<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q
(Mark One)

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

                  For the Quarterly Period Ended July 31, 1997

                                       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 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                                  77305
--------------------------------------------------------------------------------
(Address of Principal Executive Officers)                        (Zip Code)


                                  281/350/3399
--------------------------------------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

                                      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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

               Yes  x                        No 
                   ----                         ---

Number of shares outstanding of issuer's Class A Common Stock as of September
11, 1997 was 4,190,199.
<PAGE>   2
                        DAILEY PETROLEUM SERVICES CORP.
                 FORM 10-Q FOR THE QUARTER ENDED JULY 31, 1997


                                     INDEX


<TABLE>
<CAPTION>
                                                            PAGE NO.
                                                            --------
<S>     <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements (unaudited)

         Consolidated balance sheets - July 31, 1997 and April 30, 1997                 1

         Consolidated statements of operations - Three months ended July 31,
         1997 and 1996                                                                  2

         Consolidated statements of cash flows - Three months ended July 31,
         1997 and 1996                                                                  3

         Notes to consolidated financial statements - July 31, 1997
                                                                                    4 - 7

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                                  8 - 14

PART II.         OTHER INFORMATION                                                 15 - 18

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                                                                              19
</TABLE>



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


<TABLE>
<CAPTION>
                                                        JULY 31,     APRIL 30,
ASSETS:                                                   1997         1997   
                                                        --------     --------
<S>                                                    <C>          <C>
Current assets:
         Cash and cash equivalents  . . . . . . . . .   $  1,754     $ 15,200
         Accounts receivable, net . . . . . . . . . .     30,343       18,606
         Prepaid expenses . . . . . . . . . . . . . .        601          346
         Deferred income taxes  . . . . . . . . . . .        597          597
         Other current assets . . . . . . . . . . . .      1,711          907
                                                        --------     --------
         Total current assets . . . . . . . . . . . .     35,006       35,656
Revenue-producing tools and inventory, net  . . . . .     65,053       37,488
Property and equipment, net . . . . . . . . . . . . .      6,175        5,622
Deferred income taxes . . . . . . . . . . . . . . . .        ---        1,959
Accounts receivable from officer  . . . . . . . . . .        250          250
Goodwill, net . . . . . . . . . . . . . . . . . . . .     22,011          825
Intangibles and other assets  . . . . . . . . . . . .      1,465          559
                                                        --------     --------
         Total assets . . . . . . . . . . . . . . . .   $129,960     $ 82,359
                                                        ========     ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
         Accounts payable and accrued liabilities . .  $  15,145     $  8,324
         Accounts payable to affiliates . . . . . . .        514          442
         Income taxes payable . . . . . . . . . . . .      3,397        3,241
         Current portion of long-term debt  . . . . .        616        1,711
                                                        --------     --------
         Total current liabilities  . . . . . . . . .     19,672       13,718
Long-term debt  . . . . . . . . . . . . . . . . . . .     45,656        5,155
Deferred income taxes . . . . . . . . . . . . . . . .        806          ---
Other noncurrent liabilities  . . . . . . . . . . . .        945          159
Commitments and contingencies
Stockholders' equity:
         Preferred stock  . . . . . . . . . . . . . .        ---          ---
         Common stock . . . . . . . . . . . . . . . .         93           93
         Treasury stock (144,000 shares)  . . . . . .     (1,047)        (234)
         Paid-in capital  . . . . . . . . . . . . . .     40,449       39,972
         Retained earnings  . . . . . . . . . . . . .     23,386       23,496
                                                        --------     --------
         Total stockholders' equity . . . . . . . . .     62,881       63,327
                                                        --------     --------
         Total liabilities and stockholders' equity .   $129,960     $ 82,359
                                                        ========     ========
</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 JULY 31,
                                                    ---------------------------
                                                         1997         1996   
                                                      ----------   -----------
<S>                                                   <C>          <C>
REVENUES:
         Rental income  . . . . . . . . . . . . . . . $   15,602   $    12,121
         Sales of products and services . . . . . . .      4,523         4,637
         Underbalanced drilling services  . . . . . .      2,894           ---
                                                      ----------   -----------
                                                          23,019        16,758

COSTS AND EXPENSES:
         Cost of rentals  . . . . . . . . . . . . . .     10,646         9,346
         Cost of products and services  . . . . . . .      3,007         2,536
         Cost of underbalanced drilling services  . .      1,841           ---
         Selling, general and administrative  . . . .      4,218         2,900
         Reorganization costs . . . . . . . . . . . .      2,453           --- 
         Non-cash compensation  . . . . . . . . . . .        478           --- 
         Research and development . . . . . . . . . .        120           175
                                                      ----------   -----------
                                                          22,763        14,957 
                                                      ----------   -----------
Operating income  . . . . . . . . . . . . . . . . . .        256         1,801
Other (income) expense:                                                         
         Interest income  . . . . . . . . . . . . . .       (122)          (12)
         Interest expense-nonaffiliates . . . . . . .        423           202 
         Interest expense-affiliate . . . . . . . . .        ---           111 
         Foreign exchange (gain) loss . . . . . . . .         16            (7)
         Other, net . . . . . . . . . . . . . . . . .        128           (39)
                                                      ----------   -----------
Income (loss) before income taxes . . . . . . . . . .       (189)        1,546  
Income tax provision (benefit). . . . . . . . . . . .        (83)          584 
                                                      ----------   -----------
Net income (loss) . . . . . . . . . . . . . . . . . . $     (106)  $       962
                                                      ==========   ===========

Net loss per share. . . . . . . . . . . . . . . . . . $     (.01)
                                                      ==========
Pro forma earnings per share  . . . . . . . . . . . .              $      0.15
                                                                   ===========
Weighted average shares outstanding . . . . . . . . .  9,252,046
                                                      ==========
Pro forma weighted average shares outstanding . . . .                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>
                                                     THREE MONTHS ENDED JULY 31,
                                                     ---------------------------
                                                         1997         1996 
                                                       ---------    ----------
<S>                                                   <C>>         <C>
OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . .  $    (106)   $     962
                                                                             
Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
    Depreciation and amortization   . . . . . . . . .      2,301        1,479
    Deferred income taxes   . . . . . . . . . . . . .          8          123
    Provision for doubtful accounts receivable  . . .        106           79
    Gain on sale and disposition of property and
    equipment   . . . . . . . . . . . . . . . . . . .        ---           (3)
    Provision for stock awards  . . . . . . . . . . .        477          ---
    Changes in operating assets and liabilities:
    Accounts receivable - trade   . . . . . . . . . .     (4,778)      (1,083)
    Accounts receivable from affiliates   . . . . . .         72          431
    Prepaid expenses and other  . . . . . . . . . . .       (731)        (494)
    Accounts payable and accrued liabilities  . . . .      2,481        2,228
    Income taxes payable  . . . . . . . . . . . . . .       (284)         128
                                                       ---------    ----------
Net cash provided by (used in) operating activities.        (454)       3,850

INVESTING ACTIVITIES:
Additions to revenue-producing tools and inventory  .     (6,250)      (3,947)
Inventory transferred to cost of rentals  . . . . . .      2,121        1,379
Revenue-producing tools lost in hole, abandoned,
and sold  . . . . . . . . . . . . . . . . . . . . . .        815          826
Additions to property and equipment . . . . . . . . .     (2,272)        (596)
Proceeds from sale of property and equipment  . . . .        931           79
Acquisition, net of cash acquired . . . . . . . . . .    (46,226)         ---
                                                       ---------    ----------
Net cash used in investing activities . . . . . . . .    (50,881)      (2,259)
                                                       ---------    ----------
FINANCING ACTIVITIES:
Proceeds from the issuance of debt. . . . . . . . . .     45,500          400
Payments on outstanding debt  . . . . . . . . . . . .     (6,798)        (605)
Cost of initial public offering . . . . . . . . . . .        ---         (861)
Purchase of treasury stock  . . . . . . . . . . . . .      ( 813)         ---
                                                       ---------    ----------
Net cash provided by (used in) financing activities .     37,889       (1,066)
                                                       ---------    ---------- 

Increase (decrease) in cash and cash equivalents  . .    (13,446)         525
Cash and cash equivalents at beginning of period  . .     15,200        1,967
                                                       ---------    ----------
Cash and cash equivalents at end of period  . . . . .  $   1,754    $   2,492
                                                       ==========   =========
</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 months ended July 31, 1997 are not necessarily indicative of the results
that may be expected for the fiscal period. For further information, reference
is made to the consolidated financial statements and footnotes thereto included
in the Company's Form 10-K filed with the Securities and Exchange Commission on
July 29, 1997. Certain reclassifications have been made to the April 30, 1997
and July 31, 1996 financial information to conform to the current period
presentation.

2.  ORGANIZATION AND PUBLIC OFFERING

    The accompanying consolidated 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". In August 1997, the Board of Directors adopted resolutions to
change the name of the Company to Dailey International, Inc., effective
December 1, 1997, and to change its fiscal year end to December 31, effective
December 31, 1997.

    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, Louisiana and the Austin Chalk formation
in Texas. In June 1997, the Company acquired Air Drilling International, Inc.
("ADI" and "ADI Acquisition") and, as a result, became a leading provider
worldwide of air drilling services for underbalanced drilling applications. The
Company operates in one business segment.

    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,





                                       4
<PAGE>   7
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. In August 1996, the Company completed its initial public offering
of 3,910,000 shares of Class A Common Stock (the "1996 IPO").

    Dailey's Restated Certificate of Incorporation provides for three classes
of stock: Class A Common Stock, $.01 par (20,000,000 shares authorized,
4,171,000 issued and outstanding) ("Class A Common Stock"), Class B Common
Stock, $.01 par (10,000,000 shares authorized, 5,000,000 shares issued and
outstanding) ("Class B Common Stock"), and Preferred Stock, $.01 par (5,000,000
shares authorized, none issued or outstanding). The Board of Directors is
empowered to authorize the issuance of Preferred Stock in one or more series
and to fix the rights, powers, preferences and limitations of each series. A
holder of Class B Common Stock may convert its Class B Common Stock into Class
A Common Stock at any time at the ratio of one share of Class A Common Stock
for each share of Class B Common Stock. In the event of liquidation, holders of
Class A Common Stock and Class B Common Stock share with each other on a
ratable basis as a single class in the net assets of the Company available for
distribution. In addition, shares of Class B Common Stock convert automatically
into a like number of shares of Class A Common Stock upon the sale or transfer
of such shares to a person or entity that is not a member of the Lawrence Group
(as defined in the Company's Restated Certificate of Incorporation).

    In connection with the 1996 IPO, the Company issued 3,910,000 shares of
Class A Common Stock. Net proceeds from the sale of the stock were $27.6
million. The Company used $5.0 million of the proceeds from the 1996 IPO 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 1996 IPO, the Company's sole
stockholder contributed to the capital of the Company $5.0 million of the
principal of such note.  The statements of operations for the three months
ended July 31, 1996 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 period ended July 31, 1996 were based on
6,610,000 shares of Common Stock outstanding). Historical earnings per share
excluding the pro forma effect of the dividend was $0.18 per share for the
three months ended July 31, 1996.

3.  ADI ACQUISITION

    On June 20, 1997, the Company purchased the stock of ADI (a provider of air
drilling services for underbalanced drilling applications) for $46.4 million,
including the repayment of approximately $16.8 million of ADI indebtedness,
financed with bank debt of $45.5 million and proceeds from the 1996 IPO. The ADI
Acquisition was accounted for under the purchase method of accounting. As a
result, the assets and liabilities of ADI were recorded at their estimated fair
market values as of the date of the ADI Acquisition. The Company recorded
goodwill of approximately $22.3 million relating to the excess of the fair
market value of ADI's assets over the purchase price paid for ADI, which will
be amortized over 20 years and result in approximately $1.1 million in
amortization expense per





                                       5
<PAGE>   8
year. Since the goodwill associated with the ADI Acquisition will not be
amortized for tax purposes, the Company expects its effective tax rate shown on
its financial statements to increase significantly as a result of the ADI
Acquisition. The purchase price allocation was based on preliminary estimates
and may be revised at a later date.

