912

Selling, general and administrative expenses                                  2,353,362          2,368,328

Depreciation and amortization                                                 1,166,771          1,209,383

                                                                           ------------       ------------
        Income from continuing operations                                     3,353,162          2,188,164

Interest expense and amortization of debt discount                             (972,236)        (1,233,916)

Net loss on sale of fixed assets                                                   --               (6,396)

Other income (expense)                                                         (107,919)             3,512
                                                                           ------------       ------------

        Income from continuing operations before income taxes                 2,273,007            951,364

Provision for income taxes                                                       49,278            110,332
                                                                           ------------       ------------

        Income before discontinued operations                                 2,223,728            841,032

Discontinued operations (Note 5)

        Income from operations of discontinued directional
                 drilling segment                                                  --                6,594

                                                                           ------------       ------------
          Net income                                                       $  2,223,728       $    847,626
                                                                           ============       ============

Net income per share - basic and diluted:

        Income before discontinued operations                              $       0.18       $       0.07
        Discontinued operations                                                    --                 --
                                                                           ------------       ------------

Net income per share - basic and diluted                                   $       0.18       $       0.07
                                                                           ============       ============
</TABLE>

          See accompanying notes to the condensed financial statements.


                                       4
<PAGE>

Black Warrior Wireline Corp.
CONDENSED STATEMENTS OF OPERATIONS
For the nine months ended September 30, 2005 and September 30, 2004

<TABLE>
<CAPTION>
                                                                                 SEPTEMBER 30, 2005       SEPTEMBER 30, 2004
                                                                                    (UNAUDITED)              (UNAUDITED)

<S>                                                                               <C>                      <C>
Revenues                                                                          $   51,578,843           $   38,660,455

Operating costs                                                                       31,177,269               25,049,994

Selling, general and administrative expenses                                           6,757,432                6,939,348

Depreciation and amortization                                                          3,729,878                3,946,585
                                                                                  --------------           --------------
        Income from continuing operations                                              9,914,264                2,724,528

Interest expense and amortization of debt discount                                   (2,896,031)              (3,772,353)

Net gain on sale of fixed assets                                                          12,641                   47,660

Other income (expense)                                                                 (312,548)                    9,876
                                                                                  --------------           --------------
        Income (loss) from continuing operations before income taxes                   6,718,326                (990,289)

Provision for income taxes                                                               134,723                  110,332
                                                                                  --------------           --------------
        Income (loss) before discontinued operations                                   6,583,603              (1,100,621)

Discontinued operations (Note 5)

        Loss from operations of discontinued directional
                 drilling segment (including estimated loss on disposal
                 of $1,374,939)                                                                -              (1,484,574)
                                                                                  --------------           --------------
                                                                                  $    6,583,603           $   (2,585,195)
                                                                                  ==============           ==============

Net income (loss) per share - basic and diluted:

        Income (loss) before discontinued operations                                $       0.53            $      (0.09)
        Discontinued operations                                                                -                   (0.12)
                                                                                  --------------           --------------

Net income (loss) per share - basic and diluted                                     $       0.53            $      (0.21)
                                                                                  ==============           ==============
</TABLE>

          See accompanying notes to the condensed financial statements.


                                       5
<PAGE>

Black Warrior Wireline Corp.
CONDENSED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2005 and September 30, 2004
<TABLE>
<CAPTION>

                                                                              SEPTEMBER 30, 2005     SEPTEMBER 30, 2004
                                                                                  (UNAUDITED)            (UNAUDITED)
<S>                                                                               <C>                    <C>
Cash flows from operating activities:                                             $ 13,124,972           $  4,626,801
                                                                                  ------------           ------------

Cash flows from investing activities:
     Acquisitions of property, plant and equipment                                  (5,897,612)            (6,010,500)
     Decrease in restricted cash                                                          --                  504,442
     Proceeds from sale of property, plant and equipment                                15,062             10,715,521
                                                                                  ------------           ------------
                    Cash provided by (used in) investing activities                 (5,882,550)             5,209,463
                                                                                  ------------           ------------
Cash flows from financing activities:
     Debt issuance costs                                                                  --                 (234,875)
     Proceeds from bank and other borrowings                                           573,252              3,279,892
     Principal payments on long-term debt, notes payable and
        capital lease obligations                                                   (3,783,541)           (14,168,654)
     Proceeds from working revolver, net                                                  --               (3,159,929)
                                                                                  ------------           ------------
                    Cash used in financing activities                               (3,210,289)           (14,283,566)
                                                                                  ------------           ------------

                    Net increase (decrease) in cash and cash equivalents             4,032,133             (4,447,302)
Cash and cash equivalents, beginning of period                                       2,647,980              4,661,030
                                                                                  ------------           ------------
Cash and cash equivalents, end of period                                          $  6,680,113           $    213,728
                                                                                  ------------           ------------

Supplemental disclosure of cash flow information:

Cash paid during the period for:

        Interest                                                                  $    323,086           $  1,445,029
                                                                                  ------------           ------------

        Income taxes                                                              $       --             $       --
                                                                                  ------------           ------------
</TABLE>

          See accompanying notes to the condensed financial statements.



                                       6
<PAGE>

                               BLACK WARRIOR WIRELINE CORP.
                  NOTES TO CONDENSED FINANCIAL STATEMENTS

1.       GENERAL

         The accompanying condensed financial statements reflect all adjustments
that, in the opinion of management, are necessary for a fair presentation of the
financial position of Black Warrior Wireline Corp. (the "Company"). Such
adjustments are of a normal recurring nature. The results of operations for the
interim period are not necessarily indicative of the results to be expected for
the full year. The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2004 should be read in conjunction with this document.

         Business of the Company. The Company is an natural gas and oil service
company currently providing various services to natural gas and oil well
operators primarily in the continental United States and in the Gulf of Mexico.
Through August 6, 2004, the Company's principal lines of business included (a)
wireline services, and (b) directional natural gas and oil well drilling and
downhole surveying services. As discussed in Note 5, on August 6, 2004 the
Company sold its directional drilling division to Multi-Shot, LLC, a newly
formed Texas limited liability company and such business is treated as a
discontinued operation for the three and nine month periods ended September 30,
2004.

         Liquidity. The Company reported net income (loss) for the nine months
ended September 30, 2005 of approximately $6,600,000 and for the years ended
December 31, 2004, December 31, 2003, and December 31, 2002, of approximately
($1,800,000), ($5,500,000) and ($7,600,000), respectively. Cash flows provided
by operations were approximately $13,100,000 for the nine months ended September
30, 2005 and $3,600,000, $10,600,000, and $5,400,000, for the years ended
December 31, 2004, 2003, and 2002, respectively. The Company is highly
leveraged. The Company's outstanding indebtedness includes primarily senior
indebtedness aggregating approximately $6.7 million at September 30, 2005, other
indebtedness of approximately $673,000 and approximately $42.8 million
(including approximately $19.8 million of accrued interest) owing to St. James
Merchant Bankers, L.P. ("SJMB") and St. James Capital Partners, L.P. ("SJCP")
and others who participated with SJMB in the purchase of promissory notes and
warrants of the Company (collectively "the St. James Partnerships") and
directors, who are related parties. The Company's debt and accrued interest owed
to related parties is convertible into common stock and is subordinate to its
Senior Credit Facility with General Electric Capital Corporation ("GECC"). In
addition, no repayments of the related party debt or accrued interest can be
made until the Senior Credit Facility is completely extinguished.

