SUPERIOR ENERGY SERVICES INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____.

COMMISSION FILE NO. 0-20310

SUPERIOR ENERGY SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

Delaware 75-2379388
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

1105 Peters Road
Harvey, Louisiana 70058
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (504) 362-4321

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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

The number of shares of the registrant's common stock outstanding on May 8, 2003
was 73,931,783.

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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q for
the Quarterly Period Ended March 31, 2003

TABLE OF CONTENTS

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 2003 and December 31, 2002
(in thousands, except share data)

See accompanying notes to consolidated financial statements.

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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2003 and 2002
(in thousands, except per share data)
(unaudited)

See accompanying notes to consolidated financial statements.

4

SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2003 and 2002
(in thousands)
(unaudited)

See accompanying notes to consolidated financial statements.

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SUPERIOR ENERGY SERVICES, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Three Months Ended March 31, 2003 and 2002

(1) Basis of Presentation

Certain information and footnote disclosures normally in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission; however, management believes the disclosures which are made
are adequate to make the information presented not misleading. These financial
statements and footnotes should be read in conjunction with the financial
statements and notes thereto included in Superior Energy Services, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 2002 and Management's
Discussion and Analysis of Financial Condition and Results of Operations.

The financial information of Superior Energy Services, Inc. and subsidiaries
(the Company) for the three months ended March 31, 2003 and 2002 has not been
audited. However, in the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the results of
operations for the periods presented have been included therein. The results of
operations for the first three months of the year are not necessarily indicative
of the results of operations that might be expected for the entire year. Certain
previously reported amounts have been reclassified to conform to the 2003
presentation.

(2) Stock Based Compensation

The Company accounts for its stock based compensation under the principles
prescribed by the Accounting Principles Board's Opinion No. 25, Accounting for
Stock Issued to Employees (Opinion No. 25). However, Statement of Financial
Accounting Standards No. 123 (FAS No. 123), Accounting for Stock-Based
Compensation permits the continued use of the intrinsic-value based method
prescribed by Opinion No. 25 but requires additional disclosures, including pro
forma calculations of earnings and net earnings per share as if the fair value
method of accounting prescribed by FAS No. 123 had been applied. No stock based
compensation costs are reflected in net income, as all options granted under
those plans had an exercise price equal to the market value of the underlying
common stock on the date of grant. As required by Statement of Financial
Accounting Standards No. 148 (FAS No. 148), Accounting for Stock Based
Compensation - Transition and Disclosure, which amended FAS No. 123, the
following table illustrates the effect on net income and earnings per share if
the Company had applied the fair value recognition provisions of FAS No. 123 to
stock based employee compensation. The pro forma data presented below is not
representative of the effects on reported amounts for future years (amounts are
in thousands, except per share amounts).

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(3) Earnings per Share

Basic earnings per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding during
the period. Diluted earnings per share is computed in the same manner as basic
earnings per share except that the denominator is increased to include the
number of additional common shares that could have been outstanding assuming the
exercise of stock options that would have a dilutive effect on earnings per
share.

(4) Business Combinations

Effective January 1, 2002, the Company acquired Environmental Treatment Team,
L.L.C. (ETT), by converting $18.6 million of notes and other receivables into
100% ownership of ETT to further expand the environmental services of the
Company. Additional consideration, if any, will be based upon a multiple of four
times ETT's average annual earnings before interest, income taxes, depreciation
and amortization expense (EBITDA) less $9 million, to be determined in the
second quarter of 2003. The Company currently estimates that the total
additional consideration, if any, will not exceed $5.1 million. The acquisition
has been accounted for as a purchase and the acquired assets and liabilities
have been valued at their estimated fair market value. The purchase price
allocated to net assets was approximately $13 million, and the excess purchase
price over the fair value of net assets of approximately $5.6 million was
allocated to goodwill. The results of operations have been included from the
acquisition date.