    The pro forma unaudited results of operations for the three months ended
July 31, 1997 and 1996, assuming consummation of the purchase of ADI as of May
1, 1996, utilizing interim financing of $45.5 million under the Company's bank 
credit facility and reflecting extinguishment of debt of Dailey and ADI 
(except for capitalized leases) are as follows:
<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED JULY 31,
                                                    1997              1996  
                                                    ----              ----
                                                   (IN THOUSANDS, EXCEPT
                                                       PER SHARE DATA)
<S>                                              <C>              <C>
Revenues    . . . . . . . . . . . . . . .        $ 27,234         $  21,905
Net income (loss) . . . . . . . . . . . .          (1,747)              595
Net income (loss) per common share. . . .           (0.19)             0.09
</TABLE>

         The pro forma information for the three months ended July 31, 1997 and
1996, includes adjustments for additional depreciation and amortization expense
associated with the purchase price allocation using a 20 year life for goodwill
and an average life of eight years for fixed assets, increased interest expense
for the additional borrowings under the credit facility as if they were
incurred at the beginning of the period and related adjustments for income
taxes. The pro forma information is not necessarily indicative of the results
of operations had the acquisition been affected on the assumed dates or the
results of operations for any future period.

4.       REVENUE-PRODUCING TOOLS AND INVENTORY

<TABLE>
<CAPTION>
                                                           JULY 31,   APRIL 30,
                                                            1997        1997  
                                                          ---------   ---------
                                                              (IN THOUSANDS)
<S>                                                       <C>         <C>
Revenue-producing tools . . . . . . . . . . . . . . . .   $ 80,484    $ 56,622
Accumulated depreciation  . . . . . . . . . . . . . . .    (33,836)    (32,503)
                                                          ---------   ---------
                                                            46,648      24,119
Inventory:
   Components, subassemblies and expendable parts   . .     16,011      11,293
   Rental tools and expendable parts under production        1,469       1,261
   Raw materials  . . . . . . . . . . . . . . . . . . .        925         815
                                                          ---------   ---------
                                                            18,405      13,369
                                                          ---------   ---------
   Revenue-Producing Tools and Inventory  . . . . . . .   $ 65,053    $ 37,488
                                                          ========    ========
</TABLE>





                                       6
<PAGE>   9
5.       STOCK OPTIONS AND AWARDS

         No stock options were granted or exercised during the three months
ended July 31, 1997.

         On May 31, 1997, 180,000 shares of restricted stock awards granted
during fiscal 1997 vested at $6.625 per share and on June 23, 1997, 45,000
shares of restricted stock awards granted during fiscal 1997 vested at $7.00
per share. The vesting resulted in the recording of $478,000 in non-cash
compensation expense for the three months ended July 31, 1997.

6.       BORROWING ARRANGEMENTS


         Long-term debt consisted of the following:
<TABLE>
<CAPTION>

                                                JULY 31,    APRIL 30,
                                                 1997         1997  
                                                -------      -------
                                                      (IN THOUSANDS)

<S>                                            <C>         <C>
Note payable to a bank  . . . . . . . . .       $45,500      $ 6,778
Other notes payable . . . . . . . . . . .           772           88
                                                -------      -------
                                                 46,272        6,866
Less current portion of long-term debt  .           616        1,711
                                                -------      -------
    Total long-term debt  . . . . . . . .       $45,656      $ 5,155
                                                =======      =======
</TABLE>

         At July 31, 1997, the Company had a $45.5 million note payable to a
bank with scheduled maturities within the next 12 months of $1.4 million.  The
Company excluded the $1.4 million from current liabilities because, on August
19, 1997, the Company issued $115.0 million of 9.75% Senior Notes due 2007 at a
discount of 0.785%, and a portion of the proceeds was used to repay the note
payable to a bank.

7.       REORGANIZATION

         In June 1997, the Company implemented a cost reduction program to
flatten its corporate management structure and streamline the Company's
operations (the "Management Reorganization"). As a result, the Company incurred
a $2.5 million restructuring charge during the three months ended July 31, 1997
associated primarily with staff reductions, severance settlements and various
reorganization costs. 





                                       7
<PAGE>   10
                        DAILEY PETROLEUM SERVICES CORP.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



          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. Words
such as "anticipate", "expect", "estimate", "project" and similar expressions
are intended to identify such forward-looking statements. 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 oilfield services industry,
including demand for the Company's drilling services and downhole tools,
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 of Financial Condition and Results of
Operations 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.

         Such forward-looking statements are subject to certain risks,
uncertainties and assumptions, including without limitation those identified
below. Should one or more of these risks or uncertainties materialize, or
should any of the underlying assumptions prove incorrect, actual results of
current and future operations may vary materially from those anticipated,
estimated or projected. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of their dates.

         Among the factors that have a direct bearing on the Company's results
of operations and the oilfield service industry in which it operates are
changes in the price of oil and natural gas; the impact of competitive products
and pricing; product demand and acceptance risks, including product
obsolescence risks, the presence of competitors with greater financial
resources; operating risks inherent in the oilfield service industry, including
risks of environmental liability; risks associated with the ADI Acquisition,
including failure to successfully manage the Company's growth and integrate the
operations of ADI, substantial leverage following the ADI Acquisition and the
private placement of the Senior Notes; reliance on independent international
agents for the distribution of certain of its downhole tools; delays in
receiving raw materials utilized in the manufacture and assembly of the
Company's downhole tools and other difficulties in the manufacture, assembly or
delivery of the Company's downhole tools; world-wide political stability and
economic growth and other risks associated with international operations,
including foreign exchange risk, the Company's successful execution of internal
operating plans as well as regulatory uncertainties and legal proceedings.

