<PAGE>
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ---------------------
 
                                   FORM 10-K
 
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
 
                          COMMISSION FILE NO. 1-16337
 
                         OIL STATES INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)
 

<Table>
<S>                                            <C>
                   DELAWARE                                      76-0476605
       (State or other Jurisdiction of              (I.R.S. Employer Identification No.)
        Incorporation or Organization)
</Table>

 
     THREE ALLEN CENTER, 333 CLAY STREET, SUITE 3460, HOUSTON, TEXAS 77002
              (Address of Principal Executive Offices) (Zip Code)
 
       Registrant's telephone number, including area code: (713) 652-0582
 
          Securities registered pursuant to Section 12(b) of the Act:
 

<Table>
<Caption>
             TITLE OF EACH CLASS                    NAME OF EXCHANGE ON WHICH REGISTERED
             -------------------                    ------------------------------------
<S>                                            <C>
    Common Stock, par value $.01 per share                New York Stock Exchange
</Table>

 
          Securities registered pursuant to Section 12(g) of the Act:
                                      NONE
 
     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 the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K.  [X]
 
     State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant:
 

<Table>
<S>                                                           <C>
Voting common stock (as of February 28, 2002)...............  $158,424,440
</Table>

 
     Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
 
     As of February 28, 2002  Common Stock, par value $.01 per share  48,332,207
shares
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of the Registrant's Definitive Proxy Statement for the 2002 Annual
Meeting of Stockholders, which the Registrants intends to file with the
Securities and Exchange Commission not later than 120 days after the end of the
fiscal year covered by this Form 10-K, are incorporated by reference into Part
III of this Form 10-K.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>
 
                               TABLE OF CONTENTS
 

<Table>
<S>         <C>                                                           <C>

PART I..................................................................    1

  Item 1.   Business....................................................    1

  Item 2.   Properties..................................................   17

  Item 3.   Legal Proceedings...........................................   18

  Item 4.   Submission of Matters to a Vote of Security Holders.........   18

PART II.................................................................   18

  Item 5.   Market for Registrant's Common Equity and Related
            Stockholder Matters.........................................   18

  Item 6.   Selected Financial Data.....................................   19

  Item 7.   Management's Discussion and Analysis of Financial Condition
            and Results of Operations...................................   21

  Item 7A.  Quantitative and Qualitative Disclosures about Market
            Risk........................................................   34

  Item 8.   Financial Statements and Supplementary Data.................   34

  Item 9.   Changes in and Disagreements With Accountants on Accounting
            and Financial Disclosure....................................   34

PART III................................................................   35

  Item 10.  Directors and Executive Officers of Registrant..............   35

  Item 11.  Executive Compensation......................................   35

  Item 12.  Security Ownership of Certain Beneficial Owners and
            Management..................................................   35

  Item 13.  Certain Relationships and Related Transactions..............   35

PART IV.................................................................   35

  Item 14.  Exhibits, Financial Statement Schedules and Reports on Form
            8-K.........................................................   35
SIGNATURES..............................................................   38
  INDEX TO COMBINED, PRO FORMA COMBINED AND CONSOLIDATED FINANCIAL
     STATEMENTS.........................................................   39
</Table>

 
                                        i

<PAGE>
 

                                     PART I
 
     This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Exchange Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Actual results could differ
materially from those projected in the forward-looking statements as a result of
a number of important factors. For a discussion of important factors that could
affect our results, please refer to the Business section below, including Risk
Factors, and the financial statement line item discussions set forth in
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
 

ITEM 1. BUSINESS
 
  OUR COMPANY
 
     We are a leading provider of specialty products and services to oil and gas
drilling and production companies throughout the world. We focus our business
and operations in a substantial number of the world's active oil and gas
producing regions, including the Gulf of Mexico, Canada, West Africa, the Middle
East, South America and Southeast Asia. Our customers include major and
independent oil and gas companies and other oilfield service companies. We
operate in three principal business segments, offshore products, tubular
services and well site services, and have established a leadership position in
each.
 
  OUR BACKGROUND
 
     Oil States International, Inc. (Oil States or the Company) was originally
incorporated in July 1995 as CE Holdings, Inc. On August 1, 1995, CE Holdings,
Inc. acquired Continental Emsco Company, an operator of oilfield supply stores,
including its then wholly owned subsidiary Oil States Industries, Inc. Oil
States Industries is a manufacturer of offshore products.
 
     In May 1996, Oil States Industries purchased the construction division of
Hunting Oilfield Services, Ltd., which provided a variety of construction
products and services to the offshore oil and gas industry as well as certain
connector manufacturing technology. In November 1996, CE Holdings, Inc. changed
its name to CONEMSCO, Inc. (Conemsco).
 
     In July 1997, Conemsco purchased HydroTech Systems, Inc., a full service
provider of engineered products to the offshore pipeline industry, and SMATCO
Industries Inc., a manufacturer of marine winches for the offshore service boat
industry. In December 1997, Conemsco purchased Gregory Rig Service & Sales Inc.,
a provider of drilling equipment and services.
 
     In February 1998, Conemsco acquired Subsea Ventures, Inc. (SVI). SVI
designs, manufactures and services auxiliary structures for subsea blowout
preventors and subsea production systems. In April 1998, Conemsco acquired the
assets of Klaper (UK) Limited, a provider of repair and maintenance services for
blowout preventors and drilling risers used in offshore drilling.
 
     In July 2000, Conemsco changed its name to Oil States. In July 2000, Oil
States, HWC Energy Services, Inc. (HWC), PTI Group Inc. (PTI) and Sooner Inc.
(Sooner) entered into a Combination Agreement (the Combination Agreement)
providing that, concurrently with the closing of our initial public offering,
HWC, PTI and Sooner would merge with wholly owned subsidiaries of Oil States
(the Combination). As a result, HWC, PTI and Sooner became wholly owned
subsidiaries of Oil States in February 2001.
 
  OUR INDUSTRY
 
     We operate in the oilfield service industry, which provides products and
services to oil and gas exploration and production companies for use in the
drilling for and production of oil and gas. Demand for our products and services
is cyclical and substantially dependent upon activity levels in the oil and gas
industry, particularly our customers' willingness to spend capital on the
exploration and development of oil and gas reserves. Demand for our products and
services by our customers is highly sensitive to current and expected oil and
natural gas prices. See Note 17 to Consolidated and Combined Financial
Statements for financial information by segment and a geographical breakout of
revenues and long-lived assets.
 
                                        1

<PAGE>
 
     The year 2001 was characterized by high rig counts and utilization in the
first half of the year. However, industry activity weakened in the latter half
of 2001 due to reductions in oil and natural gas pricing. This weakness has
continued into 2002. See Management's Discussion and Analysis of Financial
Condition and Results of Operations.
 
  OFFSHORE PRODUCTS
 
  Overview
 
     During the year ended December 31, 2001, we generated approximately 18% of
our revenue and 10% of our operating income from our offshore products segment.
Through this segment, we design and manufacture cost-effective, technologically
advanced products for the offshore energy industry. Our products are used in
both shallow and deepwater producing regions and include flex-element
technology, advanced connector systems, blow-out preventor stack integration and
repair services, deepwater mooring systems, offshore equipment and installation
services and subsea pipeline products. We have facilities in Arlington, Houston
and Lampasas, Texas; Houma, Louisiana; Scotland; Brazil; England and Singapore.
 
  Offshore Products Market
 
     The market for our offshore products and services depends primarily upon
drilling rig refurbishments and upgrades, new rig construction and development
of infrastructure for offshore production activities. As demand for oil and gas
increase and related drilling and production increases in offshore areas
throughout the world, particularly in deeper water, we expect spending on these
activities to increase.
 
     The upgrade of existing rigs to equip them with the capability to drill in
deeper water, the construction of new deepwater-capable rigs, and the
installation of floating production systems require specialized products and
services like the ones we provide.
 
  Products and Services
 
     Our offshore products segment provides a broad range of products and
services for use in offshore drilling and development activities. In addition,
this segment provides onshore oil and gas, defense and general industrial
products and services. Our offshore products segment is dependent on continuing
innovation and creative applications of existing technologies.
 
     We design and build manufacturing and testing systems for many of our new
products and services. These testing and manufacturing facilities enable us to
provide reliable, technologically advanced products and services. Our Aberdeen
facility provides structural testing including full-scale product simulations.
 
     Offshore Development and Drilling Activities.  We design, manufacture,
fabricate, inspect, assemble, repair, test and market subsea equipment and
offshore vessel and rig equipment. Our products are components of equipment used
on marine vessels, floating rigs and jack-ups, and for the drilling and
production of oil and gas wells on offshore fixed platforms and mobile
production units including floating platforms and FPSO vessels. We believe that
sales of our equipment for new rig building and offshore infrastructure
development will be important sources of future revenues. Our products and
services include:
 
     - flexible bearings and connector products;
 
     - subsea pipeline products;
 
     - marine winches, mooring systems and rig equipment;
 
     - blowout preventor stack assembly, integration, testing and repair
       services; and
 
     - fixed platform products and services.
 
     FLEXIBLE BEARINGS AND CONNECTOR PRODUCTS.  We are the principal supplier of
flexible bearings, or FlexJoints(TM), to the offshore oil and gas industry. We
also supply connections and fittings that join lengths of large diameter
conductor or casing used in offshore drilling operations. FlexJoints(TM) are
flexible bearings that
 
                                        2

<PAGE>
 
permit movement of riser pipes or tension leg platform tethers under high
tension and pressure. They are used on drilling, production and export risers
and are used increasingly as offshore production moves to deeper water areas.
Drilling riser systems provide the vertical conduit between the floating
drilling vessel and the subsea wellhead. Through the drilling riser, equipment
is guided into the well and drilling fluids are returned to the surface.
Production riser systems provide the vertical conduit from the subsea wellhead
to the floating production platform. Oil and gas flows to the surface for
processing through the production riser. Export risers provide the vertical
conduit from the floating production platform to the subsea export pipelines.
FlexJoints(TM) are a critical element in the construction and operation of
production and export risers on floating production systems in deepwater.
 
     Floating production systems, including tension leg platforms, Spars and
FPSO systems, are a significant means of producing oil and gas, particularly in
deepwater environments. We provide many important products for the construction
of these systems. A tension leg platform is a floating platform that is moored
by vertical pipes, or tethers, attached to both the platform and the sea floor.
Our FlexJoint(TM) tether bearings are used at the top and bottom connections of
each of the tethers, and our Merlin connectors are used to join shorter pipe
segments to form long pipes offshore. A Spar is a floating vertical cylindrical
structure which is approximately six to seven times longer than its diameter and
is anchored in place.
 
     SUBSEA PIPELINE PRODUCTS.  We design and manufacture a variety of fittings
and connectors used in offshore oil and gas pipelines. Our products are used for
new construction, maintenance and repair applications. New construction fittings
include:
 
     - forged steel Y-shaped connectors for joining two pipelines into one;
 
     - pressure-balanced safety joints for protecting pipelines from anchor
       snags or a shifting sea-bottom;
 
     - electrical isolation joints; and
 
     - hot tap clamps that allow new pipelines to be joined into existing lines
       without interrupting the flow of petroleum product.
 
     We provide diverless connection systems for subsea flowlines and pipelines.
Our HydroTech collet connectors provide a high-integrity, proprietary
metal-to-metal sealing system for the final hook-up of deep offshore pipelines
and production systems. They also are used in diverless pipeline repair systems
and in future pipeline tie-in systems. Our lateral tie-in sled, which is
installed with the original pipeline, allows a subsea tie-in to be made quickly
and efficiently using proven HydroTech connectors without costly offshore
equipment mobilization and without shutting off product flow.
 
     We provide pipeline repair hardware, including deepwater applications
beyond the depth of diver intervention. Our products include:
 
     - repair clamps used to seal leaks and restore the structural integrity of
       a pipeline;
 
     - mechanical connectors used in repairing subsea pipelines without having
       to weld;
 
     - flanges used to correct misalignment and swivel ring flanges; and
 
     - pipe recovery tools for recovering dropped or damaged pipelines.
 
     MARINE WINCHES, MOORING SYSTEMS AND RIG EQUIPMENT.  We design, engineer and
manufacture marine winches, mooring systems and rig equipment. Our Skagit
winches are specifically designed for mooring floating and semi-submersible
drilling rigs and positioning pipelay and derrick barges, anchor handling boats
and jack-ups. We also design and fabricate rig equipment such as automatic pipe
racking and blow-out preventor handling equipment. Our engineering teams,
manufacturing capability and service technicians who install and service our
products, provide our customers with a broad range of equipment and services to
support their operations. Aftermarket service and support of our installed base
of equipment to our customers is also an important source of revenues to us.
 
                                        3

<PAGE>
 
     BOP STACK ASSEMBLY, INTEGRATION, TESTING AND REPAIR SERVICES.  We design
and fabricate lifting and protection frames and offer system integration of
blow-out preventor stacks and subsea production trees. We can provide complete
turnkey and design fabrication services. We also design and manufacture a
variety of custom subsea equipment, such as riser flotation tank systems, guide
bases, running tools, and manifolds. We also offer blow-out preventor and
drilling riser testing and repair services.
 
     FIXED PLATFORM PRODUCTS AND SERVICES.  We provide equipment for securing
subsea structures and offshore platform jackets, including our Hydra-Lok
hydraulic system. The Hydra-Lok tool, which has been successfully used at depths
of 3,000 feet, does not require diver intervention or guidelines.
 
     We also provide cost-effective, standardized leveling systems for offshore
structures that are anchored by foundation piles, including subsea templates,
subsea manifolds and platform jackets.
 
     OTHER PRODUCTS AND SERVICES.  Our offshore products segment also produces a
variety of products for use in applications beyond the offshore oil and gas
industry. For example, we provide:
 
     - downhole products for onshore drilling and production;
 
     - elastomer products for use in both offshore and onshore oilfield
       activities;
 
     - metal-elastomeric FlexJoints(TM) used in a variety of military, marine
       and aircraft applications; and
 
     - technology used in drum-clutches and brakes for heavy-duty power
       transmission in the mining, paper, logging and marine industries.
 
     Backlog.  Backlog in our offshore products segment at December 31, 2001 was
$72.4 million compared to a backlog of $38.1 million at December 31, 2000. Our
backlog consists of firm customer purchase orders for which satisfactory credit
or financing arrangements exist and delivery is scheduled. Our backlog has
increased $34.3 million, or 90%, from December 31, 2000. The majority of this
backlog increase has occurred in our flexible bearings and connectors, subsea
pipeline products and marine winches. Approximately 96% of the backlog at
December 31, 2001 is expected to be completed in 2002.
 
  Regions of Operations
 
     Our offshore products segment provides products and services to customers
in the major offshore oil and gas producing regions of the world, including the
Gulf of Mexico, West Africa, the North Sea, Brazil and Southeast Asia.
 
  Customers and Competitors
 
     We market our products and services to a broad customer base, including the
direct end users, engineering and design companies, prime contractors, and at
times, our competitors through outsourcing arrangements.
 
     Our three largest customers in the offshore products markets in 2001 were
General Dynamics, Shell Oil Company, Inc. and FMC Technologies, Inc. None of
these customers accounted for greater than 5% of our revenues. Our main
competitors include AmClyde Engineered Products Company, Inc., Cooper Cameron
Corporation, ABB Vetco-Gray and FMC Technologies, Inc.
 
  TUBULAR SERVICES
 
     On February 14, 2001, the Company completed its acquisition of Sooner.
Sooner's business is reported as our tubular services segment.
 
  Overview
 
     During the year ended December 31, 2001, we generated approximately 49% of
our revenue and 19% of our operating income from our tubular services segment.
Through this segment, we distribute oil country tubular goods, or OCTG, and are
a provider of associated OCTG finishing and logistics services to the oil and
 
                                        4

<PAGE>
 
gas industry. Oil country tubular goods consist of casing, production tubing and
line pipe. Through our tubular services segment, we:
 
     - distribute premium tubing and casing;
 
     - provide threading, remediation, logistical and inventory services; and
 
     - offer e-commerce pricing, ordering and tracking capabilities.
 
     In 1999, Sooner acquired the tubular divisions of Continental Emsco, Wilson
Supply and National-Oilwell, Inc. These transactions expanded its presence in
key market segments and increased its coverage of the diversified marketplace
for OCTG. We serve a customer base ranging from major oil companies to small
independents. Through our key relationships with more than 20 manufacturers of
oilfield specialty pipe, we deliver tubular products and ancillary services to
oil and gas companies, drilling contractors and consultants around the world.
The OCTG distribution market is highly fragmented and competitive, and is
predominately focused in the United States. Despite being a leading distributor
of OCTG, we estimate that our U.S. market share is approximately 15%.
 
  OCTG Market
 
     Our tubular services segment primarily provides casing and tubing. Casing
forms the structural wall in oil and gas wells to provide support and prevent
caving during drilling operations. Casing is used to protect water-bearing
formations during the drilling of a well. Casing is generally not removed after
it has been installed in a well. Production tubing, which is used to bring oil
and gas to the surface, may be replaced during the life of a producing well.
 
     A key indicator of domestic demand for OCTG is the average number of
drilling rigs operating in the United States. The OCTG market at any point in
time is also affected by the level of inventories maintained by manufacturers,
distributors and end users. In addition, in recent years the focus of drilling
activity has been shifting towards less explored, deeper geological formations
and deepwater locations which offer potentially prolific reserves. Demand for
tubular products is positively impacted by increased drilling of deeper,
horizontal and offshore wells. Deeper wells require incremental tubular footage
and enhanced mechanical capabilities to ensure the integrity of the well.
Premium tubulars are used in horizontal drilling to withstand the increased
bending and compression loading associated with a horizontal well. Since the
cost of a pipe failure is typically higher in an offshore well than in a land
well, offshore operators typically specify premium tubulars for the completion
of offshore wells.
 
  Products and Services
 
     Tubular Products and Services.  We distribute various types of OCTG
produced by both domestic and foreign manufacturers to major and independent oil
and gas exploration and production companies and other OCTG distributors. We do
not manufacture any of the tubular goods that we distribute. As a result, gross
margins in this segment are generally lower than those reported by our other
segments. We operate our tubular services segment from a total of 11 facilities
and have offices located near areas of oil and gas exploration and development
activity predominately in the United States, and to a lesser extent, in Scotland
and Nigeria. Our business in Scotland and Nigeria is expected to change and
likely to decline as a result of the completion of a contract with a major
customer in these areas. We currently have interim inventory management
contracts that extend to March 31, 2002 in Nigeria and June 30, 2002 in
Scotland. There can be no assurance that such interim contracts will be extended
beyond these dates. See Management's Discussion and Analysis of Financial
Condition and Results of Operations.
 
     In this business, inventory management is critical to our success. We
maintain on-the-ground inventory in more than 75 yards located in the United
States, giving us the flexibility to fill our customers' orders from our own
stock or directly from the manufacturer. We have a proprietary inventory
management system, designed specifically for the OCTG industry, that enables us
to track our product shipments down to the individual pipe stem.
 
                                        5

<PAGE>
 
     As a large distributor of tubular goods, we believe that we are able to
negotiate more favorable supply contracts with manufacturers. We have
distribution relationships with most major domestic and international steel
mills.
 
     A-Z Terminal.  Our A-Z Terminal pipe maintenance and storage facility in
Crosby, Texas is equipped to provide a full range of tubular services, giving us
strong customer service capabilities. The A-Z Terminal is on 109 acres and is an
ISO 9002-certified facility. A-Z Terminal has more than 1,400 pipe racks and two
double-ended thread lines. We have exclusive use of a permanent third-party
inspection center within the facility. The facility also includes indoor chrome
storage capability and patented pipe cleaning machines.
 
     We offer services at our A-Z Terminal facility typically outsourced by
other distributors, including the following: threading, inspection, cleaning,
cutting, logistics, rig returns, installation of float equipment and
non-destructive testing.
 
     Tubular Products and Services Sales Arrangements.  We provide our tubular
products and logistics services through a variety of arrangements, including
spot market sales and alliances. The spot market accounted for a majority of our
sales of tubular products and logistics services in the past three years. We
also provide our tubular products and services to independent and major oil and
gas companies under alliance arrangements. Although our alliances are not as
profitable as the spot market, they provide us with more stable and predictable
revenues and an improved ability to forecast required inventory levels, which
allows us to manage our inventory more efficiently.
 
  Regions of Operations
 
     Our tubular services segment provides tubular products and services to
customers in the United States, the Gulf of Mexico, Canada, Nigeria, Venezuela,
Ecuador, Colombia, Guatemala and the United Kingdom. However, the majority of
our sales are made in the United States, both for land and offshore
applications.
 
  Customers, Suppliers and Competitors
 
     Our three largest customers in the tubular distribution market in 2001 were
El Paso Corporation, Exxon Mobil Corporation and Phillips Petroleum Company. Our
largest customer in this segment accounted for 6.4% of our revenues in 2001. No
other customers accounted for greater than 5% of our revenues during 2001. Our
three largest suppliers were U.S. Steel Group, Maverick Tube Corporation and
Lone Star Technologies, Inc. The tubular services distribution market is
fragmented, and our main competitors are Vinson Supply Co., Red Man Pipe &
Supply Co., Inc. and Total Premier.
 
  WELL SITE SERVICES
 
  Overview
 
     During the year ended December 31, 2001, we generated approximately 33% of
our revenue and 71% of our operating income from our well site services segment.
Our well site services segment provides a broad range of products and services
that are used to establish and maintain the flow of oil and gas from a well
throughout its lifecycle. Our services include workover services, drilling
services, rental equipment, remote site accommodations, catering and logistics
services and modular building construction services. We use our fleet of
workover and drilling rigs, rental equipment, remote site accommodation
facilities and related equipment to service well sites for oil and natural gas
companies. Our products and services are used in both onshore and offshore
applications through the exploration, development, production and abandonment
phases of a well's life. Additionally, our remote site accommodations, catering
and logistics services are employed in a variety of mining and related natural
resource applications as well as forest fire fighting.
 
  Well Site Services Market
 
     Demand for our workover and drilling rigs, rental equipment and remote site
accommodations, catering and logistics services has historically been tied to
the level of cash flow of oil and gas producers which is a
 
                                        6

<PAGE>
 
function of prices they receive for oil and gas. We expect activity levels to
continue to be highly correlated to oil and gas prices received by producers.
 
     Demand for our workover services is impacted significantly by offshore
activity both in the United States and international areas. Our hydraulic
workover units compete with jackup rigs and conventional workover rigs for
shallow water workover projects. Our hydraulic workover units can be operated at
a lower cost for most applications than alternatives such as jack-up rigs. Costs
to mobilize and set up our hydraulic workover units, for example, are lower than
alternative equipment. Some operations on oil and gas wells under pressure
situations require the use of a hydraulic workover unit. On the other hand, when
activity levels in the oil and gas business decline, our hydraulic units face
more competition from larger equipment offered at lower prices which can become
more competitive with our equipment.
 
     Our rental equipment fleet is more production oriented. As a result, demand
for our rental services benefits from increased development and workover
activities in the U.S. Gulf Coast area and the Gulf of Mexico. We face
competition from many smaller companies in our rental services business in the
U.S. Gulf market.
 
     We expect a large portion of incremental spending by oil and gas producers
to be directed toward oil and gas development in the remote locations of Western
Canada and the deepwater areas of the Gulf of Mexico. Our remote accommodations,
catering and logistics business supplies products and services to companies
engaged in operations in these frontier areas.
 
  Products and Services
 
     Workover Services.  We provide our workover products and services primarily
to customers in the U.S., Venezuela, the Middle East and West Africa, for both
onshore and offshore applications. Workover products and services are used in
operations on a producing well to restore or increase production. Workover
services are typically used during the development, production and abandonment
stages of the well. Our hydraulic workover units are used for workover
operations and snubbing operations in pressure situations. Our hydraulic
drilling and workover rigs are also capable of providing underbalanced drilling
and workover services. Underbalanced drilling and workover can lead to increased
rates of penetration, longer drill bit life and reduced risk of damage to the
formation. In recent years, oil and gas operators have increasingly utilized
underbalanced services, a trend which we believe will continue in the future.
 
     A hydraulic workover unit is a specially designed rig used for vertically
moving tubulars in and out of a wellbore using hydraulic pressure. This unit is
used for servicing wells with no pressure at the surface and also has the unique
ability of working safely on wells under pressure. This feature allows these
units to be used for underbalanced drilling and workover and also in well
control applications. When the unit is snubbing, it is pushing pipe or tubulars
into the well bore against well bore pressures. Because of their small size and
ability to work on wells under pressure, hydraulic workover units offer some
advantages over larger workover rigs and conventional drilling rigs.
 
     As of December 31, 2001 we had 27 "stand alone" hydraulic workover units.
Of these 27 units, 15 were located in the U.S., three were located in the Middle
East, five were located in Venezuela and four were located in West Africa.
Typically, our hydraulic workover units are contracted on a short-term dayrate
basis. As a result, utilization of our hydraulic workover units varies from
period to period. As of December 31, 2001, six of our hydraulic workover units
were working or under contract. The length of time to complete a job depends on
many factors, including the number of wells and the type of workover or pressure
control situation involved. Usage of our hydraulic workover units is also
affected by the availability of trained personnel. With our current level of
trained personnel, we estimate that we have the capability to crew and operate
13 to 14 simultaneous jobs involving our hydraulic workover units.
 
     Our three largest customers in workover services in 2001 were Petroleos de
Venezuela S.A., Chevron Corporation, and TotalFinaElf S.A. None of these
customers accounted for greater than 5% of our revenues. Our main competitors in
workover services are Halliburton Company, Cudd Pressure Control, Inc. and
Superior Energy Services.
 
                                        7

<PAGE>
 
     Drilling Services.  Our drilling services business is located in Odessa,
Texas and Wooster, Ohio and provides drilling services for shallow to medium
depths ranging from 2,000 to 9,000 feet. Drilling services are typically used
during the exploration and development stages of a field. We have a total of 12
semi-automatic drilling rigs with hydraulic pipe handling booms and lift
capacities ranging from 200,000 to 300,000 pounds. Nine of these drilling rigs
are located in Odessa, Texas and three are located in Wooster, Ohio. As of
February 28, 2002, 8 rigs were working or under contract. This level of
utilization is down from activity in 2001 when our rigs were 92.1% utilized.
 
     We market our drilling services directly to a diverse customer base,
consisting of both major and independent oil companies. Our largest customers in
drilling services in 2001 included Oxy Permian LTD., Texland, Inc. and Conoco,
Inc. None of these customers accounted for greater than 5% of our revenues. Our
main competitors are Patterson-UTI Energy Inc., Key Energy Services, Inc. and
RodRic Drilling, Inc. The land drilling business is highly fragmented and
consists of a small number of large companies and many smaller companies.
 
     Rental Services.  Our rental services business provides a wide range of
products for use in the offshore and onshore oil and gas industry, including:
 
     - wireline and coiled tubing pressure control equipment;
 
     - pipe recovery systems; and
 
     - surface-based pressure control equipment used in production operations.
 
     Our rental services are used during the exploration, development,
production and abandonment stages. We provide rental services at 15 U.S.
distribution points in Texas, Louisiana, Oklahoma, Mississippi and New Mexico,
an increase of three locations since December 31, 2000. We provide rental
services on a day rental basis with rates varying depending on the type of
equipment and the length of time rented.
 
     Our three largest customers in rental services in 2001 were Schlumberger
Ltd., Baker Hughes, Inc. and Halliburton Company. None of these customers
accounted for greater than 5% of our revenues.
 
     Remote Site Accommodations, Catering and Logistics and Modular Building
Construction.  We are a leading provider of fully integrated products and
services required to support a workforce at a remote location, including
workforce accommodations, food services, remote site management services and
modular building construction. We provide complete design, manufacture,
installation, operation and redeployment logistics services for oil and gas
drilling, oil sands mining, diamond mining, pipeline construction, offshore
construction, disaster relief services or any other industry that requires
remote site logistics projects. Our remote site products and services operations
are primarily focused in Canada and the Gulf of Mexico. During the peak of our
operating season, we typically provide logistics services in over 200 separate
locations throughout the world to remote sites with populations ranging from 20
to 2,000 persons.
 
     Remote Site Accommodations, Catering and Logistics Services.  We sell and
lease portable living quarters, galleys, diners and offices and provide portable
generators, water sewage systems and catering services as part of our remote
site logistics services. We provide various client-specific building
configurations to customers for use in both onshore and offshore applications.
We provide our integrated remote site logistics services to customers under
long-term and short-term contractual arrangements.
 
     Modular Building Construction.  We design, construct and install a variety
of portable modular buildings, including housing, kitchens, recreational units
and offices for lease or sale to the Canadian and Gulf of Mexico markets. Our
designers work closely with our clients to build structures that best serve
their needs.
 
     In 2001, our three largest customers in remote site accommodations,
catering and logistics and modular building construction were Syncrude Canada,
Ltd., G.E. Capital Corporation and Precision Drilling Corporation. None of these
customers accounted for greater than 5% of our revenues. Our main competitors
are Atco Structures Limited, Eurest, Ltd. and Abbeyville Offshore Inc.
 
                                        8

<PAGE>
 
  EMPLOYEES
 
     As of December 31, 2001, we had 3,216 full-time employees, 962 of whom are
in our offshore products segment, 91 of whom are in our tubular services segment
and 2,149 of whom are in our well site services segment. In addition, we are
party to collective bargaining agreements covering 452 employees located in
Canada as of December 31, 2001. We believe relations with our employees are
good.
 
  GOVERNMENT REGULATION
 
     Our business is significantly affected by foreign, federal, state and local
laws and regulations relating to the oil and natural gas industry, worker safety
and environmental protection. Changes in these laws, including more stringent
administrative regulations and increased levels of enforcement of these laws and
regulations, could significantly affect our business. We cannot predict changes
in the level of enforcement of existing laws and regulations or how these laws
and regulations may be interpreted or the effect changes in these laws and
regulations may have on us or our future operations or earnings. We also are not
able to predict whether additional laws and regulations will be adopted.
 
     We depend on the demand for our products and services from oil and natural
gas companies. This demand is affected by changing taxes, price controls and
other laws and regulations relating to the oil and gas industry generally,
including those specifically directed to oilfield and offshore operations. The
adoption of laws and regulations curtailing exploration and development drilling
for oil and natural gas in our areas of operation could also adversely affect
our operations by limiting demand for our products and services. We cannot
determine the extent to which our future operations and earnings may be affected
by new legislation, new regulations or changes in existing regulations or
enforcement.
 
     Some of our employees who perform services on offshore platforms and
vessels are covered by the provisions of the Jones Act, the Death on the High
Seas Act and general maritime law. These laws operate to make the liability
limits established under states' workers' compensation laws inapplicable to
these employees and permit them or their representatives generally to pursue
actions against us for damages or job-related injuries with no limitations on
our potential liability.
 
     Our operations are subject to numerous foreign, federal, state and local
environmental laws and regulations governing the manufacture, management and/or
disposal of materials and wastes in the environment and otherwise relating to
environmental protection. Numerous governmental agencies issue regulations to
implement and enforce these laws, for which compliance is often costly and
difficult. The violation of these laws may result in the denial or revocation of
permits, issuance of corrective action orders, assessment of administrative and
civil penalties and even criminal prosecution. We believe that we are in
compliance in all material respects with applicable environmental laws and
regulations. Further, we do not anticipate that compliance with existing laws
and regulations will have a material effect on our consolidated financial
statements.
 
     We generate wastes, including hazardous wastes, that are subject to the
federal Resource Conservation and Recovery Act, or RCRA, and comparable state
statutes. The United States Environmental Protection Agency, or EPA, and state
agencies have limited the approved methods of disposal for some types of
hazardous and nonhazardous wastes. Some wastes handled by us in our field
service activities that currently are exempt from treatment as hazardous wastes
may in the future be designated as "hazardous wastes" under RCRA or other
applicable statutes. This would subject us to more rigorous and costly operating
and disposal requirements.
 
     The federal Comprehensive Environmental Response, Compensation, and
Liability Act, or CERCLA or the "Superfund" law, and comparable state statutes
impose liability, without regard to fault or legality of the original conduct,
on classes of persons that are considered to have contributed to the release of
a hazardous substance into the environment. These persons include the owner or
operator of the disposal site or the site where the release occurred and
companies that disposed of or arranged for the disposal of the hazardous
substances at the site where the release occurred. Under CERCLA, these persons
may be subject to joint and several liability for the costs of cleaning up the
hazardous substances that have been released into the
 
                                        9

<PAGE>
 
environment and for damages to natural resources, and it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances released
into the environment. We currently have operations on properties where
activities involving the handling of hazardous substances or wastes may have
been conducted by third parties not under our control. These properties may be
subject to CERCLA, RCRA and analogous state laws. Under these laws and related
regulations, we could be required to remove or remediate previously discarded
hazardous substances and wastes or property contamination that was caused by
these third parties. These laws and regulations may also expose us to liability
for our acts that were in compliance with applicable laws at the time the acts
were performed.
 
     Our operations may result in discharges of pollutants to waters. The
Federal Water Pollution Control Act and analogous state laws impose restrictions
and strict controls regarding the discharge of pollutants into state waters or
waters of the United States. The discharge of pollutants is prohibited unless
permitted by the EPA or applicable state agencies. In addition, the Oil
Pollution Act of 1990 imposes a variety of requirements on responsible parties
related to the prevention of oil spills and liability for damages, including
natural resource damages, resulting from such spills in waters of the United
States. A responsible party includes the owner or operator of a facility or
vessel, or the lessee or permittee of the area in which an offshore facility is
located. The Federal Water Pollution Control Act and analogous state laws
provide for administrative, civil and criminal penalties for unauthorized
discharges and, together with the Oil Pollution Act, impose rigorous
requirements for spill prevention and response planning, as well as substantial
potential liability for the costs of removal, remediation, and damages in
connection with any unauthorized discharges.
 
     Although we believe that we are in substantial compliance with existing
laws and regulations, there can be no assurance that substantial costs for
compliance will not be incurred in the future. Moreover, it is possible that
other developments, such as the adoption of stricter environmental laws,
regulations and enforcement policies, could result in additional costs or
liabilities that we cannot currently quantify.
 
             CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
       PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
 
     We include the following cautionary statement to take advantage of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of 1995
for any forward-looking statement made by us, or on our behalf. The factors
identified in this cautionary statement are important factors (but not
necessarily all of the important factors) that could cause actual results to
differ materially from those expressed in any forward-looking statement made by
us, or on our behalf. Where any such forward-looking statement includes a
statement of the assumptions or bases underlying such forward-looking statement,
we caution that, while we believe such assumptions or bases to be reasonable and
make them in good faith, assumed facts or bases almost always vary from actual
results. The differences between assumed facts or bases and actual results can
be material, depending upon the circumstances. All statements other than
statements of historical facts contained in this Annual Report on Form 10-K,
including statements regarding our future financial position, budgets, projected
costs and plans and objectives of management for future operations, are
forward-looking statements. You can typically identify forward-looking
statements by the use of forward-looking words such as "may," "will," "could,"
"project," "believe," "anticipate," "expect," "estimate," "potential," "plan,"
"forecast," and other similar words.
 
