You should read the following discussion and analysis together with our condensed consolidated financial statements and the notes to those statements included elsewhere in this quarterly report on Form 10-Q.

Macroeconomic Environment and Outlook

We provide a broad range of products and services to the oil and gas industry through our accommodations, offshore products, well site services and tubular services business segments. In our accommodations segment, we support both the oil and gas and mining industries. Demand for our products and services is cyclical and substantially dependent upon activity levels in the oil and gas and mining industries, particularly our customers' willingness to spend capital on the exploration for and development of oil, natural gas, coal and mineral reserves. Our customers' spending plans are generally based on their outlook for near-term and long-term commodity prices. As a result, demand for our products and services is highly sensitive to current and expected commodity prices, principally that of crude oil, coal and, to a lesser extent, natural gas.

In the first quarter of 2012, the price of crude oil increased to over $100 per barrel as positive economic news related to growth rates projected in China and other emerging markets, consumer spending and U.S. consumer confidence indicated that an economic recovery was underway. However, the spot price of crude oil decreased during the second quarter of 2012 and is currently trading at approximately $90 per barrel for West Texas Intermediates (WTI) crude and around $106 per barrel for Intercontinental Exchange (ICE) Brent crude. Successful shale oil drilling in the U.S. has led to robust oil production causing supply bottlenecks at Cushing, Oklahoma, which have contributed to WTI trading at a significant discount to Brent crude pricing. If U.S. oil production grows significantly and continues to exceed pipeline transportation capacity, we could see additional downward pressure on oil prices triggering lower future U.S. drilling activity. Despite some signs of an improving economy in the United States, the world's largest consumer of crude oil, global economic risks remain due to fiscal and financial uncertainty in various European countries, a prolonged level of relatively high unemployment in the U.S. and other advanced economies and inflation risks in certain emerging markets. Recent WTI and Brent crude pricing trends are as follows:

                                       Average Price (per bbl)
                                       WTI             Brent Crude

                   Quarter ended
                     6/30/2012     $      93.38       $      108.90
                     3/31/2012           102.85              118.54
                    12/31/2011            94.03              109.31
                     9/30/2011            89.71              112.47
                     6/30/2011           102.51              117.12
                     3/31/2011            93.93              104.90
                    12/31/2010            85.10               86.80
                     9/30/2010            76.01               76.41
                     6/30/2010            77.86               78.67

Prices for natural gas in the United States continue to be weak due to the rise in production from unconventional natural gas resources in North America, largely due to increases in onshore shale production resulting from technological advancements in horizontal drilling and hydraulic fracturing. Natural gas prices are currently trading at or below $3.25 per Mcf. Natural gas inventories in the U.S. continue to be over-stocked, particularly given an unseasonably warm winter season. The U.S. gas-related working rig count has declined from more than 800 rigs at the beginning of 2012 to less than 520 rigs currently. Increases in the supply of natural gas, whether the supply comes from conventional or unconventional production or associated gas production from oil wells, will likely constrain prices for natural gas and result in fewer rigs drilling for gas in the near-term.

Growing Chinese and Indian steel production in the first half of 2012 is expected to support metallurgical coal pricing for the remainder of 2012. After decreasing over the past year, metallurgical coal prices are expected to remain at these levels during the remainder of the year. Urbanization and infrastructure investment from the Chinese government should fuel continued strength in steel demand in the foreseeable future. Beyond China, Indian steel consumption is expected to grow as India's five-year growth plan calls for significant investments to expand its infrastructure.

Various oil and gas industry analysts have projected that 2012 global exploration and production expenditures are expected to increase over calendar year 2011 levels. North American capital spending plans are expected to be focused in onshore areas while international exploration and production budgets are expected to primarily be spent offshore.

Overview

Demand for our accommodations and offshore products segments is primarily tied to the long-term outlook for commodity prices. In contrast, demand for our well site services and tubular services segments responds to shorter-term movements in oil and natural gas prices and, specifically, changes in North American drilling and completion activity. Other factors that can affect our business and financial results include the general global economic environment and regulatory changes in the U. S. and internationally.