         On November 14, 2004, the Company entered into an Amended and Restated
Credit Agreement (the "Restated Credit Agreement") with GECC providing for the
extension of revolving and term credit facilities to the Company aggregating up
to $18.0 million. The Restated Credit Agreement amends, restates and modifies an
Original Credit Agreement entered into as of September 14, 2001, including the
amendments thereto. The Restated Credit Agreement includes a revolving loan of
up to $10.0 million, but not exceeding 85% of eligible accounts receivable and a
term loan of $8.0 million. Eligible accounts are defined to exclude, among other
items and subject to certain exceptions, accounts outstanding of debtors that
are more than 60 days overdue or 90 days following the original invoice date and
of debtors that have suspended business or commenced various insolvency
proceedings and accounts with reserves established against them to the extent of
such reserves as GECC may set from time to time in its reasonable credit
judgment. The interest rate on borrowings under the revolving loan is 1.75%
above a base rate and on borrowings under the term loan is 2.5% above the base
rate. The base rate is the higher of (i) the rate publicly quoted from time to
time by the Wall Street Journal as the base rate on corporate loans posted by at
least 75% of the nation's thirty largest banks, or (ii) the average of the rates
on overnight Federal funds transactions by members of the Federal Reserve
System, plus 0.5%. Subject to the absence of an event of default and fulfillment
of certain other conditions, the Company can elect to borrow or convert any loan
and pay interest at the LIBOR rate plus applicable margins of 3.25% on the
revolving loan and 4.0% on the term loan. If an event of default has occurred,
the interest rate is increased by 2%. Advances under the Restated Credit
Agreement are collateralized by a senior lien against substantially all of the
Company's assets. The Restated Credit Agreement expires on November 14, 2007.

                                       7
<PAGE>

         Initial borrowings under the Restated Credit Agreement advanced on
November 14, 2004 were $8.0 million borrowed under the term loan. No borrowings
were made under the revolving loan at that time. Proceeds of the initial
borrowings were used to repay indebtedness outstanding under a capex loan under
the Original Credit Agreement in the amount of approximately $4.3 million,
approximately $1.8 million was placed in escrow for the possible repayment of
principal and accrued interest on subordinated secured indebtedness and
approximately $1.9 million was borrowed to be used by the Company for general
corporate purposes. Any funds placed in escrow not used for the repayment of
subordinated secured indebtedness were returned to the Company. Borrowings under
the revolving loan are able to be repaid and re-borrowed from time to time for
working capital and general corporate needs, subject to the Company's continuing
compliance with the terms of the agreement, with the outstanding balance of the
revolving loan to be paid in full at the expiration of the Restated Credit
Agreement on November 14, 2007. The term loan is to be repaid in 35 equal
monthly installments of $133,333 with a final installment of $3,333,345 due and
payable on November 14, 2007.

         Note Extensions. In connection with entering into the GECC refinancing
in November 2004, the Company agreed with the holders to extend the maturity
date of the Company's outstanding subordinated secured promissory notes from
December 31, 2004 to February 13 and February 14, 2008 on $23.0 million of the
total $23.9 million principal amount of the notes. The remainder of the
outstanding principal was repaid. The notes bear interest at 15% per annum and
are convertible into shares of the Company's common stock at a conversion price
of $0.75 per share, subject to an anti-dilution adjustment for certain issuances
of securities by the Company at prices per share of common stock less than the
conversion price then in effect, in which event the conversion price is reduced
to the lower price at which the shares were issued. As a condition to extend the
maturity date, the Company extended the expiration date of 66.1 million
outstanding common stock purchase warrants to December 31, 2009.

         Strong and stable market conditions and the Company's ability to meet
intense competitive pressures are essential to the Company's maintaining a
positive liquidity position and meeting debt covenant requirements. Decreases in
market conditions or failure to mitigate competitive pressures could result in
non-compliance with its debt covenants and the triggering of the prepayment
clauses of the Company's debt. The Company believes that if market conditions
remain stable during the remainder of 2005, the Company will be able to generate
sufficient cash flow to meet its working capital needs and continue to comply
with its debt covenants throughout the remainder of 2005 and through 2006. If
market conditions decline significantly, the Company may be required to obtain
additional amendments to or waivers under its Senior Credit Facility, or obtain
capital through equity contributions or financing, including a possible merger
or sale of assets, or other business combination.


                                       8
<PAGE>

2.       STOCK-BASED COMPENSATION

         The Company applies principles from Statement of Financial Accounting
Standards ("SFAS") 123 in accounting for its stock option plan. In accordance
with SFAS 123, the Company has elected not to report the impact of the fair
value of its stock options in the statements of operations but, instead, to
disclose the pro forma effect and to continue to apply APB Opinion No. 25 and
related interpretations in accounting for its stock options. Accordingly, no
compensation expense has been recognized for stock options issued to employees
with an exercise price at fair market value or above. Compensation expense for
options issued to non-employees of the Company is excluded from the pro forma
effect below, as compensation expense has been recognized in the accompanying
financial statements. Had compensation cost for all of the Company's stock
options issued been determined based on the fair value at the grant dates for
awards consistent with the methods prescribed in SFAS 123 and later in SFAS 148,
the Company's net income or loss and income or loss per share would have been
decreased or increased to the pro forma amounts indicated as follows:

<TABLE>
<CAPTION>
                                                                                     THREE MONTHS ENDED
                                                                             SEPTEMBER 30,        SEPTEMBER 30,
                                                                                 2005                 2004
                                                                             -------------        -------------
<S>                                                                           <C>                  <C>
Net income - as reported                                                      $ 2,223,728          $   847,626

Add (deduct): Total stock-based employee compensation expense
   determined under fair value method for all awards, net of related
   tax effects                                                                     26,649              (28,000)
                                                                              -----------          -----------
Net income - pro forma                                                        $ 2,250,377          $   819,626
                                                                              -----------          -----------
Income per share - as reported (basic and diluted):                           $      0.18          $      0.07
                                                                              -----------          -----------
Income per share - pro forma (basic and diluted):                             $      0.18          $      0.07
                                                                              -----------          -----------

<CAPTION>
                                                                                      NINE MONTHS ENDED
                                                                             SEPTEMBER 30,        SEPTEMBER 30,
                                                                                  2005                 2004
                                                                             -------------        -------------

<S>                                                                           <C>                  <C>
Net income (loss) - as reported                                               $ 6,583,603          $(2,585,195)

Add (deduct): Total stock-based employee compensation expense
   determined under fair value method for all awards, net of related
   tax effects                                                                     53,545              (66,300)
                                                                              -----------          -----------
Net income (loss) - pro forma                                                 $ 6,637,148          $(2,651,495)
                                                                              -----------          -----------
Income (loss) per share - as reported (basic and diluted):                    $      0.53          $     (0.21)
                                                                              -----------          -----------
Income (loss) per share - pro forma (basic and diluted):                      $      0.53          $     (0.21)
                                                                              -----------          -----------
</TABLE>


                                       9
<PAGE>

3.       EARNINGS PER SHARE

The calculation of basic and diluted earning per share ("EPS") is as follows:
<TABLE>
<CAPTION>

                                         FOR THE THREE MONTHS ENDED                    FOR THE THREE MONTHS ENDED
                                             SEPTEMBER 30, 2005                            SEPTEMBER 30, 2004
                                -------------------------------------------    ------------------------------------------
                                   INCOME          SHARES       PER SHARE         INCOME          SHARES       PER SHARE
                                 NUMERATOR       DENOMINATOR      AMOUNT        NUMERATOR       DENOMINATOR     AMOUNT
                                -------------    -----------    -----------    -------------    -----------    ----------

<S>                             <C>              <C>              <C>           <C>             <C>             <C>
NET INCOME PER SHARE - BASIC
AND DILUTED
Income before discontinued
     operations available
     to common stockholders     $  2,223,728     12,499,528       $    .18      $   841,032     12,499,528      $    .07


Discontinued operations                    -     12,499,528              -            6,594     12,499,528           .00
                                -------------                   -----------    -------------                   ----------

Net income per share - basic
and diluted                     $  2,223,728     12,499,528       $    .18      $   847,626     12,499,528      $    .07
                                =============                   ===========    =============                   ==========

<CAPTION>
                                            FOR THE NINE MONTHS                           FOR THE NINE MONTHS
                                          ENDED SEPTEMBER 30, 2005                       ENDED SEPTEMBER 30, 2004
                                -------------------------------------------    ------------------------------------------
                                   INCOME          SHARES       PER SHARE          LOSS           SHARES       PER SHARE
                                 NUMERATOR       DENOMINATOR      AMOUNT        NUMERATOR       DENOMINATOR     AMOUNT
                                -------------    -----------    -----------    -------------    -----------    ----------

<S>                             <C>              <C>             <C>           <C>               <C>           <C>
NET INCOME (LOSS) PER SHARE -
BASIC AND DILUTED
Income (loss) before
     discontinued operations
     available to common
     stockholders               $  6.583,603     12,499,528      $     .53     $ (1,100,621)     12,499,528    $    (.09)


Discontinued operations                    -     12,499,528              -       (1,484,574)     12,499,528         (.12)
                                -------------                   -----------    -------------                   ----------

Net income (loss) per share -
basic and diluted               $  6,583,603     12,499,528      $     .53     $ (2,585,195)     12,499,528    $     (.21)
                                =============                   ===========    =============                   ==========
</TABLE>

         Options and warrants to purchase 81,359,183 and 98,794,169 shares of
common stock at prices ranging from $0.75 to $2.63 were outstanding during the
three and nine months ended September 30, 2005 and 2004, respectively, but were
not included in the computation of diluted EPS because the effect would be
anti-dilutive (see Note 7).

