exv99w1

Independent Auditor’s Report

To the Board of Directors of
WEDGE Energy Holdings, LLC

We have audited the accompanying combined balance sheets of WEDGE Wireline Services, Inc., WEDGE Well Services, L.L.C. and WEDGE Fishing and Rental Services, L.L.C. (which represent companies under common control as further described in Note A to the combined financial statements) as of December 31, 2007, December 31, 2006 and December 31, 2005, and the related statements of income, changes in stockholders’ and members’ equity and cash flows for the years then ended. These combined 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 did not audit the 2006 and 2005 financial statements of Penkota Wireline Service, Inc. or the 2006 and 2005 consolidated financial statements of Rocky Mountain Phoenix Surveys, Inc. and subsidiary, both are consolidated subsidiaries of WEDGE Wireline Services, Inc., which statements reflect total assets and revenue constituting 22% of the related combined totals for 2006 and 38% and 39%, respectively of the related combined totals for 2005. Those statements were audited by other auditor’s whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Penkota Wireline Service, Inc and Rocky Mountain Phoenix Surveys, Inc. and subsidiary, is based solely on the report of the other auditor’s.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 audit reports of the other auditor’s provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditor’s, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of WEDGE Wireline Services, Inc., WEDGE Well Services, L.L.C. and WEDGE Fishing and Rental Services, L.L.C. as of December 31, 2007, December 31, 2006 and December 31, 2005, and the combined results of their operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Fitts, Roberts & Co. P.C.

Houston, Texas
May 9, 2008

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WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
COMBINED BALANCE SHEETS
As of December 31,


	2007			2006			2005
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	12,209,615		$	6,542,911		$	2,413,468
Accounts receivable — trade, net of allowance		17,569,369			13,304,626			5,295,560
Inventory		830,258			918,995			300,222
Income tax receivable
From affiliate		2,302,179			1,228,049			—
Federal		1,013,108			—			—
Deferred income tax receivable — curent		348,372			30,063			—
Prepaid expenses and other		1,097,626			1,624,484			971,880


TOTAL CURRENT ASSETS		35,370,527			23,649,128			8,981,130

Land		95,000			95,000			—
Property and equipment		135,023,703			73,529,283			31,958,112
Accumulated depreciation		(16,882,716	)		(7,728,380	)		(2,270,424	)


PROPERTY AND EQUIPMENT, NET		118,235,987			65,895,903			29,687,688

Note receivable from affiliate		2,671,378			—			—
Covenants not to compete, net of amortization		435,371			538,426			377,593
Goodwill		20,527,494			19,449,230			12,637,036


TOTAL ASSETS	$	177,240,757		$	109,532,687		$	51,683,447

The accompanying notes are an integral part of this financial statement.

-4-


	2007		2006		2005
LIABILITIES AND STOCKHOLDERS’ AND MEMBERS’ EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	14,055,357	$	9,143,507	$	3,396,340
Payables to affiliates and employees		1,810,713		753,781		1,251,123
Dividends payable		—		1,140,135		—
Current income taxes payable to affiliate		—		—		935,390
Deferred income tax payable — current portion		—		—		126,786
Current maturities of subordinated notes payable		250,000		2,600,000		—
Current maturities of notes payable to affiliates		8,356,000		—		—
Current maturities of notes payable		—		—		1,911,798

TOTAL CURRENT LIABILITIES		24,472,070		13,637,423		7,621,437


LONG-TERM LIABILITIES
Long-term debt
Notes payable		—		—		9,243,958
Notes payable to affiliates		81,012,458		47,091,939		8,834,462
Subordinated notes payable		1,725,000		375,000		—

Total long-term debt		82,737,458		47,466,939		18,078,420

Deferred income tax payable		5,402,968		1,789,266		1,095,141

TOTAL LONG-TERM LIABILITIES		88,140,426		49,256,205		19,173,561


TOTAL LIABILITIES		112,612,496		62,893,628		26,794,998

STOCKHOLDERS’ AND MEMBERS’ EQUITY
Common stock		1,000		7,000,267		7,000,267
Paid-in capital		28,828,558		8,065,746		7,331,425
Retained earnings		8,463,794		6,404,502		2,988,421
Members’ equity		27,334,909		25,168,544		7,568,336

TOTAL STOCKHOLDERS’ AND MEMBERS’ EQUITY		64,628,261		46,639,059		24,888,449


TOTAL LIABILITIES AND STOCKHOLDERS’ AND MEMBERS’ EQUITY	$	177,240,757	$	109,532,687	$	51,683,447

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WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
COMBINED INCOME STATEMENTS
For the years ended December 31,


