The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited consolidated financial statements and the related notes thereto included elsewhere in this Form 10-Q and the audited consolidated financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for the year ended December 31, 2011. Unless the context otherwise requires, "we," "us," the "Company," "C&J" or like terms refers to C&J Energy Services, Inc. and its subsidiaries, including the financial results of Total and Casedhole (each as described below) from their respective acquisition dates.

This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because of various factors, including those described in the section titled "Cautionary Note Regarding Forward-Looking Statements" of this Form 10-Q.

Overview

We are an independent provider of premium hydraulic fracturing, coiled tubing, pressure pumping, wireline and other complementary services with a focus on complex, technically demanding well completions. These services, which are offered through our Stimulation and Well Intervention Services and Wireline Services segments are provided in conjunction with both unconventional and conventional well completions as well as stimulation and workover operations for existing wells.

We commenced our Wireline Services business with the acquisition of Casedhole Holdings, Inc. (including its operating subsidiary, Casedhole Solutions, Inc., "Casedhole") on June 7, 2012 (See "Recent Developments - Acquisition of Casedhole" for additional information). Although our operations have historically been focused in South Texas, East Texas/North Louisiana, Western Oklahoma and West Texas/East New Mexico, the acquisition of Casedhole provided us with an expanded geographic presence in many of the most active areas for oil and gas exploration and production activity in the United States, including areas where we previously did not have a presence, such as the Williston and Uinta Basins and the Marcellus, Utica, Avalon and Bone Springs shale plays. We have moved coiled tubing equipment into North Dakota with the intention of putting this equipment to work in the Bakken oil play during the latter part of the third quarter of 2012. We are evaluating opportunities with existing and new customers to expand our operations into new areas throughout the United States with completion and stimulation requirements similar to those where we have historically provided Stimulation and Well Intervention Services.

With the acquisition of Total E&S, Inc. ("Total") on April 28, 2011, we commenced our Equipment Manufacturing business. In addition to manufacturing hydraulic fracturing, coiled tubing, pressure pumping, wireline and other equipment used in the energy services industry, through Total we are able to provide equipment repair services and sell oilfield parts and supplies to third-party customers in the energy services industry and to meet our own internal needs. Immediately following our acquisition of Total, we acquired approximately ten acres of property adjacent to Total's existing facility and constructed an approximate 36,000 square foot manufacturing facility, which was completed in December 2011. On August 2, 2012, we acquired an additional 10 acres of land with an approximate 123,200 square foot warehouse in Greenville, Texas, which we intend to use to centralize company-wide inventory management. By significantly increasing Total's manufacturing capacity, we expect to further increase its ability to service our Stimulation and Well Intervention Services and Wireline Services segments and existing and future third-party customers, and to enhance our research and development efforts around equipment and innovation.

Recent Developments

Acquisition of Casedhole. Effective as of June 7, 2012, we acquired all of the outstanding equity interests of Casedhole for approximately $271.9 million in cash, net of cash acquired. We funded the acquisition through $220.0 million drawn from our $400.0 million senior secured revolving Credit Facility, with the remainder paid from cash on hand.

Casedhole provides cased-hole wireline and other complementary services, including logging, perforating, pipe recovery, pressure testing and pumpdown services, across many of the most attractive regions of oil and gas exploration and production activity in the United States. The acquired assets included, among other things, Casedhole's fleet of wireline units, pumpdown units and associated ancillary equipment. Casedhole's experienced senior management team has joined the Company to continue running its business as our new Wireline Services business.

Amendment to Credit Facility. Effective June 5, 2012, we entered into Amendment No. 1 and Joinder to Credit Agreement (the "Amendment") which amended our existing $200.0 million senior secured revolving credit agreement, dated April 19, 2011 (as amended, the "Credit Facility"), with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, and various other lenders. The Amendment was entered to, among other reasons, facilitate and permit the acquisition of Casedhole by, among other things, increasing our borrowing capacity under the Credit Facility from $200.0 million to $400.0 million. On June 7, 2012, we drew $220.0 million from the Credit Facility to fund a portion of the purchase price of the acquisition. As of August 3, 2012, $210.0 million was outstanding under the Credit Facility leaving $190.0 million available for borrowing. For a description of the Credit Facility, please read "Description of Our Indebtedness - Senior Secured Credit Agreement."