         Convertible debt instruments, including convertible interest, which
would result in the issuance of 56,637,203 and 54,660,888 shares of common
stock, if the conversion features were exercised, were outstanding during the
three and nine months ended September 30, 2005 and 2004, respectively, but were
not included in the computation of the diluted EPS because the effect would be
anti-dilutive. The conversion price of these instruments is $0.75 per share as
of September 30, 2005 (see Note 7).


4.       COMMITMENTS AND CONTINGENCIES

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


                                       10
<PAGE>

5.       DISCONTINUED OPERATIONS

         On August 6, 2004, the Company completed the sale of its assets
associated with its directional drilling business, (referred to as the
"Multi-Shot Business") pursuant to an Asset Purchase Agreement entered into on
June 3, 2004. The buyer of the Multi-Shot Business was a newly-organized Texas
limited liability company, with the name Multi-Shot, LLC, which included among
its members Allen Neel, formerly the Executive Vice President of the Company, as
well as two of the Company's other former employees employed in the Multi-Shot
Business. These persons are referred to as the Key Multi-Shot Employees. The
Company was advised that as of August 6, 2004, these persons held less than a
10% equity interest in the buyer.

         The transaction included the sale of all the Company's assets used in
the Multi-Shot Business, including certain real property located in Odessa,
Texas, improvements and fixtures located on the property; machinery and
equipment, receivables, inventories, tangible and intangible assets and all
books, records and files.

         The purchase price was $11.0 million consisting of $10.4 million in
cash and approximately $628,000 payable by assignment and release by the three
Key Multi-Shot Employees of their claims under their employment agreements with
the Company to change of control payments that may be due in the aggregate of
that amount. The purchase price was subject to adjustment at and as of the
closing of the sale for increases and decreases in the Multi-Shot Business' net
working capital of $270,000 as of November 30, 2003 and increases and decreases
in its inventory of approximately $5,207,000 as of December 31, 2003.

         In February 2005, the Company entered into a Compromise Agreement with
the buyer resolving certain matters that had arisen under the Asset Purchase
Agreement subsequent to the closing. Among the matters resolved was the
determination of the final purchase price adjustment under the Asset Purchase
Agreement and resolution of the capital expenditure note issued by the buyer at
the closing. Pursuant to the Compromise Agreement, the Company paid to the buyer
$940,000, and the principal amount of the buyer's capital expenditure note,
which was increased to approximately $168,000, was deemed paid. Among other
things, the Company's payment reflected a compromise with respect to any and all
claims of the buyer with respect to accounts receivable and also reflected a
compromise with respect to the final purchase price adjustment. In addition, the
Company's representations warranties and covenants in the Asset Purchase
Agreement as to the Multi-Shot Business relating to inventory, net working
capital, purchase price adjustments, financial statements, accounts receivable,
condition of assets (other than real property and leased real property) were
agreed not to survive the execution of the Compromise Agreement. Otherwise, the
Company's representations and warranties and covenants survive the closing under
the Asset Purchase Agreement to the extent provided in the agreement.

         Out of the net cash proceeds from the sale of the Multi-Shot Business,
approximately $9.6 million was applied to the reduction of indebtedness owing to
the Company's senior secured creditor.



                                       11
<PAGE>

6.       RELATED PARTY TRANSACTIONS

         The Company has executed notes payable to SJMB, L.P. ("SJMB") and St.
James Capital Partners, L.P. ("SJCP"), private investment funds. The chairman
and an employee of the general partners of SJMB and SJCP, both serve on the
Company's Board of Directors. At September 30, 2005 and 2004, notes due to SJMB,
SJCP, and related parties totaled $23.0 million. The notes bear interest at 15%
and permit conversion to equity, which would result in substantial dilutions to
existing shareholders. See Note 10 for the Company's plans for recapitalization.


7.       ISSUANCE OF COMMON STOCK

         The Company has outstanding at September 30, 2005 common stock purchase
warrants, options and convertible debt securities entitled to purchase or to be
converted into an aggregate 137,996,386 shares of the Company's common stock at
exercise and conversion prices ranging from $0.75 to $2.63. Accordingly, if all
such securities were exercised or converted, the 12,499,528 shares of Common
Stock issued and outstanding on September 30, 2005, would represent 8.3% of the
shares outstanding on a fully diluted basis. See Note 10. Subsequent Events for
information relating to issuance of shares of the Company's common stock in
exchange for outstanding warrants and agreements relating to the conversion of
the Company's outstanding convertible subordinated notes.


8.       INCOME TAXES

         The difference between the statutory rate and the effective rate
relates to federal tax net operating loss carryforwards (NOL's) that unless
utilized, expire at various dates beginning 2018 through 2024. The Company's
utilization of NOL's is subject to a number of uncertainties including the
ability to generate future taxable income. If the Company achieves sustained
profitability, which may not happen, the use of net operating loss carryforwards
would reduce the Company's tax liability and increase our net income and
available cash resources. When all operating loss carryforwards have been used
or expired, the Company would be subject to increased tax expense and reduced
earnings due to such tax expense.


9.       RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

         In December 2003, the Financial Accounting Standards Board (FASB)
issued Interpretation No. 46 (revised December 2003) ("FIN 46(R)"),
Consolidation of Variable Interest Entities, an interpretation of ARB 51. The
primary objectives of FIN 46(R) are to provide guidance on the identification of
entities for which control is achieved through means other than through voting
rights ("variable interest entities" or "VIEs") and how to determine if a
business enterprise should consolidate the VIEs. This new model for
consolidation applies to an entity for which either: the equity investors (if
any) do not have a controlling financial interest; or the equity investment at
risk is insufficient to finance the entity's activities without receiving
additional subordinated financial support from other parties. In addition, FIN
46(R) requires that all enterprises with a significant variable interest in a
VIE make additional disclosures regarding their relationship with the VIE. The
interpretation requires public entities to apply FIN 46(R) to all entities that
are considered Special Purpose Entities in practice and under the FASB
literature that was applied before the issuance of FIN 46(R). The adoption of
FIN 46(R) had no effect on the Company's financial statements.

                                       12
<PAGE>

         On December 21, 2004, FASB Staff Position (FSP) FAS 109-1, "Application
of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on
Qualified Production Activities Provided by the American Jobs Creation Act of
2004, was issued. FSP FAS 109-1 clarifies that this tax deduction should be
accounted for as a special deduction in accordance with Statement 109. As such,
the special deduction has no effect on deferred tax assets and liabilities
existing at the date of enactment. Rather, the impact of this deduction will be
reported in the period in which the deduction is claimed on the Company's tax
return beginning in 2005. As regulations are still pending, the Company has not
been able to quantify the impact.

         EITF Issue 03-13, "Applying the Conditions in Paragraph 42 of FASB
Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets, in Determining Whether to Report Discontinued Operations," provides
guidance regarding the application of paragraph 42 of Statement 144 (AC Section
I14) in determining whether to report discontinued operations and is effective
for components classified as held for sale or disposed of in fiscal periods
beginning after December 15, 2004. The adoption of EITF Issue 03-13 had no
effect on the Company's financial statements.

         In December 2004, the FASB issued Statement 123 (revised 2004),
Share-Based Payments (SFAS 123(R)). This Statement requires that the costs of
employee share-based payments be measured at fair value on the awards' grant
date using an option-pricing model and recognized in the financial statements
over the requisite service period. This Statement does not change the accounting
for stock ownership plans, which are subject to American Institute of Certified
Public Accountants SOP 93-6, Employer's Accounting for Employee Stock Ownership
Plans. SFAS 123(R) supersedes Opinion 25, Accounting for Stock Issued to
Employees and its related interpretations, and eliminates the alternative to use
Opinion 25's intrinsic value method of accounting, which the Company is
currently using. Certain stock awards may be considered liabilities instead of
equity components under SFAS 123(R).

