Canyon Reports Third Quarter 2012 Results and Preliminary 2013 Capital Expenditure Guidance

CALGARY, Nov. 6, 2012 /CNW/ - Canyon Services Group Inc. TSX: FRC ("Canyon") is pleased to announce its third quarter 2012 results.  The following should be read in conjunction with the Management's Discussion and Analysis, the Condensed Consolidated Interim Financial Statements and notes of Canyon Services Group Inc. for the three and nine months ended September 30, 2012 and should also be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2011, and which are available on SEDAR at www.sedar.com

HIGHLIGHTS SUMMARY

The main operating and financial highlights for the second quarter 2012 are as follows (000's of dollars except for horsepower amounts):

  • In Q3 2012, average consolidated revenues per job increased by 26% to $180,883 from $143,970 in Q3 2011 as Canyon completed larger jobs in emerging oil and natural gas liquids rich plays such as the Duvernay shale.  The reduced producer activity in the current quarter more than offset the larger job sizes to result in consolidated revenues decreasing by 10% to $94,401 from $105,207 in Q3 2011.
  • For the nine months ended September 30, 2012, jobs completed and consolidated revenues increased by 5% and 18% to 1,709 and $268,310 respectively from 1,628 and $227,131 respectively in the comparable 2011 period as a result of a strong first six months.  Average consolidated revenue per job increased by 13% to $157,587 in the nine months ended September 30, 2012 from $139,640 in the comparable 2011 period due to larger job sizes.
  • For the nine months ended September 30, 2012, EBITDA before share-based payments expense (see NON-GAAP MEASURES) decreased by 3% to $88,960 from $91,377 in the comparable 2011 period as revenues increased by 18% over the same periods.  In Q3 2012 EBITDA before share-based payments expense decreased by 30% to $32,496 from $46,512 in Q3 2011 as revenues declined by 10%.
  • Canyon remains in a very strong financial position with undrawn credit facilities of $60 million and working capital of $53 million, including cash, as at September 30, 2012.
  • On September 25, 2012, Canyon declared a quarterly dividend of $0.15 per common share, or $9.3 million, which was paid to shareholders on October 26, 2012.

OVERVIEW OF THIRD QUARTER 2012

       
000's except per share, job amounts and hydraulic pumping
capacity
(Unaudited)
Three Months Ended
September 30
  Nine Months Ended
September 30
  2012 2011   2012 2011
Consolidated revenues $94,401 $105,207   $268,310 $227,131
Profit and comprehensive income $17,036 $30,861   $47,263 $54,338
  Per share-basic $0.28 $0.51   $0.77 $0.90
  Per share-diluted $0.27 $0.49   $0.76 $0.87
EBITDA before share-based payments(1) $32,496 $46,512   $88,960 $91,377
Funds from operations(1) $27,727 $37,395   $77,035 $76,368
Total jobs completed (2) 524 733   1,709 1,628
Consolidated average revenue per job (2) (3) $180,883 $143,970   $157,587 $139,640
Average fracturing revenue per job(3) $248,095 $191,328   $230,583 $196,399
Hydraulic Pumping Capacity          
  Average HHP 220,000 140,000   200,500 127,000
  Exit HHP 225,500 150,500   225,500 150,500
Capital expenditures $9,740 $28,941   $64,521 $81,273

       
000's
(Unaudited)
As at
September 30, 2012
  As at
December 31, 2011
Cash balance $9,021   $42,481
Working capital $52,630   $67,009

Note (1): See Non-GAAP Measures
Note (2): Includes all jobs from each service line, specifically hydraulic fracturing; coiled tubing; nitrogen fracturing; acidizing and remedial cementing
Note (3): 2011 revenue per job numbers are restated to reflect invoice adjustments made in subsequent reporting periods.

Although Canyon reports a strong third quarter, year over year operating results were impacted by weaker producer activity and pricing pressure. The reduced drilling activity was partially offset by a carryover of weather delayed projects and a well completions backlog from the prior quarter.  Equipment utilization was stronger in July and August as the carryover from Q2 2012 was worked through, but declined in September to more closely match the reduced current producer activity.  Pricing in Q3 2012 was about 15% below Q1 2012 levels due to the combined effect of lower producer activity and equipment capacity additions across the industry over the past two years.

