Pure Energy Services Ltd. announces Q2 2011 Financial Results

CALGARY, Aug. 12, 2011 /CNW/ - Pure Energy Services Ltd. ("Pure" or "the Corporation") (TSX: PSV) is pleased to announce its financial and operating results for the three and six-month periods ended June 30, 2011 ("Q2 2011").  The financial results presented for Q2 2011 and all comparative information have been prepared in accordance with International Financial Reporting Standards ("IFRS") with effect from January 1, 2010. For more information on the Corporation's transition to IFRS refer to the "Changes in Accounting Policies - Adoption of IFRS" section of this news release. Unless otherwise indicated, references in this news release to "$" or "Dollars" are to Canadian dollars.

(1)     Refer to "Non-IFRS Measures" section

BUSINESS OVERVIEW

The Corporation provides well completion and production related oilfield services to oil and natural gas exploration and development companies in western Canada and certain regions in the United States ("US").

The Corporation's continuing operations are divided into three separate operating segments: Canadian Completion Services ("CCS"), US Completion Services ("USCS") and Corporate Administration ("Corporate"). The CCS segment conducts operations in the Western Canadian Sedimentary Basin ("WCSB") through its two operating divisions:  wireline and frac flowback (formerly described as the well testing division). The USCS segment conducts operations in the Rocky Mountain, North Dakota and Appalachian Basin regions of the US through its two operating divisions: wireline and frac flowback.  The Corporate segment is a cost center which includes corporate administration and other costs not specifically attributable to the CCS and USCS segments.  Operations for both the CCS and USCS segments are impacted by seasonality, with the CCS segment typically experiencing higher activity levels in the winter months and the USCS segment experiencing higher activity levels in the non winter months.

During 2010, the Corporation sold its drilling rig and drilling equipment rental divisions.  As a result of these transactions, the financial results of these two divisions (which previously comprised the Corporation's Drilling segment) have been reflected as discontinued operations for the three and six-month periods ended June 30, 2011 and 2010.

Q2 2011 HIGHLIGHTS FROM CONTINUING OPERATIONS

Pure recorded positive EBITDA during Q2 2011 of $0.5 million reflecting strong operating results from US operations offset by the losses from Canadian operations that are typical for the second quarter of the year.  In addition to the typically slower activity levels, significant wet weather experienced in some of Pure's core operating areas in western Canada also contributed to the losses suffered by Canadian operations during the quarter.

Pure continues to experience strong demand for its services in its western Canadian and US operating regions, driven by  strong prices for oil and natural gas liquids as well as the shift to horizontal drilling (especially in many of the emerging resource plays).  Robust activity levels are expected to resume in western Canada during Q3 2011 once weather conditions improve.

Pure exited Q2 2011 in a strong financial position with long-term debt net of working capital of $0.6 million at June 30, 2011 and $33 million of available, but undrawn, amounts on the Corporation's credit facilities. 

The number of wells drilled (rig released) in the WCSB increased on a quarter over quarter basis by 25% from 1,198 in Q2 2010 to 1,500 in Q2 2011 (source: Nickles Energy Group).  The number of horizontal wells (which are typically more service intensive) increased from 786 in Q2 2010 to 914 in the current quarter.  Rig counts in all of Pure's US operating areas continued to rise, with the most dramatic increases occurring in North Dakota and Pennsylvania where average active rig counts in Q2 2011 were 161 and 109 respectively compared to 104 and 80 respectively in Q2 2010.  Rig counts also rose in Pure's two other US operating areas of Colorado and Wyoming.

Consolidated revenue, EBITDA, gross margin and net loss improved from Q2 2010 to Q2 2011, reflecting the strong performance in Q2 2011 of the frac flowback divisions in both Canada and the US as follows:

• Revenue increased 26% from $32.4 million to $40.9 million.
• Gross margin increased 30% from $4.8 million to $6.2 million.  However, on a percentage basis, margins were 15% for both periods.
• EBITDA improved from negative $0.9 million to positive $0.5 million.
• Net loss was reduced by 15% from $3.6 million to $3.0 million.

Pure's planned capital expenditure program for calendar 2011 of $60 million includes frac flowback, wireline and fiber optic equipment.  Included in the frac flowback program are 18 high pressure frac flowback units, with 12 units slated for Canada and the remaining 6 units in the US.  The capital expenditure program also includes the purchase of auxiliary frac flowback equipment which is currently being rented from third parties.  Replacing rented equipment with equipment owned by the Corporation is expected to reduce operating expenses and improve gross margins.