On December 13, 2002, the Company acquired a business to further expand the
rental tool services of the Company. The Company paid $5.6 million in cash
consideration for this acquisition (including transaction costs) and will pay an
additional $925,000 upon the receipt of the title to a facility for this
business. The acquisition has been accounted for as a purchase and the acquired
assets and liabilities have been valued at their estimated fair market value.
The purchase price preliminarily allocated to net assets was approximately $2.6
million, and the excess purchase price over the fair value of net assets of
approximately $3 million was allocated to goodwill. The remaining

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$925,000 will be allocated to the facility upon receipt. The results of
operations have been included from the acquisition date.

Most of the Company's acquisitions have involved additional contingent
consideration based upon a multiple of the acquired companies' respective
average EBITDA over a three-year period from the respective date of acquisition.
In the three months ended March 31 2003, the Company capitalized additional
consideration of $2 million related to one of its acquisitions, which will be
paid in the second quarter of 2003. While the amounts of additional
consideration payable depend upon the acquired company's operating performance
and are difficult to predict accurately, the Company estimates that the maximum
additional consideration payable for all of the Company's acquisitions will be
approximately $38.7 million, with $10.5 million potentially payable in 2003 and
$28.2 million in 2004. These amounts are not classified as liabilities under
generally accepted accounting principles and are not reflected in the Company's
financial statements until the amounts are fixed and determinable. When amounts
are determined, they are capitalized as part of the purchase price of the
related acquisition. With the exception of the Company's guarantee of Lamb
Energy Services' $15 million credit facility (see note 6 to the unaudited
consolidated financial statements), the Company does not have any other
financing arrangements that are not required under generally accepted accounting
principles to be reflected in its financial statements.

(5) Segment Information

The Company's reportable segments are as follows: well intervention group,
marine, rental tools and other oilfield services. Each segment offers products
and services within the oilfield services industry. The well intervention group
segment provides plug and abandonment services, coiled tubing services, well
pumping and stimulation services, data acquisition services, gas lift services,
electric wireline services, hydraulic drilling and workover services, well
control services and mechanical wireline services that perform a variety of
ongoing maintenance and repairs to producing wells, as well as modifications to
enhance the production capacity and life span of the well. The marine segment
operates liftboats for oil and gas production facility maintenance, construction
operations and platform removals, as well as production service activities. The
rental tools segment rents and sells specialized equipment for use with onshore
and offshore oil and gas well drilling, completion, production and workover
activities. The other oilfield services segment provides contract operations and
maintenance services, interconnect piping services, sandblasting and painting
maintenance services, transportation and logistics services, offshore oil and
gas cleaning services, oilfield waste treatment services, dockside cleaning of
items, including supply boats, cutting boxes, and process equipment, and
manufactures and sells drilling instrumentation and oil spill containment
equipment. All of the segments operate primarily in the Gulf of Mexico.

Summarized financial information concerning the Company's segments for the three
months ended March 31, 2003 and 2002 is shown in the following tables (in
thousands):

(6) Debt

The Company has outstanding $200 million of 8 7/8% senior notes due 2011. The
indenture governing the senior notes requires semi-annual interest payments,
which commenced November 15, 2001 and continue through the maturity date of May
15, 2011. The indenture governing the senior notes contains certain covenants
that, among other things, prevent the Company from incurring additional debt,
paying dividends or making other distributions, unless its ratio of cash flow to
interest expense is at least 2.25 to 1, except that the Company may incur
additional debt in an amount equal to 30% of its net tangible assets, which was
approximately $135 million at March 31, 2003. The indenture also contains
covenants that restrict the Company's ability to create certain liens, sell
assets, or enter into certain mergers or acquisitions. At March 31, 2003, the
Company was in compliance with all such covenants.

The Company has a bank credit facility consisting of term loans in an aggregate
amount of $37.6 million at March 31, 2003 and a revolving credit facility of $75
million. The term loans require quarterly principal installments in the amount
of $3.2 million through March 31, 2005. A balance of $12 million is due on the
facility maturity date of May 2, 2005. The credit facility bears interest at a
LIBOR rate plus margins that depend on the Company's leverage ratio.
Indebtedness under the credit facility is secured by substantially all of the
Company's assets, including the pledge of the stock of the Company's principal
subsidiaries. The credit facility contains customary events of default and
requires that the Company satisfy various financial covenants. It also limits
the Company's capital expenditures, its ability to pay dividends or make other
distributions, make acquisitions, make changes to the Company's capital
structure, create liens or incur additional indebtedness. At March 31, 2003, the
Company was in compliance with all such covenants.

