UNITEDTable STATES SECURITIESof AND EXCHANGE COMMISSION Washington, D.C. 20549 Contents

~~FORM~~UNITED ~~10-Q~~STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

~~(Mark~~FORM ~~One)~~10-Q

~~[X] Quarterly report pursuant to section 13 or 15~~(d)Mark ~~of the Securities Exchange Act of 1934~~One)

For the Quarterly Period Ended September 30, 2000


[X]		Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended March 31, 2001

[ ]		Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from __________ to __________.

~~[ ] Transition~~Commission ~~report~~File ~~pursuant~~Number ~~to section 13 or 15(d) of the Securities Exchange Act of 1934 for the~~1-12542 ~~transition period from ______ to ______.~~

~~Commission~~UTI ~~File~~ENERGY ~~Number~~CORP. ~~1-12542~~ (Exact name of registrant as specified in its charter)

UTI ENERGY CORP. (Exact name of registrant as specified in its charter)


Delaware		23-2037823

(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

Suite 225N 16800 Greenspoint Park Drive Houston, Texas		77060-2390

(Address of principal executive offices)		(Zip Code)

Delaware		23-2037823
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)
Suite 225N 16800 Greenspoint Park Drive Houston, Texas		77060
(Address of principal executive offices)		(Zip Code)


	(281) 873-4111

	(Registrant’s telephone number, including area code)

(~~281) 873-4111 (Registrant’s~~Former ~~telephone number, including area code~~Address)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each class of registrant’s common stock, as of the latest practicable date.

37,~~090~~660,~~664~~257 shares of Common Stock as of ~~October~~April 1917, ~~2000~~2001.

TABLE OF CONTENTS

	PART I FINANCIAL INFORMATION
	ITEM 1. CONDENSED CONSOLIDATED FINANCIAL INFORMATION
	ITEM 1.CONDENSED CONSOLIDATED FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands, except per share amounts)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
	PART II OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 2. CHANGES IN SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
3rd Amend. to Loan and Security Agreement
Financial Data Schedule
Restated Financial Data Schedule

INDEX

		Page No.
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999		3
	Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000		3
	Condensed Consolidated Statements of Income for the Three and Nine Months ended September 30, 2000 and 1999		4
	Condensed Consolidated Statements of Income for the Three Months ended March 31, 2001 and 2000		4
	Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2000 and 1999		5
	Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2001 and 2000		5
	Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1614
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		2522
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		2522
Item 2.	Changes in Securities		25
Item 6.	Exhibits and Reports on Form 8-K		23
Item 4.	Submission of Matters to a Vote of Security Holders		26
	Signatures		24
Item 6.	Exhibits and Reports on Form 8-K		27
	Signatures		28

-–2-–

PARTTable I FINANCIALof INFORMATION Contents

~~UTI~~PART ~~ENERGY~~I FINANCIAL ~~CORP.~~INFORMATION

	September 30,			December 31,
	2000			1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	3,589		$	7,547
Accounts receivable, net of allowance for doubtful accounts accounts of $2,719 in 2000 and $3,143 in 1999		46,626			33,522
Federal income tax receivables		1,512			5,043
Material and supplies		751			748
Deferred income taxes		2,270			1,762
Prepaid expenses and other		2,604			1,487
		57,352			50,109
PROPERTY AND EQUIPMENT
Land		1,150			1,224
Buildings and improvements		3,477			3,538
Machinery and equipment		286,312			244,657
Oil and natural gas working interests		1,562			1,856
Construction in process		16,420			376
		308,921			251,651
Less accumulated depreciation and amortization		80,790			62,807
		228,131			188,844
GOODWILL, less accumulated amortization of $4,762 in 2000 and $3,616 in 1999		18,115			19,261
OTHER ASSETS		1,746			2,368
	$	305,344		$	260,582
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	27,517		$	19,672
Accrued payroll and related costs		5,237			4,536
Accrued workers compensation		2,598			871
Other accrued expenses		4,781			4,135
		40,133			29,214
LONG-TERM DEBT		59,000			32,196
DEFERRED INCOME TAXES		39,365			41,668
OTHER LIABILITIES		397			472
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Preferred Stock, $.01 par value, 0 shares issued or outstanding in 2000 and 1999		—			—
Common Stock, $.001 par value, 100,000 (50,000 prior to July 26, 2000) shares authorized, 38,296 issued and 37,090 outstanding in 2000, 36,864 shares issued and 35,658 outstanding in 1999		38			37
Additional capital		148,886			144,293
Retained earnings		27,654			22,707
Equity adjustments from foreign currency translation		(124	)		—
Treasury Stock, 1,206 shares in 2000 and 1999, at cost		(10,005	)		(10,005	)
		166,449			157,032
	$	305,344		$	260,582

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL INFORMATION

~~See~~UTI ~~notes~~ENERGY ~~to condensed consolidated financial statements~~CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands)

-3-


	March 31,			December 31,
	2001			2000


ASSETS

CURRENT ASSETS




Cash and cash equivalents	$	5,885		$	7,561




Accounts receivable, net of allowance for doubtful accounts of $1,955 in 2001 and $1,959 in 2000		68,582			59,482




Material and supplies		783			767




Deferred income taxes		2,142			1,957




Prepaid expenses and other		4,875			2,387

		82,267			72,154

PROPERTY AND EQUIPMENT




Land		1,150			1,150




Buildings and improvements		3,579			3,539




Machinery and equipment		354,677			316,288




Oil and natural gas working interests		1,359			1,359

		360,765			322,336




Less accumulated depreciation and amortization		91,037			84,049

		269,728			238,287

GOODWILL, less accumulated amortization of $5,526 in 2001 and $5,144 in 2000		17,351			17,733




OTHER ASSETS		1,446			1,633

	$	370,792		$	329,807


LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES




Accounts payable	$	47,883		$	37,449




Accrued income taxes		7,873			1,331




Accrued payroll and related costs		6,788			7,056




Accrued workers compensation		3,399			3,999




Other accrued expenses		3,769			3,730

		69,712			53,565

LONG-TERM DEBT		64,000			55,000




DEFERRED INCOME TAXES		41,672			41,816




OTHER LIABILITIES		438			438

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY




Preferred Stock, $.01 par value, 5,000 shares authorized, 0 shares issued or outstanding in 2001 and 2000		—			—




Common Stock, $.001 par value, 100,000 shares authorized, 38,866 issued and 37,660 outstanding in 2001, 38,772 shares issued and 37,566 outstanding in 2000		38			38




Additional capital		153,931			152,377




Retained earnings		52,598			36,548




Accumulated other comprehensive income (loss)		(1,592	)		30




Treasury Stock, 1,206 shares in 2001 and 2000, at cost		(10,005	)		(10,005	)

		194,970			178,988

	$	370,792		$	329,807

~~UTI~~See ~~ENERGY~~notes ~~CORP~~to condensed consolidated financial statements.

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2000			1999			2000			1999
REVENUES	$	72,331		$	42,396		$	182,189		$	103,816
COSTS AND EXPENSES
Direct operating costs (excluding depreciation and amortization)		54,055			33,263			141,333			82,186
Selling, general and administrative		3,066			2,541			8,659			7,799
Provisions for bad debts		—			—			—			548
Other income		(188	)		(5	)		(484	)		(2,684	)
Depreciation and amortization		7,406			6,093			20,691			17,700
		64,339			41,892			170,199			105,549
OPERATING INCOME (LOSS)		7,992			504			11,990			(1,733	)
OTHER INCOME (EXPENSE)
Interest expense		(1,337	)		(1,031	)		(4,002	)		(3,090	)
Interest income		68			139			347			461
Other, net		38			33			138			(77	)
		(1,231	)		(859	)		(3,517	)		(2,706	)
INCOME (LOSS) BEFORE INCOME TAXES		6,761			(355	)		8,473			(4,439	)
INCOME TAXES		2,534			—			3,197			(900	)
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM		4,227			(355	)		5,276			(3,539	)
EXTRAORDINARY ITEM, net of tax of $197		(329	)		—			(329	)		—
NET INCOME (LOSS)	$	3,898		$	(355	)	$	4,947		$	(3,539	)
BASIC EARNINGS (LOSS) PER COMMON SHARE	$	.11		$	(0.01	)	$	.13		$	(0.11	)
DILUTED EARNINGS (LOSS) PER COMMON SHARE	$	.10		$	(0.01	)	$	.13		$	(0.11	)
AVERAGE COMMON SHARES OUTSTANDING
Basic		37,069			34,884			36,734			33,432
Diluted		38,893			34,884			38,716			33,432

–3–

SeeTable notesof to condensed consolidated financial statements. Contents

~~-4-~~UTI ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except per share amounts)

UTI ENERGY CORP.


	Three Months
	Ended March 31,

	2001			2000


REVENUES	$	108,390		$	54,273

COSTS AND EXPENSES




Direct operating costs (excluding depreciation and amortization)		70,892			43,439




Selling, general and administrative		3,205			2,781




Other income		(117	)		(95	)




Depreciation and amortization		7,979			6,631

		81,959			52,756


OPERATING INCOME		26,431			1,517

OTHER INCOME (EXPENSE)




Interest expense		(963	)		(1,208	)




Interest income		55			145




Other, net		33			36

		(875	)		(1,027	)


INCOME BEFORE INCOME TAXES		25,556			490

INCOME TAXES		9,506			186


NET INCOME	$	16,050		$	304


BASIC EARNINGS PER COMMON SHARE	$	0.43		$	0.01


DILUTED EARNINGS PER COMMON SHARE	$	0.41		$	0.01


AVERAGE COMMON SHARES OUTSTANDING




Basic		37,599			36,116




Diluted		39,520			38,434

				Nine Months
				Ended September 30,
				2000			1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)				$	4,947		$	(3,539	)
	Adjustments to reconcile net income (loss) to net cash provided by operations
		Depreciation			19,043			16,051
		Amortization			1,648			1,649
		Deferred income taxes			(2,815	)		442
		Amortization of debt discount			594			357
		Provisions for bad debts			(344	)		412
		Gain on disposal of fixed assets			(484	)		(2,944	)
		Changes in operating assets and liabilities, net of effect of businesses acquired Receivables and prepaids			(10,384	)		(1,939	)
			Materials and supplies		(3	)		(14	)
			Accounts payable and accruals		13,816			(2,410	)
			Other		44			(110	)
			Net cash provided by operating activities		26,062			7,955
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of property and equipment					(19,814	)		(4,913	)
Acquisitions					(38,824	)		217
Net proceeds from disposition					—			4,935
Proceeds from sale of property and equipment					917			711
			Net cash provided (used) by investing activities		(57,721	)		950
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt					55,266			—
Repayments of long-term debt					(29,056	)		(7,951	)
Proceeds from exercise of stock options					1,721			1,371
			Net cash provided (used) by financing activities		27,931			(6,580	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					(3,728	)		2,325
FOREIGN CURRENCY TRANSLATION ADJUSTMENT					(230	)		—
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD					7,547			10,337
CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	3,589		$	12,662

See notes to condensed consolidated financial statements.

