<PAGE>   1
                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                   Form 10-Q


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

               For the Quarterly Period Ended October 31, 1996

                                       OR

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


Commission File Number                    001-11963
                      ----------------------------------------------------------


                       DAILEY PETROLEUM SERVICES CORP.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)



           Delaware                                              76-0503351     
--------------------------------------------------------------------------------
(State or other jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                             Identification No.)



          2507 North Frazier, 
            Conroe, Texas                                         77035        
--------------------------------------------------------------------------------
    (Address of principal executive offices)                    (Zip Code)


Registrant's telephone number, including area code:  (713) 350-3399
                                                   ----------------


                                     N/A
--------------------------------------------------------------------------------
             (Former Name, Former Address and Former Fiscal Year,
                        if Changed Since Last Report)


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, and (2) has been subject to such filing
requirements for the past 90 days.     
                                       Yes  [X]         No  
                                            ---             --- 
                     
Number of shares outstanding of issuer's Class A Common Stock as of December 6,
1996 was 4,270,000.                                                            
<PAGE>   2
                        DAILEY PETROLEUM SERVICES CORP.
                FORM 10-Q FOR THE QUARTER ENDED OCTOBER 31, 1996


                                     INDEX


<TABLE>
<CAPTION>
                                                                                              PAGE NO.
                                                                                              --------
<S>                                                                                             <C>
PART 1.    FINANCIAL INFORMATION                                                              
                                                                                              
Item 1.    Financial Statements (unaudited)                                                   
                                                                                              
   Consolidated balance sheets - October 31, 1996 and April 30, 1996                                1
                                                                                              
   Consolidated statements of operations - Three months and six months ended  
   October 31, 1996 and 1995                                                                        2
                                                                                              
   Consolidated statements of cash flows - Six months ended October 31, 1996                
   and 1995                                                                                         3
                                                                                              
   Notes to consolidated financial statements - October 31, 1996                                4 - 6
                                                                                              
Item 2.    Management's Discussion and Analysis of Financial Condition                        
           and Results of Operations                                                              7-9
                                                                                              
PART II.   OTHER INFORMATION                                                                       10
                                                                                              
Item 1.    Legal Proceedings                                                                  
Item 2.    Changes in Securities                                                              
Item 3.    Defaults upon Senior Securities                                                    
Item 4.    Submission of Matters to a Vote of Security Holders                                
Item 5.    Other Information                                                                  
Item 6.    Exhibits and Reports on Form 8-K                                                   
                                                                                              
Signatures                                                                                         11
                                                                                              
Index to Exhibits                                                                                  12


</TABLE>





                                       i
<PAGE>   3
                        DAILEY PETROLEUM SERVICES CORP.
                          CONSOLIDATED BALANCE SHEETS
                           (IN THOUSANDS OF DOLLARS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       OCTOBER 31,     APRIL 30,
                                                                           1996          1996    
                                                                      ------------   ------------
<S>                                                                   <C>            <C>
ASSETS:
Current assets:
     Cash and cash equivalents ....................................   $     18,697   $      1,967
     Accounts receivable, net .....................................         21,699         16,306
     Accounts receivable from officers and affiliates .............           --              436
     Prepaid expenses .............................................            906            422
     Deferred income taxes ........................................          1,125            389
     Other current assets .........................................            960            153
                                                                      ------------   ------------
         Total current assets .....................................         43,387         19,673
Revenue-producing tools and inventory, net ........................         33,255         29,208
Property and equipment, net .......................................          5,570          5,121
Property and equipment held for sale, net .........................            205            205
Deferred income taxes .............................................            323          1,384
Intangibles and other assets ......................................            422            287
                                                                      ------------   ------------
         Total assets .............................................   $     83,162   $     55,878
                                                                      ============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
     Accounts payable and accrued liabilities .....................   $     12,184   $      6,749
     Accounts payable to affiliates ...............................            175           --
     Income taxes payable .........................................          2,264          1,749
     Short-term debt ..............................................           --            1,300
     Current portion of long-term debt ............................          1,714          1,738
     Current portion of indebtedness to affiliate .................           --              660
                                                                      ------------   ------------
         Total current liabilities ................................         16,337         12,196
Long-term debt ....................................................          6,011          6,866
Long-term indebtedness to affiliate ...............................           --            1,100
Other noncurrent liabilities ......................................             59             75
Commitments and contingencies
Stockholders' equity:
     Preferred stock, $0.01 par value; 5,000,000 shares authorized,
          none issued and outstanding .............................           --             --
     Common stock, Class A, $0.01 par value; 20,000,000 shares
          authorized, 3,910,000 issued and outstanding at 
          October 31, 1996, none at April 30, 1996; Class B, 
          $0.01 par value; 10,000,000 shares authorized,
          5,000,000 shares issued and outstanding .................             89             50
     Paid-in capital ..............................................         37,354          4,559
     Retained earnings ............................................         23,312         31,032
                                                                      ------------   ------------
         Total stockholders' equity ...............................         60,755         35,641
                                                                      ------------   ------------
         Total liabilities and stockholders' equity ...............   $     83,162   $     55,878
                                                                      ============   ============
</TABLE>