The Company has $19.8 million outstanding in U. S. Government guaranteed
long-term financing under Title XI of the Merchant Marine Act of 1936 which is
administered by the Maritime Administration (MARAD) for the construction of two
245-foot class liftboats. The debt bears an interest rate of 6.45% per annum and
is payable in equal semi-annual installments of $405,000, which began December
3, 2002, and matures on June 3, 2027. The Company's obligations are secured by
mortgages on the two liftboats. In accordance with the agreement, the Company is
required to comply with certain covenants and restrictions, including the
maintenance of minimum net worth and debt-to-equity requirements. At March 31,
2003, the Company was in compliance with all such covenants.

The Company owns a 54.3% interest in Lamb Energy, which has a $15 million credit
facility with a syndicate of banks that matures in 2004. The Company fully
guarantees amounts due under the credit facility. The Company does not expect to
incur any losses as a result of the guarantee. As of March 31, 2003, Lamb Energy
had $12 million outstanding on this credit facility.

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(7) Stockholders' Equity

In March 2002, the Company sold 4.2 million shares of common stock. The offering
generated net proceeds to the Company of approximately $38.8 million.

(8) Commitments and Contingencies

From time to time, the Company is involved in litigation and other disputes
arising out of operations in the normal course of business. In management's
opinion, the Company is not involved in any litigation or disputes, the outcome
of which would have a material effect on the financial position, results of
operations or liquidity of the Company.

(9) Accounting Pronouncements

In December 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 148 (FAS No. 148), "Accounting for
Stock-Based Compensation-Transition and Disclosure-an Amendment of FASB
Statement of Financial Accounting Standards No. 123," to provide alternative
methods of transition for a voluntary change to the fair value-based method of
accounting for stock-based employee compensation. In addition, this statement
amends the disclosure requirements of Statement of Financial Accounting
Standards No. 123 (FAS No. 123), to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
This statement also requires that those effects be disclosed more prominently by
specifying the form, content and location of those disclosures. FAS No. 148
improve the prominence and clarity of the pro forma disclosures required by FAS
No. 123 by prescribing a specific tabular format and by requiring disclosure in
the "Summary of Significant Accounting Policies" or its equivalent. In addition,
this statement improves the timeliness of those disclosures by requiring their
inclusion in financial reports for interim periods. This statement is effective
for financial statements for fiscal years ending after December 15, 2002 and is
effective for financial reports containing condensed financial statements for
interim periods beginning after December 15, 2002 with earlier application
permitted. The Company adopted the disclosure provisions of FAS No. 148 and
presented the pro forma effects of FAS No. 123 for the three months ended March
31, 2003 and 2002 in note 2 of our consolidated financial statements.

In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation Number 46 (FIN 46), "Consolidation of Variable Interest
Entities." FIN 46 clarifies the application of Accounting Research Bulletin
Number 51, "Consolidated Financial Statements," to certain entities in which
equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
FIN 46 applies immediately to variable interest entities created after January
31, 2003, and to variable interest entities in which an enterprise obtains an
interest after that date. It applies in the first fiscal year or interim period
beginning after June 15, 2003, to variable entities in which an enterprise holds
a variable interest that it acquired before February 1, 2003. FIN 46 applies to
public enterprises as of the beginning of the applicable interim or annual
period. The Company is in the process of determining what impact, if any, the
adoption of the provisions of FIN 46 will have upon our financial condition or
results of operations.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD-LOOKING STATEMENTS