     Where, in any forward-looking statement, Oil States, or our management,
expresses an expectation or belief as to the future results, such expectation or
belief is expressed in good faith and believed to have a reasonable basis.
However, there can be no assurance that the statement of expectation or belief
will result, or be achieved or accomplished. Taking this into account, the
following are identified as important risk factors that could cause actual
results to differ materially from those expressed in any forward-looking
statement made by, or on behalf of, Oil States.
 
                                        10

<PAGE>
 
  Risks Related to Oil States' Business Generally
 
  DECREASED OIL AND GAS INDUSTRY EXPENDITURE LEVELS WILL ADVERSELY AFFECT OUR
  RESULTS OF OPERATIONS.
 
     We depend upon the oil and gas industry and its willingness to make
expenditures to explore for, develop and produce oil and gas. If these
expenditures decline, our business will suffer. The industry's willingness to
explore, develop and produce depends largely upon the prevailing view of future
product prices. Many factors affect the supply and demand for oil and gas and
therefore influence product prices, including:
 
     - the level of production;
 
     - the levels of oil and gas inventories;
 
     - the expected cost of developing new reserves;
 
     - the cost of producing oil and gas;
 
     - the level of drilling activity;
 
     - worldwide economic activity;
 
     - national government political requirements, including the ability of the
       Organization of Petroleum Exporting Companies (OPEC) to set and maintain
       production levels and prices for oil;
 
     - the cost of developing alternate energy sources;
 
     - environmental regulation; and
 
     - tax policies.
 
If demand for drilling services, cash flows of drilling contractors or drilling
rig utilization rates decrease significantly, then demand for our products and
services will decrease.
 
  EXTENDED PERIODS OF LOW OIL PRICES MAY DECREASE DEEPWATER EXPLORATION AND
  PRODUCTION ACTIVITY AND ADVERSELY AFFECT OUR BUSINESS.
 
     Our offshore products segment depends on exploration and production
expenditures in deepwater areas. Because deepwater projects are more capital
intensive and take longer to generate first production than shallow water and
onshore projects, the economic analyses conducted by exploration and production
companies typically assume lower prices for production from such projects to
determine economic viability over the long term. If oil prices remain near or
below those levels used to determine economic viability for an extended period
of time, deepwater activity and our business will be adversely affected.
 
  BECAUSE THE OIL AND GAS INDUSTRY IS CYCLICAL, OUR OPERATING RESULTS MAY
  FLUCTUATE.
 
     Oil prices have been volatile over the last three years, ranging from less
than $11 per barrel to over $37 per barrel. Spot gas prices have also been
volatile, ranging from less than $1.25 per MMBtu to above $10.00 per MMBtu.
These price changes have caused oil and gas companies and drilling contractors
to change their strategies and expenditure levels. Oil States, Sooner, HWC and
PTI have experienced in the past, and we may experience in the future,
significant fluctuations in operating results based on these changes.
 
  WE MIGHT BE UNABLE TO COMPETE SUCCESSFULLY WITH OTHER COMPANIES IN OUR
  INDUSTRY.
 
     We sell our products and services in competitive markets. In some of our
business segments, we compete with the oil and gas industry's largest oilfield
services providers. These companies have greater financial resources than we do.
In addition, our business, particularly our tubular services business, may face
competition from Internet business-to-business service providers. We expect the
number of these providers to increase in the future. Our business will be
adversely affected to the extent that these providers are successful in reducing
purchases of our products and services.
 
                                        11

<PAGE>
 
     Our operations may be adversely affected if our current competitors or new
market entrants introduce new products or services with better prices, features,
performance or other competitive characteristics than our products and services.
Competitive pressures or other factors also may result in significant price
competition that could have a material adverse effect on our results of
operations and financial condition.
 
  DISRUPTIONS IN THE POLITICAL AND ECONOMIC CONDITIONS OF THE FOREIGN COUNTRIES
  IN WHICH WE OPERATE COULD ADVERSELY AFFECT OUR BUSINESS.
 
     We have operations in various international areas, including parts of West
Africa and South America. Our operations in these areas increase our exposure to
risks of war, local economic conditions, political disruption, civil disturbance
and governmental policies that may:
 
     - disrupt our operations;
 
     - restrict the movement of funds or limit repatriation of profits;
 
     - lead to U.S. government or international sanctions; and
 
     - limit access to markets for periods of time.
 
     Some areas, including West Africa and parts of South America, have
experienced political disruption in the past. Disruptions may occur in the
future in our foreign operations, and losses caused by these disruptions may
occur that will not be covered by insurance.
 
  WE ARE SUSCEPTIBLE TO SEASONAL EARNINGS VOLATILITY DUE TO ADVERSE WEATHER
  CONDITIONS IN OUR REGIONS OF OPERATIONS.
 
     Our operations are directly affected by seasonal differences in weather in
the areas in which we operate, most notably in Canada and the Gulf of Mexico.
Our Canadian remote site logistics operations are significantly focused on the
winter months when the winter freeze in remote regions permits exploration and
production activity to occur. The spring thaw in these frontier regions
restricts operations in the spring months and, as a result, adversely affects
our operations and sales of products and services in the second and third
quarters. Our operations in the Gulf of Mexico are also affected by weather
patterns. Weather conditions in the Gulf Coast region generally result in higher
drilling activity in the spring, summer and fall months with the lowest activity
in the winter months. In addition, summer and fall drilling activity can be
restricted due to hurricanes and other storms prevalent in the Gulf of Mexico
and along the Gulf Coast. As a result, full year results are not likely to be a
direct multiple of any particular quarter or combination of quarters.
 
  WE MIGHT BE UNABLE TO EMPLOY A SUFFICIENT NUMBER OF TECHNICAL PERSONNEL.
 
     Many of the products that we sell, especially in our offshore products
segment, are complex and highly engineered and often must perform in harsh
conditions. We believe that our success depends upon our ability to employ and
retain technical personnel with the ability to design, utilize and enhance these
products. In addition, our ability to expand our operations depends in part on
our ability to increase our skilled labor force. The demand for skilled workers
is high, and the supply is limited. A significant increase in the wages paid by
competing employers could result in a reduction of our skilled labor force,
increases in the wage rates that we must pay or both. If either of these events
were to occur, our cost structure could increase and our growth potential could
be impaired.
 
  IF WE DO NOT DEVELOP NEW COMPETITIVE TECHNOLOGIES AND PRODUCTS, OUR BUSINESS
  AND REVENUES MAY BE ADVERSELY AFFECTED.
 
     The market for our offshore products is characterized by continual
technological developments to provide better performance in increasingly greater
depths and harsher conditions. If we are not able to design, develop and produce
commercially competitive products in a timely manner in response to changes in
technology, our business and revenues will be adversely affected.
 
                                        12

<PAGE>
 
  THE LEVEL AND PRICING OF TUBULAR GOODS IMPORTED INTO THE UNITED STATES COULD
  DECREASE DEMAND FOR OUR TUBULAR GOODS INVENTORY AND ADVERSELY IMPACT OUR
  RESULTS OF OPERATIONS.
 
     U.S. law currently restricts imports of low-cost tubular goods from a
number of foreign countries into the U.S. tubular goods market, resulting in
higher prices for tubular goods. If these restrictions were to be lifted or if
the level of imported low-cost tubular goods were to otherwise increase, our
tubular services segment could be adversely affected to the extent that we then
have higher-cost tubular goods in inventory. If prices were to decrease
significantly, we might not be able to profitably sell our inventory of tubular
goods. In addition, significant price decreases could result in a longer holding
period for some of our inventory, which could also have a material adverse
effect on our tubular services segment.
 
  IF WE WERE TO LOSE A SIGNIFICANT SUPPLIER OF OUR TUBULAR GOODS, WE COULD BE
  ADVERSELY AFFECTED.
 
     During 2001, we purchased from a single supplier approximately 40% of the
tubular goods we distributed and from three suppliers approximately 62% of such
tubular goods. We do not have contracts with any of these suppliers. If we were
to lose any of these suppliers or if production at one or more of the suppliers
were interrupted, our tubular services segment and our overall business,
financial condition and results of operations could be adversely affected. If
the extent of the loss or interruption were sufficiently large, the impact on us
would be material.
 
  WE ARE SUBJECT TO EXTENSIVE AND COSTLY ENVIRONMENTAL LAWS AND REGULATIONS THAT
  MAY REQUIRE US TO TAKE ACTIONS THAT WILL ADVERSELY AFFECT OUR RESULTS OF
  OPERATIONS.
 
     Our hydraulic well control and drilling operations and our offshore
products business are significantly affected by stringent and complex foreign,
federal, state and local laws and regulations governing the discharge of
substances into the environment or otherwise relating to environmental
protection. We could be exposed to liability for cleanup costs, natural resource
damages and other damages as a result of our conduct that was lawful at the time
it occurred or the conduct of, or conditions caused by, prior operators or other
third parties. Environmental laws and regulations have changed in the past, and
they are likely to change in the future. If existing regulatory requirements or
enforcement policies change, we may be required to make significant
unanticipated capital and operating expenditures.
 
     Any failure by us to comply with applicable environmental laws and
regulations may result in governmental authorities taking actions against our
business that could adversely impact our operations and financial condition,
including the:
 
     - issuance of administrative, civil and criminal penalties;
 
     - denial or revocation of permits or other authorizations;
 
     - reduction or cessation in operations; and
 
     - performance of site investigatory, remedial or other corrective actions.
 
  WE MAY NOT HAVE ADEQUATE INSURANCE FOR POTENTIAL LIABILITIES.
 
     Our operations are subject to many hazards. We face the following risks
under our insurance coverage:
 
     - we may not be able to continue to obtain insurance on commercially
       reasonable terms;
 
     - we may be faced with types of liabilities that will not be covered by our
       insurance, such as damages from environmental contamination;
 
     - the dollar amount of any liabilities may exceed our policy limits; and
 
     - we do not maintain full coverage against the risk of interruption of our
       business.
 
Even a partially uninsured claim, if successful and of significant size, could
have a material adverse effect on our results of operations or consolidated
financial position.
 
                                        13

<PAGE>
 
  WE ARE SUBJECT TO LITIGATION RISKS THAT MAY NOT BE COVERED BY INSURANCE.
 
     In the ordinary course of business, we become the subject of various claims
and litigation. We maintain insurance to cover many of our potential losses, and
we are subject to various self-retentions and deductibles under our insurance.
It is possible, however, that an unexpected judgment could be rendered against
us in cases in which we could be uninsured and beyond the amounts that we
currently have reserved or anticipate incurring for such matters.
 
  Risks Related to Oil States' Operations
 
  WE HAVE INCURRED LOSSES IN THE PAST. WE MAY INCUR LOSSES IN THE FUTURE.
 
     We incurred a loss from continuing operations in 1999. We cannot assure you
that we will be profitable in the future.
 
  LOSS OF KEY MEMBERS OF OUR MANAGEMENT COULD ADVERSELY AFFECT OUR BUSINESS.
 
     We depend on the continued employment and performance of Douglas E. Swanson
and other key members of management. If any of our key managers resign or become
unable to continue in their present roles and are not adequately replaced, our
business operations could be materially adversely affected. We do not maintain
any "key man" life insurance for any of our officers.
 
  IF WE HAVE TO WRITE OFF A SIGNIFICANT AMOUNT OF GOODWILL, OUR EARNINGS WILL BE
  NEGATIVELY AFFECTED.
 
     Our consolidated balance sheet as of December 31, 2001 included goodwill
representing 33% of our total assets. We have recorded goodwill because we paid
more for some of our businesses than the fair market value of the tangible and
separately measurable intangible net assets of those businesses. Generally
accepted accounting principles previously required us to amortize goodwill over
the periods we benefit from the acquired assets. Current accounting standards,
which were effective January 1, 2002 (See Note 3 to Consolidated and Combined
Financial Statements), require a periodic review of goodwill for impairment in
value and a non-cash charge against earnings with a corresponding decrease in
stockholders' equity if circumstances indicate that the carrying amount will not
be recoverable.
 
  WE MIGHT BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS.
 
     We rely on a variety of intellectual property rights that we use in our
offshore products and well site services segments, particularly our patents
relating to our FlexJoint(TM) technology. We may not be able to successfully
preserve these intellectual property rights in the future and these rights could
be invalidated, circumvented or challenged. Technological developments may also
reduce the value of our intellectual property. In addition, the laws of some
foreign countries in which our products and services may be sold do not protect
intellectual property rights to the same extent as the laws of the United
States. The failure of our company to protect our proprietary information and
any successful intellectual property challenges or infringement proceedings
against us could adversely affect our competitive position.
 
  BECAUSE WE ARE A NEWLY COMBINED COMPANY WITH A SHORT COMBINED OPERATING
  HISTORY, NEITHER OUR HISTORICAL NOR OUR PRO FORMA FINANCIAL AND OPERATING DATA
  MAY BE REPRESENTATIVE OF OUR FUTURE RESULTS.
 
     We are a newly combined company with a short period of combined operating
history. Our short combined operating history may make it difficult to forecast
our future operating results. The pro forma and combined financial statements
included in this Annual Report on Form 10-K reflect the separate historical
results of operations, financial position and cash flows of Oil States, Sooner,
HWC and PTI prior to the Combination. The consolidated financial statements
reflect activity after the Combination.
 
                                        14

<PAGE>
 
  L.E. SIMMONS, THROUGH SCF-III, L.P. AND SCV-IV, L.P. (COLLECTIVELY SCF)
  PRIVATE EQUITY FUNDS WHICH OWNED MAJORITY INTERESTS IN EACH OF THE COMPANIES
  IN THE COMBINATION, CONTROLS THE OUTCOME OF STOCKHOLDER VOTING AND MAY
  EXERCISE THIS VOTING POWER IN A MANNER ADVERSE TO OUR STOCKHOLDERS.
 
     SCF holds approximately 63.2% of the outstanding common stock of our
company. L.E. Simmons, the chairman of our board of directors, is the sole owner
of L.E. Simmons & Associates, Incorporated, the ultimate general partner of SCF.
Accordingly, Mr. Simmons, through his ownership of the ultimate general partner
of SCF, is in a position to control the outcome of matters requiring a
stockholder vote, including the election of directors, adoption of amendments to
our certificate of incorporation or bylaws or approval of transactions involving
a change of control. The interests of Mr. Simmons may differ from those of our
stockholders, and SCF may vote its common stock in a manner that may adversely
affect our stockholders.
 
  SCF'S OWNERSHIP INTEREST AND PROVISIONS CONTAINED IN OUR CERTIFICATE OF
  INCORPORATION AND BYLAWS COULD DISCOURAGE A TAKEOVER ATTEMPT, WHICH MAY REDUCE
  OR ELIMINATE THE LIKELIHOOD OF A CHANGE OF CONTROL TRANSACTION AND, THEREFORE,
  THE ABILITY OF OUR STOCKHOLDERS TO SELL THEIR SHARES FOR A PREMIUM.
 
     In addition to SCF's controlling position, provisions contained in our
certificate of incorporation and bylaws, such as a classified board, limitations
on the removal of directors, on stockholder proposals at meetings of
stockholders and on stockholder action by written consent and the inability of
stockholders to call special meetings, could make it more difficult for a third
party to acquire control of our company. Our certificate of incorporation also
authorizes our board of directors to issue preferred stock without stockholder
approval. If our board of directors elects to issue preferred stock, it could
increase the difficulty for a third party to acquire us, which may reduce or
eliminate our stockholders' ability to sell their shares of common stock at a
premium.
 
  TWO OF OUR DIRECTORS MAY HAVE CONFLICTS OF INTEREST BECAUSE THEY ARE ALSO
  DIRECTORS OR OFFICERS OF SCF. THE RESOLUTION OF THESE CONFLICTS OF INTEREST
  MAY NOT BE IN OUR OR OUR STOCKHOLDERS' BEST INTERESTS.
 
     Two of our directors, L.E. Simmons and Andrew L. Waite, are also current
directors or officers of L.E. Simmons & Associates, Incorporated, the ultimate
general partner of SCF. This may create conflicts of interest because these
directors have responsibilities to SCF and its owners. Their duties as directors
or officers of L.E. Simmons & Associates, Incorporated may conflict with their
duties as directors of our company regarding business dealings between SCF and
us and other matters. The resolution of these conflicts may not always be in our
or our stockholders' best interest.
 
  WE HAVE RENOUNCED ANY INTEREST IN SPECIFIED BUSINESS OPPORTUNITIES, AND SCF
  AND ITS DIRECTOR NOMINEES ON OUR BOARD OF DIRECTORS GENERALLY HAVE NO
  OBLIGATION TO OFFER US THOSE OPPORTUNITIES.
 
     SCF has investments in other oilfield service companies that compete with
us, and SCF and its affiliates, other than our company, may invest in other such
companies in the future. We refer to SCF, its other affiliates and its portfolio
companies as the SCF group. Our certificate of incorporation provides that, so
long as SCF and its affiliates continue to own at least 20% of our common stock,
we renounce any interest in specified business opportunities. Our certificate of
incorporation also provides that if an opportunity in the oilfield services
industry is presented to a person who is a member of the SCF group, including
any of those individuals who also serves as SCF's director nominee of our
Company:
 
     - no member of the SCF group or any of those individuals has any obligation
       to communicate or offer the opportunity to us; and
 
     - such entity or individual may pursue the opportunity as that entity or
       individual sees fit, unless:
 
     - it was presented to an SCF director nominee solely in that person's
       capacity as a director of our company and no other member of the SCF
       group independently received notice of or otherwise identified such
       opportunity; or
 
     - the opportunity was identified solely through the disclosure of
       information by or on behalf of our Company.
 
                                        15

<PAGE>
 
These provisions of our certificate of incorporation may be amended only by an
affirmative vote of holders of at least 80% of our outstanding common stock. As
a result of these charter provisions, our future competitive position and growth
potential could be adversely affected.
 
  Risks Related to Ownership of Our Common Stock
 
  THE AVAILABILITY OF SHARES OF OUR COMMON STOCK FOR FUTURE SALE COULD DEPRESS
  OUR STOCK PRICE
 
     Sales by SCF and other stockholders of a substantial number of shares of
our common stock in the public markets, or the perception that such sales might
occur, could have a material adverse effect on the price of our common stock or
could impair our ability to obtain capital through an offering of equity
securities.
 
                                        16

<PAGE>
 

I
TEM 2.  PROPERTIES
 
     The following table presents information about our principal properties and
facilities. Except as indicated below, we own all of these properties or
facilities.
 

<Table>
<Caption>
                                      APPROXIMATE
                                        SQUARE
LOCATION                            FOOTAGE/ACREAGE              DESCRIPTION
--------                            ---------------              -----------
<S>                                 <C>               <C>
United States
  Houston, Texas (lease)..........          3,095     Principal executive offices
  Arlington, Texas................         11,264     Offshore products business office
  Arlington, Texas................         55,853     Offshore products manufacturing
                                                        facility
  Arlington, Texas (lease)........         63,272     Offshore products manufacturing
                                                        facility
  Arlington, Texas................         44,780     Elastomer technology center
  Arlington, Texas................         60,000     Molding and aerospace facilities
  Houston, Texas (lease)..........         25,638     Offshore products business office
  Houston, Texas..................         65,105     Offshore products manufacturing
                                                        facility
  Houston, Texas (lease)..........         54,050     Offshore products manufacturing
                                                        facility
  Lampasas, Texas.................         47,500     Molding facility for offshore
                                                      products
  Crosby, Texas...................      109 acres     Tubular yard
  Belle Chasse, Louisiana                  20,000     Accommodations manufacturing
     (lease)......................                      facility
  Lafayette, Louisiana (lease)....        9 acres     Accommodations equipment repair
                                                        yard
  Houma, Louisiana (lease)........         24,000     Accommodations manufacturing
                                                        facility
  Houma, Louisiana................         24,000     Hydraulic well control yard and
                                                      office
  Houma, Louisiana................          8,400     Well control office and training
                                                      facility
  Houma, Louisiana................         64,659     Offshore products manufacturing
                                                        facility
  Broussard, Louisiana............         19,000     Rental tool warehouse
  Odessa, Texas...................          7,500     Office and warehouse in support of
                                                        drilling operations
  Alvin, Texas....................         20,450     Rental tool warehouse
International
  Nisku, Alberta..................     8.58 acres     Accommodations manufacturing
                                                        facility
  Nisku, Alberta (lease)..........    10.24 acres     Accommodations manufacturing
                                                        facility
  Edmonton, Alberta...............         31,000     Accommodations office and
                                                      warehouse
  Aberdeen, Scotland (lease)......         68,400     Offshore products manufacturing
                                                        facility
  Bathgate, Scotland..............         28,000     Offshore products manufacturing
                                                        facility
  Spruce Grove, Alberta...........         15,000     Accommodations facility and
                                                        equipment yard
  Grande Prairie, Alberta.........    14.69 acres     Accommodations facility and
                                                        equipment yard
  Peace River, Alberta (lease)....       80 acres     Accommodations equipment yard
  Aberdeen, Scotland (lease)......          6,260     Tubular yard
</Table>

 
                                        17

<PAGE>
 

<Table>
<Caption>
                                      APPROXIMATE
                                        SQUARE
LOCATION                            FOOTAGE/ACREAGE              DESCRIPTION
--------                            ---------------              -----------
<S>                                 <C>               <C>
  Barrow, England.................         14,551     Offshore products manufacturing
                                                        facility
  Singapore, Asia (lease).........         23,600     Offshore products manufacturing
                                                        facility
  Macae, Brazil (lease)...........         45,702     Offshore products manufacturing
                                                        facility
  Port Harcourt, Nigeria                  376,727     Tubular yard
     (lease)......................
</Table>

 
     We have five tubular sales offices and a total of 15 rental supply and
distribution points in Texas, Louisiana, New Mexico, Mississippi and Oklahoma.
Most of these office locations provide sales, technical support and personnel
services to our customers. We also have various offices supporting our business
segments which are both owned and leased.
 

ITEM 3.  LEGAL PROCEEDINGS
 
     We are a party to various pending or threatened claims, lawsuits and
administrative proceedings seeking damages or other remedies concerning our
commercial operations, products, employees and other matters, including claims
relating to matters occurring prior to our acquisition of businesses and also
relating to businesses we have sold. In certain cases, we are entitled to
indemnification from the sellers of businesses and in other cases, we have
indemnified the buyers of businesses from us. Although we can give no assurance
about the outcome of these or any other pending legal and administrative
proceedings and the effect such outcomes may have on us, we believe that any
ultimate liability resulting from the outcome of such proceedings, to the extent
not otherwise provided for or covered by insurance, will not have a material
adverse effect on our consolidated financial position, results of operations or
liquidity.
 
     The Company is aware that certain energy service companies that have in the
past used asbestos in connection with the manufacture of equipment or otherwise
in the operation of their business have become the subject of increased asbestos
related litigation. Since September 30, 2001, subsidiaries of the Company have
been named as defendants in two cases by plaintiffs seeking damages, including
punitive damages, alleging that certain of our subsidiaries have responsibility
for two individuals developing mesothelioma as a result of exposure to asbestos.
Although these are the only cases that management is aware that are pending or
threatened against the Company or its subsidiaries involving allegations
relating to asbestos exposure, there can be no assurance that other asbestos
related claims will not be made. Based on our preliminary investigation, we do
not believe that these two cases or future claims relating to asbestos exposure
will have a material adverse effect on the Company's consolidated financial
position, results of operations or liquidity.
 

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     No matters were submitted to a vote of security holders during the fourth
quarter of 2001.
 

                                    PART II
 

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     Our authorized common stock consists of 200,000,000 shares of common stock.
There were 48,332,207 shares of common stock outstanding as of February 28,
2002, including 3,601,329 shares of common stock issuable upon exercise of
exchangeable shares of one of our Canadian subsidiaries. These exchangeable
shares, which were issued to certain former shareholders of PTI in the
Combination, are intended to have characteristics essentially equivalent to our
common stock prior to the exchange. For purposes of this Annual Report on Form
10-K, we have treated the shares of common stock issuable upon exchange of the
exchangeable shares as outstanding. The approximate number of record holders of
our common stock as of February 28, 2002 was 51. Our common stock is traded on
the New York Stock Exchange
 
                                        18

<PAGE>
 
under the ticker symbol OIS. There was no public market for our common stock
before February 9, 2001. The closing price of our common stock on February 28,
2002 was $9.30 per share.
 
     The following table sets forth the high and low closing sale prices of the
Company's common stock as reported on the New York Stock Exchange Composite
Tape.
 

<Table>
<Caption>
CALENDAR YEAR                            QUARTER                             HIGH    LOW
-------------                            -------                             -----   ----
<C>             <S>                                                          <C>     <C>
    2001        First (from February 9, 2001 to March 31, 2001)...........   12.48   9.00
                Second....................................................   15.00   9.20
                Third.....................................................    9.95   5.90
                Fourth....................................................    9.51   6.05
</Table>

 
     Oil States has not declared or paid cash dividends on its common stock
since its initial public offering in February 2001. We do not intend to declare
or pay any cash dividends on our common stock in the foreseeable future.
Instead, we currently intend to retain our earnings, if any, to finance our
business and to use for general corporate purposes. Our board of directors has
the authority to declare and pay dividends on the common stock, at its
discretion, as long as there are funds legally available to do so. The payment
of dividends is restricted by our revolving credit facility.
 

ITEM 6.  SELECTED FINANCIAL DATA
 
     The selected financial data on the following pages include selected
historical and unaudited pro forma financial information of our company as of
and for the years ended December 31, 2001, 2000, 1999, 1998 and 1997. The
following data should be read in conjunction with Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
Company's Pro Forma and Consolidated and Combined Financial Statements, and
related notes included in Item 8, Financial Statements and Supplementary Data of
this Annual Report on Form 10-K.
 
     The pro forma statements of operations for 1999, 2000 and 2001 and other
financial data give effect to:
 
     - our initial public offering of 10,000,000 shares at $9.00 per share (the
       Offering) and the application of the net proceeds to us;
 
     - our issuance of 4,275,555 shares of common stock to SCF in exchange for
       approximately $36.0 million of our indebtedness held by SCF (SCF
       Exchange);
 
     - the three-for-one reverse stock split of Oil States common stock;
 
     - the combination of Oil States, HWC and PTI, excluding the minority
       interest of each company, as entities under common control from the dates
       such common control was established using reorganization accounting,
       which yields results similar to pooling of interest accounting;
 
     - the acquisition of the minority interests of Oil States, HWC and PTI in
       the Combination using the purchase method of accounting as if the
       acquisition occurred on January 1, 1999, 2000 and 2001, respectively; and
 
     - the acquisition of Sooner in the Combination using the purchase method of
       accounting as if the acquisition occurred on January 1, 1999, 2000 and
       2001, respectively.
 
                                        19

<PAGE>
 
                            SELECTED FINANCIAL DATA
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 

<Table>
<Caption>
                                                                       CONSOLIDATED
                                                                           AND
                                               PRO FORMA(1)              COMBINED                    COMBINED(2)
                                      ------------------------------   ------------   -----------------------------------------
                                                                       YEAR ENDED DECEMBER 31,
                                      -----------------------------------------------------------------------------------------
                                        2001       2000       1999         2001         2000       1999       1998       1997
                                      --------   --------   --------   ------------   --------   --------   --------   --------
<S>                                   <C>        <C>        <C>        <C>            <C>        <C>        <C>        <C>
Statement of Operations Data:
  Revenue...........................  $719,722   $595,647   $487,380     $671,205     $304,549   $267,110   $359,034   $216,259
  Expenses
    Costs of sales and operating
      expenses......................   582,934    482,662    405,652      537,792      217,601    199,865    264,658    151,012
    Selling, general and
      administrative................    51,157     46,146     43,815       50,024       37,816     33,624     45,414     23,718
    Depreciation and amortization...    28,693     26,729     26,306       28,039       21,314     20,275     18,201      8,973
    Other expense (income)..........      (347)       (69)     2,448         (346)         (69)     2,448      4,928       (122)
                                      --------   --------   --------     --------     --------   --------   --------   --------
  Operating income..................    57,285     40,179      9,159       55,696       27,887     10,898     25,833     32,678
                                      --------   --------   --------     --------     --------   --------   --------   --------
  Net interest expense..............    (8,394)    (9,260)   (11,243)      (8,674)     (11,504)   (12,496)   (15,301)    (8,710)
  Other income (expense)............        87         89       (534)          88           89     (1,297)       115       (368)
                                      --------   --------   --------     --------     --------   --------   --------   --------
  Income (loss) before income
    taxes...........................    48,978     31,008     (2,318)      47,110       16,472     (2,895)    10,647     23,600
  Income tax (expense) benefit......    (2,090)    (4,542)     3,979       (2,054)     (10,776)    (4,654)    (9,745)   (11,319)
                                      --------   --------   --------     --------     --------   --------   --------   --------
  Income (loss) from continuing
    operations before minority
    interest........................    46,888     26,466      1,661       45,056        5,696     (7,549)       902     12,281
  Minority interest.................         4        (30)       (31)      (1,596)      (4,248)       610      2,988     (6,869)
                                      --------   --------   --------     --------     --------   --------   --------   --------
  Income (loss) from continuing
    operations......................  $ 46,892   $ 26,436   $  1,630     $ 43,460     $  1,448   $ (6,939)  $  3,890   $  5,412
                                      ========   ========   ========     ========     ========   ========   ========   ========
  Income (loss) from continuing
    operations before extraordinary
    item per common share(3)
    Basic...........................  $   0.97   $   0.55   $    .03     $   0.96     $   0.05   $  (0.30)  $   0.17   $   0.28
                                      ========   ========   ========     ========     ========   ========   ========   ========
    Diluted.........................  $   0.96   $   0.55   $    .03     $   0.95     $   0.04   $  (0.30)  $   0.17   $   0.28
                                      ========   ========   ========     ========     ========   ========   ========   ========
  Average shares outstanding(3)
    Basic...........................    48,198     48,013     48,156       45,263       24,482     23,053     22,414     19,287
                                      ========   ========   ========     ========     ========   ========   ========   ========
    Diluted.........................    48,619     48,358     48,529       46,045       26,471     23,069     22,435     19,290
                                      ========   ========   ========     ========     ========   ========   ========   ========
</Table>

 

<Table>
<Caption>
                                                                    CONSOLIDATED
                                                                        AND
                                                  PRO FORMA(1)        COMBINED                    COMBINED(2)
                                               ------------------   ------------   ------------------------------------------
                                                                          YEAR ENDED DECEMBER 31,
                                               ------------------------------------------------------------------------------
                                                 2001      2000         2001         2000       1999        1998       1997
                                               --------   -------   ------------   --------   ---------   --------   --------
<S>                                            <C>        <C>       <C>            <C>        <C>         <C>        <C>
Other Data:
  EBITDA as defined(4).......................  $ 85,978   $66,908     $ 83,735     $ 49,201   $  31,173   $ 44,034   $ 41,651
  Net income (loss) before goodwill
    amortization (5).........................    54,403    33,897       50,380        3,979      (4,144)     6,698      6,415
  Capital expenditures.......................    29,718                 29,671       21,314      11,297     36,145     14,375
  Net cash provided by operating
    activities...............................    60,263                 55,122       33,937       5,170      7,469     19,348
  Net cash provided by (used in) investing
    activities...............................   (27,648)               (22,667)     (22,377)    112,227    (61,864)   (67,217)
  Net cash provided by (used in) financing
    activities...............................   (34,005)               (32,415)         304    (116,122)    42,473    101,696
</Table>

 
                                        20

<PAGE>
 

<Table>
<Caption>
                                                              CONSOLIDATED                  COMBINED(2)
                                                              ------------   -----------------------------------------
                                                                                    DECEMBER 31,
                                                              --------------------------------------------------------
                                                                  2001         2000       1999       1998       1997
                                                              ------------   --------   --------   --------   --------
<S>                                                           <C>            <C>        <C>        <C>        <C>
Balance Sheet Data:
  Cash and cash equivalents.................................    $ 4,982      $  4,821   $  3,216   $  6,034   $ 21,039
  Net property and equipment................................    150,090       143,468    142,242    138,374     95,033
  Total assets..............................................    529,883       353,518    355,544    499,025    433,499
  Long-term debt and capital leases, excluding current
    portion.................................................     73,939       102,614    120,290    109,495    171,002
  Redeemable preferred stock of subsidiaries................         --        25,293     25,064     20,150     22,650
  Total stockholders' equity................................    344,197        56,549     58,462     73,644     91,309
</Table>

 
---------------
 
(1) Includes the results of Sooner, the acquisition of the minority interests of
    Oil States, HWC and PTI in the Combination and the Offering and use of
    proceeds on a pro forma basis assuming the transactions occurred on January
    1, 1999, 2000 and 2001, respectively, for statement of operations and other
    data purposes.
 
(2) Includes the results of Oil States, HWC and PTI on a combined basis using
    the reorganization method of accounting for entities under common control
    from the dates common control was established.
 
(3) Share and per share data have been retroactively restated to reflect a
    three-for-one reverse stock split for Oil States and also to reflect the
    effects of the Combination.
 
(4) EBITDA as defined consists of operating income (loss) before depreciation
    and amortization expense. EBITDA as defined is not a measure of financial
    performance under generally accepted accounting principles. You should not
    consider it in isolation from or as a substitute for net income or cash flow
    measures prepared in accordance with generally accepted accounting
    principles or as a measure of profitability or liquidity. Additionally, the
    EBITDA as defined calculated herein may not be comparable to other similarly
    titled measures of other companies. We have included EBITDA as defined as a
    supplemental disclosure because it may provide useful information regarding
    our ability to service debt and to fund capital expenditures.
 
(5) Net income (loss) before goodwill amortization consists of net income (loss)
    before amortization expense. Net income (loss) before goodwill amortization
    is not a measure of financial performance under generally accepted
    accounting principles. You should not consider it in isolation from or as a
    substitute for net income or cash flow measures prepared in accordance with
    generally accepted accounting principles or as a measure of profitability or
    liquidity.
 

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
     You should read the following discussion and analysis together with
Selected Financial Data and our Financial Statements and the notes to those
statements included elsewhere in this Annual Report on Form 10-K. This
discussion contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
These forward-looking statements involve risks and uncertainties. Our actual
results could differ materially from those indicated in these forward-looking
statements as a result of certain factors, as more fully described under
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995 in Item 1, Business and elsewhere in
this Annual Report on Form 10-K. Except to the extent required by law, we
undertake no obligation to update publicly any forward-looking statements, even
if new information becomes available or other events occur in the future.
 
  CRITICAL ACCOUNTING POLICIES
 
     In our selection of the critical accounting policies adopted by the
Company, our objective is to properly reflect our financial position and results
of operations in each reporting period in a manner that will be understood by
those who utilize our financial statements. Often we must use our judgment about
uncertainties.
 
     There are several critical accounting policies that have been put into
practice at the Company that have an important effect on our reported financial
results. The selection of the useful lives of many of our assets requires the
judgments of our operating personnel as to the length of these useful lives.
Should our estimates
                                        21

<PAGE>
 
be too long or short, we might eventually report a disproportionate number of
losses or gains upon disposition or retirement of our long-lived assets. We
believe our estimates of useful lives are appropriate.
 