	2007			2006			2005
SALES	$	110,071,436		$	75,442,892		$	27,920,191

SELLING, OPERATING AND ADMINISTRATIVE EXPENSES
Employee wages, payroll taxes and benefits		44,593,288			27,712,875			11,549,782
Supplies, materials and equipment		9,681,772			6,569,575			2,339,435
Depreciation		10,048,763			5,777,828			2,220,657
Fuel & chemicals		4,565,824			2,922,027			965,920
Repairs and maintenance		3,739,944			2,401,090			823,768
Other expenses		2,880,525			2,511,576			1,010,103
Management fees		2,755,000			1,479,155			300,996
Taxes other than income		1,063,398			696,750			123,697

TOTAL SELLING, OPERATING AND ADMINISTRATIVE EXPENSES		79,328,514			50,070,876			19,334,358

OTHER INCOME AND (EXPENSES)
Interest income		422,717			170,764			30,373
Interest expense		(4,299,039	)		(2,816,265	)		(751,735	)
Other income (expense)		598,587			79,366			(28,298	)


INCOME BEFORE INCOME TAXES		27,465,187			22,805,881			7,836,173

PROVISION FOR INCOME TAXES
Current		6,780,591			7,402,117			3,091,212
Deferred		3,295,393			652,933			(22,000	)


TOTAL PROVISION FOR INCOME TAXES		10,075,984			8,055,050			3,069,212


NET INCOME	$	17,389,203		$	14,750,831		$	4,766,961

The accompanying notes are an integral part of this financial statement.

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WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS’ AND MEMBERS’ EQUITY
For the year ended December 31, 2007


	Rocky		Penkota				WEDGE			WEDGE		WEDGE
	Mountain		Wireline		WEDGE		Wireline			Well		Fishing &
	Phoenix		Services,		Log-Tech,		Services,			Services,		Rental
	Surveys, Inc.		Inc.		L.L.C.		Inc.			L.L.C.		Services, L.L.C.		Eliminations			Combined

Common stock, $1 par value:
Beginning and ending, 267 shares authorized and issued	$	267	$	—	$	—	$	—		$	—	$	—	$	(267	)	$	—


Common stock, $28,000 par value:
Beginning and ending, 1,000 shares authorized 250 shares issued		—		7,000,000		—		—			—		—		(7,000,000	)		—


Common stock, $1 par value, 1,000 shares authorized:		—		—		—		—			—		—		—			—
Balance, beginning		—		—		—		—			—		—		—			—
Sales of 1,000 shares		—		—		—		1,000			—		—		—			1,000

Balance, ending		—		—		—		1,000			—		—		—			1,000

Additional paid in capital,
Balance, beginning		7,331,425		734,321		—		—			—		—		(8,065,746	)		—
Contributions		—		—		—		28,981,799	(1)		—		—		(153,241	)		28,828,557

Balance, ending		7,331,425		734,321		—		28,981,799			—		—		(8,218,987	)		28,828,557


Retained earnings
Balance, beginning		4,017,798		2,558,334		—		—			—		—		(6,576,132	)		—
Add net income		3,651,572		2,964,065		—		8,439,275			—		—		(6,591,118	)		8,463,794	(2)

Balance, ending		7,669,370		5,522,399		—		8,439,275			—		—		(13,167,250	)		8,463,794


Members’ equity
Balance, beginning		—		—		5,631,570		—			11,872,389		7,646,196		(5,631,570	)		19,518,585
Add net income		—		—		2,954,691		—			7,160,921		655,403		(2,954,691	)		7,816,324

Balance, ending		—		—		8,586,261		—			19,033,310		8,301,599		(8,586,261	)		27,334,909



TOTAL STOCKHOLDERS’ AND MEMBERS’ EQUITY	$	15,001,062	$	13,256,720	$	8,586,261	$	37,422,074		$	19,033,310	$	8,301,599	$	(36,972,765	)	$	64,628,260

The accompanying notes are an integral part of this financial statement.


(1)		Includes $1,109,085 of net income of Rocky Mountain Phoenix Surveys, Inc., Penkota Wireline Services, Inc., and WEDGE Log-Tech, L.L.C. from January 1, 2007 thru February 28, 2007 which was included as part of the restructuring contribution — see Note A

(2)		Includes ten months income of Rocky Mountain Phoenix Surveys, Inc., Penkota Wireline Services, Inc., WEDGE Log-Tech, L.L.C., and WEDGE Wireline Services, Inc. See (1) above for remaining two months

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	Rocky			Penkota						WEDGE		WEDGE
	Mountain			Wireline			WEDGE			Well		Fishing &
	Phoenix			Services,			Log-Tech,			Services,		Rental
	Surveys, Inc.			Inc.			L.L.C.			L.L.C.		Services, L.L.C.		Eliminations			Combined

Common stock, $1 par value:
Beginning and ending, 267 shares authorized and issued	$	267		$	—		$	—		$	—	$	—	$	—		$	267


Common stock, $28,000 par value:
Beginning and ending, 1,000 shares authorized 250 shares issued		—			7,000,000			—			—		—		—			7,000,000


Additional paid in capital,
Balance, beginning		7,331,425			—			—			—		—		—			7,331,425
Capital contributed		—			734,321			—			—		—		—			734,321