         SFAS 123(R) allows for two alternative transition methods. The first
method is the modified prospective application whereby compensation cost for the
portion of awards for which the requisite service has not yet been rendered that
are outstanding as of the adoption date will be recognized over the remaining
service period. The compensation cost for that portion of awards will be based
on the grant-date fair value of those awards as calculated for pro forma
disclosures under SFAS 123, as originally issued. All new awards and awards that
are modified, repurchased, or cancelled after the adoption date will be
accounted for under the provisions of SFAS 123(R). The second method is the
modified retrospective application, which requires that the Company restate
prior period financial statements. The modified retrospective application may be
applied either to all prior periods or only to prior interim periods in the year
of adoption of this statement. The Company is currently determining which
transition method it will adopt and is evaluating the impact SFAS 123(R) will
have on its financial position, results of operations and EPS when the Statement
is adopted.

         On March 29, 2005, the SEC issued Staff Accounting Bulletin "SAB" No.
107 regarding the interaction between SFAS 123(R) which was revised in December
2004 and certain SEC rules and regulations and provides the SEC's staff views
regarding the valuation of share-based payment arrangements for public
companies. The Company is evaluating the impact this guidance will have on its
financial condition, results of operations and EPS.

                                       13
<PAGE>

         On April 14, 2005, the SEC issued a press release that revised the
required date of adoption under SFAS 123(R). The new rule allows for companies
to adopt the provisions of SFAS 123(R) beginning on the first annual period
beginning after June 15, 2005. Based on the new required adoption date, the
Company plans to adopt SFAS 123(R) as of the beginning of the first quarter of
2006. The Company is evaluating the impact this guidance will have on its
financial condition, results of operations and EPS.


10.      SUBSEQUENT EVENTS

         As of October 6, 2005, the Company had outstanding 70,761,185 warrants.
On October 6, 2005, the Company entered into agreements with the holders of
52,693,685 warrants to exchange those warrants for 17,564,562 shares of Common
Stock. Of the 52,693,685 warrants, an aggregate of 40,755,276 are held by SJCP
and SJMB, and 11,938,409 were held by Charles E. Underbrink and his family and
other related entities. The exchange of warrants for shares of Common Stock by
Mr. Underbrink and his related entities was completed on October 6, 2005
resulting in the issuance of 3,979,467 shares and the exchange with SJCP and
SJMB will be completed prior to or on June 30, 2006.

         On October 7, 2005, the Company commenced an offer to exchange shares
of its common stock for its remaining outstanding 18,067,500 common stock
purchase warrants. The Company is offering to exchange one (1) share of Common
Stock for each three (3) warrants. Each warrant represents the right to purchase
one share of Common Stock at an exercise price of $0.75 per share. As extended
on November 7, 2005, the offer to exchange shares of Common Stock for warrants
will remain open for acceptance by the holders of the 18,067,500 warrants
through 6:00 PM Central Time on November 14, 2005, unless extended.

         The commencement of the exchange offer is the initial step of a series
of steps intended to be undertaken by the Company for the purpose of
recapitalizing the Company through the elimination of the substantial amount of
derivative securities it has outstanding. These derivative securities include
the common stock purchase warrants and $42,477,902 of principal amount and
accrued interest, as of September 30, 2005, of its outstanding convertible
subordinated notes which, as of that date, are convertible at a conversion price
of $0.75 per share into an aggregate of 56,637,203 shares of Common Stock.

         The Agreements with SJCP, SJMB and Mr. Underbrink and his related
entities also provide that such persons will convert an aggregate of $20,277,374
of principal and all accrued interest (which amounted to $17,111,403 through
September 30, 2005) on the Company's outstanding convertible subordinated notes
into shares of Common Stock and, subject to market conditions, sell those shares
to the Company, along with the shares issued in exchange for their warrants and
an additional 5,017,481 shares held by SJMB, L.P., at the closing time of a
proposed underwritten public offering of Common Stock intended to be undertaken
by the Company. The purchase price paid by the Company for such shares will be
the price per share it receives in the public offering less commissions and
expenses of the underwriters in the public offering, but not to be less than
$0.75 per share.

                                       14
<PAGE>

         Following the completion of the exchange offer period, the Company
intends to undertake to complete an underwritten public offering of shares of
its Common Stock. The primary purposes of the offering will be to raise capital
for the Company, including for the possible repayment of a portion of the
Company's senior secured indebtedness, the repayment of any then remaining
outstanding convertible subordinated note indebtedness, the repurchase of the
shares of the Company's Common Stock from SJCP, SJMB and the Underbrink family
entities and for general corporate purposes. In addition, under the terms of a
Registration Rights Agreement, the holders of $5,089,125 principal amount and
accrued interest (as of September 30, 2005) on outstanding convertible
subordinated notes will have the right, subject to certain limitations, to
include the shares issuable on conversion of the principal and interest on the
notes, as well as the shares of Common Stock issued in exchange for their
warrants, in the registration statement. The terms of the underwritten public
offering and the amount and price of the shares of Common Stock proposed to be
offered and sold have not been determined at this time.

         The information set forth in this Quarterly Report relating to the
proposed underwritten public offering does not constitute an offer of any
securities of the Company for sale.

         In conjunction with these recapitalization plans, the Company intends,
following the exchange offer period, to effect a reverse split of its shares of
Common Stock on the basis of one (1) share for each ten (10) shares and, subject
to meeting all listing requirements, to seek to list its shares of Common Stock
on the Nasdaq Stock Market and to elect additional members to the Company's
Board of Directors so that a majority of the Board members will be independent
Directors as defined under the Nasdaq Stock Market rules.

         On September 19, 2005, the Company entered into a letter of intent to
purchase from the holders all of the outstanding equity securities of BobCat
Pressure Control, Inc. ("BobCat"). The purchase price is $51.5 million, less the
amount of long-term debt, including current maturities, payable in cash at the
closing of the transaction. BobCat provides snubbing services to natural gas and
oil well operators in the Mid-Continent area of the United States. Using a
series of high pressure blow-out preventers, a snubbing unit makes it possible
to remove and replace down-hole equipment in a well (such as drill pipe, casing
or tubing) in a pressurized environment, allowing an operator to service a well
without using other more disruptive means to control the pressure in the well.
BobCat also provides other oil field services, including freezing, hot tap
services, well control, fishing, rental tool services and drillouts. The closing
of the BobCat acquisition is subject to the completion by the Company of due
diligence inquiries into BobCat, the negotiation and execution of a definitive
purchase agreement, completion of financing for the transaction and fulfillment
of customary closing conditions to be contained in the definitive purchase
agreement. It is intended that the purchase price for the BobCat securities will
be financed with the proceeds of additional senior secured borrowings, a portion
of which, if the acquisition is completed, is expected will be repaid using a
portion of the proceeds from the proposed underwritten offering.


                                       15
<PAGE>

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

GENERAL

         The Company's results of operations are affected primarily by the
extent of utilization and rates paid for its wireline services and equipment.
The energy services sector is completely dependent upon the upstream spending by
the natural gas and oil exploration and production side of the industry. A
decline in natural gas and oil commodity prices can be expected to result in a
decline in the demand for the Company's services and equipment. The Company
believes that information regarding the count of active drilling rigs in use in
the continental United States as well as offshore in the Gulf of Mexico can be
used as an indicator of current likely demand for natural gas and oil well
services. Fluctuations in natural gas and oil commodity prices are frequently
followed by fluctuations in the number of active drilling rigs. The Company
showed improvement in revenues during 2005 over prior periods reflecting the
increased count of active drilling rigs. Inasmuch as natural gas and oil
commodity prices are subject to frequent material fluctuations, there can be no
assurance that the Company's revenues experienced in the first three quarters of
2005 will continue to equal or exceed its revenues in 2004 and prior years.
There can be no assurance that the Company will continue to experience any
increase in the current level of demand for and utilization of its services or
that the Company will maintain its current levels of revenues and profitability.

RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED
TO THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004

         The Company sold its directional drilling division business on August
6, 2004 and the operations of this division are reported in the financial
statements included in this Report as discontinued operations. The comparisons
detailed below reflect the Company's continuing operations.