~~See notes to condensed consolidated financial statements.~~–4–

-5- Table of Contents

UTI ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


				Three Months
				Ended March 31,

				2001			2000


CASH FLOWS FROM OPERATING ACTIVITIES




Net income				$	16,050		$	304




	Adjustments to reconcile net income to net cash provided by operations




		Depreciation			7,432			6,082




		Amortization			547			549




		Deferred income taxes			(278	)		(593	)




		Amortization of debt discount			—			119




		Tax benefit on exercised stock options			995			2,249




		Gain on disposal of fixed assets			(117	)		(95	)




		Changes in operating assets and liabilities




			Receivables and prepaids		(11,911	)		(988	)




			Materials and supplies		(17	)		(50	)




			Accounts payable and accruals		16,400			(813	)




			Other		21			(87	)

			Net cash provided by operating activities		29,122			6,677

CASH FLOWS FROM INVESTING ACTIVITIES




Acquisitions of property and equipment					(25,169	)		(4,236	)




Acquisitions					(15,675	)		—




Proceeds from sale of property and equipment					348			134

			Net cash used by investing activities		(40,496	)		(4,102	)

CASH FLOWS FROM FINANCING ACTIVITIES




Proceeds from revolving credit facility					9,760			—




Repayments of revolving credit facility					(760	)		—




Proceeds from exercise of stock options					559			1,217

			Net cash provided by financing activities		9,559			1,217


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					(1,815	)		3,792

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS					139			—

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD					7,561			7,547


CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	5,885		$	11,339

~~Interim~~See ~~Financial~~notes ~~Statements~~to condensed consolidated financial statements.

~~The accompanying unaudited condensed consolidated financial statements as~~–5– ~~of September 30, 2000 have been prepared in accordance with generally~~ accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position and operating results for the interim periods have been included. The results of operations for the three and nine months ended September 30, 2000 are not necessarily indicative of the results for the entire year ending December 31, 2000. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in UTI’s Annual Report on Form 10-K for the year ended December 31, 1999 and UTI’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2000.

PropertyTable andof Equipment Contents

UTI ~~capitalizes~~ENERGY ~~interest on borrowings during the active construction period of major capital projects~~CORP. ~~Capitalized interest is~~ ~~added to the cost of the underlying assets and is amortized over the~~ ~~useful lives of the assets. For the three and nine months~~ ~~ended September 30, 2000, UTI capitalized approximately $.1 million of interest in connection with various capital projects. Prior to the current quarter, capitalized interest was not significant.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2001

~~Foreign~~1. ~~Currency~~SUMMARY ~~Translation~~ OF SIGNIFICANT ACCOUNTING POLICIES

~~The~~Interim ~~U.S.~~Financial dollar is the functional currency for all of UTI’s operations except for UTI’s Canadian operations which uses the Canadian dollar as the functional currency. The effects of exchange rate changes are reflected as a separate component of shareholders’ equity. Statements

~~Reclassifications~~ The accompanying unaudited condensed consolidated financial statements as of March 31, 2001 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position and operating results for the interim periods have been included. The results of operations for the three months ended March 31, 2001 are not necessarily indicative of the results for the entire year ending December 31, 2001. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in UTI’s Annual Report on Form 10-K for the year ended December 31, 2000.

~~Certain~~Property ~~items~~and ~~in the prior period’s financial statements have been reclassified to conform with the presentation in the current period.~~ Equipment

2UTI capitalizes interest on borrowings during the active construction period of major capital projects. ~~ACQUISITIONS~~ Capitalized interest is added to the cost of the underlying assets and is amortized over the useful lives of the assets. For the three months ended March 31, 2001, UTI capitalized approximately $.4 million of interest in connection with various capital projects. Capitalized interest was not significant at March 31, 2000.

~~Asset~~Foreign ~~Acquisitions~~ Currency Translation

InThe ~~September~~U.S. ~~2000,~~dollar ~~UTI~~is ~~acquired~~the ~~four~~functional ~~drilling~~currency ~~rigs~~for all of UTI’s operations except for ~~approximately~~ $7UTI’s Canadian operations which uses the Canadian dollar as the functional currency.~~7 million~~ inThe ~~cash~~effects of exchange rate changes are reflected as a separate component of shareholders’ equity.

~~Asset~~New ~~Swap~~ Accounting Pronouncement

OnIn ~~May 15~~June 1998, ~~2000~~the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, ~~UTI~~Accounting for Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133, inas aamended ~~nonmonetary~~by ~~exchange~~Statement of ~~similar~~Financial ~~productive assets~~Accounting Standards No. 137, ~~acquired~~Accounting afor ~~drilling~~Derivative ~~rig~~Instruments inand ~~exchange~~Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133, and by Statement of Financial Accounting Standards No. 138, Accounting for ~~certain~~Certain ~~drilling~~Derivative ~~rig components~~Instruments and ~~drill~~Hedging ~~pipe~~Activities, ~~with~~which ais ~~net~~effective ~~book~~for fiscal years beginning after June 15, 2000, requires all derivatives to be recognized at fair value ofon ~~approximately $970~~the balance sheet. UTI adopted SFAS 133 on January 1,~~000~~ 2001. NoThe ~~gain~~change ordid ~~loss~~not ~~was~~have ~~recognized~~a significant effect on ~~this~~UTI’s ~~transaction~~financial statements.

-–6-–

UTITable ENERGYof CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) September 30, 2000 (All per share and share amounts reflect the 2:1 stock split effective October 3, 2000) Contents

2.UTI ~~ACQUISITIONS~~ENERGY ~~(Continued)~~CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2001

~~Phelps~~1. ~~Drilling~~SUMMARY ~~International~~OF ~~Ltd.~~ SIGNIFICANT ACCOUNTING POLICIES (Continued)

On May 5, 2000, UTI acquired the land drilling operations of Phelps Drilling International Ltd. for $29.6 million in cash. Phelps’ assets and operations are located in the Canadian provinces of Alberta, Saskatchewan and British Columbia. The acquisition has been accounted for under the purchase method of accounting. Phelps’ operating results since May 5, 2000 have been consolidated with the operating results of UTI. The acquired assets consisted of 14 land drilling rigs, drilling equipment and other equipment used in Phelps’ land drilling business. The fair market value of the drilling rigs and related equipment was estimated and the purchase price was allocated as follows (in thousands): Reclassifications

Property and Equipment	$	30,902
Goodwill		0
Liabilities Assumed		(1,215	)
Purchase Price	$	29,687


	Certain items in the prior period’s financial statements have been reclassified to conform with the presentation in the current period.

~~Schneider~~2. ~~Drilling Corporation~~ ACQUISITIONS

On December 14, 1999, UTI acquired the land drilling assets of Schneider Drilling Corporation for $7.5 million in cash. The acquisition has been accounted for under the purchase method of accounting. Schneider’s operating results since December 14, 1999 have been consolidated with the operating results of UTI. Schneider’s assets included three land drilling rigs, major components for two additional land drilling rigs and drilling equipment. The fair market value of the drilling rigs and related equipment was estimated and the purchase price was allocated as follows (in thousands): Merger

Property and Equipment	$	7,712
Goodwill		0
Liabilities Assumed		(212	)
Purchase Price	$	7,500

On February 5, 2001, UTI announced that its Board of Directors along with the Board of Directors of Patterson Energy Inc. approved a merger of the two companies. According to the terms of the merger agreement between UTI and Patterson, shareholders of UTI will receive one share of Patterson common stock for each share of UTI common stock and Patterson will assume UTI’s outstanding options and warrants. The board of directors of the new company will consist of eleven directors, six of which will be selected by Patterson and five of which would be selected by UTI. Although the merger agreement does not specify who will be the officers of the new company, management of UTI understands that Mark S. Siegel, UTI’s Chairman of the Board, would be the Chairman of the Board and Cloyce A. Talbott, Patterson’s Chairman of the Board and Chief Executive Officer, would be Chief Executive Officer. The combined company will be the second largest United States land-based drilling service contractor with 302 drilling rigs and will be called “Patterson-UTI Energy, Inc.”

~~-7-~~ Under the terms of the merger agreement, both UTI and Patterson have agreed not to solicit competing offers, but the boards of directors of each company are free to consider and accept an unsolicited offer if, based on advice of counsel, it believes it must do so in the exercise of its fiduciary duty. In the event a party accepts an unsolicited offer, or the shareholders do not vote to approve the merger because of an unsolicited offer, the other party would be entitled to receive a breakup fee of $32.5 million plus reimbursement of expenses of up to $2.5 million. In the event the shareholders of one party do not vote to approve the merger and the other party is not in default and is ready, willing and able to perform its agreement, the party whose shareholders vote against the merger will be required to pay to the other party $2.5 million, plus up to an additional $2.5 million in expenses.

~~UTI~~The ~~ENERGY~~merger ~~CORP~~is subject to customary conditions to closing, including approval by the shareholders of both companies, as well as any necessary regulatory filings. ~~NOTES~~ TOThe ~~CONDENSED~~shareholder’s ~~CONSOLIDATED~~meetings ~~FINANCIAL~~are ~~STATEMENTS~~set ~~(Unaudited) September 30~~for May 8, ~~2000 (All~~2001. ~~per~~There ~~share~~can ~~and~~be ~~share~~no ~~amounts~~assurance ~~reflect~~that the ~~2:1~~merger ~~stock~~will ~~split effective~~be ~~October~~consummated 3in accordance with the terms of the merger agreement, ~~2000)~~ if at all.

~~2. ACQUISITIONS (Continued)~~–7–

NortonTable Drillingof Services, Inc. Contents

~~On July 27, 1999,~~ UTI ~~acquired~~ENERGY ~~Norton Drilling Services, Inc~~CORP.~~, for~~ ~~approximately 2.6 million shares of UTI’s common stock. The stock was~~ ~~valued at $13.3 million or $5.12 per share based on the average price of~~ UTI’s common stock shortly before and after the acquisition was announced. UTI also repaid approximately $8.0 million of Norton’s existing debt upon the acquisition. The acquisition has been accounted for under the purchase method of accounting. Norton’s operating results since July 27, 1999 have been consolidated with the operating results of UTI. Norton’s assets included sixteen land drilling rigs, drilling equipment and rolling stock. The fair market value of the drilling rigs and related equipment was estimated and the purchase price was allocated as follows (in thousands):

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2001

Property and Equipment	$	31,381
Goodwill		0
Deferred Taxes		(6,073	)
Long-Term Debt Assumed		(7,951	)
Other Liabilities Assumed, net		(4,073	)
Purchase Price	$	13,284

ACQUISITIONS (Continued)

3.Asset ~~DISPOSITIONS~~ Acquisitions

In ~~March 1999~~January 2001, UTI ~~sold~~acquired ~~certain~~six ~~land~~ drilling ~~assets of International Petroleum Service Company~~rigs, ~~its~~through ~~wholly~~three ~~owned~~separate ~~subsidiary~~transactions, ~~to an unrelated party~~ for ~~$5.6 million.~~approximately ~~A pre-tax gain of~~ $215.8 7 million ~~was realized as a result of the sale and is recorded~~ in ~~other income before operating income~~cash. ~~Included in the sale were:~~

•In ~~five~~September ~~land~~2000, ~~drilling~~UTI ~~rigs~~acquired •four ~~related~~drilling ~~support~~rigs ~~equipment~~for •approximately ~~rolling~~$7.7 ~~stock~~million •in ~~spare parts and supplies~~cash.

~~-8-~~ Asset Swap

On May 15, 2000, UTI, ~~ENERGY~~in ~~CORP. NOTES~~a TOnonmonetary ~~CONDENSED~~exchange ~~CONSOLIDATED~~of ~~FINANCIAL~~similar ~~STATEMENTS~~productive ~~(Unaudited) September 30~~assets, ~~2000 (All~~acquired ~~per~~a ~~share~~drilling rig in exchange for certain drilling rig components and ~~share~~drill ~~amounts~~pipe ~~reflect~~with ~~the~~a ~~2:1~~net ~~stock~~book ~~split effective~~value ~~October~~of 3approximately $970,000. ~~2000)~~ No gain or loss was recognized on this transaction.