Our accommodations business is predominantly located in northern Alberta, Canada and Queensland, Australia and derives most of its business from resource companies who are developing and producing oil sands and coal resources and, to a lesser extent, other mineral resources. A significant portion of our accommodations revenues is generated by our large-scale lodge and village facilities. Where traditional accommodations and infrastructure are not accessible or cost effective, our semi-permanent lodge and village facilities provide comprehensive accommodations services similar to those found in an urban hotel. We typically contract our facilities to our customers on a fee per day basis covering lodging and meals that is based on the duration of their needs which can range from several months to several years. In addition, primarily in Canada and the U.S., we provide shorter-term remote site accommodations in smaller configurations utilizing our modular, mobile camp assets.

Generally, our oil sands and mining accommodations' customers are making multi-billion dollar investments to develop their prospects, which have estimated reserve lives of 10 to in excess of 30 years and, consequently, these investments are dependent on those customers' longer-term view of commodity demand and prices. Oil sands development activity has increased in the past year and has had a positive impact on our accommodations segment. Recent announcements of new and expanded oil sands projects will create the opportunity for extensions of existing accommodations contracts and incremental accommodations contracts for us in Canada. In addition, several major oil companies and national oil companies have announced joint ventures to develop oil sands leases that should bode well for future oil sands investment and, as a result, demand for oil sands accommodations. Our Australian accommodations business is significantly influenced by increased metallurgical coal demand, especially from China, Japan and India. Despite coal prices weakening recently, we expect Chinese metallurgical coal demand to continue to increase in 2012 compared to 2011 as the country continues to industrialize. We are expanding our Australian accommodations capacity to meet this increasing demand. We are also expanding accommodations deployed to support onshore North American drilling and completion activity in several of the active shale play regions.

Our offshore products segment provides highly engineered products for offshore oil and natural gas drilling and production systems and facilities. Sales of our offshore products and services depend primarily upon development of infrastructure for offshore production systems and subsea pipelines, repairs and upgrades of existing offshore drilling rigs and construction of new offshore drilling rigs and vessels. In this segment, we are particularly influenced by global deepwater drilling and production spending, which are driven largely by our customers' longer-term outlook for oil and natural gas prices.

The improvement in oil prices over the last two years, along with the outlook for long-term oil demand, resulted in increased bidding and quoting activity for our offshore products in the latter part of 2010 that continued throughout 2011 and the first half of 2012. As a result of this increased activity, backlog in our offshore products segment increased from $519 million as of June 30, 2011 to a record $562 million as of June 30, 2012. Offshore products' backlog totaled $535 million as of December 31, 2011. We anticipate global deepwater spending to continue to include new award opportunities coming from Brazil, West Africa, the U.S. Gulf of Mexico, South East Asia and Australia over the next twelve months.

Our well site services businesses are significantly influenced by drilling and completion activity primarily in the U.S. and, to a lesser extent, Canada and the rest of the world. Until recently, overall industry activity has been primarily driven by spending for natural gas exploration and production, particularly in the shale play regions of the U.S. using horizontal drilling and completion techniques. However, considering current oil prices, lower natural gas prices and the advancement of horizontal drilling and completion techniques, activity in North America has shifted to a greater proportion of oil and liquids-rich drilling. According to rig count data published by Baker Hughes Incorporated, the oil rig count in the U.S. now totals approximately 1,400 rigs, the highest oil-related rig count in over 20 years, comprising approximately 73% of total U.S. drilling activity.

In our well site services business segment, we predominantly provide rental tools and services and, to a lesser extent, land drilling services. Our rental tools and services business provides equipment and service personnel utilized in the completion and initial production of new and recompleted wells. Activity for the rental tools and services business is dependent primarily upon the level and complexity of drilling, completion and workover activity throughout North America. Well complexity has increased as the number of productive zones completed in connection with horizontal drilling has increased. Demand for our drilling services is driven by land drilling activity in our primary drilling markets in West Texas, where we primarily drill oil wells, and in the Rocky Mountains area in the U.S., where we drill both liquids-rich and natural gas wells.

Through our tubular services segment, we distribute a broad range of casing and tubing used in the drilling and completion of oil and natural gas wells primarily in North America. Accordingly, sales and gross margins in our tubular services segment depend upon the overall level of drilling activity, the types of wells being drilled, movements in global steel input prices and the overall industry level of OCTG inventory and pricing. Historically, tubular services' gross margin generally expands during periods of rising OCTG prices and contracts during periods of decreasing OCTG prices. Our tubular services business has historically been our most cyclical business segment. The strong U.S. land drilling activity in 2011 and in the first half of 2012 along with the return of drilling in the U.S. Gulf of Mexico have led to increased tubular services volumes and revenues.

