This Item 7 contains "forward-looking statements" - within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act that are based on management's current expectations, estimates and projections about our business operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of numerous factors, including the known material factors set forth in "Part I, Item 1A. Risk Factors." You should read the following discussion and analysis together with our Consolidated Financial Statements and the notes to those statements included elsewhere in this Annual Report on Form 10-K.

Macroeconomic Environment

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, met coal and other mineral reserves. Our customers' spending plans are generally based on their outlook for near-term and long-term commodity prices, economic growth, commodity demand and estimates of resource production. As a result, demand for our products and services is highly sensitive to current and expected commodity prices, principally that of crude oil, met coal and, to a lesser extent, natural gas.

In the past few years, crude oil prices have been volatile due to global economic movements and uncertainties including regional take-away capacity. In the first quarter of 2012, the price of West Texas Intermediates (WTI) crude oil increased from a monthly average price of $100 per barrel in January to $106 per barrel in March as positive economic news related to growth rates projected in China and other emerging markets, consumer spending and U.S. consumer confidence indicating that an economic recovery was underway. In addition, prices increased in response to tensions in the Middle East region which caused fears of supply disruption. However, crude oil prices came under pressure during the second quarter of 2012 due to increased crude oil inventories, insufficient take-away capacity in Cushing, Oklahoma, higher output expectations amid new technology and lower economic growth forecasts. In addition, certain regional markets such as the Bakken, Permian Basin and Eagle Ford were negatively impacted by significant discounts to WTI due to insufficient pipeline and rail take-away capacity. The spot price of WTI crude oil decreased to as low as $78 per barrel in the second quarter of 2012. Since the end of the second quarter of 2012, the spot price of crude oil has substantially recovered and, as of February 19, 2013, is trading at approximately $97 per barrel for WTI crude and approximately $118 per barrel for Intercontinental Exchange (ICE) Brent crude. If the global supply of oil and global inventory levels continue to decrease due to government instability in many oil-producing nations and energy demand continues to increase in countries such as China, India and the U.S., we could see continued and/or additional increases in WTI oil prices which could positively affect future U.S. drilling activity. In Canada, Western Canadian Select (WCS), which is the crude price that many of our oil sands accommodations customers receive, traded at a discount to WTI that ranged from $7.25 to $42.50 per barrel during 2012. The WCS discount was primarily due to increasing crude production from the Canadian oil sands region coupled with limited pipeline and rail capacity to transport the oil sands crude to heavy oil refineries either in the U.S. or Canada. This WCS discount had and is likely to continue to have a negative impact on our oil sands customers' desire to invest in increased oil sands production. As of February 19, 2013, WCS is trading at a discount to WTI of $25.00.

In spite of WTI's recovery to over $90 per barrel late in 2012 and in the first quarter of 2013, there remains a risk that crude prices deteriorate going forward due to potentially slowing growth rates in China, 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)(1)
        Quarter ended      WTI          Brent Crude       Western Canadian Select
         12/31/2012     $    88.01     $      110.15     $                   61.34
          9/30/2012          92.17            109.63                         76.75
          6/30/2012          93.38            108.90                         73.53
          3/31/2012         102.85            118.54                         75.82
         12/31/2011          94.03            109.31                         81.56
          9/30/2011          89.71            112.47                         75.05
          6/30/2011         102.51            117.12                         84.72
          3/31/2011          93.93            104.90                         72.43
         12/31/2010          85.10             86.80                         69.07
          9/30/2010          76.01             76.41                         57.08

(1) Source: WTI and Brent prices from U.S. Energy Information Administration (EIA) and WCS prices from Bloomberg.