For the six months ended June 30, 2011, Pure expended approximately $18.7 million of its $60 million planned capital expenditure program ($11.6 million in Q2).  Five of the 18 high pressure frac flowback units were received prior to June 30, 2011 (three of which were received during Q2).  All five of these high pressure frac flowback units are currently deployed in the field.

OUTLOOK

Pure's management remains optimistic about industry activity levels in western Canada and its US operating areas for the remainder of 2011 based on the forecasted drilling and well completion programs of its customers.  Pure continues to benefit from the high demand for its services in the emerging resource plays on both sides of the border, given the locations of its operating facilities and its significant capacity of wireline and frac flowback equipment capable of working in high pressure environments.  Improved pricing for services implemented during late 2010 and the first half of 2011, in both Canada and the US, combined with the acquisition of auxiliary frac flowback equipment to replace rentals from third party suppliers, should have a positive impact on the Corporation's margins and profitability going forward.

The primary focus areas for Pure for the remainder of 2011 are as follows:

• Completion of its 2011 capital expenditure program and deployment of the related equipment.  Pure continues to work closely with suppliers to ensure that equipment construction programs are completed on time and on budget.  The Corporation is also working closely with its customers to schedule deployment of this new equipment to the field.
  
  
• The recruitment and retention of staff to support the Corporation's growth.  Pure is investing significant efforts in the implementation of its "Superior Value" program which includes increased training and education programs for field and support staff to address the important personnel issues of recruitment, retention, leadership and succession planning.  In addition, retention bonus programs, wage adjustments and other compensation plans have also been implemented.
  
  
• Continuing to build the Corporation's operational infrastructure in the US.  This includes adding equipment to those areas of high activity, increasing sales and marketing efforts to expand the existing client base and increasing the local staff complement in some of the Corporation's busier US operating areas.  A major step towards achieving this objective was taken during Q2 2011 with the hiring of a Vice President of Operations for USCS and a General Manager for the US wireline division, each of whom have approximately 30 years of cased hole wireline experience with intermediate and senior competitors.
  
  
• Continuing to be a leader in high pressure work in Canada and selected operating areas in the US.  With its highly trained staff and large amount of equipment capable of operating in high pressure environments, Pure is well positioned to benefit from the high demand for services in the deep basin of the WCSB and some of the emerging resource plays in western Canada and the US.
  
  
• Evaluating acquisition opportunities in Canada and the US.  Pure will evaluate potential acquisition opportunities that provide business synergies with the Corporation's core service lines and/or the establishment of new core operating areas.
  
  
• Evaluating opportunities for organic growth into new geographic markets, particularly in the US.

RESULTS OF CONTINUING OPERATIONS

Financial Summary by Segment

The break-down of consolidated financial results by segment for the three and six-month periods ended June 30, 2011 and 2010 is as follows:

DISCUSSION OF SEGMENT RESULTS - CONTINUING OPERATIONS

Pure operates the largest frac flowback fleet and one of the largest wireline fleets in the WCSB.  A significant portion of the CCS equipment fleet at June 30, 2011 (33 of the 69 wireline units and 34 of the 69 frac flowback units) is capable of operating in the high pressure environments encountered in many of the emerging resource plays in western Canada.  With a large capacity of high pressure equipment, CCS is well positioned to take advantage of the high levels of drilling activity anticipated in these emerging resource plays as well as in the conventional Cardium, Viking and Bakken oil plays.

The second quarter is typically the slowest quarter in western Canada, as spring break-up conditions prevent heavy equipment from travelling to field locations in many of CCS' operating areas.  While equipment typically sits idle for much of this quarter, annual preventive maintenance programs and equipment certification are undertaken which add to operating costs and further reduce already low gross margins.

Although more wells were drilled in western Canada during the current quarter (i.e. 1,500 wells drilled in Q2 2011 compared to 1,198 in Q2 2010), the extreme wet weather in some of CCS' core operating areas resulted in a small reduction in the number of jobs and days worked for the wireline and frac flowback divisions, respectively, compared to Q2 2010.