     We have contingent liabilities and future claims for which we have made
estimates of the amount of the eventual cost to liquidate these liabilities or
claims. These liabilities and claims sometimes involve threatened or actual
litigation where damages have been quantified and we have made an assessment of
the Company's exposure and recorded a provision in our accounts to cover an
expected loss. Other claims or liabilities have been estimated based on our
experience in these matters and, when appropriate, the advice of outside counsel
or other outside experts. Upon the ultimate resolution of these uncertainties,
our future reported financial results will be impacted by the difference between
our estimates and the actual amounts paid to settle a liability. Examples of
areas where we have made important estimates of future liabilities include
litigation, taxes, postretirement benefits, warranty claims and contract claims.
 
     The Company recognizes revenue and profit as work progresses on long-term,
fixed price contracts using the percentage-of-completion method, which relies on
estimates of total expected contract revenue and costs. Oil States follows this
method since reasonably dependable estimates of the revenue and costs applicable
to various stages of a contract can be made. Recognized revenues and profit are
subject to revisions as the contract progresses to completion. Revisions in
profit estimates are charged to income or expense in the period in which the
facts that give rise to the revision become known.
 
     Our valuation allowances, especially related to potential bad debts in
accounts receivable and to obsolescence or market value declines of inventory,
involve reviews of underlying details of these assets, known trends in the
marketplace and the application of historical factors that provide us with a
basis for recording these allowances. If market conditions are less favorable
than those projected by management, or if the Company's historical experience is
materially different from future experience, additional allowances may be
required. Oil States records a valuation allowance to reduce its deferred tax
assets to the amount that is more likely than not to be realized. While Oil
States has considered future taxable income and ongoing prudent and feasible tax
planning strategies in assessing the need for the valuation allowance, in the
event the Company were to determine that it would be able to realize its
deferred tax assets in the future in excess of its net recorded amount, an
adjustment to the deferred tax asset would increase income in the period such
determination was made. Likewise, should the Company determine that it would not
be able to realize all or part of its net deferred tax asset in the future, an
adjustment to the deferred tax asset would be charged to expense in the period
such determination was made.
 
  Overview
 
     We provide a broad range of products and services to the oil and gas
industry through our offshore products, tubular services and well site services
business segments. Demand for our products and services is cyclical and
substantially dependent upon activity levels in the oil and gas industry,
particularly our customers' willingness to spend capital on the exploration and
development of oil and gas reserves. Demand for our products and services by our
customers is highly sensitive to current and expected oil and natural gas
prices. Our offshore products segment provides highly engineered and technically
designed products for offshore oil and gas development and production systems
and facilities. Sales of our offshore products and services depend upon repairs
and upgrades of existing drilling rigs, construction of new drilling rigs and
the development of offshore production systems. In this segment, we are
particularly influenced by deepwater drilling and production activities. Through
our tubular services division, we distribute premium tubing and casing. Sales of
tubular products and services depend upon the overall level of drilling activity
and the mix of wells being drilled. Demand for tubular products is positively
impacted by increased drilling of deeper horizontal and offshore wells that
generally require premium tubulars and connectors, large diameter pipe and
longer and additional tubular and casing strings. In our well site services
business segment, we provide hydraulic well control services, pressure control
equipment and rental tools and remote site accommodations, catering and
logistics services. Demand for our well site services depends upon the level of
worldwide drilling and workover activity.
 
                                        22

<PAGE>
 
     Energy and oilfield service activities are highly cyclical depending upon
crude oil and natural gas pricing, among other things. Beginning in late 1996
and continuing though the early part of 1998, stabilization of oil and gas
prices led to increases in drilling activity as well as the refurbishment and
new construction of drilling rigs. In the second half of 1998, crude oil prices
declined substantially and reached levels below $11 per barrel in early 1999.
With this decline in pricing, many of our customers substantially reduced their
capital spending and related activities. This industry downturn continued
through most of 1999. The rig count in the United States and Canada, as measured
by Baker Hughes Incorporated, fell from 1,481 rigs in February 1998 to 559 rigs
in April 1999. This downturn in activity had a material adverse effect on demand
for our products and services, and the results of our operations decreased
significantly. The price of crude oil and natural gas increased over 1999 levels
in 2000 and 2001 due to improved demand for oil, supply reductions by OPEC
member countries and reductions in natural gas storage levels. That improvement
in crude oil and natural gas pricing led to increases in the rig count in 2000
and the first half of 2001, particularly in Canada and the United States, where
the rig count reached a high of 1,698 rigs in February 2001. The average North
American rig count was 1,263 and 1,498 during 2000 and 2001, respectively. Crude
oil and natural gas prices have since decreased significantly from levels
reached in early 2001. The economic slowdown in the United States and the rest
of the world, moderate weather and the resultant increased inventories of oil
and gas, especially in the United States, contributed to the price declines.
With these price reductions, our customers have responded with decreased
drilling activity and spending on exploration and development. As of December
31, 2001, the rig count in the United States and Canada, as measured by Baker
Hughes, was 1,165, a decline of 31% from the high reached earlier in the year
and a decline of 23% from the 1,436 rigs working at December 29, 2000.
 
     We have a diversified product and service offering which has exposure
throughout the oil and gas cycle. Demand for our tubular services is highly
correlated to movements in the rig count in the United States and began to
weaken with the overall deterioration of industry fundamentals in the last half
of 2001. Certain of our well site services businesses began to decrease in the
fourth quarter of 2001 when the United States and Canadian rig count declined
18% compared to the third quarter of 2001. Our land drilling business in West
Texas and our remote accommodations business in Canada are generally impacted by
movements in the rig counts. The United States and Canadian rig count has
increased since December 31, 2001. 1,243 working rigs as of February 15, 2002.
However, this increase is due to seasonal factors in Canada, rather than an
overall improvement in drilling activity.
 
     We believe that our offshore products segment lagged the general market
recovery in 2000 and 2001 because its sales primarily relate to offshore
construction and production facility development which generally occur later in
the exploration and development cycle. Worldwide offshore construction and
development activity is improving currently and we expect it to increase
substantially as construction activity in the shallow water regions of the Gulf
of Mexico resumes and as the industry increasingly pursues deeper water drilling
and development projects. Our backlog in the offshore products segment increased
from $38.1 million at December 31, 2000 to $72.4 million at December 31, 2001,
an increase of 90%. As of February 15, 2002, our backlog totaled $84.6 million.
 
     Management believes that fundamental oil and gas supply and demand factors
will lead to increased drilling activity in North America over time. However,
the timing of any such recovery is uncertain. We view the current inventory
imbalance and price decreases as a short to medium-term situation and are
encouraged by relatively stable international drilling and development activity.
Although the diversified nature of our businesses is expected to moderate the
impact of North American drilling activity declines, we are expecting a
15 -- 20% revenue decline in 2002 compared to 2001 based upon our forecast of
energy prices and drilling activity levels.
 
  The Combination
 
     Prior to the Offering in February 2001, SCF-III, L.P. owned majority
interests in Oil States, HWC and PTI, and SCF-IV, L.P. owned a majority interest
in Sooner. L. E. Simmons & Associates, Incorporated is the ultimate general
partner of SCF-III, L.P. and SCF-IV, L.P. L.E. Simmons, the chairman of our
board of directors, is the sole shareholder of L.E. Simmons & Associates,
Incorporated. Concurrently with the closing
                                        23

<PAGE>
 
of our initial public offering, the Combination closed and HWC, PTI and Sooner
merged with wholly owned subsidiaries of Oil States. As a result, HWC, Sooner
and PTI became our wholly owned subsidiaries.
 
     The financial results of Oil States, HWC and PTI have been combined for the
three years in the period ended December 31, 2000 using reorganization
accounting, which yields results similar to the pooling of interests method. The
combined results of Oil States, HWC and PTI form the basis for the discussion of
our results of operations for those years. The operations of Oil States, HWC and
PTI represent two of our business segments, offshore products and well site
services. Concurrent with the closing of our initial public offering in February
2001, Oil States acquired Sooner, and the acquisition was accounted for using
the purchase method of accounting. The pro forma financial statements for the
years ended December 31, 1999, 2000 and 2001 reflect the acquisition of Sooner.
Following the acquisition of Sooner, we reported under three business segments.
 
  PRO FORMA RESULTS OF OPERATIONS
 

<Table>
<Caption>
                                                               PRO FORMA YEARS ENDED
                                                                    DECEMBER 31,
                                                              ------------------------
                                                               2001     2000     1999
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Revenues
  Offshore Products.........................................  $129.3   $114.6   $154.3
  Well Site Services........................................   239.8    189.9    121.1
  Tubular Services..........................................   350.6    291.1    212.0
                                                              ------   ------   ------
          Total.............................................  $719.7   $595.6   $487.4
                                                              ======   ======   ======
Gross Margin
  Offshore Products.........................................  $ 29.5   $ 21.2   $ 27.5
  Well Site Services........................................    86.2     65.7     43.4
  Tubular Services..........................................    22.1     26.1     10.8
  Corporate/Other...........................................    (1.0)      --       --
                                                              ------   ------   ------
          Total.............................................  $136.8   $113.0   $ 81.7
                                                              ======   ======   ======
Gross Margin as a Percent of Revenues
  Offshore Products.........................................    22.8%    18.5%    17.8%
  Well Site Services........................................    35.9%    34.6%    38.5%
  Tubular Services..........................................     6.3%     9.0%     5.1%
  Total.....................................................    19.0%    19.0%    16.8%
Operating Income (Loss)
  Offshore Products.........................................  $  6.6   $ (1.6)  $ (2.7)
  Well Site Services........................................    47.4     30.8     14.8
  Tubular Services..........................................    12.5     16.7     (2.2)
  Corporate/Other...........................................    (9.2)    (5.7)     (.8)
                                                              ------   ------   ------
          Total.............................................  $ 57.3   $ 40.2   $  9.1
                                                              ======   ======   ======
</Table>

 
  Year Ended December 31, 2001 Compared To The Year Ended December 31, 2000
 
     Revenues.  Pro forma revenues increased by 20.8% from $595.6 million during
the year ended December 31, 2000 to $719.7 million for the year ended December
31, 2001. Revenues from our well site services segment increased $49.9 million,
or 26.3%, of which $24.0 million was generated from our remote site
accommodations, catering and logistics services and modular building
construction services, $9.1 million was generated from our rental tool business,
$11.7 million was generated from our land drilling operations and $5.1 million
was generated from our hydraulic workover operations. Increases in Canadian
drilling activity, oil sands development activity and strong Gulf of Mexico
accommodations activity drove the increase in revenues in our remote site
accommodations, catering and logistics services and modular building
construction services. The increases in revenues from our rental tool operations
was due to increased equipment available to rent and
                                        24

<PAGE>
 
two small acquisitions completed in the third quarter of 2001. Increases in
revenues for our land drilling services were due to improvements in utilization
and pricing from the year 2000 to the year 2001. Our tubular services revenues
increased $59.5 million, or 20.4%, as a direct result of increased drilling
activity over the period. In addition, the fourth quarter benefited from a large
one-time sale of inventory held in international locations in the fourth quarter
of 2001 pursuant to scheduled contract terminations. Such international sales
totaled $17.1 million and $51.5 million in 2000 and 2001, respectively. These
contracts have been extended on an interim, short-term basis. There can be no
assurance that such interim contracts will be further extended. The remaining
$14.7 million increase in revenues was generated by our offshore products
segment. This year over year increase in revenues was generated by increased
demand for our bearings and connector products and certain fabrication work.
 
     Cost of Sales.  Pro forma cost of sales increased $100.2 million, or 20.8%,
to $582.9 million for the year ended December 31, 2001 from $482.7 million for
the year ended December 31, 2000. The cost of sales increase was due to
increased activity at each of our operating segments and other factors
influencing revenues. Cost of sales increased in our well site services, tubular
services and offshore products segments by $29.4 million, $63.5 million and $6.4
million, respectively.
 
     Gross Margin.  Our gross margins, which we calculate before a deduction for
depreciation and amortization expense, increased $23.8 million from $113.0
million in 2000 to $136.8 million in 2001. Our gross margin percentage was
consistent in 2000 and 2001 at 19.0% due to an improvement in our offshore
products and well site services segments, offset by declines in our tubular
services gross margin percentages. Offshore products' gross margin increased
from $21.2 million in 2000 to $29.5 million in 2001, an increase of $8.3
million, or 39.2%. Our gross margin percentage in this segment increased from
18.5% in 2000 to 22.8% in 2001. This gross margin increase was due to improved
revenues and margins related to our BOP stack integration and repair services as
well as increased demand for our flexible bearings and connector products. We
also had improved margins related to the manufacturing of rig and vessel
equipment. Our well site services gross margins increased from $65.7 million in
2000 to $86.2 million in 2001, an increase of $20.5 million, or 31.2%. Our gross
margin percentage in this segment increased from 34.6% in 2000 to 35.9% in 2001.
Within our well site services segment, land drilling contributed $7.2 million of
the margin increase as both utilization of our rigs and average revenues per day
worked increased in 2001 compared to 2000. Our remote site accommodations,
catering and logistics services and modular building construction was
responsible for an improvement in gross margin of $6.4 million due to increased
activity, especially in the U.S. Gulf of Mexico operations, increased equipment
available to rent as a result of capital expenditures and increased activity in
the oil sands development areas in northern Alberta, Canada. Our rental tool
operations contributed margin improvement of $4.9 million. This increase in
gross margin was principally related to the increase in revenues discussed
above. Tubular Services gross margins decreased from $26.1 million, or 9.0% of
revenues, during 2000 to $22.1 million, or 6.3% of revenues during 2001, a
decrease of $4.0 million, or 15.3%. Our tubular services segment suffered margin
declines during the last half of 2001 due to general market declines and our
decision to aggressively reduce inventory levels in anticipation of a weakening
market. This margin decline occurred despite a liquidation of our international
tubular inventories at year end 2001. Gross margin from international sales
totalled $2.8 million and $6.6 million in 2000 and 2001, respectively. The
negative gross margin for corporate/other is due to recognition of unallocated
insurance expense at the corporate level.
 
     Selling, General and Administrative Expenses.  During the year ended
December 31, 2001, pro forma selling, general and administrative (SG&A) expenses
increased $5.0 million, or 10.8%, to $51.1 million from $46.1 million during
2000. As a percent of revenues, SG&A expenses declined to 7.1% in 2001 from 7.7%
in 2000. SG&A expenses increased by $2.4 million, or 12.1%, in our well site
services segment due to headcount increases in support of increased market
activity and higher employer incentive costs, which are based upon the Company's
EBITDA performance. Corporate headquarter charges were up $2.8 million due to
the establishment of a new corporate headquarters office.
 
     Depreciation and Amortization.  Pro forma depreciation and amortization
increased $2.0 million to a total of $28.7 million for the year ended December
31, 2001. The 7.5% increase was primarily due to acquisitions and capital
expenditures made in our well site services segment during 2000 and 2001.
 
                                        25

<PAGE>
 
     Operating Income.  Our pro forma operating income represents revenues less
(i) cost of sales, (ii) selling, general and administrative expenses and (iii)
depreciation and amortization plus other operating income. Our operating income
increased $17.1 million, or 42.5%, to $57.3 million for the year ended December
31, 2001 from $40.2 million during 2000. Operating income from our well site
services segment increased $16.6 million from $30.8 million for the year ended
December 31, 2000 to $47.4 million during 2001. Operating income for our tubular
services segment decreased $4.2 million to $12.5 million for the year ended
December 31, 2001 from $16.7 million during 2000. Operating income in our
offshore products segment increased $8.2 million to $6.6 million for the year
ended December 31, 2001 from an operating loss of $1.6 million during 2000.
 
     Net Interest Expense.  Net pro forma interest expense totaled $8.4 million
for the year ended December 31, 2001 compared to $9.3 million during 2000. The
$0.9 million reduction in net interest expense was primarily related to lower
interest rates, partially offset by an increase in average debt balances
outstanding. Average debt balances were higher in 2001 as a result of
refinancing of certain preferred stock issues in February 2001. However, bank
debt has decreased from $110.5 million at February 28, 2001 to $69.2 million at
December 31, 2001.
 
     Income Tax Expense.  Pro forma income tax expense totaled $2.1 million
during 2001 compared to $4.5 million during 2000. The decrease of $2.4 million,
and the corresponding low effective tax rate, was primarily due to a reduction
in the allowance applied against tax assets, primarily net operating losses
(NOL's), due to expected tax benefits resulting from the Combination. We
adjusted such tax assets because we determined that it was more likely than not
that the deferred tax assets would be realized.
 
     Minority Interest.  Minority interest was immaterial during the years ended
December 31, 2001 and 2000. Substantially all of the minority interests were
acquired, and therefore reduced, in connection with the Combination.
 
  YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999
 
     Revenues.  Pro forma revenues increased by $108.2 million, or 22.2%, to
$595.6 million for the year ended December 31, 2000 from $487.4 million during
1999. Well site services revenues increased $68.8 million, or 56.8%, and tubular
services revenues increased $79.1 million, or 37.3%, during the same period.
These increases in revenue were partially offset by a decrease in offshore
products revenues of $39.7 million, or 25.7%. Of the $68.8 million increase in
well site services revenues, $41.5 million was generated from our remote site
accommodations, catering and logistics services and modular building
construction services, $9.1 million was generated from our hydraulic workover
units, $9.9 million was generated from our drilling operations and $8.3 million
was generated from our rental tool operations. The significant improvement in
revenues from our remote site accommodations, catering and logistics services
and modular building construction services was due to the strong level of
Canadian drilling activity during the first and fourth quarters of 2000, which
resulted in increased demand for our drilling camps and related catering
services. The increased revenues in our hydraulic workover units and drilling
rigs resulted from higher utilization during the period. The $8.3 million
increase in our rental tool revenues was largely due to increases in activity
levels. The increased tubular services revenues were directly attributable to
increases in drilling activity over the period. These revenue increases were
partially offset by declines in our offshore products segment due to a
significant downturn in offshore construction related activity.
 
     Cost of Sales.  Pro forma cost of sales increased $77.0 million, or 19.0%,
to $482.7 million for the year ended December 31, 2000 from $405.7 million
during 1999. Cost of sales increased in our well site services and tubular
services segments by $46.5 million and $63.8 million, respectively, but was
partially offset by a decrease of $33.4 million in our offshore products
segment. The changes from the 1999 period to the 2000 period were caused by the
same factors influencing revenues.
 
     Gross Margins.  Gross margins, which we calculate before a deduction for
depreciation and amortization expense, increased $31.3 million from $81.7
million in 1999 to $113.0 million in 2000. Our gross margin percentages
increased from 16.8% in 1999 to 19.0% in 2000 due to improvements in our
offshore products and tubular services segments partially offset by declines in
our well site services segment. Offshore products gross
                                        26

<PAGE>
 
margin decreased from $27.5 million, or 17.8% of revenues in 1999, to $21.2
million, or 18.5% of revenues in 2000. The offshore products gross margin
percentage improvement in the year 2000 was attributable to the greater
percentage mix of higher margin connector products revenues versus lower margin
fabrication work. Our well site services gross margin increased from $43.4
million in 1999 to $65.7 million in 2000, an increase of $22.3 million, or
51.4%. Within our well site services segment, our remote site accommodations,
catering and logistics and modular building construction contributed $11.7
million of the margin increase. This margin improvement resulted from an overall
increase in Canadian drilling activity as the average Canadian rig count
increased to 345 rigs in 2000 from 245 rigs in 1999, a 40.8% increase. Our
hydraulic workover, specialty rental tool and land drilling operations
contributed $10.6 million of the margin increase. This improvement resulted from
increased drilling and workover activity, especially in the U.S. Gulf of Mexico,
West Texas, and West Africa. Tubular services gross margins increased from $10.8
million, or 5.1% of revenue, in 1999 to $26.1 million, or 9.0% of revenue, in
2000. Increased revenues caused by higher drilling activity helped leverage our
fixed costs, and liquidation of relatively low cost inventories in a period of
rising inventory prices, helped us achieve the margin increases.
 
     Selling, General and Administrative Expenses.  During the year ended
December 31, 2000, pro forma SG&A expenses increased $2.3 million, or 5.3%, to
$46.1 million compared to $43.8 million during 1999. As a percent of revenues,
SG&A expenses declined to 7.7% in 2000 from 9.0% in 1999. SG&A expenses in our
well site services segment increased $6.7 million, or 49%, due to increased
activity, acquisitions in late 1999 in our hydraulic workover business, and
certain nonrecurring charges totaling $.4 million in our remote site
accommodations business. This increase was partially offset by a $3.2 million
decrease in our offshore products segment and a $1.2 million decrease in our
tubular services segment. We reduced costs in our offshore products segment in
response to the market downturn in offshore construction activity. Our tubular
services segment benefited from cost synergies created from the market
consolidation during 1999.
 
     Depreciation and Amortization.  Pro forma depreciation and amortization
totaled $26.7 million during the year ended December 31, 2000 compared to $26.3
million during 1999. The 1.5% increase was primarily related to asset
acquisitions and capital expenditures made in our well site services segment
during 1999.
 
     Operating Income.  Our pro forma operating income equals revenues less cost
of sales, SG&A expense, depreciation and amortization and other operating income
(expense). Our operating income increased by $31.1 million to $40.2 million for
the year ended December 31, 2000 from $9.1 million for the same period in 1999.
Operating income from our well site services segment increased $16.0 million
from $14.8 million for the year ended December 31, 1999 to $30.8 million for the
same period in 2000. Operating income in our tubular services segment increased
$18.9 million from a loss of $2.2 million in 1999 to $16.7 million of income in
2000. Operating loss in our offshore products segment decreased $1.1 million
from $2.7 million in 1999 to $1.6 million in 2000.
 
     Net Interest Expense.  Pro forma net interest expense totaled $9.3 million
during the year ended December 31, 2000 compared to $11.2 million during the
year ended December 31, 1999. The $1.9 million decrease in net interest expense
primarily related to a reduction in average debt balances outstanding in our
offshore products segment with funds generated from asset sales.
 
     Income Tax (Expense) Benefit.  Pro forma income tax expense totaled $4.5
million during the year ended December 31, 2000 compared to a benefit of $4.0
million during 1999. The increase of $8.5 million was primarily due to the
increase in pre-tax income. In both periods, the effective tax rate was
benefited by a reduction in the allowance applied against tax assets, primarily
net operating losses, due to expected tax benefits resulting from the
Combination. We adjusted such tax assets because we determined that it was more
likely than not that the deferred tax assets would be realized.
 
     Minority Interest.  Minority interest expense was immaterial during the
years ended December 31, 2000 and 1999. The minority interests were acquired,
and therefore substantially reduced, in connection with the Combination.
 
                                        27

<PAGE>
 
  Consolidated and Combined Results of Operations
 
     Prior to the Sooner acquisition in February 2001, we reported under two
business segments, offshore products and well site services. Information for
these two segments, which represent the combined results of Oil States, HWC and
PTI using reorganization accounting, is presented below for the years 2000 and
1999. Subsequent to the February 2001 acquisition of Sooner and the Combination,
we reported the following consolidated results.
 

<Table>
<Caption>
                                                             YEARS ENDED DECEMBER 31,
                                                          ------------------------------
                                                          CONSOLIDATED      COMBINED
                                                          ------------   ---------------
                                                              2001        2000     1999
                                                          ------------   ------   ------
<S>                                                       <C>            <C>      <C>
Revenues
  Offshore Products.....................................     $129.3      $114.6   $154.3
  Well Site Services....................................      239.8       189.9    112.8
     Tubular Services...................................      302.1          --       --
                                                             ------      ------   ------
          Total.........................................     $671.2      $304.5   $267.1
                                                             ======      ======   ======
Gross Margin
  Offshore Products.....................................     $ 29.5      $ 21.2   $ 27.5
  Well Site Services....................................       86.2        65.7     39.7
  Tubular Services......................................       18.7          --       --
  Corporate/Other.......................................       (1.0)         --       --
                                                             ------      ------   ------
          Total.........................................     $133.4      $ 86.9   $ 67.2
                                                             ======      ======   ======
Gross Margin as a Percent of Revenues
  Offshore Products.....................................       22.8%       18.5%    17.8%
  Well Site Services....................................       35.9%       34.6%    35.2%
  Tubular Services......................................        6.2%         --       --
  Total.................................................       19.9%       28.5%    25.2%
Operating Income (Loss)
  Offshore Products.....................................     $  6.6      $ (1.6)  $ (2.7)
  Well Site Services....................................       47.4        30.8     13.6
  Tubular Services......................................       10.5          --       --
  Corporate/Other.......................................       (8.8)       (1.3)      --
                                                             ------      ------   ------
          Total.........................................     $ 55.7      $ 27.9   $ 10.9
                                                             ======      ======   ======
</Table>

 
  YEAR ENDED DECEMBER 31, 2001 COMPARED TO THE YEAR ENDED DECEMBER 31, 2000
 
     Revenues.  Revenues increased $366.7 million, or 120.4%, during the year
ended December 31, 2001 compared to the year 2000. This revenue increase was
primarily due to the acquisition of Sooner in February 2001, which contributed
$302.1 million in revenues. Revenues from our well site services segment
increased $49.9 million, or 26.3%, of which $24.0 million was generated from our
remote site accommodations, catering and logistics services and modular building
construction services, $9.1 million was generated from our rental tool business,
$11.7 million was generated from our land drilling operations and $5.1 million
was generated from our hydraulic workover business. Increases in Canadian
drilling activity, oil sands development activity and strong Gulf of Mexico
accommodations activity drove the increase in revenues in our remote site
accommodations, catering and logistics services and modular building
construction services. The increases in revenues from our rental tool operations
and land drilling services were due to improvements in utilization and pricing.
The remaining $14.7 million increase in revenues was generated by our offshore
products segment. This year over year increase in revenues was generated by
increased demand for our bearings and connector products and certain fabrication
work.
 
     Cost of sales.  Cost of sales increased $320.2 million, or 147.1%, to
$537.8 million for the year ended December 31, 2001 from $217.6 million during
2000. The acquisition of Sooner accounted for $283.4 million
 
                                        28

<PAGE>
 
of this increase. The remaining increase in cost of sales was primarily due to
the increased activity and associated revenues at each of our operating
segments. Cost of sales increased in our well site services and offshore
products segments by $29.4 million and $6.4 million, respectively.
 
     Gross Margins.  Gross margins, which we calculate before a deduction for
depreciation and amortization expense, increased from $86.9 million in 2000 to
$133.4 million for 2001, an increase of $46.5 million. Of this total increase,
$18.7 million was due to the acquisition of our tubular services business
effective February 14, 2001. Our gross margin percentages decreased from 28.5%
in 2000 to 19.9% in 2001, largely due to the addition of our tubular services
segment, whose business is characterized by lower gross margins than are
realized in our other two operating segments. Offshore products gross margin
increased from $21.2 million, or 18.5% of revenues, in 2000 to $29.5 million, or
22.8% of revenues, in 2001, an increase of $8.3 million, or 39.2%. This margin
increase was due to improved revenues and margins related to our BOP stack
integration and repair services as well as increased demand for our flexible
bearings and connector products. We also had improved margins related to the
manufacturing of rig and vessel equipment. Our well site services gross margins
increased from $65.7 million in 2000 to $86.2 million in 2001, an increase of
$20.5 million, or 31.2%. Within our well sites services segment, land drilling
contributed $7.2 million of the margin increase as both utilization of our rigs
and average revenues per day worked increased. Our remote site accommodations,
catering and logistics services and modular building construction was
responsible for an improvement in gross margin of $6.4 million due to increased
activity, especially in the U.S. Gulf of Mexico operations, increased equipment
available to rent as a result of capital expenditures and increased activity in
the oil sands development areas in northern Alberta, Canada. Our rental tool
operations contributed gross margin improvement of $4.9 million. This increase
in gross margin was principally related to the increase in revenues discussed
above. The negative gross margin for corporate/other is attributable to
recognition of unallocated insurance expense at the corporate level.
 
     Selling, General and Administrative Expenses.  During the year ended
December 31, 2001, S,G&A expenses increased $12.2 million to $50.0 million, or
7.4% of revenues, from $37.8 million, or 12.4% of revenues, during 2000. The
acquisition of our tubular services segment contributed $6.4 million of this
increase and was the principal reason S,G&A expense as a percent of revenues was
lower in 2001 given the level of revenues contributed by the segment. S,G&A
expenses increased by $2.4 million, or 12.1%, in our well site services segment
due to headcount increases in support of increased market activity and higher
employee incentive costs, which are based upon the Company's EBITDA performance.
Corporate headquarters charges were up $3.3 million due to the establishment of
a new corporate headquarters office in connection with the Offering.
 
     Depreciation and Amortization.  Depreciation and amortization increased
$6.7 million to a total of $28.0 million for the year ended December 31, 2001.
The addition of our tubular services segment accounted for $1.9 million of this
increase. The remaining increase was due to asset acquisitions and capital
expenditures made in our well site services segment during 2000, as well as
amortization of goodwill recorded in connection with our acquisitions of Sooner
and minority interests in February 2001.
 
     Operating Income.  Operating income increased $27.8 million, or 99.6%, to
$55.7 million during the year ended December 31, 2001 from $27.9 million during
the year ended December 31, 2000. Operating income from our well site services
segment increased $16.6 million from $30.8 million for the year ended December
31, 2000 to $47.4 million for the year ended December 31, 2001. Our tubular
services segment contributed operating income of $10.5 million during the period
from acquisition in February 2001 to December 31, 2001. Operating income in our
offshore products segment increased $8.2 million to $6.6 million for the year
ended December 31, 2001 from an operating loss of $1.6 million for the year
ended December 31, 2000.
 
     Income Tax Expense.  Income tax expense totaled $2.1 million during the
year ended December 31, 2001 compared to $10.8 million during the year ended
December 31, 2000. The decrease of $8.7 million, and the corresponding low
effective tax rate, was primarily due to a reduction in the allowance applied
against tax assets, primarily net operating losses (NOL's), due to expected tax
benefits resulting from the Combination.
 
                                        29

<PAGE>
 
We adjusted such tax assets because we determined that it was more likely than
not that the deferred tax assets would be realized.
 
     Minority Interest.  Minority interests decreased by $2.6 million during the
year ended December 31, 2001 to $1.6 million from $4.2 million during the year
ended December 31, 2000. Substantially all of the minority interests were
acquired, and therefore reduced, in connection with the Combination.
 
  YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31, 1999.
 
     Revenues.  Revenues increased by $37.4 million, or 14.0%, to $304.5 million
for the year ended December 31, 2000 from $267.1 million for the year ended
December 31, 1999. Well site services revenues increased by $77.1 million, or
68.4%, partially offset by a decrease in offshore products revenues of $39.7
million, or 25.7%. Of the $77.1 million increase in well site services revenues,
$41.5 million was generated from our remote site accommodations, catering and
logistics services and modular building construction services, $16.0 million was
generated from our hydraulic workover units, $9.9 million was generated from our
drilling operations and $9.7 million was generated from our rental tool
operations. The significant improvement in revenues from our remote site
accommodations, catering and logistics services and modular building
construction services was due to the strong level of Canadian drilling activity
during the first and fourth quarters of 2000, which resulted in increased demand
for our drilling camps and related catering services. The increased revenues in
our hydraulic workover units and drilling rigs resulted from higher utilization
during the period and contributions from the operation of various hydraulic
workover assets that were acquired in the fourth quarter of 1999 and were not,
therefore, in operation for the majority of 1999. The acquisitions contributed
$8.3 million of the $16.0 million revenue increase in our hydraulic workover
operations. The $9.7 million increase in our rental tool revenues was largely
due to increases in activity levels and the acquisition of additional rental
tool facilities on March 31, 1999. These revenue increases were partially offset
by declines in our offshore products segment due to a significant downturn in
construction related activity.
 
     Cost of Sales.  Cost of sales increased by $17.7 million, or 8.9%, to
$217.6 million for the year ended December 31, 2000 from $199.9 million for the
year ended December 31, 1999. Cost of sales increased in our well site services
segment by $51.1 million, but was partially offset by a decrease of $33.4
million in our offshore products segment. The changes from the 1999 period to
the 2000 period were caused by the same factors influencing revenues.
 
     Gross Margins.  Gross margin, which we calculate before a deduction for
depreciation and amortization expense, increased from $67.2 million, or 25.2% of
revenue, in 1999, to $86.9 million, or 28.5% of revenue in 2000, an increase of
$19.7 million, or 29.3%. The improvement in gross margin as a percent of revenue
is caused by a relatively high mix of well site services revenue in the year
2000 which typically has a higher margin, compared to the offshore products
business. Offshore products margins decreased from $27.5 million, or 17.8% of
revenues, to $21.2 million, or 18.5% of revenues. The offshore products gross
margin percentage improvement in the year 2000 was attributable to the greater
percentage mix of higher margin connector products revenues versus lower margin
fabrication work in 1999. In addition, cost reductions were made in our offshore
products segments in response to the market downturn in offshore construction
activity. Our well site services gross margin increased from $39.7 million in
1999 to $65.7 million in 2000, an improvement of $26.0 million, or 65.5%. Our
remote site accommodations, catering and logistics and modular building
construction services reported an improvement of $11.7 million, or 48.1%, as a
result of an overall increase in Canadian drilling activity as the average
Canadian rig count increased to 345 rigs in 2000 from 245 rigs in 1999, a 40.8%
increase. Our hydraulic workover, specialty rental tool and land drilling
operations contributed $14.3 million of the margin increase. This improvement
resulted from acquisitions made in 1999 that were included for a full year in
2000, in addition to increased drilling and workover activity, especially in the
U.S. Gulf of Mexico, West Texas and West Africa.
 
     Selling, General and Administrative Expenses.  During the year ended
December 31, 2000, S,G&A expenses increased $4.2 million, or 12.5%, to $37.8
million, compared to $33.6 million during 1999. As a percent of revenues, S,G&A
expenses declined to 12.4% in 2000 from 12.6% in 1999. S,G&A expenses in
 
                                        30

<PAGE>
 
our well site services segment increased $6.9 million, or 50%, due to increased
activity, acquisitions in late 1999 in our hydraulic workover business and
certain nonrecurring charges totaling $.4 million in our remote site
accommodation business. This increase was partially offset by a $2.7 million
decrease in our offshore products segment. We reduced costs in our offshore
products segment in response to the market downturn in offshore construction
activity.
 
     Depreciation and Amortization.  Depreciation and amortization totaled $21.3
million during the year ended December 31, 2000 compared to $20.3 million in the
year ended December 31, 1999. The 4.9% increase was primarily related to asset
acquisitions and capital expenditures made in our well site services segment
during 1999.
 
     Operating Income.  Our operating income equals revenues less cost of sales,
selling, general and administrative expense, depreciation and amortization and
other operating income (expense). Our operating income increased by $17.0
million to $27.9 million for the year ended December 31, 2000 from $10.9 million
for the same period in 1999. Operating income from our well site services
segment increased $17.2 million from $13.6 million for the year ended December
31, 1999 to $30.8 million for the same period in 2000. Operating loss in our
offshore products segment decreased $1.1 million from $2.7 million in 1999 to
$1.6 million in 2000.
 