                             See accompanying notes

                                       1



<PAGE>   4
                       DAILEY PETROLEUM SERVICES CORP.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
          (IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)
                                 (UNAUDITED)

<TABLE>
<CAPTION>

                                             THREE MONTHS ENDED               SIX MONTHS ENDED
                                                    OCTOBER 31,                 OCTOBER  31,
                                           --------------------------    --------------------------
                                               1996           1995           1996           1995
                                           -----------    -----------    -----------    -----------
<S>                                        <C>            <C>            <C>            <C>        
REVENUES:
     Rental income .....................   $    13,056    $    10,651    $    25,175    $    21,212
     Sales of products and services ....         4,099          3,449          8,736          8,367
                                           -----------    -----------    -----------    -----------
                                                14,100         33,911         29,579

COSTS AND EXPENSES:
     Cost of rentals ...................          9,54          8,190         18,884         16,421
     Cost of products and services .....         2,263          1,643          4,799          4,136
     Selling, general and administrative         3,068          2,774          5,968          5,527
     Research and development ..........           224            156            399            318
                                           -----------    -----------    -----------    -----------
                                                15,095         12,763         30,050         26,402
                                           -----------    -----------    -----------    -----------
Operating income .......................         2,060          1,337          3,861          3,177
Other (income) expense:
     Interest income ...................          (195            (15)          (207)           (22)
     Interest expense-nonaffiliates ....           178            200            380            404
     Interest expense-affiliate ........            61             44            172             91
     Foreign exchange (gain) loss ......           (76)            71            (83)           110
     Other, net ........................            47            (23)            63
                                           -----------    -----------    -----------    -----------
Income before income taxes .............         2,076            990          3,622          2,531
Provision for income taxes .............           758            350          1,342            894
                                           -----------    -----------    -----------    -----------
Net income .............................   $     1,318    $       640    $     2,280    $     1,637
                                           ===========    ===========    ===========    ===========

Earnings per share (Note 2) ............   $      0.15                   $     0 .32
                                           ===========                   ===========   
Pro forma earnings per share............                  $      0.10                   $     0 .25
                                                          ===========                   ===========

Weighted average shares outstanding ....     9,023,065                     7,191,532    
                                           ===========                   ===========    
Pro forma weighted average shares 
     outstanding........................                    6,610,000                     6,610,000
                                                          ===========                   ===========
</TABLE>