Despite the slight drop in number of days worked, the frac flowback division recorded a significant revenue increase of $2.8 million (or 50%) in Q2 2011 compared to Q2 2010 due to:

• Improved pricing;
• Increased high pressure work which has a higher associated daily revenue rate as it typically involves the use of a significant amount of auxiliary equipment (such as high pressure pipe and line heaters) adding to the daily billing rate; and
• Increased charge-back revenue for recoverable repairs and maintenance expenses on equipment.

Gross margins for the frac flowback division increased from 12% in Q2 2010 to 17% in Q2 2011 reflecting price increases implemented over the past year which were partially offset by: wage increases, increased charge backs to customers for equipment maintenance (which have low associated margins) and higher equipment rental expenses.  To reduce the equipment rental expenses (and improve margins), CCS is planning to purchase a significant amount of auxiliary equipment to replace third party rentals.

Wireline division revenue and job count were materially consistent in Q2 2011 as compared to Q2 2010.    Despite the implementation of pricing increases over the past year for most of CCS' wireline services, the overall average revenue per job was slightly lower in Q2 2011 compared to Q2 2010 reflecting a shift in job mix.  Gross margins for the wireline division declined by $2.4 million, on a quarter over quarter basis, despite similar revenue levels.  This reflects the increased staffing and infrastructure costs incurred in the current quarter as CCS gears up for the increased drilling activity anticipated for Q3 and Q4.  The current quarter margins were also impacted by extended preventive maintenance programs combined with wage increases in order to retain staff.

On a year to date basis, revenue for the wireline division was 15% higher than in 2010 due to generally increased pricing combined with the 8% increase in the number of jobs.  Revenue for the frac flowback division was 60% higher in the current six-month period reflecting increased pricing, an increase in the number of days worked and a larger portion of high pressure work (with associated higher day rates).

Gross margins on a year to date basis for the wireline division declined slightly on a percentage basis as improved pricing was more than offset by wage increases, higher staff levels and the significant repairs and maintenance expenses incurred in Q2 2011.  Year to date gross margins for the frac flowback division increased from 23% in Q2 2010 to 32% in Q2 2011 reflecting the improved pricing offset by increased wage expenses, increased charge-back revenue (with lower associated margins).

During Q2 2011, CCS established a new field station in Bonnyville, Alberta to meet customer demands in the area primarily related to heavy oil work.  To accommodate the equipment demands for this station, plus demands from other stations during the quarter, CCS refurbished 4 wireline units that were previously parked to bring them into operating condition.

Drilling rig counts during Q2 2011 increased over the comparable Q2 2010 period in all of USCS' operating areas including North Dakota (Bakken Basin), Pennsylvania (Marcellus Shales), Colorado (Piceance Basin) and Wyoming (Pinedale Anticline/Denver Julesburg fields).  As a result of these increased activity levels, the frac flowback division posted strong results in Q2 2011 which led to overall improvements in revenues, blended margins and EBITDA for the USCS segment as a whole compared to Q2 2010.  The wireline division posted revenue and gross margins that were materially in line with the prior period.

The frac flowback division posted record revenue in Q2 2011 as all frac flowback operating stations recorded increased revenue compared to the comparable period in 2010, reflecting increased equipment utilization (with days worked up 25% and flowback units up 9%) and significantly improved pricing.  The Pennsylvania operations benefited from a guaranteed revenue contract for the use of 4 high pressure testing packages plus associated pipe and auxiliary equipment which commenced in January 2011.  Gross margins for the division were a robust 40% during Q2 2011 reflecting the higher pricing and equipment utilization which was partially offset by wage increases.  The frac flowback division continues to deal with shortages of local personnel to crew equipment, particularly in North Dakota and Pennsylvania.  Management continues to focus on recruiting and training local candidates in these areas to address this issue.

Wireline division revenue in Q2 2011 was materially in line with revenue recorded in Q2 2010 despite a 22% reduction in the number of jobs completed.  This reflected improved pricing for services and a shift in job mix to higher rate work (particularly in North Dakota). The drop in equipment utilization (as evidenced by the lower job count and increased unit count) reflected lower work levels in North Dakota and Wyoming.  In North Dakota, significant flooding in several areas resulted in certain completion work being delayed to the third quarter.  In Wyoming, Pure's major customer (for whom Pure is working on a rotational basis with two other wireline companies) allocated very little work to USCS in the current quarter.  To deal with the fluctuating revenue levels in this area, USCS has transferred several field managers and crews from Wyoming to the busier area of North Dakota to better match activity levels with staffing.