Since the first quarter, uncertainty around the commodity price outlook has impacted drilling activity across the Western Canadian Sedimentary Basin ("WCSB").  In particular, low natural gas prices and volatile oil prices experienced in the first nine months of 2012 has led to curtailed producer spending over the second half of 2012. Specifically, NYMEX natural gas price averaged US$2.89US per mmbtu for Q3 2012, about 30% below the Q3 2011 average price of US$4.06US per mmbtu.  Although average oil prices have remained relatively flat, with the West Texas Intermediate price averaging US$92.16 per barrel in Q3 2012 compared to US$89.51 per barrel for Q3 2011, the early summer months experienced volatile oil prices prompted by global economic uncertainty, while take-away pipeline capacity concerns in Western Canada also led to widening oil price differentials.

The current trend of weaker producer activity is expected to continue to impact pressure pumping activity for the remainder of the year.  This is evident from key industry indicators such as equity capital raised year-to-date, drilling rig utilization, well licenses issued and well completions.  In Q3 2012, drilling rig utilization decreased by about 30% from Q3 2011, averaging 40% in the current quarter compared to 57% in the prior year comparable quarter.  Well licenses issued have declined by 23% to 3,060 in Q3 2012 from 3,985 in Q3 2011.  In particular, well completions decreased by 27% and 32% to 2,544 and 7,745 respectively in the three and nine months ended September 30, 2012 from 3,482 and 11,466 in the comparable 2011 periods due to ongoing reluctance by E&P companies to complete wells in an uncertain commodity price and macroeconomic environment.

As a result, consolidated revenues for the three months ended September 30, 2012 were $94 million, a 10% decrease over $105 million earned in the prior year comparable quarter.  Jobs completed in Q3 2012 totaled 524, a 29% decrease from the 733 jobs completed in Q3 2011.  However, average consolidated revenue per job increased by 26% to $180,883 in Q3 2012 from $143,970 in Q3 2011 reflecting larger jobs in emerging oil and natural gas liquids rich plays such as the Duvernay shale. Profit and comprehensive income decreased by 45% to $17 million in Q3 2012 from $31 million in Q3 2011 and reflects a higher fixed cost structure to support the Company's expanded equipment fleet, increased depreciation expense relating to equipment additions and less profitable jobs resulting from reduced pricing brought on by industry conditions.  Fully diluted earnings per common share was $0.27 in Q3 2012 compared to $0.49 in Q3 2011.

For the nine months ended September 30, 2012, Canyon completed 1,709 jobs, a 5% increase over the 1,628 jobs completed in the comparable 2011 period.  In addition, average consolidated revenue per job increased by 13% to $157,587 from $139,640 in the 2011 comparable period due to Canyon completing larger jobs for customers in emerging plays such as the Duvernay.  The combination of an increased job count and higher average revenue per job resulted in consolidated revenues for the current nine month period increasing by 18% to $268 million from $227 million in the comparable 2011 period.  Although revenues increased by 18%, profit and comprehensive income decreased by 13% to $47 million in the current period from $54 million earned in the comparable 2011 period due to pricing pressure across the industry combined with higher fixed costs, including depreciation, to support the additional equipment.  Approximately 90% of Canyon's consolidated revenue is generated by its hydraulic fracturing division, with average fracturing revenue per job increasing by 17% to $230,583 in the nine months ended September 30, 2012 from $196,399 in the comparable 2011 period reflecting the larger job sizes as discussed previously.

NON-GAAP MEASURES

The Company's Condensed Consolidated Interim Financial Statements have been prepared in accordance with International Accounting Standards (IAS) 34. Certain measures in this document do not have any standardized meaning as prescribed by International Financial Reporting Standards and are considered non-GAAP measures.