Our Business

Stimulation and Well Intervention Services Segment

Our Stimulation and Well Intervention Services segment encompasses three related service lines providing hydraulic fracturing, coiled tubing and pressure pumping services, with a focus on complex, technically demanding well completions.

Hydraulic Fracturing. Approximately 78% of our consolidated revenues for the six months ended June 30, 2012 were derived from hydraulic fracturing services. We currently operate seven modern, 15,000 pounds per square inch, pressure rated hydraulic fracturing fleets with an aggregate 242,000 horsepower. We took full delivery of all pumps and initially ordered ancillary equipment for our seventh hydraulic fracturing fleet in April 2012. The 32,000 horsepower fleet was deployed in late-April for spot market work in the Eagle Ford shale in South Texas and the Permian Basin in West Texas. We currently have two additional hydraulic fracturing fleets on order, which we expect to be delivered and deployed in the third quarter and fourth quarter of 2012, respectively. The addition of these two fleets will increase our total capacity to more than 300,000 horsepower by the end of 2012.

Five of our hydraulic fracturing fleets are currently working under term contracts: Fleet 1 has been extended, in accordance with provisions in the current contract, for 12 months through mid-2013 to a producer operating in the Eagle Ford shale; Fleet 3 is dedicated through early 2013 to a producer operating in the Eagle Ford shale; Fleet 4 is dedicated through mid-2014 to a producer operating in the Haynesville shale; Fleet 5 is dedicated through mid-2013 to a producer operating in the Eagle Ford shale; and Fleets 6A and 6B are dedicated through early 2014 to a producer operating in the Permian Basin. The term contract for Fleet 2 expired on July 31, 2012, although we believe that the long-term relationship with the prior contract customer remains in place. Fleet 2 is now working for new and existing customers in the spot market, primarily in the Eagle Ford shale. Fleet 4 remains under contract but has been redeployed to the Eagle Ford shale in the spot market working mostly for new customers. The relationship with the contract customer remains in place and this fleet may be redeployed to the Haynesville shale at the election of the contract customer with timely notice. We are seeking to secure multi-year take-or-pay contracts with new and existing customers for our un-contracted fleets, including the two on-order fleets.

Our term contracts generally range from one year to three years. Under the term contracts, our customers are typically obligated to pay us on a monthly basis for a specified number of hours of service, whether or not those services are actually utilized. To the extent customers use more than the specified contract minimums, we will be paid a pre-agreed amount for the provision of such additional services. Our term contracts typically restrict the ability of the customer to terminate or require our customers to pay us a lump-sum early termination fee, generally representing all or a significant portion of the remaining economic value of the contracts to us.

Some of our term contracts allow us to supplement monthly contract revenue by deploying equipment on short-term spot market jobs on those days when the contract customer does not require our services or is not entitled to our services under the applicable term contract. We charge prevailing market prices per hour for spot market work. We may also charge fees for setup and mobilization of equipment depending on the job. Generally, these fees and other charges vary depending on the equipment and personnel required for the job and market conditions in the region in which the services are performed. We believe that one of the benefits of working our hydraulic fracturing fleets on a spot market basis is that it serves as a marketing tool, giving us the opportunity to introduce our services to new customers and strengthen our relationships with the existing customers.

Our hydraulic fracturing business contributed $216.4 million of revenue and completed 1,667 fracturing stages during the second quarter of 2012, compared to $186.4 million of revenue and 1,476 fracturing stages during the first quarter of 2012. During the three months ended June 30, 2012, we averaged monthly revenue per unit of horsepower of $307 compared to $319 for the previous quarter. Hydraulic fracturing revenue for the second quarter of 2011 was $150.6 million and 856 fracturing stages were completed. Average monthly revenue per unit of horsepower was $371 for the second quarter of 2011.