Gross margin for the wireline division was 17% in Q2 2011 compared to 20% in Q2 2010.  The low margin in the current quarter was attributed to the costs of relocating staff from Wyoming to North Dakota.  Gross margins in Q2 2010 were affected by integration costs associated with the acquisition of the wireline business of an industry peer which added 9 units to the USCS fleet.

The USCS segment continues to focus on the following objectives to increase revenue and gross margins in future quarters:

• Strengthening the wireline management team.  A major step was taken toward this objective through the hiring of a Vice President of Operations for USCS and a General Manager for the wireline division - both of whom have significant cased hole wireline experience.
  
  
• Expansion and diversification of the wireline client base, especially in those areas where the revenue stream is dependent on a few major customers.  The additional and/or more regular revenue streams will be required to improve margins in the high fixed cost wireline business.
  
  
• Expansion into new operating areas with high activity levels.  As a result, a wireline base was established in Pennsylvania during Q2 2011 to increase the overall utilization of the wireline fleet and crews.

(1)     Finance costs include interest on long-term debt, interest on operating loans and interest on finance lease liabilities.

(2)     Other expenses (income) include foreign exchange (gains) losses and (gains) losses on sale of property and equipment.

Depreciation and Amortization Expense

Depreciation and amortization expense increased from $3.1 million in Q2 2010 to $3.6 million in Q2 2011.  This increase reflected an increase in the average net book values of property and equipment from $80.8 million in Q2 2010 to $96.3 million in Q2 2011.  The increased depreciation expense on a year to date basis also reflects an increase in average net book values of property and equipment.

Finance Costs

Finance costs of $0.2 million in Q2 2011 were significantly lower than the $0.8 million recorded in Q2 2010 reflecting the decrease in average drawn debt balances (approximately $17.8 million in Q2 2011 compared to $60.5 million in Q2 2010).  The debt reduction over the past year primarily reflects the $33.5 million in net proceeds received from the sale of the drilling rig division in Q4 2010.  Finance costs on a year to date basis are also significantly lower due to the significant reduction in Pure's drawn debt.

INCOME TAX EXPENSE - CONTINUING OPERATIONS

Pure recorded a total income tax expense for the six months ended June 30, 2011 of $2.6 million on net earnings before income taxes of $6.6 million.  After excluding a $0.1 million adjustment related to a prior year, the resulting blended Canadian/US income tax rate is approximately 38%.  The high blended tax rate was driven by the large portion of net earnings ($5.3 million or 80%) generated by the higher rate US jurisdiction.  The US jurisdiction has an effective income tax rate of approximately 43% when including the impact of expenses not deductible for tax purposes. The Canadian jurisdiction has an effective income tax rate of approximately 33% after the impact of non-deductible expenses.

In determining the income tax rates to be applied to interim period net earnings, the Corporation uses an estimated annual income tax rate for each of the Canadian and US jurisdictions and applies these rates to jurisdictional interim earnings before income taxes.

As at year end December 31, 2010, the Corporation had non-capital losses and deferred expense pools available to reduce future taxable income in Canada and the US of approximately $65 million and $38 million, respectively.

Effective October 1, 2010, the Corporation sold its drilling rig division assets and operations to a private investment group for net proceeds of $33.5 million.  The drilling equipment rentals division was sold on April 20, 2010 in exchange for an industry peer's US wireline operations.  As a result of the sale of these two divisions, the related financial results have been classified as discontinued operations under the Drilling segment for the three and six-month periods ended June 30, 2011 and 2010.

SUMMARY OF QUARTERLY RESULTS ⁽¹⁾

The interim periods shown below for 2009 are presented in accordance with former Canadian Generally Accepted Accounting Principles ("GAAP"). The interim periods for 2010 and 2011 are presented in accordance with IFRS.

Pure's business is seasonal in nature with Canadian operations experiencing a slow-down in activity in Q2 of each year due to spring break-up in western Canada, and US operations typically experiencing slower activity in the colder winter months.  In addition, the business is cyclical as a result of industry activity levels that are highly correlated to oil and natural gas prices and the ability of the Corporation's clients to obtain debt and equity financing.