         The following table sets forth the Company's revenues from its
continuing operations for the three and nine months ended September 30, 2005 and
2004, respectively:

<TABLE>
<CAPTION>
                        Three Months Ended                                        Nine Months Ended
            September 30, 2005          September 30, 2004          September 30, 2005        September 30, 2004
      -------------------------------------------------------    ----------------------------------------------------
<S>                                       <C>                         <C>                        <C>
               $17,421,589                 $14,950,787                 $51,578,843                $38,660,455
</TABLE>

         Total revenues increased by approximately $2.5 million to approximately
$17.4 million for the three months ended September 30, 2005 and increased by
approximately $12.9 million for the nine months ended September 30, 2005 as
compared to total revenues of approximately $15.0 million and $38.7 million for
the three and nine months ended September 30, 2004, respectively. Revenues for
the three and nine months ended September 30, 2005 increased as a result of an
increase in the demand for the Company's services which primarily resulted from
continued high prices for natural gas and oil and increased drilling activity,
as evidenced by the higher rig count. Revenues for the three months ended
September 30, 2005 decreased by approximately $2.3 million from the three months
ended June 30, 2005 primarily as the result of the effect of weather on the
Company's offshore wireline operations in the Gulf of Mexico.

                                       16
<PAGE>

         Operating costs increased by approximately $1.4 million and $6.1
million for the three and nine months ended September 30, 2005, respectively, as
compared to the same periods of 2004. Operating costs were 60.5% and 60.4% of
revenues for the three and nine months ended September 30, 2005, respectively as
compared with 61.4% and 64.8% of revenues for the same periods in 2004. The
decrease in operating costs as a percentage of revenues was primarily the result
of the higher overall level of activities in the three and nine months ended
September 30, 2005 compared with 2004. Salaries and benefits increased by
approximately $684,000 and $3.4 million for the three and nine months ended
September 30, 2005, respectively, as compared to the same periods in 2004. Total
number of employees increased from 313 at September 30, 2004 to 359 at September
30, 2005. The increase in salaries and benefits is primarily due to the increase
in employee levels from 2004.

         Selling, general and administrative expenses decreased by approximately
$15,000 and $182,000 for the three and nine months ended September 30, 2005,
respectively. The decrease was primarily due to a decrease in bad debts and debt
issuance amortization. As a percentage of revenues, selling, general and
administrative expenses decreased to 13.5% and 13.1% for the three and nine
months ended September 30, 2005, respectively from 15.8% and 17.9% in 2004.

         Depreciation and amortization decreased by approximately $43,000 and
$217,000 for the three and nine months ended September 30, 2005, respectively.
The decrease was primarily due to certain assets becoming fully depreciated in
the periods.

         Interest expense and amortization of debt discount decreased by
approximately $262,000 and $876,000 for the three and nine months ended
September 30, 2005, respectively as compared to the same periods in 2004. The
decline in interest expense is attributable to the reduction in the Company's
senior debt outstanding. See "Note 9 of Notes to Financial Statements" in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2004.

         Other income (expense) decreased by approximately $111,000 and $322,000
for the three and nine months ended September 30, 2005, respectively as compared
to the same periods in 2004. The decrease was primarily due to the expensing of
transaction expenses associated with the Centre transaction which was terminated
in August 2005.

         The Company's net income for the three months ended September 30, 2005
was approximately $2.2 million compared with net income of approximately
$848,000 for the three months ended September 30, 2004. Net income for the nine
months ended September 30, 2005 was approximately $6.6 million compared with a
net loss of approximately $2.6 million for the same period of 2004. Included in
2004 results was a loss from operations of the discontinued directional drilling
segment of approximately $7,000 and $1.5 million during the three and nine
months ended September 30, 2004. The improved results for the three and nine
months ended September 30, 2005 over the same periods in 2004 was the result of
an increase in revenues resulting from an increase in demand for the Company's
services. Net income for the three months ended September 30, 2005 decreased by
approximately $1.5 million from the three months ended June 30, 2005 primarily
as the result of the effects of the hurricane activity in the Gulf of Mexico
which impacted the Company's offshore wireline operations.

                                       17
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         Cash provided by the Company's operating activities was approximately
$13.1 million for the nine months ended September 30, 2005 as compared to cash
provided of approximately $4.6 million for the same period in 2004 mainly as a
result in the increase in demand for the Company's services. Investing
activities used cash of approximately $5.9 million during the nine months ended
September 30, 2005 for the acquisition of property, plant and equipment as
compared to $6.0 million for the same period in 2004, more than offset by $10.7
million in proceeds from the sale of the Multishot division. During the nine
months ended September 30, 2005, financing activities used cash of approximately
$3.8 million for principal payments on debt offset by proceeds on other
borrowings of approximately $573,000. For the same period in 2004, financing
activities used cash of approximately $14.2 million for principal payments on
debt and net payments on working capital revolving loans and other borrowings of
approximately $3.2 million offset by proceeds from bank and other borrowings of
approximately $3.3 million.

         The Company's outstanding indebtedness includes primarily senior
indebtedness aggregating approximately $6.7 million at September 30, 2005, other
indebtedness of approximately $673,000 and approximately $42.8 million
(including approximately $19.8 million of accrued interest) owing primarily to
the St. James Partnerships as well as other holders of subordinated notes.

         GECC Credit Facility. On November 14, 2004, the Company entered into
the Restated Credit Agreement with GECC providing for the extension of revolving
and term credit facilities to the Company aggregating up to $18.0 million. The
Restated Credit Agreement amends, restates and modifies the Original Credit
Agreement entered into as of September 14, 2001, including the amendments
thereto. The Restated Credit Agreement includes a revolving credit facility of
up to $10.0 million, but not exceeding 85% of eligible accounts receivable and a
term loan of $8.0 million. Eligible accounts are defined to exclude, among other
items and subject to certain exceptions, debtors' accounts outstanding that are
more than 60 days overdue or 90 days following the original invoice date and of
debtors that have suspended business or commenced various insolvency proceedings
and accounts outstanding in amounts exceeding such credit limits as GECC may
establish from time to time in its reasonable credit judgment. The interest rate
on borrowings under the revolving loans is 1.75% above a base rate and the
interest rate on borrowings under the term loan is 2.5% above the base rate. The
base rate is the higher of (i) the rate publicly quoted from time to time by the
Wall Street Journal as the base rate on corporate loans posted by at least 75%
of the nation's thirty largest banks, or (ii) the average of the rates on
overnight Federal funds transactions by members of the Federal Reserve System,
plus 0.5%. Subject to the absence of an event of default and fulfillment of
certain other conditions, the Company can elect to borrow or convert any loan
and pay interest at the LIBOR rate plus applicable margins of 3.25% on the
revolving loan and 4.0% on the term loan. If an event of default has occurred,
the interest rate is increased by 2%. Advances under the Restated Credit
Agreement are collateralized by a senior lien against substantially all of the
Company's assets. The Restated Credit Agreement expires on November 14, 2007.

         Initial borrowings under the Restated Credit Agreement advanced on
September 14, 2004 were $8.0 million borrowed under the term loan. No borrowings
were made under the revolving loan at that time. Proceeds of the initial
borrowings were used to repay indebtedness outstanding under a capex loan under
the Original Credit Agreement in the amount of approximately $4.3 million,
approximately $1.8 million was placed in escrow for the possible repayment of
principal and accrued interest on subordinated secured indebtedness and
approximately $1.9 million was borrowed to be used by the Company for general
corporate purposes. Any funds placed in escrow not used for the repayment of
subordinated secured indebtedness were returned to the Company. Borrowings under
the revolving loan are able to be repaid and re-borrowed from time to time for
working capital and general corporate needs, subject to the Company's continuing
compliance with the terms of the agreement, with the outstanding balance of the
revolving loan to be paid in full at the expiration of the Restated Credit
Agreement on November 14, 2007. The term loan is to be repaid in 35 equal
monthly installments of $133,333 with a final installment of $3,333,345 due and
payable on November 14, 2007.

                                       18
<PAGE>

         At September 30, 2005, borrowings under the term loan were $6.7 million
with no outstanding borrowings under the revolving loan.