RECENT DEVELOPMENTS

         ADI Acquisition. The Company's operations and future results will be
significantly impacted





                                       8
<PAGE>   11
by the acquisition of Air Drilling International, Inc. ("ADI", the "ADI
Acquistion") on June 20, 1997. Dailey acquired ADI for $46.4 million, including
the repayment of approximately $16.8 million in indebtedness (the "ADI Debt").
As a result of the ADI Acquisition, the Company became a leading worldwide
provider of air drilling services for underbalanced drilling applications.

         The Company expects to experience significant revenue growth as a
result of the ADI Acquisition. The ADI Acquisition also will significantly
expand the Company's presence internationally, primarily in Canada where the
Company previously did not derive a significant amount of revenues.

         The ADI Acquisition was accounted for under the purchase method of
accounting. As a result, the assets and liabilities of ADI were recorded at
their estimated fair market values as of the date of the ADI Acquisition. The
Company recorded goodwill of approximately $22.3 million relating to the excess
of the fair market value of ADI's assets over the purchase price paid for ADI,
which will be amortized over 20 years and result in approximately $1.1 million
in amortization expense during the year. Since the goodwill associated with the
ADI Acquisition will not be amortized for tax purposes, the Company expects its
effective tax rate shown on its financial statements to increase significantly
as a result of the ADI Acquisition. The purchase price allocation was based on
preliminary estimates and may be revised at a later date.

         Senior Note Offering and Credit Facility. In order to finance the ADI
Acquisition, the Company amended its Amended and Restated Credit Agreement that
provided for a term loan (the "Term Loan") and a revolving line of credit (the
"Revolving Credit Line") to increase the outstanding principal balance of the
term loan to $41.5 million and the maximum amount available for borrowings
under the Revolving Credit Line to $15.0 million. On August 19, 1997, the
Company issued, pursuant to a private placement, $115 million of senior notes
(the "Senior Notes") at a discount of 0.785% (the "Note Offering"). The net
proceeds from the Note Offering were approximately $109.6, a portion of which
was utilized to repay the outstanding balance under the Term Loan and the
Revolving Credit Line. The Note Offering significantly increased the Company's
debt levels above those existing in prior periods and will result in a
significantly higher level of interest expense and increased percentage of cash
flow being used for debt service, which may limit the Company's ability to
obtain additional debt financing for future acquisitions and capital
expenditures.

         June 1997 Management Reorganization. Following the ADI Acquisition in
June 1997, the Company implemented a cost reduction program to flatten its
corporate management structure and streamline the Company's operations (the
"Management Reorganization"). As a result, the Company incurred a $2.5 million
restructuring charge during the three months ended July 31, 1997, associated
primarily with staff reductions, severance settlements and various
reorganization costs. The Company does not expect to incur any additional
restructuring charges relating to the Management Reorganization. The Company
expects the Management Reorganization to result in annual savings of
approximately $1.8 million, although there can be no assurance in this regard.





                                       9
<PAGE>   12
         1996 Initial Public Offering. The Company's operations during the
three months ended July 31, 1997 reflect the effects of the Company's initial
public offering (the "1996 IPO"). Dailey's net proceeds of $27.6 million from
the 1996 IPO were utilized to repay debt to affiliates of Dailey, to acquire
certain business assets and to increase Dailey's inventory of downhole tools.
Utilization of these additional tools increased Dailey's revenues for the three
months ended July 31, 1997 compared to the same three months last year, and are
expected to impact future periods as such tools continue to be utilized in the
Company's business.

RESULTS OF OPERATIONS

         Dailey derives rental income from its fleet of downhole tools, and to
a lesser extent, from downhole tools owned by third parties. Dailey typically
charges its customers a daily rate for downhole tools, except for its downhole
drilling motors, which are rented at an hourly rate. In international markets,
Dailey also often charges its customers a refurbishment charge, which is
included in rental income.

         Revenues from sales of products and services consist of directional
drilling services, lost-in-hole charges and sales of its mechanical drilling
jars. Revenues from services of Dailey's directional drillers and MWD
technicians are generally billed on a per person/per day basis for the time on
assignment at the customer's drill site. Although Dailey considers rentals of
its downhole drilling motors and MWD equipment to be a significant part of its
directional drilling services, revenues from such rentals are currently
recorded as rental income for financial statement purposes. Dailey's lost-in-
hole revenues consist of replacement charges that Dailey's customers pay each
time a Dailey downhole tool is lost-in-hole. Dailey sells mechanical drilling
jars in a limited number of international markets, primarily to state-owned oil
and gas companies.

         The Company derives revenues from rentals of air drilling equipment
used for underbalanced drilling applications including compressors, boosters,
mist pumps and related equipment, which are typically rented at an hourly or
daily rate. The Company also derives revenues by providing specially trained
personnel to operate its air drilling equipment, who are typically billed on a
per person/per day basis.

         The operating costs associated with Dailey's rentals consist primarily
of expenses associated with depreciation, transportation, maintenance and
repair and related direct overhead. The costs associated with Dailey's sales of
products and services consist primarily of the undepreciated portion of the
capitalized cost of its downhole tools sold or lost-in-hole and the salaries
and related costs associated with Dailey's directional drillers and MWD
technicians. Operating costs associated with the Company's revenues derived
from underbalanced drilling services consist primarily of expenses associated
with depreciation, transportation, maintenance and repair and related direct
overhead, and the salaries and related costs of the Company's air drilling
technicians.





                                       10
<PAGE>   13
Quarter Ended July 31, 1997 Compared to the Quarter Ended July 31, 1996

         Rental Income. Rental income for the three months ended July 31, 1997
was $15.6 million, an increase of 29% from $12.1 million for the same three
months last year. This increase in revenue was due to the introduction of
additional directional drilling equipment acquired with proceeds from the 1996
IPO and increased demand for these products and services primarily in the
United States Gulf Coast region and the Gulf of Mexico which resulted in a $
1.7 million increase in rentals. In addition, revenue from the rental of
drilling jars and related products increased $823,000 in the United States
primarily due to a 23% increase in the average domestic rig count during the
period compared to the same period last year and $935,000 internationally,
primarily in Indonesia, Australia and Venezuela, as the result of increased
drilling activity.

