Business

We are engaged in providing pressure pumping services and other oilfield services to the oil and natural gas industry worldwide. Services are provided through four business segments: U.S./Mexico Pressure Pumping, Canada Pressure Pumping, International Pressure Pumping and the Oilfield Services Group.

The U.S./Mexico, Canada Pressure Pumping and International Pressure Pumping segments provide stimulation and cementing services to the petroleum industry throughout the world. Stimulation services are designed to improve the flow of oil and natural gas from producing formations. Cementing services consist of pumping a cement slurry into a well between the casing and the wellbore to isolate fluids that might otherwise damage the casing and/or affect productivity, or that could migrate to different zones, primarily during the drilling and completion phase of a well. See "Business" included in our Annual Report on Form 10-K for the year ended September 30, 2008 for more information on these operations.

The Oilfield Services Group consists of casing and tubular services, process and pipeline services, chemical services, completion tools and completion fluids services in the United States and in select markets internationally.

Market Conditions

Our worldwide operations are primarily driven by the number of oil and natural gas wells being drilled, the depth and drilling conditions of such wells, the number of well completions and the level of workover activity. Drilling activity, in turn, is largely dependent on the price of crude oil and natural gas and the volatility and expectations of future oil and natural gas prices. Our results of operations also depend heavily on the pricing we receive from our customers, which depends on activity levels, availability of equipment and other resources, and competitive pressures. These market factors often lead to volatility in our revenue and profitability, especially in the United States and Canada, where we have historically generated in excess of 50% of our revenue. Historical market conditions are reflected in the table below:

                                                  Three Months Ended                Six Months Ended
                                                      March 31,                        March 31,
                                             2009     % Change      2008      2009     % Change      2008
Rig Count: (1)
U.S.                                          1,326        -25 %     1,770     1,612         -9 %     1,780
Canada                                          329        -35 %       508       369        -15 %       432
International(2)                              1,025         -2 %     1,046     1,058          3 %     1,032
Commodity Prices (average):
Crude Oil (West Texas Intermediate)         $ 42.96        -56 %   $ 97.94   $ 50.70        -46 %   $ 94.31
Natural Gas (Henry Hub)                     $  4.57        -47 %   $  8.65   $  5.50        -30 %   $  7.82

(1) Estimate of drilling activity as measured by average active drilling rigs based on Baker Hughes Inc. rig count information.

(2) Excludes Canada, and includes Mexico average rig count of 128 and 96 for the three-month periods ended March 31, 2009 and 2008, respectively, and 117 and 95 for the six-month periods ended March 31, 2009 and 2008, respectively.

U.S. Rig Count

Demand for our pressure pumping services in the United States is primarily driven by oil and natural gas drilling activity, which tends to be extremely volatile, depending on the current and anticipated prices of crude oil and natural gas. During the last 10 years, the lowest annual U.S. rig count averaged 601 in fiscal 1999 and the highest annual U.S. rig count averaged 1,851 in fiscal 2008.

With the retraction of oil and natural gas prices over the last few months, tightening and uncertainty in the credit markets, and the global economic slowdown, drilling rig activity in the U.S. has continued its rapid decline from 2,031 rigs at September 12, 2008 to 945 at May 1, 2009, and we expect to see further reductions in U.S. drilling activity throughout fiscal 2009 compared to 2008. The magnitude and duration of reduction is uncertain and will ultimately be influenced by a number of factors, including commodity prices, global demand for oil and natural gas, supplies and depletion rates of oil and natural gas reserves, and government policy with respect to the financial credit crisis.

Canadian Rig Count

The demand for our pressure pumping services in Canada is primarily driven by oil and natural gas drilling activity, and similar to the United States, tends to be extremely volatile. During the last 10 years, the lowest annual rig count averaged 212 in fiscal 1999 and the highest annual rig count averaged 502 in fiscal 2006. Similar to activity in the United States, drilling rig activity in Canada has gradually declined since late September 2008, and is expected to continue to decline throughout fiscal 2009 compared to 2008.