                             See accompanying notes











                                      2




<PAGE>   5
                        DAILEY PETROLEUM SERVICES CORP.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (IN THOUSANDS OF DOLLARS)
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                                SIX MONTHS ENDED OCTOBER 31,
                                                                ----------------------------
                                                                     1996        1995
                                                                     ----        ----
<S>                                                           <C>            <C>
Operating activities:
Net income ................................................   $     2,280    $     1,637
Adjustments to reconcile net income to net cash
     provided by operating activities:
     Depreciation and amortization ........................         3,055          2,842
     Deferred income taxes ................................           325            (19)
     Provision for doubtful accounts receivable ...........           153            105
     Gain on sale and disposition of property and equipment           (17)           (97)
     Changes in operating assets and liabilities:
         Accounts receivable - trade ......................        (5,546)        (1,939)
         Accounts receivable from/payable to affiliates ...           611             54
         Prepaid expenses and other .......................        (1,455)           (50)
         Accounts payable and accrued liabilities .........         5,435            690
         Income taxes payable .............................           515            307
                                                              -----------    -----------
Net cash provided by operating activities .................         5,356          3,530

Investing activities:
Additions to revenue-producing tools and inventory ........       (10,724)        (4,037)
Inventory transferred to cost of rentals ..................         2,894          2,342
Revenue-producing tools lost in hole, abandoned, and sold .         1,175          1,352
Additions to property and equipment .......................          (966)          (550)
Proceeds from sale of property and equipment ..............           100            480
                                                              -----------    -----------
Net cash used in investing activities .....................        (7,521)          (413)

Financing activities:
Proceeds from the issuance of debt ........................           400           --
Payments on outstanding debt ..............................        (4,339)          (872)
Cost of initial public offering ...........................        (3,496)          --
Payment of promissory note ................................        (5,000)          --
Proceeds from sale of common stock ........................        31,330           --  
                                                              -----------    -----------

Net cash provided by (used in) financing activities .......        18,895           (872)
                                                              -----------    ----------- 
Increase in cash and cash equivalents .....................        16,730          2,245
Cash and cash equivalents at beginning of period ..........         1,967          1,796
                                                              -----------    -----------
Cash and cash equivalents at end of period ................   $    18,697    $     4,041
                                                              -----------    -----------
</TABLE>

                             See accompanying notes




                                       3
<PAGE>   6
                        DAILEY PETROLEUM SERVICES CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)




1.       BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

         The accompanying unaudited consolidated financial statements include
the accounts of Dailey Petroleum Services Corp. and its subsidiaries and
predecessors ("Dailey" or the "Company"), and have been prepared in accordance
with United States generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X.  Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of management, all adjustments considered
necessary for a fair presentation have been included.  Operating results for the
three and six month periods ended October 31, 1996 are not necessarily
indicative of the results that may be expected for the year ending April 30,
1997.   For further information, reference is made to the consolidated
financial statements and footnotes thereto included in Amendment No. 1 to the
Company's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on June 7, 1996, as amended and supplemented, and included
in the Company's final prospectus dated August 14, 1996.

2.       ORGANIZATION AND PUBLIC OFFERING

         The accompanying financial statements reflect the operations of Dailey
Petroleum Services Corp., a Delaware corporation, which was merged with Dailey
Corporation (which changed its name to Dailey Petroleum Services Corp.) in June
1996.  New Dailey Petroleum Services Corp. and its predecessor, Dailey Petroleum
Services Corp., are hereinafter referred to as the "Company" or "Dailey".

         Prior to June 1996, Dailey was a wholly-owned subsidiary of Lawrence
Industries, Inc. ("Lawrence").    In June 1996,  in preparation for the initial
public offering  of  Class A Common Stock of Dailey, Lawrence reorganized its
ownership of the Company into a holding company structure through a forward
triangular merger of Dailey Petroleum Services Corp., into a newly-formed,
wholly-owned indirect subsidiary of Lawrence, Dailey Corporation (the
"Reorganization"). Following the Reorganization, Dailey Corporation changed its
name to Dailey Petroleum Services Corp.  The effect of the forward triangular
merger has been reflected retroactively in the accompanying financial
statements.  On August 14, 1996 the Company commenced its initial public
offering of 3,910,000 shares of Class A Common Stock (the "Offering").