         Sales of Products and Services. Sales of products and services for the
three months ended July 31, 1997 were $4.5 million, a decrease of 2% from $4.6
million for the same three months last year. This decrease in revenue was
primarily the result of a decrease in tools lost-in-hole of $189,000 and a
decrease in sales of mechanical jars of $380,000. This decrease in revenue was
partially offset by increased revenue from directional services of $407,000
primarily in the United States Gulf Coast Region, the Gulf of Mexico and
Venezuela and a nominal increase from ADI revenue being included in operating 
results since June 20, 1997.

         Underbalanced Drilling Services Revenue. Underbalanced drilling
services revenue for the three months ended July 31, 1997 was $2.9 million
resulting from ADI revenue being included in operating results since June 20,
1997.

         Cost of Rentals. Cost of rentals for the three months ended July 31,
1997 was $10.6 million, an increase of 14% from $9.3 million for the same three
months last year. This increase in cost was due primarily to increased variable
costs, primarily tool repair costs and third party tool charges, associated
with increased rental activity in regions where the Company had an existing
operating and administrative infrastructure. As a result, margins increased
from 23% for the three months ended July 31, 1996 to 32% for the three months
ended July 31, 1997 due to the fixed nature of the Company's cost base.

         Cost of Products and Services. Cost of products and services for the
three months ended July 31, 1997 was $3.0 million, which was a $471,000
increase from the same three months last year including a nominal increase due
to ADI. The margin on sales of products and services for the three months ended
July 31, 1997 was 34% compared to 45% for the same three months last year. This
decrease in the margin was primarily due to decreased higher margin export
sales of mechanical jars and tools lost-in-hole combined with increased
revenues from lower margin directional drilling services.

         Cost of Underbalanced Drilling Services. Cost of underbalanced
drilling services for the three months ended July 31, 1997 was $1.8 million
resulting from the ADI Acquisition in June 1997.

         Selling, General and Administrative. Selling, general and
administrative expenses for the three months ended July 31, 1997 were $4.2
million, a 45% increase from $2.9 million for the same three months last year.
This increase was primarily the result of increased compensation expense





                                       11
<PAGE>   14
related to salary increases and incentive compensation programs combined with
the inclusion of ADI expenses since June 20, 1997.

         Reorganization Costs. Reorganization costs for the three months ended
July 31, 1997 were $2.5 million. In June 1997, a cost-reduction program was
implemented to flatten the corporate management structure and streamline
operations. The reorganization costs primarily consist of the cost of staff
reductions, severance settlements and various restructuring costs. The Company
expects the reorganization to result in annual savings of approximately $1.8
million, although there can be no assurance in this regard.

         Non-cash Compensation. Non-cash compensation for the three months
ended July 31, 1997 was $478,000 which related soley to the accelerated vesting
of restricted stock that had been granted to certain executive officers of the
Company in connection with the 1996 IPO. The Company currently does not have
any issued, unvested restricted stock that will result in compensation expense
in future periods; however, there can be no assurance that additional non-cash
compensation will not be granted to the Company's executive officers in the
future.

         Interest Expense - Non-affiliate. Interest expense for the three
months ended July 31, 1997 was $423,000 compared to $202,000 for the same three
months last year. This increase is the result of a significant increase in debt
related to the ADI Acquisition.

         Income Tax Provision (Benefit). The provision for income taxes for the 
three months ended July 31, 1997 was a benefit of $83,000, a decrease from
$584,000 of expense for the same three months last year. The decrease in tax
expense was due to a decrease in income before income taxes of $1.7 million
partially offset by a change in the effective tax rate from 38% to 44% due to
increased state income taxes and the non-deductibility of goodwill from the ADI
Acquisition.

LIQUIDITY AND CAPITAL RESOURCES

         Working Capital. Cash used by operating activities was $454,000 during
the three months ended July 31, 1997. Sources of cash included net proceeds
from the issuance of debt of $45.5 million, $815,000 from revenue-producing
tools lost-in-hole, abandoned and sold and $931,000 from proceeds from the sale
of property and equipment.  Principal uses of cash for the three months were to
fund acquisitions (net of cash acquired) of $46.2 million, repayment of bank
debt of $6.8 million, repurchase treasury stock of $813,000 and fund capital
expenditures of $6.4 million. During the past several years, working capital
requirements have been funded through cash generated from operations, credit
facilities and asset sales.

         Senior Notes. On August 19, 1997, the Company issued Senior Notes to
qualified institutional buyers and accredited investors in a private placement.
The Senior Notes were issued at a discount of 0.785%. The net proceeds from the
issuance of the Senior Notes of approximately $109.6 million were used to repay
the $45.5 million outstanding under the Term Loan and Revolving Credit Line.
The remaining proceeds will be used to fund planned capital expenditures
related to downhole tools and directional and air drilling operations, finance
acquisitions and for general





                                       12
<PAGE>   15
working capital purposes. The Senior Notes bear interest at 9.75% payable semi-
annually on February 15 and August 15 of each year commencing February 15,
1998. The Senior Notes mature August 15, 2007 but are redeemable at the option
of the Company on or after August 15, 2002. The Senior Notes are
unconditionally guaranteed on a senior unsecured basis by each of the Company's
domestic subsidiaries. The Senior Notes contain affirmative and negative
covenants customary in such private placements, including limitations on
dividends, distributions and other restricted payments and limitations on
additional indebtedness unless certain pro forma coverage ratios are met.

         Revolving Credit Line. The Company currently does not have any
outstanding borrowings under its Revolving Credit Line. Borrowings under the
Revolving Credit Line are limited to the lesser of $15.0 million or a loan
formula based upon the level of eligible accounts receivable. The Revolving
Credit Line is collateralized by substantially all of the Company's and its
subsidiaries' assets. It contains restrictive covenants and events of defaults
customary in loan transactions of that type.