EBITDA before share-based payments and funds from operations are not recognized measures under IFRS.  Management believes that in addition to profit and comprehensive income, EBITDA before share-based payments and funds from operations are useful supplemental measures as they provide an indication of the results generated by the Company's business activities prior to consideration of how those activities are financed, amortized or taxed, as well as the cash generated by the Company's business activities without consideration of the timing of the monetization of non-cash working capital items.  Readers should be cautioned, however, that EBITDA before share-based payments and funds from operations should not be construed as an alternative to profit and comprehensive income determined in accordance with IFRS as an indicator of the Company's performance.  Canyon's method of calculating EBITDA before share-based payments and funds from operations may differ from other companies and accordingly, EBITDA before share-based payments and funds from operations may not be comparable to measures used by other companies.  Canyon calculates EBITDA before share-based payments as profit and comprehensive income for the year adjusted for depreciation and amortization, equity settled share-based payment transactions, loss on sale of property and equipment, finance costs and income tax expense.  Reconciliations of these nON-GAAP measures to the most directly comparable IFRS measures are outlined below.

The Company describes revenue less cost of services as gross profit.

EBITDA before share-based payments

       
000's
(Unaudited)  
Three Months Ended
September 30
  Nine Months Ended
September 30
  2012 2011   2012 2011
Profit and comprehensive income $17,036 $30,861   $47,263 $54,338
Add (Deduct):          
Depreciation and amortization 7,602 5,824   21,782 15,838
Finance costs 175 133   572 302
Share-based payment transactions 1,620 (1,557)   419 1,233
Cash settlement of deferred share units - -   2,298 -
Loss on sale of property and equipment 116 46   193 40
Income tax expense 5,947 11,205   16,433 19,626
EBITDA before share-based payments $32,496 $46,512   $88,960 $91,377

Funds from Operations

       
000's
(Unaudited)
Three Months Ended
September 30
  Nine Months Ended
September 30
  2012 2011   2012 2011
Net cash from operating activities $526 ($547)   $46,214 $43,916
Add (Deduct):          
Income Tax paid 8,405 3,498   31,471 23,164
Change in working capital 23,390 43,428   8,405 23,995
Cash settlement of deferred share units - -   2,298 -
Current tax (4,594) (8,984)   (11,353) (14,707)
Funds from operations $27,727 $37,395   $77,035 $76,368

Operating and Financial Highlights

The operating and financial highlights for the nine months ended September 30, 2012 are summarized as follows:

  • In Q3 2012, average consolidated revenues per job increased by 26% to $180,883 from $143,970 in Q3 2011 as Canyon completed larger jobs in emerging oil and natural gas liquids rich plays such as the Duvernay shale.  The reduced producer activity in the current quarter more than offset the larger job sizes to result in consolidated revenues decreasing by 10% to $94,401 from $105,207 in Q3 2011.
  • For the nine months ended September 30, 2012, jobs completed and consolidated revenues increased by 5% and 18% to 1,709 and $268,310 respectively from 1,628 and $227,131 respectively in the comparable 2011 period as a result of a strong first six months.  Average consolidated revenue per job increased by 13% to $157,587 in the nine months ended September 30, 2012 from $139,640 in the comparable 2011 period due to larger job sizes.
  • With approximately 90% of consolidated revenues derived from hydraulic fracturing services, the average fracturing revenue per job increased by 30% to $248,095 in Q3 2012 from $191,328 in Q3 2011 due again to the completion of larger jobs for customers.  For the nine months ended September 30, 2012, average fracturing revenue per job increased by 17% to $230,583 from $196,399 in the comparable 2011 period.
  • For the nine months ended September 30, 2012, EBITDA before share-based payments expense (see NON-GAAP MEASURES) decreased by 3% to $88,960 from $91,377 in the comparable 2011 period as revenues increased by 18% over the same periods.  In Q3 2012 EBITDA before share-based payments expense decreased by 30% to $32,496 from $46,512 in Q3 2011 as revenues declined by 10%.
  • The impact of lower field margins due to pricing, higher depreciation and amortization expense and an increase in fixed costs to support the Company's expanded equipment fleet resulted in profit and comprehensive income decreasing by 45% to $17,036 (profit of $0.27 per share, diluted) in Q3 2012 from $30,861 (profit of $0.49 per share, diluted) in Q3 2011.
  • For the nine months ended September 30, 2012, the profit and comprehensive income decreased by 13% to $47,263 ($0.76 per share, diluted) from $54,338 ($0.87 per share, diluted) in the comparable 2011 period.
  • Canyon's equipment fleet exited Q3 2012 with 225,500 HHP.  As at September 30, 2012 Canyon has $13 million in commitments to complete its current capital programs, which will be funded out of funds from operations
  • Canyon remains in a very strong financial position with undrawn credit facilities of $60 million and working capital of $53 million, including cash, as at September 30, 2012.
  • On September 25, 2012, Canyon declared a quarterly dividend of $0.15 per common share, or $9.3 million, which was paid to shareholders on October 26, 2012.