We have a diversified product and service offering, which has led to exposure to activities conducted throughout the oil and gas cycle. Demand for our tubular services, land drilling and rental tools and services businesses is highly correlated to changes in the drilling rig count in the United States and, to a much lesser extent, Canada. The table below sets forth a summary of North American rig activity, as measured by Baker Hughes Incorporated, for the periods indicated.

                                                Average Drilling Rig Count for
                                        Three Months Ended             Six Months Ended
                                     June 30,        June 30,      June 30,       June 30,
                                       2012            2011          2012           2011
U.S. Land - Oil                          1,351             929         1,294            866
U.S. Land - Natural gas and other          572             870           642            878
U.S. Offshore                               47              31            45             29
Total U.S.                               1,970           1,830         1,981          1,773
Canada                                     173             188           382            387
Total North America                      2,143           2,018         2,363          2,160

The average North American rig count for the six months ended June 30, 2012 increased by 203 rigs, or 9.4%, compared to the six months ended June 30, 2011 largely due to growth in the U.S. land oil rig count partially offset by a decline in natural gas drilling.

A factor that influences the financial results for our accommodations segment is the exchange rate between the U.S. dollar and the Canadian dollar and, to a lesser extent, the exchange rate between the U.S. dollar and the Australian dollar. Our accommodations segment has derived a majority of its revenues and operating income in Canada and, since 2011, Australia. These revenues and profits are translated into U.S. dollars for U.S. GAAP financial reporting purposes. Although U.S. dollar and Australian dollar exchange rates were comparable in the first half of 2012 and 2011, the Canadian dollar was valued at an average exchange rate of U.S. $0.99 in the first half of 2012 compared to U.S. $1.02 for the first half of 2011, a decrease of 3%. This weakening of the Canadian dollar had a proportionately negative impact on the translation of earnings generated from our Canadian subsidiary and, therefore, the financial results of our accommodations segment.

Steel and steel input prices influence the pricing decisions of our OCTG suppliers, thereby impacting the pricing and margins of our tubular services segment. During 2011 and 2012, OCTG marketplace supply and demand became more balanced compared to the previous two years. Increased supplies of OCTG have met the increased demand created by expanded drilling activity. Throughout 2011 and into the first half of 2012, imports of OCTG have increased, particularly goods imported from Canada and Korea followed by India, Mexico and Japan. Additionally, domestic OCTG mill capacity is expected to increase in 2012. This projected increase in OCTG production has led to a decline in OCTG prices during the first half of 2012. This increase in supply has been in response to the 12% year-over-year increase in the drilling rig count in the U. S. The OCTG Situation Report suggests that industry OCTG inventory levels peaked in the first quarter of 2009 at approximately twenty months' supply on the ground and have trended down to approximately four to four-and-a half months' supply currently, which is considered closer to a normalized level when measured against historical levels. We have expanded our physical infrastructure and installed new enterprise-wide computer systems in 2011 and 2012 to support our growth, optimize our financial returns and ensure ongoing customer service in our OCTG distribution business. We remain focused on working capital management and returns on invested capital in our tubular services segment and will continue to monitor industry inventory levels, forecasted drilling and completion activity and OCTG prices.

While global demand for oil and natural gas are significant factors influencing our business generally, certain other factors also influence our business, such as the pace of worldwide economic growth and the recovery in U.S. Gulf of Mexico drilling following the lifting of the government imposed drilling moratorium.

Although higher than 2011, the drilling rig count in the U.S. Gulf of Mexico remains below historical levels following the Macondo well incident and resultant oil spill in the U.S. Gulf of Mexico. A rescission of a moratorium on offshore drilling activity was effective in late 2010; however, substantial increases in activity were delayed by adjustments in operating procedures, compliance certifications, and lead times for permits and inspections, as a result of changes in the regulatory environment. In addition, there have been a variety of proposals to change existing laws and regulations that could affect offshore development and production. Uncertainties and delays caused by the new, more stringent regulatory environment continued to have an overall adverse effect on Gulf of Mexico drilling activity in 2011. Beginning in the third quarter of 2011, however, U.S. Gulf of Mexico drilling activity has shown signs of a slow, but steady, recovery as permitting levels have been steadily improving. New well permitting has increased from 43 permits issued in the first half of 2011 to 104 permits issued in the first half of 2012.