Balance, ending		7,331,425			734,321			—			—		—		—			8,065,746


Retained earnings
Balance, beginning		1,836,487			1,151,934			—			—		—		—			2,988,421
Add net income		2,881,311			1,776,400			—			—		—		(171,630	)		4,486,081
Deduct dividends paid		(700,000	)		(370,000	)		—			—		—		—			(1,070,000	)

Balance, ending		4,017,798			2,558,334			—			—		—		(171,630	)		6,404,502


Members’ equity
Balance, beginning		—			—			—			5,590,325		1,978,011		—			7,568,336
Contributions		—			—			3,270,000			—		5,205,593		—			8,475,593
Add net income		—			—			3,501,705			6,282,064		462,592		18,389			10,264,750
Deduct distributions		—			—			(1,140,135	)		—		—		—			(1,140,135	)

Balance, ending		—			—			5,631,570			11,872,389		7,646,196		18,389			25,168,544



TOTAL STOCKHOLDERS’ AND MEMBERS’ EQUITY	$	11,349,490		$	10,292,655		$	5,631,570		$	11,872,389	$	7,646,196	$	(153,241	)	$	46,639,059

The accompanying notes are an integral part of this financial statement.

-8-


	Rocky		Penkota		WEDGE		WEDGE
	Mountain		Wireline		Well		Fishing &
	Phoenix		Services,		Services,		Rental
	Surveys, Inc.		Inc.		L.L.C.		Services, L.L.C.			Combined

Common stock, $1 par value,:
267 shares authorized
Balance, beginning	$	—	$	—	$	—	$	—		$	—
Sales of 267 shares		267		—		—		—			267

Balance, ending		267		—		—		—			267


Common stock, $28,000 par value:
Beginning and ending, 1,000 shares authorized 250 shares issued		—		7,000,000		—		—			7,000,000


Additional paid in capital,
Balance, beginning		—		—		—		—			—
Contributions		7,331,425		—		—		—			7,331,425

Balance, ending		7,331,425		—		—		—			7,331,425


Retained earnings
Balance, beginning		—		—		—		—			—
Add net income		1,836,487		1,151,934		—		—			2,988,421

Balance, ending		1,836,487		1,151,934		—		—			2,988,421


Members’ equity
Balance, beginning		—		—		3,632,129		—			3,632,129
Contributions		—		—		—		2,157,667			2,157,667
Add net income (loss)		—		—		1,958,196		(179,656	)		1,778,540

Balance, ending		—		—		5,590,325		1,978,011			7,568,336



TOTAL STOCKHOLDERS’ AND MEMBERS’ EQUITY	$	9,168,179	$	8,151,934	$	5,590,325	$	1,978,011		$	24,888,449

The accompanying notes are an integral part of this financial statement.

-9-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
COMBINED STATEMENT OF CASH FLOWS
For the years ended December 31,


	2007			2006			2005
CASH FLOWS FROM OPERATING ACTIVITIES

Net income	$	17,389,203		$	14,750,831		$	4,766,961

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,251,818			5,966,994			2,323,064
(Gain) on sale of assets		(593,695	)		(49,242	)		(24,333	)
Decrease (increase) in operating assets:
Accounts receivable		(4,264,744	)		(7,270,074	)		(4,244,469	)
Inventory		88,737			(328,380	)		(235,336	)
Prepaid expenses		526,858			(616,418	)		(691,036	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		4,911,850			4,444,912			338,692
Payables to affiliates		1,056,932			(797,342	)		651,123
Current and deferred income taxes		1,208,155			(1,626,163	)		1,807,317


NET CASH PROVIDED BY OPERATING ACTIVITIES		30,575,114			14,475,118			4,691,983


CASH FLOWS FORM INVESTING ACTIVITIES

Purchase of property and equipment		(59,593,949	)		(36,322,008	)		(21,988,156	)
Proceeds from sale of property and equipment		1,488,122			369,114			110,501
Acquisition of business		(3,267,589	)		(10,603,788	)		(7,291,195	)
Disbursements on notes receivable from affiliate		(2,753,500	)		—			—
Receipts on notes receivable from affiliate		82,122			—			—


NET CASH (USED IN) INVESTING ACTIVITIES	$	(64,044,794	)	$	(46,556,682	)	$	(29,168,850	)

The accompanying notes are an integral part of this financial statement.

