##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2008
 or
 o
    
    Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number 1-8226
 
 Grey Wolf, Inc.
  Texas
    
    74-2144774(State or jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)10370 Richmond Avenue, Suite 600Houston, Texas
    
    77042(Address of principal executive offices)
    
    (Zip Code)
 (713) 435-6100
  þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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##### 



GREY WOLF, INC. AND SUBSIDIARIES
Table of Contents
  
 PagePart I.
    
    Financial InformationItem 1.
    
    Financial StatementsConsolidated Balance Sheets
    
    
    3Consolidated Statements of Operations
    
    
    4Consolidated Statements of Shareholders Equity and Comprehensive Income
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3.
    
    Quantitative and Qualitative Disclosure about Market Risk
    
    
    26Item 4.
    
    Controls and Procedures
    
    
    27Part II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    28Item 1a.
    
    Risk Factors
    
    
    28Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3.
    
    Defaults Upon Senior Securities
    
    
    29Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    30Item 5.
    
    Other Information
    
    
    30Item 6.
    
    Exhibits
    
    
    32Signatures
    
    
    33Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)Certification Pursuant to 18. U.S.C. Section 1350
  -2-




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##### Table of Contents



GREY WOLF, INC. AND SUBSIDIARIES
 
 Consolidated Balance Sheets
  March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    286,569
    
    
    $
    247,701Restricted cash
    
    
    847
    
    
    
    847Accounts receivable, net of allowance of $3,104
at March 31, 2008 and $3,169 at December 31, 2007
    
    
    168,804
    
    
    
    176,466Prepaids and other current assets
    
    
    10,856
    
    
    
    13,337Deferred tax assets
    
    
    5,351
    
    
    
    5,145Total current assets
    
    
    472,427
    
    
    
    443,496Property and equipment:Land, buildings and improvements
    
    
    8,784
    
    
    
    8,534Drilling equipment
    
    
    1,375,648
    
    
    
    1,331,401Furniture and fixtures
    
    
    5,656
    
    
    
    5,397Total property and equipment
    
    
    1,390,088
    
    
    
    1,345,332Less: accumulated depreciation
    
    
    (634,616
    )
    
    
    (607,388
    )Net property and equipment
    
    
    755,472
    
    
    
    737,944Goodwill
    
    
    10,377
    
    
    
    10,377Other noncurrent assets, net
    
    
    21,431
    
    
    
    16,153$
    1,259,707
    
    
    $
    1,207,970LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable-trade
    
    $
    65,242
    
    
    $
    52,557Accrued workers compensation
    
    
    6,455
    
    
    
    7,608Payroll and related employee costs
    
    
    10,841
    
    
    
    15,439Accrued interest payable
    
    
    3,801
    
    
    
    2,553Current income taxes payable
    
    
    22,895
    
    
    
    14,705Other accrued liabilities
    
    
    11,137
    
    
    
    11,830Total current liabilities
    
    
    120,371
    
    
    
    104,692Contingent convertible senior notes
    
    
    275,000
    
    
    
    275,000Other long-term liabilities
    
    
    17,064
    
    
    
    18,126Deferred income taxes
    
    
    157,153
    
    
    
    150,643Commitments and contingent liabilities
    
    
    
    
    
    
    Shareholders equity:Series B Junior Participating Preferred stock; $1 par value;
250,000 shares authorized; none outstanding
    
    
    
    
    
    
    Common stock; $0.10 par value;
shares authorized: 500,000,000; shares issued: 198,156,102
at March 31, 2008 and 197,045,996 at December 31, 2007;
shares outstanding: 178,853,761 at March 31, 2008
and 178,345,603 at December 31, 2007
    
    
    19,815
    
    
    
    19,704Additional paid-in capital
    
    
    396,461
    
    
    
    393,894Treasury stock, at cost: 19,302,341 shares at March 31, 2008
and 18,700,393 shares at December 31, 2007
    
    
    (124,487
    )
    
    
    (121,096
    )Retained earnings
    
    
    398,330
    
    
    
    367,007Total shareholders equity
    
    
    690,119
    
    
    
    659,509$
    1,259,707
    
    
    $
    1,207,970
 See accompanying notes to consolidated financial statements
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GREY WOLF, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Operations
   Three Months EndedMarch 31,2008
    