Coiled Tubing and Pressure Pumping. Approximately 15% of our consolidated revenues for the six months ended June 30, 2012 were derived from coiled tubing and pressure pumping services. We currently operate a fleet of 18 coiled tubing units with six new coiled tubing units on order that are expected to be delivered and deployed between the third quarter of 2012 and early 2013 in new geographic basins. We also have a fleet of 19 double-pumps, three single-pumps and seven high-pressure pumpdown units.

Our coiled tubing, pressure pumping and other related well intervention services are generally provided in the spot market at prevailing prices per hour, although we do have three contracts in place with major operators for dedicated coiled tubing and associated services. We may also charge fees for setup and mobilization of equipment depending on the job. The setup charges and hourly rates are determined by a competitive bid process and vary with the type of service to be performed, the equipment and personnel required for the job and market conditions in the region in which the service is performed. We also charge customers for the materials, such as stimulation fluids, nitrogen and coiled tubing materials that we use in each job. Materials charges reflect the cost of the materials plus a markup and are based on the actual quantity of materials used for the project.

Our coiled tubing business contributed $31.1 million of revenue and we completed 866 coiled tubing jobs during the second quarter of 2012, compared to $35.5 million of revenue and 908 coiled tubing jobs during the previous quarter. Revenue and jobs were down from the previous quarter primarily as a result of the continued weakening of our East Texas operations as well as significant activity reductions from our top customer in Western Oklahoma. In addition, one of our top customers in the Eagle Ford has recently moved from 24 hour operations to a temporary 12 hour schedule until their midstream infrastructure is built-out. Coiled tubing revenue for the second quarter of 2011 was $22.1 million and 819 jobs were completed. Our pressure pumping business generated $4.5 million of revenue during the second quarter of 2012, compared to $4.6 million during the first quarter of 2012 and $5.0 million for the prior year quarter.

Wireline Services Segment

Our Wireline Services segment provides cased-hole wireline and other complementary services, including logging, perforating, pipe recovery, pressure testing and pumpdown services, which are critical throughout a well's lifecycle. Our services are generally provided at prevailing rates in the spot market on a job-by-job basis. The rates are determined by a competitive bid process and vary with the type of service to be performed, the equipment and personnel required for the job and market conditions in the region in which the service is performed. Casedhole has expertise in both horizontal and high-pressure, high-temperature completion applications and experience in the most complex and demanding operating environments, focusing on oily basins.

Approximately 3% of our consolidated revenues for the six months ended June 30, 2012 were derived from our new Wireline Services segment, which we commenced with the acquisition of Casedhole on June 7, 2012. Through Casedhole, we currently operate 58 wireline units and 13 pumpdown units, as well as pressure control equipment. We currently have seven new wireline units and two new pumpdown units on order, which we expect to be delivered and deployed by the end of 2012.

Equipment Manufacturing Segment

Approximately 4% of our consolidated revenues for the six months ended June 30, 2012 were derived from our Equipment Manufacturing segment. Our Equipment Manufacturing segment constructs oilfield equipment, including hydraulic fracturing pumps, coiled tubing units, pressure pumping units, wireline units and other equipment, for our Stimulation and Well Intervention Services and Wireline Services segments, as well as for third-party customers in the energy services industry. This segment also provides equipment repair services and oilfield parts and supplies to the energy services industry and to meet the needs of our Stimulation and Well Intervention Services and Wireline Services segments.

See Note 7 - Segment Information to the accompanying consolidated financial statements for further discussion regarding the Company's reportable segments.

Outlook

We face many challenges and risks in the industry in which we operate. Although many factors contributing to these risks are beyond our ability to control, we continuously monitor these risks, and we have taken steps to mitigate them to the extent practicable. In addition, although we believe that we are well positioned to capitalize on the current growth opportunities available in the industry in which we operate, we may not be able to capitalize on our competitive strengths to achieve our business objectives and, consequently, our results of operations may be adversely affected. Please read the sections titled "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" in this Form 10-Q, as well as in our Quarterly Report on Form 10-Q for the period ended March 31, 2012 and our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, for information about the risks we face.