         In connection with the Offering, the Company issued 3,910,000 shares of
Class A Common Stock.  Net proceeds to the Company from the sale of the stock
were $29.1 million, of which approximately $1.3 million was used to pay costs
associated with the Offering.  The Company also used $5.0 million of the
proceeds from the Offering to repay the outstanding balance of a $10.0 million
promissory note, which was incurred in connection with a dividend declared on
June 27, 1996 (the "Dividend").  Prior to commencement of the Offering the
Company's sole stockholder contributed to the capital of the Company the
remaining $5.0 million of the outstanding principal of such note. The promissory
note accrued interest at the prime rate.  The statements of operations for the
1996 fiscal period





                                       4
<PAGE>   7
include pro forma per share data which gives effect to the number of shares from
which  proceeds would have been used to pay the Dividend (an additional
1,250,000 shares assuming a per share offering price of $8.00, thus earnings per
share for the periods ending October 31, 1996 and 1995, are based on 6,610,000
shares of all Common Stock outstanding). Historical earnings per share excluding
the pro forma effect of the dividend was $0.12 per share and $0.30 per share for
the three and six month periods ending October 31, 1995 respectively.

3.       REVENUE-PRODUCING TOOLS AND INVENTORY

<TABLE>
<CAPTION>                                   
                                                        OCTOBER 31,  APRIL 30,
                                                           1996        1996  
                                                        -----------  ---------
                                                            (IN THOUSANDS)
<S>                                                       <C>        <C>       
Revenue-producing tools.................................  $ 51,915   $ 48,024  
Accumulated depreciation................................   (30,932)   (29,740) 
                                                          --------   --------  
                                                            20,983     18,284  
                                                          
Inventory:                                                
  Components, subassemblies and expendable parts........     8,883      9,096
  Rental tools and expendable parts under production....     2,155      1,058
  Raw materials.........................................     1,234        770
                                                          -------
                                                            12,272     10,924
                                                          --------   --------
               Revenue-Producing Tools and Inventory....  $ 33,255   $ 29,208
                                                          ========   ========
</TABLE>

4.       STOCK OPTIONS AWARDS

         Prior to commencement of the Offering, the Company established its 1996
Key Employee Stock Plan (the "1996 Plan") and its 1996 Non-Employee Director
Stock Option Plan (the "1996 Director Plan").  Pursuant to the 1996 Plan, the
Board of Directors of the Company are authorized to grant options or restricted
stock for Class A Common Stock to management personnel for up to 900,000 shares
of the Company's Class A Common Stock.  The Board granted options totaling
378,327 shares contemporaneously with the Offering to various executive
officers, which are exercisable at the initial public offering price, of which
163,191 vest immediately and 215,136 vest over three years.  Immediately
following the Offering the Company granted to key officers restricted stock
awards totaling 360,000 shares of Class A Common Stock, which will vest over
three years and will not require any payment by the key officers.  On October 2,
1996, the Company granted additional options totaling 15,001 shares and a
restricted stock award of 45,000 shares of Class A Common Stock to an executive
officer of the Company.  These options are exercisable at $9.00 per share and
will vest over three years.  The restricted stock award will also vest over
three years and will not require any payment by the executive officer.  The
1996 Director Plan has 100,000 shares authorized for the granting of options to
outside directors, of which 20,000 shares were issued and outstanding effective
September 25, 1996 at an exercise price of $8.875.





                                       5
<PAGE>   8

5.       BORROWING ARRANGEMENTS

         Long-term debt consisted of the following:

<TABLE>
<CAPTION>
                                                                              OCTOBER 31,      APRIL 30,
                                                                                 1996           1996   
                                                                             ------------     ----------
<S>                                                                          <C>              <C>
         Note payable to a bank .......................................      $ 7,611          $   8,444
         Note payable to affiliates ...................................          ---              1,760
         Other notes payable...........................................          114                160
                                                                              ------           --------
                                                                             $ 7,725             10,364
         Less current portion of long-term debt........................        1,714              2,398
                                                                             -------           --------
                 Total long-term debt..................................      $ 6,011           $  7,966
                                                                             =======           ========
</TABLE>                                                                      
                                                                              
         Proceeds from the Offering were used to repay debt during the second 
quarter of fiscal 1997.                      
                                                                              
6.       INCOME TAXES                                                         
                                                                              
         Certain balance sheet reclassifications have been made which reflect a
change in management's estimate that the utilization of the net operating loss
carryforward will be accelerated.  The amount of the reclassification from
long-term to current is approximately $736,000.