-10-


	2007			2006			2005
CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings on notes payable	$	47,333,838		$	38,841,090		$	16,961,163
Payments on notes payable		(7,657,319	)		(10,769,997	)		(510,003	)
Capital contributions received		600,000			9,209,914			9,489,359
Dividends paid		(1,140,135	)		(1,070,000	)		—


NET CASH PROVIDED BY FINANCING ACTIVITIES		39,136,384			36,211,007			25,940,519


NET INCREASE IN CASH AND CASH EQUIVALENTS		5,666,704			4,129,443			1,463,652

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		6,542,911			2,413,468			949,816


CASH AND CASH EQUIVALENTS AT END OF YEAR	$	12,209,615		$	6,542,911		$	2,413,468


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	3,218,403		$	1,941,939		$	643,431

Cash paid for income taxes	$	9,050,265		$	8,909,404		$	2,964,426


NON-CASH INVESTING AND FINANCING ACTIVITIES
Acquisition of businesses; subordinated notes issued for portion of purchase price	$	1,600,000		$	3,250,000		$	—


Covenant not to compete purchased by issuance of accrued expenses	$	—		$	300,000		$	—

-11-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE A — Summary of Significant Accounting Policies

Nature of Business

WEDGE Wireline Services, Inc. (WIRE), WEDGE Well Services, L.L.C. (WWS) and WEDGE Fishing and Rental Services, L.L.C. (WFRS), referred to as (“WEDGE Energy” or the “Company”) on a combined basis, are based in Houston, Texas. WEDGE Energy provides various services and products to the oil and gas industry through various subsidiaries and divisions including: 1) wire line services, 2) well servicing, and 3) fishing & rental tools.

Wireline services include logging, pipe recovery, perforating and other drilling services to various oil drilling companies. These services are provided primarily in Utah, Colorado, North Dakota, Kansas, and Texas.

The well servicing division provides well and rig maintenance and repair to various oil and gas companies. These services are provided primarily in Texas and Louisiana.

The fishing & rental tool division provides rental fishing tool equipment and operators for pipe recovery needs in cased hole and open hole applications. These services are provided primarily in Texas and Oklahoma.

A summary of the significant accounting policies applied in the preparation of the accompanying combined financial statements are as follows:

Principles of Combination and Ownership

The following are included in the combined financial statements of WIRE, WWS, and WFRS:

WEDGE Wireline Services, Inc. and its consolidated subsidiaries as follows:

Rocky Mountain Phoenix Surveys, Inc. (“RMPSI”)
Penkota Wireline Services, Inc. (“Penkota”)
WEDGE Log-Tech, L.L.C. (“WLT”)

WEDGE Wireline Services, Inc. was formed on February 28, 2007 through stock contributions of RMPSI, Penkota, and WLT. 100% of the shares were transferred. WIRE is 85% owned by WEDGE Oil and Gas Services, L.L.C. (“WO&G”). WO&G is 100% owned by WOG Holdings, L.L.C (“WOG”). The remaining 15% is owned by employees of WIRE.

Prior to February 28, 2007, Penkota was 100% owned by WO&G. RMPSI and WLT were 80% owned by WO&G and the remaining 20% was owned by employees of WIRE.

-13-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE A — Summary of Significant Accounting Policies — continued

WEDGE Well Services, L.L.C.

On June 30, 2007, WEDGE WS, L.L.C. and WEDGE Well Services, L.P. merged into WEDGE Well Services, L.L.C. Prior to June 30, 2007, WEDGE WS, L.L.C (formerly WEDGE Well Services, Inc.) owned 100% of WEDGE Well Services, L.L.C. (formerly TC3 Investments, L.L.C.) and 1% of WEDGE Well Services, L.P. (formerly WEDGE TC3, L.P.). Prior to June 30, 2007, WEDGE Well Services, L.L.C. owned 99% of WEDGE Well Services, L.P.

Wedge Energy Holdings, L.L.C. (“WEH”) owns 100% of WEDGE Well Services, L.L.C.

WEDGE Fishing and Rental Services L.L.C.

WEH owns 100% of WEDGE Fishing and Rental Services, L.L.C.

WEH is 100% owned by WEDGE Group Incorporated. WEDGE Group Incorporated is 100% owned by WEDGE Holdings, Inc. (“Holdings”). Holdings and WOG are owned by the same Company.

Reclassification of Prior Period Amounts

Certain assets and liabilities as of December 31, 2006 and 2005, have been reclassified, with no effect on net income, to be consistent with the classifications adopted for the year ended December 31, 2007.

Revenue Recognition

The Company services are generally short term in nature and revenue is recognized upon completion of each service.

Cash and Cash Equivalents

Cash equivalents include time deposits, money market mutual funds, and all highly liquid debt instruments with original maturities of three months or less.

-14-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE A — Summary of Significant Accounting Policies — continued

Accounts receivable

Accounts receivable are stated net of all known uncollectible amounts. The Company uses historical experience to determine an allowance for doubtful accounts. At December 31, 2007, 2006 and 2005, management estimated an allowance for doubtful accounts of $282,389, $15,000 and zero, respectively.

Inventory

Inventory primarily consists of repair parts for fixed assets. Inventory is stated at the lower of cost or market on a first-in, first-out basis.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is computed using the straight-line method. The Company reviews the useful life of its property and equipment on an ongoing basis considering events or changes in circumstances. The Company has a significant number of trucks with weights over 13,000 pounds. The lives of these trucks are greater than that of automobiles and light trucks and during 2006 the Company decided to segregate these trucks and use an estimated life of six years rather than five years. The change resulted in approximately $459,730 in assets to be converted from a five year life to a six year life. The effect of this change in estimate was to decrease depreciation expense by approximately $23,220 in 2006.