2012 OUTLOOK

With the ongoing uncertainty around oil and natural gas prices and a depressed equity financing environment, we expect 2012 annual and fourth quarter industry field activity will be lower than 2011.  The current trend of reduced industry activity and pricing pressure is expected to continue into the first quarter of 2013 as 2012 capital budgets come to completion and our customers start to plan and reserve capital for 2013.  Although industry conditions are expected to remain challenging over the next three to six months, Canyon is anticipating a significantly improved operating environment for the second half of 2013 and for 2014.  Strong oil prices and improving natural gas prices have increased expected producer cash flows allowing for the eventual expansion of capital budgets.  In addition, both the acquisition of Canadian companies and assets by multi-national corporations and the formation of joint venture agreements with strategic foreign partners will likely lead to increased drilling activity in fracture intensive plays such as the Montney and Duvernay.  The planned construction of LNG export facilities that will ship LNG to the Asia-Pacific region will require thousands of prolific natural gas producing wells to provide feedstock for export.  In the short-term, Canyon will look to position the Company for significant expansion opportunities, such as continued deployment of equipment into the Duvernay play.  Canyon views Western Canada as the world's most attractive hydraulic fracturing market. It is the second largest in the world, and has supply-demand fundamentals that are second to no other major pressure pumping market.  In Canyon's chosen market, we foresee long-term demand growth outpacing staffed supply additions.

On March 6, 2012 Canyon announced a 140 percent increase to its quarterly dividend to $0.15 per share, effective April 2012, equating to an annualized dividend of $0.60 per share. We are frequently asked by shareholders about increases or changes to the dividend.  Management and the Board of Directors want the dividend payout to be as high as possible while maintaining sustainability through a variety of economic conditions without restricting our financial flexibility or our ability to pursue growth opportunities. We believe that the latest increase to the dividend is sustainable, given the Company's concentrated operations in the WCSB and its strong financial position, combined with its positive long-term forecast of operating conditions in Western Canada.  There are no changes to the dividend policy or payout planned at this time.

Canyon expects financial and operating results in 2012 to be lower than 2011.  With a larger fixed-cost infrastructure in place to support larger operations, combined with reduced pricing compared to 2011, margins have now eroded from the record levels that Canyon has been experiencing in prior reporting periods. Canyon believes that it is in the enviable position of having long-established customer relationships, excellent operating performance augmented by new, state-of-the-art equipment and a very strong balance sheet.  Our enduring priorities are operational success, safety, strengthening customer relationships, operating with integrity and responsibility, contributing to improved water management, staff retention and profitability.  As always, Canyon will operate as cost-effectively as possible and remain ready to respond to changing industry conditions and investment opportunities.

QUARTERLY COMPARATIVE STATEMENTS OF OPERATIONS

   
000's except per share amounts
(Unaudited)
Three Months Ended September 30
  2012   2011
Revenues $94,401   $105,207
Cost of services (64,228)   (58,128)
Gross profit 30,173   47,079
Administrative expenses (7,015)   (4,880)
Results from operating activities 23,158   42,199
Finance costs (175)   (133)
Profit before income tax 22,983   42,066
Income tax expense (5,947)   (11,205)
Profit and comprehensive income $17,036   $30,861
EBITDA before share-based payments(1) $32,496   $46,512
Earnings per share:      
  Basic $0.28   $0.51
  Diluted $0.27   $0.49

Note (1): See Non-GAAP Measures.