"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contains forward-looking statements which involve risks and
uncertainties. All statements other than statements of historical fact included
in this section regarding our financial position and liquidity, strategic
alternatives, future capital needs, business strategies and other plans and
objectives of our management for future operations and activities, are
forward-looking statements. These statements are based on certain assumptions
and analyses made by our management in light of its experience and its
perception of historical trends, current conditions, expected future
developments and other factors it believes are appropriate under the
circumstances. Such forward-looking statements are subject to uncertainties that
could cause our actual results to differ materially from such statements. Such
uncertainties include but are not limited to: the volatility of the oil and gas
industry, including the level of offshore exploration, production and
development activity; risks of our growth strategy, including the risks of rapid
growth and the risks inherent in acquiring businesses; changes in competitive
factors affecting our operations; operating hazards, including the significant
possibility of accidents resulting in personal injury, property damage or
environmental damage; the effect on our performance of regulatory programs and
environmental matters; seasonality of the offshore industry in the Gulf of
Mexico and our dependence on certain customers. These and other uncertainties
related to our business are described in detail in our Annual Report on Form
10-K for the year ended December 31, 2002. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, we can
give no assurance that such expectations will prove to be correct. You are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. We undertake no obligation to update any of
our forward-looking statements for any reason.

OVERVIEW

We are a leading provider of specialized oilfield services and equipment focused
on serving the production-related needs of oil and gas companies primarily in
the Gulf of Mexico. We believe that we are one of the few companies in the Gulf
of Mexico capable of providing most of the post wellhead products and services
necessary to maintain offshore producing wells, as well as the plug and
abandonment services necessary at the end of their life cycle. We believe that
our ability to provide our customers with multiple services and to coordinate
and integrate their delivery from our liftboats allows us to maximize
efficiency, reduce lead time and provide cost-effective services for our
customers.

Over the past several years, we have significantly expanded the range of
production-related services we provide and the geographic scope of our
operations through both internal growth and strategic acquisitions. We have
expanded our geographic focus to select international market areas and added
complimentary product and service offerings. Currently, we provide a full range
of products and services for our customers, including well intervention
services, marine services, rental tools, and other oilfield services. For
additional segment financial information, see note 5 to our unaudited
consolidated financial statements.

Our financial performance is impacted by the broader economic trends affecting
our customers. The demand for our services and equipment is cyclical due to the
nature of the energy industry. Our operating results are directly tied to
industry demand for our services, most of which are performed on the outer
continental shelf in the Gulf of Mexico. While we have focused on providing
production-related services where, historically, demand has not been as volatile
as for exploration-related services, we expect our operating results to be
highly dependent upon industry activity levels in the Gulf of Mexico.

In the first quarter of 2003, our financial performance was impacted by an
increased demand for many of our well intervention services in comparison to the
fourth quarter of 2002. For the quarter ended March 31, 2003, revenue increased
4% to $123.2 million and net income increased 26% to $7.5 million from the
fourth quarter of 2002.

Our well intervention group segment's revenue increased to $41.4 million in the
first quarter of 2003 as compared to $36.1 million in the fourth quarter of
2002. Activity increased for most well intervention services, including well
control, pumping and stimulation, hydraulic workover, coiled tubing and
mechanical wireline services as compared to the fourth quarter of 2002. This was
partially offset by decreased activity levels for plug and abandonment

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services. We believe activity was higher for most of our well intervention
services because customers began to focus more on production-related projects
rather than the storm-related construction projects of the fourth quarter of
2002.

Our marine segment's revenue decreased 12% to $18.7 million in the first quarter
of 2003 from the fourth quarter of 2002. This decrease is attributable to a
seasonal drop in the utilization for our liftboat fleet to 67% in the first
quarter of 2003 from 79% in the fourth quarter of 2002, as well as the
completion of several storm-related projects that existed in the fourth quarter
of 2002. Our fleet's average dayrate remained relatively unchanged from the
fourth quarter of 2002.

Our rental tools segment's revenue slightly increased to $34.6 million in the
first quarter of 2003 as compared to $33.4 million in the fourth quarter of
2002. Rentals for on-site accommodations, stabilizers and handling tools
increased slightly relative to the fourth quarter of 2002. This increase is
primarily the result of a higher drilling rig count in Texas.

Our other oilfield services segment's revenue was $28.5 million, a 3% increase
over the fourth quarter of 2002. During the first quarter of 2003, we had strong
sales of higher margin oil spill response equipment which was partially offset
by a seasonal decrease in lower margin construction activity.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,
2003 AND 2002

For the three months ended March 31, 2003, our revenues were $123.2 million
resulting in net income of $7.5 million or $0.10 diluted earnings per share. For
the three months ended March 31, 2002, revenues were $104.8 million and net
income was $5.8 million or $0.08 diluted earnings per share. Our increase in
revenue and net income is the result of an overall increased demand for most of
our services as a result of increased activity by our customers. The following
discussion analyzes our operating results on a segment basis.