International Rig Count

Many countries in which we operate are subject to political, social and economic risks which may cause volatility within any given country. However, our international revenue in total is less volatile because we operate in approximately 50 countries, which helps to offset exposure to any one country. Due to the significant investment and complexity of international projects, we believe drilling decisions relating to such projects tend to be evaluated and monitored with a longer-term perspective with regard to oil and natural gas pricing. Additionally, the international market is dominated by major international oil companies ("IOC's") and national oil companies ("NOC's") which tend to have different objectives and more operating stability than the typical independent producer in North America. During the last 10 years, the lowest annual international rig count, excluding Canada and including Mexico, averaged 616 in fiscal 1999 and the highest annual international rig count averaged 1,061 in fiscal 2008. International rig count has declined during fiscal 2009 compared to fiscal 2008, but at a much lower rate than North America.

Outlook

As stated under "Market Conditions" above, our worldwide operations are primarily driven by the number of oil and natural gas wells being drilled, the depth and drilling conditions of such wells, the number of well completions and the level of workover activity. The global economic slowdown has led to a steep decline in oil and natural gas prices, with current prices approximately 70% below their historic highs in July 2008. These steep price declines have reduced cash flows of oil and gas producers and have led to significant reductions in planned drilling activity for the remainder of fiscal 2009, particularly in the U.S. market.

We expect average U.S. drilling rig activity to further decline to the 800-850 rig range by the end of June 2009, averaging roughly 30% below the second fiscal quarter average. Thereafter, we expect U.S. rig activity to continue to decline in the fiscal fourth quarter to the 700 rig range and stabilize at this level until natural gas supply and demand are more in balance. We anticipate that service and product pricing pressures

will continue in most U.S. and Canadian markets as a result of the decline in drilling activity and competitive pressure driven by underutilized equipment capacity in the industry. We have undertaken a number of cost reduction measures to keep our cost structure in line with current business activity, including personnel reductions, a global wage freeze, reduced capital spending plans, supplier negotiations and working capital initiatives. We can make no assurances that these cost reductions will offset the impact of reductions in drilling activity or customer pricing.

We expect drilling activity in Canada to continue to decline from current levels heading into the third quarter, as the spring break-up period continues in the Canadian market, resulting in sequential revenue decline of over 50%. We expect revenues from International Pressure Pumping Services to be slightly lower in the fiscal third quarter when compared to the second quarter, but expect operating income in that segment to improve as a result of increased sales in higher margin businesses and due to cost reduction measures put into place in the second quarter.

We expect revenue and operating income improvement in the Oilfield Services Group as a result of several new contracts and international sales orders expected to ship during the upcoming quarter.

Results of Operations

Consolidated



                                  Three Months Ended                    Six Months Ended
                                      March 31,                            March 31,
 (dollars in millions)      2009      % Change       2008        2009      % Change       2008
 Revenue                  $ 1,054.6        -18 %   $ 1,283.2   $ 2,486.2         -3 %   $ 2,568.3
 Operating income         $    58.0        -69 %   $   186.5   $   278.4        -37 %   $   439.1

 Worldwide rig count(1)       2,680        -19 %       3,324       3,039         -6 %       3,244

(1) Estimate of drilling activity as measured by average active drilling rigs based on Baker Hughes Inc. rig count information.

Results for the three months ended March 31, 2009 and 2008

All of our reportable segments were adversely impacted by a reduction in demand for oil and natural gas during the second fiscal quarter of 2009. Lower drilling activity and intense price competition for our services and products, especially in North America, drove our revenues to lower levels over the same quarter of the prior year.

Revenue for the three months ended March 31, 2009 decreased 18% when compared to the same period in the prior year and consolidated operating income for the period decreased 69%, primarily as the result of decreased demand and intense price competition for our products and services in the U.S. and Canada pressure pumping markets. Also impacting operating income was a charge of $4.2 million in the International Pressure Pumping segment related to a denied value added tax refund claim, severance costs of $6.2 million and an $8.2 million non-cash charge related to excess or idle fixed assets in the U.S., partially offset by the reversal of $12.3 million in employee cash incentive accruals. For the three months ended March 31, 2009, consolidated operating income margins decreased to 5.5% from 14.5% reported in the same period of the prior fiscal year.