Revenues

In Q3 2012, revenues decreased 10% to $94,401 from $105,207 in Q3 2011, while jobs completed decreased 29% to 524 from 733 over the same quarters.  In addition, lower producer activity in the quarter combined with increased equipment capacity across the industry resulted in price reductions averaging about 15% from Q1 2012 pricing.  However, the pricing pressure and lower job count was partly mitigated by higher average revenues per job.  Approximately 90% of Q3 2012 consolidated revenues were provided by hydraulic fracturing services with average fracturing revenue per job increasing by 30% to $248,095 from $191,328 in Q3 2011.  The increase in average fracturing revenue per job is due to the completion of larger jobs such as Duvernay shale gas wells.

Cost of services

Cost of services for the three months ended September 30, 2012 totaled $64,228 (2011: $58,128) and includes materials, products, transportation and repair costs of $38,352 (2011: $37,915), employee benefits expense of $18,604 (2011: $14,736), and depreciation of property and equipment of $7,272 (2011: $5,477).

The increase in materials, products, transportation and repair costs is mostly due to the larger jobs requiring more materials and products, and due to the increase in the scale of Canyon's business activities with added equipment and infrastructure .  The increase in employee benefits expense is mainly due to the additional staff for Canyon's expanded equipment fleet.  The increase in depreciation of property and equipment is due to additional depreciation pertaining to equipment additions.

Administrative expenses

Administrative expenses for the three months ended September 30, 2012 totaled $7,015 compared to $4,880 in Q3 2011 and include employee benefits expense of $3,686 (Q3 2011: $4,273) and share-based payments expense of $1,620 (Q3 2011: a reduction of $1,557).  Administrative expenses also include depreciation of buildings and office equipment and amortization of intangibles of $329 (2011: $347).  In addition, other administrative expenses totaled $1,380 in Q3 2012 compared to $1,817 in Q3 2011.  The decrease in employee benefits expense is due to the allocation of certain management and administrative expenses to cost of services in 2012.  Share-based payments expense includes an increase in share-based payments expense due to fluctuations in the price of the Company's common shares.

Share-based payments expense represents the value assigned to the granting of options and incentive-based units under the Company's Share Purchase Option Plan and Stock Based Compensation Plan respectively, using the Black-Scholes model.  For Q3 2012, $0.9 million (Q3 2011 - $0.6 million) was charged to expenses and included in contributed surplus in respect of these two plans.  In addition, obligations for payments under the Company's Deferred Share Unit Plan are accrued as share-based payments expense over the vesting period.   The accrued liability increases or decreases with fluctuations in the price of the Company's common shares, with a corresponding increase or decrease in the share-based payments expense.  In Q3 2012, share-based payments expense was increased by $0.7 million (Q3 2011 - a reduction of $2.2 million) for the Company's Deferred Share Unit Plan to reflect changes in the price of the common shares of the Company.

EBITDA before share-based payments (See NON-GAAP MEASURES)

In Q3 2012, EBITDA before share-based payments (see NON-GAAP MEASURES) was $32,496 compared to $46,512 in the comparable 2011 quarter.  As previously discussed, reduced producer activity, pricing pressure and a higher fixed cost structure to support the Company's increased equipment fleet resulted in the decreased EBITDA.

Finance costs

Finance costs include interest on finance lease obligations and automobile loans and totaled $175 in Q3 2012 (Q3 2011: $133).  The increase in finance costs is due to additional finance leases for automotive equipment to support Canyon's increased business activities.

Income Tax Expense

At the expected combined income tax rate of 25%, the profit before income tax for Q3 2012 of $22,983 would have resulted in an expected expense of $5,746, compared to the actual income tax expense of $5,947. The actual income tax expense was increased by non-deductible expenses.