4.Phelps ~~LONG-TERM~~Drilling ~~DEBT~~ International Ltd.

~~Under~~On May 5, 2000, UTI’s acquired the land drilling operations of Phelps Drilling International Ltd. for $729.8 6 million ~~promissory~~in ~~notes,~~cash. aPhelps’ ~~principal~~assets ~~payment~~and operations are located in the Canadian provinces of $3Alberta, British Columbia and Saskatchewan.~~5 million~~ ~~was~~The ~~made~~acquisition ~~because~~has ~~the~~been ~~average~~accounted ~~trading~~for ~~value~~under the purchase method of ~~UTI~~accounting. Phelps’s ~~common~~operating ~~stock for~~results ~~thirty~~since ~~consecutive~~May ~~trading~~5, ~~days~~2000 ~~exceeded~~have ~~$15~~been consolidated with the operating results of UTI.00 ~~per~~The ~~share~~acquired onassets ~~March 9~~consisted of fourteen land drilling rigs, ~~2000~~ drilling equipment and other equipment used in Phelps’ land drilling business. The ~~repayments~~fair ~~were~~market ~~funded~~value byof ~~long-term~~the ~~borrowings~~drilling ~~under~~rigs and related equipment was estimated and the ~~revolving~~ ~~credit~~purchase ~~facility.~~ price was allocated as follows (in thousands):

UTI’s $65.0 million four-year revolving credit facility was increased to $75.0 million during May 2000 and subsequently increased to $90.0 million during October 2000. Other terms of the credit facility remain substantially the same.


Property and Equipment	$	31,170




Goodwill		—




Liabilities Assumed		(1,559	)

Purchase Price	$	29,611

~~UTI repaid its subordinated notes of $25.0 million in August of 2000.~~–8– ~~The repayment was funded by long-term borrowing under the revolving~~ credit facility. The subordinated notes bore interest at 12.0% while the revolving credit facility bears interest at a floating rate ranging from LIBOR plus 1.75% to LIBOR plus 2.75%. (The rate at September 30, 2000 was LIBOR plus 1.75%).

5.Table CONTINGENCIES of Contents

UTI isENERGY ~~involved in several claims arising in the ordinary course of business~~CORP. ~~UTI’s management believes all of these claims are covered by~~ ~~insurance. UTI’s management believes that these matters will not have a~~ ~~material adverse effect on UTI’s financial statements.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2001

~~UTI is partially self-insured for employee health insurance claims~~3. UTI was self-insured for workers compensation for certain years prior to 1999. UTI incurs a maximum of $100,000 per employee under medical claims and a maximum of $250,000 per event for workers compensation claims. Although UTI believes that adequate reserves have been provided for expected liabilities arising from its self-insured obligations, management’s estimates of these liabilities may change in the future as circumstances develop. CONTINGENCIES

UTI’s ~~operations~~is ~~are~~involved ~~subject~~in toseveral ~~the~~claims ~~many~~arising ~~hazards inherent~~ in the ~~onshore drilling~~ordinary ~~industry,~~course ~~such as blowouts, explosions, sour gas, well fires and spills. These hazards can result in personal injury and loss~~ of ~~life, severe damage to or destruction of property and equipment, pollution or environmental damage and suspension of operations~~business. ~~Although~~ UTI ~~maintains~~’s ~~insurance protection as~~ management ~~deems~~believes ~~appropriate,~~all ~~such insurance~~of ~~coverage~~these ~~may~~claims ~~not~~are ~~provide~~covered ~~sufficient~~by ~~funds~~insurance toor ~~protect UTI from all liabilities~~ that ~~could~~these ~~result~~matters ~~from its operations. Also, claims~~ will be ~~subject~~not tohave ~~various~~a ~~retentions~~material ~~and~~adverse ~~deductibles.~~effect ~~While~~on UTI’s ~~has generally~~financial been able to obtain some degree of contractual indemnification from its customers in most of its dayrate drilling contracts, no such indemnification is typically available for footage or turnkey contactsstatements. The indemnity agreements require the customers to hold UTI harmless in the event of loss of production or reservoir damage. This contractual indemnification may not be supported by adequate insurance maintained by the customer.

UTI is partially self-9insured for employee health insurance claims and incurs a maximum of $125,000 per employee under medical claims. UTI was self- insured for workers compensation for certain years prior to 2000 and incurs a maximum of $250,000 per event for workers compensation claims. Although UTI believes that adequate reserves have been provided for expected liabilities arising from its self-insured obligations, management’s estimates of these liabilities may change in the future as circumstances develop.

UTI’s ~~ENERGY~~operations ~~CORP~~are subject to the many hazards inherent in the onshore drilling industry, such as blowouts, explosions, sour gas, well fires and spills. ~~NOTES~~ TOThese ~~CONDENSED~~hazards ~~CONSOLIDATED~~can ~~FINANCIAL~~result ~~STATEMENTS~~in ~~(Unaudited) September 30~~personal injury and loss of life, ~~2000 (All~~severe ~~per~~damage ~~share~~to or destruction of property and ~~share~~equipment, ~~amounts~~pollution ~~reflect~~or ~~the~~environmental ~~2:1~~damage ~~stock~~and ~~split effective~~suspension ~~October~~of 3operations. Although UTI maintains insurance protection as management deems appropriate, ~~2000)~~ such insurance coverage may not provide sufficient funds to protect UTI from all liabilities that could result from its operations. Also, claims will be subject to various retentions and deductibles. While UTI has generally been able to obtain some degree of contractual indemnification from its customers in most of its dayrate drilling contracts, no such indemnification is typically available for footage or turnkey contacts. The indemnity agreements require the customers to hold UTI harmless in the event of loss of production or reservoir damage. This contractual indemnification may not be supported by adequate insurance maintained by the customer.

5UTI’s operations routinely involve the handling of various materials, including hazardous materials. ~~CONTINGENCIES~~UTI may be exposed to liability under numerous state and federal environmental laws, rules and regulations including dealing with hazardous materials. In addition, environmental laws and regulations including The Comprehensive Environmental Response, Compensation and Liability Act (~~Continued~~also known as the “Superfund Law”) , may impose strict liability whereby UTI could be liable for clean-up costs, even if the situation resulted from previous conduct of UTI that was lawful at the time conducted or from improper conduct of or conditions caused by previous property owners or other persons not associated with UTI. UTI maintains insurance coverage against some environmental liabilities, including pollution caused by sudden and accidental oil spills.

~~UTI’s~~Management ~~operations~~believes ~~routinely~~it ~~involve~~has ~~the~~adequately ~~handling~~reserved offor ~~various~~these ~~materials, including hazardous materials~~contingencies. ~~UTI~~Management ~~may~~is beof exposed to liability under numerous state and federal environmental laws, rules and regulations dealing with hazardous materials. In addition, environmental laws and regulations including The Comprehensive Environmental Response, Compensation and Liability Act (also known as the ~~“Superfund~~opinion ~~Law”), may impose strict liability whereby UTI could be liable for clean-up costs, even if the situation resulted from previous conduct of UTI~~ that ~~was lawful at~~ the ~~time~~outcome ~~conducted or from improper conduct~~ of orknown ~~conditions caused~~and bypotential ~~previous~~claims ~~property~~will ~~owners~~not orhave ~~other~~a ~~persons~~material ~~not~~adverse ~~associated~~effect ~~with UTI.~~on UTI’s ~~maintains insurance coverage against some environmental liabilities including pollution caused by sudden and accidental oil spills~~operations.

~~Management believes it has adequately reserved for these contingencies.~~–9– ~~Management is of the opinion that the outcome of known and potential~~ ~~claims will not have a material adverse effect on UTI’s operations.~~

6.Table SHAREHOLDERS'of EQUITY Contents

~~On September 14, 2000,~~ UTI's ~~Board~~ENERGY ~~of Directors authorized a two for one stock split in the form of a stock dividend~~CORP. ~~The stock~~ ~~dividend was paid on October 3, 2000 to stockholders of record on~~ ~~September 25, 2000. As a result of the stock split, all share and per~~ ~~share data contained herein have been restated to reflect the effect of the two for one stock split.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2001

At UTI's Annual Meeting held on July 26, 2000, the stockholders approved an amendment to UTI's Restated Certificate of Incorporation that increased the number of authorized shares of common stock from 50 million to 100 million4. InEARNINGS ~~addition,~~PER ~~at the Annual Meeting, the stockholders approved an amendment to the Restated Certificate of Incorporation to eliminate Class A common stock.~~ SHARE

AtThe ~~UTI's~~following ~~Board~~table ofsets ~~Directors~~forth ~~meeting on July 26, 2000,~~ the ~~board approved~~computation aof ~~resolution~~basic ~~to eliminate series A Preferred Stock~~ and ~~to restate~~diluted ~~the~~earnings ~~Certificate~~per ~~of Incorporation.~~ share:

7. EXTRAORDINARY ITEM


		Three Months Ended
		March 31,

		2001		2000

		(in thousands, except per share amounts)

Numerator:




Net income		$	16,050	$	304


Denominator for basic earnings per share —weighted-average shares			37,599		36,116




Effect of dilutive securities:




	Warrants		67		629




	Stock options		1,854		1,689

	Dilutive potential common shares		1,921		2,318


Denominator for diluted earnings per share —adjusted weighted-average shares and assumed conversions			39,520		38,434


Basic earnings per share		$	0.43	$	0.01


Diluted earnings per share		$	0.41	$	0.01

~~UTI recorded an extraordinary loss of $329,000 after taxes ($~~5.~~01 per~~ ~~share)~~COMPREHENSIVE as a result of the early retirement of its $25.0 million subordinated notes. The redemption of 12.0% debt was financed with proceeds from the revolving credit facility with interest rates between LIBOR plus 1.75% to LIBOR plus 2.75%. The loss consisted primarily of the write-off of the discount, deferred interest and financing fees. INCOME

-10-


	Three Months Ended
	March 31,

	2001			2000

	(in thousands)

Net income	$	16,050		$	304




Other comprehensive loss:




Foreign currency translation		(1,622	)		—


Comprehensive income	$	14,428		$	304

~~UTI ENERGY CORP.~~–10– ~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)~~ ~~September 30, 2000 (All per share and share amounts reflect the 2:1 stock split effective October 3, 2000)~~

8.Table EARNINGSof PER SHARE Contents

~~The~~UTI ~~following~~ENERGY ~~table sets forth the computation of basic and diluted~~CORP. ~~earnings per share:~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2001

		Three Months					Nine Months
		Ended September 30,					Ended September 30,
		2000		1999			2000		1999
		(in thousands, except per share amounts)
Numerator:
Net income (loss)		$	3,898	$	(355	)	$	4,947	$	(3,539	)
Denominator:
Denominator for basic earnings per shareshare —weighted-average shares			37,069		34,884			36,734		33,432
Effect of dilutive securities:
	Warrants		110		—			284		—
	Stock Options		1,714		—			1,698		—
	Dilutive potential common shares		1,824		—			1,982		—
Denominator for diluted earnings per share —adjusted weighted-average shares and assumed conversions			38,893		34,884			38,716		33,432
Basic earnings (loss) per share		$	.11	$	(0.01	)	$	.13	$	(0.11	)
Diluted earnings (loss) per share		$	.10	$	(0.01	)	$	.13	$	(0.11	)

INDUSTRY SEGMENT INFORMATION

~~Options~~UTI tohas ~~purchase~~two ~~1.3 million~~reportable ~~shares~~segments: ofland ~~UTI’s~~drilling ~~common stock~~ and ~~warrants~~pressure to purchase 484,000 shares of UTI’s common stock were not included in the computation of diluted earnings per share for the three months ended September 30, 1999 as the effect would have been antidilutive due to the net loss for the periodpumping. ~~Options to purchase 943,000 shares of~~ UTI’s ~~common~~ ~~stock~~reportable ~~and~~segments ~~warrants~~are tobusiness ~~purchase~~units ~~222,000~~that ~~shares~~offer ofdifferent UTI’s common stock were not included in the computation of diluted earnings per share for the nine months ended September 30, 1999 as the effect would have been antidilutive due to the net loss for the periodservices.