Trends that we believe are affecting, and will continue to affect, our industry include:

Demand for Our Services. Our business depends on the capital spending programs of our customers. Our Stimulation and Well Intervention Services and Wireline Services segments are significantly driven by the exploration, development and production expenditures made by our customers, which also impacts sales by our Equipment Manufacturing business to third-party customers in the energy services industry, who have historically tended to delay capital equipment projects, including maintenance and upgrades, during industry downturns. The oil and gas industry has traditionally been volatile, is highly sensitive to supply and demand cycles and is influenced by a combination of long-term and cyclical trends including the current and expected future prices for oil and gas, and the perceived stability and sustainability of those prices, as well as production depletion rates and the resultant levels of cash flows generated and allocated by exploration and production companies to their drilling and workover budgets.

There is increasing horizontal drilling and completion related activity in oily formations due to the significant disparity between oil and natural gas prices on a Btu basis. Further, based on industry data, we believe the price disparity will continue over the near-to-medium term resulting in increasing demand for our services in the oily basins. We are encouraged by this trend, because the growth in oil-directed drilling is taking place in unconventional drilling environments, which requires more of our services than conventional drilling activity. Increasing activity levels and the service-intensive nature of completion activities in unconventional basins, in which we have a growing presence, have had a positive impact on utilization and pricing overall and enabled us to expand our fleet of revenue-producing equipment. We believe long-term capital for the continued development of oily formations will be provided in part by the participation of large well-capitalized domestic oil and gas companies that have made significant investments, as well as international oil and gas companies that continue to make significant capital commitments through joint ventures and direct investments in North America's unconventional basins. Although we believe these investments indicate a long-term commitment to development, ultimately oil and natural gas prices and capital expenditures by exploration and production companies, together with any significant future increase in overall market capacity completion services, may affect demand for our services.

Competition. The markets in which we provide our Stimulation and Well Intervention Services and Wireline Services are highly competitive. Our competition includes many large and small oilfield service companies, including the largest integrated oilfield services companies. During the second quarter we maintained our presence in oily basins, and have near-term plans to increase our presence in these areas since customer activity levels in natural gas-directed basins is continuing to decline due to the low price of natural gas. We expect to continue to benefit from increased horizontal drilling and completion-related activity in those complex unconventional resource plays in oily regions. However, we are concerned about the migration of drilling activity and completion capacity into the oily regions from the gas- and liquids-rich regions and the near-term weakness in the price of natural gas and natural gas liquids, as this is expected to further increase competition among oilfield service companies in the oily regions, thereby potentially reducing the demand for and pricing of our services.

Hydraulic Fracturing Legislation and Regulation. Congress has from time to time, including during the current session, considered legislation to provide for federal regulation of hydraulic fracturing and to require public disclosure of the chemicals used in the fracturing process. If such current or any future federal legislation becomes law, it could establish an additional level of regulation that could lead to operational delays or increased operating costs. The federal Environmental Protection Agency ("EPA") also recently proposed rules that would establish new air emission controls for oil and natural gas production and natural gas processing operations. Among other controls, the rules would require operators to use "green completions" for hydraulic fracturing, meaning operators would have to recover rather than vent the gas and natural gas liquids that come to the surface during completion of the fracturing process. In addition, various state and local governments have implemented, or are considering, increased regulatory oversight of hydraulic fracturing, and Texas has adopted legislation that requires disclosure of information regarding the substances used in the hydraulic fracturing process to the Railroad Commission of Texas and the public.

The adoption of new laws or regulations imposing reporting obligations on, or otherwise limiting or regulating, the hydraulic fracturing process could make it more difficult to complete oil and natural gas wells in shale formations, increase our and our customers' costs of compliance, and adversely affect the hydraulic fracturing services that we render for our exploration and production customers. In addition, if hydraulic fracturing becomes regulated at the federal level as a result of federal legislation or regulatory initiatives by the EPA, fracturing activities could become subject to additional permitting or regulatory requirements, and also to attendant permitting delays and potential increases in cost, which could adversely affect our business and results of operations.