                                       6
<PAGE>   9
                        DAILEY PETROLEUM SERVICES CORP.
                       MANAGEMENT DISCUSSION AND ANALYSIS




       The Company provides directional drilling services and designs,
manufactures and rents technologically-advanced downhole tools for oil and gas
drilling and workover applications.  Founded in 1945 as a rental tool company,
Dailey began offering directional drilling services in 1984 and currently
provides such services in the Gulf of Mexico, the United States Gulf Coast
region, and most recently, Venezuela and the Austin Chalk formation in Texas
and Louisiana.  The Company operates in one business segment.

       Demand for the Company's directional drilling services and downhole
tools depends primarily upon the level of exploration and production activity
in the oil and gas industry, which in turn depends in part on oil and gas
prices, expectations about future prices, the cost of exploration for,
producing and delivering oil and gas, the discovery rate of new oil and gas
reserves, domestic and international political, military, regulatory and
economic conditions and the ability of oil and gas companies to raise capital.

       During the past five years, the Company has experienced significant
growth in revenues relating to its directional drilling services. The Company
believes this growth is consistent with trends in the oil and gas industry
towards use of technologically-advanced directional drilling services in order
to develop reservoirs that otherwise would have been marginal or uneconomical
using conventional drilling methods. During fiscal 1995, the Company expanded
its directional drilling operations into Venezuela, and in fiscal 1996, began
offering its services in the Austin Chalk formation in Louisiana and Texas. The
Company's revenues during the six months ended October 31, 1996, reflect the
effects of this expansion. The Company also believes that rentals of its
downhole tools have benefited from industry trends toward the use of
directional drilling techniques, in part because a growing percentage of the
Company's downhole tools are rented in connection with its drilling services.
Utilizing proceeds from the Offering, the Company invested $4.3 million for
downhole tools during the quarter ended October 31, 1996, which the Company
believes began to impact revenues during the quarter and will continue to
impact revenues during the second half of the year.  

Quarter Ended October 31, 1996 Compared to the Quarter Ended October 31, 1995

       Rental Income.  Rental income for the quarter ended October 31, 1996 was
$13.1 million, an increase of 23% from $10.7 million for the quarter ended
October 31, 1995.  This was due to an increase in demand for directional
drilling services and related products in the United States Gulf Coast region
and the Gulf of Mexico which resulted in a $1.2 million increase in rentals.
During the quarter, the Company purchased and began utilizing additional MWD
equipment, downhole motors and other directional drilling tools in Venezuela,
which resulted in a $600,000 increase in rentals.  Also, revenue from the
rental of drilling jars and related products increased $500,000 primarily in
the United States as the result of increased drilling activity.

       Sales of Products and Services.  Sales of products and services for the
quarter ended October 31, 1996 were $4.1 million, an increase of 19% from $3.4
million for the quarter ended October 31, 1995.   This was the result of an
increase in demand for directional drilling services in the Gulf of Mexico, the
United States Gulf Coast region and Venezuela, and to an increase in tools
lost-in-hole primarily in the United States and export sales of mechanical 
drilling jars.

       Cost of Rentals.  Cost of rentals for the quarter ended October 31, 1996
was $9.5 million, an increase of 17% from $8.2 million for the quarter ended
October 31, 1995.  This increase was due primarily to the variable costs
associated with an increase in rental activity, such as tool repair costs  and
third party tool charges.  As a percentage of rental income, cost of rentals
decreased from 77% in the second quarter of fiscal 1996 to 73% in the second
quarter of fiscal 1997,  primarily as the result of the fixed nature of the
Company's cost base and to a higher absorption of fixed overhead costs due to an
increase in manufacturing activity.