WELL INTERVENTION GROUP SEGMENT

Revenue for our well intervention group was $41.4 million for the three months
ended March 31, 2003, as compared to $36.3 million for the same period in 2002.
This segment's gross margin percentage increased to 40% in the three months
ended March 31, 2003 from 37% in the three months ended March 31, 2002. The
increase in the revenue and gross margin percentage is the result of increased
demand for our electric line, pumping and stimulation, hydraulic workover and
well control services as production-related activity in the Gulf of Mexico
increased. These increases were partially offset by decreased demand for coiled
tubing services.

MARINE SEGMENT

Our marine revenue for the three months ended March 31, 2003 increased 28% over
the same period in 2002 to $18.7 million. Due to increased demand and because an
additional three larger liftboats have been added to our fleet since the first
quarter of 2002, the average dayrate increased to $6,546 in the first quarter of
2003 from $5,434 in the first quarter of 2002. The gross margin percentage for
the three months ended March 31, 2003 decreased slightly to 32% from 35% for the
same period in 2002. The fleet's average utilization remained unchanged at 67%.
Additional fixed costs associated with new liftboats in the fleet also
contributed to the decline in gross margin percentage.

RENTAL TOOLS SEGMENT

Revenue for our rental tools segment for the three months ended March 31, 2003
was $34.6 million, an 8% increase over the same period in 2002. The increase in
this segment's revenue was primarily due to an increased demand for and an
expanded inventory of rental tool equipment and geographic expansion. The gross
margin percentage decreased slightly to 68% in the three months ended March 31,
2003 from 71% in the same period in 2002 due primarily to a change in the mix of
the demand for our rental tools.

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OTHER OILFIELD SERVICES SEGMENT

Other oilfield services revenue for the three months ended March 31, 2003 was
$28.5 million, a 30% increase over the $22 million in revenue in the same period
in 2002. The gross margin percentage increased to 24% in the three months ended
March 31, 2003 from 19% in the same period in 2002. This segment generated more
revenue and a higher gross margin percentage primarily from sales of higher
margin oil spill containment equipment and growth in our oilfield waste
treatment business.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization increased to $11.8 million in the three months
ended March 31, 2003 from $9.5 million in the same period in 2002. The increase
resulted mostly from our larger asset base as a result of our capital
expenditures during 2002 and 2003.

GENERAL AND ADMINISTRATIVE

General and administrative expenses increased to $23.7 million for the three
months ended March 31, 2003 from $21.2 million for the same period in 2002. The
increase is primarily the result of our internal growth and expansion,
including, among other things, additional liftboats and new facilities in
certain international markets.

LIQUIDITY AND CAPITAL RESOURCES

Our primary liquidity needs are for working capital, capital expenditures, debt
service and acquisitions. Our primary sources of liquidity are cash flows from
operations and borrowings under our revolving credit facility. We had cash and
cash equivalents of $5.6 million at March 31, 2003 compared to $3.5 million at
December 31, 2002. In the three months ended March 31, 2003, we generated net
cash from operating activities of $20.4 million.

We made $11.9 million of capital expenditures during the three months ended
March 31, 2003, of which approximately $4.6 million was used to expand and
maintain our rental tool equipment inventory, approximately $2.7 million was
used on facilities construction (including our facility in Broussard, Louisiana)
and approximately $1 million was on our liftboats. We also made $3.6 million of
capital expenditures to expand and maintain the asset base of our well
intervention group and other oilfield services group. We currently believe that
we will make approximately $39 million of capital expenditures, excluding
acquisitions and targeted asset purchases, during the remaining nine months of
2003 primarily to further expand our rental tool asset base. We believe that our
current working capital, cash generated from our operations and availability
under our revolving credit facility will provide sufficient funds for our
identified capital projects.