         Borrowings under the Restated Credit Agreement may be prepaid in whole
or in part or the facility terminated or reduced by the Company at any time
subject to the payment of certain pre-payment fees declining from 3% to 1% in
the event the termination or reduction during the first, second or third year of
the term of the Restated Credit Agreement. The Company is required to prepay
borrowings out of the net proceeds from the sale of any assets, subject to
certain exceptions, or the stock of any subsidiary, the net proceeds from the
sale of any stock or debt securities by the Company, and any borrowings in
excess of the applicable borrowing availability, including borrowings under the
term loan in excess of 70% of the forced liquidation value of eligible term loan
equipment. The forced liquidation value of the eligible term loan equipment is
established by appraisal conducted from time to time but not more than twice per
year.

         Initial borrowings under the Restated Credit Agreement were subject to
the fulfillment at or before the closing of a number of closing conditions,
including among others, the accuracy of the representations and warranties made
by the Company in the loan agreement, delivery of executed loan documents,
officers' certificates, an opinion of counsel, the extension of the maturity
date of approximately $23.0 million principal amount of the Company's
outstanding subordinated notes to a date 90 days after the maturity date of the
Restated Credit Facility with no payments of principal or interest to be made
prior to that date, and the completion of legal due diligence. Future advances
are subject to the continuing accuracy of the Company's representations and
warranties as of such date (other than those relating expressly to an earlier
date), the absence of any event or circumstance constituting a "material adverse
effect," as defined, the absence of any default or event of default under the
Restated Credit Agreement, and the borrowings not exceeding the applicable
borrowing availability under the Restated Credit Agreement, after giving effect
to such advance. A "material adverse effect" is defined to include an event
having a material adverse effect on the Company's business, assets, operations,
prospects or financial or other condition, on the Company's ability to pay the
loans, or on the collateral and also includes a decline in the "Average Rig
Count" (excluding Canada and international rigs) published by Baker Hughes, Inc.
falling below 675 for 12 consecutive weeks.

         Under the Restated Credit Agreement, the Company is obligated to
maintain compliance with a number of affirmative and negative covenants.
Affirmative covenants the Company must comply with include requirements to
maintain its corporate existence and continue the conduct of its business
substantially as conducted in November 2004, promptly pay all taxes and
governmental assessments and levies, maintain its corporate records, maintain
insurance, comply with applicable laws and regulations, provide supplemental
disclosure to the lenders, conduct its affairs without violating the
intellectual property of others, conduct its operations in compliance with
environmental laws and provide a mortgage or deed of trust to the lenders
granting a first lien on the Company's real estate upon the request of the
lenders, and provide certificates of title on newly acquired equipment with the
lender's lien noted.

                                       19
<PAGE>

         Negative covenants the Company may not violate include, among others,
(i) forming or acquiring a subsidiary, merging with, acquiring all or
substantially all the assets or stock of another person, (ii) making an
investment in or loan to another person, (iii) incurring any indebtedness other
than permitted indebtedness, (iv) entering into any transaction with an
affiliate except on fair and reasonable terms no less favorable than would be
obtained from a non-affiliated person, (v) making loans to employees in amounts
exceeding $50,000 to any employee and a maximum of $250,000 in the aggregate,
(vi) making any change in its business objectives or operations that could
adversely affect repayment of the loans or in its capital structure, including
the issuance of any stock, warrants or convertible securities or any revision in
the terms of outstanding stock except for permitted payments to holders of
subordinated debt and options granted under an existing or future incentive
option plan, amend its charter or by-laws in a manner that would adversely
affect the duty or ability of the Company to repay the indebtedness, or engage
in any business other than that engaged in by it on November 14, 2004 (vii)
creating or permitting to exist any liens on its properties or assets, with the
exception of those granted to the lenders or in existence on the date of making
the loan, (viii) selling any of its properties or other assets, including the
stock of any subsidiary, except inventory in the ordinary course of business and
equipment or fixtures with a value not exceeding $100,000 per transaction and
$250,000 per year, (ix) failing to comply with the various financial covenants
in the loan agreement, (x) making any restricted payment, including payment of
dividends, stock or warrant redemptions, repaying subordinated debt, rescission
of the sale of outstanding stock, (xi) making any payments to stockholders of
the Company other than compensation to employees and payments of management fees
to any stockholder or affiliate of the Company, or (xii) amending or changing
the terms of the Company's subordinated debt.

         The financial covenants prohibit the Company from making capital
expenditures in any fiscal year in an aggregate amount exceeding $3.0 million,
provided that, by amendment entered into in June 2005, the aggregate amount of
capital expenditures for the year ended December 31, 2005 cannot exceed $8.0
million. The financial covenants also require the Company to have for the twelve
months ending at the end of each fiscal month commencing with the month ending
December 31, 2004 and at the end of each of the months ending on and prior to
June 30, 2005, a ratio of EDITDA to fixed charges, including interest expense,
scheduled payments of principal, capital expenditures paid and income taxes
paid, of 1.5 to 1.0, for the twelve months ending at the end of each fiscal
month commencing with the month ending June 30, 2005 and at the end of each of
the months thereafter ending on or prior to December 31, 2005, a ratio of EDITDA
to fixed charges of 1.45 to 1.0 and, for the twelve months ending at the end of
each fiscal month commencing with each month ending after December 31, 2005, a
ratio of EDITDA to fixed charges of 1.5 to 1.0. For the purpose of such
covenant, fixed charges are calculated based on annualized operating results for
the months beginning December 1, 2004. At September 30, 2005, the Company is in
compliance with its debt covenants.

                                       20
<PAGE>

         Events of default under the Restated Credit Agreement include, among
others, (a) the failure to pay when due principal or interest or fees owing
under the Restated Credit Agreement, (b) the failure to perform the covenants
under the Restated Credit Agreement relating to use of proceeds, maintenance of
a cash management system, maintenance of insurance, delivery of certificates of
title, delivery of certain post closing documents, including evidence of key man
life insurance on the lives of William Jenkins and Ron Whitter, maintenance of
compliance with the financial covenants in the loan agreement and maintenance of
compliance with the loan agreement's negative covenants, (c) the failure, within
specified periods of 3 or 5 days of when due, to deliver monthly un-audited and
annual audited financial statements, annual operating plans, and other reports,
notices and information, (d) the failure to perform any other provision of the
loan agreement which remains un-remedied for 20 days or more, (e) a default or
breach under any other agreement to which the Company is a party beyond any
grace period that involves the failure to pay in excess of $250,000 or causes or
permits to cause in excess of $250,000 of indebtedness to become due prior to
its stated maturity, (f) any representation or warranty or certificate delivered
to the lenders being untrue or incorrect in any material respect, (g) a change
of control of the Company, (h) the occurrence of an event having a material
adverse effect, (i) William Jenkins ceases to serve as the Company's chief
executive officer, and (j) the attachment, seizure or levy upon of assets of the
Company which continues for 30 days or more and various other bankruptcy and
other events. Upon the occurrence of a default or event of default, the lenders
may discontinue making loans to the Company. Upon the occurrence of an event of
default, the lenders may terminate the Restated Credit Agreement, declare all
indebtedness outstanding under the Restated Credit Agreement due and payable,
and exercise any of their rights under the Restated Credit Agreement which
includes the ability to foreclose on the Company's assets. In the event of a
bankruptcy or liquidation proceeding, all borrowings under the Restated Credit
Agreement shall be immediately due and payable.

         There can be no assurance that the Company will be able to remain in
compliance with these financial and other covenants or be able to obtain such
amendments, consents or waivers with respect to potential violations of these
covenants when required. The Company's inability to do so may result in the
Company being placed in violation of those financial and other covenants. The
Company can make no assurances that it will remain in compliance with its debt
covenants or generate sufficient cash flows to service its debt and fund
operations. Failure to comply with these debt covenants and or generate
sufficient cash flow from operations could significantly impair the Company's
liquidity position and could result in GECC exercising mandatory prepayment
options under the Company's Restated Credit Agreement. Should the Company be
unable to borrow funds under its Restated Credit Agreement or if prepayment of
those borrowings were required, the Company can make no assurances that
alternative funding could be obtained.

         Reference is made to the Restated Credit Agreement, filed as an Exhibit
to the Company's Current Report on Form 8-K for November 14, 2004, and to the
First and Second Amendments to the Restated Credit Agreement which were filed as
exhibits to the Quarterly Report on Form 10-Q for the quarter and nine months
ended June 30, 2005, for a complete statement of the terms and conditions of the
Restated Credit Agreement.