    
    2007Contract drilling revenue
    
    $
    201,522
    
    
    $
    242,013Costs and expenses:Drilling operations
    
    
    113,508
    
    
    
    120,953Depreciation and amortization
    
    
    27,759
    
    
    
    21,414General and administrative
    
    
    8,612
    
    
    
    7,399(Gain) loss on sale of assets
    
    
    38
    
    
    
    (53
    )Total costs and expenses
    
    
    149,917
    
    
    
    149,713Operating income
    
    
    51,605
    
    
    
    92,300Other income (expense):Interest income
    
    
    2,487
    
    
    
    3,159Interest expense
    
    
    (3,337
    )
    
    
    (3,492
    )Other expense, net
    
    
    (850
    )
    
    
    (333
    )Income before income taxes
    
    
    50,755
    
    
    
    91,967Income tax expense:Current
    
    
    13,128
    
    
    
    26,980Deferred
    
    
    6,304
    
    
    
    6,409Total income tax expense
    
    
    19,432
    
    
    
    33,389Net income
    
    $
    31,323
    
    
    $
    58,578Net income per common share (Note 2):Basic
    
    $
    0.18
    
    
    $
    0.32Diluted
    
    $
    0.15
    
    
    $
    0.27Weighted average common shares outstanding:Basic
    
    
    175,771
    
    
    
    183,023Diluted
    
    
    219,332
    
    
    
    226,577
 See accompanying notes to consolidated financial statements
 -4-




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GREY WOLF, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Shareholders Equity and Comprehensive Income
  Common Stock
    
    
    Additional
    
    
    Treasury StockNumber of
    
    
    Amount,
    
    
    Paid-in
    
    
    Number of
    
    
    Amount,
    
    
    RetainedShares
    
    
    at $0.10 par value
    
    
    Capital
    
    
    Shares
    
    
    at cost
    
    
    Earnings
    
    
    TotalBalance, December 31, 2006
    
    
    185,936
    
    
    $
    19,523
    
    
    $
    383,482
    
    
    
    9,292
    
    
    $
    (65,119
    )
    
    $
    195,908
    
    
    $
    533,794Adjustment for the adoption of FASB
Interpretation No. (FIN) 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,207
    
    
    
    1,207Exercise of stock options
    
    
    802
    
    
    
    80
    
    
    
    2,785
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,865Tax effect of share-based payments
    
    
    
    
    
    
    
    
    
    
    749
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    749Issuance of restricted stock, net of forfeitures
    
    
    1,016
    
    
    
    101
    
    
    
    (101
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    6,979
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,979Purchase of treasury stock
    
    
    (9,408
    )
    
    
    
    
    
    
    
    
    
    
    9,408
    
    
    
    (55,977
    )
    
    
    
    
    
    
    (55,977
    )Comprehensive net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169,892
    
    
    
    169,892Balance, December 31, 2007
    
    
    178,346
    
    
    
    19,704
    
    
    
    393,894
    
    
    
    18,700
    
    
    
    (121,096
    )
    
    
    367,007
    
    
    
    659,509Exercise of stock options
    
    
    16
    
    
    
    2
    
    
    
    67
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69Tax effect of share-based payments
    
    
    
    
    
    
    
    
    
    
    (208
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (208
    )Issuance of restricted stock, net of forfeitures
    
    
    1,094
    
    
    
    109
    
    
    
    (109
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    2,817
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,817Purchase of treasury stock
    
    
    (602
    )
    
    
    
    
    
    
    
    
    
    
    602
    
    
    
    (3,391
    )
    
    
    
    
    
    
    (3,391
    )Comprehensive net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,323
    
    
    
    31,323Balance, March 31, 2008
(unaudited)
    
    
    178,854
    
    
    $
    19,815
    
    
    $
    396,461
    
    
    
    19,302
    
    
    $
    (124,487
    )
    
    $
    398,330
    
    
    $
    690,119
 See accompanying notes to consolidated financial statements
 -5-




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GREY WOLF, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
   Three Months EndedMarch 31,2008
    
    
    2007Cash flows from operating activities:Net income
    
    $
    31,323
    
    
    $
    58,578Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    27,759
    
    
    
    21,414Deferred income taxes
    
    
    6,304
    
    
    
    6,409(Gain) loss on sale of assets
    
    
    38
    
    
    
    (53
    )Stock-based compensation expense
    
    
    2,817
    
    
    