         Capital Expenditures. Capital expenditures of approximately $6.4
million were made during the three months ended July 31, 1997. Of this amount,
$4.1 million was for downhole tools, primarily MWD and other directional
equipment, hydraulic drilling jars, hydraulic fishing jars and related
inventory. Capital expenditures during the next nine months are expected to be
approximately $17.7 million. The Company believes it has available resources
through internally generated cash flow, availability under the Revolving Credit
Line and the remaining proceeds from the 1996 IPO and the Notes Offering to
fund operations for at least the next 12 months. In addition, as part of its
business strategy, the Company is continuing to analyze potential acquisitions
of complementary businesses and assets. The Company expects to fund any future
acquisitions utilizing a portion of its availability under the Revolving Credit
Line as well as proceeds from the Note Offering; however, depending upon the
size of any future acquisition, the Company may need additional financing to
fund such acquisitions.

         Future Acquisitions. As consolidation of the oilfield services
industry continues in response to increased demand for companies offering a
broad range of services, the Company intends to continue expanding its products
and services through strategic acquisitions. The Company continuously evaluates
potential acquisition candidates in the oilfield services industry, including
companies providing directional drilling, underbalanced drilling, fishing and
enhanced recovery services, as well as companies supplying specialized downhole
tools and equipment to the oil and gas industry. In connection with any future
acquisitions, the Company may be required to incur substantial indebtedness to
finance such acquisitions and may also issue equity securities or convertible
securities. Although the Company currently has no agreement or understanding
with any specific entities, the Company is reviewing several attractive
acquisition opportunities that, if consummated, would allow it to continue to
expand the breadth of scope of the products and services it offers as well as
create additional crossmarketing opportunities for internal growth.





                                       13
<PAGE>   16
         Income Taxes. At July 31, 1997, the Company had foreign tax
carryforwards of approximately $1.9 million. These carryforwards are available
to offset future income of the Company, but will begin to expire in 1999.

NEW ACCOUNTING PRONOUNCEMENTS

        In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share". This statement establishes new standards for computing and
presenting earnings per share requiring the presentation of "basic"
and "diluted" earnings per share as compared to "primary" and "fully diluted"
earnings per share. The Company is required to adopt SFAS No. 128 in the first
quarter of calendar 1998. Earlier adoption is not permitted and restatement of
all prior period earnings per share data is required. The Company believes that
the "diluted" disclosure required under SFAS No. 128 will not differ materially
from historical "primary" earnings per share amounts for the 1996 and 1997
periods presented.




                                       14
<PAGE>   17
                          PART II - OTHER INFORMATION




ITEM 1.      LEGAL PROCEEDINGS

         None

ITEM 2.      CHANGES IN SECURITIES

                 On August 19, 1997, the Company issued $115 million of Senior
         Notes pursuant to a private placement to qualified institutional
         buyers and accredited investors.  The Senior Notes contain customary
         affirmative and negative covenants, including limitations on
         restrictive payments, including dividends and distributions to the
         Company's stockholders.  In addition, in connection with the Company's
         acquisition of ADI, the Company amended the Term Loan and Revolving
         Credit Line.  As amended, such credit facilities prohibit the Company
         from paying dividends or making cash distributions to its
         stockholders.


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

<TABLE>
<CAPTION>
         Exhibit
         Number                            Title or Description
         ------                            --------------------
         <S>              <C>
         *4.1             Indenture dated August 19, 1997, by and between the
                          Company, the Subsidiary Guarantors and the U.S. Trust
                          Company of Texas, N.A. relating to the Company's 9.75%
                          Senior Notes Due 2007.
</TABLE>





                                       15
<PAGE>   18
<TABLE>
           <S>            <C>
           *4.2           Form of Note for the Company's Senior Notes Due 2007
                          (included in Exhibit A to Exhibit 4.1).

           10.1           Stock Purchase and Sale Agreement dated May 8, 1997
                          (the "Stock Purchase Agreement"), by and among the
                          Company, ADI, the Shareholders of ADI, and the
                          Preferred Shareholders of Air Drilling Services, Inc.
                          (incorporated by reference from the Company's Current
                          Report on Form 8-K dated June 20, 1997).

           10.2           First Amendment to Stock Purchase Agreement dated May
                          30, 1997, by and among the Company, ADI, the
                          Shareholders of ADI, and the Preferred Shareholders of
                          Air Drilling Services, Inc. (incorporated by reference
                          from the Company's Current Report on Form 8-K dated
                          June 20, 1997).

           10.3           Escrow Agreement dated June 20, 1997, by and among the
                          Company, the Shareholders and Warrantholders of ADI
                          (the "Shareholders"), and U.S. Trust Company of Texas,
                          N.A. (the "Escrow Agent").  (incorporated by reference
                          from the Company's Current Report on Form 8-K dated
                          June 20, 1997).

           10.4           Third Amendment and Restated Loan Agreement dated June
                          20, 1997 (the "Loan Agreement"), by and between the
                          Company, the financial institutions from time to time
                          a party thereto, and Wells Fargo Bank (Texas),
                          National Association, as Agent (incorporated by
                          referenced from the Company's Current Report on Form
                          8-K dated June 20, 1997).

           10.5           Third Amended and Restated Commercial Security
                          Agreement dated June 20, 1997, between Wells Fargo
                          Bank (Texas), National Association, as Agent, the
                          Banks from time to time a party to the Loan Agreement
                          and the Company.  (incorporated by reference from the
                          Company's Current Report Form 8-K dated June 20,
                          1997).