Due to significant over-supply of natural gas stemming from increased production from shale plays, natural gas prices fell precipitously in the fourth quarter of 2011 and the first half of 2012, reaching a low of $1.82 in April 2012. Since these lows, prices for natural gas in the United States improved subsequent to April 2012, largely due to increased demand for natural gas for electrical power generation and switching from coal to gas, but continue to be weak due to the rise in production from unconventional natural gas resources in North America, specifically onshore shale production, resulting from the broad application of horizontal drilling and hydraulic fracturing techniques. Natural gas prices are trading at approximately $3.30 per Mcf as of February 19, 2013. In addition, a considerable amount of natural gas is being derived as a by-product of drilling crude oil and natural gas liquids-oriented wells in liquids rich onshore basins. As a result, the U.S. gas-related working rig count has declined from more than 800 rigs at the beginning of 2012 to less than 430 rigs as of February 19, 2013. Although still overstocked, natural gas inventories in the U.S. have declined from 60% above the 5-year average as of the end of the first quarter of 2012 to only 12% above the 5-year average as of the end of 2012. Any increases in the supply of natural gas, whether the supply comes from conventional or unconventional production or associated gas production from oil wells, could constrain prices for natural gas for an extended period and result in fewer rigs drilling for gas in the near-term. Recent natural gas pricing trends are as follows:

             Quarter ended    Natural Gas Average Price(1) (per mcf)
              12/31/2012     $                                   3.40
               9/30/2012                                         2.88
               6/30/2012                                         2.29
               3/31/2012                                         2.44
              12/31/2011                                         3.32
               9/30/2011                                         4.12
               6/30/2011                                         4.37
               3/31/2011                                         4.18
              12/31/2010                                         3.81
               9/30/2010                                         4.28

(1) Source: natural gas prices from EIA.

Chinese steel production growth has fallen this year as European economies have contracted and U.S. economic growth has been anemic, lowering demand for steel and steel inputs such as met coal and iron ore. As a result, prices for met coal and iron ore fell throughout 2012, but appear to have stabilized at current levels. Met coal prices have decreased from over $200/metric ton at the beginning of 2012 to approximately $160/metric ton at the end of 2012. Depressed met coal prices have led to some coal mine closures as well as delays in the start-up of some coal mining projects in Australia.

Various oil and gas industry analysts have projected increased 2013 global exploration and production expenditures compared to 2012. North American capital spending plans are likely to be lower year-over-year and are expected to be focused in oil-related onshore shale areas while international exploration and production budgets are expected to increase and primarily be spent on offshore projects.

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.

Generally, our oil sands and mining accommodations' customers are making multi-billion dollar investments to develop their prospects, which have estimated reserve lives of ten years to in excess of thirty years and, consequently, these investments are dependent on those customers' longer-term view of commodity demand and prices. Oil sands development activity has increased over the past several years 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. For example, in the third quarter of 2012, we were awarded a ten-year contract in support of future operations personnel working on the Kearl Project, one of the Canadian oil sands potentially largest mining operations. In addition, several major and national oil companies have announced acquisitions and joint ventures to develop oil sands leases or other acquisitions of oil sands exposure that should bode well for future oil sands investment and, as a result, demand for oil sands accommodations. With the WCS discount to WTI, several oil sands customers have announced the deferral of new oil sands projects, which could negatively affect our ability to expand our oil sands room count or our occupancy levels.

We are expanding our Australian accommodations capacity to meet increasing demand, notably in the Bowen Basin in Queensland and in the Gunnedah and Hunter basins in New South Wales to support coal production, and in Western Australia to support LNG and other energy-related projects. Accommodations deployed to support onshore U.S. drilling activity in several of the active shale play regions have also favorably contributed to our results.

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.

In our well site services business segment, we predominantly provide completion services and, to a lesser extent, land drilling services. Our completion services business provides equipment and service personnel utilized in the completion and initial production of new and recompleted wells. Activity for the completion 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 of West Texas, where we primarily drill oil wells, and the Rocky Mountain 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 the United States. 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.

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 completion 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 Rig Count for
                                                       Year Ended December 31,
                                        2012        2011        2010        2009        2008
   U.S. Land - Oil                       1,335         966         573         270         377
   U.S. Land - Natural gas and other       537         877         937         772       1,436
   U.S. Offshore                            47          32          31          44          65
   Total U.S.                            1,919       1,875       1,541       1,086       1,878
   Canada                                  365         423         351         221         379
   Total North America                   2,284       2,298       1,892       1,307       2,257

The rig count fell precipitously in the first half of 2009 in response to the impact of the global economic downturn which negatively impacted energy prices but has substantially recovered from its June 2009 low. The average North American rig count for the year ended December 31, 2012 decreased by fourteen rigs, or less than 1%, compared to the average for the year ended December 31, 2011 largely due to a decline in natural gas drilling partially offset by growth in the U.S. land oil rig count.