As a result of the global recession during the fall of 2008, oil and natural gas prices were significantly reduced and Pure's customers faced limited access to capital markets.  The resulting drop in activity levels during 2009 led to reduced revenues and net earnings for the Corporation during the 2009 periods noted above.  Improved commodity prices (particularly for oil and natural gas liquids) during 2010 and continuing through 2011, in combination with an increased access to capital and increased cash flows for Pure's customers led to improved activity levels, revenues and net earnings in 2010 and through the first two quarters of 2011.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2011, Pure's long-term debt exceeded working capital by $0.6 million, compared to working capital exceeding long-term debt at March 31, 2011 by $10.3 million.  The change of $10.9 million reflects capital expenditures of $11.6 million and long-term debt repayments of $2.1 million during Q2 2011 offset by: cash flow from operations of $0.7 million, proceeds from the sale of old equipment of $0.7 million and proceeds from the exercise of stock options of $0.6 million.

For the six-month period ended June 30, 2011, Pure expended $18.7 million of the approximately $60 million capital expenditure program planned for 2011.  The Q2 2011 capital expenditures of $11.6 million were primarily for:

• Final payments for 3 high pressure frac flowback units (received at the end of the quarter) plus progress payments for an additional 9 high pressure units under construction
• Frac flowback auxiliary equipment
• Refurbishment of 6 electric line units (4 in Canada and 2 in the USA)
• Electric line tools and equipment
• Fiber optic equipment

The Corporation has the following operating lease commitments, purchase commitments and debt commitments over the next five years:

At June 30, 2011, Pure had aggregate available but undrawn credit facilities of approximately $33.4 million broken down as follows: Canadian Revolving loan - $25.0 million; Canadian Operating loan - $7.9 million; and US Revolving loan - $0.5 million. 

The Corporation was in compliance with all of its debt covenants at June 30, 2011 other than one of the covenants related to the current US credit facilities.  The Corporation has obtained a waiver from the US lender in regards to this covenant breach.

The Corporation believes that its available credit facilities, combined with funds flow from operations, will provide sufficient capital resources to fund the 2011 capital expenditure program and ongoing operations.  The current global economic concerns (including the US debt ceiling issue, the US credit rating downgrade and the sovereign debt issues in several European countries) could have a negative impact on market confidence, which in turn could potentially lower the demand for energy products as well as the Corporation's services and also reduce the Corporation's access to capital. As such, Pure's management continues to monitor its capital and operational spending programs in response to these current market conditions.

SHARE CAPITAL

As at August 11, 2011, the Corporation had 24.3 million shares outstanding and 2.0 million options outstanding, of which 299,000 were vested.

CHANGES IN ACCOUNTING POLICIES

Adoption of IFRS

Effective January 1, 2011, the Corporation commenced preparing its financial statements in accordance with Internal Financial Reporting Standards ("IFRS"). For period ends prior to that date, the Corporation prepared its financial statements in accordance with Canadian GAAP. The adoption of IFRS has not had a material impact on the Corporation's operations and strategic decisions. The Corporation's IFRS accounting policies are provided in Note 3 to the condensed consolidated interim financial statements for the three month periods ended March 31, 2011 and 2010. In addition, Note 14 to the condensed consolidated interim financial statements for the three and six-month periods ended June 30, 2011 provides the following reconciliations between the Corporation's 2010 Canadian GAAP results and the 2010 IFRS results: the consolidated statements of financial position as at January 1, 2010, June 30, 2010 and December 31, 2010; and the consolidated statements of earnings (loss), comprehensive income (loss) and cash flows for the three and six-month periods ended June 30, 2010.

RISKS AND UNCERTAINTIES

A complete discussion of risks faced by the Corporation may be found under "Risk Factors" in the Corporation's Annual Information Form dated March 15, 2011 which is available under the Corporation's profile at www.sedar.com.

NON-IFRS MEASURES

EBITDA, EBITDAS and funds flow from operations do not have standardized meanings prescribed by IFRS. Management believes that, in addition to net earnings (loss), EBITDA and EBITDAS are useful supplemental measures. EBITDA and EBITDAS are provided as measures of operating performance without reference to financing decisions, depreciation or income tax impacts, which are not controlled at the operating management level. EBITDAS also excludes stock-based compensation expense as it is also not controlled at the operating management level. Investors should be cautioned that EBITDA and EBITDAS should not be construed as alternatives to net earnings (loss) determined in accordance with IFRS as an indicator of the Corporation's performance. The Corporation's method of calculating EBITDA and EBITDAS may differ from that of other entities and accordingly may not be comparable to measures used by other entities. See section titled "Reconciliation of EBITDA and EBITDAS to Net Earnings (Loss)" below.