         Subordinated Secured Indebtedness - Note Extensions. In connection with
entering into the GECC refinancing in November 2004, the Company agreed with the
holders to extend the maturity date of the Company's outstanding subordinated
secured promissory notes from December 31, 2004 to February 13 and February 14,
2008 on $23.0 million of the total $23.9 million principal amount of the notes.
The remainder of the outstanding principal was repaid. The notes bear interest
at 15% per annum and the outstanding principal and accrued interest are
convertible into shares of the Company's common stock at a conversion price of
$0.75 per share, subject to an anti-dilution adjustment for certain issuances of
securities by the Company at prices per share of common stock less than the
conversion price then in effect, in which event the conversion price is reduced
to the lower price at which the shares were issued. As a condition to extend the
maturity date, the Company extended the expiration date of 66.1 million
outstanding common stock purchase warrants to December 31, 2009.

                                       21
<PAGE>

         All of the debt and interest owed under the subordinated secured
promissory notes is subordinated to the Company's senior credit facility and
cannot be repaid until all the amounts owed pursuant to the Credit Facility have
been repaid.

         Substantially all of the Company's assets are pledged as collateral for
the indebtedness outstanding under the subordinated secured promissory notes,
which are subordinated in the payment of principal and interest to indebtedness
owing to GECC, the Company's senior lender.

         Other Indebtedness. In December 2004, the Company incurred indebtedness
of approximately $2.3 million in connection with financing the payment of annual
insurance premiums in that amount. The indebtedness is payable in monthly
installments and was paid in full in September 2005.

         Proposed Recapitalization. In October 2005, the Company initiated a
series of steps undertaken for the purpose of recapitalizing the Company through
the elimination of the substantial amount of derivative securities it has
outstanding, among other steps intended to be undertaken. These derivative
securities include common stock purchase warrants to purchase 70,761,185 shares
of Common Stock and $42,477,902 of principal amount and accrued interest, as of
September 30, 2005, of its outstanding convertible subordinated notes which, as
of that date, are convertible at a conversion price of $0.75 per share into an
aggregate of 56,637,203 shares of Common Stock.

         As of October 6, 2005, the Company had outstanding 70,761,185 warrants.
On October 6, 2005, the Company entered into agreements with the holders of
52,693,685 of the 70,761,185 warrants to exchange those warrants for 17,564,562
shares of Common Stock. Of the 52,693,685 warrants, an aggregate of 40,755,276
are held by SJCP and SJMB, private investment funds, and 11,938,409 were held by
Charles E. Underbrink and his family and other related entities. Mr. Underbrink
is a Director of The Company and is the Chairman of the general partners of SJCP
and SJMB. The exchange of warrants for shares of Common Stock by Mr. Underbrink
and his related entities was completed on October 6, 2005 resulting in the
issuance of 3,979,467 shares and the exchange with SJCP and SJMB will be
completed prior to or on June 30, 2006.

         On October 7, 2005 the Company commenced an offer to exchange shares of
its common stock for its remaining outstanding 18,067,500 common stock purchase
warrants. The Company is offering to exchange one (1) share of Common Stock for
each three (3) warrants. Each warrant represents the right to purchase one share
of Common Stock at an exercise price of $0.75 per share. The offer to exchange
shares of Common Stock for warrants will remain open as extended for acceptance
by the holders of the 18,067,500 warrants through 6:00 PM Central Time on
November 14, 2005, unless further extended.


                                       22
<PAGE>

         The Agreements with St. James Capital Partners, L.P., SJMB, L.P. and
Mr. Underbrink and his related entities also provide that such persons will
convert an aggregate of $20,277,374 of principal and all accrued interest (which
amounted to $17,111,403 through September 30, 2005) on the Company's outstanding
convertible subordinated notes into shares of Common Stock and, subject to
market conditions, sell those shares to the Company, along with the shares
issued in exchange for their warrants and an additional 5,017,481 shares held by
SJMB, L.P., at the closing time of a proposed underwritten public offering of
Common Stock intended to be undertaken by the Company. The purchase price paid
by the Company for such shares will be the price per share it receives in the
public offering less commissions and expenses of the underwriters in the public
offering.

         Following the completion of the exchange offer period, the Company
intends to undertake to complete an underwritten public offering of shares of
its Common Stock. The primary purposes of the offering will be to raise capital
for the Company, including for the possible repayment of a portion of the
Company's senior secured indebtedness, the repayment of any then remaining
outstanding convertible subordinated note indebtedness, the repurchase of the
shares of the Company's Common Stock from St. James Capital Partners, L.P.,
SJMB, L.P. and the Underbrink family entities and for general corporate
purposes. In addition, under the terms of a Registration Rights Agreement, the
holders of $5,089,125 principal amount and accrued interest (as of September 30,
2005) on outstanding convertible subordinated notes will have the right, subject
to certain limitations, to include the shares issuable on conversion of the
principal and interest on the notes, as well as the shares of Common Stock
issued in exchange for their warrants, in the registration statement. The terms
of the underwritten public offering and the amount and price of the shares of
Common Stock proposed to be offered and sold have not been determined at this
time.

         The information set forth in this Quarterly Report relating to the
proposed underwritten public offering does not constitute an offer of any
securities of the Company for sale.

         In conjunction with these recapitalization plans, the Company intends,
following the exchange offer period, to effect a reverse split of its shares of
Common Stock on the basis of one (1) share for each ten (10) shares and, subject
to meeting all listing requirements, to seek to list its shares of Common Stock
on the Nasdaq Stock Market and to elect additional members to the Company's
Board of Directors so that a majority of the Board members will be independent
Directors as defined under the Nasdaq Stock Market rules.

         Letter of Intent Regarding Possible Acquisition. On September 19, 2005,
the Company entered into a letter of intent to purchase from the holders all of
the outstanding equity securities of BobCat Pressure Control, Inc. ("BobCat").
The purchase price is $51.5 million, less the amount of long-term debt,
including current maturities, payable in cash at the closing of the transaction.
BobCat provides snubbing services to natural gas and oil well operators in the
Mid-Continent area of the United States. Using a series of high pressure
blow-out preventers, a snubbing unit makes it possible to remove and replace
down-hole equipment in a well (such as drill pipe, casing or tubing) in a
pressurized environment, allowing an operator to service a well without using
other more disruptive means to control the pressure in the well. BobCat also
provides other oil field services, including freezing, hot tap services, well
control, fishing, rental tool services and drillouts. The closing of the BobCat
acquisition is subject to the completion by the Company of due diligence
inquiries into BobCat, the negotiation and execution of a definitive purchase
agreement, completion of financing for the transaction and fulfillment of
customary closing conditions to be contained in the definitive purchase
agreement. It is intended that the purchase price for the BobCat securities will
be financed with the proceeds of additional senior secured borrowings, a portion
of which, if the acquisition is completed, is expected will be repaid using a
portion of the proceeds from the proposed underwritten offering.

                                       23
<PAGE>

         Terminated Centre Transaction. On August 16, 2005, the Company
announced that it had determined that it was unable to reach a definitive merger
agreement with Centre Partners Management LLC and Centre Southwest Partners LLC
on terms acceptable to the Company and the letter of intent entered into with
them dated April 28, 2005 and its exclusivity provisions had expired.

         Other Liquidity Matters. The Company believes that with the execution
in November 2004 of its Restated Credit Agreement with GECC with an expiration
date of November 14, 2007, the extension of the maturity of its subordinated
indebtedness to February 2008 and the current and anticipated level of the
Company's revenues, it will be able to meet its liquidity requirements through
December 31, 2006. In addition to funding operating expenses, cash requirements
for 2005 and 2006 are expected to be comprised mainly of amortization payments
on indebtedness, funding capital improvements and the possible acquisition of
Bobcat. Such cash requirements are expected to be funded from the Company's
operating cash flows except that the purchase price of Bobcat will be financed
through additional senior secured borrowings. For a full discussion of risk
factors, please see the "Risks Related to the Company" and "Risk Factors Related
to the Oil and Gas Well Service Business" in the Company's Annual Report on Form
10-K for the year ended December 31, 2004.

