MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION OF WELLTECH
The following discussion should be read in conjunction with the
financial statements of WellTech and related notes appearing elsewhere herein.
WellTech has generated losses during each of the past five years. These
losses were primarily attributable to the operations of certain unprofitable
locations which have been sold or joint ventured over the past several years.
WellTech has also expanded its profitable operations and acquired additional
profitable operations during this time period (1991 - 1995) resulting in
declining losses. In addition to the unprofitable operations, WellTech's
overhead and level of outstanding debt was more than the profitable operations
could service. Steps were also taken in these and other areas to reduce losses
and improve profitability. From the year ended December 31, 1991 to the nine
months ended September 30, 1995, direct operating costs as a percentage of
revenues have decreased from 82.3% to 78.3%, general and administrative expenses
have decreased from 18.9% of revenues to 14.5% and long term debt has decreased
from approximately $30.0 million to $10.0 million.
Nine Months Ended September 30, 1995 versus Nine Months Ended September 30, 1994
Results of Operations
Revenues increased to $52.2 million for the nine months ended September
30, 1995 compared to $35.0 million for the nine months ended September 30, 1994,
an increase of $17.2 million or 49%. This increase was due to increases in
nearly all of WellTech's operations including drilling ($3.9 million), Mid
Continent ($5.0 million), Eastern ($1.1 million), Russia ($1.6 million) and the
consolidation of Servicios effective April 1995 ($6.2 million).
Operating expenses as a percentage of revenues were 78.3% for the nine
months ended September 30, 1995 versus 79.8% for the nine months ended September
30, 1994. This decrease was due to a provision for workers compensation losses
recorded in 1994. This was partially offset by the lower gross margins generated
by WellTech's drilling operations which were begun in late 1994.