~~-11-~~ UTI evaluates performance and allocates resources based on profit or loss from operations before other income (expense) and income taxes. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.

~~UTI~~The ~~ENERGY~~other ~~CORP. NOTES~~category TOin ~~CONDENSED~~the ~~CONSOLIDATED~~segment ~~FINANCIAL~~breakdown ~~STATEMENTS~~is ~~(Unaudited) September 30,~~attributable ~~2000 (All~~to ~~per~~investments ~~share~~in oil and ~~share~~natural ~~amounts~~gas ~~reflect~~properties. This segment has not met the ~~2:1~~quantitative ~~stock~~thresholds ~~split effective~~for ~~October~~determining 3,reportable ~~2000)~~ segments. There are no intersegment sales and transfers.

9. WARRANTS


	Three Months Ended
	March 31,

	2001			2000

	(in thousands)

Revenues:




Land Drilling	$	100,996		$	50,044




Pressure Pumping		7,337			4,180




Other		57			49

	$	108,390		$	54,273


Selling, General and Administrative:




Land Drilling	$	1,180		$	782




Pressure Pumping		918			858




Other		—			—

		2,098			1,640




Corporate		1,107			1,141

	$	3,205		$	2,781


Operating Income:




Land Drilling⁽¹⁾	$	25,825		$	2,446




Pressure Pumping⁽¹⁾		1,637			180




Other⁽¹⁾		34			23

		27,496			2,649




Corporate		(1,182	)		(1,227	)




Other Income		117			95

	$	26,431		$	1,517

~~During the nine months ended September 30, 2000, certain warrant holders~~–11– ~~executed a net exercise of their warrants. As a result of these~~ transactions, a total of 1,404,750 warrants were converted into 801,240 shares of UTI common stock. The net exercises were determined based on the trading value of UTI’s common stock for a period of days shortly before the exercise. Warrants to purchase 960,000 shares of UTI’s common stock at an exercise price of $5.42 per share were converted into UTI common stock based on an average trading price of $14.29 per share. Warrants to purchase 366,000 shares of UTI’s common stock at an exercise price of $8.00 per share were converted into UTI common stock based on an agreed price of $16.00 per share. Warrants to purchase 78,750 shares of UTI’s common stock at an exercise price of $13.25 per share were converted into UTI common stock based on an agreed price of $18.38 per share. No other consideration was given in any of the transactions.

TheTable followingof warrants to purchase UTI common stock were outstanding at September 30, 2000: Contents

Number of

Exercise

Expiration

Event

Price

Date

Southland Acquisition

24,000

8.00

April 11, 2002

Suits Acquisition

121,250

13.25-17.50

July 31, 2003

Norton Acquisition

72,528

4.75-7.41

February 24, 2004 and

April 1, 2002

UTI ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2001

106. ~~COMPREHENSIVE~~INDUSTRY ~~INCOME~~ SEGMENT INFORMATION (Continued)

For the three month period ended September 30, 2000, comprehensive income net of tax was $3.7 million and for the three month period ended September 30, 1999, comprehensive loss was $.4 million. For the nine month period ended September 30, 2000, comprehensive income net of tax was $4.9 million and for the nine month period ended September 30, 1999, comprehensive loss was $3.5 million.


	Three Months Ended
	March 31,

	2001		2000

	(in thousands)

Depreciation and Amortization:




Land Drilling	$	7,505	$	6,129




Pressure Pumping		387		404




Other		12		12

		7,904		6,545




Corporate		75		86

	$	7,979	$	6,631


Acquisitions of Property and Equipment:




Land Drilling	$	23,421	$	3,973




Pressure Pumping		1,734		254




Other		—		—

		25,155		4,227




Corporate		14		9

	$	25,169	$	4,236

-12-


	March 31,		December 31,
	2001		2000


Segment Assets:




Land Drilling	$	341,821	$	306,246




Pressure Pumping		18,264		16,114




Other		142		169

		360,227		322,529




Corporate		10,565		7,278

	$	370,792	$	329,807

~~UTI~~(1) ~~ENERGY~~Operating ~~CORP. NOTES~~income TOis ~~CONDENSED~~total ~~CONSOLIDATED~~operating ~~FINANCIAL~~revenues ~~STATEMENTS~~less ~~(Unaudited) September 30~~operating expenses, ~~2000 (All~~depreciation ~~per~~and ~~share~~amortization and ~~share~~does ~~amounts~~not ~~reflect~~include ~~the~~general ~~2:1~~corporate ~~stock~~expenses, ~~split effective~~interest ~~October~~income 3(expense), ~~2000)~~ other income or income taxes.

~~11. INDUSTRY SEGMENT INFORMATION~~–12–

UTITable hasof two reportable segments: land drilling and pressure pumping. UTI’s reportable segments are business units that offer different services. Contents

UTI ~~evaluates~~ENERGY ~~performance and allocates resources based on profit or loss from operations before other income (expense) and income taxes~~CORP. ~~The~~ ~~accounting policies of the reportable segments are the same as those~~ ~~described in the summary of significant accounting policies.~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2001

~~The other category in the segment breakdown is attributable to investments in oil and natural gas properties~~6. ~~This~~INDUSTRY ~~segment~~SEGMENT ~~has~~INFORMATION ~~not met the quantitative thresholds for determining reportable segments. There are no intersegment sales and transfers.~~ (Continued)

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2000			1999			2000			1999
	(in thousands)
Revenues:
Land Drilling	$	66,137		$	36,327		$	168,171		$	89,188
Pressure Pumping		6,160			6,022			13,902			14,501
Other		34			47			116			127
	$	72,331		$	42,396		$	182,189		$	103,816
Selling, General and Administrative:
Land Drilling	$	993		$	682		$	2,819		$	2,251
Pressure Pumping		789			874			2,355			2,613
Other		—			—			—			—
		1,782			1,556			5,174			4,864
Corporate		1,284			985			3,485			2,935
	$	3,066		$	2,541		$	8,659		$	7,799
Operating Income (Loss):
Land Drilling(1)	$	7,882		$	99		$	13,858		$	(3,537	)
Pressure Pumping(1)		1,265			1,413			1,351			2,149
Other(1)		4			7			28			26
		9,151			1,519			15,237			(1,362	)
Corporate		(1,347	)		(1,020	)		(3,731	)		(3,055	)
Other Income		188			5			484			2,684
	$	7,992		$	504		$	11,990		$	(1,733	)


	The following tables set forth financial information with respect to UTI’s operations by geographic area:

-13-


	Three Months Ended
	March 31,

	2001		2000

	(in thousands)

Revenues:




United States	$	98,064	$	54,273




Canada		10,326		—

	$	108,390	$	54,273

UTI ENERGY CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) September 30, 2000 (All per share and share amounts reflect the 2:1 stock split effective October 3, 2000)


	March 31,		December 31,
	2001		2000


Long-Term Assets:




United States	$	253,466	$	225,195




Canada		35,059		32,458

	$	288,525	$	257,653


Goodwill:




United States	$	17,351	$	17,733




Canada		—		—

	$	17,351	$	17,733

~~11. INDUSTRY SEGMENT INFORMATION (Continued)~~–13–

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2000		1999		2000		1999
	(in thousands)
Depreciation and Amortization:
Land Drilling	$	6,935	$	5,673	$	19,199	$	16,519
Pressure Pumping		390		367		1,193		1,010
Other		18		18		53		51
		7,343		6,058		20,445		17,580
Corporate		63		35		246		120
	$	7,406	$	6,093	$	20,691	$	17,700
Acquisitions of Property and Equipment:
Land Drilling	$	9,097	$	906	$	18,466	$	3,144
Pressure Pumping		894		794		1,292		1,761
Other		—		—		12		—
		9,991		1,700		19,770		4,905
Corporate		10		—		44		8
	$	10,001	$	1,700	$	19,814	$	4,913

	September 30,		December 31,
	2000		1999
Segment Assets:
Land Drilling	$	285,066	$	233,341
Pressure Pumping		14,954		16,399
Other		276		318
		300,296		250,058
Corporate		5,048		10,524
	$	305,344	$	260,582

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(1) Operating income (loss) is total operating revenues less direct operating expenses, depreciation and amortization and does not include general corporate expenses, other charge, interest income (expense), other income (expense), income taxes or extraordinary item.Overview

~~-14-~~ UTI Energy Corp. is a leading provider of onshore contract drilling services to companies that explore for and produce oil and natural gas. UTI operates one of the largest fleets of drilling rigs used to drill oil and natural gas wells on land in North America. As of April 17, 2001, UTI had a fleet of 150 land drilling rigs. A drilling rig includes the structure, power source and machinery necessary to allow a drill bit to penetrate rock to a depth desired by the customer. UTI’s drilling rigs operate in the oil and natural gas producing basins of:

~~UTI~~• ~~ENERGY~~Louisiana ~~CORP. NOTES~~• TONew ~~CONDENSED~~Mexico ~~CONSOLIDATED~~• ~~FINANCIAL~~Oklahoma ~~STATEMENTS~~• ~~(Unaudited) September 30,~~Texas ~~2000 (All~~• ~~per~~Western ~~share~~Canada ~~and~~(Alberta, ~~share~~British ~~amounts~~Columbia ~~reflect~~and ~~the 2:1 stock split effective October 3, 2000~~Saskatchewan)

11 UTI also provides pressure pumping services in the Appalachian Basin. Pressure ~~INDUSTRY~~pumping ~~SEGMENT~~services ~~INFORMATION~~consist ~~(Continued)~~primarily of well stimulation and cementing for the completion of new wells and remedial work on existing wells. Well stimulation involves processes inside a well designed to enhance the flow of oil, natural gas or other desired substances from the well. Cementing is the process of inserting material between the hole wall and the pipe to center and stabilize the pipe in the hole.

~~The~~ UTI ~~following~~operates ~~tables~~principally ~~set~~in ~~forth~~two ~~financial~~business segments: drilling oil or natural gas wells on land and pressure pumping. Financial information ~~with~~and ~~respect~~other disclosures relating to ~~UTI’s~~ ~~operations~~these bybusiness ~~geographic~~segments ~~area:~~are provided in the Notes to Condensed Consolidated Financial Statements.

	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2000		1999		2000		1999
	(in thousands)
Revenues:
United States	$	67,522	$	42,396	$	175,740	$	103,816
Canada		4,809		—		6,449		—
	$	72,331	$	42,396	$	182,189	$	103,816

Beginning in 1995, UTI decided to expand its land drilling operations. Management of UTI made this decision to take advantage of:

	September 30,		December 31,
	2000		1999
Long-Term Assets:
United States	$	217,514	$	210,473
Canada		30,478		—
	$	247,992	$	210,473
Goodwill:
United States	$	18,115	$	19,261
Canada		—		—
	$	18,115	$	19,261

	•		improving market conditions
	•		benefits arising from a consolidation in the land drilling industry

~~-15-~~ To effect this strategy, UTI disposed of its oilfield distribution business in September 1995 and embarked on an acquisition program aimed at expanding UTI’s presence in the oil and natural gas producing regions in the United States. Under this strategy, UTI has acquired 132 rigs since 1995. During this same time period, UTI disposed of nine rigs primarily in the Appalachian Basin.

