Business Overview

Led by the strong performance of our Offshore Services segment, our third quarter 2009 revenues and profitability increased compared to the prior year period, despite the continuing global economic recession which continues to affect many of our businesses. Following the significant damage from hurricanes during 2005 and 2008, and as a result of the risk of damage from future storms, Gulf of Mexico oil and gas operators continue to have a high demand for well abandonment, platform decommissioning, diving, and cutting services. The Offshore Services segment reported unprecedented profitability during the quarter as a result of this increased demand from its customers, its increased service capacity, its enhanced execution efficiency, and the near optimal weather conditions during the period. This segment significantly exceeded its performance from the prior year quarter which was interrupted by Hurricanes Gustav and Ike. While the Offshore Services segment expects to experience its typical reduced activity during the winter season, it anticipates continued strong demand for its services in 2010. Despite decreased revenues, the Fluids Division also reported increased profitability as a result of decreased product costs and administrative expenses. The overall decreased demand for many of our products and services has particularly affected our Production Testing, Compressco, and Maritech operations, as each of these segments reported decreased revenues and profitability during the third quarter of 2009 compared to the prior year period, continuing the trend from the first half of the year. Maritech also continues to be affected by reduced production volumes, primarily due to one of its major producing fields remaining shut-in following Hurricane Ike, as well as from the reduced number of newly drilled wells as a result of our efforts to conserve capital. Prospects for improvement in each of these three business segments are largely tied to natural gas prices, which have begun to increase in recent weeks. However, the overall demand for our products and services is also driven by spending levels within the oil and gas industry, particularly domestically, which is also affected by the availability of capital and general economic conditions.

During the past year's economic uncertainty, we have continued our focus on maximizing operating cash flows and conserving capital resources, while continuing with selected strategic growth initiatives.In particular, our new El Dorado, Arkansas calcium chloride plant facility, which is expected to be completed in the first quarter of 2010, is the most significant capital construction project in our history. The construction of this facility was funded primarily from operating cash flows, resulting in minimal increased borrowings under our long-term debt facility. This achievement was accomplished despite a difficult market environment for many of our businesses through a combination of reducing or deferring other capital expenditures, reducing operating and administrative expenses, enhancing operating efficiencies, and carefully managing working capital. The completion of the El Dorado, Arkansas facility, which is expected to begin its initial commercial production during the fourth quarter of 2009, is expected to further increase the Fluids Division's efficiency in manufacturing its chemicals and completion fluids products, which should strengthen operating cash flows in future years. In October 2009, we entered into a settlement agreement with the various parties to our insurance litigation regarding certain costs associated with Maritech offshore platforms which were damaged or destroyed by Hurricanes Katrina and Rita during 2005. As a result of this settlement, during the fourth quarter of 2009 we expect to receive approximately $40.0 million, which will further increase our operating cash flows for the year. In addition to applying our 2009 operating cash flows to capital expenditure projects, we also made significant progress in the abandonment and decommissioning of many of Maritech's offshore oil and gas property assets, expending approximately $71.8 million. As of September 30, 2009, Maritech reflects an asset retirement obligation for the remainder of its abandonment and decommissioning efforts of approximately $215.9 million, much of which consists of the remaining work to be done associated with the offshore platforms which were destroyed during the 2005 and 2008 hurricanes. As of September 30, 2009, the outstanding balance of our long-term debt had increased to $414.2 million, an increase of $7.3 million from the beginning of the year. Our bank credit facility is scheduled to mature in June 2011, and our Senior Notes are scheduled to mature at various dates from September 2011 through April 2016.

Critical Accounting Policies

There have been no material changes or developments in the evaluation of the accounting estimates and the underlying assumptions or methodologies pertaining to our Critical Accounting Policies and Estimates disclosed in our Form 10-K for the year ended December 31, 2008. In preparing our consolidated financial statements, we make assumptions, estimates, and judgments that affect the amounts reported. We periodically evaluate our estimates and judgments, including those related to potential impairments of long-lived assets (including goodwill), the collectability of accounts receivable (including insurance receivables), and the current cost of future abandonment and decommissioning obligations. Our judgments and estimates are based on historical experience and on future expectations that are believed to be reasonable. The combination of these factors forms the basis for judgments made about the carrying values of assets and liabilities that are not readily apparent from other sources.