     Net Interest Expense.  Net interest expense totaled $11.5 million during
the year ended December 31, 2000 compared to $12.5 million during the year ended
December 31, 1999. The $1.0 million decrease in net interest expense primarily
related to a reduction in average debt balances outstanding in our offshore
products segment funded by cash generated from asset sales.
 
     Income Tax (Expense) Benefit.  Income tax expense totaled $10.8 million
during the year ended December 31, 2000 compared to $4.7 million during the year
ended December 31, 1999. The increase of $6.1 million was primarily due to the
increase in pre-tax income. In both periods, the effective tax rate was
adversely affected by losses incurred in our offshore products segment for which
tax assets were not recorded. We did not record such tax assets because we could
not determine that it was more likely than not that the deferred tax assets
would be realized.
 
     Minority Interest.  Minority interest expense totaled $4.2 million during
the year ended December 31, 2000 compared to $0.6 million of income during the
year ended December 31, 1999. The increase in expense was primarily due to
increased profitability within our business segments, particularly well site
services.
 
  LIQUIDITY AND CAPITAL RESOURCES
 
     Our primary liquidity needs are to fund capital expenditures, such as
expanding and upgrading our manufacturing facilities and equipment, increasing
our rental tool and workover assets, increasing our accommodation units, funding
new product development and to fund general working capital needs. In addition,
capital is needed to fund strategic business acquisitions. Our primary sources
of funds have been cash flow from operations, proceeds from borrowings under our
bank facilities and private and public capital investments.
 
     Cash was provided by operations during the year ended December 31, 2001 and
2000 in the amounts of $55.1 million and $33.9 million, respectively. Cash
provided by operations in 2001 was generated by our net income before
extraordinary item and lower working capital invested in our tubular
inventories, partially offset by the use of working capital to reduce accounts
payable and accrued expenses during the year ended December 31, 2001. During the
last half of 2001, we aggressively reduced our tubular services inventories in
anticipation of expected reductions in demand for our products in light of a
general weakening of energy industry fundamentals during the period. Our tubular
services inventories decreased $29.9 million, from $71.8 million at December 31,
2000 to $41.9 million at December 31, 2001. In addition, accounts receivable
increased at December 31, 2001 due to significant amounts of international
tubular services sales made at year-end pursuant to scheduled contract
terminations with a major customer. Approximately $27 million of our accounts
receivable at December 31, 2001 relate to this contract. If such contract is not
extended beyond the current interim extensions, our working capital needs should
decrease.
 
                                        31

<PAGE>
 
     Cash was used by investing activities in the amount of $22.7 million during
the year ended December 31, 2001 primarily as a result of capital expenditures
which totaled $29.7 million and two rental tool acquisitions in our well site
services segment totaling $3.0 million, partially offset by cash acquired in
connection with the Sooner acquisition and proceeds from asset sales. Net cash
was used in investing activities in the amount of $22.4 million during the year
ended December 31, 2000, primarily to fund capital expenditures and
acquisitions.
 
     Capital expenditures totaled $29.7 million and $21.4 million during the
year ended December 31, 2001 and 2000, respectively. Capital expenditures during
both these periods consisted principally of purchases of assets for our well
site services businesses. Approximately $10 million of the 2001 capital spending
was expansionary in nature, made in order to expand in areas where our assets
were previously fully utilized. We expect to spend a total of approximately $18
million during 2002 to upgrade our equipment and facilities and expand our
product and service offerings. We expect to generate sufficient cash flow during
2002 to fund these capital expenditures.
 
     Net cash of $32.4 million was used in financing activities during the year
ended December 31, 2001, primarily as a result of debt and preferred stock
repayments, partially offset by net proceeds from the Offering. Net cash
provided by financing activities of $.3 million during the year ended December
31, 2000 was primarily from net debt changes.
 
     The following summarizes our debt and lease obligations at December 31,
2001:
 

<Table>
<Caption>
                                                               DUE IN         DUE IN          DUE
DECEMBER 31, 2001                                TOTAL    LESS THAN 1 YEAR   1-3 YEARS   AFTER 3 YEARS
-----------------                               -------   ----------------   ---------   -------------
                                                                    (IN THOUSANDS)
<S>                                             <C>       <C>                <C>         <C>
Debt and Lease Obligations:
  Long-Term Debt, Including Capital Leases....  $77,833        $3,894         $70,090       $3,849
  Non-Cancelable Operating Lease
     Obligations..............................   14,910         3,897           5,386        5,627
                                                -------        ------         -------       ------
  Total Contractual Cash Obligations..........  $92,743        $7,791         $75,476       $9,476
                                                =======        ======         =======       ======
</Table>

 
     With the proceeds received in the Offering, the Company repaid $43.7
million of outstanding subordinated debt, redeemed $21.8 million of preferred
stock of Oil States, paid accrued interest on subordinated debt and accrued
dividends on preferred stock aggregating $7.1 million, and repurchased common
stock from non-accredited shareholders and shareholders holding pre-emptive
stock purchase rights for $1.6 million. The balance of the proceeds were used to
reduce amounts outstanding under bank lines of credit. Concurrently with the
closing of the Offering, we issued 4,275,555 shares of common stock in the SCF
Exchange.
 
     Concurrent with the Offering, we also entered into a $150 million senior
secured revolving credit facility in February 2001. Up to $45.0 million of the
credit facility is available in the form of loans denominated in Canadian
dollars and may be made to our principal Canadian operating subsidiaries. This
credit facility replaced our existing credit facilities. The facility matures on
February 14, 2004, unless extended for up to two additional one-year periods
with the consent of the lenders. Amounts borrowed under this new facility bear
interest, at our election, at either:
 
     - a variable rate equal to LIBOR (or, in the case of Canadian dollar
       denominated loans, the Bankers' Acceptance discount rate) plus a margin
       ranging from 1.5% to 2.5%; or
 
     - an alternate base rate equal to the higher of the bank's prime rate and
       the federal funds effective rate plus 0.5% (or, in the case of Canadian
       dollar denominated loans, the Canadian Prime Rate) plus a margin ranging
       from 0.5% to 1.5%, depending upon the ratio of total debt to EBITDA (as
       defined in the credit facility).
 
     We pay commitment fees ranging from 0.25% to 0.5% per year on the undrawn
portion of the facility, also depending upon the ratio of total debt to EBITDA.
 
     Commitments under our credit facility will be permanently reduced, and
loans prepaid, by an amount equal to 100% of the net cash proceeds of all
non-ordinary course asset sales and the issuance of additional debt and by 50%
of the issuance of equity securities. Mandatory commitment reductions will be
allocated pro
 
                                        32

<PAGE>
 
rata based on amounts outstanding under the U.S. dollar denominated facility and
the Canadian dollar denominated facility. In addition, voluntary reductions in
commitments are permitted.
 
     Our credit facility is guaranteed by all of our active domestic
subsidiaries and, in some cases, our Canadian and other foreign subsidiaries.
Our credit facility is secured by a first priority lien on all our inventory,
accounts receivable and other material tangible and intangible assets, as well
as those of our active subsidiaries. However, no more than 65% of the voting
stock of any foreign subsidiary is required to be pledged if the pledge of any
greater percentage would result in adverse tax consequences.
 
     Our credit facility contains negative covenants that restrict our ability
to borrow additional funds, pay dividends, sell assets except in the normal
course of business and enter into other significant transactions.
 
     Under our credit facility, the occurrence of specified change of control
events involving our company would constitute an event of default that would
permit the banks to, among other things, accelerate the maturity of the facility
and cause it to become immediately due and payable in full.
 
     As of December 31, 2001, we had $65.8 million outstanding under this
facility and an additional $7.1 million of outstanding letters of credit leaving
$77.1 million available to be drawn under the facility. In addition, we have
another floating rate bank credit facility in the UK that had a balance of $3.3
million at December 31, 2001. Our total interest bearing debt represented 18.4%
of our total capitalization at December 31, 2001.
 
     We had an aggregate of approximately $8.7 million of subordinated debt
outstanding at December 31, 2001. A total of $2.8 million of this debt was paid
in January 2002. The remaining subordinated debt will become due and payable at
various times over the period from 2002 to November 2005. See Note 6 to
Consolidated and Combined Financial Statements.
 
     We believe that cash from operations and available borrowings under our
credit facility will be sufficient to meet our liquidity needs for the
foreseeable future. If our plans or assumptions change or are inaccurate, or we
make any acquisitions, we may need to raise additional capital. However, there
is no assurance that we will be able to raise additional funds or be able to
raise such funds on favorable terms.
 
  TAX MATTERS
 
     For the year ended December 31, 2001, we had deferred tax assets, net of
deferred tax liabilities, of approximately $19.7 million for federal income tax
purposes before application of valuation allowances. Our primary deferred tax
assets are net operating loss carry forwards, or NOLs, which total approximately
$93.7 million. A valuation allowance is currently provided against the majority
of our NOLs. The NOLs expire over a period through 2020. Our NOLs are currently
limited under Section 382 of the Internal Revenue Code due to a change of
control that occurred during 1995. However in 2002, approximately $40 million of
NOLs are available for use currently if sufficient income is generated. See Note
11 to Consolidated and Combined Financial Statements.
 
     Our 2001 effective tax rate approximated 4%. This low effective tax rate
was due to the partial utilization of net operating losses which benefited the
consolidated group after the merger. We currently estimate our 2002 effective
tax rate will be approximately 22%, of which $10 million are estimated to be
cash taxes. During 2001 we paid cash taxes of $12.7 million.
 
  RECENT ACCOUNTING PRONOUNCEMENTS
 
     In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards (SFAS) No. 141, Business Combinations, and No.
142, Goodwill and Other Intangible Assets (the Statements), effective for fiscal
years beginning after December 15, 2001. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be amortized
but will be subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be amortized over their
useful lives.
 
     The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of the Statements is expected to result in an
increase in net income of approximately $8.0 million ($.16 per diluted share)
per year. During 2002, the
 
                                        33

<PAGE>
 
Company will perform the first of the required impairment tests of goodwill and
indefinite lived intangible assets as of January 1, 2002. The Company has not
completed its evaluation of goodwill and indefinite lived intangible assets and,
accordingly, the impact, if any, of this statement is not yet known.
 
     In June of 2001, the Financial Accounting Standards Board issued SFAS No.
143, "Accounting for Asset Retirement Obligations." This Statement is effective
for fiscal years beginning after June 15, 2002 and the Company expects to adopt
the Statement effective January 1, 2003. It is expected that this Statement will
have an immaterial effect on the Company's consolidated financial statements.
 
     In August of 2001 the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The
Company was required to adopt this Statement effective January 1, 2002 and it
did not have an impact on the consolidated financial statements.
 

I
TEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
     Interest Rate Risk. We have long-term debt and revolving lines of credit
subject to the risk of loss associated with movements in interest rates.
 
     Currently, we have floating rate obligations totaling approximately $69.2
million for amounts borrowed under our revolving lines of credit. These
floating-rate obligations expose us to the risk of increased interest expense in
the event of increases in short-term interest rates. If the floating interest
rate were to increase by 1% from December 31, 2001 levels, our combined interest
expense would increase by a total of approximately $692,000 annually.
 
     Foreign Currency Exchange Rate Risk. Our operations are conducted in
various countries around the world in a number of different currencies. As such,
our earnings are subject to change due to movements in foreign currency exchange
rates when transactions are denominated in currencies other than the U.S.
dollar, which is our functional currency. In order to mitigate the effects of
exchange rate risks, we generally pay a portion of our expenses in local
currencies and a substantial portion of our contracts provide for collections
from customers in U.S. dollars. As of December 31, 2001, we had Canadian
dollar-denominated debt totaling approximately $17 million. We had no interest
rate hedges or forward foreign exchange contracts at December 31, 2001.
 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     The combined, pro forma combined and consolidated financial statements and
supplementary data of the Company appear on pages 39 through 82 hereof and are
incorporated by reference into this Item 8. Selected quarterly financial data is
set forth in Note 18 to Consolidated and Combined Financial Statements, which is
incorporated herein by reference.
 

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
     The financial statements of Oil States as of December 31, 1998 and 1999 and
for the three years ended December 31, 1999 were audited by Arthur Andersen LLP.
In connection with the Combination and following discussions with two accounting
firms, we engaged Ernst & Young LLP in May 2000 to audit our consolidated
financial statements in the future. Accordingly, Oil States' engagement of
Arthur Andersen LLP was terminated in May 2000. The report of Arthur Anderson
LLP for the year ended December 31, 1999 did not contain an adverse opinion or
disclaimer of opinion, nor was it qualified as to uncertainty, audit scope or
accounting principles. This report contains an explanatory paragraph related to
an uncertainty. Further, for this period and the five month period ended May 31,
2000, there were no disagreements over accounting principles, nor were any
material weaknesses in internal control reported. The engagement of Ernst &
Young LLP and the termination of Arthur Andersen LLP have been approved by our
board of directors. Ernst & Young LLP was not consulted on any matters involving
accounting principles of Oil States during the year ended December 31, 1999 or
the five-month period ended May 31, 2000. Ernst & Young LLP has audited the
consolidated financial statements of Sooner Inc. as of and for the two years in
the period ended June 30, 2000. Ernst & Young LLP has audited the consolidated
financial statements of HWC Energy Services as of December 31, 2000 and for each
of the two years in the period then ended.
 
                                        34

<PAGE>
 

                                    PART III
 

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The information required by Item 10 hereby is incorporated by reference to
such information as set forth in the Company's Definitive Proxy Statement for
the 2002 Annual Meeting of Stockholders.
 

ITEM 11.  EXECUTIVE COMPENSATION
 
     The information required by Item 11 hereby is incorporated by reference to
such information as set forth in the Company's Definitive Proxy Statement for
the 2002 Annual Meeting of Stockholders.
 

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The information required by Item 12 hereby is incorporated by reference to
such information as set forth in the Company's Definitive Proxy Statement for
the 2002 Annual Meeting of Stockholders.
 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The information required by Item 13 hereby is incorporated by reference to
such information as set forth in the Company's Definitive Proxy Statement for
the 2002 Annual Meeting of Stockholders.
 

                                    PART IV
 

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
     (a) Index to Financial Statements, Financial Statement Schedules and
Exhibits
 
          (1) Financial Statements:  Reference is made to the index set forth on
     page 39 of this Annual Report on Form 10-K.
 
          (2) Financial Statement Schedules:  No schedules have been included
     herein because the information required to be submitted has been included
     in the Combined, Pro Forma Combined and Consolidated Financial Statements
     or the Notes thereto, or the required information is inapplicable.
 
          (3) Index of Exhibits:  See Index of Exhibits, below, for a list of
     those exhibits filed herewith, which index also includes and identifies
     management contracts or compensatory plans or arrangements required to be
     filed as exhibits to this Annual Report on Form 10-K by Item 601(10)(iii)
     of Regulation S-K.
 
     (b) Reports on Form 8-K.  No reports on Form 8-K were filed during the last
quarter of the period covered by this report.
 
     (c) Index of Exhibits
 

<Table>
<Caption>
      EXHIBIT NO.                                DESCRIPTION
      -----------                                -----------
<C>                      <S>
         3.1             -- Amended and Restated Certificate of Incorporation
                            (incorporated by reference to Exhibit 3.1 to the
                            Company's Annual Report on Form 10-K for the year ended
                            December 31, 2000, as filed with the Commission on March
                            30, 2001).
         3.2             -- Amended and Restated Bylaws (incorporated by reference to
                            Exhibit 3.2 to the Company's Annual Report on Form 10-K
                            for the year ended December 31, 2000, as filed with the
                            Commission on March 30, 2001).
         3.3             -- Certificate of Designations of Special Preferred Voting
                            Stock of Oil States International, Inc. (incorporated by
                            reference to Exhibit 3.3 to the Company's Annual Report
                            on Form 10-K for the year ended December 31, 2000, as
                            filed with the Commission on March 30, 2001).
</Table>

 
                                        35

<PAGE>
 

<Table>
<Caption>
      EXHIBIT NO.                                DESCRIPTION
      -----------                                -----------
<C>                      <S>
         4.1             -- Form of common stock certificate (incorporated by
                            reference to Exhibit 4.1 of Oil States' Registration
                            Statement No. 333-43400 on Form S-1).
         4.2             -- Amended and Restated Registration Rights Agreement
                            (incorporated by reference to Exhibit 4.2 to the
                            Company's Annual Report on Form 10-K for the year ended
                            December 31, 2000, as filed with the Commission on March
                            30, 2001).
        10.1             -- Combination Agreement dated as of July 31, 2000 by and
                            among Oil States International, Inc., HWC Energy
                            Services, Inc., Merger Sub-HWC, Inc., Sooner Inc., Merger
                            Sub-Sooner, Inc. and PTI Group Inc. (incorporated by
                            reference to Exhibit 10.1 of Oil States' Registration
                            Statement No. 333-43400 on Form S-1).
        10.2             -- Plan of Arrangement of PTI Group Inc. (incorporated by
                            reference to Exhibit 10.2 to the Company's Annual Report
                            on Form 10-K for the year ended December 31, 2000, as
                            filed with the Commission on March 30, 2001).
        10.3             -- Support Agreement between Oil States International, Inc.
                            and PTI Holdco (incorporated by reference to Exhibit 10.3
                            to the Company's Annual Report on Form 10-K for the year
                            ended December 31, 2000, as filed with the Commission on
                            March 30, 2001).
        10.4             -- Voting and Exchange Trust Agreement by and among Oil
                            States International, Inc., PTI Holdco and Montreal Trust
                            Company of Canada (incorporated by reference to Exhibit
                            10.4 to the Company's Annual Report on Form 10-K for the
                            year ended December 31, 2000, as filed with the
                            Commission on March 30, 2001).
        10.5**           -- 2001 Equity Participation Plan (incorporated by reference
                            to Exhibit 10.5 to the Company's Annual Report on Form
                            10-K for the year ended December 31, 2000, as filed with
                            the Commission on March 30, 2001).
        10.6**           -- Form of Deferred Compensation Plan (incorporated by
                            reference to Exhibit 10.6 of Oil States' Registration
                            Statement No. 333-43400 on Form S-1).
        10.7**           -- Annual Incentive Compensation Plan (incorporated by
                            reference to Exhibit 10.7 to the Company's Annual Report
                            on Form 10-K for the year ended December 31, 2000, as
                            filed with the Commission on March 30, 2001).
        10.8**           -- Executive Agreement between Oil States International,
                            Inc. and Douglas E. Swanson (incorporated by reference to
                            Exhibit 10.8 to the Company's Annual Report on Form 10-K
                            for the year ended December 31, 2000, as filed with the
                            Commission on March 30, 2001).
        10.9**           -- Executive Agreement between Oil States International,
                            Inc. and Cindy B. Taylor (incorporated by Reference to
                            Exhibit 10.9 to the Company's Annual Report on Form 10-K
                            for the year ended December 31, 2000, as filed with the
                            Commission on March 30, 2001).
        10.10**          -- Form of Executive Agreements between Oil States
                            International, Inc. and Named Executive Officers (Messrs.
                            Hughes and Chaddick) (incorporated by reference to
                            Exhibit 10.10 of Oil States' Registration Statement No.
                            333-43400 on Form S-1).
        10.11**          -- Form of Change of Control Severance Plan for Selected
                            Members of Management (incorporated by reference to
                            Exhibit 10.11 of Oil States' Registration Statement No.
                            333-43400 on Form S-1).
</Table>

 
                                        36

<PAGE>
 

<Table>
<Caption>
      EXHIBIT NO.                                DESCRIPTION
      -----------                                -----------
<C>                      <S>
        10.12            -- Credit Agreement among Oil States International, Inc.,
                            PTI Group Inc., the Lenders named therein, Credit Suisse
                            First Boston, Credit Suisse First Boston Canada, Hibernia
                            National Bank and Royal Bank of Canada (incorporated by
                            reference to Exhibit 10.12 of Oil States' Registration
                            Statement No. 333-43400 on Form S-1).
        10.13A**         -- Restricted Stock Agreement, dated February 8, 2001,
                            between Oil States International, Inc. and Douglas E.
                            Swanson (incorporated by reference to Exhibit 10.13A of
                            Oil States Report on Form 10Q filed May 15, 2001).
        10.13B**         -- Restricted Stock Agreement, dated February 22, 2001,
                            between Oil States International, Inc. and Douglas E.
                            Swanson (incorporated by reference to Exhibit 10.13B of
                            Oil States Report on Form 10Q filed May 15, 2001).
        10.14**          -- Form of Indemnification Agreement (incorporated by
                            reference to Exhibit 10.14 of Oil States' Registration
                            Statement No. 333-43400 on Form S-1).
        10.15**          -- Compensation Letter Agreement between HWC Energy
                            Services, Inc. and Jay Trahan (incorporated by reference
                            to Exhibit 10.15 to the Company's Annual Report on Form
                            10-K for the year ended December 31, 2000, as filed with
                            the Commission on March 30, 2001).
        10.16*,**        -- Form of Executive Agreement between Oil States
                            International, Inc. and named Executive Officer (Mr.
                            Slator).
        16.1             -- Letter Regarding Change in Certifying Accountant
                            (incorporated by reference to Exhibit 16.1 of Oil States'
                            Registration Statement No. 333-43400 on Form S-1).
        21.1*            -- List of subsidiaries of the Company (incorporated by
                            reference to Exhibit 21.1 of Oil States' Registration
                            Statement No. 333-43400 on Form S-1).
        23.1*            -- Consent of Ernst & Young LLP
        23.2*            -- Consent of PricewaterhouseCoopers LLP
        23.3*            -- Consent of Arthur Andersen LLP
        24.1*            -- Powers of Attorney for Directors.
</Table>

 
---------------
 
* Filed herewith
 
** Management contracts or compensatory plans or arrangements
 
                                        37

<PAGE>
 

                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                          OIL STATES INTERNATIONAL, INC.
 
                                          By     /s/ DOUGLAS E. SWANSON
                                            ------------------------------------
                                                     Douglas E. Swanson
                                                       President and
                                                  Chief Executive Officer
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant in
the capacities indicated on March 1, 2002.
 

<Table>
<Caption>
                      SIGNATURE                                             TITLE
                      ---------                                             -----
<C>                                                      <S>
 
                   L. E. SIMMONS*                        Chairman of the Board
-----------------------------------------------------
                    L. E. Simmons
 
               /s/ DOUGLAS E. SWANSON                    Director, President and Chief Executive
-----------------------------------------------------      Officer (Principal Executive Officer)
                 Douglas E. Swanson
 
                 /s/ CINDY B. TAYLOR                     Senior Vice President, Chief Financial
-----------------------------------------------------      Officer and Treasurer (Principal Financial
                   Cindy B. Taylor                         Officer)
 
                /s/ ROBERT W. HAMPTON                    Vice President -- Finance and Accounting and
-----------------------------------------------------      Secretary (Principal Accounting Officer)
                  Robert W. Hampton
 
                   MARTIN LAMBERT*                       Director
-----------------------------------------------------
                   Martin Lambert
 
                    MARK G. PAPA*                        Director
-----------------------------------------------------
                    Mark G. Papa*
 
                 GARY L. ROSENTHAL*                      Director
-----------------------------------------------------
                  Gary L. Rosenthal
 
                  ANDREW L. WAITE*                       Director
-----------------------------------------------------
                   Andrew L. Waite
 
                  STEPHEN A. WELLS*                      Director
-----------------------------------------------------
                  Stephen A. Wells
 
              *By: /s/ CINDY B. TAYLOR
  ------------------------------------------------
  Cindy B. Taylor, pursuant to a power of attorney
 filed as Exhibit 24.1 to this Annual Report on Form
                        10-K
</Table>

 
                                        38

<PAGE>
 
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
                   INDEX TO COMBINED, PRO FORMA COMBINED AND
                          CONSOLIDATED FINANCIAL STATEMENTS
 

<Table>
<S>                                                           <C>
Unaudited Pro Forma Consolidated and Combined Financial
  Statements................................................   40
  Unaudited Pro Forma Consolidated and Combined Statement of
     Operations for the Year Ended December 31, 2001........   41
  Unaudited Pro Forma Combined Statement of Operations for
     the Year Ended December 31, 2000.......................   42
  Unaudited Pro Forma Combined Statement of Operations for
     the Year Ended December 31, 1999.......................   43
  Notes to Unaudited Pro Forma Consolidated and Combined
     Financial Statements...................................   44
Consolidated and Combined Financial Statements
Reports of Independent Auditors
  Ernst and Young LLP.......................................   48
  PricewaterhouseCoopers LLP................................   49
  Arthur Andersen LLP.......................................   50
Consolidated and Combined Statements of Operations for the
  Years Ended December 31, 2001, 2000, and 1999.............   51
Consolidated and Combined Balance Sheets at December 31,
  2001 and 2000.............................................   52
Consolidated and Combined Statements of Stockholders' Equity
  and Comprehensive Income (Loss) for the Years Ended
  December 31, 2001, 2000 and 1999..........................   53
Consolidated and Combined Statements of Cash Flow for the
  Years Ended December 31, 2001, 2000, and 1999.............   54
Notes to the Consolidated and Combined Financial
  Statements................................................   55
</Table>

 
                                        39

<PAGE>
 
       UNAUDITED PRO FORMA CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
 
     The consolidated financial statements of Oil States International, Inc.
reflect the Company's financial position, results of operations and changes in
stockholders' equity for periods subsequent to February 14, 2001, the date of
our initial public offering and the combination of Oil States International,
Inc. (Oil States), HWC Energy Services, Inc. (HWC) and PTI Group Inc. (PTI)
(collectively the Controlled Group), among other things.
 
     As more fully described below, and in footnotes that follow, the combined
financial statements reflect the financial position, results of operations and
changes in stockholders' equity of the predecessor entities that now comprise
Oil States International, Inc. based on reorganization accounting. The pro forma
financial information that follows reflect our historical consolidated or
combined statements of operations, depending upon the period involved, and give
effect to the pro forma transactions and adjustments more fully described below.
 
     The following tables set forth unaudited pro forma consolidated and
combined financial information for Oil States giving effect to:
 
     - the combination of Oil States, HWC and PTI as entities under the common
       control of SCF-III L.P. (SCF III), based upon reorganization accounting,
       which yields results similar to pooling of interest accounting, effective
       from the dates each of these entities became controlled by SCF III;
 
     - the conversion of the common stock held by the minority interests of each
       entity in the Controlled Group into shares of our common stock, based on
       the purchase method of accounting;
 
     - the conversion of all of the outstanding common stock of Sooner Inc.
       (Sooner) into shares of our common stock, based on the purchase method of
       accounting; and
 
     - the exchange of 4,275,555 shares of common stock for $36.0 million of
       debt of Sooner and Oil States; and
 
     - our sale of 10,000,000 shares of common stock (the Offering) and the
       application of the net proceeds totaling $84.1 million. With the proceeds
       received in the Offering, the Company repaid $43.7 million of outstanding
       subordinated debt of the Controlled Group and Sooner, redeemed $21.8
       million of preferred stock of Oil States, paid accrued interest on
       subordinated debt and accrued dividends on preferred stock aggregating
       $7.1 million, and repurchased common stock from non-accredited
       shareholders and shareholders holding pre-emptive stock purchase rights
       for $1.6 million. The balance of the proceeds was used to reduce amounts
       outstanding under bank lines of credit.
 
The unaudited pro forma consolidated and combined statements of operations for
the years ended December 31, 2001, 2000 and 1999 were prepared based upon the
historical consolidated and combined financial statements of the Controlled
Group, adjusted to conform accounting policies, and give effect to:
 
     - our acquisition of minority interests of the Controlled Group;
 
     - our acquisition of Sooner;
 
     - our exchange of shares of common stock for debt of Sooner and Oil States;
       and
 
     - our sale of shares in the Offering,
 
as if these transactions had occurred on January 1, 1999, 2000 and 2001,
respectively.
 
     The audited December 31, 2001 consolidated balance sheet reflects all of
the transactions discussed above, which were completed on February 14, 2001.
 
     The unaudited pro forma combined financial statements do not purport to be
indicative of the results that would have been obtained had the transactions
described above been completed on the indicated dates or that may be obtained in
the future. The unaudited pro forma combined financial statements should be read
in conjunction with the historical consolidated and combined financial
statements and notes thereto included elsewhere in this Annual Report on Form
10-K.
                                        40

<PAGE>
 
                         OIL STATES INTERNATIONAL, INC.
 
          PRO FORMA CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2001
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
 

<Table>
<Caption>
                                                                                   PRO FORMA
                                    HISTORICAL           -------------------------------------------------------------
                            --------------------------                                                     PRO FORMA
                            CONSOLIDATED                                                                  CONSOLIDATED
                                AND        SOONER INC.                                                        AND
                              COMBINED       (PERIOD                    MINORITY                            COMBINED
                             YEAR ENDED       FROM       SOONER INC.    INTEREST          OFFERING         YEAR ENDED
                            DECEMBER 31,   01/01/01 TO   ADJUSTMENTS   ADJUSTMENTS      ADJUSTMENTS       DECEMBER 31,
                                2001        02/14/01)     (NOTE 2)      (NOTE 3)     (NOTES 1, 3 AND 4)       2001
                            ------------   -----------   -----------   -----------   ------------------   ------------
<S>                         <C>            <C>           <C>           <C>           <C>                  <C>
Revenue...................    $671,205      $ 48,517       $             $                $                 $719,722
Expenses
  Costs of sales..........     537,792        45,142                                                         582,934
  Selling, general and
     administrative.......      50,024         1,133                                                          51,157
  Depreciation and
     amortization.........      28,039           188           331           135                              28,693
  Other income............        (346)           (1)                                                           (347)
                              --------      --------       -------       -------          --------          --------
Operating income (loss)...      55,696         2,055          (331)         (135)                             57,285
                              --------      --------       -------       -------          --------          --------
Interest income...........         602            22                                                             624
Interest expense..........      (9,276)         (585)                                          843(A)         (9,018)
Other income..............          88            (1)                                                             87
                              --------      --------       -------       -------          --------          --------
  Earnings (loss) before
     income taxes.........      47,110         1,491          (331)         (135)              843            48,978
Income tax (expense)
  benefit.................      (2,054)         (542)                                          506(D)         (2,090)
                              --------      --------       -------       -------          --------          --------
Net income (loss) before
  minority interests......      45,056           949          (331)         (135)            1,349            46,888
Minority interests........      (1,596)           --                                         1,600                 4
                              --------      --------       -------       -------          --------          --------
Net income (loss) before
  extraordinary item......      43,460           949          (331)         (135)            2,949            46,892
Preferred stock
  dividends...............         (41)           --                                            41(C)             --
                              --------      --------       -------       -------          --------          --------
Net income before
  extraordinary item
  attributable to common
  shares..................    $ 43,419      $    949       $  (331)      $  (135)         $  2,990          $ 46,892
                              ========      ========       =======       =======          ========          ========
Net income per common
  share before
  extraordinary item
  Basic...................    $    .96                                                                      $   0.97
                              ========                                                                      ========
  Diluted.................    $    .95                                                                      $   0.96
                              ========                                                                      ========
Average shares outstanding
  Basic...................      45,263                                                                        48,198
                              ========                                                                      ========
  Diluted.................      46,045                                                                        48,619
                              ========                                                                      ========
</Table>

 
                                        41

<PAGE>
 
                         OIL STATES INTERNATIONAL, INC.
 
                   PRO FORMA COMBINED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2000
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
 

<Table>
<Caption>
                                                                              PRO FORMA
                                                   ---------------------------------------------------------------
                                HISTORICAL                        MINORITY
                          ----------------------   SOONER INC.    INTEREST          OFFERING           COMBINED,
                          COMBINED                 ADJUSTMENTS   ADJUSTMENTS      ADJUSTMENTS         ACQUISITIONS
                           GROUP     SOONER INC.    (NOTE 2)      (NOTE 3)     (NOTES 1, 3 AND 4)     AND OFFERING
                          --------   -----------   -----------   -----------   ------------------     ------------
<S>                       <C>        <C>           <C>           <C>           <C>                    <C>
Revenue.................  $304,549    $291,098       $             $                 $                  $595,647
Expenses
  Costs of sales........   217,601     265,061                                                           482,662
  Selling, general and
     administrative.....    37,816       7,845                                          485(B)            46,146
  Depreciation and
     amortization.......    21,314       1,485         2,650         1,280                                26,729
  Other income..........       (69)                                                                          (69)
                          --------    --------       -------       -------           ------             --------
Operating income
  (loss)................    27,887      16,707        (2,650)       (1,280)                (485)          40,179
                          --------    --------       -------       -------           ------             --------
Interest income.........        95         428                                                               523
Interest expense........   (11,599)     (4,048)                                       5,864(A)            (9,783)
Other income............        89          --                                                                89
                          --------    --------       -------       -------           ------             --------
  Earnings (loss) before
     income taxes.......    16,472      13,087        (2,650)       (1,280)           5,379               31,008
Income tax (expense)
  benefit...............   (10,776)     (1,274)                                       7,508(D)            (4,542)
                          --------    --------       -------       -------           ------             --------
Net income (loss) before
  minority interests....     5,696      11,813        (2,650)       (1,280)          12,887               26,466
Minority interests......    (4,248)         --                                        4,218                  (30)
                          --------    --------       -------       -------           ------             --------
Net income (loss).......     1,448      11,813        (2,650)       (1,280)          17,105               26,436
Preferred stock
  dividends.............      (332)         --                                          332(C)                --
                          --------    --------       -------       -------           ------             --------
Net income attributable
  to common shares......  $  1,116    $ 11,813       $(2,650)      $(1,280)          $17,437            $ 26,436
                          ========    ========       =======       =======           ======             ========
Net income per common
  share Basic...........  $    .05                                                                      $   0.55
                          ========                                                                      ========
  Diluted...............  $    .04                                                                      $   0.55
                          ========                                                                      ========
Average shares
  outstanding Basic.....    24,482                                                                        48,013
                          ========                                                                      ========
  Diluted...............    26,471                                                                        48,358
                          ========                                                                      ========
</Table>

 
                                        42

<PAGE>
 
                         OIL STATES INTERNATIONAL, INC.
 