         The St. James Partnerships, their general partners and Charles E.
Underbrink, who is a Director of the Company and a director of the general
partners of the St. James Partnerships, were added as defendants in an amended
complaint filed in March 2005 in Texas by two of the limited partners of the St.
James Partnerships. The action was originally instituted in December 2004
against the auditors of the St. James Partnerships. The plaintiffs brought the
action as a class action on behalf of all the limited partners of the St. James
Partnerships and are seeking class action certification. No claim has been
asserted against the Company and the Company is not a defendant in the action.
However, the complaint and the amended complaint in the action contain
allegations that the Company participated with Mr. Underbrink in actions the
plaintiffs allege were fraudulent and constituted securities violations. The
Company has not concluded that it is probable that a claim will be asserted
against it and does not believe that if a claim is asserted that there is a
reasonable possibility that the outcome would be unfavorable to the Company or
that any resulting liability would be material to the Company's financial
condition.

INFLATION

         The Company's revenues have been and are expected to continue to be
affected by fluctuations in the prices for oil and gas. Inflationary pressures
did not have a significant effect on the Company's operations in the three and
nine months ended September 30, 2005.

                                       24
<PAGE>

SIGNIFICANT ACCOUNTING POLICIES

         The Company's Discussion and Analysis of Financial Condition and
Results of Operations is based upon its financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosures of
contingent assets and liabilities. On an on-going basis, the Company evaluates
its estimates, including those related to the allowance for bad debts,
long-lived assets, intangibles and goodwill. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

         The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of its customers to make required payments.
If the financial condition of the Company's customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances may be required.

         The Company assesses the impairment of identifiable intangibles,
long-lived assets and related goodwill whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. When the
Company determines that the carrying value of intangibles, long-lived assets and
related goodwill may not be recoverable, any impairment is measured at fair
value based on a projected discounted net cash flows expected to result from
that asset, including eventual disposition.

         Property and equipment are carried at original cost less applicable
depreciation. Depreciation is recognized on the straight-line basis over lives
ranging from two to ten years. Major renewals and improvements are capitalized
and depreciated over each asset's estimated remaining useful life. Maintenance
and repair costs are charged to expense as incurred. When assets are sold or
retired, the remaining costs and related accumulated depreciation are removed
from the accounts and any resulting gain or loss is included in income. Property
and equipment held and used by the Company are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amounts may not be
recoverable. The Company estimates the future undiscounted cash flows of the
affected assets to determine the recoverability of carrying amounts. Warrants
are valued based upon an independent valuation. For warrants issued with debt
instruments, the difference between the face value of the warrant issued and the
value per the valuation is amortized into income through interest expense over
the life of the related debt instrument.

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

         With the exception of historical matters, the matters discussed in this
Report are "forward-looking statements" as defined under the Securities Exchange
Act of 1934, as amended, that involve risks and uncertainties. The Company
intends that the forward-looking statements herein be covered by the safe-harbor
provisions for forward-looking statements contained in the Securities Exchange
Act of 1934, as amended, and this statement is included for the purpose of
complying with these safe-harbor provisions. Forward-looking statements include,
but are not limited to, the matters described herein, including Management's
Discussion and Analysis of Financial Condition and Results of Operations. Such
forward-looking statements relate to:


                                       25
<PAGE>

o        the Company's ability to generate revenues and attain and maintain
         profitability and cash flow, the stability and level of prices for
         natural gas and oil,

o        predictions and expectations as to the fluctuations in the levels of
         natural gas and oil prices,

o        pricing in the natural gas and oil services industry and the
         willingness of customers to commit for natural gas and oil well
         services,

o        the ability of the Company to engage in and complete the proposed
         recapitalization and restructuring of its balance sheet, the proposed
         underwritten public offering of its securities, the possible
         refinancing of its outstanding indebtedness, the intended acquisition
         of Bobcat on terms agreed or any other terms, a merger of the Company
         or sale of its assets or another business combination transaction,

o        the ability of the Company to raise debt or equity capital to
         recapitalize or restructure its balance sheet and to obtain additional
         financing when and if required,

o        the ability to maintain compliance with the covenants of its Restated
         Credit Agreement and other loan agreements pursuant to which
         securities, including debt instruments, have been issued and obtain
         waivers of violations that occur and consents to amendments as
         required,

o        the ability to implement and, if appropriate, expand a cost-cutting
         program, if required,

o        the ability to compete in the premium natural gas and oil services
         market, and to re-deploy its equipment among regional operations as
         required, and the ability of the Company to provide services using
         state of the art tooling.

      The inability of the Company to meet these objectives or requirements or
the consequences on the Company from adverse developments in general economic
conditions, changes in capital markets, adverse developments in the natural gas
and oil industry, developments in international relations and the commencement
or expansion of hostilities by the United States or other governments and events
of terrorism, declines and fluctuations in the prices for natural gas and oil,
weather events disrupting natural gas and oil operations and other factors could
have a material adverse effect on the Company. Material declines in the prices
for natural gas and oil can be expected to adversely affect the Company's
revenues. The Company cautions readers that various risk factors could cause the
Company's operating results and financial condition to differ materially from
those expressed in any forward-looking statements made by the Company and could
adversely affect the Company's financial condition and its ability to pursue its
business strategy and plans. Readers should refer to the Company's Annual Report
on Form 10-K and the risk factors disclosed therein.

         ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

         From time to time, the Company holds financial instruments comprised of
debt securities and time deposits. All such instruments are classified as
securities available for sale. The Company does not invest in portfolio equity
securities, or commodities, or use financial derivatives for trading or hedging
purposes. The Company's debt security portfolio represents funds held
temporarily pending use in its business and operations. The Company manages
these funds accordingly. The Company seeks reasonable assuredness of the safety
of principal and market liquidity by investing in rated fixed income securities
while, at the same time, seeking to achieve a favorable rate of return. The
Company's market risk exposure consists of exposure to changes in interest rates
and to the risks of changes in the credit quality of issuers. The Company
typically invests in investment grade securities with a term of three years or
less. The Company believes that any exposure to interest rate risk is not
material.

                                       26
<PAGE>

         Under the Restated Credit Agreement with GECC, the Company is subject
to market risk exposure related to changes in the prime interest rate. Assuming
the Company's level of borrowings from GECC at September 30, 2005 remained
unchanged throughout 2005, if a 100 basis point increase in interest rates under
the Restated Credit Agreement from rates in existence at December 31, 2004
prevailed throughout the year 2005, it would increase the Company's 2005
interest expense by approximately $67,000.

         ITEM 4.  CONTROLS AND PROCEDURES

         Under the supervision and with the participation of the Company's
management, including William Jenkins, its President and Chief Executive
Officer, and Ronald Whitter, its Chief Financial Officer, the Company has
evaluated the effectiveness of the design and operation of its disclosure
controls and procedures as of the end of the period covered by this report, and,
based on their evaluation, Mr. Jenkins and Mr. Whitter have concluded that these
controls and procedures are effective. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation.

         Disclosure controls and procedures are the Company's controls and other
procedures that are designed to ensure that information required to be disclosed
by it in the reports that it files or submits under the Exchange Act are
recorded, processed, summarized and reported, within the time periods specified
in the Securities and Exchange 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 the Company in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the Company's management, including Mr. Jenkins and Mr. Whitter, as
appropriate to allow timely decisions regarding required disclosure.


                                       27
<PAGE>

PART II - OTHER INFORMATION

ITEM 6.  EXHIBITS

(a)      Exhibits

         31.1           Certification of President and Chief Executive Officer
                        Pursuant to Rule 13a-14(a)

         31.2           Certification of Chief Financial Officer Pursuant to
                        Rule 13a-14(a)

         32.1           Certification of President and Chief Executive Officer
                        Pursuant to Section 1350 (furnished, not filed)

         32.2           Certification of Chief Financial Officer Pursuant to
                        Section 1350 (furnished, not filed)




                                       28
<PAGE>


                                   SIGNATURES

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

                                       BLACK WARRIOR WIRELINE CORP.
                                       ----------------------------
                                              (Registrant)


Date:  November 14, 2005               /S/  William L. Jenkins
                                       ------------------------------------
                                               William L. Jenkins
                                       President and Chief Executive Officer


                                       /S/  Ronald Whitter
                                       ------------------------------------
                                                Ronald Whitter
                                       Chief Financial Officer






                                       29