Business Overview

The global economic downturn continued to adversely affect the demand for our products and services during the second quarter of 2009, with all operating segments reporting significant decreases in revenues and profitability compared to the second quarter of the prior year with the exception of our Offshore Services segment, which showed increased demand and unprecedented profitability. In particular, our Production Testing and Fluids segments have been impacted by the significant decline in oil and gas drilling activity, which has resulted in reduced demand for completion fluids and production testing services. We are in the process of renegotiating our supply agreements with a significant supplier for our Fluids Division, Chemtura Corporation (Chemtura), as a result of Chemtura's bankruptcy proceedings. As a result, we expect the purchase price we pay to Chemtura for bromine to increase, although this increase may be partially offset by the effect of other contractual modifications being discussed. Maritech's oil and gas production revenues continue to be affected by damages suffered as a result of Hurricane Ike, which shut-in a key producing field, and the impact of decreased oil and natural gas prices compared to the prior year. Production volumes have also declined compared to the prior year period due to a decrease in the number of newly drilled wells, as a result of our efforts to conserve capital. Second quarter 2009 profitability for Maritech was also affected by oil and gas property impairments and excess decommissioning costs incurred during the period. As many of its customers respond to lower natural gas prices, our Compressco segment continues to experience decreasing utilization of its compressor units. Compressco has temporarily suspended its fabrication of new units until demand for its production enhancement services increases and inventories of available units are reduced. Countering the declines experienced by each of these segments, our Offshore Services segment reported a high level of activity during the second quarter of 2009, as many of its offshore customers increase their efforts to abandon and decommission Gulf of Mexico oil and gas assets in response to risks from future hurricanes and the significantly increased cost to insure offshore properties. Many offshore operators, including Maritech, have recently discontinued or reduced windstorm insurance coverage until reasonably priced insurance coverage becomes available, and they are seeking to maximize their abandonment and decommissioning efforts as a risk management strategy. Our Offshore Services segment has increased its capacity to service its customers through the leasing of an additional support vessel, which will be utilized for contracted hurricane recovery work during the remainder of the year.

Our long term growth strategy continues to be tempered by our capital conservation and cost containment efforts as a result of the current economic environment. Despite the 22.0% decrease in consolidated revenues during the first half of 2009 compared to the prior year period, our operating cash flows increased by 13.9%. This increase is partially due to the $23.1 million generated from the liquidation of oil swap derivative contracts as well as our efforts to improve efficiencies and reduce costs, including steps taken to reduce operating and administrative staff, reduce salaries and benefits, reduce inventory and receivables, consolidate locations, and temporarily idle certain equipment assets. While the decision to suspend Maritech's windstorm insurance coverage is expected to increase operating cash flows during the coming twelve month period, it exposes us to the risk of uninsured hurricane damage during the 2009 storm season. A portion of our operating cash flows will also be consumed by our acceleration of Maritech abandonment and decommissioning efforts, and such expenditures totaled $39.3 million during the first six months of the year. During the second quarter, a large majority of the proceeds from the sale of oil swap derivative contracts was used to reduce the outstanding balance under our revolving credit facility. Capital expenditure activity has also been decreased compared to the prior year period, particularly by our Maritech and Compressco segments, despite the completion of our new corporate headquarters building and the continuing construction of the El Dorado calcium chloride plant, which is expected to begin initial commercial production in the fourth quarter of 2009. These two projects represented 60.8% of the total capital expenditures during the six month period. We continue to reduce and postpone capital spending in an effort to further devote discretionary cash to the reduction of our long term debt. As of June 30, 2009, our cash on hand had increased to $22.6 million and the outstanding balance of our long-term debt had decreased to $399.2 million. Our bank credit facility is scheduled to mature in June 2011, and our Senior Notes are scheduled to mature at various dates from September 2011 through April 2016.

