Results of Operations

The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes thereto and the other financial information contained in our periodic reports previously filed with the Securities and Exchange Commission and incorporated herein by reference.

Our summary consolidated operating results for the fiscal years ended December 31, 2008, 2007 and 2006 were:

                                                         Years Ended December 31,
                                                     2008          2007          2006
                                                              (in thousands)
  Revenues                                         $ 209,237     $ 105,296     $ 97,030
  Costs and expenses:
  Cost of sales                                      129,018        62,581       52,281
  Operating expenses                                  30,599        17,792       15,597
  Selling, general and administrative                 10,304         5,904        4,118
  Other operating expense                                189           276          259
  Depreciation and amortization                        9,307         6,051        4,883
  Operating income                                    29,820        12,692       19,892
  Interest expense                                     2,546         2,584        3,036
  Other (income) and expense, net                          3          (532 )       (176 )
  Income tax expense                                   5,452         2,749        5,867
  Net income                                          21,819         7,891       11,165
  Preferred dividends accrued                              -             -          616
  Net income attributable to common stockholders   $  21,819     $   7,891     $ 11,781

Our operating segments are our service lines which we aggregate into three reporting segments. Previously, we presented two reporting segments, response services and well intervention services. During the fourth quarter of fiscal 2008, we reassessed the level at which the Statement of Financial Accounting Standards (SFAS) No. 131 operating segment criteria is met, and as a result, changed our operating segments. As a result of this change, the composition of our reporting segments was also revised. All prior year segment information has been restated to conform to the fiscal 2008 presentation. These reporting segments are Pressure Control, Well Intervention and Equipment Services.

We operate in three business segments: Pressure Control, Well Intervention and Equipment Services. Intercompany transfers between segments were not material. Our accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. While cost of sales expenses are variable based upon the type of revenue generated, most of our operating expenses represent fixed costs for base labor charges, rent and utilities. For purposes of this presentation, operating expenses and depreciation and amortization have been charged to each segment based upon specific identification of expenses and a pro rata allocation of remaining non-segment specific expenses are assigned between segments based upon relative revenues. Selling, general and administrative and corporate expenses have been allocated between segments in proportion to their relative revenue. Business segment operating data from continuing operations is presented for purposes of management discussion and analysis of operating results.

The Pressure Control segment consists of personnel, equipment and services which are designed to reduce the number and severity of critical well events offered through our prevention and risk management programs, including training, contingency planning, well plan reviews, audits, inspection services and engineering services. This segment also consists of personnel, equipment and services provided during a critical well event. These services can include snubbing and pressure control rental equipment provided during a response which are designed to minimize response time and mitigate damage while maximizing safety. These services primarily utilize existing personnel to maximize utilization with only slight increases in fixed operating costs.

Our Well Intervention segment consists of services that are designed to enhance production for oil and gas operators and reduce the number and severity of critical well events such as oil and gas well fires, blowouts, or other losses of control at the well. This segment includes services performed by hydraulic workover and snubbing units that are used to enhance production of oil and gas wells. These units are used for underbalanced drilling, workover, well completions and plugging and abandonment services.

The Equipment Services segment includes our pressure control equipment rental and service business, which began as an expansion of the Company's existing services in 2007. We expect our Equipment Services segment to continue to benefit as a result of cross selling of our other services by our business development team and our expanded geographic presence.

Information concerning operations in our three different business segments for the years ended December 31, 2008, 2007 and 2006 is presented below. Certain reclassifications have been made to the prior periods to conform to the current presentation.

                                                Year Ended December 31,
                                            2008          2007          2006
                                                     (in thousands)
Revenues
Pressure Control                          $ 92 ,804     $ 36, 845     $ 43,204
Well Intervention                            97,167        66,580       53,826
Equipment Services                           19,266         1,871            -
                                          $ 209,237     $ 105,296     $ 97,030
Cost of Sales
Pressure Control                          $  50,432     $  16,719     $ 15,700
Well Intervention                            67,271        45,349       36,581
Equipment Services                           11,315           513            -
                                          $ 129,018     $  62,581     $ 52,281
Operating Expenses (1)
Pressure Control                          $  15,664     $   9,017     $ 11,646
Well Intervention                            12,290         7,966        3,951
Equipment Services                            2,645           809            -
                                          $  30,599     $  17,792     $ 15,597
Selling, General and Administrative (2)
Pressure Control                          $   4,499     $   2,080     $  1,830
Well Intervention                             5,035         4,006        2,547
Equipment Services                              959            94            -
                                          $  10,493     $   6,180     $  4,377
Depreciation and Amortization (1)
Pressure Control                          $   1,032     $     663     $    520
Well Intervention                             6,796         5,239        4,363
Equipment Services                            1,479           149            -
                                          $   9,307     $   6,051     $  4,883
Operating Income
Pressure Control                          $  21,177     $   8,366     $ 13,508
Well Intervention                             5,775         4,020        6,384
Equipment Services                            2,868           306            -
                                          $  29,820     $  12,692     $ 19,892