~~ITEM~~ On 2May 5, 2000, UTI acquired the land drilling operations of Phelps Drilling International Ltd. ~~MANAGEMENT~~for $29.6 million in cash. Phelps’S ~~DISCUSSION~~assets ~~AND~~are located ~~ANALYSIS~~in OFthe ~~FINANCIAL~~Canadian ~~CONDITION~~provinces ~~AND~~of ~~RESULTS~~Alberta, OFBritish ~~OPERATIONS~~Columbia and Saskatchewan. The acquired assets consisted of fourteen land drilling rigs and other assets used in Phelps’ land drilling business. The acquisition allowed UTI to enter the Canadian market.

~~Overview~~ UTI acquired an additional five land drilling rigs in the United States during 2000 through three separate transactions and an additional six land drilling rigs in the United States during 2001 through three separate transactions. The acquisitions provide UTI with additional capacity. In 2001, one of the acquired rigs and an existing rig were deployed to the Canadian market.

~~UTI Energy Corp. is a leading provider of onshore contract drilling~~–14– ~~services to companies that explore for and produce oil and natural gas. UTI~~ operates one of the largest fleets of drilling rigs used to drill oil and natural gas wells on land in North America. A drilling rig includes the structure, power source and machinery necessary to allow a drill bit to penetrate rock to a depth desired by the customer. UTI’s drilling rigs operate in the oil and natural gas producing basins of:

•Table Coloradoof • Texas • Louisiana • Oklahoma • New Mexico • Utah • Wyoming • Alberta, Canada • Saskatchewan, Canada • British Columbia, CanadaContents

UTI’s ~~has~~results afor ~~fleet~~the ofthree ~~144~~months ~~land~~ended ~~drilling rigs.~~March ~~UTI~~31, ~~also~~2001 ~~provides~~reflect ~~pressure~~a strong ~~pumping~~improvement ~~services~~in market conditions in the ~~Appalachian~~North ~~Basin.~~American ~~Pressure~~land ~~pumping~~drilling ~~services consist~~markets ~~primarily~~resulting offrom ~~well~~an ~~stimulation~~increase ~~and~~in ~~cementing~~demand for ~~the~~drilling ~~completion of new wells and remedial work on existing wells~~services. ~~Well~~Fleet ~~stimulation involves processes inside a~~utilization ~~well~~was ~~designed~~76% tofor ~~enhance~~ the ~~flow~~three ofmonths ~~oil~~ended March 31, ~~natural~~2001 ~~gas~~compared orto ~~other~~58% ~~desired substances~~for ~~from~~ the ~~well. Cementing is the process of inserting material~~three ~~between~~months ~~the~~ended ~~hole~~March 31, ~~wall and the pipe to center and stabilize the pipe in the hole~~2000.

~~Beginning~~On inFebruary 5, ~~1995~~2001, UTI ~~decided~~announced that its Board of Directors along with the Board of Directors of Patterson Energy Inc. approved a merger of the two companies. According to ~~expand~~the ~~its~~terms ~~land~~of ~~drilling~~the ~~operations~~merger agreement between UTI and Patterson, shareholders of UTI will receive one share of Patterson common stock for each share of UTI common stock and Patterson will assume UTI’s outstanding options and warrants. The board of directors of the new company will consist ~~Management~~of eleven directors, six of which will be selected by Patterson and five of which would be selected by UTI. ~~made~~Although ~~this~~the ~~decision~~merger toagreement ~~take~~does ~~advantage~~not specify who will be the officers of: the new company, management of UTI understands that Mark S. Siegel, UTI’s Chairman of the Board, would be the Chairman of the Board and Cloyce A. Talbott, Patterson’s Chairman of the Board and Chief Executive Officer, would be Chief Executive Officer. The combined company will be the second largest United States land-based drilling service contractor with 302 drilling rigs and will be called “Patterson-UTI Energy, Inc.”

• Under ~~improving~~the ~~market~~terms ~~conditions~~of •the ~~benefits~~merger ~~arising~~agreement, ~~from~~both UTI and Patterson have agreed not to solicit competing offers, but the boards of directors of each company are free to consider and accept an unsolicited offer if, based on advice of counsel, it believes it must do so in the exercise of its fiduciary duty. In the event a ~~consolidation~~party accepts an unsolicited offer, or the shareholders do not vote to approve the merger because of an unsolicited offer, the other party would be entitled to receive a breakup fee of $32.5 million plus reimbursement of expenses of up to $2.5 million. In the event the shareholders of one party do not vote to approve the merger and the other party is not in default and is ready, willing and able to perform its agreement, the ~~land~~party whose ~~drilling~~shareholders ~~industry~~vote against the merger will be required to pay to the other party $2.5 million, plus up to an additional $2.5 million in expenses.

ToThe ~~effect~~merger ~~this~~is ~~strategy,~~subject ~~UTI~~to ~~disposed~~customary ofconditions ~~its~~to ~~oilfield~~closing, ~~distribution~~including ~~business~~approval inby ~~September 1995 and embarked on an acquisition program aimed at expanding UTI’s presence in~~ the ~~oil~~shareholders ~~and~~of ~~natural~~both ~~gas~~companies, ~~producing~~as ~~regions~~well inas ~~the~~any necessary ~~United~~regulatory ~~States~~filings. ~~Under~~The ~~this~~shareholder’s ~~strategy,~~meetings ~~UTI~~are ~~has~~set ~~acquired~~for ~~126~~May 8, ~~rigs since 1995~~2001. There ~~During~~can ~~this~~be ~~same~~no ~~time~~assurance ~~period,~~that ~~UTI~~the ~~disposed~~merger ofwill ~~nine~~be ~~rigs~~consummated ~~primarily~~ in accordance with the ~~Appalachian~~terms ~~Basin. Five~~ of the ~~nine~~merger ~~rigs~~agreement, ~~disposed~~if ofat ~~were sold in 1999~~all.

~~On May 5, 2000, UTI acquired the land drilling operations of Phelps~~–15– ~~Drilling International Ltd. for $29.6 million. Phelps’ assets are located in~~ the Canadian provinces of Alberta, Saskatchewan and British Columbia and include 14 land drilling rigs. The acquisition provided UTI with an operating base to enter the Canadian market. UTI acquired an additional 5 land drilling rigs in the United States during 2000 through three separate transactions, which provide UTI with additional capacity.

UTI’sTable resultsof for the three and nine months ended September 30, 2000 reflect a strong improvement in market conditions in the North American land drilling markets resulting from an increase in demand for drilling services. Fleet utilization (based on total rigs owned) was 63% for the three months ended September 30, 2000 compared to 44% for the three months ended September 30, 1999. Contents

~~-16-~~Results of Operations

UTI ~~currently~~believes ~~expects~~the ~~that~~number ~~its~~of land ~~drilling~~rigs ~~operations~~actively ~~will~~drilling ~~continue~~in tothe United ~~benefit~~States ~~from~~indicates ~~improved~~the ~~market~~overall ~~conditions~~strength ~~and~~of the ~~effects~~United ofStates ~~its~~oilfield ~~recent~~service ~~acquisitions~~industry. ~~UTI~~Without ~~intends~~giving effect to ~~continue its strategy of growth through~~ acquisitions, ofvariations ~~rigs~~in ~~and~~UTI’s ~~equipment that can be integrated into its fleet and~~revenues ~~operations~~ and ~~through~~gross ~~acquisitions~~margins ofgenerally ~~other~~follow ~~drilling~~trends ~~contractors~~in ~~that~~the ~~may provide~~United ~~opportunities~~States ~~for~~rig ~~expansion of UTI’s markets and services~~count.

~~Results~~ The following table presents certain results of ~~Operations~~operations data for UTI and the average United States rig count as reported by Baker Hughes Inc.(1) for the periods indicated:

UTI believes the number of land rigs actively drilling in the United States indicates the overall strength of the United States oilfield service industry. Without giving effect to acquisitions, variations in UTI’s operations generally follow trends in the United States rig count.


	Three Months
	Ended March 31,

	2001			2000

	(dollars in thousands)

Contract Drilling:




Revenues	$	100,996		$	50,044




Direct operating costs (excluding depreciation and amortization)	$	66,486		$	40,687




Selling, general and administrative	$	1,180		$	782




Depreciation and amortization	$	7,505		$	6,129




Operating days⁽²⁾		10,171			6,627




Average revenue per operating day	$	9.93		$	7.55




Average direct operating costs (excluding depreciation and amortization) per operating day	$	6.54		$	6.14




Average margin per operating day⁽³⁾	$	3.39		$	1.41




Average U.S. land rig count		966			636




Number of owned rigs at end of period		150			125




Average number of rigs owned during period		149			125




Average rigs operating		113			73




Rig utilization percentage⁽⁴⁾		76	%		58	%




Capital expenditures	$	23,421		$	3,973

Pressure Pumping:




Revenues	$	7,337		$	4,180




Direct operating costs (excluding depreciation and amortization)	$	4,395		$	2,738




Selling, general and administrative	$	918		$	858




Depreciation and amortization	$	387		$	404




Total jobs		968			653




Average revenue per job	$	7.58		$	6.40




Average direct operating costs (excluding depreciation and amortization) per job	$	4.54		$	4.19




Average margin per job⁽³⁾	$	3.04		$	2.21




Capital expenditures	$	1,734		$	254

~~The following table presents certain results of operations data for UTI~~–16– ~~and the average United States rig count as reported by Baker Hughes Inc.(1) for~~ ~~the periods indicated:~~

	Three Months						Nine Months
	Ended September 30,						Ended September 30,
	2000			1999			2000			1999
	(dollars in thousands)
Contract Drilling:
Revenues	$	66,137		$	36,327		$	168,171		$	89,188
Direct operating costs (excluding depreciation and amortization)	$	50,327		$	29,874		$	132,295		$	73,401
Selling, general and administrative	$	993		$	682		$	2,819		$	2,251
Depreciation and amortization	$	6,935		$	5,673		$	19,199		$	16,519
Operating days(2)		8,172			4,711			21,774			11,394
Average revenue per operating day	$	8.09		$	7.71		$	7.72		$	7.83
Average direct operating costs (excluding depreciation and amortization) per operating day	$	6.16		$	6.34		$	6.08		$	6.44
Average margin per operating day(3)	$	1.93		$	1.37		$	1.64		$	1.39
Average U.S. land rig count		825			543			722			459
Number of owned rigs at end of period		144			120			144			120
Average number of rigs owned during period		141			115			133			109
Average rigs operating		89			51			79			42
Rig utilization percentage(4)		63	%		44	%		60	%		39	%
Capital expenditures	$	9,097		$	906		$	18,466		$	3,144
Capital expenditures per operating day	$	1.11		$	.19		$	.85		$	.28

-17-


	Three Months
	Ended March 31,

	2001		2000

	(dollars in thousands)

Other and Corporate:




Revenues	$	57	$	49




Direct operating costs (excluding depreciation and amortization)	$	11	$	14




Selling, general and administrative	$	1,107	$	1,141




Depreciation and amortization	$	87	$	98




Capital expenditures	$	14	$	9

	Three Months				Nine Months
(1)	Baker Hughes, Inc. is an international oilfield service and equipment company. For more than twenty years, it has conducted and published a weekly census of active drilling rigs. Its active rig count is generally regarded as an industry standard for measuring industry activity levels.
	Ended September 30,				Ended September 30,
(2)	An operating day is defined as a day during which a rig is being operated, mobilized, assembled or dismantled while under contract.
	2000		1999		2000		1999
(3)	Average margin represents average revenues minus average direct operating costs and excludes provisions for bad debts, other charges, depreciation and amortization and selling, general and administrative expenses.
	(dollars in thousands)
(4)	Utilization rates are calculated by dividing the operating days by the total available days. Available days are calculated by multiplying rigs owned by the days in the period under review.
Pressure Pumping:
Revenues	$	6,160	$	6,022	$	13,902	$	14,501
Direct operating costs (excluding depreciation and amortization)	$	3,717	$	3,367	$	9,004	$	8,736
Selling, general and administrative	$	789	$	874	$	2,355	$	2,613
Depreciation and amortization	$	390	$	367	$	1,193	$	1,010
Total jobs		966		841		2,231		1,995
Average revenue per job	$	6.38	$	7.16	$	6.23	$	7.27
Average direct operating costs (excluding depreciation and amortization) per job	$	3.85	$	4.00	$	4.04	$	4.38
Average margin per job(3)	$	2.53	$	3.16	$	2.19	$	2.89
Capital expenditures	$	894	$	794	$	1,292	$	1,761
Other and Corporate:
Revenues	$	34	$	47	$	116	$	127
Direct operating costs (excluding depreciation and amortization)	$	11	$	22	$	34	$	49
Selling, general and administrative	$	1,284	$	985	$	3,485	$	2,935
Depreciation and amortization	$	81	$	53	$	299	$	171
Capital expenditures	$	10	$	—	$	56	$	8

(1)		Baker Hughes, Inc. is an international oilfield service and equipment company. For more than twenty years, it has conducted and published a weekly census of active drilling rigs. Its active rig count is generally regarded as an industry standard for measuring industry activity levels.
(2)		An operating day is defined as a day during which a rig is being operated, mobilized, assembled or dismantled while under contract.
(3)		Average margin represents average revenues minus average direct operating costs and excludes provisions for bad debts, other charges, depreciation and amortization and selling, general and administrative expenses.
(4)		Utilization rates are calculated by dividing the operating days by the total available days, including stacked rigs. Available days are calculated by multiplying rigs owned by the days in the period under review. For the nine months ended September 30, 2000, the utilization rate of UTI’s rigs, excluding stacked rigs, was 68%.

Comparison of Three Months Ended March 31, 2001 and 2000

~~-18-~~ Revenues by business segment for the three months ended March 31, 2001 and 2000 are as follows:

Comparison of Three Months Ended September 30, 2000 and 1999


	Three Months
	Ended March 31,
					%
	2001		2000		Increase

	(in thousands)

Revenues:




Land Drilling	$	100,996	$	50,044		101.8




Pressure Pumping		7,337		4,180		75.5




Other		57		49		16.3

	$	108,390	$	54,273		99.7

Revenues byincreased ~~business~~for ~~segment~~the ~~for~~three months ended March 31, 2001 from the three months ended ~~September~~March 3031, 2000 as a result of improved ~~and~~market ~~1999~~conditions. ~~are~~These asimproved ~~follows~~market conditions resulted in:

	Three Months
	Ended September 30,				%
					Increase
	2000		1999		(Decrease)
	(in thousands)
Revenues:
Land Drilling	$	66,137	$	36,327		82.1
Pressure Pumping		6,160		6,022		2.3
Other		34		47		(27.7	)
	$	72,331	$	42,396		70.6

	•		higher utilization rates in land drilling, 76% for the three months ended March 31, 2001 compared to 58% for the same period in 2000
	•		higher rates for land drilling services, average revenue per day of $9,900 for the quarter ended March 31, 2001 compared to $7,600 for the quarter ended March 31, 2000
	•		higher rates for pressure pumping services, average revenue per job of $7,600 for the quarter ended March 31, 2001 compared to $6,400 for the quarter ended March 31, 2000

~~Land drilling revenues increased for the three months ended September 30,~~–17– ~~2000 from the three months ended September 30, 1999 as a result of improved~~ ~~market conditions which resulted in improved utilization rates and higher average rates. The land drilling revenue increase is also attributable to several acquisitions completed after June 30, 1999.~~

DirectTable operatingof costs, excluding depreciation and amortization, by business segment for the three months ended September 30, 2000 and 1999 are as follows: Contents

	Three Months
	Ended September 30,				%
					Increase
	2000		1999		(Decrease)
	(in thousands)
Direct Operating Costs
(excluding depreciation and amortization):
Land Drilling	$	50,327	$	29,874		68.5
Pressure Pumping		3,717		3,367		10.4
Other		11		22		(50.0	)
	$	54,055	$	33,263		62.5

The land drilling revenue increase is also attributable to revenue generated from recent acquisitions. Acquisitions completed since March 31, 2000 generated an additional $14.5 million of revenue in the three months ended March 31, 2001.

~~The~~Direct ~~percentage increase in land drilling’s direct~~ operating costs (, excluding depreciation and amortization), isby business ~~lower~~segment ~~than~~for the ~~percentage~~three ~~increase in~~months ~~land~~ended ~~drilling’s~~March 31, ~~revenues~~2001 ~~due~~and to2000 ~~rates~~are ~~increasing more than costs~~ as ~~a result~~ ~~of improved market conditions. The percentage increase in pressure pumping’s~~follows: ~~direct operating costs (excluding depreciation and amortization) is higher than~~ ~~the percentage increase in pressure pumping revenues due to the mix of jobs performed.~~

Selling, general and administrative expenses increased $.5 million during the three months ended September 30, 2000 compared to the three months ended September 30, 1999, primarily due to acquisitions consummated during 2000.


	Three Months
	Ended March 31,				%
					Increase
	2001		2000		(Decrease)

	(in thousands)

Direct Operating Costs (excluding depreciation and amortization):




Land Drilling	$	66,486	$	40,687		63.4




Pressure Pumping		4,395		2,738		60.5




Other		11		14		(21.4	)

	$	70,892	$	43,439		63.2

~~Depreciation~~The ~~and~~percentage ~~amortization~~increase ~~expense~~in ~~increased~~direct ~~$1.3 million~~operating ~~during~~costs ~~the~~(excluding depreciation ~~three~~and ~~months~~amortization) ~~ended~~is ~~September 30,~~lower ~~2000,~~than ~~compared~~the topercentage ~~the~~increase ~~three~~in ~~months~~revenues ~~ended~~due to ~~September 30,~~rates ~~1999,~~increasing ~~primarily~~more ~~due~~than tocosts ~~acquisitions~~as ~~consummated~~a ~~during~~result ~~2000~~of ~~and 1999~~improved market conditions.

~~-19-~~ Selling, general and administrative expenses increased $.4 million during the three months ended March 31, 2001 compared to the three months ended March 31, 2000. The increase is due to acquisitions consummated during 2000 and due to additional support services needed as a result of the increase in revenue generating activity. Selling, general and administrative expenses as a percent of revenue has decreased to 3.0% for the three months ended March 31, 2001 compared to 5.1% for the same period of 2000.

~~Interest~~Depreciation and amortization expense increased $1.3 million during the ~~quarter ended September~~ ~~30,~~three ~~2000~~months ~~compared to the quarter~~ ended ~~September~~March 3031, ~~1999. This increase was primarily due to an increase in outstanding debt for the three months ended September 30~~2001, ~~2000~~ compared to the three months ended ~~September~~March 3031, ~~1999.~~ ~~The~~2000, ~~increase~~primarily ~~was~~due ~~partially~~to ~~offset~~acquisitions byconsummated ~~$.1 million in capitalized interest. Average debt outstanding was $55.1 million~~ during ~~the~~2001 ~~quarter~~and ~~ended September 30,~~ 2000 ~~compared to $32~~.~~0 million for the quarter ended September 30, 1999.~~

~~Income~~Interest ~~taxes~~expense ~~increased~~decreased $2.52 million during the quarter ended ~~September~~March 3031, 2001 compared to the quarter ended March 31, 2000. This decrease is attributable to $.4 million in capitalized interest in the quarter ended March 31, 2001 compared to no capitalized interest in the same period of 2000. While outstanding debt increased, the effective interest rate declined. Average debt outstanding was $59.4 million during the quarter ended ~~September~~March 3031, ~~1999~~2001 compared to $32.2 million for the quarter ended March 31, ~~primarily~~2000. ~~due~~The effective interest rate was 9.0% for the quarter ended March 31, 2001 compared to ~~higher~~15.0% for the ~~taxable~~quarter ~~income~~ended inMarch 31, 2000.

~~The~~Income ~~extraordinary~~taxes ~~loss~~increased ~~incurred~~ $9.3 million during the quarter ended ~~September~~March 3031, 2001, ~~2000~~compared ~~related~~ to the ~~early retirement~~quarter ofended ~~the $25.0~~March ~~million~~31, ~~subordinated~~2000, ~~notes. The early retirement was financed from the proceeds of the revolving credit facility. The loss consisted~~ primarily ofdue ~~the~~to ~~write-off of the~~higher ~~discount,~~taxable ~~deferred~~income ~~interest~~in ~~and financing fees~~2001.

~~Comparison of Nine Months Ended September 30, 2000 and 1999~~–18–

RevenuesTable byof business segment for the nine months ended September 30, 2000 and 1999 are as follows: Contents

	Nine Months
	Ended September 30,				%
					Increase
	2000		1999		(Decrease)
	(in thousands)
Revenues:
Land Drilling	$	168,171	$	89,188		88.6
Pressure Pumping		13,902		14,501		(4.1	)
Other		116		127		(8.7	)
	$	182,189	$	103,816		75.5

Liquidity and Capital Resources

~~Land~~Working drilling revenues increased for the nine months ended September 30, 2000 from the nine months ended September 30, 1999 as market conditions resulted in improved utilization rates and higher average rates. Land drilling revenue also increased due to several acquisitions completed after June 30, 1999. The decrease in pressure pumping revenue is a result of weather conditions which have limited activity in the Appalachian Basin during the nine months ended September 30, 2000. Capital

~~Direct operating costs (excluding depreciation and amortization) by business segment for the nine months ended September 30~~Historically, ~~2000~~UTI ~~and~~has ~~1999~~needed ~~are as follows~~cash:

	Nine Months
	Ended September 30,				%
					Increase
	2000		1999		(Decrease)
	(in thousands)
Direct Operating Costs
(excluding depreciation and amortization):
Land Drilling	$	132,295	$	73,401		80.2
Pressure Pumping		9,004		8,736		3.1
Other		34		49		(30.6	)
	$	141,333	$	82,186		72.0

	•		to fund working capital requirements
	•		to make capital expenditures to replace and expand its drilling rig fleet
	•		for acquisitions

~~The~~UTI ~~percentage~~has ~~increase~~funded inongoing ~~direct~~operations ~~operating costs (excluding depreciation and amortization) for land drilling correlates to the percentage increase in land drilling revenues.~~ through:

~~Selling,~~• ~~general~~available ~~and~~cash ~~administrative~~• ~~expenses~~cash ~~increased $.9 million~~provided ~~for~~from ~~the~~operations ~~nine~~• ~~months ended September 30, 2000 compared to the nine months ended September 30, 1999, primarily due to acquisitions consummated during 2000 and 1999.~~ borrowings