       Cost of Products and Services.  Cost of products and services for the
quarter ended October 31, 1996 was $2.3 million, which is a $620,000 increase
from the quarter ended October 31, 1995.  The margin on sales of products and
services for the second quarter of fiscal 1997 was 45% compared to 52% for the
same quarter last year.  This decrease in margin was due primarily to an
increase in directional drilling services which has a lower margin than sales of
products.





                                       7
<PAGE>   10
       Income Tax Expense.  Provision for income taxes for the quarter ended
October 31, 1996 was $758,000, an increase of 117% from $350,000 for the quarter
ended October 31, 1995.  This was due to a 110% increase in income before income
taxes and a change in the effective tax rate from 35% to 37% due to an increase
in state income taxes.

Six Months Ended October 31, 1996 Compared to the Six Months Ended October 31,
1995

       Rental Income. Rental income for the six months ended October 31, 1996
was $25.2 million, an increase of 19% from $21.2 million for the six months
ended October 31, 1995.  This was due primarily to an increase in demand for the
Company's directional drilling services and related products in the United
States Gulf Coast region, Gulf of Mexico and Venezuela which resulted in
increased revenue of $2.2 million and $1.5 million, respectively.  The increase
was also due to an increase in demand for the Company's drilling jars
domestically which resulted in an increase in revenue of $1.0 million.  However,
this was partially offset by a decrease in demand primarily in Latin America
which resulted in a decrease in revenue of $800,000.

       Sales of Products and Services.  Sales of products and services for the
six months ended October 31, 1996 were $8.7 million, an increase of 4% from $8.4
million for the six months ended October 31, 1995.  This was due primarily to an
increase in demand for directional drilling services in the Gulf of Mexico, the
United States Gulf Coast region and Venezuela which resulted in additional
revenue of $950,000.  The increase is partially offset by a decrease in export
sales of mechanical drilling jars of approximately $400,000.

       Cost of Rentals.  Cost of rentals for the six months ended October 31,
1996, was $18.9 million, an increase of 15% from $16.4 million for the six
months ended October 31, 1995.  This increase was due primarily to the variable
costs associated with an increase in rental activity, such as tool repair costs
and third party tool charges.  As a percentage of rental income, cost of
rentals decreased from 77% in the six months ended October 31, 1995 to 75% in
the six months ended October 31, 1996 primarily as the result of the fixed
nature of the Company's cost base and to a higher absorption of fixed overhead
costs due to an increase in manufacturing activity.

       Cost of Products and Services.  Cost of products and services for the six
months ended October 31, 1996, was $4.8 million, which is a $663,000 increase
from the six months ended October 31, 1995.  The margin on sales of products and
services for the first six months of fiscal 1997 was 45% compared to 51% for
the same period last year.  This decrease in margin was due primarily to a
decrease in higher margin export sales of mechanical jars partially offset by
increased revenues and improved margins on revenues from directional drilling
services.

       Foreign Exchange (Gain) Loss.  Foreign exchange gains of $83,000 for the
six months ended October 31, 1996 compared to losses of $110,000 for the six
months ended October 31, 1995 were due primarily to favorable fluctuations with
the British pound.





                                       8
<PAGE>   11
       Income Tax Expense.  Provision for income taxes for the six months ended
October 31, 1996 was $1.3 million, an increase of 50% from $894,000 for the six
months ended October 31, 1995.  This was due to a 43% increase in income before
income taxes and a change in the effective tax rate from 35% to 37% due to an
increase in state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

       Working Capital.  At October 31, 1996, the Company had $18.7 million in
cash and cash equivalents.    For the six months ended October 31, 1996, the
Company had net income of $2.3 million and cash provided by operating
activities of $5.4 million.  Other sources of cash included net proceeds from
the Offering of $27.8 million, $1.2 million from revenue-producing tools lost
in hole, abandoned and sold and $400,000 from advances under the revolving line
of credit discussed below.  The Company's principal uses of cash for the six
months were to fund $8.8 million for capital expenditures, $5.0 million for
payment of a promissory note to Lawrence, $1.6 million for payment of a note to
affiliate (see Notes to Lawrence below),  $1.7 million repayment on line of
credit (see Credit Facilities below) and $1.1 million for repayment of
long-term debt.  During the past several years, the Company has funded its
working capital requirements through cash generated from operations, credit
facilities and asset sales.