Critical Accounting Policies

There have been no material changes or developments in the evaluation of the accounting estimates and the underlying assumptions or methodologies pertaining to our Critical Accounting Policies and Estimates disclosed in our Form 10-K for the year ended December 31, 2008. In preparing our consolidated financial statements, we make assumptions, estimates, and judgments that affect the amounts reported. We periodically evaluate our estimates and judgments, including those related to potential impairments of long-lived assets (including goodwill), the collectability of accounts receivable (including insurance receivables), and the current cost of future

abandonment and decommissioning obligations. Our judgments and estimates are based on historical experience and on future expectations that are believed to be reasonable. The combination of these factors forms the basis for judgments made about the carrying values of assets and liabilities that are not readily apparent from other sources. These judgments and estimates may change as new events occur, as new information is acquired, and as our operating environment changes. Actual results are likely to differ from our current estimates, and those differences may be material.

Results of Operations

                                       Three Months Ended June 30,            Six Months Ended June 30,
                                        2009                 2008              2009                2008
                                                                (In Thousands)
Revenues
Fluids Division                    $       62,211       $       96,466     $     125,900       $    163,650
Offshore Division
  Offshore Services                        92,257               79,712           140,301            130,878
  Maritech                                 45,408               75,462            86,620            132,981
  Intersegment eliminations               (21,383 )             (2,774 )         (29,026 )           (5,919 )
   Total Offshore Division                116,282              152,400           197,895            257,940
Production Enhancement Division
  Production Testing                       18,287               32,010            42,906             61,534
  Compressco                               21,181               23,553            46,568             46,606
   Total Production Enhancement
Division                                   39,468               55,563            89,474            108,140
Intersegment eliminations                     (17 )                (40 )             (74 )             (185 )
                                          217,944              304,389           413,195            529,545

Gross profit
Fluids Division                            13,182               22,393            30,203             35,650
Offshore Division
  Offshore Services                        26,673               15,982            29,574             15,975
  Maritech                                (10,501 )             18,274            (2,849 )           27,319
  Intersegment eliminations                  (263 )                304              (574 )              547
   Total Offshore Division                 15,909               34,560            26,151             43,841
Production Enhancement Division
  Production Testing                        3,456               10,841            11,143             21,457
  Compressco                                8,591               10,246            17,712             19,749
   Total Production Enhancement
Division                                   12,047               21,087            28,855             41,206
Other                                        (749 )               (613 )          (1,450 )           (1,223 )
                                           40,389               77,427            83,759            119,474

Income before taxes and discontinued operations
Fluids Division                             1,216               15,570            13,369             22,411
Offshore Division
  Offshore Services                        23,024               11,547            22,380              7,444
  Maritech                                (11,431 )             17,569            (2,245 )           24,943
  Intersegment eliminations                  (187 )                303              (498 )              546
   Total Offshore Division                 11,406               29,419            19,637             32,933
Production Enhancement Division
  Production Testing                        7,382                9,336            13,081             17,758
  Compressco                                5,904                7,691            12,573             14,641
   Total Production Enhancement
Division                                   13,286               17,027            25,654             32,399
Corporate overhead                        (12,269 )            (16,513 )         (26,886 )          (30,908 )
                                           13,639               45,503            31,774             56,835

The above information excludes the results of our Venezuelan and process services businesses, which have been accounted for as discontinued operations.

Three months ended June 30, 2009 compared with three months ended June 30, 2008.

Consolidated Comparisons

Revenues and Gross Profit - Our total consolidated revenues for the quarter ended June 30, 2009 were $217.9 million compared to $304.4 million for the second quarter of the prior year, a decrease of 28.4%. Our consolidated gross profit decreased to $40.4 million during the second quarter of 2009 compared to $77.4 million in the prior year quarter, a decrease of 47.8%. Consolidated gross profit as a percentage of revenue was 18.5% during the second quarter of 2009 compared to 25.4% during the prior year period.

General and Administrative Expenses - General and administrative expenses were $22.5 million during the second quarter of 2009 compared to $28.0 million during the second quarter of 2008, a decrease of $5.6 million or 19.9%. This decrease was primarily due to approximately $5.0 million of decreased salary, benefits, contract labor costs, and other associated employee expenses as a result of decreased incentive bonuses and personnel cost reductions. In addition, general and administrative expenses decreased approximately $0.8 million due to decreased office expenses, primarily from decreased office rent following the completion of our new corporate headquarters building, approximately $0.4 million from decreased professional fees, and approximately $0.6 million from decreased marketing, investor relations, and other general expenses. These decreases were partially offset by approximately $0.9 million of increased bad debt expenses and approximately $0.3 million of increased insurance and tax expenses. General and administrative expenses as a percentage of revenue were 10.3% during the second quarter of 2009 compared to 9.2% during the prior year period, as the net decrease in general and administrative expenses was more than offset by the decrease in revenues.