These judgments and estimates may change as new events occur, as new information is acquired, and as our operating environment changes. Actual results are likely to differ from our current estimates, and those differences may be material.

Impairment of Goodwill - The impairment of goodwill is assessed whenever impairment indicators are present, but no less than once annually. The assessment for goodwill impairment is performed for each reporting unit, and consists of a comparison of the carrying amount of each reporting unit to our estimation of the fair value of that reporting unit. If the carrying amount of the reporting unit exceeds its estimated fair value, an impairment loss is calculated by comparing the carrying amount of the reporting unit's goodwill to our estimated implied fair value of that goodwill. Our estimates of reporting unit fair value are imprecise and are subject to our estimates of the future cash flows of each business and our judgment as to how these estimated cash flows translate into each business' estimated fair value. These estimates and judgments are affected by numerous factors, including the general economic environment at the time of our assessment, which affects our overall market capitalization. During the fourth quarter of 2008, due to changes in the global economic environment which affected our stock price and market capitalization, we recorded an impairment of goodwill of $47.1 million related to our Fluids and Offshore Services segments. We feel our estimates of the fair value for each reporting unit are reasonable. However, given the current volatile economic environment, the likelihood of additional material impairments of goodwill in future periods is higher.

As of September 30, 2009, our Offshore Services, Production Testing, and Compressco reporting units reflect goodwill in the amounts of $3.8 million, $23.0 million, and $72.2 million, respectively. The fair value of our Offshore Services and Production Testing reporting units significantly exceeds their associated carrying values. However, because the estimated fair value of our Compressco reporting unit currently exceeds its carrying value by approximately 11.1%, there is a reasonable possibility that Compressco's goodwill may be impaired in a future period, and the amount of such impairment may be material. Specific uncertainties affecting the estimated fair value of our Compressco reporting unit include the prices received by Compressco's customers for natural gas production, the rate of future growth of Compressco's business, and the need and timing of the full resumption of the fabrication of Compressco's new GasJackŪ compressor units. The demand for Compressco's wellhead compression services has been negatively affected by the global economic environment and the decrease in natural gas prices compared to the prior year. Further decreases in such demand could have a further negative effect on the fair value of our Compressco reporting unit.

Results of Operations

                                             Three Months Ended           Nine Months Ended
                                                September 30,               September 30,
                                             2009          2008          2009          2008
                                                             (In Thousands)
Revenues
Fluids Division                            $  50,889     $  65,399     $ 176,789     $ 229,049
Offshore Division
  Offshore Services                          131,482        84,341       271,783       215,219
  Maritech                                    43,319        51,887       129,939       184,868
  Intersegment eliminations                  (11,574 )      (8,417 )     (40,600 )     (14,336 )
   Total Offshore Division                   163,227       127,811       361,122       385,751
Production Enhancement Division
  Production Testing                          19,070        31,365        61,976        92,899
  Compressco                                  20,960        24,735        67,528        71,341
   Total Production Enhancement Division      40,030        56,100       129,504       164,240
Intersegment eliminations                       (171 )        (211 )        (245 )        (396 )
                                             253,975       249,099       667,170       778,644

                                             Three Months Ended           Nine Months Ended
                                                September 30,               September 30,
                                             2009          2008          2009          2008
                                                             (In Thousands)
Gross profit
Fluids Division                            $  10,236     $  10,440     $  40,439     $  46,090
Offshore Division
  Offshore Services                           45,800        13,857        75,374        29,832
  Maritech                                    (5,813 )      (1,285 )      (8,662 )      26,034
  Intersegment eliminations                    1,120          (244 )         546           303
   Total Offshore Division                    41,107        12,328        67,258        56,169
Production Enhancement Division
  Production Testing                           4,309        10,521        15,452        31,978
  Compressco                                   7,919        11,037        25,631        30,786
   Total Production Enhancement Division      12,228        21,558        41,083        62,764
Other                                           (798 )        (618 )      (2,248 )      (1,841 )
                                              62,773        43,708       146,532       163,182