(1) Operating expenses and depreciation and amortization have been charged to each segment based upon specific identification of expenses and an allocation of remaining non-segment specific expenses pro rata between segments based upon relative revenues.

(2) Selling, general and administrative expenses have been allocated pro rata between segments based upon relative revenues.

Comparison of the Year ended December 31, 2008 with the Year ended December 31, 2007

Revenues

Pressure Control revenues were $92,804,000 for the year ended December 31, 2008, compared to $36,845,000 for the year ended December 31, 2007, representing an increase of $55,959,000, or 151.9% in the current year. The largest increase resulted from revenue of $41,050,000 from a prevention and risk management international project which was completed in the fourth quarter. The remaining increase was primarily due to a higher level of high risk, international emergency response activity.

Well Intervention revenues were $97,167,000 for the year ended December 31, 2008, compared to $66,580,000 for the year ended December 31, 2007, representing an increase of $30,587,000, or 45.9% in the current year. The increase was due to higher utilization resulting from growth in our domestic and international hydraulic workover and snubbing services.

Equipment service revenues were $19,266,000 for the year ended December 31, 2008, compared to $1,871,000 for the year ended December 31, 2007, an increase of $17,395,000, or 929.7% in the current year. This increase is due to the domestic and international expansion of our equipment rental and services which began in August 2007.

Cost of Sales

Pressure Control cost of sales was $50,432,000 for the year ended December 31, 2008, compared to $16,719,000 for the year ended December 31, 2007, an increase of $33,713,000, or 201.6% in the current year. For the year ended December 31, 2008, cost of sales represented 54.3% of revenues compared to 45.4% of revenues for the year ended December 31, 2007. The increase in cost of sales is generally attributable to increased revenues, while the percentage increase was primarily due to a higher proportion of revenue with related third party costs in 2008 in relation to 2007.

Well Intervention cost of sales was $67,271,000 for the year ended December 31, 2008, compared to $45,349,000 for the year ended December 31, 2007, an increase of $21,922,000, or 48.3% in the current year. For the year ended December 31, 2008, cost of sales represented 69.2% of revenues compared to 68.1% of revenues for the year ended December 31, 2007. The increase in cost of sales is generally attributable to the increased revenue volume.

Equipment Services cost of sales was $11,315,000 for the year ended December 31, 2008, compared to $513,000 for the year ended December 31, 2007, an increase of $10,802,000, or 2105.7% in the current year. For the current year, cost of sales was 58.7% of revenue compared to 27.4% of revenue in the prior year. The increase in cost of sales is generally attributable to increased revenues, while the percentage increase was primarily due to being more fully operational in 2008 as contrasted with a higher component of start up costs incurred in 2007.

Operating Expenses

Consolidated operating expenses were $30,599,000 for the year ended December 31, 2008, compared to $17,792,000 for the year ended December 31, 2007, an increase of $12,807,000, or 72.0% in the current year. During the current year, operating expenses represented 14.6% of revenues compared to 16.9% of revenues in the prior year. The increase in operating expenses on an actual basis was primarily due to increases in salaries and benefits, incentive bonus, bad debt expense, travel and entertainment, tools and supplies, and professional fees as a result of the geographic expansion of all segments and the ramp up of our pressure control equipment rental services business. Operating expenses were also lower in 2007 due to a gain on disposal of assets during the year which did not recur in the year ended December 31, 2008. The percentage of revenue decrease is primarily due to higher revenues in relation to increases in expenses due to the component of such expenses that are fixed and semi fixed.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative (SG&A) expenses were $10,493,000 for the year ended December 31, 2008, compared to $6,180,000 for the year ended December 31, 2007, an increase of $4,313,000, or 69.8% in the current year. During the year ended December 31, 2008, SG&A expense represented 5.0% of consolidated revenues compared to 5.9% of revenues in the prior year. The increase in actual SG&A expense is primarily due to higher salaries, incentive bonus, benefits, and marketing related expenses associated with the higher level of revenues and operating income exceeding plan.