Profit and comprehensive income and earnings per share

Profit and comprehensive income totaled $17,036 in Q3 2012 compared to $30,861 in Q3 2011. As previously discussed, the decrease is due to reduced producer activity, pricing pressure and a higher fixed cost structure to support the Company's increased equipment fleet.

Basic and diluted earnings per share were $0.28 and $0.27, respectively, for the three months ended September 30, 2012 compared to basic and diluted earnings per share of $0.51 and $0.49, respectively, for the comparable 2011 period.

NINE MONTHS TO SEPTEMBER 30, 2012 COMPARATIVE STATEMENTS OF OPERATIONS

   
000's except per share amounts
(Unaudited)
Nine Months Ended September 30
  2012   2011
Revenues $268,310   $227,131
Cost of services (187,216)   (138,067)
Gross profit 81,094   89,064
Administrative expenses (16,826)   (14,798)
Results from operating activities 64,268   74,266
Finance costs (572)   (302)
Profit before income tax 63,696   73,964
Income tax expense (16,433)   (19,626)
Profit and comprehensive income $47,263   $54,338
EBITDA before share-based payments(1) $88,960   $91,377
Earnings per share:      
  Basic $0.77   $0.90
  Diluted $0.76   $0.87

Note (1): See Non-GAAP Measures.

Revenues

Consolidated revenues increased by 18% to $268,310 in the nine months ended September 30, 2012 from $227,131 in the comparable 2011 period, while jobs completed increased 5% to 1,709 from 1,628 over the same periods.  Approximately 90% of the current period's consolidated revenues were provided by hydraulic fracturing services with average fracturing revenue per job increasing 17% to $230,583 from $196,399 in the nine months to September 30, 2011.  Canyon's average consolidated revenue per job in the nine months ended September 30, 2012 increased 13% to $157,587 from $139,640 in Q1 2011.  As previously discussed, larger job sizes accounted for the increases in average revenue per job.

Cost of services

Cost of services for the nine months ended September 30, 2012 totaled $187,216 (2011: $138,067) and includes materials, products, transportation and repair costs of $115,585 (2011: $85,795), employee benefits expense of $50,783 (2011: $37,309), and depreciation of property and equipment of $20,848 (2011: $14,963).

The increase in materials, products, transportation and repair costs is mostly due to the larger jobs requiring more materials and products, and due to the increase in the scale of Canyon's business activities with added equipment and infrastructure.  The increase in employee benefits expense is due to the additional staff for Canyon's expanded equipment fleet.  The increase in depreciation of property and equipment is due to additional depreciation pertaining to equipment additions.

Administrative expenses

Administrative expenses for the nine months ended September 30, 2012 totaled $16,826 (2011: $14,798) and includes employee benefits expense of $8,756 (2011: $7,651), and share-based payments expense of $2,717 (2011: $1,233).  Administrative expenses also include depreciation of buildings and office equipment and amortization of intangibles of $933 (2011: $875).  In addition, other administrative expenses totaled $4,420 (2011: $5,039).  The increase in employee benefits expense is mainly due to Canyon adding management and administrative staff to support its increased business activities.  Share-based payments expense includes a payment pursuant to the exercise of 200,000 deferred share units at an exercise price of $1.25 per unit, less a reduction in share-based payments expense due to fluctuations in the price of the Company's common shares.

Share-based payments expense represents the value assigned to the granting of options and incentive-based units under the Company's Share Purchase Option Plan and Stock Based Compensation Plan respectively, using the Black-Scholes model.  For the nine months ended September 30, 2012, $2.5 million (2011 - $1.7 million) was charged to expenses and included in contributed surplus in respect of these two plans.  In addition, obligations for payments under the Company's Deferred Share Unit Plan are accrued as share-based payments expense over the vesting period.  The accrued liability increases or decreases with fluctuations in the price of the Company's common shares, with a corresponding increase or decrease in the share-based payments expense.  In the nine months ended September 30, 2012, share-based payments expense was increased by $0.2 million (2011 - decreased by $0.5 million) for the Company's Deferred Share Unit Plan to reflect the payment pursuant to the exercise of 200,000 units and changes in the price of the common shares of the Company.