Income before taxes and discontinued operations
Fluids Division                                5,800         1,895        19,169        24,306
Offshore Division
  Offshore Services                           40,250         9,793        62,630        17,237
  Maritech                                    (7,158 )       1,814        (9,403 )      26,757
  Intersegment eliminations                    1,120          (243 )         622           303
   Total Offshore Division                    34,212        11,364        53,849        44,297
Production Enhancement Division
  Production Testing                           2,850         8,127        15,931        25,885
  Compressco                                   5,277         8,039        17,850        22,680
   Total Production Enhancement Division       8,127        16,166        33,781        48,565
Corporate overhead                           (14,252 )     (10,259 )     (41,138 )     (41,167 )
                                              33,887        19,166        65,661        76,001

The above information excludes the results of our Venezuelan and process services businesses, which have been accounted for as discontinued operations.

Three months ended September 30, 2009 compared with three months ended September 30, 2008.

Consolidated Comparisons

Revenues and Gross Profit - Our total consolidated revenues for the quarter ended September 30, 2009 were $254.0 million compared to $249.1 million for the third quarter of the prior year, an increase of 2.0%. Our consolidated gross profit increased to $62.8 million during the third quarter of 2009 compared to $43.7 million in the prior year quarter, an increase of 43.6%. Consolidated gross profit as a percentage of revenue was 24.7% during the third quarter of 2009 compared to 17.5% during the prior year period.

General and Administrative Expenses - General and administrative expenses were $24.2 million during the third quarter of 2009 compared to $25.6 million during the third quarter of 2008, a decrease of $1.4 million or 5.5%. This decrease was primarily due to approximately $0.9 million of decreased salary, benefits, contract labor costs, and other associated employee expenses, primarily as a result of personnel cost reductions and despite increased incentive compensation. In addition, general and administrative expenses decreased due to decreased office expenses of approximately $0.5 million, primarily from decreased office rent following the completion of our new corporate headquarters building, and approximately $0.1 million from decreased professional fees. These decreases were partially offset by approximately $0.1 million of increased general expenses. General and administrative expenses as a percentage of revenue decreased to 9.5% during the third quarter of 2009 compared to 10.3% during the prior year period.

Other Income and Expense - Other income and expense was $1.7 million of expense during the third quarter of 2009 compared to $5.3 million of income during the third quarter of 2008, primarily due to $4.3 million of increased gains from asset sales during the prior year period. In addition, the current year period includes approximately $0.7 million of hedge ineffectiveness losses compared to approximately $2.9 million of hedge

ineffectiveness income during the prior year period. Partially offsetting these changes, other income increased approximately $1.2 million, primarily due to increased foreign currency gains.

Interest Expense and Income Taxes - Net interest expense decreased to $3.0 million during the third quarter of 2009 compared to $4.2 million during the third quarter of 2008, despite increased borrowings of long-term debt which were used to fund our capital expenditure and working capital requirements since the beginning of 2008. The decrease was due to lower interest rates on the outstanding revolving credit facility and due to increased capitalized interest, primarily associated with our El Dorado, Arkansas calcium chloride plant construction project, which is expected to begin its initial commercial production during the fourth quarter of 2009. Our provision for income taxes during the third quarter of 2009 increased to $11.1 million compared to $7.0 million during the prior year period, primarily due to increased earnings.

Net Income - Net income before discontinued operations was $22.8 million during the third quarter of 2009 compared to $12.1 million in the prior year third quarter, an increase of $10.7 million or 88.2%. Net income per diluted share before discontinued operations was $0.30 on 76,059,594 average diluted shares outstanding during the third quarter of 2009 compared to $0.16 on 76,315,957 average diluted shares outstanding in the prior year period.

During the fourth quarter of 2007, we sold our process services operation for approximately $58.7 million, net of certain adjustments. During the fourth quarter of 2006, we made the decision to discontinue our Venezuelan fluids and production testing businesses due to several factors, including the changing political climate in that country. Net loss from discontinued operations was $0.2 million during the third quarter of 2009 compared to $0.5 million of net loss from discontinued operations during the third quarter of 2008.

Net income was $22.7 million during the third quarter of 2009 compared to $11.7 million in the prior year third quarter, an increase of $11.0 million or 94.4%. Net income per diluted share was $0.30 on 76,059,594 average diluted shares outstanding during the third quarter of 2009 compared to $0.15 on 76,315,957 average diluted shares outstanding in the prior year quarter.