We continue to monitor the global economy, the demand for crude oil, coal and natural gas and the resultant impact on the capital spending plans and operations of our customers in order to plan our business. We currently expect that our 2012 capital expenditures will total approximately $600 million to $700 million compared to 2011 capital expenditures of $487 million. Our 2012 capital expenditures include funding to expand our Canadian oil sands and Australian mining related accommodations facilities, to fund our other product and service offerings, and for maintenance and upgrade of our equipment and facilities. Approximately two-thirds of our total expected 2012 capital expenditures will be spent in our accommodations segment. In our well site services segment, we continue to monitor industry capacity additions and will make future capital expenditure decisions based on an evaluation of both the market outlook and industry fundamentals.

Consolidated Results of Operations (in millions)

                                 THREE MONTHS ENDED                                   SIX MONTHS ENDED
                                      JUNE 30,                                            JUNE 30,
                                                   Variance                                             Variance
                                                 2012 vs. 2011
                     2012         2011           $             %          2012          2011          $            %

Revenues
Well site
services -
Rental tools and
services           $   125.1     $ 112.7     $    12.4          11 %   $   260.6     $   220.2     $  40.4          18 %
Drilling
services                51.4        41.0          10.4          25 %        98.9          74.1        24.8          33 %
Total well site
services               176.5       153.7          22.8          15 %       359.5         294.3        65.2          22 %
Accommodations         261.0       202.9          58.1          29 %       562.8         400.1       162.7          41 %
Offshore
products               191.6       131.7          59.9          45 %       377.4         260.2       117.2          45 %
Tubular services       462.0       332.0         130.0          39 %       890.4         626.2       264.2          42 %
Total              $ 1,091.1     $ 820.3     $   270.8          33 %   $ 2,190.1     $ 1,580.8     $ 609.3          39 %
Product costs;
service and
other costs
("Cost of sales
and service")
Well site
services -
Rental tools and
services           $    78.3     $  70.4     $     7.9          11 %   $   162.9     $   137.7     $  25.2          18 %
Drilling
services                36.4        29.2           7.2          25 %        70.5          54.4        16.1          30 %
Total well site
services               114.7        99.6          15.1          15 %       233.4         192.1        41.3          21 %
Accommodations         132.7       108.5          24.2          22 %       272.2         216.8        55.4          26 %
Offshore
products               138.8        98.2          40.6          41 %       275.0         194.8        80.2          41 %
Tubular services       433.0       310.5         122.5          39 %       834.4         587.5       246.9          42 %
Total              $   819.2     $ 616.8     $   202.4          33 %   $ 1,615.0     $ 1,191.2     $ 423.8          36 %
Gross margin
Well site
services -
Rental tools and
services           $    46.8     $  42.3     $     4.5          11 %   $    97.7     $    82.5     $  15.2          18 %
Drilling
services                15.0        11.8           3.2          27 %        28.4          19.7         8.7          44 %
Total well site
services                61.8        54.1           7.7          14 %       126.1         102.2        23.9          23 %
Accommodations         128.3        94.4          33.9          36 %       290.6         183.3       107.3          59 %
Offshore
products                52.8        33.5          19.3          58 %       102.4          65.4        37.0          57 %
Tubular services        29.0        21.5           7.5          35 %        56.0          38.7        17.3          45 %
Total              $   271.9     $ 203.5     $    68.4          34 %   $   575.1     $   389.6     $ 185.5          48 %
Gross margin as
a percentage of
revenues
Well site
services -
Rental tools and
services                  37 %        38 %                                    37 %          37 %
Drilling
services                  29 %        29 %                                    29 %          27 %
Total well site
services                  35 %        35 %                                    35 %          35 %
Accommodations            49 %        47 %                                    52 %          46 %
Offshore
products                  28 %        25 %                                    27 %          25 %
Tubular services           6 %         6 %                                     6 %           6 %
Total                     25 %        25 %                                    26 %          25 %

THREE MONTHS ENDED JUNE 30, 2012 COMPARED TO THREE MONTHS ENDED JUNE 30, 2011

We reported net income attributable to the Company for the quarter ended June 30, 2012 of $111.2 million, or $2.01 per diluted share. These results compare to net income attributable to the Company of $74.2 million, or $1.34 per diluted share, reported for the quarter ended June 30, 2011. Second quarter 2012 results included a pre-tax gain of $2.5 million, or $0.03 per diluted share after-tax, related to insurance proceeds received in excess of net book value from the constructive total loss of a drilling rig lost in a fire that occurred in the first quarter of 2012.