Other Income and Expense - Other income and expense was $0.9 million of expense during the second quarter of 2009 compared to $0.4 million of income during the second quarter of 2008, primarily due to the impact of an approximately $6.8 million impairment charge related to an unconsolidated European joint venture and $0.9 million of increased hedge ineffectiveness. These charges were partially offset by a $5.8 million gain from a legal settlement during the current year period, $0.3 million of increased gains on sales of assets, and approximately $0.3 million of increased other income, primarily from increased foreign currency gains.

Interest Expense and Income Taxes - Net interest expense decreased to $3.4 million during the second quarter of 2009 compared to $4.3 million during the second quarter of 2008, despite increased borrowings of long-term debt which were used to fund our capital expenditure and working capital requirements since the beginning of 2008. The decrease was due to lower interest rates on the outstanding revolving credit facility and due to increased capitalized interest, primarily associated with our Arkansas calcium chloride plant construction project. We anticipate that our new calcium chloride facility in El Dorado, Arkansas will begin initial commercial production during the fourth quarter of 2009. Our provision for income taxes during the second quarter of 2009 decreased to $4.4 million compared to $15.3 million during the prior year period, primarily due to decreased earnings.

Net Income - Net income before discontinued operations was $9.2 million during the second quarter of 2009 compared to $30.2 million in the prior year second quarter, a decrease of $20.9 million or 69.5%. Net income per diluted share before discontinued operations was $0.12 on 75,400,577 average diluted shares outstanding during the second quarter of 2009 compared to $0.40 on 75,752,026 average diluted shares outstanding in the prior year period.

During the fourth quarter of 2007, we sold our process services operation for approximately $58.7 million, net of certain adjustments. During the fourth quarter of 2006, we made the decision to discontinue our Venezuelan fluids and production testing businesses due to several factors, including the changing political climate in that country. Net loss from discontinued operations was $0.0 million during the second quarter of 2009 compared to $0.7 million of net loss from discontinued operations during the second quarter of 2008.

Net income was $9.2 million during the second quarter of 2009 compared to $29.4 million in the prior year second quarter, a decrease of $20.2 million or 68.8%. Net income per diluted share was $0.12 on 75,400,577 average diluted shares outstanding during the second quarter of 2009 compared to $0.39 on 75,752,026 average diluted shares outstanding in the prior year quarter.

Divisional Comparisons

Fluids Division - Our Fluids Division revenues decreased 35.5% to $62.2 million during the second quarter of 2009 compared to $96.5 million during the second quarter of 2008, a $34.3 million decrease. This decrease was primarily from $32.4 million of decreased product sales due to significantly reduced sales volumes for completion fluids and, to a lesser extent, from decreased sales of manufactured chemical products compared to the prior year quarter. The decreased completion fluids sales volumes reflect the decreased oil and gas drilling activity, both domestically and internationally, as reflected in rig count levels compared to the prior year period. The decrease in manufactured chemicals sales volumes is primarily attributed to supply constraints which affected our European operations as well as the general decline in economic conditions affecting the activity levels of the Division's oil and gas industry customers. The Division also reflected $1.9 million of decreased service revenues due to decreased domestic onshore oil and gas activity.

Our Fluids Division gross profit decreased to $13.2 million during the second quarter of 2009, compared to $22.4 million during the prior year period, a decrease of $9.2 million or 41.1%. Gross profit as a percentage of revenue decreased to 21.2% during the current year period compared to 23.2% during the prior year period. This decrease was primarily due to the decreased completion fluid sales activity discussed above as well as decreased European manufactured products gross profit, which was partially due to the supply constraint discussed above. During March 2009, a major supplier of feedstock raw materials for our Fluids Division, Chemtura, announced that it had filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy code. As a result of the bankruptcy proceedings, we are in the process of renegotiating certain terms of our supply contracts with Chemtura. While the expected increased cost of the Division's raw materials could impact its future profitability, this increase may be partially offset by the effect of other contractual modifications being discussed. In addition, the Division's new El Dorado, Arkansas calcium chloride plant facility is expected to begin initial commercial production during the fourth quarter of 2009.