Results for the six months ended March 31, 2009 and 2008

Our International Pumping Services and Oilfield Services segments experienced revenue growth for the first half of fiscal 2009 despite the impact of the global economic downturn. The integration of businesses acquired within the Oilfield Services Group in recent years and the procurement of new contracts in our International Pressure Pumping operations contributed to the higher revenue in these segments when compared to the same period of fiscal 2008. Lower drilling activity and intense price competition for our services and products in North America negatively impacted revenues in those segments for the six months ended March 31, 2009 compared to the same period of 2008.

Revenue for the six months ended March 31, 2009 decreased 3% when compared to the same period in the prior year and consolidated operating income for the period decreased 37%, primarily as the result of decreased demand and intense price competition for our products and services in the North America pressure pumping markets. Results for the six months ended March 31, 2009 also included a non-cash charge of $21.7 million, which represented 0.9% of revenue for the period, related to the settlement of a U.S. defined benefit pension plan. For the six months ended March 31, 2009, consolidated operating income margins decreased to 11.2% from 17.1% reported in the same period of the prior fiscal year.

U.S./Mexico Pressure Pumping



                                 Three Months Ended                  Six Months Ended
                                     March 31,                          March 31,
   (dollars in millions)    2009     % Change      2008       2009      % Change       2008
   Revenue                 $ 475.6        -25 %   $ 635.9   $ 1,197.1         -7 %   $ 1,290.0
   Operating income        $  25.7        -79 %   $ 125.1   $   177.6        -42 %   $   305.2

   U.S. rig count(1)         1,326        -25 %     1,770       1,612         -9 %       1,780
   Mexico rig count(1)         128         33 %        96         117         23 %          95

(1) Estimate of drilling activity as measured by average active drilling rigs based on Baker Hughes Inc. rig count information.

Results for the three months ended March 31, 2009 and 2008

Our U.S./Mexico Pressure Pumping operations second fiscal quarter 2009 revenue declined 25% with average active drilling rigs for the U.S. and Mexico decreasing 22% during the same period. The impact of declining activity and intense price competition for our products and services throughout the U.S. market was partially offset by increased activity in Mexico.

Operating income margin decreased from 19.7% in the second fiscal quarter of 2008 to 5.4% during the second fiscal quarter of 2009 as rapidly declining activity in the U.S. resulted in lower pricing for our products and services. These results also include an $8.2 million non-cash charge related to excess or idle fixed assets.

Results for the six months ended March 31, 2009 and 2008

Our U.S./Mexico Pressure Pumping operations first half of fiscal 2009 revenue declined 7% with average active drilling rigs for the U.S. and Mexico decreasing 8% during the same period. This decrease was primarily the result of lower pricing and decreased demand for our products and services within the U.S. market partially offset by increased activity in Mexico.

Operating income margin decreased from 23.7% in the first half of fiscal 2008 to 14.8% during the same period of 2009 as increased competition in the U.S. resulted in lower pricing for our products and services. These results also include an $8.2 million non-cash charge related to excess or idle fixed assets.

Canada Pressure Pumping



                                   Three Months Ended                Six Months Ended
                                        March 31,                       March 31,
      (dollars in millions)    2009    % Change      2008      2009     % Change      2008
      Revenue                 $ 95.4        -31 %   $ 138.8   $ 227.2        -13 %   $ 260.1
      Operating income        $  5.9        -59 %   $  14.5   $  34.8         10 %   $  31.5

      Canadian rig count(1)      329        -35 %       508       369        -15 %       432

(1) Estimate of drilling activity as measured by average active drilling rigs based on Baker Hughes Inc. rig count information.