           10.6           Form of Guaranty Agreement dated June 20, 1997 between
                          Wells Fargo Bank (Texas), National Association, as
                          Agent, the Banks from time to time a party to the Loan
                          Agreement and each of the following subsidiaries of
                          the Company:  Dailey International, Inc. Dailey
                          Petroleum Sales Corp., International Petroleum Sales
                          Corp., Colombia Petroleum Services Corp., Dailey
                          Worldwide Oil Tools, Corp., Dailey Environmental
                          Remediation and Technologies, Inc., Air Drilling
                          International, Inc., Air Drilling Services, Inc.,
                          Canadian Air Drilling Services Ltd., and Specialty
                          Testing and Consultants Ltd. (incorporated by
                          reference from the Company's Current Report on Form 8-
                          K dated June 20, 1997).
</TABLE>





                                       16
<PAGE>   19
<TABLE>
         <S>              <C>
           10.7           Form of Security Pledge Agreement dated June 20, 1997,
                          between Wells Fargo Bank (Texas), National
                          Association, as Agent, the Banks from time to time a
                          party to the Loan Agreement and each of the following:
                          the Company; Air Drilling International, Inc., and Air
                          Drilling Services, Inc. (incorporated by reference
                          from the Company's Current Report on Form 8-K dated
                          June 20, 1997).

           10.8           Form of Subsidiary Commercial Security Agreement dated
                          June 20, 1997, between Wells Fargo Bank (Texas)
                          National Association, as Agent, the Banks from time to
                          time a party to the Loan Agreement and each of the
                          following subsidiaries of the Company:  Dailey
                          International, Inc., Dailey Petroleum Sales Corp.,
                          International Petroleum Sales Corp., Colombia
                          Petroleum Services Corp., Dailey Worldwide Oil Tools
                          Corp., Dailey Environmental Remediation and
                          Technologies, Inc., Air Drilling International, Inc.,
                          Air Drilling Services, Inc., Canadian Air Drilling
                          Services Ltd., and Specialty Testing and Consultants
                          Ltd.  (incorporated by reference from the Company's
                          Current Report on Form 8-K dated June 20, 1997).

         **10.9           Grant of Lease dated May 18, 1995, as amended on June
                          15, 1996, between Canadian Air Drilling Services, Ltd.
                          and Malhotra Enterprises, Ltd. for real property
                          located at Nisku Industrial Park, AB.

         **10.10          Industrial Lease Agreement dated July 3, 1996 between
                          Air Drilling Services, Inc. and Melodi Lane
                          Investments, L.L.C for property located at 2122 Melodi
                          Lane, Casper, Wyoming, as amended on June 20, 1997.

         **10.11          Master Equipment Lease Agreement dated July 3, 1996,
                          between Melodi Lane Investments, L.L.C., as lessor,
                          and Air Drilling Services, Inc. as lessee.

         **10.12          Obligation of Air Drilling Services, Inc., Canadian
                          Air Drilling Services Ltd., and Specialty Testing &
                          Consulting Ltd., under a certain Agreement dated
                          February 1, 1993, to share equally in the payment of a
                          certain Promissory Note dated December 6, 1993 and
                          issued by Chaman Malhotra and Aruna Malhotra to
                          Southern Pacific Thrift and Loan Assn.

         **10.13          Employment Agreement between the Company and Chaman
                          Malhotra dated June 20, 1997.

         **10.14          Employment Agreement between the Company and Tommy
                          Ramsay dated June 20, 1997.

         **10.15          Executive Employment Agreement dated July 18, 1997
                          with Dwight Goolsbay.
</TABLE>





                                       17
<PAGE>   20
<TABLE>
         <S>              <C>
         **10.16          Executive Employment Agreement dated July 18, 1997
                          with Martin Lyons.

         **10.17          Management Employment Agreement dated July 18, 1997
                          with Chet Brame.

         **10.18          Equipment Lease Agreement dated November 1, 1996, as
                          amended, between Malhotra Enterprises and Specialty
                          Testing & Consulting, Ltd.

          *10.19          Registration Rights Agreement dated August 19, 1997
                          relating to the Senior Notes.

         **10.20          Employment Agreement with Mike Torres dated July 18,
                          1997. 

          *27.1           Financial Data Schedule.
</TABLE>


         *                Filed herewith.
         **               Filed with the Company's Annual Report on Form 10-K
                          for the year ended April 30, 1997.


         (b)  Reports on Form 8-K

                          The Company filed a Form 8-K dated June 20, 1997 to
                 report the acquisition of Air Drilling International, Inc. Such
                 Form 8-K was amended in September 1997, to include the
                 following financial statements:  (i) audited consolidated
                 balance sheet of ADI and its subsidiaries as of December 31,
                 1996 and 1995; (ii)  audited consolidated statements of
                 operations of ADI and its subsidiaries for the year ended
                 December 31, 1996 and the period from May 19, 1995 (Inception)
                 through December 31, 1995;  (iii) audited combined balance
                 sheets of Air Drilling Services, Inc., Canadian Air Drilling
                 Services Ltd., Specialty Testing & Consultants Ltd and Global
                 Air Drilling Services as of May 18, 1995; (iv) audited
                 combined statements of income for Air Drilling Services, Inc.,
                 Canadian Air Drilling Services Ltd, Specialty Testing &
                 Consultants Ltd and Global Air Drilling Services for the
                 period from January 1, 1995 through May 18, 1995;  (v)
                 unaudited consolidated balance sheet and statement of
                 operations of ADI and its subsidiaries as of and for the four
                 months ending April 30, 1997; and (vi) pro forma statement of
                 operations for Dailey for the twelve months ended April 30,
                 1997.





                                       18
<PAGE>   21




                                   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:   September 15, 1997                 /s/ DAVID T. TIGHE
                                           --------------------------------
                                           David T. Tighe
                                           Senior Vice President &
                                           Chief Financial Officer
                                                 and authorized to sign on
                                                 behalf of the Registrant





                                       19
<PAGE>   22
                              INDEX TO EXHIBITS


<TABLE>
<CAPTION>
         Exhibit
         Number                            Title or Description
         ------                            --------------------
         <S>              <C>
           *4.1           Indenture dated August 19, 1997, by and between the
                          Company, the Subsidiary Guarantors and the U.S. Trust
                          Company of Texas, N.A. relating to the Company's 9.75%
                          Senior Notes Due 2007.

           *4.2           Form of Note for the Company's Senior Notes Due 2007 
                          (included in Exhibit A to Exhibit 4.1).