                   PRO FORMA COMBINED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1999
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)

<Table>
<Caption>
                                                           PRO FORMA                                 PRO FORMA
                                                  ---------------------------                -------------------------
                                                     GROUP                      HISTORICAL                 SOONER INC.
                                                  ACQUISITION      COMBINED     ----------   SOONER INC.   ACQUISITION
                                       COMBINED   ADJUSTMENTS     GROUP WITH      SOONER     ADJUSTMENTS   ADJUSTMENTS
                                        GROUP       (NOTE 5)     ACQUISITIONS      INC.       (NOTE 2)      (NOTE 6)
                                       --------   ------------   ------------   ----------   -----------   -----------
<S>                                    <C>        <C>            <C>            <C>          <C>           <C>
Revenue..............................  $267,110      $8,296        $275,406      $159,256      $             $52,718
Expenses Costs of sales..............  199,865        4,639         204,504       148,847                     52,301
  Selling, general and
    administrative...................   33,624          222          33,846         7,297                      1,727
  Depreciation and amortization......   20,275          809          21,084         1,058        2,650           234
  Other expense......................    2,448           --           2,448            --                         --
                                       --------      ------        --------      --------      -------       -------
Operating income (loss)..............   10,898        2,626          13,524         2,054       (2,650)       (1,544)
                                       --------      ------        --------      --------      -------       -------
Interest income......................      300                          300            --
Interest expense.....................  (12,796)        (410)        (13,206)       (4,399)
Other income (expense)...............   (1,297)                      (1,297)          763
                                       --------      ------        --------      --------      -------       -------
  Earnings (loss) before income
    taxes............................   (2,895)       2,216            (679)       (1,582)      (2,650)       (1,544)
Income tax (expense) benefit.........   (4,654)        (753)         (5,407)         (627)                       540
                                       --------      ------        --------      --------      -------       -------
Net income (loss) before minority
  interests..........................   (7,549)       1,463          (6,086)       (2,209)      (2,650)       (1,004)
Minority interests...................      610           --             610            --           --            --
                                       --------      ------        --------      --------      -------       -------
Net income (loss) from continuing
  operations attributable to common
  shares.............................   (6,939)       1,463          (5,476)       (2,209)      (2,650)       (1,004)
Preferred stock dividends............     (121)          --            (121)           --
                                       --------      ------        --------      --------      -------       -------
Net income (loss) from continuing
  operations attributable to common
  shares.............................  $(7,060)      $1,463        $ (5,597)     $ (2,209)     $(2,650)      $(1,004)
                                       ========      ======        ========      ========      =======       =======
Net income (loss) per common share
  Basic..............................  $ (0.30)
                                       ========
  Diluted............................  $ (0.30)
                                       ========
Average shares outstanding Basic.....   23,053
                                       ========
  Diluted............................   23,069
                                       ========
 
<Caption>
                                                       PRO FORMA
                                       -----------------------------------------
                                        MINORITY      OFFERING       COMBINED,
                                        INTEREST     ADJUSTMENTS    ACQUISITIONS
                                       ADJUSTMENTS   (NOTES 1,3         AND
                                        (NOTE 3)       AND 4)         OFFERING
                                       -----------   -----------    ------------
<S>                                    <C>           <C>            <C>
Revenue..............................    $             $             $ 487,380
Expenses Costs of sales..............                                  405,652
  Selling, general and
    administrative...................                     945(B)        43,815
  Depreciation and amortization......      1,280                        26,306
  Other expense......................                                    2,448
                                         -------       ------        ---------
Operating income (loss)..............     (1,280)        (945)           9,159
                                         -------       ------        ---------
Interest income......................                                      300
Interest expense.....................                6,362(A, C)       (11,243)
Other income (expense)...............                                     (534)
                                         -------       ------        ---------
  Earnings (loss) before income
    taxes............................     (1,280)       5,417           (2,318)
Income tax (expense) benefit.........                   9,473(D)         3,979
                                         -------       ------        ---------
Net income (loss) before minority
  interests..........................     (1,280)      14,890            1,661
Minority interests...................         --         (641)             (31)
                                         -------       ------        ---------
Net income (loss) from continuing
  operations attributable to common
  shares.............................     (1,280)      14,249            1,630
Preferred stock dividends............                     121(C)            --
                                         -------       ------        ---------
Net income (loss) from continuing
  operations attributable to common
  shares.............................    $(1,280)      $14,370       $   1,630
                                         =======       ======        =========
Net income (loss) per common share
  Basic..............................                                $     .03
                                                                     =========
  Diluted............................                                $     .03
                                                                     =========
Average shares outstanding Basic.....                                   48,156
                                                                     =========
  Diluted............................                                   48,529
                                                                     =========
</Table>

 
                                        43

<PAGE>
 
                         OIL STATES INTERNATIONAL, INC.
 
                 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED AND
                         COMBINED FINANCIAL STATEMENTS
 
  Basis of Presentation
 
     The purchase method of accounting has been used to reflect the acquisition
of the minority interests of each company in the Controlled Group concurrent
with the closing of the Offering. The purchase price is based on the fair value
of the shares owned by the minority interests, valued at the initial public
offering price of $9.00 per share. Under this accounting method, the excess of
the purchase price over the fair value of the assets and liabilities allocable
to the minority interests acquired has been reflected as goodwill. Where book
value of minority interests exceeded the purchase price, such excess reduced
property, plant and equipment. The estimated fair values of assets and
liabilities are preliminary and subject to change. For purposes of the pro forma
combined financial statements, the goodwill recorded in connection with this
transaction is being amortized over 20 years using the straight-line method
based on management's evaluation of the nature and duration of customer
relationships and considering competitive and technological developments in the
industry. Note, however, that accounting for goodwill will change prospectively
under new accounting pronouncements (See Note 3 to Consolidated and Combined
Financial Statements). The unaudited pro forma statements of operations for the
years ended December 31, 2001, 2000 and 1999 have been adjusted for the effects
of purchase accounting, as described below.
 
     The purchase method of accounting also has been used to reflect the
acquisition of the outstanding common stock of Sooner concurrent with the
closing of the Offering. The purchase price is based on the fair value of the
shares of Sooner, valued at the initial public offering price of $9.00 per
share. The excess of the purchase price over the fair value of the assets and
liabilities of Sooner has been reflected as goodwill. For purposes of the pro
forma combined financial statements, the goodwill recorded in connection with
this transaction is being amortized over 15 years using the straight-line method
based on management's evaluation of the nature and duration of customer
relationships and considering competitive and technological developments in the
industry. Note, however, that accounting for goodwill will change prospectively
under new accounting pronouncements (See Note 3 to Consolidated and Combined
Financial Statements). The unaudited pro forma statements of operations for the
years ended December 31, 2001, 2000 and 1999 include the historical financial
statements of Sooner, converted to a calendar year end and adjusted for the
effects of purchase accounting, as presented below.
 
NOTE 1. COMBINING ADJUSTMENTS
 
     Minority interest in (income) loss and related tax effect of the Controlled
Group are presented below (in thousands):
 

<Table>
<Caption>
                                                  OIL STATES    HWC      PTI      TOTAL
                                                  ----------   -----   -------   -------
<S>                                               <C>          <C>     <C>       <C>
Year Ended December 31, 1999....................    $3,019     $ 430   $(2,808)  $   641
                                                    ======     =====   =======   =======
Year Ended December 31, 2000....................    $1,463     $(557)  $(5,124)  $(4,218)
                                                    ======     =====   =======   =======
Period from January 1, 2001 to February 14,
  2001..........................................    $   72     $(129)  $(1,543)  $(1,600)
                                                    ======     =====   =======   =======
</Table>

 
NOTE 2. ACQUISITION OF SOONER
 
     Certain reclassifications have been made to conform the presentation of
Sooner's financial statements to the Controlled Group.
 
                                        44

<PAGE>
                         OIL STATES INTERNATIONAL, INC.
 
                 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED AND
                  COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     To reflect the acquisition of all outstanding common shares of Sooner in
exchange for 7,597,152 shares of Oil States common stock valued at the estimated
offering price per share of $9.00 (in millions):
 

<Table>
<S>                                                           <C>       <C>
Purchase price..............................................  $69.5(1)
Less: fair value of net assets acquired.....................   29.7
                                                              -----
Goodwill....................................................            $39.8
                                                                        -----
Amortization for the years ended December 31, 2000 and
  1999......................................................            $2.65
                                                                        =====
Amortization for the period from January 1, 2001 to February
  14, 2001..................................................            $ .33
                                                                        =====
</Table>

 
---------------
 
(1) The purchase price for Sooner includes the estimated fair value of Sooner
    stock options ($1.1 million) converted into Oil States stock options.
 
NOTE 3. ACQUISITION OF MINORITY INTERESTS
 
     To reflect the acquisition of the minority interests of each company in the
Controlled Group in exchange for shares of Oil States common stock and
elimination of the historical amounts reflected for the combined group (in
millions, except share and per share information):
 

<Table>
<Caption>
                                       OIL STATES      HWC          PTI        COMBINED
                                       ----------   ----------   ----------   ----------
<S>                                    <C>          <C>          <C>          <C>
Common stock issued to minority
  interests..........................   1,418,729    1,359,603    4,204,058    6,982,390
Estimated offering price per share...  $     9.00   $     9.00   $     9.00   $     9.00
                                       ----------   ----------   ----------   ----------
Purchase price of the minority
  interests..........................        12.8         12.2         37.8         62.8
Minority interests in fair value of
  net assets acquired................        13.8          7.7         15.9         37.4
                                       ----------   ----------   ----------   ----------
Additional goodwill..................  $     (1.0)  $      4.5   $     21.9   $     25.4
                                       ==========   ==========   ==========   ==========
Amortization of the additional
  goodwill for the years ended
  December 31, 2000 and 1999.........  $     (.05)  $      .23   $     1.10   $     1.28
                                       ==========   ==========   ==========   ==========
Amortization of the additional
  goodwill for the period from
  January 1, 2001 to February 14,
  2001...............................  $    (.015)  $     .020   $     .130   $     .135
                                       ==========   ==========   ==========   ==========
</Table>

 
NOTE 4. OFFERING
 
     (A) To adjust interest expense for debt repaid with Offering proceeds and
as a result of the exchange of shares for subordinated debt.
 
     (B) To adjust for costs associated with the new corporate office, including
executives hired in connection with the Offering, which costs are not fully
reflected in the historical financial statements. These costs will have a
continuing impact on our operations.
 
     (C) To eliminate preferred stock dividends due to the redemption of the
preferred stock.
 
     (D) To adjust income tax expense for the reduction of deferred taxes due to
the formation of the combined group.
 
                                        45

<PAGE>
                         OIL STATES INTERNATIONAL, INC.
 
                 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED AND
                  COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 5. GROUP ACQUISITIONS
 
     To reflect the following acquisitions as if such acquisitions had occurred
on January 1, 1999:
 
     On March 31, 1999, HWC acquired all of the outstanding stock of C&H Rental
Tools, Inc., and C&H Specialty Company, Inc. (collectively, C&H). C&H provided
rental equipment for drilling and workover operations in Louisiana and offshore
in the Gulf of Mexico. We paid cash of approximately $2.4 million and $.8
million in principal amount of subordinated promissory notes for the
acquisition. Funding for the transaction was received from the issuance of
preferred stock.
 
     On November 30, 1999, HWC acquired 12 snubbing units and related equipment
from Schlumberger Limited (Schlumberger) and Target Snubbing Company (Target).
Consideration paid for these acquisitions included $3.7 million of cash and
subordinated notes in aggregate principal amount of $4.5 million. Funding for
the transactions was received from the issuance of preferred stock.
 
     Details of the fiscal year 1999 pro forma adjustments for HWC are as
follows (in thousands):
 

<Table>
<Caption>
                                                  SCHLUMBERGER   TARGET    C&H     TOTAL
                                                  ------------   ------   ------   ------
<S>                                               <C>            <C>      <C>      <C>
Revenue.........................................     $6,025       $894    $1,377   $8,296
Expenses
  Cost of sales.................................      3,324        528       787    4,639
  Selling, general and administrative...........         --        222        --      222
  Depreciation and amortization.................        530        158       121      809
                                                     ------       ----    ------   ------
Operating income (loss).........................      2,171        (14)      469    2,626
                                                     ------       ----    ------   ------
Interest expense................................       (341)       (56)      (13)    (410)
                                                     ------       ----    ------   ------
Income (loss) from continuing operations before
  income taxes..................................      1,830        (70)      456    2,216
Income tax (expense) benefit....................       (622)        24      (155)    (753)
                                                     ------       ----    ------   ------
Income from continuing operations...............     $1,208       $(46)   $  301   $1,463
                                                     ======       ====    ======   ======
</Table>

 
     The Schlumberger and Target acquisitions were asset purchases, while the
C&H acquisition was a stock purchase. The difference between the C&H purchase
price and the fair market value of the assets and liabilities acquired was not
material to the combined group.
 
NOTE 6. SOONER ACQUISITION ADJUSTMENT
 
     To reflect the acquisitions by Sooner in May and June 1999 of the tubular
distribution businesses of Continental Emsco, Wilson Supply and
National-Oilwell, Inc. Total consideration paid for these acquisitions was $36.6
million.
 
                                        46

<PAGE>
                         OIL STATES INTERNATIONAL, INC.
 
                 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED AND
                  COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Details of the fiscal year 1999 pro forma adjustments for Sooner are as
follows (in thousands):
 

<Table>
<Caption>
                                          CONTINENTAL                     NATIONAL-
                                             EMSCO      WILSON SUPPLY   OILWELL, INC.    TOTAL
                                          -----------   -------------   -------------   -------
<S>                                       <C>           <C>             <C>             <C>
Revenue.................................    $11,639        $18,705         $22,374      $52,718
Expenses
  Costs of sales........................     11,544         17,795          22,962       52,301
  Selling, general and administrative...        400            650             677        1,727
  Depreciation and amortization(1)......         69             83              83          234
                                            -------        -------         -------      -------
Operating income (loss).................       (374)           177          (1,348)      (1,544)
Income tax (expense) benefit............        131            (62)            472          540
                                            -------        -------         -------      -------
Net Income (loss).......................    $  (243)       $   115         $  (876)     $(1,004)
                                            =======        =======         =======      =======
</Table>

 
---------------
 
(1) Substantially all of this adjustment results from incremental amortization
    of goodwill recorded for these acquisitions as if such acquisitions occurred
    on January 1, 1999.
 
                                        47

<PAGE>
 
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 

                         REPORT OF INDEPENDENT AUDITORS
 
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
OIL STATES INTERNATIONAL, INC.
 
     We have audited the accompanying consolidated balance sheet of Oil States
International, Inc. as of December 31, 2001 and the combined balance sheet as of
December 31, 2000, and the related consolidated and combined statement of
operations, stockholders' equity and cash flows for the year ended December 31,
2001 and the combined statements of operations, stockholders' equity and cash
flows for each of the two years in the period ended December 31, 2000. We did
not audit the financial statements of PTI Group Inc., for any period prior to
January 1, 2001, which represented 32% of total assets in 2000 and 36% and 26%
of total revenue in 2000 and 1999, respectively, nor did we audit Oil States
International, Inc. for 1999, which represented 58% of total revenue in 1999.
These financial statements were audited by other auditors whose reports have
been furnished to us, and our opinion, insofar as it relates to the amounts
included for Oil States International, Inc. or PTI Group Inc., for the periods
noted, is based solely on the report of the other auditors. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
     In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Oil States International, Inc. at
December 31, 2001 and the combined financial position as of December 31, 2000,
and the consolidated and combined results of their operations and their cash
flows for the year ended December 31, 2001 and the combined results of their
operations and their cash flows for each of the two years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States
 
                                          ERNST & YOUNG LLP
 
Houston Texas
February 1, 2002

 
                                        48

<PAGE>
 

                                AUDITORS' REPORT
 
TO THE SHAREHOLDERS AND DIRECTORS OF
PTI GROUP INC.
 
We have audited the consolidated balance sheets of PTI Group Inc. as at December
31, 2000 and 1999 and the consolidated statements of earnings, shareholders'
equity and cash flows for the years ended December 31, 2000, 1999 and 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
 
We conducted our audits in accordance with generally accepted auditing standards
in Canada and the United States. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
 
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2000
and 1999 and the results of its operations and its cash flows for the years
ended December 31, 2000, 1999 and 1998 in accordance with United States
generally accepted accounting principles.
 
PRICEWATERHOUSECOOPERS LLP
 
CHARTERED ACCOUNTANTS
 
Edmonton, Alberta
February 26, 2001

 
                                        49

<PAGE>
 

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
OIL STATES INTERNATIONAL, INC.:
 
We have audited the consolidated balance sheets of Oil States International,
Inc. (a Delaware corporation) and subsidiaries (the "Company") (formerly
Conemsco, Inc.) as of December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity and comprehensive income (loss),
and cash flows for each of the three years in the period ended December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We did not audit the
financial statements of CE Franklin Ltd., a majority-owned subsidiary, which
represented 6% and 5% of total consolidated assets in 1998 and 1997,
respectively. CE Franklin Ltd. was sold on May 28, 1999, and was classified as
discontinued operations prior to its sale. Those statements were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts included for CE Franklin Ltd., is based solely on
the report of other auditors.
 
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for our opinion.
 
As discussed in Note 9, on July 21, 2000, the Company obtained a waiver from the
holder of the Series A Cumulative Preferred Stock totaling $14.4 million,
extending the optional redemption date to the earlier of April 30, 2001 or upon
the occurrence of a registered public offering of capital stock. On July 29,
2000 and July 31, 2000, the Company renegotiated terms with the holders of
certain subordinated debt totaling $7.0 million and $7.0 million, respectively.
Original maturities of the subordinated debt extending through February 2003
were accelerated to the earlier of April 30, 2001 or upon the occurrence of a
registered public offering of capital stock, in exchange for the holders waiving
their rights to scheduled maturities of principal and interest which were due
prior to April 30, 2001. Additionally, scheduled principal payments on other
long-term debt totaling $15.5 million become due during 2001. Management's
current projections indicate that there will not be sufficient cash flow from
operations to fund these obligations. Management is currently developing a plan
whereby the Company will be combined with other companies under common majority
ownership, and the stock of the combined company would be sold in an initial
public offering. The proceeds of the offering would be used, in part, to reduce
the existing debt obligations. If management is unsuccessful in that effort,
then management's plans would be to restructure its debt obligations as well as
generate additional cash flow through asset sales.
 
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Oil States International, Inc., and subsidiaries as of
December 31, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
 
ARTHUR ANDERSEN LLP
 
Dallas, Texas
July 31, 2000

 
                                        50

<PAGE>
 
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
               CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 

<Table>
<Caption>
                                                              CONSOLIDATED
                                                                  AND
                                                                COMBINED          COMBINED
                                                              ------------   -------------------
                                                                   YEAR ENDED DECEMBER 31,
                                                              ----------------------------------
                                                                  2001         2000       1999
                                                              ------------   --------   --------
<S>                                                           <C>            <C>        <C>
Revenues:
  Product...................................................    $421,758     $104,233   $128,128
  Service and other.........................................     249,447      200,316    138,982
                                                                --------     --------   --------
                                                                 671,205      304,549    267,110
Costs and expenses:
  Product costs.............................................     376,260       82,516    101,680
  Service and other costs...................................     161,532      135,085     98,185
  Selling, general and administrative expenses..............      50,024       37,816     33,624
  Depreciation expense......................................      20,790       18,187     16,779
  Amortization expense......................................       7,249        3,127      3,496
  Other operating expense (income)..........................        (346)         (69)     2,448
                                                                --------     --------   --------
                                                                 615,509      276,662    256,212
                                                                --------     --------   --------
Operating income............................................      55,696       27,887     10,898
Interest expense............................................      (9,276)     (11,599)   (12,796)
Interest income.............................................         602           95        300
Other income (expense)......................................          88           89     (1,297)
                                                                --------     --------   --------
Income (loss) from continuing operations before income
  taxes, minority interest, discontinued operations, and
  extraordinary item........................................      47,110       16,472     (2,895)
Income tax provision........................................      (2,054)     (10,776)    (4,654)
Minority interest in income of combined companies and
  consolidated subsidiaries.................................      (1,596)      (4,248)       610
                                                                --------     --------   --------
Net income (loss) from continuing operations before
  discontinued operations and extraordinary item............      43,460        1,448     (6,939)
Discontinued operations:
  Estimated and realized losses on sales of discontinued
    operations (net of income tax expense of $215 in
    1999)...................................................          --           --     (6,416)
                                                                --------     --------   --------
Net income (loss) before extraordinary item.................      43,460        1,448    (13,355)
Extraordinary loss on debt restructuring....................        (784)          --       (927)
                                                                --------     --------   --------
Net income (loss)...........................................      42,676        1,448    (14,282)
Preferred stock dividends...................................         (41)        (332)      (121)
                                                                --------     --------   --------
Net income (loss) attributable to common shares.............    $ 42,635     $  1,116   $(14,403)
                                                                ========     ========   ========
Basic earnings (loss) per share:
  Earnings (loss) per share from continuing operations
    before extraordinary item...............................    $    .96     $    .05   $   (.30)
  Discontinued operations, net of income taxes..............          --           --       (.28)
  Extraordinary loss on debt restructuring, net of income
    taxes...................................................        (.02)          --       (.04)
                                                                --------     --------   --------
  Basic net income (loss) per share.........................    $    .94     $    .05   $   (.62)
                                                                ========     ========   ========
Diluted earnings (loss) per share:
  Earnings (loss) per share from continuing operations
    before extraordinary item...............................    $    .95     $    .04   $   (.30)
  Discontinued operations, net of income taxes..............          --           --       (.28)
  Extraordinary loss on debt restructuring, net of income
    taxes...................................................        (.02)          --       (.04)
                                                                --------     --------   --------
  Diluted net income (loss) per share.......................    $    .93     $    .04   $   (.62)
                                                                ========     ========   ========
Weighted average number of common shares outstanding (in
  thousands):
  Basic.....................................................      45,263       24,482     23,053
  Diluted...................................................      46,045       26,471     23,069
</Table>

 
   The accompanying notes are an integral part of these financial statements.
                                        51

<PAGE>
 
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
                    CONSOLIDATED AND COMBINED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
 

<Table>
<Caption>
                                                              CONSOLIDATED     COMBINED
                                                              DECEMBER 31,   DECEMBER 31,
                                                                  2001           2000
                                                              ------------   ------------
<S>                                                           <C>            <C>
                                         ASSETS
Current assets:
  Cash and cash equivalents.................................    $  4,982       $  4,821
  Accounts receivable, net..................................     116,790         64,137
  Inventories, net..........................................      76,917         30,826
  Prepaid expenses and other current assets.................       3,932          1,715
                                                                --------       --------
          Total current assets..............................     202,621        101,499
Property, plant and equipment, net..........................     150,090        143,468
Goodwill, net...............................................     172,235        103,391
Other noncurrent assets.....................................       4,937          5,160
                                                                --------       --------
          Total assets......................................    $529,883       $353,518
                                                                ========       ========

                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued liabilities..................    $ 86,174       $ 58,348
  Income taxes..............................................       4,267          2,427
  Deferred income taxes.....................................          --            369
  Current portion of long-term debt.........................       3,894         37,629
  Other current liabilities.................................         509          2,333
                                                                --------       --------
          Total current liabilities.........................      94,844        101,106
  Long-term debt............................................      73,939        102,614
  Deferred income taxes.....................................       8,436         19,977
  Postretirement healthcare benefits........................       5,570          5,899
  Other liabilities.........................................       2,746          4,519
                                                                --------       --------
          Total liabilities.................................     185,535        234,115
Minority interest...........................................         151         37,561
Redeemable preferred stock..................................          --         25,293
Stockholders' equity:
  Convertible preferred stock...............................          --          1,625
  Common stock, $.01 par value, 200,000,000 shares
     authorized,
     48,332,207 shares and 27,154,672 shares issued and
     outstanding,
     respectively...........................................         483            272
  Additional paid-in capital................................     326,031         83,810
  Retained earnings (deficit)...............................      24,710        (25,854)
  Accumulated other comprehensive loss......................      (7,027)        (3,304)
                                                                --------       --------
          Total stockholders' equity........................     344,197         56,549
                                                                --------       --------
          Total liabilities and stockholders' equity........    $529,883       $353,518
                                                                ========       ========
</Table>

 
   The accompanying notes are an integral part of these financial statements.
 
                                        52

<PAGE>
 
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
          CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
                        AND COMPREHENSIVE INCOME (LOSS)
                                 (IN THOUSANDS)
 

<Table>
<Caption>
                                                                                                      ACCUMULATED
                                                                                                         OTHER
                                                            ADDITIONAL   RETAINED                    COMPREHENSIVE
                                       PREFERRED   COMMON    PAID-IN     EARNINGS    COMPREHENSIVE      (LOSS)       TREASURY
                                         STOCK     STOCK     CAPITAL     (DEFICIT)      INCOME          INCOME        STOCK
                                       ---------   ------   ----------   ---------   -------------   -------------   --------
<S>                                    <C>         <C>      <C>          <C>         <C>             <C>             <C>
Balance, December 31, 1998...........   $1,625      $224     $ 87,074    $(12,567)                      $(2,554)      $(158)
  Net loss...........................                                     (14,282)     $(14,282)
  Currency translation adjustment....                                                      (521)
  Other comprehensive income.........                                                     1,771
                                                                                       --------
  Total other comprehensive income...                                                     1,250           1,250
                                                                                       --------
  Comprehensive loss.................                                                  $(13,032)
                                                                                       ========
  Preferred stock dividends..........                                        (121)
  Redeemable preferred stock
    dividends........................                          (1,308)
  Minority interest..................                            (386)
  Issuance of shares from treasury...                            (493)                                                  789
  Purchase of common stock held in
    treasury at cost.................                                                                                  (631)
                                        ------      ----     --------    --------                       -------       -----
Balance, December 31, 1999...........    1,625       224       84,887     (26,970)                       (1,304)         --
  Net income.........................                                       1,448      $  1,448
  Currency translation adjustment....                                                    (1,508)
  Other comprehensive loss...........                                                      (492)
                                                                                       --------
  Total other comprehensive loss.....                                                    (2,000)         (2,000)
                                                                                       --------
  Comprehensive loss.................                                                  $   (552)
                                                                                       ========
  Issuance of common stock for
    cash.............................                 48          154
  Preferred stock dividends..........                                        (332)
  Redeemable preferred stock
    dividends........................                          (1,518)
  Compensatory stock options.........                             600
  Unearned compensation..............                            (313)
                                        ------      ----     --------    --------                       -------       -----
Balance, December 31, 2000...........    1,625       272       83,810     (25,854)                       (3,304)         --
  Net income.........................                                      42,676      $ 42,676
  Currency translation adjustment....                                                    (3,723)         (3,723)
                                                                                       --------
  Comprehensive income...............                                                  $ 38,953
                                                                                       ========
  Issuance of common stock for
    cash.............................                100       79,615
  Amortization of restricted stock
    compensation.....................                  1          421
  Preferred stock dividends..........                                         (41)
  Redeemable preferred stock
    dividends........................                            (285)
  Redemption of preferred stock......   (1,625)
  Conversion of preferred stock to
    common stock.....................                           5,143
  Conversion of debt to common
    stock............................                 43       35,936
  Shares issued to acquire Sooner....                 76       30,596
  Shares issued to acquire minority
    interest.........................                174       92,329       7,929
  Purchase of subsidiary stock in
    connection with Combination......                 (2)      (1,465)
  Three-for-one reverse stock
    split............................               (181)         181
  Other..............................                            (250)
                                        ------      ----     --------    --------                       -------       -----
Balance, December 31, 2001...........   $   --      $483     $326,031    $ 24,710                       $(7,027)      $  --
                                        ======      ====     ========    ========                       =======       =====
</Table>

 
   The accompanying notes are an integral part of these financial statements.
 
                                        53

<PAGE>
 
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
               CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 

<Table>
<Caption>
                                                                  YEAR ENDED DECEMBER 31,
                                                              -------------------------------
                                                                2001       2000       1999
                                                              --------   --------   ---------
<S>                                                           <C>        <C>        <C>
Cash flows from operating activities:
  Net income (loss) before discontinued operations and
     extraordinary item.....................................  $ 43,460   $  1,448   $  (6,939)
  Adjustments to reconcile net income (loss) from continuing
     operations to net cash provided by operating
     activities:
     Minority interest, net of distributions................     1,596      4,148        (610)
     Depreciation and amortization..........................    28,039     21,314      20,275
     Deferred income tax provision (benefit)................   (11,504)       840        (519)
     Provision for loss on accounts receivable..............     1,571        580       1,121
     Deferred financing cost amortization...................       922         --          --
     (Gain) loss on disposal of assets......................      (225)       (18)      2,472
     (Gain) loss on sale of other businesses................      (227)        --         975
     Loss on sale of marketable securities..................        --         --         334
     Other, net.............................................       378     (1,186)         (2)
  Changes in operating assets and liabilities, net of effect
     from acquired and divested businesses:
          Accounts receivable...............................   (20,030)     1,238      (5,219)
          Inventories.......................................    28,758       (774)      9,653
          Accounts payable and accrued liabilities..........   (26,866)     5,461     (16,355)
          Other current assets and liabilities, net.........     9,250        886         (16)
                                                              --------   --------   ---------
          Net cash flows provided by operating activities...    55,122     33,937       5,170
Cash flows from investing activities:
  Acquisitions of businesses, net of cash acquired..........    (5,119)    (3,500)     (7,217)
  Capital expenditures......................................   (29,671)   (21,383)    (11,297)
  Proceeds from sale of equipment...........................     5,976      2,391       1,358
  Cash acquired in Sooner acquisition.......................     4,894         --          --
  Proceeds from sale of discontinued operations.............        --         --     102,439
  Proceeds from sale of other businesses....................     1,200         --       1,976
  Proceeds from sale of marketable securities...............        --         --      24,408
  Other, net................................................        53        115         560
                                                              --------   --------   ---------
          Net cash flows provided by (used in) investing
            activities......................................   (22,667)   (22,377)    112,227
Cash flows from financing activities:
  Revolving credit repayments...............................   (10,132)    (3,158)    (65,081)
  Debt borrowings...........................................        --     13,487      10,449
  Debt repayments...........................................   (76,628)    (8,589)    (63,205)
  Preferred stock dividends.................................      (844)    (1,681)     (1,568)
  Issuance of common stock..................................    84,599        268       4,839
  Repurchase of preferred stock.............................   (21,775)        --          --
  Payment of offering and financing costs...................    (4,982)        --          --
  Other, net................................................    (2,653)       (23)     (1,556)
                                                              --------   --------   ---------
          Net cash flows provided by (used in) financing
            activities......................................   (32,415)       304    (116,122)
Effect of exchange rate changes on cash.....................        (4)       (77)         66
                                                              --------   --------   ---------
Net increase in cash and cash equivalents from continuing
  operations................................................        36     11,787       1,341
Net cash provided by (used in) discontinued operations......       375    (10,182)     (4,159)
Extraordinary item..........................................      (250)        --          --
Cash and cash equivalents, beginning of year................     4,821      3,216       6,034
                                                              --------   --------   ---------
Cash and cash equivalents, end of year......................  $  4,982   $  4,821   $   3,216
                                                              ========   ========   =========
</Table>

 
   The accompanying notes are an integral part of these financial statements.
 
                                        54

<PAGE>
 
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
            NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
 
1.  ORGANIZATION AND BASIS OF PRESENTATION
 
     The consolidated financial statements include the accounts of Oil States
International, Inc. (Oil States or the Company) and its consolidated
subsidiaries since February 14, 2001. On February 14, 2001, the Company acquired
the three companies (HWC Energy Services, Inc. -- HWC; PTI Group, Inc. -- PTI
and Sooner Inc. -- Sooner) previously reported in the Combined and Pro Forma
financial statements presented herein. The combined financial statements include
the activities of Oil States, HWC and PTI, collectively the Controlled Group or
the Company for the period prior to February 14, 2001, utilizing reorganization
accounting. The reorganization accounting method, which yields results similar
to the pooling of interests method, has been used in the preparation of the
combined financial statements of the Controlled Group (entities under common
control of SCF-III L.P. (SCF-III), a private equity fund that focuses on
investments in the energy industry). Under this method of accounting, the
historical financial statements of HWC and PTI are combined with Oil States for
the years ended December 31, 1999 and 2000 and for the period until February 14,
2001 when Oil States, HWC and PTI merged and Oil States acquired Sooner in
exchange for its common stock. After February 14, 2001, the consolidated
financial statements of Oil States include the results of all its subsidiaries
including HWC, PTI and Sooner. The combined financial statements have been
adjusted to reflect minority interests in the Controlled Group. All significant
intercompany accounts and transactions between the consolidated entities have
been eliminated in the accompanying consolidated, combined and pro forma
financial statements.
 
  Oil States International, Inc.
 
     Oil States was formerly named CONEMSCO, Inc. On July 20, 2000, an amendment
to the Certificate of Incorporation for CONEMSCO, Inc. was filed with the State
of Delaware to change the corporate name from CONEMSCO, Inc. to Oil States
International, Inc. Oil States' subsidiaries currently include: Oil States
Industries, Inc. and its subsidiaries (collectively, OSI) HWC, PTI and Sooner.
OSI's wholly-owned subsidiaries are Oil States Skagit SMATCO, LLC (SMATCO), Oil
States Industries (UK) Limited (OSI-UK), Oil States Industries (Asia) Pte. Ltd.,
Oil States Industries do Brasil Instalacoes Maritimas Ltda. and Continental
Emsco Company and its subsidiaries. OSI also owns a 60% interest in Elastomeric
Actuators, Inc., a joint venture with a third party. OSI-UK's wholly-owned
subsidiaries include Oil States MCS Limited (MCS Limited) and Oil States Klaper
Limited.
 
     OSI is a leading designer and manufacturer of a diverse range of products
for offshore platforms, subsea pipelines, and defense and general industrial
applications. Major product lines include flexible bearings, advanced
connectors, mooring systems, winches, services for installing and removing
offshore platforms, downhole production equipment, and custom molded products.
Sales are made primarily to major oil companies, large and small independent oil
and gas companies, drilling contractors, and well service and workover
operators.
 
     During 1999, OSI sold all of the operating assets of CE Distribution
Services, Inc. (CE Distribution), CE Drilling Products, Inc. (CE Drilling), CE
Mobile Equipment, Inc. (CE Mobile), and its 51.8% investment in CE Franklin,
Ltd. (CE Franklin). Accordingly, for the periods presented, the results of CE
Distribution, CE Drilling, CE Mobile, and CE Franklin are shown as discontinued
operations. A charge for the estimated and realized losses on sale of
discontinued operations of $6.4 million was recorded during 1999 (See Note 16).
During the year ended December 31, 1999, OSI sold two wholly-owned subsidiaries:
H.O. Mohr Research and Engineering, Inc. (H.O. Mohr) and Oil States Martec Crane
Services, Inc. (Martec).
 
  PTI Group, Inc.
 
     PTI was formed on January 8, 1997 as a result of the amalgamation of PTI
Group, Inc. and 712955 Alberta Ltd. (Alberta), a special purpose company formed
to acquire PTI.
 
                                        55

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     PTI is a supplier of integrated housing, food, site management and
logistics support services to remote sites utilized by natural resources and
other industries primarily in Canada and the United States.
 
  HWC Energy Services, Inc.
 
     HWC provides worldwide well control services and drilling and rental
equipment to the oil and gas industry. HWC operates primarily in Texas,
Louisiana, Ohio, Oklahoma and New Mexico, along with foreign operations
conducted in Venezuela, the Middle East, and Africa. Its hydraulic well control
operations provide, globally, hydraulic workover (snubbing) units for emergency
well control situations and, in selected markets, various hydraulic well control
solutions involving well drilling and workover and completion activities. In
West Texas and Ohio, HWC's Capstar Drilling, Inc., subsidiary operates shallow
well drilling rigs with automated pipe handling capabilities. Specialty Rental
Tools and Supply, Inc. (Specialty), a subsidiary of HWC, operates from 5
locations in Texas, Louisiana, Mississippi, New Mexico and Oklahoma to provide
rental equipment for drilling and workover operations.
 