Divisional Comparisons

Fluids Division - Our Fluids Division revenues decreased from $65.4 million during the third quarter of 2008 to $50.9 million during the third quarter of 2009, a $14.5 million decrease, or 22.2%. This decrease was primarily caused by $10.9 million of decreased product sales due to significantly reduced sales volumes for completion fluids and manufactured chemical products compared to the prior year quarter. The decreased completion fluids sales volumes reflect the decreased oil and gas drilling activity, particularly domestically, as reflected in rig count levels compared to the prior year period. In addition, many operators who are continuing drilling activities are deferring completion operations, which further decreases demand for the Division's completion fluids products. The decrease in manufactured chemicals sales volumes also reflects the general decline in economic conditions which is affecting the activity levels of the Division's customers. In addition to decreased sales volumes, the Division also received decreased prices for many of its products compared to the prior year period. The Division also reflected $3.4 million of decreased service revenues due to decreased domestic onshore oil and gas activity.

Our Fluids Division gross profit decreased slightly to $10.2 million during the third quarter of 2009 compared to $10.4 million during the prior year period, a decrease of $0.2 million or 2.0%. Gross profit as a percentage of revenue increased to 20.1% during the current year period compared to 16.0% during the prior year period. Gross profit decreased slightly despite the more significant decrease in revenues primarily due to decreased product costs. During March 2009, a major supplier of feedstock raw materials for our Fluids Division, Chemtura Corporation (Chemtura), announced that it had filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy code. As a result of the bankruptcy proceedings, we are in the process of renegotiating certain terms of our supply contracts with Chemtura. While the expected increased cost of the Division's raw materials could impact its future profitability, this increase may be partially offset by the effect of other contractual modifications being discussed. In addition, the Division's new El Dorado, Arkansas calcium chloride plant facility is expected to begin initial commercial production during the fourth quarter of 2009 and is expected to allow the Division to further decrease its product costs in the future.

Fluids Division income before taxes during the third quarter of 2009 increased $3.9 million to $5.8 million compared to $1.9 million in the corresponding prior year period, an increase of 206.1%. This increase was despite the $0.2 million decrease in gross profit discussed above and was primarily due to approximately $1.9 million of decreased administrative expenses, a $1.4 million legal charge incurred during the prior year period, and approximately $0.8 million of increased other income primarily from foreign currency gains.

Offshore Division - Revenues from our Offshore Division, which was previously known as the Well Abandonment and Decommissioning (WA&D) Division, increased from $127.8 million during the third quarter of 2008 to $163.2 million during the third quarter of 2009, an increase of $35.4 million or 27.7%. Offshore Division gross profit during the third quarter of 2009 increased significantly to $41.1 million compared to $12.3 million during the prior year third quarter, an increase of $28.8 million or 233.4%. Offshore Division income before taxes was $34.2 million during the third quarter of 2009 compared to $11.4 million during the prior year period, an increase of $22.8 million or 201.1%.

The revenues of the Division's Offshore Services segment increased 55.9% to $131.5 million during the third quarter of 2009 compared to $84.3 million in the prior year third quarter, an increase of $47.1 million. This increase was due to the increased offshore decommissioning activity and vessel utilization during the current year quarter, reflecting the current high demand for the segment's offshore diving, abandonment, heavy lift, and cutting services. Also, beginning in June 2009, the segment increased its service capacity to its customers through the leasing of a specialized dive service vessel which will be utilized for contracted hurricane recovery work during the remainder of the year. In addition, a portion of the prior year quarter was affected by downtime resulting from Hurricanes Ike and Gustav. Although the activity level for Offshore Services operations is expected to decrease during the winter season, the segment expects demand for services to continue to be strong during 2010. Many Gulf of Mexico oil and gas operators are expected to continue to perform repair and recovery operations over the next several years on offshore properties which were damaged or destroyed by hurricanes during 2005 and 2008 or attempt to accelerate their efforts to abandon and decommission offshore platform facilities in response to risks from future storms and the significantly increased windstorm insurance costs for offshore properties. Many offshore operators, including Maritech, have reduced or discontinued windstorm insurance coverage until premium costs decrease or become justifiable and are seeking to maximize their abandonment and decommissioning activity in order to decrease their risk of future damage. The segment is planning to continue to perform a significant amount of such work for Maritech during the next fifteen months.