    1,532Excess tax benefit of stock option exercises
and vested restricted stock
    
    
    (18
    )
    
    
    (45
    )Net effect of changes in assets and liabilities
related to operating accounts
    
    
    25,116
    
    
    
    33,356Cash provided by operating activities
    
    
    93,339
    
    
    
    121,191Cash flows from investing activities:Property and equipment additions
    
    
    (46,117
    )
    
    
    (67,377
    )Deposits for new rig purchases
    
    
    (5,842
    )
    
    
    Proceeds from sale of property and equipment
    
    
    792
    
    
    
    1,337Cash used in investing activities
    
    
    (51,167
    )
    
    
    (66,040
    )Cash flows from financing activities:Proceeds from exercise of stock options
    
    
    69
    
    
    
    176Excess tax benefit of stock option exercises
and vested restricted stock
    
    
    18
    
    
    
    45Purchase of treasury stock
    
    
    (3,391
    )
    
    
    (11,446
    )Cash used in financing activities
    
    
    (3,304
    )
    
    
    (11,225
    )Net increase in cash and cash equivalents
    
    
    38,868
    
    
    
    43,926Cash and cash equivalents, beginning of period
    
    
    247,701
    
    
    
    229,773Cash and cash equivalents, end of period
    
    $
    286,569
    
    
    $
    273,699Supplemental cash flow disclosure:Cash paid for interest
    
    $
    1,876
    
    
    $
    1,874Cash paid for taxes
    
    $
    5,814
    
    
    $
    1,320
 See accompanying notes to consolidated financial statements
 -6-




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GREY WOLF, INC. AND SUBSIDIARIES
 
 Notes to Consolidated Financial Statements
  (1) General
   (2) Significant Accounting Policies
 Earnings Per Share
   -7-




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GREY WOLF, INC. AND SUBSIDIARIES  Notes to Consolidated Financial Statements
  Three Months EndedMarch 31,2008
    
    
    2007(In thousands, except per share amounts)Numerator:Net income
    
    $
    31,323
    
    
    $
    58,578Add interest expense on contingent
convertible senior notes,
net of related tax effects
    
    
    1,887
    
    
    
    2,074Adjusted net incomediluted
    
    $
    33,210
    
    
    $
    60,652Denominator:Weighted average common
shares outstandingbasic
    
    
    175,771
    
    
    
    183,023Effect of dilutive securitiesOptionstreasury stock method
    
    
    476
    
    
    
    691Restricted stocktreasury stock method
    
    
    628
    
    
    
    406Contingent convertible senior notes
    
    
    42,457
    
    
    
    42,457Weighted average common shares
outstandingdiluted
    
    
    219,332
    
    
    
    226,577Earnings per common share:Basic
    
    $
    0.18
    
    
    $
    0.32Diluted
    
    $
    0.15
    
    
    $
    0.27A summary of securities excluded from the computation of basic and diluted earnings per share
is presented below for the applicable periods (in thousands):Basic earnings per share:Unvested restricted stock
    
    
    2,902
    
    
    
    2,148Diluted earnings per share:Anti-dilutive stock options
    
    
    1,881
    
    
    
    1,275Anti-dilutive restricted stock
    
    
    396
    
    
    
    Total anti-dilutive securities excluded from the
computation of diluted earnings per share
    
    
    2,277
    
    
    
    1,275
 -8-




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GREY WOLF, INC. AND SUBSIDIARIES  Notes to Consolidated Financial Statements
 Share-Based Payment Arrangements
   Recent Accounting Pronouncements
     -9-




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GREY WOLF, INC. AND SUBSIDIARIES  Notes to Consolidated Financial Statements
  (3) Accounting for Income Taxes
    -10-




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GREY WOLF, INC. AND SUBSIDIARIES  Notes to Consolidated Financial Statements
 (4) Long-Term Debt
  March 31,
    
    
    December 31,2008
    
    
    20073.75% Contingent ConvertibleSenior Notes due May 2023
    
    $
    150,000
    
    
    $
    150,000Floating Rate Contingent ConvertibleSenior Notes due April 2024
    
    
    125,000
    
    
    
    125,000275,000
    
    
    
    275,000Less current maturities
    
    
    
    
    
    
    Long-term debt
    
    $
    275,000
    
    
    $
    275,000
 3.75% Notes
    Floating Rate Notes
   -11-




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GREY WOLF, INC. AND SUBSIDIARIES  Notes to Consolidated Financial Statements
   CIT Facility
    (5) Segment Information
  -12-