  Sooner, Inc.
 
     Sooner is a distributor of oilfield tubular products with operations
located primarily in the United States (U.S.). Sooner also has sales and
marketing subsidiaries located in the United Kingdom, Canada, Nigeria and
Venezuela. The majority of sales are to large fully integrated and independent
oil companies headquartered in the U.S.
 
2. INITIAL PUBLIC OFFERING, MERGER TRANSACTIONS AND REFINANCING
 
     On February 9, 2001, the Company began trading its common stock on the New
York Stock Exchange under the symbol "OIS" pursuant to completion of its initial
public offering (the Offering). On February 14, 2001, the Company closed the
business combination and the Offering thereby acquiring the minority interests
in PTI and HWC and 100% of the Sooner operations. The Company recorded
additional goodwill of $61.9 million as a result of the acquisition of these
minority interests.
 
     Concurrent with the Offering, the Company acquired Sooner for $69.5
million. The Company exchanged 7,597,152 shares of its common stock for all the
outstanding common shares of Sooner. The Company accounted for the acquisition
using the purchase method of accounting and recorded approximately $40 million
in goodwill that is being amortized over a 15-year period. In 2001, the
Financial Accounting Standards Board issued a new standard that will effect
goodwill amortization (See Note 3).
 
     Concurrent with the closing of the Offering, the Company issued 4,275,555
shares of common stock to SCF-III and SCF-IV L.P. (SCF-IV) in exchange for
approximately $36.0 million of indebtedness of Oil States and Sooner which was
held by SCF-III and SCF-IV (the SCF Exchange).
 
     With the proceeds received in the Offering, the Company repaid $43.7
million of outstanding subordinated debt of the Controlled Group and Sooner,
redeemed $21.8 million of preferred stock of Oil States, paid accrued interest
on subordinated debt and accrued dividends on preferred stock aggregating $7.1
million, and repurchased common stock from non-accredited shareholders and
shareholders holding pre-emptive stock purchase rights for $1.6 million. The
balance of the proceeds was used to reduce amounts outstanding under bank lines
of credit.
 
     On February 14, 2001, the Company entered into a $150 million senior
secured revolving credit facility. This new credit facility replaced existing
bank credit facilities (See Note 6).
 
                                        56

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Cash and Cash Equivalents
 
     The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
 
  Fair Value of Financial Instruments
 
     The Company's financial instruments consist of cash and cash equivalents,
investments, receivables, payables, and debt instruments. The Company believes
that the carrying values of these instruments on the accompanying consolidated
balance sheets approximate their fair values.
 
  Inventories
 
     Inventories consist of tubular and other oilfield products, manufactured
equipment, and spare parts for manufactured equipment. Inventories include raw
materials, work in process, finished goods, labor, and manufacturing overhead.
Approximately 13% and 37% of combined inventories at December 31, 2001 and 2000,
respectively, is valued at the lower of cost or market with cost determined by
the last-in, first-out (LIFO) method. The cost of tubular goods inventories is
determined using the first-in, first-out (FIFO) method and the cost for the
remaining inventories is determined on an average cost or specific-
identification method. If the LIFO method had not been used for particular
inventories, total inventories would have been approximately the same at
December 31, 2001 and 2000. During 2001 and 2000, the Company experienced
reductions in inventories carried on a LIFO basis. The cost of these liquidated
LIFO inventories did not differ from the current cost by a material amount.
 
  Property, Plant, and Equipment
 
     Property, plant, and equipment are stated at cost and depreciation is
computed using the straight-line method over the estimated useful lives of the
assets. Leasehold improvements are capitalized and amortized over the lesser of
the life of the lease or the estimated useful life of the asset.
 
     Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statements of operations.
 
  Goodwill
 
     Goodwill represents the excess of the purchase price for acquired
businesses over the allocated value of the related net assets. Goodwill is
amortized on a straight-line basis over a period of 15 to 40 years based on
management's evaluation of the nature and duration of customer relationships and
considering competitive and technological developments in the industry. Goodwill
is stated net of accumulated amortization of $18.2 million and $10.0 million at
December 31, 2001 and 2000, respectively. In 2001, the Financial Accounting
Standards Board issued a new standard that will affect goodwill amortization
(See Note 3).
 
  Impairment of Long-Lived Assets
 
     In compliance with Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," the recoverability of the carrying values of
property, plant and equipment, goodwill, and other intangible assets is assessed
at a minimum annually, or whenever, in management's judgment, events or changes
in circumstances indicate that the carrying value of such assets may not be
recoverable based on estimated future cash flows. If this
 
                                        57

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
assessment indicates that the carrying values will not be recoverable, as
determined based on undiscounted cash flows over the remaining useful lives, an
impairment loss is recognized. The impairment loss equals the excess of the
carrying value over the fair value of the asset. The fair value of the asset is
based on prices of similar assets, if available, or discounted cash flows. Based
on the Company's review, the carrying value of its assets are recoverable and no
impairment losses have been recorded for the periods presented.
 
     In August of 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The
Company was required to adopt this Statement effective January 1, 2002 and it
did not have an impact.
 
  Foreign Currency
 
     Gains and losses resulting from balance sheet translation of foreign
operations where a foreign currency is the functional currency are included as a
separate component of accumulated other comprehensive income within
stockholders' equity. Gains and losses resulting from balance sheet translation
of foreign operations where the U.S. dollar is the functional currency are
included in the consolidated statements of operations as incurred.
 
  Revenue and Cost Recognition
 
     Revenue from the sale of products is recognized upon shipment to the
customer or when all significant risks of ownership have passed to the customer.
For significant fabrication projects built to customer specifications, revenues
are recognized under the percentage-of-completion method, measured by the
percentage of costs incurred to date to estimated total costs for each contract
(cost-to-cost method). Management believes this method is the most appropriate
measure of progress on large fabrication contracts. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are
determined. In rental equipment and services, revenues are recognized based on a
periodic (usually daily) rental rate or when the services are rendered. Proceeds
from customers for the cost of oilfield rental equipment that is damaged or lost
downhole are reflected as revenues. For drilling contracts based on footage
drilled, we recognize revenues as footage is drilled.
 
     Cost of goods sold includes all direct material and labor costs and those
costs related to contract performance, such as indirect labor, supplies, tools,
and repairs. Selling, general, and administrative costs are charged to expense
as incurred.
 
  Income Taxes
 
     The Company follows the liability method of accounting for income taxes in
accordance with SFAS No. 109, "Accounting for Income Taxes." Under this method,
deferred income taxes are recorded based upon the differences between the
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the underlying
assets or liabilities are recovered or settled.
 
     When the Company's earnings from foreign subsidiaries are considered to be
indefinitely reinvested, no provision for US income taxes is made for these
earnings. If any of the subsidiaries have a distribution of earnings in the form
of dividends or otherwise, the Company would be subject to both US income taxes
(subject to an adjustment for foreign tax credits) and withholding taxes payable
to the various foreign countries.
 
     In accordance with SFAS No. 109, the Company records a valuation reserve in
each reporting period when management believes that it is more likely than not
that any deferred tax asset created will not be realized. Management will
continue to evaluate the appropriateness of the reserve in the future based upon
the operating results of the Company.
                                        58

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Receivables and Concentration of Credit Risk
 
     Based on the nature of its customer base, the Company does not believe that
it has any significant concentrations of credit risk other than its
concentration in the oil and gas industry. The Company evaluates the credit
worthiness of its major new and existing customers' financial condition and,
generally, the Company does not require significant collateral from its domestic
customers.
 
  Earnings per Share
 
     The Company's basic income (loss) per share (EPS) amounts have been
computed based on the average number of common shares outstanding, including
3,601,329 shares of common stock issuable upon exercise of exchangeable shares
of one of our Canadian subsidiaries. These exchangeable shares, which were
issued to certain former shareholders of PTI in the Combination, are intended to
have characteristics essentially equivalent to our common stock prior to the
exchange. We have treated the shares of common stock issuable upon exchange of
the exchangeable shares as outstanding. Diluted EPS amounts include the effect
of the Company's outstanding stock options under the treasury stock method and
the effect of convertible preferred stock in periods when such preferred shares
were outstanding. All shares awarded under the Company's Equity Participation
Plan are included in our fully diluted shares.
 
  Reclassifications
 
     Certain amounts in prior years' financial statements have been reclassified
to conform with the current year presentation.
 
  Use of Estimates
 
     The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires the use
of estimates and assumptions by management in determining the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Examples of a few such
estimates include the costs associated with the disposal of discontinued
operations, including potential future adjustments as a result of contractual
agreements, revenue and income recognized on the percentage-of-completion
method, and the valuation allowance recorded on net deferred tax assets. Actual
results could differ from those estimates.
 
  Recent Accounting Pronouncements
 
     In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
derivative instruments embedded in other contracts) be recorded on the balance
sheet as either an asset or liability measured at its fair value. The statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. We adopted SFAS No. 133 effective January 1,
2001, and the adoption did not have a material impact on our results of
operations.
 
     In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets (collectively the Statements), effective
for fiscal years beginning after December 15, 2001. Under the new rules,
goodwill and intangible assets deemed to have indefinite lives will no longer be
amortized but will be subject to annual
 
                                        59

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.
 
     The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of the Statement is expected to result in an increase
in net income of approximately $8.0 million ($.16 per diluted share) per year.
During 2002, the Company will perform the first of the required impairment tests
of goodwill and indefinite lived intangible assets as of January 1, 2002. The
Company has not completed its evaluation of goodwill and indefinite lived
intangible assets and accordingly, the impact, if any, of this Statement is not
yet known.
 
     In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations." The Statement is effective for
fiscal years beginning after June 15, 2002 and the Company expects to adopt the
Statement effective January 1, 2003. It is expected that this Statement will
have an immaterial effect on the Company's consolidated financial statements.
 
4. DETAILS OF SELECTED BALANCE SHEET ACCOUNTS
 
     Additional information regarding selected balance sheet accounts at
December 31, 2001 and 2000, is presented below (in thousands):
 

<Table>
<Caption>
                                                                2001      2000
                                                              --------   -------
<S>                                                           <C>        <C>
Accounts receivable:
  Trade.....................................................  $115,726   $61,969
  Unbilled revenue..........................................     2,674        --
  Other.....................................................     1,123     4,323
  Allowance for doubtful accounts...........................    (2,733)   (2,155)
                                                              --------   -------
                                                              $116,790   $64,137
                                                              ========   =======
</Table>

 

<Table>
<Caption>
                                                               2001      2000
                                                              -------   -------
<S>                                                           <C>       <C>
Inventories:
  Tubular goods.............................................  $41,882   $    --
  Other finished goods and purchased products...............   20,024    14,813
  Work in process...........................................   12,012    12,208
  Raw materials.............................................    8,696     8,720
                                                              -------   -------
     Total inventories......................................   82,614    35,741
  Inventory reserves........................................   (5,697)   (4,915)
                                                              -------   -------
                                                              $76,917   $30,826
                                                              =======   =======
</Table>

 

<Table>
<Caption>
                                                               ESTIMATED
                                                              USEFUL LIFE     2001       2000
                                                              -----------   --------   --------
<S>                                                           <C>           <C>        <C>
Property, plant and equipment:
  Land......................................................                $  4,163   $  3,660
  Buildings and leasehold improvements......................  2-50 years      27,505     25,501
  Machinery and equipment...................................  2-15 years     147,183    134,983
  Rental tools..............................................  3-10 years      24,876     18,370
  Office furniture and equipment............................  1-10 years      10,667      8,724
  Vehicles..................................................   2-5 years       6,197      4,853
  Construction in progress..................................                   1,033         26
                                                                            --------   --------
       Total property, plant and equipment..................                 221,624    196,117
  Less: Accumulated depreciation............................                 (71,534)   (52,649)
                                                                            --------   --------
                                                                            $150,090   $143,468
                                                                            ========   ========
</Table>

 
                                        60

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 

<Table>
<Caption>
                                                                  COMBINED
                                                              -----------------
                                                               2001      2000
                                                              -------   -------
<S>                                                           <C>       <C>
Accounts payable and accrued liabilities:
  Trade accounts payable....................................  $52,386   $26,215
  Accrued compensation......................................   10,317     7,685
  Accrued insurance.........................................    3,498     2,819
  Accrued interest..........................................      248     6,646
  Accrued taxes, other than income taxes....................    3,314       812
  Deferred revenue..........................................    2,646     4,456
  Reserves related to discontinued operations, current
     portion................................................    4,976     3,283
  Postretirement healthcare benefits, current portion.......    1,100     1,100
  Other.....................................................    7,689     5,332
                                                              -------   -------
                                                              $86,174   $58,348
                                                              =======   =======
</Table>

 
5. ACQUISITIONS
 
     On February 14, 2001, the Company acquired 100% of the issued and
outstanding shares of Sooner for $69.5 million of the Company's common stock
(See Note 2).
 
     In July and August 2001, Oil States acquired, within its well site services
segment, 100% of the common stock of two rental tool businesses located in
Mississippi and Oklahoma for aggregate cash consideration of $3.0 million, net
of cash acquired. A total of $2.1 million of goodwill was recorded in connection
with these acquisitions which will not be deductible for tax purposes.
 
     On February 28, 2000, the Company acquired substantially all the operating
assets and business of International Quarters, L.L.C. (IQ), a company located in
Houma, Louisiana, for a purchase price of $4.5 million. IQ manufactures and
leases accommodation facilities primarily to the oil and gas industry. The IQ
acquisition was accounted for using the purchase method of accounting.
Accordingly, the purchase price was allocated to the net assets acquired based
on their estimated fair values with the balance of the purchase price, $1.3
million, included as goodwill.
 
     On March 31, 1999, Specialty completed the acquisition of all of the
outstanding stock of C&H Rental Tools, Inc., and C&H Specialty Company, Inc.
(collectively C&H). Specialty paid cash of approximately $2.4 million and $0.82
million in subordinated promissory notes. C&H provides rental equipment for
drilling and workover operations in Louisiana and offshore in the Gulf of
Mexico. In addition, the C&H purchase agreement provided for the payment of
contingent consideration based on the earnings of the acquired business during
the period from January 1, 1999 through December 31, 2000. The contingent
consideration was earned based on results through December 31, 2000.
Accordingly, an additional payment of $2.1 million was paid to the sellers on
March 31, 2001. The contingent consideration was reflected in the December 31,
2000 balance sheet as a current liability and the additional purchase
consideration was recorded as goodwill in 2001 when paid.
 
     Effective November 30, 1999, the Company completed the acquisition of 12
snubbing units and related equipment from two unrelated vendors for total
consideration of $8.2 million, consisting of $3.7 million cash and subordinated
notes held by one of the companies in the amount of $4.5 million. The snubbing
units are similar to those currently operated by the Company and were located in
Europe, Africa, the Middle East and Canada when acquired. The purchase agreement
contained a pre-established rate which would be charged to the buyers upon
future leasing of the equipment and such amounts paid by the buyers will be
applied as payment of the related debt obligations.
 
                                        61

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
6. LONG-TERM DEBT
 
     As of December 31, 2001 and 2000, long-term debt consisted of the following
(in thousands):
 

<Table>
<Caption>
                                                               2001       2000
                                                              -------   --------
<S>                                                           <C>       <C>
OSI
US revolving credit facility, up to $105 million; secured by
  substantially all assets; commitment fee on unused portion
  ranges from 0.25% to 0.5% per annum; variable interest
  rate payable monthly based on prime or LIBOR plus
  applicable percentage; weighted average rate is 5.55% for
  2001......................................................  $48,850   $     --
US revolving credit facility, up to $21 million; secured by
  substantially all assets; commitment fee on unused portion
  is 0.375% per annum; variable interest rate payable
  monthly based on prime plus 2.25%; weighted average rate
  is 9.34% and 9.5% for 2001 and 2000, respectively.........       --      6,624
US term bank loan -- Payable in monthly principal
  installments of $81,740 with the remainder due March 1,
  2003; secured by substantially all assets; variable
  interest rate payable monthly based on prime plus 0.25%;
  weighted average rate of 9.5% and 9.6% for 2001 and 2000,
  respectively..............................................       --      4,169
UK revolving overdraft credit facility -- Payable on demand;
  interest payable quarterly at a margin of 1.90% per annum
  over the bank's variable base rate; weighted average rate
  is 6.4% and 8.0% for 2001 and 2000, respectively..........    3,349      3,777
Subordinated debt issued in conjunction with
  acquisition -- Payable to the stockholders of the acquired
  company in installments through July 2002; terms were
  renegotiated during 2000 with full payment due upon
  closing of the offering; interest rate is prime plus 4%
  payable annually; weighted average rate is 12.9% and 10.3%
  for 2001 and 2000, respectively...........................       --      7,000
Subordinated debt issued in conjunction with
  acquisition -- Payable to the stockholders of the acquired
  company in installments through August 2003; terms were
  renegotiated during 2000 with full payment due upon
  closing of the offering; interest rate is prime plus 4%
  payable annually; weighted average rate is 12.8% and 9.8%
  for 2001 and 2000, respectively...........................       --      7,000
Subordinated note payable to shareholders -- Principal and
  accrued interest at 6% are due December 2005..............       --     25,000
Subordinated note payable to related party -- $10.4 million
  is due on May 17, 2001 with the remaining $500,000 due on
  September 1, 2001; rate of 8.5% for 2001 and 2000.........       --     10,949
Obligations under capital leases............................      348        558
PTI
Canadian revolving credit facility, up to $45 million;
  secured by substantially all assets; variable interest
  rate payable monthly based on the Canadian prime rate or
  Bankers Acceptance discount rate plus applicable
  percentage; weighted average rate is 6.2% for 2001........   16,955         --
Canadian revolving operating credit facility -- A portion of
  the facility is designated as overdraft and the remainder
  is restricted by a margin limit based on the level of
  trade accounts receivable and inventories.................       --      1,816
PTI US revolving credit facility............................       --      1,560
Canadian term revolving bank facility -- Payable in
  quarterly installments of $834,000........................       --     23,506
Unsecured notes payable issued in conjunction with
  acquisitions due in installments over 24 to 36 months and
  bearing interest at 7.5% to 8.5%..........................      720      2,549
</Table>

 
                                        62

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 

<Table>
<Caption>
                                                               2001       2000
                                                              -------   --------
<S>                                                           <C>       <C>
PTI U.S. term loan facility -- Payable in monthly
  installments of $100,000 from September 2000 through
  February 2005, at which time the remaining balance is
  due.......................................................       --      7,000
Obligations under capital leases............................      586        730
HWC
Bank line of credit -- up to $20.0 million available based
  upon a borrowing base consisting of a percentage of
  eligible accounts receivable, real estate and fixed
  assets; interest payable monthly at the bank's prime rate
  or LIBOR plus from 1.00% to 3.00% and an unused commitment
  fee ranging from 0.25% to 0.50% based on the ratio of debt
  to earnings before depreciation, interest and taxes; the
  weighted average interest rate for 2000 was 8.7%; amounts
  outstanding are due May 1, 2003...........................       --     12,250
Bank term debt -- interest is the same rate as the above
  bank line of credit; principal of $762 is repayable
  quarterly through March 31, 2003; balance due at maturity
  May 1, 2003...............................................       --     11,940
Bank line of credit -- up to $500 (Canadian dollars)
  available at HWC's option; interest is payable monthly at
  the bank's prime rate plus 0.25%; amounts outstanding are
  due on demand.............................................       --         87
Bank term debt -- interest is payable monthly at the bank's
  prime rate plus 0.50%; principal of $300 (Canadian
  dollars) is repayable consisting of $200 due at the end of
  April and $50 at the end of July and October each year;
  balance due at maturity, December 2, 2004.................       --        799
Subordinated unsecured notes payable due January 31, 2001;
  interest payable quarterly at 7.00%.......................       --      4,215
Subordinated unsecured note payable due May 1, 2002;
  interest payable quarterly at 7.00%.......................    2,750      2,750
Subordinated notes payable due November 30, 2005; interest
  accrues at 7.00% annually; principal and interest are
  payable at a fixed amount for each day the acquired
  equipment is utilized.....................................    4,245      4,488
Subordinated note payable due September 30, 2003; interest
  payable quarterly at 6.50%................................       --        820
Convertible subordinated unsecured note payable due June 15,
  2001; interest payable quarterly at 5.00%; convertible by
  holder into 200 shares of common stock....................       --        500
Other notes and capital lease obligations payable in monthly
  installments of principal and interest at various interest
  rates.....................................................       30        156
                                                              -------   --------
     Total debt.............................................   77,833    140,243
Less: current maturities....................................    3,894     37,629
                                                              -------   --------
     Total long-term debt...................................  $73,939   $102,614
                                                              =======   ========
</Table>

 
                                        63

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Scheduled maturities of combined long-term debt as of December 31, 2001,
are as follows (in thousands):
 

<Table>
<Caption>
YEAR ENDING DECEMBER 31,
------------------------
<S>                                                           <C>
2002........................................................  $ 3,894
2003........................................................    3,791
2004........................................................   66,299
2005........................................................      283
2006........................................................    3,566
                                                              -------
                                                              $77,833
                                                              =======
</Table>

 
  Current Debt Instruments
 
     On February 14, 2001, OSI entered into a $150 million senior secured
revolving credit facility with a group of banks. Up to $45.0 million of the
credit facility is available in the form of loans denominated in Canadian
dollars and may be made to our principal Canadian operating subsidiaries. This
credit facility replaced our existing credit facilities. The facility matures on
February 14, 2004, unless extended for up to two additional one-year periods
with the consent of the lenders. Amounts borrowed under this new facility bear
interest, at our election, at either:
 
     - a variable rate equal to LIBOR (or, in the case of Canadian dollar
       denominated loans, the Bankers' Acceptance discount rate) plus a margin
       ranging from 1.5% to 2.5%; or
 
     - an alternate base rate equal to the higher of the bank's prime rate and
       the federal funds effective rate plus 0.5% (or, in the case of Canadian
       dollar denominated loans, the Canadian Prime Rate) plus a margin ranging
       from 0.5% to 1.5%, depending upon the ratio of total debt to EBITDA (as
       defined in the new credit facility).
 
     Commitment fees ranging from 0.25% to 0.5% per year are paid on the undrawn
portion of the facility, also depending upon the ratio of total debt to EBITDA.
 
     Subject to exceptions, commitments under our credit facility will be
permanently reduced, and loans prepaid, by an amount equal to 100% of the net
cash proceeds of all non-ordinary course asset sales and the issuance of
additional debt and by 50% of the issuance of equity securities. Mandatory
commitment reductions will be allocated pro rata based on amounts outstanding
under the U.S. dollar denominated facility and the Canadian dollar denominated
facility. In addition, voluntary reductions in commitments will be permitted.
 
     The credit facility is guaranteed by all of our active domestic
subsidiaries and, in some cases, our Canadian and other foreign subsidiaries.
The credit facility is secured by a first priority lien on all the Company's
inventory, accounts receivable and other material tangible and intangible
assets, as well as those of our active subsidiaries. However, no more than 65%
of the voting stock of any foreign subsidiary is required to be pledged if the
pledge of any greater percentage would result in adverse tax consequences.
 
     The credit facility contains negative covenants that restrict the Company's
ability to borrow additional funds, pay dividends, sell assets except in the
normal course of business and enter into other significant transactions.
 
     Under our credit facility, the occurrence of specified change of control
events involving our company would constitute an event of default that would
permit the banks to, among other things, accelerate the maturity of the facility
and cause it to become immediately due and payable in full.
 
     As of December 31, 2001, we had $65.8 million outstanding under this
facility and an additional $7.1 million of outstanding letters of credit leaving
$77.1 million available to be drawn under the facility. Our
 
                                        64

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
weighted average interest rate on our outstanding borrowings under this facility
at December 31, 2001 was 4.1%.
 
     In conjunction with executing the $150 million senior secured revolving
credit facility on February 14, 2001, OSI recognized an extraordinary charge,
net of tax benefit, of $.78 million. In conjunction with executing amendments to
a prior credit facility during 1999, OSI recognized an extraordinary charge of
$.9 million. These extraordinary charges are due to the write-off of deferred
financing costs related to OSI's credit facilities and the payment of prepayment
penalties in 2001 of $.25 million.
 
     On March 3, 2000, OSI entered into an overdraft credit facility providing
for borrowings totaling L5.0 million for UK operations. On June 22, 2001 OSI
renewed this overdraft credit facility for its UK operations providing for
borrowings totaling L3.5 million. Interest is payable quarterly at a margin of
1.90% per annum over the bank's variable base rate. All borrowings under this
facility are payable on demand.
 
  Refinanced Debt Instruments
 
     On March 1, 2000, OSI entered into a new credit agreement (the 2000
Agreement) providing for borrowings totaling $25.9 million for US operations.
From the proceeds of the initial borrowings, all U.S. borrowings under a prior
credit agreement were repaid on March 1, 2000. The 2000 Agreement provided for
$4.9 million of term advances and up to $21.0 million of borrowings on a
revolving basis to OSI. The 2000 Agreement provided for the issuance of letters
of credit, such issuance reducing the amount available for borrowing under the
revolving portion of the facility. On March 1, 2000, $12.4 million was available
to borrow under the revolving portion of the 2000 Agreement. The 2000 Agreement
has a scheduled termination date of March 1, 2003. The term advances were
payable in 59 monthly principal installments of $81,740 with the remainder due
March 1, 2003. Borrowings under the 2000 Agreement carried variable interest
rates payable monthly based upon prime, or eurodollar rate plus 2.25%, for the
revolving loans and prime plus 0.25%, or eurodollar rate plus 2.5%, for the term
loans. The commitment fee on the unused portion of the revolving facility was
0.375% per annum. The 2000 Agreement was secured by substantially all of OSI's
assets and contains customary representations and warranties and events of
default. The 2000 Agreement also required compliance with a number of
affirmative, negative and financial covenants, including a limitation on the
incurrence of indebtedness and a requirement that OSI maintain a specified net
worth.
 
     OSI had subordinated notes payable to Hunting Oilfield Services
(International), Ltd. (Hunting) totaling $10.9 million. Of the total, $10.4
million was due on May 17, 2001, and the remaining $0.5 million was due
September 30, 2001. These notes carried an interest rate of 8.50%. Accrued
interest was payable on March 31 of each year; however, interest payments were
only required to be made if specified cumulative EBITDA thresholds were met. OSI
did not meet such EBITDA thresholds for 1999 and 2000. As of December 31, 2000,
interest of $1.8 million had been accrued but not paid. These instruments were
paid in full during 2001.
 
     On July 31, 1997, OSI issued subordinated promissory notes totaling $7.0
million payable to the stockholders of an acquired company. Principal of $2.0
million was paid on July 31, 2000, with $2.0 million due on July 31, 2001, and
$3.0 million due on July 31, 2002. These notes carried an interest rate of 8.0%
with interest payable on July 31 of each year, beginning July 31, 1998. These
notes were paid in full during 2001.
 
     On February 28, 1998, OSI issued subordinated promissory notes totaling
$7.5 million payable to former SVI stockholders in conjunction with the SVI
acquisition. Principal on these notes was payable in the amounts of $0.5 million
on February 28, 2001, $1.5 million on August 31, 2001, $1.5 million on February
2002, $1.5 million on August 31, 2002 and $1.5 million on February 28, 2003.
Payments of $.95 million had been made as of December 31, 2000. These notes
carried an interest rate of 8.0% with interest payable on the last day of
February 1999 and 2000, and on each payment date thereafter. These notes were
paid in full during 2001.
 
                                        65

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     On July 29, 2000 and July 31, 2000, OSI renegotiated terms with the holders
of subordinated debt totaling $7.0 million and $7.0 million, respectively.
Original maturities of the subordinated debt extending through February 2003
were accelerated to the earlier of April 30, 2001 or upon the occurrence of a
registered public offering of capital stock, in exchange for the holders waiving
their rights to scheduled maturities of principal and interest which were due
prior to April 30, 2001. Interest increased from 8% to prime plus 4% until
principle was paid in full in February 2001.
 
     On December 31, 1998, OSI declared a dividend in the form of a subordinated
note payable to SCF III, acting as agent for all of the common stockholders of
OSI, in the amount of $25.0 million. Principal and accrued interest at 6.0% was
due on December 31, 2005. A portion of this debt was converted to common stock
on February 14, 2001 with the remainder paid in cash.
 
     On July 5, 2000, PTI signed an Amended and Restated Credit Agreement (PTI
Amended Agreement) that included a revolving operating credit facility with
Canadian banks. A portion of the facility was designated as the overdraft
facility and the remainder of the facility was restricted by a margin limit
based on the level of trade accounts receivable and inventories. Amounts
outstanding under this facility were $1.8 million as of December 31, 2000. This
facility was available to the Company through direct advances, subject to the
limits, and at the interest rates as described.
 

<Table>
<Caption>
                                                                      2000
                                                             -----------------------
<S>                                                          <C>
Applicable interest rates:
  Canadian prime based rate................................  7.50% + (0.00% - 0.50)%
  Bankers' acceptances based rate..........................  5.80% + (1.00% - 1.50)%
</Table>

 
     Under the PTI Amended Agreement, the scheduled loan repayments on the term
revolving facility bank loan consist of quarterly installments of $0.8 million,
with payment commencing on August 31, 2000. The unused portion of this facility
was $8.2 million at December 31, 2000. Amounts drawn against the term revolving
facility were available through direct advances and bankers' acceptances. The
interest rate depends on the ratio of PTI's total debt to its earnings before
interest, taxes, depreciation and amortization for the preceding 12 months and
ranges from the Canadian prime rate of 7.50% at December 31, 2000 plus 0.50% to
1.00% for direct advances, and market rate of 5.80% at December 31, 2000 plus
stamping fees of 1.50% to 2.00% for bankers' acceptances.
 
     On August 16, 2000, PTI replaced a prior U.S. revolving credit facility
with a new credit agreement (PTI U.S. Credit Agreement), which included a $2.0
million revolving line of credit facility and a $2.0 million non-revolving line
of credit facility. The PTI U.S. Credit Agreement was with the same bank with
applicable U.S. interest rates being prime based (at December 31, 2000, 9.50%
+/- 0.25%) or LIBOR based (at December 31, 2000, 6.80% + 1.75% to 2.50%). At
December 31, 2000, $1.6 million was drawn under this revolving line of credit
facility.
 
     On August 16, 2000, under the PTI U.S. Credit Agreement, a term loan was
replaced by a $6.5 million term loan facility. The scheduled loan repayments
consist of monthly installments of $0.1 million, from September 1, 2000 through
February 1, 2005, at which time the remaining balance is due. This debt was
repaid on February 14, 2001. This loan bore interest at United States prime (at
December 31, 2000, 9.50% +/- 0.25%) or LIBOR (at December 31, 2000, 6.80% +
1.75% to 2.50%). Collateral provided against the operating credit facility and
term revolving facility is a general security agreement, a fixed and floating
charge debenture on the assets of PTI, pledge of all shares directly held in the
capital stock of subsidiaries, joint and several guarantees from subsidiaries,
assignment of accounts receivable, postponement of claims by the shareholders
and assignment of insurance proceeds.
 
     In connection with an acquisition, PTI issued a promissory note in the
amount of $3.5 million, repayable in three equal annual installments commencing
June 16, 1999. This note was repaid during the year ended December 31, 2001. The
previous term loan incurred interest at 7.50%, and was repayable monthly over
three
 
                                        66

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
years, commencing June 1999, with annual payments of $0.3 million. Certain
assets in the US are provided as collateral. On December 7, 2000, an additional
term loan under the PTI U.S. Credit Agreement was established for $1.0 million
with repayment scheduled for March 7, 2001. This loan bears interest at the
bank's prime (at December 31, 2000, 9.50%). Collateral provided is a first
charge on specified U.S. assets. Certain assets in the US are provided as
collateral.
 
     Amounts owed the bank in previous years by HWC were secured by
substantially all the assets of HWC. Each of HWC's subsidiaries as well as HWC
were guarantors under those bank credit agreements. The bank credit agreement
contained financial and other covenants that, among other things, restricted the
amount of dividends HWC could pay and the amount of debt HWC could incur. HWC
was required to pay an unused commitment fee ranging from 0.25% to 0.5% per
annum of the amount of the unused commitment from the bank line of credit.
 
7.  POSTRETIREMENT HEALTHCARE AND OTHER INSURANCE BENEFITS
 
     The Company provides healthcare and other insurance benefits for
approximately 650 eligible retired employees. This plan is no longer available
to current employees. The healthcare plans are contributory and contain other
cost-sharing features such as deductibles, lifetime maximums, and co-payment
requirements.
 

<Table>
<Caption>
                                                               2001       2000
                                                              -------    -------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Changes in accumulated postretirement benefit obligation:
  Benefit obligation at beginning of year...................  $ 9,058    $ 9,973
  Interest cost on accumulated postretirement benefit
     obligation.............................................      618        849
  Benefits paid.............................................   (1,100)    (1,299)
  Actuarial (gain) loss.....................................   (1,420)     1,154
  Settlement of life benefits...............................       --     (1,619)
                                                              -------    -------
Benefit obligation at end of year...........................  $ 7,156    $ 9,058
                                                              =======    =======
</Table>

 

<Table>
<Caption>
                                                              2001    2000     1999
                                                              ----   -------   ----
                                                                 (IN THOUSANDS)
<S>                                                           <C>    <C>       <C>
Components of net periodic benefit cost:
  Service cost, benefits earned during the period...........  $ --   $    --   $ 24
  Interest cost on accumulated postretirement benefit
     obligation.............................................   618       849    615
  Amortization of net loss (gain)...........................   (16)       51     --
  Amortization of prior service cost........................    79        78     10
  Gain due to settlement of life benefits...................    --    (1,720)    --
                                                              ----   -------   ----
Total net periodic benefit cost (benefit)...................  $681   $  (742)  $649
                                                              ====   =======   ====
</Table>

 
                                        67

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 

<Table>
<Caption>
                                                               2001       2000
                                                              -------    -------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Accumulated postretirement benefit obligation:
  Retirees and dependent spouses............................  $ 6,607    $ 8,337
  Other plan participants...................................      549        721
                                                              -------    -------
  Total accumulated postretirement benefit obligation.......    7,156      9,058
  Unrecognized prior service cost...........................     (775)      (855)
  Unrecognized net gain (loss)..............................      289     (1,204)
                                                              -------    -------
          Total liability included in the consolidated and
            combined balance sheets.........................    6,670      6,999
Less: Current portion.......................................   (1,100)    (1,100)
                                                              -------    -------
          Noncurrent liability..............................  $ 5,570    $ 5,899
                                                              =======    =======
</Table>

 
     The healthcare plans are not funded, and the Company's policy is to pay
these benefits as they are incurred.
 
     In 2000, the Company amended the postretirement plan, which resulted in a
$1.6 million benefit obligation reduction. This amount was credited to expense
in the fourth quarter of 2000.
 