~~-20-~~ To date, UTI has funded acquisitions with:

~~Provision~~• ~~for~~available ~~bad~~cash ~~debts~~• ~~decreased~~borrowings ~~$.5 million~~• ~~for~~issuances ~~the~~of ~~nine~~common ~~months~~stock ~~ended September 30,~~and ~~2000~~warrants ~~compared~~ to ~~the~~purchase ~~nine~~common ~~months ended September 30, 1999. This was primarily due to improved market conditions.~~ stock

~~The~~Operations ~~other~~provided ~~income~~net cash of $229.71 million ~~for~~in the ~~nine~~first three months ~~ended September 30,~~of ~~1999~~2001 ~~was~~and ~~related~~$6.7 million ~~primarily~~in to the ~~gains~~first ~~associated~~three ~~with~~months ~~the sale~~ of ~~long~~2000. ~~lived assets~~UTI ~~offset~~used bythese ~~costs~~funds along ~~incurred~~with inavailable acash ~~series~~balances ofon ~~actions~~hand ~~taken~~ to ~~improve~~fund ~~efficiency,~~capital ~~increase productivity~~expenditures and acquisitions. ~~make~~Capital ~~UTI~~expenditures, ~~more~~excluding ~~competitive~~acquisitions, inwere ~~the marketplace~~$25. ~~The actions~~2 million ~~included~~for the ~~reduction~~three ofmonths ~~regional~~ended ~~operating~~March 31, ~~offices~~2001 ~~from seven to four~~ and ~~the reduction of UTI’s administrative staff by twenty-six individuals. A pre-tax gain of~~ $24.82 million ~~was~~for ~~realized from~~ the ~~sale~~three ofmonths ended ~~certain~~March 31, ~~land~~2000. ~~drilling~~In ~~assets of~~January 2001, ~~International~~UTI ~~Petroleum~~acquired ~~Service~~six ~~Company~~drilling rigs, athrough three ~~wholly~~separate ~~owned~~transactions ~~subsidiary~~for ofapproximately ~~UTI, operated~~$15.7 million in ~~the Appalachian Basin~~cash.

~~Depreciation~~UTI’s ~~and~~working ~~amortization~~capital ~~expense~~at ~~increased~~March 31, 2001 was $312.06 million ~~during~~compared ~~the~~to ~~nine~~$18.6 million ~~months~~at ~~ended September~~December 3031, 2000,. ~~compared~~The todecrease ~~the~~is ~~nine~~attributable ~~months~~to ~~ended~~UTI’s use ~~September 30,~~of ~~1999,~~cash ~~primarily~~for ~~due~~long-term toassets, ~~acquisitions~~primarily ~~consummated~~drilling ~~during 2000 and 1999~~rigs.

~~Interest~~At ~~expense increased $.9~~March ~~million~~31, ~~during the nine months ended September 30~~2001, ~~2000~~UTI ~~compared~~had toavailable ~~the~~borrowings ~~nine~~of ~~months ended September~~ $30~~, 1999~~.3 million ~~This~~under its ~~increase~~revolving ~~was~~credit ~~primarily~~facility ~~due~~compared to an$39.3 million ~~increase~~of inavailable ~~outstanding~~borrowings ~~debt for the nine~~at ~~months ended September~~December 3031, 2000. ~~compared~~The tomaximum ~~the~~borrowing ~~same~~amount ~~period~~under ofthe ~~1999.~~revolving ~~Average~~credit ~~debt~~facility ~~outstanding~~is ~~was~~ $4390.40 million. ~~during~~During ~~the~~2001, ~~nine~~UTI ~~months~~made ~~ended~~additional ~~September 30,~~borrowings under ~~2000~~its ~~compared~~revolving tocredit ~~$31.9 million~~facility for ~~the~~acquisitions ~~nine~~of ~~months~~drilling ~~ended September 30, 1999~~rigs.

~~Income~~Long ~~taxes~~Term ~~increased~~Debt ~~$4.1 million during the nine months ended September~~Facilities ~~30, 2000, compared to the nine months ended September 30, 1999, primarily due~~ ~~to higher taxable income in 2000.~~

~~The~~As ~~extraordinary~~of ~~loss incurred during the nine months ended September~~March 3031, ~~2000~~2001, ~~related~~UTI tohad ~~the~~outstanding ~~early~~debt ~~retirement~~ of ~~the~~ $2564.0 million ~~subordinated~~comprised of ~~notes~~$59.7 million ~~The~~under ~~early retirement was financed from~~ the ~~proceeds of the~~ revolving credit facility. ~~The~~and ~~loss consisted~~$4.3 million ~~primarily~~ of ~~the~~notes associated ~~write-off~~with ofan ~~the~~acquisition ~~discount,~~completed ~~deferred interest~~in ~~and financing fees~~1998.

~~Liquidity and Capital Resources~~–19–

WorkingTable Capital of Contents

~~Historically~~Revolving Credit Facility. On November 22, 1999, UTI entered into a $65.0 million revolving credit facility. The initial term of the facility is for four years with automatic annual renewals thereafter unless terminated by either party. An early termination fee applies if UTI terminates before the four year anniversary date. The maximum borrowings under this revolving credit facility was increased to $75.0 million in May of 2000 and was further increased to $90.0 million in October of 2000. UTI incurs a fee of .375% per annum on the unused facility amount. Under the revolving credit facility, UTI may use up to $10.0 million for letters of credit. The amount used for letters of credit decreases the borrowing base of the facility. At March 31, 2001, UTI has ~~needed~~a ~~cash:~~$2.6 million standby letter of credit issued under the facility. The revolving credit facility calls for periodic interest payments at a floating rate ranging from LIBOR plus 1.75% to LIBOR plus 2.75%. The actual rate charged above LIBOR (1.75% at March 31, 2001) is based on UTI’s trailing twelve-month EBITDA. UTI’s assets secure the facility.

• Promissory toNotes. On ~~fund~~July 31, ~~working~~1998, ~~capital~~UTI ~~requirements~~issued •$7.8 million toprincipal amount ~~make~~of ~~capital~~unsecured ~~expenditures~~promissory tonotes. ~~replace~~An ~~and~~early ~~expand~~principal ~~its~~repayment ~~drilling~~of ~~rig~~$3.5 million ~~fleet~~became •payable because the average trading value of UTI’s common stock for ~~acquisitions~~thirty consecutive days exceeded $15.00 per share on March 9, 2000. The repayments were funded by long-term borrowings under the revolving credit facility. The notes bear interest at 7.0% and, except for the $3.5 million discussed above, mature on July 31, 2002. The notes were issued in connection with an acquisition.

~~UTI~~Future ~~has~~Acquisitions ~~funded~~and ~~ongoing~~Capital ~~operations through:~~Needs

• Management ~~available~~believes ~~cash~~UTI •will ~~cash~~be ~~provided~~able ~~from~~to ~~operations~~meet •its ~~borrowings~~working capital, capital expenditure and debt service requirements for the next twelve months by using:

To• ~~date,~~internally ~~UTI~~generated ~~has~~cash ~~funded~~• ~~acquisitions~~availability ~~with:~~ under the revolving credit facility • cash balances on hand

• Management ~~available~~believes ~~cash~~that •UTI’s ~~borrowings~~strong •liquidity ~~issuances~~position ofwill ~~common~~allow ~~stock~~it ~~and~~to react ~~warrants~~quickly to ~~purchase~~opportunities ~~common~~in ~~stock~~the land drilling industry. These opportunities could include making strategic acquisitions.

~~Operations~~Risks ~~provided~~Associated ~~net cash of $26.1 million in the first nine months of 2000 and $8.0 million in the first nine months of 1999. UTI used these funds along~~ with ~~available~~Forward-Looking ~~cash balances on hand to fund capital expenditures.~~Statements ~~Capital expenditures, excluding acquisitions, were $19.8~~ ~~million for the nine months ended September 30, 2000 and $4.9 million for the nine months ended September 30, 1999.~~

From time to time, UTI may make certain statements that contain “forward-21looking” information. Forward-looking statements speak to the future. The following words and similar expressions are intended to identify forward-looking statements:

~~UTI~~• ~~had~~anticipate ~~$3.6 million~~• ~~in cash~~believe ~~and~~• ~~cash~~could ~~equivalents~~• ~~and~~estimate ~~borrowings~~• ofexpect ~~$54.7 million~~• ~~under~~intend ~~the~~• ~~revolving~~may ~~credit~~• ~~facility~~plan as• ofpredict ~~September 30,~~• ~~2000.~~project ~~This~~• ~~is compared to $7.5 million in cash and cash equivalents and no borrowings under the revolving credit facility as of December 31, 1999.~~ will

~~Long Term Debt Facilities~~–20–

AsTable of September 30, 2000, UTI had outstanding debt of $59.0 million comprised of $54.7 million under the revolving credit facility and $4.3 million of notes associated with an acquisition completed in 1998. Contents

~~Revolving~~Forward-looking ~~Credit~~statements ~~Facility. On~~may ~~November 22,~~be ~~1999,~~made ~~UTI entered into a $65.0 million revolving credit facility. The initial term of the facility is for four years with automatic annual renewals thereafter unless terminated~~ by ~~either~~ ~~party.~~management Anboth ~~early~~orally ~~termination~~or ~~fee applies if UTI terminates before the four year anniversary date. The maximum borrowings under this revolving credit facility was increased to $75.0 million~~ in ~~May of 2000 and was increased to $90.0~~ ~~million in October of 2000~~writing. ~~UTI~~Written ~~incurs~~forward-looking astatements ~~fee of .375% per annum on the unused facility amount. Under the revolving credit facility, UTI~~ may ~~use up to $10.0~~appear: ~~million for letters of credit. The amount used for letters of credit decreases~~ the borrowing base of the facility. At September 30, 2000, UTI has a $2.6 million standby letter of credit issued under the facility. The revolving credit facility calls for periodic interest payments at a floating rate ranging from LIBOR plus 1.75% to LIBOR plus 2.75%. The actual rate charged above LIBOR (1.75% at September 30, 2000) is based on UTI’s trailing twelve-month EBITDA. UTI’s assets secure the facility.

~~Subordinated~~• ~~Notes. On~~in ~~April 11,~~press ~~1997,~~releases ~~UTI~~• ~~issued~~as ~~$25.0 million~~part ~~principal amount~~ of ~~12.0%~~the ~~subordinated~~“Management’s ~~notes.~~Discussion ~~These~~and ~~subordinated~~Analysis ~~notes~~of ~~were~~Financial ~~repaid~~Condition ~~in full~~and inResults ~~August~~ of ~~2000~~Operations” ~~from~~contained ~~borrowings~~in ~~under~~this ~~the~~report ~~revolving~~• ~~credit facility which resulted~~ in ~~the extraordinary charge on early retirement of $329,000 after tax. The subordinated notes were issued at a 2.0% discount along with seven-year warrants to purchase 2.4 million shares of~~ UTI’s ~~common~~other ~~stock~~filings atwith anthe ~~exercise price~~Securities ofand ~~$5.42~~Exchange ~~per share.~~ Commission

~~Promissory Notes. On July 31, 1998,~~ UTI ~~issued~~believes ~~$7.8 million~~that ~~principal amount of unsecured promissory notes. An early principal repayment of $3.5 million became payable because~~ the ~~average~~expectations ~~trading~~reflected ~~value~~in ofthese ~~UTI’s common stock~~forward-looking ~~for~~statements ~~thirty~~are ~~consecutive days exceeded $15~~reasonable.00 ~~per share on March 9~~However, ~~2000.~~UTI ~~The repayments~~cannot ~~were~~give ~~funded~~any byassurance ~~long-term~~that ~~borrowings under the revolving credit~~such ~~facility.~~expectations ~~The~~will ~~notes bear interest at 7~~materialize.0% ~~and,~~These ~~except~~forward-looking ~~for~~statements ~~the~~are ~~$3.5 million~~subject ~~discussed above, mature on July 31, 2002. The notes were issued in connection~~to: ~~with an acquisition.~~

~~Future~~• ~~Acquisitions~~risks ~~and~~• ~~Capital~~uncertainties ~~Needs~~ • assumptions

~~Management~~If ~~believes~~any ~~UTI~~of ~~will~~these berisks, ~~able~~uncertainties toor ~~meet~~assumptions ~~its working capital~~materialize, ~~capital~~actual ~~expenditure~~results of current and ~~debt~~future ~~service~~operations ~~requirements~~may ~~for~~not ~~the~~be ~~next~~as ~~twelve~~expected. ~~months~~Therefore, readers byshould ~~using:~~not place undue certainty on these forward-looking statements. These forward-looking statements speak only as of their dates.