Expected useful lives of property and equipment are as follows:


Asset Category		Useful Lives
Autos, trucks and trailers		5-6 years
Buildings		40 years
Computers		3-5 years
Computer software		5 years
Machinery and equipment		7-12 years
Furniture and fixtures		3-5 years
Leasehold improvements		Lease term

Prepaid expenses

Prepaid expenses include items such as insurance and other miscellaneous items. The prepaid expenses are recognized as an operating expense in the period they benefit.

-15-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE A — Summary of Significant Accounting Policies — continued

Fair Value of Financial Instruments

The carrying amounts of financial instruments, including cash, cash equivalents, accounts receivable, accounts payable, accrued liabilities and short-term borrowings approximate fair value due to the short maturity of these instruments. The carrying amount of long-term debt approximates fair value because the interest rates fluctuate with market interest rates or the fixed rates are based on current rates offered to the Company for debt with similar terms and maturities.

Intangibles & Goodwill

Intangible assets are recorded at cost. Intangible assets subject to amortization are non-compete agreements. The following is a summary of the Company’s non-compete agreements:


			Accumulated		Amortization
Company	Cost		Amortization		Period
RMPSI	$	100,000	$	71,296	5 Years
WWS		400,000		260,000	5 Years
WLT		250,000		125,000	4 Years
WFRS		100,000		55,555	3 Years
WIRE		100,000		2,778	3 Years


Total	$	950,000	$	514,629

Amortization expense on all amortizable intangibles totaled $203,055, $189,167 and $122,407 during 2007, 2006 and 2005, respectively.

Estimated aggregate future amortization expenses are as follows:


Year ending December 31,
2008		223,425
2009		180,281
2010		31,666

	$	435,372

These costs will be evaluated annually for impairment in accordance with Statement of Financial Accounting Standards No. 144, Accounting for Impairment of Disposal of Long-Lived Assets.

-16-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE A — Summary of Significant Accounting Policies — continued

Intangible assets not subject to amortization is goodwill. Goodwill represents the excess of the purchase price of acquisitions over the fair value of the net assets acquired. The Company accounts for goodwill in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”. The following is a summary of the Company’s Goodwill at December 31, 2007 as a result of the following acquisitions:


	Initial
Company	Consideration

Penkota	$	5,659,092
TC3		1,249,556
RMPSI		5,728,388
Log — Tech		6,812,194
Wireline		1,078,264


Total Goodwill	$	20,527,494

The changes in the carrying amount of goodwill for the year ended December 31, 2007, 2006 and 2005 are as follows:


Balance, December 31, 2004	$	6,908,648
Goodwill acquired during 2005		5,728,388

Balance, December 31, 2005		12,637,036
Goodwill acquired during 2006		6,812,194

Balance, December 31, 2006		19,449,230
Goodwill acquired during 2007		1,078,264

Balance, December 31, 2007	$	20,527,494

Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized but are reviewed annually (or more frequently if impairment indicators arise) for impairment. The amortization provisions of SFAS No. 142 apply to goodwill and intangible assets acquired after June 30, 2001. The Company periodically assesses the recoverability of the unamortized balance based on expected future profitability and undiscounted future cash flows of the acquisitions and their contribution to the overall operation. During 2007, 2006 and 2005, no impairment indicators arose that may suggest the recoverability of goodwill was impaired.

-17-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE A — Summary of Significant Accounting Policies — continued

Income Taxes

During 2006 and 2005, the Company was included in the consolidated income tax returns of Holdings. During 2007, WWS and WFRS are included in the consolidated income tax returns of Holdings. The current portion of its income tax obligation is computed applying tax rates established by Holdings to the Company’s current year operating results. The resulting tax obligation is then remitted to Holdings. During 2007, WIRE filed separately and was not included in the consolidated income tax returns of Holdings.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense or benefit is the result of changes in deferred tax assets and liabilities.

Deferred taxes result primarily from the use of (i) different methods and lives for depreciation and amortization of fixed assets and intangibles and (ii) different methods of accounting for organizational costs.

The Company assesses its deferred tax assets on an annual basis and if necessary provides a valuation allowance for deferred tax assets if it believes that it is more likely than not that the value of these assets may not be realized in the future. Deferred taxes are computed using the asset and liability approach as prescribed in FASB Statement No. 109, Accounting for Income Taxes.

Advertising

Advertising costs are expensed as incurred and totaled $166,018, $85,889 and $48,544 for the years ended December 31, 2007, 2006 and 2005, respectively.