Results for the three months ended March 31, 2009 and 2008

Canadian Pressure Pumping revenue decreased $43.4 million, or 31%, for the second fiscal quarter of 2009 compared to the same period of fiscal 2008, $24.4 million of which was attributable to the weakening Canadian dollar compared to the U.S. dollar during the comparable periods. In addition, decreased demand and lower pricing for our services and products negatively impacted revenue for the comparable periods. Average drilling rig count in Canada was down 35% for the comparable quarters.

Operating income margin declined to 6.2% for the three months ended March 31, 2009, from 10.4% during the same period in the prior year, primarily as a result of lower drilling activity, competitive pricing pressures and reduced higher margin services related revenue.

Results for the six months ended March 31, 2009 and 2008

Canadian Pressure Pumping revenue decreased, $32.9 million, or 13%, for the first half of fiscal 2009 compared to the same period of fiscal 2008. The weakening Canadian dollar compared to the U.S. dollar during the comparable periods resulted in a $47.7 million revenue decrease, which was partially offset by improved pricing and increased activity in the first fiscal quarter of 2009 compared to the prior year period. Average drilling rig count in Canada was down 15% for the same periods.

Operating income margin improved to 15.3% for the six months ended March 31, 2009, from 12.1% during the same period in the prior year, as a result of a more favorable job mix and lower fuel costs in the current year period when compared to the prior year period.

International Pressure Pumping



                                                     Three Months Ended                Six Months Ended
                                                         March 31,                        March 31,
(dollars in millions)                           2009     % Change      2008      2009     % Change      2008
Revenue                                        $ 276.7         -5 %   $ 292.1   $ 605.6          4 %   $ 580.6
Operating income                               $  21.6        -38 %   $  34.7   $  67.1         -5 %   $  70.6

International rig count, excluding Mexico(1)       897         -6 %       950       941         -  %       938

(1) Estimate of drilling activity as measured by average active drilling rigs based on Baker Hughes Inc. rig count information.

Results for the three months ended March 31, 2009 and 2008

The following table summarizes the percentage change in revenue for each of the operating segments within the International Pressure Pumping reportable segment, comparing the second fiscal quarter of 2009 with the comparable period of fiscal 2008:

                                           % Change in
                                             Revenue
                           Europe/Africa            -  %
                           Middle East             -10 %
                           Asia Pacific             17 %
                           Russia                  -55 %
                           Latin America            -5 %

International Pressure Pumping revenue of $276.7 million in the second fiscal quarter of 2009 decreased 5% compared to the same period in the prior year, with our Russia and the Middle East operations being the most significant contributors to the revenue decline. International drilling rig activity decreased 6% over the same time period. The revenue decrease in the Middle East was primarily the result of lower rig activity in Saudi Arabia, India and Kazakhstan. Russia was negatively impacted by the completion of a significant service contract during the first quarter of fiscal 2009. We have closed one base in Russia and continue to service a single service contract out of our one remaining base. Upon completion of that contract later in the fiscal year, we intend to orderly exit the Russian pressure pumping market.

Revenues in Europe/Africa were flat for the second fiscal quarter of 2009 compared to the same period of 2008 as increased activity in the Netherlands, Nigeria and Ghana was offset by lower activity in Norway. Revenue in our Asia Pacific operations improved in the second fiscal quarter of 2009 on increased project activity in Thailand, Malaysia and China when compared to the same period of 2008.

Operating income margins from our International Pressure Pumping operations decreased from 11.9% in the second quarter of fiscal 2008 to 7.8% in the second quarter of fiscal 2009. The decreased operating margin is largely attributable to a high fixed cost structure in Russia required to maintain operations on the single remaining contract in advance of exiting that market, severance costs totaling $2.6 million associated with our initiative to align our workforce with current market conditions and the $4.2 million charge related to a denied value added tax refund claim.