We have outstanding $200 million of 8 7/8% senior notes due 2011. The indenture
governing the senior notes requires semi-annual interest payments, which
commenced November 15, 2001 and continue through the maturity date of May 15,
2011. The indenture governing the senior notes contains certain covenants that,
among other things, prevent us from incurring additional debt, paying dividends
or making other distributions, unless our ratio of cash flow to interest expense
is at least 2.25 to 1, except that we may incur additional debt in an amount
equal to 30% of our net tangible assets, which was approximately $135 million at
March 31, 2003. The indenture also contains covenants that restrict our ability
to create certain liens, sell assets, or enter into certain mergers or
acquisitions.

We also have a bank credit facility with term loans in an aggregate amount of
$37.6 million at March 31, 2003 and a revolving credit facility of $75 million.
The credit facility bears interest at a LIBOR rate plus margins that depend on
our leverage ratio. As of May 8, 2003, the amount outstanding under the term
loans was $37.6 million, none was outstanding under our revolving credit
facility, and the weighted average interest rate on amounts outstanding under
the credit facility was 4.1% per annum. Indebtedness under the credit facility
is secured by substantially all of our assets, including the pledge of the stock
of our principal subsidiaries. The credit facility contains customary events of
default and requires that we satisfy various financial covenants. It also limits
our capital expenditures, our ability to pay dividends or make other
distributions, make acquisitions, make changes to our capital structure, create
liens or incur additional indebtedness.

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We have $19.8 million outstanding in U. S. Government guaranteed long-term
financing under Title XI of the Merchant Marine Act of 1936 which is
administered by the Maritime Administration (MARAD) for the construction of two
245-foot class liftboats. This debt bears an interest rate of 6.45% per annum
and is payable in equal semi-annual installments of $405,000, which began
December 3, 2002, and matures on June 3, 2027. Our obligations are secured by
mortgages on the two liftboats. In accordance with the agreement, we are
required to comply with certain covenants and restrictions, including the
maintenance of minimum net worth and debt-to-equity requirements.

The following table summarizes our contractual cash obligations and commercial
commitments at March 31, 2003 (amounts in thousands) for our long-term debt and
operating leases. We do not have any other material obligations or commitments.

The table does not include the guarantee of the Lamb Energy Services $15 million
credit facility under which $12 million was outstanding as of March 31, 2003, or
any potential additional consideration that may be payable as a result of our
acquisitions. Additional consideration is generally based on the acquired
company's operating performance after the acquisition as measured by earnings
before interest, income taxes, depreciation and amortization (EBITDA) and other
adjustments intended to exclude extraordinary items. While the amounts payable
depend upon the acquired company's operating performance and are difficult to
predict accurately, we currently estimate that the maximum additional
consideration payable for all of our acquisitions is approximately $38.7
million, with $10.5 million potentially payable in 2003 and $28.2 million in
2004. These amounts are not classified as liabilities under generally accepted
accounting principles and not reflected in our financial statements until the
amounts are fixed and determinable. When amounts are determined, they are
capitalized as part of the purchase price of the related acquisition. We have no
other financing arrangements that are not required under generally accepted
accounting principles to be reflected in our financial statements.

We intend to continue implementing our growth strategy of increasing our scope
of services through both internal growth and strategic acquisitions. In 2003, we
expect to continue to make the capital expenditures required to implement our
growth strategy in amounts consistent with the amount of cash generated from
operating activities, the availability of additional financing and our credit
facility. Depending on the size of any future acquisitions, we may require
additional equity or debt financing in excess of our current working capital and
amounts available under our revolving credit facility.

NEW ACCOUNTING PRONOUNCEMENTS

In December 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 148 (FAS No. 148), "Accounting for
Stock-Based Compensation-Transition and Disclosure-an Amendment of FASB
Statement of Financial Accounting Standards No. 123," to provide alternative
methods of transition for a voluntary change to the fair value-based method of
accounting for stock-based employee compensation. In addition, this statement
amends the disclosure requirements of Statement of Financial Accounting
Standards No. 123 (FAS No. 123), to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
This statement also requires that those effects be disclosed more prominently by
specifying the form, content and location of those disclosures. FAS No. 148
improve the prominence and clarity of the pro forma disclosures required by FAS
No. 123 by prescribing a specific tabular format and by requiring disclosure in
the "Summary of Significant Accounting Policies" or its equivalent. In addition,
this statement improves the timeliness of those disclosures by requiring their
inclusion in financial reports for interim periods. This statement is effective
for financial statements for fiscal years ending after December 15, 2002 and is
effective for financial reports containing condensed financial

14

statements for interim periods beginning after December 15, 2002 with earlier
application permitted. We have adopted the disclosure provisions of FAS No. 148
and presented the pro forma effects of FAS No. 123 for the three months ended
March 31, 2003 and 2002 in note 2 of our consolidated financial statements.