Funds flow from operations is defined as cash from operating activities before changes in non-cash working capital, as presented on the Corporation's statement of cash flows. Funds flow from operations is a measure that provides investors with additional information regarding the Corporation's liquidity and its ability to generate funds to finance its operations. Funds flow from operations does not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures provided by other entities.

RECONCILIATION OF EBITDA AND EBITDAS TO NET EARNINGS (LOSS) - CONTINUING OPERATIONS

(1) Finance costs include interest on long-term debt, interest on operating loans and interest on finance lease liabilities.
(2) Other expenses (income) include foreign exchange (gains) losses and (gains) losses on sale of property and equipment.

FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking statements and other information that are based on the Corporation's current expectations, estimates, projections and assumptions made by management in light of its experience and perception of historical trends, current conditions, anticipated future developments and other factors believed by management to be relevant.

All statements and other information contained in this document that address expectations or projections about the future are forward-looking statements. Some of the forward-looking statements may be identified by words such as "may", "would", "could", "will", "intends", "targets", "expects", "believes", "plans", "anticipates", "estimates", "continues", "maintains", "projects", "indicates", "outlook", "proposed", "objective" and other similar expressions. These statements speak only as of the date of this document. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed in the "Risks and Uncertainties" section in the most recent Annual Information Form, Information Circular, quarterly reports, material change reports and news releases. The Corporation cannot assure investors that actual results will be consistent with the forward-looking statements and readers are cautioned not to place undue reliance on them. The forward-looking statements are provided as of the date of this document and, except as required pursuant to applicable securities laws and regulations, the Corporation assumes no obligation to update or revise such statements to reflect new events or circumstances.

The forward-looking statements and information contained in this document reflect several major factors, expectations and assumptions of the Corporation, including without limitation, that the Corporation will continue to conduct its continuing operations in a manner substantially consistent with past operations; the general continuance of current or, if applicable, assumed industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) taxation, royalty and regulatory regimes; the continuance of current or future increased pricing for the Corporation's services; certain commodity prices and other cost assumptions; certain conditions regarding oil and natural gas supply, demand and storage in North America; the continued availability of adequate debt and/or equity financing and cash flow from the Corporation's operations to fund its capital and operating requirements as needed; and the extent of its liabilities. Many of these factors, expectations and assumptions are based on management's knowledge and experience in the industry and on public disclosure of industry participants and analysts relating to anticipated exploration and development programs of oil and natural gas producers, the effect of changes to regulatory, taxation and royalty regimes, expected active rig counts and industry equipment utilization in the WCSB and the US Rocky Mountain, North Dakota and Appalachian Basin regions and other matters. The Corporation believes that the material factors, expectations and assumptions reflected in the forward-looking statements and information are reasonable; however, no assurances can be given that these factors, expectations and assumptions will prove to be correct.

In particular, this document contains forward-looking information pertaining to the following: ability to manage costs in response to industry activity levels; success of marketing programs; capital expenditure programs; ability to move equipment within operating locations; availability of debt financing and ability to renew the Corporation's existing credit facilities, at acceptable terms; supply and demand for oilfield services and industry activity levels; oil, natural gas liquids and natural gas prices; oil and natural gas drilling activity; treatment under governmental royalty programs or regimes; collection of accounts receivable; operating risk liability; expectations regarding market prices and costs; expansion of services and operations in Canada and the US; the integration of assets and personnel from acquisitions; increases in the pricing for the Corporation's services and impact on gross margins; net working capital levels; the amount and timing of recognition of income tax recoveries, income tax losses and deferred expense pools; the effect of implementation of IFRS on the Corporation's financial reports and related accounting policies; future customer work; expected levels of the Corporation's sales, general and administrative expenses; ability to crew equipment; availability of local employees for the Corporation's field operations; the reduction of rented equipment and corresponding reduction in operating expenses (and improved gross margins); and competitive conditions.

Consolidated Statements of Financial Position

Condensed Consolidated Statements of Changes in Equity

* AOCI represents Accumulated other comprehensive income (loss)

* AOCI represents Accumulated other comprehensive income (loss)