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. For the year ended December 31, 2012, average U.S. dollar and Canadian and Australian dollar exchange rates were comparable with a less than 1% change over average exchange rates in 2011.

Steel and steel input prices influence the pricing decisions of our OCTG suppliers, thereby impacting the pricing and margins of our tubular services segment. Steel prices on a global basis declined precipitously during the recession in 2009. Industry inventories increased materially as the rig count declined, and OCTG imports remained at high levels. These developments in the OCTG marketplace had a material detrimental impact on OCTG pricing and, accordingly, on our revenues and margins realized during the last half of 2009 in our tubular services segment. These negative trends moderated in 2010 because of a reduction in imports, largely due to the imposition of trade sanctions on Chinese OCTG imports, coupled with increases in the U.S. rig count.

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 2012, imports of OCTG have increased, particularly goods imported from Canada and Korea followed by India, Mexico and Japan. Additionally, domestic OCTG mill capacity increased in 2012. These increases in supply have been in response to increased well complexity coupled with the 2% year-over-year increase in the drilling rig count in the U.S. The OCTG Situation Report suggests that industry OCTG inventory levels have increased throughout 2012 and currently stand at five to six months' supply. Ample industry inventory on the ground along with increasing imports and domestic production coupled with modestly declining drilling activity put downward pressure on OCTG prices throughout 2012. Average OCTG prices declined 9% during 2012.

We remain focused on working capital management and generating 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 2012 in the U.S. Gulf of Mexico remains below historical levels following the April 2010 Macondo well incident and resultant oil spill in the U.S. Gulf of Mexico. 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 improved. New well permitting has increased from 109 permits issued in 2011 to 179 permits issued in 2012.

We continue to monitor the global economy, the demand for crude oil, met coal and natural gas and the resultant impact on the capital spending plans and operations of our customers in order to plan our business. Our capital expenditures in 2012 totaled $488 million compared to 2011 capital expenditures of $487 million. Our 2012 capital expenditures included funding to expand our Canadian oil sands and Australian mining related accommodations facilities, to fund our other product and service offerings, and to upgrade our equipment and facilities. Approximately two-thirds of our total 2012 capital expenditures were 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. We currently expect to spend a total of approximately $600 million to $650 million for capital expenditures during 2013.

Recent Acquisitions

On December 14, 2012, we acquired all of the equity of Tempress for purchase price consideration of $48.3 million consisting of $32.5 million of cash and contingent consideration with a fair value of $15.8 million. The Company funded escrow accounts totaling $25.3 million related to the contingent consideration and seller transaction indemnities which are classified as "Other noncurrent assets" in our December 31, 2012 Consolidated Balance Sheet. Liabilities for contingent consideration and escrowed amounts potentially due to the seller total $21.1 million at December 31, 2012 and are classified as "Other noncurrent liabilities" in our Consolidated Balance Sheet. Headquartered in Kent, Washington, Tempress designs, develops and markets a suite of highly specialized, hydraulically-activated tools utilized during downhole completion activities. The operations of Tempress have been included in our well site services segment since the acquisition date.

On July 2, 2012, we acquired all of the operating assets of Piper for total cash consideration of $48.0 million. Headquartered in Oklahoma City, Oklahoma, Piper designs and manufactures high pressure valves and manifold components for oil and gas industry projects located offshore (both surface and subsea) and onshore. The operations of Piper have been included in our offshore products segment since the acquisition date.

On November 1, 2011, we purchased an open camp accommodations facility located in Carrizo Springs, Texas for total consideration of $2.2 million. This facility provides accommodations support to customers working in the Eagle Ford Shale basin. The operations of the Carrizo Springs facility have been included in our accommodations segment since the acquisition date.