Results of Operations

Our results of operations are driven primarily by four interrelated variables:
(1) drilling and stimulation activities of our customers, (2) the prices we charge for our services, (3) cost of products, materials and labor and (4) our service performance. We seek to pass the cost of raw materials, such as proppants and chemicals, onto our customers, and historically, our profitability has not been materially impacted by changes in the costs of these materials. To a large extent, the pricing environment for our services will dictate our level of profitability. To mitigate the volatility in utilization and pricing for the services we offer, we currently have term contracts covering five out of our seven existing fleets.

Our revenues and results of operations were positively impacted by: (1) the addition and deployment of our fourth fleet in April 2011; (2) the addition and deployment of our fifth hydraulic fracturing fleet in August 2011; (3) the addition and deployment of the vertical portion of our sixth hydraulic fracturing fleet in December 2011 and the horizontal portion in February 2012;
(4) the addition and deployment of our seventh hydraulic fracturing fleet in April 2012; (5) the addition and deployment of five new coiled tubing units during 2011; (6) the acquisition of Total in April 2011; and (7) the acquisition of Casedhole in June 2012. We expect that our results of operations in 2012 compared to 2011 will be significantly impacted by the dramatic growth of our asset base over the last twelve months.

Results for the Three Months Ended June 30, 2012 Compared to the Three Months
Ended June 30, 2011

The following table summarizes the change in our results of operations for the
three months ended June 30, 2012 when compared to the three months ended
June 30, 2011 (in thousands):



                                                       Three Months Ended June 30,
                                                   2012           2011         $ Change
  Revenue                                        $ 278,388      $ 182,171      $  96,217
  Cost of sales                                    173,269        110,068         63,201

  Gross profit                                     105,119         72,103         33,016
  Selling, general and administrative expenses      22,841         11,703         11,138
  Loss on disposal of assets                           212             17            195

  Operating income                                  82,066         60,383         21,683
  Other income (expense):
  Interest expense, net                               (891 )       (1,200 )          309
  Loss on early extinguishment of debt                  -          (7,605 )        7,605
  Other income (expense), net                           -             (27 )           27

  Total other expenses, net                           (891 )       (8,832 )        7,941

  Income before income taxes                        81,175         51,551         29,624
  Provision for income taxes                        27,900         18,313          9,587

  Net income                                     $  53,275      $  33,238      $  20,037

Revenue

Revenue increased $96.2 million, or 53%, to $278.4 million for the three months ended June 30, 2012, as compared to $182.2 million for the same period in 2011. This increase was primarily due to the deployment of additional hydraulic fracturing equipment in our Stimulation and Well Intervention Services segment. Fleets 4, 5, 6A, 6B and 7 which were deployed in April 2011, August 2011, December 2011, February 2012 and April 2012, respectively, contributed approximately $100 million of incremental revenue in the second quarter of 2012. To a lesser extent, revenue was higher in the second quarter of 2012 due to the acquisition of Casedhole in June 2012, the acquisition of Total in April 2011 and the addition of five coiled tubing units. These increases were partially offset by approximately $35 million in reduced revenue associated with some customers choosing to provide their own sand and fluid additives during the three months ended June 30, 2012 compared to the same period a year ago.

Cost of Sales

Cost of sales increased $63.2 million, or 57%, to $173.3 million for the three months ended June 30, 2012, compared to $110.1 million for the same period in 2011 primarily due to the significant quarter over quarter increase in revenue and to a lesser extent, price increases on our primary fluid additive, guar-based gel.

Selling, General and Administrative Expenses ("SG&A")

SG&A increased $11.1 million, or 95%, to $22.8 million for the three months ended June 30, 2012, as compared to $11.7 million for the same period in 2011. The increase primarily related to $2.9 million in increased SG&A costs related to Casedhole, which was acquired in June 2012, $2.2 million in higher payroll and personnel costs associated with the continued hiring of personnel to support our growth, $1.8 million in higher long-term and short-term incentive costs, $1.0 million in higher professional fees, $0.8 million in incremental SG&A costs related to Total, which was acquired in April 2011, and $0.7 million in transaction costs related to the acquisition of Casedhole.

Interest Expense

Interest expense decreased by $0.3 million, or 26%, to $0.9 million for the . . .