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GREY WOLF, INC. AND SUBSIDIARIES  Notes to Consolidated Financial Statements
  Three Months EndedMarch 31,2008
    
    
    2007RevenueUnited States
    
    $
    195,601
    
    
    $
    242,013Mexico
    
    
    5,921
    
    
    
    Total revenue
    
    $
    201,522
    
    
    $
    242,013Operating IncomeUnited States
    
    $
    50,019
    
    
    $
    92,300Mexico
    
    
    1,586
    
    
    
    Total operating income
    
    $
    51,605
    
    
    $
    92,300
 (6) Contingencies
  (7) Capital Stock and Option Plans
  
    
    incentive stock options;
    
    non-statutory stock options;
    
    restricted shares; and
    
    other stock-based and cash awards.
   -13-




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GREY WOLF, INC. AND SUBSIDIARIES  Notes to Consolidated Financial Statements
    (8) Treasury Stock
   (9) Concentrations
   (10) Subsequent Event
  -14-




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GREY WOLF, INC. AND SUBSIDIARIES
 
 Managements Discussion and Analysis of Financial
 Condition and Results of Operations
  Overview
   Definitive Merger Agreement
  New Rig Purchases
  Rig Activity
  -15-




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2006
    
    2007
    
    2008DomesticLand Rig
    
    Full
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Full
    
    
    
    
    
    4/1 -Count
    
    Year
    
    Q-1
    
    Q-2
    
    Q-3
    
    Q-4
    
    Year
    
    Q-1
    
    4/30Baker Hughes
    
    
    1,535
    
    
    
    1,626
    
    
    
    1,653
    
    
    
    1,691
    
    
    
    1,705
    
    
    
    1,669
    
    
    
    1,690
    
    
    
    1,744Grey Wolf
    
    
    108
    
    
    
    110
    
    
    
    104
    
    
    
    104
    
    
    
    103
    
    
    
    105
    
    
    
    100
    
    
    
    104
 Term Contracts
   Drilling Contract Rates
  -16-




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Turnkey Contract Activity
 Reconciliation of
Non-GAAP Financial Measures
 Stock
Repurchase Program
  Financial Outlook
    -17-




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Critical Accounting Policies
  Property and Equipment
  Impairment of Long-Lived Assets
  -18-




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Goodwill
   Revenue Recognition
  Insurance Accruals
  -19-




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Income Taxes
   -20-




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Financial Condition and Liquidity
  March 31, 2008
    
    
    December 31, 2007(Unaudited)(Dollars in thousands)Amount
    
    
    %
    
    
    Amount
    
    
    %Working capital
    
    $
    352,056
    
    
    
    31
    
    
    $
    338,804
    
    
    
    31Property and equipment, net
    
    
    755,472
    
    
    
    66
    
    
    
    737,944
    
    
    
    67Goodwill
    
    
    10,377
    
    
    
    1
    
    
    
    10,377
    
    
    
    1Other noncurrent assets, net
    
    
    21,431
    
    
    
    2
    
    
    
    16,153
    
    
    
    1Total
    
    $
    1,139,336
    
    
    
    100
    
    
    $
    1,103,278
    
    
    
    100Long-term debt
    
    $
    275,000
    
    
    
    24
    
    
    $
    275,000
    
    
    
    25Other long-term liabilities
    
    
    174,217
    
    
    
    15
    
    
    
    168,769
    
    
    
    15Shareholders equity
    
    
    690,119
    
    
    
    61
    
    
    
    659,509
    
    
    
    60Total
    
    $
    1,139,336
    
    
    
    100
    
    
    $
    1,103,278
    
    
    
    100
 Significant Changes in Financial Condition
    Long-Term Debt
  3.75% Notes
  -21-




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Floating Rate Notes
    CIT Facility
   -22-




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Cash Flow
  Three Months EndedMarch 31,2008
    
    
    2007(In thousands)(Unaudited)Net cash provided by (used in):Operating activities
    
    $
    93,339
    
    
    $
    121,191Investing activities
    
    
    (51,167
    )
    
    
    (66,040
    )Financing activities
    
    
    (3,304
    )
    