Depreciation and Amortization

Consolidated depreciation and amortization expense increased by $3,256,000, or 53.8% between the years ended December 31, 2008 and 2007. The increase was primarily due to the depreciation increase of $2,959,000 resulting from an increase in capitalized assets in 2008. Additionally, amortization of intangible assets, related to our acquisition of StassCo Pressure Control LLC in August 2007, for the full year in 2008 compared to five months in 2007 was $512,000 and $215,000, respectively. The intangible assets consist of customer relationships being amortized over a 13 year period and management non-compete agreements being amortized over 5.5 and 3.5 year periods.

Interest Expense

Interest expenses decreased by $38,000 in the year ended December 31, 2008 compared to the prior year period. The interest expense decrease was primarily due to a lower average interest rate and a lower balance on our term loan borrowings offset by an increase in our average revolver balance.

Other (Income) and Expense, Net

Other income and expenses increased by $535,000 in the year ended December 31, 2008 compared to the prior year period. The net expense increase was primarily a result of the decrease in interest income of $515,000 from the prior year period which was due to a reduction in funds available for investment in 2008.

Income Tax Expense

Income taxes for the year ended December 31, 2008 were $5,452,000, or 19.99% of pre-tax income compared to the year ended December 31, 2007 of $2,749,000, or 25.8% of pre-tax income. We determined that as a result of the acquisition of HWC we have experienced a change of control pursuant to limitations set forth in
Section 382 of the IRS rules and regulations. As a result, we are limited to utilizing approximately $2.1 million of U.S. net operating losses (NOL) to offset U.S. taxable income generated during the tax year ended December 31, 2008 and expect similar dollar limits in future years until our U.S. NOL's are either completely used or expire. In 2008, the tax expense as a percent of pretax income was lower due to taxable income in foreign jurisdictions with lower tax rates compared to the U.S. and a tax benefit related to the utilization of future Net Operating Losses (NOL's) against taxable income in future years which was partially offset by FIN 48 related penalty and interest. All 2008 U.S. current tax expense was offset by utilization of NOL's and Foreign Tax Credits.

Comparison of the Year ended December 31, 2007 with the Year ended December 31, 2006

Revenues

Pressure Control revenues were $36,845,000 for the year ended December 31, 2007, compared to $43,204,000 for the year ended December 31, 2006, representing a decrease of $6,359,000, or 14.7% in 2007. The decrease in revenue was primarily due to a lower level of high risk, international emergency response activity.

Well Intervention revenues were $66,580,000 for the year ended December 31, 2007, compared to $53,826,000 for the year ended December 31, 2006, representing an increase of $12,754,000, or 23.7% in 2007. The increase of $5,309,000 in revenue is due to the inclusion of a full year of hydraulic workover revenue in the current year compared to 10 months in the year 2006, and $2,965,000 in revenue is due to the one time rig assist unit contract settlement in Qatar. The remaining increase in revenue is due to growth initiatives in our hydraulic workover and snubbing services in Wyoming, North Texas, the Middle East and Egypt which was offset by lower activity in the Gulf of Mexico and Venezuela.

Equipment service revenues were $1,871,000 for the year ended December 31, 2007, compared to no revenue for the year ended December 31, 2006, an increase of $1,871,000, or 100.0% in 2007. The increase was due to our start up and entry into the rental tool equipment and services business in August 2007.

Cost of Sales

Pressure Control cost of sales were $16,719,000 for the year ended December 31, 2007, compared to $15,700,000 for the year ended December 31, 2006, an increase of $1,019,000, or 6.5% in 2007. For the year ended December 31, 2007, cost of sales was 45.4% of revenue compared to 36.3% of revenue in the prior year. The increase as a percentage of revenue is primarily due to the lower level of favorable international response activity during 2007 as well as the reduction of non-recurring low cost Gulf of Mexico remediation work from the prior year period.