• Among ~~internally~~the ~~generated~~factors ~~cash~~that •will ~~availability~~directly ~~under~~affect ~~the~~UTI’s ~~revolving~~results ~~credit~~of ~~facility~~operations and •the ~~cash~~contract ~~balances~~drilling onservice ~~hand~~industry are:

~~Management~~• ~~believes~~changes ~~that~~in the price of oil and natural gas • the volatility of the contract drilling service industry • UTI’s ~~strong~~ability ~~liquidity~~to ~~position~~successfully ~~will~~integrate ~~allow~~recent itacquisitions ~~to react~~• ~~quickly~~presence toof ~~opportunities~~competitors with greater financial resources • labor shortages • contractual risk associated with turnkey and footage contracts • operating risks inherent in the ~~land~~contract drilling service industry., ~~These opportunities~~such ~~include~~as ~~making~~blowouts, ~~strategic~~explosions, ~~acquisitions.~~ sour gas, well fires and spills • domestic and worldwide political stability and economic growth • risks associated with UTI’s successful execution of internal operating plans • regulatory uncertainties • legal proceedings • drill pipe shortages • exposure to environmental liabilities • currency risk factors

~~-22-~~–21–

RisksTable Associatedof with Forward-Looking Statements Contents

From time to time, UTI may make certain statements that contain “forward-looking” information. Forward-looking statements speak to the future. The following words and similar expressions are intended to identify forward-looking statements:

• anticipate • believe • could • estimate • expect • intend • may • plan • predict • project • will

Forward-looking statements may be made by management both orally or in writing. Written forward-looking statements may appear:

• in press releases • as part of the “Management’s Discussion and Analysis of Financial Condition and Results of Operation” contained in this report • in UTI’s other filings with the Securities and Exchange Commission

UTI believes that the expectations reflected in these forward-looking statements are reasonable. However, UTI cannot give any assurance that such expectations will materialize. These forward-looking statements are subject to:

• risks • uncertainties • assumptions

If any of these risks or uncertainties materialize, actual results of current and future operations may not be as expected. Therefore, readers should not place undue certainty on these forward-looking statements. These forward-looking statements speak only as of their dates.

-23-

Among the factors that will directly affect UTI’s results of operations and the contract drilling service industry are:

• changes in the price of oil and natural gas • the volatility of the contract drilling service industry • UTI’s ability to successfully integrate recent acquisitions • presence of competitors with greater financial resources • labor shortages • contractual risk associated with turnkey and footage contracts • operating risks inherent in the contract drilling service industry, such as blowouts, explosions, sour gas, well fires and spills • domestic and world-wide political stability and economic growth • risks associated with UTI’s successful execution of internal operating plans • regulatory uncertainties • legal proceedings • drill pipe shortages • exposure to environmental liabilities • currency risk factors

-24-

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

WeUTI’s ~~have~~ exposure to market risk ~~related~~for to changes in interest ~~rates on the revolving credit facility. Interest on borrowings under the revolving credit facility accrue at a variable~~ rate, ~~using~~and ~~either the prime rate or LIBOR plus 1.75% to 2.75%,~~it’s ~~depending upon our EBITDA for the trailing 12 month period. Our~~ exposure to ~~interest~~ ~~rate~~foreign exchange risk ~~due~~has ~~to changes in LIBOR is~~ not ~~expected~~changed tomaterially besince ~~material and at September~~December 3031, ~~2000, the fair value of the obligation approximates its~~ ~~related carrying value~~2000.

With the Phelps Drilling acquisition we now conduct some business in Canadian dollars. The exchange rate between Canadian dollars and U.S. dollars has fluctuated over the last ten years. If the value of the Canadian dollar against the U.S. dollar weakens, revenues and earnings of our Canadian operations will be reduced when they are translated to U.S. dollars. Also, the value of our Canadian net assets in U.S. dollars may decline.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

UTI is involved in several claims arising in the ordinary course of business. In the opinion of management, all of these claims are covered by insurance or will not have a material adverse effect on UTI’s financial position.

UTI and its operating subsidiaries are sometimes named as a defendant in litigation usually relating to personal injuries alleged to result from negligence. UTI maintains insurance coverage against such claims to the extent deemed prudent by management.

There can be no assurance that UTI will be able to maintain adequate insurance at rates it considers reasonable and there can be no assurance that insurance will continue to be available on terms as favorable as those that currently exist. The occurrence of an adverse claim in excess of the coverage limits maintained by UTI could have a material adverse effect on UTI’s financial condition and results of operations.

~~ITEM 2. CHANGES IN SECURITIES~~–22–

OnTable September 14, 2000, UTI’s Board of Directors authorized a two for one stock split in the form of a stock dividend. The stock dividend was paid on October 3, 2000 to stockholders of record on September 25, 2000. As a result of the stock split, all share and per share data contained herein have been restated to reflect the effect of the two for one stock split. Contents

At UTI’s Annual Meeting held on July 26, 2000, the stockholders approved an amendment to UTI’s Restated Certificate of Incorporation that increased the number of authorized shares of common stock from 50 million to 100 million. In addition, at the Annual Meeting, the stockholders approved an amendment to the Restated Certificate of Incorporation to eliminate Class A common stock.

At UTI's Board of Directors meeting on July 26, 2000, the board approved a resolution to eliminate Series A Preferred Stock and to restate the Certificate of Incorporation.

-25-

During the quarter, UTI sold unregistered common stock to parties related to Suits Enterprises, Inc. The Suits parties exchanged warrants covering 78,750 shares of common stock of UTI that they acquired on July 31, 1998 for 21,964 shares of common stock of UTI and no other consideration was paid. Under Section 3(a)(9) of the Securities Act of 1993, if an existing security holder exchanges securities of the issuer for other securities of the issuer and no other consideration is paid, then the transaction is exempt from registration.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At UTI’s Annual Meeting of Stockholders held on July 26, 2000, the following members were elected to the Board of Directors in the class specified:

AFFIRMATIVE

VOTES

WITHHELD

Class III

Vaughn E. Drum

15,626,231

481,808

Robert B. Spears

15,624,491

483,548

In addition, the following proposals were approved at UTI’s Annual Meeting:

	AFFIRMATIVE		VOTES		VOTES		BROKER
	VOTES		AGAINST		ABSTAINED		NON-VOTES
Approve an amendment to the UTI Energy Corp.
Restated Certificate of Incorporation to increase the number of authorized shares		14,444,214		1,519,014		144,811		—
Approve an amendment to the UTI Energy Corp.
Restated Certificate of Incorporation to eliminate Class A Common Stock		13,710,694		27,001		150,513		2,219,831
Approve an amendment to the UTI Energy Corp. 1997
Long-Term Incentive Plan		13,002,506		2,955,858		149,675		—

-26-

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


(a)		Exhibits

Exhibit
Number		Title or Description
10.1* -		Third Amendment dated as of October 18, 2000 to the Loan and Security Agreement, dated as of November 22, 1999, by and among The CIT Group/Business Credit, Inc., Foothill Capital Corporation, GMAC Business Credit, LLC and The CIT Group/Equipment Financing, Inc. as Lenders, UTI Energy Corp., UTICO, Inc., UTICO Hard Rock Boring, Inc., International Petroleum Service Company, Norton Drilling Services, Inc. and Norton Drilling Company Mexico, Inc. as Guarantors and UTI Drilling, L.P., Norton Drilling LP, a successor in interest by conversion to Norton Drilling Company, Universal Well Services, Inc., UTI Management Services, L.P. and Suits Drilling Company as Borrowers.
27.1* -		Financial Data Schedule.
27.2* -		Restated Financial Data Schedule.


Exhibit
Number		Title or Description

* Filed herewith.

(b) Reports on 8-K

None.

(b) Reports on 8-~~27-~~ K

~~SIGNATURES~~ To report a Merger Agreement, pursuant to Item 5 of Form 8-K, UTI filed a Form 8-K with the Securities and Exchange Commission dated February 5, 2001.

~~Pursuant~~To toreport ~~the~~an ~~requirements~~Underwriting ofAgreement, ~~the~~pursuant ~~Securities~~to ~~Exchange~~Item ~~Act~~5 of ~~1934~~Form 8-K, UTI ~~has duly~~filed ~~caused~~a ~~this~~Form ~~report~~8-K towith bethe ~~signed~~Securities onand ~~its~~Exchange ~~behalf~~Commission bydated ~~the~~January ~~undersigned~~10, ~~who have been duly authorized~~2001.

To report Asset Purchase Agreements, pursuant to Item 5 of Form 8-K, UTI ~~ENERGY~~filed ~~CORP~~a Form 8-K with the Securities and Exchange Commission dated January 5, 2001.

Signature	Title	Date
/s/ John E. Vollmer III John E. Vollmer III	Senior Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer)	October 23, 2000
/s/ Bruce Sauers Bruce Sauers	Vice President and Corporate Controller (Principal Accounting Officer)	October 23, 2000

–23–

-28- Table of Contents

~~EXHIBIT INDEX~~SIGNATURES

Exhibit
Number		Title or Description
10.1* -		Third Amendment dated as of October 18, 2000 to the Loan and Security Agreement, dated as of November 22, 1999, by and among The CIT Group/Business Credit, Inc., Foothill Capital Corporation, GMAC Business Credit, LLC and The CIT Group/Equipment Financing, Inc. as Lenders, UTI Energy Corp., UTICO, Inc., UTICO Hard Rock Boring, Inc., International Petroleum Service Company, Norton Drilling Services, Inc. and Norton Drilling Company Mexico, Inc. as Guarantors and UTI Drilling, L.P., Norton Drilling LP, a successor in interest by conversion to Norton Drilling Company, Universal Well Services, Inc., UTI Management Services, L.P. and Suits Drilling Company as Borrowers.
27.1* -		Financial Data Schedule.
27.2* -		Restated Financial Data Schedule.

Pursuant to the requirements of the Securities Exchange Act of 1934, UTI has duly caused this report to be signed on its behalf by the undersigned, who have been duly authorized.

UTI ENERGY CORP.


Signature	Title	Date


/s/ John E. Vollmer III	Senior Vice President, Treasurer	April 18, 2001
	and Chief Financial Officer
John E. Vollmer III	(Principal Financial Officer)

/s/ Bruce Sauers	Vice President and Corporate	April 18, 2001
	Controller
Bruce Sauers	(Principal Accounting Officer)

–24–

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