Accrued Compensated Absences

Compensated absences are accrued and charged to expense in the period in which it is earned.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

-18-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE A — Summary of Significant Accounting Policies — continued

Financial Instruments and Credit Risk

Financial instruments which potentially subject the Company to credit risk include cash and accounts receivable. Cash is maintained in federally insured domestic institutions. The terms of these deposits are on demand to minimize risk. The Company has not incurred losses related to these deposits, although at times, these deposits exceed federally insured limits. Trade accounts receivable consist of uncollateralized receivables from customers in the oil and gas industry located primarily in the United States. The Company routinely assesses the financial strength of its customers and establishes an allowance for doubtful accounts, if necessary, based on factors surrounding the credit risk of specific customers, historical trends and other information.

Recently Issued Accounting Standards

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157 “Fair Value Measurements”. SFAS No. 157 establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. However, on February 12, 2008, the FASB issued FSP FAS No. 157-2, Effective Dates of FASB Statement No. 157, which delays the effective date of SFAS No. 157 for fiscal years beginning after November 15, 2008 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company is currently evaluating the impact that SFAS No. 157 will have on its results of operations and financial position.

In June 2006, the Financial Accounting Standards Board issued FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes”. FIN No. 48 is an interpretation of SFAS No. 109, which prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements uncertain tax positions that the Company has taken or expects to take in the Company’s tax returns. FIN No. 48 is effective for fiscal years beginning after December 15, 2008, with early adoption permitted. The Company will adopt FIN No. 48 for its fiscal year ending December 31, 2009, unless it is further delayed by the FASB. The impact of FIN No. 48 on the Company’s financial statements, if any, has not been determined at this time.

-19-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE B — Acquisitions

Effective February 1, 2005 RMPSI’s shareholders sold 80% of their equity interests to WO&G. WO&G used the purchase method of accounting to account for the RMPSI acquisition. Under the purchase method of accounting, the cost of the acquisition is required to be allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The purchase included $5,656,000 of cash and $1,500,000 of subordinated notes payable to the sellers. The purchase price was increased by the aggregate amount of all capital expenditures, $135,195, as approved by WO&G bringing the total purchase price to $7,291,195 which was allocated as follows:


Property and equipment	$	2,229,600
Covenant not to compete		100,000
Goodwill		5,728,388
Liabilities		(766,793	)


Total acquisition price	$	7,291,195

On January 1, 2006, WLT purchased 100% of the common stock of Log Tech, Inc., a Kansas corporation. WLT used the purchase method of accounting to account for the Log Tech, Inc. acquisition. The purchase included $8,670,000 of cash and two subordinated notes payable to the sellers of $2,750,000 and $933,788. The total acquisition price of $12,353,788 has been allocated as follows:


Current assets
Accounts receivable	$	738,991
Inventory		290,393

Total current assets		1,029,384

Machinery & equipment		4,283,907
Other assets		36,186
Covenant not to compete		250,000
Goodwill		6,812,194

Total assets		12,411,671

Accounts payable		(57,883	)


Total acquisition cost	$	12,353,788

-20-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE B — Acquisitions — continued

On May 1, 2006, WFRS purchased the assets of BW Fishing & Rental, L.L.C. (“BW”). WFRS used the purchase method of accounting to account for the BW acquisition. The purchase included $1,000,000 of cash, $500,000 of subordinated notes payable to the sellers, and $300,000 non-compete payable due to an employee. The total acquisition price of $1,800,000 has been allocated as follows:


Land	$	95,000
Building		115,000
Autos and trucks		109,000
Fishing & rental tools		1,381,000
Covenant not to compete		100,000


Total acquisition price	$	1,800,000

On December 1, 2007, WIRE purchased the assets of Phoenix Surveys, Inc. (“PSI”). WIRE used the purchase method of accounting to account for the PSI acquisition. The purchase included $3,267,589 of cash and $1,600,000 of notes payable to the sellers. The total acquisition price of $4,867,589 has been allocated as follows:


Property & equipment	$	3,689,325
Goodwill		1,078,264
Covenant not to compete		100,000


Total acquisition price	$	4,867,589

NOTE C — Prepaid expenses and other

Prepaid expenses consist of the following at December 31:


	2007		2006		2005
General insurance	$	522,974	$	755,822	$	834,483
Workers compensation insurance		140,180		619,636		51,577
Other prepaid expenses		434,472		249,026		85,820

	$	1,097,626	$	1,624,484	$	971,880

-21-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE D — Property and Equipment

Property and equipment consists of the following at December 31:


	2007			2006			2005
Building	$	790,441		$	115,000		$	—
Automobiles, trailers, and trucks		8,167,839			5,140,242			2,622,987
Machinery and equipment		108,820,468			54,179,911			27,755,289
Office furniture and equipment		694,518			414,675			157,139
Leasehold improvements		439,552			264,662			131,736

		118,912,818			60,114,490			30,667,151
Less accumulated depreciation		(16,882,716	)		(7,728,380	)		(2,270,424	)

		102,030,102			52,386,110			28,396,727

Assets not depreciated:
Land		95,000			95,000			—
Machinery and equipment in process		16,110,885			13,414,793			1,290,961