Well Intervention cost of sales were $45,349,000 for the year ended December 31, 2007, compared to $36,581,000 for the year ended December 31, 2006, an increase of $8,768,000, or 24.0% in 2007. The increase was primarily the result of an additional cost of sales of $7,197,000 due to the inclusion of a full year of hydraulic workover cost of sales in 2007 compared to ten months in the prior year.

Equipment service cost of sales were $513,000 for the year ended December 31, 2007, compared to no cost of sales for the year ended December 31, 2006, an increase of $513,000, or 100.0% in 2007. The increase was due to our start up and entry into the rental tool equipment and services business in August 2007.

Operating Expenses

Consolidated operating expenses were $17,792,000 for the year ended December 31, 2007, compared to $15,597,000 for the year ended December 31, 2006, an increase of $2,195,000, or 14.1% in 2007. During 2007, operating expenses represented 16.9% of revenues compared to 16.1% of revenues in the prior year. The increase was primarily the result of an additional $1,418,000 due to the inclusion of a full year of hydraulic workover operating expense in 2007 compared to ten months in the prior year as well as additional support personnel costs which include start up expenses of $1,054,000 for our equipment services, our prevention and risk management business in the Middle East and North Africa, and our hydraulic workover and snubbing business in North Texas and the Middle East. The percentage of revenue increase from 2006 to 2007 is primarily due to the start up expenses incurred in 2007.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative (SG&A) expenses were $6,180,000 for the year ended December 31, 2007, compared to $4,377,000 for the year ended December 31, 2006, an increase of $1,803,000, or 41.2% in 2007. The increase in total SG&A expense is primarily due to salaries, benefits, and marketing related expenses. The increases were offset by a decrease in incentive bonus expense. During the twelve months ended December 31, 2007, SG&A expense represented 5.9% of consolidated revenues compared to 4.5% of revenues in the prior year.

Depreciation and Amortization

Consolidated depreciation and amortization expense increased by $1,168,000 between the years ended December 31, 2007 and 2006. The increase was primarily due to an additional $704,000 resulting from the inclusion of a full year of hydraulic workover depreciation in 2007 compared to ten months of hydraulic workover depreciation in the prior year, depreciation of current year property and equipment additions and the amortization of intangible assets related to the acquisition of StassCo Pressure Control, LLC.

Interest Expense

Interest expense decreased by $452,000 in the year ended December 31, 2007 compared to the prior year period. The interest expense decrease was primarily due to the increase in capitalized interest expense in 2007 which resulted in a credit of $376,000 for the year ended December 31, 2007.

Other (Income) and Expense, Net

Other income and expenses decreased by $356,000 in the year ended December 31, 2007 compared to the prior year period. The interest expense decrease was primarily due to the interest income increase of $375,000 provided by earnings from funds received from the underwritten public offering of 14.95 million shares of our common stock in April 2007.

Income Tax Expense

Income taxes for the year ended December 31, 2007 were $2,748,769 or 25.83% of pre-tax income compared to the year ended December 31, 2006 of $5,867,000, or 34.45% of pre-tax income. We have determined that as a result of the acquisition of HWC we have experienced a change of control pursuant to limitations set forth in Section 382 of the IRS rules and regulations. As a result, we are limited to utilizing approximately $2.1 million of U.S. net operating losses (NOL) to offset U.S. taxable income generated during the tax year ended December 31, 2007 and expect similar dollar limits in future years until our U.S. NOL's are either completely used or expire. In 2007, the tax expense as a percent of pretax income was lower due to taxable income in foreign jurisdictions with lower tax rates compared to the U.S., a tax benefit related to the utilization of future Net Operating Losses (NOL's) against taxable income in future years which was partially offset by further FIN 48 assessments and related penalty and interest. All 2007 U.S. current tax expense was offset by utilization of NOL's.

Liquidity and Capital Resources

Liquidity

At December 31, 2008, we had working capital of $40,169,000 compared to $34,712,000 at December 31, 2007. Our cash balance at December 31, 2008 was $6,220,000 compared to $6,501,000 for the prior year. We ended the year with stockholders' equity of $101,761,000 which increased $24,718,000 compared to $77,043,000 in the prior year primarily due to 2008 net income of $21,819,000. Our primary liquidity needs are working capital, capital expenditures such as assembling hydraulic units, expanding our pressure control fleet of equipment and replacing support equipment for our hydraulic workover and snubbing service line, debt service and acquisitions. Our primary sources of liquidity are cash flows from operations and borrowings under the revolver credit facility.