    
    (11,225
    )Net increase in cash
    
    $
    38,868
    
    
    $
    43,926
    Projected Cash Sources and Uses
  -23-




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Inflation and Changing Prices
  Results of Operations
  Reconciliation of Non-GAAP Financial Measures
  -24-




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Three Months EndedMarch 31,2008
    
    
    2007(Dollars in thousands)(Unaudited)Earnings before interest expense, income taxes,
depreciation and amortization
    
    $
    81,851
    
    
    $
    116,873Depreciation and amortization
    
    
    (27,759
    )
    
    
    (21,414
    )Interest expense
    
    
    (3,337
    )
    
    
    (3,492
    )Total income tax expense
    
    
    (19,432
    )
    
    
    (33,389
    )Net income applicable to common shares
    
    $
    31,323
    
    
    $
    58,578
 Comparison of the Three Months Ended March 31, 2008 and 2007
  Three Months Ended
    
    
    Three Months EndedMarch 31, 2008
    
    
    March 31, 2007Daywork
    
    
    Turnkey
    
    
    
    
    
    
    Daywork
    
    
    TurnkeyOperations
    
    
    Operations
    
    
    Total
    
    
    Operations
    
    
    Operations
    
    
    Total(Dollars in thousands except averages per rig day worked)(Unaudited)Rig days worked
    
    
    8,533
    
    
    
    604
    
    
    
    9,137
    
    
    
    9,302
    
    
    
    619
    
    
    
    9,921Contract drilling revenues
    
    $
    172,344
    
    
    $
    29,178
    
    
    $
    201,522
    
    
    $
    207,364
    
    
    $
    34,649
    
    
    $
    242,013Drilling operations expenses
    
    
    (92,900
    )
    
    
    (20,608
    )
    
    
    (113,508
    )
    
    
    (99,863
    )
    
    
    (21,090
    )
    
    
    (120,953
    )General and administrative
expenses
    
    
    (8,119
    )
    
    
    (493
    )
    
    
    (8,612
    )
    
    
    (6,958
    )
    
    
    (441
    )
    
    
    (7,399
    )Interest income
    
    
    2,322
    
    
    
    165
    
    
    
    2,487
    
    
    
    2,961
    
    
    
    198
    
    
    
    3,159Gain (loss) on sale of assets
    
    
    (36
    )
    
    
    (2
    )
    
    
    (38
    )
    
    
    38
    
    
    
    15
    
    
    
    53EBITDA
    
    $
    73,611
    
    
    $
    8,240
    
    
    $
    81,851
    
    
    $
    103,542
    
    
    $
    13,331
    
    
    $
    116,873Average per rig day worked:Contract drilling revenues
    
    $
    20,197
    
    
    $
    48,308
    
    
    $
    22,056
    
    
    $
    22,292
    
    
    $
    55,976
    
    
    $
    24,394EBITDA
    
    $
    8,627
    
    
    $
    13,642
    
    
    $
    8,958
    
    
    $
    11,131
    
    
    $
    21,536
    
    
    $
    11,780
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Daywork Operations
  Turnkey Operations
  Other
   
 Item 3. Quantitative and Qualitative Disclosure about Market Risk
 Interest Rate Risk.
 -26-




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Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1a. Risk Factors
  Risks Relating to the Proposed Merger with Basic Energy Services
 Failure to complete our proposed merger with Basic Energy Services could negatively impact our
stock price and future business and financial results because of, among other things, the
disruption that would occur as a result of uncertainties relating to a failure to complete the
merger.
  While the merger is pending, we will be subject to business uncertainties and contractual
restrictions that could adversely affect our business.
  We will incur significant transaction costs in connection with the merger.
  The merger agreement limits our ability to pursue an alternative acquisition proposal and may
require us to pay a termination fee of up to $30 million if we do.
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Uncertainties associated with the merger may cause us to lose key employees.
  The anticipated benefits of the proposed merger may not be realized.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  ApproximateTotal Number of
    
    Dollar Value ofShares Purchased
    
    Shares that MayTotal Number of
    
    
    
    
    
    as Part of Publicly
    
    Yet be PurchasedShares
    
    Average Price
    
    Announced
    
    Under thePeriod
    
    Purchased(1)
    
    Paid per Share
    
    Program
    
    Program(2)January 1, 2008 to January 31, 2008
    
    
    399
    
    
    $
    5.34
    
    
    
    399
    
    
    $
    28,070February 1, 2008 to February 29, 2008
    
    
    203
    
    
    $
    6.16
    
    
    