Net property and equipment	$	118,235,987		$	65,895,903		$	29,687,688

NOTE E — Long-Term Debt

The following long-term debt exists at December 31:


	2007		2006		2005
Note payable to an affiliated entity, bearing interest at LIBOR plus 1%, monthly payments of interest only due on the first of each month with a final mauturity on October 16, 2011.	$	80,543,458	$	46,341,939	$	8,834,462

Note payable to an affiliated entity, bearing interest at LIBOR plus 1%, with accrued interest and principal balance payable upon demand. The full balance of accrued interest and principal was paid in January 2008 subsequent to year end.		8,075,000		—		—

-22-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE E — Long-Term Debt — continued


	2007		2006		2005
Subordinated note payable to certain employees, as part of the asset acquisition of PSI, bearing interest at 7%, quarterly payments of interest only beginning February 28, 2008 through November 30, 2008. Beginning February 28, 2009, quarterly principal payments of $200,000 plus accrued interest due with a final maturity of November 30, 2010.		1,600,000		—		—

Note payable to an affiliated entity in the principal amount of $750,000, bearing interest at LIBOR plus 1%, annual payments of interest only on January 1, 2007 and January 1, 2008. Beginning April 1, 2008, quarterly principal payments of $93,750 plus accrued interest, with a final maturity of January 1, 2010.		750,000		750,000		—

Three subordinated notes payable to former shareholders of Log-Tech Inc. bearing interest at 7%, quarterly payments of interest only on April 3, 2006 and July 3, 2006. Beginning October 1, 2006, quarterly principal payments of $275,000 plus accrued interest with final maturity of January 1, 2009. The note is subject to accelerated principal payments based on certain revenue thresholds of WLT. The thresholds were met in 2007, resulting in the note maturing in 2007.		—		2,475,000		—

-23-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE E — Long-Term Debt — continued


	2007		2006		2005
Subordinated note payable to the sellers of BW bearing interest at 7%, quarterly payments of interest only beginning July 31, 2006 through April 30, 2007. Beginning July 31, 2007, quarterly principal payments of $62,500 plus accrued interest due with a final maturity of April 30, 2009.		375,000		500,000		—

Two revolving lines of credit allowing draws totaling $1,400,000, maturing through September 29, 2006, bearing interest at prime, monthly interest payments with final principal plus accrued interest due at maturity.		—		—		220,000

Note payable to bank for asset purchase in the original amount of $2,250,000, bearing interest at 6.28%, requiring 60 monthly payments of $43,882 maturing in September, 2009. *		—		—		1,752,187

Note payable to bank for equipment purchases, allowing draws of up to $4,375,000. Once amount is reached, loan converts to term loan bearing interest at prime, payments of interest only through March 30, 2006 and 60 payments of $86,341 commencing on April 30, 2006 with a final maturity of March 31, 2011. *		—		—		39,785

-24-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE E — Long-Term Debt — continued


Two notes payable to bank for heavy equipment purchases totaling $8,150,000, maturing from September, 2010 through December, 2010, bearing interest at prime, requiring monthly payments of interest only for eight and twelve months from loan dates and 60 monthly payments of $96,752 and $57,764 after such dates.*		—			—			7,933,238

Note payable to bank for purchase of rental equipment in the amount of $1,300,000, bearing interest at prime, payments of interest only from loan date through January 10, 2006, 60 monthly payments of $21,666 commencing February 10, 2006.*		—			—			1,210,546


		91,343,458			50,066,939			19,990,218
Less current maturities		(8,606,000	)		(2,600,000	)		(1,911,798	)

	$	82,737,458		$	47,466,939		$	18,078,420


*		In 2006, these notes were paid in full from the proceeds of the Company’s new note with an affiliated entity.

As of December 31, 2007, annual maturities of long-term debt are as follows (amounts are in thousands):


Year Ending December 31,
2008	$	8,606
2009		1,300
2010		894
2011		80,543

	$	91,343

-25-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE F — Commitments and Contingencies

Lease Commitments

The Company leases various operating and office facilities from unrelated entities and affiliates and entities owned by officers of the subsidiaries (see Note G). At December 31, 2007, future minimum lease payments under these leases are as follows:


Year Ending December 31,
2008	$	535,417
2009		353,446
2010		271,727
2011		157,350
2012		2,879

	$	1,320,819

Litigation

From time to time, the Company may be engaged in various claims and litigation arising in the ordinary course of business. In the opinion of management, uninsured losses, if any, resulting from these matters will not have a material adverse impact on the consolidated financial statements of the Company.

NOTE G — Related Party Transactions

The Company leases various operating and office facilities from affiliates or from entities owned by officers of the subsidiaries. For the years ending December 31, 2007, 2006 and 2005, lease expense to affiliates totaled $295,493, $232,186 and $80,700, respectively.

The Company receive accounting, management and advisory services from an affiliate, charges for these services totaled $2,755,000, $1,479,155 and $301,000 during the years ended December 31, 2007, 2006 and 2005, respectively.