On December 30, 2010, we acquired all of the ordinary shares of The MAC, through a Scheme of Arrangement (the Scheme) under the Corporations Act of Australia. The MAC is headquartered in Sydney, Australia and supplies accommodations services to the Australian natural resources market. Under the terms of the Scheme, each shareholder of The MAC received $3.95 (A$3.90) per share in cash. The total purchase price was $638 million, net of cash acquired plus debt assumed of $87 million. The MAC's operations have been included in our accommodations segment beginning in 2011.

On December 20, 2010, we also acquired all of the operating assets of Mountain West for total consideration of $47.1 million including estimated contingent consideration of $4.0 million. Headquartered in Vernal, Utah, with operations in the Rockies and the Bakken Shale region, Mountain West provides remote site workforce accommodations to the oil and gas industry. Mountain West has been included in our accommodations segment since the acquisition date.

On October 5, 2010, we purchased all of the equity of Acute for total consideration of $30.2 million. Headquartered in Houston, Texas with additional operations in Brazil, Acute provides metallurgical and welding engineering, consulting and services to the oil and gas industry in support of critical, complex subsea component manufacturing and deepwater riser fabrication on a global basis. Acute has been included in our offshore products segment since its date of acquisition.

The Company funded all of its acquisitions with cash on hand and/or amounts available under our senior secured credit facilities. See Note 8 to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information on our senior secured bank facilities.

Consolidated Results of Operations (in millions)

                                                             YEARS ENDED
                                                            December 31,
                                                        Variance                          Variance
                                                     2012 vs. 2011                     2011 vs. 2010
                       2012          2011            $            %           2010            $            %
Revenues
Well site services
-
Completion
services             $   522.6     $   488.0     $    34.6            7 %   $   343.0     $   145.0           42 %
Drilling services        191.0         165.9          25.1           15 %       133.2          32.7           25 %
Total well site
services                 713.6         653.9          59.7            9 %       476.2         177.7           37 %
Accommodations         1,113.5         864.7         248.8           29 %       537.7         327.0           61 %
Offshore products        804.1         585.8         218.3           37 %       428.9         156.9           37 %
Tubular services       1,781.9       1,374.8         407.1           30 %       969.2         405.6           42 %
Total                $ 4,413.1     $ 3,479.2     $   933.9           27 %   $ 2,412.0     $ 1,067.2           44 %
Product costs;
service and other
costs ("Cost of
sales and
service")
Well site services
-
Completion
services             $   324.6     $   298.4     $    26.2            9 %   $   220.1     $    78.3           36 %
Drilling services        133.2         122.7          10.5            9 %       105.5          17.2           16 %
Total well site
services                 457.8         421.1          36.7            9 %       325.6          95.5           29 %
Accommodations           552.3         456.4          95.9           21 %       314.4         142.0           45 %
Offshore products        595.9         430.0         165.9           39 %       316.5         113.5           36 %
Tubular services       1,687.0       1,291.8         395.2           31 %       917.8         374.0           41 %
Total                $ 3,293.0     $ 2,599.3     $   693.7           27 %   $ 1,874.3     $   725.0           39 %
Gross margin
Well site services
-
Completion
services             $   198.0     $   189.6     $     8.4            4 %   $   122.9     $    66.7           54 %
Drilling services         57.8          43.2          14.6           34 %        27.7          15.5           56 %
Total well site
services                 255.8         232.8          23.0           10 %       150.6          82.2           55 %
Accommodations           561.2         408.3         152.9           37 %       223.3         185.0           83 %
Offshore products        208.2         155.8          52.4           34 %       112.4          43.4           39 %
Tubular services          94.9          83.0          11.9           14 %        51.4          31.6           61 %
Total                $ 1,120.1     $   879.9     $   240.2           27 %   $   537.7     $   342.2           64 %
Gross margin as a
percentage of
revenues
Well site services
-
Completion
services                    38 %          39 %                                     36 %
Drilling services           30 %          26 %                                     21 %
Total well site
services                    36 %          36 %                                     32 %
Accommodations              50 %          47 %                                     42 %
Offshore products           26 %          27 %                                     26 %
Tubular services             5 %           6 %                                      5 %
Total                       25 %          25 %                                     22 %

YEAR ENDED DECEMBER 31, 2012 COMPARED TO YEAR ENDED DECEMBER 31, 2011

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