    
    
    
    $
    28,070March 1, 2008 to March 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    28,070
 
 (1)
    
    Our employees may elect to have shares of stock withheld to cover payroll taxes when
shares of restricted stock vest. We then pay the taxes on their behalf and hold the shares
withheld as treasury stock. We had approximately 203,000 of such treasury share purchases
during the three months ended March 31, 2008. These share repurchases are not covered under
a publicly announced program.(2)
    
    On May 25, 2006, we announced that our Board of Directors approved a plan authorizing
the repurchase of up to $100.0 million of Grey Wolf common stock in open market or in
privately negotiated block-trade transactions. On September 25, 2007, we announced that our
Board of Directors authorized a $50.0 million increase in the Companys common stock
repurchase program for a total of $150.0 million. The number of shares to be purchased and
the timing of purchases will be based on several factors, including the price of the common
stock, general market conditions, available cash and alternate investment opportunities.
The stock repurchase program is subject to termination prior to
completion. Presently, we do not intend to repurchase any shares of
common stock prior to the closing of the merger with Basic Energy
Services. 
 Item 3. Defaults Upon Senior Securities
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Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
    
    proposed merger with Basic Energy Services (merger);
    
    business strategy;
    
    demand for our services;
    
    spending by our customers;
    
    projected rig activity;
    
    increases in rig supply and its effects on us;
    
    projected dayrates;
    
    projected interest expense;
    
    projected tax rate;
    
    rigs expected to be engaged in turnkey operations;
    
    cost of building new rigs, delivery times and deployment destinations of these rigs;
    
    the ability to recover the purchase price of rigs from term contracts;
    
    the availability and financial terms of term contracts;
    
    wage rates and retention of employees;
    
    sufficiency of our capital resources and liquidity;
    
    projected depreciation and capital expenditures;
    
    future common stock repurchases by us; and
    
    projected sources and uses of cash.
  
    
    required approvals by stockholders and regulatory agencies of the merger;
    
    the possibility that the anticipated benefits from the merger cannot be fully
realized;
    
    the possibility that costs or difficulties related to the integration of the two
companies party to the merger will be greater than expected;
    
    fluctuations in prices and demand for oil and natural gas;
    
    fluctuations in levels of oil and natural gas exploration and development
activities;
    
    fluctuations in demand for contract land drilling services;
    
    fluctuations in interest rates;
    
    the existence and competitive responses of our competitors;
    
    uninsured or underinsured casualty losses;
    
    technological changes and developments in the industry;
    
    the existence of operating risks inherent in the contract land drilling industry;
    
    U.S. and global economic conditions;
    
    the availability and terms of insurance coverage;
    
    the ability to attract and retain qualified personnel;
    
    unforeseen operating costs such as cost for environmental remediation and turnkey
cost overruns; and
    
    weather conditions.
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-31-




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Item 6. Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of Grey Wolf, Inc. (incorporated
herein by reference to Exhibit 3.1 to Form 8-K filed May 21, 2007).3.2
    
    By-Laws of Grey Wolf, Inc., as amended (incorporated herein by reference to
Exhibit 99.1 to Form 8-K dated March 23, 1999).4.1
    
    Rights Agreement dated as of September 21, 1998 by and between the Company and
American Stock Transfer and Trust Company as Rights Agent (incorporated herein by
reference to Exhibit 4.1 to Form 8-K filed September 22, 1998).4.2
    
    Indenture, dated as of May 7, 2003, relating to the 3.75% Contingent
Convertible Senior Notes due 2023 between the Company, the Guarantors, and JPMorgan
Chase Bank, a New York Banking Corporation, as Trustee (incorporated herein by
reference to Exhibit 4.2 to the Companys Registration Statement on Form S-3 No.
333-106997 filed July 14, 2003).4.3
    
    Supplemental Indenture, dated as of May 22, 2003, relating to the 3.75%
Contingent Convertible Senior Notes due 2023 between the Company, the Guarantors, and
JPMorgan Chase Bank, a New York Banking Corporation, as Trustee (incorporated herein by
reference to Exhibit 4.3 to the Companys Registration Statement on Form S-3 No.
333-106997 filed July 14, 2003).4.4
    