We generated cash from operating activities in fiscal year 2008 of $22,906,000 compared to cash generated by operating activities of $2,146,000 in 2007. Cash was provided by operations primarily through net income of $21,819,000, increases in accounts payable and accrued liabilities of $20,377,000, and non-cash charges of $12,474,000. Accounts payable and accrued liabilities increased primarily due to increases in third party charges related to a larger revenue volume in the latter part of the year as well as an increase in accrued bonus and accrued agent commissions. Non-cash charges were comprised primarily of $9,307,000 depreciation and amortization, bad debt provision of $2,177,000, and stock based compensation of $1,397,000. These positive cash flows were offset by increases in receivables of $28,073,000, increases in inventory of $1,361,000, increases in prepaid expenses and other current assets of $2,005,000, a gain on sale/disposal of assets of $215,000 and increases in other assets of $110,000. Receivables increased due to greater revenue volume in the final quarter of 2008 compared to the same period in 2007. Inventory increased as a result of supporting the increased revenue activity, and prepaid expenses and other current assets increased primarily due to an increase in prepaid taxes during 2008.

Cash used in investing activities during the years ended December 31, 2008 and 2007 was $28,120,000 and $27,065,000, respectively. Capital expenditures, including capitalized interest, totaled $28,537,000 and $21,309,000 during the years ended December 31, 2008 and 2007, respectively. Capital expenditures in 2008 and 2007 consisted primarily of purchases of assets for our hydraulic workover and snubbing services and our pressure control rental equipment services. We received proceeds on sale or disposal of equipment generating cash of $417,000 in 2008 compared to $4,938,000 in 2007. In 2007, we realized insurance proceeds on two claims related to loss of hydraulic units lost offshore, one claim was related to a Gulf of Mexico claim incurred in 2005 during the Katrina hurricane which generated cash of $1,040,000 and the second claim generated cash of $3,565,000 resulting from our claim on the loss of a hydraulic unit operating offshore of the Republic of Congo, which resulted in a gain of $1,830,000 in the current year. Our cost to replace the equipment was approximately $2,500,000, which is included in our 2007 capital expenditures.

On March 3, 2006, we acquired the hydraulic well control business (HWC) of Oil States International, Inc. As consideration for HWC, we issued approximately 26.5 million shares of our common stock and subordinated promissory notes of $21,200,000, while the transaction netted cash to our company of $4,366,000. At the time of acquisition, this service line was operating in the Louisiana Gulf Coast, Venezuela, North Africa, West Africa and Middle East oil and gas markets.

On July 31, 2007, we acquired Rock Springs, Wyoming-based StassCo Pressure Control, LLC (StassCo) for cash consideration of $10,694,000, net of cash acquired and including transaction costs but excluding a payable to the former owners of $500,000. This transaction was funded utilizing cash proceeds available from our underwritten public offering of common stock in April 2007. StassCo performed snubbing services in the Cheyenne basin, Wyoming and operated four hydraulic rig assist units.

We increased our net cash by $4,933,000 due to financing activities during the year ended December 31, 2008 primarily as a result of borrowings under our revolving line of credit and proceeds from exercise of stock options offset by payments under our term loan.

During 2007, we received $2,965,000 from a customer in Qatar settlement of the customer's contractual obligations to reimburse our costs for procuring and transporting a rig assist unit. We also retained ownership of the unit as part of the settlement.

We operate internationally, giving rise to exposure to market risks from changes in foreign currency exchange rates to the extent that transactions are not denominated in U.S. Dollars. We typically endeavor to denominate our contracts in U.S. Dollars to mitigate exposure to fluctuations in foreign currencies. On December 31, 2008, we had cash of $628,000 denominated in Bolivars and residing in a Venezuelan bank. Venezuela trade accounts receivables of $7,884,000 were denominated in Bolivars and included along with cash in net working capital denominated in Bolivars of $3,898,000 and subject to market risks.

The Venezuelan government implemented a foreign currency control regime on February 5, 2003. This has resulted in currency controls that restrict the conversion of the Venezuelan currency, the Bolivar, to U.S. Dollars. The Company has registered with the control board (CADIVI) in order to have a portion of total receivables in U.S dollar payments made directly to a United States bank account. Venezuela is also on the U.S. government's "watch list" for highly inflationary economies. Management continues to monitor the situation closely. . . .