The Offshore Services segment of the Division reported gross profit of $45.8 million during the third quarter of 2009 compared to $13.9 million of gross profit during the third quarter of 2008, a $31.9 million or 230.5% increase. The Offshore Services segment's gross profit as a percentage of revenues was 34.8% during the third quarter of 2009 compared to 16.4% during the prior year period. This increase was primarily due to the increased gross profit of the segment's heavy lift, diving, and cutting services businesses, which generated significant efficiencies from increased utilization, improved weather conditions, and increased operating efficiency during the current year period. In addition, the segment has consolidated certain office and administrative functions, reduced crews, and temporarily idled selected inland water equipment in order to further increase efficiencies.

Offshore Services segment income before taxes increased from $9.8 million during the third quarter of 2008 to $40.3 million during the current year quarter, an increase of $30.5 million or 311.0%. This increase was due to the $31.9 million increase in gross profit described above and $0.7 million of decreased administrative costs, partially offset by approximately $2.0 million of increased other expenses as a result of a legal settlement during the current year period.

The Division's Maritech operations reported revenues of $43.3 million during the third quarter of 2009 compared to $51.9 million during the prior year period, a decrease of $8.6 million or 16.5%. Revenues decreased by approximately $5.4 million as a result of decreased realized commodity prices. Maritech has hedged a portion of its expected future production by entering into derivative hedge contracts, with certain contracts extending through 2010. Including the impact from its hedge contracts, Maritech reflected average realized oil and natural gas prices during the third quarter of 2009 of $68.81/barrel and $8.98/MMBtu, respectively, compared to $74.97/barrel and $9.59/MMBtu, respectively, during the prior year period. However, fourth quarter 2009 oil and natural gas prices have risen and are now in excess of the price levels received earlier during the current year. Decreased production volumes resulted in decreased revenues of approximately $3.3 million primarily due to certain properties which continue to be shut-in as a result of Hurricane Ike. In particular, one of Maritech's key oil producing fields, East Cameron 328, will continue to have a portion of its production shut-in until a new platform can be constructed to replace a platform which was toppled during the storm. However, Maritech has recently installed additional production equipment on the remaining platform in the field in order to restore approximately one half of the field's production. Much of Maritech's daily production is processed through neighboring platforms, pipelines, and processing facilities of other operators and third parties, many of which were also damaged during the storm. As a result, an additional portion of Maritech's production remains shut-in. The decreased production from the shut-in properties more than offset newly added production during the quarter from wells drilled in 2008. The level of Maritech's drilling and development activity has decreased during 2009 as a result of our efforts to conserve capital. Partially offsetting the decrease in prices and volumes, Maritech reported $0.2 million of increased processing revenue during the current year quarter.

Maritech reported negative gross profit of $5.8 million during the third quarter of 2009 compared to a negative gross profit of $1.3 million during the third quarter of 2008, a decrease of $4.5 million or 352.4%. Although the impact of reduced revenues was partially offset by decreased depletion expenses associated with the decreased production, Maritech's gross profit was also reduced due to approximately $4.1 million of increased repair costs and approximately $4.9 million of increased excess decommissioning costs incurred during the quarter compared to the prior year period. Partially offsetting these decreases, Maritech recorded oil and gas property impairments of approximately $0.6 million during the current year period compared to $10.7 million of impairments and dry hole costs which were recorded during the prior year period. In addition, Maritech recorded $1.7 million of decreased insurance premium expense due to the discontinuance of its insurance coverage for windstorm damage due to the current high premium cost of insurance and the reduced levels of coverage. In October 2009, we entered into a settlement agreement with the parties to our insurance litigation regarding certain costs associated with Maritech offshore platforms which were damaged or destroyed by Hurricanes Katrina and Rita during 2005. As a result of this settlement, we expect to receive proceeds of approximately $40.0 million, which will be credited to earnings during the fourth quarter of 2009.

The Division's Maritech operations reported a pretax loss of $7.2 million during the third quarter of 2009 compared to income before taxes of $1.8 million during the prior year period, a decrease of $9.0 million or 494.6%. This decrease was . . .