EBITDA before share-based payments (See NON-GAAP MEASURES)

For the nine months ended September 30, 2012, EBITDA before share-based payments (see NON-GAAP MEASURES) was $88,960 (2011: $91,377).  The 3% decrease was due to reduced producer activity, pricing pressure and a higher fixed cost structure to support the Company's increased equipment fleet even though revenues increased by 18%.

Finance costs

Finance costs include interest on finance lease obligations and automobile loans and totaled $572 (2011: $302).  The increase in finance costs is due to additional finance leases for automotive equipment to support Canyon's increased business activities.

Income Tax Expense

At the expected combined income tax rate of 25%, the profit before income tax for the nine months ended September 30, 2012 of $63,696 results in an expected income tax expense of $15,924 compared to the actual income tax expense of $16,433.  The actual income tax expense was increased by non-deductible expenses.

Profit and comprehensive income and earnings per share

Profit and comprehensive income decreased 13% to $47,263 for the nine months ended September 30, 2012, from $54,338 in the comparable 2011 period mainly due to reduced producer activity, pricing pressure and a higher fixed cost structure to support the Company's increased equipment fleet.

Basic and diluted earnings per share were $0.77 and $0.76, respectively earned in the nine months ended September 30, 2012 compared to basic and diluted earnings per share of $0.90 and $0.87, respectively earned in the comparable 2011 period.

2013 Preliminary Capital Expenditure Guidance

Canyon has set its preliminary capital program for 2013 at $15 million.  The capital program includes blending, chemical, transportation and miscellaneous support equipment.  Canyon will monitor industry conditions and when appropriate, will adjust the capital program accordingly.

FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking information and statements within the meaning of applicable securities laws.  The use of any of the words "expect", "anticipate", "continue", "estimate", "guidance", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "budget", "strategy" and similar expressions are intended to identify forward-looking information or statements.  In particular, but without limiting the foregoing, this document contains forward-looking information and statements pertaining to the following: future oil and natural gas prices; future results from operations; future liquidity and financial capacity and financial resources; future costs, expenses and royalty rates; future interest costs; future capital expenditures; future capital structure and expansion; the making and timing of future regulatory filings; and the Company's ongoing relationship with major customers.

The forward-looking information and statements contained in this document reflect several material factors and expectations and assumptions of the Company including, without limitation: that the Company will continue to conduct its operations in a manner consistent with past operations; the general continuance of current or, where applicable, assumed industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; certain commodity price and other cost assumptions; the continued availability of adequate debt and/or equity financing and cash flow to funds its capital and operating requirements as needed; and the extent of its liabilities.  The Company believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct.

The forward-looking information and statements included in this document are not guarantees of future performance and should not be unduly relied upon.  Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements including, without limitation: changes in commodity prices; changes in the demand for or supply of the Company's services; unanticipated operating results; changes in tax or environmental laws, royalty rates or other regulatory matters; changes in the development plans of third parties; increased debt levels or debt service requirements; limited, unfavourable or a lack of access to capital markets; increased costs; a lack of adequate insurance coverage; the impact of competitors; reliance on industry partners; attracting and retaining skilled personnel and certain other risks detailed from time to time in the Company's public disclosure documents (including, without limitation, those risks identified in this document and the Company's Annual Information Form).

The forward-looking information and statements contained in this document speak only as of the date of the document, and none of the Company or its subsidiaries assumes any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.

SOURCE: Canyon Services Group Inc.

For further information:

Brad Fedora 
President and CEO 
Canyon Services Group Inc.
2900 Bow Valley Square III 
255 - 5th Avenue SW 
Calgary, Alberta, T2P 3G6 
Phone:  403-290-2491 
Fax: 403-355-2211

Or

Barry O'Brien
Vice President, Finance and CFO
Canyon Services Group Inc.
2900 Bow Valley Square III
255 - 5th Avenue SW
Calgary, Alberta, T2P 3G6
Phone:  403-290-2478
Fax: 403-355-2211