Fluids Division income before taxes during the second quarter of 2009 decreased $14.4 million to $1.2 million compared to $15.6 million in the corresponding prior year period, a decrease of 92.2%. This decrease was primarily due to the $9.2 million decrease in gross profit discussed above and the $6.8 million charge associated with the impairment of the Division's investment in a European unconsolidated joint venture. The joint venture plans to cease operation of its calcium chloride manufacturing plant following our joint venture partner's announced closure of its adjacent plant facility which supplies the joint venture's plant with feedstock raw material. These decreases were partially offset by approximately $1.3 million of decreased administrative expenses and approximately $0.2 million of increased other income primarily from foreign currency gains.

Offshore Division - Revenues from our Offshore Division, which was previously known as the Well Abandonment and Decommissioning (WA&D) Division, decreased from $152.4 million during the second quarter of 2008 to $116.3 million during the second quarter of 2009, a decrease of $36.1 million or 23.7%. Offshore Division gross profit during the second quarter of 2009 totaled $15.9 million compared to $34.6 million during the prior year second quarter, a decrease of $18.7 million or 54.0%. Offshore Division income before taxes was $11.4 million during the second quarter of 2009 compared to $29.4 million during the prior year period, a decrease of $18.0 million or 61.2%.

The revenues of the Division's Offshore Services segment increased 15.7% to $92.3 million during the second quarter of 2009 compared to $79.7 million in the prior year second quarter, an increase of $12.5 million. This increase was primarily due to increased offshore decommissioning activity and vessel utilization during the current year quarter due to the current high demand for the segment's offshore diving, abandonment, heavy lift, and cutting services. Beginning in June 2009, the segment increased its service capacity to its customers through the leasing of a specialized dive service vessel which will be utilized for contracted hurricane recovery work during the remainder of the year. The Offshore Services segment plans to continue to capitalize on the current high demand as Gulf of Mexico oil and gas operators continue to perform recovery operations on offshore properties which were damaged or destroyed by hurricanes during 2005 and 2008 or attempt to accelerate their efforts to abandon and decommission offshore platform facilities in response to risks from future storms and the significantly increased insurance costs for offshore properties. Many offshore operators, including Maritech, have reduced or discontinued windstorm insurance coverage until premium costs decrease or become justifiable and are seeking to maximize their abandonment and decommissioning activity in order to decrease their risk of future damage. The segment is planning to perform a significant amount of such work for Maritech during the next eighteen months.

The Offshore Services segment of the Division reported gross profit of $26.7 million during the second quarter of 2009 compared to $16.0 million of gross profit during the second quarter of 2008, a $10.7 million or 66.9% increase. The Offshore Services segment's gross profit as a percentage of revenues was 28.9% during the

second quarter of 2009 compared to 20.0% during the prior year period. This increase was primarily due to the increased gross profit of the segment's heavy lift and cutting services businesses, which generated significant efficiencies from increased utilization during the current year period. It is anticipated that the segment's gross profit margin will continue to exceed prior year levels during the seasonally strong third quarter of the year, as the segment has historically incurred the greatest weather risks associated with offshore operations during the first and fourth quarters. In addition, the segment has consolidated certain office and administrative functions, reduced crews, and temporarily idled selected inland water equipment in order to increase efficiencies for certain of its operations.

Offshore Services segment income before taxes increased from $11.5 million during the second quarter of 2008 to $23.0 million during the current year quarter, an increase of $11.5 million or 99.4%. This increase was due to the $10.7 million increase in gross profit described above, plus approximately $0.8 million of decreased administrative expenses.