Results for the six months ended March 31, 2009 and 2008

The following table summarizes the percentage change in revenue for each of the operating segments within the International Pressure Pumping reportable segment, comparing the first half of fiscal 2009 with the comparable period of fiscal 2008:

                                           % Change in
                                             Revenue
                           Europe/Africa            -3 %
                           Middle East              -1 %
                           Asia Pacific             23 %
                           Russia                  -26 %
                           Latin America             7 %

International Pressure Pumping revenue of $605.6 million in the first six months of fiscal 2009 increased 4% compared to the same period in the prior year, with our Asia Pacific and Latin America operations being the most significant contributors. International drilling rig activity remained flat over the same time period. The increased revenue in Asia Pacific is largely attributable to new projects in China and increased activity in Malaysia and Thailand. Latin America benefited from activity-related increases in Brazil, Venezuela and Ecuador.

Revenues in Europe decreased largely as a result of unfavorable exchange rates primarily in the first quarter of fiscal 2009, which caused local currency billings to translate into fewer U.S. dollars. In the Middle East, the favorable impact of increased activity and new service contracts in North Africa and Oman was offset by lower rig activity in India and Saudi Arabia. Russia was negatively impacted by the completion of a significant service contract during the first quarter of 2009.

Operating income margin from our International Pressure Pumping operations decreased from 12.2% in the first six months of fiscal 2008 to 11.1% in the first six months of fiscal 2009. The decreased operating margins are largely attributable to a high fixed cost structure in Russia required to maintain operations on the single remaining contract in advance of exiting that market, severance costs totaling $2.7 million associated with our initiative to align our workforce with current market conditions and the $4.2 million charge related to a denied value added tax refund claim.

Oilfield Services Group



                                   Three Months Ended                Six Months Ended
                                       March 31,                        March 31,
     (dollars in millions)    2009     % Change      2008      2009     % Change      2008

Results for the three months ended March 31, 2009 and 2008

The following table summarizes the percentage change in revenue for each of the operating segments within the Oilfield Services Group:

                                                  % Change in
                                                    Revenue
                    Tubular Services                      -10 %
                    Process & Pipeline Services           -11 %
                    Chemical Services                       6 %
                    Completion Tools                        3 %
                    Completion Fluids                      -3 %

Revenues from our Oilfield Service Group decreased 4% to $207.0 million in the second quarter of fiscal 2009 compared to the same period in fiscal 2008, with the most significant decreases from our Tubular Services and Process & Pipeline Services businesses. The decrease in Tubular Services revenue is primarily attributable to lower activity in most international markets and in the Gulf of Mexico. Process & Pipeline Services revenue decreased primarily as a result of the completion of a large international project and the activity decline in the U.S. and Canada markets. Chemical Services revenues increased primarily as a result of the expansion of capillary services into new markets and increased industrial service work.

Operating income margin for the Oilfield Services Group for the second fiscal quarter of 2009 decreased to 9.9% compared to 18.1% in the second fiscal quarter of fiscal 2008, primarily as a result of a large project-oriented Completion Tools product sale in the second fiscal quarter of 2008 that did not repeat, and lower activity in the U.S and certain international markets.

Results for the six months ended March 31, 2009 and 2008

The following table summarizes the percentage change in revenue for each of the operating segments within the Oilfield Services Group:

                                                  % Change in
                                                    Revenue
                    Tubular Services                       -6 %
                    Process & Pipeline Services            -6 %
                    Chemical Services                      11 %
                    Completion Tools                       20 %
                    Completion Fluids                      18 %

Revenues from our Oilfield Service Group increased 4% to $456.3 million in the first half of fiscal 2009 compared to the same period in fiscal 2008, primarily as a result of increased revenue in the Completion Tools business. The increase in Completion Tools revenue is primarily attributable to the inclusion of the Innicor Subsurface Technologies business, which was acquired in May 2008.

Operating income margin for the Oilfield Services Group for the first six months of fiscal 2009 decreased to 13.5% compared to 18.5% for the same period of fiscal 2008, primarily as a result of lower tubular service activity, a difference in product / service mix and fewer high end jobs and decreased activity in Completion Tools.

Other Operating Expenses

The following table sets forth our other operating expenses (in thousands):



                                             Three Months Ended       Six Months Ended
                                                 March 31,               March 31,
                                              2009         2008       2009        2008
. . .