-26-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE G — Related Party Transactions — continued

As discussed in Note A, the Company is included in the consolidated income tax return of Holdings during 2005 and 2006. During 2007, WWS and WFRS are included in the consolidated income tax return of Holdings. The Company has recorded tax provision, to be included in the consolidated return of Holdings, of $4,652,551, $8,055,050 and $3,069,212 for the years ended December 31, 2007, 2006 and 2005, respectively. As of December 31, 2007, 2006 and 2005, the Company has a receivable from them in the amount of $2,302,179, $1,228,049 and a payable to them in the amount of $935,390, respectively. In addition, $74,424 is included in payables to affiliates and employees for the minority shareholders of WLT’s tax liability. See Note H for further information.

The Company purchases substantially all of its property and liability insurance through an affiliated entity. For the years ended December 31, 2007, 2006 and 2005, insurance expense of $3,682,006, $2,178,932 and $1,308,002, respectively, was purchased from this affiliate and $1,588,537, $191,682 and zero remained in payable to affiliate at December 31, 2007, 2006 and 2005, respectively.

In connection with the recent acquisitions made by the Company, the Company entered into non-compete agreements with several of the former owners of the businesses, who are now employed by the Company. At December 31, 2007, 2006 and 2005, $200,000, $300,000 and $200,000 is payable to these employees, respectively.

The Company made various loans to an affiliate. These advances totaled $2,671,378 at December 31, 2007 and are included in note receivable from affiliate at December 31, 2007. The notes bear interest at LIBOR plus 1% and mature on October 16, 2011. No loans were made during 2006 and 2005.

The Company received various advances from an affiliate. These advances totaled approximately $750,000 at December 31, 2005 and are included in payable to affiliate at December 31, 2005. During 2006, these advances were repaid in full.

-27-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE H — Income Taxes

As disclosed in Note A the Company is included in the consolidated tax return of Holdings.

The income tax provision reported in the statement of operations includes the following components for the years ended December 31:


	2007		2006		2005
Current income tax expense	$	6,780,591	$	7,402,117	$	3,091,212
Deferred income tax (benefit)		3,295,393		652,933		(22,000	)


Total provision for income taxes	$	10,075,984	$	8,055,050	$	3,069,212

A reconciliation of the effective tax rate to the statutory federal rate of 34% is as follows:


	2007			2006			2005
Tax at statutory rate	$	9,338,194		$	7,806,101		$	2,664,299
Nondeductible expenses		182,656			59,758			44,275
State income taxes on various entities		681,986			542,073			211,170
Nontaxable income		—			(74,424	)		—
Other		(126,852	)		(278,458	)		149,468


Net provision for income taxes	$	10,075,984		$	8,055,050		$	3,069,212

-28-

WEDGE WIRELINE SERVICES, INC., WEDGE WELL SERVICES, L.L.C.,
AND WEDGE FISHING & RENTAL SERVICES, L.L.C.
NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE H — Income Taxes — continued

The source of the timing differences resulting in deferred income taxes are primarily associated with the differing tax and financial accounting lives of the Company’s property and equipment and non-compete agreements. Deferred income tax balances are as follows as of December 31:


	2007			2006			2005
Current:

Deferred tax asset — current	$	348,372		$	30,063		$	—

Deferred tax liability — current		—			—			(126,786	)


Net deferred tax asset/(liability) — current	$	348,372		$	30,063		$	(126,786	)


Long-term

Deferred tax asset — long-term	$	37,326		$	45,798		$	—

Deferred tax liability — long-term		(5,440,294	)		(1,835,064	)		(1,095,141	)


Net deferred tax (liability) — long-term	$	(5,402,968	)	$	(1,789,266	)	$	(1,095,141	)

NOTE I — Retirement Plan

The employees are covered by a 401(k) plan allowing eligible employees to defer a portion of their compensation. Employees age 21 and over are eligible to participate after a defined period of service. The Company matches the employee’s contribution up to 3% and the Company will match one-half of the employee’s contribution that exceeds 3%, up to 5%. Employees are immediately 100% vested in the matching contributions. The Company’s match was $822,654, $461,267 and $91,056 for the years ending December 31, 2007, 2006 and 2005, respectively.

NOTE J — Subsequent Event

Effective March 1, 2008, 100% of the stock of WEDGE Wireline Services, Inc., WEDGE Well Services, L.L.C. and WEDGE Fishing and Rental Services, L.L.C., all the entities included in this combined financial statement, were acquired by Pioneer Drilling Company.

-29-


	Page
Independent Auditor’s Report		3

Combined Balance Sheets		4

Combined Income Statements		6

Combined Statement of Changes in Stockholders’ and Members’ Equity		7

Combined Statement of Changes in Stockholders’ and Members’ Equity		8

Combined Statement of Changes in Stockholders’ and Members’ Equity		9

Combined Statements of Cash Flows		10

Notes to Combined Financial Statements		13