Revenues. Consolidated revenues increased $270.8 million, or 33%, in the second quarter of 2012 compared to the second quarter of 2011.

Our well site services segment revenues increased $22.8 million, or 15%, in the second quarter of 2012 compared to the second quarter of 2011 primarily due to increases in both rental tools and services revenues and drilling services revenues. Our rental tools and services revenues increased $12.4 million, or 11%, in the second quarter of 2012 compared to the second quarter of 2011 primarily due to increased demand for completion services supporting the 8% increase in the U.S. rig count, a more favorable mix of higher value rentals and services, increased equipment utilization, additional capital investment in rental equipment and greater service intensity. Our drilling services revenues increased $10.4 million, or 25%, in the second quarter of 2012 compared to the second quarter of 2011 primarily as a result of increases in pricing, with average day rates rising to $18,500 per day for the second quarter of 2012 up from $16,500 per day for the second quarter of 2011, and increased utilization of our rigs from an average of approximately 80% for the second quarter of 2011 to an average of approximately 92% for the second quarter of 2012.

Our accommodations segment reported revenues in the second quarter of 2012 that were $58.1 million, or 29%, higher than the second quarter of 2011. Higher accommodations revenues were generated primarily from expanded room capacity in Canada and Australia. Revenues and average available rooms for lodges and villages increased 41% and 29%, respectively, in the second quarter of 2012 compared to the second quarter of 2011.

Our offshore products segment revenues increased $59.9 million, or 45%, in the second quarter of 2012 compared to the second quarter of 2011. This increase was primarily the result of higher levels of manufacturing and service activity, along with an improved revenue mix favoring our production equipment and connector products. Backlog reached a new record level, totaling $562 million at June 30, 2012 compared to $519 million reported at June 30, 2011.

Our tubular services segment revenues increased $130.0 million, or 39%, in the second quarter of 2012 compared to the second quarter of 2011. This increase was primarily a result of an increase in tons shipped from 173,300 in 2011 to 230,000 in 2012, an increase of 56,700 tons, or 33%, driven by the 8% increase in U.S. drilling and completion activity, particularly increased activity in the Permian, Eagle Ford and Gulf of Mexico markets coupled with increased service intensity. We also reported a 5% increase in realized revenues per ton shipped in the second quarter of 2012 compared to the second quarter of 2011.

Cost of Sales and Service. Our consolidated cost of sales increased $202.4 million, or 33%, in the second quarter of 2012 compared to the second quarter of 2011 as a result of increased cost of sales at our tubular services segment of $122.5 million, or 39%, an increase at our offshore products segment of $40.6 million, or 41%, an increase at our accommodations segment of $24.2 million, or 22%, and an increase at our well site services segment of $15.1 million, or 15%. These cost of sales increases were directly related to the increases in segmental revenues. Our consolidated gross margin as a percentage of revenues was 25% in both the second quarter of 2012 and 2011.

Our well site services segment cost of sales increased $15.1 million, or 15%, in the second quarter of 2012 compared to the second quarter of 2011 as a result of a $7.9 million, or 11%, increase in rental tools and services cost of sales and a $7.2 million, or 25%, increase in drilling services cost of sales. Our well site services segment gross margin as a percentage of revenues was 35% in both the second quarter of 2012 and 2011. Our rental tools and services gross margin as a percentage of revenues was consistent at 37% in the second quarter of 2012 compared to 38% in the second quarter of 2011. Our drilling services gross margin as a percentage of revenues was also consistent at 29% in the second quarters of 2012 and 2011 despite increased rig utilization and pricing due to increased repair and maintenance costs.

Our accommodations segment cost of sales increased $24.2 million, or 22%, in the second quarter of 2012 compared to the second quarter of 2011 primarily due to increased revenues and room capacity in both Canada and Australia. Our accommodations segment gross margin as a percentage of revenues increased from . . .