    Indenture, dated as of March 31, 2004, relating to the Floating Rate Contingent
Convertible Senior Notes Due 2024 between the Company, the Guarantors, and J.P. Morgan
Chase Bank, a New York banking corporation, as Trustee (incorporated by reference to
Exhibit 4.1 to Form 10-Q dated May 5, 2004).4.5
    
    Registration Rights Agreement as of March 31, 2004 by and between Grey Wolf,
Inc., the Guarantors, and the Initial Purchasers of the Floating Rate Contingent
Convertible Senior Notes due 2024 (incorporated by reference to Exhibit 4.2 to the
Quarterly Report on Form 10-Q filed May 5, 2004).4.6
    
    Second Supplemental Indenture, dated as of March 31, 2004, relating to the
3.75% Contingent Convertible Senior Notes due 2023 between the Company, the Guarantors,
and JP Morgan Chase Bank, a New York Banking Corporation, as Trustee (incorporated by
reference to Exhibit 4.3 to the Quarterly Report on Form 10-Q filed May 5, 2004).* 31.1
    
    Certification of 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 pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 of Thomas P. Richards, Chairman, President
and Chief Executive Officer and David W. Wehlmann, Executive Vice President and Chief
Financial Officer.
 
 *
    
    Filed herewith**
    
    Furnished, not filed, in accordance with Item 601(b)(32) of Regulation S-K. -32-




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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.
  Date: May 6, 2008
    By:
    /s/ David W. WehlmannDavid W. Wehlmann 
   Executive Vice President and 
   Chief Financial OfficerDate: May 6, 2008
    By:
    /s/ Kent D. CauleyKent D. CauleyVice President and Controller -33-




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Index to Exhibits
 3.1
    
    Amended and Restated Articles of Incorporation of Grey Wolf, Inc. (incorporated
herein by reference to Exhibit 3.1 to Form 8-K filed May 21, 2007).3.2
    
    By-Laws of Grey Wolf, Inc., as amended (incorporated herein by reference to
Exhibit 99.1 to Form 8-K dated March 23, 1999).4.1
    
    Rights Agreement dated as of September 21, 1998 by and between the Company and
American Stock Transfer and Trust Company as Rights Agent (incorporated herein by
reference to Exhibit 4.1 to Form 8-K filed September 22, 1998).4.2
    
    Indenture, dated as of May 7, 2003, relating to the 3.75% Contingent
Convertible Senior Notes due 2023 between the Company, the Guarantors, and JPMorgan
Chase Bank, a New York Banking Corporation, as Trustee (incorporated herein by
reference to Exhibit 4.2 to the Companys Registration Statement on Form S-3 No.
333-106997 filed July 14, 2003).4.3
    
    Supplemental Indenture, dated as of May 22, 2003, relating to the 3.75%
Contingent Convertible Senior Notes due 2023 between the Company, the Guarantors, and
JPMorgan Chase Bank, a New York Banking Corporation, as Trustee (incorporated herein by
reference to Exhibit 4.3 to the Companys Registration Statement on Form S-3 No.
333-106997 filed July 14, 2003).4.4
    
    Indenture, dated as of March 31, 2004, relating to the Floating Rate Contingent
Convertible Senior Notes Due 2024 between the Company, the Guarantors, and J.P. Morgan
Chase Bank, a New York banking corporation, as Trustee (incorporated by reference to
Exhibit 4.1 to Form 10-Q dated May 5, 2004).4.5
    
    Registration Rights Agreement as of March 31, 2004 by and between Grey Wolf,
Inc., the Guarantors, and the Initial Purchasers of the Floating Rate Contingent
Convertible Senior Notes due 2024 (incorporated by reference to Exhibit 4.2 to the
Quarterly Report on Form 10-Q filed May 5, 2004).4.6
    
    Second Supplemental Indenture, dated as of March 31, 2004, relating to the
3.75% Contingent Convertible Senior Notes due 2023 between the Company, the Guarantors,
and JP Morgan Chase Bank, a New York Banking Corporation, as Trustee (incorporated by
reference to Exhibit 4.3 to the Quarterly Report on Form 10-Q filed May 5, 2004).* 31.1
    
    Certification of 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 pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 of Thomas P. Richards, Chairman, President
and Chief Executive Officer and David W. Wehlmann, Executive Vice President and Chief
Financial Officer.
 
 *
    
    Filed herewith**
    
    Furnished, not filed, in accordance with Item 601(b)(32) of Regulation S-K.