           10.1           Stock Purchase and Sale Agreement dated May 8, 1997
                          (the "Stock Purchase Agreement"), by and among the
                          Company, ADI, the Shareholders of ADI, and the
                          Preferred Shareholders of Air Drilling Services, Inc.
                          (incorporated by reference from the Company's Current
                          Report on Form 8-K dated June 20, 1997).

           10.2           First Amendment to Stock Purchase Agreement dated May
                          30, 1997, by and among the Company, ADI, the
                          Shareholders of ADI, and the Preferred Shareholders of
                          Air Drilling Services, Inc. (incorporated by reference
                          from the Company's Current Report on Form 8-K dated
                          June 20, 1997).

           10.3           Escrow Agreement dated June 20, 1997, by and among the
                          Company, the Shareholders and Warrantholders of ADI
                          (the "Shareholders"), and U.S. Trust Company of Texas,
                          N.A. (the "Escrow Agent").  (incorporated by reference
                          from the Company's Current Report on Form 8-K dated
                          June 20, 1997).

           10.4           Third Amendment and Restated Loan Agreement dated June
                          20, 1997 (the "Loan Agreement"), by and between the
                          Company, the financial institutions from time to time
                          a party thereto, and Wells Fargo Bank (Texas),
                          National Association, as Agent (incorporated by
                          referenced from the Company's Current Report on Form
                          8-K dated June 20, 1997).

           10.5           Third Amended and Restated Commercial Security
                          Agreement dated June 20, 1997, between Wells Fargo
                          Bank (Texas), National Association, as Agent, the
                          Banks from time to time a party to the Loan Agreement
                          and the Company.  (incorporated by reference from the
                          Company's Current Report Form 8-K dated June 20,
                          1997).

           10.6           Form of Guaranty Agreement dated June 20, 1997 between
                          Wells Fargo Bank (Texas), National Association, as
                          Agent, the Banks from time to time a party to the Loan
                          Agreement and each of the following subsidiaries of
                          the Company:  Dailey International, Inc. Dailey
                          Petroleum Sales Corp., International Petroleum Sales
                          Corp., Colombia Petroleum Services Corp., Dailey
                          Worldwide Oil Tools, Corp., Dailey Environmental
                          Remediation and Technologies, Inc., Air Drilling
                          International, Inc., Air Drilling Services, Inc.,
                          Canadian Air Drilling Services Ltd., and Specialty
                          Testing and Consultants Ltd. (incorporated by
                          reference from the Company's Current Report on Form 8-
                          K dated June 20, 1997).
</TABLE>





<PAGE>   23
<TABLE>
         <S>              <C>
           10.7           Form of Security Pledge Agreement dated June 20, 1997,
                          between Wells Fargo Bank (Texas), National
                          Association, as Agent, the Banks from time to time a
                          party to the Loan Agreement and each of the following:
                          the Company; Air Drilling International, Inc., and Air
                          Drilling Services, Inc. (incorporated by reference
                          from the Company's Current Report on Form 8-K dated
                          June 20, 1997).

           10.8           Form of Subsidiary Commercial Security Agreement dated
                          June 20, 1997, between Wells Fargo Bank (Texas)
                          National Association, as Agent, the Banks from time to
                          time a party to the Loan Agreement and each of the
                          following subsidiaries of the Company:  Dailey
                          International, Inc., Dailey Petroleum Sales Corp.,
                          International Petroleum Sales Corp., Colombia
                          Petroleum Services Corp., Dailey Worldwide Oil Tools
                          Corp., Dailey Environmental Remediation and
                          Technologies, Inc., Air Drilling International, Inc.,
                          Air Drilling Services, Inc., Canadian Air Drilling
                          Services Ltd., and Specialty Testing and Consultants
                          Ltd.  (incorporated by reference from the Company's
                          Current Report on Form 8-K dated June 20, 1997).

         **10.9           Grant of Lease dated May 18, 1995, as amended on June
                          15, 1996, between Canadian Air Drilling Services, Ltd.
                          and Malhotra Enterprises, Ltd. for real property
                          located at Nisku Industrial Park, AB.

         **10.10          Industrial Lease Agreement dated July 3, 1996 between
                          Air Drilling Services, Inc. and Melodi Lane
                          Investments, L.L.C for property located at 2122 Melodi
                          Lane, Casper, Wyoming, as amended on June 20, 1997.

         **10.11          Master Equipment Lease Agreement dated July 3, 1996,
                          between Melodi Lane Investments, L.L.C., as lessor,
                          and Air Drilling Services, Inc. as lessee.

         **10.12          Obligation of Air Drilling Services, Inc., Canadian
                          Air Drilling Services Ltd., and Specialty Testing &
                          Consulting Ltd., under a certain Agreement dated
                          February 1, 1993, to share equally in the payment of a
                          certain Promissory Note dated December 6, 1993 and
                          issued by Chaman Malhotra and Aruna Malhotra to
                          Southern Pacific Thrift and Loan Assn.

         **10.13          Employment Agreement between the Company and Chaman
                          Malhotra dated June 20, 1997.

         **10.14          Employment Agreement between the Company and Tommy
                          Ramsay dated June 20, 1997.

         **10.15          Executive Employment Agreement dated July 18, 1997
                          with Dwight Goolsbay.
</TABLE>





<PAGE>   24
<TABLE>
         <S>              <C>
         **10.16          Executive Employment Agreement dated July 18, 1997
                          with Martin Lyons.

         **10.17          Management Employment Agreement dated July 18, 1997
                          with Chet Brame.

         **10.18          Equipment Lease Agreement dated November 1, 1996, as
                          amended, between Malhotra Enterprises and Specialty
                          Testing & Consulting, Ltd.

          *10.19          Registration Rights Agreement dated August 19, 1997
                          relating to the Senior Notes.

         **10.20          Employment Agreement with Mike Torres dated July 18,
                          1997. 

          *27.1           Financial Data Schedule.
</TABLE>


         *                Filed herewith.
         **               Filed with the Company's Annual Report on Form 10-K
                          for the year ended April 30, 1997.