In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation Number 46 (FIN 46), "Consolidation of Variable Interest
Entities." FIN 46 clarifies the application of Accounting Research Bulletin
Number 51, "Consolidated Financial Statements," to certain entities in which
equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
FIN 46 applies immediately to variable interest entities created after January
31, 2003, and to variable interest entities in which an enterprise obtains an
interest after that date. It applies in the first fiscal year or interim period
beginning after June 15, 2003, to variable entities in which an enterprise holds
a variable interest that it acquired before February 1, 2003. FIN 46 applies to
public enterprises as of the beginning of the applicable interim or annual
period. We are in the process of determining what impact, if any, the adoption
of the provisions of FIN 46 will have upon our financial condition or results of
operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes in our market risks since the year ended
December 31, 2002. For more information, please read the consolidated financial
statements and notes thereto included in our Annual Report on Form 10-K for the
year ended December 31, 2002.

ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluation conducted within 90 days of filing this report on Form
10-Q, our chief financial officer and chief executive officer have concluded
that our disclosure controls and procedures (as defined in rules 13a-14c
promulgated under the Securities Exchange Act of 1934, as amended) are effective
and designed to alert them to material information relating to the Company.

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect those controls subsequent to the date of
our most recent evaluation.

15

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) The following exhibits are filed with this Form 10-Q:

3.1 Certificate of Incorporation of the Company (incorporated
herein by reference to the Company's Quarterly Report on Form
10-QSB for the quarter ended March 31, 1996).

3.2 Certificate of Amendment to the Company's Certificate of
Incorporation (incorporated herein by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999).

3.3 Amended and Restated Bylaws (incorporated herein by reference
to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).

10.1 First Amendment to Stockholders' Agreement dated March 31,
2003 by and among Superior Energy Services, Inc., First
Reserve Fund VII, Limited Partnership, and First Reserve Fund
VIII, Limited Partnership.

99.1 Certificate pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.

99.2 Certificate pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.

(b) Reports on Form 8-K. The following reports on Form 8-K were filed
during the quarter ended March 31, 2003:

On February 27, 2003, the Company filed a current report on Form 8-K
reporting, under item 5, the announcement of earnings for the fourth
quarter ended December 31, 2002.

On March 31, 2003, the Company filed a current report on Form 8-K
reporting, under item 5, that one of its subsidiaries, Wild Well
Control, Inc., has been subcontracted by Kellogg Brown & Root and
Halliburton's Energy Services Group to provide firefighting and well
control services for wells damaged in Iraq.

16

SIGNATURE

Pursuant to the requirements 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.

SUPERIOR ENERGY SERVICES, INC.

Date: May 14, 2003 By: /s/ Robert S. Taylor
------------- -------------------------------------------
Robert S. Taylor
Chief Financial Officer
(Principal Financial and Accounting Officer)

17

CERTIFICATION

I, Terence E. Hall, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Superior Energy
Services, Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function);

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

SUPERIOR ENERGY SERVICES, INC.

Date: May 14, 2003 By: /s/ Terence E. Hall
------------ -------------------------------------
Terence E. Hall
Chairman of the Board,
Chief Executive Officer and President

18

CERTIFICATION

I, Robert S. Taylor, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Superior Energy
Services, Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant's,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function);

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

SUPERIOR ENERGY SERVICES, INC.

Date: May 14, 2003 By: /s/ Robert S. Taylor
------------ -----------------------------------
Robert S. Taylor
Chief Financial Officer
(Principal Financial and Accounting Officer)

19

EXHIBIT INDEX