       Credit Facilities.  At October 31, 1996, the Company had $7.6 million of
bank debt outstanding pursuant to an amended and restated credit agreement
dated December 13, 1995, as amended on June 5, 1996 (the "Credit Agreement").
The Credit Agreement provides for a term loan and a revolving credit
facility.  Borrowings under the revolving credit facility are limited to the
lesser of $3.0 million or a loan formula based upon the level of the Company's
eligible accounts receivable.  At October 31, 1996, there were no outstanding
advances made pursuant to the revolving line of credit.

       Notes to Lawrence.  During the quarter, the Company repaid $6.6 million
in outstanding notes to Lawrence utilizing a portion of the net proceeds from
the Offering.  This repayment included a $5.0 million payment on a $10.0 million
promissory note incurred in connection with the Dividend.  The remainder of the
promissory note, $5.0 million, was contributed back to the capital of the
Company by the stockholder prior to the Offering.  At October 31, 1996, there
were no outstanding amounts due on these notes.

       Capital Expenditures.  The Company incurred capital expenditures of
approximately  $8.8 million in the six months ending October 31, 1996.  Of this
amount, $7.8 million was for downhole tools, primarily MWD and other directional
equipment, hydraulic drilling jars, hydraulic fishing jars and related
inventory.  The Company has budgeted approximately $6.6 million for capital
expenditures during the remaining six months of the fiscal year. The Company
believes it has available resources through internally generated cash flow, the
existing Credit Agreement and the net proceeds of the Offering to fund its
operations for at least the next 12 months.

OTHER

     From time to time, the Company may make certain statements that contain
"forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1995) and that involve risk and uncertainty. These forward-looking
statements may include, but are not limited to, future capital expenditure
plans, anticipated results from current and future operations, earnings,
margins, acquisitions, market trends in the oil and gas industry, technological
evolution and product obsolescence, competition and various business trends.
Forward-looking statements may be made by management orally or in writing
including, but not limited to, the Management's Discussion and Analysis and
Financial Condition Results of Operation section and other sections of the
Company's filings with the Securities and Exchange Commission under the
Securities Act of 1933 and the Securities Exchange Act of 1934.

     Actual results and trends in the future may differ materially depending on
a variety of factors including, but not limited to, the success of the Company's
exploration and development program, changes in the price of oil and natural
gas, world-wide political stability and economic growth, the Company's
successful execution of internal exploration, development and operating plans,
environmental regulation and costs, regulatory uncertainties and legal
proceedings.



                                       9
<PAGE>   12
                          PART II - OTHER INFORMATION




ITEM 1.  LEGAL PROCEEDINGS

         None

ITEM 2.  CHANGES IN SECURITIES

         None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None

ITEM 5.  OTHER INFORMATION

         None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

                 10 -  Employment Agreement dated October 2, 1996 
                       between the Company and James J. Percle

                 27 -  Financial Data Schedule

         (b)  Reports on Form 8-K
                 None





                                       10
<PAGE>   13
                                   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.


                                          Dailey Petroleum Services Corp.
                                          -------------------------------
                                                      (Registrant)
                                          
                                          
                                          
Date   December 13, 1996                  /s/ DAVID T. TIGHE
      ------------------                  --------------------------------------
                                          David T. Tighe
                                          Senior Vice President &
                                          Chief Financial Officer
                                                and authorized to sign on
                                                behalf of the Registrant
                                          
                                          
                                          


                                       11
<PAGE>   14
                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
EXHIBIT                  DESCRIPTION
-------                  -----------
<S>                      <C>
  10                     Employment Agreement dated October 2, 1996
                         between the Company and James J. Percle

  27                     Financial Data Schedule
</TABLE>





                                       12