The Division's Maritech operations reported revenues of $45.4 million during the second quarter of 2009 compared to $75.5 million during the prior year period, a decrease of $30.1 million or 39.8%. Revenues decreased by approximately $16.0 million as a result of decreased realized commodity prices. Maritech has hedged a portion of its expected future production by entering into derivative hedge contracts, with certain contracts extending through 2010. Including the impact from its hedge contracts, Maritech reflected average realized oil and natural gas prices during the second quarter of 2009 of $64.10/barrel and $7.32/MMBtu, respectively, compared to $86.19/barrel and $9.83/MMBtu, respectively, during the prior year period. Third quarter 2009 oil and natural gas prices continue to be significantly below the price levels received during the prior year. Decreased production volumes resulted in decreased revenues of approximately $14.6 million, primarily due to certain properties which continue to be shut-in as a result of Hurricane Ike. In particular, one of Maritech's key oil producing fields, East Cameron 328, will continue to have a portion of its production shut-in until a new platform can be constructed to replace a platform which was toppled during the storm. However, operations are underway to install production equipment on the remaining platform in the field to restore approximately one half of the field's production prior to the end of 2009. Much of Maritech's daily production is processed through neighboring platforms, pipelines, and processing facilities of other operators and third parties, many of which were also damaged during the storm. As a result, an additional portion of Maritech's production remains shut-in. The decreased production from the shut-in properties more than offset newly added production during the quarter from wells drilled in 2008. The level of Maritech's drilling and development activity has decreased during 2009 as a result of our efforts to conserve capital. Partially offsetting the decrease in prices and volumes, Maritech reported $0.6 million of increased processing revenue during the current year quarter.

Maritech reported negative gross profit of $10.5 million during the second quarter of 2009 compared to $18.3 million of gross profit during the second quarter of 2008, a decrease of $28.8 million or 157.5%. Maritech's gross profit as a percentage of revenues was 24.2% during the prior year quarter. Although the impact of reduced revenues was partially offset by decreased lease operating and depletion expenses associated with the decreased production, Maritech's gross profit was also reduced due to excess decommissioning costs incurred during the quarter which were approximately $7.0 million higher than that of the prior year period. Also, Maritech recorded oil and gas property impairments of approximately $2.0 million during the current year period compared to $4.0 million of dry hole costs which were recorded during the prior year period. Maritech discontinued its insurance coverage for windstorm damage due to the current high premium cost of insurance and the reduced levels of coverage. While this decision should result in lower operating expenses beginning in June 2009, Maritech is also exposed to losses from uninsured damages during the current year hurricane season. Depending on the severity and location of the storms, such losses could be significant.

The Division's Maritech operations reported a pretax loss of $11.4 million during the second quarter of 2009 compared to income before taxes of $17.6 million during the prior year period, a decrease of $29.0 million or 165.1%. This decrease was due to the $28.8 million decrease in gross profit discussed above, plus approximately $0.1 million of increased administrative costs and approximately $0.2 million of decreased gains on sales of properties recorded compared to the prior year period.

Production Enhancement Division - Beginning in the fourth quarter of 2008, our Production Enhancement Division consists of two separate reporting segments: the Production Testing segment and the Compressco segment. Production Enhancement Division revenues decreased from $55.6 million during the second quarter of 2008 to $39.5 million during the current year quarter, a decrease of $16.1 million or 29.0%. Production Enhancement Division gross profit decreased from $21.1 million during the second quarter of 2008 to $12.0 million during the current year period, a decrease of $9.0 million or 42.9%. Production Enhancement Division gross profit as a percentage of revenue also decreased from 38.0% during the second quarter of 2008 to 30.5% during the

second quarter of 2009. Production Enhancement Division income before taxes decreased during the second quarter of 2009 to $13.3 million, compared to $17.0 million during the second quarter of 2008, a decrease of $3.7 million or 22.0%.

Production Testing revenues decreased dramatically during the second quarter of 2009 to $18.3 million, a $13.7 million decrease compared to $32.0 million during the second quarter of 2008. This 42.9% decrease was primarily due to the significant decrease in demand due to decreased drilling activity. The Division's Production Testing segment is particularly affected by the activities of its domestic customers, many of whom have significantly decreased activity due to the current economic climate. This decrease was partially offset by slightly increased international revenues, primarily in Mexico and Brazil.

Production Testing gross profit decreased 68.1% during the second quarter of 2009 from $10.8 million during the prior year period to $3.5 million during the current year period, a decrease of $7.4 million. Gross profit as a percentage of revenues also decreased dramatically from 33.9% during the second quarter of 2008 to 18.9% during the second quarter of 2009. This decrease was due to the significantly weaker demand and decreased activity domestically.

Production Testing income before taxes decreased from $9.3 million during the second quarter of 2008 to $7.4 million during the second quarter of 2009, a . . .