     The accumulated benefit obligation was determined under an actuarial
assumption using a healthcare cost trend rate of 7.5% for medical and 11.25% for
prescription drugs in 2001, gradually declining to approximately 5% in the year
2009 and thereafter over the projected payout period of the benefits. The
accumulated benefit obligations were determined using an assumed discount rate
of 7.25% and 7.50% at December 31, 2001 and 2000, respectively. Under the plan's
provisions, the Company's prescription costs are capped at annual benefit
limits. Retirees are assumed to pay the portion of future prescription costs
above the capped limit.
 
     A one percentage-point increase or decrease in the assumed healthcare cost
trend rates would be immaterial to the accumulated postretirement benefit
obligation and net periodic benefit cost at December 31, 2001.
 
8.  RETIREMENT PLANS
 
     Prior to January 2002, the Company sponsored a number of defined
contribution plans. Effective in January 2002, the Company merged its domestic
defined contribution plans into a single plan sponsored by Oil States.
Participation in these plans is available to substantially all employees.
 
     The Company recognized expense of $1.7 million, $1.7 million and $2.2
million related to its various defined contribution plans during the years ended
December 31, 2001, 2000 and 1999, respectively.
 
                                        68

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
9.  REDEEMABLE PREFERRED STOCK
 
     Redeemable preferred stock outstanding as of December 31, 2001 and 2000, is
as follows (dollar amounts in thousands):
 

<Table>
<Caption>
                                                          SHARES
                                                        OUTSTANDING    2001      2000
                                                        -----------   -------   -------
<S>                                                     <C>           <C>       <C>
OSI
Series A Cumulative Preferred Stock...................    143,000     $    --   $14,300
Series A Exchangeable Cumulative Preferred Stock......     20,000          --     2,000
Series B Exchangeable Cumulative Preferred Stock......     38,500          --     3,850
HWC
Series A Convertible Preferred Stock..................      2,145          --     2,322
Series B Convertible Preferred Stock..................      2,717          --     2,821
                                                                      -------   -------
                                                                      $    --   $25,293
                                                                      =======   =======
</Table>

 
  Series A Cumulative Preferred Stock
 
     As of December 31, 2000, OSI had 143,000 shares of Series A Cumulative
Preferred Stock (Series A Preferred Stock), issued and outstanding with a par
value of $100 per share. The stock was issued to LTV Corporation (LTV) in
conjunction with the acquisition of OSI (formerly Continental Emsco Company) in
1995. Holders of the Series A Preferred Stock were entitled to cumulative
quarterly dividends which commenced on September 15, 1995, at the annual rate of
7.0% ($7.00 per share). As of December 31, 2000, dividends of $.07 million had
been accrued but not paid. The holders of Series A Preferred Stock were not
entitled to vote, except as specified in the Series A Preferred Stock
designation. OSI or the holders of the Series A Preferred Stock could, at either
party's option, redeem all or any part of the Series A Preferred Stock at $100
per share (plus accrued and unpaid dividends), commencing September 15, 2000. On
July 21, 2000, OSI obtained a waiver from LTV whereby LTV waived its rights to
the optional redemption on September 15, 2000. LTV could request redemption at
the earlier of April 30, 2001 or after completion of a registered public
offering. Dividends increased from 7% to 12% effective as of September 15, 2001
as consideration for LTV executing the waiver. This preferred stock and accrued
dividends were paid in full in February 2001 with the proceeds received in the
Offering (See Note 2).
 
  SERIES A EXCHANGEABLE CUMULATIVE PREFERRED STOCK
 
     On July 15, 1997, OSI issued 45,000 shares of preferred stock having a par
value of $0.0001 per share, in connection with the acquisition of HydroTech.
These shares, designated as Series A Exchangeable Cumulative Preferred Stock
(Series A Exchangeable Preferred Stock), had a liquidation value of $100 per
share, plus any accrued and unpaid dividends, less any amounts due from former
HydroTech stockholders. The acquisition agreement with HydroTech provided that
25,000 shares of the Series A Exchangeable Preferred Stock be placed in escrow
and be released in accordance with earn-out requirements specified in the
acquisition agreement. Holders of the Series A Exchangeable Preferred Stock were
entitled to cumulative annual dividends commencing on July 15, 1998, at the
annual rate of 7.0% ($7.00 per share). As of December 31, 2000, dividends of $.2
million had been accrued but not paid. Each share of Series A Exchangeable
Preferred Stock was exchangeable, prior to July 15, 2002, into a number of
shares of OSI's Class A common stock determined by dividing the liquidation
value as of the conversion date by the exchange price. The exchange price was
defined as $15.00 plus 80% times the excess of the fair market value of OSI's
common stock on the date of exchange over $15.00. All unexchanged shares of
Series A Exchangeable Preferred Stock outstanding on July 15, 2002 would
automatically be redeemed at a redemption price equal to liquidation value. OSI
also has the option, upon the occurrence of events specified in the Series A
 
                                        69

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
Exchangeable Preferred Stock certificate of designation, to redeem all or any
portion of the Series A Exchangeable Preferred Stock at a redemption price equal
to liquidation value. The holders of Series A Exchangeable Preferred Stock were
not entitled to vote. During 1998, OSI purchased 25,000 shares, placed in escrow
for $0.01 per share, in accordance with the provisions of the acquisition
agreement as HydroTech failed to meet the specified earn-out requirements. The
difference of $2.5 million was treated as a reduction in goodwill. This
preferred stock and accrued dividends were paid in full in February 2001 with
the proceeds received in the Offering (See Note 2).
 
  Series B Exchangeable Cumulative Preferred Stock
 
     On July 15, 1997, OSI issued 38,500 shares of preferred stock having a par
value of $0.0001 per share in connection with the acquisition of HydroTech.
These shares, designated as Series B Exchangeable Cumulative Preferred Stock
(Series B Exchangeable Preferred Stock), had a liquidation value of $100 per
share, plus any accrued and unpaid dividends, less any amounts due from former
HydroTech stockholders. Holders of the Series B Exchangeable Preferred Stock
were entitled to cumulative annual dividends commencing on July 15, 1998, at the
annual rate of 3.1% ($3.10 per share). As of December 31, 2000, dividends of
$.17 million had been accrued but not paid. Each share of Series B Exchangeable
Preferred Stock was exchangeable, prior to July 15, 2004, into a number of
shares of OSI's Class A common stock determined by dividing the liquidation
value as of the conversion date by the exchange price of $12.80 per share. All
unexchanged shares of Series B Exchangeable Preferred Stock outstanding on July
15, 2004 would automatically be redeemed at a redemption price equal to
liquidation value. OSI also has the option, upon the occurrence of events
specified in the Series B Exchangeable Preferred Stock certificate of
designation, to redeem all or any portion of the Series B Exchangeable Preferred
Stock at a redemption price equal to liquidation value. The holders of Series B
Exchangeable Preferred Stock were not entitled to vote. This preferred stock and
accrued dividends were paid in full in February 2001 with the proceeds received
in the Offering (See Note 2).
 
  Series A Redeemable Convertible Preferred Stock
 
     In connection with the 1999 acquisition of C&H, HWC issued 2,145 shares of
a new Series A class of redeemable convertible preferred stock (Redeemable
Series A Preferred Stock). The shares were redeemable with a liquidation
preference of $1,000 per share. The preferred shares accrued dividends at the
rate of 6.5% per annum. HWC accrued the cumulative unpaid dividends totaling
$.18 million at December 31, 2000. The Redeemable Series A Preferred Stock shall
be redeemed as a whole by HWC on March 31, 2004, at a redemption price of $1,000
per share, plus all accrued and unpaid dividends to the date of the redemption.
The holders of the Redeemable Series A Preferred Stock had the right to convert,
at any time, all or any shares into common stock of HWC based on the liquidation
value of the preferred stock, including accrued but unpaid dividends, on such
date based upon pre-established formulas defined in the agreement. This
preferred stock and accrued dividends were converted into common stock in
February 2001 (See Note 2).
 
  Series B Redeemable Convertible Preferred Stock
 
     In connection with the 1999 acquisition of two unrelated companies, HWC
issued 2,650 shares of a new Series B class of redeemable convertible preferred
stock (Redeemable Series B Preferred Stock). The shares were redeemable with a
liquidation preference of $1,000 per share. The preferred shares accrued
dividends at the rate of 6.5% per annum. HWC accrued the cumulative unpaid
dividends totaling $.1 million at December 31, 2000. The Redeemable Series B
Preferred Stock shall be redeemed as a whole by HWC on October 30, 2004, at a
redemption price of $1,000 per share, plus all accrued and unpaid dividends to
the date of the redemption. The holders of the Redeemable Series B Preferred
Stock had the right to convert, at any time, all or any shares into common stock
of HWC based on the liquidation value of the preferred stock, including accrued
but unpaid dividends, on such date based upon pre-established formulas defined
in the
 
                                        70

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
agreement. This preferred stock and accrued dividends were converted into common
stock in February 2001 (See Note 2).
 
10.  CONVERTIBLE PREFERRED STOCK
 
     On July 31, 1997, OSI issued 16,250 shares of preferred stock, having a par
value of $0.0001 per share, in connection with the acquisition of SMATCO. These
shares, designated as Series A Convertible Cumulative Preferred Stock
(Convertible Preferred Stock), had a liquidation value of $100 per share, plus
any accrued and unpaid dividends. Holders of the Convertible Preferred Stock are
entitled to cumulative annual dividends commencing on July 31, 1998, at the
annual rate of 3.0% ($3.00 per share). As of December 31, 2000, dividends of
$.07 million had been accrued but not paid. Each share of Convertible Preferred
Stock was convertible into a number of shares of OSI's Class A common stock
determined by dividing the liquidation value as of the conversion date by the
conversion price of $15.00 per share. Conversion was optional, prior to August
1, 2002, subject to the occurrence of events specified in the Convertible
Preferred Stock certificate of designation. On August 1, 2002, each share of
Convertible Preferred Stock outstanding would automatically convert as described
above. Upon the occurrence of events specified in the Convertible Preferred
Stock certificate of designation, OSI had the option to redeem all or any
portion of unconverted Convertible Preferred Stock at liquidation value. The
holders of Convertible Preferred Stock were not entitled to vote. This preferred
stock and accrued dividends were paid in full in February 2001 with the proceeds
received in the Offering (See Note 2).
 
11.  INCOME TAXES
 
     Consolidated pre-tax income (loss) from continuing operations for the years
ended December 31, 2001, 2000 and 1999 consists of the following (in thousands):
 

<Table>
<Caption>
                                                          2001      2000       1999
                                                         -------   -------   --------
<S>                                                      <C>       <C>       <C>
US operations..........................................  $21,899   $(2,915)  $(13,808)
Foreign operations.....................................   25,211    19,387     10,913
                                                         -------   -------   --------
  Total................................................  $47,110   $16,472   $ (2,895)
                                                         =======   =======   ========
</Table>

 
     The components of the income tax provision for continuing operations before
extraordinary items for the years ended December 31, 2001, 2000 and 1999 consist
of the following (in thousands):
 

<Table>
<Caption>
                                                            2001      2000      1999
                                                          --------   -------   ------
<S>                                                       <C>        <C>       <C>
Current:
  Federal...............................................  $  2,451   $ 2,085   $1,009
  State.................................................     1,450        54      (65)
  Foreign...............................................     9,657     9,523    4,229
                                                          --------   -------   ------
                                                            13,558    11,662    5,173
                                                          --------   -------   ------
Deferred:
  Federal...............................................   (12,153)     (839)    (940)
  State.................................................      (209)       --       --
  Foreign...............................................       858       (47)     421
                                                          --------   -------   ------
                                                           (11,504)     (886)    (519)
                                                          --------   -------   ------
     Total Provision....................................  $  2,054   $10,776   $4,654
                                                          ========   =======   ======
</Table>

 
                                        71

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The provision for taxes for continuing operations, before extraordinary
items, differs from an amount computed at statutory rates as follows for the
years ended December 31, 2001, 2000 and 1999 (in thousands):
 

<Table>
<Caption>
                                                            2001      2000      1999
                                                          --------   -------   ------
<S>                                                       <C>        <C>       <C>
Federal tax expense (benefit) at statutory rates........  $ 16,490   $ 5,600   $ (984)
Foreign income tax rate differential....................     2,472       517      151
Reduced foreign tax rates...............................        --     1,183      480
Nondeductible expenses..................................     2,867     1,670    1,550
Foreign distributions...................................     6,650        --       --
Net operating loss (utilized) not benefited.............        --      (187)   2,741
State tax expense (benefit), net of federal benefits....     1,296      (161)    (121)
Manufacturing and processing profits deduction..........      (782)     (620)    (295)
Adjustment of valuation allowance.......................   (26,939)    2,876    1,279
Other, net..............................................        --      (102)    (147)
                                                          --------   -------   ------
  Net income tax provision..............................  $  2,054   $10,776   $4,654
                                                          ========   =======   ======
</Table>

 
     The significant items giving rise to the deferred tax assets and
liabilities as of December 31, 2001 and 2000 are as follows (in thousands):
 

<Table>
<Caption>
                                                                2001       2000
                                                              --------   --------
<S>                                                           <C>        <C>
Deferred tax assets
  Net operating loss carryforward...........................  $ 31,913   $ 46,909
  Allowance for doubtful accounts...........................       547        453
  Inventory.................................................     1,330        961
  Employee benefits.........................................     3,408      2,407
  Depreciation..............................................     1,531        924
  Other, net................................................     5,230      6,005
                                                              --------   --------
  Total deferred tax assets.................................    43,959     57,659
  Less: valuation allowance.................................   (28,104)   (55,043)
                                                              --------   --------
  Net deferred tax assets...................................    15,855      2,616
                                                              --------   --------
Deferred tax liabilities
  Depreciation..............................................   (22,901)   (22,232)
  Other intangibles.........................................        --       (182)
  Inventories...............................................      (185)      (369)
  Other.....................................................    (1,205)      (179)
                                                              --------   --------
          Total deferred tax liabilities....................   (24,291)   (22,962)
                                                              --------   --------
          Net deferred tax (liabilities)....................  $ (8,436)  $(20,346)
                                                              ========   ========
</Table>

 
     For US federal income tax purposes, the Company has net operating loss
carryforwards of approximately $93.7 million for regular income taxes that will
expire in the years 2005 through 2020. A portion of the Company's net operating
loss carryforwards are subject to limitations under Section 382 of the Internal
Revenue Code of 1986, as amended. Based on these limitations, the years the
carryforwards expire, and the uncertainty in achieving levels of taxable income
required for their utilization, the Company has provided a valuation allowance
on a portion of these carryforwards. The Company has federal alternative minimum
tax net operating loss carryforwards of $75.2 million, which will expire in the
years 2005 through 2020.
 
     Appropriate US and foreign income taxes have been provided for earnings of
foreign subsidiary companies that are expected to be remitted in the near
future. The cumulative amount of undistributed
 
                                        72

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
earnings of foreign subsidiaries that the company intends to permanently
reinvest and upon which no deferred US income taxes have been provided is $30.1
million at December 31, 2001. The company anticipates that there would be no
material incremental US tax due on the unremitted foreign earnings, if ever
repatriated, as any additional US Tax should be offset in whole or in part by
foreign tax credits.
 
     A portion of the deferred tax assets associated with property, plant and
equipment and net operating loss carryforwards relates to our Canadian
subsidiary's Chilean operation. Because these deferred tax assets can only be
realized against income earned in Chile, a valuation allowance has been
provided. The operating loss carryforwards of approximately $2.9 million are
available to reduce future years taxable income, with no expiration date.
 
12. SUPPLEMENTAL CASH FLOW INFORMATION
 
     Cash paid during the years ended December 31, 2001, 2000 and 1999, for
interest and income taxes was as follows (in thousands):
 

<Table>
<Caption>
                                                            2001      2000     1999
                                                           -------   ------   -------
<S>                                                        <C>       <C>      <C>
Interest.................................................  $12,366   $7,828   $11,610
Income taxes, net of refunds.............................  $12,736   $9,187   $ 8,107
</Table>

 
     Components of cash used for acquisitions as reflected in the consolidated
statements of cash flows for the years ended December 31, 2001, 2000 and 1999,
are summarized as follows (in thousands):
 

<Table>
<Caption>
                                                           2001      2000      1999
                                                          -------   -------   -------
<S>                                                       <C>       <C>       <C>
Fair value of assets acquired and goodwill..............  $ 7,766   $ 4,500   $14,945
Liabilities assumed.....................................   (1,795)       --    (2,168)
Noncash consideration...................................       --    (1,000)   (5,522)
Less: cash acquired.....................................     (852)       --       (38)
                                                          -------   -------   -------
Cash used in acquisition of businesses..................  $ 5,119   $ 3,500   $ 7,217
                                                          =======   =======   =======
</Table>

 
     Other noncash transactions included the receipt of noncash consideration in
1999 for businesses sold by OSI totaling $57.4 million.
 
13. COMMITMENTS AND CONTINGENCIES
 
     The Company leases a portion of its equipment, office space, computer
equipment, automobiles and trucks under leases which expire at various dates.
 
     Minimum future operating lease obligations in effect at December 31, 2001,
are as follows (in thousands):
 

<Table>
<Caption>
                                                               OPERATING
                                                                LEASES
                                                               ---------
<S>                                                            <C>
2002........................................................    $ 3,897
2003........................................................      3,153
2004........................................................      2,233
2005........................................................      1,800
2006........................................................        772
Thereafter..................................................      3,055
                                                                -------
          Total.............................................    $14,910
                                                                =======
</Table>

 
     Rental expense under operating leases was $3.9 million, $3.0 million and
$3.0 million for the years ended December 31, 2001, 2000 and 1999, respectively.
                                        73

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     As of December 31, 2000, OSI had entered into forward purchase contracts
through March 30, 2001 with a bank totaling $3.2 million for the purchase of
foreign currency as a hedge to existing receivable balances. The contract
purchase rates were not significantly different from the December 31, 2000
currency exchange rates.
 
     The Company is involved in various claims, lawsuits and other proceedings
relating to a wide variety of matters. While uncertainties are inherent in the
final outcome of such matters, and it is presently impossible to determine the
actual costs that ultimately may be incurred, management believes that the
resolution of such uncertainties and the incurrence of such costs will not have
a material adverse effect on the Company's consolidated financial position,
results of operations or liquidity.
 
     The Company is aware that certain energy service companies that have in the
past used asbestos in connection with the manufacture of equipment or otherwise
in the operation of their business have become the subject of increased asbestos
related litigation. Since September 30, 2001, subsidiaries of the Company have
been named as defendants in two cases by plaintiffs seeking damages, including
punitive damages, alleging that our subsidiaries have responsibility for two
individuals developing mesothelioma as a result of exposure to asbestos.
Although these are the only cases that management is aware that are pending or
threatened against the Company or its subsidiaries involving allegations
relating to asbestos exposure, there can be no assurance that other asbestos
related claims will not be made. Based on management's preliminary
investigation, management does not believe that these two cases or future claims
relating to asbestos exposure will have a material adverse effect on the
Company's consolidated financial position, results of operations, or liquidity.
 
14. RELATED-PARTY TRANSACTIONS
 
     The Company incurred legal fees totaling $.24 million in 2001 for services
rendered by a law firm in connection with a possible acquisition of a company. A
member of our Board of Directors is a partner with that law firm. No transaction
resulted from the acquisition effort.
 
     The company currently rents land and buildings from an officer of the
Company and pays a monthly rent of $5,100. Such officer was the previous owner
of a business acquired by Oil States.
 
     L. E. Simmons & Associates Incorporated, from time to time, has served as
financial advisor to the Company as it explored opportunities for mergers,
acquisitions or divestitures. Professional advisory fees and out-of-pocket
expenses totaling approximately $.08 million and $.12 million were paid to L. E.
Simmons & Associates, Incorporated, in 2000 and 1999, respectively.
 
     On December 31, 1998, OSI declared a $25.0 million dividend in the form of
a subordinated note payable to SCF III, acting as agent for all common
stockholders of OSI (See Note 6).
 
     HWC paid consulting fees of approximately $.4 million in 1999 to three
former owners of Hydraulic Well Control, Inc., one of which was a board member
of HWC.
 
15.  STOCK-BASED COMPENSATION
 
     In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which requires the Company to record stock-based compensation at
fair value. The Company has adopted the disclosure requirements of SFAS No. 123
and has elected to record employee compensation expense in accordance with
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued
to Employees."
 
     The Company accounts for its employee stock-based compensation plan under
APB Opinion No. 25 and its related interpretations. Accordingly, any deferred
compensation expense is recorded for stock options based on the excess of the
market value of the common stock on the date the options were granted over the
aggregate exercise price of the options. This deferred compensation is amortized
over the vesting period of
                                        74

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
each option. The Company is authorized to grant 3,700,000 stock options under
the 2001 Equity Participation Plan (the Stock Option Plan) to employees,
consultants and directors with amounts, exercise prices and vesting schedules
determined by the Company's compensation committee. As the exercise price of
options granted under the Stock Option Plan have been equal to or greater than
the market price of the Company's stock on the date of grant, no compensation
expense related to this plan has been recorded. Had compensation expense for its
Stock Option Plan been determined consistent with SFAS No. 123, the Company's
net income (loss) and earnings per share at December 31, 2001, 2000 and 1999,
would have been as follows (in thousands, except per share amounts):
 

<Table>
<Caption>
                                                           2001      2000      1999
                                                          -------   ------   --------
<S>                                                       <C>       <C>      <C>
Net income (loss):
  As reported...........................................  $42,676   $1,448   $(14,282)
  Pro forma.............................................   41,136      836    (14,357)
Pro forma income (loss) per share:
  Basic.................................................  $   .91   $  .02   $  (0.63)
  Diluted...............................................      .89      .02      (0.63)
</Table>

 

<Table>
<Caption>
                                                                  STOCK OPTION PLAN
                                                              --------------------------
                                                                             WEIGHTED
                                                                             AVERAGE
                                                               OPTIONS    EXERCISE PRICE
                                                              ---------   --------------
<S>                                                           <C>         <C>
Balance at December 31, 1998................................  1,020,873       $10.05
  Granted...................................................    114,795         6.13
  Exercised.................................................    (85,880)        6.27
  Forfeited.................................................   (288,835)       14.03
                                                              ---------
Balance at December 31, 1999................................    760,953         8.37
  Granted...................................................    118,377         8.95
  Exercised.................................................    (14,562)        8.65
  Forfeited.................................................    (27,897)       12.36
                                                              ---------
Balance at December 31, 2000................................    836,871         8.31
  Granted...................................................  1,389,060         8.02
  Exercised.................................................    (75,820)        5.94
  Forfeited.................................................    (94,619)        7.95
                                                              ---------
Balance at December 31, 2001................................  2,055,492         8.24
                                                              =========
Exercisable at December 31, 1999............................    294,679         8.93
Exercisable at December 31, 2000............................    435,616         8.64
Exercisable at December 31, 2001............................    717,533         7.98
</Table>

 
                                        75

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following table summarizes information for stock options outstanding at
December 31, 2001:
 

<Table>
<Caption>
OPTIONS OUTSTANDING                                                           OPTIONS EXERCISABLE
--------------------------------------------------------------------       --------------------------
                                           WEIGHTED
                          NUMBER            AVERAGE         WEIGHTED         NUMBER          WEIGHTED
                        OUTSTANDING        REMAINING        AVERAGE        EXERCISABLE       AVERAGE
RANGE OF                   AS OF          CONTRACTUAL       EXERCISE          AS OF          EXERCISE
EXERCISE PRICES         12/31/2001           LIFE            PRICE         12/31/2001         PRICE
---------------         -----------       -----------       --------       -----------       --------
<S>                     <C>               <C>               <C>            <C>               <C>
 $5.6659 -  $5.7686        732,111           2.88           $ 5.7247         471,401         $ 5.7299
 $6.2700 -  $6.5432        113,772           3.17           $ 6.3606          96,995         $ 6.3290
 $8.1790 -  $8.6529        238,008           7.66           $ 8.3874          55,796         $ 8.4927
 $9.0000 -  $9.8148        838,866           8.98           $ 9.0183              --         $     --
$11.4506 - $19.8000        112,733           2.52           $16.4277          75,003         $18.5200
$30.0000 - $30.0000         20,002           3.46           $30.0000          18,338         $30.0000
                         ---------           ----           --------         -------         --------
 $5.6659 - $30.0000      2,055,492           5.93           $ 8.2356         717,533         $ 7.9829
</Table>

 
     At December 31, 2001, 1,468,688 options were available for future grant
under the Stock Option Plan.
 
     The weighted average fair values of options granted during 2001, 2000, and
1999 were $5.48, $1.98, and $1.66 per share, respectively. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions used for
grants in 2001, 2000, and 1999, respectively: risk-free interest rates of 5.0%,
4.9%, and 6.3%, no expected dividend yield, expected lives of 8.3, 5.3, and 5.6
years, and an expected volatility of 45%, 0% and 0%.
 
     In February 2001, the Company granted a restricted stock award totaling
100,000 shares. The total value of this award at award date ($.9 million) is
being amortized as compensation expense over its three-year vesting period.
 
16.  DISCONTINUED OPERATIONS
 
     On May 28, 1999, in one transaction, CE Distribution sold all of its
distribution net assets for two senior subordinated notes receivable totaling
$30.0 million, and OSI sold its 51.8% investment in CE Franklin for marketable
securities with a fair market value of $24.7 million on the date of sale. The
combined transaction resulted in a loss on sale of approximately $17.2 million,
net of income tax benefit of $.19 million. Included in the loss on sale is a
provision for operating losses of $12.4 million, net of income tax benefit of
$.8 million, recorded during the phaseout period. In June 1999, one of the
senior subordinated notes in the amount of $14.5 million, plus accrued interest
at LIBOR plus 2.75%, was paid in full. In July 1999, the second senior
subordinated note in the amount of $15.5 million, plus accrued interest at LIBOR
plus 2.75%, was paid in full. Subsequent to May 28, 1999, all of the marketable
securities were sold at a loss of $.33 million. On June 21, 2000, OSI returned
$1.8 million of the purchase price to the buyer for indemnification of specified
post-closing liabilities. Additional adjustments to the purchase price are
possible and management believes the amounts accrued are adequate to cover any
exposure.
 
     On May 28, 1999, in a separate transaction, CE Distribution sold all of its
"oil country tubular" related assets to Sooner for cash of $7.4 million and $2.0
million of noncash consideration for the cancellation of the subordinated
promissory note discussed in Note 6, resulting in a loss on sale of $.7 million.
As a result of the above-mentioned transactions, CE Distribution ceased
operations in 1999.
 
     On July 7, 1999, CE Drilling sold all of its operating net assets, which
included the net assets of CE Mobile, for $65.0 million in cash resulting in a
loss on sale of $4.9 million, net of income tax expense of $.07 million.
Included in the loss on sale is operating income of $.26 million, net of income
tax expense of $.01 million, recorded during the phase out period. The purchase
price was subject to adjustments as defined in the agreement. During 1999, an
additional accrual of $5.7 million, net of income tax expense of
 
                                        76

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
$.22 million, was recorded primarily to accrue for a revision of the purchase
price. On April 17, 2000, OSI settled the purchase price adjustment and returned
$6.9 million of the purchase price to the buyer; however, there are some
outstanding claims which remain to be settled and management believes the
amounts accrued are adequate to cover any exposure. As a result of the
above-mentioned transaction, CE Drilling and CE Mobile ceased operations in
1999.
 
     The results of CE Distribution, CE Franklin, CE Drilling, and CE Mobile are
shown as discontinued operations. Components of amounts reflected in the
accompanying combined statements of operations and cash flows as of and for the
year ended December 31, 1999 is presented in the following table (in thousands):
 

<Table>
<Caption>
                                                                 1999
                                                               --------
<S>                                                            <C>
Operations data:
  Revenues..................................................   $141,489
  Costs and expenses........................................    147,385
                                                               --------
  Operating (loss) income...................................     (5,896)
Interest expense............................................      2,371
Other expense...............................................      4,710
Income tax (benefit) expense................................       (793)
Amount reserved in 1998 for 1999 losses.....................    (12,184)
                                                               --------
Income from discontinued operations.........................   $     --
                                                               ========
Cash flow data:
  Cash flows from operations................................   $(12,251)
  Cash flows from investing activities......................   $     --
  Cash flows from financing activities......................      8,092
                                                               --------
Net cash used in discontinued operations....................   $ (4,159)
                                                               ========
</Table>

 
17. SEGMENT AND RELATED INFORMATION
 
     In accordance with SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," the Company has identified the following
reportable segments: Offshore Products, Wellsite Services and Tubular Services.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies. Most of the
businesses were acquired as a unit, and the management at the time of the
acquisition was retained.
 
     Financial information by industry segment for each of the three years ended
December 31, 2001, 2000 and 1999, is summarized in the following table in
thousands. The Company evaluates performance and allocates resources based on
EBITDA as defined, which is calculated as operating income adding back
depreciation and amortization. Calculations of EBITDA as defined should not be
viewed as a substitute to calculations under accounting principles generally
accepted in the US, in particular operating income and net income. In addition,
EBITDA calculations by one company may not be comparable to another company. The
 
                                        77

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
accounting policies of the segments are the same as those described in the
summary of significant accounting policies.
 

<Table>
<Caption>
                                                                    CORPORATE
                                  OFFSHORE   WELLSITE   TUBULAR        AND
                                  PRODUCTS   SERVICES   SERVICES   ELIMINATIONS    TOTAL
                                  --------   --------   --------   ------------   --------
<S>                               <C>        <C>        <C>        <C>            <C>
2001
  Revenues from unaffiliated
     customers..................  $129,349   $239,777   $302,079     $    --      $671,205
                                  ========   ========   ========     =======      ========
  EBITDA as defined.............    13,008     63,931     12,242      (5,446)       83,735
  Depreciation and
     amortization...............     6,420     16,522      1,786       3,311        28,039
                                  --------   --------   --------     -------      --------
  Operating income (loss).......     6,588     47,409     10,456      (8,757)       55,696
                                  ========   ========   ========     =======      ========
  Capital expenditures..........     4,708     24,131        732         100        29,671
                                  ========   ========   ========     =======      ========
  Total assets..................   136,527    241,621    148,491       3,244       529,883
                                  ========   ========   ========     =======      ========
2000
  Revenues from unaffiliated
     customers..................  $114,594   $189,955   $     --     $    --      $304,549
                                  ========   ========   ========     =======      ========
  EBITDA as defined.............     4,946     45,514         --      (1,259)       49,201
  Depreciation and
     amortization...............     6,568     14,740         --           6        21,314
                                  --------   --------   --------     -------      --------
  Operating (loss) income.......    (1,622)    30,774         --      (1,265)       27,887
                                  ========   ========   ========     =======      ========
  Capital expenditures..........     2,476     18,907         --          --        21,383
                                  ========   ========   ========     =======      ========
  Total assets..................   140,846    208,641         --       4,031       353,518
                                  ========   ========   ========     =======      ========
1999
  Revenues from unaffiliated
     customers..................  $154,330   $112,780   $     --     $    --      $267,110
                                  ========   ========   ========     =======      ========
  EBITDA as defined.............     4,788     26,385         --          --        31,173
  Depreciation and
     amortization...............     7,476     12,799         --          --        20,275
                                  --------   --------   --------     -------      --------
  Operating income (loss).......    (2,688)    13,586         --          --        10,898
                                  ========   ========   ========     =======      ========
  Capital expenditures..........     2,638      8,659         --          --        11,297
                                  ========   ========   ========     =======      ========
     Total assets...............   157,718    197,826         --          --       355,544
                                  ========   ========   ========     =======      ========
</Table>

 
     Financial information by geographic segment for each of the three years
ended December 31, 2001, 2000 and 1999, is summarized below in thousands.
Revenues in the US include export sales. Revenues are attributable to countries
based on the location of the entity selling the products or performing the
services. Total assets are attributable to countries based on the physical
location of the entity and its operating assets and do not include intercompany
balances and the net assets of discontinued operations.
 
                                        78

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 

<Table>
<Caption>
                                     UNITED               UNITED     OTHER
                                     STATES     CANADA    KINGDOM   NON-US     TOTAL
                                    --------   --------   -------   -------   --------
<S>                                 <C>        <C>        <C>       <C>       <C>
2001
  Revenues from unaffiliated
     customers....................  $451,690   $108,685   $41,138   $69,692   $671,205
  Long-lived assets...............   279,783     19,144    17,698    10,637    327,262
2000
  Revenues from unaffiliated
     customers....................  $154,746   $101,624   $29,149   $19,030   $304,549
  Long-lived assets...............   170,105     52,200    19,162    13,373    254,840
1999
  Revenues from unaffiliated
     customers....................  $171,221   $ 56,221   $26,995   $12,673   $267,110
  Long-lived assets...............   160,748     56,408    21,455    11,048    249,659
</Table>

 
     One customer in the year ended December 31, 2001 accounted for 6.4% of our
revenues. No other customer accounted for more than 5% of our revenues in the
periods presented.
 
                                        79

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
18.  QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
 
     Summarized quarterly financial information for 2001, 2000 and 1999 as
follows (in thousands, except per share amounts):
 

<Table>
<Caption>
                                             FIRST       SECOND     THIRD       FOURTH
                                           QUARTER(1)   QUARTER    QUARTER    QUARTER(1)
                                           ----------   --------   --------   ----------
<S>                                        <C>          <C>        <C>        <C>
2001
  Revenues...............................  $  142,976(2) $175,333  $173,510    $179,386
  Gross profit*..........................      34,798     33,711     33,120      31,784
  Income from continuing operations......      11,814     10,261     10,302      11,083
  Extraordinary loss.....................        (784)        --         --          --
  Net income.............................      11,030     10,261     10,302      11,083
  Basic earnings per share:
     Continuing operations...............        0.32       0.21       0.21        0.23
     Extraordinary loss..................       (0.02)        --         --          --
     Net income..........................        0.30       0.21       0.21        0.23
  Diluted earnings per share:
     Continuing operations...............        0.31       0.21       0.21        0.23
     Extraordinary loss..................       (0.02)        --         --          --
     Net income..........................        0.29       0.21       0.21        0.23
2000
  Revenues...............................  $   88,227   $ 68,160   $ 67,525    $ 80,637
  Gross profit*..........................      28,204     17,535     18,904      22,305
  Net income (loss)......................       3,028     (1,840)    (1,071)      1,331
  Basic earnings (loss) per share........        0.12      (0.08)     (0.04)       0.05
  Diluted earnings (loss) per share......        0.11      (0.08)     (0.04)       0.05
1999
  Revenues...............................  $   71,314   $ 64,328   $ 63,658    $ 67,810
  Gross profit*..........................      19,729     14,815     17,688      15,013
  Loss from continuing operations........        (622)    (3,232)      (221)     (2,864)
  Loss from discontinued operations......          --       (701)        --      (5,715)
  Extraordinary loss.....................          --       (349)      (578)         --
  Net loss...............................        (622)    (4,282)      (799)     (8,579)
  Basic and diluted loss per share:
  Continuing operations..................       (0.03)     (0.14)     (0.01)      (0.12)
  Discontinued operations................          --      (0.03)        --       (0.25)
  Extraordinary loss.....................          --      (0.02)     (0.02)         --
  Net loss...............................       (0.03)     (0.19)     (0.03)      (0.37)
</Table>

 
---------------
 
* Represents revenues less costs of sales.
 
(1) Our business in the Wellsite Services segment, particularly in Canada, is
    seasonal with the highest activity occurring in the winter months.
 
(2) Effective, February 14, 2001, the Company acquired Sooner and results of
    Sooner are included from acquisition date.
 
                                        80

<PAGE>
                OIL STATES INTERNATIONAL, INC. AND SUBSIDIARIES
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
19.  VALUATION ALLOWANCES
 
     Activity in the valuation accounts was as follows (in thousands):
 

<Table>
<Caption>
                                  BALANCE AT   CHARGED TO                TRANSLATION   BALANCE AT
                                  BEGINNING    COSTS AND                 AND OTHER,      END OF
                                  OF PERIOD     EXPENSES    DEDUCTIONS       NET         PERIOD
                                  ----------   ----------   ----------   -----------   ----------
<S>                               <C>          <C>          <C>          <C>           <C>
Year Ended December 31, 2001:
  Allowance for doubtful
     accounts receivable........    $2,155       $1,064      $   (729)      $243         $2,733
  Reserve for inventories.......     4,915        1,119          (740)       403          5,697
  Reserves related to
     discontinued operations....     6,512           --          (403)        --          6,109
Year Ended December 31, 2000:
  Allowance for doubtful
     accounts receivable........    $2,177       $  580      $   (558)      $(44)        $2,155
  Reserve for inventories.......     4,620          778          (447)       (36)         4,915
  Reserves related to
     discontinued operations....    17,529           --       (11,017)        --          6,512
Year Ended December 31, 1999:
  Allowance for doubtful
     accounts receivable........    $1,686       $1,121      $   (557)      $(73)        $2,177
  Reserve for inventories.......     4,554          773          (729)        22          4,620
  Provision for operating loss
     during phaseout period
     included in net assets of
     discontinued operations....    12,977           --       (12,977)        --             --
  Reserves related to
     discontinued operations....    13,511        4,000          (182)       200         17,529
</Table>

 
                                        81

<PAGE>
 

                               INDEX TO EXHIBITS
 

<Table>
<Caption>
        EXHIBIT
        -------
<C>                      <S>
         3.1             -- Amended and Restated Certificate of Incorporation
                            (incorporated by reference to Exhibit 3.1 to the
                            Company's Annual Report on Form 10-K for the year ended
                            December 31, 2000, as filed with the Commission on March
                            30, 2001).
         3.2             -- Amended and Restated Bylaws (incorporated by reference to
                            Exhibit 3.2 to the Company's Annual Report on Form 10-K
                            for the year ended December 31, 2000, as filed with the
                            Commission on March 30, 2001).
         3.3             -- Certificate of Designations of Special Preferred Voting
                            Stock of Oil States International, Inc. (incorporated by
                            reference to Exhibit 3.3 to the Company's Annual Report
                            on Form 10-K for the year ended December 31, 2000, as
                            filed with the Commission on March 30, 2001).
         4.1             -- Form of common stock certificate (incorporated by
                            reference to Exhibit 4.1 of Oil States' Registration
                            Statement No. 333-43400 on Form S-1).
         4.2             -- Amended and Restated Registration Rights Agreement
                            (incorporated by reference to Exhibit 4.2 to the
                            Company's Annual Report on Form 10-K for the year ended
                            December 31, 2000, as filed with the Commission on March
                            30, 2001).
        10.1             -- Combination Agreement dated as of July 31, 2000 by and
                            among Oil States International, Inc., HWC Energy
                            Services, Inc., Merger Sub-HWC, Inc., Sooner Inc., Merger
                            Sub-Sooner, Inc. and PTI Group Inc. (incorporated by
                            reference to Exhibit 10.1 of Oil States' Registration
                            Statement No. 333-43400 on Form S-1).
        10.2             -- Plan of Arrangement of PTI Group Inc. (incorporated by
                            reference to Exhibit 10.2 to the Company's Annual Report
                            on Form 10-K for the year ended December 31, 2000, as
                            filed with the Commission on March 30, 2001).
        10.3             -- Support Agreement between Oil States International, Inc.
                            and PTI Holdco (incorporated by reference to Exhibit 10.3
                            to the Company's Annual Report on Form 10-K for the year
                            ended December 31, 2000, as filed with the Commission on
                            March 30, 2001).
        10.4             -- Voting and Exchange Trust Agreement by and among Oil
                            States International, Inc., PTI Holdco and Montreal Trust
                            Company of Canada (incorporated by reference to Exhibit
                            10.4 to the Company's Annual Report on Form 10-K for the
                            year ended December 31, 2000, as filed with the
                            Commission on March 30, 2001).
        10.5**           -- 2001 Equity Participation Plan (incorporated by reference
                            to Exhibit 10.5 to the Company's Annual Report on Form
                            10-K for the year ended December 31, 2000, as filed with
                            the Commission on March 30, 2001).
        10.6**           -- Form of Deferred Compensation Plan (incorporated by
                            reference to Exhibit 10.6 of Oil States' Registration
                            Statement No. 333-43400 on Form S-1).
        10.7**           -- Annual Incentive Compensation Plan (incorporated by
                            reference to Exhibit 10.7 to the Company's Annual Report
                            on Form 10-K for the year ended December 31, 2000, as
                            filed with the Commission on March 30, 2001).
        10.8**           -- Executive Agreement between Oil States International,
                            Inc. and Douglas E. Swanson (incorporated by reference to
                            Exhibit 10.8 to the Company's Annual Report on Form 10-K
                            for the year ended December 31, 2000, as filed with the
                            Commission on March 30, 2001).
</Table>


<PAGE>
 

<Table>
<Caption>
        EXHIBIT
        -------
<C>                      <S>
        10.9**           -- Executive Agreement between Oil States International,
                            Inc. and Cindy B. Taylor (incorporated by Reference to
                            Exhibit 10.9 to the Company's Annual Report on Form 10-K
                            for the year ended December 31, 2000, as filed with the
                            Commission on March 30, 2001).
        10.10**          -- Form of Executive Agreements between Oil States
                            International, Inc. and Named Executive Officers (Messrs.
                            Hughes and Chaddick) (incorporated by reference to
                            Exhibit 10.10 of Oil States' Registration Statement No.
                            333-43400 on Form S-1).
        10.11**          -- Form of Change of Control Severance Plan for Selected
                            Members of Management (incorporated by reference to
                            Exhibit 10.11 of Oil States' Registration Statement No.
                            333-43400 on Form S-1).
        10.12            -- Credit Agreement among Oil States International, Inc.,
                            PTI Group Inc., the Lenders named therein, Credit Suisse
                            First Boston, Credit Suisse First Boston Canada, Hibernia
                            National Bank and Royal Bank of Canada (incorporated by
                            reference to Exhibit 10.12 of Oil States' Registration
                            Statement No. 333-43400 on Form S-1).
        10.13A**         -- Restricted Stock Agreement, dated February 8, 2001,
                            between Oil States International, Inc. and Douglas E.
                            Swanson (incorporated by reference to Exhibit 10.13A of
                            Oil States Report on Form 10Q filed May 15, 2001).
        10.13B**         -- Restricted Stock Agreement, dated February 22, 2001,
                            between Oil States International, Inc. and Douglas E.
                            Swanson (incorporated by reference to Exhibit 10.13B of
                            Oil States Report on Form 10Q filed May 15, 2001).
        10.14**          -- Form of Indemnification Agreement (incorporated by
                            reference to Exhibit 10.14 of Oil States' Registration
                            Statement No. 333-43400 on Form S-1).
        10.15**          -- Compensation Letter Agreement between HWC Energy
                            Services, Inc. and Jay Trahan (incorporated by reference
                            to Exhibit 10.15 to the Company's Annual Report on Form
                            10-K for the year ended December 31, 2000, as filed with
                            the Commission on March 30, 2001).
        10.16*,**        -- Form of Executive Agreement between Oil States
                            International, Inc. and named Executive Officer (Mr.
                            Slator).
        16.1             -- Letter Regarding Change in Certifying Accountant
                            (incorporated by reference to Exhibit 16.1 of Oil States'
                            Registration Statement No. 333-43400 on Form S-1).
        21.1*            -- List of subsidiaries of the Company.
        23.1*            -- Consent of Ernst & Young LLP.
        23.2*            -- Consent of Pricewaterhousecoopers LLP.
        23.3*            -- Consent of Arthur Andersen LLP.
        24.1*            -- Powers of Attorney for Directors.
</Table>

 
---------------
 
* Filed herewith
 
** Management contracts or compensatory plans or arrangements




<PAGE>
                                                                   EXHIBIT 10.16

                               EXECUTIVE AGREEMENT

         This Executive Agreement ("Agreement") between Oil States
International, Inc., a Delaware corporation (the "Company"), and Sandy Slator
(the "Executive") is made and entered into effective as of the date of the
consummation of the initial public offering of the common stock of the Company
(the "Effective Date").

         WHEREAS, Executive is a key executive of the Company or a subsidiary;
and

         WHEREAS, the Company believes it to be in the best interests of its
stockholders to attract, retain and motivate key executives and ensure
continuity of management; and

         WHEREAS, it is in the best interest of the Company and its stockholders
if the key executives can approach material business development decisions
objectively and without concern for their personal situation; and

         WHEREAS, the Company recognizes that the possibility of a Change of
Control (as defined below) of the Company may result in the departure of key
executives to the detriment of the Company and its stockholders; and

         WHEREAS, the Board of Directors of the Company has authorized this
Agreement and certain similar agreements in order to retain and motivate key
management and to ensure continuity of key management;

         THEREFORE,
 for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive agree as
follows:

1.       TERM OF AGREEMENT

         A.       This Agreement shall commence on the Effective Date and,
                  subject to the provisions for earlier termination in this
                  Agreement, shall continue in effect through the third
                  anniversary of the Effective Date; provided, however,
                  commencing on the Effective Date and on each day thereafter,
                  the term of this Agreement shall automatically be extended for
                  one additional day unless the Board of Directors of the
                  Company shall give written notice to Executive that the term
                  shall cease to be so extended in which event the Agreement
                  shall terminate on the third anniversary of the date such
                  notice is given.

         B.       Notwithstanding anything in this Agreement to the contrary,
                  this Agreement, if in effect on the date of a Change of
                  Control, shall automatically be extended for the 24-month
                  period following the Change of Control.

         C.       Termination of this Agreement shall not alter or impair any
                  rights of Executive arising hereunder on or before such
                  termination.


<PAGE>
7
2.       CERTAIN DEFINITIONS

         A.       "Cause" shall mean:

                  (i)      Executive's conviction of (or plea of nolo contendere
                           to) a felony, dishonesty or a breach of trust as
                           regards the Company or any subsidiary;

                  (ii)     Executive's commission of any act of theft, fraud,
                           embezzlement or misappropriation against the Company
                           or any subsidiary that is materially injurious to the
                           Company or such subsidiary regardless of whether a
                           criminal conviction is obtained;

                  (iii)    Executive's willful and continued failure to devote
                           substantially all of his business time to the
                           Company's business affairs (excluding failures due to
                           illness, incapacity, vacations, incidental civic
                           activities and incidental personal time) which
                           failure is not remedied within a reasonable time
                           after written demand is delivered by the Company,
                           which demand specifically identifies the manner in
                           which the Company believes that Executive has failed
                           to devote substantially all of his business time to
                           the Company's business affairs; or

                  (iv)     Executive's unauthorized disclosure of confidential
                           information of the Company that is materially
                           injurious to the Company.

                           For purposes of this definition, no act, or failure
                  to act, on Executive's part shall be deemed "willful" unless
                  done, or omitted to be done, by Executive not in good faith
                  and without reasonable belief that Executive's action or
                  omission was in the best interest of the Company.

         B.       "Change of Control" shall mean any of the following:

                  (i)      any "person" (as such term is used in Section 13(d)
                           and 14(d) of the Securities Exchange Act of 1934, as
                           amended (the "Exchange Act")), (other than a trustee
                           or other fiduciary holding securities under an
                           employee benefit plan of the Company or any
                           affiliate, SCF III, L.P., SCF IV, L.P., or any
                           affiliate of SCF-III, L.P. or SCF-IV, L.P. or any
                           corporation owned, directly or indirectly, by the
                           stockholders of the Company in substantially the same
                           proportions as their ownership of stock of the
                           Company), acquires "beneficial ownership" (within the
                           meaning of Rule 13d-3 under the Exchange Act) of
                           securities of the Company representing 35% or more of
                           the combined voting power of the Company's then
                           outstanding securities; provided, however, that if
                           the Company engages in a merger or consolidation in
                           which the Company or surviving entity in such merger
                           or consolidation becomes a subsidiary of another
                           entity, then references to the Company's then
                           outstanding securities shall be deemed to refer to
                           the outstanding securities of such parent entity;


                                       2

<PAGE>

                  (ii)     a change in the composition of the Board, as a result
                           of which fewer than a majority of the directors are
                           Incumbent Directors. "Incumbent Directors" shall mean
                           directors who either (i) are directors of the Company
                           as of the Effective Date, or (ii) are elected, or
                           nominated for election, to the Board with the
                           affirmative votes of at least two-thirds of the
                           Incumbent Directors at the time of such election or
                           nomination, but Incumbent Director shall not include
                           an individual whose election or nomination occurs as
                           a result of either (1) an actual or threatened
                           election contest (as such terms are used in Rule
                           14a-11 of Regulation 14A promulgated under the
                           Exchange Act) or (2) an actual or threatened
                           solicitation of proxies or consents by or on behalf
                           of a person other than the Board of Directors of the
                           Company;

                  (iii)    the consummation of a merger or consolidation of the
                           Company with any other corporation, other than a
                           merger or consolidation which would result in the
                           voting securities of the Company outstanding
                           immediately prior thereto continuing to represent
                           (either by remaining outstanding or by being
                           converted into voting securities of the surviving
                           entity (or if the surviving entity is or shall become
                           a subsidiary of another entity, then such parent
                           entity)) more than 50% of the combined voting power
                           of the voting securities of the Company (or such
                           surviving entity or parent entity, as the case may
                           be) outstanding immediately after such merger or
                           consolidation;

                  (iv)     the stockholders of the Company approve a plan of
                           complete liquidation of the Company; or

                  (v)      the sale or disposition (other than a pledge or
                           similar encumbrance) by the Company of all or
                           substantially all of the assets of the Company other
                           than to a subsidiary or subsidiaries of the Company.

         C.       "Date of Termination" shall mean the date the Notice of
                  Termination is given unless such termination is by Executive
                  in which event the Date of Termination shall not be less than
                  30 days following the date the Notice of Termination is given.
                  Further, a Notice of Termination given by Executive due to a
                  Good Reason event that is corrected by the Company before the
                  Date of Termination shall be void.

         D.       "Good Reason" shall mean:

                  (i)      a material reduction in Executive's authority, duties
                           or responsibilities from those in effect immediately
                           prior to the Change of Control or the assignment to
                           Executive duties or responsibilities inconsistent in
                           any material respect from those of Executive in
                           effect immediately prior to the Change of Control;

                  (ii)     a material reduction of Executive's compensation and
                           benefits, including, without limitation, annual base
                           salary, annual bonus, and equity incentive


                                       3

<PAGE>

                           opportunities, from those in effect immediately prior
                           to the Change of Control;

                  (iii)    the Company fails to obtain a written agreement from
                           any successor or assigns of the Company to assume and
                           perform this Agreement as provided in Section 9
                           hereof; or

                  (iv)     the Company requires Executive, without Executive's
                           consent, to be based at any office located more than
                           50 miles from the Company's offices to which
                           Executive was based immediately prior to the Change
                           of Control, except for travel reasonably required in
                           the performance of Executive's duties.

                  Notwithstanding the above however, Good Reason shall not exist
                  with respect to a matter unless Executive gives the Company
                  written notice of such matter within 30 days of the date
                  Executive knows or should reasonably have known of its
                  occurrence. If Executive fails to give such notice timely,
                  Executive shall be deemed to have waived all rights Executive
                  may have under this Agreement with respect to such matter.

         E.       "Notice of Termination" shall mean a written notice delivered
                  to the other party indicating the specific termination
                  provision in this Agreement relied upon for termination of
                  Executive's employment and shall set forth in reasonable
                  detail the facts and circumstances claimed to provide a basis
                  for termination of Executive's employment under the provision
                  so indicated.

         F.       "Protected Period" shall mean the 24-month period beginning on
                  the effective date of a Change of Control.

         G.       "Target AICP" shall mean the targeted value of Executive's
                  annual incentive compensation plan bonus for the year in which
                  the Date of Termination occurs or the fiscal year immediately
                  preceding the Change of Control, whichever is a greater
                  amount.

         H.       "Termination Base Salary" shall mean Executive's base salary
                  at the rate in effect at the time the Notice of Termination is
                  given or, if a greater amount, Executive's base salary at the
                  rate in effect immediately prior to the Change of Control.

3.       NO EMPLOYMENT AGREEMENT.

         This Agreement shall be considered solely as a "severance agreement"
         obligating the Company to pay Executive certain amounts of compensation
         and to provide certain benefits in the event and only in the event of
         Executive's termination of employment for the specified reasons and at
         the times specified herein. The parties agree that this Agreement shall
         not be considered an employment agreement and that Executive is an "at
         will" employee of the Company.


                                       4

<PAGE>

4.       REGULAR SEVERANCE BENEFITS.

         Subject to Section 13, if the Company terminates Executive's employment
         (i) other than for Cause and (ii) not during the Protected Period,
         Executive shall receive the following compensation and benefits from
         the Company:

         A.       Within 15 days of the Date of Termination the Company shall
                  pay to Executive in a lump sum, in cash, an amount equal to
                  one times the sum of Executive's (i) Termination Base Salary
                  and (ii) Target AICP.

         B.       Notwithstanding anything in any Company stock plan or grant
                  agreement to the contrary, all restricted shares and
                  restricted stock units of Executive shall become 100% vested
                  and all restrictions thereon shall lapse as of the Date of
                  Termination and the Company shall promptly deliver such shares
                  to Executive.

         C.       For the 24-month period following the Date of Termination (the
                  "Regular Severance Period"), the Company shall continue to
                  provide Executive and Executive's eligible family members,
                  based on the cost sharing arrangement between the Company and
                  similarly situated active employees, with medical and dental
                  health benefits and disability coverage and benefits at least
                  equal to those which would have been provided to Executive if
                  Executive's employment had not been terminated or, if more
                  favorable to Executive, as in effect generally at any time
                  during such period. Notwithstanding the foregoing, if
                  Executive becomes eligible to receive medical, dental and
                  disability benefits under another employer's plans during this
                  Regular Severance Period, the Company's obligations under this
                  Section 4C shall be reduced to the extent comparable benefits
                  are actually received by Executive during such period, and any
                  such benefits actually received by Executive shall be promptly
                  reported by Executive to the Company. In the event Executive
                  is ineligible under the terms of the Company's health and
                  other welfare benefit plans or programs to continue to be so
                  covered, the Company shall provide Executive with
                  substantially equivalent coverage through other sources or
                  will provide Executive with a lump sum payment in such amount
                  that, after all taxes on that amount, shall be equal to the
                  cost to Executive of providing Executive such benefit
                  coverage. The lump sum shall be determined on a present value
                  basis using the interest rate provided in Section
                  1274(b)(2)(B) of the Internal Revenue Code of 1986, as amended
                  (the "Code") on the Date of Termination.

CHANGE OF CONTROL SEVERANCE BENEFITS

5.       SEVERANCE BENEFITS. Subject to Section 13, if either (a) Executive
         terminates his employment during the Protected Period for a Good Reason
         event or (b) the Company terminates Executive's employment during the
         Protected Period other than for Cause, Executive shall receive the
         following compensation and benefits from the Company:


                                       5

<PAGE>

         A.       Within 15 days of the Date of Termination the Company shall
                  pay to Executive in a lump sum, in cash, an amount equal to
                  two times the sum of Executive's (i) Termination Base Salary
                  and (ii) Target AICP.

         B.       Notwithstanding anything in any Company stock plan or grant
                  agreement to the contrary, (i) all restricted shares and
                  restricted stock units of Executive shall become 100% vested
                  and all restrictions thereon shall lapse as of the Date of
                  Termination and the Company shall promptly deliver such shares
                  to Executive and (ii) each then outstanding stock option of
                  Executive shall become 100% exercisable and, excluding any
                  incentive stock option granted prior to the Effective Date,
                  shall remain exercisable for the remainder of such option's
                  term.

         C.       Executive shall be fully vested in Executive's accrued
                  benefits under all qualified pension, nonqualified pension,
                  profit sharing, 401(k), deferred compensation and supplemental
                  plans maintained by the Company for Executive's benefit,
                  except to that the extent the acceleration of vesting of such
                  benefits would violate any applicable law or require the
                  Company to accelerate the vesting of the accrued benefits of
                  all participants in such plan or plans, in which event the
                  Company shall pay Executive a lump sum amount, in cash, within
                  15 days following the Date of Termination, equal to the
                  present value of such unvested accrued benefits that cannot
                  become vested under the plan for the reasons provided above.

         D.       For the 36-month period following the Date of Termination (the
                  "COC Severance Period"), the Company shall continue to provide
                  Executive and Executive's eligible family members, based on
                  the cost sharing arrangement between Executive and the Company
                  on the Date of Termination, with medical and dental health
                  benefits and disability coverage and benefits at least equal
                  to those which would have been provided to Executive if
                  Executive's employment had not been terminated or, if more
                  favorable to Executive, as in effect generally at any time
                  during such period. Notwithstanding the foregoing, if
                  Executive becomes eligible to receive medical, dental and
                  disability benefits under another employer's plans during this
                  COC Severance Period, the Company's obligations under this
                  Section 5D shall be reduced to the extent comparable benefits
                  are actually received by Executive during such period, and any
                  such benefits actually received by Executive shall be promptly
                  reported by Executive to the Company. In the event Executive
                  is ineligible under the terms of the Company's health and
                  other welfare benefit plans or programs to continue to be so
                  covered, the Company shall provide Executive with
                  substantially equivalent coverage through other sources or
                  will provide Executive with a lump sum payment in such amount
                  that, after all taxes on that amount, shall be equal to the
                  cost to Executive of providing Executive such benefit
                  coverage. The lump sum shall be determined on a present value
                  basis using the interest rate provided in Section
                  1274(b)(2)(B) of the Code on the Date of Termination.

         E.       Throughout the term of the COC Severance Period or until
                  Executive accepts other employment, including as an
                  independent contractor, with a new employer, whichever occurs
                  first, Executive shall be entitled to receive outplacement


                                       6

<PAGE>

                  services, payable by the Company, with an aggregate cost not
                  to exceed 15% of Executive's Termination Base Salary, with an
                  executive outplacement service firm reasonably acceptable to
                  the Company and Executive.

6.       PARACHUTE TAX GROSS UP.

         If any payment (including without limitation any imputed income) made,
         or benefit provided, to or on behalf of Executive pursuant to this
         Agreement, including any accelerated vesting or any deferred
         compensation or other award, in connection with a "change in control"
         of the Company (within the meaning of Section 280G of the Code) results
         in Executive being subject to the excise tax imposed by Section 4999 of
         the Code (or any successor or similar provision) the Company shall
         promptly pay Executive an additional amount in cash (the "Additional
         Amount") such that the net amount of all such payments and benefits
         received by Executive after paying all applicable taxes (including
         penalties and interest) on such payments and benefits, including on
         such Additional Amount, shall be equal to the net after-tax amount of
         the payments and benefits (excluding the Additional Amount) that
         Executive would have received if Section 4999 were not applicable to
         such payments and benefits. Such determinations shall be made by the
         Company's independent certified public accountants.

7.       ACCELERATED VESTING OF OPTIONS UPON A CHANGE OF CONTROL.

         Notwithstanding any provisions of any Company stock option plan or
         option agreement to the contrary, upon a Change of Control all
         outstanding unvested stock options, if any, granted to Executive under
         any Company stock option plan (or options substituted therefor covering
         the stock of a successor corporation) shall be fully vested and
         exercisable as to all shares of stock covered thereby effective as of
         the date of the Change of Control.

8.       MITIGATION.

         Executive shall not be required to mitigate the amount of any payment
         provided for in this Agreement by seeking other employment or otherwise
         nor, except as provided in Section 4C and Section 5D, shall the amount
         of any payment or benefit provided for in this Agreement be reduced by
         any compensation earned or benefit received by Executive as the result
         of employment by another employer or self-employment, by retirement
         benefits, by offset against any amount claimed to be owed by Executive
         to the Company or otherwise, except that any severance payments or
         benefits that Executive is entitled to receive pursuant to a Company
         severance plan or program for employees in general shall reduce the
         amount of payments and benefits otherwise payable or to be provided
         under this Agreement.

9.       SUCCESSOR AGREEMENT.

         The Company will require any successor (whether direct or indirect, by
         purchase, merger, consolidation or otherwise) to all or substantially
         all of the business and/or assets of the Company to assume expressly
         and agree to perform this Agreement in the same manner and to the same
         extent that the Company would be required to perform if no succession


                                       7

<PAGE>

         had taken place. Failure of the successor to so assume shall constitute
         a breach of this Agreement and entitle Executive to the benefits
         hereunder as if triggered by a termination by the Company other than
         for Cause.

10.      INDEMNITY.

         In any situation where under applicable law the Company has the power
         to indemnify, advance expenses to and defend Executive in respect of
         any judgements, fines, settlements, loss, cost or expense (including
         attorneys fees) of any nature related to or arising out of Executive's
         activities as an agent, employee, officer or director of the Company or
         in any other capacity on behalf of or at the request of the Company,
         then the Company shall promptly on written request, indemnify
         Executive, advance expenses (including attorney's fees) to Executive
         and defend Executive to the fullest extent permitted by applicable law,
         including but not limited to making such findings and determinations
         and taking any and all such actions as the Company may, under
         applicable law, be permitted to have the discretion to take so as to
         effectuate such indemnification, advancement or defense. Such agreement
         by the Company shall not be deemed to impair any other obligation of
         the Company respecting Executive's indemnification or defense otherwise
         arising out of this or any other agreement or promise of the Company
         under any statute.

11.      NOTICE.

         For the purpose of this Agreement, notices and all other communications
         provided for in this Agreement shall be in writing and delivered by
         United States certified or registered mail (return receipt requested,
         postage prepaid) or by courier guaranteeing overnight delivery or by
         hand delivery (with signed receipt required), addressed to the
         respective addresses set forth below, and such notice or communication
         shall be deemed to have been duly given two days after deposit in the
         mail, one day after deposit with such overnight carrier or upon
         delivery with hand delivery. The addresses set forth below may be
         changed by a writing in accordance herewith.

         Company:                                    Executive:

         Oil States International, Inc.              Sandy Slator
         333 Clay Street, Suite 3460                 10264 Connaught Drive
         Houston, Texas 77002                        Edmonton, Alberta T5N 3J2
         Attn: Chairman of the Board

12.      ARBITRATION.

         The parties agree to resolve any claim or controversy arising out of or
         relating to this Agreement, including but not limited to the
         termination of employment of Executive, by binding arbitration under
         the Federal Arbitration Act before one arbitrator in Houston, Texas,
         administered by the American Arbitration Association under its
         Commercial Arbitration Rules, and judgment on the award rendered by the
         arbitrator may be entered in any court having jurisdiction thereof. The
         fees and expenses of the arbitrator shall be borne solely by the
         non-prevailing party or, in the event there is no clear prevailing
         party, 


                                       8

<PAGE>

         as the arbitrator deems appropriate. Except as provided above, each
         party shall pay its own costs and expenses (including, without
         limitation, attorneys' fees) relating to any mediation/arbitration
         proceeding conducted under this Section 12.

13.      WAIVER AND RELEASE.

         As a condition to the receipt of any payment or benefit under this
         Agreement, Executive must first execute and deliver to the Company a
         binding general release, as prepared by the Company, that releases the
         Company, its officers, directors, employees, agents, subsidiaries and
         affiliates from any and all claims and from any and all causes of
         action of any kind or character that Executive may have arising out of
         Executive's employment with the Company or the termination of such
         employment, but excluding (i) any claims and causes of action that
         Executive may have arising under or based upon this Agreement, and (ii)
         any vested rights Executive may have under any employee benefit plan or
         deferred compensation plan or program of the Company.

14.      EMPLOYMENT WITH AFFILIATES.

         Employment with the Company for purposes of this Agreement includes
         employment with any entity in which the Company has a direct or
         indirect ownership interest of 50% or more of the total combined voting
         power of all outstanding equity interests, and employment with any
         entity which has a direct or indirect interest of 50% or more of the
         total combined voting power of all outstanding equity interests of the
         Company. For purposes of this Agreement, "Good Reason" shall be
         construed to refer to Executive's positions, duties, and
         responsibilities in the position or positions in which Executive serves
         immediately before the Change of Control, but shall not include titles
         or positions with subsidiaries and affiliates of the Company that are
         held primarily for administrative convenience.

15.      GOVERNING LAW.

         (a)      THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
                  WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
                  CONFLICTS OF LAW PRINCIPLES.

         (b)      EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
                  JURISDICTION OF THE STATE AND FEDERAL COURTS IN HARRIS COUNTY,
                  TEXAS, FOR THE PURPOSES OF ANY PROCEEDING ARISING OUT OF THIS
                  AGREEMENT.

16.      ENTIRE AGREEMENT.

         This Agreement is an integration of the parties' agreement and no
         agreement or representatives, oral or otherwise, express or implied,
         with respect to the subject matter hereof have been made by either
         party which are not set forth expressly in this Agreement. This
         Agreement hereby expressly terminates, rescinds and replaces in full
         any prior agreement (written or oral) between the parties relating to
         the subject matter hereof.


                                       9

<PAGE>

17.      WITHHOLDING OF TAXES.

         The Company shall withhold from all payments and benefits provided
         under this Agreement all taxes required to be withheld by applicable
         law.

18.      BENEFICIARY.

         In the event Executive dies before receiving the lump sum severance
         payment to which Executive was entitled hereunder, Executive's spouse
         or, if there is no spouse, the beneficiary designated by Executive
         under the Company-sponsored group term life insurance plan, shall
         receive such payment.

         IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement effective for all purposes as of the Effective Date.

                                        OIL STATES INTERNATIONAL, INC.

                                        By:  /s/ CINDY B. TAYLOR
                                           ------------------------------------
                                        Name:    Cindy B. Taylor
                                             ----------------------------------
                                        Title:   Senior Vice President - CFO
                                               --------------------------------


                                        EXECUTIVE /s/ SANDY SLATOR
                                        ---------------------------------------


                                       10


<PAGE>
                                                                    EXHIBIT 21.1

                     LIST OF SUBSIDIARIES OF THE REGISTRANT

The following represents the Registrant's direct and indirect subsidiaries.
Unless otherwise indicated, each subsidiary will be wholly-owned, directly or
indirectly, by the Registrant.

Oil States Industries, Inc. (DE)
892489 Alberta Inc. (Alberta)
892492 Alberta Inc. (Alberta)
892493 Alberta Inc. (Alberta)
3045843 Nova Scotia Company (Nova Scotia)
HWC Energy Services, Inc. (TX)
Specialty Rental Tool & Supply, Inc. (TX)
Capstar Drilling, Inc. (TX)
Hydraulic Well Control, Inc. (LA)
PTI Group Inc. (Alberta)
Ekati Services Ltd. (NW Territories) (3)
Norwel Developments Limited (NW Territories)
General Marine Leasing, Inc. (LA)
Diamond Resource Services Ltd. (Alberta)
Travco Industrial Housing Ltd. (Alberta)
Sooner Inc. (DE)
Sooner Pipe Inc. (OK)
Sooner Holding Company (DE)
Sooner Pipe & Supply Nigeria Limited (Nigeria)




<PAGE>
                                                                    EXHIBIT 23.1


                        CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-57960) pertaining to the 2001 Equity Participation Plan of Oil
States International, Inc. and (Form S-8 No. 333-63050) pertaining to the
Deferred Compensation Plan of Oil States International, Inc. of our report dated
February 1, 2002, with respect to the consolidated financial statements of Oil
States International, Inc. included in the Annual Report (Form 10-K) for the
year ended December 31, 2001.


                                             ERNEST & YOUNG LLP

Houston, Texas
March 1, 2002





<PAGE>
                                                                    EXHIBIT 23.2

  
March 1, 2002


CONSENT OF INDEPENDENT AUDITORS


We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-57960) and Form S-8 (No. 333-6050) of Oil States
International, Inc. of our report dated February 26, 2001 relating to the
consolidated financial statements of PTI Group Inc. for the year ended December
31, 2000, that appears in the Annual Report of Oil States International, Inc. on
Form 10-K for the year ended December 31, 2001, filed with the Securities and
Exchange Commission.

/s/ PricewaterhouseCoopers LLP

Chartered Accountants
Edmonton, Alberta, Canada





<PAGE>
                                                                    EXHIBIT 23.3


                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into Oil States International, Inc.'s
previously filed Registration Statements on Form S-8, File No. 333-57960 and No.
333-63050.


ARTHUR ANDERSEN LLP


Dallas, Texas
March 4, 2002






<PAGE>
                                                                    EXHIBIT 24.1

                                POWER OF ATTORNEY



         The undersigned directors of Oil States International, Inc. (the
"Company") do hereby constitute and appoint Douglas E. Swanson and Cindy B.
Taylor, and each of them, with full power of substitution, our true and lawful
attorneys-in-fact and agents to do any and all acts and things in our name and
behalf in our capacities as directors, and to execute any and all instruments
for us and in our names in such capacities indicated below which such person may
deem necessary or advisable to enable the Company to comply with the Securities
Exchange Act of 1934, as amended and any rules, regulations and requirements of
the Securities and Exchange Commission, in connection with the Company's annual
report on Form 10-K for the year ended December 31, 2001, including
specifically, but not limited to, power and authority to sign for us, or any of
us, in our capacities indicated below and any and all amendments thereto; and we
do herby ratify and confirm all that such person or persons shall do or cause to
be done by virtue hereof.

         IN WITNESS WHEREOF, each of the undersigned have executed this Power of
Attorney as of the dates set forth beside their respective names below.


<Table>
<Caption>
               SIGNATURE                                 TITLE
                                  DATE
               ---------                                 -----                                  ----
<S>                                              <C>                                      <C>         

      /s/ L.E. Simmons                           Chairman of the Board                    March 1, 2002         
---------------------------
        L.E. Simmons                       


    /s/ Martin Lambert                           Director                                 March 1, 2002    
---------------------------
      Martin Lambert                             


   /s/ Mark G. Papa                              Director                                 March 1, 2002       
---------------------------
      Mark G. Papa                             

 /s/ Gary L. Rosenthal                           Director                                 March 1, 2002        
---------------------------
   Gary L. Rosenthal                         


 /s/ Andrew L. Waite                             Director                                 March 1, 2002              
---------------------------
   Andrew L. Waite                           


 /s/ Stephen A. Wells                            Director                                 March 1, 2002         
---------------------------
  Stephen A. Wells                          
</Table>



                                       1